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ALGERIA1
IU.S. DEPARTMENT OF STATE
ALGERIA: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                            ALGERIA
                    Key Economic Indicators
       (Millions of U.S. dollars unless otherwise noted)
                                   1992  1/  1993  2/  1994  3/
Income, Production and Employment:
GDP (at current prices)           45,300    46,500      N/A
GDP Growth Rate (pct.)               2.3       2.6      N/A
GDP Per Capita (USD)               1,674     1,694      N/A
By Sector:
  Agriculture                      5,450     5,700      N/A
  Industry                        16,592    22,100      N/A
  Services                        14,142    15,700      N/A
Labor Force (millions)               6.2      6.45     6.70
Unemployment Rate (pct.)              22        24      N/A
Money and Prices:  (annual percent growth)
Money Supply                        23.9      21.2      N/A
Consumer Price Index                31.8      20.8     31.0
Commercial Interest Rate              17        20       22
Exchange Rate (dinars/USD)          21.8      23.0     40.0
Balance of Payments and Trade:
Exports (FOB)  4/                 11,510    10,330      N/A
Imports (CIF)  4/                  8,300     7,770      N/A
Current Account Balance            1,290     1,010      N/A
Exports to U.S.                    1,694     1,711    1,232
Imports from U.S.                    677       898      821
Trade Balance with U.S.            1,017       813      411
External Debt                     26,349    24,600      N/A
Debt Service Payments              9,277     9,100      N/A
Gold and Foreign Exch. Reserves    3,318     3,300      N/A
N/A--Not available.
1/ World Bank data.
2/ U.S. Embassy estimates.
3/ Data as of August 1994.
4/ Merchandise trade.
1.  General Policy Framework
    With a rapidly growing population of about 27 million
people and tremendous natural gas and petroleum reserves,
Algeria has the potential to be a major market for American
exports.  Algeria has an aging industrial sector in need of
new investment.  The infrastructure of its cities is
inadequate and often employs antiquated technologies.  With
the vast bulk of its territory desert, Algeria also will
remain a substantial market for agricultural exports.
    This potential for American exports of goods, services and
investment so far has not been fully realized, due mainly to
Algerian government mismanagement of the economy.  With the
exception of the state-owned hydrocarbons sector, an efficient
economy able to compete internationally has never evolved.  As
a result, hydrocarbons exports still account for about 97
percent of Algeria's foreign exchange earnings.  The low level
of petroleum prices in 1993 left Algeria unable to finance
needed imports and also make payments on its foreign debt.
    During 1994, however, the Algerian government began in
earnest a broad program aimed at freeing more hard currency for
imports.  It concluded an agreement with the International
Monetary Fund (IMF) which allowed it to close a debt
rescheduling agreement with its Paris Club creditors.  The
subsequent rescheduling of about five billion dollars in
payments will make possible a substantially higher level of
imports in 1995.  The government is also negotiating a
rescheduling of payments due on its five billion dollar
commercial debt.  Meanwhile, Algeria also signed the Uruguay
Round agreements which now await ratification by the country's
legislature.
    In conjunction with its IMF accord, the government also
enacted measures to transform eventually the state-managed
economy to one guided by market forces.  Beyond the structural
measures discussed in section 3 below, the government reduced
its budget deficit from about nine percent of GDP in 1993 to
about three percent in 1994.  It cut a broad series of
consumer-good subsidies and raised energy prices.  It also
restrained government expenditures and limited wage increases
to the roughly two-thirds of the labor force who work in the
government, public and private sectors.  The government has
financed its budget deficits primarily by borrowing from the
Bank of Algeria (Central Bank) which increased the money
supply.  The government had little choice, since monetary
policy instruments are relatively rudimentary.  There are no
bond sales to finance government spending, and much of the
money circulating in the economy is outside government control
in the parallel market.  Reduced bank financing for the
government budget deficit and public-sector enterprises has
slowed money supply growth from about 22 percent in 1993 to
roughly 14 percent in 1994.  To attract some of the liquidity
back out of the parallel economy into the formal commercial
sector, the government raised interest rates at the banks.
These measures should reduce inflation in 1995 from the roughly
30 percent level of 1994.
    The period of transition for an economy in which the
government-owned sector is so predominant will take years.
Moreover, the ultimate success of the reform policies will
remain linked to an improvement in the unsettled political and
security situation.
2.  Exchange Rate Policy
    The dinar is still not a fully convertible currency.
However, the structural readjustment changes put into effect
this year, such as the debt rescheduling, the devaluation of
the dinar and an easing of controls on imports and access to
hard currency, have made it somewhat easier for companies to
buy the hard currency necessary to pay for imports.  In April,
after negotiations with the IMF, the Algerian government
devalued the dinar by forty percent, setting the official rate
at USD 1 equals 36 dinars.  By November that value had fallen
to an official value of USD 1 equals 41.7 dinars, versus a
black market rate of approximately USD 1 equals 65 dinars.  To
establish the exchange rate, the Algerian Central Bank sells
foreign currency to the commercial banks once a week, thus
tying the exchange rate to commercial demand.  Central Bank
officials anticipate that by 1995 foreign currency sales to
banks will be made on a daily basis.
    In 1994 the Algerian government made it easier for
investors and private citizens to buy and to hold foreign
currency.  Algerian banks allow deposit accounts denominated in
a foreign currency.  The most restrictive control still
limiting the ability of potential investors to import products
is the commercial banks' requirement that an importer deposit
the full cost of the imported item and also a percentage of the
cost in the bank before it will ask international banks for
letters of credit.  The banks justify this extra charge by
saying that their costs have risen.  This extra dinar margin
also protects the Algerian banks from losses stemming from
additional devaluations.  International banks have been
reticent in extending new credit lines to Algerian banks
because of the debt rescheduling and because of a longer term
concern about the political unrest in Algeria.
3.  Structural Policies
    Prior to the initiation of its reform policies, the
government controlled many prices directly and allowed fixed
profit margins on many others.  In April 1994, the government
eliminated controls on prices for agricultural equipment and
spare parts and lubricants.  These measures should lead to an
increase in U.S. exports of these products.  The government is
also moving towards eliminating the requirement that producers
notify it of their prices with an obligation that they simply
publish their prices.  This should encourage more efficient
pricing policy, especially in sectors such as food industries
and construction which could utilize American inputs.
    Government officials stress their desire for foreign
investment and have sought to streamline the application
process.  In October 1993 the government issued an investment
code which liberalizes the regulatory environment outside of
the hydrocarbons sector.  The code provides investors with a
three-year exemption from the value added tax on goods and
services used as production inputs and a two to five year
exemption from corporate taxes.  It also cut the duty on
imported goods to three percent and placed a ceiling of seven
percent on an employer's contribution to local social
security.  The government, in November 1994, was preparing to
create an agency, modelled on success stories in Morocco and
Tunisia, to determine incentive eligibility and shepherd the
applications through the maze of Algerian bureaucracy.  In July
of 1994 the government opened to foreign investment up to 49
percent of selected public-sector enterprises:  there is no
limit on ownership shares of the subsidiaries now owned by
public-sector firms.  An influx of foreign investment, however,
hinges on improvements in the security situation.
4.  Debt Management Policies
    The fall in oil prices in the last quarter of 1993
triggered a balance of payments crisis that obliged Algeria to
conclude an IMF agreement and seek debt relief.  The Algerian
government had resisted debt rescheduling, preferring to carry
a heavy payments load (in 1991 debt service payment consumed 75
percent of export earnings, and in 1992, 77 percent) rather
than permit outside "interference" in the monetary management
of the country.  The Algerian government was facing 9.3 billion
dollars of debt servicing in 1994 and the possibility of export
revenues reaching only USD 8.8 billion to USD 9 billion.
Unable to secure large new inflows of credit, the government
could continue on its old policy track no longer.
    After the IMF approved Algeria's reform program on May 31,
1994, Algeria reached agreement on June 1 with its official
(Paris Club) creditors to reschedule USD 5.3 billion in
principal and interest payments falling due between June 1994
and May 1995.  An eventual agreement with commercial debtors to
reschedule commercial debt payments coming due is expected to
further reduce Algeria's debt substantially.  Central Bank
foreign exchange reserves quickly recovered from 1.5 billion
dollars in December 1993 to 2.8 billion in August 1994.  This
provided Algerian commercial banks far easier access to hard
currency for their customers.  In addition, the World Bank
released 150 million dollars in July 1994 as part of its loan
for public-sector reform.  However, because of the debt
rescheduling, some commercial and official creditors have been
reluctant to extend new credit lines to Algerians, thereby
limiting Algerian importers' ability to take further advantage
of the government's reform measures.
5.  Significant Barriers to U.S. Imports
    The government has deregulated the foreign trade sector
significantly, but some controls remain.  The list of items
which may not be imported was reduced from 107 products to 85
in April 1994.  Those items still on the list are foods,
consumer goods and machinery produced in the Algerian public
sector for which the government wants to extend trade
protection.  The government has indicated it will eliminate
this list entirely by early 1995, thus opening up many new
product areas to potential U.S. exporters.  The government
maintains a second list of products for which an importer must
receive a special permit.  This list includes a number of goods
in which American producers enjoy comparative advantage, such
as wheat, flour, barley, powdered milk, medicines and medical
equipment.  Some Algerian business people have complained that
the necessary permits are difficult to obtain.  It is unclear
when this second list will be abolished.
    Aside from import controls, many importers still lack ready
access to foreign exchange by which they can finance imports
from the U.S.  Prior to the June 1994 Paris Club accord, there
was an acute shortage of foreign exchange, and the government
channelled the available hard currency resources into priority
needs, such as food imports.  As 1994 progressed, hard currency
reserves at the Bank of Algeria increased substantially.
Nonetheless, imports were slow to increase for two reasons.
First, well-established importers, most notably public-sector
enterprises, lack dinar liquidity with which to buy the foreign
exchange.  In addition, the Bank of Algeria in April 1994
ordered banks not to provide importers with foreign exchange
until they had undertaken careful study of the importers'
projects.  Many business people claim the banking system is too
bureaucratic to complete the studies quickly, and the
applications for hard currency have piled up.  Notably, private
importers have obtained only about 18 percent of the foreign
exchange allocated to imports in 1994, with the remainder
channelled to the public sector.
    To save hard currency, the Algerian government gives
preference to local engineering and construction firms unless
the technology needed is not available in Algeria.  The ability
of foreign firms to obtain contracts depends critically on
their ability to offer attractive financing.  U.S. Eximbank's
decision in April 1994 to suspend new medium- and long-term
financing will hinder U.S. firms' ability to find suitable
finance terms for Algerian customers.  Firms from countries
retaining extensive bilateral lines of credit with Algeria have
an advantage over U.S. firms in this regard.
    The government had maintained a monopoly on particular
services, most notably insurance and banking.  In November 1994
the legislature is reviewing a draft bill ending the
government's monopoly in the insurance sector.  The banking
sector, however, is opening up to private investors.  One
private bank now operates in Algeria, and a second bank has
received a license.  Foreign banks are allowed to have
representative offices in Algeria, but these may not engage in
commercial transactions.  A U.S. bank, Citibank, maintains such
an office in Algeria.
6.  Export Subsidies Policies
    About 97 percent of Algeria's export earnings come from the
hydrocarbons sector.  To date few other economic activities
able to compete internationally have emerged.  The government's
contractionary budget policies preclude it from offering any
kind of explicit export subsidy to foster new exports.
Exporters do enjoy below-market priced energy, but to the
extent that the official rate for the dinar remains overvalued,
exporters pay an implicit tax as well.
7.  Protection of U.S. Intellectual Property
    Algeria is a party to the Universal Copyright Convention
and the Paris Convention for the Protection of Industrial
Property.  The government of Algeria has a good record of
respect for intellectual property rights.  Generally, Algerian
practice is to obtain authorization and pay royalties for
proprietary technology.  Copying of patented technologies is
generally beyond Algeria's technical capabilities.  There are
no reports of trademarks being counterfeited or suffering
problems obtaining registration.
8.  Worker Rights
    a.  The Right of Association
    Algerians have the right to form and be represented by
trade unions of their choice.  Government approval for the
creation of a labor union is not necessary, although limits are
imposed on union activities.  Unions may not receive funds from
abroad, and the government may suspend a union's operations if
it violates the law.  Unions may form and join federations or
confederations and affiliate themselves with international
bodies.
    b.  The Right to Organize and Bargain Collectively
    A 1990 law permits collective bargaining for all unions,
and this right has been freely practiced.  The law also
prohibits discrimination by employers against union members and
organizers and provides mechanisms for resolving trade union
complaints of antiunion practices by employers.  It further
permits all unions, whether longstanding or newly created, to
recruit members of the workplace.
    c.  Prohibition of Forced or Compulsory Labor
    Forced or compulsory labor has not been practiced in
Algeria and is incompatible with the Constitution.
    d.  Minimum Age of Employment of Children
    The minimum employment age is 16 years and state inspectors
enforce this regulation in the state sector.  It is not much
enforced in the agricultural sector or in the growing informal
sector, where economic necessity is forcing a growing number of
children into menial jobs.
    e.  Acceptable Conditions of Work
    The 1990 law on work relations defines the overall
framework for acceptable conditions of work, but leaves
specific policies with regard to hours, salaries, and other
work conditions to the discretion of employers in consultation
with employees.  A guaranteed monthly minimum wage rate for all
sectors is set by the government.  Algeria has a 44-hour
workweek.  A government decree regulates occupation and health
standards.
    f.  Rights in Sectors with U.S. Investment
    Nearly all U.S. investment is located in the hydrocarbons
sector.  The rights outlined above better enjoyed by Algerian
workers at these U.S. facilities than in the Algerian economy
at large.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                             (1)
Total Manufacturing                                    0
  Food & Kindred Products                   0
  Chemicals and Allied Products             0
  Metals, Primary & Fabricated              0
  Machinery, except Electrical              0
  Electric & Electronic Equipment           0
  Transportation Equipment                  0
  Other Manufacturing                       0
Wholesale Trade                                        0
Banking                                                0
Finance/Insurance/Real Estate                          3
Services                                               0
Other Industries                                       0
TOTAL ALL INDUSTRIES                                  (1)
(1) Suppressed to avoid disclosing data of individual companies
Source: U.S. Department of Commerce, Bureau of Economic
Analysis
(###)
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ANGOLA1
EU.S. DEPARTMENT OF STATE
ANGOLA: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                              ANGOLA
                     Key Economic Indicators
        (Millions of U.S. dollars unless otherwise noted)
                                   1992        1993 1/   1994 2/
Income, Production and Employment:
Nominal GDP                       9,206       7,218       N/A
Real GDP Growth (pct.)              1.3       -23.8       N/A
Share by Sector:  (pct.)
  Agriculture                       6.9         6.1       N/A
  Extractive                       39.9        43.6       N/A
  Oil/lpg                          35.7        42.1       N/A
  Diamonds                          4.2         1.5       N/A
  Manufacturing                     1.5         1.9       N/A
  Construction                      4.0         2.8       N/A
  Services                         26.8        23.1       N/A
  Trade                            15.6        17.8       N/A
  Transport/Communications          1.9         2.2       N/A
  Import Duties                     3.3         2.4       N/A
Net Exports of Goods and Services  -961      -1,211       N/A
Nominal GDP Per Capita (USD)        868         661       N/A
Unemployment Rate (pct.) 3/        22.3         N/A       N/A
Money and Prices:
Money Supply (M2)                 392.4       358.6       N/A
Base Interest Rate (pct.)          12.0        16.0       N/A
Retail Inflation (pct.) 3/        495.8     1,837.9   1,003.0
Consumer Price Index 3/           1,643      31,834    71,470
Exchange Rate:  (NKZ/USD) 4/
  Official (end of period)        550.0     6,500.3   410,000
  Parallel (end of period) 3/     6,900     106,000   610,000
Balance of Payments and Trade:
Total Exports (FOB)               3,833       2,831       N/A
  Exports to U.S. (CIF)           2,303       2,090     1,811
Total Imports (FOB)               1,988       1,415       N/A
  Imports from U.S. (FAS)           158         169       187
Aid from U.S.                        72         N/A        97
External Public Debt 5/           8,325       8,624       N/A
Debt Service Payments               504         583       N/A
Gold and Foreign Exch. Reserves   485.4       216.4       N/A
Trade Balance                     1,845       1,416       N/A
  Trade Balance with U.S.         2,145       1,921     1,624
N/A--Not available.
1/ Estimated and/or based on incomplete data.
2/ Estimate based on January-June data.
3/ Data for Luanda only.
4/ See Section 2 for exchange rate info; data as of 10/25.
5/ Medium- and long-term debt; excludes a portion of the oil
companies' debt and short-term commitments.
1.  General Policy Framework
    The Republic of Angola is potentially one of Africa's
wealthiest countries.  Relatively sparsely populated, it has
large hydrocarbon and mineral resources, huge hydroelectric
potential, and ample arable land.  Civil war between the
Government of Angola and the National Union for the Total
Independence of Angola (UNITA) from 1975 until May 1991, and
again from November 1992 until November 1994, has wreaked havoc.
    In addition to extreme disruptions caused by conflict, a
severe lack of managerial and technical talent has hampered
economic performance.  Misguided and ineffective attempts at
socialist economic planning and centralized decisionmaking
further hindered development.  Of the country's productive
sectors, only the oil sector, jointly run by foreign oil
companies and the state oil firm Sonangol, has remained
well-managed and prosperous.  Angola currently produces over
580,000 barrels per day of crude, accounting for the majority
of GDP, over 90 percent of exports, and over 80 percent of
government revenues.  The softening of world oil prices after
the Gulf War, and especially in late 1993 and early 1994, has
served to erode government export earnings at the same time
production has been increasing.
    Urban populations swollen by internally-displaced refugees
have subsisted largely on food aid or parallel markets.  The
rural population often carves out a living in marginal
security, surviving by subsistence farming.  Administrative
chaos, corruption, hyperinflation, and war have vitiated normal
economic activity and attempts at reform.  As a result of the
near-total absence of domestic production of nonoil products,
importation of food and other consumer items is lucrative
enough to attract traders from abroad.
    The government budget, perpetually in deficit from heavy
military and other non-productive spending, ballooned to 38% of
GDP in 1992 and 32% in 1993.  The deficit has been financed by
increasing the money supply and resorting to expensive,
oil-backed short-term lending.  Shortages, price controls,
hyperinflation, and erosion of confidence in the national
currency encourage parallel markets and widespread dependence
on barter or dollar transactions.
    The signature of the Lusaka Protocol on November 20, 1994
provides a hope that Angola may finally end the destructive
civil war and embark on the road to economic development.  The
Protocol calls for a UN-monitored cease-fire, the formation of
a unified army, and the demilitarization of UNITA forces.  In
return, UNITA will be given representation at every level of
government, from the local "commune" to the national Cabinet.
Both the Angolan government and UNITA have asked for a strong
UN presence to oversee the implementation of the Protocol.
    The long-term effects of the war, the destruction of
infrastructure, and years of economic mismanagement remain to
be addressed.  The end of conflict should portend economic
stabilization and growth, but there appears to be little hope
for an immediate "peace dividend."  Reconstruction is likely to
be a long and arduous process, requiring significant inflows of
foreign assistance and investment.
    Since 1987, the government has launched various programs
aimed at privatization, liberalization, devaluation of the
kwanza, and new rigor in financial management.  Most of these
programs have enjoyed little implementation.  The government's
1994 Economic and Social Program has been favorably received by
donor nations and financial institutions, but its execution
remains largely undone.
    The oil sector, the only functional part of the Angolan
economy managed by the government and largely isolated from the
civil war, has been the focus of U.S.-Angolan trade and
investment.  The U.S. bought about 74% of Angola's oil exports
in the first quarter of 1994, while equipment for the sector
accounts for much of U.S. sales to Angola.  Given the country's
huge potential, lasting peace and genuine economic
liberalization could provide substantial opportunities for U.S.
trade and investment in Angola, particularly in communications,
energy, and transportation sectors.
2.  Exchange Rate Policy
    From 1978 to September 1990, the government maintained the
official exchange rate for the kwanza, a non-convertible
currency, at 29 kwanzas/$.  The new kwanza (NKz) replaced the
kwanza at par in September 1990, and in March 1991, the
government devalued the new kwanza by 50%; further devaluations
brought the official rate to NKz550/$ by April 1992.  To narrow
the gap between that and a parallel market rate several times
higher, the government adopted a program of auctions in late
1992 and early 1993 that led to the devaluation of the currency
to NKz7000/$.  In March 1993, the government revalued the new
kwanza to NKz4000/$, but in October devalued to NKz6500/$.
    In 1994, the government began a program of foreign exchange
selling in which the Central Bank and commercial banks
participate.  The rate which results from "fixing" sessions is
utilized as a floating official rate.  By late October 1994,
that rate reached 410,000 kwanzas per dollar.  The parallel
rate, meanwhile, has risen to over 600,000 kwanzas per dollar.
Exchange houses operate legally in Luanda and other cities.
Rates close to the parallel rate can be obtained both in
exchange houses and in some banks in limited amounts.  The
government continues to declare its intention to bridge the gap
between official and parallel rates via further devaluations.
3.  Structural Policies
    Angola's economic policy remained in flux in 1994.  The
government has taken steps to reduce its role in the economy,
and has reduced or eliminated subsidies and controls of some
foodstuffs and other consumer products.  Nevertheless, it
continues to heavily subsidize fuel, public transport,
electricity and other utilities, and to regulate profit margins
on the sale of numerous products.
    During 1994, the government has focused on bringing down
inflation and taking measures to stabilize the budget deficit.
While the government has publicly declared its desire for IMF
balance of payments assistance, the IMF has only agreed to
begin a monitoring program of Angolan performance.
4.  Debt Management Policies
    The government began substantial foreign borrowing only in
the early 1980's, principally to finance large oil sector
investments.  Prior to the 1986 slump in international oil
prices, the government scrupulously met its foreign debt
commitments, even those contracted prior to independence.
Subsequently, however, large payment arrears, estimated by the
IMF to be over $4.2 billion at the end of 1993, have forced
major Western export credit agencies to suspend or highly
restrict cover to the country.
    Total foreign debt is now probably between $9 and $10
billion, and at the end of 1993 was 119% of GDP and 293% of
exports, according to the IMF.  Approximately half of the debt
is owed to the former Soviet Union and its former satellites
for military purchases between 1975 and 1991.  In 1989, Angola
joined the IMF and the World Bank, and was able to secure the
rescheduling of over $1.8 billion in Paris Club and other
debt.  Creditors rescheduled $669 million of Angolan debt in
1990, but only about $17 million in 1993.  The government has
admitted that it will be unable to lighten its debt burden,
further failing an agreement with the IMF on structural
adjustment of the economy.
5.  Significant Barriers to U.S. Exports
    Since the sharp decline of its coffee and diamond sectors,
Angola's ability to import has depended entirely on oil
earnings, and has been severely constrained by the diversion of
resources to defense spending since the return of hostilities
in late 1992.  The lack of customers with access to foreign
exchange, together with Angola's poor international financial
reputation, presents sizable challenges for U.S. suppliers of
goods and services.
    Import licenses are now routinely granted after the fact,
and are more easily obtained if no government allocation of
foreign exchange is involved.  Most products require import
licenses, but enforcement is lax.  State-owned firms in some
service industries have in the recent past attempted to keep
out foreign competition, sometimes with success.
    Angola is "off cover" for trade finance from the
Export-Import Bank of the U.S. (EXIM) because of the elevated
business risk in Angola and the country's extensive outstanding
arrears.  It is possible, however, that EXIM will consider
supporting specific projects.  The Overseas Private Investment
Corporation (OPIC) signed an Investment Incentive Agreement
with Angola in 1994.  OPIC lists Angola among the countries
where its investment finance and insurance programs are
generally available.  The U.S. Department of Agriculture (USDA)
made $8 million in agricultural export loan guarantees
available to Angola for the purchase of U.S. agricultural
products under the P.L. 480 Title I program in 1994.
    The U.S. government continues to prohibit the transfer of
U.S.-origin lethal material to all entities in Angola under the
"Triple Zero Clause" of the Bicesse Peace Accords and the
International Traffic in Arms Regulations, and to prohibit by
Executive Order, in accordance with UN sanctions enacted in
September, 1993, the transfer of all defense articles and
petroleum products to UNITA.  The U.S. government has lifted
the restriction on the private transfer of U.S.-origin
nonlethal defense articles to the Government of Angola, with a
presumption of approval of applications for export licenses for
such transfers.
    Foreign investment regulations enacted since the late
1980's have aimed at opening more sectors to foreign
investment, and at simplifying the process for potential
investors.  Regulations and the lack of execution of reforms
continue to prohibit or limit foreign investment in defense,
banking, public telecommunications, media, energy, and
transport.
6.  Export Subsidies Policies
    No export subsidy schemes currently exist, although among
the measures proposed but not yet implemented is a foreign
exchange retention scheme as an incentive for nonoil export
industries.
7.  Protection of U.S. Intellectual Property
    The Republic of Angola joined the World Intellectual
Property Organization in 1985, and acceded to the GATT in
1994.  To date, Angola has not adhered to any of the principal
international intellectual property rights conventions.
8.  Worker Rights
    a.  The Right of Association
    The 1991 constitution recognizes the right of Angolans to
form trade unions and to bargain collectively.  The law
governing unions has yet to be passed; free labor organizations
cannot yet affiliate with international labor bodies.  The
National Union of Angolan Workers (UNTA), the former official
union of the ruling MPLA, remains the principal worker
organization.  UNTA is affiliated with the Organization of
African Trade Union Unity and the formerly communist-dominated
World Federation of Trade Unions.
    b.  The Right to Organize and Bargain Collectively
    The constitution provides for the right to strike.
Legislation passed in 1991 provides the legal framework to
strike, including prohibition of lockouts, protection of
nonstriking workers, and prohibition of worker occupation of
places of employment.  Strikes by military and police
personnel, prison workers, and firemen are prohibited.  The
Ministry of Labor and Social Security continues to set wages
and benefits on an annual basis.  Salaries for public servants
are set at the minister's discretion; salaries of parastatal
employees are based on profits of the previous year and
available loans from the Central Bank.
    Angola has no export processing zones.
    c.  Prohibition of Forced or Compulsory Labor
    New legislation is still pending which prohibits forced
labor, reversing previous laws and provisions which had been
cited by the International Labor Organization (ILO) for
violation of Convention 105.  The previous legislation
permitted forced labor for breaches of discipline and
participation in strikes.
    d.  Minimum Age of Employment of Children
    The legal minimum age for employment in Angola is 14.  The
Inspector General of the Ministry of Labor is responsible for
enforcing labor laws.  Labor Ministry registration centers
screen out applicants under the age of 14.  However, children
at a much younger age work throughout the informal sector.
    e.  Acceptable Conditions of Work
    Formal wages in the state and private sector rarely surpass
the equivalent of $10 per month on the parallel market; many
workers earn less than $5 per month.  Most workers depend on
the informal sector, second jobs at night, subsistence farming,
theft, corruption, or overseas remittances to maintain an
acceptable standard of living.  The normal workweek is 37
hours.  There is no information on adequacy of work conditions
or health standards, but they are in most cases assumed not to
approach Western standards, given the extreme underdevelopment
of the Angolan economy and lack of enforcement mechanisms.
    f.  Rights in Sectors with U.S. Investment
    U.S. investment in Angola is concentrated in the petroleum
sector.  Workers in the oil sector earn salaries far greater
than those in almost every other sector of the Angolan
economy.  Workers in the petroleum sector enjoy the same rights
as those in other sectors of the Angolan economy.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                             100
Total Manufacturing                                     0
  Food & Kindred Products                   0
  Chemicals and Allied Products             0
 Metals, Primary & Fabricated               0
  Machinery, except Electrical              0
  Electric & Electronic Equipment           0
  Transportation Equipment                  0
   Other Manufacturing                      0
Wholesale Trade                                         0
Banking                                                 0
Finance/Insurance/Real Estate                         (1)
Services                                              (2)
Other Industries                                        0
TOTAL ALL INDUSTRIES                                  (1)
(1) Suppressed to avoid disclosing data of individual companies
(2) Less than $500,000
Source: U.S. Department of Commerce, Bureau of Economic
Analysis
(###)
ARGENTIN1
UU.S. DEPARTMENT OF STATE
ARGENTINA: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                            ARGENTINA
                     Key Economic Indicators
        (Billions of U.S. dollars unless otherwise noted)
                                    1992      1993      1994 1/
Income, Production and Employment:
GDP (at current prices) 2/           229       257       279
Real GDP Growth (pct.)               8.7       6.0       6.5
GDP by Sector:  (pct./GDP)
  Agriculture                        7.8       7.3       7.0
  Manufacturing                     27.0      26.6      27.5
  Mining                             2.3       2.3       2.3
  Services                          55.4      55.9      56.0
GDP Per Capita (USD)               6,932     7,644     8,206
Labor Force (000s)                13,126    13,126    13,978
Unemployment Rate (pct.)             6.9       9.3      10.8
Money and Prices:
Money Supply (M1) Growth (pct.) 3/  48.9      31.0      10.0
Commercial Interest Rates
  on 180 Day Deposits 3/             8.0       7.8      8.9(Aug)
Savings Rate (pct. of GDP)          15.2      15.9      13.5
Investment Rate (pct. of GDP)       16.7      17.7      20.0
Wholesale Inflation 3/               3.3       0.1       3.9
CPI (pct. change) 3/                17.5       7.4       3.7
Exchange Rate (USD/peso) 4/
  Official                         .9910     .9990       1.0
  Parallel                         .9910     .9990       1.0
Balance of Payments and Trade:
Total Exports (FOB) 5/              12.2      13.1      14.7
  Exports to U.S. (FOB)              1.4       1.3       1.5
Total Imports (CIF)                 14.9      16.8      20.2
  Imports from U.S. (FAS) 6/         3.0       3.8       4.8
Aid from U.S. (USD/000s)             1.2       1.8       1.7
External Public Debt 7/             65.5      62.8      70.1
Debt Service Payments 8/             4.2       4.2       3.3
Gold and Foreign Exch. Reserves     12.5      15.0      15.5
Trade Balance                       -2.6      -3.7      -5.5
  Trade Balance with U.S. 6/        -1.8      -2.5      -3.3
1/ Figures for 1994 are U.S. Embassy estimates.
2/ Nominal GDP is virtually the same in dollars or pesos after
1991 when the Convertibility Plan took effect, linking the peso
and the dollar at the rate of one to one.
3/ End of period.
4/ Average for the period.
5/ Based on official Argentine Government data.
6/ Based on U.S. Department of Commerce data.
7/ Foreign currency debt.
8/ Includes net debt service paid by public sector to
international financial institutions and on Government of
Argentina Foreign Currency Bonds.
1.  General Policy Framework
    President Carlos Menem's far-reaching reform program, which
began in earnest in 1991, has revitalized Argentina's economy.
From 1991-1993 real GDP growth averaged eight percent annually,
and the government has forecast growth of nearly seven percent
in 1994.  By mid-1993 the inflation rate fell to virtually
zero--a major accomplishment given Argentina's bouts with
hyperinflation only a few years ago.  Meanwhile, a stable
exchange rate and the opening of the economy to international
competition, including large reductions in tariffs and other
trade barriers and elimination of all but one export tax, have
resulted in a boom in imports, particularly from the United
States.  During the first five months of 1994 Argentina's
deficit with the United States was $1.4 billion, 56 percent of
Argentina's overall trade deficit during that timeframe.  The
expanding deficit has raised eyebrows, but the government has
countered this by citing the high concentration (30 percent) of
vitally needed capital goods in the import bill.
    The public sector budget has been in the black for the past
few years--a result of more efficient tax collection, increased
revenue from import tariffs (resulting from the import surge)
and large infusions of revenue from the sale of state
industries.  The government has also eased the tax burden on
businesses by eliminating charges on bank debt, freight,
shipping, and foreign currency transactions.  At the same time,
the burden on the consumer has grown, via increases in the
value added tax (VAT) and personal income tax rates.  However,
continued heavy expenditures have threatened to generate a
deficit (less than one percent of GDP) in 1994, prompting the
government to crack down on tax evaders and to turn to foreign
borrowing.
    The Central Bank of Argentina controls the money supply
through the buying and selling of dollars.  Under the
Convertibility Law of 1991, the exchange rate of the Argentine
peso is fixed to the dollar at par value.  Through the first
nine months of 1993, the Central Bank bought $2.2 billion,
selling an equal amount of pesos.
2.  Exchange Rate Policy
    Argentina has no exchange controls; customers may freely
buy and sell currency from banks and brokers at market prices.
The Convertibility Law, however, requires the Central Bank to
sell dollars at a fixed rate of one peso to one dollar.  The
Bank buys dollars at a rate of .998 pesos per dollar.
    The fixed exchange rate, which some observers believe is
overvalued, and the release of pent-up demand stemming from the
overall economic recovery, have made imports increasingly
competitive for local buyers.  Accordingly, the value of U.S.
exports to Argentina nearly quadrupled from 1990 to 1993, with
further growth in 1994.
3.  Structural Policies
    The Menem Administration's reform program has made
significant progress in transforming Argentina from a closed,
highly regulated economy to one based on market forces and
exposed to international competition.  The government's role in
the economy has diminished markedly through the privatization
of most state firms, including the oil firm YPF.  Meanwhile,
the authorities have eliminated price controls on all but a few
goods in the marketplace.  Nevertheless, the expanded trade
deficit has occasionally compelled the government to implement
ad hoc protectionist measures.  For example, in 1993 the
authorities temporarily placed higher duties on various textile
imports which allegedly were being sold in Argentina below
cost.  These measures remain in effect until January 31, 1995
with a possible one-time extension of six months.
    Argentina, Brazil, Paraguay and Uruguay formed a customs
union (MERCOSUR) on January 1, 1995 with a common external
tariff (CET) covering 85 percent of traded goods.  (Capital
goods, informatics and telecommunications will be excepted from
the CET until the turn of century).  Argentina strove to
maintain minimal tariffs during MERCOSUR negotiations in order
to facilitate renovation of its industrial plant, which
requires continued imports of capital equipment and other
inputs.  The CET will range from zero to 20 percent; many
non-MERCOSUR products entering Argentina will face higher
tariffs.  The Argentine government has indicated it will
compensate by lowering or eliminating the statistical tax.
    Argentina ratified the Uruguay Round Agreements and became
a founding member of the World Trade Organization (WTO) on
January 1, 1995.
4.  Debt Management Policies
    The government reduced Argentina's public debt by $10.4
billion in 1993 through privatizations, decline in net
disbursements, reduction in capital (Brady Plan),
capitalization of interest and adjustment of the value of
government assets.  From 1989 to 1993 Argentina's debt service
fell from 101 percent to under 50 percent of exports of goods
and non-factor services.  Total public sector foreign currency
external debt came to $62.9 billion at the end of 1993.
    The IMF, World Bank, and InterAmerican Development Bank
(IDB) have been major sources of funds to Argentina.  In
September 1994 the government terminated an IMF Extended Fund
Facility (EEF) arrangement, initiated in 1992, preferring to
forego Fund conditionality in favor of commercial borrowing.
Both the World Bank and IDB obligated over $1 billion annually
in 1993-1994.
5.  Significant Barriers to U.S. Exports
    One of the key free market reforms of the Menem
Administration has been to open the Argentine economy to
foreign producers.  The government abolished the import
licensing system in 1989 and since 1990 has slashed the average
tariff from nearly 29 percent to less than 10 percent, although
many imports must pay a higher surcharge (the "statistics
tax").  Tariffs are as low as zero on capital goods and 0.5
percent on raw materials.  American exports have capitalized on
this and risen dramatically over the past few years.
    Barriers to U.S. Exports:  Despite the generally favorable
environment for imports, the authorities occasionally erect
protectionist barriers.  In September 1993, responding to what
it considered widespread "dumping" of apparel, particularly
from the far east, the government imposed temporary import
surcharges on an array of clothing, rugs and textiles.
Restrictions apply to imports of a broad range of used and
manufactured equipment as well.  In October 1994, following
congressional passage of a law designed to promote the local
film industry, the government enacted new taxes on video sales
and rentals, which could curtail demand for U.S.-made films.
(However, President Menem vetoed other sections of the bill,
including authority for the National Film Institute to regulate
the release of foreign films and establishment of a six month
minimum timeframe between opening of a film in the theater and
its video release).  On the other hand, in September 1994 the
government eliminated tariffs and duties on imports of computer
software, much of which is supplied by American firms.
    Argentina also protects the automobile assembly industry
through a combination of quotas and heavy tariffs.
Nevertheless, the number of foreign-manufactured vehicles on
the roads is increasing through heavy demand that easily
outstrips local production.  The government claims it will
dismantle the protection scheme by the turn of the century.
    Service Barriers:  The government has progressively
eliminated restrictions on foreign-owned banks.  In January
1994 the authorities formally abolished the distinction between
foreign and domestic banks.  They allowed foreign banks to open
branches and began issuing new licenses.  However, lending and
other operational limits for foreign bank branches are based on
local, rather than global capital.  Government bodies and state
agencies must still direct their business to public banks, but
this stipulation's importance is declining, given the ongoing
privatization program.  U.S. banks are well represented in
Argentina and are some of the more dynamic players in the
financial market.  Furthermore, the privatization of pension
funds has attracted some American firms.
    Investment Barriers:  There are few barriers to foreign
investment.  Firms need not obtain permission to invest in
Argentina.  Foreign investors may wholly own a local company,
and investment in shares on the local stock exchange requires
no government approval.
    A U.S.-Argentina bilateral investment treaty came into
force on October 20, 1994.  Under the treaty U. S. investors
enjoy national treatment in all sectors except shipbuilding,
fishing, insurance and nuclear power generation.  An amendment
to the treaty removed mining, except uranium production, from
the list of exceptions.
    Government Procurement Practices:  "Buy Argentina"
practices have been virtually abolished.  Argentine sources
will normally be chosen only when all other factors (price,
quality, etc.) are equal.
    Customs Procedures:  Customs procedures are generally
extensive and time consuming, thus raising the costs for
importers, although installation of an automated system has
eased the burden somewhat.
6.  Export Subsidies Policies
    Argentina adheres to the GATT Subsidies Code and also has a
bilateral agreement with the United States to eliminate
remaining subsidies for industrial exports and to ports located
in the Patagonia region.  Nevertheless, the government retains
minimal supports, such as reimbursement of indirect tax
payments to exporters.
7.  Protection of U.S. Intellectual Property
    Argentina officially adheres to most treaties and
international agreements on intellectual property, including
the Paris Convention for the Protection of Industrial Property
(Lisbon Text and non-substantive portions of the Stockholm
Text), the Brussels and Paris Texts of the Berne Convention,
the Universal Copyright Convention, the Geneva Phonogram
Convention, the Treaty of Rome and the Treaty on the
International Registration of Audiovisual Works.  In addition,
Argentina is a member of the World Intellectual Property
Organization (WIPO) and a signatory to the Uruguay Round TRIPS
text.  However, USTR maintained Argentina on its "priority
watch list" in 1994 because of the lack of patent protection
for pharmaceuticals.
    Patents:  Argentina's patent law, enacted in 1864, is the
weakest component of the country's IPR regime.  The law
specifically excludes pharmaceutical "compositions" from patent
protection, which have cost U.S. drug firms hundreds of
millions of dollars in sales lost to pirates and has damaged
Argentina's ability to attract certain high-tech industries in
both production and research and development.  The law also
contains stringent working requirements and allows a maximum
patent term of only 15 years.  The Menem Administration
submitted a draft of a new patent law to Congress in 1991.  The
new law would improve patent protection and extend it to
pharmaceuticals, but as of October 1994, the bill was still not
passed by either house of the Argentine congress.
    Copyrights:  Argentina's copyright law, enacted in 1993, is
adequate by international standards.  Recent decrees provided
protection to computer software and extended the term of
protection for motion pictures from 30 to 50 years after the
death of the copyright holder.  As in many countries, however,
video piracy has become a serious problem.  Efforts are
underway to combat this, including arrests, seizure or pirated
material and introduction of security stickers for cassettes.
    Trademarks:  Trademark laws and regulations in Argentina
are generally good.  The key problem is a slow registration
process, which the government has striven to improve.
    Trade Secrets:  Argentina has no trade secrets law per se,
but the concept is recognized and encompassed by laws on
contract, labor and property.  Penalties exist under these
statutes for unauthorized revelation of trade secrets.
    Semiconductor Chip Layout Design:  Argentina has no law
dealing specifically with the protection of layout designs and
semiconductors.  This technology conceivably could be covered
by existing legislation on patents or copyrights, but this has
not been verified in practice.  Nevertheless, Argentina has
signed the WIPO Treaty on Integrated Circuits.
8.  Worker Rights
    a.  Right of Association
    The Argentine labor movement is undergoing a difficult
transition as the government privatizes inefficient state-owned
enterprises.  These changes have affected the composition of
the labor movement, but have not altered the worker's right to
form trade unions.  Most unions belong to the large, national
General Labor Confederation (CGT), which supports, with
reservations, the government's economic reforms.  However, a
militant faction within the CGT, the Movement of Argentine
Workers, and a separate organization, the Congress of Argentine
Workers, led by some government and teachers' unions, are
critical of the government's economic reform policies.
    Unions have the right to strike and members who participate
in strikes are protected by law.  In 1994 major strikes
occurred without government interference against the privatized
greater Buenos Aires electric power utility and the aluminum
smelting plant in the southern province of Chubut.  However,
the government declared illegal a proposed general strike by
trade union opponents of the government's economic policies, on
the grounds that the constitutional right to strike is intended
to protect workers' economic interests but not to be used as a
political weapon.
    Argentine unions are members of international labor
associations and secretariats and participate actively in their
programs.
    b.  The Right to Organize and Bargain Collectively
    Anti-union practices are prohibited by law and respected in
practice.  Argentine labor, the government and the private
sector reaffirmed these rights in a framework agreement signed
in July aimed at reforming labor-management relations in the
context of economic restructuring and increasing global
competitiveness.  The trend towards bargaining on a company
level in contrast to negotiating at the national level on a
sectoral basis continues, but the adjustment is difficult for
both sides.  For this reason, the agreement proposes to create
a national mediation service to promote more effective
collective bargaining.
    The Committee of Experts on the Application of Conventions
and Recommendations of the International Labor Organization
(ILO) took note of a teacher's union complaint regarding
restrictions on collective bargaining in certain specified
sectors and asked the government to inform the ILO of measures
it may take or has taken to encourage voluntary negotiations
without impediments.
    The framework agreement also covers health and safety
issues, employment creation and training, work-related
injuries, grievance procedures, and the distribution of social
benefits.  It is expected to lead to the reform of a
significant body of the labor code, which many observers agree
needs urgent revision.  The framework agreement aims, in part,
to lower labor costs and give employers greater flexibility in
hiring, firing, and redistributing the workforce.
    Workers may not be fired for participating in legal union
activities.  Those who prove they have been discriminated
against have the right to be reinstated.
    There are no officially designated export processing zones.
    c.  Prohibition of Forced or Compulsory Labor
    Forced labor is not known to be practiced in Argentina.
    d.  Minimum Age for the Employment of Children
    Employment of children under 14, except within the family,
is prohibited by law.  Minors aged 14 to 18 may work in a
limited number of job categories, but not more than six hours a
day or 35 hours a week.  Notwithstanding these regulations, a
significant number of children between 10 and 14 years of age,
estimated at 200 thousand in a 1993 report by the Ministry of
Labor, UNICEF and the ILO, are illegally employed, primarily as
street vendors or household workers.
    e.  Acceptable Conditions of Work
    The national monthly minimum wage is $200.  Federal labor
law mandates acceptable working conditions in the areas of
health, safety and hours.  The maximum workday is eight hours,
and workweek 48 hours.  The framework agreement is designed to
produce legislation to modernize the accident compensation
process and occupational health and safety norms.  In
responding to a complaint from the Argentine Congress of
Workers that work-related illnesses were not covered under the
existing workmen's compensation system, the ILO's committee of
experts urged the government to provide information to the
Congress of Argentine Workers regarding the measures it plans
to take to fulfill its obligations under Convention 42,
Workmen's Compensation (occupational diseases) which Argentina
ratified in 1950.
    Occupational health and safety standards in Argentina are
comparable to those in most industrialized countries, but
federal and provincial governments lack sufficient resources to
enforce them fully.  The most common victims of inhumane
working conditions generally are illegal immigrants with little
opportunity or knowledge to seek legal redress.
    f.  Rights in Sectors with U.S. Investment
    Argentine law does not distinguish between worker rights in
nationally-owned enterprises and those in sectors with U.S.
investment.  The rights enjoyed by Argentine employees of
U.S.-owned firms in Argentina equal or surpass Argentine legal
requirements.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                               566
Total Manufacturing                                   1,993
  Food & Kindred Products                   667
  Chemicals and Allied Products             443
  Metals, Primary & Fabricated              (1)
  Machinery, except Electrical              (1)
  Electric & Electronic Equipment            56
  Transportation Equipment                   23
  Other Manufacturing                       386
Wholesale Trade                                         135
Banking                                                 552
Finance/Insurance/Real Estate                           578
Services                                                 77
Other Industries                                        455
TOTAL ALL INDUSTRIES                                  4,355
Source: U.S. Department of Commerce, Bureau of Economic
Analysis
(###)
ARMENIA1
?U.S. DEPARTMENT OF STATE
ARMENIA: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                             ARMENIA
                     Key Economic Indicators
        (Millions of U.S. dollars unless otherwise noted)
                                    1992       1993      1994
Income, Production and Employment:  (billions of rubles)
Real GDP (1991 prices)             7.593      6.469     6.391
Real GDP Growth (pct.)             -52.3      -14.8      -1.2
GDP (at current prices)           59.068    779.619    29.400 2/
By Sector:  (pct.)
  Agriculture                       31.8       48.1      34.8
  Industry                          37.6       26.0      51.6
  Construction                       4.3        3.7       2.6
  Transportation                     1.3        0.6       1.5
  Trade/Catering                     3.3        2.0       1.5
  Other                             21.5       19.6       8.0
Real Per Capita GDP (1991 USD)       N/A        990       900
Labor Force (000s)                 2,194      1,530     1,490
Unemployment Rate (pct.)             3.4        6.5       7.0
Money and Prices:  (annual percentage growth)
Money Supply (M2)                    N/A        N/A       700
Base Interest Rate                  8-10       46.5   360-210
Personal Savings Rate               9-10        N/A    60-180
Retail Inflation                   728.7      930.0     900.0
Wholesale Inflation                  N/A      990.0     900.0
Consumer Price Index                28.7      940.0     900.0
Exchange Rate (USD/NC)
  Official                         1/400    1/2,020     1/350
  Parallel                         1/400    1/2,050     1/370
Balance of Payments and Trade:  (USD millions)
Total Exports (FOB)                74.52     108.01    129.98
  Exports to U.S.                   1.43       0.23      0.39
Total Imports (CIF)               141.02     205.43    254.44
  Imports from U.S. 3/              1.02       1.99      2.30
Aid from U.S. 4/                   45.10      93.20     81.73
Aid from Other Countries             N/A     112.50    113.00
External Public Debt                 0.0      220.0     592.0
Debt Service Payments (paid)         0.0        0.0      45.0
Gold and Foreign Exch. Reserves     15.9        N/A       N/A
Trade Balance 3/                 -66.500    -97.417  -124.460
  Trade Balance with U.S. 3/       0.409     -1.764    -1.991
N/A--Not available.
1/ 1994 Figures are all estimates based on available data in
October 1994.
2/ 1994 GDP estimate is in billions of Armenian drams.
3/ Grain, fuel and other assistance imports not included.
4/ Other U.S. assistance was available through regional
programs for which a country-by-country breakdown is not
available.
Sources:  the Armenian Ministry of Economy, the Armenian State
Statistical and Analysis Committee, and the Central Bank.
1.  General Policy Framework
    In 1994, the severe economic crisis in Armenia continued.
Almost all Armenian industries suffered shortages of fuel,
electricity and raw materials, as a result of the embargoes by
Azerbaijan and Turkey, and civil unrest in Georgia.
Rehabilitation of regions damaged by the 1988 earthquake has
been progressing slowly.  The average purchasing power of the
population decreased as compared with 1993 and further limited
trade opportunities.  Corruption remained a problem.  However,
the relative stability afforded by the cease-fire which has
been in place since May 1994 for the Nagorno-Karabakh conflict
has enabled the government to devote more attention to the
economy and invigorate its reform efforts.
    The present Armenian government has demonstrated a firm
commitment to turning Armenia from a centralized state with a
planned economy into a democratic society with free-market
economic relations.  The disintegration of the ruble zone in
1993 led Armenia to introduce its national currency, the dram,
which lost value rapidly at the beginning of 1994.  The general
economic crisis and severe shortages of energy resources during
the winter period resulted in a significant decrease in
industrial production.  The standard of living has continued to
erode, and a significant out-migration of the population has
occurred.  The Nagorno-Karabakh conflict had forced the
government to convert many of its operating machinery
manufacturers to defense production, but the cease-fire, which
has been in place since May 1994, has helped stabilize the
economic situation.
    The government has taken measures to lift almost all trade
barriers for exporters, and to reinforce the role of the
Central Bank by granting it significant authority to conduct
state monetary policy and license individuals or organizations
engaged in banking and related activities.  However, the
government budget deficit in 1994 decreased markedly due to
increases in grants, decreases in lending, and lower levels of
current expenditure.  The deficit was partially financed by
borrowing from the Central Bank and commercial banks, and by
credits received from Russia, other countries, and multilateral
institutions.  Since June 1994, the Central Bank has exercised
strong control on the emission and the exchange rates policy,
set higher reserve/deposits ratio requirements for banks, and
started to conduct credit auctions.  This, along with a slight
increase in exports during the summer and a number of
international credits, contributed to a sharp decrease in the
rate of inflation, from 30-40 percent in January/February to
3-7 percent in September/October.
    In 1992, Armenia privatized almost 80 percent of its
agricultural land.  In 1994, Armenia began major privatization
of industry.  The privatization program will be conducted in
three stages during 1994-1997, and is considered to be a key
step in improving the economic situation.  In 1994, more than
4,700 small and medium-sized enterprises were planned to be
privatized.  Privatization of dwellings also took place
throughout the year and is expected to end in 1995.
    During 1994, the Armenian government worked hard to improve
operating industries' export performance.  Concentrated efforts
were made to upgrade energy industry infrastructure, and to
find new sources/suppliers of energy and fuel.  An agreement
has been reached with Russia on joint exploitation of the
Metsamor nuclear power plant which may reopen in 1995.  In the
meantime, Armenian and Russian specialists continue to test and
modernize the plant, which was closed after the 1988 earthquake
for safety reasons.
    Armenian business laws have gradually been readjusted to
match those of western developed nations.  Present Armenian law
permits the establishment of almost all types of private
companies existing in the West, and the country's banking
system, which currently is very backward, is expected to
improve in the near future.  Armenia is open to foreign
investors and maintains a liberal foreign trade policy.
2.  Exchange Rate Policy
    At present, Armenia's banking sector consists of two state
banks, the Central Bank and the Savings Bank, and more than
forty private commercial banks, some of which are partially
controlled by the state.  During 1994, in an attempt to
stabilize the exchange rate and fight the hard currency black
market, the Central Bank adopted a number of contradictory
measures including a liberal policy toward issuing licenses for
exchange operations to any businesses, no strict control on
exchange rate policy, and numerous dollar interventions (though
of modest value).  Then, the Central Bank decided to set
obligatory exchange rates for all exchanges in Armenia, and
finally, to close many of the private exchanges, granting the
right for exchange operations to the existing banks only, and
determining exchange rates at the regular hard currency
auctions.  Exchange rates may vary from the Central Bank's
exchange rate by up to three percent.  In addition to the
market rate, the Central Bank maintains a second, lower
official exchange rate to be used in non-cash transactions
between state enterprises.
    No strict measures exist for control of hard currency
outflow from Armenia.  Armenian residents are currently
permitted to take a maximum of USD 500 with them when they
leave the country.  Permission to export foreign currency in
excess of USD 500 is granted only upon presentation of a
document proving that the money was purchased officially, or
legally obtained.  In May 1994, the Central Bank ordered all
Armenian resident companies to close their business accounts in
foreign banks, transfer funds to Armenia, and conduct all their
international transactions via Armenian resident banks.
3.  Structural Policies
    In 1994, U.S. commercial exports to Armenia were
insignificant, and were more affected by the Azerbaijani and de
facto Turkish blockade, unrest in Georgia, and the conflict in
Nagorno-Karabakh than by Armenia's tax and regulatory
policies.  In Armenia, resident foreign business owners receive
national treatment, and are generally subject to the same taxes
and regulations as Armenian businessmen.  Joint ventures with
more than 30 percent foreign investment are granted significant
tax benefits and other privileges.
    Basic Armenian taxes include a profit/corporate tax (12-20
percent), a value-added tax (16.6-20 percent), an excise tax
(5-70 percent) for sale of certain products, a personal income
tax, and taxes paid to social security and pension funds.
Amounts of duties and fees paid for export/import licenses and
licenses for certain professional activities are normally
dependent on the current minimum monthly wages set by the
government.  Though Armenian tax law describes ten more types
of taxes, including a property and a land tax, relevant
necessary legislation and collection mechanisms have yet to be
adopted.
    All exports from Armenia are duty-free.  The law sets minor
customs duties (5-10 percent) for imports of certain goods.
    In 1992, Armenia and the United States signed a bilateral
investment treaty and an Overseas Private Investment
Corporation (OPIC) incentive agreement, which allows OPIC to
offer political risk insurance and other programs to U.S.
investors in Armenia.  In 1994, Armenia adopted the Law on
Foreign Investments in hope of providing a legal structure for
secure investments in the country's economy.
4.  Debt Management Policies
    In 1992, Russia assumed responsibility for managing
Armenia's share of the former Soviet Union's external debt of
$561.6 million.  In 1993, Armenia incurred ruble and hard
currency external debt totalling $220 million.  This included
credits received from the World Bank, European Bank for
Reconstruction and Development (EBRD), as well as from other
international institutions and foreign governments.  No debt
service payments were made in 1993.
    At the end of 1994, the Armenian external debt increased to
$592 million.  It included loans received from the World Bank
for rehabilitation projects in the earthquake zone, irrigation
projects, an EBRD loan for reconstruction of the Hrazdan
natural gas-fired power generating unit, a credit for
construction of a cargo terminal at Yerevan's Zvartnots
airport, and a number of other foreign credits.  Debt service
payments by the end of 1994 are estimated at $45 million.
    In December 1994, the IMF approved a $25 million IMF
Systemic Transformation Facility loan to support Armenia's
reform program.  The World Bank is also expected to offer
financing worth about $80 million during 1995, which will
support reform.  The United States, France, and the Netherlands
pledged about $110 million in humanitarian assistance and trade
credits which also will support Armenia's reform program by
addressing its balance of payments needs.  Earlier in 1994,
Russia also agreed to extend a 110 billion ruble credit, part
of which will be used for retooling the Metsamor nuclear power
plant.
5.  Significant Barriers to U.S. Exports
    In 1994, the following factors acted as significant
barriers to U.S. exports to Armenia:  a partial road and rail
embargo of the country, fuel shortages, lack of market
information, lack of a modern telecommunications system,
nonconvertibility of the Armenian dram outside of the country,
inflation, a backward banking system, insufficient protection
of foreign investments, the extremely low purchasing power of
the population and local companies, and lack of international
trade experience.
    Local or foreign companies registered and operating in
Armenia which receive their revenues in hard currency are
required to sell 50 percent of their hard currency profits to
the state for drams at the official exchange rate.
    In 1994, government procurement practices were mainly based
on countertrade transactions, as well as competitive bidding in
certain industry sectors and programs financed by international
credits.
6.  Export Subsidies Policies
    In 1994, export-oriented industries continued to receive
government assistance.  As was the case during the Soviet
period, the government subsidized some state enterprises and
provided resource discounts to producers in critical industries.
7.  Protection of U.S. Intellectual Property
    An agreement on trade relations between Armenia and the
United States, signed in 1992, states that the parties shall
ensure that domestic legislation provide for protection and
implementation of internal property rights, including
copyrights on literary, scientific and artistic works,
including computer programs and data bases, patents and other
rights on inventions and industrial design, know-how, trade
secrets, trademarks and servicemarks, and protection against
unfair competition.
    In August 1993, the Armenian parliament adopted the Law on
Patents, and the government established a Patent
Administration.  Patents are granted for a period of 20 years.
Laws on trademarks and copyrights are being considered by the
Parliament.
    Armenia plans to join the Paris Convention for the
Protection of Intellectual Property, the Madrid Agreement
concerning international registration of trademarks, and the
Patent Cooperation Treaty.
    Meanwhile, piracy of video and audio materials, books and
software in the poorly controlled private sector is
widespread.  Items are copied locally, and some are imported
from neighboring states, mainly Russia.  No exports of pirated
materials from Armenia to other states have been observed.
Armenian state television and numerous illegal private cable
channels regularly air Western video materials, many of which
are unlicensed and of low quality.
8.  Worker Rights
    The 1992 Law on Employment guarantees employees the right
to form or join unions of their own choosing without previous
authorization.  At the same time, many large enterprises,
factories, and organizations remain under state control, and
voluntary, direct negotiations between unions and employers
without the participation of the government cannot take place.
The 1992 Law on Employment guarantees the right to organize and
bargain collectively.  Armenia's high unemployment rate makes
it difficult to gauge to what extent this right is exercised in
practice.
    The 1992 Law on Employment prohibits forced labor.  Child
labor is not practiced.  The statutory minimum age for
employment is sixteen.  The minimum wage is set by governmental
decree and was increased periodically during 1994.  Employees
paid the minimum and even average official wages cannot support
either themselves or their families and must look for sources
of additional income.  Most enterprises are either idle or
operating at only a fraction of their capacity.  Individuals
still on the payroll of idle enterprises continue to receive
two-thirds of their base salary.  The overwhelming majority of
Armenians are thought to live below the officially recognized
poverty level.
AUSTRALI1
qU.S. DEPARTMENT OF STATE
AUSTRALIA: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                            AUSTRALIA
                     Key Economic Indicators
       (Billions of U.S. dollars unless otherwise noted 1/)
                                   1992      1993      1994 2/
Income, Production and Employment:
Real GDP (1989-90 prices) 3/      276.7     262.4     293.8
Real GDP Growth (pct.)              1.8       3.2       4.3
GDP (at current prices)           292.1     281.5     317.6
By Sector:
  Agriculture                      11.7      10.9      12.2
  Energy/Water                      9.2       8.7       9.4
  Manufacturing                    41.2      40.3      46.1
  Construction                     18.2      17.8      19.6
  Ownership of Dwellings           27.5      26.1      28.8
  Finance/Property/Business Svcs.  33.0      30.4      32.6
  Other Services 4/                45.4      43.4      49.1
  General Government and Defense   10.8      10.0      10.9
  Net Exports of Goods & Services  -0.5      -1.3      -1.3
Real Per Capita GDP (USD)          15.8      15.0      16.6
Labor Force (000s)                8,623     8,648     8,760
Unemployment Rate (pct.)           10.8      10.9       9.8
Money and Prices:  (annual percentage growth)
Money Supply (M1) (pct./year-end)  20.0      17.8      19.3
Base Interest Rate 5/               7.2       5.8       6.0
Personal Savings Ratio (pct.)       4.9       5.0       5.4
Retail Price Index (pct. change)    2.1       2.8       2.9
Consumer Price Index (pct. change)  1.0       1.8       2.4
Wholesale Price Index               N/A       N/A       N/A
Exchange Rate (A$1=U.S. cents)     74.0      68.0      73.0
  Percentage Growth                -5.0      -8.1       7.4
Balance of Payments and Trade:
Total Exports (FOB) 6/             43.2      42.7      50.4
  Exports to U.S.                   3.8       3.4       4.0
Total Imports (FOB)                41.1      42.4      51.1
  Imports from U.S.                 9.2       9.0      10.2
Aid from U.S.                         0         0         0
Aid from Other Countries              0         0         0
Gross External Public Debt         63.2      64.9      67.9
Debt Service Payments (paid)        9.2       7.5       7.9
Gold and Foreign Exch. Reserves    14.9      14.3      15.0
Current Account Balance           -10.7     -10.7     -12.0
  Trade Balance with U.S.          -5.3      -5.5      -6.2
N/A--Not available.
1/ Exchange rate fluctuations must be considered when analyzing
data.  Percentage changes are calculated in Australian dollars.
2/ 1994 figures are all estimates based on available monthly
and quarterly data in October 1994.
3/ GDP at factor cost for base year indicated.
4/ "Other Services" includes community, recreation, personal
and other services.
5/  Figures are actual, average annual interest rates, not
changes in them.
6/ Trade data recorded on a foreign trade basis - different to
those recorded on a balance of payments basis.
1.  General Policy Framework
    Australia's gross domestic product (GDP) in 1994 was
estimated to be US $317.6 billion.  Real GDP is estimated to
have grown by 4.3 percent, a substantial improvement from
1993's 3.2 percent.  Nevertheless, the impact of the recession
which began during the third quarter of 1989 and ended in 1991
continued to be felt; unemployment hovered between 9.5 and 10
percent during 1994.
    U.S. economic interests in Australia are substantial,
including direct investment worth approximately US $16 billion
and a bilateral trade surplus of approximately US $6 billion
(up by approximately US $600 million from 1993).
    Although in area Australia is the size of the contiguous
United States, its domestic market is limited by a small
population (17.7 million people).  The production of
agricultural commodities and primary products is an important
component of the economy; Australia leads the world in wool
production, is a significant supplier of wheat, barley, dairy
produce, meat, sugar, and fruit, and a leading exporter of
coal, minerals and metals, particularly iron ore, gold,
alumina, and aluminum.  Export earnings are not well
diversified; in 1993, primary products accounted for  60
percent of the total value of goods and services exports.
    The drought which Australia suffered in 1994 affected the
agricultural sector severely.  The wheat crop, for example, was
cut by an estimated 51 percent from the previous year, reducing
export earnings and necessitating the importation of wheat,
corn, and sorghum.  Some commentators believe that the drought
may reduce otherwise-attainable real GDP growth (as shown in
the data table above) by approximately 0.5 percent.
    To increase Australia's international competitiveness, the
government has continued its longstanding effort to reduce
protective trade barriers and deregulate large segments of the
economy.  Privatization of government services at both the
federal (airlines, banks, telecommunications) and state level
(water treatment, transportation, electricity, banks) is being
pursued.  The government intends to sell the remaining
75 percent of Qantas to the public in 1995.  Trade reforms
begun in June 1988 resulted in an end to import quotas on all
but textiles, clothing, and footwear, and lower tariffs on most
imports.  Although the 20 percent preference given by the
federal government to Australian and New Zealand firms bidding
on government contracts was abolished November 1, 1989, and
civil offsets in December 1992, some state and territory
governments continue to apply preferences in their contracts.
    The Australian Government continued to provide substantial
fiscal stimulus to the domestic economy in 1994.  The budget
deficit reached US $9.6 billion (3.4 percent of GDP).  Public
sector borrowing more than funded the deficit, and took the
form of treasury notes (US $427 million), treasury bonds
(US $10.1 billion), and cash drawdowns (US $4.9 billion).  As
part of its Australian Fiscal Year (AFY) 1994-95 budget, the
government announced its intention to cut the deficit to
1 percent of GDP by AFY 1996-97.
    The money supply is controlled through an open-market
trading system of nine dealers who act as a conduit between the
Reserve Bank and the financial system.  Transactions may
involve purchases, sales, or trade in repurchase agreements of
short-term treasury securities.  Depending on liquidity
conditions, the Reserve Bank may bypass dealers and buy or sell
short-term treasury notes directly with banks on a cash basis.
Banks do not normally hold liquid deposits of any size with the
Reserve Bank.  Instead, they hold call-funds with the
authorized dealers.  If a bank needs cash on a given day, it
either borrows from other banks or withdraws funds it has on
deposit with the dealers.  Under the above money supply control
system, foreign exchange flows and government deficits and
credits have only limited impact on the money supply.  The
government also uses interest rate changes to influence the
money supply.  In 1994, official government interest rates were
increased twice, by 75 basis points in August, and a full
percentage point in October, to reach 6.5 percent.
    A strong supporter of the Uruguay Round negotiations
liberalizing international trade, the Australian government
moved rapidly to ratify the Uruguay Round agreements and became
a founding member of the World Trade Organization (WTO) on
January 1, 1995.  Australia also advocates liberalizing trade
within the Asia-Pacific region; it is a leading member of the
Asia Pacific Economic Cooperation (APEC) forum, and strongly
supported the November 1994 Bogor Declaration, in which APEC
leaders set the goal of free trade in the region by the year
2020.
    The challenge the government will face in 1995 is to
maintain moderately high real growth and reduce unemployment
without causing a revival of inflation and a massive increase
in the current account deficit (by virtue of the impact growth
has on the demand for imports).  Many economists believe that
the desired gains in growth and employment will come, but are
worried that unless the government cuts the budget deficit
faster than currently planned, both of the feared side effects
could be produced by an overheating economy.
2.  Exchange Rate Policies
    Australian Dollar (A$) exchange rates are determined by
international currency markets.  Official policy is not to
defend any particular exchange rate level.  In practice,
however, the Reserve Bank has a comfort range in mind when
looking at exchange rate movements.  It is active in "smoothing
and testing" foreign exchange rates in order to provide a
generally stable environment for fundamental economic
adjustment policies, and intervenes occasionally to combat
speculative attacks on the Australian dollar.
    Australia does not have major foreign exchange controls
beyond requiring Reserve Bank approval if more than A$5,000
(US $3,650) in cash is to be taken out of Australia at one
time, or A$50,000 (US $36,500) in any form in one year.  The
purpose is to control tax evasion and money laundering.  If the
Reserve Bank is satisfied that there are no liens against the
money, authorization to take large sums out of the country is
automatic.  The regulation does not affect U.S. trade.
3.  Structural Policies
    Pursuing a goal of a globally competitive economy, the
Australian government is continuing a program of economic
reform begun in the 1980s that includes an accelerated
timetable for the reduction of protection and micro-economic
reform.  Initially broad in scope, the Australian government's
program is now focusing on industry-by-industry, micro-economic
changes designed to compel businesses to become more
competitive.
    The strategy has three principal premises:  protection must
be reduced; the pace of reform needs to be accelerated; and
industry must learn to do without high levels of protection.
    Towards these ends, a phased program to cut tariffs by an
average of about 70 percent was begun July 1, 1988, to be
completed on June 30, 1996.  Specifically, in approximately
equal phases, except for textiles, clothing, footwear and motor
vehicles, all tariffs will be reduced to 5 percent.   Along
with these measures, some of the few manufactured products
still receiving bounties (production subsidies) will have those
benefits reduced each year until the bounties expire.   The
Uruguay Round agreements will force faster-than-planned tariff
reductions in only a small number of cases.
    As noted in Section five (below), local content
requirements on television advertising and programming and
certain government procurement practices may have adverse
effects on U.S. exporters and service industries.
4.  Debt Management Policies
    Australia's gross external public debt now exceeds
US $67.7 billion, or 23.5 percent of GDP.  That figure
represents 46 percent of Australia's gross external debt; the
remaining 54 percent is owed by the private sector.  Gross
interest payments on public debt totaled US $4.0 billion in
AFY 1993/94, representing 6.7 percent of exports of goods and
services.  Private sector debt service totaled US $4.0 billion,
an amount equal to another 6.7 percent of export earnings.  On
an overall basis, therefore, Australia's debt service ratio was
13.4 percent, down substantially from AFY 1992/93's 14.9
percent.  Falling international interest rates caused the drop
in the debt service ratio.  Standard and Poor's general credit
rating for Australia remained AA during 1994.
5.  Significant Barriers to U.S. Exports
    The U.S. enjoyed an estimated US $6.2 billion trade surplus
with Australia in 1994.  There are no longer any significant
Australian barriers to U.S. exports.  The U.S. is the number
one source of imports in Australia, with a 21 percent share of
Australia's import market and a substantial share of the
imported products purchased by the government.  The following
Australian trade policies and practices affect U.S. exports to
some degree.
    Licensing:  Import licenses are now required only for
certain vehicles, textiles, clothing, and footwear.  Licensing
applied to these products is for protection, but except for a
small market among importers of used automobiles has had little
impact on U.S. products.
    Service Barriers:  The Australian services market is
generally open, and many U.S. financial services, legal, and
travel firms are established in Australia.  In 1992 the
Government announced a complete liberalization of the banking
sector and new foreign banks will be licensed to operate as
either branches (for wholesale banking) or subsidiaries (for
retail operations).  The Australian Broadcasting Authority
(ABA), which controls broadcast licensing, liberalized rules
governing local content in television advertising effective
January 1, 1992.  Under current rules, up to 20 percent of the
time used for paid advertisements can be filled with messages
produced by non-Australians.  Statistics covering 1992 (the
latest available) indicate that approximately 8 percent of
television advertisements broadcast in that year were produced
abroad.
    On January 1, 1990, local content regulations regarding
commercial television programming entered into force.
Beginning with 35 percent for 1990, the local content
requirement increased by 5 percent per year until January
1993.  From that date forward, 50 percent of a commercial
television station's weekly broadcasts between the hours of
6:00 a.m. and midnight must be dedicated to Australian
programs.  Programs are evaluated on a complex point system
based on relevancy to Australia (setting, accent, etc., ranging
from no Australian content to a 100 percent Australian
production).  Trade sources indicate that the content
regulation does not have a substantial impact on the amount of
U.S. programming sold to Australian broadcasters, as the mix of
programming is driven by the market's preference for Australian
themes.  The latest available statistics bear that out.
According to the ABA, in the two years before the local content
requirement took effect, an average of 46 percent of commercial
stations' broadcasting time was devoted to imported
programming.  During the 1992 broadcasting year, that figure
fell to 44 percent.  Regulations governing the development of
Australia's pay-TV system require that channels carrying drama
programs devote at least 10 percent of broadcast time to new,
locally produced programs.  The ABA's local content
requirements have been opposed actively by the American Embassy
and U.S. trade officials.  In September 1994 the Embassy
reiterated U.S. opposition to quotas in the context of the
ABA's review of broadcasting content regulation.  That review
is expected to conclude in early 1995.
    State governments restrict development of private
hospitals.  States' motives are to limit public health
expenditures and to balance public/private services to prevent
saturation and overuse -- major government fiscal concerns
given that most medical expenses for private hospital care are
paid through government health programs.
    Standards:  In 1992, Australia became a signatory to the
GATT Standards Code.  However, it still maintains restrictive
standards requirements and design rules for automobile parts,
electronic and medical equipment, and some machine parts and
equipment.  Currently, all Australian standards are being
rewritten to harmonize them where possible to international
standards with the objective of fulfilling all obligations of
the GATT Standards Code.  State governments agreed in March
1991 to recognize each others' standards.  As a result, state
standards are being reviewed to harmonize with federal
standards.
    Labeling:  Federal law requires that country of origin be
clearly indicated on the front label of some products sold in
Australia.  Labels must also give the name and address of a
person in Australia responsible for the information provided on
the label.  State rules requiring that mass or volume of
packaging contents be expressed on labels to the nearest five
milliliters or kilograms are expected to be changed as state
standards are harmonized.  These and similar regulations are
being reconsidered along with other standards in light of
compliance with GATT obligations, lack of utility and effect on
trade.
    Motor Vehicles:  Passenger vehicle tariffs, currently
30 percent, will drop to 27.5 percent on January 1, 1995 and
will be phased down to 15 percent on January 1, 2000.  Under
automotive arrangements announced in March 1991, automobile
manufacturers may import duty free dutiable imported components
up to a maximum value equal to 15 percent of their automobile
production in a given year.  In addition, under terms of the
export facilitation scheme, local manufacturers of vehicles and
automotive components can receive an offset on the tariff on
finished vehicles they import for sale in Australia in an
amount equal to the value of their exports of
vehicles/components times the duty rate on the vehicles
imported.  Under the Motor Vehicle Standards Act of August
1989, the import of used vehicles manufactured after 1973 for
personal use is banned, except where the car was purchased and
used overseas by the buyer for a minimum of three months.
Commercial importers must apply for a "compliance plate"
costing A$20,000 (US $14,600) for each make of car imported.
Left-hand drive cars must be converted to right hand before
they may be driven in Australia.  Only approved (licensed)
garages are permitted to make these conversions.  Because of
these requirements, only a small number of used cars are
imported into Australia each year.
    Foreign Investment:  U.S. firms account for the largest
single share of the stock of foreign direct investment in
Australia.  In February 1992 the government announced
significant reforms to open the economy even further to foreign
investment.  In the mining sector (excluding uranium), the
50 percent Australian equity and control guideline for
participation in new mining projects, and the economic benefits
test for acquisitions of existing mining businesses, were
abolished.  In almost all sectors of the economy, the
thresholds above which foreign investment proposals must be
examined by the Foreign Investment Review Board (FIRB)
wereincreased.  Proposals to acquire 15 percent or more of a
company or business with total assets below A$50 million
(US $36.5 million), or takeover an off-shore company with
Australian subsidiaries or assets valued below A$50 million
(US $36.5 million) are no longer examined.  Proposals above the
threshold will be approved unless found contrary to the
national interest.  The only sectors in which the reforms do
not apply are uranium mining, civil aviation, the media, and
urban real estate.
    Divestment cannot be forced without due process of law.
There is no record of forced disinvestment outside that
stemming from investments or mergers which tend to create
market dominance, contravene laws on equity participation, or
result from unfulfilled contractual obligations.
    Government Procurement:  Australia is not a member of the
GATT government procurement code.  However, in June 1994 the
government announced an interagency examination of the code and
the question of possible adherence.  The review is scheduled to
be completed in early 1995.
    The federal government abandoned the civil offset program
in 1992.  Three state governments still require offsets in some
cases.  Nonetheless, in dismantling the offset program, the
government removed a major trade irritant between the United
States and Australia.
    Since 1991, foreign information technology companies with
annual sales to the Australian government of A$10-40 million
(US $7.3-29.2 million) have been required to enter into fixed
term arrangements (FTAs), and those with sales greater than
A$40 million (US $29.2 million) into partnerships for
development (PFDs).  Under FTAs, a foreign company or its
subsidiary commits to undertake local industrial development
activities worth 15 percent of its projected amount of
government sales over a four year period.  Under a PFD, the
headquarters of the foreign firm agrees to invest 5 percent of
its annual local turnover on R and D in Australia; export goods
and services worth 50 percent of imports (for hardware
companies) or 20 percent of turnover (for software companies);
and achieve 70 percent local content across all exports within
the seven year life of the PFD.  In 1992 this scheme was
extended into the telecommunications customer premises
equipment (CPE) sector, replacing, in large measure, the
requirement that suppliers of cellular mobile telephones, pabx,
small business systems, and first telephones have Industrial
Development Arrangements (IDAS) in place before obtaining
licenses to connect their equipment to the public switched
network.  The IDA program now is scheduled to be eliminated in
June 1996.
    Beginning on February 1, 1992, the government implemented a
Restricted Systems Integration Panel (RSIP) scheme.  The RSIP
is a panel of 20 to 25 selected private companies through which
all Commonwealth information technology requirements involving
systems integration activity are to be sourced, except for
purchases with an estimated value of less than A$1 million
(US $0.7 million).  Firms applying for panel membership will be
evaluated on "demonstrated competence, commercial viability and
potential to contribute to government policy objectives,
including expansion into Asian-Pacific markets, particularly
those of North and Southeast Asia".  The net effect of the
panel will be to hinder non-member participation in government
systems integration contracts.  Technically, panel membership
will not be closed.  However, access will remain restricted and
a new applicant (domestic or foreign) would have to demonstrate
eligibility to join or be able to offer expertise not available
within the panel.  Several U.S. firms were named initial
members of the panel.  The U.S. Embassy and the Australian
Information Industry Association have strongly opposed the
panel's establishment.
    In December 1992 the Australian government announced an
initiative requiring, beginning in AFY 1993/4, Government
Business Enterprises (GBEs - central government-owned companies
such as the Australian and Overseas Telecommunication
Corporation and the Civil Aviation Authority) to, inter alia,
give "local companies the maximum opportunity to compete for
government business consistent with the commercial objectives
of GBEs and the need to obtain value for money".  The new
policy stops well short of directing GBEs to give preference to
local suppliers.  However, it does bias them towards buying
locally and could, therefore, become a significant element
determining their procurement choices.
    The Australian government's May 1994 employment and
industry policy statement strengthens these efforts to use
government procurement policy to encourage local industrial
development.  It requires industry impact statements to be
drafted for procurement of US $7.4 million or more, and
establishes a two-envelope system for such tenders.  Under the
latter system, bidders will be required to submit detailed
information regarding Australian industrial development
separately (in "envelope 2"), and bids will be judged both on
price/product specifications and industrial development grounds.
    Quarantines:  Because of its geographic location, Australia
is relatively free of many animal diseases (rabies,
hoof-and-mouth, etc.) and pests that plague other parts of the
world.  To preserve its environment, Australia imposes
extremely stringent animal and plant quarantine restrictions.
Except for horses, livestock imports are limited to
reproductive material and a few valuable breeding animals that
must undergo long quarantines.  Studies are underway which
could see the lifting of phytosanitary barriers to the
importation of U.S. salmon and cooked chicken.
    Tobacco:  Local manufacturers are encouraged to use at
least 50 percent local leaf in their products through the offer
of concessional duties on imported leaf.  In practice, an
"informal" agreement between growers and cigarette
manufacturers extends the local content requirements to
57 percent.  This local content rule is to be removed on
October 1, 1995.  Since October 12, 1989 the government has
banned the sale of smokeless tobaccos (chewing tobacco, snuff
for oral use) in Australia, leaving the market solely to local
products used for oral purposes, but not labeled as such.
    Fruit Drinks:  Noncarbonated fruit drinks containing
20 percent or more local fruit juice are assessed a sales tax
of 10 percent, whereas fruit drinks with below 20 percent local
fruit juice content are assessed a 20 percent sales tax.  This
Australian content-based tax rule was due to be rescinded on or
before January 1, 1995.  In 1993, Australia modified its
preferential tariff scheme to equalize, from July 1, 1995, the
tariff applied on citrus from developed and developing
countries.  The tariff will be set at 8 percent effective on
that date, and will fall to 5 percent on July 1, 1996.
6.  Export Subsidies Policies
    Australia signed the GATT Subsidies Code and joined with
the U.S. in GATT negotiations to limit export subsidy use.
    The Australian government provides export market
development-reimbursement grants of up to A$250,000
(US $182,500) for most qualifying domestic firms exporting
goods and services.  Other mechanisms provide for drawbacks of
tariffs, sales, and excise taxes paid on exported finished
products or their components.  In some cases, government grants
and low-cost financing are provided to exporters for bonding,
training, research, insurance, shipping costs, fees, market
advice, and to meet other costs.  "Bounties" (in effect
production subsidies) are paid to manufacturers of some textile
and yarn products, bed sheets, new ships, some machine tools,
and computer and molding equipment to help them export or
compete with cheaper foreign-made substitutes.  Existing
bounties are to be phased down until they expire.   Bounties
and their expiration dates are:  shipbuilding and textiles
(June 30, 1995); citric acid (March 31, 1996); machine tools
and robots (June 30, 1997); books, computers and circuit boards
(December 31, 1997).  All bounties will be reviewed before
expiration with some possibly extended or converted to
tariffs.  Dairy market support payments, which were classed as
an export subsidy under the Uruguay Round, are to be terminated
on June 30, 1995 in accordance with Australia's Uruguay Round
implementing legislation.
    The government provides support and research and
development grants to Australian industry for trials and
development of internationally competitive products and
services for which the Federal or state government are the
primary purchasers.
    Electricity production is within the purview of state
governments, some of which subsidize the industry and/or
selected users of electricity.  States also control railroads
and rates; some use rail charges as a form of indirect taxation
to overcome their legal inability to levy income and some sales
taxes.  New South Wales and Queensland charge high freight
rates for coal partly for that reason.  Other states charge
high prices to move wheat by rail, a factor which hurts
Australian wheat's competitiveness on world markets.  In
competing for investment, states offer a wide range of
negotiable concessions on land, utilities, and labor training,
some of which amount to subsidies.
7.  Protection of U.S. Intellectual Property
    Patents, trademarks, designs and integrated circuit
copyrights are protected by Australian law.  Australia is a
member of the World Intellectual Property Organization, the
Paris Convention for the Protection of Industrial Property, the
Berne Convention for the Protection of Literary and Artistic
Works, the Universal Copyright Convention, the Geneva
Phonograms Convention, the Rome Convention for the Protection
of Performers, Producers of Phonograms and Broadcasting
Organizations, and the Patent Cooperation Treaty.  Australian
law is broad and protects new technology, including genetic
engineering.
AUSTRALI2
U.S. DEPARTMENT OF STATE
AUSTRALIA: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
    Patents:  Patents are available for inventions in all
fields of technology (except for human beings and biological
processes for their production).  They are protected by the
Patents Act, which offers coverage for 16 years, subject to
renewal.  However, patents for pharmaceutical substances may
have the term of protection extended to 20 years.  Trade
secrets are protected by common law, such as by contract.
Designs can be initially protected by registration under the
Designs Act for one year, which may be extended for six years
and for further periods of five and five years respectively,
upon application.
    Trademarks:  Trade names and marks may be protected for
seven years and renewed at will by registration under the
Trademark Act.  Once used, trade names and marks may also,
without registration, be protected by common law.  Some
protection also extends to parallel importing; that is, imports
of legally manufactured products ordered by someone other than
a person or firm having exclusive distribution rights in
Australia.  Parallel importation is allowed, however, for
books, and has been proposed for sound recordings (legislation
which would have allowed such imports died when Parliament was
dissolved for the March 1993 national election).  In September
1993 the Australian Copyright Law Review Committee recommended
that parallel importation of computer software be allowed under
strict limitations.
    Copyrights:  Copyrights are protected under the Copyright
Act.  Works do not require registration and copyright
automatically subsists in original literary, artistic, musical
and dramatic works, film and sound recordings.  Computer
programs are legally considered to be literary works.
Copyright protection is for the life of the author plus
50 years.
    The Australian Copyright Act provides protection regarding
public performances in hotels and clubs, and against video
piracy and unauthorized third-country imports.  Australia's
Uruguay Round implementing legislation extends protection
against the commercial rental of sound recordings and computer
programs.  The Attorney General's Department monitors the
effectiveness of industry bodies and enforcement agencies in
curbing the illegal use of copyrighted material.
    New Technologies:  Illegal infringement of technology does
not appear to be a significant problem.  Australia has its own
software industry and accords protection to foreign and
domestic production.  Australia manufactures only basic
integrated circuits and semiconductor chips.  Its geographic
isolation precludes most U.S. satellite signal piracy.
Australian networks, which pay for the rights to U.S.
television programs, jealously guard against infringement.
Cable television is not yet established in Australia.
8.  Worker Rights
    a.  Right of Association
    Workers in Australia fully enjoy and practice the rights to
associate, to organize and to bargain collectively; these
rights are enshrined in the Arbitration Act of 1904.
Legislation which went into effect on March 30, 1994 formally
legalized the right to strike, which already had been
well-established in practice.  In general, industrial disputes
are resolved either through direct employer-union negotiations
or under the auspices of the various state and federal
industrial relations commissions whose mandate includes
resolution of disputes through conciliation and arbitration.
Australia has ratified the major International Labor
Organization conventions regarding worker rights.
    b.  Right to Organize and Bargain Collectively
    Slightly less than 40 percent of the Australian work force
belongs to a union.  The industrial relations system operates
through independent federal and state tribunals; unions are
fully integrated into that process, having explicitly stated
legal rights and responsibilities.
    c.  Prohibition of Forced or Compulsory Labor
    Compulsory and forced labor are prohibited by ILO
conventions which Australia has ratified, and are not practiced
in Australia.
    d.  Minimum Age for Employment of Children
    The minimum age for the employment of children varies in
Australia according to industry apprenticeship programs, but
the enforced requirement in every state that children attend
school until age 15 maintains an effective floor on the age at
which children may be employed full time.
    e.  Acceptable Conditions of Work
    There is no legislatively-determined minimum wage.  An
administratively-determined minimum wage exists, but is now
largely outmoded, although some minimum wage clauses still
remain in several federal awards and some state awards.
Instead, various minimum wages in individual industries are
specified in industry "awards" approved by state or federal
tribunals.
    Workers in Australian industries, including the petroleum,
food, chemicals, metals, machinery, electrical, transportation
equipment, wholesale trade, and general manufacturing sectors,
enjoy hours, conditions, health, safety standards and wages
that are among the best and highest in the world.
    f.  Rights in Sectors with U.S. Investment
    Most of Australia's industrial sectors enjoy some U.S.
investment.  Worker rights in all sectors are essentially
identical in law and practice and do not differ between
domestic and foreign ownership.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                              2,579
Total Manufacturing                                    7,076
  Food & Kindred Products                   1,319
  Chemicals and Allied Products             2,235
  Metals, Primary & Fabricated                317
  Machinery, except Electrical                624
  Electric & Electronic Equipment             405
  Transportation Equipment                    472
  Other Manufacturing                       1,704
Wholesale Trade                                        1,706
Banking                                                1,199
Finance/Insurance/Real Estate                          2,060
Services                                                 734
Other Industries                                       3,083
TOTAL ALL INDUSTRIES                                  18,437
Source: U.S. Department of Commerce, Bureau of Economic
Analysis
AUSTRIA1
pLpLU.S. DEPARTMENT OF STATE
AUSTRIA: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                             AUSTRIA
                     Key Economic Indicators
        (Billions of U.S. dollars unless otherwise noted)
                                   1992      1993        1994 1/
Income, Production and Employment:
Real GDP (1985 prices) 2/          78.8      78.6       80.6
Real GDP growth (pct.)              1.6      -0.3        2.5
GDP (at current prices)           185.2     181.4      195.4
By Sector:
  Agriculture                       4.5       4.1        4.4
  Energy/Water                      5.1       5.1        5.3
  Manufacturing/Mining             46.9      43.7       47.4
  Construction                     13.8      13.5       14.7
  Rents                             N/A       N/A        N/A
  Financial Services               32.7      33.9       36.6
  Other Services                   50.7      49.5       53.0
  Public Services                  24.9      25.2       27.0
Net Exports of Goods & Services   -73.3     -69.1      -73.5
Real Per Capita GDP
  (USD/1985 base) 2/              9,990     9,890     10,090
Labor Force (000s)                3,663     3,684      3,685
Unemployment Rate (pct.) 3/         3.6       4.3        4.3
Money and Prices:
(annual percentage growth unless otherwise noted)
Money Supply (M2)                   6.2       3.2        3.0
Secondary Bond Market Rate 4/      8.39      6.74       6.50
Personal Savings Rate 4/           11.2      11.5       12.0
Wholesale Inflation                -0.2      -0.4        1.0
Consumer Price Index                4.1       3.6        3.0
Exchange Rate (AS/USD) 5/         10.99     11.63      11.40
Balance of Payments and Trade:
Total Exports (FOB)                44.4      40.2       44.1
  Exports to U.S.                   1.2       1.3        1.4
Total Imports (CIF)                54.0      48.6       53.8
  Imports from U.S.                 2.1       2.1        2.3
Aid from U.S.                       N/A       N/A        N/A
Aid from Other Countries            N/A       N/A        N/A
External Public Debt 6/            15.7      18.3       21.5
Debt Service Payments               1.8       2.5        2.2
Gold and FOREX Reserves (year-end) 16.2      18.3        N/A
Trade Balance 7/                   -9.7      -8.4       -0.9
  Trade Balance with U.S. 7/       -0.9      -0.8      -10.0
N/A--Not available.
1/ Data as of October 1994 and economic forecasts.
2/ Converted at the 1985 exchange rate of AS 20.69=US$1.
3/ Unemployment rate according to OECD method.
4/ Average annual rates.
5/ There is only an official rate, no parallel rates.
6/ Figures reflect the federal government's external debt.
7/ Merchandise trade only.
1.  General Policy Framework
    Austria, a member of the European Free Trade Association
(EFTA) and the OECD, has a highly developed economy with a high
standard of living.  Austria's economy is highly integrated
into the international economy, with exports of goods and
services amounting to almost 40 percent of GDP.  The
state-owned sector has traditionally played a significant role
in the economy.  Austria achieved a top economic and political
goal - full membership in the European Union (EU), which
occurred on January 1, 1995.  The Austrian Parliament ratified
the EU accession agreement by an overwhelming majority on
November 11, 1994.
    After eleven consecutive years of growth, the Austrian
economy experienced a mild recession in 1993, by contracting
0.3 percent in Austrian Schilling (AS) terms.  In 1994, Austria
has again entered a phase of swift recovery.  The budget
deficit has increased, however, from the planned three percent
of GDP to 4.7 percent in 1993 as a result of the weak economy
and spending increases, particularly for unemployment benefits
and a second year of maternity leave.  Austria financed its
1993 federal budget deficit of AS 117.1 billion (10 billion
dollars) primarily through Schilling and foreign currency
bonds.  The Austrian National Bank does not set money supply
targets, but uses interest rates, in particular the rediscount
rate and the rate for open market transactions, as its main
tool for maintaining the mark-schilling peg.
    Formation of the European Union's single market and the
transformation occurring in Central Europe have posed
significant challenges for Austria, with the need for major
restructuring.  Austria's Grand Coalition Government of Social
Democrats and Conservatives undertook measures to make the
Austrian economy more liberal and open by introducing tax
reforms, privatizing some state firms, and liberalizing
cross-border capital movements.  Austria has significantly
increased trade and investment activities in Central Europe
since 1989, but has also faced stiffer competition from the
influx of low-priced Eastern products, and discrimination
resulting from the EU's free trade agreements with those
countries.  In July 1994, Austria's parliament approved the
Uruguay Round agreements.  Austria ratified the Uruguay Round
agreements in December and became a founding member of the
World Trade Organization on January 1, 1995.
2.  Exchange Rate Policy
    Because of the Federal Republic of Germany's importance as
a trading partner, the Austrian National Bank (ANB) maintains
its "hard schilling policy" by adjusting money supply and
interest rates to peg the schilling to the German Mark at an
exchange rate of AS 7 equals DM 1.  The schilling continued to
appreciate vis-a-vis many other European currencies in 1993,
which meant that Austria's international competitiveness
deteriorated.  After a small recovery in 1993, the dollar
started to decline again vis-a-vis the schilling in late summer
1994.  Austria's foreign exchange regime is fully liberalized.
Austrian capital markets were deregulated and liberalized by
the new Capital Market Law on Public Securities introduced in
1992.  U.S. issuers of bonds and securities are free to place
offerings in the Austrian capital market.
3.  Structural Policies
    Austria's participation in the European Economic Area (EEA)
beginning in January 1994 and preparations for EU membership
have resulted in broad structural reform.  Most non-tariff
barriers to merchandise trade have been removed, financial and
other services have been liberalized, and cross-border capital
movements and market access for foreign bonds have been fully
liberalized.
    Following a preliminary set of tax reform measures in 1992
and 1993 geared at the environment and tax simplification, a
comprehensive tax reform became effective January 1, 1994.
Main features of the reform were an increase of the general tax
credit for all taxpayers, the streamlining of tax procedures,
and the abolition of existing taxes such as capital tax and tax
on industry and trade.  To compensate for part of the revenue
shortfall, the corporate tax rate was raised from 30 to 34
percent.
    Other laws and regulations have been amended to open up the
economy.  A more liberal Business Code became effective July 1,
1993, which reduced licensing requirements.  On November 1,
1993, Austria's new cartel law allowing for merger control
became effective.  The government enacted on July 1, 1994, a
new law requiring environmental impact assessments for many
projects in the waste, transportation, and energy sectors, and
for large industrial projects.  Austria's participation in the
EEA required Austria to implement its first federal procurement
law and to make its subsidy programs consistent with EU
regulations.
4.  Debt Management Policies
    Austria's external debt management has no significant
impact on U.S. trade.  At the end of 1993, Austria's external
Federal Government debt amounted to AS 212.9 billion (18
billion dollars), or 19.2 percent of the Government's overall
debt.  In terms of GDP, Austria's public external debt amounted
to 10.1 percent in 1993 and is estimated to rise to 11 percent
in 1994.  Debt service for Austria's external federal debt
amounted to AS 29.2 billion (2.5 billion dollars) in 1993 and
was equal to 1.4 percent of GDP and 3.6 percent of total
exports of goods and services.
5.  Significant Barriers to U.S. Exports
    Austria's tariff regime will change when it impliments the
EU common external tariff on January 1, 1995.  U.S. exporters
will face higher tariffs in many sectors including computers,
modems, fax machines, and other electronic equipment.
    In some sectors, competition is restricted, especially in
agriculture.  High tariffs combined with complicated licensing
and quota systems limit agricultural imports.  Discretionary
licenses are required for imports of some food products,
including dairy product, red meats, poultry, grains (except
rice), fruits, vegetables, sugar, brown coal, and some
weapons.
    Trade of cheese and beef between the U.S. and Austria is
conducted under two bilateral agreements.  The first, dating
from 1980, gives the U.S. a 600 ton quota for U.S. high quality
beef (HQB) in Austria, and the U.S. granted Austria a duty free
quota of 7,850 tons for cheese.  The second accord, negotiated
in 1992 under GATT Article XXVIII as a result of trade
concessions withdrawn by Austria on oilseeds products, provides
for an additional HQB quota of 400 tons for the U.S.  In the
fall of 1993, the U.S. requested consultations, claiming that
Austria was in violation of the agreements because of changes
in the import mechanism, failure to release the full quota in a
timely manner, and substantial increases in levies.  In the
first half of 1994, the import mechanism was changed, but the
import levy, which can reach as high as four dollars a
kilogram, remains in place.  The U.S. beef quota is likely to
be folded into the EU-wide HQB quota.  Due to the EU ban on
hormones, this would effectively curtail exports of U.S. beef
to Austria.
    The Government of Austria generally welcomes foreign direct
investment.  One hundred percent foreign ownership is
permitted, and there are no restrictions on repatriation of
earnings, interest payments, and dividends.  However, investors
must sometimes deal with complicated administrative procedures
to obtain approval for new operations.  Environmental
regulations and land use plans that differ between provinces
complicate both domestic and foreign investment.  For example,
environmental and administrative approval of one recent large
U.S. investment took nearly two years.
    In July 1993, Austria implemented a highly restrictive
residency law aimed at curbing illegal immigration.  It applies
to all residents, except those from EU countries and
Switzerland, staying longer than six months.  Procedures are
complicated and lengthy, and it has made timely approval for
American business executives, their representatives, and their
families difficult.
    Austria's 1993 Banking Act presents a number of obstacles
for market entry of U.S. banks.  Branches of non-EEA banks must
be licensed, while EEA banks may operate branches on the basis
of their home country licenses.  For bank branches or
subsidiaries from a non-EEA member country, the limits for
single large loan exposures and open foreign exchange positions
will shrink considerably, because the endowment capital from
their parent companies can no longer be included in the capital
base used for calculating these limits.  Other providers of
financial services, such as accountants, tax consultants, and
property consultants must specifically prove their
qualifications, such as university education or experience in
order to practice.  Other service companies also require a
business license, one of the preconditions of which is legal
residence.  As a result, U.S. service companies often must form
a joint venture with an Austrian firm.  U.S. companies holding
investments in several EEA member countries benefit from more
liberal regulations with the enforcement of the EEA.
    Imports of foodstuffs, plant pesticides, pharmaceuticals,
or electrical equipment are permitted only if the products pass
standards set by the Austrian Testing Institute or a government
agency.  Due to the sometimes broad and diverse testing
procedures for pharmaceuticals, responses may take as long as
three or four years.  The Austrian Consumer Protection Law and
the Law Against Unfair Competition require that textile
products, apparel, household chemicals, soaps, toiletries, and
cosmetic preparations must be marked and labeled in German.
All telecommunications equipment, including customer premises
equipment, private networks, cable TV networks and value-added
services, is subject to approval by the Austrian Post and
Telegraph Administration (PTT).  The Austrian approval policy
for customer premises equipment tends to be liberal.
    Austrian government procurement is non-discriminatory and
complies with the General Agreement on Tariffs and Trade (GATT)
Agreement on Government Procurement.  Austria does not have
restrictive "buy-national" legislation and the principle of the
best bidder is usually maintained.  Bid times are sufficiently
long to allow foreign firms to submit bids.  In the military
sector, the Austrian Government often requests offset
arrangements; in early 1993, it concluded such an agreement
with the French Government for the purchase of Mistral
missiles.  With Austria's participation in the EEA, Austria
enacted its first federal procurement law, adapting the EU's
Single Market legislation on procurement.  The Austrian
Government did not, however, implement Article 29 of the EU
Utilities Directive which mandates price preferences for EU
firms.
6.  Export Subsidies Policies
    The Government provides export promotion loans and
guarantees within the framework of the OECD Export Credit
Arrangement and the GATT Subsidies Code.  Preferential
financing is the main form of subsidy.  In mid-1991, the
Austrian Kontrollbank (AKB), Austria's export financing agency,
revised its guarantee policy to set rates according to country
risk rather than fixed rates.  As a result, the extension of
guarantees has become more restrictive.  The Government assumes
guarantees for credit transactions of the AKB if the proceeds
of such transaction are used for financing exports and
contributes to the AKB's borrowing costs.  The AKB's Export
Fund provides export financing programs for small and
medium-sized companies with annual export sales of up to AS 100
million.  Austria is a member of the GATT Subsidies Code.
7.  Protection of U.S. Intellectual Property
    Austrian Laws are consistent with international standards,
and Austria is a member of all principal multilateral
intellectual property organizations, including the World
Intellectual Property Organization.  Austria took an active
position on intellectual property during the Uruguay Round
negotiations.  To adopt to EU laws, as required by the EEA
agreement, Austria amended in March 1993 its copyright law to
provide for the protection of computer software.  The
Government also implemented in April 1994 the Protection of
Inventions Act and a law implementing protection certificates
for medicine patents in July 1994.
    A levy on imports of home video cassettes and a compulsory
license for cable transmission is required under Austrian
copyright law.  Fifty-one percent of total revenues go to a
special fund used for social and cultural projects.  A draft
law which was prepared by the Justice ministry to introduce
compulsory licensing of videocassettes to tourist and
educational institutions was postponed in September 1994.
Austrian copyright law requires that the owner of intellectual
property must prove the entire chain of rights up to the
producer.  In the case of films, this has made prosecution of
cases for video piracy rare.
8.  Worker Rights
    a.  The Right of Association
    Workers in Austria have the constitutional right to
associate freely and the de facto right to strike.  Guarantees
in the Austrian Constitution governing freedom of association
cover the rights of workers to join unions and engage in union
activities.  Labor participates in the "Social Partnership," in
which the leaders of Austria's labor, business, and
agricultural institutions give their concurrence to new
economic legislation and influence overall economic policy.
    b.  The Right to Organize and Bargain Collectively
    Austrian unions enjoy the right to organize and bargain
collectively.  The Austrian Trade Union Federation (OGB) is
exclusively responsible for collective bargaining.  All workers
except civil servants are required to be members of the
Austrian Chamber of Labor.  Leaders of the OGB and labor
chamber are democratically elected.  Workers are legally
entitled to elect one-third of the board of major companies.
    c.  Prohibition of Forced or Compulsory Labor
    Forced or compulsory labor is prohibited by law.
    d.  Minimum Age of Employment of Children
    The minimum legal working age is 15.  The law is
effectively enforced by the Labor Inspectorate of the Ministry
for Social Affairs.
    e.  Acceptable Conditions of Work
    There is no legally-mandated minimum wage in Austria.
Instead, minimum wage scales are set in annual collective
bargaining agreements between employers and employee
organizations.  Workers whose incomes fall below the poverty
line are eligible for social welfare benefits.  Over 50 percent
of the workforce works a maximum of either 38 or 38.5 hours per
week, a result of collective bargaining agreements.  The Labor
Inspectorate ensures the effective protection of workers by
requiring companies to meet Austria's extensive occupational
health and safety standards.
    f.  Rights in Sectors with U.S. Investment
    Labor laws tend to be consistently enforced in all sectors,
including the automotive sector, in which the majority of U.S.
capital is invested.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                               210
Total Manufacturing                                     578
  Food & Kindred Products                    15
  Chemicals and Allied Products              25
  Metals, Primary & Fabricated                2
  Machinery, except Electrical               54
  Electric & Electronic Equipment           (1)
  Transportation Equipment                  (1)
  Other Manufacturing                        60
Wholesale Trade                                         453
Banking                                                 (1)
Finance/Insurance/Real Estate                           110
Services                                                 12
Other Industries                                        (1)
TOTAL ALL INDUSTRIES                                  1,384
(1) Suppressed to avoid disclosing data of individual companies.
Source: U.S. Department of Commerce, Bureau of Economic
Analysis
AZERBAIJ1
GU.S. DEPARTMENT OF STATE
AZERBAIJAN: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                            AZERBAIJAN
                     Key Economic Indicators
        (Millions of U.S. dollars unless otherwise noted)
                                     1992      1993      1994 1/
Income, Production and Employment:
GDP (current prices)                  131       331       166
Real GDP Growth (pct.)              -35.2     -13.3     -25.6
GDP Growth by Sector:  (pct.)
  Agriculture                       -32.5     -29.4     -11.5
  Energy/Water                        N/A       N/A      -7.7
  Manufacturing                     -50.5     -45.6     -25.6
  Construction                       -8.8     -13.7     -25.0
  Rents                               N/A       N/A       N/A
  Financial Services                  N/A       N/A     131.0
  Other Services                     -4.8      -3.6       N/A
  Government/Health/Education         N/A       N/A       N/A
Real Per Capita GDP 2/              179.0       N/A       N/A
Labor Force (000s)                  3,849     2,706     2,639
Unemployment (pct.)                  0.16      0.70     27.90
Money and Prices:  (annual growth percentage)
Money Supply                          N/A       N/A       507
Base Interest Rate (pct.)             N/A       N/A       150
Personal Saving Rate                  N/A       N/A    60-200
Retail Inflation (pct.)           1,066.6     833.0   1,742.6
Wholesale Inflation                 463.4     208.7     890.0
Consumer Price Index (actual)         N/A       N/A     1,403
Exchange Rate (avg/manats:USD)        N/A       N/A     2,000
Balance of Trade and Payments:
Total Exports (FOB)                   N/A     255.0     397.2
  Exports to U.S.                     N/A       3.4       0.0
Total Imports (CIF)                   N/A     147.0     577.0
  Imports from U.S.                   N/A      10.8       4.2
Trade Balance                         N/A     108.0    -179.8
  Trade Balance with U.S.             N/A       7.4       4.2
Aid from U.S. 3/                      N/A       N/A      25.0
Aid from Other Countries              N/A       N/A       N/A
External Public Debt                  N/A       N/A       N/A
Debt Service Payments                 N/A       N/A       N/A
Gold and Foreign Exch. Reserves       N/A       N/A       N/A
N/A--Not available.
1/ January-August 1994.
2/ Figure obtained using the 1992 average annual exchange rate
of 20 manat = 1 dollar.
3/ Some U.S. assistance was available through regional programs
for which a country-by-country breakdown is not available.
Figures should be considered as indicators of order of
magnitude only.  Most data was furnished by the State
Statistics Committee of Azerbaijan.
1.  General Policy Framework
    Azerbaijan, a country of 7.5 million people with rich
natural resources, has significant potential as a trading and
investment partner of the United States.  Exploitation of its
enormous oil and gas reserves in the Caspian Sea will require
foreign capital and know-how, and Azerbaijan has taken the
first step toward developing these resources by signing a
production sharing agreement with a consortium of western oil
firms, including several U.S. companies, in September 1994.
Azerbaijan has an array of heavy industries, particularly oil
refining, petrochemicals, oil field equipment, and air
conditioners, that will require foreign investment to make them
viable in a world economy.  Finally, Azerbaijan is richly
endowed with a diverse agricultural sector producing grapes,
cotton, tobacco, silk, tea, and other fruits for export.
    Azerbaijan has yet to realize its potential largely because
recent governments have been preoccupied with issues of
survival and instability arising from the conflict in
Nagorno-Karabakh, a break-away, formerly autonomous province of
Azerbaijan inhabited mostly by ethnic Armenians.  Azerbaijan
has been unable to resolve the conflict and approximately 20
percent of its territory has been occupied by Nagorno-Karabakh
Armenian forces.  President Heydar Aliyev, a former member of
the Soviet Union's Politburo and former communist ruler of
Azerbaijan in the 1970s, has announced his government's
commitment to democratic and market-based reforms, though he
favors a process of gradual reform rather than economic shock
therapy.  First Deputy Prime Minister Quliyev is responsible
for economic performance and reform, while four deputy prime
ministers in the Cabinet of Ministers have responsibility for
directing different economic ministries, though all answer
ultimately to President Aliyev.  Ministerial and
sub-ministerial changes are taking place following an internal
political crisis in October 1994 which resulted in the
dismissal of the Prime Minister.  Some of these changes will
affect economic decision-makers.
    The economy remains dominated by large state enterprises
and, in the agricultural sector, by large state and cooperative
farms, all of whose production is theoretically based on state
orders prepared by the government ministries.  The national
parliament passed a privatization law in August 1994, but the
process has languished as no implementing legislation has yet
been approved.  Private business has begun to appear, primarily
in the retail sector in the main cities and towns.  In
addition, many state enterprises are beginning to produce and
even market their products independently of central government
control.
    The economy declined about 25 percent in the first nine
months of 1994 compared to the same period in 1993.  The
government, continuing its subsidies of key commodities,
allowed budget deficits to remain above ten percent of GDP in
the first nine months of 1994.  The government does not yet
have a realistic plan for financing this deficit, and will
probably continue to rely on the inflationary policy of issuing
more currency.
    Azerbaijan declared its currency, the manat, sole legal
tender January 1, 1994, and has allowed the manat to float
against major currencies since April 1994.  Foreign currency
exchanges have been introduced to help make the manat
convertible, but are still operating at very low volumes.
    Although Azerbaijan became an active member of the
Commonwealth of Independent States (CIS) in 1993, it has not
signed the proposed ruble zone agreement.  Joining the CIS
eliminated tariff and other restrictions on Azerbaijan's
critical trade with Russia, Ukraine, and other CIS countries,
but commercial ties continue to slump due to payment problems
on Azerbaijan's part and disagreements over Azerbaijan's debts
with some CIS members, especially Russia.  The conflict in
Chechenya has disrupted Azerbaijan's main trade route with
Russia, and  Moscow has imposed restrictions on Azerbaijani use
of the Volga-Don Canal, the only water route linking Baku to
the outside world.
2.  Exchange Rate Policy
    The Azerbaijani manat has been allowed to float against
major currencies, and has suffered a sharp, steady devaluation
as a result of Baku's expansionary fiscal and monetary
policies.  The manat has lost more than 90 percent of its
value.  In October 1994, the rate reached 2,500 manats to the
dollar.  The government imposes several controls on foreign
exchange, including a surrender requirement and a limit on the
amount of foreign currency that can be taken out of the country.
3.  Structural Policies
    Structural change is coming to Azerbaijan, albeit slowly
and more as a result of the breakdown of the centrally planned
system rather than through a government reform plan.
    Pricing Policies:  Several key commodities, including
bread, natural gas and gasoline, remain under price controls.
While the government raises these controlled prices
periodically, they remain artificially low, and shortages of
these goods occur, along with corruption and black market
activity.  In addition, nearly all goods are produced by state
enterprise monopolies, and the government continues to set
prices it will pay to these enterprises based on fixed
cost-plus formulas.
    Tax Policies:  The government implemented a new tax system
in 1992 through a series of presidential decrees.  This system
is composed mainly of four taxes:  a 28 percent value-added
tax; an enterprise profit tax, with a standard 35 percent rate
and differential rates allowed on certain enterprises; excise
taxes of up to 90 percent of the price for selected goods; and
a personal income tax, progressive in nature but not strictly
enforced.  Other important sources of government revenue are a
royalty on crude oil production, and a tax on vehicle ownership.
    Regulatory Policies:  The government regulates the export
of strategic commodities produced in Azerbaijan, which include
the main hard currency earners such as refined oil products,
cotton, and wine.  Potential buyers of such commodities must
pay for an export license or cooperate with an Azerbaijani
partner that has obtained a general license for that commodity.
4.  Debt Management Policies
    In September 1993, Azerbaijan signed a "zero option
agreement" with Russia under which Russia will pay Azerbaijan's
share of the external debt of the former Soviet Union in return
for Azerbaijan's share of the former Soviet Union's assets.
    The Azerbaijani budget deficit remains at high levels,
amounting to over 10 percent of GDP in 1994.  Since Russia has
stopped financing Azerbaijani debt outlays with rubles,
Azerbaijani officials increased contacts with the International
Monetary Fund (IMF), World Bank, and the European Bank for
Reconstruction and Development (EBRD).  However, borrowing
programs will not be granted until Azerbaijan tightens its
policy to meet generally accepted financial criteria, which has
proposed to do by the end of 1994.  Azerbaijan has no borrowing
relationship with commercial banks, and in the short term is
likely to finance budget shortfalls through printing manats and
issuing credit through the National Bank.
5.  Significant Barriers to U.S. Exports
    Corporate Barriers to U.S. Exports:  The most significant
barrier to trade with the United States is the lack of hard
currency reserves.  Azerbaijan pays for nearly all imports with
barter goods, primarily oil-based products, cotton, oil field
equipment, diesel fuel, chemical products of organic synthesis,
silk, waste metals and tobacco.  Selling goods or services to
Azerbaijan almost always entails receiving barter goods in
payment.
    Lack of laws and institutions which regulate fairness in
trade, and poor infrastructure create barriers.  Azerbaijan has
no bankruptcy or commercial transactions laws.  Only some banks
have access to foreign exchange.  The customs service and
airport officials lack professional training and attitudes.
Entry and exit regulations at the airport change frequently and
without warning.  Office space is at a premium and costly,
telecommunications are not reliable and experience with western
business practices is rare.
    Standards and Testing Requirements:  Azerbaijan produces
oil field equipment, machine tools and other manufactured goods
according to the GOST standards used throughout the former
Soviet Union, which are not up to U.S. or European industry
standards.  There are a few Western companies here with joint
ventures which have brought or are bringing products and
facilities up to American or European standards.  It is assumed
that with the recent signing of the oil contract, foreign
companies and banks will be more likely to move forward on
planned projects.
    Trademarks and Logos:  There is a small but growing market
in Azerbaijan for pirated videos, sound recordings, and
computer software, with no government effort to stop it.  A
privately-owned television channel's programming consists
almost entirely of pirated American films and television
mini-series, which have been dubbed into Russian and marketed
throughout the former Soviet Union.  There is no evidence,
however, that Azerbaijan produces such pirated works.
    Investment Barriers:  According to the Foreign Investment
Law of 1992, the government's Council of Ministers must
pre-approve all foreign investments.  Mineral exploration and
extraction rights granted through concessionary agreements with
the approval of the Council of Ministers usually require
parliamentary approval as well.  There are restrictions on the
number of foreign personnel that an enterprise may hire.  At
present, both Azeris and foreigners may lease land but not own
it outright.  The exception is the .05 percent of land owned by
private farmers.
    To normalize its trade and investment relations with
Azerbaijan, the United States has proposed a network of four
bilateral economic agreements.  A bilateral trade agreement,
which would provide reciprocal most-favored nation status, was
signed in April 1993 but has yet to be ratified by the
Azerbaijani parliament.  An Overseas Private Investment
Corporation (OPIC) incentive agreement, which would allow OPIC
to offer political risk insurance and other programs to U.S.
investors in Azerbaijan, was concluded in 1992, but it also has
yet to be ratified by Azerbaijan.  The United States has
proposed a bilateral investment protection treaty, which would
establish an open investment legal regime for investments
between the two countries.  The Azerbaijani government has not
yet accepted the U.S. offer to negotiate this treaty.
6.  Export Subsidies Policies
    The government continues to subsidize production at state
enterprises to maintain production levels and employment
(although most factories work below capacity).  There is,
however, no direct government support for exports to countries
outside the former Soviet Union.
7.  Protection of U.S. Intellectual Property
    Azerbaijan has yet to adopt adequate laws to protect
intellectual property.  The Committee on Science and
Technology of the presidential apparatus drafted patent and
trademark laws, but the parliament has not passed them into
law.  A presidential decree on patents provides some
protection.  There is no copyright law.  Azerbaijan has not
adhered to any of the international conventions that protect
intellectual property.  Trademarks may be registered with the
Ministry of Foreign Economic Relations, but there is widespread
unauthorized use of pirated films.
    The lack of intellectual property protection is one of the
factors inhibiting the development of U.S. trade and
investment, though its impact is difficult to assess given the
low levels of trade and investment to date.  The trade
agreement of April 1993 contains commitments on protection of
intellectual property.  This agreement has not been ratified by
the Azerbaijani parliament.
8.  Worker Rights
    a.  The Right of Association
    Azerbaijani labor unions continue to be highly dependent
upon the government, but are free from federations, and
participate in international bodies.  Azerbaijan is a member of
the ILO (International Labor Organization).  There is a legal
right to strike, and workers do from time to time strike at
certain factories.
    b.  The Right to Organize and Bargain Collectively
    Collective bargaining remains at a rudimentary level.
Wages are decreed by relevant government ministries for
organizations within the government budget.  There are no
export-processing zones.
    c.  Prohibition of Forced or Compulsory Labor
    Forced or compulsory labor is prohibited by law and is not
known to be practiced.
    d.  Minimum Age for Employment of Children
    The minimum employment age is 16, though children of 14 are
allowed to work during vacations with the consent of their
parents and certification of a physician.  Children of 15 may
work if the work place's labor union does not object.
    e.  Acceptable Conditions of Work
    A nationwide minimum wage is set by presidential decree,
and was raised numerous times in the past year to offset
inflation.  Unemployment benefits (5,000 rubles or about $4 per
month) were granted to 21,567 people between September 1992 and
August 1993, although state factories and enterprises
temporarily laid off many more employees.  The legal work
week is 41 hours.  Health and safety standards exist but are
not enforced.
    f.  Rights in Sectors with U.S. Investment
    In the petroleum sector, the only sector with significant
U.S. investment, worker rights do not generally differ from
those in other sectors of the economy, with one important
exception.  In the work places in which U.S. petroleum
companies have invested, the health and safety standards have
dramatically improved.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                             (1)
Total Manufacturing                                     0
  Food & Kindred Products                     0
  Chemicals and Allied Products               0
  Metals, Primary & Fabricated                0
  Machinery, except Electrical                0
  Electric & Electronic Equipment             0
  Transportation Equipment                    0
  Other Manufacturing                         0
Wholesale Trade                                         0
Banking                                                 0
Finance/Insurance/Real Estate                           0
Services                                                0
Other Industries                                        0
TOTAL ALL INDUSTRIES                                  (1)
(1) Suppressed to avoid disclosing data of individual companies
Source: U.S. Department of Commerce, Bureau of Economic
Analysis
THE_BAHA1
\F\FU.S. DEPARTMENT OF STATE
BAHAMAS: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                           THE BAHAMAS
                     Key Economic Indicators
        (Millions of U.S. dollars unless otherwise noted)
                                     1992      1993      1994 /1
Income, Production and Employment:
Real GDP                            3,059     3,065       N/A
GDP Growth Rate                       3.0       3.0       N/A
GDP Share by Sector:  (pct.)
  Tourism                              50        50        50
  Finance                              12        12        12
  Manufacturing                         4         4         4
  Agriculture/Fisheries                 4         4         4
  Government                           12        12        12
GDP Per Capita (USD)               11,588    11,610       N/A
Labor Force                       135,700   136,900       N/A
Unemployment Rate (pct.)             14.8      13.1       N/A
Money and Prices:
Money Supply (M1)                   377.7     379.5       N/A
Commercial Interest Rate (pct.)       8.0      7.25       N/A
Personal Savings Rate             3.20-5.55 2.54-5.13 3.00-4.63
Investment Rate                       N/A       N/A       N/A
Retail Price Index (1987=100)       133.0     136.2     136.6
Retail Price Index Change (pct.)      7.2       5.7       2.7
Wholesale Price Index                 N/A       N/A       N/A
Exchange Rate (USD:BD)                1:1       1:1       1:1
Balance of Payments and Trade:
Total Exports (FOB)                 310.2     256.8       N/A
  Non-Oil Exports (estimated)       585.3     348.2       N/A
  Exports to U.S.                   488.2     607.2     227.0
Total Imports (CIF)               1,129.9   1,151.3     628.2
  Non-oil Imports (estimated)       972.7   1,014.7     330.5
  Imports from U.S.                 712.6     704.1       N/A
Aid from U.S.                           0         0         0
Aid from Other Countries                0         0         0
External Public Debt                133.3     117.2       N/A
Debt Repayment                       72.2      77.5      30.3
Gold Reserves                         N/A       N/A       N/A
Foreign Exchange Reserves           173.9     146.0     252.8
Balance of Payments
  Current Account                   173.9     146.0       N/A
  Merchandise Exports (FOB)         310.2     256.8       N/A
  Merchandise Imports (FOB)       1,069.2   1,080.9       N/A
  Services (net)                    711.5     738.9       N/A
N/A--Not available.
1/ Statistics cover mid-year 1994.
1.  General Policy Framework
    The Bahamas is a politically stable, middle-income
developing country.  The economy is based primarily on tourism
and financial services, which account for approximately 50
percent and 12 percent of gross domestic product (GDP),
respectively.  The agricultural and industrial sectors, while
small, have recently been the focus of government efforts to
expand these sectors to produce new jobs and diversify the
economy.
    The United States remains The Bahamas' major trading
partner.  U.S. firms exported an estimated $704.1 million worth
of goods and services to The Bahamas in 1993, down from $712.5
million the previous year but still approximately 55 percent of
all Bahamian imports.  The Bahamian Government actively
encourages foreign investment, with free trade zones on Grand
Bahama and New Providence.  Capital and profits are freely
repatriated, and investors are offered relief from personal and
corporate income taxes.  Designation under the Caribbean Basin
Initiative (CBI) trade program allows qualified Bahamian goods
to enter the United States duty-free.
    The Bahamas continues to run a fiscal deficit due to
investment in capital projects by the government and public
corporations.  The recurrent government budget included
repayments estimated at $64 million on a total public debt of
$358.4 million.  The public debt service ratio reached 4.6
percent as of the first quarter of 1994.  The overall FY 94/95
government budget of $756 million represented an increase of
$75 million over the total projected expenditures in the FY
1993-94 budget.  The budget announced new tax measures,
including a 10 percent increase in the gasoline tax (the second
such raise in two years), an import tariff on pork products
(previously untaxed), increases in business license fees and
other government fees, and the elimination of a system of
rebates for early payments of annual property taxes.  These new
measures were projected to raise an additional $38 million in
government revenue.  The government also projected an increase
in public borrowing of $60 million to make up for the budgetary
shortfall.  One problem faced by the Ingraham Administration
was that government revenue under the previous budget fell an
estimated $30 million short of original projections, apparently
due to slow growth of the overall economy and substantial tax
evasion.  Total 1993 national debt was $1.41 billion, up from
$1.28 billion in 1992.
    The Bahamas' primary monetary strategy is to maintain
stability and expansion in foreign exchange reserves to
purchase essential imports, maintain the parity of the Bahamian
and American dollars, and finance repatriation of corporate
profits.  Despite efforts by the Central Bank to ease consumer
credit in January 1993 by removing the previous 35 percent
down-payment requirement for consumer loans, domestic Bahamian
banks were so awash in liquidity by mid-1994 that some banks
even refused new Bahamian dollar deposits.  Central Bank
authorities blamed overly cautious lending policies by Bahamian
banks for both consumer and business loans for the excess
liquidity problem.  By mid 1994, the commercial banks' prime
lending rate was 6.75 percent.
2.  Exchange Rate Policy
    The Bahamian dollar is pegged to the U.S. dollar at an
exchange rate of 1:1, and the Bahamian Government recently
repeated its longstanding commitment to maintain parity.
3.  Structural Policies
    Price controls exist on 13 bread basket items, gasoline,
utility rates, public transportation, automobiles, and auto
parts.  The rate of inflation which was estimated at 5.7
percent in 1993 is now 2.7 percent.
    Recognized internationally as a tax haven, The Bahamas does
not impose income, inheritance or sales taxes.  In 1994, the
Government raised some customs duties and imposed new tariffs
on pork products.  Bahamians shopping in Florida (and elsewhere
abroad) are permitted to import $300 worth of goods duty free
per trip, twice a year ($150 for persons under 12 years of
age.)  In addition, The Bahamas charges a host of "stamp taxes"
on most imports above and beyond the import duties.  These
stamp taxes vary depending upon the item in question, and apply
even to many items otherwise duty free.  For example, in 1992,
the Bahamian government lifted customs duties on a list of
items (including china, crystal, fine jewelry, leather goods,
crocheted linens and tablecloths, liquor, wines, perfume,
cologne, photographic equipment and accessories, sweaters, and
watches) which could be sold to tourists as "duty-free," but
retained variable stamp taxes on these items.  Bahamian Customs
requires entry forms and genuine invoices (original or carbon
copy) for goods coming by sea, air or post.  The Customs
Department only honors discounts of up to three percent given
by U.S. exporters.
    Certain goods may be imported conditionally on a temporary
basis against a security bond or deposit which is refundable on
their re-exportation.  These include fine jewelry, goods for
business meetings or conventions, travelling salesman samples,
automobiles or motorcycles, photographic and cinematographic
equipment, and equipment or tools for repair work.
    The Bahamian government in 1993 repealed the Immovable
Property (Acquisition by Foreign Persons) Act, which required
foreigners to obtain approval from the Foreign Investment Board
before purchasing real property in the country, replacing it
with the Foreign Persons (Landholding) Act.  Under the new law,
approval is automatically granted for non-Bahamians to purchase
residential property of less than five acres on any single
island in The Bahamas, except where the property constitutes
over fifty percent of the land area of a cay (small island) or
involves ownership of an airport or marina.
    The Bahamian government hopes this new legislation will
stimulate the second home/vacation home market and revive the
once-vibrant real estate sector.  The new law also provides for
a two-year real property tax exemption for foreign persons
acquiring undeveloped land in The Bahamas for development
purposes, provided that substantial development occurs during
those two years.  Following protests by foreign property
owners, the Bahamian government has revised plans for the
proposed 7 percent increase on the assessed value of
undeveloped property owned by non-Bahamians.  The new tax
structure as of January, 1994 follows:
      $1 - $3,000:  the standard property tax is $30.00.
      $3,001 - $100,000:  the property tax is 1 percent of the
      assessed value.
      Over $100,000:  the property tax is 1 1/2 percent of the
      assessed value.
    A gambling tax is also levied.  To increase revenues, the
airport departure tax was raised from $7 to $13 per person in
1991 and from $13 to $15 per person in 1993.  The government
raised the harbor departure tax from $7 to $20 per person in
1991.  Following protests from cruise ship operators, the
harbor departure tax was later lowered to $15, effective April
1, 1992.
    Although The Bahamas encourages foreign investment, the
government reserves certain businesses exclusively for
Bahamians, including restaurants, most construction projects,
most retail outlets, and small hotels.  Other categories of
businesses are designated for possible joint ventures involving
Bahamians and foreigners.
    A new "One-Stop Shop" for investment established in 1992,
the Bahamas Investment Authority (BIA), consolidated the
Investment Promotion Division of The Bahamas Agricultural and
Industrial Corporation (BAIC) and the Financial Services
Secretariat (FSS).  The Authority planned to facilitate and
coordinate local and international investment and to provide
overall guidance to the Government on all aspects of investment
policy.
    Other trade and investment incentives include the
International Business Companies Act, the Industries
Encouragement Act, the Hotels Encouragement Act, the
Agricultural Manufactories Act, the Spirit and Beer Manufacture
Act, and the Tariff Act.  The International Business Companies
Act simplifies procedures and reduces costs for incorporating
companies.  The Industries Encouragement Act provides duty
exemption on machinery, equipment, and raw materials used for
manufacturing purposes.  The Hotels Encouragement Act grants
refunds of duty on materials, equipment, and furniture required
in construction or furnishing of hotels.
    The Agricultural Manufactories Act provides exemption for
farmers from duties on agricultural imports and machinery
necessary for food production.  The Spirit and Beer Manufacture
Act grants duty exemptions for producers of beer or distilled
spirits on imported raw materials, machinery, tools, equipment,
and supplies used in productions.  The Tariff Act grants
one-time relief from duties on imports of selected products
deemed to be of national interest.
    The Hawksbill Creek Agreement of 1954 granted certain tax
and duty exemptions on business license fees, real property
taxes, and duties on building materials and supplies in the
town of Freeport on Grand Bahama Island.  In July 1993, the
Government enacted legislation extending most Hawksbill Creek
tax and duty exemptions through 2054, while withdrawing
exemptions on real property tax for foreign individuals and
corporations.  The Prime Minister declared, however, that
property tax exemptions might still be granted to particular
investors on a case-by-case basis.
    The Bahamas is a beneficiary of the United States'
Caribbean Basin Initiative (CBI) trade program, permitting the
country to export most goods duty-free to the United States.
4.  Debt Management Policies
    The Bahamas' national debt reached $1.41 billion in 1993,
with debt service of $74.0 million accounting for 8.6 percent
of total government revenues.
5.  Significant Barriers To U.S. Exports
    The Bahamas is a $700 million market for U.S. companies.
There are no barriers to the import of U.S. goods, although a
substantial duty applies to most imports.  Deviations from the
average duty rate often reflect policies aimed at import
substitution.  Tariffs on items which are also produced locally
are at a rate designed to provide protection to local
industries.  The Ministry of Agriculture occasionally issues
temporary bans on the import of certain agricultural products
when it determines that a sufficient supply of locally grown
items exists.  The government's quality standards for imported
goods are similar to those of the United States.
6.  Export Subsidies Policies
    The Bahamian Government does not provide direct subsidies
to industry.  The Export Manufacturing Industries Encouragement
Act provides exemptions to approved export manufacturers from
duty for raw materials, machinery, and equipment.  The approved
product is not subject to any export tax.
7.  Protection of U.S. Intellectual Property
    The Bahamas is a member of the World Intellectual Property
Organization (WIPO), and is a party to the Paris Convention for
the Protection of Industrial Property and the Berne Convention
for the Protection of Literary and Artistic Works (older
versions for some articles of the latter are used).  It is also
a member of the Universal Copyright Convention.
8.  Worker Rights
    a.  Right of Association
    The Constitution specifically grants labor unions the
rights of free assembly and association.  Unions operate
without restriction or Government control, and are guaranteed
The right to strike and to maintain affiliations with
international trade union organizations.
    b.  Right to Organize and Bargain Collectively
    Workers are free to organize and collective bargaining is
extensive for the 34,225 workers (25 percent of the work force)
who are unionized.  Collective bargaining is protected by law
and the Ministry of Labor is responsible for mediating
disputes.  The Industrial Relations Act requires employers to
recognize trade unions.
    c.  Prohibition of Forced or Compulsory Labor
    Forced or compulsory labor is prohibited by the
Constitution and does not exist in practice.
    d.  Minimum Age for Employment of Children
    While there are no laws prohibiting the employment of
children below a certain age, compulsory education for children
up to the age of 14 years and high unemployment rates among
adult workers effectively discourage child employment.
Nevertheless, some children sell newspapers along major
thoroughfares and work at grocery stores and gasoline
stations.  Children are not employed to do industrial work in
The Bahamas.
    e.  Acceptable Conditions of Work
    The Fair Labor Standards Act limits the regular workweek to
48 hours and provides for at least one 24-hour rest period.
The Act requires overtime payment (time and a half) for hours
in excess of the standard.  The Act permits the formation of a
Wages Council to determine a minimum wage; to date, no such
Council has been established.
    The Ministry of Labor is responsible for enforcing labor
laws and has a team of several inspectors who make on-site
visits to enforce occupational health and safety standards and
investigate employee concerns and complaints.  The Ministry
normally announces these inspections ahead of time.  Employers
generally cooperate with the inspections in implementing safety
standards.  A 1988 law provides for maternity leave and the
right to reemployment after childbirth.  Worker rights
legislation applies equally to all sectors of the economy.
    f.  Rights in Sectors with U.S. Investment
    Authorities enforce Labor laws and regulations uniformly
for all sectors and throughout the country, including within
the export processing zones.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                             471
Total Manufacturing                                   (1)
  Food & Kindred Products                   0
  Chemicals and Allied Products             (1)
  Metals, Primary & Fabricated              0
  Machinery, except Electrical              0
  Electric & Electronic Equipment           0
  Transportation Equipment                  0
  Other Manufacturing                       (2)
Wholesale Trade                                       140
Banking                                               2,707
Finance/Insurance/Real Estate                         817
Services                                              -38
Other Industries                                      (1)
TOTAL ALL INDUSTRIES                                  4,194
(1) Suppressed to avoid disclosing data of individual companies
(2) Less than $500,000
Source: U.S. Department of Commerce, Bureau of Economic
Analysis
(###)
BAHRAIN1
WU.S. DEPARTMENT OF STATE
BAHRAIN: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                             BAHRAIN
                     Key Economic Indicators
        (Millions of U.S. dollars unless otherwise noted)
                                    1992       1993     1994  1/
Income, Production and Employment:
GDP (at current prices)             4,338      4,555     4,637
GDP Growth (nominal)                  3.4        5.0       1.8
Per Capita GNP (USD)                8,300       8530      8725
Labor Force (000s)                    203        212       221
Unemployment (pct.)                    12         15        15
Money and Prices:
Money Supply (M2/ann. pct. growth)    4.1        5.5       6.0
Prime Interest Rate                   7.5        6.1       6.5
Savings Rate                          3.5        3.0       3.0
Consumer Price Inflation              2.0        4.8       2.3
Consumer Price Index (1983/84=100)   96.5      101.1     103.5
Exchange Rate (USD/BD)               2.65       2.65      2.65
Balance of Payments and Trade:  2/
Total Exports (FOB)               3,408.2    3,675.6   3,174.7
  Non-Oil Exports to U.S.            69.0      102.2     103.0
Total Imports (CIF)               4,133.7    3,811.2   3,561.6
  Non-Oil Imports from U.S.  3/     345.1      349.4     277.0
Aid from Other Countries               50         50        50
  Aid from U.S.                         0          0         0
External Public Debt                  N/A        N/A       N/A
Debt Service                          N/A        N/A       N/A
Gold and Foreign Exch. Reserves     1,449      1,350     1,336
Trade Balance                     (-725.5)  (-135.6)  (-386.9)
Non-Oil Balance with U.S.  3/     (-276.1)  (-247.2)  (-174.0)
N/A/--Not available.
1/ 1994 Figures are all estimates based on data available in
October 1994.
2/ Trade figures are for merchandise trade.
3/ Excluding imports of military items and civil aircraft.
1.  General Policy Framework
    Although the Government of Bahrain has controlling
interests in many of the island's major industrial
establishments, its overall approach to economic policy,
especially those policies which affect demand for U.S. exports,
can best be described as laissez-faire.  Except for a few basic
foodstuffs, the price of goods in Bahrain is determined by
market forces, and the importation and distribution of foreign
commodities and manufactured products is carried out by the
private sector.  Owing to its historical position as a
regional trading center, Bahrain has a well-developed and
highly competitive mercantile sector in which products from
the entire world are represented.  Import duties are primarily
a revenue device for the government and are assessed at a ten
percent rate on most products.  The Bahraini dinar (BD) is
freely convertible, and there are no restrictions on the
remittance of capital or profits.  With the exception of the
petroleum sector, Bahrain does not tax either corporate or
individual earnings.
    Over the last two decades, the Government of Bahrain has
encouraged economic diversification by investing directly in
such basic industries as aluminum smelting, petrochemicals,
and ship repair, and by creating a regulatory framework which
has fostered the development of Bahrain as a regional
financial and commercial center.  Despite diversification
efforts, the oil and gas sector remains the cornerstone of the
economy.  Oil and gas revenues constitute over 60 percent of
governmental revenues, and oil and related products account
for about 80 percent of the island's exports.  The largest
source of the government's oil revenue comes from Bahrain's
100,000 barrel/day share of the offshore Abu Saf'a Field,
which is shared with and managed by Saudi Arabia.
    The budgetary accounts for the central government are
prepared on a biennial basis.  The budget for 1993-94 was
approved in April 1993.  Budgetary revenues consist primarily
of receipts from oil and gas (over 60 percent) supplemented by
fees and charges for services, customs duties, and investment
income.  Bahrain has no income taxes and thus does not use its
tax system to implement social or investment policies.  In
1993, revenue was $1.487 billion and expenditures were $1.659
billion.  The resulting $172 million shortfall was financed
through the issuance of three-month and six-month treasury
bills to domestic banks, according to the normal practice of
recent years.  1994 revenue is projected to be $1.590 billion
and expenditures are projected to be $1.789 billion.  The
projected $199 million deficit will also be financed through
the issuance of treasury bills.  The 1995-96 budget is
expected to be approved by the Council of Ministers by spring
1995.  It will most likely project budget shortfalls similar
to those seen over the past two years.
    The instruments of monetary policy available to the
Bahrain Monetary Agency (BMA) are limited.  Treasury bills are
used to regulate dinar liquidity positions of the commercial
banks.  Liquidity to the banks is provided now through
secondary operations in treasury bills, including:  (A)
discounting treasury bills; and (B) sales by banks of bills to
the BMA with a simultaneous agreement to repurchase at a later
date ("repos").  Starting in 1985, the BMA imposed a reserve
requirement on commercial banks equal to five percent of dinar
liabilities.  Although the BMA has no legal authority to fix
interest rates, it has published recommended rates for
Bahraini dinar deposits since 1975.  In 1982, the BMA
instructed the commercial banks to observe a maximum margin of
one percent over their cost of funds, as determined by the
recommended deposit rates, for loans to prime customers.  In
August 1988, special interest rate ceilings for consumer loans
were introduced.  In May 1989, the maximum prime rate was
abolished and, in February 1990, new guidelines permitting the
issuance of dinar certificates of deposit (CD's) at freely
negotiated rates for any maturity from six months to five
years were published.
2.  Exchange Rate Policies
    Since December 1980, Bahrain has maintained a fixed
relationship between the Bahraini dinar and the U.S. dollar at
the rate of one U.S. dollar equals 0.377 BD.  Bahrain
maintains a fully open exchange system free of restrictions on
payments and transfers.  There is no black market or parallel
exchange rate.
3.  Structural Policies
    Bahrain ratified the Uruguay Round Agreements and became
one of the founding members of the World Trade Organization
(WTO) on January 1, 1995.  Bahrain is also a member of the
regional Gulf Cooperation Council (GCC).  As a member of the
GCC, Bahrain participates fully in its efforts to achieve
greater economic integration among its member states.  In
addition to according duty-free treatment to imports from
other GCC states, Bahrain has adopted GCC food product
labeling and automobile standards.
    Efforts are underway within the GCC to enlarge the scope
of cooperation in fields such as product standards and
industrial investment coordination.  In recent years, the GCC
has focused its attention on negotiations on a trade agreement
with the European Union.  If these negotiations are
successfully concluded, such an agreement could have a
long-term adverse impact on the competitiveness of U.S.
products within the GCC, including Bahrain.  Bahrain is also
an active participant in the ongoing U.S.- GCC economic
dialogue.  For the present, U.S. products and services compete
on an equal footing with those of other non-GCC foreign
suppliers.  Bahrain participates in the Arab League economic
boycott against Israel, but this year announced that it would
not observe secondary and tertiary boycott policies against
third-country firms having economic relationships with Israel.
    With the exception of a few basic foodstuffs and petroleum
product prices, the Government of Bahrain does not attempt to
control prices on the local market.  Because most manufactured
products sold in Bahrain are imported, prices are basically
dependent upon the source of supply, shipping costs and
agents' mark-ups.  Since the opening of the Saudi
Arabia-Bahrain Causeway in 1985, local merchants are less able
to maintain excessive margins and, as a consequence, prices
have tended to fall toward the levels prevailing in other GCC
countries.
    Bahrain is essentially tax-free.  The only corporate
income tax in Bahrain is levied on oil, gas, and petroleum
companies.  There is no individual income tax, nor does the
island have any value added tax, property tax, or production
tax.  A few indirect and excise taxed are assessed.  Aside
from customs duties, including a tax on gasoline, a ten
percent municipal levy on rents paid by residential tenants
and a 12.5 percent tax on office rents are imposed.
4.  Debt Management Policies
    The Government of Bahrain follows a policy of strictly
limiting its official indebtedness to foreign financial
institutions.  In the past, it has financed its budget deficit
through local banks.  The $1.4 billion Aluminum Bahrain (ALBA)
Smelting Plant Expansion Project, completed in December 1992,
was financed in part through foreign commercial and supplier
credits.  The Government of Bahrain does not regard this debt
as sovereign risk.  Bahrain has no International Monetary Fund
or World Bank programs.
5.  Significant Barriers to U.S. Exports
    Standards:  Processed food items imported into Bahrain are
subject to strict shelf life and labeling requirements.
Pharmaceutical products must be imported directly from a
manufacturer which has a research department and must be
licensed in at least two other GCC countries, one of which
must be Saudi Arabia.
    Investment:  The government actively promotes foreign
investment and in recent years promulgated regulations
permitting 100 percent foreign ownership of new industrial
establishments and the establishment of representative offices
or branches of foreign companies without local sponsors.  Most
other commercial investments are subject to government
approval and generally must be made in partnership with a
Bahraini national controlling 51 percent of the equity.
Except for citizens of Kuwait, Saudi Arabia, and the U.A.E.,
foreign nationals are not permitted to purchase land in
Bahrain.  The government encourages the employment of local
nationals by setting local-national employment targets in each
sector and by restricting the issuance of expatriate labor
permits.
    Government Procurement Practices:  The government makes
major purchasing decisions through the tendering process.  For
major projects, the Ministry of Works, Power, and Water
extends invitations to selected, prequalified firms.
Likewise, construction companies bidding on government
construction projects must be registered with the Ministry of
Works, Power, and Water.  Smaller contracts are handled by
individual ministries and departments and are not subject to
prequalification.
    Customs Procedures:  The customs clearance process is used
to enforce the primary boycott of Israel.  While goods
produced by blacklisted firms may be subjected to minor
delays, the secondary and tertiary boycotts are no longer used
as the basis for denying customs clearance.  Bahraini customs
also enforces the Foreign Agency Law.  Goods manufactured by a
firm with a registered agent in Bahrain may only be imported
by that agent or, if by a third party, upon payment of a
commission to the registered agent.
6.  Export Subsidies Policies
    The Government of Bahrain provides indirect export
subsidies in the form of preferential rates for electricity,
water, and natural gas to selected industrial establishments.
The government also permits the duty-free importation of raw
material inputs for incorporation into products for export and
the duty-free importation of equipment and machinery for
newly-established export industries.  The government does not
specifically target subsidies to small businesses.  Bahrain is
a member of GATT, the GATT Subsidies Code, and the WTO.
7.  Protection of U.S. Intellectual Property
    The Government of Bahrain is not yet a signatory to any
major intellectual property convention, and its new copyright
law, adopted in 1993, excludes from protection nearly all
foreign works which are first introduced outside Bahrain.
Procedures for enforcement even of this limited law are unduly
cumbersome, and there is no effective enforcement mechanism.
Consequently, protection of intellectual property is
considered unsatisfactory by U.S. standards.  The sale of
unauthorized cheap video and audio tapes and counterfeit
computer software is widespread.  Patents and trademarks,
however, are protected by Bahraini law.
    Existing intellectual property protection is provided by
the Patent, Design, and Trademark Law of 1955, as amended by
Ministerial Decree No. 22 of 1977 and implementing regulations
of 1978.  The Trademark Law was revised in 1991 and reissued
as Decree No. 10 of 1991.  Protection periods are as follows:
(1) A trademark can be registered for a period of ten years,
renewable without limit for further ten-year periods; (2) A
design can be registered for a period of five years, but the
registration is only renewable for two periods of five years
each; (3) A patent can be registered for 15 years, renewable
for one five-year period if the patent is deemed by the
Patents and Trademarks Registration Office of the Ministry of
Commerce and Agriculture to be of special importance and not
to have realized revenue commensurate with the expenses
involved in its formulation.
    The enforcement of trademarks is generally left to the
local agent or an appointed representative of the trademark
owner.  The government does not have a proactive policy of
seeking and/or removing counterfeit goods from the
marketplace.  Trademark registration fees and procedures have
not been identified as obstacles to seeking or maintaining
trademark protection.
    Infringement of new technology in Bahrain is basically
limited to software piracy.  Private satellite receivers are
banned.  The U.S.-based Cable News Network (CNN) is
transmitted for one hour every night on an open channel by the
Ministry of Information with the agreement of the firm, and
viewers wishing to receive CNN on a 24-hour basis must pay a
    Bahrain's recently-enacted copyright law, Legislative
Decree No. 10 of 1993, applies only to intellectual properties
of Bahrainis and other Arab authors who are nationals of
states which have ratified the Arab Copyright Protection
Agreement of 1958.  Intellectual properties of other foreign
authors are protected only if originally published in
Bahrain.  There are no reliable estimates of losses to U.S.
trade as a result of Bahrain's failure to provide adequate
copyright protection.  However, as part of its Uruguay Round
obligations under the Trade Related Intellectual Property
Agreement (TRIPS), Bahrain will bring its laws into conformity
with international intellectual property rights conventions.
8.  Worker Rights
    a.  The Right of Association
    The partially suspended 1973 Constitution recognizes the
right of workers to organize, but trade unions do not exist in
Bahrain, and the government does not encourage their
formation.  However, the government passed a series of labor
regulations which, among other things, allow the formation of
elected workers' committees in larger Bahraini companies.
Worker representation in Bahrain today is based on a system of
joint labor-management consultative councils (JCCs)
established by ministerial decree.  Between 1981 and 1984, 12
JCCs were established in the major state-owned industries.  In
1994, four new JCCs were established in the private sector,
including one in a major hotel.  Further expansion of the JCC
system into tourism and banking sectors is under active
consideration.  The JCCs are composed of equal numbers of
appointed management representatives and worker
representatives elected from and by company employees.  The
selection of worker representatives appears to be a fair
process, and worker representatives appear generally to
genuinely represent worker interests.  The elected labor
representatives of the JCCs select the 11 members of the
General Committee of Bahraini Workers (GCBW) established in
1983 by law, which oversees and coordinates the work of the
JCCs.  The JCC-GCBW system represents close to 70 percent of
the islands indigenous industrial workers, although both
government and labor representatives readily admit that
nonindustrial workers and expatriates are clearly
underrepresented within the system.
    b.  The Right to Organize and Bargain Collectively
    While the JCCs described above are empowered to discuss
labor disputes, organize workers' services, and discuss wages,
working conditions, and productivity, the workers have no
entirely independent, recognized vehicle for representing
their interests on these or other labor-related issues.
Bahraini labor law neither grants nor denies workers the right
to organize and bargain collectively or to strike.  There are
no recent examples of major strikes, but walkouts and other
job actions have been known to occur without governmental
intervention and with positive results for the workers.
Minimum wage rates are established by Council of Ministers'
decree.  Increases in wages above the minumum, which are
subject to discussion in the JCCs, are set by management, with
government salaries for comparable work often serving as an
informal guide.
    c.  Prohibition of Forced or Compulsory Labor
    Forced or compulsory labor is prohibited in Bahrain, and
the Labor Ministry is charged with enforcing the law.  The
press often performs an ombudsman function on labor problems,
reporting instances in which private sector employers
occasionally compelled foreign workers from developing
countries to perform work not specified in their contracts, as
well as Ministry of Labor responses.  Once a complaint has
been lodged by a worker, the Labor Ministry opens an
investigation and often takes remedial action.
    d.  Minimum Age for Employment of Children
    The minimum age for employment is 14.  Juveniles between
the ages of 14 and 16 may not be employed in hazardous
conditions or at night, and may not work over 6 hours per day
or on a piecework basis.  Child labor laws are effectively
enforced by Ministry of Labor inspectors in the industrial
sector; child labor outside that sector is less well
monitored, but is not believed to be significant outside
family-operated businesses.
    e.  Acceptable Conditions of Work
    Bahrain's labor law, enforced by the Ministry of Labor,
mandates acceptable conditions of work for all adult workers,
including adequate standards regarding hours of work (maximum
48 hours per week) and occupational safety and health.
Minimum wage scales, set by government decree, exist for both
private and public sector employees.  Complaints brought
before the Ministry of Labor which cannot be settled through
arbitration must, by law, be referred to the fourth high court
(labor) within 15 days.  In practice, most employers prefer to
settle such disputes through arbitration, particularly since
the court and labor law are generally considered to favor the
worker/employee.  The law provides protection for both
Bahraini and expatriate workers.  However, all foreign workers
are required to be sponsored by Bahrainis or institutions and
companies based in Bahrain.  Foreign workers, particularly
those from developing countries are often unwilling to report
abuse for fear of losing residence rights in Bahrain and
having to return to their native countries, in which they
would face significantly inferior working conditions and
earning possibilities.  In addition, the labor law
specifically favors Bahrainis, followed by Arab expatriates,
over all other expatriate workers in the areas of hiring and
firing.  Women are generally paid less than men, and are
prohibited from performing night work, except in certain
exempted fields.  Women are entitled to 60 days of paid
maternity leave, nursing periods during the day, and up to one
year of unpaid maternity leave.
    f.  Rights in Sectors with U.S. Investment
    U.S. capital investment in Bahrain is concentrated
primarily in the petroleum sector.  It takes the form of
minority share interests in the Bahrain Petroleum Company
 (BAPCO), Bahrain National Gas Company (BANAGAS), and the
Bahrain Aviation Fueling Company (BAFCO).  There are also
joint venture factories producing plastic bottle caps,
tissues, and pipes.  Workers at all these companies enjoy the
same rights and conditions as other workers in Bahrain.
    Extent of U.S. Investment in Selected Industries.--U.S.
Direct Investment Position Abroad on an Historical Cost
Basis--1993
                   (Millions of U.S. dollars)
              Category                         Amount
Petroleum                                               25
Total Manufacturing                                      0
  Food & Kindred Products                   0
  Chemicals and Allied Products             0
  Metals, Primary & Fabricated              0
  Machinery, except Electrical              0
  Electric & Electronic Equipment           0
  Transportation Equipment                  0
  Other Manufacturing                       0
Wholesale Trade                                          4
Banking                                               -152
Finance/Insurance/Real Estate                           (1)
Services                                                (1)
Other Industries                                         0
TOTAL ALL INDUSTRIES                                  -114
(1) Suppressed to avoid disclosing data of individual companies
Source: U.S. Department of Commerce, Bureau of Economic
Analysis
(###)
BANGLADE1
^U.S. DEPARTMENT OF STATE
BANGLADESH: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                            BANGLADESH
                     Key Economic Indicators
        (Millions of U.S. dollars unless otherwise noted)
                                    1992      1993      1994 1/
Income, Production and Employment:
Real GDP (1985 prices)            14,054    14,307    14,688
Real GDP Growth (pct.)              4.23      4.46      4.90
GDP (at current prices)           23.760    24,746    25,983
By Sector:  2/
  Agriculture                      8,209     8,580     9,068
  Energy/Water                       363       379       N/A
  Manufacturing                    2,140     2,236     2,858
  Construction                     1,385     1,446       N/A
  Financial Services                 461       482       N/A
  Other Services                  10,850    11,341       N/A
Net Exports of Goods & Services   -1,403    -1,526       N/A
Real Per Capita GDP
  (1985 prices/USD)                  118       119       119
Labor Force (000s)                54,300       N/A       N/A
Unemployment Rate (pct.)             N/A       N/A       N/A
Money and Prices:  (annual percentage growth)
Money Supply (M2/bil. Taka)        285.3     315.4     351.3
Base Interest Rate                  9.00      7.00      6.00
Personal Saving Rate                3.80      3.80      3.80
Retail Inflation 3/                 5.09      1.33      1.67
Wholesale Inflation                  N/A       N/A       N/A
Consumer Price Index 3/           724.40    734.30     746.2
Exchange Rate (USD/Taka)
  Official                         38.15     39.15     40.00
  Parallel                           N/A       N/A       N/A
Balance of Payments and Trade:
Total Exports (FOB)                1,901     2,138     2,347
  Exports to U.S.                    832       732       784 4/
Total Imports (CIF)                3,457     3,983     3,905
  Imports from U.S.                  189       129       100
Aid from U.S. 5/                     135      73.5      95.1
Aid from Other Countries           1,611     1,675     1,559
External Public Debt              12,605    13,178    14,027
Debt Service Payments              535.5     505.6     512.4
Gold and Foreign Exch. Reserves    1,612     2,125     2,822
Trade Balance                     -1,556    -1,845    -1,558
  Trade Balance with U.S.            643       603       604 4/
N/A--Not available.
1/ Information for Bangladesh fiscal year, July 1-June 30.
Data for FY94 is mostly provisional.
2/ FY94 sectoral data is estimated on the basis of sectoral GDP
contribution of FY93.
3/ Inflation figures are based on Consumer Price Index.
4/ Figures are based on Bangladesh Bank calculation on total
amount of commercial bank letter of credit value.
5/ Figures are for the October 1-September 30 fiscal year.
1.  General Policy Framework
    Bangladesh is one of the world's poorest, most densely
populated, and least developed nations.  With 123 million
people and a GDP of $26 billion in Bangladeshi fiscal year 1994
(FY94), per capita income (current basis) was $211.  However, a
low cost of living gives Bangladesh an estimated purchasing
power parity per capita GDP of $1,230.  Many factors have
inhibited the growth of Bangladesh's overwhelmingly
agricultural economy.  These include frequent cyclones and
floods, government interference with the economy, a rapidly
growing labor force which cannot be absorbed by agriculture, a
low level of industrialization, underdeveloped energy
resources, and inefficient power supplies.  A major policy
objective, feeding the rapidly growing population, is supported
by self-sufficiency in rice production and supplemented by
significant U.S. wheat exports to Bangladesh under both PL-480
programs and commercial sales.
    Despite political unrest and opposition to some elements of
its economic reforms from those who benefit from the status
quo, Bangladesh's democratically elected government continued
its macroeconomic stabilization program throughout FY94.  As a
result, the overall economic condition of the country remained
stable.  The GDP growth rate registered 4.9 percent, an
increase over FY93's growth rate of 4.4 percent.  Further rate
reductions in Bangladesh's tax and tariff regimes and the
liberalization of the foreign exchange regime (including full
convertibility of the taka on the current account) mark major
progress in the government's drive toward a more open, modern,
liberal economy.  Inflation remained low during FY94, at 1.7
percent.  Foreign currency reserves are put at approximately
$2.8 billion, sufficient to cover over eight months of imports.
    Government expenditures, composed of current expenditures
and the annual development budget, stayed under tight control
during FY94.  Domestic revenues, buoyed by improved tax revenue
performance, exceeded current expenditure by 31 billion taka
(equivalent to $775 million).  This surplus provides the
government contribution to the country's development budget,
termed the "Annual Development Program" (ADP).  While most
funding for the ADP comes from donors, the Finance Ministry
claimed to have maintained Bangladesh's contribution at about
33 percent in FY94.  Tax revenues reached a record high of 99
billion taka ($2,475 million), almost double the amount of FY89.
    However, the impact of government stabilization and trade
liberalization programs has cooled the ardor for reform among
many local businessmen.  Leaders of major business associations
representing small and medium-sized firms claim that reforms
(which increased the competition they face) have hit their
pocketbooks, accounting for a 30 percent drop in sales revenue
since 1991, the year the government initiated the stabilization
program.  These businessmen argue that current economic reforms
have opened Bangladesh to a surge of imports, principally from
India, and that reciprocal trade has not occurred.  The local
media have highlighted an apparent increase in smuggling of
Indian salt, sugar, textiles, fruit, leather, livestock,
automotive spares, and cement.  Rather than evaluate
Bangladesh's terms of trade or exchange rate policy vis-a-vis
its neighbors, these trade organizations demand greater tariff
protection for local industries.  Using India as an example,
they favor the classic protectionist "infant industry" path of
industrial development, ignoring the urgent need to enhance
productivity of domestic industries.  Given this kind of
thinking on the part of business, combined with a fractious
political environment, progress on the remaining structural
reforms is likely to stall.
    The microeconomic picture stands in contrast to
Bangladesh's record of achievement in attaining macroeconomic
stability.  State presence in the economy continues to be large
and, despite rhetoric to the contrary, privatization has slowed
to a virtual standstill.  The level of investment from both
private and public sources is among the lowest in Asia.
    Although some liberal investment measures were taken by the
government to foster private sector involvement in the energy
and telecommunication sectors, the investment climate continues
to be generally poor.  Bureaucratic bottlenecks, poor
infrastructure, corruption, labor unrest and a deteriorating
law and order situation continued to discourage domestic and
foreign investors.  Investment, stuck at 12 to 13 percent of
GDP in the FY85-FY92 period, increased slowly to over 13
percent in FY93 and is expected to reach 14 percent in FY94.
It is generally held that only an investment-to-GDP ratio of 17
to 18 percent and a GDP growth rate of 6 to 8 percent can begin
to make a real difference in lifting Bangladesh out of
poverty.  Bangladesh's current GDP growth rate of 4.9 percent,
while good by historical standards, is not high enough to make
a real difference to the poorest level of the economy.
2.  Exchange Rate Policy
    The Bangladesh Bank follows a semi-flexible exchange rate
policy, revaluing the currency on the basis of a weighted
basket of economic indicators.  The high and rising level of
foreign exchange reserves suggests the taka is undervalued.
The black market rate is quite close to the official rate and
has been stable.  The taka's effective market value is
bolstered by the large sum of foreign exchange Bangladesh
receives every year through aid transfers, and by continued
high levels of tariff protection and other restrictions on
imports.  Foreign exchange received as remittances from
overseas workers (manpower exports) further strengthens the
taka.  Noting that the real exchange rate for the taka has
risen vis-a-vis the exchange rates for the currencies of export
competitors such as India and China, some economists and
exporters are arguing for more rapid trade liberalization and
further devaluation.  The government has declared the taka to
be fully convertible for current account transactions, and is
considering full convertibility for capital account
transactions by December 1994.
    U.S. products and services have become generally more price
competitive in the Bangladesh market to the extent that the
value of the U.S. dollar has declined against competitor
nations' currencies.  Inbound and outbound foreign investment
flows are too small to affect the exchange rate.  Most foreign
firms are able to repatriate profits, dividends, royalty
payments and technical fees without difficulty, provided the
appropriate documentation is presented to the Bangladesh Bank.
Outbound foreign investment by Bangladeshi nationals requires
government approval and must be in support of export
activities.  Bangladeshi travellers are limited by law to
taking no more than $2,500 out of the country per year.
3.  Structural Policies
    In 1993, Bangladesh successfully completed the
International Monetary Fund's three-year Enhanced Structural
Admustment Facility (ESAF) program, meeting all fiscal and
monetary targets.  Money supply growth has been about 10
percent in FY93 and FY94.  The value added tax (VAT) continued
to generate higher than anticipated revenues for the
government, with collections up eight percent in real terms.
Government spending has also been curbed through controlling
the level of subsidies provided to several money-losing
parastatals, and attempting to shift more central government
resources towards capital or development expenditures.
According to the Central Bank, over the first quarter of FY94
Bangladesh actually experienced a bout of deflation.  Continued
fiscal discipline coupled with low money supply growth and
increasing banking liquidity kept FY94 inflation at 1.67
percent.
    While Bangladesh met ESAF monetary and fiscal targets,
progress on sectoral reforms, backed by multilateral
development banks and bilateral donors, has been halting.  Long
an easy source of funds for preferred borrowers who did not
feel obliged to repay, the banking sector in Bangladesh is
undergoing a wholesale reform effort under the Financial Sector
Reform Project (FSRP), supported by the U.S. Agency for
International Development and the World Bank.  The FSRP faces a
daunting challenge in attempting to convert a bureaucratically
run, economically unresponsive network of nationalized banks
into a useful source of capital for entrepreneurs.  Insulation
from market forces permitted the banks to maintain administered
interest rates and to ignore the bottom line in providing and
pricing banking services.  The FSRP continued to make
considerable progress in repricing banking services and
liberalizing interest rates during FY94.
    Efforts at reform often run afoul of vested interest
groups, such as public sector labor unions or domestic
producers in import-competing industries.  The public sector
accounts for only one-fourth of Bangladesh's industrial output,
but it exercises a dominant influence on industry and the
economy.  Most public sector industries, including textiles,
jute processing, and sugar processing, are perennial money
losers, draining the treasury and setting high wages that their
private sector counterparts often feel compelled to meet out of
fear of union action.  Moreover, the fact that crucial
infrastructure (power, telecommunications, railroads, and the
national airline) is in the public sector tends to limit
private sector productivity.
4.  Debt Management Policies
    Assessed on the basis of outstanding principal,
Bangladesh's external public debt was $14 billion as of June
1994, up six percent from the previous year's level of $13.18
billion.  Given the fact that virtually all of the debt was
provided on highly concessional terms by bilateral and
multilateral donors, the net present value of the total
outstanding debt is significantly lower than its face value.
Bangladesh currently owes approximately $1,314 million to the
United States, primarily incurred under the old PL-480 Title I
and III food program.  Total medium and long term debt
servicing for FY94 was $512 million, an increase over the $506
million paid out in FY93.
5.  Significant Barriers to U.S. Exports
    Officially, private industrial investment is completely
deregulated and the government has significantly streamlined
the investment registration process.  However, while
registration has been simplified, domestic and foreign
investors typically must obtain a series of approvals from
various government agencies in order to implement their
projects.  Bureaucratic red tape, compounded by rent-seeking
activity, slows decision-making.  The major exception is
investment in the country's Export Processing Zones (EPZ),
located in Chittagong and Dhaka.  Investment proposals for the
EPZs are processed quickly, and the EPZ administrators take
care of the investor's needs, from tax treatment to utility
hook-ups.  Barriers to investment also include the country's
low labor productivity, poor infrastructure, and an uncertain
law and order situation.  The lack of effective commercial laws
makes it difficult to enforce business contracts.
    The government has made significant progress in
liberalizing what had been one of the most restrictive trade
regimes in Asia.  Tariff reform was accelerated significantly
in FY94 by the compression of customs duty rates into a range
of 7.5 to 100 percent for most products, with the exception of
large vehicles, alcohol, cigarettes and air-conditioners, for
which duties remain in excess of 100 percent.  The trade
weighted average import tax rate was 43 percent in FY94
compared to 59 percent in FY92.  In July 1992 the government
replaced an import sales tax with a trade-neutral VAT, leaving
only the 2.5 percent "advance income tax" to be removed to make
customs duty the only protective instrument for most imports.
The number of products subject to an import ban or restriction
was reduced during FY94 and import procedures have been further
streamlined.  The formerly cumbersome procedure for opening
letters of credit also has been simplified.  Bangladesh
continues to raise relatively high shares of its government
revenue from customs duties.  Bangladesh ratified the Uruguay
Round agreements and became a founding member of the World
Trade Organization (WTO) on January 1, 1995.
6.  Export Subsidies Policies
    The Bangladesh government attempts to encourage export
growth through measures such as ensuring duty-free status for
some imported inputs, including capital machinery, and
providing easy access to financing for exporters.  Ready made
garment producers are stimulated by bonded warehousing and
back-to-back letter of credit facilities.  Exporters are now
allowed to exchange 100 percent of their foreign currency
earnings through any authorized dealer.  Government financed
interest rate subsidies to exporters were slightly reduced in
FY91 and further reduced over FY93-FY94.
    The growth in garment exports, still by far the most
dynamic performer in Bangladesh's economy, continued to taper
in FY94, up only 15 percent compared to a robust growth of 68
percent in FY91 and 48 percent in FY92.  At over $1.4 billion
in FY94, garments now comprise 60 percent of the value of
Bangladesh's total exports. However, because most of the trade
consists of assembling imported cloth for re-export, the total
value added to garments in Bangladesh is only about one fourth
of the exported value.  Bangladesh is shifting a larger share
of its garment exports towards the European Union, while U.S.
garment imports from Bangladesh dropped slightly in FY94.
Recent years have seen some challenges to Bangladeshi garment
exporters from U.S. labor groups protesting child labor
practices, and from U.S. garment producers alleging that some
products are being dumped or covertly subsidized.
7.  Protection of U.S. Intellectual Property
    Bangladesh intellectual property law dates from the
colonial era and has many similarities with the current British
system.  The Patent and Design Act of 1911, as amended by the
Patent and Design Rule of 1933, the Trademark Act of 1940, and
the Copyright Ordinance of 1962, govern patents, trademarks,
and copyrights in Bangladesh.
    Drafts of new legislation have been produced by the legal
profession in some cases and are under review by governmental
committees.  A new "Companies Act 1994" has been approved by
the parliament although it has not yet been publicly released
nor implemented.  Although the government has not given
intellectual property rights a high priority, Bangladesh has
been a member of the World Intellectual Property Organization
in Geneva since 1985 and is represented on two of its permanent
committees.  Intellectual property infringement is common, but
is of limited significance for U.S. firms, with the possible
exception of pharmaceutical products and audio and video
cassettes.
8.  Worker Rights
    a.  The Right of Association
    The Bangladesh constitution guarantees freedom of
association, the right to join unions, and, with government
approval, the right to form a union.  With the exception of
workers in the railway, postal, telegraph, and telephone
sectors, state administration workers are forbidden to join
unions.  However, some workers covered by this ban have formed
unregistered unions.  The ban also applies to security-related
government employees, such as in the military and police.
Bangladeshi civil servants forbidden to join unions, such as
those for teachers or nurses, have joined associations which
perform functions similar to labor unions.  Workers in
Bangladesh's two EPZs have also skirted prohibitions on forming
unions by setting up associations.  The government has stated
that labor law restrictions on freedom of association and
formation of unions in the EPZ will be lifted by 1997.  In the
burgeoning garment industry, there have been numerous
complaints of workers being harassed and fired in some
factories for trying to organize workers.
    b.  The Right to Organize and Bargain Collectively
    Unions in Bangladesh are highly politicized.  Virtually all
the National Trade Union centers are affiliated with political
parties, including the ruling Bangladesh Nationalist Party.
    Some unions are militant and engage in intimidation and
vandalism.  General strikes, or "hartals" continue to be used
by the political opposition to pressure the government.
Hartals cause significant economic and social disruption
through loss of work hours and production.  The Essential
Services Ordinance permits the government to bar strikes for
three months in any sector deemed "essential."  Mechanisms for
conciliation, arbitration, and labor court dispute resolution
were established under the Industrial Relations Ordinance of
1969.
    c.  Prohibition of Forced or Compulsory Labor
    The constitution prohibits forced or compulsory labor.  The
Factories Act and Shops and Establishments Act of 1965 set up
inspection mechanisms to enforce laws against forced labor, but
limited resources prevent the rigorous enforcement of these
laws.
    d.  Minimum Age of Employment of Children
    Bangladesh has laws that prohibit child labor.  The
Factories Act of 1965 bars children under the age of 15 from
working in factories.  In reality, enforcement of these rules
in inadequate.  According to United Nations estimates, about
one third of Bangladesh's population under the age of 18 is
working.  In a society as poor as Bangladesh's, the extra
income obtained by children, however meager, is welcome and
sought after.  In anticipation of possible U.S. legislation
prohibiting the import of products made by child labor,
thousands of underage children employed in Bangladesh's garment
industry were fired in 1993, and this trend continued
throughout 1994.
    e.  Acceptable Conditions of Work
    Regulations regarding minimum wages, hours of work, and
occupational safety and health are not strictly enforced.  The
legal minimum wage varies depending on occupation and
industry.  It is generally not enforced.
    The law sets a standard 48-hour workweek with one mandated
day off.  A 60-hour workweek, inclusive of a maximum 12 hours
of overtime, is allowed.  The Factories Act of 1965 nominally
sets occupational health and safety standards.  The law is
comprehensive but appears to be largely ignored by many
Bangladeshi employers.
    f.  Rights in Sectors with U.S. Investment
    U.S. investment stock in Bangladesh is very small,
totalling less than $30 million.  It is concentrated in the
capitalization and physical assets of a life insurance company,
a commercial bank and a representative banking office, and a
few other service and manufacturing operations.
    The manufacturing firms with U.S. investment have unions
and bargain collectively.  The threat of worker layoffs due to
reductions-in-force can cause serious management-labor
disputes.  As far as can be determined, firms with U.S. capital
investment abide by the labor laws and the provisions of the 31
International Labor Organization conventions ratified by
Bangladesh.  Similarly, these firms respect the minimum age for
the employment of children.  According to both the Bangladesh
government and representatives of the firms, workers in firms
with U.S. capital investment generally earn a much higher
salary than the minimum wage set for each specific industry.
In some cases, workers in these firms enjoy shorter working
hours than those working in comparable indigenous firms.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                               0
Total Manufacturing                                   (1)
  Food & Kindred Products                     0
  Chemicals and Allied Products             (1)
  Metals, Primary & Fabricated                0
  Machinery, except Electrical                0
  Electric & Electronic Equipment             0
  Transportation Equipment                    0
  Other Manufacturing                         0
Wholesale Trade                                         0
Banking                                               (1)
Finance/Insurance/Real Estate                           1
Services                                                0
Other Industries                                        0
TOTAL ALL INDUSTRIES                                  (1)
(1) Suppressed to avoid disclosing data of individual companies
Source: U.S. Department of Commerce, Bureau of Economic
Analysis
(###)
BARBADOS1
^q^qU.S. DEPARTMENT OF STATE
BARBADOS: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                             BARBADOS
                     Key Economic Indicators
        (Millions of U.S. dollars unless otherwise noted)
                                     1992      1993      1994
Income, Production and Employment:
Real GDP (1985 prices)              422.2     396.0     401.1
Nominal GDP (current prices)      1,696.7   1,585.7   1,640.3
Real GDP Growth Rate (pct.)          -4.0      -5.8       0.8
Sectoral Growth Rates:  (pct.)
  Agriculture/Fishing                -4.6      -9.2      -7.1
  Tourism                            -9.0      -2.0       3.2
  Manufacturing                      -5.6      -9.3      -0.3
  Energy/Gas/Water                    3.0       1.3       0.3
  Mining/Quarrying                    3.1      -9.7       4.2
  Construction                       -7.5      -8.1       2.1
  Wholesale/Retail Trade             -6.3      -7.9       2.4
  Business/General Services          -2.4      -5.3       0.9
  Transport/Storage/Communication     7.5      -3.5       1.2
  Government Services                -2.2      -5.0       0.0
Population (000s)                   262.5     263.1     263.9
Nominal Per Cap. GDP (official/$)   5,600     5,150     5,250
Nominal Per Cap. GDP (GDP/pop/$)    6,464     6,027     6,216
Labor Force (000s)                  122.5     124.8     126.3
Unemployment Rate (pct.)             17.1      23.0      24.5
Money and Prices:
Growth in Money Supply (M2/pct.)     -4.3       8.2       1.7
Prime Lending Rate (pct.) 1/        14.50     10.75      8.75
Retail Price Index (pct. change)      6.3       6.1       1.1
Average Annual Exchange Rate (USD/BDs)
  Official                           0.50      0.50      0.50
  Parallel                           0.50      0.50      0.50
Balance of Payments and Trade:
Total Exports (FOB)                 411.6     382.5     364.0
  Exports to U.S.                    53.4      62.3       N/A
Total Imports (CIF)               1,394.0   1,048.5   1,153.9
  Imports from U.S.                 494.1     377.3       N/A
Trade Balance                      -982.5    -665.9    -789.9
Current Account Balance             -29.9    -137.9      58.7
Aid from U.S.                         0.7       1.1       N/A
Aid from Other Countries              N/A       N/A       N/A
External Central Government Debt    393.8     346.3     330.6
Domestic Central Government Debt    556.8     618.3     808.5
Total Debt Service Payments (paid)  393.8     346.4     330.6
N/A--Not available.
1/ End of period.
1.  General Policy Framework
    Barbados is a British-style parliamentary democracy.  As a
result of the September 1994 general elections, the political
party comprising the government is the Barbados Labour Party,
headed by Prime Minister Owen Arthur.  The official opposition
is the Democratic Labour Party.  Seated in Parliament also is a
member of the National Democratic Party, as well as a few
independent Members of Parliament.
    As a country with a relatively narrow resource base and
limited production structure, Barbados imports much of what it
needs to survive, including energy, food, and most types of
consumer products.  Previous governments have pursued policies
-- including high tariffs, restrictions on entry into certain
sectors of business activity (such as telecommunications and
broadcasting), and laws which restrict the entry of
subsidiaries or branches of foreign retail establishments --
whose purpose was to protect local businesses from external
competition.  Those policies have had the unintended effects of
making both manufacturing and many services sectors
uncompetitive in terms of price (because inputs are so
expensive) and contributing to the generally high-cost wage
environment in Barbados.  Early indications are, however, that
in its efforts to reduce the high unemployment rate, the new
Barbados Labor Party government will act to lower the costs of
doing business here.  In October 1994, the new government
announced that businesses in the manufacturing, agricultural,
and fishing sectors will be able to import all inputs free of
all duties and taxes.  The policy change should result in
higher levels of goods imports, a development U.S. exporters
well may be able to take advantage of.
    In general, Barbados' trade policy seeks to stimulate
exports of goods and services (tourism and offshore financial
services), encourage domestic light manufacturing, maintain the
government's revenue base through direct taxation, and actively
manage foreign exchange reserves.  In 1993, the United States
was the leading source of imports into Barbados, followed by
CARICOM, the United Kingdom, and Canada.  Barbadian attitudes
toward the United States and toward U.S. business are also
generally favorable, as evidenced by the approximately 26
percent of the import market commanded by goods from the United
States.  According to U.S. Department of Commerce figures, U.S.
exports to Barbados grew about 13.9 percent in 1993, to U.S.
$145.5 million.
    Barbados ratified the Uruguay Round Agreements and became a
founding member of the World Trade Organization (WTO) on
January 1, 1995.
2.  Exchange Rate Policy
    Since 1975, the Barbadian dollar has been pegged to the
United States dollar at a fixed rate of Bds. $2.00 to U.S.
$1.00.  Despite intermittent problems in maintaining adequate
levels of international reserves, both of the major political
parties have formed governments committed to avoiding a
devaluation of the currency.  Any impact of this policy on U.S.
exports is probably positive, at least in the short term, since
Barbadians can buy more United States goods and services than
they would be able to if the currency were devalued.  Some
economists hypothesize, however, that the Barbadian currency is
overvalued, which contributes to making Barbadian manufactures
uncompetitive in terms of price (and perhaps quality) in
markets outside Barbados and restricts the long-term potential
output of the economy -- which could have implications for
import volumes in the long term.
    The Ministry of Finance makes foreign exchange control
policy, which is then administered by the Central Bank of
Barbados (CBB) through its Exchange Control Division.
Individuals may convert the hard-currency equivalent of U.S.
$2,500 per year without special permission, if they are
traveling outside Barbados, by applying to a commercial bank.
Amounts in excess of U.S. $2,500 may be obtained upon
application to the CBB.  Profits and capital from foreign
direct investment usually may be repatriated if the investment
was registered with the bank at the time the investment was
made.  The CBB may limit or delay conversions of funds
depending on the level of international reserves under its
control.
3.  Structural Policies
    Although the Barbadian economy is generally free
market-oriented, the government controls a relatively large
public sector, including a number of "parastatal" entities.
Pricing of goods is generally left to the market, although the
prices of certain food staples, as well as utility and public
transportation rates, are set by the government.  The
government subsidizes losses incurred by the entities -- such
as the monopoly dairy and the public bus system -- which it
partially or wholly owns, but the effect of those subsidies on
U.S. exports is probably minimal.  For example, milk imports
face high tariffs, as they do in most countries.  However, even
if imports were liberalized, U.S. exporters likely would face
strong competition from many other countries with milk
surpluses, such as from those in the European Union.  Bulk
users of utilities -- such as industry -- are eligible for
resource discounts, but the trade effect of the subsidy is
probably negligible on international markets, because of the
generally higher costs of production Barbadian industry faces.
    The 1992 and 1993 reform of the direct tax system broadened
the tax base while lowering maximum rates -- a change which
resulted in an overall lower level of government revenues in
the first half of 1994 (see section four).  The previous
government announced in April 1994 that a value-added tax (VAT)
would be initiated in April 1995, which, among other things,
would replace many of the indirect taxes -- such as consumption
taxes and stamp duties on imports -- which now exist.  The new
government has not yet announced whether the VAT will be
implemented according to the previous government's plan.
    In October 1994, the new government announced that
businesses in the manufacturing, agricultural, and fishing
sectors will be able to import all inputs free of all duties
and taxes.  The policy change should result in higher levels of
goods imports, a development U.S. exporters may be able to take
advantage of.
    In regard to purchases of consumer household durables, the
government has not yet announced its policy on the amount of
down payment needed, if any, to purchases these big-ticket
items, many of which are imported from the United States.  At
one point, the previous government sought to constrain imports
by making consumers put hefty down payments on installment
purchases of durables.  Currently, no down payment requirement
is in place.
4.  Debt Management Policies
    The overall deficit on central government operations
widened slightly during the first half of 1994, from about one
percent at the end of 1993 to between one and two percent of
Gross Domestic Product (GDP) at the end of June 1994.  The
increased deficit was due to a decline in revenues -- a result
of the 1993 tax reform which reduced direct levies -- and not
to increased expenditures.  The decline in government revenues
took place even as real GDP rose 3.8 percent on an annual basis
in the first six months of the 1994 (from 0.8 percent in
1993).  The Barbadian government has continued its concerted
effort to repay foreign debt, the levels of which have declined
steadily for over three years.  As in the recent past, an
increasing share of debt is being financed locally.  As a
result of high liquidity in the banking system, commercial
banks and other local buyers were the main source of new credit
to the government to finance the deficit during the first half
of 1994.  Previously, the deficit had been financed primarily
through purchases by the National Insurance Scheme (akin to the
Social Security System) of Treasury bonds.  As a result of the
government's repayments of its external debt, net foreign
financing in the January - June 1994 period was negligible.
    With the September 1994 election of a new (Barbados Labour
Party) government, it seems unlikely that Barbados will
willingly participate in a formal International Monetary Fund
(IMF) program in order to obtain funds for structural
adjustment in the near- to mid-term.  The new Prime Minister
has repeatedly said that he will not run his country according
to IMF dictates.  In the autumn of 1991 (under the former
Democratic Labour Party government), Barbados was compelled to
ask the IMF for funds to handle a severe shortfall of
international reserves.  In exchange, the IMF required Barbados
to institute economic austerity measures to reduce government
spending in ways that were politically unpopular, including
cutting spending on public sector wages.  Government officials
have expressed their desire to continue to work with the
Inter-American Development Bank and the Caribbean Development
Bank on essential infrastructure projects, and relations
between the Government of Barbados and those institutions
appear cordial.
5.  Significant Barriers to U.S. Exports
    The introduction of the CARICOM Common External Tariff
several years ago will continue to disadvantage imports from
countries which are not CARICOM (Caribbean Community) member
states -- including exports from the United States.  In
February 1994, Barbados eliminated its "negative list" of goods
which could not be imported or for which an import license was
necessary, and replaced it with a higher duty.  The benefit of
a duty replacing an import license is that the trade barrier is
transparent; previously, there was no way to foretell whether
the responsible Minister would approve a particular import
license application.  There is no provision of Barbadian law
that discriminates against U.S. exports in or of itself.
    U.S. standards are generally acceptable in Barbados; the
American Embassy is not aware of any cases in which Barbadian
standards have acted as a trade barrier to U.S. goods exports.
Barbados is a member of the GATT/Tokyo Round Agreement on
Standards (Standards Code).
    Barbados permits full ownership by foreigners of
investments and property, although certain sectors are reserved
for citizens of Barbados.  There are no maximum equity position
restrictions on foreign ownership of a local enterprise or
participation in a joint venture.  Non-residents need
permission from the Central Bank to purchase real property or
stock which is traded on the Securities Exchange of Barbados,
but permission is usually granted.  A property transfer tax is
levied on real property or stock transactions conducted by
foreigners.
    The Barbadian government must approve a license in order
for foreigners to invest in utilities, broadcasting, banking,
and insurance enterprises.  Previous governments denied all
requests by investors, both domestic and foreign, to open a
television station to compete with the government-owned
monopoly, but the current government has indicated that at
least one new television venture will be licensed.  In
addition, the government has licensed only one firm to provide
basic (local) telephone service and another to provide
long-distance telephone service.  Banking and insurance
services are open to foreign direct investment provided the
required level of capital is invested and prior government
approval is obtained.  Stock exchange membership (for traders)
is closed to non-Barbadians, and only firms long-established in
Barbados may be traded on the local securities exchange.  This
situation may change as the new government assesses ways to
broaden the possibilities for attracting foreign direct
investment to Barbados.  Other services (such as travel) are
generally open to foreign investment, although the ministries
responsible for trade and for labor matters must, by law,
determine if the competition of another service provider would
be detrimental to the financial health of currently-established
Barbadian businesses.
    The government requires a Barbadian citizen to apply for
many of the requisite licenses that allow enterprises to
operate.  Thus, a foreign-owned firm might have to hire a
Barbadian.  Work permits for foreigners usually are granted
only when no Barbadian is qualified to perform.  Administrative
proceedings involving Customs clearances are sometimes
burdensome.  While no special documents are required,
occasional capricious or dilatory judgments by officials can
slow the importation of essential inputs.
    Government procurement is not handled in a transparent
manner; both sole-source and competitive contracts are tendered
and the government is not obliged to accept the lowest, or any,
bid for public works projects or for critical procurements.
The government must "Buy Barbados" where it can, but the
Embassy has received no complaints by U.S. businesses of
discrimination against U.S. goods by Barbadian goods.  Neither
offsets nor countertrade is used in making procurements.
6.  Export Subsidies Policies
    Barbados gives priority to investments which intend to
manufacture, especially for export.  Incentives for
manufacturing are available under the Fiscal Incentives Act
(1974), which does not discriminate between foreign and
national ownership.  Any manufacturer may qualify for a maximum
10-year tax holiday by satisfying a value-added criterion or as
a so-called "enclave" (international business company, or IBC)
under Barbadian law, which, by definition, exports 100 percent
of its output.  IBCs enjoy the most advantageous tax treatment,
because the higher the level of gains and profits, the lower
the tax rate.  IBC tax rates range from a high of three percent
to a low of one percent of net profits.  However, under the
Income Tax Act, any manufacturing company in Barbados --
whether locally- or foreign-owned -- may enjoy tax reductions
which vary according to the percentage of its profits derived
from export income.  If a manufacturer derives more than 80
percent of its profits from exports, its effective tax rate can
be reduced from a maximum of 26 percent to 2.8 percent.
    Commercial and development bank financing is restricted to
Barbadian citizens, but because interest rates in Barbados are
generally higher than those in the United States, the subsidy
element likely is nil.  The Barbados Investment and Development
Corporation generally limits its export promotion efforts to
firms owned by Barbadians, although it may make exceptions for
firms which employ Barbadian citizens regardless of ownership.
In addition, the government offers export guarantee schemes
offering letters of credit and credit insurance for Barbadian
exporters.  Also (as mentioned previously), the new Barbados
government has announced that businesses in the manufacturing,
agricultural, and fishing sectors will be able to import all
inputs free of all duties and taxes, a measure designed to
stimulate the productive sectors in Barbados.
7.  Protection of U.S. Intellectual Property
    The Government of Barbados has made efforts in recent years
to improve the legal regime to protect, as well as to acquire
and dispose of, all property rights, including intellectual
property rights (IPR).  Barbados is a signatory of the Paris
Convention of Intellectual Property Rights and the Madrid
accords, and is a member of the World Intellectual Property
Organization (WIPO).  The law of Barbados does not promote
domestic industries at the expense of foreign industrial and
intellectual property rights holders.  However, Barbados has
only limited experience with IPR matters and very few
industrial designs or patents have been registered here.  There
have been no recent court challenges or settlements for patent,
trademark, or copyright infringements although infringement is
commonplace in certain sub-sectors of the economy (e.g.,
rentals and sales of films on videocassettes, tee-shirt
production of unlicensed copyrighted images, unlicensed use of
trademarks as store names, software piracy, satellite signal
piracy).  Enforcement has not been an active priority of
government, although the Government may initiate some
challenges in court in late 1994 or the first half of 1995.
Private parties may also initiate court challenges in that time
frame.
    Separate statutes govern and regulate IPR protection.  The
Industrial Designs Act provides for registration of industrial
designs for exclusive use by the registrant for five years,
which may be renewed for two additional consecutive five year
periods.  The Patents Act of 1981 allows for protection of
patents for 14 years.  The Trademarks Act of 1981 protects
marks initially for ten years with renewals possible for ten
year periods.  The Copyright Act protects copyrights during the
life of the author and for seven years thereafter.  There is no
specific statutory reference to trade secrets or semiconductor
chip layout designs.  In 1990, a WIPO consultant made
recommendations for changes in Barbados' IPR statutes and
administrative and enforcement procedures which are still being
considered.  Embassy cannot estimate lost U.S. import
opportunities related to local IPR protection standards.
8.  Worker Rights
    a.  The Right of Association
    Barbados boasts one of the most advanced trade union
environments in the hemisphere.  Workers have the right to form
and belong to trade unions and to strike, and they freely
exercise these rights.  There are two major unions and several
smaller ones, representing various sectors of labor.  The Civil
Service Union, called the National Union of Public Workers
(NUPW), is completely independent of any political party or the
government.  The General Secretary of the NUPW was a candidate
of the National Democratic party, while the former Director of
Education was a candidate for the Democratic Labor Party and a
Cabinet Minister.  The largest union, The Barbados Workers'
Union (BWU), was historically closely associated with the
governing Democratic Labor Party.  However, in February 1994,
Leroy Trotman, BWU General Secretary and President of the
Caribbean Congress of Labor, resigned from the DLP while
remaining in Parliament as an independent representative.
Trotman resigned because the public and especially union
members perceived a conflict between his role as union leader
and his role as parliamentarian.  The latter required him to
support the government's economic stabilization and austerity
measures which were viewed as setting back union achievements
and harming workers.  Nevertheless, one of Trotman's deputies
in the BWU remained a government backbencher in parliament
until he was voted out of office in September, 1994.
    Trade unionists' personal and property rights are given
full protection under law.  Under a long-standing law, strikes
are prohibited in the water, gas and electricity sectors,.
However, there have been several cases of work stoppages in the
electricity sector.  All other private and public sector
employees are permitted to strike.
    There were fewer industrial actions in 1993 than 1992,
despite severe cutbacks in personnel in the private sector.  In
the public sector, wage cuts, layoffs, and efforts to privatize
state-run enterprises continued.  Public, private, and union
sector leaders in the summer of 1993 signed a tripartite wage
policy accord that established a two- year wage freeze.  Any
increase in wages will be tied to productivity increases by
particular workers or by particular enterprises.  Critics
argued that the wage policy undermined the right of unions to
bargain collectively because it forestalled any new
company-wide or industry-wide negotiations for wage and benefit
increases.  Supporters of the tripartite pact hailed it as a
cooperative solution to the recession which prevailed at the
time.
    Trade Unions are free to form federations and are in fact
affiliated with a variety of regional and international labor
organizations.  Leroy Trotman head of the Barbados Workers'
Union, is also President of the ICFTU and President of the
Caribbean Congress of Labor.  The CCL is the main regional
labor organization; its headquarters are in Bridgetown and it
conducts many of its seminars and other programs in Barbados.
    b.  The Right to Organize and Bargain Collectively
    The right to organize and bargain collectively is provided
by law and respected in practice.  In 1993, over 25 percent of
the working population was organized, but a major loss of jobs
in the economy has resulted in a reduction in union
membership.  The BWU reported that it alone lost about 2,000
members in 1993 in the private and public sectors as a result
of adverse economic conditions.  Normally, wages and working
conditions are negotiated through the collective bargaining
process, but this was influenced by the tripartite wage accord
described in Section 8(A).
    Employers have no legal obligation to recognize unions
under the Trade Union Act of 1964.  But most do so when a
majority of their employees signify a desire to be represented
by a registered union. The act expressly prohibits employers
from discriminating against employees for engaging in trade
union activities.  However, there is no law that expressly sets
out unfair labor practices by either employers or trade
unions.  The courts commonly award monetary compensation but
rarely order re-employment.
    There are no manufacturing or special areas where
collective bargaining rights are legally or administratively
impaired.  Barbados has no specially designated export
processing zones.
    c.  Prohibition of Forced or Compulsory Labor
    Force or compulsory labor is prohibited by the constitution
and does not exist.
    d.  Minimum Age for Employment of Children
    The legal minimum working age of 16 is generally observed.
Minimum age limitations are reinforced by compulsory primary
and secondary education policies, which require school
attendance until age 16.  Occasionally, especially among
migrant worker families, children assist in agricultural
production during peak season.  The Labor Ministry has a small
cadre of labor inspectors who conduct spot investigations of
enterprises and check records to verify compliance with the
law.  These inspectors are authorized to take legal action
against an employer who is found to have underage workers.
    e.  Acceptable Conditions of Work
    Minimum wages for specified categories of workers are
administratively established and enforce by law.  Only two
categories of workers have a formally regulated minimum wage --
household domestic workers and shop assistants (entry level
commercial workers).  Household domestics receive a minimum
wage of about U.S.$32.50 per week, although in actual labor
market conditions the prevailing wage is almost double that
amount.  There are two age-related minimum wage categories for
shop assistants.  The adult minimum hourly wage for shop
assistants is U.S. $ 1.87 per hour; the juvenile minimum wage
for shop assistants is U.S. $1.625 per hour.  Agricultural
workers (i.e., sugar plantation workers) receive a minimum wage
as a matter of practice, but such compensation is not found in
legislation.
    The minimum wage for shop assistants is marginally
sufficient to meet minimum living standards; most employees
earn more.  In 1992 an International Labor Organization (ILO)
Committee of Experts (COE) cited Barbados for not adhering to
the ILO Convention On Equal Remuneration in its wage
differentials in the sugar industry.  The COE admonished the
government to ensure the application of the principle of equal
remuneration for work of equal value to male and female workers
in the sugar industry or to provide further information on job
descriptions which might justify such wage distinction.  This
case was not resolved at years' end.
    The standard legal work week is forty hours in five days,
and the law requires overtime payment for hours worked in
excess of that.  Barbados accepts ILO conventions, standards,
and other sectoral conventions regarding maximum hours of
work.  However, there is no general legislation that covers all
occupations.  Workers are guaranteed a minimum of three weeks
annual leave.,  All workers are covered by unemployment
benefits legislation and by national insurance (Social
Security).  A comprehensive government-sponsored health program
offers subsidized treatment and medication.
    Under the Factories Act of 1993, which sets out the
officially recognized occupational safety and health standards,
the labor ministry enforces health and safety standards and
follows up to ensure that problems cited are corrected by
management.  Workers have a limited right to remove themselves
from dangerous or hazardous job situations without jeopardizing
their continued employment.  The Factories Act requires that in
certain sectors firms employing more than fifty workers set up
a safety committee.  That committee can challenge the decisions
of management concerning the occupational safety and health
environment.  Recently, however, trade unions called on the
government to increase the number of factory inspectors in
order to enforce existing and proposed safety and health
legislation more effectively, and to follow up to ensure that
problems cited are corrected by management.  Government-
operated corporations in particular were accused of doing a
"poor job" in health inspections of government-run corporations
and manufacturing plants as a priority.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
BARBADOS2
U.S. DEPARTMENT OF STATE
BARBADOS: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
Petroleum                                              95
Total Manufacturing                                     7
  Food & Kindred Products                   3
  Chemicals and Allied Products             0
  Metals, Primary & Fabricated              0
  Machinery, except Electrical              0
  Electric & Electronic Equipment           2
  Transportation Equipment                  0
  Other Manufacturing                       1
Wholesale Trade                                       379
Banking                                               (1)
Finance/Insurance/Real Estate                          88
Services                                              (1)
Other Industries                                        0
TOTAL ALL INDUSTRIES                                  644
(1) Suppressed to avoid disclosing data of individual companies
Source: U.S. Department of Commerce, Bureau of Economic
Analysis
(###)
BELARUS1
@U.S. DEPARTMENT OF STATE
BELARUS: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                             BELARUS
                     Key Economic Indicators
        (Millions of U.S. dollars unless otherwise noted)
                                     1992      1993      1994 1/
Income, Production and Employment:
Real GDP Growth 2/                    -10        -9       -24
Labor Force (000s)                4,887.4   4,823.7   4,608.0
Unemployment (pct.)                   0.5       1.4       2.0
Money and Prices:  (annual percentage growth)
Money Supply (bil. rubles)            N/A     3,748     3,470
Base Interest Rate                    N/A       310       310
Retail Inflation                    693.5     517.1     283.7
Wholesale Inflation               1,627.5     936.8     327.9
Exchange Rate                         341     3,160     2,241 /3
Trade and Balance of Payments:  (USD millions)
Total Exports (FOB)                   N/A   2,941.0   2,556.0
  Exports to U.S.                    43.0      39.1      37.5
Total Imports (CIF) /4                N/A   3,216.0   3,193.0
  Imports from U.S.                  91.9      87.3      37.8
Trade Balance                         N/A    -275.0    -636.0
  Trade Balance with U.S.           -48.6     -48.2     -0.26
Aid from U.S.                        38.6      60.0       N/A
External Public Debt /5               N/A       890     1,652
Debt Service Payments (paid)          N/A         2       108
N/A--Not available.
1/ January-September 1994.
2/ National Bank base rate for loans to commercial banks.
3/ Average exchange rate through September 1, taking into
account the August 20 denomination.  Exchange rate on
December 1 was 9,100 Belarusian rubles:$1.00.
3/ Merchandise only - does not include energy imports.
4/ Does not include over $450 million debt to Russia for energy.
1.  General Policy Framework
    Belarus formally declared independence on July 27, 1991.
With Russia and Ukraine, Belarus was a founding member of the
Commonwealth of Independent States (CIS) in December 1991.  In
March 1994, the parliament passed Belarus' first post-Soviet
constitution, building the framework for a government with a
strong executive branch.  In July 1994, Alexander Lukashenko
was elected president of Belarus.  Economic policy is directed
by the president's administration through the Cabinet of
Ministers, led by Prime Minister Chigir.
    Belarus has declared its intention to create a
"socially-oriented market economy," but the pace of reform in
Belarus has been slow.  The delay in implementing a
comprehensive program of economic reforms has been blamed on
the government's fear of possible social unrest caused by
decreased living standards and unemployment.  In October, the
parliament approved the president's "plan of urgent measures"
for the Belarusian economy.  Like the plan for 1993 and prior
years, October's plan calls for increased reliance on market
mechanisms, but maintains central control over key market
sectors, including agriculture.  The plan has produced some
encouraging results thus far, including removal of energy
subsidies to state-owned enterprises, and cutting off
electricity and gas supplies to enterprises which have not paid
their share of Belarus' arrears to Russia for energy, which now
total over $450 million.  The Government of Belarus recently
came to agreement with the IMF on a standby arrangement, to be
financed with a second Structural Transformation Facility (STF)
loan and an upper credit tranche.  Prior actions for this
program included significant food price liberalization.
Unfortunately, the government delayed the price liberalization
and damaged the credibility of its new reform drive.  A
pledging session for the program did not yield sufficient donor
country support and IMF Board consideration of the program was
delayed from the end of December into January 1995 while the
IMF tries to adjust the program and seek additional donor
support to close the balance of payments gap.
    Belarus has a diversified economy, which during the
Soviet-era gave Belarus one of the highest standards of living
in the former Soviet Union.  Belarus can meet most of its own
basic food needs, with the exception of feed grains, sugar and
vegetable oil.  The agricultural sector accounts for an
estimated 26 percent of net material product (NMP) and relies
heavily on livestock, which contributes about 60 percent of the
sector's NMP.  The industrial sector is biased toward heavy
industry, with concentration in machine building, electronics,
chemicals, defense-related production, and construction
materials.  Virtually all enterprises are state-owned.
    The industrial sector continues to experience major supply,
demand, and price shocks as it relies on other CIS countries to
supply about 70 percent of its raw materials and to absorb more
than 40 percent of Belarus' output.  As prices for raw
materials approach world market levels, thus causing demand to
slacken, Belarus' industrial production continues to fall.
Despite past reform efforts, the military complex is in need of
vast restructuring which will require investment as well as
changes in operations and ownership.
    The economy is energy-intensive due to traditionally low
energy prices.  More than 90 percent of primary energy
consumption is met by imports.  Belarus' arrears for energy
supplies from Russia, its primary supplier, now exceed $450
million.  Belarus also faces a number of environmental problems
related to the Chernobyl accident and its heavy industrial
base.  The Government of Belarus claims that over 20 percent of
its budget goes to Chernobyl-related activities.  Agricultural
activity is still restricted in many areas damaged by Chernobyl.
    Fiscal and Monetary Policies:  The Government of Belarus
allowed itself a budget deficit of no more than six percent of
government expenditures.  The Central Bank is authorized by law
to issue credits up to four percent of gross domestic product.
The minimum wage was raised three times in the first three
quarters of 1994.  Since all other government wages, pensions
and taxes are pegged to the minimum wage, slight changes have
far-reaching impact.
    The National Bank of Belarus (NBB) is a weak financial
institution hampered by a lack of technical and financial
expertise, as well as by political interference.  However,
National Bank Chairman Bogdankevich, though not immune to
political influence, is considered to be a positive voice for
reform in Belarus.  The main instruments of monetary control in
Belarus are the volume and cost of NBB lending to banks,
reserve requirements, and restrictions on interest rates.
Establishing monetary control is hindered by the practice of
monetizing the fiscal deficit and the past practice of
cancelling outright the outstanding debts to state
enterprises.  The refinance rate of the NBB serves as an
indirect subsidy to state enterprises, as the rate is lower
than commercial credit or the inflation rate.
    Minimal regulation of the banking industry in this
credit-starved republic has led to a small bank boom.
Forty-four commercial banks currently exist in Belarus, one
with as many as 20 branch offices.  New regulations have been
introduced that are intended to institute new minimum reserve
requirements and encourage saving.  Although the National Bank
no longer cancels outright loans to state enterprises, it still
monetizes the government deficit, thwarting efforts at monetary
control.
    Belarus joined the International Monetary Fund (IMF), World
Bank and the European Bank for Reconstruction and Development
(EBRD) in 1992.  In late 1994, Belarus reached agreement with
the IMF on a program of market reforms, making the country
eligible for a stabilization loan of $100 million, as well as a
stand-by credit of $180 million.  The agreement calls for a
strict timetable for moving toward a market economy.  The U.S.
government and the EBRD have capitalized investment funds at
nearly $200 million targeted at small and medium-sized
businesses.  Belarus was granted GATT observer status in 1992.
2.  Exchange Rate Policy
    In October of 1992, Belarus created the "Belarusian rubel"
to supplement increasingly scarce cash Soviet rubles in
circulation.  When Russia withdrew Soviet rubles in July 1993,
the "rubel" became the de facto national currency.  After
continued attempts at forming a monetary union with Russia
failed to produce acceptable terms, Belarus gave up on the
effort and declared the rubel the national currency.  All
government obligations must now, by law, be paid in the
national currency.  Belarus has announced that, beginning
January 1, 1995, all retail trade must be conducted in
Belarusian rubels.  Licenses for continued trade in hard
currency are to be strictly controlled.
    In August, after losing over 90 percent of its value
against the Russian ruble in the two years since its
introduction, the Government of Belarus revalued the rubel to
one-tenth of its former value, reducing all denominations of
bank notes, non-cash deposits and prices by one zero.  However,
in the four months following this "currency reform," inflation
remains high and the rubel has again lost over two-thirds of
its value.
3.  Structural Policies
    The government has stated that it is anxious to attract
foreign investment and has introduced a series of reforms to
improve the investment climate.  The Supreme Soviet has passed
legislation regulating bankruptcy, leasing, and enterprises,
but implementation remains problematic.
    The process of privatization continues to move slowly
forward in Belarus.  The Minister of Privatization claims that
of all state-owned enterprises eligible for privatization, ten
percent are now in private hands.  A presidential decree on
privatization is expected to be issued by the end of 1994.
4.  Significant Barriers to U.S. Exports
    The tax code for foreign-owned businesses has not changed
significantly in the last three years.  Despite more than
twenty separate taxes on foreign-owned businesses, the
Government of Belarus has instituted legislation to attract
foreign investment.  Joint ventures with more than
30 percent foreign ownership are entitled to export products
without a license and pay no tax on profits for three years
after the company earns its first profits, if products are
manufactured by joint ventures in Belarus.  If the company
sells foods or services of third parties -- so-called
"middleman activity" -- the tax holiday on profits does not
apply.  Hard currency earnings from the export of a 30 percent
foreign-owned joint venture can be disposed of by the
enterprise after payment of appropriate taxes.
    These taxes include:  a) individual income tax; b)
value-added tax (20 percent); c) excise tax, if the company
produces specified goods, e.g. cigarettes and alcohol; d) real
estate and land taxes; e) tax on the use of natural resources
depending on the volume of natural resources extracted and on
polluting substances emitted or disposed of into the
environment; and f) fuel tax.
    Belarusian law forbids 100 percent ownership by foreigners
of property in Belarus.  To attract some foreign investors,
however, Belarus allows foreigners to obtain property in
Belarus under a 99-year lease.  The government has also
indicated that the president might make special exception to
allow foreigners 100 percent ownership.
    To date, there is no law on currency regulation in Belarus,
although a new law on the use of hard currency is due to go
into force in January 1995.  Belarus is still operating under a
decree issued by the Supreme Soviet at the end of 1992 entitled
"Temporary Rules for Hard Currency Regulation and the
Conducting of Operations with Hard Currency on the Territory of
the Republic of Belarus."  Under this decree, hard currency
earnings from the export of products made by an enterprise with
at least 30 percent foreign investment remain at the disposal
of the enterprise.  All other enterprises must sell 20 percent
of their hard currency earnings to the Government of Belarus
and pay a 10 percent hard currency revenue tax.
    The United States is working on several levels to increase
trade and investment in Belarus.  In the spring of 1993, the
U.S.-Belarus trade agreement, providing reciprocal
most-favored-nation status, went into force.  President Clinton
signed the Bilateral Investment Treaty during his visit to
Belarus in January 1994.  This treaty, when ratified by the
United States (Belarus has already ratified it), will provide a
legal framework to stimulate investment.  A bilateral tax
treaty intended to provide relief to businesses from double
taxation is also being developed.  An Overseas Private
Investment Corporation (OPIC) incentive agreement, which allows
OPIC to offer political risk insurance and other programs to
U.S. investors in Belarus, has also been concluded and is in
force.  The U.S. Export-Import Bank also has active programs in
Belarus.  Once ratified, the U.S.-Belarus bilateral investment
treaty will provide substantial assurances to U.S. investments.
5.  Export Subsidies Policies
    One of the legacies of a centrally-planned economy is
government subsidization of state-owned enterprises.  In
Belarus these subsidies are aimed at maintaining production and
employment rather than being specifically targeted at
supporting exports.
6.  Protection of U.S. Intellectual Property
    After the breakup of the Soviet Union, Belarus acceded to
the World Intellectual Property Organization (WIPO).  Piracy of
printed material, video and sound recordings, while prohibited
by law, continues.  The U.S.-Belarus trade agreement includes
some provisions on the protection of intellectual property.
7.  Worker Rights
    The independent trade union movement is developing very
slowly.  The largest trade union in Belarus, the Federation of
Trade Unions of Belarus, consisting of five million members, is
not considered an independent organization because it still
follows government directives.  However, as Belarus progresses
toward a market economy, unions are becoming more vocal in
demanding social protections formally provided under the Soviet
system.
    a.  The Right of Association
    The new Belarusian constitution, passed in March 1994,
allows the formation of independent trade unions.  However,
workers are often automatically inducted into the
government-affiliated Federation of Trade Unions.  The
Federation's active role in controlling social programs, such
as pension funds, will impede the growth of truly independent
trade unions.
    b.  The Right to Organize and Bargain Collectively
    The Belarusian constitution provides the right to organize
and bargain collectively, and bars discrimination against trade
union organizers.  In practice, however, there have been
reported cases of dismissals and threats of loss of employment
against independent trade union members.
    c.  Prohibition of Forced or Compulsory Labor
    The Belarusian constitution explicitly prohibits forced or
compulsory labor.  Belarus has ratified one of the
International Labour Organization's forced labor conventions.
However, penal production of manufactured goods exists.
    d.  Minimum Age for Employment of Children
    Existing law establishes 16 to be the minimum age for
employment.  Exceptions are allowed in cases where a family's
primary wage earner is incapacitated.
    e.  Acceptable Conditions of Work
    The Supreme Soviet, along with the Cabinet of Ministers,
has the responsibility to set a minimum wage which is increased
periodically in response to inflation.  The labor code limits
the work week to 40 hours, with a required 24 hour rest
period.  Many workers, however, find themselves under-employed
and are forced to take unpaid leave due to lack of demand for
factory production.  The law establishes minimum conditions for
work place safety and employee health.  Enforcement of these
standards is lax.
    f.  Rights in Sectors with U.S. Investment
    There is no significant U.S. investment in Belarus.
BELGIUM1
qqqqU.S. DEPARTMENT OF STATE
BELGIUM: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                             BELGIUM
                     Key Ecomomic Indicators
        (Millions of U.S. dollars unless otherwise noted)
                                    1992      1993      1994 1/
Income, Production and Employment:
Real GDP (1985 prices) 2/          176.9     162.1     172.9
Real GDP Growth (pct.)               1.4      -1.3       1.8
GDP (at current prices) 2/         219.0     206.4     226.3
By Sector:
  Agriculture                        3.7       N/A       N/A
  Energy/Water                       9.6       N/A       N/A
  Manufacturing                     44.5       N/A       N/A
  Construction                      12.7       N/A       N/A
  Services                         119.1       N/A       N/A
  Government/Health/Education       29.3       N/A       N/A
Real Per Capita GDP (1985 prices) 17,711    16,210    17,170
Labor Force (000s)                 4,237     4,261     4,279
Unemployment Rate (pct.)             9.4      10.5      10.9
Money and Prices:
Money Supply (M1)                   40.4      40.7       N/A
Base Interest Rate 3/                8.7       7.2       6.4
Personal Saving Rate                19.5      20.6      20.2
Retail Inflation                     2.1       2.6       1.8
Wholesale Inflation                 -1.8       0.2       1.5
Consumer Price Index                 2.4       2.7       2.5
Exchange Rate (BF/USD)              32.1      34.6      32.8
Balance of Payments and Trade:
Total Exports (FOB)                123.5     111.3     115.6
  Exports to U.S.                   4.41      4.90       N/A
Total Imports (CIF) 4/             125.2     114.7     117.5
  Imports from U.S.                 5.47      5.21       N/A
External Public Debt                31.5      43.9     44.65
Gold and Foreign Exch. Reserves     11.4      13.9      18.1
Trade Balance 4/                    -1.7      -3.4      -1.9
  Trade Balance with U.S.          -1.06      -0.3       N/A
N/A--Not available.
1/ 1994 figures are all estimates based on available monthly
data in October 1994.
2/ GDP at factor cost.
3/ Figures are actual, average annual interest rates.
4/ Merchandise trade.
1.  General Policy Framework
    Belgium, a highly developed market economy, belongs to the
OECD group of leading industrialized democracies.  With exports
and imports each equivalent to about 60 percent of GDP, the
country depends heavily on world trade.  About 75 percent of
its trade takes place with other European Union (EU) members.
Belgium ranked as the ninth-largest trading country in the
world in 1993.  The country's service sector generates more
than 70 percent of GDP, compared with 25 percent for industry
and two percent for agriculture.  Belgium imports many basic or
intermediate goods, adds value, and then exports final products.
    Belgium exports twice as much per capita as Germany and
five times as much as Japan.  The country derives trade
advantages from its central geographic location, and a highly
skilled, multilingual and industrious workforce.  Over the past
30 years, Belgium has enjoyed the second-highest average annual
growth in productivity for all OECD countries after Japan.
    Globally, Belgium ranks as the United States' 10th-largest
export market worldwide and the fifth-largest in Western
Europe.  Belgium is the 13th largest target for U.S. investment
in the world.  U.S. trade and investment prospects are
positive, and many opportunities exist for U.S. exporters and
investors.  The Belgian government recently undertook steps to
improve the foreign investment climate even more.
    Of all European Union members, Belgium's 1993 economic
recession was the worst after Germany's.  Part of the 1993
recession came about because the government instituted a
variety of budget cuts and revenue measures totalling about 6.6
percent of GDP in 1992 and 1993 to try to meet economic
performance targets under the EU's proposed Economic and
Monetary Union (EMU).  Due to the highest net public sector
debt load among OECD countries (127 percent of GDP), Belgium
faces tight fiscal policy for many years to come.
    Belgium, with its small open economy, is very vulnerable to
declines in economic activity in Germany, France and the
Netherlands, which together account for more than half of
Belgium's exports.  Belgian unemployment currently stands at
more than 10 percent of the workforce (by EU and OECD
standardized definitions), an increase of more than 15 percent
in one year.  The country's competitiveness also deteriorated
in 1993.  Per capita wage costs increased by 4.2 percent,
against 3.6 percent for the country's seven most important
trading partners.
    For 1994, the extent of economic recovery in Belgium
depends in large part on economic development results in
neighboring countries, as well as the degree of Belgian
monetary and fiscal tightness.  Most recent GDP growth
forecasts are in the neighborhood of 2.3 percent in 1994 and
2.8 percent in 1995.
    Belgium completed domestic ratification of the Uruguay
Round agreement and became a founding member of the WTO on
January 1, 1995.
    When the present coalition government under Prime Minister
Dehaene came to power in March 1992, it set three budgetary
targets.  First, federal expenditures net of debt payments
should not grow faster than the inflation rate.  Second, the
growth rate of fiscal revenues should at least match the growth
rate of nominal GDP.  Third, the deficit in the social security
budget should be eliminated.  The Government has managed to
meet the two first criteria, but has not yet balanced the
social security budget, mainly due to substantial cost overruns
in health insurance and unemployment benefits.  In 1993, the
Government of Belgium's (GOB) public sector budget deficit
equaled 7.2 percent of GDP, up 0.3 percentage points from the
1992 level.  According to the Government's own convergence plan
for possible membership in the European Economic and Monetary
Union (EMU), the 1993 target was 5.8 percent.  For 1994, it is
4.8 percent.  Despite weak fiscal results to date, the Belgian
Government since March 1992 has implemented budgetary austerity
measures worth more than $ 16.2 billion, or about 6.6 percent
of GDP.  Even though 75 percent of these measures were revenue
increases rather than expenditure cuts, they had the advantage
of being mostly structural in nature, as opposed to one-time
measures.  As a consequence, the Government still expects to
meet the three percent of GDP annual budget deficit target in
1996, one of the Maastricht Treaty requirements for possible
full EMU membership.  Since Belgium has virtually no chance of
reaching in this decade the 60 percent of GDP public debt
target under the Maastricht Treaty, the Belgian public sector
must come close to the annual deficit target to obtain a
derogation on the debt target.
2.  Exchange Rate Policy
    Belgian monetary policy basically shadows German interest
rates as closely as possible in order to keep the Belgian Franc
(BF) close to a central parity with the Deutsche Mark (DM).  In
June 1990, the National Bank of Belgium (NBB) decided to keep
the BF within a plus or minus 0.3 percent band around the
central parity of the DM, a much narrower band than what the
European Exchange Rate Mechanism (ERM) required.  That policy
proved successful during the next three years; Belgian
inflation ranked among the lowest in the EU, and renewed
credibility of the BF allowed the Government to finance its
debt at good rates.  As part of the near collapse of the entire
ERM on July 30, 1993, this "strong franc" policy came under
serious attack both before and after the widening of the ERM
fluctuation bands on August 2, 1993.  Despite the NBB's
intention to bring the BF back within the narrow ERM band as
soon as possible, markets began to focus more on Belgium's
imbalances (mainly the widening budget deficit gap, the huge
public debt and the depth of the recession).  Serious pressures
developed against the BF in the summer and fall of 1993.
Consequently, the NBB and Government used high short-term
interest rates, jawboning and currency market interventions to
support the BF.
    After the franc slipped by about seven percent against the
central parity rate with the Mark, several factors came to its
rescue, apart from high interest rates and currency market
intervention.  The German Bundesbank lowered its key interest
rates at the end of October 1993, relieving the pressure in the
ERM.  The ensuing appreciation of the dollar against the DM
further eased the pressure on the BF.  Subsequently, the NBB
lowered its interest rates by more than 100 basis points within
two weeks.  Through the combination of the above factors, the
BF by the end of 1993 had returned close to the central parity
with the DM, and has stayed there since then, despite gradual
short-term interest rate cuts.
3.  Structural Policies
    In practice, freedom of trade in Belgium does not
discriminate between foreign and domestic investors.  There are
basically no legal measures in force to protect local industry
against foreign competitors, except in the agricultural sector
where the EU's external tariffs and the quota structure of the
Common Agricultural Policy (CAP) apply.  Nevertheless,
unwritten rules have favored national suppliers for public
procurement contracts and there have been occasional instances
where individual private sector projects have met resistance
from established economic interests.
    Subsidies:  On July 20, 1993, Belgium completed its process
of constitutional change and became a federal state.  In this
new system, the three regional governments of Flanders,
Brussels, and Wallonia will assume responsibility for most
state aid programs under the guidance of the federal government
and EU regulation.  State aids are mainly based on two federal
laws:  (1) the Economic Expansion Act of August 4, 1978 (for
small companies), and (2) the Economic Expansion Act of
December 30, 1970 (for large companies).  Both laws provide
financial and fiscal incentives for investments in land,
buildings, and tangible and intangible assets.  Belgian state
aid programs at all levels of government seem likely to shrink
in the next several years as pressures to limit them from the
EU Commission and from declining national and regional budgets
intensify.  The EU Commission believes that state aids distort
the single market, impair structural change, and threaten EU
convergence and social and economic cohesion.  Belgium has
historically been near the top of the EU in providing state
aids, well above the community average.  In recent years about
five percent of total Belgian public sector spending has gone
to state aids, about 64 percent of which went to particular
industries, e.g. the railroads and coal mines.  In the future,
the remaining state aid programs will emphasize general macro
objectives such as promoting innovation, research and
development, energy saving, exports, and most of all,
employment.
    Investment:  Belgium maintains an excellent investment
climate for U.S. companies. U.S. investment in Belgium - almost
$11 billion - ranks 13th in the world.  No restrictions in
Belgium apply specifically to foreign investors.  Specific
restrictions that apply to all investors in Belgium, foreign
and domestic, include the need to obtain special permission to
open department stores, provide transportation, produce and
sell certain food items, cut and polished diamonds, and sell
firearms and ammunition.  During 1993, the American Chamber of
Commerce in Belgium complained publicly on behalf of some of
its members about a deterioriation in certain aspects of the
previously excellent foreign investment climate in Belgium.
The American Chamber specifically criticized the absence of a
unified government policy on foreign investment within Belgium
resulting in firms finding themselves welcomed and turned away
at the same time by different government agencies.  In
addition, the Chamber complained of an inconsistent approach to
environmentally sensitive investment projects, contradictory
tax treatment of expatriate cost remuneration, uncertainties
concerning the legal status of certain kinds of investments,
and hardships for the families of expatriates occasioned by
Belgian tax, visa, and immigration policies.  Since then, the
government has responded positively to these points and
promised to take the necessary measures to remedy these
problems.
    Tax structure:  Belgium's tax structure was substantially
revised in 1989.  The top marginal rate on personal income is
still 55 percent.  Corporations are taxed on income at a
standard rate of 39 percent and a reduced rate ranging from 29
percent to 37 percent.  Branches of foreign offices are taxed
on total profits at a rate of 43 percent, or at a lower rate in
accordance with the provisions contained in the double taxation
treaty.  Under the bilateral treaty between Belgium and the
United States, that rate is 39 percent.
    Despite the reforms of the past five years, the Belgian tax
system is still characterized by relatively high marginal rates
and a fairly narrow base resulting from numerous fiscal
loopholes.  While indirect taxes are lower than the EU average,
both in relation to GDP and as a share of total revenues,
personal income taxation and social security contributions are
particularly heavy.
    The United States-Belgium bilateral income tax treaty dates
from 1970.  A protocol to the 1970 treaty was concluded in
December 1987 and approved by the Belgian Parliament in April
1989.  The instruments of ratification were exchanged by the
U.S. and Belgian governments in July 1989, and the protocol
went into effect retroactive to January 1, 1988.  The protocol
amends the existing treaty by providing for a reciprocal
reduction of the withholding rate on corporate dividends from
15 to 5 percent (a feature which was actively sought by the
American business community).
4.  Debt Management Policies
    Belgium's public sector is a net external debtor, but the
net foreign assets of the private sector push the country into
a net creditor position.  Only about 15 percent of the Belgian
government's overall debt is owed to foreign creditors.
Moody's top Aa1 rating of the country's bond issues in foreign
currency fully reflects Belgium's integrated position in the
EU, its significant improvements in fiscal and external
balances over the past few years, its economic union with the
financial powerhouse of Luxembourg, as well as the slowdown in
external debt growth.  The Belgian government does not
experience any major problems in obtaining new loans on the
local credit market.  Because of the reform of monetary policy
in January 1991, as well as greater independence granted in
1993 to the National Bank of Belgium (NBB), direct financing in
Belgian francs by the Treasury through the central bank has
become impossible.  The Treasury retains only a $ 500 million
credit facility with the NBB for day-to-day cash management
purposes.  The contracting of foreign currency loans by the
Belgian government has also been restricted.  Such borrowing is
possible only in consultation with the NBB, which ensures that
these loans do not compromise the effectiveness of the exchange
rate policy.
    As a member of the G-10 group of leading financial nations,
Belgium participates actively in the IMF, the World Bank, the
EBRD and the Paris Club.  Belgium is a significant donor
nation, and it closely follows development and debt issues,
particularly with respect to Zaire (where development aid flows
are frozen) and some other African nations.
5.  Significant Barriers to U.S. Exports
    With the beginning of the EU's single market, Belgium has
implemented most, but not all, of the trade and investment
rules necessary to harmonize with the rules of the other EU
member countries.  Thus, the potential for U.S. exporters to
take advantage of the vastly expanded EU market through
investments or sales in Belgium has grown significantly.
    Some barriers to services and commodity trade still exist,
however, including:
    Telecommunications:  The Belgian telecommunications market,
with its state monopoly of the basic telephone network, has
shown recently a greater degree of openness than in the past.
A second cellular license will be issued before the end of
1994, the yellow pages have been opened up to competition
(albeit both under EU pressure) and the search is on for a
strategic partner for Belgacom, the public telephone operator.
However, foreign suppliers of equipment still complain that
they face an unequal battle with the 'national champions'.
    Ecotaxes:  The Belgian government has passed a series of
ecotaxes, in order to redirect consumer buying patterns away
from environmentally damaging materials (as defined by the
green parties, which supported the government coalition's
efforts to revise the constitution and create a federal
state).  These taxes will possibly raise costs for U.S.
exporters, since U.S. companies selling into the Belgian market
must adapt to the phased-in implementation of these taxes,
which may add more costs to U.S. producers forced to adapt
worldwide products to varying EU environmental standards.
    Belgian Subsidies to Airbus Participants:  Since the
inception of the Airbus project in Europe, Belgian companies
have participated as subcontractors to the main German and
French producers of the aircraft.  In the past, Belgian public
production supports for Airbus contractors have included
subsidies for both recurring and non-recurring costs.  Cash
advances were halted in 1991, though support continues today in
the form of a guaranteed exchange rate designed to compensate
Belgian contractors for the decline in the BF/dollar rate.  The
precise level of the subsidy depends on the equipment being
supplied, the Airbus aircraft type, and the degree of Belgian
federal and regional government participation.  Between 1978
and 1991, Belgian federal and regional authorities contributed
an estimated $167 million to Belgian Airbus component
manufacturers participating in the Belairbus consortium. In the
period 1992-1998, Belgian governments have pledged $392 million
in total support.  While federal supports are scheduled to end,
regional government subsidies are likely to continue and even
rise in the future, despite federal government commitments to
control them.  This, of course, depends on Belgian industry
receiving continued work from the Airbus consortium.
    Regionalization:  The devolution of various central
government powers to the three regions of Belgium is
accelerating.  The regions already have considerable influence
over educational and environmental matters and control most of
the subsidies and investment incentives given to both domestic
and foreign business.  At some point, it is likely that the
regions will press for taxing authority to raise revenues, in
order to meet their added responsibilities.  There is
inconsistent enforcement of environment regulations among the
regions, which may lead to a less favorable investment climate
for U.S. business in some parts of the country.  The regions
have promised to take steps to avoid nontransparency and
conflicting jurisdictions.
    Opening the Retail Service Sector to U.S. Firms:  During
1993 and 1994, the large U.S. retail chain, Toys R Us, has
experienced considerable difficulty in obtaining permits to
open three outlets in Belgium.  Current legislation is designed
to protect the small shopkeeper in Belgium and has a decidedly
nontransparent and protectionist bent.  While Belgian retailers
also suffer from the same restrictions, their existing sites
give them strong market share and power in local markets.  Toys
R Us officials want to continue to open outlets in Belgium and
are concerned that strict enforcement of the retail law will
prevent them from doing so.
    Military Offset Programs:  Belgian military investment
programs frequently contain offset clauses, whereby a certain
amount of the contract needs to be performed in Belgium, either
directly (i.e. direct compensation on the sale) or indirectly
(i.e. by giving Belgian subcontractors a share of unrelated
contracts).  The offset programs are complicated because of the
required regional breakdowns: 53 percent must go to Flanders,
38 percent to Wallonia and 9 percent to Brussels.  The number
of military contracts is dwindling, however, as Belgian
military spending declines.
    Broadcasting and Motion Pictures:  Belgium voted against
the EU broadcasting directive (which required high percentages
of European programs) because its provisions were not, in the
country's view, strong enough to protect the fledgling film
industry in Flanders.  The Flemish (Dutch-speaking) region and
Walloon (French-speaking) community of Belgium have local
content broadcasting requirements for private television
stations operating in those areas.  The EU has taken the
Walloon and Flemish communities to the European Court of
Justice concerning these requirements.  In 1993 the Francophone
community led an effort to exclude the U.S. TNT cartoon channel
from cable systems in all three regions.  A Brussels court
subsequently required the broadcasting of TNT in the Brussels
region.  Similar difficulties await NBC and Viacom, when they
try to enter the Flemish market in early 1995 with their TV4
channel.
6.  Export Subsidies Policies
    There are no direct export subsidies offered by the
Government of Belgium to industrial and commercial entities in
the country, but the Government does conduct an active program
of trade promotion.  This trade promotion activity (subsidies
for participation in foreign fairs and the compilation of
market research reports), together with a social expenditure
break (a reduction of social security contributions by
employers, and generous rules for cyclical layoffs) are offered
to both domestic and foreign companies in export sectors, and
they may come close to the definition of a subsidy in the case
of a company engaged in exporting.
7.  Protection of U.S. Intellectual Property
    Belgium is party to the major intellectual property
agreements, including the Paris, Berne and Universal Copyright
Conventions, and the Patent Cooperation Treaty.  Nevertheless,
an estimated 25 percent of Belgium's video cassette and compact
disc markets are composed of pirated cassettes.
    On June 30, 1994, the Belgian Senate gave its final
approval of the revised Belgian copyright law.  The old law
dated from 1886.  National treatment standards were introduced
in the blank tape levy provisions of the new law, replacing
reciprocity standards.  Problems regarding first fixation and
non-assignability were also resolved.  The final law states
that authors will receive national treatment, and allows for
sufficient manoeuvrability in neighbouring rights.  It is
estimated that U.S. authors and producers will receive some $7
million annually from the proceeds of the blank tape levy in
Belgium.
    Patents:  A Belgian patent can be obtained for a maximum
period of twenty years and is issued only after the performance
of a novelty examination.
    Trademarks:  The Benelux Convention on Trademarks, signed
in Brussels in 1962, established a joint process for the
registration of trademarks for Belgium, Luxembourg, and the
Netherlands.  Product trademarks are available from the Benelux
Trademark Office in The Hague.  This trademark protection is
valid for ten years, renewable for successive ten-year
periods.  The Benelux Office of Designs and Models will grant
registration of industrial designs for 50 years of protection.
International deposit of industrial designs under the auspices
of World Intellectual Property Organization (WIPO) is also
available.
8.  Worker Rights
    a.  The Right Of Association
    Belgium has a long tradition of democratic trade unions.
Workers have the right to associate freely, hold free elections
and strike.  Unions striking or protesting government policies
or actions are free from harassment and persecution.
Anti-union actions before a union is legally registered are
effectively prohibited.  Labor unions are independent of the
government but have important informal links with and influence
on several major political parties.  Belgian unions are free to
affiliate with and are affiliated with the major international
labor bodies.  In the provision of essential public services,
public employees' right to strike is implicitly recognized.
Public employees may and often do strike.  Laws and
regulations, effectively enforced, prohibit retribution against
strikers and union leaders.
    b.  The Right To Organize and Bargain Collectively
    The right to organize and bargain collectively is
recognized and exercised freely.  Management and unions
negotiate a nationwide collective bargaining agreement, which
establishes the framework for negotiations at plant and branch
levels.  The right to due process and judicial review are
guaranteed for all protected union activity.  Belgian law
prohibits discrimination against union members and organizers
and provides special protection against termination of
contracts of shop stewards and members of workers' councils and
of health and safety committees.  Employers found guilty of
such discrimination are required to reinstate workers.
Effective mechanisms exist for adjudicating disputes between
labor and management.  Belgium maintains a system of labor
tribunals and regular courts which hear disputes arising from
labor contracts, collective bargaining agreements, and other
labor matters.
    Belgium has no export processing zones.
    c.  Prohibition of Forced or Compulsory Labor
    Forced or compulsory labor is illegal and does not occur.
    d.  Minimum Age for Employment of Children
    The minimum age for employment of children is 15, but
schooling is compulsory until the age of 18.  Youth between the
ages of 15 and 18 can participate in part-time work/part-time
study programs.  Students can also sign summer labor contracts
of up to 30 days.  During that period, they can work the same
number of hours as adults.  The labor courts effectively
monitor compliance with nationals laws and standards.
    e.  Acceptable Conditions of Work
    The current monthly national minimum wage rate for workers
age 22 and over is 42,469 Belgian francs, effective as of June
1994.  Based on the exchange rate of October 19, 1994, this is
equivalent to $ 1,374.  Workers between 18 and 21 can be paid
less than minimum wage.  18-year-olds can be paid 82 percent of
the national minimum wage, 19-year-olds 88 percent, and
20-year-olds 94 percent.  Minimum wage rates in the private
sector are established by nation-wide labor/management
negotiations.  In the public sector, the minimum wage is
determined in negotiations between the government and the
public service unions.  Regular cost of living adjustments are
made during the course of each year to the basic minimum wage
rate.  The Ministry of Labor effectively enforces minimum-wage
laws.  A maximum 40-hour workweek which provides at least one
24-hour rest period is mandated by law, although many
collective bargaining agreements have set shorter work weeks.
The law requires overtime payment for hours worked in excess of
a regular workweek.  Excessive compulsory overtime is
prohibited.  These laws are enforced effectively.
Comprehensive health and safety legislation is supplemented by
collective bargaining agreements on safety issues.  Workers
have the right to remove themselves from situations which
endanger their health or safety without jeopardy to their
continued employment, and Belgian law protects workers who file
complaints about such situations.  The Labor Ministry
implements health and safety legislation through a team of
inspectors and determines whether workers qualify for
disability and medical benefits.  Health and safety committees
are mandated by law in companies with more than 50 employees
and by works councils in companies with more than 100
employees.  The Ministry of Labor effectively monitors
compliance with national health and safety laws and standards.
    f.  Rights in Sectors with U.S. Investment
BELGIUM2
U.S. DEPARTMENT OF STATE
BELGIUM: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
    U.S. capital is invested in many sectors in Belgium.
Worker rights in these sectors do not differ from those in
other aeas.  Worker rights are practiced and observed uniformly
throughout the country.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                                249
Total Manufacturing                                    5,557
  Food & Kindred Products                     411
  Chemicals and Allied Products             3,415
  Metals, Primary & Fabricated                240
  Machinery, except Electrical                 56
  Electric & Electronic Equipment             215
  Transportation Equipment                    (1)
  Other Manufacturing                         (1)
Wholesale Trade                                        2,056
Banking                                                   97
Finance/Insurance/Real Estate                          2,794
Services                                                 708
Other Industries                                          91
TOTAL ALL INDUSTRIES                                  11,552
(1) Suppressed to avoid disclosing data of individual companies
Source: U.S. Department of Commerce, Bureau of Economic
Analysis
BOLIVIA1
kU.S. DEPARTMENT OF STATE
BOLIVIA: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                             BOLIVIA
                     Key Economic Indicators
        (Millions of U.S. dollars unless otherwise noted)
                                     1992      1993      1994 a/
Income, Production and Employment:  c/
Real GDP (pct. change)               2.69      3.18       4.0 j/
GDP Per Capita Income (USD)           958     1,017     1,065 j/
  Percent Change                     5.56      6.16      4.72 j/
Nominal GDP                         6,527     7,059     7,100 j/
Sectoral GDP (pct.)                 100.0     100.0     100.0
  Agriculture                       19.83     20.36       N/A
  Manufacturing                     13.90     13.57       N/A
  Trade/Services                    28.52     28.41       N/A
  Public Administration              9.02      8.86       N/A
  Mining                             8.51      8.73       N/A
  Transportation/Communications      9.00      9.05       N/A
  Oil Industry                       6.17      6.00       N/A
  Others                             5.05      5.02       N/A
Unemployment Rate (pct.) f/           5.4       7.4       7.9
Money and Prices:  c/
Money Supply (M1)                   503.9     591.3     643.2 h/
Fiscal Deficit (pct. GDP) k/          4.6       6.0       6.3 j/
Inflation (12 months)                10.5       9.3       7.5
Commercial Bank Deposits g/       1,118.4   1,856.0   2,362.7 h/
Interest Rates (USD)
  Loans (avg. pct.)                   7.6      17.4      14.9 h/
  Deposits (avg. pct.)               11.7      10.1       9.9 h/
  CD Time Deposits (avg. pct.)        7.5       6.6       6.5 h/
Exchange Rate (Bs/USD) c/
  Year-end                           4.10      4.48      4.70
  Average                            3.89      4.26      4.55
Trade and Balance of Payments:  c/
Total Exports (FOB)                 637.6     709.7     910.0
  Exports to U.S. d/                161.2     191.0     106.6 e/
  Natural Gas                       122.8      90.2      75.8 h/
  Tin (CIF)                         107.4      83.4      83.3 h/
  Other Mineral Exports (CIF)       272.5     278.6     281.5 h/
Total Imports (CIF frontier)      1,090.3   1,205.9   1,220.0
  Imports from U.S. d/              221.8     215.9      76.9 e/
Current Account Balance            -587.0    -224.0    -542.0 m/
Capital Account Balance             317.0     211.2   1,316.3 m/
Central Bank Gross Reserves
  (year-end)                        416.9     494.8     635.1 h/
Central Bank Net Reserves (yr. end)  40.0     370.3     504.5 h/
Public Foreign Debt i/
  Total                           3,784.5   3,795.6   4,080.0
  Loan Disbursements                384.5     319.2     183.2 h/
  Capital Payments                  106.9     119.5      89.4 h/
  Interest Payments                  99.5     120.6      93.8 h/
N/A--Not available.
Sources:
a/ Estimated data (Central Bank of Bolivia and UDAPE) and/or
targets set by the GOB and the IMF.
b/ National Institute of Statistics (based on 1992 census).
c/ Central Bank of Bolivia.
d/ U.S. Department of Commerce.
e/ U.S. Department of Commerce as of June 1994.
f/ Based on surveys of urban areas.  Data does not consider
under-employment.
g/ Superintendency of Banks.
h/ Central Bank of Bolivia as of September 1994.
i/ Foreign debt of the Central Bank of Bolivia.
j/ U.S. Embassy estimate based on 1980 figures.
k/ IMF data. N.B. The IMF estimate of GDP is much lower than
that reported by the Central Bank.
m/ Central Bank of Bolivia estimate as of September 30, 1994.
1.  General Policy Framework
    Following a prolonged period of economic instability the
Government of Bolivia initiated a series of economic reforms in
1985 intended to arrest hyperinflation and open the economy.
The currency was allowed to float, commercial banks were
allowed to set their own interest rates, import and investment
permit requirements were eliminated, economic activities which
had been reserved for government corporations were opened to
private investment, and the government entered into an IMF
standby program.  For four years, the Paz Zamora
Administration, which took office in 1989, institutionalized
and advanced these market-oriented economic reforms but limited
economic growth was achieved.  The Sanchez de Lozada
Administration, which took office in August 1993, is pushing
these market-oriented reforms further with several structural
reforms of which the "capitalization" (privatization) program
of six of the larger state-owned corporations is the
cornerstone.  In addition, the Sanchez de Lozada administration
has implemented changes in the nation's Constitution and other
reforms in the areas of education, popular participation, and
in the administration of the executive branch.  Other reforms
that are under consideration include reforms in the judicial
system, taxation system, political parties structures, and
national pension funds.
    The results of the economic reforms have been a dramatic
drop in inflation (to less than 15 percent each year since
1986), steady economic growth (between 2.5 and 4.1 percent
annually starting in 1987) and growing amounts of private
investment and savings.
    During the next twelve to sixteen months, the Bolivian
economy will run into uncertainties as adjustments will have to
be made to keep pace with the economic demands and costs that
the structural reforms will require.  In spite of all this, the
government expects that the economy will grow by about 4.0
percent in 1994 and 4.5 percent in 1995 with inflation around
7.5 percent in 1994 and 6.5 percent in 1995.
    Commercial bank deposits have more than doubled since 1992
to over 2.3 billion dollars.  Trade surpluses and large inflows
of foreign aid have resulted in growing foreign exchange
reserves.  There has been a drastic increase of net reserves in
the Central Bank, reaching, since 1980, a record figure of
504.5 million dollars by September 1994, or about six months
worth of imports.  Exports are expected to increase by 30
percent in 1994 compared to the previous year.  Positive growth
since 1986 has more than offset the decline of the economy
during the early eighties.
    In compliance with IMF programs, the government has reduced
the budget deficit of the non-financial public sector (which
includes central, regional and municipal governments along with
the parastatal corporations) to 6.5 percent of the GDP in 1993
(as estimated by the IMF) and 6.3 percent in 1994 (as estimated
by the American Embassy).  Estimated fiscal deficit for 1995 is
3.3 percent and 4.4 percent for 1996.  Central Government tax
revenues came to about 13.5 percent of GDP in 1993.  Tax
revenues have risen sharply due to better administration and
increasing tax rates.  The government also receives transfers
from public enterprises and from foreign grants (about 1.5
percent of GDP).  Budget deficits have been covered by foreign
loans and the sale of certificates of deposit by the Central
Bank.  The IMF has requested that the fiscal deficit in 1994
and beyond should be covered by concessional loans only.  With
the budget deficit shrinking, the number of certificates of
deposit in circulation has decreased to only 90 million dollars
worth in 1993 and the interest rate offered on the certificates
has declined from 16.2 percent in 1989 to an average of 7.8
percent in 1993.
    The money supply, both M1 and M2, has grown slowly since
1985 with M1 averaging around 5 percent of GDP.  However, the
published figure for money in circulation (643 million dollars
worth of Bolivianos) is misleading since there are also
millions of U.S. dollars in circulation and dollars are a legal
means of exchange.  Banks are allowed to keep dollar accounts
and make dollar loans.  Over 85 percent of the 2.3 billion
dollars worth of deposits in Bolivia's 16 commercial banks are
presently in dollars.
    The new investment law allows contracts to be written in
dollars.  Interest rates have fallen over the last three years
as growing confidence in Bolivia's financial stability led to
excessive liquidity in the banks and as government borrowing
has decreased.  By September 1994 the average rate of dollar
deposits had fallen to 9.9 percent and the average rate on
dollar loans was down to 14.9 percent from 10.1 and 17.4
percent respectively in 1993.
2.  Exchange Rate Policy
    Since 1985, the official exchange rate continues to be set
daily by the government's exchange house, the BOLSIN, which is
under the supervision of the Bolivian Central Bank.  The BOLSIN
holds daily auctions of dollars.  The Directors of the BOLSIN
meet every day to decide the minimum rate and the number of
dollars to offer for sale.  The average amount of dollars
offered each day is five million.  Sealed bids are then
collected and opened with dollars going to those bidding at or
above the minimum rate.  With this mechanism the Central Bank
has slowly devalued the Boliviano in line with domestic
inflation and inflation in Bolivia's major trading partners.
The rates set by the BOLSIN cannot ignore market forces because
currency exchanges in banks, hotels, exchange houses and on the
street corners are legal and active.  The parallel market
exchange rates are always less than one percent different from
the official rates.
3.  Structural Policies
    In 1990, the government reduced tariffs from 16 to 10
percent for all imports except for capital goods for which the
tariff is five percent.  In addition, the government charges a
13 percent value-added tax and a two percent transaction tax on
all goods, whether imported or produced domestically, when they
are sold.  There are excise taxes on some consumer products
including cars.  No import permits are required.  The central
government sets the prices of finished fuels while the
municipal governments try to control the price of a bread roll
commonly consumed by the poorer members of society.
    In late 1990 and early 1991, the Bolivian congress approved
three laws that the executive branch had pushed hard in order
to promote private investment.  The investment law establishes
many guarantees, such as remission of profits, freedom to set
prices, convertibility of currency, etc., that had been
previously authorized by Presidential decree.  That law
essentially guarantees national treatment for foreign investors
and authorizes international arbitration except for
non-technical disputes in the oil industry.  The hydrocarbons
law authorized YPFB, the government-owned oil company, to enter
into joint ventures with private firms and to contract
companies to take over YPFB fields and operations, including
refining and transportation.  The mining law created a tax on
profits, which is creditable in the United States, and opened
up the border areas to foreign investors as long as their
Bolivian partners hold the mining concession.  Both laws are
under revision to comply with the capitalization program.
    In 1992 the Bolivian congress approved a privatization law
that allows the government to sell state owned companies and
assets.  In 1993 the congress passed a new banking law that
establishes clear rules for the commercial banks and authorizes
them to maintain foreign currency accounts.  (That
authorization had been in effect since 1985 from a presidential
decree but a law passed by congress is much more permanent.)
All government purchases over 100,000 Bolivianos (about
$23,000) are, by law, handled by one of three private
purchasing agents.  The purchasing agents sell the bid
specifications, evaluate the bids and rank order the offers for
the government office or corporation making the purchase.
    For 1994 and beyond, the cornerstone of President Sanchez
de Lozada's economic program is the capitalization
(privatization) program of the six largest state-owned
companies (YPFB - oil, ENDE - electricity, ENTEL -
telecommunications, LAB - airline, ENFE - railroad, and ENAF -
tin/antimony smelter).  The capitalization program was approved
by Congress in April 1994.  Capitalization involves giving a
(presumably) foreign partner 50 percent ownership in return for
direct investment in the company.  For example, if ENTEL, the
telecommunication company, is determined to be worth $200
million, the GOB hopes a foreign investor would agree to make a
$200 million investment over a certain period of time.  The
foreign investor would then own half of an enterprise worth
$400 million (the Bolivian Government original assets worth
$200 million, plus the investor's new investment of $200
million) and would be granted a long-term management contract
and control all assets.  The remaining 50 percent would be
turned over to all adult Bolivians in the form of stock to be
placed in individual pension accounts.  The Sanchez de Lozada
administration hopes capitalization will boost investment,
increase output and efficiency, reduce corruption, increase
fiscal revenues, and create as many as 500,000 new jobs
4.  Debt Management Policies
    The Bolivian government owes over $4.08 billion to foreign
creditors.  About 55.6 percent of that is owed to international
financial institutions, mainly the Inter-American Development
Bank, the World Bank and the Andean Development Corporation.
About 42.8 percent is owed to foreign governments and 1.6
percent to private banks and suppliers.  85.5 percent of the
foreign debt is owed by the non-financing public sector of
which 65.7 percent is owed by the Central Government and local
government.  The external public debt owed by the state-owned
corporations amounts to 19.8 percent of the total foreign
debt.  The public sector financing institution's foreign debt
adds to 14.5 percent of Bolivia's foreign debt.
    The bilateral debt payments have been rescheduled four
times now by the Paris Club, the last time for an 18-month
period.  A fifth rescheduling is sought for the end of 1994.
Furthermore, several foreign governments have forgiven
substantial amounts of the bilateral debt.  In September 1990,
the U.S. Government forgave $372 million owed by the Bolivian
government including all of the old A.I.D. loans and $31
million of the old PL-480 loans.  (All U.S. assistance to
Bolivia has been on a grant basis since the late 1980's.)
    The Bolivian government has reduced the debt it owes to
commercial banks from over $700 million in 1985 to $8.8 million
by the end of 1993.  The government bought back many of the
debt claims at 11 cents on the dollar and has exchanged other
debt claims for investment bonds which will mature with the
full face value of the debt claim in 25 years.  Most of the
investment bonds have already been redeemed for private
investment projects in Bolivia.  The government has now
contracted to exchange the remaining commercial debt at 16
cents on the dollar.
5.  Significant Barriers to U.S. Exports
    There are no significant barriers to U.S. exports to
Bolivia and the minor barriers to U.S. direct investment apply
to all foreign investors, not just U.S. investors.  The
requirement to obtain import licenses, previously required for
sugar, wheat and cement, was eliminated in September 1990 with
the passage of the Investment Law.  Article 8 of that law
states, "Freedom to import and export goods and services is
guaranteed, with the exception of those products that affect
public health and/or the security of the state."  The Export
Law of April 1993 also prohibited the import of products which
affect the preservation of flora and fauna, particularly
nuclear waste.  Again, none of these restrictions discriminate
against U.S. exporters.
    In October, 1992, as part of the Andean Pact integration
effort, the Bolivian Government eliminated the tariffs on all
but 11 products coming from three members of the Andean Pact
(Venezuela, Colombia, and Ecuador) which means that similar
products coming from the United States could be at a slight
price disadvantage.  However, less than five percent of
Bolivia's current level of trade is with those Andean
countries.  The Andean Pact is committed to adopting a common
external tariff but Bolivia will be allowed to keep its tariff
rates at five and ten percent.
    Bolivia became a member of GATT in August 1990 but has only
signed the GATT codes on customs valuation and import licensing
procedures so far.  The Government is currently studying the
Uruguay Round Agreement, but ratification is not likely until
1995.
    There are no limitations on foreign equity participation
and dozens of Bolivian companies are wholly owned by U.S.
investors.  The new investment law essentially guarantees
national treatment for foreign investors.  The only restriction
on foreign investment is that foreigners may not obtain mining
or oil concessions within 50 kilometers of the borders.
However, Bolivians with mining concessions near the borders may
have foreign partners as long as they are not from the country
adjacent to that portion of the border.  In the case of the oil
industry, an operational contract is signed with YPFB, the
state-owned oil company, avoiding this constitutional
restriction.
6.  Export Subsidies Policies
    In early 1991 the government eliminated a certificate
rebate program under which the exporters of "non-traditional"
goods received certificates equal to six percent of the value
of the export.  The certificates were to offset the ten percent
value-added tax charged on all purchases in Bolivia.   The
certificate program was replaced with a "drawback" scheme which
rebated either two or four percent of the value of most
"non-traditional" exports.  An Export Law, approved by congress
in April 1993, replaced the drawback program with one whereby
the government grants rebates of all the domestic taxes paid on
the production of items later exported.  The only indirect
subsidy on exports comes from the government-owned railroad
which charges a lower shipping rate per ton on exported
commodities than on imported goods.
7.  Protection of U.S. Intellectual Property
    The Bolivian government promulgated two intellectual
property rights laws during 1992.  The Film Law, passed by
Bolivia's congress in December 1991, will provide protection to
films and videos as soon as the implementing regulations are
published.  The law requires all films and videos shown or
distributed in Bolivia to be registered with the newly created
National Movie Council.  Films not registered and not carrying
a seal by the Council may be confiscated.  The Copyright Law
(Ley de Derecho de Author) passed in April 1992 will provide
IPR protection to literary, artistic and scientific works for
the lifetime of the author plus 50 years.  The law will protect
the rights of Bolivian authors, of foreign authors domiciled in
Bolivia, and of foreign authors published for the first time in
Bolivia.  These protections will extend to authors of computer
programs once the implementing regulations have been
promulgated.  The Bolivian Congress has ratified four treaties
in order to join the World Intellectual Property Organization
(WIPO) and the Bern, Rome, and Paris conventions.
    Patent protection remains inadequate but there is
widespread agreement in the Bolivian Government that the 90
year-old patent law needs to be updated to conform to
international standards.  The executive branch is drafting a
bill for congressional consideration that would raise these
standards by law.
    U.S. copyright industries note problems with book and
software piracy, and with the pirating of satellite signals for
television broadcasting, estimating 1993 losses at $13-14
million.  Pirated films are also widely available, with most of
them apparently coming from other countries.
8.  Worker Rights
    a.  The Right of Association
    Workers may form and join organizations of their choosing.
The labor code requires prior authorization to establish a
union, limits unions to one per enterprise, and allows the
government to dissolve unions, but the government has not
enforced these provisions in recent years.  While the code
denies civil servants the right to organize and bans strikes in
public services, including banks and public markets, nearly all
civilian government workers are unionized.  In theory,
virtually the entire work force is represented by the Bolivian
Labor Federation (COB);  approximately one-half the workers in
the formal economy belong to labor unions.  Some members of the
informal economy participate in organizations.  Workers in the
private sector frequently exercise the right to strike.
Solidarity strikes are illegal, but the government does not
prosecute those responsible nor impose penalties.
    Significant strikes in 1994 centered around annual
negotiations over salaries and benefits for public employees.
When the government refused to accede to union demands,
strikers marched, set up roadblocks, and cut access to certain
areas of the Chapare.  Additional talks produced a settlement
acceptable to the workers and the strikes ended.  Unions are
not independent of government and political parties.  Most
parties have labor committees that try to influence union
activity, causing fierce political battles within unions.  The
law places no restrictions on a union's joining international
labor organizations.  The COB became an affiliate of the
communist-dominated World Federation of Trade Unions (WFTU) in
1988.  COB leadership, apparently unable to free itself from
archaic, increasingly inefficient Marxist rhetoric and
practices, is being strongly challenged by the more dynamic
leaders of the Confederation of Rural Workers Unions (CSUTCB),
an organization dominated by coca growers of the Chapare region.
    b.  The Right to Organize and Bargain Collectively
    Workers may organize and bargain collectively.  In
practice, collective bargaining, defined as voluntary direct
negotiations between unions and employers without participation
of the government, is limited.  Consultations between
government representatives and labor leaders are common but
there are no collective bargaining agreements as defined
above.  In state industries, the union issues a list of demands
and the government concedes some points.  Private employers
often use public sector settlements as guidelines for their own
adjustments, and some private employers exceed what the
government grants.  The government, conscious of international
monetary fund guidelines, rarely grants wage increases
exceeding inflation.
    The law prohibits discrimination against union members and
organizers.  Complaints go to the National Labor Court, which
can take a year or more to rule.  Union leaders say problems
are often moot by the time the court rules.  Labor law and
practice are the same in the seven special duty-free zones as
in the rest of Bolivia.
    c.  Prohibition of Forced or Compulsory Labor
    The law bars forced or compulsory labor; no cases were
reported.
    d.  Minimum Age for Employment of Children
    The law prohibits the employment of persons under 18 years
of age in dangerous, unhealthy, or immoral work.  Bolivia's
50-year old labor code is ambiguous on the conditions of
employment for minors from 14 through 17 years of age.
However, even the existing legal provisions concerning
employment of children are not enforced.  For example, child
labor under 14 years of age is common.  Young children can be
found on the streets selling lottery tickets and cocaine laced
cigarettes, shining shoes and assisting bus drivers.  They are
not generally employed in factories or businesses.
    e.  Acceptable Conditions of Work
    In urban areas, only half the labor force enjoys an
eight-hour workday and a workweek of five or five and one-half
days.  Like many other labor laws, the maximum legal workweek
of 44 hours is not enforced.  Responsibility for the protection
of workers' health and safety lies with the Labor Ministry's
Bureau of Occupational Safety.  Labor laws that provide for the
protection of workers' health and safety are not adequately
enforced.  Although the state-owned mining corporation,
COMIBOL, has a special office in charge of mine safety, the
mines, often old and operated with antiquated equipment, are
particularly dangerous and unhealthy.  Miners work long days,
they are often underground for 24-72 hours straight.  They work
with no personal safety gear, in areas where respirators are
needed for protection against toxic gases.  Wages do not
reflect the nature of working conditions that miners endure;
cooperative mines pay less than $3.00 per 12-hour day.  Miners
are told by industry officials that the chewing of coca leaf
serves as a substitute for food, water, and rest.  The coca
leaf, with a catalyst, releases alkaloids and cocaine.  Miners
work in these terrible conditions under the belief that the
chewing of coca leaf makes them strong, and protects them from
toxic gases and silicosis.  There are no scheduled rest
periods, and employers supply no food or water in the mines;
miners often resort to drinking their own urine, which they
also use to fuel their carbide lanterns.  These working
conditions that fall far below international labor and human
rights standards are perpetuated by employers, politicians, the
COB, and persons having a financial stake in the manufacture
and sale of cocaine.
    f.  Rights in Sectors with U.S. Investment
    Probably 70 percent of U.S. investment in Bolivia is in the
petroleum industry.  Petroleum industry worker rights are
legally the same as in other sectors.  However, conditions and
salaries for workers in the petroleum industry are generally
better than in other industries because of strong labor unions
in that industry.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                             (1)
Total Manufacturing                                     0
  Food & Kindred Products                   0
  Chemicals and Allied Products             0
  Metals, Primary & Fabricated              0
  Machinery, except Electrical              0
  Electric & Electronic Equipment           0
  Transportation Equipment                  0
  Other Manufacturing                       0
Wholesale Trade                                       (1)
Banking                                                 1
Finance/Insurance/Real Estate                           0
Services                                                0
Other Industries                                      (1)
TOTAL ALL INDUSTRIES                                  196
(1) Suppressed to avoid disclosing data of individual companies
Source: U.S. Department of Commerce, Bureau of Economic
Analysis
(###)
BOSNIA_A1
	U.S. DEPARTMENT OF STATE
BOSNIA-HERZEGOVINA: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                        BOSNIA-HERZEGOVINA
    Bosnia-Herzegovina remains a war zone with very little
economic activity beyond smuggling and distribution of
humanitarian supplies.  U.S. Embassy estimates place the
remaining industrial activity, which primarily supports the war
effort, at five percent of the 1991 level.  In a region which
once boasted world-class resorts, there are now destroyed
factories and burnt-out villages.  The Bosnian Serbs, who are
continuing their policy of "ethnic cleansing," have displaced
or killed hundreds of thousands of residents.
    Bosnia-Herzegovina receives its natural gas by pipeline
from Russia via Hungary and Serbia.  Adequate gas supplies were
restored to Sarajevo in February 1994.  The situation remains
unstable, however, due to maintenance problems, war damage, and
Bosnian Serb control of areas through which the pipeline
passes.  Electric energy supplies for greater Sarajevo fell
from a pre-war level of 250 MW to about 50 MW in 1993.  With
international assistance, the daily electric energy supply in
Sarajevo averaged 68 MW by mid-1994.
    Bad weather, fighting, and Bosnian Serb blockades often
block supply lines into Bosnia-Herzegovina, Sarajevo, and the
eastern enclaves of Gorazde, Zepa, and Srebrenica.  Sarajevo
and the eastern enclaves remain under siege and are currently
experiencing shortages of food, water, electricity, fuel, and
many other basic neccesities.  Humanitarian aid has been
intermittent and insufficient to meet full requirements.
Bosnian Serb sniper activity regularly halts use of the
Sarajevo airport.  In the winter months, when the need is
greatest, land supply routes become impassable and airports
often close.
    The economic outlook for Bosnia-Herzegovina remains bleak.
Even if hostilities ended at once, the infrastructure is
heavily damaged and a large part of the most productive segment
of society has been dislocated or eliminated.  No financial
reserves exist with which reconstruction could begin.  In March
1994, the U.S. and United Kingdom launched a joint initiative
to restore essential public services to Sarajevo.  While this
has resulted in some success, it will take many years for
Bosnia-Herzegovina to recover from the current crisis, and
massive donor support will be needed to continue the process.
(####)
BRAZIL1
+r+rU.S. DEPARTMENT OF STATE
BRAZIL: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                              BRAZIL
                     Key Economic Indicators
        (Millions of U.S. dollars unless otherwise noted)
                                     1992      1993      1994 1/
Income, Production and Employment:
Real GDP (1985 prices) 2/         332,000   349,000   352,000
Real GDP Growth (pct.)               -0.8       4.1       4.0
GDP (at current prices) 2/        425,000   456,000   474,000
By Sector: (pct.)
  Agriculture                        11.1      12.5       N/A
  Industry                           35.4      38.2       N/A
    Mining                            1.6       1.8       N/A
    Manufacturing                    22.9      24.9       N/A
    Construction                      7.3       7.4       N/A
    Public Utilities                  3.6       4.2       N/A
  Services                           62.4      59.4       N/A
    Commerce                          6.8       7.6       N/A
    Transport                         4.2       4.5       N/A
    Communications                    1.5       1.7       N/A
    Financial Services                9.0       9.7       N/A
    Government                       10.2      11.0       N/A
    Rents                            16.5       6.9       N/A
    Other Services                   14.3      18.0       N/A
Subtotal                            108.9     110.1       N/A
Less: Financial Intermediation        8.9      10.1       N/A
GDP at Factor Cost                  100.0     100.0       N/A
Real Per Capita GDP
  (USD in 1985 prices)              2,226     2,993     2,273
Labor Force (000s)                 64,400    65,600    66,900
Unemployment Rate (pct.)              4.5       4.4       5.5
Money and Prices:  (annual percentage growth)
Money Supply (M2)                   1,721     2,596      20.9
Interest Rate for Financing
  Working Capital 3/                 30.7      41.2       3.9
Personal Saving Rate 3/              24.6      38.2       2.9
Retail Inflation                    1,149     2,489        23
Wholesale Inflation                 1,154     2,639      24.5
Exchange Rate 4/
  Official/Commercial               12.39    326.11     0.839
  Parallel                          14.60    325.00     0.870
Balance of Payments and Trade:
Total Exports (FOB) 5/             35,793    38,783    41,400
  Exports to U.S. (FOB) 5/          7,120     8,028     8,300
Total Imports (FOB) 5/             20,554    25,711    28,400
  Imports from U.S. (FOB) 5/        4,949     6,028     6,800
Aid from U.S.                        14.6      24.9      14.6
Aid from Other Countries              N/A       N/A       N/A
External Public Debt 6/            95,555    94,018    91,197
Debt Service Payments
  (paid annually)                   7,253     8,453     9,975
Gold and Foreign Exch. Reserves
  (International Liquidity Concept)23,754    32,211    48,000
Trade Balance                      14,844    13,072    13,000
  Trade Balance with U.S.           2,171     2,000     1,500
N/A--Not available.
1/ 1994 figures are estimates based on available monthly data
in October 1994.
2/ GDP at market prices.
3/ Figures are actual monthly nominal rates, not changes in
them.
4/ Cruzeiro reals/usd, end of year, for 1992, 1993; reals/usd,
as of October 10 for 1994.
5/ Total trade.  Figures for merchandise trade only not
available.  CIF prices for imports are not available.
6/ Nonfinancial public sector.  Excludes Petrobras and Vale do
Rio Doce (CVRD).
1.  General Policy Framework
    On July 1, 1994, Brazil introduced a new national currency,
the "real" (the fifth in seven years), replacing the "cruzeiro
real" at the rate of 2,750 cruzeiro reals to 1.00 real.  The
new currency is the centerpiece of the government's economic
stabilization plan, the "Plano Real," designed to curb chronic,
rampant inflation, which had reached an annual level of nearly
5,000 percent by the end of 1993.  Other key elements of the
stabilization plan include balancing the federal government
budget, privatization of state-run industries, and strict
monetary controls.  Following the introduction of the new
currency, nominal monthly rates of inflation fell from 50
percent in June (measured in the old currency) to 1.5 percent
in September (measured in the new currency).  The real rate of
inflation (as measured by the IPC-r, the Plano Real's index, in
reals) is higher than in 1993:  15.87 percent for the first
nine months of 1994 vs. 13.38 percent for all of 1993.
    The stabilization plan under which the real was introduced
established quantitative targets on the expansion of the
monetary base.  Monetary policy is also constrained by the need
to maintain positive real interest rates in order to roll over
the domestic government debt and to prevent capital outflow.
High interest rates, however, aggravate the fiscal deficit.
Brazil has suffered structural deficits for many years.
Provisions of the 1988 Constitution which mandate substantial
revenue transfers to states and municipalities, as well as
mandatory federal expenditures, leave the government with
discretionary control of only about 10 percent of revenues
collected.
    Long-term stabilization will require structural reforms and
revision of Brazil's 1988 Constitution.  The constitutional
review process which began in late 1993 expired in May 1994
with virtually no reforms adopted.  Among the reforms
considered by the Constitutional Review Congress were fiscal
reforms, including a redistribution of federal, state and
municipal government responsibilities, simplification of the
tax system, privatization of the state-owned telecommunications
and petroleum monopolies, elimination of the distinction
between foreign and national capital, and permitting foreign
investment in mining.  Broad consensus exists on the need for
constitutional reform to rectify the economic distortions of
the current constitution, but there are significant differences
regarding the specific reforms needed.  Now that the
constitutional review process is over, approval of
constitutional reforms will require two votes each by the upper
and lower chambers of the Brazilian Congress; a 60 percent
majority is required for all four votes.
    The process of economic and trade liberalization begun in
1990 slowed during 1993 and 1994, but has nevertheless produced
significant changes in Brazil's trade regime, resulting in a
more open and competitive economy.  Imports are increasing in
response to lower tariffs and reduced non-tariff barriers, as
well as the strength of the real relative to the dollar, and
are now composed of a wide-range of industrial, agricultural
and consumer goods.  Access to Brazilian markets in most
sectors is generally good, and most markets are characterized
by competition and participation by foreign firms through
imports, local production and joint ventures.  Some sectors of
the economy, such as the telecommunications, petroleum and
electrical energy sectors, are still dominated by the
government, and opportunities for trade and investment are
severely limited.
    Brazil and its Southern Common Market (Mercosul) partners
Argentina, Uruguay and Paraguay concluded negotiations in
August 1994 for a common external tariff (CET) which went into
effect on January 1, 1995.  The CET levels for most products
range between zero and 20 percent.  The Brazilian government
unilaterally lowered tariffs on some 6,000 items to the CET
levels in September of 1994, as part of its anti-inflationary
effort.  With the exception of tariffs on informatics products
and some capital goods, the maximum Brazilian tariff level is
now 20 percent;  the most commonly applied tariff is 14
percent.  When the CET enters into force in the four Mercosul
countries in January 1995, all revisions to the tariff schedule
will have to be negotiated among the four partners.
    The Government of Brazil ratified the Uruguay Round
Agreements in 1994 and became a founding member of the World
Trade Organization on January 1, 1995.
2.  Exchange Rate Policy
    Brazil has three exchange rates:  a commercial rate, a
tourist rate and a semi-official parallel rate.  The commercial
rate is used for import-export transactions registered at the
Central Bank and financial transactions linked to external
debt.  The tourist, or floating rate, is used for individual
transactions such as unilateral transfers, travel, tourism, and
transactions involving education and training abroad.  The
parallel rate is also used for individual transactions, but
they are not recorded.  All three rates fluctuate;  the spread
between them has diminished since the introduction of the new
currency.
    The measure introducing the real established parity with
the dollar.  However, a surplus of dollars, caused by financial
activities of exporters and foreign investors, resulted in the
steady appreciation of the real relative to the dollar.  The
Central Bank did not intervene until September, when the real
reached 0.85 to one dollar.  Subsequent Central Bank
interventions indicate that this level is the Bank's floor.
3.  Structural Policies
    Although some administrative improvements have been made in
recent years, the Brazilian legal and regulatory system is far
from transparent.  The government has historically exercised
considerable control over private business through extensive
and frequently changing regulations.  To implement economic
policies rapidly, the government has resorted to issuing
decrees rather than securing congressional approval of
legislation.  These decrees are frequently challenged in the
courts and a number have been declared unconstitutional.  The
regulatory instability makes planning difficult.  In June 1994
a new antitrust law was passed to prevent "abusive pricing."
The law will likely face a legal challenge.
    The tax system in Brazil is extremely complex, with a wide
range of income and consumption taxes levied at the federal,
state and municipal levels.  Both payment and collection of
taxes is burdensome.  An effort to streamline the tax system
was begun in 1991; considerable progress has been made to
improve collections.  Significant further reforms will require
constitutional revision.
    The privatization program initiated in 1990 to reduce the
size of the government and improve fiscal performance slowed to
a near halt during 1994.  The planned privatization of part of
the electricity sector was abandoned entirely, while a number
of planned auctions of financially troubled or non-competitive
state-owned companies were delayed in response to lukewarm
investor interest and low price offers.  The pace of
privatizations is expected to increase significantly during
1995, under the administration of President-elect Fernando
Henrique Cardoso, who took office on January 1, 1995.
4.  Debt Management Policies
    Brazil's external debt totaled approximately $146 billion
at the end of 1993.  Of this total, about $34 billion is
medium-term commercial bank debt owed by the government.
Foreign private bank debt is $63 billion, of which the U.S.
share is $24 billion.  In 1993, Brazil's debt service payments
represented 4 percent of its gross domestic product, and 42
percent of its export earnings.
    In April 1994, the government concluded a debt
renegotiation agreement with foreign commercial banks.  The
agreement included exchanging $35 billion in medium-term
commercial bank debt for new instruments.  The agreement also
included rescheduling outstanding arrears.  Unlike past Brady
Plan debt exchanges, the Brazilian deal was closed without the
support of the official international financial community since
the Brazilian government was unable to reach an agreement with
the IMF for a standby program.
    Brazil did not reach an agreement with the Paris Club
during 1994 to reschedule official debt.  Under Brazil's 1992
agreement with the Paris Club, further debt rescheduling is
contingent upon the government concluding a standby agreement
with the IMF.
5.  Significant Barriers to U.S. Exports
    Import Licenses:  Although Brazil requires import licenses
for virtually all products, import licensing generally does not
pose a barrier to U.S. exports.  Import licenses, which until
1990 were a significant barrier to imports, are now used
primarily for statistical purposes and generally are issued
automatically within five days.  However, obtaining an import
license can occasionally still be difficult.  For example, the
Brazilian government has refused to grant an import license for
lithium for nearly two years.  In January 1992, a standard
import license fee of approximately $100 was instituted,
replacing a 1.8 percent ad valorem fee.
    The Secretariat of Foreign Trade's computerized trade
documentation system (SISCOMEX), scheduled to be fully
operational in January 1995, will further streamline filing and
processing of import documentation.
    Services Barriers:  Restrictive investment laws, lack of
administrative transparency, legal and administrative
restrictions on remittances, and arbitrary application of
regulations and laws limit U.S. service exports to Brazil.  In
some areas, such as construction engineering, foreign companies
are prevented from providing technical services unless
Brazilian firms are unable to perform them.
    Many service trade possibilities are restricted by
limitations on foreign capital under the 1988 Constitution.  In
particular, services in the telecommunications, oil field, and
mining industries are severely restricted.  Foreign financial
institutions are restricted from entering Brazil or expanding
pre-1988 operations.  Restrictions exist on the use of
foreign-produced advertising materials.
    Foreign legal, accounting, tax preparation, management
consulting, architectural, engineering, and construction
industries are hindered by various barriers.  These include
forced local partnerships, limits on foreign directorships and
non-transparent registration procedures.
    Foreign participation in the insurance industry is impeded
by limitations on foreign investment, market reserves for
Brazilian firms in areas such as import insurance, and the
requirement that parastatals purchase insurance only from
Brazilian-owned firms.  Further, the lucrative reinsurance
market is reserved for the state monopoly, the Reinsurance
Institute of Brazil (IRB).
    Other legal and administrative obstacles to foreign
services suppliers are being eased.  In January 1992, the
government announced rules which allow foreign remittances of
trademark license fees and technology transfer payments covered
by franchising agreements.  The change effectively ended a
20-year ban on international franchising in Brazil.
    Investment Barriers:  In addition to the restrictions on
the services-related investments mentioned above, foreign
investment faces various prohibitions in petroleum production
and refining, internal transportation, public utilities, media,
real estate, shipping, and various other "strategic
industries."  In other sectors, such as the auto industry,
Brazil limits foreign equity participation and imposes
local-content requirements.  Foreign ownership of land in rural
areas and adjacent to international borders is prohibited.
    Foreign investors are denied national treatment pursuant to
the constitutional distinction between national and foreign
capital.
    Informatics:  Under the 1991 Informatics Law, prohibitions
or requirements for government prior review for imports,
investment, or manufacturing by foreign firms in Brazil were
eliminated.  However, import duties remain high (up to 35
percent) on informatics products, and Brazilian firms receive
preferential treatment in government procurement and have
access to certain fiscal benefits, including tax reductions.
For a foreign-owned firm to gain access to most of these
incentives, it must commit to invest in local research and
development and meet export and local training requirements.
Rules governing computer software are contained in Law 7646
(the software law) of December 1987.  The software law requires
that all software be "catalogued" by the Informatics
Secretariat of the Ministry of Science and Technology prior to
its commercialization in Brazil, and that in many cases
software must be distributed through a Brazilian firm.  The law
contains provisions to deny cataloguing of foreign software if
the Secretariat determines there is a similar program of
Brazilian origin.  However, this provision is no longer
applied.  A draft law has been introduced into Brazil's
Congress to eliminate the requirement for cataloguing, the test
of similarities, and the requirement that software to be run on
Brazilian-origin hardware must be distributed by a Brazilian
firm.
    Government Procurement:  Given the significant influence of
the state-controlled sector due to its large size,
discriminatory government procurement policies are, in relative
terms in Brazil's market, an important barrier to U.S.
exports.  For example, discriminatory government procurement
practices in the computer, computer software and digital
electronics sector may have significant adverse market access
implications for U.S. firms, particularly firms not established
in Brazil.
    Article 171 of the 1988 Constitution provides for
government discrimination in favor of "Brazilian companies with
national capital."  On June 21, 1993, Brazil adopted
procurement legislation, Law Number 8666, requiring open bids
based upon the lowest price.  However, in late 1993 the
government introduced new regulations which allow consideration
of non-price factors and give preferences to
telecommunications, computer, and digital electronics goods
produced in Brazil, and stipulate local content requirements
for eligibility for fiscal benefits.  In March 1994, the
government issued Decree 1070 regulating the procurement of
informatics and telecommunications goods and services.  The
regulations require federal agencies and parastatal entities to
give preference to locally produced computer products based on
a complicated and non-transparent price/technology matrix.  It
is not possible to estimate the economic impact of these
restrictions upon U.S. exports.  However, free competition
could provide significant market opportunities for U.S. firms.
    Brazil is not a signatory to the GATT Government
Procurement Code.
6.  Export Subsidies Policies
    In general, the Brazilian Government does not provide
direct subsidies to exporters, but does offer a variety of tax
and tariff incentives to encourage export production and to
encourage the use of Brazilian inputs in exported products.
Several of these programs have been found to be countervailable
under U.S. countervailing duty provisions in the context of
specific subsidy/countervailing duty cases.  Incentives include
tax and tariff exemptions for equipment and materials imported
for the production of goods for export, excise and sales tax
exemptions on exported products, and excise tax rebates on
materials used in the manufacture of export products.
Exporters also enjoy exemption from withholding tax for
remittances overseas for loan payments and marketing, and from
the financial operations tax for deposit receipts on export
products.  In October 1994, the Brazilian government issued
Decree Law 674, granting exporters a rebate on social
contribution taxes paid on locally acquired production inputs.
    An export credit program, known as PROEX, was established
in 1991.  PROEX is intended to eliminate the distortions in
foreign currency-linked lending caused by Brazil's high rates
of inflation and currency depreciation.  Under the program, the
government provides interest rate guarantees to commercial
banks which finance export sales, thus ensuring Brazilian
exporters access to financing at rates equivalent to those
available internationally.  Capital goods, automobiles and auto
parts, and consumer goods are eligible for financing under the
PROEX program.
7.  Protection of U.S. Intellectual Property
    Brazil's regime for the protection of intellectual property
rights is inadequate.  Serious gaps exist in current statutes
with regard to patent protection for pharmaceuticals,
chemicals, and biotechnological inventions; trademarks and
trade secrets; and copyrights.  Legislation has been pending
before the Brazilian Congress for several years to address many
of these areas.  The Brazilian government has made a commitment
to bring its intellectual property regime up to the
international standards specified in the Uruguay Round Trade
Related Aspects of Intellectual Property (TRIPs) Agreement.  As
a result of this commitment, the U.S. government terminated the
Special 301 investigation initiated in May of 1993, and revoked
Brazil's designation as a "priority foreign country."  Brazil
remains under Section 306 monitoring.
    Brazil is a signatory to the GATT Uruguay Round Accords,
including the TRIPs Agreement.  Brazil is a member of the World
Intellectual Property Organization and a signatory to the Berne
Convention on Artistic Property, the Universal Copyright
Convention, the Washington Patent Cooperation Treaty, and the
Paris Convention on Protection of Intellectual Property.
    Patents:  Brazil does not provide either product or process
patent protection for pharmaceutical substances, processed
foods, metallurgical alloys, chemicals, or biotechnological
inventions.  The Industrial Property Bill passed in 1993 by the
Chamber of Deputies and currently pending before the Senate
would recognize the first four of these categories and extend
the term for product patents from 15 to 20 years.  The
Brazilian government announced in early 1994 that it would
support amendments to the bill which would bring its provisions
into conformity with TRIPs provisions, including those on
compulsory licensing, domestic working requirements and
parallel imports.
    Trade Secrets:  Brazil lacks explicit legal protection for
trade secrets, although a criminal statute against unfair trade
practices can, in theory, be applied to prosecute the
disclosure of privileged trade information.  The Industrial
Property Bill pending in Congress includes civil penalties and
injunctive relief for trade secret infringement.
    Trademarks:  All trademarks, as well as licensing and
technical assistance agreements (including franchising), must
be registered with the National Institute of Industrial
Property (INPI).  Without such registration, a trademark is
subject to cancellation for non-use.  The pending Industrial
Property Bill includes significant trademark revisions which
will improve trademark protection.
    Copyrights:  While Brazil's copyright law generally
conforms to international standards, the 25-year term of
protection for computer software falls considerably short of
the Berne Convention standard of the life of the author plus 50
years.  Enforcement of copyright laws has been lax.  Current
fines do not constitute an adequate deterrent to infringement.
The U.S. private sector estimates that piracy of video
cassettes, sound recordings and musical compositions, books and
computer software continues at substantial levels.  In the last
two years, enforcement of laws against video and software
piracy has improved, and foreign firms have had some success in
using the Brazilian legal system to protect their copyrights.
The government has also initiated action to reduce the
importation of pirated sound recordings and videocassettes.
    Semiconductor Chip Lay-out Design:  A bill introduced in
1992, and still pending before the Congress, will protect the
lay-out designs of integrated circuits.  Amendments to the
draft law are expected to bring its provisions into conformity
with the TRIPs text.
    Impact on U.S. Trade:  In early 1994, the U.S.
pharmaceuticals industry estimated losses of $500 million due
to inadequate intellectual property protection.  The U.S.
software industry claims losses of $268 million, and estimates
that less than 50 percent of the software in use in Brazil was
legally obtained.  The Motion Picture Export Association of
America estimates its annual losses due to motion picture
piracy in Brazil at $39 million.
8.  Worker Rights
    a.  The Right of Association
    Brazil's Labor Code provides for union representation of
all Brazilian workers (excepting military, military police and
firemen), but imposes a hierarchical, unitary system, funded by
a mandatory "union tax" on workers and employers.  Under a
restriction known as "unicidade" (one per city), the code
prohibits multiple unions of the same professional category in
a given geographical area.  It also stipulates that no union's
geographic base can be smaller than a municipality.  The 1988
Constitution retains many provisions of the 1943 Labor Code.
The retention of "unicidade" and of the union tax continues to
draw criticism both from elements of Brazil's labor movement
and from the International Confederation of Free Trade Unions
(ICFTU).
    In practice, however, "unicidade" has proven less
restrictive in recent years, as more liberal interpretations of
its restrictions have permitted new unions to form and, in many
cases, compete with unions and federations that had already
enjoyed official recognition.  The sole bureaucratic
requirement for new unions is to register with the Ministry of
Labor which, by judicial decision, is bound to receive and
record their registration.  The primary source of continuing
restriction is the system of labor courts, which retain the
right to review the registration of new unions, and adjudicate
conflicts over their formation.  Otherwise, unions are
independent of the government and of political parties.
Approximately 20 to 30 percent of the Brazilian workforce is
organized, with just over half of this number affiliated with
an independent labor central.  (Mandatory labor organization
under the Labor Code encompasses a larger percentage of the
workforce.  However, many workers are believed to have minimal
if any contact with these unions.)  Intimidation of rural labor
organizers by landowners and their agents continues to be a
problem.
    The Constitution provides for the right to strike
(excepting, again, military, police and firemen, but including
other civil servants).  Enabling legislation passed in 1989
stipulates that essential services remain in operation during a
strike and that workers notify employers at least 48 hours
before beginning a walkout.  The Constitution prohibits
government interference in labor unions but provides that
"abuse" of the right to strike (such as not maintaining
essential services, or failure to end a strike after a labor
court decision) is punishable by law.
    b.  The Right to Organize and Bargain Collectively
    The right to organize is provided by the Constitution, and
unions are legally mandated to represent workers.  With some
government assistance, businesses and unions are working to
expand and improve mechanisms of collective bargaining.  Under
current Brazilian law, however, the scope of issues subject to
collective bargaining is narrow and the labor court system
exercises normative powers with regard to the settlement of
labor disputes, thereby discouraging direct negotiation.
Existing law charges these same courts, as well as the Labor
Ministry, with mediation responsibility in the preliminary
stages of dispute settlement.  Wages are set by free
negotiation in many cases, and in others by labor court
decision.  There is a movement for extensive revisions in the
Labor Code which would broaden the scope of collective
bargaining and restrict the role of the labor courts, but such
changes appear unlikely in the near future.
    The Constitution incorporates a provision from the Labor
Code which prohibits the dismissal of employees who are
candidates for or holders of union leadership positions.
Nonetheless, dismissals take place, with those dismissed
required to resort to a usually lengthy court process for
relief.  In general, enforcement of laws protecting union
members from discrimination lacks effectiveness.
    Labor law applies uniformly throughout Brazil, including
the free trade zones.  However, unions in the Manaus free trade
zone, rural unions and many unions in smaller cities are
relatively weaker vis-a-vis industry compared to unions in the
major industrial cities of the southeast.
BRAZIL2
U.S. DEPARTMENT OF STATE
BRAZIL: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
    c.  Prohibition of Forced or Compulsory Labor
    Although the Constitution prohibits forced labor, there
have been credible citations of cases of forced labor in
Brazil.  The federal government asserts that it is taking steps
to halt the practice and prosecute perpetrators, but admits
that existing enforcement resources are inadequate.  The
largest number of reports of forced labor originate in rural
areas.  A provision in the agricultural reform law passed in
1993 provides for the confiscation of property in cases of
forced labor.  The law by itself is unlikely to have
significant impact without extensive improvements in
enforcement activity.
    d.  Minimum Age of Employment of Children
    The minimum working age under the Constitution is 14,
except for apprentices, and legal restrictions are also set in
the Constitution to protect working minors under age 18.  There
are credible reports indicating problems with enforcement.
Further, judges can authorize employment for children under 14
when they believe it appropriate.  (The ILO noted in 1992 that
the constitutional provision for apprenticeships under age 14
is not in accordance with ILO Convention No. 5 on minimum age
in industry.)  By law, the permission of the parents or
guardians is required for minors to work, and provision must be
made for them to attend school through the primary grades.  All
minors are barred from night work and from work that
constitutes a physical strain.  Minors are also prohibited from
employment in unhealthful, dangerous, or morally harmful
conditions.
    Despite these legal restrictions, however, official figures
indicate that nearly three million children 10 to 14 years of
age are employed.  Of these, 46 percent work eight hours or
more per day, with most earning no more than one minimum salary
($70 to $100 per month).
    e.  Acceptable Conditions of Work
    Unsafe working conditions are prevalent throughout Brazil.
Enforcement of the occupational health and safety standards
established by the Ministry of Labor is weak due to
insufficient resources for inspection.  There are credible
allegations of corruption within the enforcement system.
Workers, or their union, can file a claim with the regional
labor court if a workplace safety or health problem is not
resolved directly with the employer, although in practice this
is frequently a cumbersome, protracted process.
    f.  Rights in Sectors with U.S. Investment
    U.S. investment is concentrated heavily in the
transportation equipment, food, chemicals, petroleum
distribution and electric/electronic equipment industries.
Labor conditions in industries owned by foreign investors
generally meet or exceed the minimum legal standards
established under Brazil's Labor Code.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                                738
Total Manufacturing                                   12,574
  Food & Kindred Products                   1,596
  Chemicals and Allied Products             2,144
  Metals, Primary & Fabricated                673
  Machinery, except Electrical              1,668
  Electric & Electronic Equipment             715
  Transportation Equipment                  2,265
  Other Manufacturing                       3,514
Wholesale Trade                                           96
Banking                                                1,139
Finance/Insurance/Real Estate                          1,946
Services                                                  80
Other Industries                                         334
TOTAL ALL INDUSTRIES                                  16,908
Source: U.S. Department of Commerce, Bureau of Economic
Analysis
(###)
BULGARIA1
r]r]U.S. DEPARTMENT OF STATE
BULGARIA: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                             BULGARIA
                     Key Economic Indicators
        (Millions of U.S. dollars unless otherwise noted)
                                    1992      1993      1994 1/
Income, Production and Employment:
Real GDP (1993 prices) G,E/       10,773    10,557    10,409
GDP (at current prices) I,E/       8,478    10,557    20,859
Real GDP Growth Rate (pct.) C/      -5.6      -4.2      -1.4
Real GDP by Sector:  G,E,I/
  Industry                         5,063     3,647     3,539
  Agriculture                      1,120       804     1,145
  Trade/Services                   4,632     4,164     5,724
Per Capita Income (USD) G,E,2/     1,209     1,195     1,181
Labor Force (000s) G,E/            3,796     3,787     3,827
Unemployment Rate (pct.) G,E/       15.0      15.8      15.5
Money and Prices:
Money Supply (M1:bil. lev) G/       37.8      36.9      55.0
Commercial Interest Rate (pct.)G/   61.1      58.2      77.9 3/
Gross Domestic Savings Rate I,E/     2.1       2.1       N/A
    (pct.)
Gross Domestic Investment          1,739     1,669       N/A
Consumer Price Index I,E/            100       164       342
  (Dec. 1992 equals 100)
Inflation (pct.)
  (end-of-period/Dec-Dec) 4/        79.4      63.9     110.0
Producer Price Index                 N/A       N/A       N/A
Exchange Rate (year-end: leva/$)
  Official 5/                       24.5      32.7      80.0
  Parallel                          25.5      34.0      83.0
Balance of Trade and Payments:  ($millions, current) G,E,I,5/
Total Exports (FOB)               5,090     3,640     3,160
  Exports to U.S.                    85.3     115.3     163.0
Total Imports (FOB)               4,610     4,330     2,820
  Imports from U.S.                  78.9     158.7     106.0
Trade Balance                       480      -690       340
  Trade Balance with U.S.             6.4     -43.4      57.0
Aid from U.S. (fiscal yr.)            40       46        35
Aid from Other Countries 6/          600      154     1,097
External Public Debt ($ bil.)       11.9      12.5       8.7
Annual Debt Service
  Scheduled                       2,918      2,211      850
  Paid                              193         88.8    850 7/
Gold and Foreign Exchange
  Reserves ($ bil.)                  1.7       1.5       1.2
N/A-- Not available.
E/ U.S. Embassy estimate.
G/ Government of Bulgaria.
I/ International financial institutions.
C/ U.S. Department of Commerce.
1/ 1994 figures are estimates for year-end.
2/ Per capita incomes are calculated at following exchange
rates:  1992 24.5 leva:dollar
        1993 32.7 leva:dollar
        1994 80 leva:dollar
3/ BNB basic (lombard) refinancing rate (period average).
4/ U.S. Department of Commerce figures.
5/ Rate depreciated from 32.7:1 to 65:1 from January to
November 1993.
6/ Includes international financial institutions.
7/ 1994 estimate based on first six months data.
1.  General Policy Framework
    Bulgaria's transition to a market economy continued slowly
during 1994.  The nonparty cabinet of centrist economist Lyuben
Berov successfully concluded Bulgaria's drawn-out negotiations
with commercial creditors and the IMF.  Structural reforms
remained stymied and inflation accelerated, in spite of
continued restrictive fiscal and monetary policies.  This,
along with the collapse of Bulgaria's COMECON trade (80 percent
of the pre-1989 total), the global recession, and United
Nations sanctions against Iraq and Serbia resulted in a
prolonged economic downturn, which finally may have bottomed
out in 1994.  After several years of decline, national output
achieved zero growth and production in several sectors
increased.  Unemployment also declined during the year.  Prime
Minister Berov's resignation in September opened the way for
pre-term parliamentary elections on December 18.  The Bulgarian
Socialist Party won a narrow majority in those elections.
Pending the elections, a caretaker government was appointed by
President Zhelev on October 17.
    The Central Bank (BNB) sought to bring inflation down from
a 3.9 percent to a three percent monthly rate by year end 1994,
using a normal range of policy instruments.  However, inflation
accelerated from 63.7 percent in 1993 to a projected 110
percent in 1994.  The rapid depreciation of the Bulgarian lev
in foreign exchange markets early in 1994 significantly boosted
the lev value of foreign-currency accounts, thereby increasing
the money supply.  To control the fall of the lev, the BNB
significantly raised interest rates.  Later in the year there
was concern that the money supply was being dangerously
increased by BNB credit for several troubled state banks.
Despite stagnation in the standard of living over
1994, exports of U.S. consumer goods to Bulgaria have risen
given the relative weakness of the dollar versus european
convertible currencies.
    During most of 1994, the government kept its budget deficit
within the 6.5 percent of GDP target agreed to with the IMF.
It achieved this success through stringent restrictions on
state expenditures and increased revenues from the new VAT
(implemented on April 1) and excise taxes.  U.S. Treasury
Department estimates the deficit will reach about 7 percent of
GDP by year-end 1994, due to increased social security outlays,
expenditures on the elections, and interest on domestic debt.
The Government of Bulgaria financed the deficit through a
combination of central bank borrowing and treasury bill sales.
    In April, Bulgaria rescheduled its 1993 and 1994 maturities
with the Paris Club (official creditors).  In June, it
restructured 8.1 billion dollars in commercial (London Club)
debt, resulting in a 47 percent reduction.  The government and
the IMF agreed on a Standby Agreement/Systemic Transformation
Facility for approximately 300 million Special Drawing Rights
(about 410 million dollars).  The World Bank released the
second 100 million tranche of its 1991 Structural Adjustment
Loan.  Talks with the Bank stalled on a Financial and
Enterprise Structural Adjustment Loan.
    The transition to a market-oriented economy continued,
albeit slowly and against political and social resistance.
Structural reforms necessary to underpin macroeconomic
stabilization were not pursued vigorously.  Restitution of
urban shops and houses put capital into the hands of many
ordinary Bulgarians, helping to fuel the rapidly growing
service and consumer goods sectors.  However, legal
privatization of state-owned industry moved slowly, as did the
breakup of state-organized collective farms.
    Bulgaria's association agreement with the European Union
(EU) finally took effect January 1, 1994.  An analogous
agreement with the European Free Trade Association
(EFTA) entered into force in 1993.  With the conclusion of its
EU and EFTA negotiations, Bulgaria returned its attention to
negotiating its GATT accession.  The Bilateral Investment
Treaty with the United States was ratified by the U.S. Senate
and took effect in June.
2.  Exchange Rate Policy
    After several years of remarkable stability, and even
significant real appreciation given inflation, in August 1993
the Bulgarian lev began to fall in foreign exchange markets.
By March 1994, the lev had fallen 42 percent (from BGL 22.1 to
53:U.S. dollar) and a run on the lev briefly threatened before
it stabilized temporarily at around BGL 51:U.S. dollar.  The
lev continued to depreciate gradually during the rest of the
year.  BNB intervention in the currency market reduced the
country's convertible currency reserves from more than one
billion to around 600 million dollars in February.  Reserves
increased significantly thereafter with the infusion of balance
of payments support from the IMF, the IBRD, and the G-24
nations.
    The BNB sets an indicative daily U.S. dollar rate for
statistical and customs purposes, but commercial banks and
others licensed to trade on the interbank market are free to
set their own rates.  A parallel market operates openly
offering about a four percent premium.
    Only some of the commercial banks are licensed to effect
currency operations abroad.  Companies may freely buy foreign
exchange for imports from the interbank market.  Individual
Bulgarian citizens may legally buy only 10,000 leva worth of
hard currency per year without specific cause.  Companies are
required to repatriate, but no longer to surrender, earned
foreign exchange to the central bank.  Bulgarian citizens and
foreign persons may also open foreign currency accounts with
commercial banks.  Foreign investors may repatriate 100 percent
of profits and other earnings.  Capital gains transfers appear
to be protected under the revised Foreign Investment Law; free
and prompt transfers of capital gains are guaranteed in the
Bilateral Investment Treaty.  A permit is required for hard
currency payments to foreign persons for direct and indirect
investments and free transfers unconnected with import of goods
or services.
3.  Structural Policies
    Bulgaria's new market-oriented legal structure does not
inhibit U.S. exports, which are more affected by the
government's tight monetary policy and Bulgaria's isolation
from trade financing.  The enactment of an up-to-date
Bankruptcy Law in 1994 was a significant step in bringing
Bulgaria's Commercial Code up to international standards.
Further revisions in the Code (regarding commercial activity)
and security and exchange laws are under parliamentary
consideration.  Implementation of reforms is hindered by slow
decision making and bureaucratic red tape.
    Although Prime Minister Berov entered office pledging his
would be the "privatization government," privatization advanced
only marginally in 1994, primarily in small-scale and municipal
projects.  It is estimated that only five percent of state
enterprises have been privatized so far.  After prolonged
wrangling, Berov announced in June a mass privatization plan
closely patterned on the voucher system employed in the former
Czechoslovakia.  Parliament approved the "demand side" program,
but had not yet approved the "supplyside" (including the list
of 360 firms to be privatized in the first wave) when it was
dissolved on October 17.  Implementation of the mass
privatization program now must await the formation of a new
government after the December elections, probably in early
1995.  Meanwhile, caretaker Prime Minister Indjova took steps
to speed up small-scale and municipal privatization.  Until
privatization is well rooted, one can expect a certain
unpredictability in commercial dealings.
    With the implementation of the new 18 percent unified-rate
VAT on April 1, Bulgaria took a significant step in reforming
its tax system.  However, the revised Income and Profits Tax
laws still have not been submitted for consideration to
Parliament.  While average tax rates are relatively low
according to the IMF, U.S. experts believe that marginal tax
rates are too high to stimulate the economy.  There is no
export tax.
4.  Debt Management Policies
    Bulgaria's former Communist regime more than doubled the
country's external debt from 1985 to 1990.  With more than 10
billion dollars outstanding, the government declared a debt
service moratorium in March 1990.  Bulgaria continued to
service three small convertible-currency bond issues.  Bulgaria
resumed partial servicing of its debt in late 1992.  Of
Bulgaria's current 13 billion dollar debt, more than 80 percent
is owed to foreign commercial creditors; almost half of the
commercial debt is trade financing.  The cutoff of trade
financing by the western banks because of the moratorium has
been the main barrier to imports from the U.S. and elsewhere.
    In April 1994, Bulgaria rescheduled its official ("Paris
Club") debt for 1993 and 1994.  In June, it concluded a Brady
plan-type agreement to reschedule 8.1 billion dollars of its
debt to commercial creditors ("London Club").  This agreement
reduced Bulgaria's commercial debt by 47 percent.  Even with
this debt reduction, however, Bulgaria will be challenged to
meet its total debt service requirements in the next few
years.  Debt to GDP ratio is 84 percent.
    After protracted negotiations, the IMF approved a one-year
standby agreement/structural transformation facility of
approximately 410 million dollars for Bulgaria in February
1994.  To support the IMF stabilization program, the G-24
countries pledged 330 million dollars in balance of payments
support for 1994. Bulgaria also complied with the final
conditions of its World Bank structural adjustment loan,
permitting the release of the 100 million dollar second tranche
and 100 million dollars in Japanese matching funds.  An
additional 250 million dollars was loaned jointly by the IMF
and World Bank to help finance the initial payment of
Bulgaria's London Club rescheduling.
5.  Significant Barriers to U.S. Exports
    Import licenses are required for a specific, limited list
of goods.  Among others, the list includes radioactive
elements, rare and precious metals and stones, ready
pharmaceutical products, and pesticides.  Armaments and
military-production technology and components also figure on
the list.  (Prior to the dissolution of COCOM, Bulgaria was
granted "favorable consideration status," which means a
presumption of approval for COCOM applications and a shorter
approval period.  Bulgaria has expressed its interest in
membership in the "COCOM successor" regime currently under
negotiation.)  The Bulgarian government has declared that it
grants licenses within three days of application, without fees,
and in a non-discriminatory manner.  The U.S. Embassy has no
complaints on record from U.S. exporters that the
import-license regime has affected U.S. exports.
    The Bulgarian government states that its system of
standardization is in line with internationally accepted
principles and practices.  Imported goods must conform to
minimal Bulgarian standards, but in testing and procedures
imported goods are accorded treatment no less favorable than
that for domestic products.  Bulgaria accepts test results,
certificates or marks of conformity issued by the relevant
authorities of countries signatories to international and
bilateral agreements to which Bulgaria is a party.  All product
imports of plant or animal origin are subject to veterinary and
phytosanitary control, and relevant certificates should
accompany such goods.
    Under the January 1992 Foreign Investment Law, Bulgaria
grants national treatment unless otherwise provided for by law
or international agreement.  Foreign investors may hold up to
100 percent of an investment.  Foreigners may not own
agricultural land, real estate, or natural resources, but may
lease for up to 70 years.  Foreign persons may freely
repatriate earnings and other income from their investments at
the market rate of exchange.  Although capital gains are less
clearly covered in the law, Bulgaria committed itself to their
free repatriation in the U.S.-Bulgarian Bilateral Investment
Treaty signed in September 1992.  Since the 1993 repeal of
special tax incentives, foreign investors have been subject to
the same 40 percent Profits Tax as Bulgarian enterprises.
    Foreign investors are required to obtain a license to own
or have controlling interest in banking or insurance; in firms
manufacturing arms, ammunition, or military equipment; in
so-far unspecified geographic areas; and in research,
development and extraction of natural resources.  A U.S.
tobacco company complained of the lack of transparency in the
issuing of cigarette manufacturing licenses and privatization
in the tobacco sector.
    There are no specific local content or export-performance
requirements nor specific restrictions on hiring of expatriate
personnel.  Bulgaria committed itself in the U.S.-Bulgarian
Bilateral Investment Treaty to international arbitration in the
event of expropriation, disinvestment, or compensation disputes.
    U.S. firms complain that the inflexible or rigid
enforcement of tax and other regulations inhibits investment
plans.  U.S. tobacco companies complain that the arbitrary
classification of cigarette brands for excise-tax purposes
seriously limits the incentives to invest.  A major U.S.
company complained that the inflexibility of the Bulgarian
bureaucracy delayed the startup and increased the cost of a
major investment project.
    There is no legal requirement for the Bulgarian government
to procure only local goods and services.  Government
procurement works mostly by competitively-bid international
tenders.  There have been problems of lack of clarity in many
tendering procedures (e.g. the extension of the E-80
superhighway from Plovdiv to the Turkish border).  U.S.
investors also are finding that, in general, neither remaining
state enterprises nor private firms are accustomed to
competitive bidding procedures for supplying goods and services.
    Bulgaria's new harmonized tariff schedule increased average
tariffs, although a 15 percent import tax was eliminated.  (The
import tax remains on 10 agricultural commodities.)  The new
schedule did reduce the overall range of tariff rates and
eliminated spikes.  Customs duties are paid ad valorem
according to the tariff schedule.  A one-half percent customs
clearance fee is assessed on all imports and exports.  Bulgaria
applies the single administrative document used by European
Community members.
    Imports from the United States are assessed at the most-
favored-nation (MFN) rate.  Bulgaria's Association Agreement
significantly lowered tariffs and modified quantitative
restrictions on goods orignating in the EU.  Just over 25
percent of U.S. exports to Bulgaria for January-June 1993 were
put at some price disadvantage by these changes.  The United
States is seeking significant reductions in Bulgarian tariffs
on U.S. goods as part of Bulgaria's accession to the GATT.
6.  Export Subsidies Policies
    The Bulgarian government does not subsidize exports.
7.  Protection of U.S. Intellectual Property
    The adoption in 1993 of new Patent and Copyright Laws
brought the Bulgarian IPR system up to international standards
generally, but enforcement is seriously deficient.  The most
serious problem with current IPR legislation is the lack of
retroactive copyright protection for sound recordings, which
are protected internationally by the Rome and Geneva
Conventions, to which Bulgaria is not a signatory.  Until
Bulgaria does sign, sound recordings copyrighted prior to
August 1, 1993 are not protected.  Bulgaria's third major piece
of IPR legislation, the Trade Mark and Industrial Design Law,
is in need of updating but considered adequate overall.
Production and trade secrets are nominally protected under Art.
14 of the "Protection of Competition Act."
    Enforcement of IPR laws is problematic.  Authorities have
not established a record of vigorous enforcement to make the
laws credible.  Video and computer program piracy are
widespread.  One major U.S. company estimates that it is losing
15-20 percent of its sales volume due to trademark
infringement.  This firm does not regard the fines or the
publicity given in several successful prosecutions of piracy as
sufficient to deter future infringement.  The U.S. Embassy is
not aware of any cases of patent violation.  For 1992, the
International Intellectual Property Alliance estimated total
trade losses for the U.S. of 47 million dollars due to piracy
in Bulgaria.
8.  Worker Rights
    a.  The Right of Association
    The 1991 Constitution guarantees the right of all workers
to form or join trade unions of their own choice.  This right
appears to have been freely exercised in 1994.  Estimates of
the unionized share of the workforce range from 30 to 50
percent.  Bulgaria has two large trade union confederations,
the Confederation of Independent Trade Unions of Bulgaria
(CITUB), and Podkrepa.  CITUB is the successor to the trade
union controlled by the former Communist regime, but now
appears to operate as an independent entity.  Podkrepa, the
independent confederation created in 1989, was one of the
earliest opposition forces, but is no longer a member of the
Union of Democratic Forces (UDF).  The two confederations
cooperate on some tactical issues, particularly in the
country's tri-partite body, the National Social Council, which
includes employers and government.  The Labor Code passed in
December 1992 recognizes the right to strike when other means
of conflict resolution have been exhausted, but "political
strikes" are forbidden.  Military, police, energy production
and supply, and health sectors are defined as essential
services, and workers in these sectors are restricted from
striking.  There were two major national strikes in 1994, by
students and miners; both ended without major concessions by
the government.
    b.  The Right to Organize and Bargain Collectively
    The Labor Code institutes collective bargaining, which is
practiced both nationally and on a local level.  Only Podkrepa
and CITUB are authorized to bargain collectively.  This led to
complaints by smaller unions, which may in individual
workplaces have more members than either of of the two larger
confederations.  Smaller unions also complained that they are
excluded from the National Social Council.
    c.  Prohibition of Forced or Compulsory Labor
    Many observers agreed that the practice of shunting
minority and conscientious-objector military draftees into work
units which often carry out commercial construction and
maintenance projects is a form of forced labor.
    d.  Minimum Age of Employment of Children
    The Labor Code sets the minimum age for employment of
children is 16, and 18 for dangerous work.  Employers and the
Ministry of Labor and Social Welfare are responsible for
enforcing these provisions.  Underage employment occurs in the
informal and agricultural sectors, but does not seem to be
either widespread or systematic.
    e.  Acceptable Conditions of Work
    The national monthly minimum wage was adjusted twice in
1994, and at year's end stood at approximately 33 dollars
(1,814 leva).  Inflation in 1994 dramatically increased the
cost of living.  The minimum wage was not enough for a single
wage earner to provide a decent standard of living for a
family.  The Constitution stipulates the right to social
security and welfare aid and assistance for the temporarily
unemployed.  The Labor Code provides for a standard workweek of
40 hours, with at least one 24-hour rest period per week.
Bulgaria has a national labor safety program with standards
established by the Labor Code.  Conditions in many cases are
worsening owing to budget stringencies and a growing private
sector over which labor inspectors have not yet achieved
effective supervision.
    f.  Rights in Sectors with U.S. Investment
    Overall U.S. investment is relatively small as of late
1994.  Of the nine sectors covered in the Trade Act Report,
only the "Food and Related Products," "Electric and Electronic
Equipment," and "Other Manufacturing" sectors have an active
U.S. presence as of late 1994.  Conditions do not significantly
differ in these sectors from the rest of the economy.
CANADA1
YfYfU.S. DEPARTMENT OF STATE
CANADA: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                              CANADA
                     Key Economic Indicators
        (Millions of U.S. dollars unless otherwise noted)
                                     1992      1993      1994
Income, Production and Employment:
Real GDP (billions of 1986 USD)     462.0     442.3     435.2 1/
GDP Growth Rate (pct.)                0.6       2.2       3.9 2/
Real GDP by Industry: (millions of 1986 USD)
  Manufacturing                    72,077    70,889    70,561 1/
  Finance/Insurance/Real Estate:   67,142    64,577    62,589 1/
  Trade                            49,390    48,371    49,088 1/
  Community/Business/
    Personal Services              49,785    47,686    45,965 1/
  Transportation/Communications    33,185    32,010    31,998 1/
  Construction                     22,624    20,184    19,892 1/
  Mining                           16,795    16,817    16,875 1/
  Agriculture                       8,221     8,231     8,037 1/
  Utilities                        13,144    12,541    12,416 1/
  Logging/Forestry                  2,158     2,182     2,159 1/
Per Capita Personal
     Disposable Income             13,843    13,149    12,618 1/
Personal Savings Rate (pct.)          9.6       9.1       8.9 1/
Labor Force (000s)                 13,797    13,946    14,133 3/
Unemployment Rate (pct.)             11.3      11.2      10.2 3/
Money, Interest Rates and Prices:  (end of period)
Money Supply (M2)                 282,323   273,333   262,426 4/
Bank of Canada Rate (pct.)           7.36      4.11      5.54 5/
Chartered Banks' Prime Rate (pct.)   7.25      5.50      7.00 5/
90-Day Commercial Paper (pct.)       7.46      4.03      5.40 5/
Consumer Price Index (1986 = 100)   128.1     130.4     130.8 E/
Annual Percent Change                 1.5       1.8       0.3 E/
Industrial Product
  Price Index (1986 = 100)          109.1     112.7     118.8 E/
Annual Percent Change                 0.5       3.3       5.4 E/
Exchange Rate (one C$ = US cents)
  (average annual noon rate)        82.76     77.53     74.58 5/
Balance of Payments and Trade:
Merchandise Exports               128,935   140,594   147,492 6/
  Exports to U.S.                  99,724   112,734   124,782 6/
Merchandise Imports               123,396   133,217   141,285 6/
  Imports to U.S.                  87,564    97,495   108,183 6/
Merchandise Trade Balance           5,539     9,377     6,208 6/
  Trade Balance with U.S.          12,160    15,240    16,599 6/
Current Account Balance           -21,917   -23,805   -21,971 6/
  Balance with U.S.               - 1,849   - 1,671   -   410 6/
Gold Holdings (millions USD)        478.0     287.0     210.0 5/
Official Int'l Reserves
  (millions USD)                   11,909    12,776    15,790 5/
Total Federal Debt:
  Accumulated Deficits
    (billions USD)                  386.0     396.2     405.0
  Federal Deficit                 FY91-92:  FY92-93:  FY93-94:
    (billions USD)                   33.5      32.6      29.2 7/
Note:  Converting the data from C$ to US$ distorts actual
growth and trend lines.
E/ Embassy projection.
1/ Second quarter (IIQ) 1994 (actual data), seasonally adjusted
at an annual rate.
2/ Percent change between IIQ 1994 and IIQ 1993.
3/ Third quarter average.
4/ M1 + chartered banks non-personal notice deposits + personal
savings deposits, as of 8/31/94.
5/ Third quarter end of period.
6/ First half of 1994 annualized.
7/ Federal Govt. projection for FY1994-95.  Canada's fiscal
year covers the period April 1 to March 31.
1.  General Policy Framework
    Canada is the world's seventh-largest market economy.
Production and services are predominantly privately owned and
operated.  However, the federal and provincial governments are
significantly involved in the economy.  They provide a broad
regulatory framework and redistribute wealth from high income
individuals and regions to lower income persons and provinces.
While the government has made progress on privatization,
government-owned Crown Corporations such as the Canadian
Broadcasting Corporation, the Canadian National Railway, the
Canadian Wheat Board, and provincial electric utilities still
play an important role in the economy.
    Canada is the most important trading partner of the United
States.  Although natural resources and related products remain
important components of the Canadian economy, the economy is
now fully industrialized and produces highly sophisticated
consumer goods and capital equipment.  As of August 1994,
Canada's annualized merchandise exports to the United States
were US$140.5 billion, and annualized merchandise imports from
the United States were US$118.2 billion.  Motor vehicles and
parts account for approximately 20 percent of U.S. merchandise
exports to Canada, followed by exports of machinery and
equipment and industrial equipment.  The stock of total foreign
direct investment in Canada in 1993 was US$113 billion, of
which US$70 billion or 62 percent was U.S. foreign direct
investment.  Roughly 40 percent of the assets of Canadian
manufacturing companies are foreign-owned; of this total, about
75 percent belong to U.S. firms.
    Federal government economic policies since late 1984 have
emphasized reduction of public sector interference in the
economy and promotion of private sector initiative and
competition.  Both federal and provincial governments also
undertook privatization of selected Crown Corporations.
    The deficit and related expansion of government debt are
the most pressing problems facing fiscal policymakers at the
federal and provincial levels.  Net public debt in FY1993-94
exceeded 74 percent of Gross Domestic Product.  Government
options to reduce deficits are constrained by high levels of
non-discretionary spending.  Statutory social transfers to
individuals and to provincial governments account for over 40
percent of the federal budget, and public debt service payments
account for about an additional 25 percent of spending.
Further reductions of subsidies for regional development and
other remaining discretionary programs such as defense,
agriculture and foreign aid would require the government to
make difficult political decisions.  Nevertheless, the
government has stated firmly that it intends to reduce the
deficit to three percent of GDP by the April 1996-March 1997
fiscal year.
    The Bank of Canada is Canada's central bank.  The governor
of the Bank is responsible for conducting monetary policy.  The
Bank's main monetary policy tool is management of cash balances
with the chartered banks.  Other tools used to control the
money supply include open market operations, such as purchase
and resale agreements with money market participants, and the
bank rate (the interest charge on central bank advances), which
is set 25 basis points above the average yield on 90-day
Treasury bills at the weekly auction conducted by the Bank.
The Bank may participate in the auction to influence its
outcome.
2.  Exchange Rate Policy
    The Canadian dollar is a fully convertible currency, and
exchange rates are determined by supply and demand conditions
in the exchange market.  There are no exchange control
requirements imposed on export receipts, capital receipts, or
payments by residents or non-residents.  The Bank of Canada
operates in the exchange market on almost a daily basis to
maintain orderly trading conditions and smooth rate movements.
3.  Structural Policies
    Prices for most goods and services are established by the
market without government involvement.  The most important
exceptions to market pricing are government services, services
provided by regulated public service monopolies, most medical
services, and supply-managed agricultural products (eggs,
poultry and dairy products).
    The principal sources of federal tax revenue are corporate
and personal income taxes and the goods and services tax (GST),
a multi-stage seven percent value-added tax on consumption.
Federal personal and corporate income tax rates are comparable
to U.S. rates.
    Federal government regulatory regimes affect foreign
investment (see section 5 below) and also U.S. firms in the
financial services sector.  Although foreign-owned bank
subsidiaries are subject to federal restraints on their
operations and growth, U.S. banks have been exempted from most
of these restrictions under the U.S.-Canada Free Trade
Agreement (FTA).  This continues under NAFTA.  However, the
federal government still prohibits the entry of direct branches
of foreign banks.  In mid-1992 Canada implemented further
financial sector reforms, which largely eliminated remaining
barriers among banks, trust companies and insurance companies.
    Transportation policies:  The pro-competitive National
Transportation Act and its companion legislation, the Motor
Vehicle Transport Act, entered into force in 1988.  While
underscoring the continuing need to maintain high safety
standards, this legislation introduced a greater degree of
deregulation in the Canadian transportation industry.
    Aviation is not included in the NAFTA.  Based on a mutual
desire for a liberalized North American market, in October 1990
the U.S. and Canada announced a joint initiative to negotiate a
new "open skies" agreement covering transborder air services.
The last round of negotiations was held in December 1992.  On
September 27, 1994 U.S. Transportation Secretary Pena and
Canadian Transport Minister Young appointed personal
representatives to explore the possibilities of reopening
negotiations.  Formal negotiations were subsequently scheduled
for January of 1995 with the objective of rapid market
liberalization.
    Telecommunications Policies:  Canada's long-awaited
Telecommunications Act was proclaimed in force on October 25,
1993.  Among its provisions, the legislation allows the federal
regulator, the Canadian Radio-television and Telecommunications
Commission, to forbear from regulating competitive segments of
the industry, exempts resellers from regulation, and limits
foreign ownership of telecommunications firms to 20 percent.
Carriers which operated in Canada prior to 1987, but which do
not meet the Canadian ownership requirements, are grandfathered
under Section 16 of the legislation.
4.  Debt Management Policies
    Canada's net public and private external indebtedness rose
from US$89 billion (26 percent of GDP) in 1984 to US$243
billion (44 percent of GDP) in 1993, a relatively high figure
for an industrialized country.  While foreigners have been
receptive to holding Canadian securities and such purchases
contribute to the strength of the Canadian dollar, the sharp
rise in external indebtedness has made the Canadian dollar and
economy increasingly vulnerable to shifts in international
investor confidence.
5.  Significant Barriers to U.S. Exports
    On January 1, 1989, Canada and the United States began to
implement a free trade agreement to eliminate, over a ten year
period, virtually all tariff and non-tariff barriers to trade
between the two countries.  The Canada FTA was suspended on
January 1, 1994, with the entry into force of the North America
Free Trade Agreement (NAFTA), which expands the free trade area
to include Mexico.  The NAFTA provisions go beyond the CFTA in
the areas of services, investment and government procurement.
Canada passed implementing legislation for the Uruguay Round
agreement under the General Agreement on Tariffs and Trade, and
joined the World Trade Organization as a founding member.
    Nevertheless, a number of Canadian practices remain which
constitute barriers to U.S. exports to Canada.
    Canada applies various restrictions to imports of
supply-managed products (dairy, eggs, and poultry), fresh fruit
and vegetables, potatoes, processed horticultural products and
live swine.  The US continues to pursue these issues
bilaterally.  Regarding the supply managed commodities,
bilateral talks will be necessary to resolve contradictions
between Canada's Uruguay Round implementation and its
obligations under NAFTA.
    Provincial legislation and Liquor Board policies regulate
Canadian importation and retail distribution of alcoholic
beverages.  The Canada FTA addressed a number of these policies
(listing, distribution, and pricing) and provided dispute
settlement procedures.  Provincial beer distribution practices
had been grandfathered under the FTA but were challenged by the
U.S. under the GATT.  The U.S. and Canada concluded a
Memorandum of Understanding in August 1993 which significantly
improved access to the Canadian market for U.S. beer.  However,
U.S. exporters have remained unhappy about provincial minimum
import price requirements and cost-of-service issues hinder the
importation of U.S. wine.
    Although some progress has occurred, problems remain in the
area of standards and labeling.  The FTA chapter on technical
standards provides for the accreditation of U.S. certification
organizations and testing laboratories in Canada.  The Canadian
accreditation agency, the Standards Council of Canada, has been
slow in effecting the necessary regulatory changes and in
reviewing U.S. applications, but in 1992 it accredited two
major U.S. testing and certification bodies, Underwriters
Laboratories and the American Plywood Association.  Since then,
three additional test laboratories -- Architectural Testing
Inc., ETL Testing Laboratories, and Dash, Straus & Goodhue
Inc., have been accredited.  To date, several accreditation
applications by U.S. certification and testing organizations
remain under review by the Standards Council.
    Under its Processed Product Regulations, Canada allows
imports of processed fruit and vegetables to be sold only in
certain limited-size packages (i.e. consumer sizes) for
products where Canadian standard sizes are prescribed.
Following three years of formal U.S. government representation,
which prompted Canadian regulatory change in November 1993,
U.S. exporters have improved access to Canada's hotel,
institutional, and food service trade for a wide range of
products such as ketchup, french fries, pickles, etc. in sizes
larger than those stipulated in the regulations.  However,
trade remains hindered by strict packaging and labeling rules,
from which Canadian manufacturers received a temporary
(two-year) exemption, and plant certification requirements.
For example, U.S. frozen french fry manufacturers remain unable
to capture a share of the Canadian food service market
estimated to be worth at least $40 million.
    Canadian customs regulations limit the temporary entry of
specialized equipment needed to perform short-term service
contracts.  Certain types of equipment are granted duty-free or
reduced-duty entry into Canada only if they are unavailable
from Canadian sources.  Although NAFTA has broadened the range
of professional equipment permitted entry, it has not provided
unrestricted access.
    Canada restricts the direct export of Pacific salmon by
requiring that a portion of the Canadian catch be landed in
Canada before being exported.  An interim agreement reached
following FTA dispute settlement permits direct export (i.e.
sale at sea) of a portion of the catch by Canadian licensees.
The level of direct exports, however, has been disappointing.
Following a mid-term review in February, technical changes were
made in the requirements for licensees.  A Canadian ban on
reexporting unprocessed herring, aimed at Japan, also prevents
Canadian processors from using U.S. refrigeration facilities.
The U.S. government will continue to monitor developments.
    Canadian industries have used Canada's Special Import
Measures Act (SIMA) to restrict access to the Canadian market
by U.S. companies.  Dumping margins in successful cases
constitute a significant barrier to U.S. exports.
    Canada denies Canadian enterprises tax deductions for the
cost of advertising in foreign broadcast media and publications
when the advertising is directed primarily at Canadians.
Various restrictions on advertising aimed specifically at the
Canadian market restrict U.S. access to the Canadian market for
publications and print media advertising.
    Under the Investment Canada Act, the Broadcast Act, and
policies in the energy, publishing, telecommunications and
transportation, broadcasting and cable television sectors,
Canada maintains laws and policies which interfere with new or
expanded foreign investment.  As well, foreign investment in
the banking and financial services sectors is restricted under
the Bank Act and related statutes.
    The Investment Canada Act (as amended by the FTA and NAFTA)
requires the federal government to review and approve foreign
investment to ensure "net benefit to Canada."  The Act exempts
from prior government approval foreign investments in all new
("greenfield") businesses, and acquisitions worth less than C$5
million (C$150 million for U.S. investors -- 1992 dollars).
The exemption excludes "culturally sensitive sectors" such as
book publishing and distribution, film and video, audio music
recordings and music in print or machine readable form.  Also
excluded as "culturally sensitive" are foreign investments to
establish new businesses or acquire existing ones for the
publication of magazines (including "split-run" editions),
periodicals or newspapers.  Foreign investment in these sectors
is potentially subject to review regardless of size or whether
the investment is new or through direct or indirect
acquisition.
    Further to the legal position on culture embodied in the
Investment Canada Act, Investment Canada enforces a federal
book publishing policy known as the "Baie Comeau Policy."
Canada prohibits the majority acquisition of Canadian book
publishing and distributing companies, and requires that
foreign-owned subsidiaries in Canada be divested to Canadians
within two years if the ownership of the parent changes hands.
Exceptions to the policy permit direct acquisition if the
Canadian firm is in financial distress and no Canadian buyer
can be found.  Also, a foreign owner indirectly acquiring a
Canadian firm might not be forced to divest it if a transaction
of "net benefit" to Canada can be negotiated.  Investment
Canada also has specific policies regarding foreign investment
in the film distribution sector.
    In the banking sector, the Bank Act of 1980 made chartering
of foreign-owned banking subsidiaries possible for the first
time.  However, foreign banks are still not permitted to enter
Canada as direct branches.  Foreign banks are also unable to
acquire a domestic Canadian bank, since no single entity
(person or corporation) can hold more than 10 percent of a
Canadian bank's capital.  The FTA eliminated other
discriminatory restrictions on U.S. bank subsidiaries in
Canada.
    In the trust and loan, and insurance sectors, which are
regulated by both the federal and provincial governments,
foreign investors wishing to establish in either of these two
areas may do so, but acquisitions of provincial firms are
subject to restrictions preventing foreign control.
    Where GATT Government Procurement Code or NAFTA
requirements do not apply, Canadian government entities follow
preferential sourcing policies favoring Canadian-based firms
over foreign-based firms. In addition, Government Services
Canada, the major federal procurement agency, maintains a
supplier development fund to promote new Canadian sources of
supply.  Canada's Federal and Provincial crown
(government-owned) corporations also follow strong "buy
national" or "buy provincial" policies.  Products affected
include telecommunications, heavy electrical and
transportation-related products.
    Canada pursues an "industrial benefits policy" which is
administered through a procurement review mechanism.  The
policy is intended to insure that major government procurement
projects provide long-term benefits for "the economic or social
development of Canada" beyond the immediate impact of the
procurement expenditures.  Frequently resulting in "offsets,"
this policy arouses considerable U.S. concern.
6.  Export Subsidies Policies
    Under the Western Grains Transportation Act (WGTA), the
Canadian government subsidizes rail transportation of western
grown wheat, barley, oats and many other agricultural
commodities intended for export.  The Free Trade Agreement
eliminated subsidies on agricultural products shipped to the
United States through West Coast ports, but not on those
shipped directly by rail or through Great Lakes ports.  Under
the terms of the FTA, Canada will terminate all export-based
duty remission schemes by 1998.  In the interim, Canada has
excluded exports to the U.S. in calculating the duty waived.
In June, 1994, the GOC announced a proposal to phase out WGTA
payments over a five-year period.  Instead, the government will
make direct income support payments to farmers.
    Canada's production-based duty remission program provides
for the rebate of customs duties to qualifying foreign
automobile firms on their imports of automobiles and original
equipment automotive parts into Canada.  Under the program,
duty remissions are granted in proportion to the amount of
"Canadian value-added" generated by these firms in Canada.
Under the provisions of the FTA, Canada has agreed to terminate
the program by 1996 and to limit application of the program to
the four companies with which agreements were already in
place.  NAFTA will not change these provisions.
7.  Protection of U.S. Intellectual Property
    The Canadian government has long-standing legislation to
protect intellectual property rights, and these laws are
effectively enforced.
    1987 amendments to the Canadian Patent Act significantly
improved protection for patented drugs and was a positive step
in resolving some of the complaints voiced by the U.S.
pharmaceutical industry concerning alleged Canadian bias in
favor of generic drugs.  In February 1993 the Canadian
government amended the Patent Act to eliminate compulsory
licensing for pharmaceuticals, thereby extending patent
protection to the standard 20 years.
    1989 amendments to the Canadian Copyright Act granted
explicit copyright protection for computer programs, and
provided a right of payment for retransmission of broadcast
programming as required by the FTA.
    In 1993 Canada proclaimed the Integrated Circuit Topography
Act, a law protecting semiconductor chip design.
    In January 1994, the Copyright Act was amended to reflect
the changes required by NAFTA, e.g., rental rights for computer
programs and sound recordings; protection for data bases and
other compilations; and increased measures against all
categories of pirated works.
8.  Worker Rights
    a.  The Right of Association
    Except for members of the armed forces, workers in both the
public and private sectors have the right to associate freely.
These rights, protected by both the federal labor code and
provincial labor legislation, are freely exercised.
    b.  The Right to Organize and Bargain Collectively
    Workers in both the public and private sectors freely
exercise their rights to organize and bargain collectively.
Some essential public sector employees have limited collective
bargaining rights which vary from province to province.  37.5
percent of Canada's non-agricultural workforce is unionized.
    c.  Prohibition of Forced or Compulsory Labor
    There is no forced or compulsory labor practiced in Canada.
    d.  Minimum Age for Employment of Children
    Generally, workers must be 17 years of age to work in an
industry under federal jurisdiction.  Provincial standards
(covering over 90 percent of the national workforce) vary, but
generally require parental consent for workers under 15 or 16
and prohibit young workers in dangerous or nighttime work.  In
all jurisdictions, a person under 16 cannot be employed in a
designated trade, or, in other words, become an apprentice
before that age.
    e.  Acceptable Conditions of Work
    Federal and provincial labor codes establish labor
standards governing maximum hours, minimum wages and safety
standards.  Those standards are respected in practice.
    f.  Rights in Sectors with U.S. Investments
    Worker rights are the same in all sectors, including those
with U.S. investment.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                              8,840
Total Manufacturing                                   34,062
  Food & Kindred Products                    3,645
  Chemicals and Allied Products              5,032
  Metals, Primary & Fabricated               2,745
  Machinery, except Electrical               2,240
  Electric & Electronic Equipment            1,623
  Transportation Equipment                   8,720
  Other Manufacturing                       10,059
Wholesale Trade                                        6,653
Banking                                                  823
Finance/Insurance/Real Estate                         12,242
Services                                               2,425
Other Industries                                       5,349
TOTAL ALL INDUSTRIES                                  70,395
Source: U.S. Department of Commerce, Bureau of Economic
Analysis
CHILE1
qU.S. DEPARTMENT OF STATE
CHILE: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                              CHILE
                     Key Economic Indicators
        (Millions of U.S. dollars unless otherwise noted)
                                    1992      1993      1994
Income, Production and Employment:
Real GDP (1993 exchange rate)     41,100    43,700    45,400
GDP (at current prices)           40,800    43,700    48,500
Real GDP Growth (peso terms)        11.0       6.3       4.0
Real GDP by Sector:
  Agriculture                      2,930     2,970     3,050
  Utilities                        1,180     1,240     1,280
  Manufacturing                    7,260     7,550     7,970
  Construction                     2,200     2,520     2,580
  Fishing                            460       470       550
  Mining                           3,350     3,390     3,400
  Trade                            6,400     6,980     7,150
  Transport/Communications         3,100     3,350     3,650
  Other (includes services)       14,220    15,230    15,770
Real Per Capita GDP (USD)          3,030     3,170     3,250
Labor Force (000s)                 4,844     5,095     5,200
Unemployment Rate (pct.)             4.9       4.6       5.6
Money and Prices: (annual percentage growth)
Money Supply (M1A)                  40.3      19.1      17.0
Interest Rate 2/                     8.1       9.2       9.2
Wholesale Inflation (12-month)       8.9       6.7       9.0
Consumer Price Inflation (12-month) 12.7      12.2      10.5
Average Exchange Rate: (pesos/USD)
  Interbank Rate (actual)            363       404       423
  Mid-Point of Crawling Peg          390       430       460
Balance of Payments and Trade:
Total Exports (FOB)                9,986     9,202    10,700
  Exports to U.S. (FOB)            1,649     1,655     1,800
Total Imports (FOB)                9,237    10,181    10,800
  Imports from U.S. (CIF)          1,985     2,477     2,500
Aid from U.S. 3/                       4         4         4
Public Foreign Debt (yearend)      9,623     9,035     8,800
Public Foreign Debt Service 4/     1,400     1,300     1,400
Gold and Foreign Exch. Reserves    9,009     9,759    10,700
Trade Balance                        749      -979      -100
  Trade Balance with U.S.           -336      -822      -700
1/ 1994 figures are estimates based on data through August.
2/ Real (i.e., in addition to inflation) annualized rate for
90-365 day loans.
3/ Fiscal years, including all of FY-1994.  All grants.
4/ Estimate.  Includes non central government debts (e.g.,
Central Bank, public corporations) and private debts with
public guarantees.
1.  General Policy Framework
    Chile's economic expansion is now into its twelfth year.
The most notable developments over the last several years have
been the diversification of the export base and the renewed
ability of Chilean firms to obtain capital from international
markets.  Although copper remains the country's largest export
earner and foreign investment pours into the mining sector,
exports of fish, forestry products, and fresh fruit are
important as well.  Chile's credit rating is the highest in
Latin America; since Chile received an investment-grade rating
in 1992, Chilean firms have financed investment with foreign
capital by borrowing, issuing bonds, and selling stock abroad.
Domestically financed investment is also significant and
growing, and many Chilean firms are expanding abroad.
    The democratic governments of Patricio Aylwin (1990-1994)
and Eduardo Frei (1994-present) have emphasized the need to
maintain macroeconomic stability and the economy's export
orientation.  The government has generated fiscal surpluses in
each of the years 1990-1993, and it is projected to do so in
1994.  In the last few years, the government and the
independent Central Bank have privatized some firms and
gradually loosened foreign exchange restrictions, although they
remain concerned about the potential effects on the exchange
rate of rapid foreign currency inflows.  In 1994, new laws
liberalized capital markets, fixed a framework for
environmental regulation, and made money laundering a crime.  A
bill pending in Congress would allow banks to enter new
businesses.  Chile has ratified the Uruguay Round agreements
and became a founding member of the World Trade Organization
(WTO) on January 1, 1995.
    The Central Bank's monetary policy targets real interest
rates.  It has resisted calls to lower interest rates as growth
rates fell in 1993 and 1994, emphasizing the need to prevent
long-term domestic spending growth from outpacing that of the
economy as a whole.  The authorities have sought to maintain an
exchange rate which provides incentives to invest in export
industries, although rapid capital inflows since 1991 have
complicated their task by contributing to peso appreciation.
    Indicators for 1994 suggest that growth will be around four
percent as a result of decelerating domestic spending.  Growth
is being led by exports, with domestic trade and construction
(which boomed in 1993) facing difficulties.  Inflation will be
near the government's target range of 9-11 percent, while
unemployment will average between five and six percent.
Because of an unexpected increase in the price of copper, the
trade balance will be very close to even, and the current
account deficit will be around 2.5 percent of GDP.  For 1995,
preliminary Central Bank projections envision growth of over
five percent, inflation of nine percent, a slightly positive
trade balance, and a current account deficit of three percent
of GDP.  Keeping inflation on a downward path remains a high
priority, but the authorities have cautioned that the
indexation of the economy makes rapid gains unlikely in the
short-term.
2.  Exchange Rate Policy
    The Central Bank pegs the peso to a basket composed of the
U.S. dollar, the mark and the yen (weighted 50 percent, 30
percent and 20 percent, respectively).  The peg is adjusted to
reflect inflation differentials between Chile and its major
trading partners.  Although the path for the crawling peg is
determined a month in advance, the individual cross rates are
determined daily, depending on market rates for the dollar,
mark and yen.  The official interbank rate is allowed to move
within a 20 percent band around the crawling peg.
    Exporters must remit most (75 percent or all but $15
million, which ever is greater) of their foreign currency
earnings through the interbank market.  The Central Bank
intervenes in the interbank market on different occasions to
reduce short-term fluctuations.  A legal parallel market
operates, with rates typically within one percent of the
interbank rate.  The peso appreciated against the currencies of
Chile's trading partners by around 20 percent in real terms
between 1991 and 1993.  The appreciation was in large part due
to the strong capital inflows prompted by high Chilean interest
rates and the perception abroad of reduced country risk.  In
the first half of 1994, the peso appreciated by another three
percent as a result of the dollar's weakness in international
markets.
3.  Structural Policies
    Pricing Policies:  The government rarely sets specific
prices.  Exceptions are urban public transport and some public
utility prices and port charges.  State enterprises purchase at
the lowest possible price, regardless of the source of the
material.  U.S. exports enter Chile and compete freely with
other imports and Chilean products.  Import decisions are
typically related to price competitiveness and product
availability.  (Certain agricultural products are an exception.
See section five.)
    Tax Policies:  An 18 percent value-added tax (VAT) applies
to all sales transactions and accounts for 43 percent of total
tax revenue.  There is an 11 percent tariff on most imports.
There are duty-free zones in Iquique and Punta Arenas and a
limited duty-free zone in Arica; less than three percent of
Chilean imports pass through these zones.  Personal income tax
rates will fall modestly in 1995; the top marginal rate will
fall from 48 to 45 percent on annual income over approximately
$75,000.  Profits are taxed at flat rates of 15 percent for
retained earnings and 35 percent for distributed profits, with
incentives for business donations to educational institutions.
Tax evasion is not a serious problem.
    Regulatory Policies:  Regulation of the Chilean economy is
limited.  The most heavily regulated areas are utilities, the
banking sector, the securities markets, and pension funds.
There are no government regulations that explicitly limit the
market for U.S. exports to Chile (although other government
programs, like the price band system for some agricultural
commodities described below, displace U.S. exports).  In recent
years, the government has for the first time begun to allow
private firms to invest in and operate public infrastructure
projects.  Most Chilean ports are administered by a state-owned
firm, although stevedoring services are typically provided by
the private sector.
4.  Debt Management Policies
    Chile's vigorous economic growth and careful debt
management over the last decade have meant that foreign debt is
no longer a major problem.  The government restructured 1991-94
foreign debt maturities at market interest rates with its
creditor banks in September 1990.  As of mid-1994, Chile's
public and private foreign debt stock stood at $19.9 billion.
In every year since 1987, public sector debt has declined and
private sector debt has risen, the latter a result of firms
borrowing abroad to finance investment.  Public sector debt is
now less than private sector debt, and in the last few years
the overall debt level as a percentage of GDP has remained
relatively stable at around 40 percent.  (In 1985, the
debt-to-GDP ratio was 125 percent.)
5.  Significant Barriers to U.S. Exports
    Chile has few barriers to U.S. exports.  Nevertheless,
treatment in some areas, especially agricultural commodities,
diverges from this norm.  Chile agreed in the GATT Uruguay
Round not to raise its tariff rates above 25 percent (except
for a few agricultural products, for which the rate is 31
percent).  The uniform Chilean tariff rate is currently 11
percent.  Chile has free trade agreements providing for
duty-free trade in most products by the late 1990s with Mexico,
Venezuela, and Colombia, and it was expected to complete
another such agreement with Ecuador in late 1994.  In 1994,
Chile also began negotiations on a trade-liberalizing agreement
with the Mercosur nations (Argentina, Brazil, Paraguay, and
Uruguay).  Tariffs also are lower than 11 percent for certain
products from member countries of the Latin American Free Trade
Association and products imported by diplomats and the Chilean
military.  A 50 percent surcharge, in addition to the 11
percent import tariff, is applied to all imports of used goods.
    The 18 percent VAT is applied to the CIF value of imported
products plus the 11 percent import duty. This compounding adds
an effective two percent to the duty charged on the imported
good.  Duties may be deferred for a period of seven years for
capital goods imports purchased as inputs for products to be
exported. (See section 2.)
    Automobiles are subject to additional taxes based on value
and engine size.  The engine tax applies to vehicles with
engines of over 1,500 cc., while the value tax is 85 percent of
the CIF value over a certain level (around $9,700 in 1994).
These taxes discourage sales of larger and more expensive
vehicles, including most U.S.-made automobiles.  Despite these
taxes, sales of U.S.-made vehicles are growing.
    Another tax that has the effect of discouraging U.S.
exports is the 70 percent tax on whiskey, which is produced in
only small volumes domestically and which competes with other
domestically produced liquors taxed at lower rates.
    Import Licenses:  According to legislation governing the
Central Bank since 1990, there are no legal restrictions on
licensing.  Import licenses are granted as a routine
procedure.  Imports of used automobiles are prohibited.
    Investment Barriers:  Chile's foreign investment statute,
Decree Law 600, sets a standard of treatment of foreign
investors in the same manner as Chilean investors.  Foreign
investors using D.L. 600 sign a contract with the government's
Foreign Investment Committee guaranteeing the terms of their
investments.  These terms include the rights to repatriate
profits immediately and capital after one year, to exchange
currency at the official interbank exchange rate, and to choose
between either national tax treatment or a guaranteed rate for
the first ten years of an investment.  Approval by the Foreign
Investment Committee is routine.  Since 1991, investors have
been required to deposit some (currently 30 percent) of the
capital obtained from foreign loans in a non-interest bearing
Central Bank account (known as the "encaje") for one year.
There is no tax treaty between Chile and the United States, so
profits of U.S. companies operating in Chile are taxed by both
governments, although U.S. firms generally can claim credits
for taxes paid in Chile.
    Firms may invest without using D.L. 600 or registering with
the Foreign Investment Committee by bringing capital in through
foreign exchange dealers or private banks.  Few firms use this
means of investment, as it lacks the guarantees provided by the
contract with the Foreign Investment Committee.
    There are some deviations, both positive and negative, from
the nondiscrimination standard.  Foreign investors receive
better than national treatment on taxation, as they have the
option of fixing the tax rate they will pay at 42 percent for
ten years or paying the prevailing domestic rate, which is at
present lower.  Unlike domestic firms, foreign investors may
also keep all of their export earnings abroad.
    There are also examples of less than national treatment.
In an emergency, D.L. 600 allows the Central Bank to restrict
the access of foreign investors to domestic borrowing in order
to prevent distortion of local financial markets.  The Central
Bank has never exercised this power.
    Other examples of less than national treatment are the
restrictions on foreign investment in some sectors.  With few
exceptions, fishing in the country's 200-mile exclusive
economic zone is reserved for Chilean-flag vessels with
majority Chilean ownership.  Such vessels also are the only
ones allowed to transport by river or sea between two points in
Chile ("cabotage") cargo shipments of less than 900 tons or
passengers.
    Full foreign ownership of radio and television stations is
allowed, but the principal officers of the firm must be Chilean.
    A freeze in force for the last decade on the issuance of
new bank licenses means that would-be foreign (or domestic)
entrants must acquire existing banks.
    The automobile and light truck industry is the subject of
trade-related investment measures, although U.S. firms are
among those helped as well as those harmed.  Manufacturers from
the United States (GM) and France (Peugeot/Renault) receive
import protection in the form of the taxes noted above, which
protect their Chilean production.  The manufacturers also
receive tax benefits for the use of local inputs and for
exporting auto components.  Despite these measures, imports
make up around 85 percent of the market.
    Oil and gas deposits are reserved for the state.  Private
investors are allowed concessions, however, and foreign and
domestic nationals are accorded equal treatment.
    Principal Nontariff Barriers:  The main trade remedies
available to the Chilean Government are surcharges, minimum
customs values, countervailing duties, antidumping duties, and
import price bands.  Chile's most significant nontariff barrier
is the import price band system for certain agricultural
commodities, which currently applies to wheat, wheat flour,
vegetable oils, and sugar.  Surtaxes are levied on imports of
these commodities on top of the across-the-board 11 percent
tariff in order to bring import prices up to an average of
international prices over previous years.
    The Chilean Government may apply country-specific duties on
products that it determines to have received subsidies from
exporting countries and on products that it determines to have
been dumped at below-market prices.  As of late 1994, only
imports of certain textiles and garments from selected Asian
countries and imports of one industrial chemical are subject to
these duties.  Low world prices have led Chile to establish
minimum customs values for milk, spun cotton, and wheat flour.
    Animal Health and Phytosanitary Requirements:  Chile
occasionally uses animal health and phytosanitary requirements
in a nontransparent manner that has the effect of impeding
imports.  No public comment process or announcement of proposed
rule changes precedes the promulgation of these requirements.
U.S. exporters have expressed concern about the application of
phytosanitary requirements to poultry.  Chilean authorities
have in some instances eliminated or liberalized specific
requirements when presented scientific evidence by U.S. animal
health or phytosanitary officials.
    Government Procurement Practices:  The government has a
"buy Chile" policy only when conditions of sale of locally
produced goods (price, delivery times, etc.) are equal to or
better than those of equivalent imports.  In practice, given
that many categories of products are not manufactured in Chile,
purchasing decisions by most state-owned companies are made
among competing imports.  Requests for public and private bids
are published in the local newspapers.  Government officials
have on occasion urged some government agencies to buy Chilean
coal on a preferential basis.
6.  Export Subsidies
    With minor exceptions, the Chilean Government does not
provide exporters with direct or indirect support such as
preferential financing or export promotion funds.  The Chilean
Government does, however, offer a few nonmarket incentives to
exporters.  For example, paperwork requirements are simplified
for nontraditional exporters.  Small nontraditional exporters
also qualify for the government's simplified duty drawback
system.  Through this mechanism, the government returns to
producers an amount equivalent to three to ten percent of their
exports' value.  This figure represents an estimate of the
duties actually paid for imported components in the exported
merchandise.  Alternatively, qualifying exporters can apply for
the return of all paid duties.  The government also provides
exporters with quicker returns of VAT paid on inputs than other
producers receive.
    All Chilean exporters may also defer tariff payments on
capital imports for a period of seven years.  If the capital
goods are used to produce exported products, deferred duties
can be reduced by the ratio of export sales to total sales.  If
all production is exported, the exporter pays no tariff on
capital imports.
    In order to encourage forestation of land that would be of
marginal agricultural use, the government subsidizes
approximately 75 percent of planting costs as well as certain
management costs for the first generation of trees, which in
practice are almost always nonnative species.  The value of the
subsidy is adjusted for inflation and treated as taxable income
when the trees are harvested.  Forestry industry
representatives say the subsidy, when allocated over the life
of plantations, amounts to about five percent of total costs.
Both foreign investors and Chileans are eligible for the
subsidy.  The law which established the subsidy in 1974 (D.L.
701) expires in March of 1995, and discussions are ongoing
about its possible renewal or revision.
7.  Protection of U.S. Intellectual Property
    Chile's intellectual property regime is basically
compatible with international norms, and industry
representatives have welcomed government enforcement efforts.
Continuing deficiencies in patent protection, however, have
kept Chile on the USTR Special 301 watch list since 1989.
Efforts to enforce intellectual property rights in Chilean
courts have been successful.  Chile does not have an explicit
statute for protecting the design of semiconductors nor does it
have comprehensive trade secret protection.  Chile belongs to
the World Intellectual Property Organization.  Contracts may
set fees and royalties only as a percentage of sales, and
payments for the use of trade secrets and proprietary processes
are usually limited to three percent.
    Patents:  The Industrial Property Law promulgated in
September 1991 substantially improved Chile's protection of
industrial patents, but it falls short of international
standards.  The law provides a patent term of 15 years from the
date of grant.  (The term in the United States is 17 years.)
The law also does not consider plant and animal varieties or
surgical methods to be patentable.  Most importantly, the law
does not provide pipeline protection for pharmaceutical patents
filed abroad before the law's promulgation.  Because of the
lack of pipeline protection and the long lead times involved in
the marketing of new pharmaceutical products, the law will not
prevent local companies from pirating foreign pharmaceutical
patents of products introduced into the market for several more
years.  In addition, the registration procedures required by
the health ministry to market new drugs are more onerous for
first-to-file firms, which tend to be foreign firms.  Payments
for the use of patents may not exceed five percent of sales.
    Copyrights:  Piracy of video and audio tapes has been
subject to criminal penalties since 1985.  Chilean authorities
have taken aggressive enforcement measures against video, video
game, audio, and computer software pirates in recent years, and
piracy has declined in each of these areas.  In the mid-1980s,
the software piracy rate was believed to be around 90 percent;
it is currently estimated at around 70 percent.  The decline is
in part the result of a campaign by the industry, with the
cooperation of the courts and the government, to suppress the
use of pirated software.  Improved access to authorized dealers
and service has also helped to reduce the rate of piracy.
Industry sources say that penalties remain low relative to the
potential earnings from piracy and that stiffer penalties would
help to deter potential pirates.  In 1992, the Chilean Congress
approved legislation that extended the term of copyright
protection from 30 years to 50 years.  U.S. recording industry
officials have said that the copyright law grants producers
less favorable treatment vis-a-vis authors than is the
international norm.
    Trademarks:  Chilean law provides for the protection of
registered trademarks and prioritizes trademark rights
according to filing date.  Local use of the mark is not
required for registration.  Payments for use of trademarks may
not exceed one percent of sales.
    Impact of Chile's Intellectual Property Practices on U.S.
Trade:  Although it is difficult to accurately estimate
damages, most observers believe that the U.S. pharmaceutical
industry has suffered most from the infringement of its
intellectual property (in this case, patent) rights in Chile.
U.S. software industry sources have estimated that some $65
million worth of pirated software was used in 1993, although
only a fraction of this amount would go directly to U.S.
exporters if piracy were eliminated.
8.  Worker Rights
    a.  The Right of Association
    Most workers have a right to join unions or to form unions
without prior authorization, and around 11 percent of the work
force belongs to unions.  Government employee associations
operate like unions in some ways, but they do not have the same
legal protection as unions.  Legislation has been introduced to
give them the same rights as unions.
    Reforms to the labor code in 1990 removed significant
restrictions on the right to strike.  Those reforms require
that a labor inspector or notary be present when union members
vote for a strike.  Employers are required to show cause
whenever they fire workers, but "needs of the enterprise" is a
permissible cause.  Observers believe that some employers
invoke this cause to fire employees for trying to form unions.
    b.  The Right to Organize and Bargain Collectively
    The climate for collective bargaining has improved, and the
number of contract negotiations has grown steadily, but only 17
percent of eligible workers had collective bargaining
agreements as of the end of 1992.  The process for negotiating
a formal labor contract is heavily regulated, a vestige of the
statist labor policies of the 1960's.  However, the law permits
(and the Aylwin and Frei governments have encouraged) informal
union-management discussions to reach collective agreements
outside the regulated bargaining process.  These agreements
have the same force as formal contracts.
    Temporary workers -- defined in the labor code as
agricultural, construction, and port workers as well as
entertainers -- may form unions, but their right to collective
bargaining is restricted.  Some 700,000 workers, including most
agricultural workers, are limited to informal negotiations.
    c.  Prohibition of Forced or Compulsory Labor
    Forced or compulsory labor is prohibited in the
constitution and the labor code, and there is no evidence that
it is currently practiced.
    d.  Minimum Age for Employment of Children
    Child labor is regulated by law.  Children as young as 14
may legally be employed with permission of parents or guardians
and in restricted types of labor.  Economic factors have forced
many children to seek employment in the informal economy, which
is more difficult to regulate.  A UNICEF study concluded that
107,000 minors (seven percent of their age group) held jobs,
mostly in the countryside, and that many of them worked with
their parents.
    e.  Acceptable Conditions of Work
    Minimum wages, hours of work, and occupational safety and
health standards are regulated by law.  The legal workweek is
48 hours.  The minimum wage, currently around $125 per month,
is set by government, management, and labor representatives, or
by the government if the three groups cannot reach agreement.
Lower-paid workers also receive a family subsidy.  Poverty
rates have declined dramatically in recent years, and real
wages have risen, although not as rapidly as the overall GDP
has grown.
    f.  Rights in Sectors with U.S. Investment
    Labor rights in sectors with U.S. investment are the same
as those specified above. U.S. companies are involved in
virtually every sector of the Chilean economy and are subject
to the same laws that apply to their counterparts from Chile
and other countries. There are no export processing zones or
other special districts where different laws apply.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                              (1)
Total Manufacturing                                    229
  Food & Kindred Products                    30
  Chemicals and Allied Products             119
  Metals, Primary & Fabricated             -181
  Machinery, except Electrical                1
  Electric & Electronic Equipment           (1)
  Transportation Equipment                  (1)
  Other Manufacturing                       169
Wholesale Trade                                        204
Banking                                                374
Finance and Insurance                                1,185
Services                                               (1)
Other Industries                                       628
TOTAL ALL INDUSTRIES                                 2,869
(1) Suppressed to avoid disclosing data of individual companies
Source: U.S. Department of Commerce, Bureau of Economic Analysis
(###)
CHINA1
sU.S. DEPARTMENT OF STATE
CHINA: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                    PEOPLE'S REPUBLIC OF CHINA
                     Key Economic Indicators
        (Billions of U.S. dollars unless otherwise noted)
                                   1992      1993      1994 1/
Income, Production and Employment:
Real GDP (RMB bn/1980 base) 2/    1,272     1,440     1,606
Real GDP Growth (pct.)              9.5      13.4      11.5
GDP (at current prices)           315.4     309.5     417.6
GDP by Sector:
  Agriculture                      85.2       N/A       N/A
  Energy/Water                      N/A       N/A       N/A
  Manufacturing                   140.9       N/A       N/A
  Construction                     21.7       N/A       N/A
  Rents                             N/A       N/A       N/A
  Financial Services                N/A       N/A       N/A
  Other Services                  117.9       N/A       N/A
  Government/Health/Education       N/A       N/A       N/A
  Net Exports of Goods & Services   6.3       N/A       N/A
Real Per Capita GDP (RMB) 2/      1,828     2,013     2,214
Labor Force (millions)              568       571       575
Official Unemployment (pct.)        2.5       2.3       2.5
Money and Prices:  (annual percentage growth)
Money Supply (M2)                  31.3      25.0      35.0
Base Interest Rate                  N/A       N/A       N/A
Personal Saving Rate 3/            40.0      40.0      40.0
Retail Inflation                    5.4      14.0      21.0
Wholesale Inflation                 N/A       N/A       N/A
Consumer Price Index                8.6      16.0      23.0
Exchange Rate (RMB/USD;year-end)
  Official 4/                       5.8       5.8       N/A
  Parallel 4/                       6.8       8.8       8.5
Balance of Payments and Trade:
Total Exports (FOB) 5/             84.9      91.8     118.0
  Exports to U.S. (CV) 5/          25.7      31.5      38.5
Total Imports (CIF) 5/             80.6     104.0     117.0
  Imports from U.S. (FAS) 5/        7.5       8.8      10.3
Aid from U.S.                       0.0       0.0       0.0
Aid from Other Countries            N/A       N/A       N/A
External Public Debt               61.0      66.0      80.0
Debt Service Payments (paid)        8.8       9.3      10.5
Gold and Foreign Exch. Reserves    20.7      21.2      40.0
Trade (Merchandise) Balance 5/      4.4     -12.2       1.0
  Trade Balance with U.S. 5/       18.2      22.8      28.2
N/A--Not available.
1/ 1994 figures are all estimates based on monthly data
available in October 1994.  Sources:  State Statistical Bureau
Yearbook, PRC General Administration of Customs Statistics,
International Monetary Fund and World Bank reports, U.S.
Department of Commerce trade data and U.S. Embassy estimates.
2/ Real GDP and real per capita GDP are given in renminbi (RMB)
using 1980 prices.  All other income and production figures are
converted into dollars at the parallel rate.
3/ Personal Saving Rate is as estimated by the IMF in May 1992.
4/ Prior to 1994 China maintained a dual exchange rate system
with an official rate and a parallel "swap market" rate.  In
January 1994 these two rates were unified.
5/ Source:  U.S. Department of Commerce (U.S.-China bilateral
trade data); PRC Customs (Chinese global trade data).
1.  General Policy Framework
    Since the beginning of economic reforms in 1979, the
Chinese economy has grown at an average rate of nine percent
per year, and in 1992 and 1993 growth accelerated to over 13
percent per year.  This striking evidence of the dynamism of
the Chinese economy has transformed foreign views of the
potential of the Chinese economy and encouraged large inflows
of foreign direct investment over the past three years.  With
appropriate economic reforms, China should be able to sustain
high growth rates into the next century.  But the next phase of
reform will require China to tackle problems such as enterprise
reform that were largely bypassed in the first phase of reform,
and to build new legal and political structures more
appropriate to a market economy.
    During the first nine months of 1994, real GDP growth
reached 11.4 percent, down only slightly from the torrid pace
set last year.  But despite the introduction of stabilization
measures in mid-1993, rapid growth in 1994 has been accompanied
by a steady increase in inflation.  The national cost of living
index was up 24 percent in 1994, as inflation reached its
highest level since 1988-89.  Chinese authorities blame most of
the 1994 inflation on price reform and developments in the
agricultural sector.  But the more fundamental cause appears to
be the accommodating monetary and fiscal policies that China
has maintained, except for a few brief interludes, since the
current boom began in 1991-92.
    China's economic reform program in 1994 has been guided by
the landmark "decision" approved at the Third Plenum of the
Chinese Communist Party, held in November 1993.  This
"decision" established a broad framework for China's transition
to a "socialist market economy," including ambitious plans for
fiscal, financial, and enterprise reforms to be implemented by
the end of the decade.  In keeping with the spirit of the Third
Plenum "decision," the Chinese government introduced major
reforms of China's foreign exchange and taxation systems at the
beginning of 1994, and it announced plans for a series of
important economic laws, including commercial and central
banking laws, a foreign trade law, and a securities law.  Some
of these reforms have been taken with an eye to China's
standing application to join the World Trade Organization (WTO)
which remains under consideration by WTO members.
    During 1994, however, concern over inflation and domestic
stability have slowed the pace of some reforms while others
have met with mixed success.  The unification of China's
foreign exchange rates has gone relatively smoothly, with the
renminbi actually appreciating slightly against the U.S. dollar
since January 1994.  Tax reform has led to a more simplified
code and has reduced the gap in tax rates for state-owned and
other enterprises.  The new structure of tax-sharing between
central and provincial governments also marks a significant
improvement over the old tax-contracting system.  But the new
tax system has yet to increase real government revenues or the
share of government revenues in GDP, two of its key
objectives.  During 1994 many foreign corporations in China
expressed concerns about possibly discriminatory application of
taxes to their operations there.
    Concern over the social costs of cutting subsidies to state
enterprises has slowed enterprise reform, and little progress
has been made in reforming China's backward financial system.
The Draft Securities Law and the Central and Commercial Banking
Laws now appear unlikely to be passed by the National People's
Congress before the first quarter of 1995, and despite the
establishment of three new state development banks, China's
large state banks remain only in the preliminary stages of
their transformation into true commercial banks.
    Chinese authorities have announced that enterprise reform
will be the centerpiece of their reform efforts in 1995.  Some
loss-making state enterprises will reportedly be forced into
bankruptcy, and there has been continued discussion of possible
measures to establish a new social insurance system that could
buffer the costs of restructuring the state sector.  But the
success of reform in 1995 will depend heavily on China's
ability to limit high inflation and by continued concern about
the possible impact of rising urban unemployment on social
stability.
    While the government hopes to reduce inflation to 15
percent or less in 1995, it has avoided implementing tough
austerity measures of the type that have been effective in the
past but that might slow economic growth and increase urban
unemployment.  Unfortunately, the government's tentative
stabilization program has proven ineffective, and there is a
significant risk of inflation worsening still further unless
the government takes more decisive steps to cut lending to the
state sector and control China's rapidly increasing money
supply.
2.  Exchange Rate Policies
    China unified its dual exchange rate system on January 1,
1994 and began phasing out the use of Foreign Exchange
Certificates, a convertible form of the renminbi (RMB) formerly
reserved for use by foreigners within China.  Chinese
authorities describe the current exchange rate as a "managed
floating rate."  During each day's trading the exchange rate is
permitted to fluctuate in a narrow band around a central rate
announced by the People's Bank of China.  Since January 1994,
the RMB/USD exchange rate has appreciated slightly from about
8.7 to 8.5.
    Under new foreign exchange guidelines, the RMB is
conditionally convertible for certain trade and current account
transactions.  Most Chinese enterprises are now required to
sell their foreign exchange earnings to Chinese banks at the
new unified rate.  A Chinese importer with a valid import
contract and any required import licenses or quota permits can,
in principle, purchase foreign exchange through a designated
foreign exchange bank at the unified rate, without receiving
prior approval from the State Administration for Exchange
Control (SAEC).
    The Chinese authorities have maintained separate foreign
exchange rules for foreign-invested enterprises (FIEs), which
can maintain foreign currency deposits and keep their foreign
exchange earnings.  FIEs are formally excluded from the
"interbank" foreign exchange market and required to buy and
sell foreign exchange from each other in a modified version of
the old swap center.  In practice, however, most FIEs now buy
and sell foreign exchange using designated foreign-exchange
banks, including branches of foreign banks, as their agents.
These transactions are completed over the same trading system
used by Chinese banks for their domestic customers.
    While FIEs have generally enjoyed improved access to
foreign exchange this year, the current system has several
serious shortcomings.  FIEs still need to obtain SAEC approval
before they can purchase foreign exchange, and they remain
subject to foreign exchange balancing requirements.  While the
SAEC did not enforce these requirements strictly in 1994, they
could be used to control FIE purchases of foreign exchange for
imports or the repatriation of profits if conditions in the
foreign exchange market should change.
3.  Structural Policies
    China's structural policies remain caught between plan and
market.  The "decision" of the Party's Third Plenum in the fall
of 1993 detailed plans to establish by the end of the decade
the foundation for a "socialist market economy," in which free
market principles would guide nearly all economic activity but
public or socialist ownership would still predominate.  The
government claims that prices have been freed for about 95
percent of consumer goods and 85 percent of industrial inputs.
Nevertheless, as part of the fight against inflation, the
government has over the past year intervened extensively in
pricing for daily necessities, basic urban services, and key
commodities, including petroleum imports.
    In addition, under the guise of "macroeconomic management,"
the government has begun to formulate sectoral industrial
policies that will affect U.S. investment in, and exports to,
China.  The Automotive Industrial Policy, issued in July 1994,
contains a number of measures to protect infant industry,
including import controls, local content and other performance
requirements for foreign investors, and temporary price
controls for sedans.  In the "Framework Industrial Policy for
the 1990s," the government announced plans to issue industrial
policies for the following other sectors:  telecommunications
and transportation, machinery and electronics, construction,
foreign trade, investment and, possibly, textiles.
4.  Debt Management Policies
    China's current external debt burden remains within
acceptable limits.  At the end of 1993, China's external debt
stood at about $80 billion, or 87.2 percent of exports,
according to official Chinese estimates.  China's 1993 debt
service to export ratio was about 12-13 percent.  The Asian
Development Bank, the World Bank, and Japan are China's major
creditors, providing approximately 60 percent of all China's
governmental and commercial loans.  In September 1994, China's
official foreign exchange reserves were $39.8 billion, up $18.6
billion from the beginning of the year; foreign exchange
reserves continued to climb later in the year with the People's
Bank of China alone holding $48.9 billion in November 1994.
5.  Significant Barriers to U.S. Exports
    China continues to impose barriers to U.S. exports, despite
its stated goal of reforming and liberalizing its trade
regime.  In addition to prohibitively high tariffs in many
sectors, China relies on multiple, overlapping nontariff
barriers, administered at the national and provincial levels by
various bureaus or ministries, to limit imports.  These
barriers include absence of transparency in the trade regime;
import licensing requirements; import quotas, restrictions and
controls; standards and certification requirements; and
scientifically unjustified sanitary and phytosanitary (SPS)
measures.  Strict controls over Chinese enterprises' trading
rights are also a major market access barrier.
    On October 10, 1992, the United States and China signed a
Memorandum of Understanding (MOU) on Market Access that commits
China to dismantle most of these barriers and gradually open
its markets to U.S. exports.  The actions China has committed
to take are among those being considered by members of the
GATT/World Trade Organization (WTO) in examining China's
pending application for membership.  Until the signing of the
MOU, many of China's trade laws and regulations were considered
"internal" documents not available to foreigners.  As agreed in
the MOU, China has taken certain steps to make its trade regime
more transparent, including:  1) publishing trade laws and
regulations in a newly established central register and making
available some information of commercial interest to U.S.
companies; 2) publishing a State Council notice, intended to
halt the use of restricted internal directives, stating that
only trade laws that are published can be enforced; and 3)
identifying agencies involved in the import approval process.
To date, however, China has not fulfilled its MOU commitment to
publish import quotas or to deal with SPS restrictions.
    High and unpredictable tariffs make importing into the
Chinese market difficult.  Tariffs on discouraged imports, such
as automobiles, can run in excess of 100 percent.  In addition,
tariffs may vary for the same product, depending on whether the
product is eligible for an exemption from the published
tariff.  Under commitments made in the market access MOU, the
Chinese government lowered tariffs on 3,371 items in December
1992 and on an additional 2,898 items in December 1993.  Among
imports with lowered tariffs are edible fruits and nuts,
vegetable oils, photographic/cinematographic goods, games,
miscellaneous chemical products, iron/steel articles,
machinery/mechanical appliances, electrical machinery and
parts, and perfumery, cosmetic and toiletry preparations.
    China currently retains nontariff measures (quotas,
licenses or tenders) for 784 tariff line items.  Under
commitments made in the market access MOU to progressively
phase out import barriers, China eliminated such measures for
283 items on December 31, 1993, and an additional 208 items on
June 1, 1994, including a number ahead of, or in addition to,
the schedule set in the MOU.  Time frames for liberalization
vary from product to product.  Under the market access MOU
liberalization time table, China agreed to eliminate
approximately 75 percent of all import licensing requirements,
quotas, controls and restrictions by the end of 1994, and 90
percent will be removed by the end of 1997.  Export sectors
affected by the MOU which are of interest to U.S. firms
include:  autos and parts, medical equipment, computers,
photocopiers, telecommunications, electrical appliances,
chemicals, agrichemicals, pharmaceuticals, film and instant
print film, instant cameras, beer, wine, alcoholic beverages,
mineral waters, wood products, steel, and a wide range of
machinery products.
    Despite its commitments in the market access agreement,
China has not stopped using unscientifically-based standards
and certification as barriers to trade.  China's phytosanitary
and sanitary measures for imports of plants and animals are
often overly strict, unevenly applied and not backed by modern
scientific practices.  In the market access MOU, China
committed to resolve questions about scientifically unjustified
phytosanitary restrictions on citrus fruits, stone fruits,
apples, grapes, wheat, and tobacco, and to negotiate a
veterinary protocol regarding the import of animal breeding
stock.  As of October 1994, U.S. concerns have been partly
resolved with regard to apples and bovine semen.  For
manufactured goods, China has required quality licenses before
granting import approval, with testing based on standards and
specifications often unknown or unavailable to foreigners and
not applied equally to domestic products.  In the MOU, China
committed to applying the same standards and testing
requirements to nonagricultural products, whether foreign or
domestic.
    A fundamental philosophy of import substitution stood
behind these various policies.  In the market access MOU, China
has agreed to eliminate the use of import substitution policies
and measures, and has promised that it will not subject any
imported products to such measures in the future, nor will it
deny approval to imports because an equivalent product is
produced in China.  Import substitution lists have been
publicly disavowed.  Nonetheless, the Chinese government has
continued to place local content requirements on foreign
investments in China, most recently in the industrial policy
governing the automotive industry.
    In the past few years, China undertook a number of reforms
to improve its trade regime.  The National People's Congress
(NPC) adopted an Unfair Competition Law, effective December 1,
1993, which deals with protection of trademarks and commercial
secrets, unfair practices by state monopolies and government
departments, bribery, false or misleading advertising,
predatory pricing, collusion, and other unfair practices.
China's first comprehensive Foreign Trade Law also went into
effect on July 1, 1994.  The law aspires to be consistent with
requirements of the GATT, but it serves mainly as a framework
codifying the existing system or setting goals for future
reforms.  A key concern is that the Foreign Trade Law does not
establish a legal standing for foreign individuals or
foreign-owned firms engaged in trade in China.  Implementing
regulations have in many cases not yet been drafted.
    While implementation of the market access MOU will reduce
or eliminate many of the most serious barriers to trade in
goods, China has only recently begun to reform its services
sector.  China has permitted "experiments" in foreign
investment in service sectors by authorizing a limited number
of foreign firms to establish joint ventures in insurance,
legal services, tourist resorts and department stores.  In
general, Chinese restrictions on certain foreign service
activities (including construction, banking, accounting, travel
services, audio visual services, and data processing services)
prevent U.S. firms from enjoying a reciprocal level of
participation in China's service sector.  U.S. and other
foreign banks cannot engage in local currency business in China
or deal with Chinese clients, while the Bank of China branch in
New York has conducted all forms of branch banking activities
since 1980.  Numerous non-transparent approval procedures
hamper foreign banks' dealings with other foreign-invested
enterprises.  Except for one "experimental firm," U.S.
insurance firms are not allowed to participate in the direct
insurance market in China.  U.S. lawyers and accountants must
largely limit their activities to servicing foreign firms that
do business in China.  Foreign firms cannot establish
wholesaling operations and can only engage in a very narrow
range of retailing:  restaurants, "experimental" department
stores and retail outlets selling only products made at a
foreign investor's own factory in China.
    Many joint ventures are highly dependent on China's
state-owned sector for downstream services.  Some investors
have been permitted to set up their own marketing and service
organizations, but many have no choice but to rely on PRC
channels for support.  Imports of audio and video recordings
are hampered by quotas, restrictions on foreign exchange
availability, and lax enforcement of intellectual property
laws.  China does not permit foreign investment services firms
to establish profit-making operations or gain membership on its
stock exchanges.  Foreigners are limited to holding "B" shares,
a small volume of outstanding equities.  Representative offices
of foreign companies must hire their local employees through a
labor services company.
    There are also significant barriers to investment which
warrant further reform.  FIE's continue to be treated
differently for tax purposes.  Foreign firms established prior
to January 1, 1994, pay a 17 percent value-added tax on
domestic materials in exports from which Chinese firms are
exempt.  Foreign investors may not own land in China.  Chinese
authorities are, however, approving long term land use deals
for investors, some lasting up to 70 years.  Chinese
regulations and policies place strong pressure on most foreign
investors to export and to localize production through greater
use of Chinese components rather than imports.  China also
encourages the development of favored industries through tax
incentives and tariff exemptions.  Depending on the locality,
investments above $30-50 million require national as well as
local approval.  The law permits repatriation of profits, so
long as the venture has earned sufficient foreign exchange to
cover the remitted amount.  Foreign equity participation is
restricted in some industries but not in others, although
solely-owned foreign ventures are still rare.  In at least one
recent case, a U.S. company has tried unsuccessfully to file an
international arbitration award with a Chinese court, despite
the court's obligation to accept the case under China's law and
international treaty obligations.
    Although open competitive bidding procedures are
increasingly used for both domestic and foreign-funded
projects, the great majority of government procurement
contracts in China are handled through domestic tenders or
direct negotiation with selected suppliers.  Projects in
certain fields require government approval, usually from
several different organizations and levels.  Procedures are
opaque and foreign suppliers are routinely discriminated
against in areas where domestic suppliers exist.
    Customs procedures are not applied uniformly throughout
China.  Importers frequently report being charged different
rates for the same product.  Some products, including foods and
chemicals, are subject to different inspection or registration
procedures than domestic products (violations of the GATT
principle of national treatment).
6.  Export Subsidies Policies
    China abolished direct subsidies for exports on January 1,
1991.  Nonetheless, many of China's manufactured exports
receive indirect subsidies through guaranteed provision of
energy, raw materials or labor supplies.  Other indirect
subsidies are also available such as bank loans that need not
be repaid or enjoy lengthy or preferential terms.
Import/export companies also cross-subsidize unprofitable
exports with earnings from more lucrative products.  Tax
rebates are available for exporters, as are duty exemptions on
imported inputs for export production.  Although China does not
currently provide extensive agricultural subsidies, it has
sought in GATT/WTO accession negotiations to retain the right
to offer very large subsidies should it see fit in the future.
7.  Protection of U.S. Intellectual Property
    China has made significant progress in recent years in the
enactment of laws and regulations to protect intellectual
property, but enforcement of these measures has been extremely
poor.  A copyright law, passed in 1990, went into effect in
June 1991, and a trade secrets law was passed and went into
effect in October 1993.  China has joined the World
Intellectual Property Organization and has acceded to a number
of intellectual property conventions, including the Paris
Convention on the Protection of Industrial Property, the Berne
Copyright Convention, and the Madrid Agreement Concerning the
International Registration of Trademarks.  Although not now a
member of the GATT/WORLD TRADE ORGANIZATION (WTO), China has
publicly declared its support of the Uruguay Round text on
trade-related aspects of intellectual property protection
(TRIPS).
    Much of this progress followed the U.S. decision in April
1991 to identify China as a "priority foreign country" under
the Special 301 provisions of the Trade Act for its failure to
provide adequate and effective protection of U.S. intellectual
property.  Subsequent negotiations under the Special 301
investigation resulted in the signing of a bilateral Memorandum
of Understanding (MOU) on the Protection of Intellectual
Property on January 17, 1992.  China met most of its
commitments under the MOU, which included amending its patent
law, joining the Berne Convention, and enacting trade secrets
legislation.  Enforcement of laws, however, remained lax.
Consequently, China was again named as a "priority foreign
country" and a Special 301 investigation was initiated in June
1994 seeking improved enforcement of intellectual property laws
and better market access for U.S. products.
    In 1994 China has taken some additional steps to strengthen
its enforcement regime.  The government recently passed
legislation adding criminal penalties for copyright
infringement.  It empowered the Customs Administration to
provide border enforcement for intellectual property and the
Copyright Office to enforce software copyrights.  The State
Council established an intellectual property enforcement office
whose mandate includes coordinating enforcement efforts
countrywide.  However, these recent steps have yet to alter the
environment of rampant infringement of products relying on
intellectual property.  Factories producing massive quantities
of pirated sound and video recordings, long identified to China
as IPR infringers, continued to produce IPR infringing works at
the end of 1994.  Lack of market access for licit audiovisual
products also remains an impediment to effective enforcement.
Recent regulations outlining agency responsibilities in this
area have not clarified access procedures for foreign exporters
and manufacturers.
    Among the most serious issues facing U.S. right holders is
the pervasiveness of copyright infringement.  For instance,
U.S. industry associations estimate that pirating of U.S.
copyrighted works cost U.S. rights holders nearly $1 billion in
China in 1994.  Competing bureaucratic interests and the lack
of a reliable legal system for resolving commercial disputes
have hampered the establishment of effective enforcement
mechanisms.  Chinese authorities also face great challenges in
educating the public on the value and importance of protecting
intellectual property, a concept hitherto foreign to the vast
majority of Chinese.
    The 1992 intellectual property rights MOU committed China
to make important improvements in the protection of patented
products.  An amendment to China's patent law, which took
effect on January 1, 1993, extended patent protection to
chemical, pharmaceutical and food products, materials which
heretofore were excluded from eligibility.  The amendment also
extended the term of patent protection from 15 to 20 years from
the date of filing and gave the patent holder rights over
importation.  The MOU additionally provided for administrative
protection of certain U.S. pharmaceutical and agricultural
chemicals as of January 1, 1993.  China agreed to provide the
equivalent of full product patent protection for these products
if they were patented in the U.S. between 1986 and 1993 but not
yet marketed in China.  The Ministry of Chemical Industries is
administering the regime, and the U.S. government is currently
monitoring the Ministry's procedures.
CHINA2
U.S. DEPARTMENT OF STATE
CHINA: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
    China's trademark regime is generally consistent with
international practice.  Revisions providing for increased
criminal penalties for infringement have significantly
strengthened the law's efficacy.  However, pirating of
trademarks is still widespread and actions taken against
infringers generally must be initiated by the injured party.
8.  Worker Rights
    a.  The Right of Association
    China's 1982 Constitution provides for "freedom of
association," but this right is subject to the interest of the
State and the leadership of the Chinese Communist Party.  The
country's sole officially-recognized workers' organization, the
All-China Federation of Trade Unions (ACFTU), is controlled by
the Communist Party.  Independent trade unions are illegal.
The 1993 revised Trade Union Law required that the
establishment of unions at any level be submitted to a higher
level trade union organization for approval.  The ACFTU, the
highest level organization, has not approved the establishment
of independent unions.  Workers in companies with foreign
investors are guaranteed the right to form unions, which then
must affiliate with the ACFTU.  Fourteen coastal provinces have
passed regulations requiring all foreign-invested enterprises
to establish unions before the end of 1994.
    b.  The Right to Organize and Bargain Collectively
    The long-awaited National Labor Law, passed by the Chinese
National People's Congress Standing Committee on July 5, 1994,
permits workers in all types of enterprises in China to bargain
collectively.  The law, which will take effect January 1, 1995,
supersedes a 1988 law that allowed collective bargaining only
by workers in private enterprises.  Some high profile
experiments in collective bargaining have been carried out at
state enterprises.  In the past, the ACFTU has limited its role
to consulting with management over wages and regulations
affecting working conditions and serving as a conduit for
communicating workers' complaints to management or municipal
labor bureaus.  Worker congresses have mandated authority to
review plans for wage reform, though these bodies serve
primarily as rubber stamp organizations.
    c.  Forced or Compulsory Labor
    In addition to prisons and reform through labor facilities,
which contain inmates sentenced through judicial procedures,
China also maintains a network of "reeducation through labor"
camps where inmates are sentenced through non-judicial
procedures.  Inmates of reeducation through labor facilities
are generally required to work.  Reports from international
human rights organizations and foreign press indicate that at
least some persons in pretrial detention are also required to
work.  Justice officials have stated that in reeducation
through labor facilities there is a much heavier emphasis on
education than on labor.  Most reports conclude that work
conditions in the penal system's light manufacturing factories
are similar to those in ordinary factories, but conditions on
farms and in mines can be harsh.
    d.  Minimum Age of Employment of Children
    China's new National Labor Law forbids employers to hire
workers under 16 years of age and specifies administrative
review, fines and revocation of business licenses of those
businesses that hire minors.  In the interim, regulations
promulgated in 1987 prohibiting the employment of school-age
minors who have not completed the compulsory nine years of
education continued in force.  In poorer isolated areas, child
labor in agriculture is widespread.  Most independent observers
agree with Chinese officials that, given its vast surplus of
adult labor, China's urban child labor problem is relatively
minor.  No specific Chinese industry is identifiable as a
significant violator of child labor regulations.
    e.  Acceptable Conditions of Work
    The Labor Law adopted in July codified many of the general
principles of China's labor reform, setting out provisions on
employment, labor contracts, working hours, wages, skill
development and training, social insurance, dispute resolution,
legal responsibility, supervision and inspection.  In
anticipation of the law's minimum wage requirements, many local
governments already enforce regulations on minimum wages.
Unemployment insurance schemes now cover a majority of urban
workers (primarily state sector workers).  In February 1994,
the State Council reduced the national standard work week from
48 hours to 44 hours, excluding overtime, with a mandatory
24-hour rest period.  A system of alternating weeks of six and
five-day work weeks began in March 1994, with a six-month grace
period for implementation.  The same regulations specified that
cumulative monthly overtime could not exceed 48 hours.
    Every work unit must designate a health and safety
officer.  Moreover, while the right to strike is not provided
for in the 1982 Constitution, the Trade Union Law explicitly
recognizes the right of unions to "suggest that staff and
workers withdraw from sites of danger" and to participate in
accident investigations.  Labor officials reported that such
withdrawals did occur in some instances during 1994.
Nonetheless, pressures for increased output, lack of financial
resources to maintain equipment, lack of concern by management,
and a traditionally poor understanding of safety issues by
workers have contributed to a continuing high rate of
accidents.  Partial year statistics provided by the ACFTU
indicate that 11,600 workers were killed in industrial
accidents from January to August of 1993, up 12.9 percent over
the same period of 1992.
    f.  Rights in Sectors with U.S. Investment
    Worker rights practices do not appear to vary substantially
among sectors.  In general, safety standards are higher in
U.S.-invested companies.  There are no confirmed reports of
child labor in the Special Economic Zones or foreign-invested
sectors.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                             223
Total Manufacturing                                   461
  Food & Kindred Products                    66
  Chemicals and Allied Products              67
  Metals, Primary & Fabricated              (1)
  Machinery, except Electrical               16
  Electric & Electronic Equipment           (1)
  Transportation Equipment                  (1)
  Other Manufacturing                        53
Wholesale Trade                                       144
Banking                                               (1)
Finance/Insurance/Real Estate                          -2
Services                                              (1)
Other Industries                                      (1)
TOTAL ALL INDUSTRIES                                  877
(1) Suppressed to avoid disclosing data of individual companies
Source: U.S. Department of Commerce, Bureau of Economic Analysis
COLOMBIA1
sU.S. DEPARTMENT OF STATE
COLOMBIA: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                             COLOMBIA
                     Key Economic Indicators
        (Millions of U.S. dollars unless otherwise noted)
                                    1992      1993 1/   1994 /2
Income, Production and Employment:
Real GDP                          23,626    24,872    26,115
Real GDP Growth (pct.)               3.8       5.3       5.0
GDP (at current prices)           45,358    49,396    54,443
By Sector:
  Agriculture                      7,111     6,933     7,501
  Energy/Water                     1,210     1,580     1,741
  Manufacturing                    8,814     9,127     9,941
  Construction                     2,577     2,985     3,342
  Rents                            3,214     2,976     3,392
  Financial Services               5,195     5,799     6,386
  Other Sectors                   17,238    19,996    22,140
Real Per Capita GDP
  (at current prices)              1,307     1,431     1,562
Labor Force (000s)                11,300    11,500    11,700
Unemployment Rate (pct.)            10.3       7.9      10.0
Money and Prices annual percentage growth
Money Supply (M2: an. pct. gwth.)   39.4      31.7      28.0
Base Interest Rate (pct.)           37.2      35.8      38.0
Personal Savings Rate (pct.)         7.5       7.0       6.5
Retail Inflation (pct.)             25.1      22.6      22.0
Wholesale Inflation (pct.)          17.9      13.2      18.0
Consumer Price Index               268.1     325.7     397.7
Exchange Rate (USD/Peso)
  Official                         811.8     917.3     988.0
  Market Rate                      738.0     802.7     865.0
Balance of Payments and Trade:
Total Exports (FOB)                6,909     7,111     8,333
  Exports to U.S.                  2,466     2,641     3,833
Total Imports (CIF)                6,513     9,841    10,609
  Imports from U.S.                2,434     3,469     3,712
Aid from U.S.                       48.5        16         1
Aid from Other Countries             N/A       N/A       N/A
External Public Debt              13,601    13,206    12,600
Debt Service Payments (paid)       3,451     3,141     3,667
Gold and Foreign Exch. Reserves    7,728     7,932     8,381
Trade Balance                        396    -2,730    -2,275
  Trade Balance with U.S.             32      -828      -879
N/A--Not available.
1/ Preliminary.
2/ Data for 1994 are estimates based on latest reports from
Colombian Government sources.
3/ U.S. aid is for fiscal years 1992, 1993 and 1994.
1.  General Policy Framework
    The Administration of President Ernesto Samper took office
in August 1994, following the four-year term of President Cesar
Gaviria.  The Gaviria Administration was responsible for a
profound economic liberalization program known as "apertura."
That program made great strides in opening the Colombian
economy to international trade and investment by reforming
foreign exchange and tax legislation, the labor code and the
foreign investment regime.  In addition to slashing tariffs
from an average of 42 percent in 1990 to 12 percent in 1992 and
eliminating many nontariff barriers, apertura also led to great
strides in the privatization of state enterprises such as ports
and railroads.  Although President Samper has said he will take
no backward step in the apertura process, he will try to reduce
some of the economic dislocations, especially in agriculture,
caused by the rapid economic policy changes.  Colombia has
ratified the Uruguay Round agreements and became a founding
member of the World Trade Organization (WTO) on January 1,
1995.
    Concurrent with the economic reform program, the Colombian
government has continued its policy of gradually reducing
inflation.  Inflation, as measured by the CPI, was brought down
to 22.6 percent in 1993; it was 32.4 percent in 1990.
Government economists forecast that the inflation rate will be
between 21 and 22 percent in 1994.  The CPI has not dropped
more quickly in recent years primarily because of inflationary
pressures stemming from the strong inflows of foreign capital,
the policy of indexing the wages of Colombian workers, and the
desire of the government to avoid the adverse impact on the
economy a shock treatment would have.
    In 1990 and 1991 the government resorted to restrictive
monetary and fiscal policies to cope with inflation.  In late
1991 monetary policy was directed at overcoming the effect of
large inflows of foreign capital while maintaining the
stability of the peso.  Monetary policy in the period between
1990 and 1992 was impacted by developments in the foreign
exchange sector.  The high domestic interest rates caused by
restrictive monetary policies boosted the expected yield from
Colombian assets.  The large capital inflows that followed
would have caused the money supply to increase, complicating
monetary policy, if the Central Bank had not taken action.
That action came in the form of a June 1991 decree mandating
that foreign exchange receipts would be redeemed for exchange
certificates, denominated in U.S. dollars.  Government
authorities also increased the tax on unilateral transfers of
foreign exchange to residents of Colombia from abroad to 10
percent in mid-1992.
    The exchange certificate system was discontinued in January
1994.  In March 1994 the Central Bank announced regulations to
limit internal and external credit availability to private
Colombians.  The measures were aimed at reducing inflationary
pressures.
    Monetary policy in the Samper government will be aimed at
the further gradual reduction of inflation while avoiding
abrupt movements in the exchange rate of the peso.  The Samper
administration is sympathetic to complaints by Colombian
exporters that the strong peso has adversely affected the price
competitiveness of Colombia's exports, especially
nontraditional exports.  Days after President Samper took
office the Central bank amended regulations to discourage the
public and private sectors from incurring more short-term debt
in foreign currencies.
    Colombia's fiscal policy over the last four years has been
designed to achieve four principal objectives:  (1)  the
establishment of a macroeconomic foundation for sustainable
growth, (2)  the direction of public resources to those sectors
of the economy which can best support the social development
and competitiveness of the nation, (3)  the restructuring of
the budgetary system to increase constitutionally-mandated
transfers to states and municipalities, and (4)  the decrease
in reliance on import tariffs as a source of revenue.
2.  Exchange Rate Policy
    In January 1994 the Central Bank moved to free market
exchange rates for Colombia's peso.  Since that time the daily
quotation is set by the Banking Superintendency, and is based
on quotations from certain commercial banks and financial
corporations.
    Colombia's exchange rate policy underwent significant
reforms following the introduction of the apertura program in
1990.  In 1991 Colombian residents were permitted to hold
foreign currency and maintain foreign bank accounts.
Furthermore, the Central Bank relaxed the total control over
the foreign exchange regime it had exercised; the primary aim
was the development of a foreign exchange system governed by
market forces.  Also, the crawling peg system, introduced in
1967, was replaced by a floating rate system under the control
of the Central Bank.
    In September 1993 the foreign exchange system was further
liberalized by the introduction of streamlined administrative
procedures and the reduction of the number of transactions that
had to be done through commercial banks or other sanctioned
intermediaries.  In January 1994 the Central Bank moved to the
free market exchange system in which the peso may move within a
band 7.5 percent above or below the daily quotation.    The
Central Bank may intervene by buying or selling its instruments
in order to keep the currency within the band.  The strength of
the peso in recent years has improved price competitiveness of
U.S. exports to Colombia and has resulted in a significant
shift in the balance of bilateral trade.
3.  Structural Policies
    Taxes:  Part of the apertura program consisted of the
reform of Colombia's tax system.  Tax reform legislation passed
in 1990 and 1992 reduced the dependence of the central
government on import tariffs as a source of revenue.  As a
result, import tariffs fell from 42 percent in 1990 to 12
percent in 1992 while the VAT increased from 10 percent to 14
percent in the same period.  The Colombian government imposes a
"war tax" on producers of crude oil and minerals, two sectors
with heavy foreign participation.  Tax collection showed
improvement in recent years because of better enforcement and
administrative changes (i.e., introduction of simpler forms and
permitting taxpayers to make payment at local bank branches).
    Privatization:  The Colombian government initiated an
ambitious privatization plan beginning in 1991.  Since that
time the nation's ports, its railroad system, cellular
telephone service and domestic long-distance service, five
banks, eight chemical firms, three shipbuilding companies, six
agroindustry enterprises, a fishing company, and a retail
gasoline chain, among others, have been sold to private
owners.  In early 1994 a court decision made it mandatory that
all shares of firms being privatized thereafter must be offered
first to the employees of those firms and to such institutions
as pension funds, cooperatives, and unemployment funds.
    Regulatory Policy:  Performance requirements exist in the
automotive assembly sector in the form of local content
requirements, as outlined in Decree 2642 of December 23, 1993.
This decree requires the following local content: passenger
vehicles carrying up to 16 persons and cargo vehicles up to
10,000 pounds, 30 percent; all other vehicles, 15 percent.
    Government Procurement:  Government procurement is subject
to the norms established by Law 80 of October 1993.  Certain
articles contained in the legislation have been problematic to
potential foreign investors, including some U.S. companies.
Article 20 of Law 80 requires that foreign firms without an
active local headquarters document that Colombian companies
enjoy reciprocity in similar bids under the foreign firms'
countries' procurement legislation.  The law suggests that
reciprocity be confirmed through bilateral or multilateral
treaties or accords, or that it be certified by an "authorized"
government entity.  The American Embassy has been in contact
with the Colombian government to attempt to find a mutually
satisfactory resolution to these issues.  However, no
resolution had been reached as of late December 1994.
4.  Debt Management
    The Colombian Government continues to pursue ambitious
structural economic reforms to stimulate real growth,
strengthen its external sector, and enhance the country's
access to new sources of credit.  The debt management strategy
is aimed at accessing new sources of credit in the external and
domestic capital markets and on improving the debt profile of
the country generally.  The government used the proceeds of
external bond sales in 1992, 1993 and the first nine months of
1994 to prepay approximately $1.8 billion of debt.  At the end
of 1993 Colombia's long term and medium term public and private
debt was $17 billion, equivalent to 34 percent of GDP.
    The Samper administration has announced that it will
continue the orthodox management of Colombia's foreign debt
pursued by the previous government.  The administration's main
debt-related objectives include obtaining a better rating for
Colombian securities and increasing exposure with multilateral
banks.  The latter objective is being sought to provide
priority financing for social programs and infrastructure
improvements that are key elements of Samper's development
program.
    The government also intends to continue to reduce the
burden of external debt service by keeping the growth of
indebtedness below GDP growth.  The government will also
continue to broaden its access to funds in money markets in
Europe, Japan, and the United States.  In September 1994 the
Colombian government placed $175 million in five-year "Yankee
Bonds" in the United States market (at 1.6 points over Libor).
That made $425 million placed in the United States during the
first nine months of 1994.  Colombian financial authorities
will continue to seek funds under the most favorable terms in
the world's largest markets.
5.  Significant Barriers to U.S. Exports
    Import Licenses:  Colombia's prior import licensing
requirement was formerly the country's most onerous import
restriction.  In 1991 the government abolished nearly all prior
import requirements.  Some 98 percent of tariff categories can
now be imported freely, requiring only prior registration with
the Colombian Trade Institute (Incomex).  The remaining two
percent of product categories still subject to prior import
licensing include chemicals which could be used to manufacture
cocaine, arms, and munitions.  Imports by government entities,
donations, and nonreimbursable imports also require prior
licenses.  The impact of import licensing requirements on U.S.
exports is minimal.
    Banking and Securities:  Law 9 and Resolution 49 of 1991
opened up Colombia's financial sector to foreign investment.
This legislation permits foreign investors to own up to 100
percent of financial institutions.  There were two wholly-owned
U.S. banking subsidiaries operating in Colombia in October
1994.  A third is expected to commence operations before the
end of 1994.  U.S. companies in the Colombian banking and
security sectors receive full national treatment.
    Legal:  The provision of legal services is limited to those
licensed under Colombian law.  Foreign law firms are not
permitted a commercial presence in Colombia.
    Insurance:  A commercial presence (i.e., a registered place
of business, a branch or an agent) is required in order to sell
policies other than those for international travel or
reinsurance.  Colombia permits 100 percent foreign ownership of
subsidiaries, but the establishment of branch offices of
foreign insurance companies is not allowed.
    Accounting and Auditing:  Some restrictions exist because
the firms which control 80 percent of the market are
subsidiaries of multinationals.  Providers of these services
must be licensed in Colombia.  However, services offered by tax
and administrative consulting firms or individuals are not
restricted.
    Mining and Hydrocarbons:  Petroleum and mining companies
have expressed concern about restrictions on the use of local
versus expatriate personnel, especially during the start up
phase of a project.  Colombian law requires that, unless an
exemption is granted, at least 80 percent of employees be
Colombian nationals.
    Information Processing:  Commercial presence is required to
provide this service.
    Advertising:  At least 50 percent of programmed advertising
must have local content.  However, this applies only to public
broadcast network programming.
    Audiovisual Services:  Public network programming limits
foreign air time to 40 percent of the total.
    Standards, Labeling, and Marking Requirements:  The
Colombian Foreign Trade Institute (INCOMEX) does not require
specific technical standards for any products.  However,
specifications established by the Colombian Institute of
Technical Standards (ICONTEC) apply to Colombian government
imports made pursuant to international bids.  The Colombian
Import Code states a preference, but not a requirement, that
imports be described in metric system terms.
    Specific marks or labels are required only for
pharmaceutical and food products.  Labels on food products must
indicate the specific name of the product, ingredients in order
of content, the name and address of the manufacturer, and the
total contents.  No label or illustration may be inaccurate or
misleading in any way.  Pharmaceutical products must bear a
label, in Spanish, stating "for sale under medical, dental or
veterinary prescription," the generic and brand names of the
product, the net weight or volume of the package, the weight or
quantity of active ingredients, the product's license number,
and the lot control number.  Products with limited shelf life
must indicate the product's expiration date.
    Investment Barriers:  Foreign direct investment policies in
Colombia are guided by two principles:  (1) equality, in the
sense that foreign and national investors receive the same
legal and administrative treatment; and (2) openness, meaning
that few restrictions will be imposed on the value of foreign
direct investment or its destination.
    Law 9 of 1991, Resolutions 51, 52, and 53 of the Council of
Economic and Social Policy (CONPES) and Resolution 21 of the
Board of Directors of the Central Bank are the principal
regulations which govern foreign direct investment.  These
resolutions grant national treatment for foreign direct
investors and permit 100 percent foreign ownership in virtually
all sectors of the Colombian economy.  The few exceptions
include ownership of real estate, activities related to the
national security, and the disposal of hazardous waste.
    Investment Screening:  Investment screening has been
largely eliminated, and those procedures still in place are
generally routine and nondiscriminatory.  Prior approval by the
National Planning Department for foreign direct investment is
required only if the investor is providing a public service
(energy, water, communications, etc.), requesting coverage by
international insurance or risk protection (i.e., OPIC) or
investing more than $100 million in activities related to
mining, smelting, refining, transportation, or distribution.
The Ministry of Communications must approve foreign direct
investment in that sector and the Ministry of Mines and Energy
must approve all investment dealing with hydrocarbons.  All
foreign direct investment must be registered with the Central
Bank's foreign exchange office within three months of start up
in order to obtain permission to repatriate earnings.  Finally,
all foreign direct investment must obtain an operating license
from the Superintendent of Companies and must be registered
with the local Chamber of Commerce.
    Customs Valuation:  Establishing the value of imported
merchandise, previously performed only by customs officials, is
now done in many cases directly by the importer.  The importer
declares the value of the import and pays the corresponding
tariff and other taxes at a commercial bank.  Customs
clearance, which frequently took months under the former
system, can now be completed in a few hours.
    Customs officers inspect merchandise on a random basis to
verify that description and classification conform to the
importer's declaration.  A program is also being implemented
for major customs brokers which provides them with a computer
terminal linked to the computer network operated by the Bureau
of Customs.  Brokers with these terminals can complete most
clearance procedures in their offices before picking up the
merchandise at the port of entry.
6.  Export Subsidies Policies
    The Colombian Government has sharply reduced export
subsidies.  At present there are three types of export
incentives:  (1) indirect tax rebate certificates of 2.5
percent, 4 percent and 5 percent, (2) import duty exemptions on
the import of capital goods and raw materials used to
manufacture goods that are subsequently exported, and (3)
export credits provided by the Colombian Bank of Foreign
Trade.  The overall effect of these programs has diminished
considerably following Colombia's accession to the GATT
Subsidies Code.
7.  Protection of U.S. Intellectual Property
    Colombia continues to improve protection of intellectual
property rights through Andean Pact Decisions.  Colombia
remained on the Special 301 Watch List in 1994 due to
continuing concerns over deficiencies in the patent regime and
copyright enforcement efforts.  Enforcement concerns arise not
only at the police level, but also in the juridical system.
Several private attorneys have commented on the lack of respect
for preservation of evidence and frequent instances of
perjury.  Colombia is a member of the Convention establishing
the World Intellectual Property Organization.
    Patents:  Andean Pact Decision 313 of 1991 provides patent
protection for most products, including pharmaceuticals,
biotechnology, and plant varieties.  (Only pharmaceuticals on
the World Health Organization list of "essential medicines" are
excluded.)  In 1993 the Andean pact adopted Decision 344, which
represented a significant improvement over previous standards
used for the protection of industrial property.  For example,
it provided for a 20-year patent protection term beginning with
the filing date.  However, the decision still falls short of
U.S. goals in several respects, and is inconsistent with
several provisions of the recently concluded agreement on Trade
Related Aspects of Intellectual Property (TRIPs) in the Uruguay
Round and the Paris Convention for the Protection of Industrial
Property.  For example, the compulsory licensing authority is
inconsistent with TRIPs and no pipeline protection exists.
Colombia also adopted Andean Pact Decision 345, which provides
protection to certain plant varieties.
    Colombia has not joined the major international conventions
on patent protection.  However, the government has stated its
intention to sign the Paris Convention for the Protection of
Industrial Property, the Patent Cooperation Treaty and the UPOV
Convention.  In April 1994, the UPOV determined that Colombia
met the requirements for admission to the UPOV Convention, and
authorized it to deposit accession documents.
    Copyrights:  In 1994, Colombia adopted Andean Pact Decision
351, which harmonizes, integrates and modernizes the laws of
the five Andean countries.  It also expressly protects
software.  In general, however, Decision 351 does not
significantly alter copyright protection in Colombia.
    Colombia's copyright law is based on Law 23 of 1982 and Law
44 of 1993, which increase criminal penalties.  Colombian law
provides copyright protection for the life of the author plus
80 years.  If the holder of the rights to the work is a legal
entity, the term of protection drops to 30 years from the date
of first publication.  Computer software was protected under
Law 44.  Colombian copyright law is unclear as to whether it
must honor foreign satellite signals.
    Although Colombia has a modern copyright law, weak
enforcement remains a serious problem.  Video cassette and
satellite signal piracy continue to be widespread.  Amendments
to the copyright law made in 1993 have significantly increased
penalties for infringement.  The police administrative agencies
now can seize pirated material and close an establishment, and
either suspend or cancel the operating license of any
establishment open to the public where copyright infringement
has occurred.  Nevertheless, enforcement efforts have been
sporadic.
    Colombia belongs to the Berne (1987) and Universal (1976)
Copyright Conventions, the Buenos Aires and Washington
Conventions, the Rome Convention on Copyrights (1976) and the
Geneva convention for Phonograms (1994).  It is not a member of
the Brussels Convention on Satellite Signals.
    Trademarks:  Colombia's trademark protection requires
registration and use of a trademark in Colombia.  Trademark
registrations have a ten-year duration and may be renewed for
successive ten-year periods.  Priority rights are granted to
the first application for trademark in another Andean Pact
country or in any country which grants reciprocal rights.
Trademark owners do not have a cause of action against
importation of products from other Andean Pact countries that
bear their trademarks without authorization, though certain
labeling requirements concerning country-of-origin apply.
Colombia is a member of the Interamerican Convention for
Trademark and Commercial Protection.  Enforcement of trademark
legislation in Colombia is weak.
    Trade Secrets:  Andean Pact Decision 344 protects
industrial secrets.  Protected property includes that which is
secret (not generally known or easily accessible to those who
usually handle such information) or has an effective commercial
value or a potential commercial value as a secret, when the
person possessing the secret has taken reasonable steps to
ensure secrecy.
    Semiconductors:  Semiconductor design layouts are not
protected under Colombian law.  However, the Colombian
Copyright Office has expressed its willingness to discuss the
issue.
8.  Worker Rights
    a.  The Right of Association
    The right of workers to organize unions, engage in
collective bargaining and strike is recognized by the
Constitution and the law.  The Colombian labor code was
completely revised in December 1990 by Law 50, which authorizes
automatic legal recognition of unions which have obtained
internally 25 signatures from a work place.  It also
strengthens penalties for interfering with workers' freedom of
association.  The new Labor Law also authorizes the
independence of labor organizations in determining internal
rules and electing officers.  In addition, the law forbids the
dissolution of trade unions by administrative decree.
Colombian workers are organized into 2,265 unions, 101
federations and three confederations.  Unions may establish
international affiliations without governmental restrictions.
The Constitution extends the right to strike to nonessential
public employees, but the definition of "essential" has yet to
be determined by law.  Before carrying out a legal strike,
unions must negotiate directly with management and, in the
absence of an agreement, engage in conciliation procedures.  By
law, public employees must go to binding arbitration if
conciliation talks fail.  In practice, public service unions
decide by membership vote whether or not to seek arbitration.
    b.  The Right to Organize and Bargain Collectively
    Colombian unions have been moderately successful in
organizing larger firms and public services, but their members
comprise less than eight percent of Colombia's economically
active population.  Weak union organizations have limited
workers' bargaining power in the private sector.  Antiunion
discrimination or the obstruction of union association is
illegal and is enforced by administrative labor inspections.
The use of strikebreakers is prohibited by the labor code.
Colombian labor law is applied in the country's free trade
zones (FTZs).  There is no restriction against union
organization or collective bargaining agreements in the FTZs.
    c.  Forced or Compulsory Labor
    Forced or compulsory labor is prohibited by the
Constitution, which specifically forbids slavery or any
treatment of human beings in servitude.  This prohibition is
respected in practice.
    d.  Minimum Employment Age
    The Constitution prohibits the employment of youngsters in
most jobs under the age of 14.  The labor code prohibits those
under age 18 from receiving government work permits.  While
this provision is generally respected by larger private
companies, the extensive informal economy as well as specific
areas such as cut flowers, coal mining, and leather tanning are
effectively outside governmental control.
    e.  Acceptable Conditions of Work
    The Colombian Government annually sets a national minimum
wage which serves as an important benchmark for wage
negotiations.  However, an estimated one-quarter of the labor
force, mainly in the informal sector, earns less than the
minimum wage.  The labor code also establishes a standard work
day of eight hours and a forty-eight hour work week.
Enforcement of these laws is the responsibility of the Ministry
of Labor and the court system.
    f.  Rights in Sectors with U.S. Investment
    All foreign investors are subject to Colombian laws
protecting worker rights.  U.S. investment is found principally
in the petroleum, coal mining, chemicals, and manufacturing
industries.  Worker rights conditions in those sectors in
practice are superior to those prevailing elsewhere in the
economy due to the large size and high degree of organization
of the enterprises.  Examples include shorter than average
working hours, payment of the highest wages and salaries in
Colombia and maintenance of occupational health and safety
standards well above the national average.
COLOMBIA2
U.S. DEPARTMENT OF STATE
COLOMBIA: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                               758
Total Manufacturing                                     769
  Food & Kindred Products                   220
  Chemicals and Allied Products             284
  Metals, Primary & Fabricated               34
  Machinery, except Electrical                0
  Electric & Electronic Equipment            26
  Transportation Equipment                    1
  Other Manufacturing                       204
Wholesale Trade                                         117
Banking                                                 (1)
Finance/Insurance/Real Estate                           335
Services                                                 13
Other Industries                                        (1)
TOTAL ALL INDUSTRIES                                  2,542
(1) Suppressed to avoid disclosing data of individual companies
Source: U.S. Department of Commerce, Bureau of Economic
Analysis
(###)
COSTA_RI1
qU.S. DEPARTMENT OF STATE
COSTA RICA: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                                      COSTA RICA
                               Key Economic Indicators
                  (Millions of U.S. dollars unless otherwise noted)
                                               1992      1993      1994
          Income, Production and Employment:
          Real GDP (in current USD)         6,737.3   7,563.1   8,325.1
          Growth Rate (pct.) (1966 colones)     7.7       6.1       4.7
          By Sector:
            Agriculture                         3.9       2.2       0.0
            Industry                           10.3       6.5       5.5
            Electricity/Water                     6         7         6
            Construction                        2.6       4.7       7.5
            Commerce                           12.5       8.2       4.0
            Transportation/Communications      14.0      11.3       8.7
            Financial/Insurance                10.8      12.4      10.7
            General Government                  1.0       2.0       2.5
            Other Personal Services             4.2       4.5       5.5
          Real GDP Per Capita
            1966 Colones                      4,302     4,464     4,590
            Current U.S. Dollars              2,292     2,317     2,543
          Labor Force (OOOs)                  1,087     1,109     1,131
          Unemployment (pct.)                   4.1       4.1       4.1
          Money and Prices:
          Money Supply (M1, daily avg.)
            (millions current col.)          90,390   107,022   126,714
          Interest Rate (lending pct.)           28        37        38
          Interest Rate (deposit pct.)           20        25        27
          Gross Domestic Investment
            (pct. of GDP)                      23.4      25.9      26.0
          Consumer Price Index
            (pct. change Dec to Dec)             17         9        19
          Colon to USD Rate
            (avg. balance of payments)        134.3     142.4     155.0
          Colon to USD Exchange Rate
            (December, parallel market)         138       152       168
          Balance of Payments and Trade:
          Total Exports (FOB)               1,814.3   2,044.6   2,300.0
            Exports to U.S. (FOB)             789.8     850.0     915.0
          Total Imports (CIF)               2,455.8   2,900.7   3,400.0
            Imports from U.S. (CIF)         1,148.5   1,300.0   1,470.0
          Assistance from U.S.                17.4 1/    20.5     3.317
          Assistance from Other Countries       N/A       N/A       N/A
          Foreign Public Debt               3,263.8   3,158.4   3,192.8
          Annual Debt Service Paid            496.6     481.6     181.5
          Gold Reserves                           9         9        13
          Net International Reserves        1,096.0   1,076.7     900.0
            IMF Methodology                   354.0     457.5     277.5
          Current Account Balance              -357      -470      -600
1/ Included ESF obligated but never disbursed.
Source:  Central Bank of Costa Rica, for table and text.
1.  General Policy Framework
    The Government of Costa Rica continues trade and economic
policies in favor of open markets, international competition and
freer trade.  These policies are supported through active IMF and
World Bank programs.  Significant setbacks to this general policy
have resulted from European Community restrictions on banana
exports, domestic pressure to restrict foreign competition,
constitutional protection of state-owned monopoly enterprises,
disagreements with major trade partners within the GATT
framework, and domestic political pressures resulting from uneven
economic growth.  Many reforms are lacking permanent legal
backing or are still too new to gauge their efficacy, and some
recent reforms have become political issues.
    The reforms have contributed to an improving economy.  The
economy of Costa Rica showed significant growth during 1993, but
slightly less than in 1992.  Gross Domestic Product (GDP)
increased 6.1 percent in 1993 (7.7 percent growth in 1992).
Financial intermediation continued to be the fastest growing
activity in Costa Rica, growing 12.4 percent in 1993, followed by
communications, transportation and storage which grew 11.3
percent in 1993, and electricity and water which grew 7.0 percent
in 1993, largely the consequence of price increases in
state-supplied services.  Industry grew 6.5 percent, and
agriculture 2.2 percent, in 1993.  Commerce, restaurants and
hotels grew 8.2 percent in 1993.  The general price level, as
measured by the Consumer Price Index (CPI), increased 9 percent
in 1993, a significant improvement after an increase of 17
percent in 1992.  However, the CPI had increased 10.5 percent by
the end of August 1994, and is expected to be close to 20 percent
by the end of 1994.  1993's lower price levels were the result of
tight money controls by the Central Bank and continuing decreases
in tariff rates.  These reduced tariffs also caused
record-breaking increases in imports of cheaper goods.  While
increased taxation and public sector revenue reduced disposable
income in 1992 and 1993, the relative stability of the exchange
rate, plus the gradual reduction of tariffs, contributed to a
record 40 percent increase in imports from the United States in
1993.
    The Central Government's fiscal deficit reached USD 145.7
million in 1993, vs. USD 129.8 in 1992 and USD 173.9 million in
1991.  Despite the increase in nominal terms, the Central
Government deficit in 1993 remained equivalent to 1.9 percent of
GDP, the same share as in 1992, and much lower than the 3.1
percent of GDP share in 1991.  According to Central Bank data,
the consolidated Public Sector fiscal deficit totalled USD 66.5
million in 1993, equivalent to 0.9 percent of GDP, an improvement
over 1992 when the deficit was 1.1 percent of GDP.  While tax
income increased 15.8 percent in 1993, government
bond sales (USD 686.2 million in 1993) increased 92.2 percent,
becoming a critical source of financing.  Monetary measures taken
by the Central Bank in the second half of 1993 and rising
interest and exchange rates made the cost of borrowing higher for
the GOCR.  On the revenue side, decreased tariff revenues (caused
by lower tariff rates) and reduced export tax revenues (due in
large part to low world coffee prices) resulted in lower tax
revenues.
    In 1993 the Central Bank continued to use a range of tools to
control the growth of the money supply, including open market
operations, restriction of public sector credit, and increases in
the reserve requirements to commercial banks.  Starting August 1,
1993, the Central Bank raised by 2 percent per month the reserve
requirement for local currency demand deposits.  By the end of
1993, the rate was 36 percent.  The reserve requirement for time
deposits in local currency (less than 180 days) increased from 14
percent at the end of 1992, to 17 percent at year-end 1993.
Reserve requirements for foreign currency deposits were made
equal to those applied to deposits in local currency.  This
measure consisted of a 13 percentage points increase in reserve
requirements for dollar deposits of less than 30 days, and 5
percentage points for dollar deposits of more than 30 days but
less than 180 days.  The rate of interest paid by the Central
Bank for its bonds was increased gradually by 18 percentage
points from June to September 1993, in an effort to capture
excess liquidity.  On October 31, 1994, the Central Bank
announced forthcoming increased reserve requirements for on-sight
deposits from 36 percent to 43 percent, and from 17 percent to 30
percent for time deposit less than 6 months, effective at the end
of November 1994.  The reasons given for the increases were the
need to capture excess liquidity, and for the Central Bank to
cover some of the losses resulting from the closing of Banco
Anglo.  Also for reasons of excess liquidity, limits were put by
the Central Bank on amounts that could be used by public
institutions from donations previously made by USAID and
deposited in the form of bonds with the Central Bank.
2.  Exchange Rate Policy
    The exchange rate policy in 1993 continued practices set in
March 1992 by the Central Bank, aimed at primarily allowing the
market to determine the exchange rate.  The single exchange rate
is set indirectly every morning by the Central Bank through its
sale or purchase of foreign currency.  Exporters are allowed to
keep 60 percent of incoming dollars, but must sell the remaining
40 percent to a commercial bank, which in turn must sell 25
percent to the Central Bank, facilitating the Central Bank's
acquisition of reserves.  Additionally, all foreign transactions
by state institutions are channeled through the Central Bank.
Commercial banks are free to negotiate foreign exchange prices.
However, the difference between the sell and buy rates cannot
exceed 1 percent, and from that limited spread, 0.39 colon per
dollar is a tax, and 0.68 colon is a fee paid to the Central
Bank.  Commercial banks must liquidate their foreign exchange
positions daily.
    This exchange policy resulted in an essentially unchanged
exchange rate during 1993, as freely traded dollars from tourism
and capital investment continued to flow into Costa Rica.  The
free and sufficient supply of foreign currency continued to be
the most significant factor in increasing imports during 1993,
particularly from the United States, aided by the relative
devaluation of the U.S. dollar vs. other major currencies.
Between June and August of 1993, high demand for dollars forced
the Central Bank to depreciate the exchange rate.  By the end of
1993, the exchange rate had depreciated 9 percent with respect to
the end of 1992, resulting in an increase of 13.52 colones per
dollar.
3.  Structural Policies
    While consumer protection laws in Costa Rica fix prices,
regulate profit margins, and prohibit price speculation, most
price controls and all margin controls are currently suspended by
executive decree.  Pending legislation would remove most price
and all profit margin controls, impose antitrust rules and
protect consumers against product misrepresentation and price
fixing.  This change in pricing laws is a requirement for the
World Bank's Third Structural Adjustment Loan (SAL III), which
was signed by the Government of Costa Rica in 1993, but which has
not been ratified by the Legislative Assembly.
    Other laws and regulations affecting U.S. exports to Costa
Rica include the exclusive use of metric units, detailed labeling
requirements, including the required use of Spanish, and strength
requirements for car bumpers.  Phytosanitary and zoosanitary
restrictions on the import of fresh produce, as well as import
permit requirements for many agricultural products limit or act
as a de facto ban on U.S. exports of these products.
Pharmaceuticals, veterinary drugs and chemicals, including
chemicals that are component parts, must be registered and
approved by the Ministry of Health before the chemicals or
finished products can be imported.  Chemicals and pesticides
exported to Costa Rica must be legally available in the exporting
country.
    Government purchasing and contracting are highly regulated
and often frustrating due to protracted appeals of contract
awards, and bid and performance bond requirements.  Despite this,
no special requirements apply to foreign suppliers and U.S.
companies regularly win public contracts.  Competition is fierce
among international suppliers and frequently the winner must
propose comprehensive packages that include performance
guarantees and financing.  All exporters must have a legally
responsible representative in Costa Rica in order to sell goods
or services in Costa Rica.
4.  Debt Management Policies
    Costa Rica had a net foreign reserve decrease of USD 19.3
million during 1993.  This was the result of a record USD 856.1
million deficit in the trade balance, resulting from an 18.1
percent increase in imports and a 12.7 percent increase in
exports.  The trade deficit was offset by net foreign investments
of USD 275.0 million (USD 222.0 million in 1992) and services and
transfers mostly due to tourism of USD 486.1 million in 1993 (USD
384.5 million in 1992).  Costa Rica imported USD 1,300 million
from the United States in 1993, a 13.2 percent increase from
1992.  In 1993 Costa Rica exported USD 850 million to the United
States, resulting in a trade surplus for the United States of USD
450 million.  While the pending (since 1992) SAL III funds, for
USD 350 million, are a potential source of foreign exchange, it
is unlikely to be disbursed in the near future, if at all, due to
the unwillingness of the Legislative Assembly to approve loans
and pass quickly the laws that are conditions for its
disbursement.  Consequently, Costa Rica will continue to
experience pressure on its balance of payments, especially its
trade account, and will need to attract more foreign investment
and tourism, in order to avoid an eventual foreign exchange
shortage.
    Costa Rica paid USD 481.6 million in 1993 (USD 497 million in
1992) to service its official foreign debt, equivalent to 24
percent of exports.  The debt is now USD 3,158.4 million (Dec.
31, 1993), equivalent to 42 percent of GDP.  During 1993, the
Government of Costa Rica managed to renegotiate USD 56.7 million
of bilateral debts with the members of the Paris Club.  Debt
service payments decreased 3 percent in 1993, after an increase
of 42.9 percent in 1992 when a concerted effort to reduce the
country's debt was made in order to qualify for an eventual
partial debt forgiveness by the United States.  Servicing the
very large internal debt continues to be a more serious immediate
problem.  Almost a third of the government's budget is spent in
servicing its domestic debt, more than the amount spent in paying
public employees, leaving precious little for making capital
improvements and for importing U.S. goods and services.  The
Central Bank's anti-inflation policy of keeping interest rates
high keeps debt service costs extremely high for the Finance
Ministry.
5.  Significant Barriers to U.S. Exports
    Costa Rica requires import permits for dairy products, pork
and poultry meat, rice, beans, potatoes, onions, wheat, and
sorghum.  Some of these permit requirements can act as de facto
bans on U.S. exports.  That the requirements can be met is
evidenced by U.S. exports of wheat, which is not produced in
Costa Rica, and is almost exclusively imported from the U.S.
However, it is expected that on November 24, 1994, in compliance
with GATT requirements, import permits will be replaced by
tariffs.  Solvents and precursor chemicals are carefully
regulated to prevent illegal use.  Surgical and dental
instruments and machinery can be sold only to licensed importers
and health professionals.  All food products, medicines, toxic
substances, chemicals, insecticides, pesticides and agricultural
inputs must be registered and certified by the Ministry of Health
prior to any sale.
    The Central Bank no longer licenses imports.  All imports and
exports are registered for statistical purposes only.
Foreign companies and persons may legally own equity in Costa
Rican companies, including real estate.  However, several
activities are reserved to the state, including public utilities,
insurance, bank demand deposits, the production and distribution
of electricity, hydrocarbon and radioactive minerals extraction
and refining, and the operation of ports and airports.  (Note:
Electricity can be produced, in plants up to 20 KVA capacity, by
private entities for sale to the state electricity grid, and
legislation is under discussion to increase the percentage of
foreign ownership allowed).  However, recognizing the
impossibility of public financing of large scale infrastructure
projects, the legislature recently passed a law, which, once its
implementing regulations are approved, would allow private
construction and operation of public projects on a concession
basis.  Such facilities would revert to the state after an agreed
upon period.
    Many service industries are so rigorously controlled that
foreign participation is practically impossible.  Medical
practitioners, lawyers, certified public accountants, engineers,
architects, teachers and other professionals must be members of
local guilds which stipulate residency, and examination and
apprenticeship requirements that can only be met by long-time
residents of Costa Rica.  Investment in such private sector
activities as customs brokerage firms is limited to Costa Rican
citizens.  In October 1994, the law limiting ownership of
newspapers and radio and TV stations to Costa Rican citizens was
repealed by the Constitutional Court.  The law, which had been
enacted in 1974 to prevent fugitive American financier Robert
Vesco from owning a newspaper, was deemed discriminatory and
therefore unconstitutional by the Constitutional Court of Costa
Rica.
    While the Government encourages the development of
nontraditional exports and tourism, and may provide incentives
for U.S. investment, it does not restrict foreign equity
participation.  The share of foreign workers in an enterprise is
limited by law, but the Ministry of Labor generally grants
permission for foreigners to work.  Permits for foreign
participation in management have always been granted.  No
requirement exists for foreign owners to work in their own
companies.  There are no restrictions on the repatriation of
profits and capital.
    The government and other state institutions make procurements
through open public bidding, but the law allows private tenders
and direct contracting of goods and services in limited
quantities or in case of emergency, with the consent of the
Contraloria (General Accounting Office).  Public bidding is
complicated and foreign bidders are frequently disqualified for
failure to comply with the detailed procedures.  The lengthy and
costly appeal process often causes losses due to interim price
changes while bidders cannot alter their bids.
    Customs procedures are legendary for their cost and
complexity.  Most large enterprises are forced to have customs
specialists on the payroll, in addition to buying the services of
customs brokers.  Customs brokers must be bonded Costa Rican
companies and enjoy a monopoly on the handling of imports.  All
importers and exporters, including U.S. companies, suffer from
defective customs procedures, poor administration, theft, graft
and inadequate facilities.  The Government of Costa Rica, with
USAID and U.S. Customs Service assistance, is implementing a
profound reform of the system to automate and streamline to
lessen the possibility of corruption and improve efficiency.
This project is expected to be completed by December 1995.  In
addition, the Government of Costa Rica, again with USAID
financial assistance, is setting up a one-stop window to speed up
the pre-import permit process.
    The government's expropriation policy is a disincentive to
U.S. investment in Costa Rica.  The government has expropriated
large amounts of land for national parks, biologic and indigenous
reserves, and squatters, and in a number of cases has yet to
provide adequate compensation.  Some unpaid U.S. expropriation
claims date back over 25 years.  While it is theoretically
possible to obtain compensation through the court system, the
time, cost and frustration of litigating against the government
greatly diminish the value of such efforts.  The government has
made some efforts to resolve expropriation cases.  However,
several U.S. citizens with long-standing claims have not yet
received prompt, adequate or effective compensation.  The U.S.
government, through extraordinary means, has been able to
encourage progress in some individual cases.  In theory,
claimants also have had recourse to international arbitration
through the International Center for the Settlement of Investment
Disputes since early 1993, although the Government of Costa Rica
has thus far not submitted any case to ICSID.  Local arbitration
has been employed since 1991.  Landowners in Costa Rica also run
the risk of losing their property to squatters, who are often
organized and increasingly violent.  Costa Rican land tenure laws
favor squatters, and police protection of landowners in rural
areas is poor to non-existent.
6.  Export Subsidy Policies
    The Government of Costa Rica has attempted to diversify its
export production and markets.  Until mid-1992, all goods other
than coffee, bananas, beef, sugar and cacao exported outside of
Central America and Panama qualified for export subsidies through
the issuance of negotiable tax rebate certificates (CATS).  These
subsidies proved costly and violated the requirements for Costa
Rica's GATT membership.  However, existing export contracts call
for the issuance of CATS until 1996.  Costa Rica is a member of
GATT but not the GATT subsidies code.  There are no
discriminatory import policies.  However under the terms of the
Central American Common Market Treaty of 1960, industrial
products produced in any of the five countries enter duty-free
into the other member countries.
       Costa Rica did not sign the services agreement or the
subsidies code under GATT.  Costa Rica has ratified the Uruguay
Round agreements and became a founding member of the World Trade
Organization (WTO) on January 1, 1995.
    Export companies wishing to locate in duty free production
zones can benefit from exemption from import duties on raw
materials and products, from all export, sales and consumer
taxes, from taxes on remittance abroad, and from taxes on
profits for a period of six years from the beginning of the
operations, and a 50 percent exemption for the following four
years.
7.  The Protection of U.S. Intellectual Property
    Costa Rica is a signatory to most major intellectual property
rights (IPR) conventions and agreements, and is a member of the
World Intellectual Property Rights Organization.  However,
significant weaknesses exist in the country's IPR system,
particularly in enforcement and in patent protection.  Pending
legislation would ratify the Paris Convention on Industrial
Property and create a Trade Secrets law.  However, prospects for
passage of such legislation in 1994 are problematic.  The Uruguay
Round TRIPS agreement should improve the Costa Rican IPR regime.
    Copyrights:  Costa Rica is a signatory to the following
copyright conventions:  Title 17 USC (October 19, 1899 and April
9, 1910); Mexico City Convention on Literary and Artistic
copyrights (1902); Rio de Janeiro Convention on Patents,
Industrial Designs, Trademarks and Literary and Artistic Property
(1906); Buenos Aires Convention on Literary and Artistic
Copyrights (1910), and as revised at Havana (1928);
Inter-American Convention on the Rights of the Author (1946);
Universal Copyright Convention (Paris 1971); Rome Convention for
the Protection of Performers, Producers of Phonograms and
Broadcasting Organizations (1961); Berne Convention for the
Protection of Literary and Artistic Works (Paris Act 1971);
Convention for the Protection of Producers of Phonograms (Geneva
1971); and Central American Convention (1982).
    Costa Rica's copyright laws are generally adequate.  The
major problem for copyright holders is enforcement.  On May 10,
1994, the copyright law (No. 6683 of 1 October 1982), was
modified to extend protection to all forms of intellectual
creations, including music scores, paintings, software programs,
books, etc.  The modifications also increase protection by
directing the police to prevent non-authorized presentations of
protected works.  On May 24, 1994, the Government of Costa Rica
issued regulations to Law No. 6683 that provide better protection
and mandate police participation.  The cable television industry
now operates almost entirely under quitclaim agreements with
foreign producers.  However, a number of hotels are pirating
transmission signals.  Pirate videocassettes are widely
available.  According to industry sources and their legal
representatives, no authorized distributor of videocassettes is
currently operating in Costa Rica.  The new copyright law has
been challenged before the Constitutional Court by video
operators.  The Court has not yet decided whether it will hear
the challenge.
    Patents:  Costa Rica is a signatory to the following patent
conventions:  Convention of Paris (1883); and Rio de Janeiro
Convention on Patents, Industrial Design, Trademarks and Literary
and Artistic Property (1906).
    Costa Rican patent laws are deficient in several key areas.
The patent protection term is far too short.  Patents are granted
for non-extendable 12 year terms.  In the case of products deemed
"in the public interest," patents are granted only for one year.
This exception applies to all pharmaceuticals, items with
therapeutic applications, chemical and agricultural fertilizers,
agrochemicals and all beverage and food products.
    No patent protection is available for plant or animal
varieties, any biological or microbiological process or products,
although the government is working on a legislative proposal that
would protect such products.  Costa Rica also has broad
compulsory licensing requirements that force patent owners to
license inventions that are not produced locally.  The limited
patent protection available cannot be enforced until local
production has begun.  Costa Rican law also provides for
compulsory dependent patent licensing and for expropriation of
patents.
    Trademarks:  Costa Rica is a signatory to the following
trademark conventions:  Paris Convention (1883); Rio de Janeiro
Convention on Patents, Industrial Designs, Trademarks and
Literary and Artistic Property (1906); and Central American
Treaty on Industrial Property (1970).
    Trademarks, service marks, trade names and slogans can be
registered in Costa Rica.  There is no actual use requirement.
Registration is for renewable ten-year periods from the date of
registration.  Counterfeit goods are widely available in Costa
Rica and compete with goods manufactured under trademark
authorization.  Another problem is registration of famous marks
by speculators, who demand to be bought out if and when the
legitimate rights holders come to Costa Rica.  Litigation to
remove such speculative registrations can be lengthy and
expensive.
    Trade Secrets are protected by existing laws, and Article 24
of the Constitution protects the confidentiality of
communications.  The penal code stipulates prison sentences for
divulging trade, employment or other secrets, and doubles the
punishment for public servants.  Some existing laws also
stipulate criminal and civil penalities for divulging trade
secrets.  The burden of enforcement is on the affected party.
8.  Worker Rights
    a.  The Right of Association
    Workers are nominally free to join unions of their choosing
without prior authorization, although barriers exist in practice.
Unions are independent of government control and are generally
free to form federations and confederations, and to affiliate
internationally.  Various trade union organizations contend that
trade unionism's right of association has been hurt by Costa
Rica's "solidarismo" (solidarity) movement.  This movement
espouses cooperation between employers and workers, offering such
services as credit unions and savings plans in return for their
renunciation of the right to strike and
bargain collectively.  However, in practice, solidarity
associations have been accused of acting as collective bargaining
agents.  In 1993, the Government of Costa Rica approved a package
of reforms that, in part, addressed the International Labor
Organization's (ILO) concerns about the effect of solidarity
organizations on workers' right to association.  Prominent among
these reforms was a provision explicitly prohibiting solidarity
associations from participating in collective bargaining or
direct agreements affecting labor conditions.  In June 1994, the
ILO's Committee of Experts ruled that, with the 1993 changes to
the Labor Code and the promise of further reforms made by the
Government of Costa Rica, progress has been made in assuring
worker rights.
COSTA_RI2
U.S. DEPARTMENT OF STATE
COSTA RICA: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
    Costa Rican law restricts the right of public sector workers
to strike, but two articles of the Penal Code that mandated tough
punishment for striking government workers were repealed in 1993.
There are no restrictions on the rights of private workers to
strike, but the Labor Code contains clauses that employers have
used to fire employees who try to organize or strike.  Very few
private sector workers are union members.
    b.  The Right to Organize and Bargain Collectively
    The right to organize is protected by the Constitution.
Specific provisions of the 1993 Labor Code reforms provide
protection from dismissal for union organizers and members during
the period of union formation.  Previously, employers used a
clause in the Labor Code, permitting employees to be discharged
"at the will of the employer" provided the employee received
severance benefits.  The payment of severance benefits to
dismissed workers has often been circumvented in practice.
Public sector workers cannot engage in collective bargaining
because the Public Administration Act of 1978 makes labor laws
inapplicable in relations between the Government and its
employees.  Collective bargaining is allowed in the private
sector but, due to the dearth of unions, is not a widespread
practice.
    c.  Prohibition of Forced or Compulsory Labor
    The Constitution prohibits forced or compulsory labor, and
there are no known instances of either.
    d.  Minimum Age of Employment of Children
    The Constitution provides special employment protection for
women and minors and establishes the minimum working age at 12
years, with special regulations in force for workers under 15.  A
child welfare agency, in cooperation with the Labor Ministry, is
responsible for enforcement.  Enforcement in the formal sector is
reasonably effective.  Nonetheless, child labor appears to be an
integral part of the large informal economy, although data on
this is lacking.
    e.  Acceptable Conditions of Work
    The Constitution provides the right to a minimum wage.  A
National Wage Board sets minimum wage and salary levels for all
sectors.  The monthly minimum wage ranges from USD 115 for
domestic servants to USD 557 for certain professionals.  Public
sector negotiations normally follow the settlement of private
sector negotiations.  In addition, the Constitution sets the
workday hours, remuneration for overtime, days of rest, and
annual vacation rights.  Maximum work hours are eight during the
day and six at night, up to weekly totals of 48 and 36 hours,
respectively.  Ten-hour days are permitted for work not
considered unhealthful or dangerous, but weekly totals may not
exceed 48 hours.  Nonagricultural workers receive an overtime
premium of 50 percent of regular wages for work in excess of the
daily work shift.  Agricultural workers are not paid overtime,
however, if they work beyond their normal hours voluntarily.  A
1967 law governs health and safety at the workplace, but there
are too few labor inspectors, especially outside of the San Jose
metropolitan area, to ensure that minimum conditions of safety
and sanitation are maintained.
    f.  Rights in Sectors with U.S. Investment
    Generally, in industries with significant U.S. investment
(primarily food and related products and other manufacturing),
respect for worker rights is good.  This holds for those plants
and operations under U.S. management and capital and does not
necessarily hold for the industry as a whole.  Outside of these
U.S. companies, working conditions and respect for worker rights
vary enormously, often to the detriment of workers seeking to
organize trade unions.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                     (Millions of U.S. dollars)
  Category                      Amount
Petroleum                           2
Total Manufacturing               339
  Food & Kindred Products         134
  Chemicals and Allied Products    97
  Metals, Primary & Fabricated     21
  Machinery, except Electrical      0
  Electric & Electronic Equipment  35
  Transportation Equipment          0
  Other Manufacturing               53
Wholesale Trade                     67
Banking                             0
Finance/Insurance/Real Estate       0
Services                            6
Other Industries                  -30
TOTAL ALL INDUSTRIES              385
Source: U.S. Department of Commerce, Bureau of Economic Analysis
(###)
CROATIA1
U.S. DEPARTMENT OF STATE
CROATIA: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                             CROATIA
    In 1994 Croatia's economy showed tentative signs of
recovery from the disruption it suffered after the breakup of
the former Yugoslavia.  But the scars of war remain highly
visible as Serb forces still occupy one-fourth of Croatian
territory.  With 25-30 percent of its agricultural capacity
destroyed, Croatia's 1993 GDP remained around half of its 1990
level.  Due largely to the war and the collapse of
intra-Yugoslav trade, industrial production remained at 30-40
percent of Croatia's 1991 production level.  Despite these
figures, a bold economic stabilization program initiated by the
government in October 1993 has shown promising results.
    The ongoing occupation of Croatian territory by Krajina
Serbs continues to retard Croatia's recovery.  The Krajina
Serbs continue to cut a key railroad link to the coast as well
as the Adria pipeline.  Energy production suffers while oil
fields in Slavonia remain occupied.  The war crippled Croatia's
profitable tourist industry, which in the summer of 1994
operated at only one third of the pre-war level.  Nonetheless
tourist activity improved, especially in the Istrian peninsula;
in October 1994 Hina reported a 55% increase in tourist
activity over the previous year's level.  Intermittent
hostilities and U.N. sanctions restrict trade with Serbia, a
major pre-war market.  A tentative step towards reconciliation
with the Serbian population of Croatia occurred in December
1994, with the signing of an agreement on economic
confidence-building measures.
    The three-phase stabilization program which the government
adopted in October 1993 has improved Croatia's economic
situation.  The unemployment rate continued its three-year
decline, yet at 15 percent remains well above the pre-war level
of nine percent.  Inflation dramatically fell by the summer of
1994 to a monthly rate of 1-2 percent, one of the lowest in the
region.  Croatia had increased its hard currency reserves to
$1.68 billion by July 1994.
    With the signing of the Washington Accords in March 1994,
Croatia won key support for multilateral assistance.  The World
Bank approved a $128 million Economic Recovery Loan in June.
Another $100 million for agricultural support and private
family support are in the pipeline for approval.  The IMF
recently approved a Standby Arrangement and Systemic
Transformation Facility totalling $192 million.  The EBRD will
act upon two additional infrastructure project proposals in
late 1994, $46.7 million for electricity network reconstruction
and $76.3 million for roads and bridges.
    Croatia's economy supports over 400,000 refugees and
displaced persons from Bosnia and occupied Croatian
territories.  An estimated 80 percent of refugees have found
shelter with families in Croatia; this situation is untenable
in the long term.  Refugees continue to occupy hotels and fill
refugee centers.  In September 1994, refugees continued pouring
into Croatia at a rate of nearly 500 per week.  While the
international community has provided the bulk of the food
needed for the refugees, the Croatian government pays for
medical care and utilities at an estimated daily cost of $1.2
million.  Even with such expense, the conditions in many
refugee camps are inadequate with a lack of warm water, health
care, schools, and other basic necessities.
CZECH_RE1
lOlOU.S. DEPARTMENT OF STATE
CZECH REPUBLIC: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                        THE CZECH REPUBLIC
                     Key Economic Indicators
    (Billions of U.S. dollars at the exchange rate indicated)
                                    1992 1/   1993    1994 (est)
Income, Production and Employment:
Real GDP (1985 Prices) 2/           14.2      13.8      14.4
Real GDP Growth (pct.)              -7.1      -0.3       2.5
GDP (current prices) 2/             28.4      31.7      35.7
By Sector:  3/
  Agriculture/Husbandry/
    Forestry/Fisheries                         0.8       0.8
  Mining of Raw Materials                      0.6       0.5
  Energy/Water/Gas                             1.0       1.0
  Manufacturing                                3.9       4.7
  Construction                                 0.5       0.3
  Retail/Vehicle Reparis/
    Consumer Goods                             1.3       1.6
  Transports/Storage/Communications            0.8       1.0
  Private Health/Education                     2.0       2.6
  Goverment Health/Education                   2.2       2.5
Real Per Capita GDP                1,375     1,335     1,384
Labor Force (000s)                 4,766     4,777     4,777
Unemployment (pct.)                  2.6       3.5       3.5
Money and Prices:  (annual percentage growth)
Money Supply (M2)                  594.4     722.0     769.6
Base Interest Rate (average)       13.38     14.00     12.80
Personal Saving Rate                 7.5       9.3       9.9
Retail Inflation                    11.1      20.8      11.0
Producer Price Index                 9.9      13.1       7.0
Exchange Rate (KC/USD)
  Official                         28.29     29.15     28.17
  Parallel (Vienna market)         32.28     29.85     30.00
Balance of Payments and Trade:  (Billions of U.S. dollars)
Total Exports (FOB) 5/              8.23     12.93      6.59
  Exports to U.S.                  0.153     0.235     0.191 6/
Total Imports (CIF) 5/              8.89     12.84      6.40
  Imports from U.S.                0.525     0.386     0.306 6/
Aid from U.S. (million USD)           32        33        30
Aid from Other Countries            1.47      1.20      0.80
External Public Debt                 7.5       8.5       9.0
Debt Service Payment (paid)          1.3       1.4       1.1
Gold and Foreign Exch. Reserves
  Official                           0.8       3.0       5.2
  Gross                              3.6       6.2       7.7
Trade Balance 5/                   -0.66      0.09      0.19
  Trade Balance with U.S.         -0.372    -0.151    -0.115
1/ Figures are data from CNB and Czech Statistical Office.
2/ GDP at factor cost.
3/ Figures compare first half year of 1993 to that of 1994.
4/ Figures are average annual interest rates.
5/ Merchandise trade.
6/ January to August.
1.  General Policy Framework
    The Czech government has continued the tight, IMF-endorsed,
economic and fiscal policies begun by the former Czechoslovak
government in 1991, and which were devised and initiated by
many of the current policymakers in the Czech Republic.
Similarly, it has maintained the former government's program of
broad privatization and wholesale legal reform in order to
permit the continued operation of a viable market economy.  The
economy is likely to experience growth this year.  The
government's estimate for this year is 2.5 percent growth, and
for the next year is 3.3 percent.
    The Czech government, having largely adjusted to the
economic consequences of the split with Slovakia, is continuing
down the road towards European economic integration.  Despite
notable problems, such as restructuring newly privatized firms,
dealing with a shortage of domestic capital, and coping with a
generally weak financial sector, statistics suggest that the
Czech economy as a whole appears to have bottomed out in late
1992 and remained stable through 1993.  The economy is likely
to experience growth in 1994, as suggested by the latest data
on GDP.  Though 3.3 percent growth in the first quarter of 1994
can be ascribed to significant decline in the first quarter of
1993 due to the country's split, 2.2 percent growth over the
whole first half of 1994 indicates a real growth trend.
    The government completed the first wave of privatization in
early 1993, during which approximately 1,500 formerly
state-owned large enterprises were transferred to the private
sector.  This was accomplished through the process of "coupon
privatization" whereby citizens over the age of 18 were allowed
to acquire shares of enterprises through the purchase of
vouchers.  Approximately 80 percent of Czechs (and Slovaks,
under the former Czechoslovakia) eligible to participate in the
voucher program did so, giving this country's population
perhaps the highest percentage of stockholders in the world.
In addition, approximately 20,000 small businesses were
transferred through direct sale.  The second wave of
privatization is currently underway and is scheduled for
completion by the end of 1994.  When it is complete, some 80
percent of production will be in private hands.  The private
sector contribution to GDP is estimated at around 56 percent in
the first half of 1994.
    The government is likely to meet its target of a balanced
budget for 1994 with the contribution of funds acquired through
the sale of state enterprises and with restricted expenditures
counterbalancing lower than forecast tax revenues.  As of
August 1994, there was a budget surplus of 19.8 billion
crowns.  In 1993, the budget had a surplus of 1.1 billion
crowns.  The 1992 budget for Czechoslovakia was in deficit by
approximately $550 million, roughly 2 percent of GDP.  This can
be attributed chiefly to an overestimation of the turnover tax
revenues, an undercalculation of entitlement programs, and
off-budget expenditures needed to cover government loan
guarantees.
    The central bank, or Czech National Bank, is an independent
monetary authority which has proven itself capable of
withstanding political pressure.  Monetary policy in the
Republic has stabilized.  As the inflow of foreign capital was
stronger than expected this year, the central bank, as an
anti-inflation measure, increased reserve requirements from 9
to 12 percent as of July 1994, and the discount and lombard
rates by 0.5 percent (as of October 24 they were 8.5. and 11
percent respectively).  The Czech National Bank also has been
strengthening its supervision over commercial banks.
2.  Exchange Rate Policy
    The Czech government has followed a "hard crown" policy
which has kept the crown stable since January 1991.  The
official exchange rate has remained at the level of 28-30
crowns per U.S. dollar throughout 1993 and only in October 1994
did it fall below 28 crowns, following the USD-DM exchange
rate.  The composition of the currency basket was changed in
May 1993 from a mixture of five currencies to a new basket of
German marks (65 percent) and U.S. dollars (35 percent).  The
crown is fully convertible for trade purposes.  Full current
account convertibility is expected in 1995 and full capital
account convertibility in 1996-1997.
    Under the Foreign Exchange Act of 1990, both domestic and
foreign companies in the Czech Republic are guaranteed the
right to freely exchange crowns for hard currency in
business-related, current account transactions.  Current
account transactions include the import of goods and services,
royalties, interest payments and dividend remittances.
Repatriation of earnings from U.S. investments is also
guaranteed by the U.S.-Czechoslovak Bilateral Investment Treaty
which went into effect in December 1992.  However, there is
currently a 25 percent tax on repatriation of profits from the
Czech Republic, and capital account transactions still require
a foreign exchange license.  In the past, companies were
obligated to exchange any foreign convertible currency earned
for crowns, except for cases when the bank granted permission
to maintain a foreign-exchange account.  As of March 1, 1994,
the Czech National Bank has routinely granted permission to
establish foreign currency accounts.  Private persons do not
need permission to have a foreign-exchange account.
Additionally, if requested, banks must sell to foreign
investors for Czech crowns foreign currency equal to revenue
from investment.  In this instance, "revenue from investment"
is defined as income from business profits, interest, capital
profits, securities, or intellectual property.
3.  Structural Policies
    The continued shift away from a centrally-planned economy
towards the free market continues to require adjustments
throughout the legal, financial, and political structure.  Some
of the major changes are outlined below.
    Taxes:  The new tax system of January 1993 provides uniform
rates and is better aligned with EU tax policies.  The
corporate income tax or "profit tax" of 43 percent in 1993 was
lowered to 42 percent in 1994 and, if approved by the
Parliament, should drop to 41 percent in 1995.  In addition, in
1993 the government implemented a 5 percent value added tax
(VAT) on staple goods and a 23 percent VAT on other goods, as
well as a personal income tax.  The 23 percent VAT is to be
lowered by 1 percent as of 1995.  The government plans to lower
tax rates to EU levels over time.  A bilateral tax treaty
between the United States and the Czech Republic was signed in
September 1993 and went into force retroactively as of January
1, 1993.
    Prices:  Over 95 percent of price controls were eliminated
in 1991.  As of late 1994, only the price of utilities, rents,
gasoline, fuel oil, and various municipal services continue to
be regulated.  Remaining price controls are being eased
gradually over time.
    Wages:  Following repeated warnings against wage inflation,
the government reimposed punitive levies on excessive wage
growth at the end of June 1993.  For wage growth between 15 and
30 percent, companies unable to demonstrate productivity gains
are taxed at 100 percent of the excess in wages.  For wage
increases of more than 30 percent, the tax equals 200 percent
of the excess increase not justified by productivity growth.
However, the government has announced it will abolish wage
regulation in the second half of 1995.
    Privatization:  The Czech government completed its first
wave of privatization in August 1993.  Under this program, the
majority of stock under large-scale privatization was sold
through the voucher program, whereby citizens over the age of
18 were allowed to acquire shares of enterprises through the
purchase of vouchers.  Approximately 80 percent of Czechs (and
Slovaks, as the program started under the Federation) eligible
to participate in this program did so.  The second wave of
privatization started on April 11, 1994 and is expected to be
complete by early 1995.  The government plans to sell 861
companies with property value of 155 billion crowns during the
second wave.
4.  Debt Management Policies
    The Czech Republic maintains one of the lowest foreign
debts in central and eastern Europe.  As of September 1994, the
gross foreign debt was approximately 9.0 billion dollars.
Government debt represents approximately 17 percent of GDP, and
current government plans call for the level of debt to drop to
10 percent by the year 2000.  The government believes it can
reach this level by payment of interest combined with general
expansion of the economy.  The current level of indebtedness is
well within the limits specified by the Republic's agreement
with the IMF.  The Czech Republic repaid its debt to the IMF
ahead of schedule, the first post-communist country to do so.
    Due mainly to the lending policies of the former communist
regime, the current government is owed approximately 4.5
billion dollars by various (mainly formerly communist bloc)
countries.  Among them are Russia (owing approximately 3
billion dollars) and Syria (owing approximately 750 million
dollars).  Although the Russian debt was restructured in 1994
and some payments on this debt have been made, collection on
other debts is uncertain.
5.  Significant Barriers to U.S. Exports
    The government of the Czech Republic is determined to
create and maintain a free market, and has made the elimination
of artificial trade barriers an important element of its
overall economic policy.  Thus, there are currently no
significant barriers for U.S. exports to this country.  The
Czech Republic adopted a GATT tariff code which has an average
tariff of 5-6 percent.
    Some provisions of the 1993 Czech tax code have been
criticized as inhibiting investment.  In particular, concern
has been expressed over bad debt write-off and the tax status
of group and offshore companies.  Czech legislation denies
(generally until bankruptcy proceedings are initiated)
corporate tax deductibility of bad debt reserves and the
possibility of reclaiming VAT on bad debts.  In addition, Czech
legislation effectively penalizes use of holding company
structures by leveling both corporate tax and dividend
withholding tax on profit flows between group companies, thus
creating double taxation on such profits.  Czech law also does
not permit intra-group use of losses (i.e., offsetting losses
in one group entity against profits in another) and imposes
corporate tax on dividends received from foreign holdings
without allowing use of a foreign tax credit for the underlying
tax suffered in the subsidiary's home jurisdiction.  Offshore
companies are taxable in the Czech Republic if they engage in a
significantly lower level of domestic activity than the
guidelines recommended by the Organization of Economic
Cooperation and Development (OECD) or standards applied in
other countries.
    With a few limited exceptions, such as defense-related
industries, all sectors of the Czech economy are fully open to
U.S. investment.  The official monopolies in tobacco and film
distribution were both abolished in 1993.
    In late 1991, Czechoslovakia signed a Bilateral Investment
Treaty (BIT) and an agreement with the U.S. Overseas Private
Investment Corporation (OPIC).  The BIT was ratified by the
U.S. in August 1992 and ratification by the Czechoslovak
parliament occurred in late 1992.
    A bilateral tax treaty was signed with the Czech Republic
in September 1993 and entered into force in January 1994.  The
United States granted most favored nation (MFN) status to
Czechoslovakia in 1992 and to the Czech Republic as a successor
state in January 1993.  The Czech Republic has signed the
Uruguay Round document in GATT to lower tariff rates over the
next ten years.
6.  Export Subsidies Policy
    A legal framework is being drafted to enable the Czech
export bank, a subsidiary of the Export Guarantee and Insurance
Company, to provide export guarantees and credits to Czech
exporters.  It is expected to begin operating in mid-1995.
Additionally, the government maintains a fund (the Fund for
Market Regulation) through which it purchases domestic
agricultural surpluses for resale on international markets.
For some commodities, pricing is established at a level which
includes a subsidy to local producers.
7.  Protection of U.S. Intellectual Property
    The Czech government has agreed to be bound by the
obligations undertaken by the former Czechoslovak government
under the Bern, Paris, and Universal Copyright Conventions and
is working to ensure that laws for the protection of
intellectual property conform to those of western Europe.
However, enforcement of existing regulations is still uneven.
    Enforcement of video piracy laws is an ongoing concern for
U.S. video and motion picture exporters.  While awareness of
the problem by Czech officials is increasing, economic losses
continue to threaten the viability of these exports.  In 1993
the Czech Antipiracy Union (CPU) stated that 40 to 50 percent
of the local market for video cassettes was lost to video
products either illegally produced or imported.  The CPU filed
450 video piracy court cases in 1992 and 468 in 1993, but
enforcement remains lax and fines are low.  In 1993, the
activity in Prague's so-called "video exchanges" stabilized.
Inspections in video-lending shops, carried out by CPU in
cooperation with the police, has improved enforcement.
Copyright violations also represent a problem, especially
copies from German originals and piracy of both foreign and
Czech originals.
    There have been similar concerns about software piracy.
Recently, two cases of software piracy were disclosed by the
media and are under investigation by the police.  The US-based
Business Software Alliance has opened an affiliate office in
Prague and is working to raise the level of awareness on this
and similar issues.
8.  Worker Rights
    Workers in the Czech Republic have the legal right to form
and join unions without prior authorization.  Currently,
two-thirds of workers are members of some labor organization,
although the overall number of union members has declined
slightly since 1991.  Under the law, all workers are guaranteed
the right to strike when mediation efforts have been exhausted;
exceptions are those workers in sensitive positions (nuclear
power plant operators, military, police, etc.) who are
forbidden to strike.
    Workers also have the right to organize and bargain
collectively.  Wages are set by free negotiation.
    Forced or compulsory labor was expressly prohibited by the
federal government's 1991 Declaration on Basic Rights and
Freedoms, and the Czech Republic has adopted the same
guarantee.  There is no evidence or indication that such
practices have occurred since the 1989 Revolution.
    The basic minimum age for employment is 16.  Exceptions are
made for 15 year-olds who have already finished elementary
school and for 14 year-olds who have completed courses at
special schools for the disabled.
    The Ministry of Labor and Social Affairs has set minimum
wage standards to guarantee an adequate standard of living for
a worker and, with special allowances, for his family as well.
A standard workweek of 42.5 hours was mandated by law, but
collective bargaining has brought the actual number of hours
worked closer to 40.  Additionally, caps exist for overtime and
workers are assured at least 30 minutes of paid rest per work
day and annual leave of three to four weeks per year.
    As far as the Embassy is aware, all workers' rights are
applied to firms with U.S. investment and do not differ from
those in place in other sectors of the economy.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                               0
Total Manufacturing                                    62
  Food & Kindred Products                   (1)
  Chemicals and Allied Products             (1)
  Metals, Primary & Fabricated                0
  Machinery, except Electrical              (2)
  Electric & Electronic Equipment             1
  Transportation Equipment                    0
  Other Manufacturing                        -1
Wholesale Trade                                       (1)
Banking                                               (1)
Finance/Insurance/Real Estate                           0
Services                                              (2)
Other Industries                                      (1)
TOTAL ALL INDUSTRIES                                  127
(1) Suppressed to avoid disclosing data of individual companies
(2) Less than $500,000
Source: U.S. Department of Commerce, Bureau of Economic
Analysis
DENMARK1
>t>tU.S. DEPARTMENT OF STATE
DENMARK: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                             DENMARK
                     Key Economic Indicators
       (Millions of U.S. dollars unless otherwise noted 1/)
                                     1992     1993      1994 2/
Income, Production and Employment:
Real GDP (1985 prices) 3/          97,004    91,292    96,700
Real GDP Growth (pct.)                1.7       1.0       4.3
GDP (at current prices) 3/        122,364   117,658   127,000
By Sector:
  Agriculture                       4,353     4,410     4,700
  Energy/Water/Heat                 2,043     2,337     2,550
  Manufacturing                    23,561    22,258    24,000
  Building/Construction             6,536     6,123     6,600
  Raw Materials/Mining              1,231       977     1,000
  Rents                            12,587    11,556    12,450
  Financial Services                2,105     2,439     2,700
  Other Services                   44,151    42,705    46,100
  Government Services              28,360    27,531    29,700
  Overlap Corrections              -2,562    -2,679    -2,800
Net Exports of Goods & Services    11,269    10,905     9,000
Real Per Capita GDP 3/
  (USD/1985 prices)                18,762    17,592    18,578
Labor Force (000s)                  2,835     2,851     2,852
Unemployment Rate (pct.)             11.3      12.4      12.4
Money and Prices:  (annual percentage growth)
Money Supply                         -1.2      11.2       4.8
Base Interest Rate (pct.) 4/         11.6      10.5       8.3
Personal Saving Rate (pct.)           5.7       5.2       4.4
Retail Inflation
  Consumer Price Index                2.1       1.3       2.0
Wholesale Inflation                  -1.1      -0.6       0.8
Exchange Rate (USD/DKK)            0.1656    0.1543    0.1567
Balance of Payments and Trade:
Total Exports (FOB) 5/             38,908    37,196    40,300
  Exports to U.S.                   1,724     1,898     2,250
Total Imports (CIF) 5/             30,578    30,549    35,500
  Imports from U.S.                 1,788     1,418     1,800
Aid from U.S.                         N/A       N/A       N/A
Aid from Other Countries              N/A       N/A       N/A
External Debt                      50,000    42,130    38,900
External Debt Service
  Net Interest Payments             5,583     4,722     4,200
Gold and Foreign Exch. Reserves     7,444    11,539    10,000
Trade Balance 5/                    8,330     6,647     4,800
  Trade Balance with U.S.             -64       480       450
N/A--Not available.
1/ Danish Krone/Dollar exchange rates used:
1992: DKK 6.04=$1.00; 1993: DKK 6.48=$1.00; 1994: DKK 6.38=$1.00
2/ 1994 figures are all estimates based on available data in
October 1994.
3/ GDP at factor cost.
4/ Figures are actual, average annual bank lending interest
rates, not changes in them.
5/ Merchandise trade, excludes EU Agricultural Export Subsidies.
Note:  All dollar figures shown in the text have been converted
from Danish Kroner figures using the average DKK/USD exchange
rate in the relevant year.
1.  General Policy Framework
    Denmark is a small, highly industrialized "value-added"
country with a long tradition of foreign trade, free capital
movements, political stability, an efficient and well-educated
labor force, and a modern infrastructure effectively linking
Denmark to the rest of Europe.  Denmark's natural resources are
concentrated in oil and gas fields in the North Sea, which make
Denmark more than self-sufficient in oil and gas.  As Denmark
remains dependent on imported raw materials and
semi-manufactures for its industry and on coal for its
electrical power production, ensuring adequate supplies has
always been a major goal of Danish trade and industry
policies.  Denmark's active liberal trade policy in the EU,
OECD, and GATT often coincides with U.S. interests.  Denmark
ratified the Uruguay Rounds agreements in 1994.  EU and EFTA
countries account for more than three-quarters of Denmark's
total trade.  The United States, Denmark's largest non-European
trading partner, accounted in 1993 for about five percent of
total Danish merchandise trade.  On May 18, 1993, Danish voters
reversed their earlier rejection of the far-reaching European
Union (The Maastricht Treaty) and reinforced Denmark's
commitment to continued EU cooperation and integration.
However, Denmark reserved its participation in the third phase
of the Economic and Monetary Union (EMU).  Denmark benefits
from the EU Single Market, which started January 1, 1993, and
has taken the initiative to increase the EU Commission's and
member countries' focus on new nontariff trade barriers being
created while other barriers are dismantled.
    Despite increasing unemployment and low economic growth in
the late 1980's and early 1990's, the underlying Danish economy
has been strong due to increasing balance of payments surpluses
and falling inflation.  This resulted from the former minority
center-right coalition government's tight fiscal policies of
minimum increases in public expenditures and monetary and
exchange rate policies similar to Germany's.  The Social
Democratic Party (SDP)-led majority coalition government, which
took power in January 1993, relaxed fiscal policy, and
introduced a limited income tax reform to kick-start the
economy.  The government also introduced a series of measures
to combat unemployment, which have included government-funded
leave programs and government-subsidized job creation
measures.  An SDP-led minority government has continued in
office following the September 21, 1994 election.
    Despite strong economic growth starting in the second half
of 1993, unemployment has been slow to react due to large
productivity increases and extraordinarily large new inflows of
labor.  Although there is broad political agreement on putting
a lid on the public sector's size and costs, increased
unemployment benefit costs and other transfer income costs, as
well as the introduction of recession response measures, have
led to growing budget deficits.  The public sector budget
deficit almost doubled in 1993 to 4.4 percent of GDP and is
only being marginally reduced in 1994.  Foreign investment
economic incentives consist of lenient income taxation of
high-paid foreigners working in Denmark (a flat 30 percent tax
on gross income).  Since 1989, the government has spent the
equivalent of about $10 million promoting direct investment in
Denmark by U.S. and Japanese high-tech companies, which has
assisted some U.S. acquisitions of Danish high-tech companies.
U.S. and Japanese greenfield investments, on the other hand,
have been limited.
    Danish fiscal policy meets the conditions of the EMU.  For
example, Denmark complies with the prohibition against
monetization of its central government deficits.  Deficits are
financed through the sale of government bonds and treasury
bills on market terms.
    The Danish fixed exchange rate policy (see section 2),
pursued since the early 1980's, requires a monetary policy
which gives high priority to price stability.  This together
with fully liberalized capital movements means there is limited
room for Denmark to adopt independent interest rate and
liquidity policies.  Official Danish interest rates are linked
closely to those of Germany.  In order to tighten management of
money-market rates (without adjusting official rates), the
Central Bank, which has monetary policy authority, introduced
in April 1992 a liquidity management system via weekly
issuances of two-week deposit certificates and by providing
liquidity to commercial banks via re-purchases of both treasury
bills and deposit certificates.  During 1993, the Central Bank
successfully used discount rate adjustments to control
liquidity and to protect the krone.  The discount rate was
adjusted 17 times, twice upwards by two percent during the
February and July currency crises.  The 15 downward changes
were generally within 0.25 to 0.5 percentage point range.
Starting at 9.5 percent at the beginning of 1993, the discount
rate was reduced to 6.25 percent by the end of the year.  By
September 1994, the discount rate was five percent (last
reduction was in May).  However, the low inflation (two percent
in 1994), together with monetary and the exchange rate
policies, maintains high real market interest rates which
impede investment.
2.  Exchange Rate Policy
    Denmark is a member of the European Monetary System (EMS)
and its Exchange Rate Mechanism (ERM).  It supports the
objectives of the EMU, but has the right not to participate in
its third phase (establishment of a single EU currency and
relinquishment of national sovereignty over monetary policy).
Since 1982, the government has successfully resisted solving
Denmark's economic problems through exchange rate adjustments,
and this policy continues.  In August 1994, the trade-weighted
value of the krone was more than five percent higher than in
August 1993, due mostly to volatile developments in the ERM in
July and August 1993, when the ERM fluctuation bands were
widened to plus or minus 15 percent.  Intervention by the
Danish Central Bank (and German Bundesbank) protected the
krone's position in the ERM, but drained foreign exchange
reserves, which in turn required new large government borrowing
abroad.  As foreign exchange markets stabilized, Denmark's
foreign exchange reserves returned to normal levels.
    The value of the krone against the dollar in September 1994
(DKK 6.11 to $1.00) was almost nine percent higher than in
September 1993.  In late October, the dollar had fallen further
to DKK 5.87, a 13 percent decline since late October 1993.  The
consequent improvement in U.S. price competitiveness should
assist increased U.S. exports to Denmark.
3.  Structural Policies
    Danish pricing policies are based on market forces.
Entities with the ability to fix prices because of their
dominance in the market are regulated by a Competition Council.
    In spite of the income tax reform introduced in 1994, Danes
generally concede that the tax system needs further overhaul to
improve incentives for work and investment and to reduce the
"underground" economy, which today may equal as much as 10
percent of GDP.  For example, the highest marginal tax rate is
more than 60 percent and applies to all income above that of a
fully employed skilled worker.  With the introduction in 1994
of a five percent tax on gross income (increasing to eight
percent by 1997), the Danish income tax system was brought
closer to those of other EU countries.  Uniquely among EU
countries, Danish employers pay virtually no nonwage
compensation.  Most of employers' costs of sick leave and
unemployment insurance are paid by the government.  Employees
pay their part of unemployment insurance out of wages.  Another
concern is the high Danish Value Added Tax (VAT), which, at 25
percent, is the highest in the EU.  However, as VAT revenues
constitute more than one-quarter of total central government
revenues, a reduction would have severe budgetary
consequences.  The government has no plans to reduce the VAT,
and hopes for VAT rate harmonization through increases in the
VAT rates of other EU countries, particularly those of
Germany.  The corporation tax is 34 percent which, combined
with favorable depreciation rules and other deductions, is
among the lowest in the EU.
    Despite Denmark's success in resolving many of its former
structural problems, unemployment remains a major problem.
Despite high unemployment, labor mobility, both geographically
and sectorally, is low in Denmark due to leniently applied
requirements to qualify for unemployment benefits and
structural rigidity which prevents crossing craft lines.  The
government is considering enforcing present rules more
vigorously to tighten eligibility for benefits and increase
mobility in general.  At present, about two-thirds of the costs
of unemployment benefits are paid from general revenues.
Rather than consider extensive labor market reform, the SDP
government's efforts have so far concentrated on job rotation
(leave programs) and on job creation through subsidization of
repair and maintenance of buildings and subsidization of home
services work, the latter without any notable success.
4.  Debt Management Policies
    Since 1963, large, recurring balance of payments (BOP)
deficits produced a foreign debt which in 1988 peaked at $44
billion (DKK 6.73 to the dollar), or 40 percent of GDP.
However, since 1990, the BOP has moved into a surplus which
reached $5.6 billion in 1993.  Consequently, foreign debt is
gradually being reduced and by the end of 1993 equaled 31
percent of GDP.  Despite BOP surpluses, net interest payments
on the debt continue to be a burden, accounting for some 10
percent of goods and services export earnings.  Standard and
Poor's and Moody's Investors Service rate Denmark AA+ and AA1,
respectively, reflecting the strong economy and the large BOP
surplus.  Denmark's public sector is a net external debtor,
while the private sector, including banks, is a net creditor.
At the end of 1993, the public sector's net foreign debt,
including foreign exchange reserves, was the equivalent of $59
billion, of which krone-denominated government bonds accounted
for more than 70 percent.
    The central government's debt denominated in foreign
currencies rose almost 60 percent to the equivalent of $34.6
billion at the end of 1993 due to the large borrowing in
connection with the July/August currency crisis.  Dollar
denominated debt accounted for 31 percent of this debt,
followed by German mark debt accounting for 29 percent.  Close
to one-half of the debt is in short term obligations with
variable interest rates.  The total debt has an average term of
two years (3.5 years for the fixed interest rate debt alone).
    Danish development assistance is large by international
standards, accounting for one percent of Gross National Product
(GNP), or $1.3 billion in 1993.  It is almost equally
distributed between bilateral and multilateral assistance.
Bilateral assistance is concentrated on 18 "program" countries,
of which four were added in 1993: Burkina Faso, Eritrea,
Nicaragua, and Vietnam.  African countries account for some 60
percent of total bilateral assistance.  Denmark also supports
the new democracies in Central Europe, the Baltics and the
former Soviet Union and in 1994 will spend about $330 million
for assistance (0.25 percent of GNP).  Finally, Denmark will
spend in 1994 about $750 million for multinational
environmental and disaster programs, including "pre-asylum"
refugee costs in Denmark and U.N. peace keeping efforts.
Denmark actively participates in the IMF, the EBRD, the World
Bank, and the Paris Club.
5.  Significant Barriers to U.S. Exports
    Heavily dependent on foreign trade, Denmark maintains few
restrictions on imports of goods and services and on
investment.  Denmark adheres to all GATT codes and, as a member
of the EU, also to all EU legislation which impacts on trade
and investment.  There are no special Danish import
restrictions or licenses which pose problems for U.S.
industrial products exporters.  Agricultural goods must compete
with domestic production, protected under the EU's Common
Agricultural Policy.  Denmark also has stringent phyto-sanitary
requirements.
    With the implementation of the EU Single Market on January
1, 1993, most industrial standards, testing, labeling and other
requirements are being harmonized within the EU.  However, as
harmonization takes place, new trade barriers have surfaced in
individual EU member countries.  Denmark has taken the lead in
combatting the problem and, together with the EU Commission,
hosted a successful nontariff barrier conference in Copenhagen
in September 1994.
    With respect to services, the Danish Credit Card Act,
adopted in 1987, prevents credit card companies from operating
in Denmark on standard international terms.  This law prohibits
credit card companies from charging vendors for costs related
to the use of cards held by Danes.  As a consequence, American
Express stopped issuing credit cards to Danes for use in
Denmark.  However, other credit card companies have continued
operations under the new requirements.
    Denmark, like most other countries, requires an exam or
experience in local law in order to practice law.  The Danish
goverment requires the managing directors of foreign-owned
stockbroker companies to have at least three years of
experience in securities trade.  However, experience in a U.S.
stock exchange alone will probably not meet this requirement.
    Denmark provides national, and in most instances
nondiscriminatory, treatment to all foreign investment.
Ownership restrictions are only applied in a few sectors:
hydrocarbon exploration (which in general requires limited
government participation, but as of the end of 1994, no longer
on a carried interest basis); arms production (a maximum of 40
percent of equity and 20 percent of voting rights may be held
by foreigners); aircraft (third-country citizens or airlines
may not directly own or exercise control over aircraft
registered in Denmark); and ships registered in the Danish
International Ships Register (a Danish legal entity or physical
person must own a significant share and exercise a significant
control -- about 20 percent -- over such ships).  Danish law
provides for a reciprocity test to foreign direct investment in
the financial sector, which, however, has not been an obstacle
to U.S. investment.  For example, the U.S. Republic National
Bank of New York opened a representative office in Copenhagen
on July 1.  Once established, an entity receives national
treatment.  The Danish telecommunications network will be a
government controlled monopoly until 1998 when networks become
liberalized within the EU, but is open to minority portfolio
investment.  A second private cellular mobile telephone network
(General Systeme Mobile-GSM) with the U.S. BellSouth
participating, competes with the government controlled Tele
Danmark's GSM operation.
    Danish government procurement practices meet the
requirements of the GATT public procurement code and of EU
public procurement legislation.  Denmark implemented the EU
Public Procurement Directive 93/36/EEC on June 24, 1994 and the
new EU "Utilities" Directive 93/38/EEC (public procurement of
goods, building and construction, and services within the
water, energy, transport, and telecommunication sectors) on
July 1, 1994.  Regarding the latter, indications are that the
voluntary "50 percent EU Origin requirement" will be
interpreted liberally by the Danish government and that the
mandatory three percent price differential requirement will
only have minor importance in procurement decisions.
Countertrade, or rather offset trade, is used by the Danish
government only in connection with military purchases which are
not covered by the GATT code and EU legislation.  Denmark has
no "Buy Danish" laws.
    There is no record of U.S. companies complaining about
burdensome customs procedures.  Denmark has an effective and
modern customs administration which has reduced processing time
to a minimum.
    U.S. companies residing in Denmark as a general rule
receive national treatment regarding access to Danish R&D
programs. In some programs, however, Denmark requires
cooperation with a Danish company (ies).  The Embassy has no
record of complaints by U.S. companies in this area.
6.  Export Subsidies Policies
    EU agricultural export restitutions (subsidies) in 1993 of
$880 million were equivalent to more than 10 percent of the
value of total Danish agricultural exports.  Government support
for agricultural export promotion programs is insignificant.
Denmark has no direct subsidies for its nonagricultural exports
except for shipbuilding.  Also, the government does not
subsidize exports by small and medium size companies.
Indirectly, however, Denmark has programs to assist export
promotion, establishment of export networks for small and
medium sized companies, research and development, regional
development, and a limited number of preferential financing
schemes aimed, inter alia, at increasing exports.  In 1989,
Denmark restructured its development assistance and abolished
the distinction between untied and tied bilateral assistance.
However, the principle of using at least 50 percent of all
bilateral assistance for purchases of Danish goods and services
is maintained (it was 51 percent in 1993).  All these programs,
however, apply equally to foreign companies producing in and
exporting from Denmark.
    Denmark has one of the lowest rates of state aids to
industry (about two percent of GDP) among EU countries.
Shipbuilding support, where Danish subsidization is within the
ceiling set in the EU Shipbuilding Directive (nine percent of
the contract value), accounts for about one-third of total
Danish state aids to industry.  Denmark, as an ally of the
United States, strongly welcomed the 1994 OECD agreement to
phase out shipbuilding subsidies internationally, but EU
ratification of the agreement is pending.
7.  Protection of U.S. Intellectual Property
    Denmark is a party to, and effectively enforces, a large
number of international conventions and treaties concerning
protection of intellectual property rights.
    Patents:  Denmark is a member of the World Intellectual
Property Organization (WIPO).  It adheres to the Paris
Convention for the protection of Industrial Property, the
Patent Cooperation Treaty (PCT), the Strasbourg convention and
the Budapest convention.  Denmark has ratified the European
Patent Convention and the EU Patent Convention.
    Trademarks:  Denmark is a party to the 1957 Nice
Arrangement and to this arrangement's 1967 revision.  A new
Danish trademark act entered into force January 1, 1992 which
also implements the EU trademark directive harmonizing EU
member countries' trademark legislation.  Denmark strongly
supports efforts to establish an EU-wide trademark system.  In
addition, Denmark has legislation implementing EU regulations
for the protection of the topography of semiconductor products
which also extends protection to legal U.S. persons.
    Copyrights:  Denmark is a party to the 1886 Berne
Convention and its subsequent revisions, the 1952 Universal
Copyright Conventions and its 1971 revision, the 1961
International Convention for the Protection of Performers,
etc., and the 1971 Convention for the Producers of Phonograms,
etc.  There is little piracy in Denmark of records or
videocassettes.  However, software piracy in Denmark is
estimated at more than $100 million annually.  Piracy is on the
decline due to sharply reduced prices, improved protection of
programs, and efforts to combat such piracy by the Business
Software Alliance.  Piracy of other items, including books,
appears very limited.  There are no indications that pirated
products are being imported to or exported from Denmark.  One
possible copyright problem involves the imposition on January
1, 1993 of a Danish levy on blank analog and digital audio and
video tapes for home use.  Pending implementation of "material
reciprocity" provisions, U.S. artists as of October 1994
receive national treatment.  If these provisions are
implemented, a large share of revenues from the levy will be
passed on to Danish artists and artists from countries having a
comparable levy.  Since the United States imposes a comparable
levy only on digital tapes, U.S. artists, who account for some
two-thirds of works being copied in Danish homes, would not
benefit from the levy collected on analog tapes.
    The U.S. Embassy has no record of other complaints by U.S.
organizations, exporters or subsidiaries in Denmark regarding
infringement of intellectual property rights and/or unfair
Danish practices in this field.  Thus the impact on U.S. trade
with Denmark appears limited.
    Denmark is not named on the Special 301 Watch List or
Priority Watch List, nor is it identified as a Priority Foreign
Country.
8.  Worker Rights
    a.  Right of Association
    Workers in Denmark have the right to associate freely, and
all (except those in essential services and civil servants)
have the right to strike.  Approximately 80 percent of Danish
wage earners belong to unions.  Trade unions operate free of
government interference.  They are an essential factor in
political life and represent their members effectively.  In
1993, 113,700 workdays were lost due to labor conflicts (up
from 62,800 in 1992).  Greenland and the Faroe Islands have the
same respect for worker rights, including full freedom of
association, as Denmark.
    b.  Right to Organize and Bargain Collectively
    Workers and employers acknowledge each others' right to
organize.  Collective bargaining is widespread.  The law
prohibits antiunion discrimination by employers against union
members, and there are mechanisms to resolve disputes.
Salaries, benefits, and working conditions are agreed in
biennial negotiations between the various employers'
associations and their union counterparts.  If negotiations
fail, a national conciliation board mediates, and its proposal
is voted on by both management and labor.  If the proposal is
turned down, the government may force a legislated solution
(usually based upon the mediator's proposal).  In case of a
disagreement during the life of a contract, the issue may be
referred to the Labor Court.  The decisions of the court are
binding.  The labor contracts which result from collective
bargaining, as a general rule, are also used as guidelines in
the nonunion sector.
    Labor relations in non-EU parts of the Danish Realm,
Greenland (a beneficiary of the U.S. Generalized system of
Preferences) and the Faroe Islands, are generally conducted in
the same manner as in Denmark proper.
    c.  Prohibition of Forced or Compulsory Labor
    Forced or compulsory labor is prohibited and does not exist
in the Danish Realm.
    d.  Minimum Age for Employment of Children
    The minimum age for full-time employment is 15 years.  The
law prescribes limitations on the employment of those between
15 and 18 years of age, and it is enforced by the Danish
Working Environment Service, an autonomous arm of the Ministry
of Labor.  There are no export industries in which child labor
is significant.
    e.  Acceptable Conditions of Work
    There is no legally mandated workweek nor national minimum
wage.  However, the workweek set by labor contracts is 37
hours.  The lowest hourly wage in any national labor agreement
is sufficient for an adequate standard of living for a worker.
Danish law provides for five weeks of paid vacation.  Danish
law also prescribes conditions of work, including safety and
health; duties of employers, supervisors, and employees; work
performance; rest periods and days off; medical examinations;
and maternity leave.  The Danish Working Environment Service
ensures compliance with work place legislation.  In addition,
Danish law provides for government-funded temporary withdrawal
from the labor market through parental, educational or
sabbatical leave programs.
    Similar conditions of work, except leave programs, are
found in Greenland and the Faroe Islands, but the workweek is
40 hours.  Unemployment benefits in Greenland are either
contained in labor contract agreements or come from the general
social security system.  A general unemployment insurance
system in the Faroe Islands was established in August 1992,
replacing former unemployment compensation covered by the
social security system.  Sick pay and maternity pay, as in
Denmark, fall under the social security system.
    f.  Rights in Sectors with U.S. Investment
    Worker rights in those goods-producing sectors in which
U.S. capital is invested do not differ from the conditions in
those other sectors where no U.S. investment is found.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                               (1)
Total Manufacturing                                     206
  Food & Kindred Products                   (1)
  Chemicals and Allied Products             (1)
  Metals, Primary & Fabricated              (1)
  Machinery, except Electrical              (1)
  Electric & Electronic Equipment            15
  Transportation Equipment                  (2)
  Other Manufacturing                        78
Wholesale Trade                                         572
Banking                                                 (1)
Finance/Insurance/Real Estate                           363
Services                                                113
Other Industries                                         20
TOTAL ALL INDUSTRIES                                  1,797
DENMARK2
U.S. DEPARTMENT OF STATE
DENMARK: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
(1) Suppressed to avoid disclosing data of individual companies
(2) Less than $500,000
Source: U.S. Department of Commerce, Bureau of Economic
Analysis
(###)
DOMINICA1
aiaiU.S. DEPARTMENT OF STATE
DOMINICAN REPUBLIC: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                        DOMINICAN REPUBLIC
                     Key Economic Indicators
        (Millions of U.S. dollars unless otherwise noted)
                                      1992      1993     1994 1/
Income, Production and Employment:
Real GDP (1970 prices)             4,104.9   4,228.7  4,333.75
Real GDP Growth (pct.)                 7.8       3.0       2.5
GDP (current prices)                 7,828     8,689     9,172
By Sector:
  Agriculture                        1,174     1,304     1,376
  Energy/Water                         157       174       183
  Manufacturing                      1,252     1,390     1,467
  Construction                         548       608       642
  New Housing Investment               548       608       642
  Financial Services                   470       521       550
  Other Services                       783       869       917
  Government/Health/Education          783       869       917
  Others                             2,113     2,346     2,476
  Net Exports of Goods & Services   -824.0    -749.5       N/A
Real Per Capita GDP
  (1985 prices in DR pesos) 2/       2,202     2,209     2,211
Labor Force (000s) 3/                3,240     3,370       N/A
Unemployment Rate (pct.) 4/             30        30        30
Money and Prices:  (annual percentage growth)
Money Supply (M2)                       32        28         8
Base Interest Rate 5/                   30        29        27
Personal Saving Rate                   N/A       N/A       N/A
Retail Inflation                         7         8        12
Wholesale Inflation                    N/A       N/A       N/A
Consumer Price Index 6/                779       800       896
Exchange Rate (DR peso/U.S dollar)
  Official                           12.75     12.75     12.87
  Parallel                           12.74     12.60     14.00
Balance of Payments and Trade:
National Exports (FOB) 7/            561.9     530.4     530.9
  Trade Zone Exports (value added)   287.4     368.5       N/A
  Exports to U.S. 8/               2,095.0   2,349.5   2,584.5
National Imports (CIF) 7/          2,178.1   2,118.4   2,224.3
Imports from U.S. 8/               2,098.1   2,671.5   2,938.7
Aid from U.S. 9/                      22.5      24.6       N/A
Aid from Other Countries               N/A       N/A       N/A
External Public Debt               4,582.3   4,685.4   3,900.0
Debt Service Payments (paid)         480.9       N/A       N/A
Gold and FOREX Reserves 10/          580.8     714.2     250.0
Trade Balance (National) 7/       -1,616.2  -1,588.0  -1,693.4
  Trade Balance with U.S. 8/          -3.1    -322.0    -354.2
N/A--Not available.
1/ U.S. Embassy projections for 1994 calendar year.
2/ Source:  The Dominican National Statistic Office is the
source of population figures used to calculate per capita GDP.
3/ Source:  Dominican National Planning Office.
4/ Source:  U.S. Embassy Economic Section estimates.
5/ The 1994 figure is as of July 1994. Short term (90 day)
credit costs (prime rate).
6/ May 1976-April 1977 equals 100.
7/ "National exports" means all exports other than from free
trade zones.  "National imports" means all imports other than
those bound for free trade zones.
8/ Source:  U.S. Department of Commerce.  This data includes
all items exported to or imported from the Dominican Republic
by the United States, including Dominican free trade zone
activity.
9/ Calculation based on U.S. Government fiscal year.
10/ Embassy estimate for December 1994.
Source:  Economic Studies Department, Central Bank of
the Dominican Republic, unless otherwise indicated.
1.  General Policy Framework
    During 1994, the Dominican Republic began to show signs of
macroeconomic instability.  While inflation had stayed in the
single digit range during 1991-1993, by the end of 1994 the
consumer price index is expected to register a jump of some 12
percent (over December 1993). Similarly, exchange rate
stability began to deteriorate; during early October 1994 the
buy rate for U.S. Dollars in Santo Domingo's informal foreign
exchange market reached 14.70 pesos per dollar - a 15 percent
decline from the peso's October 1993 value. Because of the
Dominican Republic's very high propensity to import, changes in
the exchange rate inevitably have a significant impact on
consumer prices.
    The reasons for this deviation from macroeconomic stability
are clear: national elections were held on May 16, 1994 and
government spending increased during the period prior to the
elections.  Much of the increased spending was - in essence -
financed via money creation.  By July 1994, cash in the hands
of the public (m0) had increased by 24 percent over its July
1993 level. This increase in the money supply caused a big
increase in aggregate demand for goods and services, putting
pressure on both the exchange rate and the consumer price index.
    Significant reductions in the Dominican Central Bank's
dollar reserves left the government with a greatly reduced
capacity to intervene in the foreign exchange market: beginning
the year with dollar reserves of some 736 million dollars by
late August reserves were down to approximately 150 million
dollars. The reserves were diminished as a result of Central
Bank efforts to bolster the peso in the face of
election-related nervousness. The Central Bank also used a
significant portion of its reserves to settle the Dominican
government's long-standing commercial debt problem (see below).
    Starting in early September 1994, the Dominican government
initiated efforts to recover macroeconomic stability. A
seasoned finance professional was given the position of Central
Bank Governor and steps were immediately announced to reign in
the monetary expansion mentioned above. President Balaguer
pledged his support for the Central Bank's stabilization
program. As of late October 1994, it appears that the
government was having some success in these efforts.
2.  Exchange Rate Policy
    In effect there are three different sets of exchange rates
in the Dominican Republic: the official Central Bank rates, the
rates used by the commercial banking system and the rates used
by the semi-legal "informal" foreign exchange market.  Some
sectors of the Dominican economy are still required by law to
buy and sell foreign exchange at the Central Bank, but most
businesses and individuals are free to carry out foreign
exchange transactions through the commercial bank system. In
practice the Central Bank works to prevent the commercial bank
rates from deviating too widely from the official rates, but
when dollars are in short supply the informal market exchange
rate will begin to rise and dominicans seeking to buy or sell
dollars will make increasing use of this market.
    In its attempts to influence the exchange rate, the Central
Bank buys or sells dollars and attempts to influence overall
demand for dollars by manipulating the reserve requirements of
the commercial banks. To a limited extent the Central Bank also
eng short-term notes).
    While the peso price of U.S. Dollars has increased, as of
October 1994 there was no indication that business activity was
being seriously affected by any shortage of foreign exchange.
Businesses here do, however, worry that the government might
respond with exchange rate controls should the value of the
peso continue to decline.
3.  Structural Policies
    Starting in 1990, the government began to eliminate many of
the distorting price control and subsidy programs that had
contributed to the crisis of the late 1980's.  Today, the vast
majority of prices are determined by market forces.
    Of particular interest to U.S. exporters are reforms in the
customs and tariffs area. In September, 1990 the Dominican
government enacted a major tariff reform by presidential
decree. The decree reduced and simplified the tariff schedule
to six categories with seven tariff rates ranging from 3 to 35
percent. It also replaced some quantitative import restrictions
with tariffs and transformed all tariffs to ad valorem rates.
    While it marked an improvement over the previous tariff
regime, the 1990 decree still left the Dominican Republic with
trade barriers significantly higher than many similar countries
in the region. In August 1993, the Dominican president signed
into law a bill that was essentially a codification of the 1990
decree (with some modifications designed to increase rates of
effective protection for Dominican firms.)  This new tariff law
was bitterly opposed by free trade advocates - it leaves the
Dominican Republic with a maximum tariff of 35 percent while
many other countries in the region are moving toward much lower
maximum tariffs.  (There are additional taxes on imports - see
below.)
    The Dominican government has also implemented changes in
its tax system aimed at increasing revenues.  The concept of
taxable income has been enlarged, marginal tax rates on
individuals and companies were reduced and capital gains are no
longer considered exempted income.
    In May, 1992 a new labor code was promulgated.  Provisions
of this new code increase a variety of employee benefits and
may result in increased labor costs.
    The banking and finance system is also in need of reform.
The goal is a healthier, more competitive and transparent
finance system with closer compliance to clearly understood
"rules of the game."  Unfortunately a new financial monetary
code that was expected to be enacted in late 1992 has not been
put into effect.  Some bank reforms are being carried out by
decree, but bank supervision remains very weak and there is
uneasiness about the health of the banking system.
    Government policy prohibits new foreign investment in a
number of areas including public utilities, communications and
media, national defense production, forest exploitation and
domestic air, surface and water transportation. It is widely
recognized that there is a pressing need for investment climate
reform. A draft foreign investment law is currently in the
hands of the Congress, but progress in this area has been very
slow.
4.  Debt Management Policies
    The total external debt of the Dominican government is now
approximately 3.9 billion dollars. A significant portion of the
official debt was rescheduled under the terms of a Paris Club
negotiation concluded in November, 1991.  In August 1994 the
Dominican government successfully concluded debt settlement
negotiations with its commercial bank creditors. The deal
involved a combination of buy-back schemes and U.S. Treasury
backed rescheduling.
    The Dominican Republic's debt burden is fairly typical for
a lower middle income country.  Total external debt as a
percentage of GNP is approximately 48 percent.
5.  Significant Barriers to U.S. Exports
    Trade Barriers:  Tariffs on most products fall within a 5
to 35 percent range.  In addition,  the government of the
Dominican Republic imposes a 5 to 80 percent selective
consumption tax on "non-essential" imports such as home
appliances, alcohol, perfumes, jewelry, automobiles and auto
parts. Due to the way in which this selective consumption tax
was assessed, U.S. made automobiles were prohibitively
expensive in the Dominican market. In response to inquiries
from the U.S. Embassy, the Dominican government corrected this
situation and the number of U.S. made automobiles increased
significantly.
    The Dominican Republic continues to require a consular
invoice and "legalization" of documents, which must be
performed by a Dominican consulate in the United States.
Moreover, importers are frequently queried to obtain licenses
from the Dominican customs service.
    There are food and drug testing and certification
requirements, but these are not burdensome.
    Customs Procedures:  Many businesspersons have complained
that bringing goods through Dominican customs is a slow and
arduous process, but there are indications that this situation
improved during 1994.  Customs department interpretation of
exonerated materials being brought into the country still
provokes many complaints and businessmen here must spend
considerable time and money to get items through customs.
    Arbitrary customs clearance procedures sometimes cause
problems for businessmen. The use of "negotiated fee" practices
to gain faster customs clearance continues to put some U.S.
Firms at a competitive disadvantage in the Dominican market.
U.S. firms must comply with the provisions of the U.S. Foreign
Corrupt Practices Act.
    Government Procurement Practices:  The government of the
Dominican Republic has a centralized government procurement
office, but the procurement activities of this office are
basically limited to expendable supply items for the
government's general office work.  In practice, each public
sector entity has its own procurement office, both for
transactions in the domestic market and for imports. Provisions
of the U.S. Foreign Corrupt Practices Act often put U.S.
bidders on government contracts at a serious disadvantage.
    Prohibitions on Land Ownership:  For foreigners, ownership
of more than approximately one-half acre (2,000 square meters)
needs presidential approval.
    Investment Barriers:  As indicated above, legislation
designed to improve the investment climate is being discussed,
but as of October 1994, no significant changes in the
investment climate had been put into effect.
    Foreign investment must receive approval from the foreign
investment directorate of the Central Bank in order to qualify
for repatriation of profits.  The granting of such approval
sometimes is time-consuming and the procedures are unclear,
making approval sometimes difficult.  As per Law 861, Article
16, of July, 1978 companies registered under the foreign
investment law are limited in remitting profits or dividends
abroad to 25 percent of registered capital per year.
Unregistered investment has no right to transfer profits.
    Capital gains have the right to be remitted only up to two
percent annually and, cumulatively, to 20 percent of the
original investment.  Invested (and registered) capital may be
remitted, but only upon the sale or liquidation of the
enterprise.
    Royalties (payments made for technology transfers,
licensing contracts and for use of patents and trademarks) may
only be paid based on a percentage of sales.  Further, each
such contract must be individually approved by the foreign
investment directorate.
    Reinvestment of profits is highly restricted.  The
enterprise must be in the agribusiness or tourism sectors, must
export at least 80 percent of its sales, and must remain at
least 70 percent domestically owned.
    All contracts with foreigners for the use of trademarks, or
for the use of specialized technical knowledge, must be
submitted to the foreign investment directorate for
registration.  The directorate is permitted to delay or even to
disapprove them.
    Financial institutions doing business in the Dominican
Republic must be at least 50 percent Dominican owned, as per
Law 861, Article 23 of July, 1978.  Exceptions to this law are
Citibank and the Bank of Nova Scotia, which were grandfathered
in because they were here prior to passage of this law.  A new
finance and monetary code (and the foreign investment law
mentioned above) could bring changes to this local ownership
requirement.
    Foreign companies cannot obtain internal credit for a
period greater than one year without prior approval from the
Central Bank, as per Law 861, Article 28 of July, 1978.
    Sectors reserved by other provisions of Law 861 for
Domestic Investment are:  Public utilities, communications and
media, national defense production, forest exploitation, and
domestic air, surface and water transport.  (Some foreign
businesses operate in these sectors because they have been
"grandfathered in.")  Foreign investors can participate in
joint ventures (defined as having 51 to 70 percent Dominican
capital and management control) in fishing, insurance, farming,
animal husbandry, and commercial and investment banking.
    The electricity sector continues to be a weak link in the
Dominican economy.  Businesses operating in the DR cannot
depend on the power utility to be a reliable source of
electricity. While the government has been exploring the
privatization of portions of the electric power system,  little
progress has been made.
    Foreign employees may not exceed 20 percent of a firm's
work force.  This is not applicable when foreign employees only
perform managerial or administrative functions.
    Dominican expropriation standards (e.g., in the "public
interest") do not appear to be consistent with international
law standards; several investors have outstanding disputes
concerning expropriated property.
    The Dominican Republic has not recognized the general right
of investors to binding international arbitration.
    All mineral resources belong to the state, which controls
all rights to explore or exploit them.  Although private
investment has been permitted in selected sites, the process of
choosing and contracting such areas has not been clear or
transparent.
    Investors operating in the Dominican Republic's free trade
zones experience far fewer problems than do investors working
outside the zones. For example, materials coming into or being
shipped out of the zones are reported to move very quickly,
without the kinds of bureaucratic difficulties mentioned above
and the onerous restrictions on profit remittances do not apply
to free trade zone businesses.
6.  Export Subsidies Policies
    The Dominican Republic has two sets of legislation for
export promotion:  the free trade zone law (Law no. 8-90,
passed in 1990) and the export incentive law (Law no. 69,
passed in 1979).  The free trade zone law provides 100 percent
exemption on all taxes, duties, and charges affecting the
productive and trade operations at free trade zones.  These
incentives are provided to specific beneficiaries for up to 20
years, depending on the location of the zone.  This legislation
is managed jointly by the foreign trade zone national council
and by the Dominican customs service.
    The export incentive law provides for tax and duty free
treatment of inputs from overseas that are to be processed and
re-exported as final products.  This legislation is managed by
the Dominican export promotion center and the Dominican customs
service.  In practice, use of the export incentive law to
import raw materials for process and re-export is cumbersome
and delays in clearing customs can take anywhere from 20-60
days.  This customs clearance process has made completion of
production contracts with specific deadlines very difficult.
As a result, non-free trade zone exporters rarely take
advantage of the export incentive law.  Most prefer to import
raw materials using the normal customs procedures which,
although more costly, are more rapid and predictable.
    There is no preferential financing for local exporters nor
is there a government fund for export promotion.
7.  Protection of U.S. Intellectual Property
     In general, copyright laws are adequate, but enforcement
is weak, resulting in widespread piracy.  Although the
Dominican Republic is a signatory to the Paris Convention and
the Universal Copyright Convention, and in 1991 became a member
of the World Intellectual Property Organization, the lack of a
strong regulatory environment results in inadequate protection
of intellectual property rights.  In 1992, the Dominican
Republic was the subject of a petition by the Motion Picture
Export Association of America (MPEAA) before the United States
Trade Representative, alleging piracy of satellite television
signals and unauthorized use of videos in Dominican theaters.
In response to this complaint, the Dominican government took
effective action against cable television pirates and most of
the television piracy was halted.
    Patents (product and process):  In a local pharmaceutical
market of approximately 110 million dollars a year, Dominican
manufacturers supply about 70 percent of the total.  Of that,
about seven per cent is believed to be counterfeit.
    Trademarks and Copyrights:  Many apparel brands are
counterfeited and sold in the local market.  In addition to the
MPEAA complaint, problems have arisen with illegally copied
videos, software and books.
    Impact of IPR Policies on U.S. Trade:  Non- protection of
intellectual property rights is so widespread that it is
virtually impossible to quantify its impact on U.S.-Dominican
Republic trade.  The U.S. Motion Picture Exporters' Association
had estimated that losses to its members due to theft of
satellite-carried programming were more than one million
dollars per year.  Losses due to other counterfeiting cost U.S.
companies millions more.
8.  Worker Rights
    a.  The Right of Association
    The constitution provides for the freedom to organize labor
unions and also for the rights of workers to strike and for the
private sector to lock out.  All workers, except military and
police, are free to organize, and strikes are legal except in
sectors which are considered essential services.  Organized
labor in the Dominican Republic represents about 10-15 percent
of the work force and is divided among three large
confederations, three minor confederations, and a number of
independent unions.  Labor unions can and do freely affiliate
regionally and internationally.
    b.  The Right to Organize and Bargain Collectively
    Collective bargaining is permitted and can take place in
firms in which a union has gained the support of an absolute
majority of the workers of a firm.  According to law workers
cannot be dismissed because of union activities or membership.
There has been a history of labor conflict in the free trade
zones, with companies firing workers for engaging in union
organizing activities. The 1992 Labor Code protects from
layoffs up to 20 members of a union in formation and between 5
to 10 members of a union executive council, depending on the
size of the work force.  The 1990 firings of unionized workers
by the Dominican Electric Corporation led to management/labor
disputes which have yet to be fully resolved.  The free trade
zones have also been the scene of some management/labor
 disputes (see Section 8.F.).
    c.  Prohibition of Forced or Compulsory Labor
    Forced or compulsory labor is prohibited by law. The
Dominican government has been criticized for its treatment of
Haitian workers employed by the State Sugar Council (CEA).
Alleged abuses have included forced recruitment, compulsory
labor, and restrictions on freedom of movement.  Instances of
forced labor and restrictions on movement occurred in only
isolated instances on CEA plantations in 1993.  Forced labor
has not been a problem in other areas.
    d.  Minimum Age for Employment of Children
    The labor code prohibits employment of youths under 14
years of age and places various restrictions on the employment
of youths under the age of 16.  In practice, there are large
numbers of minors working illegally, primarily in the informal
sector.  The high level of unemployment and the lack of a
social safety net create pressures on families to allow
children to generate supplemental income.  Instances of child
labor in CEA sugar plantations have diminished greatly and most
observers note that such practice is no longer a serious
problem.
    e.  Acceptable Conditions of Work
    The Labor Code establishes a standard work period of eight
hours per day and 44 hours per week, with an uninterrupted rest
period of 36 hours each week.  In practice, a typical workweek
is Monday through Friday plus half day on Saturday, but longer
hours are not unusual, especially for agricultural and informal
sector workers.  Workers are entitled to a 35 percent wage
differential when working between 44 and 68 hours per week and
a 100 percent differential for any hours above 68 per week.
The vast majority of workers receive only the minimum wage
(which varies by law in accordance with the type of activity
and the size of the company).  Safety and health conditions at
places of work do not always meet legal standards.  The
existing social security system does not apply to all workers
and is under funded.
    f.  Rights in Sectors with U.S. Investments
    U.S.-based multinationals active in the free trade zones
represent one of the principal sources of U.S. investment in
the Dominican Republic.  The free trade zone sector's
compliance with the right to organize and bargain collectively
has been a matter of controversy, but during 1994 some progress
was made.  Some companies in the free trade zones adhere to
significantly higher worker safety and health standards than do
non-free trade zone companies.  In other categories of worker
rights, conditions in sectors with U.S. investment do not
differ significantly from conditions in sectors lacking U.S.
investment.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                             (1)
Total Manufacturing                                   237
  Food & Kindred Products                     4
Chemicals and Allied Products             (1)
  Metals, Primary & Fabricated              (1)
  Machinery, except Electrical                0
  Electric & Electronic Equipment             5
  Transportation Equipment                    0
  Other Manufacturing                       210
Wholesale Trade                                         5
Banking                                               (1)
Finance/Insurance/Real Estate                           3
Services                                              (1)
Other Industries                                      (1)
TOTAL ALL INDUSTRIES                                1,020
(1) Suppressed to avoid disclosing data of individual companies
Source: U.S. Department of Commerce, Bureau of Economic
Analysis
(###)
ECUADOR1
UiUiU.S. DEPARTMENT OF STATE
ECUADOR: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                             ECUADOR
                     Key Economic Indicators
    (Millions of current U.S. dollars unless otherwise noted)
                                    1992      1993      1994 1/
Income, Production and Employment:
Real GDP (1985 factor cost)       10,694    10,908    11,279
Real GDP Growth (pct.)               3.6       2.0       3.4
GDP (at current prices)           12,233    14,311    16,590
By Sector:
  Agriculture/Fishing              1,554     1,733     2,010
  Petroleum/Mining                 1,537     1,534     1,780
  Manufacturing                    2,697     3,112     3,610
  Electricity/Gas/Water               14        40        40
  Construction                       556       699       810
  Transport/Communications           949     1,277     1,480
  Commerce/Hotels                  2,627     2,894     3,350
  Finance/Business Services          568       718       830
  Government/Other Services        1,132     1,531     1,780
  Sales Tax/Other                    599       775       900
Net Exports of Goods & Services    (110)     (490)     (890)
Real Per Capita GDP (1985 USD)       996       993     1,005
Labor Force (000s/estimated)       3,455     3,503     3,590
Open Urban Unemployment (pct.)       8.9       9.4       N/A
Money and Prices:  (percentage)
Money Supply (M2 growth)            55.5      54.0      67.0
Base Interest Rate 2/               47.4      33.8      34.0
Consumer Price Inflation            60.2      31.0      25.0
Exchange Rate (Sucres/USD) 3/      1,587     1,918     2,200
Balance of Payments:
Merchandise Exports (FOB)          3,008     2,904     2,850
  Exports to U.S.                  1,408     1,327     1,311
Merchandise Imports (CIF)          2,430     2,562     2,820
  Imports from U.S.                  813       824       902
Aid from U.S. (fiscal year)         32.1      23.7      16.9
Aid from Other Countries              88       106       113
External Public Debt              12,122    12,806    13,248 4/
Debt Service Payments 4/           1,532     1,299        -
Foreign Exchange Reserves            782     1,254     1,583 5/
Merchandise Trade Balance            960       578       310
N/A--Not available.
1/ 1994 estimates are based on data available in October 1994.
GDP sector figures are based on sector shares of 1993 GDP.
2/ Average annual interest rate for 90-day bank deposits.
3/ Average annual free market exchange rate.
4/ 1994 debt stock, excluding interest on interest, as of June
30.  Debt service includes public and private scheduled
payments, including arrears, but not refinanced payments.
5/ Reserves as of September 30, 1994.
1.  General Policy Framework
    The Ecuadorian economy is based on petroleum production,
along with exports of agricultural commodities (chiefly
bananas) and seafood (particularly shrimp).  Industry is
largely oriented to servicing the domestic market, but is
becoming more export-oriented.  During the oil boom of the
1970's, the Ecuadorian government borrowed heavily from abroad,
increased subsidies to consumers and producers, and expanded
the state's role in economic production.  In the 1980's, such
policies became less financially sustainable, leading to
chronic macroeconomic instability.  The resulting fiscal
deficits were financed by accumulation of arrears to suppliers
and foreign banks, along with monetary emissions by the Central
Bank.  Nevertheless, a functioning democracy and partial reform
measures kept Ecuador's economic problems within manageable
limits.  In 1992 the electorate turned away social democratic
and populist presidential candidates to choose a conservative
advocate of economic liberalization.  President Sixto Duran
Ballen took office in August 1992 promising to stabilize the
economy, modernize the state, and expand the role of the free
market.  While the macroeconomic program has been successful,
the fundamental structural reforms required to improve the
investment climate and prospects for long-term growth has
proven more difficult to achieve.
    Two rounds of economic stabilization measures in 1992 and
1994, including large fuel and public utility price hikes, all
but eliminated the public sector budget deficit, reduced
chronic inflation, slowed the depreciation of the currency, and
built up Ecuador's foreign currency reserves.  The 1992 budget
reform law should help unify the central government budget,
curtail the earmarking of revenues for unrelated expenditures,
and give the Ministry of Finance greater control over spending
by public agencies.  The elimination of the Central Bank's role
in subsidizing credit earlier in 1992 has also helped curb the
deficit.  Since February 1994, the government has set domestic
gasoline prices according to world market factors, thereby
stabilizing an important source of government revenue.
Finally, the tax reform of December 1993 and the March 1994
customs law, if fully implemented, should increase the
government's non-oil revenues.
    After failing to close an agreement with the IMF in
mid-1993, the government concluded a two-year stand-by
arrangement in March 1994 and has applied strict fiscal
discipline to date.  Deferral of capital projects has helped
keep the 1994 consolidated public sector deficit to below 0.5
percent of GDP.  Government revenue from oil exports and
domestic sales of fuel will account for about 7.5 percent of
GDP in 1994, while sales and income taxes will only contribute
6.2 percent of GDP.  Public sector expenditures (including the
state enterprises, but excluding the military's capital budget
funded by a direct allocation of oil revenues) will account for
about 26 percent of GDP in 1994.  Debt service is the largest
area of government spending, followed by education and
defense.  For 1995, the government plans to increase real
spending on debt service, road building, public health, and the
military, and cut spending on housing, welfare, agriculture,
and general administration.
    As a result of the stabilization program and weaker demand
for Ecuadorian exports, economic growth slowed to 2 percent in
1993, down from 3.6 percent in 1992.  Greater oil and banana
production volumes in 1994 may result in GDP growth of over 3
percent in 1994.  The government hopes that reform measures
will finally produce a general economic recovery and 4 percent
growth in 1995.  Gross domestic product for 1994 should reach
about $16.6 billion, producing a GDP per capita of
$1,479.  In 1993, Ecuador ran a $578 million merchandise trade
surplus and a current account deficit of $360 million due to a
services deficit of $1,068 million.  Ecuador's trade surplus
will fall further to around $300 million in 1994, with oil and
banana prices remaining below the levels of previous years.
    After experiencing general price rises of 60 percent in
1992 and 31 percent in 1993, Ecuador's inflation rate is
slowing to about 25 percent for 1994.  The government hopes to
reduce inflation to 15 percent in 1995 and single digits in
1996.  Driven by capital inflows, the money supply (M2 or bank
liquidity) increased by 54 percent in 1993 and as of the end of
September 1994 was up 70 percent over the previous 12 months.
M2 has risen to 21 percent of GDP.  Since late 1992 the Central
Bank has tried to smooth out fluctuations in liquidity through
weekly bond auctions and interventions in the secondary
market.  The government has attempted to compensate for the
inflationary effect of the foreign exchange influx by
increasing its sucre deposits at the Central Bank.  In July
1994, the Central Bank abandoned the use of reserve
requirements as a monetary policy tool when it unified the
requirement for checking and savings deposits, then lowered it
to 10 percent.  From late 1992 to early 1994, free market sucre
interest rates swung sharply in response to alternating periods
of declining inflationary expectations and renewed uncertainty
over the direction of government economic policy.  Declining
liquidity produced a slower climb in rates from April to July
1994 to peak at 41 percent for 90-day CD's.  During the second
half of 1994, 90-day CD rates eased to about 35 percent.  The
spread between savings and lending rates has narrowed from an
average of 11 points in 1993 to 8 points for 1994.
2.  Exchange Rate Policy
    In September 1992, the government devalued the currency by
35 percent, set an intervention rate of 2,000 sucres to the
dollar and embarked on a controlled float.  Since December 1992
exporters have no longer had to surrender their foreign
exchange earnings to the Central Bank.  The intervention rate
was abandoned in September 1993.  Foreign currency is readily
available on the free market, trading at about 2,275 sucres to
the dollar in October 1994, a 12 percent nominal depreciation
since the beginning of the year.  There are no restrictions on
the movement of foreign currencies into or out of Ecuador.  A
partially-controlled exchange rate structure remains in effect
for the public sector.  The state oil company and other public
entities currently receive about 11 percent less for dollars
earned from exports than the free market rate for buying
dollars.  The spread, which the government plans to eliminate,
serves to finance the Central Bank and force savings by the
public sector enterprises.
    A high interest rate differential between Ecuador and the
United States has attracted net capital inflows of around $700
million since late 1992, slowing the nominal depreciation of
the sucre.  Relative exchange rate stability contributed to a
real inflation-adjusted appreciation of the sucre of 16.7
percent in 1993, a pattern that has continued in 1994.  The
overvalued currency and earlier trade liberalization measures
have made imports more competitive and served as a partial
anchor against inflation, but Ecuadorian exporters are
increasingly caught between rising sucre costs and stagnant
sucre earnings.  The Central Bank has intervened in the
exchange market on occasion to keep the currency from
appreciating by selling sucres, leading to an increase in
foreign reserves, but creating upward pressure on the money
supply.  By the end of September 1994, foreign exchange
reserves had risen to $1.58 billion, enough to cover imports
for about 6 months.  During 1995, increased inflows of
multilateral development resources should be offset by renewed
debt service payments.
3.  Structural Policies
    The Duran Ballen administration has had only partial
success with its structural reform program designed to promote
investment and economic growth.  In the administration's first
year, progress was made on budget reform and promoting the
development of capital markets.  The government's staffing
level, particularly for contractors, was significantly
reduced.  Many unnecessary and market-distorting regulations
were eliminated.  With a few exceptions for pharmaceuticals and
some foodstuffs, all prices are now set by the free market.
During the second year, the state development banks began
selling their equity shares in commercial enterprises to the
private sector, although there have been no sales of shares
owned by the military.  The government hopes to move forward
during its final two years with the partial privatization of
some of the major state enterprises, while continuing the
effort to implement earlier government modernization
legislation and combat corruption.
    The version of the state modernization law finally passed
by Congress in late 1993 allows private sector participation in
"strategic sectors" of the economy, including petroleum,
electricity, and telecommunications, but only on a concession
basis.  Legislation to promote private sector involvement in
telephone service and electricity generation may be enacted in
1995.  Meanwhile, the government is proceeding with the sale of
Ecuatoriana, the bankrupt state airline.  Since April 1994, new
leaders at the National Modernization Council (CONAM) have
given direction and purpose to the government's structural
reform program.  In addition to the plans for the major state
enterprises, CONAM is developing concession programs for public
works, the civil registry, airports, and ports and customs
administration.  Postal and railroad services will be left more
to the private sector.  Efforts will also be made to modernize
higher education and the social security system's troubled
pension and health systems.  The Ministry of Education is
introducing a modern curriculum in the public schools designed
to emphasize reasoning over memorization.
    The May 1993 capital markets law provided a mechanism for
privatizing state enterprises by establishing the legal basis
for turning the Quito and Guayaquil stock exchanges into true
equity markets.  During the first year of operations under the
new law, monthly trading volume of equity shares grew from
practically nothing to $53 million in July 1994.  The markets
should expand further in the wake of social security pension
reform, privatizations of state firms, and greater private
sector interest in the markets' capital-raising potential.
Meanwhile, Congress enacted a new financial institutions law in
May 1994 that substantially deregulates the financial sector,
while providing greater safeguards against bank failures.
    Investment liberalization measures in 1991 and 1993
provided foreign investors with full national treatment and
eliminating prior authorization requirements for investment in
most industries, including finance and the media.  Specific
restrictions, most applicable to Ecuadorian as well as foreign
investors, remain for petroleum, mining, electricity,
telecommunications, and fishing investments.  A bilateral
investment treaty that provides free transfers and a binding
arbitration dispute settlement procedure was signed with the
United States in August 1993 and ratified by Ecuador's Congress
in September 1994.  The capital markets law equalized income
tax rates on foreign and domestic companies at 25 percent.  A
value-added tax of 10 percent applies to sales of imports of
goods and services in the formal sector.  Utilizing the more
investor-friendly procedures of the November 1993 hydrocarbons
law, the goverment generated considerable foreign interest in
the 1994 seventh petroleum exploration licensing round and a
project to construct and manage a second oil pipeline across
the Andes.  In July 1994, Congress approved an agrarian
development law that will improve the security of agricultural
land tenure for both peasants and agrobusiness.
4.  Debt Management Policies
    At the end of the first half of 1994, Ecuador's external
debt, including past-due interest, exceeded $13.3 billion.
Over half of the debt, about $4.5 billion in principal and $2.8
billion in interest arrears, was owed to foreign commercial
banks and secondary market investors in bank paper.
Total debt service owed in 1993 amounted to 36 percent of goods
and services exports and 9 percent of GDP.  Ecuador stopped
paying debt service to the commercial banks in 1987, resumed
paying 30 percent of interest due in June 1989, then halted
partial interest payments in September 1992.  Settlement of the
debt issue has been a major priority for the Duran Ballen
administration.  Resolution of the debt problem should improve
Ecuador's creditworthiness and attractiveness to investors.
    In May 1994, Ecuador and its commercial creditors agreed on
a comprehensive restructuring of its external commercial bank
debt.  Under the agreement, creditors can exchange existing
instruments for new bonds carrying a 45 percent discount or for
par bonds with fixed interest rates varying from 3 to 5
percent.  Given the mix of instruments chosen by the creditors
under the agreement signed in October 1994, Ecuador received a
net reduction of 26 percent in principal owed, while 57 percent
of the remaining debt stock of $3.32 billion will carry a fixed
interest rate of no more than 5 percent.  The government will
have to spend about $540 million to purchase collateral for
debt principal and interest.  Multilateral bank financing, made
possible by the 1994 agreement with the IMF, will help Ecuador
meet the upfront costs of the debt settlement.  Service on the
commercial debt should average some $275 million over the next
6 years and rise thereafter unless the government takes steps
to retire some of its debt stock.
    In June 1994 Ecuador reached an agreement with the Paris
Club to reschedule $304 million in official bilateral debt
service on pre-1983 obligations that fell due in 1993 and
1994.  Ecuador is currently negotiating a bilateral
rescheduling agreement with the United States.  The Ecuadorian
government is also negotiating a major structural adjustment
loan with the World Bank.
5.  Significant Barriers to U.S. Exports
    In the early 1990's, the Borja administration initiated a
major trade liberalization program, reducing tariffs and tariff
dispersion, eliminating most non-tariff surcharges, and
enacting an in-bond processing industry (maquila) law.  As part
of the Andean Pact integration effort, the Duran Ballen
administration concluded bilateral free trade agreements with
its Andean Pact partners Colombia, Bolivia, Peru, and
Venezuela.  Ecuador applied to join GATT in September 1992 and
is currently engaged in negotiations with GATT contracting
parties over the terms of its accession to both GATT and the
WTO.  As part of its accession, Ecuador will commit to ensure
its trade regime is GATT-consistent.
    Ecuador's tariff schedule is based on the GATT's Harmonized
System of Nomenclature.  In 1991, the Borja administration
overhauled a highly protectionist tariff system, reducing
duties and fees for most imports to the 5 to 20 percent range.
Ecuador is in the process of establishing a common external
tariff system with other members of the Andean Pact.  In
September 1993, Ecuador reached an agreement with Colombia and
Venezuela to introduce a common tariff of 35 percent for cars
and light trucks.
    Customs procedures can be difficult, and have occasionally
been used to discriminate against U.S. products.  The
government is implementing a new customs reform law to reduce
corruption and improve efficiency in the customs service,
thereby eliminating a major constraint on trade.  Sanitary
requirements for imported foods, as well as some other
consumption goods have had the effect of blocking the entry of
some imports from the United States.  The government is phasing
out its policy of setting minimum prices for assessing customs
duties on textiles and some other imports.  Import bans are in
effect for used clothing, cars, and tires.  Price bands have
resulted in high effective tariffs for a variety of
agricultural products.
    All importers must obtain a prior import license from the
Central Bank.  Licenses are usually made available for all
goods, although importers sometime encounter bureaucratic
delays.  A 1976 law prevents U.S. and other foreign suppliers
from terminating existing exclusive distributorship
arrangements without paying compensation.  Foreigners may
invest in most sectors, other than public services, without
prior government approval.  There are no controls or limits on
transfers of profits or capital and foreign exchange is readily
available.
    Government procurement practices do not usually
discriminate against U.S. or other foreign suppliers.  However,
bidding for government contracts can be cumbersome and
time-consuming.  Many bidders object to the requirement for a
bank-issued guarantee to ensure execution of the contract.
6.  Export Subsidies Policies
    Ecuador does not have any export subsidy programs.
7.  Protection of U.S. Intellectual Property
    Ecuador's protection of patent and trademark rights is
based on Andean Pact Decisions 344 and 345, while copyrights
are covered by Decision 351.  The new decisions provide 20-year
patent terms (except for some pharmaceuticals), protection for
plant varieties.  Ecuador's implementing regulations provide
pipeline protection for patents, and control of parallel
imports.
    In a major breakthrough, Ecuador and the U.S. signed a
bilateral Intellectual Property Rights Agreement in October
1993 that guarantees full protection for copyrights,
trademarks, patents, satellite signals, computer software,
integrated circuit layout designs, and trade secrets.  While
the government implemented some provisions by executive order
and legislation, the Ecuadorian Congress has not yet ratified
the agreement; nor has the government introduced legislation to
harmonize local law with the agreement's requirements.  Ecuador
is committed to adopting legislation implementing the
Trade-Related Intellectual Property (TRIPS) Agreement of the
Uruguay Round, as part of its GATT/WTO accession.
    Enforcement of intellectual property rights remains a
problem for Ecuador.  Copyright infringement occurs and there
is some local trade in pirated audio and video recordings, as
well as computer software.  Local registration of unauthorized
copies of well-known trademarks is a problem since the
government lacks the resources to monitor and control such
registrations.  Some local pharmaceutical companies produce or
import patented drugs without licenses.
8.  Worker Rights
    a.  Right of Association
    Under the Ecuadorian constitution and labor code, most
workers in the private and parastatal sectors enjoy the right
to form trade unions.  The revised labor code of November 1991
raised the number of workers required for an establishment to
be unionized to 30.  Less than 10 percent of the labor force,
mostly skilled workers in parastatal or medium to large sized
industries, is organized.  Except for public servants and
workers in some parastatals, workers by law have the right to
strike.  Sitdown strikes are allowed, but restrictions on
solidarity strikes were imposed in 1991.  Ecuador does not have
a high level of labor unrest.  Most strike activity involves
public sector employees.
    b.  Right to Organize and Bargain Collectively
    Private employers with more than 30 workers belonging to a
union are required to engage in collective bargaining when
requested by the union.  The labor code prohibits
discrimination against unions and requires that employers
provide space for union activities.  The labor code provides
for resolution of conflicts through a tripartite arbitration
and conciliation board process.  Employers are not permitted to
dismiss permanent workers without the express permission of the
Ministry of Labor.  The in-bond (maquila) law permits the
hiring of temporary workers in maquila industries, effectively
limiting unionization in the sector.  Despite reforms in 1991,
employers consider the labor code to be highly unfavorable to
their interests and a disincentive to hiring union members and
to employment in general.
    c.  Prohibition of Forced or Compulsory Labor
    Compulsory labor is prohibited by both the constitution and
the labor code and is not practiced.
    d.  Minimum Age of Employment of Children
    Persons less than 14 years old are prohibited by law from
working except in special circumstances such as
apprenticeships.  Those between the ages of 14 and 18 are
required to have the permission of their parent or guardian to
work.  In practice, many rural children begin working as farm
laborers at about 10 years of age, while poor urban children
under age 14 often work for their families in the informal
sector.
    e.  Acceptable Conditions of Work
    The labor code provides for a 40 hour work week, a 15 day
annual vacation, a minimum wage, and other variable employer-
provided benefits such as uniforms and training opportunities.
The minimum wage is set by the Ministry of Labor every six
months and can be adjusted by Congress.  Mandated bonuses bring
total monthly compensation to about $123.  The Ministry of
Labor also sets specific minimum wages by job and industry so
that the vast majority of organized workers in state industries
and large private enterprises earn substantially more than the
general minimum wage.  The Duran Ballen administration has
proposed a simplification of the complex wage and bonus
system.  The labor code also provides for general protection of
workers' health and safety on the job.  Occupational health and
safety is not a major problem in the formal sector.  There are
no enforced safety rules in the agriculture sector and informal
mining.
    f.  Worker Rights in Sectors with U.S. Investment
    The economic sectors with U.S. investment include
petroleum, chemicals and related products, and food and related
products.  U.S. investors in these sectors are primarily large,
multinational companies which abide by the generous Ecuadorian
labor code.  In 1994 there were no strikes or serious labor
problems in any U.S. subsidiary.  U.S. companies are subject to
the same rules and regulations on labor and employment
practices governing basic worker rights as Ecuadorian companies.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                             355
Total Manufacturing                                    97
  Food & Kindred Products                    33
  Chemicals and Allied Products              -3
  Metals, Primary & Fabricated               18
  Machinery, except Electrical                0
  Electric & Electronic Equipment           (1)
  Transportation Equipment                  (1)
  Other Manufacturing                        31
Wholesale Trade                                        38
Banking                                               (1)
Finance/Insurance/Real Estate                           0
Services                                                0
Other Industries                                      (1)
TOTAL ALL INDUSTRIES                                  511
(1) Suppressed to avoid disclosing data of individual companies
Source: U.S. Department of Commerce, Bureau of Economic
Analysis
(###)
EGYPT1
qU.S. DEPARTMENT OF STATE
EGYPT: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                              EGYPT
                     Key Economic Indicators
        (Millions of U.S. dollars unless otherwise noted)
                                  1991/92   1992/93   1993/94
Income, Production and Employment:
Real GDP (1991/92 prices)  /1       3,947    40,341    41,177
Real GDP Growth (pct.)                N/A       2.5       3.6
Current GDP by Sector:
  Agriculture                       6,530     6,673     6,797
  Industry/Mining                   6,545     6,715     6,886
  Petroleum/Related Products        3,918     3,967     4,051
  Electricity                         668       689       707
  Construction                      2,028     2,042     2,103
  Transportation                    2,623     2,721     2,781
  Suez Canal                        1,845     1,742     1,806
  Trade                             6,545     6,712     6,878
  Finance                           1,369     1,405     1,447
  Insurance                            23        24        24
  Tourism                             729       758       608
  Housing                             708       736       775
  Public Utilities                    121       128       134
  Social Insurance                     26        28        28
  Government Services               2,814     2,925     2,995
  Personal Services                 2,980     3,076     3,154
Per Capita GDP (1991/92 prices)       715       715       714
Labor Force (000s)                 15,141    15,571    16,013
Unemployment Rate (pct.)              9.2      10.1       9.8
Money and Prices:
Money Supply (M2)                  31,511    36,576       N/A
Banks Lending Rate (pct.)  /2        20.6      19.1      17.5
Banks Saving Rate (pct.)  /2         16.2      15.1      12.1
Consumer Price Index (pct.)           9.7      15.0       N/A
Wholesale Price Index (pct.)         14.0      10.2       N/A
Exchange Rate (USD/LE)
  Free Market Rate                  0.332     0.333     0.338
Balance of Payments and Trade:
Total Exports (FOB)  /3             1,094     1,026       N/A
  Exports from U.S. (CY/USD)  /4    3,037     2,762     1,579
Total Imports (CIF)  /3             3,028     3,222       N/A
  Imports to U.S. (CY/USD)  /4        434       613       324
Trade Balance                      -1,933    -2,196       N/A
  Trade Balance with U.S. (CY)     -2,603    -2,149    -1,255
Aid from U.S. (USFY/obligations)    2,342     2,097     1,892
External Public Debt  /5            5,300     3,430     3,400
Debt Service Payments (paid)          N/A       N/A       N/A
Gold and FOREX Reserves  /6         9,900     1,480     1,600
N/A--Not available.
The Egyptian fiscal year is July 1 to June 30; Unless otherwise
indicated, all figures above are for this period.
/1 Real GDP are factor cost figures based on the 1991/92 prices.
/2 Lending and deposit rates are average estimates.
/3 Total imports (CIF) and total exports (FOB) are drawn from
the Central Bank of Egypt's annual report and are based on the
Egyptian fiscal year.
/4 U.S./Egypt trade figures are based on CY.  The 1994 figures
cover the period January 1994 through end July 1994.
/5 Ministry of Finance and Central Bank preliminary estimates.
/6 Central Bank preliminary figures, excluding gold.
1.  General Policy Framework
    Egypt is instituting reforms to reduce the role of the
state and increase reliance on market mechanisms.  In 1991,
Egypt lifted most foreign-exchange controls, unified the
exchange rate, instituted a sales tax, reduced the budget
deficit, freed interest rates and began financing the deficit
through treasury bill auctions.  In the last three years, a
stable Egyptian pound (LE) against the dollar and high interest
rates have prompted a preference for the use of pounds in favor
of dollars by the economy and fed a steady growth in the money
supply.  While the macroeconomic stabilization program has
proved highly successful, the Government has proceeded more
cautiously in key areas such as trade policy and
privatization.  Three years into the economic reform, the
international financial institutions and donors are concerned
that the Government's timid approach to structural reform is
condemning the economy to prolonged stagnation.
    Follow-on IMF and World Bank programs focus on supporting
the private sector.  The Government has taken tentative steps
toward privatization of the public sector, which represents
approximately 70 percent of industrial production.  In 1993,
the 314 public sector enterprises were organized into 17
holding companies, which are permitted to sell, lease or
liquidate company assets, and sell Government-owned shares.
The Government claims to have sold approximately LE 4.5 billion
(USD 1.3 billion) in assets to date.  Despite these claims,
delays in the procedure, disagreements over the valuation
process, and a general reluctance to follow through on bids
have slowed the process to a crawl.  Outright sales have been
few and share flotation, a method now favored by the
Government, have been hampered by the weakness of the
long-dormant stock exchange.  Further, many important public
sector companies are not candidates for privatization,
including the national airline (Egypt Air), telecommunications
(Arento), and electricity utilities (EEA).  Trade reform has
been significant; but domestic industry remains protected by
relatively high tariff rates and non-tariff import barriers.
In 1993, import bans on most commodities were eliminated, and
in 1994 the maximum tariff rate was reduced from 80 percent to
70 percent (with a few exceptions).
    As reforms proceed and the private sector gains more
strength, exporters of U.S. products (which are popular in
Egypt) may find improved market opportunities in Egypt.  This
will depend on the Government's ability to spur private
investment, which remains dormant outside of the tourism
sector.  Potential investors await progress in privatization
and the elimination of bureaucratic barriers before proceeding
with new projects.
    The United States is Egypt's largest supplier of imports.
U.S. exports to Egypt in 1993 totaled USD 2.8 billion.
Annually over USD 200 million worth of exports are financed
through USAID's Commodity Import Program, over USD 400 million
through various USAID projects and about USD 165 million under
Department of Agriculture programs (GSM/102).  A substantial
portion of the USD 1.3 billion in U.S. military assistance
finances U.S. exports to Egypt.
2.  Exchange Rate Policy
    Egypt, in November 1991, adopted a free-market exchange
system subject only to Central Bank buying and selling
intervention.  The exchange rate is essentially free of
restrictions now and non-bank dealers are allowed.  High
interest rates and stable exchange rates have stimulated large
capital inflows and a change in preference favoring the use of
pounds instead of U.S. dollars by the economy.  Central Bank
foreign exchange reserves stand at USD 17 billion.  New inflows
are concentrated in short-term deposits and Treasury bills.  A
new foreign currency law was passed in April 1994, eliminating
all restrictions on repatriation of tourism and export proceeds.
    Exchange rate stability and the sharp increase in the
availability of hard currencies, now readily accessible in the
market, should increase opportunities for U.S. exports to Egypt
when demand conditions become more favorable and with expected
future reductions in trade restrictions.  Egypt's export
competitiveness, however, has eroded significantly due to the
exchange rate which has not been depreciating to compensate for
annual inflation rates of 10-13 percent.
3.  Structural Policies
    Egypt is committed to eliminating most domestic price
controls.  The Government freed all industrial prices with the
exception of pharmaceuticals, cigarettes, rationed sugar and
rationed edible oil.  The Government still subsidizes
mass-consumption bread, which stimulates demand for U.S.
wheat.  The Government has shown no sign of relaxing price
controls on pharmaceutical products, which are administered
inflexibly and are financially harmful to U.S. and other
foreign pharmaceutical companies.  While energy,
transportation, and water prices are expected to remain
administered, price increases have brought domestic petroleum
product prices to about 88 percent of international prices
(June 1993) and electricity prices to about 77 percent of
long-run marginal costs (the exact figure is in dispute between
the World Bank and the Government). The Government is committed
to raising energy prices further.  Additionally, the Government
is in the process of deregulating the cotton sector and
reactivating the cotton exchange.
    Despite much progress, domestic industry is still protected
by high tariff rates.  In March 1994, the maximum tariff rate
was cut to 70 percent and tariffs between 70 and 30 percent
were reduced by ten percentage points.  The lower rate was
maintained at five percent.  The Government is committed to
reduce further the maximum custom tariff to 60 percent by
end-1994 and 50 percent by mid-1995.  Several commodities
including passenger cars, tobacco products, and alcoholic
beverages are exempt from the tariff ceiling.  In February
1994, the Government imposed "service fee" surcharges of three
and six percent (depending on the custom duty of the imported
item), which undid much of the benefit of the customs rate
reduction.  After the World Bank cried foul, the Government
undertook to abolish this surcharge by July 1995.  In addition
to the custom tariff, a sales tax ranging between five and 25
percent is added to the final customs value of the imported
item.  Assembly industries may benefit from lower custom rates
on imported goods if they meet a local content requirement of
40 percent.  Continued liberalization of the import regime and
free-market pricing of domestically-produced commodities should
help U.S. goods competing in the Egyptian market.
    The Government instituted a General Sales Tax (GST), at
first applicable at the import and manufacturing level, in May
1991.  The GST is to develop in stages into a full value added
tax by 1995.  Taxes on certain consumer goods (alcoholic and
soft drinks, tobacco and petroleum products) not integrated in
the GST were raised and progressively converted to ad valorem
taxes.  A Unified Income Tax has been passed which reduces
marginal tax rates, simplifies the tax rate structure, and aims
to improve administration of tax policy.  Both the GST and the
income tax are designed to broaden the tax base and compensate
for the loss of customs revenues caused by tariff reductions.
4.  Debt Management Policies
    In early 1991, official creditors in the Paris Club agreed
to reduce by 50 percent the net present value of Egypt's
official debt, phased in three tranches of 15, 15 and 20
percent.  Release of the three tranches was conditioned on
successful review of Egypt's reform program by the IMF.  At
about the same time, the U.S. Government forgave 6.8 billion
dollars of high-interest military debt.  As a result, Egypt's
total outstanding medium- and long-term debt has declined to
about USD 34 billion, and the debt service ratio has been
reduced from 46 percent to around 17 percent.  Egypt has
cleared-up its arrearages to Paris Club creditor countries and
is committed to remaining current on its Paris Club payments.
The reduction in Egypt's debt service bill has helped it reduce
dramatically the budget deficit, create macroeconomic stability
and build a high level of reserves (approximately USD 17
billion).  In September 1993, the IMF announced an extended
fund facility of Special Drawing Rights (SDR) 400 million
(USD 556 million), covering the period June 1993 to June 1996.
The World Bank is working in parallel with the IMF on a
Structural Adjustment Monitoring Program (SAMP).  In July 1994,
the Paris Club postponed implementation of the final tranche of
debt relief, due to a lack of satisfactory IMF review, as
required by the agreed minute.
5.  Significant Barriers to U.S. Exports
    Import Barriers:  Egypt does not require import licenses.
In July 1993, the Government canceled the list of items
requiring prior approval before importation.  The import ban
list, which included 210 products in 1990, was significantly
reduced in July 1993 and it now includes three commodity
groups: poultry, fabrics and apparel, which represent
approximately four percent of total production.  The Government
has pledged to remove the ban on poultry in 1994 and review the
ban on textile products in conjunction with GATT negotiations
on the Multifiber Arrangement.  For food and non-food imports
that have a shelf-life, the Government mandates that they
should not exceed half the shelf-life at time of entry into
Egypt.
    Services Barriers:  In March 1993, the Bank Law was amended
to allow existing foreign bank branches to conduct local
currency dealings, and two U.S. bank branches have received
licenses to do so.  The domestic insurance market is closed to
foreign companies, but they may operate in free trade zones as
minority partners.  Four public sector insurance companies (one
of which is a reinsurance company) dominate the market,
although three private sector Egyptian companies exist.  Two
joint ventures, each with 49 percent ownership, operate in the
free zones.  Other services barriers include the following:  a
screen quota exists for foreign motion pictures; only Egyptian
nationals may become certified accountants; there is no law
regulating leasing activities in Egypt; and there is regular
censorship of films and printed materials.
    Standards, Testing, Labeling and Certification:  Egypt is
party to the GATT Standards Code.  The Egyptian Government
pledged that it would not introduce any new non-tariff barriers
as it reduced tariff rates and eliminated import bans.  When
the import ban list was reduced in August 1992 and July 1993,
however, many items that came off that list were added to the
list of commodities requiring inspection for quality control.
In August 1994, five more items were added to the list, which
now consists of 131 items, including food stuffs, spare parts,
construction products, electronic devices, appliances, and many
consumer goods.  Although Egyptian authorities stress that
standards applied to imports are the same as those applied to
domestically-produced goods, importers report that testing
procedures for imports differ, and tests are carried out with
faulty equipment by testers who often make arbitrary
judgments.  Moreover, importers face the problems of
ill-defined or unwritten product standards, and backlogs
resulting from authorities having limited staff or too few
inspection machines.
    All imported goods should be marked and labeled.  The
following information must be written on each package in clear
Arabic letters in a non-erasable manner:  the name of the
product, type and brand; country of origin; date of production
and expiry date; any special data on transportation and
handling of the product.  An Arabic-language catalog should
accompany imported tools, machines and equipment.
    Investment Barriers:  In early 1991, Egypt replaced its
investment licensing regime with a system for automatic
approval of investments in sectors not on a "Negative List".
The list now includes:  all military products and related
industries; tobacco and tobacco products; and investments in
the Sinai (except oil, gas, and mineral exploration). Foreign
investors seeking incentives (primarily tax holidays) under
Investment Law 230 must obtain project approval from the
General Authority of Investment (GAFI), which may cause
delays.  Industrial establishments may also be formed under
Companies Law 159, but they will not receive incentives or
protections offered by Law 230.  The U.S.-Egypt Bilateral
Investment Treaty (BIT) was implemented in June 1992.  While
its safeguard provisions are generally no more liberal than
those in Law 230, it provides a further measure of protection
to American investors.  The BIT has not yet resulted in
significant new U.S. investments which would stimulate Egyptian
demand for U.S. machinery, spare parts, and technical services.
    Government Procurement Practices:  Egypt has not signed the
GATT Government Procurement Code.  Although Egypt does not
employ systematic or discriminatory policies which adversely
affect U.S. businesses, the Government buys from public sector
firms whenever possible.  Egypt's tender regulations are
written by the Government, for the Government's benefit.  A
contractor/supplier's safeguard must be negotiated before
contract signing, particularly in defining force majeure,
"final acceptance", and dispute resolution.  Egyptian bidders
(public and/or private sector) receive a 15 percent price
preference.  Government tenders should be awarded to the best
qualified, lowest bidder; however, it is typical for Government
negotiators to bargain with several bidders.  There is no
penalty for Government delays in making an award decision or in
returning bid or performance bonds.  Egypt does not observe the
Arab League boycott of Israel.  Egypt has moved away from
government-to-government barter agreements and toward private
sector initiatives.
    Customs Procedures:  Egyptian customs procedures are
complicated and rigid in areas such as duty rates.  Customs
procedures are subjective when it comes to identifying whether
a commodity fits in one tariff category or another.  In
February 1994, Egypt implemented the Harmonized System (HS)
which replaces the previously used CCCN (Customs Commodity
Classification Nomenclature).  This should help eliminate the
arbitrariness because it identifies items by a ten-digit code
which allows simpler and more accurate classification of
commodities.  Tariff valuation is based on the so-called
"Egyptian selling price" based on the commercial invoice that
accompanies a product the first time it is imported from any
source, although some allowance is given on an ad hoc basis for
different sources of supply (such as expensive versus
cheap-labor source countries).  Customs authorities retain
information from the original commercial invoice and expect
subsequent imports of the same product to have a value no lower
than that noted on the invoice from the first shipment.  As a
result of that expectation, and the belief that under-invoicing
is widely practiced, customs officials routinely increase
invoice values from 10 to 30 percent.
    The government does not abide by tariff rates outlined in
the GATT, and in late 1991, importers began to experience
difficulties with customs officials who refused to apply the
lower rates that Egypt had offered in GATT for imports from
GATT member countries.  Subsequent to customs authority
actions, the Government submitted to GATT a request for a
waiver of its obligation to provide these lower rates.  The
waiver was approved with the Government pledging to negotiate
new rates with its GATT partners.
6.  Export Subsidies Policies
    Direct export subsidies do not exist in Egypt.  Exporting
industries, including Investment Law 230 projects, may benefit
from duty exemptions on imported inputs (if released under the
temporary release system).  Alternatively, these industries may
receive rebates on duties paid on imported inputs at the time
of export of the final product (if released under the drawback
system).  Under its commitments to the World Bank, the Egyptian
Government has increased energy and cotton procurement prices,
and has abolished privileges enjoyed by public sector
enterprises (subsidized inputs, credit facilities, reduced
energy prices and preferential custom rates), thus reducing the
indirect subsidization of exports.
7.  Protection of U.S. Intellectual Property
    Egypt, as a party to the Berne Convention for the
Protection of Literary and Artistic Works and the Paris
Convention for the Protection of Industrial Property (inter
alia), has undertaken to protect U.S. intellectual property.
Egyptian law provides protection for most forms of intellectual
property rights (IPR).  However, IPR enforcement, although
improving, is still ineffective.  The Egyptian government
passed an improved copyright law in 1992 and added software
protection in early 1994.  A new patent law is currently under
consideration.  Due to Egypt's progress on copyright
protection, the U.S. Trade Representative lowered Egypt from
the "Priority Watch List" to the "Watch List" in April 1994.
The U.S. Government is working closely with Egypt to improve
intellectual property rights protection.
    Patents (product and process):  Egypt's 1949 Patent Law
excludes certain categories of products and contains
overly-broad compulsory licensing provisions.  Industrial
designs also receive protection under the patent law through
registration with the Bureau of Industrial Designs in the
Ministry of Supply.  Pharmaceuticals and food products are
among those excluded from patent protection under Egyptian
law.  In addition, for patentable products or processes, the
term of patent protection is limited to 15 years from the
application filing date.  A five-year renewal of a patent
may be obtained, but only if the invention is of special
importance and has not been worked adequately to compensate
patent holders for their efforts and expenses.  Compulsory
licenses, which limit the effectiveness of patent protection,
are granted if a patent is not worked in Egypt within three
years or if the patent is worked inadequately.  In 1994 U.S.
officials conferred with Egyptian officials as they considered
revisions to the existing patent law.  At the end of the year,
the GOE had made substantial progress toward a draft law.
However, the U.S. government continues to express its concern
that the new law include adequate patent protection for
products not currently covered (including pharmaceuticals, food
products and agricultural chemicals) and that the new law be
consistent with international conventions to which Egypt is a
party, particularly the Paris Convention.
    Trademarks:  Trademark protection is provided by Law 57 of
1939.  Egypt is a member of the Paris Convention for Protection
of Industrial Property of 1883, the Madrid Convention of 1954,
and the Nice Convention for the Classification of Goods and
Services.  Instances of trademark infringement have been cited
by U.S. and other foreign firms operating in Egypt.  The
Trademark Law is not enforced strenuously and the courts have
only limited experience in adjudicating infringement cases.
Fines amount to less than USD 100 per seizure, not per
infringement, although criminal penalties are theoretically
available.
    Copyrights:  In response to calls for improved legal
protection for copyrighted works, the Government passed Law 38
of 1992, amending the 1954 Copyright Law.  The amendments did
not resolve all areas of U.S. concern, however.  The Berne
Convention, to which Egypt acceded in 1977, is self-executing
according to Egypt's Constitution.  Thus, in cases where the
coverage of the Egyptian copyright law may be vague or
non-existent, such as protection for satellite or cable
transmissions and data banks, and on the question of
retroactivity, U.S. copyright holders may be able to rely
directly on Berne Convention provisions in the Egyptian
courts.  As a result of U.S. lobbying, in March 1994, the
Egyptian government passed Law 29 which amended some provisions
of Law 38 to ensure that computer software was afforded
protection as a literary work (allowing it a 50-year term of
protection).  In addition, in April 1994, the Government issued
a ministerial decree which clarifies rental and public
performance rights, protection for sound recordings, and the
definition of personal use.  Copyright piracy is still
widespread and affects all categories of works.  Although
motion picture piracy (in video cassette format) has declined
over the past year, holders of copyrights on sound recordings,
printed matter (notably medical textbooks), and computer
software continue to suffer harm.  Most piracy seems to be for
the local market, with some imports of pirated works from
Lebanon and the Gulf States.
    New Technologies:  There is no separate legislation
protecting semiconductor chip layout design, although Egypt
signed the Washington Semiconductor Convention.  Further, plant
and animal varieties do not receive protection under current
    Estimated 1993 trade losses due to piracy of U.S.
intellectual property were USD 84 million of which
approximately USD 11 million were due to video piracy (a
significant drop from the 1992 level of USD 37 million prior to
the passage of Copyright Law 38/92), and USD 52 million in
losses due to computer software piracy.  U.S. officials
continue to stress the need for better enforcement efforts by
Egyptian authorities and to underscore the importance of
following police activity with court decisions and prosecutions.
8.  Worker Rights
    a.  The Right of Association
    Egyptian workers may, but are not required to, join trade
unions.  A union local, or worker's committee, can be formed if
50 employees express a desire to organize.  Most members, about
25 percent of the labor force, are employed by State-owned
enterprises.  The law stipulates that "high administrative
officials" in Government and the public sector may not join
unions.  There are 23 industrial unions, all required to belong
to the Egyptian Trade Union Federation (ETUF), the sole legally
recognized labor federation.  However, the International Labor
Organization (ILO) has long noted that a law requiring all
unions to belong to a single federation infringes on a worker's
freedom of association.  The Government has shown no sign that
it intends to accept more than one federation and ETUF
leadership asserts that it actively promotes worker interests
and that there is no need for another federation.  ETUF
leadership has close relations with the ruling National
Democratic Party:  some ETUF leaders are members of the
legislature.  While ETUF leaders speak vigorously on behalf of
workers' concerns, public confrontations between ETUF and the
government are rare.  Disputes are often resolved by consensus
behind closed doors.
    b.  The Right to Organize and Bargain Collectively
    The Government has drafted a new labor law which is under
discussion in committee in the People's Assembly.  The proposed
law provides statutory authorization for collective
bargaining.  Under the current law, unions may negotiate work
contracts with public sector enterprises if the latter agrees
to such negotiations, but unions otherwise lack collective
bargaining power in the public sector.  Under current
circumstances, collective bargaining does not exist in any
meaningful sense because the government sets wages, benefits,
and job classifications by law.  Larger firms in the private
sector generally adhere to such government-mandated standards.
Labor law and practice are the same in the export processing
zones as in the rest of the country.
    c.  Prohibition of Forced or Compulsory Labor
    Forced or compulsory labor is illegal and not practiced.
    d.  Minimum Age of Employment of Children
    The minimum age for employment is 12.  Education is
compulsory until age 15.  An employee must be at least 15 to
join a labor union.  The Labor Law of 1981 states that children
12 to 15 may work six hours a day, but not after seven p.m.,
and not in dangerous activities or activities requiring heavy
work.  Child workers must obtain medical certificates and work
permits before they are employed.  A 1988 survey found that
1.4 million children between the ages of 6 and 14 work in
Egypt.  A 1989 study estimated that two-thirds of child labor,
perhaps 720,000 children, work on farms.  However, children
also work as apprentices in repair and craft shops, in heavier
industries such as brick making and textiles, and as workers in
leather factories and carpet-making, which largely supply the
export market.  While local trade unions report that labor laws
are well-enforced in state-owned enterprises, enforcement by
the Ministry of Labor in the private sector, especially in
family-owned enterprises, appears quite lax.
EGYPT2
	U.S. DEPARTMENT OF STATE
EGYPT: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
    e.  Acceptable Conditions of Work
    For government and public sector employees, the minimum
wage is approximately USD 20 a month for a six-day, 48-hour
work week.  Base pay is supplemented by a complex system of
fringe benefits and bonuses that may double or triple a
worker's take-home pay.  It is doubtful that the average family
could survive on a worker's base pay at the minimum wage rate.
The minimum wage is also legally binding on the private sector,
and larger private companies generally observe the requirement
and pay bonuses as well.  Smaller firms do not always pay the
minimum wage or bonuses.  The Ministry of Manpower sets worker
health and safety standards, which also apply in the free trade
zones, but enforcement and inspection are uneven.
    f.  Rights in Sectors with U.S. Investment
    There are U.S. investments in the following industries
(inter alia):  petroleum, food and related products, metal,
non-electric machinery, electric and electronic equipment, and
transportation equipment.  Rights available to workers as
described in the foregoing sections also apply to workers in
these industries.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                              1,087
Total Manufacturing                                       81
  Food & Kindred Products                    (1)
  Chemicals and Allied Products               6
  Metals, Primary & Fabricated                7
  Machinery, except Electrical                5
  Electric & Electronic Equipment             5
  Transportation Equipment                   (1)
  Other Manufacturing                         0
Wholesale Trade                                           41
Banking                                                   (1)
Finance/Insurance/Real Estate                             (1)
Services                                                  36
Other Industries                                          (1)
TOTAL ALL INDUSTRIES                                   1,374
(1) Suppressed to avoid disclosing data of individual companies
Source: U.S. Department of Commerce, Bureau of Economic
Analysis
(###)
EL_SALVA1
&L&LU.S. DEPARTMENT OF STATE
EL SALVADOR: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                           EL SALVADOR
                     Key Economic Indicators
    (Millions of current U.S. dollars unless otherwise noted)
                                      1992      1993     1994 1/
Income, Production and Employment:
Real GDP
  (millions of 1962 colones) 2/    3,563.0   3,761.7   3,978.2
Real GDP Growth (pct.)                 4.8       5.1       5.8
GDP (at current prices)            6,543.1   7,600.9   8,784.4
By Sector:
  Agriculture                        606.9     651.8     797.2
  Energy/Water                       153.4     198.7     230.7
  Manufacturing                    1,236.3   1,447.8   1,669.8
  Construction                       186.0     237.5     279.8
  Rents                              367.7     400.9     450.9
  Financial Services                 172.7     213.5     247.7
  Other Services                     682.2     779.4     894.2
  Public Administration              461.2     495.9     550.3
  Net Exports of Goods & Services -1,028.5  -1,077.2  -1,228.9
Nominal Per Capita GDP             1,201.0   1,495.0   1,632.0
Urban Labor Force (000s) 3/            893       965     1,041
Unemployment Rate (pct.) 3/            7.9       7.8       7.5
Money and Prices:
Money Supply
  (M2 annual pct. growth)             31.4      35.7      21.4
Base Interest Rate 4/                16-18     16-19     16-19
Personal Saving Rate (on deposits)   12-14     11-15     11-14
GDP Deflator (pct. change)             8.9      14.9       8.8
Consumer Price Index                  19.9      12.0      10.0
Exchange Rate (colon/USD)             8.37      8.73      8.75
Balance of Payments and Trade:
Total Exports (FOB)                    597       731       823
  Exports to U.S.                    257.3     219.0     173.0
Total Imports (CIF)                1,698.5   1,912.0   2,142.0
  Imports from U.S.                    650       844       910
Aid from U.S. 5/                       270       161       215
Aid from Other Countries              20.0      44.3      30.0
External Debt                      2,337.5   1,924.0   2,051.0
Debt Service Payments (paid)           346       290       365
Gold and Foreign Exch. Reserves      554.2     645.0     780.0
Trade Balance                     -1,101.5  -1,181.0  -1,319.0
  Trade Balance with U.S.           -392.7    -625.0    -737.0
1/ 1994 figures are July Central Bank estimates.
2/ GDP at market cost; 1962 base currently being revised by
Central Bank to 1988; no dollar figures available.
3/ Ministry of Planning household survey.
4/ Loan rate.
5/ Excludes military aid.
1.  General Policy Framework
    The Salvadoran economy continues to reap the benefits of
sound economic programs, a commitment to a free economy, and
careful fiscal management.  Real GDP growth in 1994 reached an
estimated 5.8 percent, led by a strong performance in the
service and construction sectors, while inflation was held to
10 percent.  Exports, particularly to the reconstituted Central
American Common market, expanded notably during the year.  The
new president, Armando Calderon Sol, who took office in June
1994, has stated clearly his intention to pursue the trade
liberalization and economic reform programs begun by his
predecessor.  However, the post-war economic recovery is
fragile, heavily dependent on a favorable balance of payments
position maintained by large amounts of remittances from
Salvadorans abroad.
    El Salvador turned decisively toward market-oriented
economics in the four years under President Alfredo Cristiani
(1989-1994).  The Cristiani government rejected the
import-substitution model and pursued trade liberalization and
export-led growth.  From a structure with tariffs as high as
240 percent, the government established a system in which most
duties fall in a range of 5-20 percent.  Nontariff barriers and
import licensing were almost totally abolished.  The Central
American Common Market has been reactivated, with most commerce
duty-free.  Government agricultural monopolies were dismantled,
as were internal price controls on 240 consumer goods.  Trade
has grown 12 percent (higher than real economic growth) from
1993 to 1994; although the absolute value of merchandise
exports is still less than half the value of imports.
    The government's drive to liberalize trade has been matched
by reforms in the financial markets.  Parallel exchange rates
were abolished, and the foreign exchange market was opened to
both banks and dealers.  The colon, currently valued at about
8.7 to the dollar, has traded in a narrow range for the past
two years, maintained to a certain extent by modest
interventions on the part of the Central Bank and remittances.
The banking system has been reprivatized.  Controls on interest
rates have been removed, allowing rates to return to real
positive levels.  A generally disciplined monetary policy has
reduced inflation from 12 percent in 1993 to an estimated 10
percent in 1994.
    Fiscal policy has been the biggest challenge for the
Salvadoran government.  The peace accords signed between the
government and the Faribundo Marti Liberation Movement (FMLN)
in December 1991 committed the government to heavy expenditures
for transition programs and social services.  International aid
has not been as generous as expected.  The government has
focussed on improving the collection of its current revenues,
relying more on its own resources than on foreign aid.
Government revenues, half of them generated by the new Value
Added Tax (IVA), have increased substantially during 1993 and
1994.  The share of domestic taxes in GDP is expected to grow
from 9.4 percent in 1993, to 10.6 in 1994.  Efforts now are
underway to improve tax collection.  Government planners
estimate that the IVA is presently contributing only 60 percent
of its potential revenue.  Overall, enhanced revenues --
including IVA and income tax and improved collection of import
duties -- and some expenditure reduction are expected to
sharply reduce the need for domestic financing of the deficit.
    The government completed implementation of an Integrated
Accounting System in the public sector in June 1994.  It has
also taken steps to improve its financial control over public
enterprises and is pursuing privatization of key institutions
-- the National Telecommunications Enterprise (ANTEL), parts of
the Hydroelectric Production Agency (CEL), and the Social
Security Institute (ISSS). Other important fiscal reforms
include the repeal of the wealth tax in April 1994, approval of
a new Customs Law in May 1994, and elimination of all import
duty exemptions in July 1994, including exemptions to public
enterprises.
2.  Exchange Rate Policy
    A multiple exchange rate regime that had been used to
conserve foreign exchange was phased out during 1990 and
replaced by a free-floating rate.  The colon depreciated from
five to the dollar in 1989 to eight in 1991 but has remained
relatively stable since.  Large inflows of dollars in the form
of family remittances from Salvadorans working in the U.S.
offset a substantial trade deficit.  The monthly average of
remittances reported by the Central Bank is slightly less than
$80 million, representing more than $900 million for 1994. In
addition, the Central Bank intervenes periodically in the
exchange market to moderate speculative pressures and smooth
out rate fluctuations.
3.  Structural Policies
    U.S. exports to El Salvador have increased over 60 percent
since 1991, accounting for some 40 percent of El Salvador's
total imports.  The key policy change driving this trend was
the government's decision to radically lower tariff barriers.
El Salvador's open trade policies are not likely to be
reversed.  Although the country has run up huge trade deficits
in recent years, they have been more than offset by
remittances, short-term capital inflows, official transfers and
loans.  In fact, El Salvador's net international reserves are
estimated at $780 million as of December 1994, up 20 percent
over 1993.  Also contributing to the surge in imports is the
robust rate of economic growth and a post-war construction
boom.  Over 73 percent of imports in 1994 were in the
categories of capital and intermediate goods.
    Prices, with the exception of bus fares and utility rates,
are set by the market.  The 10 percent value-added tax is
applied equally to all goods and services, imported and
domestic, with a few limited exceptions (dairy products, fresh
fruits and vegetables, and medicines).  It has not proven to be
an impediment to import sales.  In October 1994, the government
suspended a price band mechanism, introduced in 1990 to
regulate tariffs on basic grains, and imposed a fixed tariff of
20 percent ad valorem.  However, Salvadoran officials have
indicated that they plan to reinstitute price bands sometime in
1995, probably on a regional basis.
4.  Debt Management Policies
    El Salvador's external debt decreased sharply in 1993,
chiefly as a result of an agreement under which the United
States forgave about $461 million of official debt.  As a
result, total debt service decreased  by 16 percent over 1992.
In 1994, El Salvador received $265 million in external aid,
from multilateral institutions, bilateral sources, and private
sources.  External debt crept up from $1.924 billion in 1993 to
$2.142 billion in 1994 and debt service rose correspondingly to
$365 million.  However, El Salvador has eliminated all payment
arrears, and its debt burden is considered moderate.
    The government of El Salvador has been successful in
obtaining significant new credits from the international
financial institutions.  Among the most recent loans are a
second structural adjustment loan from the World Bank, for
$52.5 million, another World Bank loan of $40 million for
agricultural reform, a $20 million loan from the Central
American Bank for Economic Integration to be used to repair
roads and a $60 million Interamerican Development Bank loan for
poverty alleviation projects.
5.  Significant Barriers to U.S. Exports
    There are no legal barriers to U.S. exports of manufactured
goods or bulk, non-agricultural commodities to El Salvador.
Virtually all import licenses and prohibitive tariffs were
removed by the Cristiani administration.  U.S. goods face
tariffs from 5 to 20 percent with higher duties only applied to
automobiles, alcoholic beverages, textiles and some luxury
items.  As of January 1, 1995 the tariff on textiles will
decrease from 35 to 25 percent.
    Generally, standards have not been a barrier to the
importation of U.S. consumer-ready food products.  The Ministry
of Health requires a Certificate of Free Sale showing that the
product has been approved by U.S. health authorities for public
sale.  Importers also may be required to deliver samples for
laboratory testing, but this requirement has not been
enforced.  All fresh foods, agricultural commodities and live
animals must be accompanied by a sanitary certificate.  Basic
grains and dairy products also must have import licenses.
Authorities also have not enforced the Spanish labeling
requirement.
    Restrictions on foreign banks entering El Salvador have
been removed.  Foreign banks now face the same requirements as
Salvadoran banks and can offer a full range of services.
    El Salvador officially promotes foreign investment in most
sectors of the economy.  The foreign investment law allows
unlimited remittance of net profits for most types of
companies, and up to 50 percent for commercial or service
companies.  Both electricity generation and distribution and
telecommunications remain in the hands of government
monopolies.  The government is privatizing some services in
these industries, improving the prospects of U.S. exports in
these sectors.  One U.S. power company has already invested in
a local generating station.  It is possible that the government
will choose to accelerate this trend.
    El Salvador is a member of the GATT and expects to become a
member of the World Trade Organization.  The government is
drafted legislation to implement the full range of its Uruguay
Round commitments.
6.  Export Subsidies Policies
    El Salvador does not employ direct export subsidies.  It
does offer a six percent rebate to exporters of non-
traditional goods based on the FOB value of the export, but
exporters have found it very difficult to collect.  In
addition, exporters benefit from an exemption from the tax on
net worth.  Free zone operations are not eligible for the
rebate but enjoy a 10-year exemption from income tax as well as
duty-free import privileges.
    In October 1994, the Salvadoran Central Bank announced that
it would write off $5.7 million in credits granted to some
10,000 small businesses that sustained losses during the armed
conflict.  El Salvador is a not member of the GATT subsidies
code.
7.  Protection of U.S. Intellectual Property
    El Salvador's new law protecting intellectual property
rights took effect in October 1994.  Implementing regulations
have not yet been promulgated, but the law is being enforced.
Local representatives of U.S. companies report a significant
drop in violations, particularly in the areas of sound and
video recordings.  However the government has been hampered by
resource limitations and a burgeoning crime rate that has
forced it to give priority to crime-related issues.  El
Salvador remains on the Special 301 watch list pending U.S.
government evaluation of the law's implementation.
    The new law addresses several key areas of weakness.
Patent terms are lengthened to 20 years (15 for
pharmaceuticals), and the definition of patentability is
broad.  Compulsory licensing applies only in cases of national
emergency.  Computer software is also protected, as are trade
secrets.  Trademarks, however, are still regulated by the
Central American Convention for the Protection of Industrial
Property.  It is an occasional practice to license a famous
trademark and then seek to profit by selling it when the
legitimate owner wants to do business in El Salvador.  The
government is working on consensual amendments to the
convention to eliminate this problem.
    El Salvador is a signatory to the Geneva phonograms and
Rome copyright conventions.  The government has signed the
Berne convention on the protection of artistic and literary
works.  The National Assembly ratified the Paris Convention on
the protection of industrial property in January 1994.
8.  Worker Rights
    a.  The Right of Association
    Approximately 150 unions, public employee associations, and
peasant organizations represent over 300,000 Salvadorans, about
20 percent of the total work force.  Private sector workers can
form unions and strike, while public sector workers can form
employee associations, but may not strike.  (Despite the
restriction, there have been many strikes in the public
sector.)  Major reforms to the labor code were passed in April
1994, streamlining the process required to form a union;
extending union rights to agricultural, independent, and
small-business workers; and extending the right to strike to
union federations.
    b.  The Right to Organize and Bargain Collectively
    Only private sector unions and unions at autonomous public
agencies have the right to collective bargaining, though in
practice government workers do so as well.  The employment of
union officials is protected by law until one year after the
end of their term. This measure is generally respected, but
some organizers have been dismissed before receiving union
credentials.  The labor code reforms attempt to address this
problem.
    c.  Prohibition of Forced or Compulsory Labor
    The Constitution prohibits forced or compulsory labor
except in the case of calamity and other instances specified by
law.  This prohibition is followed in practice.
    d.  Minimum Age of Employment in Children
    The Constitution prohibits the employment of children under
the age of 14.  Exceptions may be made only where such
employment is absolutely indispensable to the sustenance of the
minor and his family, most often the case for children of
peasant families, who traditionally work with their families
during planting and harvesting seasons.  Children also
frequently work in small businesses as laborers or vendors,
despite the legal requirement that they complete schooling
through the ninth grade.  Child labor is not found in the
industrial sector.
    e.  Acceptable Conditions of Work
    In July the government raised the minimum wages for
commercial, industrial, service, and agro-industrial employees
by 13 percent.  The new rate for industrial and service workers
was 35 colones per day (about $4); agro-industrial employees
must be paid 26 colones (about $3), including a food allowance,
per day.  Despite these increases, approximately 40 percent of
the population lives below the poverty level.  The law limits
the workday to eight hours and the work week to 44 hours,
requiring premium pay for additional hours.  Occupational
safety remains a problem because of outdated regulations,
limited enforcement resources, and a reluctance to strictly
enforce regulations.
    f.  Rights in Sectors with U.S. Investment
    U.S. investment in El Salvador is distributed fairly evenly
inside and outside the so-called "maquilas" or free zones.  The
labor laws apply equally to all sectors, including the free
zones.  However, in practice businesses in the free zones
discourage union activity; those trying to form unions have
been fired.  The Ministry of Labor lacks the resources and
support from the legal system to adequately monitor the
activities of the companies in the free zones.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                              44
Total Manufacturing                                   (1)
  Food & Kindred Products                   (1)
  Chemicals and Allied Products             (1)
  Metals, Primary & Fabricated                7
  Machinery, except Electrical                0
  Electric & Electronic Equipment            -1
  Transportation Equipment                    0
  Other Manufacturing                       (1)
Wholesale Trade                                         2
Banking                                               (1)
Finance/Insurance/Real Estate                           4
Services                                              (1)
Other Industries                                      (1)
TOTAL ALL INDUSTRIES                                  104
(1) Suppressed to avoid disclosing data of individual companies
Source: U.S. Department of Commerce, Bureau of Economic
Analysis
(###)
ESTONIA1
^A^AU.S. DEPARTMENT OF STATE
ESTONIA: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                             ESTONIA
                     Key Economic Indicators
       (Millions of U.S. dollars unless otherwise noted) 1/
                                     1992      1993      1994
Income, Production and Employment:
Real GDP (1985 prices)                N/A       N/A       N/A
Real GDP growth (pct.)              -14.8       2.0       6.0 2/
GDP (at current prices)           1,105.0   1,769.9   1,379.2 3/
By Sector:  (pct.)
  Agriculture                          13        11         7
  Energy/Water                          5         4         3
  Manufacturing                        33        27        18
  Construction                          5         6         5
  Rents                                 3         4         6
  Financial Services                    2         3         3
  Other Services                       34        34        45
  Government/Health/Education           6        10         8
Net Exports of Goods & Services       N/A       N/A       N/A
Real Per Capita GDP (1985 base)       N/A       N/A       N/A
Labor Force (000s)                  873.0     853.9     840.8 4/
Unemployment Rate (pct.)              1.7       2.2       1.5 4/
Money and Prices:
Money Supply (M2)                   209.0     439.3     493.8
Base Interest Rate                    N/A       N/A       N/A
Personal Saving Rate                 15.5      14.8      11.0
Retail Inflation                      N/A       N/A       N/A
Wholesale Inflation                   N/A       N/A       N/A
Consumer Price Index                  N/A      35.6      26.8 3/
Exchange Rate (official)             12.9      13.2      12.2
Balance of Payments and Trade:
Total Exports (FOB)                 430.1     806.2     967.9 5/
  Exports to U.S.                     8.1      15.2      16.0 5/
Total Imports CIF                   397.5     897.6   1,214.9 5/
  Imports from U.S.                   9.4      24.5      22.3 5/
Aid from U.S.                         N/A       0.9       1.1 5/
Aid from Other Countries              N/A      28.5      16.3 5/
External Public Debt                   29       108       327 5/
Debt Service Payment (paid)           N/A       N/A       2.1 4/
Gold and Foreign Exch. Reserves     194.0     406.4     444.5 4/
Trade Balance                        32.6      91.4    -247.0 5/
  Trade Balance with U.S.            -1.3      -9.4      -6.3 5/
N/A--Not available.
1/ Exchange rate used is 12.2 Estonian kroons to one dollar.
2/ Annualized estimated rate.
3/ Six month data.
4/ Eight month data.
5/ Nine month data.
1.  General Policy Framework
    Estonia is well on the road to economic recovery after its
economy bottomed out from post Soviet shocks in the second
quarter of 1993.  First quarter 1994 data indicate that GNP
growth may be as high as six percent on an annualized basis.
Estonia's currency, the Kroon, remains stable and fixed to the
German Mark at an six to one exchange rate; no devaluations or
revaluations are anticipated.  Trade continued to expand in
1994, although Estonia fell into a deficit position with
imports outpacing exports by approximately 10 percent.
    Inflation remained higher than expected, but began to taper
off as the year progressed; inflation for 1994 is anticipated
to be approximately 40 percent.  Estonia's privatization
program made commendable progress in 1994, with approximately
50 percent of larger state enterprises now in private hands.
Small and medium scale privatization is virtually complete.
Housing privatization is just beginning and is moving
relatively slowly.  Estonia also made some headway in
introducing vouchers into its privatization scheme and in
creating mutual funds markets for voucher holders.  The
Government continued to report a balanced budget and due to
higher than expected accruals of tax revenues, two
supplementary budgets have been adopted.  This permitted some
modest increases to state pensions and salaries.
2.  Exchange Rate Policies
    Estonia introduced its own currency, the Kroon, in June of
1992.  The monetary reform gave a major boost to Estonia's
sovereignty and economic progress.  The Kroon is frequently
cited as the most important factor in creating fertile
conditions for economic restructuring and recovery.  Estonia's
hard currency reserves have close to quadrupled since the
introduction of the Kroon, although the money supply has
contracted to a modest extent during the latter half of 1994.
    Estonia eliminated the last of its capital controls in
1994; there are no restrictions in opening foreign bank
accounts either in Estonia or abroad.  There are no
restrictions in exchanging Kroons for hard currency and
repatriating funds from Estonia.  The exchange rate policy of
Estonia is anticipated to remain unchanged.  There are no
perceived pressures on the Kroon for a reevaluation (or
devaluation).  Current policies should continue to exert
downward pressure on inflation which is expected to be
significantly lower in 1995.
3.  Structural Policies
    Pricing Policies:  In January of 1992, the prices of 90
percent of goods became free, and the Government of Estonia has
liberalized even further since then.  The only prices still
controlled directly by the Government  are electricity,
precious stones and metals and energy inputs such as
oil shale.  Some goods and services (telecommunications,
passenger transport) are subject to price regulation.
    Tax Policies:  Most elements of a modern tax system -- such
as corporate income tax, personal income tax, and value-added
tax (VAT) are now in place.  Property taxes were introduced in
1993.  New tax laws became effective as of January 1, 1994,
which established a 26 percent across the board tax for both
personal and corporate income.  Tax holidays for foreign
investors were phased out as they were viewed as distorting and
discriminating against local enterprises; companies already
receiving tax holidays were grandfathered, however.  An
18 percent VAT is levied on most goods and services.  VAT is
collected on imports as they enter Estonia; the importer gets
VAT reimbursed when the goods are sold in Estonia or
reexported.  The general trend with Estonian tax legislation
has been to decrease taxes associated with production of goods
and increase taxes associated with consumption.
    Regulatory Policy:  Estonia's import and export regime is
amongst the most liberal in the world.  Import duties exist for
fur and goods made of fur (16 percent), cars, bicycles,
launches, yachts (10 percent).  The only export duties are
levied on rapeseed oil (100 percent), values of culture (e.g.
cars from before 1950)(100 percent), and metals (ferrous and
nonferrous waste and scrap) (5 to 25 percent).  There are some
fields of economic activity, which are subject to licensing,
such as the trading of metals and precious metals, trading of
alcohol and tobacco products.  Any legal entity registered in
Estonia can apply for an operational license.
4.  Debt Management Policies
    With respect to external debts, Estonia has signed loan
agreements with foreign lenders of which 12 have entered into
force.  The total commitments of foreign loans as of November
1, 1994 was 251.65 million dollars.  An additional
75.16 million dollars is in the form of government credit
guarantees.
    On the basis of current projections, the ratio of total
external public debt to GDP is envisaged to increase to a peak
of about 18.5 percent in 1995-1996 before declining to some 12
percent in the year 2000.  Debt service as a proportion of
exports to non-FSU countries is projected to remain in the
range of about 5 to 8 percent during the period 1995 to 1999
before rising to just over 10 percent in the year 2000.
5.  Significant Barriers to U.S. Exports
    Import Licenses:  With the elimination of import licenses
on all products except alcohol, tobacco, pharmaceuticals and
weapons, Estonia is a very receptive market to U.S. exports.
Estonia has no major domestic impediments to imports, but minor
impediments involving infrastructure deficiencies and financial
institutions exist.
    Infrastructure Deficiencies:  While the Estonian telephone
system has improved considerably since the formation of a joint
venture with Finland and Sweden, telephone service is still
uneven; telephone service in areas outside the capital is
greatly inferior.  This has been a major factor for the minimal
amount of foreign investment that has gone to regions further
from the capital, and since foreign investment is a major spur
to trade, trade performance in these same regions has suffered.
    Financial Institutions:  Performance of Estonian banks is
uneven, but several larger banks are offering services roughly
comparable to western banks.  Trade financing is difficult to
obtain (particularly for new enterprises without a track
record) and high interest rates present some obstacles.  Some
banks have very limited experience with trade financing
options, such as letters of credit.
    Investment Barriers:  According to the law on foreign
investment, foreign investors have the same rights and
obligations as domestic individuals or companies.  However, in
some sectors (mining, power engineering, telecommunications,
gas and water supply, transport, telecommunications, banking)
foreign investors require a license.  All property brought into
Estonia by foreign investors as an initial capital investment
is exempt from customs duties, but is subject to VAT.  A
foreign investor has the right to repatriate profits after
paying income tax on proceeds which it has received after the
liquidation of the enterprise.
6.  Export Subsidies Policies
    The Government provides no subsidies to Estonian exports.
7.  Protection of U.S. Intellectual Property
    The Estonian Government has passed several important pieces
of legislation designed to bring its intellectual property
regime up to modern standards.  As of February 5, 1994, Estonia
is a member of the World Intellectual Property Organization
(WIPO).
    Patents:  Estonia has taken several significant steps to
improve patent regulation.  The patent law, which has been in
force since May 23, 1994, regulates the legal protection of
patentable inventions in the Republic of Estonia.  At the same
time, the Utility Model Law came into force.  On August 24,
1994, Estonia became a party to the Paris Industrial Property
Convention and the 1970 Washington Patent Cooperation Treaty.
The number of objects exempt from protection has not been
determined.
    Trademarks:  Counterfeiting is not a significant problem at
this time.  The Trademark Law, passed in Parliament on
October 12, 1992, stipulates what is protected by law and sets
out judicial proceedings:  There have been 15,258 applications
for trademark registration since 1992, about 60 percent of them
are from foreign companies, including 3,032 U.S. companies.  Up
to the present, about 7,200 applications have received
certificates proving trademark registration; this number
includes 61 companies from the United States.  The fee for a
trademark registration is approximately $250.00
    Copyrights:  The Copyright Law became effective on
December 12, 1992.  This law provides for protection of
software, cable television publications, records, video
broadcast, satellite signals, etc.  The Copyright Law applies
to works "which require protection in the Republic of Estonia
by virtue of international treaties to which the Republic of
Estonia is a party."  On October 26, 1994, Estonia acceded to
the Berne Convention for the Protection of Literary and
Artistic Works.
8.  Worker Rights
    a.  The Right of Association
    The Constitution guarantees the right to form and join
freely a union or employee association.  The Central
Organization of Estonian Trade Unions (EAKL) came into being as
a wholly voluntary and purely Estonian organization in 1990 to
replace the Estonian branch of the official Soviet Labor
Confederation, the all-Union Central Council of Trade Unions
(AUCCTU).  Workers were given a choice as to whether or not
they wanted to join the EAKL.  While in 1990 the AUCCTU claimed
to represent 800,000 members in Estonia, in 1992 the AUCCTU
claimed to represent 800,000 members in Estonia, in 1992 the
EAKL claimed to represent about 500,000 members, organized in
30 unions.  In 1993 EAKL's membership dropped to some 330,000
organized in 27 unions and in 1994 dropped further to about
200,000 organized into 25 unions.  The EAKL explains the drop
in membership by the breakup of large government-owned
enterprises and privatization.  EAKL officials estimate that
some 40 percent of an approximately 600,000 strong workforce is
organized.
    The right to strike is legal and unions are independent of
the Government and political parties.  There were no strikes in
1994.  There are constitutional and statutory prohibitions
against retribution against strikers.  Unions may join
federations freely and affiliate internationally.  The
International Labor Organization has not cited the Government
for failure to observe pertinent ILO conventions and standards.
    b.  The Right to Organize and Bargain Collectively
    While Estonian workers now have the legally acquired right
to bargain collectively, collective bargaining is still in its
infancy.  The Government remains by far the biggest employer.
According to EAKL leaders, few collective bargaining agreements
have been concluded between the management and workers of a
specific enterprise.  The EAKL has, however, concluded
framework agreements with producer associations.  The EAKL was
also involved with developing Estonia's new labor code covering
employment contracts, vacations and occupational safety.  The
Labor Code prohibits anti-union discrimination, and employees
have the right to go to court to enforce their rights.  In
1993, a collective bargaining law, a collective dispute
resolution law, and a shop steward law were adopted.  EAKL
officials reported that the courts re-instated a union official
who alleged dismissal because of union activity.
    No Export Processing Zones have been established.
    c.  Prohibition of Forced or Compulsory Labor
    Forced or compulsory labor is prohibited by the
Constitution and is not known to occur.  It is effectively
enforced by the Labor Inspections Office.
    d.  Minimum Age for Employment of Children
    According to the Labor Law, the statutory minimum age for
employment is 16.  Minors aged 13 through 15 may work with
written permission of a parent or guardian and the local labor
inspector, if working is not dangerous to the minor's health,
considered immoral, or interferes with studies, and provided
that the type of work is included on a list the Government has
prepared.  State authorities effectively enforce Minimum Age
Laws through inspections.
    e.  Acceptable Conditions of Work
    The Government, after consultations with the EAKL and the
Central Producers Union, sets the minimum wage and reviews it
monthly.  In September, the minimum wage was raised from 300 to
450 Kroons per month (36 U.S. dollars).  The minimum wage is
not sufficient to provide a worker and family a decent standard
of living.  About three percent of the work force receive the
minimum wage.  The average wage is about four times the minimum.
    The standard workweek was reduced from 41 to 40 hours in
1993.  There is a mandatory 24-hour rest period in the workweek.
    According to EAKL sources, legal occupational health and
safety  standards are satisfactory, but they are extremely
difficult to achieve in practice.  They are supposed to be
enforced by the National Labor Inspection Board, the
effectiveness of which may improve with experience.  In
addition, the Labor Unions have occupational health and safety
experts who assist workers in bringing employers in compliance
with the legal standards.
    The overriding concern of workers during the period of
transition to a market economy is to hold on to their jobs and
receive adequate pay.  Workers have the right to remove
themselves from dangerous work situations without jeopardy to
continued employment.
(###)
FINLAND1
~Y~YU.S. DEPARTMENT OF STATE
FINLAND: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                             FINLAND
                     Key Economic Indicators
        (Billions of U.S. dollars unless otherwise noted)
                                    1992      1993      1994 1/
Income, Production and Employment:
Real GDP (1990 prices)             102.9      79.1      85.0
Real GDP Growth (pct.)              -3.6      -2.0       3.5
GDP (at current prices) 2/          92.7      73.0      81.2
By Sector:
  Agriculture                       2.43      2.01       2.2
  Other Primary Production          2.71      2.02       2.6
  Energy/Water                      2.45      1.93       3.3
  Manufacturing                    20.62     17.83      21.3
  Construction                      5.81      3.46       3.6
  Rents 3/                         13.94     11.44      12.2
  Financial Services                2.90      3.07       3.4
  Other Services                   23.91     18.81      19.8
  Public Sector                    20.25     14.94      15.3
  Bank Service Charge 3/           -2.35     -2.50      -2.5
Net Exports of Goods & Services    +1.43     +4.62      +7.5
Per Capita GDP (1990 prices)      20,364    15,572    16,700
Labor Force (000s)                 2,502     2,484     2,485
Unemployment Rate (pct.)            13.1      17.9      18.5
Money and Prices:
Money Supply (M2)
  (annual percentage growth)        -0.4       2.0       4.5
Base Interest Rate 4/                9.2       6.9       5.3
Personal Saving Rate                10.4       9.5       6.5
Retail Inflation                    -7.3      -1.4       3.0
Wholesale Inflation                 -9.9      -0.8       4.5
Consumer Price Index (1990=100)    107.4     109.7     110.8
Exchange Rate (USD 1.00/FIM)        4.48      5.72       5.5
Balance of Payments and Trade:
Total Exports (FOB)                 24.0      23.5      28.0
  Exports to U.S.                    1.4       1.8       2.1
Total Imports (CIF)                 21.2      18.0      20.0
  Imports from U.S.                  1.3       1.3       1.5
Aid from U.S.                          0         0         0
Aid from Other Countries               0         0         0
External Public Debt (central government)
  (in foreign currency)             23.7      27.2      34.5
Foreign Net Interest Payments        4.4       4.1       3.7
  (of which by central government)   0.9       1.6       2.0
Gold and Foreign Exchange
  Reserves (year-end)                6.6       5.9       9.1
Trade Balance                       +2.8      +5.4      +8.0
  Trade Balance with U.S.           +0.1      +0.5      +0.5
1/ 1994 figures are all estimates based on available monthly
data in October 1994, or predictions by the Ministry of Finance.
2/ GDP at factor cost.
3/ "Real estate, renting and business activities" sectoral
division is based on UN SIC-95 classification.
4/ Bank of Finland's base rate.
1.  General Policy Framework
    The Finnish economy is slowly and unevenly emerging from
its 3-year recession, during which GDP has declined by a
cumulative 13 percent.  An economic recovery led by strong
exports has been underway since the first quarter of 1994.  GDP
looks set to grow at least 5 percent in 1994.  The recession
has resulted in a significant shakeout of the Finnish economy,
including corporate downsizing, increased competition and
cutbacks in government services.  Also spurring structural
change is membership in the the European Union (EU), scheduled
for January 1, 1995.
    The economic recovery so far has been largely jobless, with
unemployment remaining in the high teens amid stagnant domestic
demand.  These factors, coupled with low levels of business
investment, have resulted in declining government revenues and
increases in countercyclical spending, producing large budget
deficits.  Also contributing is continuing government
assistance to the banking sector, particularly to the savings
bank system.  In 1994, the deficit will be about a third of
total spending, the same level as 1993.  The deficit is
financed by foreign and domestic borrowing through the issuance
of bonds; the balance has been roughly evenly divided between
the two.  The large deficits have brought about rapid increases
in overall debt levels.  Finnish government debt will increase
from 35 percent of GDP at the end of 1992 to an estimated 64
percent at the end of 1994 and debt service will account for
some 11 percent of government expenditures.  Cuts in government
social programs and aid to municipalities are helping to keep
the debt from rising still faster.  Also contributing are
higher income tax rates and increases in indirect taxation.
Finland's tax ratio will rise to an estimated 48 percent in
1994, a record.
    Despite the high level of foreign debt servicing, Finland
is experiencing a sharp improvement in its balance of payments;
the current account should move into strong surplus in 1994
after years of deficits.  The main contributing factor is a
sharp increase in export sales, spurred on by a depreciated
finnmark and declining real wages.  Finnish international
competitiveness has increased by about 30 percent as compared
to its long-term average in the past several years.  Inflation
has so far stayed at a low level as wholesalers and retailers
remain reluctant to pass along increased import prices in the
face of depressed domestic demand.  However, the money supply
(M1) is showing rapid growth due to capital inflows, causing
concern among some analysts that inflation could take off in
early 1995.  Domestic credit is tight as banks seek to regain
profitability; as inflation fears mount, the Bank of Finland is
threatening to raise interest rates further.  Banks remain
conservative in their lending practices, particularly to new
businesses.
    Finnish economic policy is based to a large extent on its
forthcoming membership in the EU.  The requirements of the EU,
for example, have resulted in new competition legislation that
is helping to reduce the cartelized nature of many Finnish
industries.  Legislation which took effect at the beginning of
1993 liberalizing foreign investment restrictions has helped
spur a sharp increase in foreign portfolio investment and hence
has contributed to the internationalization of large Finnish
companies.  The rise in stock market activity is also due to
lower domestic interest rates and a tax law, also new in 1993,
which sets a uniform rate of 25 percent on capital income
taxation.  Foreign direct investment has been slower to
materialize, although Finland is hoping to capitalize on its
location and expertise to serve as a "gateway" for foreign
investors in the former Soviet Union.
    In October 1994 Finland's citizens voted in favor of EU
membership.  Membership will occur in January 1995.  EC
membership and budgetary constraints have brought about some
reform in Finland's highly protected agricultural sector.
Finland will convert to the EU agricultural regime in 1995,
although in the membership negotiations Finland has strived
(with some success) to establish special support mechanisms
which provide levels of support higher than the EC average.
However, the support mechanisms will not be adequate to prevent
major structural changes in the agricultural sector.  Over the
longer term, some of these changes will include a reduction in
the number of farmers and consolidation of surviving farms into
larger, more efficient units.
2.  Exchange Rate Policy
    The finnmark has been floating since the government and
central bank broke its fixed link with the European Currency
Unit (ecu) in September 1992 in the midst of a currency
crisis.  Shortly after the float was initiated, the parliament
passed new legislation allowing the float to continue
indefinitely.  It is unlikely that the government will attempt
to establish a new currency linkage anytime soon.
    The finnmark has declined by about 35 percent in relation
to the dollar and over 15 percent in relation to the ecu since
the float was initiated, but in recent months the finnmark has
again been gaining strength against both of these currencies.
Devaluation has strongly boosted Finland's international
competitiveness and has dampened demand for imports from all
sources, including the United States.  Conversely, exports have
boomed.  The government has not regularly intervened in
financial markets to influence the value of the finnmark.  The
government has encouraged lower interest rates to boost
domestic demand, but rates (particularly long term rates)
remain high.  Many analysts expect that in the medium term the
finnmark's value may stabilize near present levels.  The
slightly strengthened finnmark has eased Finland's external
debt burden and has partially offset the inflationary impact of
higher commodities prices, but has not had a measurable impact
on export competitiveness.
3.  Structural Policies
    Finland replaced its turnover tax with a value added tax in
June 1994.  While the change is expected to have little effect
on overall revenues, several areas not now taxed or taxed at a
lower rate, including many corporate and consumer services and
construction, are now subject to the new VAT in conformity with
EU practice.  The government decided to keep the basic VAT rate
at the same rate as the turnover tax, 22 percent.  Some goods
and services, including transportation services,
accommodations, films, pharmaceuticals and books, will be taxed
at a 12 percent rate and other services, including health care,
education, insurance, and rentals are not subject to the VAT.
Agricultural and forestry products will continue to be subject
to different forms of taxation outside the VAT.  At the
beginning of 1993, a uniform tax rate of 25 percent on capital
income took effect, including dividends, capital gains, rental
income, insurance, savings, forestry income, and corporate
profits.  The sole exception was bank interest, where the tax
rate was increased from 20 to 25 percent at the beginning of
1994.
    The change in capital taxation, along with a sharp decline
in interest rates and liberalization of foreign investment
legislation, has resulted in a strong revival of the Finnish
stock market and greater corporate use of equity rather than
debt financing.  It has also substantially increased the
foreign ownership share of many of Finland's leading companies,
and may become the vehicle for the privatization or partial
privatization of state-owned or dominated companies.  The
government has moved slowly on privatization, but has been
reducing the government stake in several state-dominated
companies.  Currently, four of Finland's 10 largest companies
are majority state-owned, and the government is heavily
involved in several key industrial sectors, including energy,
forestry products, mining and chemicals.
    The volume of government subsidies provided to Finnish
industry has increased markedly as the Finnish economy has
deteriorated.  In real terms, industrial subsidies have
increased by about 80 percent since 1988 and now constitute
about 1.2 percent of GDP.  The government has begun to reduce
subsidies in line with falling government revenue and the
requirements of EU membership.  The government has set the goal
of reducing direct subsidies and replacing them with more
general measures to improve the business climate.
4.  Debt Management Policies
    Finland has rapidly accumulated external debt in order to
finance recession-induced budget deficits.  Gross public debt
(EMU definition) continues to rise, and is projected in the
1995 budget at 78.5 percent (in 1990 gross public sector debt
stood at only 27 percent of GDP).  Finnish corporations,
formerly heavy users of foreign capital, are now reducing their
foreign obligations.  However, financing requirements of the
central government have not diminished.  In response to the
rapid increase in foreign borrowing, Moody's lowered its rating
on Finnish long-term government bonds from its second to its
fourth highest category (AA-) in March 1993.  Finnish debt
issues continue to sell easily (albeit at slightly higher risk
premiums) in international financial markets, however.
    Finland is an active participant in the Paris Club, the
Group of 24 countries providing assistance to East and Central
Europe, and in efforts to assist the former Soviet Union.  In
response to budgetary problems, Finland has reduced foreign
assistance from approximately 0.7 to 0.4 percent of GDP in the
past three years.
5.  Significant Barriers to U.S. Exports
    In most cases, effective January 1, 1995 Finland will adopt
the EU's overall trade regime, including the EU tariff
schedule.  The agricultural sector will remain the most heavily
protected area of the Finnish economy.  In 1993 Finland changed
its basic system of protection from an import licensing system
to a system of variable levies similar to the EU.  The net
effect is essentially the same, which is to protect domestic
production from cheaper foreign imports.  Surpluses of
agricultural products are usually disposed of on world markets
through government and producer-financed export subsidies.  The
government will end direct government financing of export
subsidies as part of its EU accession terms.  Import licenses
are no longer required for any products, although some textile
imports from Far Eastern suppliers are covered by quotas.
Finland will phase in EU textiles tariffs over a 3-year period
starting in January 1995.
    Finland's adoption of the EU tariff schedule will result in
increased barriers to U.S. exporters in several key categories
including agriculture, chemicals, and electronics.  Preliminary
analysis indicates that semiconductors will be the U.S. export
category most adversely affected.  Tariffs for several key
semiconductor types will increase from the present 0 percent to
14 percent under the EU tariff schedule.  In late 1994 the U.S.
Government entered into negotiations with the EU under Article
24:6 of the GATT, seeking compensation for lost exports as a
consequence of Finland's EU accession.
    The Finnish service sector is undergoing considerable
liberalization in connection with EU membership.  Legislation
implementing EU insurance directives has gone into effect.
Finland will have exceptions in insurance covering medical and
drug malpractice and nuclear power supply.  Restrictions placed
on statutory labor pension funds, which are administered by
insurance companies, will in effect require that companies
establish an office in Finland.  It is unclear whether such
restrictions will cover workers' compensation as well.  Auto
insurance companies will not be required to establish a
representative office in Finland, but will have to have a
claims representative there.  In 1994 the government opened up
long distance telephone service within Finland to competition.
The government requires that the Finnish Broadcasting Company
devote a "sufficient" amount of broadcasting time to domestic
production, although in practical terms this has not resulted
in discrimination against foreign productions.  Upon accession
to the EU, Finland will adopt the EU broadcast directive, which
has a 50 percent European programming target for non-news and
sports programming.  Finland does not intend to impose specific
quotas and has indicated its opposition to quotas to the EU.
    Finland is a GATT Standards Code signatory and has largely
completed the process of harmonizing its technical standards to
EU norms.
    Finland removed most restrictions on foreign investment and
ownership through a law which took effect at the beginning of
1993.  The new law abolishes various restrictions placed on
companies with foreign ownership and eliminates distinctions
between foreign and domestic shareholders.  A large increase in
foreign portfolio investment has occurred since the law took
effect.  The new law provides for a screening mechanism for
proposed foreign acquisitions involving a third or more of the
stock of approximately 100 large companies.  The provision will
be in effect until the end of 1995, but the government has
pledged that only in extreme circumstances would a foreign
takeover of a Finnish company be prevented.  New investments
are not affected by the monitoring procedure.  After 1995, only
proposed investments involving the manufacturing of defense
equipment will be monitored.  A requirement to obtain the
permission of local governments in order to purchase a vacation
home in Finland will also remain.  EU membership will eliminate
most sectoral investment restrictions.  Foreign investors
instead will have to meet the obligations required of Finnish
investors.
    Finland is a signatory to the GATT Agreement on Government
Procurement (Procurement Code) and has a good record in
enforcing Code requirements in letter and spirit.  In the
excluded sectors, particularly defense, countertrade is
actively practiced.  Finland is purchasing fighter aircraft and
associated equipment valued at $3 billion from U.S. suppliers.
One hundred percent offsets are required as a condition of
sale.  In connection with the EEA agreement, Finland is
implementing all EU procurement-related directives.
    Finland has a streamlined customs procedure, reflecting the
importance of foreign trade to its economy.
6.  Export Subsidies Policy
    The only significant Finnish direct export subsidies are
for agricultural products, including grain, meat, butter,
cheese, and eggs as well as for some processed agricultural
products.  Finland does not provide subsidies to promote
shipbuilding exports, although a mechanism exists on paper to
do so.  Finland has advocated worldwide elimination of
shipbuilding subsidies through the OECD's Working Party 6.
    Finland is a member of the GATT Subsidies Code.
7.  Protection of U.S. Intellectual Property
    Finland has a good record in passing effective laws to
protect intellectual property.  With the exception of software,
where unauthorized copying is widespread, enforcement is very
good.  Finland and the Nordic group of countries have taken a
constructive position on intellectual property in the GATT
Uruguay Round negotiations and in other international
discussions.  Finland is a member of all principal multilateral
intellectual property organizations.
    Finland's copyright legislation has recently been modified
to conform with EU practice, as required by the EEA agreement.
The EU directive dealing with reselling videocassettes has been
implemented, as has the EU software directive.  The directive
has made it easier to prosecute cases of unauthorized software
copying.  While piracy of audio and video recordings is only a
small problem in Finland, industry representatives estimate
that over 50 percent of software installed for business use has
been illegally copied.  Finland will start granting product
patent protection for pharmaceuticals at the beginning of 1995;
currently process patent protection is applied.
8.  Worker Rights
    a.  The Right of Association
    The Finnish constitution contains specific guarantees for
the right of workers to form trade unions and assemble
peacefully.  The right to strike is guaranteed by law.  These
rights are honored in practice; trade unions are among the most
powerful political forces in Finland.  About 85 percent of the
work force is unionized.  Unions are free, independent,
democratic and associate in three federations as well as
internationally.
    b.  The Right to Organize and Bargain Collectively
    The right to organize and bargain collectively is protected
both in law and in practice.  Collective bargaining
traditionally has been conducted according to national
guidelines agreed among employers, the three central trade
union organizations, and the government, but in the past two
years wage negotiations have been more decentralized.  Workers
are effectively protected against antiunion discrimination
which is prohibited by law.
    c.  Forced or Compulsory Labor
    Forced or compulsory labor is prohibited by the
constitution and is not practiced.
    d.  Minimum Age for Employment of Children
    Sixteen is the minimum age for full-time employment (eight
hours per day).  Children that are fifteen years old may work
up to six hours per day under certain restricted conditions.
Finland has compulsory education laws.  Child labor laws are
effectively enforced.
    e.  Acceptable Conditions of Work
    Finland has no legislated minimum wage, but non-union
employers are required to meet the minimum wages established by
collective bargaining for unionized workers in each sector.
The maximum standard legal work week is 40 hours; in practice
most contracts call for standard work weeks of 37-38 hours.
Finland's health and safety laws are among the strictest in the
world.  They are enforced effectively by government inspectors
and actively monitored by the unions.
    f.  Rights in Sectors with U.S. Investment
    There is no difference in the application of worker rights
between sectors with U.S. investment and those without.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                             (1)
Total Manufacturing                                   127
  Food & Kindred Products                     1
  Chemicals and Allied Products              52
  Metals, Primary & Fabricated                4
  Machinery, except Electrical              (1)
  Electric & Electronic Equipment             2
  Transportation Equipment                    0
  Other Manufacturing                       (1)
Wholesale Trade                                       141
Banking                                               (1)
Finance/Insurance/Real Estate                           1
Services                                                7
Other Industries                                      (1)
TOTAL ALL INDUSTRIES                                  336
(1) Suppressed to avoid disclosing data of individual companies
Source: U.S. Department of Commerce, Bureau of Economic
Analysis
(###)
FRANCE1
^U.S. DEPARTMENT OF STATE
FRANCE: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                              FRANCE
                     Key Economic Indicators
        (Billions of U.S. dollars unless otherwise noted)
                                    1992      1993      1994 1/
Income, Production and Employment:
Real GDP (1980 prices)               683       632       657
Real GDP growth (pct.)               1.2        -1       1.8
GDP (at current prices)            1,322     1,253     1,325
GDP by Sector:  2/                 1,222     1,159       N/A
  Agriculture                         37        29       N/A
  Processed Food                      37        38       N/A
  Energy/Water                        53        53       N/A
  Manufacturing                      217       194       N/A
  Construction                        69        64       N/A
  Rents                              115       116       N/A
  Financial Services                  57        56       N/A
  Retail Trade/Other
    Non-Financial Services           471       446       N/A
  Government/Non-Profit Services     216       213       N/A
  Statistical Adjustment             -51       -50       N/A
Net Exports of Goods & Services       18        27        39
Real Per Capita GDP (1980 prices) 11,920    10,978    11,344
Labor Force (avg/000s)            25,097    25,159    25,234
Unemployment Rate (avg/pct.)        10.3      11.6      12.3
Money and Prices:  (annual percentage growth) 3/
Money Supply (M3)                    6.0      -0.9      -3.5
Base Bank Lending Rate (yr-end)     10.0       8.1       7.7
Personal Savings Rate (avg)         13.9      14.1      13.0
Retail Inflation (avg)               1.9       2.1       1.7
Intermediate Good Prices (avg)      -1.7      -2.8       0.9
Consumer Price Index (1990=100/avg)105.7     107.9     109.7
Exchange Rate (USD/FF) 4/            5.3       5.7       5.6
Balance of Payments and Trade:
Total Exports (FOB) 5/             236.0     210.0     234.0
  Exports to U.S. 4,6/              15.0      15.0      17.0
Total Imports (CIF) 5/             240.0     203.0     221.0
  Imports from U.S. 4,6/            20.0      18.0      19.0
Trade Balance (CIF/FOB) 5/          -4.0       7.0      13.0
  Balance with U.S. 4,6/            -5.0      -3.0      -2.0
Gold and Foreign Exch. Reserves     56.0      51.0      57.0
N/A--Not available.
1/ OECD forecasts unless otherwise indicated.
2/ Excludes value added and other taxes.
3/ June 1994 data.
4/ 1994 estimate based on first nine months average and
assumption of fourth quarter equal to September average.
5/ Merchandise trade - 1994 data are for first seven months.
6/ Department of Commerce figures.
1.  General Policy Framework
    France is the fourth largest industrial economy in the
world, with an economy about one-fifth the size of that of the
United States'.  The service sector, including government and
financial services, accounted for 54 percent of output in
1993.  Industry and agriculture provided 38 percent and 3
percent, respectively.
    Economic growth slowed considerably between 1991 and 1993,
after a period of healthy expansion between 1988 and 1990.
Growth began to pick up significantly beginning in 1994, with
real gross domestic product (GDP) expanding 0.7 percent and 1.0
percent during the first and second quarters, respectively.
Imports have increased as well, with real imports of goods and
services increasing 3.2 percent and 2.8 percent during the
first and second quarters, respectively.  Nominal merchandise
imports from the United States grew over five percent during
the first quarter of 1994 and remained steady during the second
quarter, after falling by seven percent each year in 1992 and
1993.  Real GDP is likely to grow about two percent in 1994 and
three percent in 1995; the Organization for Economic
Cooperation and Development (OECD) forecast in June 1994 that
real imports of goods and services would increase close to
three percent in 1994 and six percent in 1995.  Unemployment,
on the other hand, is expected to remain high, hovering around
12.5 percent for 1994.
    Inflationary pressures remain well contained.  The annual
inflation rate for consumer prices fell from 3.6 percent in
1989 to 1.6 percent by September 1994, the lowest rate in
France in 37 years.  Continued wage restraint due to high
unemployment is likely to keep inflation from increasing,
despite stronger growth.
    Low inflation has given French producers a price advantage
in overseas and domestic markets.  Due in part to this
phenomenon, France's merchandise trade balance (cif/fob basis)
changed from a deficit of FF 20 billion in 1992 to a record
FF42 billion surplus in 1993, according to French customs
statistics.  Trade in manufactured goods registered the largest
increase, from a surplus of FF7 billion to FF54 billion.
France's surplus with other European Union (EU) countries
increased from FF17 billion to FF32 billion.  With non-EU OECD
countries, France reduced its deficit from FF60 billion to FF31
billion, primarily due to a decrease in its deficit with the
United States, which fell to FF16 billion from FF26 billion in
1992 because of strong U.S. growth.  Much of the overall trade
surplus can be attributed to weak domestic demand, and in
particular, to persistently weak corporate investment in
imported capital goods.  France is likely to run another large
merchandise trade surplus in 1994, although slightly lower than
the 1993 figure.
    Due primarily to the merchandise trade surplus, France ran
a current account surplus of FF59 billion in 1993.  The surplus
in tourism receipts was a record FF60 billion.  In contrast,
the deficit on net investment income increased to FF45 billion
in 1993 from FF41 billion in 1992, due to the continued inflow
of foreign portfolio investment and higher interest rates
relative to rates in other industrialized countries.  Due to a
lower merchandise trade balance and lower interest payments to
foreigners (resulting from a large outflow of foreign portfolio
investment at the beginning of 1994), the current account
surplus is likely to fall in 1994.
    Since France is a member of the EU, its imports are subject
to a common external tariff and to the restrictions of the
Common Agricultural Policy.  As the EU continues to implement
its "single market" program to remove all barriers to the free
internal circulation of goods, services, capital and labor,
jurisdiction over a growing number of economic areas, including
certain aspects of tax and investment policy, will be
transferred to Brussels from Paris.
    Since 1991, the sharp drop in economic activity has led to
a dramatic decline in government revenues.  This, coupled with
increased spending on unemployment, retirement, health care,
and interest payments, has resulted in soaring budget
deficits.  The central government budget deficit as a
percentage of GDP rose from 1.9 percent in 1991 to 4.5 percent
in 1993, and is expected to be close to four percent in 1994.
The general government budget deficit, which includes federal,
local, and social security budgets, rose from 2.2 percent of
GDP in 1991 to 5.8 percent in 1993, and is expected to be 5.6
percent in 1994.
    Like its G-7 counterparts, the Bank of France conducts its
monetary policy primarily by adjusting official rates and
through open market operations.  During most of 1993, French
money supply (M3) grew far less than the Bank of France's
target growth rate of 4-6.5 percent, and fell almost one
percent between the fourth quarters of 1992 and 1993.   The
Bank of France estimated that had it not been for the large
transfer of assets from money market funds (which are included
in M3) to stocks and long-term bonds, in response to tax
incentives and declining interest rates, M3 would have
increased 1.5-2 percent during this time, still far below its
target.
2.  Exchange Rate Policies
    Within the established limits of the European Exchange Rate
Mechanism (ERM), whose bands were significantly widened in
August 1993, the value of the French franc is set by market
forces.  It is also influenced by macroeconomic policy actions
or central bank interventions.  These actions are usually
coordinated with those of other governments, both within the
ERM and as part of broader international economic policy  a
series of exchange rate crises to maintain high short term
interest rates to keep the franc within its ERM bands.  Even
after the bands were widened in August 1993, the Bank
maintained high rates while it replenished the foreign exchange
reserves it spent in July to defend the franc.  Beginning
February 1994, the Bank followed the German Bundesbank in
gradually lowering official rates.  It is expected to continue
coordination efforts among industrialized countries, including
the United States.
    Throughout much of 1992 and the first half of 1993, the
Bank of France was forced by high German interest rates andto
maintain a 20-40 basis point spread between French and German
official rates to prevent further serious pressures on the
franc.  The interest rate on three-month interbank loans has
fallen from 12.1 percent to 5.6 percent between February 1993
and August 1994.  However, the average interest rate on
long-term government bonds, after declining from 10.6 percent
in September 1990 to less than 5.8 percent in October 1993, is
expected to rise to 8.3 percent by October 1994, due in part to
rising U.S. interest rates.
    The Balladur government has continued the "franc fort"
(strong franc) policy of its predecessors.  The government's
objective is to lower the cost of imports and keep inflation
and wage increases low, thereby improving French
competitiveness.  It is also seen as a way to build France's
reputation for sound economic policies, and to ensure further
progress toward European Monetary Union (EMU).  The Franc
appreciated 3.0 percent in nominal terms against other OECD
currencies between September 1993 and September 1994.  However,
factoring in France's low inflation rate, the Franc only
appreciated 1.7 percent in real terms.  Compared to the U.S.
dollar, the franc appreciated by 5.2 percent in real terms
during this period.
3.  Structural Policies
    Since it submitted its first budget in mid-1993, the
Balladur government's fiscal strategy has been to reduce the
budget deficit in the long term (primarily by raising taxes and
controlling spending), but offset the immediate restrictive
effects through temporary stimulus measures.  In addition, many
of the French government's fiscal policy proposals in 1993 and
1994 were designed to offset, through state aid, effects of
high real interest rates in sectors such as real estate and
automobiles where consumption is dampened strongly by high
rates.
    During 1993, the Balladur government's assortment of
supplemental budgets cut corporate taxes by approximately FF50
billion for 1993-94, while increasing taxes on households for
these two years by FF100 billion.  The government's priority
was to limit spiraling unemployment by stopping the hemorrhage
of bankruptcies, particularly among labor-intensive small
businesses.  The government decided to change course in 1994,
and to try to boost short-term economic growth by stimulating
household consumption.  In its 1994 budget, the government
reduced personal income taxes by FF19 billion a year.  The
government also offered several incentives to induce households
to withdraw funds from savings accounts, in the hopes of
reducing savings and boosting consumption.  However, the
decrease in income taxes only partially offset the 1993
increases in excise taxes and in the general social
contribution (CSG), a supplemental tax on all earned and
unearned income.  As a result, the government expects total
taxes as a percentage of GDP will increase from 43.6 percent in
1993 to 44.5 percent in 1994, before falling to 44.2 percent in
1995.  This remains one of the highest ratios among
industrialized countries.
    In March 1993, the French government began a massive
privatization program, and has already sold some of the largest
and best known government-owned corporations.  A seven-member
commission decides the minimum price for the shares to be sold
and chooses the core of stable investors for each
privatization; and the Economics Ministry decides the
percentage of shares to be sold, the proportion to be sold in
foreign financial markets, and the size of "core" shareholdings.
    To meet deficit reduction targets in its 1994 and 1995
central government budgets, the government has essentially
frozen non-interest spending, and is counting on receipts of
over FF100 billion in privatization revenues.  Fiscal policy,
or at least central government spending, is likely to remain
tight for many years to come, as the government seeks to meet
common macroeconomic criteria agreed among EU members in the
Maastricht Treaty:  general government budget deficits of no
greater than three percent of GDP, and a debt to GDP ratio of
no more than sixty percent.  In 1993, the government submitted,
for the first time, a multi-year deficit reduction plan.  In
the revised 5-year plan in its 1995 budget, the government
maintains the real freeze on government spending, and extends
it to 1998.  Real non-interest spending would be cut by 0.6
percent in 1996 and 1997, and by 0.4 percent in 1998, the
longest and largest sustained reduction in non-interest French
government spending since the end of World War II.
4.  Debt Management Policies
    The budget deficit is financed through the sale of
government bonds at weekly and monthly auctions.  As a member
of the G-10 group of leading financial nations, France
participates actively in the International Monetary Fund, the
World Bank and the Paris Club.  France is a leading donor
nation and is actively involved in development issues,
particularly with its former colonies in North and West Africa.
5.  Significant Barriers to U.S. Exports
    U.S. companies sometimes complain of complex technical
standards and of unduly long testing procedures.  Requirements
for testing (which must usually be done in France) and
standards sometimes appear to exceed levels reasonable to
assure proper performance and safety.  Most of the complaints
have involved electronics, telecommunications equipment,
medical/veterinary equipment/products and agricultural
phytosanitary standards.
    An area where French trade policy is clearly discriminatory
is in audiovisual trade.  The 1989 EU Broadcast Directive
requiring a "majority proportion" of programming to be of
European (i.e. EU or Central European) origin was incorporated
into French legislation on January 21, 1992.  France, however,
goes beyond this rule, specifying a percentage of European
programming (60 percent) and French programming (40 percent).
These broadcast quotas were approved by the EU Commission and
became effective on July 1, 1992.  They are less stringent than
France's previous quota provisions, which required that 60
percent of all broadcasts be of European origin and that 50
percent be originally produced in French.  The new 60 percent
European/40 percent French quotas are applicable both during a
24-hour day, and during prime time slots.  The prime time rules
go beyond the requirements of the EU Broadcast Directive and
limit the access of U.S. programs to the French market.
    The French government has recently revised its legal
services system.  Non-EU lawyers may no longer practice as
legal consultants and are required to qualify as "avocats," on
the basis of full-fledged membership in the French bar.  Under
implementing legislation which went into effect on January 29,
1993, this means that non-EU lawyers will have to pass either a
"short-form" exam or the full French bar exam.  Non-EU lawyers
qualify for a "short-form" exam provided they are able to prove
that the foreign state or territory in which they practice
allows French lawyers to practice law "under the same
conditions."  Failing that, they must take the full French bar
exam.  Due to EU regulations, France is required to recognize
law degrees for EU nationals but not third country nationals.
Nevertheless, non-French EU lawyers, who are also required to
qualify as "avocats," may do so via exams less stringent than
those for non-EU lawyers.  Meaningful access will hinge on how
implementing regulations are administered, including the
interpretation of what is meant by granting access on a
"reciprocal basis" and the nature of the exam imposed on non-EU
lawyers.
    Since September 1988, foreign investors establishing new
businesses in France are no longer subject to advance notice
and approval requirements.  However, there are still several
administrative procedures related to acquisition of French
firms that burden foreign investors.  Unless firms are
controlled by French nationals or "established" EU investors,
they must receive prior approval from the Ministry of Economics
in order to purchase existing French businesses valued at more
than FF50 million or having more than FF500 million in sales.
To qualify as an "established" EU-controlled firm, a business
must have annual sales of more than FF1 billion and have been
in business for at least 3 years.  EU-controlled firms not
qualifying as "established" and non-EU controlled firms
purchasing smaller French entities are required to notify the
Ministry in advance.  The Ministry can block large acquisitions
deemed not to be in the national interest, as well as any
acquisition, irrespective of size or nationality of the
investors, which the Minister sees as a threat to public
health, public order or national security.
    There are several restrictions on foreign holdings in
French firms that are privatized.  A December 1993
privatization law prevents the government from selling more
than twenty percent of a firm's capital to non-EU investors at
the time shares are first sold.  The law does not prohibit
private EU-investors from selling their shares to non-EU
investors thereafter, and shares held by non-EU investors
before the law went into effect are not affected by the 20
percent limit.  The Balladur government also gave the
privatization commission the option of waiving the 20-percent
limit if the purchase is part of an industrial, commercial, or
financial cooperation agreement.  This option has not yet been
exercised in privatizations to date.
    Through "golden shares" in key companies being privatized,
the government retains the following rights:  to block the sale
of any assets "essential to the national interest;" to prevent
certain investors from purchasing additional shares; and to
exert significant control over company management, even after
privatization is completed.  Finally, any investor seeking to
own more than five percent of outstanding shares of a
privatized company in the health, security or defense sectors
will be required to seek the approval of the Economics
Ministry.
    The French government has notified the OECD that it treats
foreign investors differently than domestic investors and may
not provide national treatment in the following sectors:
agriculture, aircraft production, air transport, atomic energy,
audiovisual, accounting and financial services, defense,
insurance, maritime transport, road transport, publishing,
telecommunications, and tourism.
    France is a party to all the relevant GATT codes, including
those on government procurement and standards.
6.  Export Subsidy Policies
    France is a party to the OECD guidelines on the arrangement
for export credits, which includes provisions regarding the
concessionality of foreign aid.  The government has begun
examining ways to concentrate the benefits of its export
promotion efforts more on small and medium-sized businesses.
    There are virtually no direct French government subsidies
to agricultural production.  Direct subsidies come primarily
from the budget of the European Union.  The French government
does offer indirect assistance to French farmers in many forms,
such as easy terms for loans, start-up funds, and retirement
funds.
7.  Protection of U.S. Intellectual Property
    France is a strong defender of intellectual property rights
worldwide.  Under the French intellectual property rights
regime, industrial property is protected by patents and
trademarks, while literary/artistic property is protected by
copyrights.  France is a party to the Bern Convention on
Copyright, the Paris Convention on Patents, the Universal
Copyright Convention, the Patent Cooperation Treaty, and the
Madrid Convention on Trademarks.  By virtue of the Paris
Convention and the Washington Treaty Regarding Industrial
Property, U.S. nationals have a "priority period" after filing
an application for a U.S. patent or trademark, in which to file
a corresponding application in France.
8.  Worker Rights
    The French constitution guarantees the right of workers to
form unions.  Although union membership has declined to ten
percent of the workforce, the institutional role of organized
labor is far greater than its numerical strength might
indicate.  The French government regularly consults labor
leaders on economic and social issues, and joint works councils
play an important role even in industries that are only
marginally unionized.  The principle of free collective
bargaining was reestablished after World War II, and subsequent
amendments in labor laws encourage collective bargaining at the
national, regional, local, and plant levels.  French law
prohibits anti-union discrimination and forced or compulsory
labor.
    With a few minor exceptions for those enrolled in
recognized apprenticeship programs, children under the age of
16 may not be employed.  France has a minimum wage of
approximately $6.50 per hour.  The legal work week is 39 hours
long, and overtime is restricted to 9 hours per week.  In
general terms, French labor legislation and practice, including
that pertaining to occupational safety and health, are fully
comparable to those in other industrialized market economies.
France has three small export processing zones, where regular
French labor legislation and wage scales apply.  Labor law and
practice are uniform throughout all industries of the private
sector.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                                973
Total Manufacturing                                   13,257
  Food & Kindred Products                   1,267
  Chemicals and Allied Products             4,536
  Metals, Primary & Fabricated                488
  Machinery, except Electrical              2,237
  Electric & Electronic Equipment             359
  Transportation Equipment                    700
  Other Manufacturing                       3,672
Wholesale Trade                                        4,733
Banking                                                  364
Finance/Insurance/Real Estate                          2,374
Services                                                 996
Other Industries                                         868
TOTAL ALL INDUSTRIES                                  23,565
Source: U.S. Department of Commerce, Bureau of Economic Analysis
(###)
GABON1
=U.S. DEPARTMENT OF STATE
GABON: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                              GABON
                     Key Economic Indicators
        (Millions of U.S. dollars unless otherwise noted)
                                   1992      1993      1994 1/
Income, Production and Employment:
Real GDP (1989 prices) 2/         4,212     4,316     4,293
Real GDP Growth (pct.)             -1.5       2.5      -0.5
GDP (at current prices) 2/        5,021     4,824     3,654
By Sector:
  Agriculture                       466.7     450.5     326.6
  Industry                        2,378.4   2,443.1   2,150.7
  Oil                             1,720.3   1,626.1   1,558.4
  Non-Oil                           652.4     629.3     456.2
  Construction                      194.3     187.6      36.0
  Services                        2,631.6   2,571.3   1,484.9
Real Per Capita GDP ($:1989 base)   4,254     4,272     4,127
Labor Force (000s)                   89.3      89.5       N/A
Unemployment Rate (pct.)              N/A       N/A       N/A
Money and Prices:  (annual percentage growth)
Money Supply (M2)                  -11.23     -4.66     19.46
Base Interest Rate (pct.) 3/         12.0      11.5      12.0
Personal Saving Rate (pct.)            23        22       N/A
Retail Inflation (pct.)              -4.6       1.3      48.2
Wholesale Inflation (pct.)            N/A       N/A       N/A
Consumer Price Index (100=75)       283.0     286.7     400.8
Exchange Rate (USD/CFA)
  Official                            265       283       530
  Parallel                            N/A       N/A       N/A
Balance of Payments and Trade:
Total Exports (FOB) 4/            2,259.1   2,113.7   1,883.0
  Exports to U.S.                   927.9     940.6     543.2 5/
Total Imports (FOB) 4/              886.2     835.2     741.1
  Imports from U.S.                  54.7      48.2      20.0 5/
Aid from U.S. (000's)               168       168         N/A
Aid from Other Countries            125        12         N/A
External Public Debt              3,350.9   3,358.4   3,442.0
Debt Service Payments (paid)        351.7     119.0     463.7
Gold and Foreign Exch. Reserves      75.3       5.0       N/A
Trade Balance 4/                  1,372.4   1,278.5   1,141.8
  Trade Balance with U.S.           873.2     892.4     543.2 5/
N/A--Not available.
1/ 1994 figures are all estimates based on available monthly
data in October 1994.
2/ GDP at factor cost.
3/ Figures are actual, average annual interest rates, not
changes in them.
4/ Merchandise trade.
5/ Figure is based on January-June data.
1.  General Policy Framework
    The Gabonese economy is dominated by petroleum and mining
production, which together contribute nearly 40 percent of
gross domestic product (GDP).  Oil is the key variable, as the
petroleum industry generates 80 percent of Gabon's export
earnings and nearly half of government revenues.  Although most
finished goods are imported, there is some manufacturing in
Gabon including a brewery, an oil refinery, and factories which
produce plywood, plastics and cigarettes.  The remaining
manufacturing is concentrated in the initial transformation of
Gabon's raw materials (e.g., a uranium "yellowcake" plant
located adjacent to the uranium mine at Mounana in southeastern
Gabon, and a petroleum refinery located at Port Gentil).  The
civil service accounts for over 10 percent of GDP by itself.  A
wide range of tertiary activities ranging from banking to legal
and accounting services and business consulting also figure
prominently in the economy.
    Since oil prices weakened sharply in 1986, the Gabonese
government has been in fiscal crisis.  Large deficits have led
Gabon to turn to foreign creditors for financing.  Following
years of arrears accumulation and the January 1994 devaluation
of the CFA (African Financial Community) franc, Gabon reached
an agreement with the IMF in March 1994 on a stand-by
arrangement and a compensatory and contingency financing
facility.  This was followed by Gabon's sixth Paris Club debt
rescheduling, a ten-year agreement with the London Club of
private creditors, a World Bank economic recovery credit, and a
credit from the African Development Bank for general budget
support.  Despite these arrangements, government revenue
remains depressed and expenditures have not been significantly
reduced.
    Monetary policy is tight, exercised through adjustments in
the Central Bank discount rate, ceilings on net lending, and
adjustments in bank reserve requirements.  Given the
arrangements of the Franc Zone, monetary policy is not used as
a tool for sectoral policies and is largely neutral in its
effect on the competitiveness of U.S. exports.
2.  Exchange Rate Policy
    As a member of the CFA Franc Zone, Gabon has no flexibility
in monetary and exchange policies.  The value of the CFA franc
is currently set at 100 CFAF per French franc.  While this
mechanism assures exporters and importers of the convertibility
of the currency, it ensures a fixed exchange rate vis-a-vis the
French franc only.  Thus, it discriminates in practice against
imports from outside France in that prices for French goods can
be more readily anticipated and transactions with France are
simpler than those with other countries.
    Although the CFA franc is fully convertible, the Central
Bank exercises administrative control over foreign exchange
transactions.  Outflows of foreign exchange must be justified
with an invoice or other contractual document, which must be
accepted by the the Central Bank before the commercial bank may
complete the transaction.  Generally, these controls appear to
be little more than an administrative formality, and there are
no known instances where exchange controls have been used to
impede the operations of U.S. firms.
3.  Structural Policies
    The Gabonese government levies a personal income tax, a
corporate income tax, a value-added tax and customs duties on
imports.  The government draws a major component of its
revenues from oil royalties.  Newly founded small- and
medium-sized businesses (SMBs) routinely receive tax holidays
for up to five years, and the government uses similar
incentives without discrimination by nationality to attract oil
exploration companies.  The personal income tax is widely
evaded.  Customs duties have recently been lowered, but here
too, collection is inefficient.  In the past, some observers
estimated the annual loss in revenues due to fraud and
smuggling to be as high as $100 million.
    The effects of the devaluation of the CFA franc in January
1994 and the implementation of the newly enacted budget law
have yet to be fully determined.  Inflation surges prompted the
government to impose price controls on certain staples at the
retail level at the beginning of 1994.
4.  Debt Management Policies
    Gabon has experienced a sharp increase in its indebtedness
since the international oil price drop of 1986.  External debt
rose from about $1 billion in 1985 to $3.5 billion in 1993, or
96 percent of projected 1994 GDP.  The country was in the grips
of stagflation and the internal arrears of the government
threatened to paralyze the domestic financial system.  Gabon
rescheduled its private debts with the London Club in 1987 and
in 1994.  It has been to the Paris Club six times, most
recently in April 1994.
    Faced with recurrent domestic political crises since late
1989, the government considered itself unable to implement
necessary fiscal reforms.  It suspended debt repayments on most
foreign obligations in early 1990.  Its history with the Paris
and London Clubs is checkered, sometimes difficult.  The
Gabonese government was unable to meet obligations under the
September 1991 Paris Club, and the agreement was "pulled back"
a year later.
    Negotiations with the IMF have often been protracted, with
key issues being the government's lack of fiscal discipline,
the need for parastatal reforms, and questions surrounding the
accounting for the country's oil revenues.  The January 1994
decision of the CFA countries to devalue the CFA franc was a
basis for an IMF stand-by arrangement.  Official creditors took
a relatively firm stand at the Paris Club, rescheduling
principal but requiring payment of previously deferred Paris
Club arrears over 12 months.  As of October 1994, the
government had paid its first tranche of 30 percent of deferred
Paris Club arrears.  The London Club rescheduled loans for ten
years with a two-year grace period.
5.  Significant Barriers to U.S. Exports
    Decrees, pursuant to the IMF standby, have lifted
prohibitions against importing mineral water, household soap,
cooking oil, cement and sugar.  The prices paid for wheat and
rice are subject to government approval.  The wheat market is
under the control of a French firm, SETUCAF, which is principal
shareholder in Gabon's only flour mill and which has an
exclusive right to import wheat.  The rice market is more open,
with several Asian brands available.  U.S. rice has been
imported successfully, but faces a price disadvantage which
excludes it from the mass market.  Technical and other
standards tend to be drawn directly from the relevant French
standards.  Telecommunications equipment, for example, has in
the past been restricted to French brands due to a perception
in the Telecommunications Ministry that only French equipment
could be used in Gabon.  Perceptions such as these can be
sucessfully challenged, although factors such as language,
distance, culture, and historical ties to France remain as
practical barriers to U.S. trade.
    The Gabonese government has not imposed intrusive or
discriminatory measures on the investments of foreign firms,
which are the mainstay of the petroleum industry.  Gabon signed
the MIGA convention on April 15, 1994.
    The Gabonese government does not always adhere to
competitive bidding practices, and French technical advisers
are well placed to steer contracts to French firms.  In the
petroleum sector, the government has organized seven bidding
rounds for exploration leases since the the mid-1980's, but it
continues to sign contracts outside the rounds.  Off-round
deals are not reserved for French firms, however, and U.S.
firms have struck off-round exploration deals as well.
    Customs procedures are slow and cumbersome, particularly
since the introduction of a new computer system.  The burden,
however, affects all suppliers equally, regardless of
nationality.
    The Gabonese government passed a revised budget law in June
of 1994 which incorporates many new standards and practices
relating to the country's financial activities, but the
implementation and effects of the new law have yet to be
determined.
6.  Export Subsidies Policies
    Gabon's exports are almost exclusively raw materials,
subject to export taxes rather than benefiting from subsidies.
The 50 percent devaluation of the CFA franc, which occurred on
January 12, 1994 was in part a measure designed to make exports
more competitive.
7.  Protection of U.S. Intellectual Property
    Gabon is a member of the World Intellectual Property
Organization (WIPO) and several international intellectual
property rights conventions including the Berne Convention for
Protection of Literary and Artistic Works, the Paris Convention
for the Protection of Industrial Property and the Patent
Cooperation Treaty.  However, the Gabonese governmemt is not
active in the GATT or in other international trade fora and has
not taken a position on the intellectual property aspects of
the Uruguay Round.  Largely for lack of enforcement capability,
the government turns a blind eye on trademark violations.  For
example, U.S. ethnic cosmetic brands are sought after in Gabon,
but many of those available are in fact "remanufactured" (i.e.,
diluted) versions which transit Nigeria en route to Gabon.
8.  Worker Rights
    a.  The Right of Association
    Since 1990 reforms ended the single party political system
in Gabon, the Gabonese Union Confederation (COSYGA) no longer
has an exclusive right to represent workers.  Unions throughout
the economy have proliferated; in some cases two or more unions
compete for members in the same industry.  In addition, a
second trade union confederation, the Gabonese Confederation of
Free Unions (CGSL) now competes with COSYGA and has made
significant inroads as a collective bargainer for industrial
employees.
    b.  The Right to Organize and Bargain Collectively
    With the promulgation of the Constitution of 1991 the right
of collective bargaining was confirmed.  Before its formal
passage, Gabonese workers had begun to bargain with management
outside the COSYGA framework as early as mid-1990.
    c.  Prohibition of Forced or Compulsory Labor
    The Constitution of 1991 guarantees the right to
employment.  The Labor Code of 1978 forbids forced labor.
However, credible sources report cases of prisioners, mostly
African expatriates, being forced to provide unpaid labor.
    d.  Minimum Age of Employment of Children
    The Labor Code of 1978 sets a minimum age of sixteen years
for employment.  UNICEF and other organizations have reported
instances of abuse of children as domestic or agricultural
help.  Non-Gabonese children are most at risk.
    e.  Acceptable Conditions of Work
    Conditions of work in much of the formal sector in Gabon
are reasonably good.  Health and safety standards are in place,
but not always observed; it is not uncommon to see workers
without hardhats or protective footwear in some industrial
plants.  Most of the firms operating production facilities in
Gabon are subsidiaries of, or are otherwise associated with,
European or U.S. companies and tend to follow European or U.S.
standards.  Conditions in the informal sector and in Gabonese
SMBs are less uniform and less favorable for the workers.  The
Gabonese authorities do not exercise effective monitoring of
working conditions, primarily for lack of enforcement
capability.
    f.  Rights in Sectors with U.S. Investment
    U.S. investment is almost exclusively in the petroleum
sector.  Worker rights, working conditions, and adherence to
safety standards are generally better in U.S. firms than
elsewhere in the economy.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                             177
Total Manufacturing                                     3
  Food & Kindred Products                   0
  Chemicals and Allied Products             3
  Metals, Primary & Fabricated              0
  Machinery, except Electrical              0
  Electric & Electronic Equipment           0
  Transportation Equipment                  0
  Other Manufacturing                       0
Wholesale Trade                                        -1
Banking                                                 5
Finance/Insurance/Real Estate                           0
Services                                                0
Other Industries                                        0
TOTAL ALL INDUSTRIES                                  184
Source: U.S. Department of Commerce, Bureau of Economic
Analysis
GEORGIA1
1G1GU.S. DEPARTMENT OF STATE
GEORGIA: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                             GEORGIA
                     Key Economic Indicators
                                     1992       1993      1994
Income, Production and Employment:
GDP (1990 prices/bil. rubles)        9.87       5.92       N/A
GDP Growth (pct.)                   -50.1      -40.0       N/A
GDP (current prices/bil. rubles)    149.2    1,522.9       N/A
By Sector:
  Agriculture                        77.7        N/A       N/A
  Industry/Manufacturing             26.1        N/A       N/A
  Energy/Construction                 9.3        N/A       N/A
  Rents                               N/A        N/A       N/A
  Financial Services (crediting)      6.8        N/A       N/A
  Other Services                      N/A        N/A       N/A
  Government/Health/Social
    Security/Education/Defense       48.3        N/A       N/A
  Net Export of Goods & Services      N/A        N/A       N/A
Per Capita GDP
  (current prices/rubles)          27,300    280,800       N/A
Labor Force (000s)                  3,138      3,100       N/A
Unemployment Rate (pct.)              6.1        8.4       N/A
Money and Prices:  (annual percentage growth)
Money Supply (M2/bil. coupons)         72      1,834       N/A
Base Interest Rate (pct.)               0         40       700
Personal Saving Rate                  N/A        N/A       N/A
Wholesale Inflation                   N/A        N/A       N/A
Consumer Price Index                  846     11,372    40,601
Exchange Rate
  Official (rubles/USD)             193.2          0         0
           (coupons/USD)                0     12,280   824,928
Balance of Payments and Trade:
(Millions of U.S. dollars unless otherwise noted)
Total Exports (FOB 1/               86.80        466       465
  Exports to U.S. 2/                    7          0         0
Total Imports (CIF) 1/             183.20        795       739
  Imports from U.S. 2/                 15         37      87.6
Aid from U.S.                           0        159         0
Aid from Other Countries                0          0         0
External Public Debt                  N/A        860       N/A
Debt Service Payments (paid)          N/A        N/A       N/A
Gold and Foreign Exch. Reserves       N/A        N/A       N/A
Trade Balance 1/                   -96.40       -329      -274
  Trade Balance with U.S. 2/           -8        -37     -87.6
N/A--Not available.
1/ Figures for 1993 and 1994 are U.S. Treasury Department
estimates.
2/ 1994 Figures are estimates based on January-October data.
1.  General Policy Framework
    The economic reforms being carried out by the Government of
Georgia aim to reduce inflation to single digits by the end of
1994, arrest the decline in output by accelerating systematic
reforms, promote private sector activities, improve the gross
external reserve position of the National Bank, and provide
social assistance to society's most vulnerable groups.  The IMF
granted Georgia a $40 million Structural Transformation
Facility loan in December 1994 to support its reform program.
    However, in 1994 economic decline continued in Georgia.  In
July, only 80 percent of 1,362 registered industrial
enterprises reported to the government.  Total industrial
production fell by 49.5 percent compared to the same period
last year.  Production of paper, manganese, wool yarn, milk,
and soap increased, while production of the 70 remaining
Georgian products decreased.  Production declined due to
interruptions in energy supplies from Russia, Azerbaijan and
Turkmenistan.  In October 1994, Turkmenistan cut the delivery
of gas on a credit basis because of unpaid Georgian bills.
According to most estimates, the underground economy is greater
in size than the official economy.
    The crisis-in-payment system in Georgia and between Georgia
and other NIS countries made it very difficult to maintain
trade links with other countries of the former Soviet Union.
At the same time, a chronic fiscal deficit and the National
Bank's subsidizing monetary policy led to hyperinflation with
prices increasing roughly 60 percent a month from mid-1993
through mid-1994.  About 80 percent of the deficit was caused
by spending on electricity, natural gas and bread.  Spending on
education, science, and administration did not exceed three
percent of GDP.  Under the IMF program, the cash budget deficit
was to be reduced to 3.8 percent of GDP, bringing the deficit
for the year down to 9.1 percent of GDP, still quite high but
about a quarter the 1993 figure.
    Since September the value of the coupon has fluctuated
significantly, but has maintained an upward trend, rising from
2.5 million coupons = 1 USD to 1.5 million coupons = 1 USD.
High inflation was responsible for the currency's collapse in
value during the first three quarters of 1994, which increased
the use of rubles and U.S. dollars in Georgia.  Improved
financial policies seem to have begun to reverse this trend, as
reflected in the improved exchange rate, and may increase the
public's willingness to use the national currency.
2.  Exchange Rate Policy
    In July 1993 the National Bank of Georgia modified its
fixed official exchange rate system after the Central Bank of
Russia withdrew Soviet rubles from circulation and moved to a
floating exchange rate regime.  The official exchange rate of
the interim currency, the coupon, against other major
currencies is determined by the Interbank Currency Exchange.
This is the only currently operating exchange market,
established in April 1993 as a counterbalance to the Caucasian
Exchange, where the actual exchange rate was defined.  The
banknote rate is defined at the currency exchange kiosks, which
need to have special permission to do so.  The banknote rate
exceeds the cash rate usually by 15-18 percent.
    In October 1993 the coupon traded at 21,000 = 1 USD, and in
October 1994 the rate was 2.4 million coupons = 1 USD.  The
Interbank Exchange operates twice a week.  Gross volume of
coupon-dollar trading increased from 50,000 USD to 250-300,000
USD a week.  There is a requirement to surrender 35 percent of
foreign exchange earnings at the exchange rate determined by
the Interbank market auction.  Nonresidents may hold both
foreign exchange and local currency accounts and may freely
transfer these balances offshore.  However, individual Georgian
banks may have difficulty transferring large amounts due to a
foreign exchange shortage.
    As a rule, the National Bank of Georgia is the only seller
of hard currency on the exchange market.  However, trends since
September 1994 show that since Interbank Currency Exchange is
the only operating currency market, banks are more willing to
participate as sellers.
    Neither the foreign exchange system in Georgia nor exchange
controls have any impact on the price competitiveness of U.S.
exports.
3.  Structural Policies
    Pricing Policies:  The government freed most prices in
February 1992.  In response to IMF and World Bank requirements,
the Cabinet of Ministers of Georgia increased prices of
electricity and natural gas to world market levels, and bread
prices are scheduled to be raised to reflect full market cost
by the end of December.
    Tax Policies:  The parliament adopted a new tax system in
December 1993 which is composed mainly of four taxes:  a 14
percent value-added tax (VAT); a corporate profit (income) tax
with a 20 percent rate for enterprises, a 10 percent rate for
construction enterprises, and a 35 percent rate for banks;
excise taxes of up to 90 percent on the price of goods; and a
personal income tax, progressive in nature but not strictly
enforced.  Other important sources of government income are
customs duties, a two percent import tax, an eight percent
export tax rate, a 20 percent tax for bartered goods, and a
fixed tax levied on the currency exchange kiosks.   The
government plans to increase VAT up to 20 percent, import tax
up to 12 percent, and to eliminate export tax.
    Tax collection is severely undermined because of inflation,
decline of government authority and corruption.  In the first
quarter of 1994, VAT and excise taxes constituted only 2.3
percent of GDP.  In 1994 the government ruled without an
adopted budget, with a 46 percent of GDP deficit in the first
half of the year, basically financed by borrowing from the
National Bank.  In response to the demands of the IMF and the
World Bank, the Government of Georgia presented a zero deficit
budget for the fourth quarter of 1994.  However, about 50
percent of income is contributed by grants and from borrowing
abroad.
    Government investments are still high, contributing
67 percent of total investments, though reliable information on
private investments is not available.  New investment
regulations remain in draft form.  In March 1994 the Bilateral
Investment Treaty was signed with the United States.  The
treaty is pending ratification by both countries.
    Only 25.8 percent of the enterprises approved for
privatization by the State Property Control Ministry were
privatized by May 1994.  A total of 1,152 enterprises, mostly
in the trade or service sectors, sold for 11 billion coupons
(roughly $40,000).
    In order to accelerate the privatization process, a new
decree by the head of state on privatization allows employees
to directly purchase 51 percent of company shares (except in
strategically important industries).  About 380 large
enterprises were privatized by November 1994.
    The government regulates the export of strategic
commodities produced in Georgia by a system of quotas and
licenses, which limit or prohibit export of certain types of
goods.
4.  Debt Management Policies
    Official statistics on the national debt do not exist.
Some officials have set the amount of debt at $870 million,
including $380 million owed to Turkmenistan, $71 million owed
to Russia, $141 million owed to the EU, $86 million owed to
Austria, $40 million owed to Turkey, $24 million owed to
Kazakhstan, $11 million owed to Armenia, $8 million owed to
Azerbaijan, and $1 million owed to the Netherlands.
5.  Significant Barriers to U.S. Exports
    Georgia's policy of encouraging imports has meant few
established barriers to U.S. products.  Georgia maintains
import licenses on a number of goods:  medical equipment,
medicines and raw materials for medicines, vegetation
protection chemicals, industrial scrap materials, drugs, and
weapons and ammunition.
    According to an executive decree, all commodities imported
to Georgia must have an insurance certificate from the Georgian
insurance company Aldagi.  This decree contradicts another
government decree on the limitation of monopolistic activity
and development of a competitive environment, and is expected
to be opposed by the Prosecutor General's office.
    Import Licenses must be obtained through the Committee on
Foreign Economic Relations on the basis of a preliminary
decision by the proper branch ministry.  Once ratified, the
U.S.-Georgia bilateral investment treaty will provide
substantial assurances to U.S. investments.
    The exporting company must also submit to the customs
office at the border and to the customs district office at the
cargo's destination the following:  pro forma invoice or bill
of lading for sea transport or bill of board for air transport,
export packing list, and a contract for exporting goods.  The
documentation from cargo origin country, certificate of quality
and sanitary certificates for food products may also be
required at the customs office.  In addition, according to the
new decree, persons taking abroad more than $500 must submit a
certificate from a bank.
    Importers pay a two percent customs duty and a 0.2 percent
processing fee, as well as applicable VAT and excise taxes on
goods from outside the Commonwealth of Independent States (CIS).
    The Georgian Customs Department has submitted to the
parliament newly proposed customs tariffs and draft laws on
customs duties and on transit taxes, and a customs code.  The
import tax is expected to be increased from 2 to 12 percent.
    The effect of barriers to U.S. trade and investment in
Georgia is minimal.  The current law on foreign investment does
not specifically hinder U.S. investment.  The only barrier to
foreign investments is lack of appropriate legislation and
absence of a law regarding owning land.  Currently land cannot
be purchased by a foreign investor.  A new law on investments
is planned for passage by the parliament by the end of 1994.  A
U.S.-Georgia trade agreement providing for reciprocal
most-favored-nation status was signed and entered into force in
late 1993.  Outmoded and inadequate infrastructure and the
absence of first-class bank guarantees create barriers to trade
and investment in Georgia.
6.  Export Subsidies Policies
    Georgia is not a member of the GATT Subsidies Code.  The
government does not provide any type of significant export
subsidy.  On the contrary, it discourages exports through
licensing requirements and quotas on a number of products.  The
export of some types of goods is prohibited.
7.  Protection of U.S. Intellectual Property
    Laws protecting patents and trademarks are adequate, but
copyright protection is nonexistent.  In accordance with
decrees issued in March 1992, a patent office under the
Committee of Science and New Technologies administers and
approves patents and trademarks, utilizing the classic system
of patent inspection.  Georgia is a member of the Patent
Cooperation Treaty and the Madrid Agreement of 1929 on
Trademarks.  There is currently no copyright protection law in
effect, and the Georgian government, while working on one, does
not expect to issue it by the end of 1994.  Georgia is not
listed on any special 301 watch lists, nor is it identified as
a priority foreign country.
    In January 1994 Georgia became a party to the Paris
Convention for the Protection of Industrial Property, a member
of the World Intellectual Property Organization, and a party to
the Patent Cooperation Treaty.  The new adjusted laws have not
been completed.
    Patent and trademark protection do not appear to pose
substantial problems in Georgia.  Systematic cases of patent
infringement do not exist, although brand counterfeiting is
known to have taken place, though not on a large scale.  Patent
terms are for the standard twenty years, although after four
years there is compulsory licensing to domestic firms of rights
held by foreigners.  No important sector is excluded from the
availability of a patent.  Registering a trademark costs $520
and this can be renewed every five years.  There are no
procedural barriers to obtaining a trademark, although Georgia
operates on the first-come first-serve system, where the first
to register the trademark obtains the right, unless the
trademark is internationally known, or registered under the
Madrid Agreement.
    The absence of any legal protection on copyrights has
allowed for some pirating of U.S. motion pictures, although not
on a large scale.  Because of the very low levels of U.S. trade
and investment with Georgia, the impact of any of Georgia's
intellectual property practices on U.S. trade and investment is
minimal.
8.  Worker Rights
    Georgia relies on old Soviet legislation which guarantees
most major labor rights, although efforts to refine these laws
began in late 1993.  Resources devoted to investigation of
complaints and enforcement of rights, centered in the Labor
Ministry, are slim.  In 1993 there was little interest in labor
activity, and in 1994 there were few worker strikes demanding
salary increases.
    a.  The Right of Association
    The labor code allows workers to form unions and
associations freely.  These associations must be registered
with the Ministry of Justice.  In late 1993, the Georgian
government had planned to implement specific legislation that
would allow for strikes and prohibit management retribution
against striking workers.  A single confederation of trade
unions, made up of about 30 sector organizations, is active in
Georgia, but steadily lost membership throughout 1993 and 1994.
    b.  The Right To Organize and Bargain Collectively
    The labor code also grants workers the right to organize
and bargain collectively.  This right is freely practiced in
the Georgia.   Anti-union discrimination is prohibited.
    c.  Prohibition of Forced or Compulsory Labor
    Forced or compulsory labor is prohibited under the labor
code.  Instances of this practice are rare.
    d.  Minimum Age for Employment of Children
    According to the labor code, the minimum age for employment
of children is 14.  Children between 14 and 16 years are
allowed to work a maximum of 30 hours a week.  The minimum age
is widely respected, and Georgian officials know of no sectors
where the rule is violated.
    e.  Acceptable Conditions of Work
    Acceptable conditions of work generally follow the old
Soviet pattern.  A nationally mandated minimum wage applies to
the government sector.  In November 1994, it was revised to
one million coupons a month.  The labor week is 40 hours,
although the government adopted 35 hour weeks for the winter
period from November 15 to February 15.  The labor code permits
higher wages for hazardous work and allows a worker to refuse
to perform if the work could become a danger to his life, but
otherwise, there are insufficient safeguards for worker
well-being.
    f.  Rights in Sectors with U.S. Investment
    Conditions in sectors where there is U.S. investment do not
differ from those in other sectors of the economy.
(###)
GERMANY1
OU.S. DEPARTMENT OF STATE
GERMANY: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                             GERMANY
                     Key Economic Indicators
        (Billions of U.S. dollars unless otherwise noted)
                                    1992*     1993*     1994* /1
Income, Production and Employment:
Real GDP (1991 prices)            1,870.1   1,743.0   1,824.5
Real GDP Growth Rate                  2.2      -1.1       2.5
GDP by Sector:  (1991 prices)
  Agriculture/Forestry/Fishing       25.6      21.7       N/A
  Manufacturing/Mining/
    Construction                    717.9     656.6       N/A
  Trade/Transportation              281.9     268.6       N/A
  Services                          614.9     634.0       N/A
  General Government/Households     271.9     267.7       N/A
  Net Exports of Goods & Services   -16.5     -14.7      -7.3
Real GDP Per Capita (USD)          23,203    21,471    22,316
Civilian Labor Force (millions)      38.9      38.7      38.5
Unemployment Rate /2
  (annual average)                    7.7       8.8       9.8
Money and Prices:  (annual percentage growth)
Money Supply (M3) /3,4                9.6       7.5       7.9
Commercial Interest Rate /3         12.03     10.16      9.43
Personal Savings Rate /5,6           13.9      13.3      12.5
Retail Inflation /6                   2.5       2.1       1.2
Wholesale Inflation /6                0.1      -1.1       1.5
Consumer Price Inflation /6           4.0       4.2       3.0
Exchange Rate (annual average)
  (deutschmarks/USD)               1.5595    1.6544      1.62
Balance of Payments and Trade:
Total Exports (FOB)                 430.4     379.9     413.6
  Total Exports to U.S. 7/           28.8      28.6      30.6
Total Imports (CIF)                 408.8     343.1     364.2
  Total Imports from U.S. 7/         21.2      18.9      18.5
Gold and Foreign Exch. Reserves /3    3.8      45.6      50.0
Trade Balance                        21.6      36.9      49.4
  Trade Balance with U.S. 7/          7.6       9.6      12.1
N/A--Not available.
* All Germany.
1/ Estimates based on latest available data.
2/ Percent of civilian labor force.
3/ 1994: latest available data.
4/ Change 4th qtr./4th qtr.; for 1994, seasonally adjusted
annual rate, through September 1994 over 4th qtr. 1993.
5/ Bundesbank definition.
6/ Western Germany only; all German GDP data are incomplete.
7/  Official U.S. figures.  1994 based on first three quarters.
1.  General Policy Framework
    The German economy is the world's third largest and
attained a GDP equivalent to USD 1.9 trillion (in nominal
terms) in 1993.  That same year was marked by a recession in
which the German economy contracted by 1.1 percent.  In late
1994, the economy is back on a growth path, and the consensus
forecast is for 2.5 percent real growth this year and next.
The German "social market" economy is organized on free market
principles and affords its citizenry a greater degree of
unemployment, health and educational benefits than most other
industrialized countries.  One of the world's foremost trading
nations, Germany since reunification in 1990 has experienced a
substantial decline in its foreign trade surplus due to the
demands of integrating the economy of the erstwhile GDR.  The
German parliament has ratified the Uruguay Round agreement.
    German fiscal policy also has been driven by the financial
exigencies of reunification.  The government extended the
country's generous social welfare system to eastern Germany and
committed itself to quickly raise eastern German production
potential via public investment and generous subsidies to
attract private investment.  The budgetary cost of these
policies was increased by the decision to rapidly raise eastern
German wages to western German levels.  This resulted in heavy
job losses and greatly increased the government's unemployment
compensation costs, as well as wage costs in government-owned
firms being prepared for privatization.  As a result, western
Germany has had to transfer vast sums to eastern Germany on the
magnitude of DM 150 billion annually, or 5.0 percent of
all-German gdp.  These transfers accounted for the dramatic
ballooning of public sector deficits and borrowing.  The
recession of 1992/93 further contributed to a widening fiscal
deficit as tax revenues weakened and anticyclical expenditures
rose.
    Despite the recession and the fiscal demands of
reunification, the German government has sought to narrow the
federal budget deficit through a variety of tax and fee
increases, public spending restraint and cuts in certain social
benefits.  Nonetheless, the overall public sector borrowing
requirement (broadly measured to include all levels of
government as well as hitherto "off-budget" funds and agencies)
will be some DM 180 billion in 1994 and is expected to be only
slightly smaller in 1995.
    In recent years, relatively high rates of inflation (the
CPI rose an average 4.1 percent in 1992 and 1993) and money
growth, as well as concern over wage developments and fiscal
deficits, have preoccupied the German central bank
(Bundesbank).  The Bundesbank places overriding importance on
price stability and thus responded to the rising inflation in
1991/92 by hiking short term interest rates, which peaked in
July 1992 at post-war highs.  Since then, the central bank
discount rate has declined by 4.25 percentage points, with the
most recent cut occurring in May 1994.  In 1993-94, wage
settlements were moderate and inflation has declined to about
three percent.  However, the Bundesbank has continued to be
concerned about rapid monetary growth.
    The government's public sector deficits are financed
primarily through sales of government bonds, the maximum
maturity of which normally is ten years (for the first time in
over a decade, the government issued a 30-year bond in January
1994).  The Bundesbank's primary monetary policy tool is
short-term liquidity provided to the banking system primarily
via repurchase operations.  It also provides financing to the
banking system via discount and Lombard facilities, and it sets
minimum reserve requirements for the banks.  The discount rate
as of October 31, 1994 was 4.5 percent.
2.  Exchange Rate Policies
    The Deutsche mark is a freely convertible currency, and the
government does not maintain exchange controls.  Germany
participates in the exchange rate mechanism of the European
Monetary System.  The Bundesbank intervenes in the foreign
exchange markets infrequently, usually in cooperation with
other central banks in order to counter disorderly market
conditions.
3.  Structural Policies
    Since the end of the second world war, German economic
policy has been based on a "social-market" model which has been
characterized by a higher level of direct government
participation in the production and services sector than in the
United States.  In addition, an extensive regulatory framework,
which covers most facets of retail trade, service licensing and
employment conditions has worked to limit market entry by not
only foreign firms but also by German entrepreneurs.  Although
the continuation of the "social market" model remains the goal
of all mainstream political parties, changes resulting from the
integration of the German economy with those of its EU
partners, the shock of German unification and a perceived
decline in competitiveness in its traditional manufacturing
industries, has forced a rethink of the German post-war
economic consensus in the so-called Standort Debate.
    As a result of this debate, numerous structural impediments
to the continued growth and diversification of the German
economy have been identified.  These can be broadly grouped as
follows:
    --An excessively rigid labor market
    --A regulatory system which discourages new entrants
especially in the services sector
    --High taxes and social charges
    --Lack of risk and venture capital for start-up firms
    In recognition of these problems, the government has been
pursuing a program of reforms since the mid-1980's focusing on
tax reform, privatization and deregulation.  Within the last
year, the reorganization of the German Federal Railroad, and
the operating entities of the German Federal Post into stock
companies was completed.  The federal government also reduced
its majority holdings in Lufthansa to less than 36 percent with
the objective of selling the entire stake by the end of 1995.
U.S. firms are likely to benefit from these developments as
purchasing decisions are driven more by commercial criteria
than in the past.  It is also expected that the introduction of
competition in some of these formerly protected sectors will
eventually result in lower costs for the users.
    Despite the progress in recent years, lack of competition
in several protected sectors continues to drive up business
costs in Germany.  The service sectors which continue to be
subject to excessive regulation and market access restrictions
include communications, energy, retail distribution and
insurance.  A government proposal to modify or eliminate the
so-called "rebate and premium" laws which limit firms' pricing
and marketing flexibility failed to pass the German parliament
in the summer of 1994.  The government has indicated it may
reintroduce legislation to reform these laws in the next
session.  Opposition from small shop owners also derailed an
attempt to revise Germany's highly restrictive regulations on
store hours.  Irrespective of short-term German government
reform priorities, the EU is expected to continue to pressure
its member states to reduce barriers to trade in services
within the Community.  U.S. firms, especially with operations
in other EU states, will likely benefit from EU market
integration efforts over the long term.
4.  Debt Management Policies
    Germany has recorded current account deficits since 1991
due to a dramatic drop in the country's traditionally strong
trade surplus, related in part to strong eastern German demand,
and exacerbation of Germany's services account deficit because
of the substantial foreign borrowing undertaken to finance the
costs of unification.  Nonetheless, due to large current
account surpluses from the 1970's through 1990, Germany remains
the world's second largest creditor, with net foreign assets
estimated at some USD 275 billion at the end of 1993.  The
current export-led recovery is widely projected to improve both
the trade surplus and the current account balance.
5.  Significant Barriers to U.S. Exports
    Germany is one of the most important trade partners
worldwide for the U.S.  The country's strong economy poses
virtually no formal barriers to U.S. trade or investment
interests.  It is possible to identify some pitfalls,
especially for the newcomer to the German market, but on the
whole the Federal Republic is an excellent place for U.S.
companies to do business.
    Import Licenses:  The FRG demands virtually no import
licenses, having abolished almost all national import quotas.
Germany is subject, however, to the import-license requirements
imposed on some products by the European Union.  (An example is
the recent imposition of a quota for "dollar" bananas under the
EU's banana import regime.)
    Services Barriers:  Conditions of access vary considerably
but the Embassy has received very few complaints.  Some
progress has been made in participation of foreign companies in
banking and other financial services.  The insurance market is
still a tough one to crack.  Telecommunications services are
being increasingly deregulated.
    Standards, Testing, Labeling, and Certification:  Germany's
regulations and bureaucratic procedures can prove a baffling
maze, blunting the enthusiasm of U.S. exporters.  While not
"protectionist" in the classic sense, government regulation
does offer a degree of protection to German suppliers.  Safety
standards, not normally discriminatory but sometimes zealously
applied, and exemplified by, for example, the testing and
licensing procedures of the Technischer Ueberwachungsverein
e.V. (TUV, or technical inspection association), complicate
access to the market for many U.S. products.
    Government Procurement Practices:  German government
procurement is non-discriminatory and appears to comply with
the General Agreement on Tariffs and Trade (GATT) as well as
the terms of the U.S.-FRG Treaty of Friendship, Commerce and
Navigation.  That said, it is undeniably difficult to compete
head to head with major German suppliers who have long-term
ties to German government purchasing entities.  Those areas
which fall outside of GATT agreement coverage, such as military
procurement or procurement of services, have been the most
susceptible to these problems.  With the implementation,
January 1, 1995, of the Uruguay round agreement under the
auspices of the WTO, GATT coverage will commence for some of
these areas.
    Germany recently implemented the EU Utilities Directive and
its related Remedies Directive.  With the recent conclusion of
a US-EU memorandum of understanding on utilities procurement of
heavy electrical equipment, U.S. firms now can claim rights
equivalent to European firms under the Utilities Directive in
this sector.  Under the terms of the U.S.-German FCN, Germany
is also to provide U.S. firms with nondiscriminatory treatment
in the telecommunications sector.
    Investment Barriers:  The German investment climate is
generally very open, but some of the concerns mentioned above,
such as access to services markets and standards and
procurement questions, may also be seen as obstructing an
increase in investments.
    Customs Procedures:  Customs procedures at German
ports-of-entry are relatively streamlined and efficient.
6.  Export Subsidy Policy
    Germany does not directly subsidize exports outside the EU
framework of export subsidies for agricultural goods.
Government or quasi-government entities do provide export
financing, but Germany subscribes to the OECD guidelines that
restrict the terms and conditions of export finance.  An
earlier policy that provided exchange rate guarantees to the
German Airbus partner has been terminated, largely as a result
of U.S. pressure and a GATT finding against this program.
7.  Protection of U.S. Intellectual Property
    Germany is a member of the World Intellectual Property
Organization and party to the Bern Convention for the
Protection of Literary and Artistic Works, the Paris Convention
for the Protection of Industrial Property, the Universal
Copyright Convention, the Geneva Phonograms Convention, the
Patent Cooperation Treaty, the Brussels Satellite Convention,
and the Treaty of Rome on neighboring rights.
    Intellectual property is generally well protected in
Germany.  The German Patent Bureau, Verwertungsgesellschaft
(which handles printed material), and GEMA (the German
rough-equivalent to the American Society of Composers, Authors
and Publishers) are the agencies responsible for intellectual
property protection.  U.S. citizens and firms are entitled to
national treatment in Germany.
    Legislation to transpose the EC software copyright
directive into national law was passed in June 1993.  This new
law met U.S. concerns about IPR protection for computer
software by lowering the standards of originality which had
undermined the level of protection for many business
application programs.  But American software firms are still
concerned with the perceived level of software piracy by
businesses in Germany.  These concerns will be addressed when
Germany implements provisions required by the TRIPs portion of
the Uruguay Round, most likely before the end of 1995
8.  Workers' Rights
    a.  Right of Association
    The constitution guarantees full freedom of association
(Article 9).  The workers' rights to strike and the lock-out
are also legally protected activities.  These rights have been
developed further by jurisdiction.
    b.  Right to Organize and Bargain Collectively
    The German industrial relations system consists of a series
of statutory mechanisms for sharing power over certain
activities within firms, coupled and overlapping with an
autonomous private collective bargaining system developed
between the unions and employers organizations.  The system of
codetermination and worker participation (Mitbestimmung) is
regulated at different levels by various laws enacted between
1951 and 1989.  They cover two basic spheres: day-to-day
social, personnel, and economic matters, which are handled by
elected works councils; and basic business decisions at the
enterprise level, made by supervisory or management boards,
which include members elected by the workers.  Wages, salaries
and working conditions are determined either by collective
bargaining agreements or individual contracts.  Collective
bargaining agreements are legally binding and can be enforced
through the courts.  Under certain circumstances, a collective
bargaining agreement can be declared "generally binding" by the
Government which means that all employers in the industry
covered by the agreement must abide by its provisions,
regardless of whether or not they are members of the
association that signed the agreement.
    c.  Prohibition of Forced or Compulsory Labor
    The German constitution guarantees every German the right
to choose his own occupation and prohibits forced labor
although some prisoners are required to work.
    d.  Minimum Age for Employment of Children
    German legislation in general bars child labor under age
15.  There are limited exemptions for children employed in
family farms, delivering newspapers or magazines, or involved
in theater or sporting events.
    e.  Acceptable Conditions of Work
    German labor and social legislation is comprehensive and,
in general, imposes strict occupational safety and health
standards.  The legislation and regulations may be supplemented
by collective agreements which cover entire industries or
regions.  The resulting standards are widely considered to be
among the very highest in the European Union, and thus the
World.  European Union legislation is becoming more and more
important in this area.  There is also a mandatory occupational
accident and health insurance system for all employed persons.
    f.  Rights in Sectors with U.S. Investment
    The enforcement of German labor and social legislation is
strict, and applies to all firms and activities, including
those in which U.S. capital is invested.  Employers are
required to contribute to the various mandatory social
insurance programs and belong to and support Chambers of
Industry and Commerce which organize the dual (school/work)
system of vocational education.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                              2,468
Total Manufacturing                                   22,283
  Food & Kindred Products                   2,054
  Chemicals and Allied Products             3,812
  Metals, Primary & Fabricated              1,194
  Machinery, except Electrical              5,368
  Electric & Electronic Equipment             877
  Transportation Equipment                  5,293
  Other Manufacturing                       3,686
Wholesale Trade                                        2,945
Banking                                                2,229
Finance/Insurance/Real Estate                          5,107
Services                                                 862
Other Industries                                       1,630
TOTAL ALL INDUSTRIES                                  37,524
Source: U.S. Department of Commerce, Bureau of Economic
Analysis
(###)
GHANA1
 V VU.S. DEPARTMENT OF STATE
GHANA: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                              GHANA
                     Key Economic Indicators
            (Millions of cedis unless otherwise noted)
                                    1992      1993     1994 est.
Income, Production and Employment:
Real GDP (1985 prices) 1/           474,600   498,300   523,200
Real GDP Growth (pct.)                  3.9       5.0       5.0
GDP (at current prices) 1/        3,008,800 3,949,000 5,030,000
By Sector:
  Agriculture                     1,461,005 1,887,633       N/A
  Energy/Water                       63,130    71,082       N/A
  Manufacturing                     261,538   359,361       N/A
  Construction                      105,216   126,369       N/A
  Rents                                 N/A       N/A       N/A
  Financial Services                108,227   150,063       N/A
  Other Services                    941,036 1,259,739       N/A
  Government/Health/Education           N/A       N/A       N/A
Net Exports of Goods & Services     481,408   775,852 1,056,300
Real Per Capita GDP (1975 base)         491       501       511
Labor Force (000s)                      N/A       N/A     5,900
Money and Prices:
Money Supply (M2)                   360,690   461,347       N/A
Base Interest Rate (pct.)              30.0      35.0      35.0
Personal Saving Rate                    N/A       N/A       N/A
Retail Inflation (pct.)                13.3      27.7      22.5
Wholesale Inflation                     N/A       N/A       N/A
Consumer Price Index (1985=100)       510.8     645.6     790.9
Exchange Rate (USD/Cedi)
  Official                            1/520     1/780    1/1060
  Parallel                            1/545       N/A       N/A
Balance of Payments and Trade:  (USD millions) 3/
Total Exports (FOB) 2/                986.3    1051.0     490.9
  Exports to U.S.                      96.4     208.6     117.9
Total Imports (CIF) 2/               1457      1728       622
  Imports from U.S.                   123.8     214.5     253.0
Aid from U.S.                          43.0      63.7      50.0
Aid from Other Countries                570       760       N/A
External Public Debt                 4104.0    4603.3       N/A
Debt Service Payments (paid)          282.6     332.0       N/A
Gold and Foreign Exch. Reserves       388.2     420.4       N/A
Trade Balance 2/                     -470.7    -677.0    -131.1
  Trade Balance with U.S.             -27.4      -5.9    -135.1
N/A--Not available.
1/ GDP at factor cost.
2/ Merchandise trade.
3/ 1994 data is for six months.
1.  General Policy Framework
    Ghana operates in a free market environment under a
civilian government headed by elected President, Jerry John
Rawlings.  Rawlings headed a "provisional" regime from the end
of 1981 until January 1993 when democratic government, under a
written constitution, was restored.  A popularly-elected
parliament -- absent opposition parties which boycotted
parliamentary elections because of a belief that the
presidential vote was fraudulent -- took office in January
1993.  The executive branch takes the lead in promulgating
legislation which requires parliamentary approval before
enactment.  The judiciary, in particular the Supreme Court,
acts as the final arbiter of Ghanaian laws.  As an indication
of its independence, the Supreme Court rendered several
decisions in 1993 in favor of parties bringing suit against the
government's executive branch.
    The government has, on balance, maintained the reform
measures and budgetary stringencies of a structural adjustment
program (SAP) adopted in 1983 by the previous military
government.  During the period between 1983 - 1992 impressive
progress was made in reducing the fiscal deficit and bringing
down inflation and interest rates.  In 1992, with elections
approaching, fiscal discipline was relaxed and public sector
expenditures rose, resulting again in an increased fiscal
deficit.  A large wage increase was granted to civil servants
in an effort to maintain a stable political atmosphere during
the preparations for multiparty elections.  In addition,
performance in the fiscal sector was further undermined by a
shortfall in cocoa production and a sharp decline in world
cocoa prices.  Since 1993, renewed efforts have been made to
reduce public sector expenditures.
    In general, the SAP has been characterized by an emphasis
on development of Ghana's private sector, which historically
has been weak and more keenly involved in trading activities
rather than domestic production of goods and services.  Ghana
is seeking to privatize a large number of enterprises which
currently operate under government control or outright
ownership.  During the past year the privatization effort has
intensified, resulting in 15 firms being sold by the
government.  The prospects for 1995 are promising, with an
estimated 30 additional firms likely to be privatized.  Several
state-owned banks, Ghana Airways, Ghana Posts and
Telecommunications and the State Shipping Corporation are also
being prepared for sale.
    Other reforms adopted under the SAP include the elimination
of exchange rate controls on the cedi and the lifting of
virtually all restrictions on imports, as well as the
liberalization of access to foreign exchange.  The tariff
structure in place is designed to discourage importation of a
limited number of luxury items deemed non-essential to the
growth needs of the economy.  A largely dysfunctional duty
drawback scheme has been totally revamped into a more
"user-friendly" duty relief instrument.  Whereas prior to 1994
no exports benefitted from the scheme, during the first six
months of 1994 the cedi equivalent of $325,000 has been paid to
exporters.  Further, the elimination of virtually all local
direct production subsidies characterizes the overall greater
reliance on market conditions to determine the value of goods
and services introduced into channels of commerce.
    Ghana relies heavily on donor assistance and received
pledges amounting to $2.1 billion from the donor community for
the two-year period beginning January 1, 1994.  The World Bank
is the largest donor, offering assistance at an annual level of
approximately $300 million in the form of sectoral and
structural adjustment credits.  However, some of the assistance
is currently blocked pending further progress on
privatization.  Ghana succeeded in eliminating its remaining
debt arrears by mid-1991 and has not rescheduled official or
commercial bank credits in the meantime.  Ghana graduated from
its IMF enhanced structural adjustment facility in December
1991; current support from the IMF takes the form of a
surveillance regime monitoring developments in Ghana's
macroeconomy.
2.  Exchange Rate Policy
    Ghana's current exchange rate policy is aimed at achieving
macroeconomic stability and market-determined exchange rates.
As imports have increased in recent years, the government --
with the encouragement of the World Bank and the IMF --  has
allowed the cedi to depreciate.  In March 1992, the foreign
exchange auction procedure was abandoned and the exchange rate
of the cedi is now determined freely in the context of an
extended interbank market.
    The Bank of Ghana retains all hard currency earnings on the
sale of cocoa and a sliding scale percentage of earnings on
gold exports.  Foreign exchange is made available to importers
through the commercial and merchant banks as well as
independently-operated foreign exchange bureaus.  A chronic
shortage of forex supplied to banks by the Bank of Ghana has
caused frequent delays for importers settling their overseas
accounts.  Foreign currency accounts may be held in local banks
with interest (except on export earnings) exempt from Ghanaian
tax.  Transfers abroad are free from foreign exchange control
restrictions.  Taken in its entirety, the exchange rate regime
in Ghana is seen to have no particular impact on the
competitiveness of U.S. exports.
3.  Structural Policies
    Ghana is a member of the WTO; however its adherence to the
agreement's liberal trading principles has been compromised by
the need to stem the outflow of hard currency to overcome
external payments difficulties.  During the course of Ghana's
structural adjustment program, it progressively reduced import
quotas and surcharges.  Tariff structures are being adjusted in
harmony with the ECOWAS trade liberalization program and U.S.
companies are well-advised to make inquiries on a case-by-case
basis.  With the elimination of import licensing in 1989,
importers now are merely required to sign a declaration that
they will comply with Ghanaian tax and other laws.
    The Government of Ghana is committed to principles of free
trade, upon which support from the Bretton Woods institutions
is predicated.  However, the government is also committed to
the development of competitive domestic industries with
exporting capabilities.  The government is expected to continue
to support promising domestic private enterprise with
incentives and financial support.  Beyond this, Ghanaian
manufacturers clamor for stronger measures and voice
displeasure that Ghana's tariff structure places local
producers at a competitive disadvantage vis-a-vis imports from
countries enjoying greater production and marketing economies
of scale.  High costs of local production frequently boost the
price of locally manufactured items above the landed cost of
goods imported from Asia and elsewhere.  Reductions in tariffs
have increased competition for local producers and
manufacturers while reducing the cost of imported raw materials.
    Under the structural adjustment program, in addition to
reducing tariffs, the Government of Ghana has enacted various
forms of personal and corporate tax relief.  In 1993 the
government eliminated the experimental "super sales tax" on
luxury vehicles and consumer goods and maintained lower tax
rates on annual personal income below the equivalent of
$17,500.  The top corporate tax rate for producer industries is
35 percent.  Income earned by bank and other financial
institutions is taxed at the same rate.  The new investment
code provides that income earned from investment in export
industries will be taxed at 20 percent (this rate takes effect
in early 1995).  This should be a significant incentive for
increased investment, especially in the export sector.
4.  Debt Management Policies
    At year-end 1993 total outstanding public and
government-guaranteed external debt totalled $4.6 billion , or
approximately 116 percent of GDP at the current rate of
exchange.  External debt increased from 26 percent of total
exports of goods and services in 1992 to 37 percent in 1993.
Domestic debt rose from 7.5 percent of GDP in 1992 to 12
percent in 1993.  However, nominal interest and principal
payments have declined significantly since 1988 and Ghana's
external debt indicators show significant improvement,
reflecting a change in the composition of new borrowing in
favor of financing with generous grant elements.  In 1990,
Ghana succeeded in clearing all external debt arrears and has
maintained this position ever since.
5.  Significant Barriers to U.S. Exports
    Import Licenses:  Ghana eliminated the last vestiges of its
import licensing system in 1989.  Tariffs, which in some cases
are very high, have replaced the import bans which until
recently were applied to certain goods.
    Services:  Foreign investors are permitted to participate
in all economic sectors save four reserved for Ghanaians in the
current investment code.  These activities are petty trading,
the operation of taxi services, lotteries (excluding football
pools) and the operation of beauty salons and barber shops.
    Standards, Testing, Labelling and Certification:  Ghana has
promulgated its own standards for food and drugs.  The Ghana
Standards Board, the testing authority, subscribes to accepted
international practices for the testing of imports for purity
and efficacy.  Under Ghanaian law, imports must bear markings
identifying in English the type of product being imported, the
country of origin, the ingredients or components, and the
expiration date, if any.  The thrust of this law is to set
reasonable standards for imported food and drugs.  Locally
manufactured goods are subject to comparable testing,
labelling, and certification requirements.
    Investment:  The new investment code eliminates the need
for prior project approval from the Ghana Investment Promotion
Center (GIPC).  Registration, which is for statistical
purposes, is normally accomplished within five working days.
Investment incentives are no longer subject to discretionary
judgments -- they have been made automatic by incorporating
them into the corporate tax and customs codes.  Incentives
include zero-rating import tariffs for plant and generous tax
incentives.  Immigrant quotas for businesses, though relaxed,
remain in effect.  In anticipation of the new and liberalized
foreign investment regime, a marked increase in registration of
investments has been recorded by the GIPC, from 211 in 1991, to
250 in 1992, to 438 in 1993, and over 600 so far in 1994.
    Government Procurement Practices:  Government purchases of
equipment and supplies are usually handled by the Ghana Supply
Commission (the official purchasing agency), through
international bidding, and, at times, through direct
negotiations.
    Former government import monopolies have been abolished.
However, parastatal entities continue to import some
commodities.  The parastatals no longer receive government
subsidies to finance imports.
6.  Export Policies
    The Government of Ghana does not directly subsidize
exports.  Exporters are entitled to a 100 percent drawback of
duty paid on imported inputs used in the processing of exported
goods.  As noted earlier, this system, while moribund in the
past, has been restructured and exporters are now able to
receive this rebate.  Furthermore, over the past year four
bonded warehouses have been established which allow importers
to avoid duties on imported inputs used to produce merchandise
for export.  It is expected that investors taking advantage of
this duty relief arrangement will increase inward investment
flows substantially over the next 2-3 years.
7.  Protection of U.S. Intellectual Property
    After independence, Ghana instituted separate legislation
for copyright (1961) and trademark (1965) protection based on
British law.  In 1985 and 1992, the government passed new
copyright and patent legislation respectively.  Prior to 1992,
the patent laws of the United Kingdom applied in Ghana.  Ghana
is a member of the Universal Copyright Organization, the
Intellectual Property Organization and the English-speaking
African Regional Intellectual Property Organization.  IPR
holders have access to local courts for redress of grievances.
Few infringement cases have been filed in Ghana in recent years.
    Patents (product and process):  Patent registration in
Ghana presents no serious problems for foreign rights holders.
Fees for registration by local and foreign applicants vary
according to the nature of the patent.  Normal minimums are $50
and $150 for local and foreign applicants respectively.
    Trademarks:  Ghana has not yet become a popular location
for imitation designer apparel and watches.  In cases where
trademarks have been misappropriated, the price and quality
disparity between the counterfeit and the genuine would trigger
warning signals to alert a potential buyer.
    Copyrights:  Local enforcement of foreign copyrights has
improved recently.  The current copyright law provided for the
establishment of a copyright office, an autonomous body.  In
addition, the establishment of the Copyright Society of Ghana
(COSGA) to protect the interests of local and foreign copyright
holders has improved copyrights administration in Ghana.
    Ghana is a signatory to the Universal Copyright Convention
and the Bern Convention.  Moreover, COSGA has signed
representation agreements with similar organizations in other
countries, including the United States.
    The current copyright statute provides for the protection
of computer software, satellite programming and cable
television distribution.  The duration of protection is
presently lifetime plus 50 years.
8.  Worker Rights
    a.  The Right of Association
    Trade unions are governed by the Industrial Relations Act
(IRA) of 1958, as amended in 1965 and 1972.  Organized labor is
represented by the Trades Union Congress (TUC), which was
established in 1958.  The IRA confers power on government to
refuse to register a trade union; however this right has not
been exercised by the current government or the previous
military government.  No union leaders have been detained in
recent years nor have workers' rights to associate freely been
otherwise circumscribed.
    b.  The Right to Organize and Bargain Collectively
    The IRA provides a framework for collective bargaining and
protection against anti-union discrimination.  Civil servants
are prohibited by law from joining or organizing a trade
union.  However, in December 1992 the government passed a law
which allows each branch of the civil service to establish a
negotiating committee to engage in collective bargaining for
wages and benefits in the same fashion that trade unions
function in the private sector.  While the right to strike is
recognized in law and in practice, the government has on
occasion taken strong action to end strikes, especially in
cases involving vital government interests or public
tranquility.  The IRA provides a mechanism for conciliation and
then arbitration before unions can resort to job actions or
strikes.  "Wildcat" strikes do, however, occur occasionally.
    c.  Prohibition of Forced or Compulsory Labor
    Ghanaian law prohibits forced labor, and it is not known to
be practiced.  The International Labor Organization (ILO)
continues to urge the government to revise various legal
provisions that permit imprisonment with an obligation to
perform labor for offenses that are not countenanced under ILO
Convention 105, ratified by Ghana in 1958.
    d.  Minimum Age of Employment of Children
    Labor legislation in Ghana sets a minimum employment age of
16 and prohibits night work and certain types of hazardous
labor for those under 18.  The violation of child labor laws is
prevalent and young children of school age can often be found
during the day performing menial tasks in the agricultural
sector or in the markets.  Observance of minimum age laws is
eroded by local custom and economic circumstances that
encourage people to become wage earners at an early age.
Inspectors from the Ministry of Labor and Social Welfare are
responsible for enforcement of child labor laws.  Violators of
laws prohibiting heavy labor and night work by children are
occasionally punished.
    e.  Acceptable Conditions of Work
    A tripartite committee of representatives from government,
organized labor, and employers established a minimum wage of
780 cedis (less than one dollar) per day.  In real terms, the
minimum wage is less than in 1980.  The standard work week is
40 hours.  Occupational safety and health regulations are in
effect and sanctions are occasionally applied through the labor
department of the Ministry of Health and Social Welfare.
Safety inspectors are few in number and inadequately trained.
Inspectors will take action if matters are brought to their
attention but lack the resources to seek out violations.
    f.  Rights in Sectors with U.S. Investment
    U.S. investment in Ghana is dominated by a firm in the
primary and fabricated metals sector.  There is also
significant U.S. investment in the petroleum, seafood, mining,
telecommunications, chemicals and related products, as well as
wholesale trade sectors.  Labor conditions in these sectors of
the economy do not differ from the norm described above.  U.S.
firms in Ghana are obliged to adhere to Ghanaian labor laws and
no instances of noncompliance are known.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                             (1)
Total Manufacturing                                   (1)
  Food & Kindred Products                     2
  Chemicals and Allied Products               0
  Metals, Primary & Fabricated              (1)
  Machinery, except Electrical                0
  Electric & Electronic Equipment           (1)
  Transportation Equipment                    0
  Other Manufacturing                         0
Wholesale Trade                                         0
Banking                                                 0
Finance/Insurance/Real Estate                           0
Services                                                0
Other Industries                                      (1)
TOTAL ALL INDUSTRIES                                  117
(1) Suppressed to avoid disclosing data of individual companies
Source: U.S. Department of Commerce, Bureau of Economic Analysis
GREECE1
nRnRU.S. DEPARTMENT OF STATE
GREECE: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                              GREECE
                     Key Economic Indicators
        (Billions of U.S. dollars unless otherwise noted)
                                      1992      1993     1994 1/
Income, Production and Employment:
Real GDP (1988 prices) 2/             62.6      62.2      62.9
Real GDP Growth (pct.)                 0.8      -0.5       1.1
GDP (at current prices) 2/            84.6      80.6       N/A
By Sector:
  Agriculture                          9.2       8.2       N/A
  Energy/Water                         2.2       2.0       N/A
  Mining                               0.7       0.6       N/A
  Manufacturing                       11.5      10.0       N/A
  Construction                         6.5       6.1       N/A
  Rents                               12.3      12.7       N/A
  Financial Services                  16.0      15.5       N/A
  Other Services                      11.0      10.8       N/A
  Government/Health/Education         14.0      13.9       N/A
  Statistical Discrepancies            1.2       0.8       N/A
  Net Exports of Goods & Services     -9.6      -9.0      -9.7
Real Per Capita GDP
  (1988 prices/USD)                6,087.0   6,005.0   6,041.0
Labor Force (000s)                 4,034.3   4,118.4   4,143.1
Unemployment Rate (pct.)               8.7       9.7      10.0
Money and Prices:  (annual percentage growth)
Money Supply (M3/end period) 3/       14.4      15.0      10.0
Base Interest Rate 4/                 29.0      26.0      26.0
Personal Saving Rate                 18-19      17.0     16-17
Retail Inflation                      15.8      14.4      11.1
Wholesale Inflation                   11.3      11.9       8.5
Consumer Price Index                  15.8      14.5      11.1
Exchange Rate (USD/DRS)
  Official                           190.7     229.3     243.0
  Parallel                             N/A       N/A       N/A
Balance of Payments and Trade:  (millions of USD)
Total Exports (FOB) 5/             6,008.8   5,034.3   5,000.0
  Exports to U.S. 6/                 382.6     377.1      86.2
Total Imports CIF 5/              19,902.0  17,615.5  18,500.0
  Imports from U.S. 6/               848.9     820.5     190.6
Aid from U.S.                          N/A       N/A       N/A
Aid from Other Countries               N/A       N/A       N/A
External Public Debt              22,954.5  26,857.0  28,800.0
Debt Service Payments (paid)       7,974.8   6,987.4   7,000.0
Gold and Foreign Exch. Reserves    5,588.0   8,693.6  13,000.0
Trade Balance 5/                  -13,893.5 -12,581.2 -13,500.0
  Trade Balance with U.S. 6/        -466.3    -443.4    -104.4
N/A--Not available.
1/ 1994 figures are all estimates based on available monthly
data in October 1994.
2/ GDP at factor cost.
3/ M2 not available in Greece.
4/ Figures are actual average annual interest rates, not
changes in them.
5/ Merchandise trade, Bank of Greece data, transaction basis.
6/ Customs data (National Statistical Service of Greece).  1994
figures cover January-March period.
1.  General Policy Framework
    Greece has been a member of the European Union (EU) since
1981 and enjoys a relatively open, free-market economy.  It has
a population of 10.4 million and a work force of about four
million.  The moderate level of development of Greece's basic
infrastructure -- road, rail, telecommunications -- reflects
its middle-income status.  The public sector constitutes 50 to
60 percent of Gross Domestic Product (GDP), a substantial
portion of the total official economy.  Despite the recent
revision on national accounts, which boosted GDP by 20 percent,
some 15 percent of economic activity still remains unrecorded
(parallel economy).  With about 66 percent of GDP deriving from
services (including government services), 23 percent from
industry (13 percent from manufacturing) and 11 percent from
agriculture, Greece imports more than it exports.  In 1993,
Greece had a trade deficit of 12.6 billion dollars on a total
two-way trade of 22.6 billion dollars.  Greece exports
primarily light manufactures and agricultural products, and
imports more sophisticated manufactured goods.  Tourism
receipts, emigrant remittances, shipping, and, increasingly,
transfers from the EU form the core of invisibles earnings.
Substantial funds from the EU (about 20 billion dollars) are
allocated for major infrastructure projects (road and train
network, ports, airports, bridges etc.) over the next five
years (1994-99).  The Uruguay Round Agreements were ratified in
late 1994.
    The government has expressed the intention to meet the
targets of the Maastricht Treaty for EU Economic and Monetary
Union (EMU).  The new government which took office on October
13, 1993 has pledged that it will continue efforts to lower
inflation and to reduce net borrowing as a percent of GDP from
the present 12.5 percent to 7 percent in 1996 and 0.9 percent
in 1999.  The government is concentrating its efforts on ending
tax evasion and an incomes policy aimed at protecting the real
income of workers.  It also intends to sell minority share
holdings of certain state enterprises and organizations.
However, international financial organizations believe that new
measures are required to reduce the budget deficit if Greece is
to meet its convergence targets.
    Greece's huge government deficit stems from past debts and
a bloated public sector which has many more civil servants than
an economy the size of Greece's can support.  Greece's social
security program has also been a major drain on public
spending.  Finally, the state owns a number of loss-generating
companies.  The government passed in September 1992 a new bill
on social security with the eventual goal of balancing
expenditures with receipts.  Deficits are financed primarily
through treasury bills.
    The government passed a new tax reform package into law in
April 1994.  The new law makes changes in the income tax system
mainly through the introduction of objective income criteria
for determining the income of small businesses and some 1,300
professions.  A new investment incentives law, introduced in
1994, makes modifications to the incentives regime.  The
emphasis of the new legislation is on the assistance for larger
projects and on the development of new products.  Foreign
investments offering new know-how will get preferential
treatment.  Greek investments throughout the Balkans will be
subsidized.
    Monetary policy is implemented by the Bank of Greece.  The
Bank uses the discount and other interest rates in its
transactions with commercial banks as tools to control the
money supply.  The State continues to retain privileged access
to credit via state-controlled banks and via the tax-free
status accorded to government debt obligations (which includes
the right of Greek residents to purchase government debt
obligations without having to declare their source of income to
the tax authorities).  Treasury bills are issued by the
Ministry of Finance but they are expected to fall within the
monetary program prepared by the Bank of Greece.  The Bank's
policy includes a more active intervention in the secondary
money market.
2.  Exchange Rate Policy
    Greece has followed a relatively "strong drachma" policy
during 1994 as a means of holding down inflation.  The Bank of
Greece maintains a "crowling-peg" system and allows on a
limited depreciation of the drachma against the Deutche Mark.
In the past year, the drachma has appreciated slightly against
the U.S. Dollar.  The Greek drachma does not yet belong to the
EU's Exchange Rate Mechanism.
    Foreign exchange controls have been progressively relaxed
since 1985.  Medium- and long-term capital movements for EU and
non-EU countries have been fully liberalized.  Remaining
restrictions on short-term capital movements were lifted as of
May 16, 1994.  This move brings Greece in line with EU rules on
free movement of capital.  Some bureaucratic obstacles still
remain, but they are expected to be phased out.
3.  Structural Policies
    Greece's structural policies are largely dictated by the
need to comply with the provisions of the EU Single Market and
the Maastricht Treaty on Economic and Monetary Union.
    Pricing Policies.  The only remaining price controls are on
pharmaceuticals and rents; some rents have been freed.
However, about one quarter of the goods and services included
in the consumer price index are produced by state-controlled
companies, and the government retains considerable indirect
control.  Government-set prices and subsidies, e.g., public
transport prices, distort the economy, but they are not
barriers to U.S. exports.
    Tax policies.  New tax legislation passed in April 1993:
-- Increased the corporate tax rate from 35 to 40 percent for
all non-public corporations
-- Increased the top personal income tax rate to 45 percent
from 40 percent for amounts exceeding 62,000 dollars annually.
-- Imposed presumptive taxation on a large number of
professionals on the basis of a number of factors, i.e. the
location and type of business, the number of years in
operation, the imputed rent of the property.
    The new law did not change the value added tax (VAT)
rates:  the lower rate of eight percent is applicable to basic
commodities (mainly food products) and certain services; the
higher rate of 18 percent is applicable to items not included
in the lower rate.  A four percent VAT applies to periodicals
and books.
    Tax laws do not discriminate against foreign or U.S.
products.
4.  External Debt Management Policies
    Greece's public sector debt is forecasted at 113 percent of
GDP in 1994.  A change in national accounts statistical
methodology has recently led to a 23 percent statistical
increase in GDP.  Before such adjustment government debt was as
high as 135.8 percent of reported GDP in 1993.  If one includes
the debt of other public entities, total Greek public sector
debt was measured at 150 to 160 percent of GDP, using the old
system of national accounts.  Foreign debt does not affect
Greece's ability to import U.S. products.
    Servicing of external debt in 1993 (interest and
amortization) was equal to 138.9 percent of exports and 7.8
percent of GDP.  With no new net borrowing, Greece's external
debt service will be around 7.2 billion dollars in 1994.  About
two-thirds of the external debt is denominated in currencies
other than the dollar.
    Greece has regularly serviced its debts and has generally
good relations with commercial banks and international
financial institutions.  It has not had an adjustment program
with the IMF or any program with the World Bank.  In 1985, and
again in 1991, Greece borrowed from the EU.
5.  Significant Barriers to U.S. Exports
    Greece does not have merchandise trade barriers other than
those imposed by the EU.  It maintains, however, specific
barriers on trade in services such as law, accounting,
aviation, tourism and motion pictures:
-- Greece maintains nationality restrictions on a number of
professional and business services, including legal advice and
accounting.  Except for accounting, these restrictions do not
apply to EU citizens.  The U.S. companies can generally
circumvent these barriers by employing EU citizens, the most
prominent example being in auditing.  However, the government
recently passed a law which imposes burdensome qualifications
on non-Greek accountants, virtually excluding non-Greeks from
most accounting activities.  The government has pledged to
withdraw this restriction.
-- Foreign air carriers may not sell ground services for
aircraft to other airlines.  The Greek flag carrier, Olympic,
has a partial monopoly to provide ground services to other
airlines.
--  Greek residents are limited on the amount of foreign
exchange they may spend on personal travel to 2,000 ECUs per
trip (2,300 dollars).
--  Greek film production is subsidized by a 12 percent
admissions tax on all motion pictures.  Moreover, Greek laws
and practices are currently ineffective in protecting
intellectual property rights, including film, software, music
and books (see below).
    Investment Barriers:
-- Both local content and export performance are elements which
are seriously taken into consideration by Greek authorities in
evaluating applications for tax and investment incentives.
However, they are not legally mandatory prerequisites for
approving investments.
-- U.S. and other non-EU investors receive less advantageous
treatment than domestic or other EU investors in (1) the
mineral sector, where restrictions continue to apply to non-EU
investors, (2) banking, where only 40 percent of the shares of
Greek state banks is open to non-EU residents and (3) land
purchases in border regions.  U.S. banks have been able to
overcome this provision by operating on branches of EU
operations.
    Greek laws and regulations concerning government
procurement ostensibly guarantee nondiscriminatory treatment
for foreign suppliers.  In fact, the Greek Government
procurement favors Greek companies, or in some cases EU
corporations.  Officially, Greece adheres to the EU procurement
policy, and Greece has also recently joined the GATT
procurement code.  Greek willingness to adhere to GATT
government procurement procedures is a positive step.
    Many problems, however, still exist.  Included are
occasional sole sourcing (explained as extensions of previous
contracts), loosely written specifications which are subject to
varying interpretations, and allegiance of tender evaluators to
technologies offered by longtime, traditional suppliers.  The
real impact of Greece's "buy national" policy is felt in the
government's offset policy (mostly for purchases of defense
items) where local content, joint ventures, and other
technology transfers are stressed.  Occasionally transfer of
technology is required in telecommunications projects.
6.  Export Subsidies Policies
    The Greek government allows exporters to pay tax deductible
commissions and expenses to support exports.  Some agricultural
products receive subsidies from the EU.  Greece, as an EU
member, is also a member of the GATT Subsidies Code.
7.  Protection of U.S. Intellectual Property
    Greece is a member of the Paris Convention for the
Protection of Industrial Property, the European Patent
Organization, the World Intellectual Property Organization, and
the Berne Copyright Convention.  As a member of the EU, the
government intends to harmonize fully its laws with EU
standards.  Current Greek law extends equal protection for
patents and trademarks to foreign and Greek nationals.
    While intellectual property appears to be adequately
protected in the field of patents and trademarks, the same is
not true for copyrights.  Piracy of copyrighted products is
currently widespread in Greece.  Industry estimates are that 30
to 50 percent of video cassette rental transactions involve
pirated product.  Over 100 unlicensed television stations
frequently broadcast American movies and television programs
without authorization or payment of royalties.
    Greece took a step toward addressing this problem by
enacting a new copyright law in February 1993.  This law offers
a high standard of protection for all copyrighted works.  Its
greatly increased penalties may eventually serve as a
deterrent, if properly enforced.  The new law relies heavily
upon a new intellectual property office (OPI) to supervise
implementation.  The legal procedures for the establishment of
this new office were completed in October 1994, but the office
has not started operating yet.  How effective the law is will
depend directly upon how well OPI functions.  Due to the piracy
situation, Greece was placed on the USTR: "Priority Watch List"
under the "Special 301" provision of the 1988 Trade Act, in
November 1994.
8.  Worker Rights
    a.  The Right of Association
    The right of association is set out in the constitution and
in specific legislation passed in 1987 and amended in 1992.
All Greek workers except the military and police may form or
join unions of their choosing.  In 1993, approximately 30
percent of Greek workers were organized in unions.  Over 4,000
unions are grouped into regional and sectoral Federations and
two umbrella confederations, one for civil servants and one for
private sector employees.  Unions are highly politicized, and
there are party-affiliated factions within the labor
confederations, but they are not controlled by political
parties or the government in their day to day operations.
Greek unions maintain a variety of international affiliations
and are free to join international federations and
confederations.  Greek labor law prohibits firms from laying
off more than two percent of total personnel per month.  This
restricts the flexibility of firms and the mobility of Greek
labor.  Labor law mandates skeleton staffs during strikes
affecting public services such as electricity, transportation,
communications and banking.  The courts have the power to
declare strikes illegal, although such decisions are seldom
enforced.  Employers do not have the right to lock out workers.
    b.  The Right to Organize and Bargain Collectively
    The right to organize and bargain collectively was
guaranteed in legislation passed in 1955 and amended in
February 1990 to provide for mediation and reconciliation
services prior to compulsory arbitration.  Antiunion
discrimination is prohibited, and complaints of discrimination
against union members or organizers may be referred to the
Labor Inspectorate or to the courts.  However, litigation is
lengthy and expensive, and penalties are seldom severe.  There
are no restrictions on collective bargaining for private
workers.  Social security benefits are legislated by parliament
and are not won through bargaining.  Although civil servants
have no formal system of collective bargaining, they negotiate
their demands with the Ministry to the Prime Minister.
    c.  Prohibition of Forced or Compulsory Labor
    Forced or compulsory labor is strictly prohibited by the
Greek constitution and is not practiced.  However, the
government may declare "civil mobilization" of workers in case
of danger to national security or to social and economic life
of the country.
    d.  Minimum Age of Employment of Children
    The minimum age for work in industry is 15 with higher
limits for certain activities.
    e.  Acceptable Conditions of Work
    Minimum standards of occupational health and safety are
provided for by legislation.  Although the Greek General
Confederation of Labor (GSEE) has characterized health and
safety legislation as satisfactory, it has also charged that
enforcement of the legislation is inadequate, citing statistics
indicating a relatively high number of job-related accidents in
Greece.  Inadequate inspection, outdated industrial plants and
equipment, and poor safety training of employees contribute to
the accident rate.
    f.  Rights in Sectors with U.S. Investment
    Although labor management relations and overall working
conditions within foreign business enterprises may be among the
more progressive in Greece, worker rights do not vary according
to the nationality of the company or the sector of the economy.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                             (1)
Total Manufacturing                                   125
  Food & Kindred Products                   (1)
  Chemicals and Allied Products              50
  Metals, Primary & Fabricated                0
  Machinery, except Electrical                0
  Electric & Electronic Equipment           (1)
  Transportation Equipment                    0
  Other Manufacturing                        29
Wholesale Trade                                        60
Banking                                               (1)
Finance/Insurance/Real Estate                          34
Services                                              (1)
Other Industries                                        0
TOTAL ALL INDUSTRIES                                  424
(1) Suppressed to avoid disclosing data of individual companies
Source: U.S. Department of Commerce, Bureau of Economic Analysis
(###)
GUATEMAL1
gU.S. DEPARTMENT OF STATE
GUATEMALA: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                            GUATEMALA
                     Key Economic Indicators
        (Millions of U.S. dollars unless otherwise noted)
                                    1992      1993      1994
Income, Production and Employment:
Real GDP (1985 prices)             7,264     8,262     9,089
Real GDP Growth (pct.)               4.8       3.9       4.0
GDP (at current prices)            7,741    11,260    12,527
By Sector:  (pct.)
  Agriculture                       25.3      24.9      24.8
  Energy/Water                       2.7       2.9       2.9
  Manufacturing                     14.6      14.5      14.5
  Construction                       2.3       2.2       2.2
  Rents                              4.9       4.8       4.8
  Financial Services                 4.3       4.5       4.5
  Other Services                     6.0       5.9       5.8
  Government/Health/Education        7.1       7.5       7.5
  Transportation                     8.4       8.4       8.5
  Commerce                          24.1      24.1      24.1
  Mining                             0.3       0.3       0.4
Real Per Capita GDP (1985 base)      745       824       881
Labor Force (000s)                 2,803     2,897     3,213
Unemployment Rate (pct.) 2/          6.1       5.5       4.9
Money and Prices:  (annual percentage growth)
Money Supply (M2)                  2,234     2,451     2,584
  M2 Annual Percentage Change       19.5       8.9       8.0
Base Interest Rate 3/
  Commercial Banks (deposits)       16.0      14.0      15.0
  Commercial Banks (loans)          25.0      27.0      25.0
Consumer Price Index                13.7      11.6      12.0
Exchange Rate (quetzal/dollar)      5.70      5.66      5.80
Balance of Payments and Trade:  4/
Total Exports (FOB)                1,284     1,356     1,383
  Exports to U.S.                    453       501       417
Total Imports (CIF)                2,328     2,381     2,566
  Imports from U.S.                1,081     1,172     1,120
Aid From U.S.                         70        55        54
External Public Debt               2,252     2,071     2,034 5/
Debt Service Payments (paid)         720       556       N/A
Net Gold and FOREX Reserves          473       608       608
Total Trade Balance               -1,044    -1,025    -1,183
  Merchandise Balance with U.S.     -628      -671      -703
N/A--Not available.
1/ 1994 figures are U.S. Embassy estimates.
2/ Unemployment figures provided by the Guatemalan Government
do not reflect serious underemployment, estimated as high as 50
percent.
3/ Interest rates are average maximum levels.
4/ Based on Guatemalan customs data.
5/ As of June 30, 1994.
1.  General Policy Framework
    With a GDP of roughly 12.5 billion dollars, Guatemala is
the largest economy in Central America, as well as the biggest
importer of U.S. products.  The 1993 merchandise trade deficit
of 671 million dollars with the U.S. was more than double the
figure recorded two years earlier.
    Guatemala's economy is dominated by a strong private
sector, with the government sector accounting for only about 12
percent of GDP.  Agriculture accounts for a quarter of all
output, two thirds of all exports, and over half of all
employment.  Half of all exports come from just five
traditional agricultural products: coffee, sugar, bananas,
cardamom, and meat.  After several years of depressed world
prices, export receipts from these traditional products have
rebounded significantly in the last several years.  Coffee
export earnings, for example, are running 60 percent higher in
1994 than in 1993.  The other main productive activities are
commerce and manufacturing, which contribute 24 percent and 15
percent, respectively, of total GDP.  Nontraditional exports
such as drawback textile manufacturing and high value
agricultural products now account for about 40 percent of
export earnings, up from 17 percent six years ago.  Tourism
receipts accounted for $256 million in exchange earnings in
1993, but are running 10 percent below that level in 1994.
    The administration of Ramiro de Leon Carpio has adhered to
the sound fiscal and monetary policies that have been in place
since 1991.  As a result, real GDP growth for 1993 was about
3.9 percent, down somewhat from the 4.8 growth of 1992.  Growth
is expected to be about 4.0 percent in 1994.  The Bank of
Guatemala has adhered to a number of fairly tight monetary
measures and kept prices in check.  Beginning in 1991,
Guatemala implemented a policy of zero net credit to the
Central Government, which halted the prior tendency to monetize
the deficit.  Since then, the Central Government deficit has
been financed primarily by various bonds issued by the Finance
Ministry.  From a rate of 60 percent in 1990, inflation fell to
an average of around 12 percent in subsequent years.
    By drastically curtailing expenditures in 1991, the
government successfully reduced the consolidated public sector
deficit from 4.7 percent of GDP in 1990 to just 1.6 percent in
1991.  With the 1992 fiscal reform, the overall deficit fell
further to just 0.6 percent.  However, due to declining tax
collections in real terms, the combined public sector deficit
rose to 2.7 percent of GDP in 1993 and could reach as high as
3.3 percent in 1994.
    Late in 1993, Guatemala began a shadow program with the
International Monetary Fund, which the government hopes to
convert to a formal standby agreement in 1995.  In accordance
with that agreement, the government has eliminated subsidies
for municipal wages and, in March of 1994, liberalized gasoline
prices.  The government also concluded a Financial Sector
Modernization Loan agreement with the Inter-American
Development Bank.  Under this program, Guatemala is moving to
liberalize and better supervise its financial system.  The
Government has yet to present legislation to implement the
Uruguay Round to the Guatemalan Congress, although it has
expressed its intent to do so.
2.  Exchange Rate Policy
    Guatemala maintains an open, relatively undistorted
exchange regime.  There are no legal constraints on the
quantity of remittances or other capital flows.  In early 1994,
the government ended the requirement that local private banks
sell all their foreign exchange to the Bank of Guatemala every
day and eliminated the daily auction system for foreign
exchange.  Although the Bank still intervenes occasionally to
dampen speculation, there are no longer any delays in acquiring
foreign exchange.  The government sets only one reference rate,
which it applies only to its own transactions and which is
based on the market determined commercial exchange rate.
Remittances can take the form of dollar denominated government
bonds, although the supply of these is limited.  A number of
banks also offer "pay through" dollar denominated accounts.
Under this plan, the depositor makes deposits and withdrawals
at a local bank, but the account is actually maintained in a
U.S. bank on behalf of the depositor.  The holding of dollar
accounts in local banks is still prohibited.
    The quetzal depreciated 10 percent in nominal terms during
1993.  Thus, the quetzal more or less maintained its real value
vis-a-vis the dollar last year, after having appreciated about
7 percent in real terms during each of the two prior years.  So
far in 1994, the nominal value of the quetzal, currently about
5.7 to the dollar, has not changed significantly.
3.  Structural Policies
    In mid-1992, the government instituted a sweeping tax
reform.  The income tax was simplified.  Individuals now face a
three tier income tax structure with a top rate of 25 percent;
corporations pay a simple 25 percent flat rate.  Most
exemptions for value added taxes and most stamp taxes were
eliminated.  As a result of these reforms, the bases for both
the income and value added taxes were broadened considerably.
Tariffs on most imports from outside Central America were
lowered first to a 5-30 percent band in 1992 and then to a 5-20
percent band in 1993.  The main exceptions are on imports of
rice, poultry and petroleum products, where tariffs ranging up
to 45 percent remain in effect.  In addition, the 3 percent
surcharge on imports was eliminated in 1992.  As a result of
this reform, tax revenues increased from 7.4 percent of GDP in
1991 to 8.4 percent in 1992.  Since then, however, tax revenues
fell to 7.9 percent of GDP in 1993 and are expected to decline
further to approximately 7 percent of GDP in 1994.  The
government's goal is to increase the tax burden to 8.5 percent
in 1995, by increasing taxes and by increasing penalties for
tax evasion.
    Wheat, flour and sugar are virtually the only products on
which Guatemala maintains price controls.  Direct government
control of production is small and decreasing, with growing
private participation in key areas such as electricity
generation.  Even in sectors controlled by the government
(telecommunications, for example), foreign companies are
generally allowed to compete for contracts on an equal basis
with domestic producers.
    Guatemala has also taken steps to streamline the regulatory
process.  For instance, all government processing of exports
has been centralized in a "one stop shop."  Virtually all
export restrictions have been eliminated.  The government is in
the process of establishing a "one stop shop" for investors, as
well.  Nonetheless, the bureaucracy often presents a difficult
hurdle for both domestic and foreign companies, subjecting them
to requirements that are both ambiguous and inconsistently
applied.  It is not unusual for regulations to contain few
explicit criteria for the government decision maker, thus
generating significant uncertainty and latitude.  Moreover,
there is no consistent pattern or judicial review of
administrative regulations.
4.  Debt Management Policies
    Guatemala's modest foreign debt has been declining for
several years.  The drop has been most marked in relation to
GDP.  From 35 percent of GDP in 1990, foreign debt fell to 22
percent by the end of 1992 and to 19 percent by the end of
1993.  Public sector foreign debt has declined faster than
total external debt, reflecting an increasing reliance on
private, rather than public, investment.  From 32 percent of
GDP in 1990, the external debt of the public sector declined to
just 18.3 percent at the end of 1993.  During the same time
period, debt service increased steadily, reaching 16.3 percent
of exports in 1992, as Guatemala cleared its foreign arrears,
before falling back to 14.4 percent in 1993.  Following its
first Paris Club agreement in 1993, the Government reached
bilateral agreements to reschedule about a quarter of its
approximately 450 million dollars in arrears on official
bilateral debt.  As of late October, 1994, however, Guatemala
was still negotiating the rescheduling of its official arrears
with Spain.
    In December, 1992, Guatemala signed a 120 million dollar
Economic Modernization Loan (EML) with the World Bank.
Although Guatemala could have borrowed approximately 70 million
dollars under the standby agreement with the International
Monetary Fund (IMF), the government decided to treat the
agreement as precautionary and never requested any
disbursements.  Guatemala received the first EML disbursement
of 48 million dollars in December, 1992.  The second tranche
disbursement under the EML, scheduled for June 1993, finally
occurred in the beginning of 1994 after the loan was
restructured and the government entered into a new, "shadow
agreement" with the IMF (following the successful,
constitutional resolution of the auto-golpe of May, 1993 and
the resultant economic dislocations).  The third tranche,
rescheduled for June, 1994 has yet to occur, since Guatemala
had failed to meet several conditions for disbursement,
particularly tax reforms and raising electricity rates.  In
early 1993, the World Bank provided another 20 million dollar
loan for Guatemala's Social Investment Fund.   Guatemala is
close to meeting the conditions for disbursement of the second
tranche of a 130 million dollar financial sector modernization
loan from the Inter-American Development Bank.
5.  Significant Barriers to U.S. Exports
    Exporters to Guatemala enjoy a generally open trade
regime.  For the most part, imports are not subject to
nontariff trade barriers, although arbitrary customs valuation
and excessive bureaucracy can sometimes create delays and
complications.  The vast majority of tariffs has been reduced
to a band of 5-20 percent.
    Restrictions remain on foreign investment in very few
sectors.  The Constitution provides the state telephone
company, Guatel, with a monopoly on most telecommunications
services.  The Constitution also designates all subsurface
minerals, petroleum and other resources as property of the
state.  Concessions are typically granted in the form of
production sharing contracts.  However, the solicitation and
contracting process for energy concessions tends to be
protracted and nontransparent.  Some foreign oil companies also
complain that the Guatemalan royalty scale is not competitive
with that of other countries.  Also, only Guatemalan citizens
or corporations which are at least 75 percent owned by
Guatemalans can operate radio or television stations.
Foreigners can own no more than 30 percent of "small mining" or
forestry companies.  Ground transportation is limited to
companies with at least 60 percent Guatemalan ownership.
Licensing requirements for fishing operations are enforced
insuch a way as to ensure at least minority Guatemalan
participation.  Only airlines with at least 51 percent
Guatemalan ownership can provide domestic service.
    Foreign firms are barred from directly selling insurance or
rendering licensed professional services, such as legal or
accounting services, in Guatemala.  Foreign firms are still
able to operate, however, through correspondents or locally
incorporated subsidiaries.  Most "Big Six" U.S. accounting
firms are represented in Guatemala.  Restrictions on housing
construction are so onerous that they virtually exclude foreign
participation.
    Sanitary licenses are required for all imports of animal
origin.  During the past year, the impact of this requirement
on U.S. exporters has been negligible.  However, recent reports
indicate that Guatemala may begin using these license
requirements as nontariff barriers to protect domestic
producers.  Licenses are also required to import apples and
wheat flour.
    In addition, all processed foods are required to have
Spanish language labels attached.  In the past this rule has
not been enforced.  However, on October 25, 1994, the
Government began a to crack down on violators, a move which
could significantly impact the 26 million dollars per year in
U.S. exports of processed foods to Guatemala, a figure which
had been growing rapidly.
6.  Export Subsidies Policies
    Significant tax exemptions are granted to both foreign and
domestic enterprises producing for export.  With the rise in
coffee prices, there has been no effort to repeat the coffee
sector's 1993 bond program which provided a 15 dollar per
hundred weight subsidy to exporters (to be repaid with higher
coffee prices).  The country is not a member of the GATT
Subsidies Code.
7.  Protection of U.S. Intellectual Property
    The level of protection provided intellectual property
remains inadequate.  In general, the Criminal Code contains
ineffective penalties for infringement of intellectual property
rights and a poorly trained judiciary is slow to provide
injunctive relief.  However, there have been significant recent
improvements.  The 1991 GSP petition against Guatemala filed by
the Motion Picture Export Association of America was dropped in
1994 after Guatemala passed an antipiracy law and local cable
operators generally ceased illegal retransmission of signals.
In addition, the current legislature is considering laws to
afford more effective protection of intellectual property
rights.  The government has also announced its intention to
accede to the Paris Convention for the Protection of Industrial
Property and to the Berne Convention for the Protection of
Literary and Artistic Works.  Guatemala is named on the Special
301 "Watch List."
    Copyrights:  While the right to copy, publish and
distribute is clearly protected, control over leasing or
renting of protected works is not clear under Guatemalan law.
Despite membership in the Rome and Geneva Conventions,
Guatemalan law does not generally protect sound recordings.
Legislation was enacted in 1992 to prohibit pirating for
commercial use of satellite television transmissions.  As a
result, unauthorized retransmission of signals has dropped
significantly.  However, video piracy remains a problem.
Pirated videos are both locally produced (but not for export)
and brought in via parallel imports.  At the urging of a
legitimate distributor, the Government has begun to crack down
on video clubs that rent pirated copies.  The distributor also
plans to work with these clubs to develop a plan for voluntary
compliance.  In addition, a new copyright law has been drafted
for consideration by the Guatemalan Congress early in 1995.
This law would impose greater sanctions for noncompliance, as
well as protect sound recordings, computer programs, videos and
films and the transmission of these works.
    Patents:  Guatemala's patent law is old and does not
protect mathematical methods, living organisms, commercial
plans, surgical, therapeutic or diagnostic methods, or chemical
compounds or compositions.  Protection is circumscribed by
short patent terms (15 years, except for the production of
food, beverages, medicines and agrochemical products, which
last only 10 years), compulsory licensing provisions and local
exploitation requirements.  Patent rights do not extend to any
action executed in the pursuit of education, research,
experiments or investigation.  Patent rights do not prevent the
importation of counterfeits, unless the product is being
produced in Guatemala.  Protection lapses six years from the
date of the patent if the product is not being produced
locally.  To address these issues and bring Guatemalan law in
line with international standards, the government is currently
drafting new patent legislation for submission to Congress in
early 1995.
    Trademarks:  The Central American Convention for the
Protection of Industrial Property (CACPIP) forms the legal
basis for the protection of trademarks in Guatemala.
Guatemalan law does not provide sufficient protection against
counterfeiters, nor does it afford adequate protection for
internationally famous trademarks.  The right to exclusive use
of a trademark, for instance, is granted to whoever files first
to register the mark.  There is no requirement for use, nor any
cancellation process for nonuse.  As a result, foreign firms
whose trademark has been registered by another party in
Guatemala have often had to pay royalties to that party, or buy
him out.  The Central American countries are currently revising
the Convention to bring it more in line with emerging
international standards and to simplify the registration
process.  It is expected that the Government will approve the
changes to the Convention in November and submit the Convention
to Congress for ratification.
    New Technologies:  Guatemala makes no specific provision
for the protection of trade secrets or semiconductor chip
design, although it has signed the Washington Treaty on
Intellectual Property in Respect of Integrated Circuits.
Guatemalan copyrights do not currently extend to databases,
audiovisual works, or software.
    The International Intellectual Property Alliance estimates
that in 1993 trade losses due to piracy of motion pictures,
records and music, computer programs and books in Guatemala
were 2.7 million dollars.
8.  Worker Rights
    a.  The Right of Association
    Approximately five percent of the Guatemalan work force is
unionized in approximately 900 unions.  Bureaucratic procedures
necessary to obtain legal authorization to form a union were
significantly eased in late 1992, as part of a successful
effort to amend the Labor Code.  Regulations to implement these
changes remain under discussion with trade union leaders, in an
effort to make the procedure as quick and as transparent as
possible.  Even though the regulations have yet to be adopted,
the time and steps required to register a union have been
significantly reduced since the labor code amendments.  Union
leaders continue to charge, however, that it is more difficult
to register a trade union than it is to register a business.
They also claim that management often encourages competing
unions and/or "solidarity" associations to form when
negotiating contracts and that these groups make "no strike"
agreements.
    In 1992, petitions filed by the International Labor Rights
Education and Research Fund (ILRERF) and the AFL-CIO to remove
GSP benefits from Guatemala for failure to protect
internationally recognized worker rights were accepted for
review by the US Government.  The review was extended through
the end of the 1993-1994 review cycle.
    b.  The Right to Organize and Bargain Collectively
    The Labor Code allows collective bargaining, but emphasizes
the protection of individual worker rights.  Antiunion
practices are forbidden, but enforcement requires court action
and this is generally subject to inordinate delay.  The labor
court system is badly overloaded.  One new labor court was
added in 1993 and a second new court was established in 1994.
The greatest obstacles to union organizing and collective
bargaining are not the law, but the inability of the legal
system to enforce the law adequately, the weakness of the labor
movement and a continuing enormous excess of labor.  A series
of tripartite discussions took place in 1993 to address these
problems, signaling a major change in attitude by both
management and labor.
    c.  Prohibition of Forced or Compulsory Labor
    The Guatemalan Constitution prohibits forced labor and
specifically states that service in civil defense partols is
voluntary.  Human rights groups claim, with some justification
in conflictive zones, that coercion is used to recruit some
people for these patrols.
    d.  Minimum Age for Employment of Children
    The Constitution provides a minimum age of 14 for the
employment of children and, then, only in certain types of
jobs.  Government statistics indicate that 50,000 children
under this age are employed in the formal sector, including
agriculture, with only 10 percent having legal permission to
work.  An unknown number are employed in the informal sector as
street vendors, beggars and menial laborers.  Enforcement of
labor regulations has been given greater emphasis by the de
Leon administration; the Labor Ministry has started a program
designed to educate parents about the rights of children in the
work force.
    e.  Acceptable Working Conditions
    The Constitution provides for a 44 hour work week.  While
occupational safety and health regulations exist, they have not
been effectively enforced.  The corps of labor inspectors was
expanded in 1993, to provide greater coverage to all aspects of
the Labor Code.  As noted above, however, the major problem
remains an overcrowded and lethargic labor court system.  The
selection of all new judges on the supreme court and appellate
courts in mid-1994, based on new selection procedures designed
to protect against incompetent, corrupt, or politically biased
judges is expected to make a major difference, over time, in
the honesty and efficiency of the court system.   A minimum
wage applies to most workers;  although the the minimum wages
remain low, they were increased for all sectors of the private
economy in late 1994 by an average of 35 percent.  Surveys
carried out by the Labor Ministry indicate, however, that many
workers do not receive the minimum wage.
    f.  Rights in Sectors With U.S. Investment
    Guatemala does not register foreign investment, so accurate
records of U.S. investment are not available.  Union officials
say that, in general, international corporations in Guatemala
have been respectful of worker rights.  The high profile
exception continues to be some, mostly Asian-owned firms in the
maquila sector, which assemble garments primarily for the U.S.
market.  U.S. companies operating in Guatemala are more likely
to have unions than their Guatemalan competitors and are also
generally credited with providing better wages and working
conditions.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                              28
Total Manufacturing                                   102
  Food & Kindred Products                   51
  Chemicals and Allied Products             23
  Metals, Primary & Fabricated              -4
  Machinery, except Electrical               0
  Electric & Electronic Equipment            0
  Transportation Equipment                   0
  Other Manufacturing                       32
Wholesale Trade                                        -6
Banking                                                 1
Finance/Insurance/Real Estate                           7
Services                                                3
Other Industries                                        3
TOTAL ALL INDUSTRIES                                  138
Source: U.S. Department of Commerce, Bureau of Economic
Analysis
(###)
HONDURAS1
#^#^U.S. DEPARTMENT OF STATE
HONDURAS: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                             HONDURAS
                     Key Economic Indicators
                  (Millions of U.S. dollars 1/)
                                    1992       1993      1994 2/
Income, Production and Employment:
Real GDP (1978 Prices) 3/          2,791      2,889     2,830
Real GDP Growth (pct.)               5.6        3.7      -2.0
GDP (at current prices) 3/         3,221      3,092     2,950
By Sector:
  Agriculture                        607        754       N/A
  Mining                              67         50       N/A
  Energy/Water                        91         83       N/A
  Manufacturing                      474        489       N/A
  Construction                       181        195       N/A
  Rents                              180        197       N/A
  Financial Services                 216        288       N/A
  Other Services                     991        735       N/A
  Government/Health/Education        205        192       N/A
  Net Exports of Goods & Services    -70        -57       N/A
Real Per Capita GDP (1978 prices)    500        503       493
Labor Force (000s)                 1,477      1,521     1,770
Unemployment Rate (pct.)            15.5       15.8      16.0
Money and Prices:  (annual percentage growth)
Money Supply (M2)                   24.7       12.3       0.5
Base Interest Rate 4/               23.4       26.4      35.0
Personal Saving Rate                19.3       18.8       N/A
Retail Inflation                     6.5       13.0      33.0
Wholesale Inflation                 10.1       14.6       N/A
Consumer Price Index                 6.5       13.0      33.0
Exchange Rate (USD/LP):
  Official                           5.8        7.8       8.8
  Parallel                           5.8        7.8       8.8
Balance of Payments and Trade:
Total Exports (FOB) 5/             833.1      846.0     904.0
  Exports to U.S.                  431.9      433.4     440.0
Total Imports (CIF) 5/             990.2    1,079.5   1,217.0
  Imports from U.S.                539.3      563.0     615.0
Aid from U.S.                       95.7       57.0      45.0
Aid from Other Countries           520.8      490.0       N/A
External Public Debt               3,403      3,607     3,612
Debt Service Payments (Paid)         332        296       300
Gold and Foreign Exch. Reserves    544.4      434.5     -81.1
Trade Balance 5/                  -157.1     -233.5    -313.0
  Trade Balance with U.S.         -107.8     -129.6    -175.0
N/A--Not available.
1/ Exchange rates used are the average official rate for each
year cited:  5.75 (1992), 6.82 (1993), 8.8 (1994).
2/ 1994 figures are all estimates based on available monthly
data in October 1994.
3/ GDP at factor cost.
4/ Figures are actual, average annual interest rates, not
changes in them.
5/ Merchandise trade.
1.  General Policy Framework
    Despite abundant natural resources and substantial U.S.
economic assistance, Honduras remains one of the poorest
countries in the hemisphere.  In the 1980's, the Honduran
economy was buffeted by declining world prices for its
traditional exports of bananas and coffee.  The unfavorable
terms of trade, high external debt levels, and flawed economic
policies doomed Honduras to a decade of low growth rates and
declining living standards.
    From 1990 until 1993, the Government of President Callejas
embarked on an ambitious economic reform program, including
dismantling price controls, lowering import tariff duties and
removing many nontariff barriers to trade.  The Government of
Honduras adopted a free market exchange rate regime and
legalized/licensed foreign exchange trading houses.  Interest
rate ceilings were removed.  Modern national investment
legislation was enacted which mandated generous,
nondiscriminatory incentives for local and foreign investment.
To confront the chronic fiscal deficit, the Callejas government
took measures to increase revenues and slash credit and
exchange rate subsidies.  Unfortunately, in 1992 and 1993, a
sharp rise in public sector investment spending reversed the
progress on the fiscal front and raised the deficit to 11.2
percent of GDP for 1993.  External grant inflows financed part
of the fiscal gap, but the monetized fiscal deficit resulted in
a resurgence in domestic inflation.
    President Carlos Roberto Reina, inaugurated in January
1994, has taken a series of measures to deal with the fiscal
deficit.  Reina ordered a 10 percent cut in current spending
and negotiated with the IMF a series of economic measures
designed to cut the fiscal deficit by four percent.  Under
President Reina, the restrictive (anti-inflationary) monetary
and fiscal policies of the Central Bank have been further
tightened.  Absolute limits have been imposed on public sector
borrowing.  The reserve requirement (currently 42 percent)
remains the favored policy tool to control money supply growth
and inflation.
    Honduras became a member of the General Agreement on Trade
and Tariffs (GATT) in April 1994, and the accession was
ratified by the Honduran Congress that same month.  Honduras
ratified the Uruguay Round in May 1994 in Marrakesh.  Honduras
has ratified the Uruguay Round agreements and became a founding
member of the World Trade Organization (WTO) on January 1, 1995.
2.  Exchange Rate Policy
    Beginning in 1990, the Honduran government abandoned the
fixed exchange rate system and gradually moved to a flexible
exchange rate mechanism.  These phased policy measures allowed
for a smooth transition to a floating exchange rate regime in
June 1992.  To provide a more transparent and efficient foreign
exchange market, the Honduran Central Bank legalized and
licensed the operations of foreign exchange trading houses
(cases de cambio).  As of June 1992, the Central Bank
authorized commercial banks to buy and sell foreign exchange at
freely-determined rates.  These foreign exchange reforms
improved Honduras' export competitiveness in a wide range of
industries.
    In June 1994, the Central Bank changed to a more
restrictive foreign exchange regime.  A foreign exchange
auction system was introduced by which all foreign exchange in
the formal financial system was auctioned daily by the Central
Bank.  The auction rate then became the legal exchange rate for
foreign exchange transactions.  This rate is revised with every
auction, but is permitted to rise by not more than one percent
every three weeks.  Commercial banks and exchange houses are no
longer allowed to retain foreign exchange purchased from the
public, but are required to sell this foreign exchange to the
Central Bank within 24 hours.  In January 1990, the
lempira-per-dollar exchange rate had been two to one for many
decades.  Since January 1994, the lempira-per-dollar exchange
rate has moved from 7.3 to the current rate of 9.2 lempiras per
dollar, a 26 percent depreciation.
3.  Structural Policies
    Trade Policy:  A critical component of the structural
adjustment reforms has been to end the debilitating effects of
decades long import-substitution policies.  These remedial
policies were designed to open up the economy to global
competition, force local entrepreneurs to reduce costs,
increase productivity, and provide incentives for
export-oriented business activity.  An important byproduct of
trade liberalization is the promotion of technology transfer.
Among other measures taken was the reduction of tariff barriers
to trade, by gradually cutting import duties from a past range
of 5 to 20 percent.  The Government also removed many
protectionist/cumbersome import licensing and prior import
deposit requirements.
    Pricing Policy:  In an effort to boost production
incentives, the Government lifted price controls on several
hundred consumer and industrial products in 1990 and suspended
the operations of the State Marketing Board.  In the period
1990-92, price hikes were adopted on gasoline, electricity,
water and telephone services.  In December 1992, the Government
moved to a flexible petroleum pricing system reflecting changes
in world market prices.  As of September 1994, the only
existing government controlled prices were for utilities,
public transport, fertilizer, cement, ground roasted coffee and
air fares.  In October 1994, the Honduran Congress enacted
legislation mandating price controls on 26 basic market basket
items through the end of 1994.
    Tax Policies:  Honduras has long maintained a high
corporate tax rate.  This rate has been generally considered a
major disincentive to direct foreign investments not covered by
the tax exemptions for export-oriented firms operating in free
trade zones and industrial parks.  Early in his term, President
Reina lowered the top marginal corporate tax rate from above 40
percent to 35 percent.  The most important sources of
government revenue are the seven percent sales tax and various
consumption taxes.
4.  Debt Management Policies
    Since early 1990, the Honduran government has been working
to restore the country's creditworthiness, reschedule its 3.3
billion dollar external debt and regain support from the
multilateral development banks.  In early 1990, negotiations
began with the World Bank (IBRD), Inter-American Development
Bank (IDB) and International Monetary Fund (IMF) to pay off
arrears and reestablish pipeline disbursements being withheld
by these institutions.  The payments of 245.7 million dollars
in arrears were made possible by a bridge loan from the U.S.
Treasury Department.  This bridge loan was complemented by
additional financing from Venezuela, Mexico and Japan.
    In July 1990, the IMF approved a 12-month standby
arrangement, later extended for seven additional months.  The
standby provided Honduras with 30 million dollars in balance of
payments support funds.  In the second half of 1990, the IDB
and IBRD renewed pipeline disbursements.  The IMF program, and
repayment of international financial institution (IFI) arrears,
paved the way for favorable debt rescheduling terms for 350
million dollars of debt.  The Paris Club accord strengthened
Honduras' capacity to service its debt with a number of other
creditors, including Venezuela, Mexico and OPEC.  In 1991, the
U.S. government also provided 430 million dollars in debt
forgiveness for Honduras.  The Honduran government reduced its
debt obligations with international commercial banks from 245
million dollars in 1982 to 45 million dollars in 1992.  A
series of privatizations and conversion mechanisms was used to
settle these obligations.
    In 1992, Honduras was classified as an IDA-only country.
This opened the door to concessional loans from the IBRD's soft
loan window.  In June 1992, the IMF approved a three-year
(1992-95) enhanced structural adjustment facility (ESAF),
allowing Honduras to obtain a second favorable Paris Club
Agreement in October 1992.  In 1993 the Callejas government
took on substantial new commercial debt obligations for public
investment projects and began to fail to make scheduled debt
service payments to the United States and other Paris Club
creditors.  The Paris Club agreement was technically suspended
in August 1993, pending agreement with the IMF on an economic
program and payment of all Paris Club arrears.  The Reina
government is currently negotiating with the IFIs and the Paris
Club.  In 1994, Honduras' total external debt obligations total
3.6 billion dollars, well in excess of the country's annual
gross domestic product (GDP).
5.  Significant Barriers to U.S. Exports
    Import Policy:  While reforms have gone far to open up
Honduras to U.S. exports and investment, a number of
protectionist policies remain in place.  For example, although
all import licensing requirements have been eliminated,
Honduras has resorted to an onerous phyto-sanitary system that
effectively denies market access to U.S. chicken parts.
Similar phyto-sanitary requirements are used to limit U.S. corn
exports to Honduras.
    Labeling and Registration of Processed Foods:  Honduran law
requires that all processed food products be labelled in
Spanish and registered with the Ministry of Health.  The laws
are indifferently enforced at present.  However, these
requirements may discourage some suppliers.
    Services Barriers:  Under Honduran law, special government
authorization must be obtained to invest in the tourism, hotel
and banking service sectors.  Foreigners are not permitted
majority ownership of foreign exchange trading companies.
Foreigners cannot hold a seat in Honduras' two stock exchanges,
or provide direct brokerage services in these exchanges.
    Investment Barriers:  Several restrictions exist on foreign
investment in Honduras despite the 1992 Investment Law.  For
example, special government authorization is required for
foreign investment in sectors including forestry,
telecommunications, air transport and aquaculture.  The law
also requires Honduran majority ownership in certain types of
investment, including beneficiaries of the National Agrarian
Reform Law, commercial fishing and direct exploitation of
forest resources, and local transportation.
    Honduran law also prohibits foreigners from establishing
businesses capitalized at under 150,000 lempiras.  In all cases
of investments, at least 90 percent of a company's labor force
must be national, and at least 80 percent of the payroll must
be paid to Hondurans.  Finally, while a one-stop investment
window has been instituted to facilitate investment, this
office does not provide complete information or assistance to
the foreign investor.
    Government Procurement Practices:  The Government
Procurement Law (Decree No. 148.5) governs the contractual and
purchasing relations of Honduran state agencies.  Under this
law, foreign firms are given national treatment for public bids
and contractual arrangements with state agencies.  In practice,
U.S. firms frequently complain about the mismanagement and lack
of transparency of Honduran government bid processes.  These
deficiencies are particularly evident in telecommunications,
pharmaceuticals and energy public tenders.
    Customs Procedures:  Honduras' customs administrative
procedures are burdensome.  There are extensive documentary
requirements and red tape involving the payment of numerous
import duties, customs surcharges, selective consumption taxes,
consular fees and warehouse levies.
6.  Export Subsidies Policies
    With the exception of free trade zones and industrial
parks, almost all export subsidies have been eliminated.  The
Temporary Import Law (RIT), passed in 1984, allows exporters to
bring raw materials and capital equipment into Honduran
territory exempt from customs duties and consular fees if the
product is to be exported outside Central America.  This law
also provides a 10 year tax holiday on profits from these
exports under certain conditions.
    The export processing zones (ZIPs) exempt the payment of
import duties on goods and capital equipment, charges,
surcharges and internal consumption, and sales taxes.  In
addition, the production and sale of goods within the ZIPs are
exempt from state and municipal taxes.  Firms operating in ZIPs
are exempt from income taxes for 20 years and municipal taxes
for 10 years.
7.  Protection of U.S. Intellectual Property
    Until recently, Honduran legislation on intellectual
property rights (IPR) dated back to the early 1900s, and
provided inadequate protection.  In August 1992, a United
States government decision to review Honduras' status under the
Generalized System of Preferences (GSP), as a result of
widespread piracy of U.S. satellite signals by local cable TV
companies, forced the Honduran government to move seriously to
modernize its IPR regime.  On August 31 - September 1, 1993,
the Honduran congress approved comprehensive, world class
copyright, trademark, and patent laws.  Honduras is a signatory
to the Berne Copyright Convention and, in May 1993, became a
member of the Paris Industrial Property Convention.  As part of
its application for membership in the GATT, Honduras has
committed to the "TRIPS" standard established under the Uruguay
Round negotiations.  Honduras' recent enactment of modern IPR
legislation and its active support of international IPR
conventions and agreements pave the way for substantive
progress in this area.  As part of the GSP review, however,
Honduras will have to demonstrate a serious commitment to
enforcing IPR protection.
    Patents:  The Patent Law enacted in September 1993 provides
full and effective patent protection for up to 20 years.  The
exception is patent protection for pharmaceuticals, which are
protected for 17 years from the date of patent application.
The Patent Law also contains stiff fines and jail sentences for
violators.
    Trademarks:  The registration of notorious trademarks is
widespread in Honduras.  Several local firms have profited
greatly from the loophole in the old law excluding notorious
trademarks.  The new law has strict regulations on the
registration and use of notorious trademarks, and provides
strong penalties against violators.
    Copyrights:  The piracy of books, music cassettes, records,
video tapes, compact discs, cable TV and computer software is
widespread in Honduras.  The new Copyright Law provides strong
protection for copyright owners, however.  The Honduran
government has committed itself to legalizing the activities of
its cable TV companies and video store operators.  There are no
reliable data on the cost of local piracy to U.S. industry.
Before the Honduran cable industry legalized most of its
operations, the Motion Pictures Exporters Association of
America (MPEAA) estimated the annual loss of revenues from
local cable piracy at 2.5 million dollars.
8.  Worker Rights
    a.  The Right of Association
    Workers have the legal right to form and join labor unions
and, with few exceptions, the unions are independent of the
government and political parties.  Although only about 20
percent of the work force is organized, trade unions exert
considerable political and economic influence.  The right to
strike, along with a wide range of other basic labor rights, is
provided for by the constitution and honored in practice.  The
Civil Service Code, however, stipulates that public workers do
not have the right to strike.
    A number of private firms have instituted "solidarity"
associations, which are essentially aimed at providing credit
and other services to workers and management who are members of
the association.  Organized labor strongly opposes these
associations.
    b.  The Right to Organize and Bargain Collectively
    The right to organize and bargain collectively is protected
by law, and collective bargaining agreements are the norm for
companies in which the workers are organized.  In practice,
management often discourages workers from attempting to
organize.  Workers in both unionized and nonunionized companies
are under the protection of the labor code, which gives them
the right to seek redress from the Ministry of Labor.
Depending upon the decision of the labor or civil court,
employers can be required to rehire employees fired for union
activity.  Such decisions are uncommon.  Generally, however,
agreements between management and their union contain a clause
prohibiting retaliation against any worker who participated in
a strike or union activity.
    c.  Prohibition of Forced or Compulsory Labor
    There is no forced or compulsory labor in Honduras.  Such
practices are prohibited by law and the constitution.
    d.  Minimum Age for Employment of Children
    The constitution and the labor code prohibit the employment
of children under the age of 16, but the Ministry of Labor
lacks resources to exercise its responsibility to ensure
enforcement.  Children between the ages of 14 and 16 can
legally work with the permission of the parent and the Ministry
of Labor.  Violations of the labor code occur frequently in
rural areas and in small companies.  High adult unemployment
and underemployment have resulted in many children working in
small family farms, as street vendors, or in small workshops to
supplement the family income.  According to the Ministry of
Labor, human rights groups and organizations for the protection
of children, there were no significant child labor problems in
Honduras in 1994.
    e.  Acceptable Conditions of Work
    The constitution and the labor code require that all labor
be fairly paid.  Minimum wages, working hours, vacations, and
occupational safety are all regulated, but the Ministry of
Labor lacks the staff and other resources for effective
enforcement.
    The law prescribes an eight-hour day and a 44-hour
workweek.  There is a requirement for at least one 24-hour rest
period every eight days, a paid vacation of 10 workdays after
one year and 20 workdays after four years.  The regulations are
frequently ignored in practice as a result of the high level of
unemployment and underemployment.
    f.  Rights in Sectors with U.S. Investment
    The same labor regulations apply in export processing zones
(EPZs) as in the rest of private industry.  U.S. firms
employing garment workers are active in several EPZs.  Working
conditions and wages in the EPZs are generally considered
superior to those prevailing in the rest of the country.
Unions are active in the government-owned Puerto Cortes Free
Trade Zone, but factory owners have resisted efforts to
organize the new privately-owned industrial parks.
    While progress has been made in some maquiladoras towards
unionization, a hard line in other, mostly Korean-owned,
maquilas has led to plant seizures and blockage of public
highways.
    Blacklisting is clearly prohibited by the labor code, but
nevertheless occurs in the privately owned industrial parks.
Some companies in the industrial parks have dismissed union
organizers before union recognition was granted.
    There are still as many as 50 deaths per year resulting
from serious health and safety hazards facing Miskito indian
scuba divers employed in lobster and conch harvesting off the
Caribbean coast of Honduras.  The seafood is destined primarily
to the U.S. market.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                             (1)
Total Manufacturing                                   144
  Food & Kindred Products                   (1)
  Chemicals and Allied Products               3
  Metals, Primary & Fabricated                3
  Machinery, except Electrical                0
  Electric & Electronic Equipment             0
  Transportation Equipment                    0
  Other Manufacturing                       (1)
Wholesale Trade                                        15
Banking                                                 5
Finance/Insurance/Real Estate                          23
Services                                                0
Other Industries                                      (1)
TOTAL ALL INDUSTRIES                                  223
(1) Suppressed to avoid disclosing data of individual companies
Source: U.S. Department of Commerce, Bureau of Economic
Analysis
(###)
HONG_KON1
qU.S. DEPARTMENT OF STATE
HONG KONG: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                            HONG KONG
                     Key Economic Indicators
        (Millions of U.S. dollars unless otherwise noted)
                                     1992      1993      1994 1/
Income, Production and Employment:
Real GDP (1990 prices)             83,805    88,807    93,991
Real GDP Growth (pct.)                6.0       5.9       5.7
GDP (at current prices)           100,622    14,738   131,086
GDP by Sector:  (pct.)
  Agriculture                         0.2       N/A       N/A
  Energy/Water                        2.2       N/A       N/A
  Manufacturing                      13.7       N/A       N/A
  Construction                        5.1       N/A       N/A
  Rents                               3.2       N/A       N/A
  Finance 2/                         24.5       N/A       N/A
  Other Services 3/                  35.9       N/A       N/A
  Government/Health/Education        15.2       N/A       N/A
Net Exports of Goods & Services
  (at current prices)               5,840     9,152     5,050
Real Per Capita GDP (1990 prices)  14,419    15,004    15,619
Labor Force (000s)                  2,820     2,929     2,977
Unemployment Rate (pct.)              2.0       2.0       2.2
Money and Prices:  (annual percentage growth)
Money Supply (M2)                    10.8      16.0      11.8
Base Interest Rate (pct.)
  Prime Rate                          6.5       6.5       8.5
Personal Savings Rate (pct.)          1.5       1.5      3.75
Retail Inflation 4/                   N/A       N/A       N/A
Wholesale Inflation 4/                N/A       N/A       N/A
Consumer Price Index 5/             125.2     135.9     151.1
Official Exchange Rate (HKD/USD)    7.741     7.736     7.726
Balance of Payments and Trade:
Total Exports (FOB)               119,487   135,244   150,857
  Exports to U.S. (FOB)            27,259    31,107    35,196
Total Imports (CIF)               123,816   139,052   159,909
  Imports from U.S. (CIF)           9,119    10,266    11,300
Aid from U.S.                           0         0         0
Aid from Other Countries                0         0         0
External Public Debt                    0         0         0
Annual Debt Service                     0         0         0
Foreign Exch. Reserves 6/          35,250    43,003       N/A
Trade Balance                      -4,329    -3,808    -9,052
  Trade Balance with U.S.          18,410    20,841    23,896
N/A--Not available.
1/ 1994 projections are by the Consulate and are based on first
three quarters statistics.  1994 exchange rates were based on
HKD 7.726 to US $1.00; 1992 and 1993 exchange rates as listed.
2/ Includes financing, insurance, real estate and business
services.
3/ Includes wholesale, retail, import/export trades,
restaurants, hotels, transport, storage and communications.
4/ Hong Kong government provides only the consumer price index
(CPI).
5/ Oct 1989-Sept 1990 equals 100; CPI(A) covers urban
households with monthly expenditure of US $325-1300
(approximately 50 percent of households).
6/ Foreign currency assets of exchange fund (US dollars).
Statistical Note:  the Census and Statistics Department has
recently completed a non-routine revision of GDP, to base real
GDP at 1990 prices and to include certain offshore service
activities.
1.  General Policy Framework
    The Hong Kong government pursues economic policies of
noninterference in commercial decisions, low and predictable
taxation, government spending increases within the bounds of
real economic growth, and competition subject to transparent
laws (albeit without anti-trust legislation) and consistent
application of the rule of law.  Market forces determine wages
and prices in Hong Kong, with price controls limited only to
certain government-sanctioned monopolies in the service
sector.  There are no restrictions on foreign capital or
investment, except for some limitations in the media sector,
nor are there export performance or local content
requirements.  Profits may be freely repatriated.  There are
some barriers to entry in certain service sectors, in
particular medicine, law, and aviation.  Hong Kong reverts to
People's Republic of China (PRC) sovereignty in 1997, but China
has committed to leaving Hong Kong's economic system intact for
50 years.
    Hong Kong's free market, generally non-interventionist
policies have spurred high rates of real growth, low
unemployment, rising wages, and one of the highest per-capita
GDP levels in the world.  The growing economy has produced
additional tax revenues despite modest increases in excise,
real estate and business profits taxes.  The corporate profits
tax is 16.5 percent, and personal income is taxed at a maximum
rate of 15 percent.  Property is taxed; interest, royalties,
dividends, capital gains and sales are not.  In spite of the
growth of government spending from approximately 14 percent of
GDP in the mid 1980s to about 19 percent by the early 1990s,
the Hong Kong Government annually runs budget surpluses and has
amassed large fiscal reserves.
    Asset price inflation, a dominant feature of Hong Kong's
economy during 1993, has shown signs of moderating during the
second half of 1994 as interest rates have increased.
Skyrocketing property prices have fallen some 10-15 percent
since June 1994, when the government introduced a package of
measures designed to curb property speculation, release more
land for building, and accelerate major housing projects.  Hong
Kong's Hang Seng index of blue chip stocks, which increased by
116 percent in 1993, was down by 1.7 percent year-on-year as of
November 15, 1994.
    Hong Kong is a duty-free port.  It levies consumption taxes
on certain goods, including tobacco, alcoholic beverages,
methyl alcohol and some fuels, but otherwise goods trade
freely.  Hong Kong is also an entrepot for Chinese and regional
trade.  In 1993, Hong Kong reexported US $106 billion worth of
goods made elsewhere, more than three times as much as it
produced domestically for export (US $29 billion).  One third
of all of China's exports flow through Hong Kong on their way
elsewhere, and 25 percent of China's imports come via Hong
Kong.  The opening of China, and especially the development of
Guangdong province as a low-cost manufacturing base, has
encouraged Hong Kong to shift from a manufacturing to a
services-based economy; over 75 percent of Hong Kong's GDP now
derives from the service sector, much of it connected in one
way or another with China.
    The Hong Kong dollar is linked to the U.S. dollar at an
exchange rate of HKD 7.8 = US $1.00.  The link was established
in 1983 to encourage stability and investor confidence in the
run-up to Hong Kong's reversion to Chinese sovereignty in
1997.  The linked exchange rate requires that Hong Kong
interest rates generally track U.S. interest rates.  Despite
several interest rate increases during 1994, Hong Kong's
prevailing 8 percent inflation rate has meant that savers have
continued to face negative real interest rates.
    On July 1, 1997, Hong Kong will revert to PRC sovereignty.
As guaranteed by the 1984 Sino-United Kingdom (UK) "Joint
Declaration" and the 1990 PRC "Basic Law" -- the latter passed
by China's National People's Congress -- Hong Kong will become
on July 1, 1997, a "Special Administrative Region" (SAR) of the
PRC.  China will take over responsibility for Hong Kong's
foreign affairs and defense.  However, under China's "one
country, two systems" doctrine, Hong Kong has been guaranteed
"a high degree of autonomy" in managing its economic, social,
legal, budget and other internal policies for fifty years.
Hong Kong will remain a separate customs territory with all of
its current border arrangements, and it will retain its
independent membership in economic organizations such as the
GATT.
    Sino-British consultations on transition concerns take
place chiefly in the Joint Liaison Group (JLG).  The JLG (or
other joint bodies) must approve Hong Kong's laws, economic
agreements with third countries, and economic decisions that
will stretch beyond July 1, 1997.  This includes major
infrastructure contracts and franchises, such as the new
airport and port projects.  Cooperation on transition issues in
the JLG has been uneven because of China's opposition to
Governor Patten's electoral reforms, which were implemented in
1994.
    Hong Kong ratified the Uruguay Round agreements and became
a founding member of the World Trade Organization (WTO) on
January 1, 1995.  Hong Kong strongly supports an open
multilateral trading system and is a member, in its own right,
of a number of other multilateral organizations, including the
Asia Pacific Economic Cooperation (APEC) forum and the Asia
Development Bank, notwithstanding its status as a colony of the
United Kingdom.  In other international economic fora, such as
the International Telecommunications Union or the International
Labor Organization, Hong Kong participates as part of the UK
delegation.
2.  Exchange Rate Policies
    The Hong Kong government remains firmly committed to
ensuring currency stability through the linked exchange rate to
the U.S. dollar.  Authority for maintaining the exchange value
of the Hong Kong dollar as well as the stability and integrity
of the financial and monetary systems rests with the Hong Kong
Monetary Authority, which was established in April 1993 through
the consolidation of the Office of the Exchange Fund and the
Commissioner of Banking.  There are no multiple exchange rates
and no foreign exchange controls of any sort.
    Under the linked exchange rate, the overall exchange value
of the Hong Kong dollar is influenced predominantly by the
movement of the U.S. dollar against other major currencies.
The price competitiveness of U.S. exports is affected in part
by the value of the U.S. dollar in relation to third country
currencies.  While the proportion of Hong Kong's imports from
the United States. has declined slightly as a percentage of its
total imports in recent years, Hong Kong still consumes more
U.S. goods per capita than almost any other economy.  U.S.
firms have increased exports to Hong Kong by well over
US $1 billion each year in the 1990s.
3.  Structural Policies
    Hong Kong's generally non-interventionist policies have
brought rising prosperity and low unemployment to the colony
and have created an attractive barrier-free market for U.S.
goods exporters and most services providers.  There are
virtually no controls on trade and industry other than to meet
standard obligations associated with health, safety and
security.  Procurement is conducted on an open basis, although
Hong Kong elected this year to remove itself from the GATT
Government Procurement Code.  While in the past British firms
seemed to enjoy an advantage in bidding for major contracts,
U.S. firms have more recently been quite successful in both the
design and supply stages of major projects.  Other factors
often cited for Hong Kong's dynamic economic success include a
simple, low-rate tax structure, a well-educated and industrious
work force, and an extremely efficient transportation and
communications infrastructure.
    Hong Kong takes justified pride in the efficiency of its
port, the world's largest in container throughput, and the
airport, the fourth-largest in terms of passenger traffic.  But
these facilities are under severe strain given robust economic
growth in the region and projections for continued strong
growth well into the future.  Major new infrastructure,
including the replacement Chek Lap Kok (CLK) airport and
Container Terminal No. 9 (CT-9) are badly needed to ease
congestion and ensure Hong Kong's continued competitiveness as
a center for trade.
    In November, the UK and China reached agreement on a
financing package for CLK that sets the overall level of debt
and equity in the Provisional Airport Authority (PAA) and Mass
Transit Railway Corporation (MTRC).  The two sides must still
reach accord on separate financial support agreements before
the PAA and MTRC will be able to borrow on international
markets.  Once these are resolved, and Sino-British agreement
is reached on the draft airport corporation bill, the PAA will
be able to complete tendering for airport services franchises,
such as catering, cargo handling, fuel supply and aircraft
maintenance.
4.  Debt Management Policies
    The Hong Kong government has minuscule public debt.
Repeated budget surpluses have meant that Hong Knog has not had
to borrow.  To promote the development of Hong Kong's debt
market,  in March 1990the government launched an exchange fund
bills program with the issuance of 91-day bills.  Maturities
have gradually been extended, and, in October 1993, the Hong
Kong Monetary Authority issued five-year notes, with maturities
that extend beyond Hong Kong's reversion to Chinese
sovereignty.  Under the Sino-British Agreed Minute on financing
the new airport and related railway, total borrowings for these
projects cannot exceed US $2.95 billion, and such borrowings
"will not need to be guaranteed or repaid by the government."
Liability for repayment will rest with the PAA and MTRC.
5.  Significant Barriers to U.S. Exports
    As noted above, Hong Kong is a duty-free port with no
quotas, anti-dumping laws, or other barriers to the import of
U.S. goods.  Phytosanitary standards are generally compatible
with U.S. exports of agricultural products.  In fact, according
to Commerce Department data, Hong Kong was the 11th largest
market for U.S. goods in the world last year, recognizing that
a significant portion of those exports are actually reexported
to China.
    Market domination by several firms:  Hong Kong does not
have anti-trust laws.  Certain sectors of its economy are
dominated by monopolies or cartels, some but not all of which
are regulated by the government.  These companies do not
necessarily discriminate against U.S. products.  However, many
of them actively campaign against foreign competitors, for
example in the aviation sector.
    The government's policy is to discourage unfair trade
practices -- see, for example, the Governor's 1992 and 1994
policy addresses.  While there are no agencies with anti-trust
powers, the Consumer Council is tasked, inter alia, with
reporting on anti-competitive behavior in the market.  Its
reports can spur government action.  For example, the
government decided to remove the interest cap for time deposits
after reviewing the Council's report on banking, although the
government chose not to dismantle the interest rate bank cartel
itself.
    The Hong Kong government has promised to work more closely
with the Consumer Council on its publications of other sector
specific study reports on supermarkets (just completed),
broadcasting, telecommunications, gas supply and the
residential property market.  The government has committed to
provide funds for the Council to establish a trade practices
division with a view to improving competition.  And in July
1994, the government ended the prohibition on the Council from
investigating several specific entities, including the air
cargo handling monopoly, the international basic telecom
monopoly, and the hospital authority.
    Telecommunications/Basic Voice:  Value-added telecom
services in Hong Kong are open to competition, as are mobile
communications.  However, basic public voice services are
provided under exclusive franchise.  Hong Kong Telecom
International (HKTI) has the exclusive license until September
30, 2006, to provide a range of international telephone
services.  This has constrained at least one U.S. company from
offering its full range of services in Hong Kong; however, that
company plans to submit an application to Hong Kong regulatory
authorities arguing that its services should rightly be
considered "value-added", and hence not restricted.
    Professional Services:  Physician services -- UK-trained
physicians may practice in Hong Kong with pro forma
certification, and some Commonwealth nationals receive
expedited certification, but other foreign doctors are
forbidden from practicing without going through a lengthy
testing and retraining program.  The special privileges
afforded to British and Commonwealth doctors will likely be
abolished.  There is no indication that other foreign doctors
will be any better treated, however.
    Lawyers/Law Firms:  Foreign law firms have been barred from
hiring local lawyers to advise clients on local law -- even
though Hong Kong firms can hire foreign lawyers to advise
clients on foreign law.  In amendments passed earlier this
year, foreign law firms may now become "local law firms" and
hire Hong Kong attorneys, but they must do so on a strict
1:1 ratio with foreign lawyers.  In addition, there are
restrictions on use of firm names for foreign firms.  For
foreign firms already in Hong Kong, the situation has
improved.  However, for new-to-market firms, the playing field
is still not level.  With respect to qualifying to practice
Hong Kong law, the Law Society has been working on a revised
exam that should facilitate U.S. attorneys' ability to sit and
pass the Hong Kong bar exam.
    Airport Aviation Services:  At Hong Kong's present airport,
Kai Tak, maintenance, cargo handling, catering and other
aviation services are provided by one of two UK-affiliated
companies.  This has prevented U.S. service providers from
competing and has denied U.S. airlines adequate competitive
choice and prices.  The Provisional Airport Authority,
overseeing construction of the new airport, has committed to
having multiple service providers.  The United States has
strongly urged Hong Kong economic policy-makers to follow
through on the commitment to expand competition in these areas,
notwithstanding the pleas by the duopolists for an extension of
their privileged positions.
    Civil Aviation Agreement:  The U.S.-Hong Kong civil
aviation market is ruled by the restrictive provisions of the
U.S.-UK Bermuda II agreement.  Since this agreement will become
invalid when sovereignty over Hong Kong shifts from the UK to
the PRC in 1997, U.S. and Hong Kong negotiators met twice in
1994 to seek an independent bilateral agreement.  The U.S. is
pressing for a substantially more open civair market, including
"fifth freedoms" for cargo and more fifth freedoms and
additional gateways for passenger carriers.
    High Alcohol Taxes:  In 1994 Hong Kong amended its alcohol
taxation system, moving to a 90/100 percent ad valorem tax on
grape wines and spirits respectively.  This is an improvement
over the prior system from the perspective of most U.S.
alcoholic beverage exporters.  However, the high tax rate is an
impediment to expanding U.S. sales.
6.  Export Subsidies Policies
    The government neither protects nor directly subsidizes
manufacturers, despite calls from some local legislators to do
so.  However, a number of quasi-governmental organizations do
provide substantial indirect support to industry.
    The Hong Kong Trade Development Council (HKTDC) engages in
export and import promotion activities with a total revenue of
US $148 million and a total expenditure of US $106 million.
About half of HKTDC's budget comes from a tax on exports
(0.05 percent) and imports (0.035 percent), and the other half
from internal operations (trade shows, magazines).
    In August 1994, the U.S. Trade Representative's (USTR)
office, acting on a Section 308 petition filed by a Hong Kong
publishing company with U.S. financial interests, sought
information from the HKTDC with respect to its trade
publications.  Specifically, the petitioner stated that the
HKTDC subsidized its trade magazines, permitting HKTDC's
magazines, which are direct competitors with the private
sector, to charge advertising rates up to 50 percent below
market price.  On November 4, the Hong Kong government supplied
information to the USTR's questions.  In the meantime, Hong
Kong also submitted a page of questions of its own to the USTR
about similar U.S. promotional activities.
    In answer to one of the USTR's questions, the HKTDC
acknowledged that it had, in one case, provided US $300,000 in
legal defense funds to Hong Kong sweater makers facing dumping
duties in the United States.  The HKTDC pointed out that U.S.
courts subsequently rejected the U.S. government's findings of
dumping, thus justifying HKTDC's support of Hong Kong's
manufacturers.
    Another statutory body, the Hong Kong Industry Technology
Center Corporation (HKITCC), established in June 1993, promotes
technological innovation and application of new technologies in
Hong Kong industry.  The government has allocated US $26
million to the center, together with a loan of US $24 million
for research and design activities.  The loan is interest
bearing at seven percent per year.  The main programs are
incubation, technology transfer and research and design support
services.  There are now six pilot projects.  These companies
enjoy a 70 percent discount on the market rental of the tech
center offices, and 45 percent and 25 percent in subsequent
years.  Any Hong Kong registered company is eligible to apply,
provided it is less than three years old and has fewer than 20
employees.
    The Hong Kong Productivity Council (HKPC) is financed by
annual government allocations and by fees earned from its
services.  With 500 staff members, HKPC provides a variety of
training programs, industrial and management consultancies, and
technical support services.  HKPC invites local companies to
join consortia to share the design and development cost of new
products.
    The Hong Kong Export Credit and Insurance Corporation
(ECIC), a statutory body set up in 1966, provides insurance
protection to exporters.
7.  Protection of U.S. Intellectual Property
    Hong Kong's intellectual property laws and their
enforcement are among the best in the world.  However, with a
massive increase in pirate production in China over the last
twelve months, especially in music and software compact discs,
the Hong Kong market has suffered.
    Hong Kong has acceded to the Paris Convention for the
Protection of Industrial Property, the Bern International
Copyright Convention, and the Geneva and Paris Universal
Copyright Conventions.  Hong Kong has enacted laws covering
trademarks, copyright for trade descriptions (including
counterfeiting), industrial designs, maskworks, and patents.
    Inasmuch as Hong Kong's intellectual property statutes are
based chiefly on laws of the United Kingdom, they will have to
be "localized" for post-1997 application.  Drafts of the laws
indicate that, if anything, the process of localization will be
used by the Hong Kong government to strengthen existing laws.
    Enforcement:  The Customs and Excise Department is
responsible for enforcing the criminal aspects of intellectual
property rights.  The department has a special IPR unit with
over 100 employees; in addition to conducting raids on local
establishments and street vendors, this unit works closely with
the anti-smuggling task force to combat suspected smuggling
operations.  In the first eight months of 1993, there were 298
seizures of copyright infringing products with a total value of
US $2.5 million and 614 seizures of goods violating trademarks
and trade descriptions with a total value of US $50 million.
    Most of the pirate manufacturers have been driven out of
Hong Kong in the last several years.  However, many have
established operations across the border in south China.  One
U.S. music company has seen its sales in Hong Kong fall 40
percent in the last six months.  Hong Kong judges have handed
down penalties that seemed at times too light to be a
deterrent, although recent cases indicate sentences may be
getting tougher.  However, attacking pirate production at its
source will be the most effective remedy for Hong Kong's market.
8.  Worker Rights
    Protection afforded under Hong Kong ordinances extends to
both local and foreign workers in all sectors.  Injuries and
occupational diseases qualifying for compensation, while
normally not specified by industry, cover injuries resulting
from use of industrial machinery as well as disease caused by
exposure to physical, biological or chemical agents.
    a.  The Right of Association
    The right of association and the right of workers to
establish and join organizations of their own choosing are
provided for under local law.  Unions are defined as corporate
bodies and enjoy immunity from civil suits arising from
breaking of contingent contracts or interference with trade by
work stoppages on the part of their members.  The Hong Kong
government does not discourage or impede union formation or
discriminate against union members.  Workers who allege
anti-union discrimination have the right to have their cases
heard by a government labor relations body.
    b.  The Right to Organize and Bargain Collectively
    The right to organize and bargain collectively is
guaranteed under local law.  However, the latter is not widely
practiced and there are no mechanisms to specifically encourage
it.  Instead, a dispute settlement system administered by the
government is generally resorted to in the case of
disagreements.  In the case of a labor dispute, should initial
conciliation efforts prove unsuccessful, the matter may be
referred to arbitration with the consent of the parties or a
board of inquiry may be established to investigate and make
suitable recommendations.
    c.  Prohibition of Forced or Compulsory Labor
    Compulsory labor is prohibited under existing legislation.
    d.  Minimum Age of Employment of Children
    Under regulations governing the minimum age for employment
of children, minors are allowed to do limited part-time work
beginning at age 13 and to engage in full-time work at age 15.
Employment of females under age 18 in establishments subject to
liquor regulations is prohibited.  The Labor Inspectorate
conducts work place inspections to ensure that these
regulations are being honored.
    e.  Acceptable Conditions of Work
    Wage rates are determined by supply and demand.  There is
no legislated minimum wage.  Hours and conditions of work for
women and young persons aged 15 to 17 in industry are
regulated.  There are no legal restrictions on hours of work
for men.  Overtime is restricted in the case of women and
prohibited for all persons under age 18 in industrial
establishments.  In extending basic protection to its work
force, the Hong Kong government has enacted industrial safety
and compensation legislation.  The Hong Kong Labor Department
carries out inspections to enforce legislated standards and
also carries out environmental testing and conducts medical
examinations for complaints related to occupational hazards.
    f.  Rights in Sectors with U.S. Investment
    U.S. direct investment in manufacturing is concentrated in
the electronics and electrical products industries.  Aside from
hazards common to such operations, working conditions do not
differ materially from those in other sectors of the economy.
Labor market tightness and high job turnover in the
manufacturing sector have spurred continuing improvements in
working conditions as employers compete for available workers.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                                496
Total Manufacturing                                    2,660
  Food & Kindred Products                      -1
  Chemicals and Allied Products               149
  Metals, Primary & Fabricated                (1)
  Machinery, except Electrical                302
  Electric & Electronic Equipment           1,559
  Transportation Equipment                    (1)
  Other Manufacturing                         531
Wholesale Trade                                        3,624
Banking                                                1,079
Finance/Insurance/Real Estate                          1,562
Services                                                 443
Other Industries                                         594
TOTAL ALL INDUSTRIES                                  10,457
HONG_KON2
U.S. DEPARTMENT OF STATE
HONG KONG: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
(1) Suppressed to avoid disclosing data of individual companies
Source: U.S. Department of Commerce, Bureau of Economic
Analysis
HUNGARY1
qU.S. DEPARTMENT OF STATE
HUNGARY: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                             HUNGARY
                    Key Economic Indicators 1/
        (Millions of U.S. dollars unless otherwise noted)
                                      1992      1993     1994 2/
                                                         (est.)
Income, Production and Employment:
Real GDP  (Index: 1985=100) 3/        85.6      84.5        N/A
Real GDP Growth (pct.)                -4.3      -2.3        2.0
GDP (at current prices) 3/          36,500    36,055     41,777
By Sector:
  Agriculture                     2,394.46  2,133.76   2,486.00
  Energy/Water                    1,291.13  1,150.59   1,220.00
  Manufacturing                   7,397.74  7,301.17   8,463.00
  Construction                    1,940.50  2,021.94   2,600.00
  Rents                           3,934.20  4,423.90   5,376.00
  Financial Services              2,198.73  2,064.31   2,160.00
  Other Services                  7,103.80  7,589.10  10,185.00
  Government/Health/Education     4,893.67  5,180.35   7,098.00
Net Exports of Goods & Services 4/  10,131     7,990        N/A
GDP Per Capita (USD)                 3,441     3,700      4,056
Labor Force (000s)                  45,049    45,522     44,407
Unemployment Rate (pct.)              12.3      12.1       11.8
Money and Prices:  (annual percentage growth)
Money Supply (M2) 4/                  27.0      16.6        N/A
Base Interest Rate 4/                   22        21         25
Personal Saving Rate 4/               10.9       6.5        N/A
Retail Inflation                      25.0      25.5       22.0
Wholesale Inflation                   11.5      10.3        N/A
Consumer Price Index                  23.0      22.5       20.0
Exchange Rate
  Official                           79.00     92.04     103.00
  Parallel                              90       100        110
Balance of Payments and Trade:  5/
Total Exports (FOB)               10,678.5   8,912.0    9,625.7
  Exports to U.S.                    294.6     375.9      350.0
Total Imports (CIF)               11,120.3  12,635.9   13,383.4
  Imports from U.S.                  278.5     493.3        392
Aid from U.S. 5/                       116       155        193
Aid from Other Countries 5/          618.6     813.6      978.9
External Public Debt                21,438    24,560     26,556
Debt Sevice Payments (paid) 4/       4,653     4,806      5,232
Gold and Foreign Exch. Reserves 4/   4,381     6,763      7,000
Trade Balance                        441.8  -3,723.9   -3,757.7
  Trade Balance with U.S.             16.9    -117.3      -42.0
1/ Source: Central Statistical Office, unless stated otherwise;
provided in HUF and converted at the official exchange rates,
indicated in this table.
2/ Source: Ministry of Finance, except data on trade.
3/ At factor cost.
4/ Source: National Bank of Hungary.
5/ Source: Ministry of Industry and Trade; all 1994 data are
estimates.
1.  General Policy Framework
    Hungary is well along in its efforts to establish a full
market economy.  It has liberalized its trade regime
extensively during the last five years.  Ninety percent of
imported products no longer require prior government approval.
Foreign direct investment has flowed rapidly into Hungary since
1990, bringing with it a greater familiarity with foreign,
including U.S., products.  Since the May 1994 elections, the
new coalition government has been formulating its economic
policy.  In response to the need to reduce government spending
and the current account deficit some GATT-consistent measures
are expected.  Two of the key tenets of the program are
promoting exports and investment.  The government ratified the
Uruguay Round Agreement at the end of 1994.  As a result,
quotas on agricultural products are being replaced by tariffs.
Therefore, the only remaining vestige of protectionism after
ratification of the GATT will be consumer goods quotas on
manufacturing products.
    The population of Hungary is saddled with the highest per
capita foreign debt in Europe.  Interest payments on the debt
are expected to balloon in 1995 and 1996.  In addition, Hungary
has very large balance of payment and current account deficits,
the former of which was caused primarily by spending on social
programs and a rate of domestic consumption that surpassed
domestic production by almost 10 percent.  The government has
financed the deficit primarily through issuing government
bonds, both domestically and abroad.  At the same time, a tight
budget program is planned for 1995, projecting a $1.6 billion
primary budget surplus.
  The government, describing the economic situation as a
crisis, is seeking to stabilize the economy by calling for zero
growth in net debt, keeping a tight lid on inflation, and
holding growth in real wages to four to five percent below the
rate of inflation.  The parliament is currently debating these
measures, as is the Interest Reconciliation Council (a
tripartite group on which government, employers, and employees
are all represented).  The final results of these discussions,
intended to be a three-year Social Pact, will not be known
until the end of the year at the earliest.
    Promotion of foreign direct investment continues to be a
government priority.  The government has introduced regional
development programs that will provide tax preference to
investments in certain regions.  Tax preference for investments
will be normative and the threshold for equity will be
decreased.  Incentives are also provided for domestic private
investment.  Tax preferences are being proposed for enterprises
that reinvest their income and a less burdensome tax process is
being proposed for small entrepreneurs.  In addition, Hungarian
law provides for the establishment of companies in customs-free
zones.  The companies established there are exempt from customs
and foreign-exchange requirements as well as from indirect
taxation tied to the turnover of goods.  With respect to direct
taxes, these companies enjoy transitory preferences.  Effective
January 1994, the Corporate Tax Act allowed for a discretionary
tax reduction for companies meeting the prerequisites.  This
provision, however, has come under some criticism and the new
government is expected to legislate a number of investment
incentives which will not discriminate between domestic and
foreign investment.  It has also stated that it will eliminate
the minimum two percent turnover tax.
    The National Bank of Hungary (known by its Hungarian
acronym, MNB) is the primary monetary policy actor.  In order
to control the money supply, the MNB uses open market
operations to a large extent.  It controls the rate of interest
on government T-bills as well as the rate applied to repurchase
agreements.  Under conditions identical with the repurchase
rates, commercial banks can conclude foreign exchange swap
transactions with the MNB.  In addition to controlling the
money supply through open market operations, the government
also carried out a fairly active exchange rate policy in 1994.
2.  Exchange Rate Policy
    The Hungarian forint is almost fully convertible for
current account transactions, but not for capital account
movements.  It should be noted, however, that while the
government is currently reviewing its Foreign Exchange Law with
an eye toward liberalizing both current and capital accounts in
an effort to meet OECD membership requirements, significant
changes in capital account restrictions are not expected for
several years.  Currently, the forint is pegged to a currency
basket consisting of the U.S. dollar (30 percent) and the
European Currency Unit (70 percent).  Inflation-led
appreciation of the forint has resulted in periodic
devaluations.  Exporters have been critical of the government's
exchange rate policy, claiming that the overvaluation of the
forint has priced them out of the foreign markets.  The
worsening current account fueled anticipation that a sizeable
devaluation would occur to correct the situation.  In August
1994, the government devalued the forint by eight percent --
the largest devaluation since 1991.  That was followed by a 1.1
percent devaluation in early October.
    Although the forint continues to be a managed currency, it
is in essence fully convertible for business purposes.
Foreigners may freely repatriate profits and dividends in hard
currency.  Foreign exchange controls have been liberalized
steadily.  Foreigners are now permitted to maintain forint
accounts which can be used to purchase goods domestically.
3.  Structural Policies
    There are no centrally-determined prices for consumer
products in Hungary.  However, the prices for the state-owned
gas, electricity, and water utilities (the first two of which
may soon be partially privatized) are determined by the state.
As privatization of these companies proceeds, prices will be
brought more in line with market prices.  The government offers
a wholesale floor price for unprocessed agricultural products,
but producers are not obliged to sell their products to state
companies at this price.  As a floor support price, this policy
has no impact on U.S. agricultural exports to Hungary.
    Hungary overhauled its tax system in the late 1980's,
instituting a western-style system.  It is now in the process
of reforming the entire budget system, including some taxes.
The most important taxes for a foreign investor are:  company
tax (36 percent of corporate profits); the general turnover tax
(a value-added tax attached to the value of goods and services
supplied domestically, imported, or exported; current rates are
0, 10, and 25 percent, but the new government proposes raising
the 10 percent rate to 12 percent); and personal income tax
(current rates range from 0 to 44 percent, but a proposal
before the Parliament would add a 50 percent bracket for those
whose annual earnings exceed one million forints, about
$10,000).  In addition to taxes, employers must also pay
contributions to the Social Security and Solidarity
(unemployment) funds (44 and 7 percent respectively.)
    As mentioned above, the new government is now debating its
economic policy for 1995 and subsequent years.  Tax laws are
likely to change as a result of these discussions.  The
government has indicated that promoting investment is one of
its primary goals.  According to tax proposals before
Parliament, tax on profits will be 18 percent if they are
reinvested and 36 percent if they are remitted as dividends to
shareholders.  In 1992, the Act on Separate State Funds
established an Investment Promotion Fund to encourage foreign
investment in infrastructure, new technology, and public
utilities.  To qualify for subsidies from this fund, a company
must have at least 30 percent foreign participation, a minimum
of $500,000 in capital, and the foreign contribution must be in
convertible currency and not less than 50 percent of the
foreign partner's share.  Companies that meet the first two of
these requirements and invest in manufacturing that generates
more than half of their gross revenues may qualify for a 60
percent tax exemption for the first five years and a 40 percent
exemption for the next five.  If they invest in one of 15
designated sectors, they could receive a 100 percent tax
exemption for the first 5 years and a 60 percent exemption for
the second five.
    Act LXXXVI of 1990 on the Prohibition of Unfair Market
Practices (the "Competition Act") is actually a comprehensive
law intended to foster the establishment and maintenance of a
competitive market.  The Competition Act addresses consumer
fraud, the restriction of competition, abuse of a dominant
market position, and unfair competition.  The Competition Act
created the Economic Competition Office.  This office is
responsible for investigating and stopping any unfair market
practices.
4.  Debt Management.
    As mentioned earlier, Hungary has the highest per capita
foreign debt in Europe.  Despite this, it has never sought debt
forgiveness or debt rescheduling.  As a result, Hungary has a
generally good relationship with commercial creditors, the IMF,
and the World Bank.  It fell far short of IMF target figures
for debt as a percentage of GDP and for the budget deficit in
1993.  Currently, the Government of Hungary and the IMF are
negotiating a new agreement to replace the 18 month agreement
that expired in December 1994 (an agreement that has been
dormant for much of its term).  Although the government is
seeking a three-year agreement to facilitate economic
restructuring, it is more likely that it will reach agreement
on a one-year credit in the short run, with prospects for a
longer-term agreement linked to an acceptable three-year
economic program.  Hungary's foreign debt totals approximately
$27 billion, with interest payments on the debt ballooning in
1995 and 1996.  The government is counting on an improving
current account balance and increased foreign investment to
lessen this burden.
5.  Significant Barriers to U.S. Exports.
    Hungary has liberalized its market substantially in recent
years.  While Hungary's average tariff rates are decreasing,
peak rates are exceptionally high (on coffee, for example).
Hungary imposes a $750 million global quota on imports of
consumer goods.  American companies have complained about an
insufficient quota to properly supply the market.
Additionally, by the terms of the Association Agreement,
Hungary has reserved quota allotments for imports from the
European Union.  As a result of the Uruguay Round, quotas on
agricultural products and processed foods will be replaced by
tariffs.  On November 1, prior to ratification of the GATT
Agreement, the government increased tariffs on agricultural
products that are not bound by GATT; during the first half of
1995, a further increase will take place in accordance with the
Uruguay Round Agreement's requirement that non-tariff barriers
be replaced by tariffs.
    Foreign companies complain that the implementation of new
regulations with no advance notice disrupts trade.  For
example, in October 1993 the Government passed new regulations
mandating that quality control certificates were required for
consumer goods imports to be customs-cleared.  There was no
advance notice of the implementation of the new regulations.
Consequently, neither the importers nor the
testing/certification agencies were prepared for the regulatory
change.  Similarly, the government gave only a 5 day advance
notice of tariff increases on agricultural imports (mentioned
above).
    While the investment market in Hungary is substantially
liberalized, there are still some potential barriers.  Act XVI
of 1991 on Concessions authorizes the state to provide
investors with concessions in return for their investment in
infrastructure and certain other sectors.  In general, though,
100 percent foreign ownership is permitted in sectors open to
private investment.  Exceptions include restrictions on foreign
investment in defense-related industries, in the media, and on
foreigners' acquisition of land.  While screening of foreign
investments does not normally occur, Hungary does screen
investments in financial institutions and insurance.  However,
a number of foreign banks and financial institutions currently
operate in Hungary despite this screening process; the Embassy
has received no reports of established U.S. banks or other
financial institutions being denied permission to operate in
Hungary.
    Foreign investors are nearly always accorded national
treatment under law.  Nevertheless, a few instances of
discrimination do exist.  For example, foreign investors may
only exercise shareholder rights if they have purchased
registered shares (although if they buy unregistered shares,
they may petition to have those shares converted to registered
shares).  The Investment Act guarantees foreigners the right to
repatriate "in the currency of the investment" any dividends,
after-tax profits, royalties, fees, or other income deriving
from the operation or sale of the investment.  The Act also
grants foreign employees of foreign investors the right to
transfer abroad fifty percent of their after-tax salaries.
Foreign investors are also allowed to keep any cash
contributions made in a convertible currency in a foreign
exchange account.  All companies registered in Hungary,
including those with foreign participation, are required to
sell foreign exchange receipts from exports to the National
Bank within eight days of receipt unless an exemption has been
granted by the MNB.  One notable exception allows a company to
maintain a foreign currency account to pay for foreign travel,
advertising, and related expenses.  All companies must obtain
permission from the National Bank before taking out a hard
currency loan (although this requirement will reportedly be
dropped as part of the governments rewrite of the Foreign
Exchange Law).
    Hungary is not a signatory to the GATT Agreement on
Government Procurement.  Increasingly, foreign businesses
criticize the tendering processes, citing non-transparency and
irregularities.  The government is likely to promulgate new
government procurement guidelines that may address some of
these issues, but could, at the same time, establish local
content requirements.
    All importers and exporters must file a VAM 91 document
which can be obtained from the Hungarian Customs.  Essentially,
this document serves as a declaration for the type and number
of goods being imported or exported.  This document must
contain the Product Code Number which identifies the
classification of the goods.  The Product Code Number can be
obtained from the Central Statistical Office.
    Upon the importation of goods, the importer must present
certification documents from the Commercial Quality Control
Institute (KERMI); goods cannot be customs-cleared without the
KERMI permits.  In certain instances, the KERMI permit may be
substituted by documentation from other testing and
certification agencies such as the National Institute for Drugs
and the Quality Control Office of the Building Industry.  All
food products must be labelled in Hungarian and must give the
following information:  net quantity, name/address of producer
(or importer), consumption expiration date, recommended storage
temperature, listing of ingredients/additives, energy content,
and approval symbols from the National Institute of Food
Hygiene and Nutrition (OETI) and KERMI.  There are also
specific marking and labelling requirements for cosmetics as
well as human and animal pharmaceuticals.
    The Hungarian Standardization Office (MEI) oversees the
standards system.  There are currently two types of standards:
national and sectoral.  National standards are issued by the
MDI.  These standards are binding and supersede sectoral
standards.  Sectoral standards are issued by individual
ministries and other central government agencies.  National
standards conform to international norms.  Hungary is a
signatory to the GATT Agreement on Technical Barriers to Trade
(Standards Code).  Hungary also participates in the
International Organization for Standardization (ISO) and the
International Electro-technical Commission (IEC).
    New consumer goods are subject to an approval process
implemented by KERMI.  The Hungarian Electro-technical Control
Institute (MEEI) controls electronic/technical goods; approval
is based on compliance with Hungary's standards on protection
against electric shock.  In order to import or market these
highlighted products, they must be tested and certified by
these control institutes.
6.  Export Subsidies Policies
    There are no subsidies on exports of industrial products.
Various agricultural product groups, however, receive a certain
percentage subsidy from the state.  The general level of
agricultural subsidy, however, is relatively low.  Two
institutions were established in 1994 to support exports:  the
Export Import Bank and the Export Credit Guarantee Ltd.  The
two institutions will provide credit or credit insurance for
about 8 to 10 percent of total exports.  Upon ratification of
the Uruguay Round Agreement, Hungary will become an automatic
signatory to the GATT Subsidies Code.
7.  Protection of U.S. Intellectual Property
    The Hungarian legal system protects and facilitates the
acquisition and disposition of property rights.  The basic
legislation providing protection for inventions is Act II of
1969 (as amended) on the Patent Protection of Inventions.  The
Patent Act provides twenty years of protection from the date of
filing at the National Office of Inventions, as opposed to the
American system which extends protection from the date of
invention.  Licenses may be granted.  Compulsory licensing to a
Hungarian enterprise may be ordered in certain circumstances
when a patent has not been used within four years of the date
of application or three years from the date of issue.
    Act III of 1969 (as amended) on Copyrights is intended to
protect literary, scientific, and artistic creations.
"Computer programs and the related documentation" (software)
are expressly included in the list of protected works.
According to the law, "the consent of the author shall be
required for any use of his work" or of the title of the work.
"Use" is defined as "the process in the course of which the
work or a part thereof is communicated to the public" and
pertains to "alterations, adaptations, and translations."  The
law includes under communication "posters, newspapers,
programs, films, radio, television, etc." relating to the
work.  There have been numerous complaints that Hungarian
enforcement of the Copyrights Act has not been sufficiently
vigorous and that significant quantities of pirated and
counterfeit software, sound recordings, etc., are marketed in
Hungary.
    The registration and protection of trademarks is governed
by Act IX of 1969 on Trade Marks and related decrees.  The
application process can take from six months to a year.
Foreigners are required to appoint a Hungarian attorney to
represent them.  Decisions by the National Office of Inventions
to deny an application or cancel a registration may be appealed
to the Supreme Court.  Registrations are valid for ten years
and can be renewed.  Licensing of trademarks is permitted.  The
law protects well-known marks, stating that "the existence of a
well-known mark (whether registered or unregistered) is a bar
to registration of an identical or confusingly similar mark,
regardless of the goods concerned."  While there are no
statutory use requirements, "failure to use a mark over a
five-year period renders the registration open to cancellation."
    Trade secrets are protected by Act LXXXVI of 1990 on the
Prohibition of Unfair Market Practices.  The law expressly
forbids obtaining or using business secrets "in an unethical
way" and disclosing them to unauthorized persons or making them
public.  Business secrets are defined as "every such fact,
information, solution, or data related to economic activity
that it is in the entitled person's interest to have remain
secret."
    Two new laws protecting intellectual property entered into
force in January of 1992.  Act XXXVIII of 1991 protects utility
models, and Act XXXIX of 1991 protects the topography (layout
design) of semiconductor chips.
    In 1993, the United States and Hungary signed a
comprehensive Intellectual Property Rights Treaty.  Law Number
VII (1994) on the Amendment to Industrial Property and
Copyright Legislation was adopted by Parliament and implemented
on July 1, 1994.  This law amends several existing laws and
serves to extend patent protection for pharmaceutical and
chemical products (previously, Hungary issued only process
protection for products in these categories); addresses who
controls the rights of works; extends and unifies the terms of
protection; expands protection for the original layout designs
incorporated in semiconductor chips; provides the legal means
to prevent proprietary information from being disclosed or
acquired without the consent of the trade secret owner by other
than "honest commercial practices"; and ensures enforcement
procedures are available under civil, criminal, or
administrative law to permit effective action against IPR
infringement.
    Hungary is a member of the World Intellectual Property
Organization and a signatory of important agreements on this
issue, such as the Paris Convention for the Protection of
Industrial Property, the Nice Agreement on the Classification
and Registration of Trademarks, the Madrid Agreement concerning
the Registration and Classification of Trademarks, the Patent
Cooperation Treaty, the Universal Copyright Convention, and the
Bern Convention for the Protection of Literary and Artistic
Works.
8.  Worker Rights
    a.  The Right of Association
    The labor code passed in 1992 recognizes the right of the
unions to organize and bargain collectively and permits trade
union pluralism.  Workers have the right to associate freely,
choose representatives, publish journals, and openly promote
members' interests and views.  With the exception of military
personnel and the police, they also have the right to go on
strike.
    b.  The Right to Organize and Bargain Collectively
    The 1992 labor code permits collective bargaining at the
enterprise and industry level and it is practiced.  Minimum
wage levels are set by the Interest Reconcilation Council
(known by its Hungarian acronym, ET), a forum for tripartite
consultation among representatives from the employers,
employees, and the government, and higher levels (but not lower
ones) may be negotiated at the plant level between individual
trade unions and management.  By agreement, the legal minimum
wage is centrally negotiated at the ET in order to control
inflation.  The Ministry of labor is responsible for drafting
labor-related legislation, while special labor courts enforce
labor laws.  The decisions of these courts may be appealed to
the civil court system.  Under the new legislation, employers
are prohibited from discriminating against unions and their
organizers.
    c.  Prohibition of Forced or Compulsory Labor
    Forced or compulsory labor is prohibited by law, which is
enforced by the Ministry of Labor.
    d.  Minimum Age of Employment of Children
    Labor courts enforce the minimum age of 16 years, with
exceptions for apprentice programs, which may begin at 15.
There does not appear to be any significant abuse of this
statute.
    e.  Acceptable Conditions of Work
    The legal minimum wage is established by the ET and
subsequently implemented by Ministry of Labor Decree.  The 1992
labor code specifies various conditions of employment,
including termination procedures, severance pay, maternity
leave, trade union consultation rights in some management
decisions, annual and sick leave entitlements, and labor
conflict resolution procedures.
    f.  Rights in Sectors with U.S. Investment
    Conditions in specific goods-producing sectors in which
U.S. capital is invested do not differ from those in other
sectors of the economy.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                                 0
Total Manufacturing                                     315
  Food & Kindred Products                   (1)
  Chemicals and Allied Products             -24
  Metals, Primary & Fabricated              (1)
  Machinery, except Electrical              (2)
  Electric & Electronic Equipment           (1)
  Transportation Equipment                    3
  Other Manufacturing                       (1)
Wholesale Trade                                          66
Banking                                                 (1)
Finance/Insurance/Real Estate                           (1)
Services                                                (2)
Other Industries                                        (1)
TOTAL ALL INDUSTRIES                                  1,001
(1) Suppressed to avoid disclosing data of individual companies
(2) Less than $500,000
Source: U.S. Department of Commerce, Bureau of Economic
Analysis
HUNGARY2
U.S. DEPARTMENT OF STATE
HUNGARY: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
(###)
INDIA1
dU.S. DEPARTMENT OF STATE
INDIA: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                              INDIA
                     Key Economic Indicators
        (Billions of U.S. dollars unless otherwise noted)
           (Indian fiscal year is April 1 to March 31)
                                  1992/93   1993/94   1994/95 1/
Income, Production and Employment:
Real GDP (1981 prices) 2/            87.0      83.5      88.1
Real GDP Growth (pct.)                4.6       4.0       5.5
GDP (at current prices) 2/          243.6     252.8     289.5
GDP Share by Sector: (pct.)
  Agriculture                        30.3      30.0      30.1
  Energy/Water                        2.5       2.5       2.5
  Manufacturing                      22.0      22.2      22.4
  Construction                        4.4       4.5       4.5
  Rents                               5.1       5.1       5.1
  Financial Services                  5.9       5.9       6.0
  Other Services/Government/
    Health/Education                 29.8      29.8      29.4
Real Per Capita GDP
  (1981 prices/USD)                  99.8      93.9      97.1
Labor Force (millions)                330       338       346
Unemployment Rate (pct.)             22.0      22.5      22.5
Money and Prices:  (annual percentage growth)
Money Supply (M3)                    15.7      18.2      17.5
Base Interest Rate                   19.0      19.0      14.5
Personal Saving Rate                 17.4      17.5      18.0
Retail Inflation                      9.6       7.5       8.0
Wholesale Inflation (pct.)           10.1       8.4       9.0
Consumer Price Index (1982=100)       240       258       279
Exchange Rate (USD/rupee)
  Official                          28.96     31.37     31.37
  Parallel                           31.0      33.0      32.5
Balance of Payments and Trade:
Total Exports (FOB) 3/               18.4      22.2      25.0
  Exports to U.S.                     3.5       4.0       4.7
Total Imports (CIF) 3/               21.7      23.2      26.7
  Imports from U.S.                   2.2       2.7       3.4
Trade Balance 4/                     -3.3      -1.0      -1.7
  Trade Balance with U.S.             1.3       1.3       1.3
Aid from U.S. (mil. USD) 4/           141       142       148
Aid from Other Countries/
  Institutions                        3.5       3.3       3.5
External Public Debt 5/              79.2      81.4      82.0
Debt Service Payments                 7.0       7.6       9.4
Gold and Foreign Exch. Reserves       9.8      19.3      25.0
1/ 1994 figures are all estimates based on data available in
October 1994.
2/ GDP at market prices.
3/ Merchandise trade.
4/ Figures refer to Indian fiscal years: April 1-March 31.
5/ Excludes rupee debt of $10 billion to the former USSR.
Sources:  Government of India (GOI) Economic Survey, GOI
budgets, Reserve Bank of India bulletins, and the World Bank.
1.  General Policy Framework
    By mid-1994, India's economic reform program had achieved
remarkable macroeconomic stability and substantially
liberalized its trade, investment and financial sectors.
India's decision in 1991 to move away from a "mixed" economy,
marked by slow growth, a highly protected market and state
control of the economy's "commanding heights," has potentially
important ramifications for the international economy.  The
Indian economy is already the sixth largest in terms of
purchasing power, and is home to roughly 15 percent of the
world's population.  India's middle-class is estimated to be
between 150 - 250 million.  A sustained period of rapid
economic growth would sharply reduce poverty in India and
provide major opportunities for international trade and
investment.
    Progress toward reducing the government's unsustainably
high fiscal deficit, which helped trigger India's 1990-91
economic crisis, has been mixed.  After reaching nine percent
of GDP in FY 1990/91, the fiscal deficit fell to 5.7 percent of
GDP in FY 1992/93 before rebounding to 7.3 percent of GDP the
following year.  Buoyant receipts and better expenditure
controls imply a fiscal deficit of about six percent of GDP for
FY 1994/95; little progress is expected in the run-up to the
1996 national elections.  However, the Finance Minister and
Reserve Bank of India (RBI) Governor reached agreement to place
a Rs. 60 billion ($1.9 billion) cap on the issuance of ad hoc
Treasury bills during 1994, the principal source of
inflationary money creation.  The issuance of ad hoc Treasury
bills is to be abolished by FY 1997/98.
    During the first six months of FY 1994/95, M3 rose by an
estimated 17.5 percent.  The RBI hopes to contain M3 growth at
16 percent for the year, a rate it considers consistent with a
four percentage point decline in inflation and GDP growth of
5.5 percent.  Government and private forecasters now predict an
average retail inflation rate of about eight percent during
FY 1994-95, following inflation of 7.5 percent in the previous
year.  The rate of increase in RBI credit to the government
declined by about 50 percent during the first half of
FY 1994/95.  This permitted the government to reduce the
Statutory Liquidity Ratio (SLR) from 33.75 in September 1993 to
31.5 percent in October 1994.  Further cuts are planned as the
government seeks to avoid crowding out private borrowers.
    Other economic indicators underscore India's sharp break
with its socialist past.  Foreign investment inflows and steady
export growth expanded foreign exchange reserves from $1.1
billion in June 1991 to $19.0 billion in October 1994.  Reform
has made India one of the most sought-after emerging markets
for institutional investors.  After stagnating for several
years, private investment is expected to fuel industrial growth
in FY 1994-95 of about 8.0 percent, and GDP growth in excess of
5.0 percent.  Most importantly, India's liberalization program
has received solid backing from the middle- and upper-classes
that have been its early beneficiaries.
2.  Exchange Rate Policy
    India has utilized exchange rate policy to improve its
export competitiveness.  On March 1, 1993, the exchange rate
was unified and made fully convertible on the trade account.
On August 20, 1994, the current account was fully liberalized.
Controls remain on capital account transactions, but their
gradual removal is expected as foreign exchange reserves grow
and India's capital markets merge more completely with
international financial markets.  The RBI has intervened in the
foreign exchange market to rebuild reserves and defend the
rupee's stability.  However, foreign investment inflows have
been an equally important factor in maintaining the rupee at
roughly Rs. 31.5 per dollar since March 1993.  As a result, the
real effective exchange rate has appreciated by over 10 percent
since 1992.
3.  Structural Policies
    Price Policies:  Central and state governments still
regulate the prices of most essential products, including food
grains, sugar, edible oils, basic medicines, energy,
fertilizers, water and many industrial inputs.  Agricultural
commodity procurement prices have risen substantially during
the past three years, while nitrogenous fertilizer, rural
electricity and irrigation costs remain well below market
levels.  However, acute power shortages are forcing several
states to arrest the financial decline of state electricity
boards by raising tariffs.  The federal government has also
begun to scrutinize more carefully the cost of its subsidies.
Many basic food products are under a dual pricing system:  some
output is supplied at fixed prices through government
distribution outlets ("fair price shops"), with the remainder
sold by producers on the free market.  Prices are usually
regulated according to a cost-plus formula; some formulas have
not been adjusted in more than a decade.  Regulation of basic
drug prices has been a particular problem for U.S.
pharmaceutical firms operating in India, although changes in
national drug policy will sharply reduce the number of
price-controlled formulations by late-1994.
    Tax Policies:  India's tax policies suffer from several
problems common to developing countries.  Public finances
remain highly dependent on indirect taxes, particularly import
tariffs.  Between 1990 and 1993, indirect taxes accounted for
75 percent of central government tax revenue.  India's direct
tax base is excessively narrow, with only eight million
taxpayers out of a total population of about 900 million.
Marginal rates are high by international standards, although
the FY 1994/95 budget lowered the corporate income tax rate for
foreign companies from 65 percent to 55 percent.  Tax evasion
is widespread, and the government has stated that future tax
rate cuts will depend upon its efforts to improve compliance.
The government has begun streamlining the nation's tax regime
along the lines recommended by a government-appointed
committee:  increasing the revenue share from direct taxes,
introducing a value-added tax (VAT), and replacing India's
complex tax code with one that is simple and transparent.  The
Indian government is also experimenting with tax incentives for
specific targeted areas, such as a five-year tax holiday for
power projects.
    Regulatory Policies:  The "New Industrial Policy" announced
in July 1991 relaxed considerably government's regulatory hold
on investment and production decisions.  The new policies
withdrew industrial licensing from all but 16 specified
industries and removed most of the strictures on plant
location.  These reforms have been followed by more recent
adjustments, including the announcement in mid-1994 of more
liberal policies for the pharmaceutical and telecommunications
industries.  Local sourcing requirements have also been
abolished.  Nevertheless, Indian industry remains highly
regulated by a powerful bureaucracy armed with excessive rules
and broad discretion.  As many as 92 approvals are still
required to establish an industrial plant; the speed and
quality of regulatory decisions governing important issues such
as zoning, land-use and environment can vary dramatically from
one state to another.  Political opposition has slowed or
halted important regulatory reforms governing areas like labor,
bankruptcy, and company law that would enhance the efficiency
of foreign and domestic investment.  However, international
competition for capital is gradually forcing India's federal
and state governments to implement more investor-friendly
regulatory policies.
4.  Debt Management Policies
    External Debt Management:  India's reliance during the
1980's on debt-financed deficit spending to boost economic
growth meant that commercial debt and Non-Resident Indian (NRI)
deposits provided a growing share of the financing for India's
mounting trade deficit.  The result was a hefty increase in
external debt, compounded by rising real interest rates and a
declining term structure that reflected India's falling
creditworthiness.  Total external debt rose from $20 billion in
FY 1980/81 to about $84 billion in FY 1990/91.  Fueled by
rising debt service payments, foreign exchange reserves fell to
$1.1 billion during the FY 1990/91 balance of payments crisis,
the equivalent of only two weeks of imports.  By October 1994,
India's reform program had succeeded in boosting reserves to
$19.0 billion.  This remarkable surge in reserves has obviated
the need to renew its Standby Arrangement with the
International Monetary Fund (IMF), and allowed India to prepay
$1.1 billion in credits to the IMF during 1994.
    External Debt Structure:  India's total external debt
(including ruble and defense-related debt) reached $91.4
billion by mid-1994, making India one of the world's major
borrowers.  India's debt-service payments exceeded $8.0 billion
in each of the last four years (FY 1990/91 - FY 1993/94).
However, roughly two-thirds of the country's foreign currency
debt is composed of multilateral and bilateral debt, much of it
on highly-concessional terms.  The stock of short-term debt
constituted only $4.6 billion during FY 1993/94.  The addition
of new debt has slowed substantially, as the government
maintained a tight rein on commercial borrowing and
defense-related debt and encouraged foreign equity investment
rather than debt financing.  As a result, the ratio of total
external debt to GDP fell from 39.8 percent in FY 1992/93 to
about 36 percent in FY 1993/94.
    Relationship with Creditors:  India has an excellent debt
servicing record.  U.S. and Japanese rating agencies downgraded
Indian paper in 1990, as India encountered balance of payment
difficulties exacerbated by the Persian Gulf conflict and a
sharp downturn in trade with the former Soviet Union.  The
sharp growth in official reserves and the enthusiastic response
of institutional and foreign direct investors to India's
economic reforms are restoring creditor confidence.  Japanese
agencies recently upgraded India's rating, and in late-1994
Moody's began reviewing India's foreign currency debt rating.
(India is currently rated BA2/BB plus by Moody's.)  Citing its
growing foreign exchange reserves and ample food stocks, India
chose not to negotiate an Extended Financing Facility with the
IMF when its Standby Arrangement expired in May 1993.
5.  Significant Barriers to U.S. Exports
    Import Licensing:  U.S. exports have benefited from
significant reductions in India's import-licensing
requirements.  Until 1992, India's extraordinarily complex
import regime featured 26 commodity lists with numerous
approval and licensing procedures.  Since that time, the
government has eliminated the licensing system for imports of
intermediates and capital goods, and steadily reduced the
import-weighted tariff from 87 percent to 33 percent at
present.  U.S. exports to India rose from $2.0 billion in 1991
to $2.8 billion in 1993, according to U.S. Department of
Commerce trade data.  Imports of phosphate fertilizer, kerosene
and liquid propane gas were opened to the private sector in
1993.  A few commodity imports (mostly bulk agricultural
commodities) are still "canalized" through state trading
companies, but their number is steadily declining.
Notwithstanding this progress, U.S. exporters face a negative
list of import items affecting roughly one-third of all tariff
lines, and tariff protection that is still very high by
international standards.  Import licenses are still required
for most consumer durables, certain electronics, pesticides and
insecticides, fruits, vegetables and processed food products,
breeding stock, most pharmaceuticals and chemicals, and
products reserved for small-scale industry.  This licensing
requirement serves in many cases as an effective ban on
importation.
    Services Barriers:  The Indian government runs many major
service industries either partially or entirely, but the
controls are loosening.  The banking sector remains highly
regulated, with only five licenses per year to be given for new
foreign bank branches and/or expansion of existing operations.
(Only 12 new foreign banks or bank branches were granted
operating approval between June 1993 and September 1994.)
India does not allow foreign nationals to practice law in its
courts.  The Indian government is now reviewing its monopoly of
life and general insurance services, and is expected to approve
domestic and foreign private sector competition during 1995.
Foreign and domestic private firms dominate advertising,
accounting, car rental and a wide range of consultancy
services.  Furthermore, policy reforms introduced in late 1994
offer foreign firms a major role in modernizing India's
telecommunications sector.
    Standards, Testing, Labelling and Certification:  Indian
standards generally follow international norms and do not
constitute a significant barrier to trade.  However, India's
food safety laws are often outdated or more stringent than
international norms.  Where differences exist, India is seeking
to harmonize national standards with international norms.  No
distinctions are made between imported and
domestically-produced goods, except in the case of some bulk
grains.
    Investment Barriers:  The industrial policy introduced in
July 1991 achieved a dramatic overhaul of regulations
restricting foreign investment.  Government approval for equity
investments of up to 51 percent in 35 industries covering the
bulk of manufacturing activities has been entirely eliminated.
The government has rarely denied requests to increase equity
stakes up to 100 percent, although it reserves this right.  All
sectors of the Indian economy are now open to foreign
investors, except those with security concerns such as defense,
railways and atomic energy.  Industrial licensing applies to
manufacturing activities in only 15 industries considered to be
of strategic, social or environmental importance.  As a result,
the $5.1 billion in foreign investment approved between January
1991 and July 1994 exceeded the nominal dollar value of all
foreign investment approved during the previous four decades.
The United States and India have not negotiated a bilateral
investment treaty, although an agreement with the Overseas
Private Investment Corporation (OPIC) remains in force to
protect U.S. investors.  In 1992, India became the 113th
country to announce it would join the Multilateral Investment
Guarantee Agency (MIGA).  India ratified the Uruguay Round
agreements and became a founding member of the World Trade
Organization (WTO) on January 1, 1995.
    Government Procurement Practices:  Indian government
procurement practices occasionally discriminate against foreign
suppliers, but they are improving under the influence of fiscal
stringency.  Price and quality preferences for local suppliers
were largely abolished in June 1992.  Recipients of
preferential treatment are now concentrated in the small-scale
industrial and handicrafts sectors, which represent a very
small share of total government procurement.  Defense
procurement through agents is not permitted, forcing U.S. firms
to maintain resident representation.  When foreign financing is
involved, procurement agencies generally comply with
multilateral development bank requirements for international
tenders.
    Customs Procedures:  Liberalization of India's trade regime
has reduced tariff and non-tariff barriers, but it has not
eased some of the worst aspects of customs procedures.
Documentation requirements, including ex-factory bills of sale,
are extensive and delays are frequent.  Interpretations
rendered by customs officials are frequently arbitrary.
6.  Export Subsidies Policies
    The 1991 budget phased out most direct export subsidies,
but a tangle of indirect subsidies remains.  Exports are exempt
from income and trade taxes, and a variety of tariff incentives
and promotional import licensing schemes, some of which carry
export quotas, still remain.
7.  Protection of U.S. Intellectual Property
    The Indian government is slowly, but steadily, revising its
treatment of intellectual property rights (IPR), bringing its
laws and enforcement in line with international practice.  The
government has traditionally contended that IPR protection
should balance the interests of rights holders with those of
consumers and broader "social" interests.  The Special-301
investigation initiated by the United States Trade
Representative in 1991 determined that Indian IPR practices --
particularly inadequate patent protection -- unduly burdened
U.S. commerce.  In response, the United States removed all
Indian-origin chemical and pharmaceutical products from
duty-free entry under the Generalized System of Preferences
(GSP) in April 1992.
    Under pressure from domestic industry, India strengthened
its copyright law in May 1994, placing it on a par with
international practice.  The new law entered into force in
late-1994.  Subsequently, India's designation as a "priority
foreign country" under Special-301 was revoked and India was
placed on the Priority Watch list.  Copyright and trademark
enforcement is also rapidly improving.  Classification of
copyright and trademark infringements as "cognisable offenses"
has expanded police search and seizure authority, while the
formation of appellate boards has speeded prosecution.
Parliamentary approval is expected in late 1994 or early 1995
for strict revisions in India's Trademark Bill.
    Indian patent law, which was revised in 1970 to shorten
patent life and end product patents for pharmaceuticals,
chemicals and food products, remains a major concern for U.S.
investors and exporters.  Widespread patent piracy has resulted
in a pronounced shortage of investment in high-tech areas, such
as pharmaceutical and bioengineering research and development,
where India enjoys a comparative advantage.  Nonetheless, the
convergence of India's economic interests with those of her
major trade and investment partners may accelerate product
patent introduction.  The Indian government has announced that
it will fully conform to the IPR-related requirements of the
Uruguay Round, including the introduction of full product
patent protection by the Year 2005 and TRIPs-related
implementing legislation by January 1, 1995.
8.  Worker Rights
    a.  The Right of Association
    India's constitution gives workers the right of
association.  Workers may form and join trade unions of their
choice; work actions are protected by law.  Unions represent
roughly two percent of the total workforce, or about 25 percent
of industrial and service workers in the organized sector.
    b.  The Right to Organize and Bargain Collectively
    Indian law recognizes the right to organize and bargain
collectively.  Procedural mechanisms exist to adjudicate labor
disputes that cannot be resolved through collective
bargaining.  State and local authorities occasionally use their
power to declare strikes "illegal" and force adjudication.
    c.  Prohibition of Forced or Compulsory Labor
    Forced labor is prohibited by India's constitution; a 1976
law specifically prohibits the practice of "bonded labor."
Despite implementation of the 1976 law, bonded labor continues
in many rural areas.  Efforts to eradicate the practice are
complicated by extreme poverty and jurisdictional disputes
between the central and state governments; legislation is a
central government function, while enforcement is the
responsibility of the states.
    d.  Minimum Age of Employment for Children
    Poor social and economic conditions and lack of compulsory
education make child labor a major problem in India.  The
Government of India estimates that 17 million Indian children
from ages 5 to 15 work.  Non-governmental organizations
estimate that there may be more than 50 million child
laborers.  A 1986 law bans employment of children under age 14
in hazardous occupations and strictly regulates child
employment in other fields.  Nevertheless, tens of thousands of
children are employed in the glass, pottery, carpet and
fireworks industries, among others.  Resource constraints and
the sheer magnitude of the problem limit ability to enforce
child-labor legislation.
    e.  Acceptable Conditions of Work
    India has a maximum eight-hour work day and 48-hour work
week.  This maximum is generally observed by employers in the
formal sector.  Occupational safety and health measures vary
widely from state to state and among industries, as does the
minimum wage.
    f.  Rights in Sectors with U.S. Investment
    U.S. investment exists largely in manufacturing and service
sectors where organized labor is predominant and working
conditions are well above the average for India.  U.S.
investors generally offer better than prevailing wages,
benefits and work conditions.  Intense government and press
scrutiny of all foreign activities ensures that any violation
of acceptable standards under the five worker rights criteria
mentioned above would receive immediate attention.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                             (1)
Total Manufacturing                                   395
  Food & Kindred Products                     1
  Chemicals and Allied Products             143
  Metals, Primary & Fabricated               11
  Machinery, except Electrical               68
  Electric & Electronic Equipment             4
  Transportation Equipment                    5
  Other Manufacturing                       164
Wholesale Trade                                        23
Banking                                               316
Finance/Insurance/Real Estate                         (1)
Services                                               18
Other Industries                                      (2)
TOTAL ALL INDUSTRIES                                  759
(1) Suppressed to avoid disclosing data of individual companies
(2) Less than $500,000
Source: U.S. Department of Commerce, Bureau of Economic Analysis
(###)
INDONESI1
8b8bU.S. DEPARTMENT OF STATE
INDONESIA: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                            INDONESIA
                     Key Economic Indicators
        (Millions of U.S. dollars unless otherwise noted)
                                     1992      1993      1994
Income, Production and Employment:
Real GDP (1983 prices)             64,623    66,942    69,013
Real GDP Growth (pct.)                6.9       6.5       6.7
GDP (at current prices)           128,022   144,713   157,230
By Sector:
  Agriculture                      24,992    26,711    29,021
  Mining                           14,733    14,734    16,008
  Manufacturing                    27,853    32,315    35,110
  Electricity/Gas/Water             1,058     1,301     1,413
  Construction                      7,540     8,692     9,444
  Retail Trade and Hotels          21,050    23,857    25,920
  Transportation/Comm.              8,423     9,932    10,791
  Banking/Finance                   6,157     7,310     7,943
  Real Estate                       3,249     3,647     3,962
  Government                        8,527    10,761    11,692
  Other Services                    4,440     5,455     5,927
Real Per Capita GDP                   691       768       821
Labor Force (millions)                 79        81        83
Unemployment Rate (pct.)              3.2       3.4       3.4
Underemployment Rate (pct.)          36.6      36.8      37.0
Money and Prices:  (annual percentage growth)
Money Supply (pct. rise)             20.0      26.5      15.0
Interest Rate 1/                     11.3       7.0      10.6
National Savings (pct. GDP)          25.0      25.0      25.0
CPI (pct. change)                     5.0      10.2      10.0
WPI (pct. change)                     5.3       3.6       7.4
Exchange Rate (Rp/USD) 2/           2,030     2,087     2,160
Balance of Payments and Trade:
Total Exports                      33,966    37,459    41,311
  Exports to U.S.                   4,332     5,439     5,999
Total Imports                      27,279    28,587    31,446
  Imports from U.S.                 2,777     2,770     3,254
Aid from U.S.                         155        94        90
Aid from All Sources                4,948     5,110     5,202
Foreign Debt (official/private)    72,927    85,837    89,858
Debt Service Ratio                   32.1      30.0      31.2
Foreign Exchange Reserves          11,161    12,352    13,140
Trade Balance                       6,687     8,872     9,865
  Trade Balance with U.S.           1,555     2,669     2,745
N/A--Not Available
1/ Interbank fund rates.
2/ Period average.
1.  General Policy Framework
    Indonesia is an economic success story.  In 1967, when
President Soeharto took power, it was one of the world's
poorest countries, with per capita GNP of $70 per person, half
that of India and Bangladesh.  In 1993, Indonesia's per capita
GNP passed $700, triple that of Bangladesh and more than double
India's.  Life expectancy has risen dramatically -- from 41 in
1967 to 63 in 1993 -- while infant mortality and illiteracy
rates have plummeted.
    Real GDP growth has averaged 6.7 percent per year over the
last five years.  Through a restrictive monetary policy and a
conservative fiscal stance, the government has held inflation
to the 5-10 percent range.  With strong export performance and
manageable import growth, the current account deficit dropped
from $4.4 billion in 1991 to $1.9 billion in 1993.
    Prospects for continued growth are good.  Government and
private sector projects are alleviating infrastructure
shortages, particularly in telecommunications, electric power,
and roads.  The banking industry continues to adjust to the
more stringent prudential regulations introduced in 1991 and
modified in 1993; credit constraints began to ease in late 1993.
    In 1994 Indonesia continued to take steps to open the
economy.  Indonesia ratified the Uruguay Round agreements and
became a founding member of the World Trade Orgainization on
January 1, 1995.  Indonesia was the 1994 chairman of APEC (Asia
Pacific Economic Cooperation); on November 15 President
Soeharto hosted leaders of the APEC economies at a meeting in
which they declared the goal of reaching free trade in the
region by the year 2020.
    In June 1994, the government issued another deregulation
package aimed at improving the investment climate.  This set of
measures opened up several previously closed sectors to foreign
investment and eliminated barriers to 100 percent foreign-owned
investment in most, but not all, sectors.  Further progress is
needed, however, to eliminate remaining barriers to foreign and
domestic trade, to replace the outdated commercial code, and to
establish clear and transparent accounting and auditing
standards.
    Indonesia's development is good news for U.S. business.
U.S. exports to the country have doubled since 1988, totaling
2.8 billion dollars in 1993.  The best prospects for U.S.
exporters stem from the government's efforts to improve
infrastructure; they include equipment for power generation,
telecommunications, roads, harbors, and airports.  U.S.
exporters can also provide inputs for Indonesia's rapidly
expanding manufacturing sector.  For example, the United States
already supplies about half of the textile industry's
requirements for cotton.
2.  Exchange Rate Policies
    The government has maintained the convertibility of the
rupiah since the 1960s.  There have been no foreign exchange
controls since 1972.  The government follows a managed float
based on a basket of major trading currencies, including the
U.S. dollar.  Current policy is to maintain the competitiveness
of the rupiah through a gradual depreciation against the
dollar, at a rate of about five percent a year.  The exchange
rate at the end of October 1994 was 2,170 rupiah per dollar.
3.  Structural Policies
    In general, the government allows the market to determine
price levels.  The government enforces a system of floor and
ceiling prices for certain "strategic" food products such as
rice.  In some cases, business associations, with government
support, establish prices for their products.  Direct
government subsidies are confined to a few goods such as
fertilizers.
    Individuals and businesses are subject to income taxes.
The maximum rate is 35 percent of annual earnings in excess of
rupiah 50 million (about $25,000), but the government has
introduced legislation that would reduce the maximum rate to
30 percent.  In 1985, a value-added tax (VAT) was introduced.
Import duties are another important source of government
revenue.  Companies can apply for an exemption from or a rebate
of import duties and VAT paid on inputs used to produce
exports.  A few products remain subject to export taxes,
usually with the goal of job creation.  For example, in October
1989 export taxes on sawn lumber were raised to prohibitive
levels; and in May 1992 a previous export ban on logs was
replaced by high export taxes.  According to government
officials, total tax compliance in Indonesia is about 55
percent.
4.  Debt Management Policies
    Indonesia's medium and long term foreign debt totals about
$95 billion, with $60 billion owed by the state sector and
$35 billion by the private sector.  In 1994 Indonesia will pay
approximately 31 percent of total export earnings in principal
and interest payments on its foreign debt.  The government is
fully committed to meeting its debt service obligations and has
no plans to seek a debt rescheduling.
    The cabinet-level team set up by the government in
September 1991 to oversee foreign borrowing has had a
measurable effect on controlling public offshore debt.  The
team is charged with reviewing applications for foreign
commercial credits to finance projects in which the government
or a state-owned enterprise is involved.  Financing for purely
private projects is not directly affected.  The team is also
charged with prioritizing by project the use of offshore funds
and with establishing borrowing ceilings.  In October 1991 the
team announced ceilings on public sector foreign commercial
borrowing and guidelines for private sector borrowing through
FY 1995/96 ranging from $5.5 to $6.5 billion total per year.
5.  Significant Barriers to U.S. Exports
    Import Licenses:  Since 1986, import licensing requirements
have been relaxed in a series of deregulation packages.  Items
still subject to import licensing include some agricultural
commodities (rice, wheat, sorghum, sugar), alcoholic beverages,
and some iron and steel products.  Remaining import licensing
requirements may be waived for companies importing goods to be
incorporated into subsequent exports.  In June 1993, the
government lifted the previous ban on most types of completely
built-up passenger vehicles, although the ban was replaced with
high import duties and surcharges, totalling as much as
300 percent in many cases.  Automotive imports have followed
previous patterns, in which nontariff barriers such as bans and
licensing requirements have been replaced with tariffs and
surcharges.
    Services Barriers:  Services barriers abound, although
there has been some loosening of restrictions, particularly in
the financial sector.  Foreign banks, securities firms, and
life and property insurance companies are permitted to form
joint ventures with local companies although they are not
allowed to establish 100 percent foreign-owned subsidiaries or
branches.  In all cases, capitalization requirements for
foreign joint venture firms are higher than for domestic
firms.  Foreigners may purchase up to 49 percent of a company's
shares listed on the stock exchange.
    Foreign attorneys may serve as consultants and technical
advisors.  However, attorneys are admitted to the bar only if
they have graduated from an Indonesian legal facility or from
an institution recognized by the government as equivalent.
Foreign accountants may serve as consultants and technical
advisors to local accounting firms.  Air express companies are
not permitted to own equity in firms providing courier
services, although they may arrange with local firms to provide
services in their name and second expatriate staff to the local
firms.
    Indonesia imposes a quota on the number of foreign films
which may be imported in a given year.  Films may be imported
and distributed only by fully Indonesian-owned companies.  In
November 1994 the government issued the final set of
regulations necessary to allow U.S. video companies to work
with Indonesian distributors to provide legal video and laser
disc rentals and sales.
    Standards, Testing, Labelling, and Certification:  In May
1990 the Government of Indonesia issued a decree which stated
that the Department of Health must decide within one year of
receipt of a complete application for registration of new
foreign pharmaceutical products.  Under the national drug
policy of 1983, a foreign firm may register prescription
pharmaceuticals only if they both incorporate high technology
and are products of the registering company's own research.
Foreign pharmaceutical firms have complained that copied
products sometimes become available on the local market before
their products are registered.
    Investment Barriers:  By enacting a new deregulation
package in June 1994, the government took a large step forward
in improving Indonesia's investment climate.  The package,
known as PP 20, dropped initial foreign equity requirements and
sharply reduced divestiture requirements.  Indonesian law now
provides for both 100 percent direct foreign investment
projects and joint ventures with a minimum Indonesian equity of
5 percent.  In addition, PP 20 opened several previously
restricted sectors to foreign investment, including harbors,
electricity generation, telecommunications, shipping, airlines,
railways, roads and water supply.  Some sectors, however,
remain restricted or closed to foreign investment.  For
example, foreign investors may not invest in retail
operations.  They may, however, distribute their products at
the wholesale level.
    Most foreign investment proposals must be approved by the
Capital Investment Coordinating Board (BKPM).  Investments in
the oil and gas, mining, banking and insurance industries are
handled by the relevant technical ministries.  While BKPM seeks
to function as a one-stop investor service, most investors will
also need to work closely with various technical government
departments and with regional and local authorities.  There are
limited provisions under which foreign nationals may exploit or
occupy real property in Indonesia, but ownership is limited to
Indonesian citizens.  There are numerous restrictions on the
employment of foreign nationals, and obtaining expatriate work
permits can be difficult.
    Government Procurement Practices:  In March 1994 President
Soeharto signed a decree which regulates government procurement
practices and strengthens the procurement oversight process.
Most large government contracts are financed by bilateral or
multilateral donors who specify procurement procedures.  For
large projects funded by the government, international
competitive bidding practices are to be followed.  Under a 1984
Presidential Instruction ("Inpres-8") on government-financed
projects, the government seeks concessional financing which
meets the following criteria:  3.5 percent interest and a
25 year repayment period which includes 7 years grace.  Some
projects proceed, however, on less concessional terms.  Foreign
firms bidding on certain government-sponsored construction or
procurement projects may be asked to purchase and export the
equivalent in selected Indonesian products.  Government
departments and institutes and state and regional government
corporations are expected to utilize domestic goods and
services to the maximum extent feasible.  (This is not
mandatory for foreign aid-financed goods and services
procurement.)  An October 1990 government regulation exempts
state-owned enterprises which have offered shares to the public
through the stock exchange from government procurement
regulations; as of November 1994 only two such enterprises had
made a public offering.
6.  Export Subsidies Policies
    Indonesia joined the GATT Subsidies Code and eliminated
export loan interest subsidies as of April 1, 1990.  As part of
its drive to increase non-oil and gas exports, the government
permits restitution of VAT paid by a producing exporter on
purchases of materials for use in manufacturing export
products.  Exemptions from or drawbacks of import duties are
available for goods incorporated into exports.
7.  Protection of U.S. Intellectual Property
    Indonesia is a member of the World Intellectual Property
Organization and is a party to certain sections of the Paris
Convention for the Protection of Intellectual Property.  It
withdrew from the Berne Convention for the Protection of
Literary and Artistic Works in 1959.  Indonesia has made
progress in intellectual property protection, but it remains on
the U.S. Trade Representative's Special 301 "Watch List" under
the provisions of the 1988 Omnibus Trade and Competitiveness
    Patents:  Indonesia's first patent law came into effect on
August 1, 1991.  Implementing regulations clarified several
areas of concern, but others remain, including compulsory
licensing provisions, a relatively short term of protection,
and a provision which allows importation of 50 pharmaceutical
products by non-patent holders.  The patent law and
accompanying regulations include product and process protection
for both pharmaceuticals and chemicals.
    Trademarks:  A new Trademark Act took effect on April 1,
1993.  Under the new law, trademark rights will be determined
by registration rather than first use.  After registration, the
mark must actually be used in commerce.  Well-known marks are
protected.  However, there are some remaining problems with
marks filed prior to 1991.  Cancellation actions must be lodged
within five years of the trademark registration date.
    Copyrights:  On August 1, 1989 a bilateral copyright
agreement with the United States went into effect extending
national treatment to each other's copyrighted works.
Enforcement of the ban on pirated audio and video cassettes and
textbooks has been vigorous, although software producers remain
concerned about piracy of their products.  The government has
demonstrated that it wants to stop copyright piracy and that it
is willing to work with copyright holders toward this end.
Enforcement to date has significantly reduced losses from
pirating, but leakages still exist.
    New Technologies:  Biotechnology and integrated circuits
are not protected under Indonesian intellectual property laws.
Indonesia has, however, participated in a World Intellectual
Property Organization conference on the protection of
integrated circuits and is considering introducing legislation.
    Impact:  It is not possible to estimate the extent of
losses to U.S. industries due to inadequate intellectual
property protection, but U.S. industry has placed considerable
importance on improvement of Indonesia's intellectual property
regime.
8.  Worker Rights
    a.  The Right of Association
    Private sector workers, including those in export
processing zones, are free to form or join unions without prior
authorization.  However, in order to bargain on behalf of
employees, a union must register as a mass organization with
the Department of Home Affairs and meet the requirements for
recognition by the Department of Manpower.  (In January 1994, a
new government regulation authorized non-affiliated "Plant
Level Unions" to be set up in individual plants and to
negotiate binding collective signing agreements.)  While there
are no formal constraints on the establishment of unions, the
recognition requirements are a substantial barrier to
recognition and the right to engage in collective bargaining.
The one union recognized by the Department of Manpower is the
All Indonesia Workers Union (Serikat Pekerja Seluruh Indonesia,
SPSI).  Its membership is approximately 994,500, or about 1.4
percent of the total work force.  However, if agricultural
workers and others in categories such as self-employed and
family workers who are not normally union members are factored
out, the percentage of union members rises to approximately six
percent.
    Civil servants are not permitted to join unions and must
belong to KORPRI, a nonunion association whose central
development council is chaired by the Minister of Home
Affairs.  Teachers must belong to the Teachers' Association.
Though technically possessing the same rights as a union, the
PGRI has not engaged in collective bargaining.
    All organized workers, with the exception of civil
servants, have the right to strike.  In practice, state
enterprise employees and teachers rarely exercise this right.
Before a strike can occur in the private sector, the law
requires intensive mediation by the Department of Manpower and
prior notice of the intent to strike.  However, no approval is
required.
    b.  The Right to Organize and Bargain Collectively
    Collective bargaining is provided for by law, but only
recognized trade unions and "plant level unions" may engage in
it.  Once notified that 25 employees have joined a registered
union, an employer is obligated to bargain with them.  Before a
company can register or renew its company regulations it must
demonstrate that it consulted with the union or in its absence
a committee consisting of employer and employee representatives.
    Labor law applies equally in export processing zones.
Regulations forbid employers from discriminating or harassing
employees because of union membership, but in practice
retribution against union organizers occurs.
    c.  Prohibition of Forced or Compulsory Labor
    Forced labor is forbidden by law.  Indonesia has ratified
ILO convention No. 29 concerning forced labor.
    d.  Minimum Age for Employment of Children
    Child labor exists in both industrial and rural areas.  The
Department of Manpower acknowledges that there is a class of
children under the age of 14 who, for socioeconomic reasons,
must work and legalizes their employment provided they have
parental consent and do not engage in dangerous or difficult
work.  The workday is limited to four hours.  Employers are
also required to report in detail on every child employed, and
the Department of Manpower carries out periodic inspections.
Critics, however, charge that the inspection system is weak and
that employers do not report when they employ children.
    e.  Acceptable Conditions of Work
    The law establishes 7 hour workdays and 40 hour workweeks,
with one 30 minute rest period for each 4 hours of work.  In
the absence of a national minimum wage, minimum wages are
established for regions by area wage councils working under the
supervision of the National Wage Council.  Ministerial
regulations provide workers with a variety of other benefits,
such as social security, and workers in more modern facilities
often receive health benefits and free meals.  However,
enforcement of labor regulations is limited and a number of
employers do not pay the minimum wage or provide other required
benefits.  The failure to implement government regulations has
been a significant cause of strikes.
    f.  Rights in Sectors with U.S. Investment
    Working conditions in firms with U.S. ownership are widely
recognized as better than the norm for Indonesia.  Application
of legislation and practice governing worker rights is largely
dependent upon whether a particular business or investment is
characterized as private or public.  U.S. investment in
Indonesia is concentrated in the petroleum and related
industries, primary and fabricated metals (mining), and
pharmaceuticals sectors.
    Foreign participation in the petroleum sector is largely in
the form of production sharing contracts between the foreign
companies and the state oil and gas company, Pertamina, which
retains control over all activity.  All employees of foreign
companies under this arrangement are considered state employees
and thus all legislation and practice regarding state employees
generally applies to them.  Employees of foreign companies
operating in the petroleum sector are organized in KORPRI.
Employees of these state enterprises enjoy most of the
protection of Indonesian labor laws but, with some exceptions,
they do not have the right to strike, join labor organizations,
or negotiate collective agreements.  Some companies operating
under other contractual arrangements, such as contracts of work
and, in the case of the mining sector, cooperative coal
contracts, do have unions and collective bargaining agreements.
    Regulations pertaining to child labor and child welfare are
applicable to employers in all sectors.  Employment of children
and concerns regarding child welfare are not considered major
problem areas in the petroleum and fabricated metals sectors.
    Legislation regarding minimum wages, hours of work,
overtime, fringe benefits, health and safety, etc. applies to
all sectors.  The best industrial and safety record in
Indonesia is found in the oil and gas sector.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                             4,552
Total Manufacturing                                     160
  Food & Kindred Products                   (1)
  Chemicals and Allied Products              61
  Metals, Primary & Fabricated                6
  Machinery, except Electrical              (1)
  Electric & Electronic Equipment           (1)
  Transportation Equipment                   -1
  Other Manufacturing                       (1)
Wholesale Trade                                         -25
Banking                                                  95
Finance/Insurance/Real Estate                           (1)
Services                                                (1)
Other Industries                                        222
TOTAL ALL INDUSTRIES                                  5,031
(1) Suppressed to avoid disclosing data of individual companies
Source: U.S. Department of Commerce, Bureau of Economic
Analysis
IRAN1
>U.S. DEPARTMENT OF STATE
IRAN: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                               IRAN
                     Key Economic Indicators
     (Millions of Iranian rials (IR) unless otherwise noted)
Years ending March 20             1991-92   1992-93   1993-94
Income, Production and Employment:
Population (millions)                55.8      57.0     62.0
Real GDP  /1
  (billion 1985 rials)             16,871    17,647   18,176
  (million USD)                    59,800    65,000   66,950
Per Capita GDP USD                  1,071     1,140    1,140
Real GDP Growth (pct.)  /1            8.6       4.6      3.0
GDP by Sector:  (pct. of GDP)
  Manufacturing                      21.2      21.0     21.0
  Agriculture                        23.3      23.3     23.0
  Petroleum                          21.2      21.0     21.0
  Services                           35.5      36.0     36.0
Money and Prices:
Money Supply (M1/billion rials)    14,300    17,000      N/A
Interest Rate on
  Short-term Deposits (pct.)          6.5       7.0      N/A
Wholesale Price Index
 (1985 = 100) End-Year              417.1     547.6      712
Consumer Price Index
 (1985 = 100) End-Year              346.6     411.0      534
Exchange Rate (IR per USD)
  Basic Rate                         67.4      67.1    1,740
  Floating Rate                     1,440     1,540    2,200
Balance of Payments and Trade:  (millions of U.S dollars)
Total Exports (FOB)  /1            18,415    19,280   15,400
  Exports to U.S.  /2                 0.8       0.2      0.5  /3
Total Imports (FOB)  /1            24,975    24,000   17,800
  Imports from U.S.  /2               749       616      169  /3
Trade Balance                      -6,560    -5,720   -2,400
Current Account  /1               -10,300    -5,000   -5,000
N/A-- Not available.
1/ Estimate.
2/ Year ending December 31.
3/ January-August, 1994.
1.  General Policy Framework
    In 1994, Iranian President Rafsanjani's political opponents
blocked and even rolled back several important elements of his
economic reform program.  Military spending continued to burden
the economy.  Reschedulings of $10 billion of Iran's official
debt brought temporary relief, but the country is finding it
difficult to obtain significant new credits and may face a new
debt crisis.
    Economic uncertainty and parliamentary opposition to
economic liberalization resulted in the postponement of the
regime's second Five-Year Plan (FYP), which was originally to
have gone into effect in March, 1994.  The government now
states that it will have the FYP in place by March, 1995.  In
late 1994, senior government and parliamentary figures were
highlighting features of the new FYP which emphasizes social
justice concerns over economic liberalization.
    Rafsanjani's administration had to retreat from one of its
hardest-fought victories of 1993 -- the unification of exchange
rates -- when the Iranian rial plunged from an open market
value of about 1,400 to the dollar in March 1993 to over 2,500
to the dollar in the spring of 1994.
    The large influx of imports which came with postwar
reconstruction after 1989 abated due to the 1993 credit
crunch.  The government's efforts to improve its credit
position have led to a significant import compression.
    There are no diplomatic relations between the United States
and Iran.  The current state of political relations has acted
generally to discourage a U.S. business presence in Iran.
Moreover, U.S. trade restrictions and the Iranian foreign
exchange shortage are major deterrents to reviving significant
economic ties with the United States.  Despite these problems,
there is a modest trade relationship; U.S. exports to Iran
peaked at $749 million in 1992.  However, because of its
economic problems, Iran's purchases of U.S. products have been
steadily declining since then.
2.  Exchange Rate Policies
    Iran moved from its former three-tiered system of legal
exchange rates to a unified exchange rate of on March 20,
1993.  However, because of public outcry at the declining
international purchasing power of the rial, the government
intervened throughout the summer of 1993 in an effort to hold
the exchange rate at about 1,700 rials to the dollar, using up
billions of dollars in scarce foreign exchange.  When, in the
spring of 1994, the rial dropped as low as 2,800 to the dollar,
the government reimposed complicated import controls which
amount to foreign exchange rationing for most transactions.
There has also been a return to government-subsidized
preferential exchange rates for the import of selected consumer
goods, another drain on scarce foreign exchange resources.
3.  Structural Policies
    The banking, petroleum, transportation, utilities, and
mining sectors are nationalized.  The government has announced
its intent to begin limited privatization in banking and
finance, but so far has not been able to implement its plans.
At the time of the revolution, radicals were put in charge of
bonyads (foundations) which inherited much wealth confiscated
from the former elite.  They retain control of many large
industrial and trading enterprises, and are politically
powerful opponents of privatization.
    The petroleum sector is the economy's traditional
mainstay.  Iran's current maximum sustainable capacity is
around four million barrels per day (mbd), according to the
government.  Iran's OPEC quota is 3.6 mbd.  Capacity is
constrained by the natural decline in the productivity of major
onshore fields, delays in implementing necessary gas
re-injection projects, and a shortage of experienced
personnel.  Without large infusions of capital, the oil sector
may have difficulty maintaining current production, much less
achieving the government's publicly-stated goal of five million
barrels per day (mbd) of sustainable capacity.     .
    The government did not meet its projected petroleum
revenues in 1994 due to soft oil prices.  The government sells
petroleum products domestically at about 10 percent of the
world price, thus cutting exports and encouraging
over-consumption.
4.  Debt Management Policies
    During the eight-year war with Iraq, Iran contracted almost
no external debt.  From 1988 through 1992, Iran borrowed large
amounts, primarily in the form of short-term trade credits
(often covered by creditor government guarantees), in order to
increase domestic living standards, rebuild its petroleum and
industrial sectors, and modernize its armed forces.
    The credit crunch of 1993-94 crippled Iran's trade.  A
series of bilateral reschedulings with official creditors in
1994 did not include significant new credits.  Several export
credit guarantee agencies, including those of Japan, France,
Germany, and Italy, have either suspended coverage for Iran or
are considering new loans only on a case-by-case basis.
5.  Significant Barriers to U.S. Exports
    The U.S. prohibits the export of items on the U.S.
Munitions List, crime control and detection devices, chemical
weapons precursors, nuclear and missile technology, and
equipment used to manufacture military equipment.  As a result
of the Iran-Iraq Nonproliferation Act, passed by Congress and
signed by the President on October 23, 1992 all goods exported
to Iran which require a validated export license are subject,
upon application, to a policy of denial.  This affects all dual
use commodities.  Iranian exports to the United States were
prohibited by order of the President on October 29, 1987.
Exceptions to the embargo of imports of Iranian oil are allowed
in connection with payments to U.S. claimants awarded by the
U.S.-Iran Claims Tribunal at The Hague.  U.S. sanctions have
had a deleterious effect on U.S. exports to Iran.  However,
Iran's current financial problems can be considered the most
significant barrier to the export of U.S. goods and services to
Iran.
6.  Export Subsidies Policies
    In a countervailing duty investigation on Iranian
pistachios, the U.S. pistachio industry alleged that a foreign
exchange subsidy was available to exporters in Iran.  Although
countervailing duties were imposed, the U.S. Department of
Commerce was never able to verify the existence of this program
because of a lack of cooperation from the Iranian authorities
and a paucity of information from the growers.
7.  Protection of U.S. Intellectual Property
    Iran is not a member of the World Intellectual Property
Organization, but is a signatory to the Paris Convention for
the Protection of Industrial Property.  Patent protection is
below the level of protection in the United States.  Iran has
not adhered to any of the international copyright conventions.
8.  Worker Rights
    a.  Right of Association
    Article 131 of Iran's Labor Code grants workers and
employers alike the right to form and join their own
organizations.  In practice, however, there are no real labor
unions.  A national organization known as the "Worker's House,"
founded in 1982 as the labor wing of the now-defunct Islamic
Republican Party, is the only authorized national labor
organization with nominal claims to represent all Iranian
workers.  It works closely with the work place Islamic councils
that exist in many Iranian enterprises.  The Workers' House is
largely a conduit of government influence and control, not a
trade union founded by workers to represent their interests.
    The officially sanctioned Islamic labor councils also are
instruments of government influence and not bodies created and
controlled by workers to advance their own interests, although
they have frequently been able to block layoffs or the firing
of workers.
    There is also a network of guild unions, which operates on
a regional basis.  These guild unions issue vocational
licenses, fund financial cooperatives to assist members, and
help workers to find jobs.  The guild unions operate with the
backing of the government.
    No information is available on the right of workers in Iran
to strike.  However, it is unlikely that the government would
tolerate any strike deemed to be at odds with its economic and
labor policies.
    b.  Right to Organize and Bargain Collectively
    In practice, the right of workers to organize independently
and bargain collectively cannot be documented.  It is not known
whether labor legislation and practice in the export processing
zones differ in any significant respect from the law and
practice in the rest of the country.  No information is
available on the mechanism used to set wages.
    c.  Prohibition of Forced or Compulsory Labor
    Section 273 of the Iranian Penal Code provides that any
person who does not have definite means of subsistence and who,
through laziness or negligence, does not look for work may be
obliged by the government to take suitable employment.  This
provision has been frequently criticized by the Committee of
Experts (COE) of the International Labor Organization (ILO) as
contravening ILO Convention 29 on forced labor.  In its 1990
report, the COE noted an indication by the government in its
latest report to the Committee that Section 273 had been
abolished and replaced for a trial period by a new provision
approved by the Parliament.  The Iraqi government, according to
the COE, stated that the new provision was not incompatible
with Convention 29, and promised to provide a copy after the
provision was translated.  The COE noted that the Government of
Iraq had indicated in its 1977 report that similar regulations
concerning unemployed persons and vagrants had been repealed,
but had not yet complied with the Committee's request for a
copy of the repealing legislation.
    d.  Minimum Age for Employment of Children
    Iranian labor law, which exempts agriculture, domestic
service, family businesses, and, to some extent, other small
businesses, forbids employment of minors under 15 years
(compulsory education extends through age 11) and places
special restrictions on the employment of minors under 18.  In
addition, women and minors may not be used for hard labor or,
in general, for night work.  The extent to which these
regulations are enforced by the Labor Inspection Department of
the Ministry of Labor and Social Affairs and the local
authorities is not known.
    e.  Acceptable Conditions of Work
    The Labor Code empowers the Supreme Labor Council to set
minimum wage levels each year determined by industrial sector
and region.  It is not known if minimum wage levels are in fact
issued annually or if the Labor Ministry's inspectors enforce
their application.  The Labor Code stipulates that the minimum
wage should be sufficient to meet the living expenses of a
family and should take into account the announced rate of
inflation.  It is not known what share of the working
population is covered by the minimum wage legislation.
    The labor law establishes a six-day workweek of 48 hours
maximum (except for overtime at premium rates), with one day of
rest (normally Friday) per week as well as at least 12 days per
year of leave with pay and a number of paid public holidays.
    According to the Labor Code, a Supreme Safety Council,
chaired by the Labor Minister or his representative, is
responsible for promoting work place safety and health and
issuing occupational safety and health regulations and codes of
practice.  The Council has reportedly issued 28 safety
directives.  The Supreme Safety Council is also supposed to
oversee the activities of the safety committees that have
reportedly been established in about 3,000 enterprises
employing more than 10 persons.  It is not known how well the
Labor Ministry's inspectors enforce the safety and health
legislation and regulations nor whether industrial accident
rates are compiled and show positive trends (Iran does not
furnish this data to the ILO for publication in its Year Book
of Labour Statistics).
    Given the large segments of the economy exempted from the
labor law, the effects of the war with Iraq, and the general
lack of effective labor unions, it is unclear to what extent
the provisions of Iran's labor law affect most of the labor
force.
    f.  Rights in Sectors with U.S. Investment
    The U.S. investment which remains in post-revolutionary
Iran, as reported to the U.S. Department of Commerce (see table
below), is residual investment in the petroleum sector.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                               (1)
Total Manufacturing                                      0
  Food & Kindred Products                   0
  Chemicals and Allied Products             0
  Metals, Primary & Fabricated              0
  Machinery, except Electrical              0
  Electric & Electronic Equipment           0
  Transportation Equipment                  0
  Other Manufacturing                       0
Wholesale Trade                                          0
Banking                                                  0
Finance/Insurance/Real Estate                            0
Services                                                 0
Other Industries                                         0
TOTAL ALL INDUSTRIES                                    (1)
(1) Suppressed to avoid disclosing data of individual companies
Source: U.S. Department of Commerce, Bureau of Economic
Analysis
(###)
IRAQ1
U.S. DEPARTMENT OF STATE
IRAQ: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                               IRAQ
    In response to the Iraqi invasion of Kuwait on August 2,
1990, the President, acting under authority of the
International Emergency Economic Powers Act, issued Executive
Orders 12722 and 12724 which, respectively, froze Iraqi
government assets within the United States or in the possession
or control of U.S. persons, and barred virtually all unlicensed
transactions between U.S. persons and Iraq.  This embargo
remains in effect unaltered.
    U.S. sanctions against Iraq incorporate all the measures
contained in the numerous United Nations Security Council
Resolutions passed and still in effect since the invasion.
These resolutions forbid member states, companies and
individuals from undertaking any economic intercourse with the
Iraqi government or with private Iraqi firms, except in regard
to goods deemed by the U.N. Sanctions Committee to be of a
humanitarian nature.
    Between January and August of this year, the UN Sanctions
Committee was notified of $2 billion worth of food planned for
shipment to Iraq, and $175 million worth of medicine.  During
the same period, the Committee approved shipments of $2 billion
worth of other items deemed to be for essential civilian needs.
    Iraq's Ba'athist regime engages in extensive central
planning and management of industrial production.  Small-scale
industry and services and most agriculture are in private
hands.  While the country has extensive arable land, it is
historically a net food importer.  The economy is dominated by
oil, which traditionally provided 95 percent of foreign
exchange earnings.
    The economy, already battered by the impact of three years
of sanctions, apparently took a drastic turn for the worse
during 1994.  Reliable statistics are not available, but
anecdotal evidence points to an increasingly desperate economic
situation.  The standard of living has been reduced to at least
half of its pre-war level.
    In late September, the government announced a 40 percent
cut in government-provided rations of basic foodstuffs such as
cooking oil, flour, and sugar.  These rations no longer provide
minimum daily caloric requirements.
    Rampant inflation has made it difficult for the average
Iraqi to turn to the open market to find the products now
restricted under rationing.  Again, reliable statistics are not
available, but it is reported that the cost of basic food items
has far outstripped salaries.  Government troop movements to
the Kuwaiti border in October led to a temporary doubling of
food prices.
    Trade unions independent of the government do not exist in
Iraq.  Workers in private and mixed enterprises -- but not
public employees --  have the right to join local union
committees, which are part of larger trade union federations.
At the top of this pyramid is the Iraqi General Federation of
Trade Unions, linked to the ruling Ba'ath party and utilized to
promote party principles and policies.  The right to strike is
heavily circumscribed by the Labor Law of 1987, and no strike
has been reported over the past two decades.
    The value of the Iraqi dinar has plunged against the dollar
in the past year.  In late 1993, the dinar traded on the black
market at a rate of approximately 100 dinar to the dollar.  In
late 1994 the official rate was approximately 500 dinar to the
dollar, and on the black market it traded as low as 650-750
dinar to the dollar after the October troop movements.  Many
consumer goods and basic necessities, including medicine, are
available on the black market at highly inflated prices.
    The seriousness of the economic situation is illustrated by
the increasing number and severity of punishments for economic
crimes.  Apparent hoarding of crops has led the government to
withhold seeds and fertilizer from farmers who fail to bring
their crop to market.  Farmers who fail to cultivate their land
altogether have their land confiscated.  Capital punishment has
been decreed for those smuggling cars and trucks from the
country and harsh penalties have been levied on currency
traders and "profiteers."  Merchants have been executed for
hoarding and fixing prices.
    Since the end of Desert Storm, it appears Iraq has been
able to rebuild most of its infrastructure in
telecommunications, transportation, and power, as well as oil
production.  This reconstruction has been concentrated in areas
which support the government and which are visible to
outsiders.  The depth and permanence of much of this
reconstruction is difficult to estimate, since it relied
heavily on cannibalization and the drawdown of spare parts.
Shortages of inputs and spare parts have shut down much of the
country's industry.
    United Nations Security Council Resolutions 706 and 712
(1991) authorized the export of $1.6 billion of Iraqi petroleum
during a six-month period.  Proceeds of the sale would go to a
United Nations escrow account, which would be used to purchase
humanitarian supplies for the Iraqi population, as well as fund
other programs mandated by the U.N.  The government of Iraq has
refused to implement these resolutions.
    In summary:  1. UN resolutions preclude trade with Iraq
except approved exports to Iraq of humanitarian-related goods.
2. Treasury Department regulations and licensing requirements
enforce U.S. compliance with the UN embargo.  3. Iraqi
implementation of UNSCR 706 and 712 would open the possibility
of a limited resumption of international oil trade for
humanitarian supplies.  4. Reliable economic statistics are
unavailable, and those produced by the Government of Iraq
cannot be considered accurate.
(###)
IRELAND1
ntntU.S. DEPARTMENT OF STATE
IRELAND: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                             IRELAND
                     Key Economic Indicators
        (Millions of U.S. dollars unless otherwise noted)
                                    1992      1993      1994 1/
Income, Production and Employment:
Real GDP 2/                       45,339    42,482    43,296
Real GDP Growth Rate (pct.)          4.9      -0.7       1.5
GDP (at current prices) 2/
By Sector:
  Agriculture/Forestry/Fishing     4,286     3,752       N/A
  Industry                        17,109    15,809       N/A
  Distribution/Transport/
    Communication                  7,572     7,280       N/A
  Public Administration/Defense    2,676     2,502       N/A
  Other Domestic                  15,633    14,777       N/A
  Adjustment for Financial
    Services                      -1,936    -1,638       N/A
  GDP at Factor Cost              45,339    42,482       N/A
  Plus Taxes on Expenditure        8,128     7,158       N/A
  Less Subsidies                  -2,487    -2,497       N/A
  GDP at Market Prices            50,978    47,143    53,607
  Exports of Goods and Services   31,744    29,828    33,877
Real Per Capita GDP               21,712    18,207    18,555
Labor Force (000's) 3/             1,364     1,378     1,391
Unemployment Rate (standardized)    15.5     15.75     15.25
Money and Prices: (annual percentage growth)
Money Supply (M3) (year-end)         9.0      22.3       8.4
(year-to-year pct. change)                             (Aug)
Associated Banks' Prime
Lending Rate (avg.)                19.00      7.19      5.81
                                                      (Sept)
Commercial Interest Rates
  Over 1 Year-Up to 3 Years (avg)  15.25     10.25      8.90
                                                      (July)
Savings Interest Rate               6.50-     0.75-     0.50-
  Investment Share Accounts        10.75      4.00      3.00
                                                      (July)
Investment Rate:
  1-Year to Maturity               13.13      5.74      6.16
                                                      (July)
  10-Year to Maturity              10.12      6.26      8.44
                                                      (July)
Consumer Price Index               108.2     109.8     117.1
  (base 1985 as 100)                               (2nd qtr)
Retail Sales Index                 106.2     109.4     116.2
  (base 1990 Aa 100)                               (2nd qtr)
 Wholesale Price Index             106.4       N/A       N/A
  (base 1985 as 100)
Exchange Rate ($/IP)                1.70      1.46      1.53
                                                   (3rd qtr)
Balance of Payments and Trade:
Total Exports (FOB) 4/            27,853    28,378    32,240
  Exports to U.S. 5/               2,260     2,500       N/A
Total Imports (CIF) 4/            22,137    21,348    24,156
  Imports from U.S. 5/             2,860     2,700       N/A
Aid from the E.U. (000s) 6/       19,465    17,520    18,360
Aid from the U.S. (000s)          15,590    19,211    19,600
Gross Public Sector Foreign Debt  18,455    17,922    18,918
  (external government debt)
Debt Service Payments (paid)       4,004     3,489       N/A
Gold and Foreign Exch. Reserves    5,535     6,246     6,850
  (official external reserves)                        (June)
Trade Balance                      5,716     7,030     8,084
  Trade Balance with U.S.            600       200       N/A
N/A--Not available.
1/ Forecasts.
2/ GDP at factor cost.
3/ Annual averages.
4/ Merchandise trade.
5/ U.S. Department of Commerce figures.
6/ Aid from the European Union for the years 1995 through 1997
will be increased to USD 24 million per year following the
ceasefires in Northern Ireland.
Sources:  Central Bank of Ireland (CBI); Central Statistics
Office (CSO); Economic and Social Research Institute (ESRI);
Irish Trade Board (ITB); Department of Enterprise and
Employment (DEE).
1.  General Policy Framework
    Ireland has a small open economy which is very dependent on
trade.  Exports of goods and services in 1993 were equivalent
to 77 percent of GNP, while imports were equivalent to 61
percent of GNP.  Government policies are generally formulated
to facilitate trade and inward direct investment.  Ireland has
a market economy, which is based primarily on private
ownership.  Government ownership and control of companies
generally occurs in those sectors which are considered by the
government to be natural monopolies, those in which the state
has stepped in to assist failing firms, or those of special
importance to the economy.  In the majority of cases,
government owned firms are operated on a commercial basis, and
may be in competition with privately owned firms in the same
sector.  In recent years the government has reduced its share
holding in a number of companies which are considered viable.
Government policy is heavily influenced by sustained high
unemployment, 15 percent seasonally adjusted in September
1994.  A young and growing work force will continue to put
pressure on the labor market in Ireland through the end of the
century and emigration will likely continue at a significant
scale.
    Fiscal Policy:  In 1993, Ireland's government debt was
approximately IP 30 billion, of which about IP 12 billion was
denominated in foreign currencies.  The debt has generally been
financed by the sale of government securities.  The vast
majority of the debt was accumulated in the 1970's and early
1980's, partly as a result of oil price shocks, but more
generally as a result of expanding social welfare programs and
government employment.  The debt grew rapidly in the late
1970's and early 1980's due to increased interest rates and
large government deficits.  However, successive governments
have made considerable progress during the past seven years in
reducing budget deficits and containing the growth of total
debt.
    Ireland ratified the Uruguay Round agreement and is a
founding member of the World Trade Organization.
    In recent years, most collective bargaining in Ireland has
taken place in the context of a national economic program.  A
new program, the Program for Competitiveness and Work (PCW) was
agreed to by representatives of government, unions, employers
and farmers in February 1994 and was a major element of the
government's success in fostering economic growth.  The PCW is
Ireland's third centralized pay agreement and replaces the
Program for Economic and Social Progress (PESP) which expired
in December 1993.  These programs are credited with providing a
favorable economic climate for strong growth in Irish GNP since
1987.  The PCW contains similar provisions to the previous
programs for moderate wage increases and improvements in
government finances.  Government budget deficits fell
dramatically while exports, investment and consumer spending
showed strong growth.  Unemployment has begun to decline, but,
the expanding Irish economy is unlikely to make a significant
impact on Ireland's high unemployment rate.  The Irish
labor-economic environment is remarkably open.  With over a
half-million Irish working outside Ireland, particularly in the
U.K., the robust economy usually attracts home many emigres
offsetting any temporary reduction in unemployment due to
emigration.  Projections for 1994 indicate that government
borrowing will be about 2.7 percent of GNP.
    Irish tax policies have a major effect on personal
consumption and demand for imported goods.  Personal income tax
rates are high in Ireland.  Over the last few years, in
conjunction with the massive reduction in public borrowing
which was achieved, the government made substantial progress in
reducing the standard and higher income tax rates by six
points.  Income tax rates did not change in the 1994 budget,
however, and remain at 27 and 48 percent.  Approximately 62
percent of Irish tax payers are in the 27 percent standard rate
bracket.  The controversial one percent income levy which was
introduced in the 1993 budget was abolished in 1994.  Irish
value added tax (VAT) rates are among the highest in the
European Union (EU) and were streamlined in the 1993 budget,
and remain unchanged.  The standard corporate income tax rate
in Ireland is 40 percent.  Manufacturing firms and many
exporting firms pay only 10 percent on corporate income under
special arrangements designed to boost industrial development.
    Monetary Policy:  Ireland's monetary policies are aimed
primarily at maintaining exchange rate stability within the
European Monetary System (EMS), which Ireland joined in 1979.
Interest rates are the predominate tool used by the Central
Bank to affect monetary variables.
2.  Exchange Rate Policies
    Until 1979, the Irish pound was pegged to the pound
sterling.  In March 1979, Ireland joined the Exchange Rate
Mechanism (ERM) of the EMS and broke its link to the British
currency.  It has, however, endeavored to maintain a stable
competitive exchange rate against sterling due to the large
amount of trade between Ireland and the U.K.  Following changes
to the ERM in August, 1993, membership in the ERM now involves
a commitment to maintain the Irish currency within a 15 percent
band against other ERM currencies.  The Irish pound has been
adjusted downward three times since Ireland joined the EMS.
Adjustments were 3.5 percent in 1983, 8.0 percent in 1986 and
10 percent in 1993.  As part of the Common Agricultural Policy
(CAP) of the EU, Ireland has maintained multiple exchange rates
(known as green currency exchange rates) on agricultural goods
subject to the CAP.  Devaluation of these rates usually mirror
those of the Irish currency.
    In accordance with Ireland's EU obligations the removal of
all remaining existing exchange controls took place in December
1992, bringing to an end the Irish Exchange Controls Act of
1954-1990.  New legislation was introduced in order to ensure,
among other things, that the government can continue to impose
financial sanctions (i.e. on Iraq and the former Yuguslavia)
under its international obligations.
    Ireland is a signatory to Article VIII of the International
Monetary Fund Agreement, regarding freedom of current payments
(including payments for goods and services imported) between
residents and non-residents.  In addition, Ireland subscribes
to the Code of Liberalization of Capital Movements and the Code
of Liberalization of Current Invisible Operations of the OECD.
3.  Structural Policies
    In October 1991, the Irish Government adopted a new
Competition Act.  The legislation marks a shift from the
previous system of restrictive practices orders and
administrative control, to a system which allows claims of
anticompetitive behavior to be pursued in the courts.  As a
result, the government has revoked price controls on petroleum
products and all other restrictive practice orders.  Controls
on below cost selling of grocery and food items do exist.
    Tax Policies:  The Irish tax system for corporations favors
manufacturing and exporting companies.  Those companies pay
income tax of only 10 percent, compared to the normal rate of
40 percent.  This gap encourages the development of export and
manufacturing industries, and discourages growth in other
industries.  The 10 percent corporate tax rate (manufacturing
companies) has been extended by the government to the year
2010.  Personal income tax rates are relatively high,
encouraging tax avoidance at all income levels, which has led
to the creation of a "black economy" estimated at between IP
1.5 and 3 billion, or between five and ten percent of GNP.
    In the 1994 budget, the standard rate tax band was extended
from USD 23,486 to USD 25,092 for a married couple and from
USD 11,743 to USD 12,546 for a single person.  Together with
improvements in personal allowances, this resulted in the
threshold for the higher tax rate, in the case of most
employees, being increased to USD 33,945 if married, and
USD 17,803 if single.  While these measures help some lower
paid workers, the middle income class still bears a heavy tax
burden.  Many pay an additional 7.75 percent of their earnings
for a variety of social security programs.  Value-added tax
(VAT) rates are among the highest in the European Union (EU)
and were streamlined in the 1994 budget.  The national standard
rate of VAT remains at 21 percent.  The lowest VAT rate of 12.5
percent is to be maintained for labor intensive services,
including the construction sector.  A zero or 2.5 percent rate,
however, will apply to certain items.  VAT rates and many
excise taxes are the subject of harmonization in the EU.  The
completion of the Single Market has eased the movement of
products between EU member states and has, since January 1,
1993, eliminated many customs controls in Ireland for items of
EU origin.
    Regulatory Policies:  Government investment incentives are
weighted in favor of high technology, export oriented
companies.  Capital grants by the Irish Industrial Development
Authority (IDA) reportedly have tended to favor capital
intensive investments over labor intensive ones.
4.  Debt Management Policies
    Ireland's total exchequer debt amounted to about IP 30
billion, or about 102 percent of estimated 1993 GNP, from 99.6
percent at end-1992.  The increase is attributable to the
adjustment of the Irish pound within the exchange rate
mechanism (ERM).  The downward trend in the debt/GNP ratio in
evidence each year, from 125 percent in 1987, is expected to
resume in 1994 and is now on line to achieve the 60 percent
target set by the Maastricht Treaty.  While the debt has
continued to grow in nominal terms, it has fallen significantly
as a percentage of GNP since 1987.  The foreign portion of the
debt is IP 12.2 billion.  As of June 1994, 15.6 percent of
foreign debt was dollar denominated, 25.6 percent was in
deutsch marks, 16.9 percent in Swiss francs, 11.2 percent in
Japanese yen, 10.3 percent was in Sterling, 8.7 percent in
European currency units (ECU), and lesser amounts in Dutch
guilders, French francs, and Austrian schillings.  Debt service
costs in 1993 were USD 3.5 billion, about 10.9 percent of
estimated Irish exports of goods and services and about 8.4
percent of GNP.  In 1991 the government created an independent
agency to manage the debt, the National Treasury Management
Agency (NTMA).
5.  Significant Barriers to U.S. Exports
    Ireland maintains a limited number of barriers to U.S.
services trade.  Airlines serving Ireland may provide their own
ground handling services, but are prohibited from providing
ground handling services to other airlines.
    The Irish banking and insurance sectors are slowly becoming
deregulated.  Full deregulation in insurance will not occur
until 1998.  An immediate opportunity for U.S. companies exists
in the Dublin International Financial Services Center (IFSC).
This center offers interested U.S. companies the opportunity to
establish an EU financial base.  The IFSC is attracting
international financial services such as asset financing,
captive insurance, fund and investment management, and
corporate treasury measurement.  Qualified financial services
companies have a maximum tax of 10 percent, guaranteed by the
government through the year 2005.  The deadline for granting
IFSC licences is December 31, 1994.  The special corporation
tax rate of 10 percent applies in the IFSC until the end of
2005, but the EU deadline means only companies obtaining
licences before December 31, 1994 will qualify for the special
tax rate.  The United States has the second largest
representation at the IFSC with approximately 45 projects.
    Exchange controls on foreign travel by Irish citizens have
been eliminated.  Although they have been liberalized in recent
years, Ireland still maintains some of the strictest animal and
plant health import restrictions in the EU.  These, together
with EU import duties, effectively exclude many meat based
foods, fresh vegetables and other agricultural products.
    The EU directive on broadcasting activities was adopted on
October 3, 1989.  The primary purpose of the directive is to
promote the free flow of broadcasting services across national
boundaries.  Separately, the Council of Europe agreed to a
convention on transfrontier broadcasting which is largely the
same as the EU directive.  The main components of the directive
are (a) general provisions which require member states to
ensure freedom of reception of broadcasts from other member
states; (b) provisions for the promotion of distribution and
production of television programs; (c) provisions for
advertising, sponsorship, the protection of minors, and right
of reply.  Many of the provisions of the directive have been
transposed into law under the Broadcasting Act, 1990.  Two sets
of statutory regulations were used to transpose the remaining
provisions, as follows.  (1) The EU Communities (Television
Broadcasting) Regulations, 1991 Directive requires broadcasters
to reserve a majority of broadcast time for productions of EU
origin and to reserve at least 10 percent of transmission time
or budget for independently produced European programs.  (2)
The Wireless Telegraphy (Television Program Retransmission and
Relay) Regulations 1991 amends the regulations under which
cable and multichannel microwave distribution systems (MMDS)
licenses are issued.  In short, MMDS operators will no longer
require approval in advance of relaying a service.  The Irish
government is concerned about minority languages and cultures,
but has not been a major player on this issue.
6.  Export Subsidies Policies
    Export sales relief (ESR) was discontinued in April 1990 in
line with Ireland's EU obligations.  Companies manufacturing
goods in Ireland benefit from a reduced rate of corporation tax
of 10 percent on their profits.  Stockholders of companies
eligible for this program paid income tax of only 10 percent on
dividends received from the company, rather than the normal tax
rate (27-48 percent).  This program will expire at the end of
the year 2010.  There are no tax or duty exemptions on imported
inputs except for those companies located in the Shannon Duty
Free processing zone and Ringaskiddy Port.  Ringaskiddy is
Ireland's major deep water port located in the Cork harbor
complex.  The Shannon Duty Free processing zone benefits from
the reduced rate of corporation tax of 10 percent, while
Ringaskiddy does not.  No duties are levied at Shannon Free
Zone on goods destined for non-EU countries.
    The Irish Trade Board (Bord Trachtala), provides a single,
integrated range of marketing support services for companies
selling in Ireland and developing export sales.  As of
January 1, 1992, the government provides export credit
insurance for political risk and medium-term commercial risk in
accordance with OECD guidelines.  Export credit insurance for
short-term commercial risk is available from the private
insurance sector.  As a participant in the Common Agricultural
Policy (CAP) of the EU, the Irish Department of Agriculture
Food & Forestry administers CAP export refund and exchange rate
programs on behalf of the EU Commission.
7.  Protection of U.S. Intellectual Property
    Ireland supports strong protection for intellectual
property rights.  The government encourages foreign investment,
especially in high tech industries.  Consequently, protection
of intellectual property rights has been an important part of
the government's business policy.  Protection is generally on a
par with other developed countries in Europe, and the
government is responsive to problems which arise.
    Patents:  Following the enactment in February, 1992 of the
Patents Act, 1992, Ireland ratified the European Patent
Convention and the Patent Cooperation Treaty.  The Convention
and the Treaty entered into force, as did the 1992 Patents Act,
on August 1, 1992.  The Act updates national law in a number of
important respects and the substantive law is in line with that
of other European countries that have harmonized their laws on
the basis of the European Patent Convention. The new
legislation will also facilitate speedier processing of patent
applications; it provides for a patent term of 20 years and
contains provision for the grant of short-term patents (half
the duration of the normal patent) in the interest of
small/medium innovators.  Legislation extending the term of
protection of products covered by medicinal patents came into
force on January 2, 1993, S.I. 125 of 1993.  The amendment of
the Constitution approved by the referendum held in June 1992
has cleared the way for Ireland's ratification of the agreement
relating to EU patents.
    Trademarks:  Existing trademark legislation in Ireland does
not specifically cover service industry trademarks, although
some court cases have extended protection to trademarks in
service industries.
    Copyrights:  Copyright protection in Ireland is generally
considered to be good.  However, industry sources have
indicated that penalties for infringement of copyrights on
video tapes are not sufficiently severe to curb pirating.  The
entire copyright system is under review and new copyright
legislation will be introduced in 1995.  EU directives will be
included in the new legislation.
8.  Worker Rights
    a.  The Right of Association
    Irish Workers have the right to associate freely and to
strike.  The right to join a union is guaranteed by law, as is
the right to refrain from joining.  The Industrial Relations
Act of 1990 provides members and officials of unions immunities
for industrial actions taken with regard to terms or conditions
of employment.  The Act contains some limitations on
picketing.  A code of practice, drawn up by the Labor Relations
Commission, was introduced by the government in June, 1993.  It
lays down guidelines of duties and responsibilities of employee
representatives and the protection and facilities to be granted
to them by employers.
    About 48 percent of all private sector workers and 52
percent of all public sector workers are trade union members.
Police and military personnel are prohibited from joining
unions or striking, but they may form associations to represent
them in matters of pay, working conditions, and general
welfare.The right to strike is freely exercised in both the
public and private sectors.
    The Irish Congress of Trade Unions (ICTU), which represents
unions in both the Republic and Northern Ireland, has 68 member
unions with 681,138 members.  Mergers have steadily reduced the
number of unions affiliated to the ICTU in recent years, but
union membership numbers are up by 20,000 since 1987.  Both the
ICTU and the unaffiliated unions are independent of the
government and of the political parties.  The ICTU is
affiliated with the European Trade Union Confederation.
    b.  The Right to Organize and Bargain Collectively
    Labor unions have full freedom to organize and to engage in
free collective bargaining.  Legislation prohibits antiunion
discrimination.  In recent years, most terms and conditions of
employment in Ireland are determined through collective
bargaining in the context of a national economic program.
Representatives of government, unions, employers and farmers
agreed to a new program, the Program for Competitiveness and
Work (PCW) in February 1994.  It was a major element of the
government's success in fostering economic growth.  The PCW is
Ireland's third centralized pay agreement in recent years and
replaces the PESP which expired in 1993.  These programs are
credited with providing a favorable economic climate for the
strong growth in Irish GNP since 1987.  The declared aim of the
new program, which provides for pay raises amounting to eight
percent over three years to employees in the public and private
sectors, is to help create a substantial number of new jobs.
Pay increases in the private sector will be calculated on the
basis of 2 percent of basic pay for the first 12 months of the
Agreement; 2.5 percent for the second 12 months; 2.5 percent
for the first six months of the third year; and 1 percent for
the second six months of the third year.  In the public sector,
pay increases will be calculated on the basis of 2 percent of
basic pay for 12 months starting five months after the expiry
date of the PESP pay agreement; 2 percent for the next twelve
months; 1.5 percent for the next four months; 1.5 percent for
the next three months; and 1 percent for the remaining six
months of the Agreement.  The government expects the plan to
help increase employment by 60,000 over the next three years.
It also plans to create 100,000 jobs for the unemployed in
community work schemes.  Of critical importance to unions and
employers are the moderate pay elements of the PCW and the
promise of industrial peace.  The PCW has been ratified by all
the negotiating bodies.
    The Industrial Relations Act of 1990 established the Labor
Relations Commission which provides advice and conciliation
services in industrial disputes.  The Commission may refer
unresolved disputes to the Labor Court.  The Labor Court,
consisting of an employer representative, a trade union
representative, and an independent chairman, may investigate
trade union disputes, recommend the terms of settlement, engage
in conciliation and arbitration, and set up joint committees to
regulate conditions of employment and minimum rates of pay for
workers in a given trade or industry.
    c.  Prohibition of Forced or Compulsory Labor
    Forced or compulsory labor is prohibited by law and does
not exist in Ireland.  However, portions of the 1894 Merchant
Shipping Act are considered by the International Labor
Organization (ILO) to be inconsistent with the prohibition on
forced or compulsory labor.
    d.  Minimum Age of Employment of Children
    Under Irish legislation, the minimum age for employment of
children is 15 years.  Children over 14 years are permitted to
carry out light, non-industrial work during school holidays
with the written permission of the parents.  Irish laws limit
the working hours in any week for young persons aged between 15
and 16 years to eight hours per day up to a maximum of 40 hours
in any week.  The normal working hours are 37.5 hours a week.
Young persons aged between 16 and 18 years may work a normal
day of eight hours and a maximum of nine hours in any day.  The
normal work week is 40 hours, with a maximum of 45 hours.
These provisions are effectively enforced by the Minister for
Enterprise and Employment.  The EU is adopting a new directive
on the protection of young people at work.
    e.  Acceptable Conditions of Work
    There is no general minimum wage legislation.  However,
some workers are covered by minimum wage laws applicable to
specific industrial sectors, mainly those in which wages tend
to be below the average.  A government submission to an EC
Commission white paper on "Growth, Competitiveness and
Employment" suggested that a minimum wage policy could hinder
job creation and recommended that the EC assess the potential
effects on employment, of any such proposal to regulate the
labor market.  In 1993 the average weekly wage was USD 371 (in
1993 IRP 1 was equivalent to USD 1.46) for production and
transport workers.  Working hours in the industrial sector are
limited to 9 hours per day and 48 hours per week.  Overtime is
limited to 2 hours per day, 12 hours per week, and 240 hours in
a year.  As part of the new national economic pact adopted in
1993, the standard work week is being gradually reduced to 39
hours.  The Department of Enterprise and Employment enforces
four basic laws dealing with occupational safety that provide
adequate and comprehensive coverage.
    f.  Rights in Sectors with U.S. Investment
    Worker rights described above are applicable in all sectors
of the economy, including those with significant U.S.
investment.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                               (1)
Total Manufacturing                                   5,122
  Food & Kindred Products                     363
  Chemicals and Allied Products             2,340
  Metals, Primary & Fabricated                198
  Machinery, except Electrical                -14
  Electric & Electronic Equipment             762
  Transportation Equipment                     52
  Other Manufacturing                       1,420
Wholesale Trade                                         159
Banking                                                 (1)
Finance/Insurance/Real Estate                         3,389
Services                                                684
Other Industries                                         52
TOTAL ALL INDUSTRIES                                  9,575
IRELAND2
U.S. DEPARTMENT OF STATE
IRELAND: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
(1) Suppressed to avoid disclosing data of individual companies
Source: U.S. Department of Commerce, Bureau of Economic
Analysis
(###)
ISRAEL1
eU.S. DEPARTMENT OF STATE
ISRAEL: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                              ISRAEL
                     Key Economic Indicators
        (Millions of U.S. dollars unless otherwise noted)
                                    1992      1993      1994  1/
Income, Production and Employment:
Real GDP (1990 prices)  2/        58,872    60,878    75,190
Real GDP Growth (pct.)               6.7       3.4       5.0
GDP (at current prices)  2/       63,962    73,544    85,716
By Sector:
  Agriculture/Forestry/Fishing     1,791     1,765     1,714
  Construction/Electricity/Water   6,460     6,619     7,029
  Industry                        13,490    15,812    18,686
  Ownership of Dwellings           4,478     5,369     6,429
  Finance/Business Services       17,001    13,679    16,286
  Government/Health/Education     14,391    16,621    19,286
  Net Exports of Goods & Services 20,779    22,143    25,000
Real Per Capita GDP (USD)         11,993    13,820    15,727
Labor Force (000s)                 1,860     1,960     2,020
Unemployment Rate (pct.)            11.2      10.0       7.8
Money and Prices:  (annual percentage growth)
Money Supply (M2)                     26        47       N/A
Base Interest Rate  3/              11.3      11.9       N/A
Personal Savings Rate               19.6      17.7       N/A
Wholesale Price Index                9.1       7.2         9
Consumer Price Index                 9.4      11.2      14.0
Exchange Rate (USD/shekel)           2.5       2.8      2.98
Balance of Payments and Trade:  (billions USD)
Total Exports (FOB)  4/            12.48     14.08     16.20
  Exports to U.S.                    4.0       4.6       5.2
Total Imports (CIF)  4/            18.56     20.24     22.50
  Imports from U.S.                  3.2       3.6       4.2
Aid from U.S.                        3.0       3.0       3.0
Aid from Other Countries             N/A       N/A       N/A
External Public Debt  3/           24.31     22.97     25.89
Debt Service Payments (paid)        1.36      1.40       1.6
Gold and Forex Reserves  4/          6.3       5.6       6.5
Trade Balance  4/                  -5.09     -5.05      -6.3
  Trade Balance with U.S.            0.8       1.0       1.0
N/A--Not available.
1/ 1994 Figures are all estimates based on available monthly
data in October 1994.
2/ GDP at factor cost.
3/ Figures are actual, average annual rates.
4/ Merchandise trade.
Sources:  Bank of Israel; Central Bureau of Statistics;
Ministry of Finance.
1.  General Policy Framework
    Israel is in the midst of a four year economic expansion,
with five to six percent growth projected to continue
throughout the decade.  Economists estimate that Israel's
economy will grow by over 5% in 1994.  Inflation, likely to
reach 14 percent on an annualized basis, has replaced
unemployment as the biggest cause for concern in the economy.
Increased inflation is driven by soaring housing costs, higher
than anticipated private consumption, and costly public sector
wage agreements.  The best economic news is unquestionably
Israel's success in reducing the unemployment rate from over 11
percent in 1992 to approximately 7.5 percent in the third
quarter of 1994.  Given changes in the composition of the labor
force due to the recent wave of immigration, the rate of
unemployment may be approaching what some economists believe is
Israel's normal unemployment rate.
    An increase in imports relative to exports has caused the
balance of payments deficit to widen in the first half of
1994.  Increases in imports continue to outstrip export growth,
despite 10 percent growth in exports in 1994.  The import bulge
consists of industrial inputs (which may lead to increased
production), fuel, diamond and ship and airplane imports, and
continued increases in Israeli tourism abroad.  This trend of
increased imports moderated in the third quarter.  The trade
deficit increased by 28% during the first nine months of 1994,
in comparison to the same period in 1993.  The Government of
Israel estimates that the balance of payments deficit for 1994
will exceed 2 billion dollars.
    The United States continues to be Israel's single largest
trading partner.  Although the U.S. consistently runs a trade
deficit with Israel, U.S. sales of goods and services to Israel
are expanding.  In 1993, exports of U.S. goods and services to
Israel went up by 12 percent, and this trend continued in the
first nine months of 1994.  Total bilateral trade is estimated
to approach 10 billion dollars in 1994, with Israel accruing a
trade surplus with the United States of nearly 1 billion
dollars.  The U.S.-Israel Free Trade Area Agreement will be
completely phased-in as of January 1, 1995, with all tariffs
dropping to zero.  Israel retains non-tariff barriers for
sensitive areas like agriculture and processed food products.
    Israel's 1993 budget deficit equaled 2.5 percent of GDP.
Israel finances its deficit through sale of government bonds,
sale of government-owned companies, tax revenues, unilateral
transfers from abroad, and borrowing on the international
market.  Under balanced-budget legislation passed in 1991, the
deficit ceiling was reduced by a set percentage every year.  In
1993, the government revised the legislation to replace
mandated reductions in future years with a general requirement
that each year's planned budget deficit target be less than
that of the previous year.  In 1994, the budget deficit is
expected to reach 3% of GDP.
    Total government debt is increasing, due primarily to
borrowing under the U.S. Loan Guarantee Program.  While Israel
lowered several purchase taxes, corporate income tax and income
tax rates for the middle class, in 1994 the tax burden rose
slightly to 41% due to bracket creep, increased private
consumption, and revenues from purchase taxes on sales of
homes, whose prices continue to rise ahead of inflation.
Government policies such as continued capital market reforms
and shifting national priorities from housing construction and
roads in the Occupied Territories to investment in
infrastructure and human capital within Israel have laid the
groundwork for continued growth.
    Foreign investment is likely to increase as the peace
process advances and the Arab League Boycott weakens.  In the
course of 1994, Jordan, Morocco, Tunisia and other Arab states
extended new ties to Israel.  The Gulf Cooperation Council
(GCC) announced the discontinuance by its members of the
secondary and tertiary aspects of the Arab League Boycott.
2.  Exchange Rate Policy Framework
    Under the "diagonal" exchange rate mechanism introduced in
December 1991, the shekel floats within a band, five percent
above or below an established midpoint tied to a basket of
foreign currencies.  The midpoint is shifted gradually against
the basket on a daily basis, while the actual exchange rate
responds to the demand for foreign currency.  Since its
introduction, the diagonal mechanism has successfully
forestalled large speculative currency movements and attendant
swings in reserves and interest rates.
3.  Structural Policies
    Prime Minister Rabin's government, up for reelection in
1996, has made some limited progress on reducing government
intervention in the economy.  The Rabin government has
achieved more in the areas of capital market reforms and
taxation, but has barely made a dent in the privatization of
large government-owned companies.
    Privatization efforts stalled in 1994.  In 1993, the
government of Israel raised USD 1.24 billion through
privatization.  In the first nine months of 1994, by
comparison, the government generated only 50 million dollars
through privatization.  Even if scheduled sales are concluded
of limited shares in the government-owned Shekem retail chain
and Israel Chemicals Limited (ICL), and sale of the Housing and
Development Corporation and the Mizrachi Bank are completed by
the end of 1994, revenues will still fall far short of the 1993
levels (USD 1.24 billion) and the Government of Israel's own
goals for 1994.  However, Israeli officials are gearing up for
1995, to lay the groundwork for USD 1.5 billion worth of sales.
    Ten government-owned firms account for 90 percent of
earnings of government-owned companies:  El Al, Bezek (the
national telecommunications firm), Israel Oil Refineries,
Israel Aircraft Industries, Israel Military Industries, Israel
Electric Corporation, Israel Shipyards, Zim (the national
shipping company), and the Housing and Development
Corporation.  Bezek, ZIM, Israel Shipyards and El Al are all
targets for partial or substantial sale in the next twelve to
fifteen months.
    Capital market reform and liberalization of foreign
exchange movements initiated in 1987 have continued, sharply
reducing government involvement in the allocation of capital
and integrating the Israeli banking system more closely with
international financial markets.  Recent liberalizations
include:  elimination of constraints on private sector
investment in real assets abroad, allowing private sector
investment in foreign financial assets as well as long term
savings funds to invest in securities overseas, loosening of
foreign currency restrictions on Israeli citizens traveling
abroad, and opening the Israeli capital market to foreign
corporations.
    The overall tax burden for Israelis has increased over the
last few years, largely due to bracket creep.  The government
announced reductions in indirect taxes and income taxes in
1994, but initiated a new capital gains tax on stock exchange
earnings effective January 1, 1995.  In addition, new taxes to
pay for health and pension fund reforms may be implemented in
1995.  Tax levels are higher than rates in Japan or the U.S.,
but roughly comparable to European standards.  A U.S.-Israel
double taxation treaty went into effect January 1, 1995.
4.  Debt Management Policies
    Israel's net external debt increased in 1994 (8.9% in first
half of the year), due to increased borrowing under the Loan
Guarantee Program and increased deposits by foreigners in
Israeli banks.  The government's foreign debt reached $21.4
billion dollars or 79 percent of total external debt.  Israel's
debt to GDP ratio rose to 27 percent, up from 26 percent in
1993.
5.  Significant Barriers to U.S. Exports
    All duties on products from the United States were
eliminated under the 1985 United States-Israel Free Trade Area
(FTAA) Agreement as of January 1, 1995.  The FTAA liberalized
and expanded the trade of goods between the United States and
Israel, and spurred discussions on freer trade in tourism,
telecommunications and insurance services.
    Non-tariff barriers, such as purchase taxes, variable
levies, quotas, uplifts, standards and quantitative
restrictions, continue to impede U.S. exports, especially in
sensitive sectors like agriculture and processed food products.
    Although Israel has liberalized imports of all bulk
agricultural commodities except beef, extensive import
restrictions remain, including variable levies on such U.S.
exports as prunes, raisins, almonds, and baked goods.
Quantitative restrictions, and in some cases, outright
prohibitions, affect primarily U.S. beef, plywood, poultry, and
dairy products.
    In addition to these restrictions, the Government of Israel
has two unique forms of protection for locally produced goods.
The first is Harama, or uplift, applied at the pre-duty stage
of import, and the second is TAMA, a Hebrew acronym standing
for additional quota percentage, which applied after imposition
of duty but before any assessment of purchase taxes.
    Harama is a pre-duty uplift applied to the CIF value of
goods to bring the value of the products to an acceptable level
for customs valuation.  Israel calculates import value
according to the Brussels Definition of Value (BDV), a method
which tolerates uplifts of invoice prices.  For purposes of
calculating duty and other taxes, the Israeli Customs Service
arbitrarily uplifts by two to five percent the value of most
products which exclusive agents import, and by 10 percent or
more the value of other products.  Israel has agreed to use
only actual wholesale price for large importers after 1995.
Israel is not a signatory to the GATT Valuation Code.
    TAMA is a post-duty uplift designed to convert the CIF
value plus duty to an equivalent wholesale price for purposes
of imposing purchase tax.  Coefficients for calculation of the
TAMA vary from industry to industry and from product to product.
    In addition, purchase taxes that range from 25 to 95
percent are applied on goods ranging from automobiles to some
agriculture and food items.  The Government of Israel
eliminated or reduced purchase taxes on many products in 1994,
including consumer electronics, building inputs, and office
equipment.  Where still remaining, purchase taxes apply to both
local and foreign products.  However, when there is no local
production, the purchase tax becomes a duty equivalent charge.
    Israel has reduced the burden of some discriminatory
measures against imports.  Israel agreed in late 1990 to
harmonize standards treatment, either dropping health and
safety standards applied only to imports or making them
mandatory for all products.  Implementation of this promise has
been slow.  Enforcement of mandatory standards on domestic
producers can be spotty and in some cases (e.g. refrigerators,
carpets, and packaging/labeling for food items) standards are
written so that domestic goods meet requirements more easily
than imports.  The Government of Israel is still reviewing the
issue of package size standards to facilitate entry of some
standard U.S. units.  Israel has agreed to notify the United
States of proposed new, mandatory standards to be recorded
under the GATT.
    The Standards Institution of Israel is proposing a
bilateral Mutual Recognition Agreement of Laboratory
Accreditation with the United States that could result in the
acceptance of U.S. developed test data in Israel.  The proposed
program would eliminate the need for redundant testing of U.S.
products in Israel to ensure compliance with mandatory product
requirements.
    The Israeli government actively solicits foreign private
investment, including joint ventures, especially in industries
based on exports, tourism, and high technology.  Foreign firms
are accorded national treatment in terms of taxation and labor
relations, and are eligible for incentives for designated
"approved" investments in priority development zones.  There
are generally no ownership restrictions, but the foreign entity
must be registered in Israel.  Profits, dividends, and rents
can generally be repatriated without difficulty through a
licensed bank.  About 100 major U.S. companies have
subsidiaries in the Israel and some 170 Israeli companies have
subsidiaries in the United States.  Investment in regulated
sectors, including banking, insurance, and defense industries,
requires prior government approval.
    Israel has one free trade zone, the Red Sea port city of
Eilat.  In addition to the Eilat Free Trade Zone, there are
three free ports:  Haifa (including Kishon), Ashdod, and
Eilat.  Enterprises in these areas may qualify for special tax
benefits, and are exempt from indirect taxation.
    Israel is a signatory to the Uruguay Round Procurement
Code, which provides wide coverage of Israeli government
entities to enable more open and transparent international
tendering procedures.  Legislation establishing the loan
guarantee program envisions a substantial increase of U.S.
exports of investment goods to Israel, as Israel makes use of
the loan guarantee funds.  To this end, the Israeli government
provides information to the USG on existing and proposed
tenders issued by government entities valued at over $50,000.
    The Government of Israel frequently seeks offsets
(subcontracts to Israeli firms) of up to 35 percent of total
contract value for purchases by ministries, state-owned
enterprises and municipal authorities.  Failure to enter or
fulfill such industrial cooperation agreements (investment,
codevelopment, coproduction, subcontracting, purchase from
Israeli industry) may disadvantage a foreign company in
government awards.  Although Israel pledged to relax offset
requests on civilian purchases under the FTAA, U.S. firms may
still encounter requests to enter into offset arrangements.
Israeli government agencies and state-owned corporations not
covered by the Uruguay Round Government Procurement Code follow
this "Buy Israel" policy to promote national manufacturers.
    Recent legislation codified and strengthened a 15 percent
cost preference accorded domestic suppliers in many Israeli
public procurement purchases, although the legislation
explicitly recognizes the primacy of Israel's bilateral and
multilateral procurement commitments.  This preference can
reach as high as 30 percent for domestic suppliers located in
priority development areas.
    In addition to its GATT multilateral trade commitments and
its FTAA with the U.S., Israel also has FTAs with the European
Union (EU) and European Free Trade Area (EFTA) states.  With
respect to all other countries, Israel substituted steep
tariffs for non-tariff barriers previously applied to trade,
and has gradually reduced these tariffs.  The seven-year
phase-in of Israel's import liberalization program has diluted,
to some extent, U.S. advantages under the U.S.-Israel FTAA.  As
EFTA countries accede to the European Union, Israel's EFTA FTAA
will be superceded by the E.U.-Israel Agreement, currently
being renegotiated in an attempt to broaden and deepen the 1975
accord.  Israel has also begun negotiations of FTAAs or other
trade agreements with Canada, Turkey, Jordan, Egypt, and
individual Central and Eastern European states.
6.  Export Subsidies Policies
    The U.S.-Israeli FTAA included agreement to phase out the
subsidy element of export enhancement programs and not to
institute new export subsidies.  Israel has already eliminated
grants, and in 1993 eliminated the major remaining export
subsidy, an exchange-rate, risk-insurance scheme which paid
exporters five percent on the FOB value of merchandise.  Israel
still retains a mechanism to extend long-term export credits,
but the volumes involved are small -- roughly $250 million.
Israeli export subsidies have resulted in past U.S.
anti-dumping/countervailing duty cases.  In 1994 the United
States Government cited Israeli subsidy of butt-weld pipe
fittings in an anti-dumping/countervailing duty investigation.
Israel has been a member of the GATT Subsidies Code since 1985.
    The Israeli Parliament passed legislation in May 1994
authorizing creation of free processing zones (FPZs).
Qualifying companies operating in the (still undetermined) FPZs
will be exempt from direct taxation for a twenty-year period,
and imported inputs will not be subject to import duties or
tariff or most health and safety regulations generally in
effect throughout Israel.  Companies will also be exempt from
collective bargaining and minimum-wage requirements, although
subject to other labor requirements.  The legislation was
originally intended to promote investment in export-related
industries, but the wording of the legislation as passed does
not limit applicant companies to exporters or providers of
services to overseas clients.  Accordingly, the FPZs will not
violate the U.S.-Israeli FTAA export subsidies commitment.
7.  Protection of U.S. Intellectual Property
    Standards of Intellectual Property Rights (IPR) protection
are adequate, but enforcement in some areas is weak.  U.S.
industry has complained that Israeli companies violate
intellectual property rights by illegal duplication of video
cassettes.  Unauthorized showings of films and television
programs by unregulated cable television systems has been
reduced to some extent as legal cable services become available
throughout the country.  Legislation is currently being drafted
to improve copyright protection in cable television
broadcasts.  This law provides for binding arbitration as the
appropriate remedy for disputes over broadcast rights.  Israel
is a member of the International Center for the Settlement of
Investment Disputes (ICSID) and the New York Convention of 1958
on the recognition and enforcement of foreign arbitral awards.
    Protection for software has been upgraded, and the two
major movie distribution chains generally comply with copyright
requirements.  The Government of Israel hopes to pass a general
overhaul of the copyright law in early 1995 to correct
weaknesses in status quo protection of IPR.  Israeli patent law
contains overly broad licensing provisions concerning
compulsory issuance for dependent and nonworking patents.
Israel is a member of the Paris Convention for the Protection
of Industrial Property, the Universal Copyright Convention, and
the Berne Convention for the Protection of Literary and
Artistic Works.  Further, as a signatory of the GATT Uruguay
Round and World Trade Organization (WTO) agreements, including
the Agreement on Trade Related Aspects of Intellectual Property
Rights (TRIPS), Israel is in the process of making all legal
and regulatory revisions necessary to meet all GATT TRIPS
requirements.
8.  Worker Rights
    a.  The Right of Association
    Israeli workers may join freely established organizations
of their choosing.  Most unions belong to the General
Federation of Labor in Israel (Histadrut) and are independent
of the government.  In 1994 about 70 percent of the workforce,
including Israeli Arabs, are members of Histadrut trade unions,
and still more are covered by Histadrut's social and insurance
programs and collective bargaining agreements.  Non-Israeli
workers, including the approximately 57,000 nonresident
Palestinians from the West Bank and Gaza currently working
legally in Israel, may not be members of Israeli trade unions,
but are entitled to some protections in organized workplaces.
The right to strike is exercised regularly.  Unions freely
exercise their right to form federations and affiliate
internationally.
    b.  The Right to Organize and Bargain Collectively
    Israelis fully exercise their legal right to organize and
bargain collectively.  While there is no law specifically
prohibiting anti-union discrimination, the Basic Law against
discrimination could be cited to contest discrimination based
on union membership.  There are currently no export processing
zones, although the Knesset has passed legislation authorizing
creation of free processing zones, as discussed in section 6.
    c.  Prohibition of Forced or Compulsory Labor
    The law prohibits forced or compulsory labor, and neither
Israeli citizens nor nonresident Palestinians working in Israel
are subject to such practices.
    d.  Minimum Age for Employment of Children
    By law, children under the age of 15 may not be employed.
Employment of those aged 16 to 18 is restricted to ensure time
for rest and education.  Israeli labor exchanges do not process
work applications for West Bank or Gaza Palestinians under age
17.  Ministry of Labor inspectors enforce these laws, but
advocates of children's rights charge that enforcement is
inadequate, especially in smaller, unorganized workplaces.
    e.  Acceptable Conditions of Work
    Legislation in 1987 established a minimum wage at 45
percent of the average wage, calculated periodically and
adjusted for cost of living increases.  Union officials have
expressed concern over enforcement of minimum wage regulations,
particularly with respect to employers of illegal nonresident
workers.  Along with union representatives, the Labor
Inspection
Service enforces labor, health, and safety standards in the
workplace.  By law, maximum hours of work at regular pay are 47
hours per week (8 hours per day and 7 hours the day before the
weekly rest).  The weekly rest must be at least 36 consecutive
hours and include the Sabbath.  Palestinians working in Israel
are technically covered by the laws and collective bargaining
agreements that cover Israeli workers.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                                (1)
Total Manufacturing                                      (1)
  Food & Kindred Products                      (1)
  Chemicals and Allied Products                (1)
  Metals, Primary & Fabricated                 (1)
  Machinery, except Electrical                 17
  Electric & Electronic Equipment             834
  Transportation Equipment                      3
  Other Manufacturing                          (1)
Wholesale Trade                                          25
Banking                                                   0
Finance/Insurance/Real Estate                           202
Services                                                133
Other Industries                                         (1)
TOTAL ALL INDUSTRIES                                  1,660
(1) Suppressed to avoid disclosing data of individual companies
Source: U.S. Department of Commerce, Bureau of Economic
Analysis
(###)
ITALY1
tU.S. DEPARTMENT OF STATE
ITALY: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                              ITALY
                     Key Economic Indicators
        (Millions of U.S. dollars unless otherwise noted)
                                     1992      1993      1994 1/
Income, Production and Employment:
Real GDP (1985 prices)            505,520   499,186   508,214
Real GDP Growth (pct.)                0.7      -0.7       1.8
GDP (at current prices)
  (billions USD)                    1,220       992     1,026
By Sector:
  Agriculture                      42,778    32,992       N/A
  Industry                        349,468   269,830       N/A
    Energy                         32,094    26,507       N/A
    Construction                   71,151    55,088       N/A
  Services                        610,418   497,125       N/A
  Non-Market Services             169,185   137,363       N/A
    Government                    157,127   116,718       N/A
Net Exports of Goods and Services  -3,564    27,803    35,694
Real GDP Per Capita (USD)
  (1985 prices)                    13,667    10,612    10,615
Labor Force (000s)                    N/A    22,743    22,453 2/
Unemployment Rate (pct.)              N/A      10.4      11.3 2/
Money and Prices:
Money Supply (M2)                 583,371   543,393   595,791 3/
  (annual pct. growth)                4.6       7.9       4.5 3/
Base Interest Rates                  15.8      12.0      11.2 3/
Personal Savings Rate                17.2      18.0      18.9
Retail Inflation (COL)                5.4       4.2       3.9
Wholesale Inflation (PPI)             1.9       3.7       3.4
Exchange Rate (lire/USD aver.)      1,233     1,572     1,600
Balance of Payments and Trade:
Total Exports (FOB)               177,969   168,630    89,243 4/
  Exports to U.S.                  12,393    13,034     7,071 4/
Total Imports (CIF)               188,249   147,772    79,978 4/
  Imports from U.S.                 9,847     7,855     3,913 4/
External Public Debt
  (USD billions) (year end)          44.0      42.9      48.5 2/
Debt Service Payments
  (billion USD?)                      4.1       4.3       2.7 2/
Gold and Foreign Exch. Reserves
  (end-period)                     45,219    49,221    58,116 3/
Trade Balance                     -10,780    20,858       265 4/
    Trade Balance with U.S.         2,547     2,741     4,543 4/
N/A--Not available.
1/ 1994 data are estimates by Italian Government or U.S.
Embassy except where data are followed by a footnote,
indicating actual data through that period.
2/ Figure based on January-July data.
3/ Figure based on January-August data.
4/ Figure based on January-June data.
1.  General Policy Framework
    The Italian economy is the industrialized world's fifth
largest, having undergone a dramatic transformation into an
industrial power in the last 50 years.  A member of the Group
of Seven (G-7), the OECD, the GATT, the IMF, and the European
Union (EU), Italy maintains a relatively open economy.
Economic activity in Italy is centered predominantly in the
North, resulting in a divergence of wealth between North and
South that remains one of Italy's most difficult economic and
social problems.
    The state plays an active role in the economy, not only in
the formulation of macroeconomic policy and regulations, but
also through state ownership of a number of large industrial
and financial concerns.  Recent governments, however, have
begun a process of privatization that, if continued, should
lead to a significant reduction in state ownership.  To date,
several large financial institutions and a few industrial
concerns have been privatized.  Key state monopolies in
electricity and telecommunications are slated for privatization
in 1995.  Foreign firms, including U.S. firms, have been active
both as purchasers of privatizing companies as well as
privatization advisors.  There is also a large and dynamic
private sector.  While a few major conglomerates with extensive
overseas operations exist, the private sector is characterized
primarily by a large number of small and medium-sized firms
which produce for domestic and export markets.
    Italy's large public sector deficit and growing public debt
constitute its most pressing economic problems.  The stock of
debt is currently estimated to be 123 percent of GDP.  The
budget deficit is expected to be about 9.6 percent of GDP in
1994.  Since 1992, successive governments have implemented
deficit reduction policies designed to alter the underlying
deficit trend.  The 1994 deficit was reduced by about 26
trillion lire ($16 billion).  The government budget for 1995,
with spending cuts and increased revenues of approximately 47
trillion lire ($29 billion), aims to reduce the deficit to 8
percent of GDP.  Deficit reduction in 1995 will be attained
primarily by means of spending cuts on pensions and health
care, combined with additional revenues from expeditious
settlement of outstanding tax disputes and a pardon on building
violations.
    Given Italy's fiscal imbalances, the primary objective of
monetary policy is to support financing the budget deficit in
the least inflationary manner.  The monetary policy objective
is to hold the increase in both M-2 (currency plus all bank
deposits) and credit to the non-state sector to the expected
level of increase of nominal GDP growth.  The Bank of Italy has
moved away from direct monetary controls in favor of indirect
instruments, an essential shift in light of the integration of
European capital markets.  Its principal policy tool is open
market operations exercised through repurchase agreements with
commercial banks.  The central bank discount window is seldom
used, although changes in the discount rate are used to signal
policy shifts.
    In late 1994 the Italian Parliament completed legislation
implementing the Uruguay Round Final Act.  Italy became a
founding member of the World Trade Organization on January 1,
1995.
2.  Exchange Rate Policy
    Italy has a freely floating exchange rate and no exchange
controls.  Prior to September, 1992, Italy participated in the
Exchange Rate Mechanism (ERM) of the European Monetary System,
which obligated Italy to maintain fluctuations of the lira
against other ERM currencies within a narrow band.  In
September 1992, due to severe pressures in foreign exchange
markets, the Italian Government devalued the lira by seven
percent against the other ERM currencies.  When this failed to
relieve pressure on the lira, Italy withdrew from the ERM.  The
Bank of Italy continues to monitor exchange rates and to seek
lira stability against other EU currencies (especially the
deutschemark) in order to avoid tensions with other EU
countries regarding the question of competitive devaluations.
The Bank of Italy does not intervene in the markets to defend
the lira except in exceptional circumstances.
    The lira devaluation has made Italian exports more
competitive and resulted in a substantial trade surplus
(estimated at 4 percent of GDP for 1994).  Italy's share of
global exports increased from 3.5 percent at end-1992 to 3.7
percent at end-1993, and exports are expected to grow by 9
percent in 1994.  The lower lira, combined with the recession
in 1992-93, has resulted in stagnation in Italian imports, not
only from the U.S., but from other suppliers as well.
3.  Structural Policies
    Structural rigidities have hindered Italy's economic
growth.  Rigid hiring and firing rules, downward wage stiffness
and high unemployment benefits for redundant industrial workers
have distorted the labor market and have had a negative impact
on job creation.  On the positive side, two labor cost
agreements in the last several years have reduced the cost of
labor to less than annual increases in inflation, which has
resulted in increased Italian competitiveness in international
markets.  As part of its effort to create jobs, the Berlusconi
government passed tax legislation in July 1994 aimed at
encouraging the formation of small businesses (Italy's major
employers) and providing incentives to young entrepreneurs.
    Another major area of structural rigidity in Italy is
financial markets, particularly the banking sector, which have
been heavily regulated and slow to respond to market needs.
    The Italian stock market, relatively undeveloped compared
to its European counterparts, has undergone a significant
transition over the last few years.  A 1991 law, designed to
make the Italian stock market more modern, efficient, and
transparent, established a new type of brokerage company, the
Security Intermediation Company, known by its Italian acronym,
SIM.  SIMs have replaced individual stockbrokers as the primary
stock market intermediaries.  While supporting reform of the
Italian market, U.S. and other foreign firms have objected to a
provision of the law requiring all securities firms wishing to
do business in Italy or with Italian clients to establish a SIM
in Italy.  Due to the costs of establishing a SIM, the law
disadvantages U.S. and other foreign firms.  The SIMs law
violates the basic tenets of the OECD Code of Liberalization
and has been challenged by the EU Commission because it also
violates the Treaty of Rome.  It will likely require
modification to conform to European Union directives which come
into effect in 1996.
    Government procurement practices are not completely guided
by free market principles.  Government procurement in some
areas (e.g. heavy electrical equipment, telecommunications, and
military hardware) is heavily directed toward Italy-based
suppliers.  Moreover, procurement procedures are not fully
transparent.  Except for agricultural products, taxes and
customs duties do not present serious obstacles to U.S.
exports.  While Italy remains relatively open to foreign
investment, direct foreign investment can become a political
issue.  The 1990 anti-trust law gives the government the
authority to block mergers over a certain size involving
foreign companies under certain conditions.  Thus far, however,
the anti-trust authority has not acted against foreign
investment, concentrating instead on promoting increased
competition in Italian markets.  There are no impediments to
foreign investment participation in the privatization process.
    Legislation to bring Italy into conformity with European
Union regulations has begun to eliminate some of these
structural barriers.  The elimination of foreign exchange
controls is one example.  Legislation to reform the banking
system, which took effect on January 1, 1994, is another.
Similar legislation for the securities market is expected in
1995.  The degree to which these policies affect demand for
U.S. exports will to a large extent be determined by the
orientation of the unified EU market.  Despite its serious
financial problems, Italy is committed to participating in
economic and monetary union.  As a founding member of the EU,
Italy wants to move forward with the first group of countries
in economic and monetary union.  Nonetheless, due to the high
costs associated with the convergence measures, there is strong
political opposition to the economic policies necessary for
Italy to achieve economic convergence with other members of the
4.  Debt Management Policy
    Although Italy has not had external debt or serious balance
of payments difficulties since the mid-1970's, its domestic
public debt is extremely large.  It is financed principally
through domestic capital markets, with various securities
ranging in maturity from three months to thirty years.  Italy
also has a large external debt, though very little of this
represents obligations of the Republic of Italy.  Italy's
foreign assets, primarily in portfolio form, are substantial.
Italy's banking system had claims on the so-called debtor
countries of 15.1 billion dollars at end-September 1993, more
than half of which were accounted for by Russia and Eastern
Europe.  Italy's banking system is considerably less exposed to
the debtor countries than those in other G-7 countries.
    U.S. and other foreign banks have complained about the
handling of the liquidation of EFIM, a large state holding
company.  Two years after the liquidation was announced in July
1992, some foreign banks and creditors still have not been paid.
5.  Significant Barriers to U.S. Exports
    In Italy highly-fragmented, non-transparent government
procurement practices and significant problems with corruption
have created obstacles for U.S. firms' seeking to win Italian
government procurement contracts.  A widening investigation of
abuses in this area has created pressure for reform.  On
January 13, 1994, the Italian Parliament enacted legislation
(Merloni law) which should provide more transparent procurement
procedures, including establishment of a central body to
monitor implementation.  However, the reforms envisaged in the
legislation will not be fully implemented until 1996 and are
under review by the Berlusconi Government.
    U.S. agricultural exports to Italy compete with products
covered under the EU's Common Agricultural Policy (CAP).  For
this reason, U.S. products such as meat and sugar continue to
be subject to quantitative restrictions which are enforced
through licenses.  Agricultural imports also face sanitary and
phytosanitary barriers that result in the exclusion or
restriction of certain U.S. products including beef, some seeds
for planting, and citrus fruit (other than grapefruit).
Additionally, there are restrictions on U.S. bull semen imports
into Italy.
    Telecommunications services are still tightly regulated by
the state, which maintains a monopoly on voice telephony and
the telecommunications infrastructure, including all
switching.  Enhanced services must be offered over the public
switched network or through dedicated leased circuits.  Resale
of leased line capacity remains difficult until Italy
implements EU directives on telecommunications services.
Multi-user networks are officially outlawed, but sometimes
tolerated where need is demonstrated.  Mobile phone services
are no longer the monopoly of the state-owned telephone
utility, SIP.  On March 28, 1994, a second cellular operating
license was awarded to the Omnitel consortium (40 percent U.S.
participation).
    In keeping with the 1989 EU Broadcast Directive, Italy's
1990 Broadcast Law requires that upon conclusion of three years
from concession of a national broadcast license, a majority of
TV broadcast time for feature films be reserved for EU-origin
films.  The Italian law also requires that half of the European
quota be dedicated to Italian films.  The Italian law is more
narrowly focused than the Broadcast Directive, since it
encompasses only films produced for cinema performance, and
excludes TV films and series and other programming.  The film
sector decree-law enacted on January 18, 1994, calls for
application of the Italian broadcast quotas proportionately
during evening viewing hours, but its language is strictly
hortatory.
    A separate but related issue concerns films shown in
Italian theaters.  The film sector law approved by Parliament
on February 23, 1994 eliminated obligatory screen quotas for
Italian films (heretofore 25 days per quarter subject to
closing of the theater, under a 1965 law), and in their place
substituted discretionary rebates on Italy's box office tax for
theaters that show Italian films.  The rebates and eligibility
thresholds (percentages of screenings required to qualify) vary
according to the category of film.  The United States continues
its efforts both to obtain elimination of discriminatory laws
and regulations in the audiovisual sector and to limit their
impact in the interim.
    In the areas of standards and standards setting, Italy has
been slow in accepting test data from foreign sources, but is
expected to adopt EU standards in this area.  In sectors such
as pollution control, the uniformity in application of
standards may vary according to region, thus complicating
certification requirements for U.S. business.
    Some professional categories (e.g. engineers, architects,
lawyers, accountants) face restrictions that limit their
ability to practice in Italy without either possessing Italian
nationality or having received an Italian university degree.
    Rulings by individual local customs authorities can be
arbitrary or incorrect, resulting in denial or delays of entry
of U.S. exports into the country.  Considerable progress has
been made in correcting these deficiencies, but problems do
arise on a case-by-case basis.
    Since 1990, the United States/Italy civil aviation
relationship has undergone some liberalization, including the
entry of new U.S. carriers in 1991 and 1992.  However, U.S.
carriers have expressed concern over a range of doing-business
issues, a number of which relate to the services monopolies at
international airports.
    While official Italian policy is to encourage foreign
investment, industrial projects require a multitude of
approvals and permits from the many-layered Italian
bureaucracy, and foreign investments often receive close
scrutiny.  These lengthy procedures can present extensive
difficulties for the uninitiated foreign investor.  There are
several industry sectors which are either closely regulated or
prohibited outright to foreign investors, including domestic
air transport, aircraft manufacturing, and the state monopolies
(e.g., railways, tobacco manufacturing and electrical power).
    Until 1992, meaningful privatization of Italian government
parastatals was thought to be unlikely.  However, on August 7,
1992 legislation was enacted which began the process of
converting major groups such as IRI (the industrial state
holding company) and ENI (the state energy company) into
joint-stock companies.  As of October 1994, several major
financial institutions and a few industrial concerns had been
privatized.  U.S. firms served as advisors in several of these
privatizations.  The government has announced plans to
privatize the electricity and telecommunications sectors in
1995.  Foreign firms, including U.S. firms, have expressed
interest in upcoming privatizations.
    The expansion of modern distribution units, such as chain
stores, department stores, supermarkets, hypermarkets, and
franchises, is severely restricted by local practice and
national legislation which subjects applications for large
retail units above a certain merchandising surface to a lengthy
and cumbersome authorization process.  Italy provides a number
of investment incentives consisting of tax breaks and other
measures to attract industrial investment to depressed areas,
especially in the south of Italy.
    In September, 1990 the Italian Parliament approved an anti-
trust law.  The law gives the government the right to review
mergers and acquisitions over a certain threshold.  The
government has the authority to block mergers involving foreign
firms for "reasons essential in the national economy" if the
home government of the foreign firm does not have a similar
anti-trust law or applies discriminatory measures against
Italian firms.  A similar provision in the law applies to
purchases by foreign entities of five or more percent of an
Italian credit institution's equity.
6.  Export Subsidies Policies
    Italy subscribes to EU directives and Organization for
Economic Cooperation and Development agreements on export
subsidies.  Through the EU, it is a member of the GATT
Subsidies Code.  Italy also provides extensive export refunds
under the Common Agricultural Policy (CAP), which are being
scrutinized under CAP reform..  Italy has an extensive array of
export promotion programs.  Grants range from funding of travel
for trade fair participation to funding of export consortia and
market penetration programs.  Many programs are aimed at
small-to-medium size firms.  Italy provides direct assistance
to industry and business firms to improve their international
competitiveness.  This assistance includes export insurance
through SACE, the state export credit insurance body, as well
as direct export credits.  While subsidies to the steel and
shipbuilding industries were legally terminated in July 1992,
some U.S. industries have expressed concern that these
export-promoting subsidies continue.
7.  Protection of U.S. Intellectual Property
    The Italian Government is a member of the World
Intellectual Property Organization, and a party to the Berne
and Universal Copyright conventions, the Paris Industrial
Property and Brussels Satellites conventions, the Patent
Cooperation Treaty, and the Madrid Agreement on International
Registration of Trademarks.
    Italy since 1989 has been on the intellectual property
rights "watch list" under the Special 301 provision of the 1988
trade act, reflecting problems with protection of copyrights
for computer software and film videos.  Enactment in December
1992 of the EU software directive making software copyright
violations a criminal offense was a major step forward.
Simultaneously, the GOI substantially increased enforcement
actions against both video and software pirates and created an
Interministerial Anti-Piracy Committee.  Other activity has
included specialized training courses for Italy's three law
enforcement agencies, and creation by the Judiciary of
specialized "pools" of prosecutors to press the fight against
piracy in several major municipal centers.  U.S. consultations
with Italy have contributed to improved enforcement action and
are continuing to seek a stronger legal framework.
    Application of the new software law appears to be making a
significant dent in Italy's software piracy problem.  Following
enactment of the law, Italy's Guardia di Finanza initiated a
large number of investigations, seizing 94,000 illegal programs
and pressing criminal charges against 60 resellers in 1993.  As
Italian companies moved to legalize software holdings, U.S.
industry reported that the rate of software piracy in Italy
declined from an estimated 86 percent in 1992 to 50 percent in
1993 (less than the European average).  As a result, the
Business Software Alliance reports that sales of packaged
personal computer software increased by 331 percent compared to
1992 sales.
    Film video piracy remains a serious problem.  U.S. motion
picture distributors estimate that some 40 percent of the video
market consists of pirated material.  According to U.S.
distributors, the television piracy rate ranges from 6-8
percent and unauthorized film screenings account for 15-20
percent of all showings.  U.S. industry has noted a significant
increase in raids and confiscation of illegal cassettes and
equipment.  Italian plans to enact by June 1995 the EU
Copyright Duration Directive, which would extend the general
copyright term to 70 years, should help address a longstanding
issue about protection for older classics.
8.  Worker Rights
    a.  The Right of Association
    The Workers' Statute of 1970 provides for the right to
establish a trade union, to join a union and to carry out union
activities in the workplace.  Trade unions are not government
controlled, and the Constitution fully protects their right to
strike, which is frequently exercised.  In the past, the three
major labor confederations had strong historical ties to the
three major political parties, but now are autonomous of all
political parties and continue to administer certain social
welfare services for the Government, which compensates them
accordingly.  Moreover, the Workers' Statute favors the three
confederations to the extent that it is difficult for small
unions, including the so-called "base committees" (COBAS), to
obtain recognition.  The election of the new Union
Representation Units (RSU) in the workplaces, as stipulated in
the July 1993 agreement, has begun.  So far, less than
one-third of all workplaces have held elections.  The three
major labor confederations have won most of the elections to
date.  These unions suffered some loss of active worker
membership due to the recession in 1993.  Small autonomous
unions refuse to participate in the RSU elections, and often
try to maintain their local union representation structure.
    In June 1994, a period of light collective bargaining
activity, 170,000 hours were lost due to strikes, one tenth of
the total lost in June 1993 (1.7 million hours).  In the period
January-June 1994, 2.4 million hours were lost because of
strikes, almost 80 percent below the time lost in the
corresponding period in 1993 (11.6 million hours).  The total
time lost in 1993 (23.8 million hours), was the highest
recorded since the 1990 strike law was enacted.  Most of the
strikes were motivated by layoffs and downsizing in industry.
    b.  The Right to Organize and Bargain Collectively
    The right of workers to organize and bargain collectively
is protected by the Constitution and is freely practiced
throughout the country.  Labor-management relations are
governed by legislation, custom, collective bargaining
agreements, and labor contracts.  A new system of collective
bargaining was negotiated in July 1993.  It provides for wage
increases to be limited to programmed inflation in the first
two years of four year contracts with a reopener clause after
the second year to adjust wages in accordance with actual
inflation.  It also permits plant level bargaining to take
place according to schedules established in national sectoral
contracts.  The renewal of the major national labor contracts
started in early 1994 and is expected to continue into early
1995.  More than 10 million workers are covered by these
agreements, of which those covering 7 million workers are still
pending renewal.  Company-level agreements have also been
signed in some large and medium-sized enterprises, providing
for wage increases tied to productivity and profitability of
the firm, introducing more flexibility in the use of the
workforce and, in some cases, establishing private pension
funds jointly financed by management and labor.
    National collective bargaining agreements in fact apply to
all workers regardless of union membership.  The July 1993
accord calls for this to be guaranteed by law.  Collective
bargaining at the national level (involving the three
confederations, the public and private employers' organizations
and, where appropriate, the Government) occurs irregularly and
deals with issues of universal concern.  The EU has recently
approved a directive on Work councils in multinational
companies which is aimed at permitting unions and workers to
establish European-level representation structures.  The
directive establishes a two year period for the implementation
of European Work Councils.  Some multinationals operating in
Italy have already established such bodies in anticipation of
this directive.
    Italy enacted legislation in 1992 to bring it into
compliance with the EU Directive on transfer of ownership.  The
law provides that the unions of both the former owner and the
new owner's respective companies must be consulted in advance
of the sale and that no worker's benefits will be lost as a
result of the transfer of ownership.  Unions have the right to
bargain with the employers in case of restructuring processes
and workers who are laid off are entitled to receive their
wages from the earnings compensation fund (financed by
employers and the state).
    There are no areas of the country, such as export
processing zones, where union organizations and collective
bargaining are impeded or discouraged.  The law prohibits anti-
union discrimination by employers against union members and
organizers.  A 1990 law encourages workers in small enterprises
(i.e., fewer than 16 employees) to join unions and requires
"just cause" for dismissals from employment.
    c.  Prohibition of Forced or Compulsory Labor
    Forced or compulsory labor, which is prohibited by law,
does not exist in practice.
    d.  Minimum Age for Employment of Children
    Under current legislation, no child under 15 years of age
may be employed (with some specified exceptions).  The Ministry
of Labor may, as an exception, authorize the employment on
specific jobs of children under 15 years of age, for example in
artistic presentations or film making, which are not dangerous
or harmful to the child's morality and health and do not take
place after midnight.  The child must have at least 14
consecutive hours of rest between performances.  The minimum
age is 16 for youth employed in dangerous, fatiguing, and
unsanitary work, and 18 for youth employed in a number of
occupations including mines, tunnels without mechanical
vehicles, and sulfur ovens in Sicily.  No worker under 18 years
may be employed in driving and pulling trucks and carriages, or
in jobs involving explosives.  Minimum age and compulsory
education laws (currently through age 14, but due to be raised
to age 16) are effectively enforced in most areas.  According
to a research study conducted by sociologists among children
attending elementary school, the number of children below 15
years of age who work is estimated at 400,000.  According to
ITALY2
U.S. DEPARTMENT OF STATE
ITALY: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
this study most children who work do so not out of need, but
because of family cultural reasons, i.e. early access to work
is considered a normal activity and is even appreciated by the
children.  However, in less prosperous parts of the country
(primarily in the south), child labor is more prevalent and
often involves evasion of compulsory school obligations.  A
legislative decree approved by the government in August 1994
provided for more severe fines for child labor violations by
the employers, but at the same time removed some minor
violations from the criminal code.
    e.  Acceptable Conditions of Work
    Minimum work and safety standards are established by law
and buttressed and extended in collective labor contracts.  The
Basic Law of 1923 provides for a maximum workweek of 48 hours
-- no more than 6 days per week and 8 hours per day.  The
8-hour day may be exceeded for some special categories.  Most
collective labor agreements provide for a 36- to 38-hour week.
Overtime may not exceed 2 hours per day or an average of 12
hours per week.
    There is no minimum wage set under Italian law; basic wages
and salaries are set forth in collective bargaining
agreements.  National collective bargaining agreements contain
minimum standards to which individual employment agreements
must conform.  In the absence of agreement between the parties,
the courts may step in to determine fair wages on the basis of
practice in related activities or related collective bargaining
agreements.
    Basic health and safety standards and guidelines for
compensation for on-the-job injury are set forth in an
extensive body of law and regulations.  In most cases these
standards are exceeded in collective bargaining agreements.  A
legislative decree was approved by the government in September
1994 incorporating into Italian law eight EU directives on
health and safety, which had not yet been applied in Italy.
Among other things, the decree stipulates employers'
obligations in matters of workplace adjustments for disabled
employees, establishes safety rules in workplaces and
guidelines in the use of computers.  Enforcement of health and
safety regulations is entrusted to labor inspectors, who are
employees of local health units and have the same status as
judicial police officers.  Inspectors make periodic visits to
companies to ensure observance of safety regulations.
Violators may be fined or even imprisoned.  Trade unions also
play an important role in reporting safety violations to
inspectors.  In 1993 the number of work-related deaths in
industry decreased by more than 450 compared to 1993 (1,277
compared to 1,729 the year before).  In agriculture there were
306 deaths, (131 less than in 1993).  These declines were due
to the effects of the recession (reduction in working hours and
employment) as much as to improved safety measures and the
problem of an inadequate number of inspectors continues.  Due
to high unemployment, there is also pressure on workers to
accept unsafe conditions as a necessary evil if they need
jobs.  There are many substandard workplaces in Italy,
especially in the south.  A special body which was expected to
be set up to monitor industrial accidents is not yet
operating.  However, appropriate legislation was revised in
1994 providing guidelines in case of dangerous production
processes.
    f.  Rights in Sectors with U.S. Investment
    Conditions do not differ from those in other sectors of the
economy.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                                352
Total Manufacturing                                    8,745
  Food & Kindred Products                     432
  Chemicals and Allied Products             2,607
  Metals, Primary & Fabricated                215
  Machinery, except Electrical              3,127
  Electric & Electronic Equipment             577
  Transportation Equipment                    163
  Other Manufacturing                       1,625
Wholesale Trade                                        2,086
Banking                                                  182
Finance/Insurance/Real Estate                          1,816
Services                                                 513
Other Industries                                         227
TOTAL ALL INDUSTRIES                                  13,920
Source: U.S. Department of Commerce, Bureau of Economic
Analysis
(###)
JAMAICA1
3V3VU.S. DEPARTMENT OF STATE
JAMAICA: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                             JAMAICA
                     Key Economic Indicators
        (Millions of U.S. dollars unless otherwise noted)
                                     1992      1993   1994 1/
Income, Production and Employment:
Real GDP (1986 base year)           768.7     712.5     546.4
Real GDP Growth Rate 2/               1.4       1.2       2.0
GDP (at current prices)
By Sector:
  Agriculture/Forestry/Fishing      251.2     320.3       N/A
  Mining/Quarrying                  297.6     277.2       N/A
  Manufacturing                     619.1     703.6       N/A
  Construction/Installation         407.9     491.5       N/A
  Retail Trade                      745.1     904.3       N/A
  Transportation/Storage/
    Communication                   242.7     303.9       N/A
  Real Estate/Business Services       392       429       N/A
  Government Services               191.6     360.9       N/A
  Other                               6.7      23.9       N/A
  Total                            3153.9    3814.6       N/A
Real GDP Per Capita ($, 1986 base)  314.0     288.2     221.2
Labor Force (000s)                 1074.9    1083.0       N/A
Unemployment Rate (pct.)             15.7      16.3       N/A
Money and Prices:
Money Supply (M2)                  1209.5    1549.9    1372.8 3/
Commercial Interest Rate             46.4      61.3      65.0
Personal Savings Rate             15-28.8   15-25.0     15-30
Retail Inflation                     40.2      30.0      39.0
Wholesale Price Index                 N/A       N/A       N/A
Consumer Price Index                419.6     546.0     758.9 4/
Exchange Rate (JD/USD)              23.00     25.11     33.40
Balance of Payments and Trade:
Total Exports (FOB)                1053.6    1044.5      1200
  Exports to U.S.                   386.3     379.9       397
Total Imports (CIF)                1775.4    2165.2      2230
  Imports from U.S.                 943.6    1074.3      1128
AID from U.S. (FY 93, 94, 95) 5/     50.4      34.6      22.5
AID from Other Countries 6/         170.1     429.0       N/A
External Public Debt               3678.0    3647.2    3608.0 7/
Debt Service Payments (actual)      637.9     542.1     539.9
Net Official Reserves (Dec.)        -50.7      70.8     194.8 8/
Trade Balance                      -721.8   -1120.7   -1030.0
  Trade Balance with U.S.          -557.3    -694.4    -731.2
N/A--Not available
1/ Projected.
2/ Growth rate is based on Jamaican dollars whereas real GDP is
shown in U.S. dollars.
3/ Figure is based on January-June data.
4/ Fiscal year ending December.
5/ FY '95 does not include military assistance.
6/ Commitments from Jamaica's cooperation partners.
7/ Figure is based on January-May data.
8/ Figure is based on January-June data.
1.  General Policy Framework
    Economic Structure:  Jamaica is an import-oriented economy
with imports of goods and services accounting for two-thirds of
GDP.  Tourism and the bauxite/alumina industry are the two
major pillars sustaining the economy.  In 1993 these two
industries accounted for about 77 percent (USD 1535.9 million)
of the country's foreign exchange earnings.  Hence, both GDP
and foreign exchange inflows are extremely sensitive to
external economic factors.  Agriculture employs 24 percent of
the workforce, and contributes about eight percent of GDP.  The
relatively small size of the Jamaican economy, and relatively
high costs of production (e.g., interest rates) has reduced the
contribution of the manufacturing sector over the last several
years to about 18 percent in 1993.  However, the Government of
Jamaica has made some progress in promoting investment in
certain nontraditional export-oriented manufacturing
enterprises (especially the garment industry) in the last few
years.  About 56 percent of Jamaica's work force is employed in
the services sector, contributing 59 percent of GDP.
    Economic Policies:  The Jamaican economy grew by 1.2
percent in 1993, following a growth of 1.4 percent in 1992.
The pace of economic growth thus far in 1994 has been modest
due to tight monetary and fiscal policies.  However, continued
high inflation (arising from wage increases, high interest
rates, and drought during the latter part of the year, among
other factors) has led to declining real incomes for the
majority of the population.  The government has reduced public
sector operations through privatization of certain public
entities.  To date, about 29 entities have been divested and
the government is seeking to divest some 78 entities in the
next few years to increase economic efficiency.  Under the
Common External Tariff, the tariff rate is to be phased down
from the current 5-30 percent to 5-20 percent by 1998.
    Fiscal Policy:  The Jamaican fiscal year (JFY) 1994/95
budget calls for Jamaican dollars (JD) 55.2 billion in outlays,
an increase of 27.2 percent over the previous fiscal year's
budget, but will be about 10 percent lower in real terms given
the 37.1 percent inflation rate in JFY 93/94.  The present
budget reflects a tight budgetary situation with only 38
percent of the outlay directed to meet the economic development
and social needs of the country.  The other 62 percent will be
used for debt servicing costs (49 percent), Bank of Jamaica
losses (3.5 percent), and government employee compensation (8.5
percent).
    The government hopes to finance the budget through an
expected total revenue of JD 39.9 billion through recurrent,
capital revenue, and the capital development fund.  The balance
is proposed to be financed from external debt (44.7 percent of
total deficit) and internal debt (55.3 percent).  Furthermore,
in order to ease the pressure for foreign exchange and to
reduce inflation to the target of one percent per month for FY
94/95, the government has increased the issue of local
registered stocks, treasury bills and certificates of deposit
(offering high interest rates) to mop up excess liquidity.  In
the past, the Bank of Jamaica's open market operations were a
means by which the Government of Jamaica funded its fiscal
deficit.  The current budget, however, is a departure from the
recent practice of reliance on massive central bank assistance.
    Monetary Policy:  The Bank of Jamaica (BOJ) continued to
reduce spending demand by issuing long term securities (Local
Registered Stock, short-term certificates of deposit (CDs), and
T-bills) at very high interest rates (varying from 52 percent
in January 1994 to 37.5 percent in October 1994).  These
increases in deposit yields were transmitted through the
financial system and had the effect of raising commercial bank
lending rates as high as 65 percent in September 1994.
Interest payments on the maturing securities have served to
increase liquidity, necessitating additional security
offerings.  Funds acquired by the BOJ through issuance of CDs
were generally borrowed by the government and used to finance
current expenditures.  It is contemplated that the BOJ will
reduce its reliance on CDs as an instrument for mopping up
excess liquidity in the future.  The BOJ has increased the
ceiling on treasury bills recently from JD 7.5 billion to JD 12
billion.  Other instruments used by the government to control
aggregate demand and stabilize the exchange rate include the
reserve requirements of financial institutions (50 percent),
and issuing a USD 12.5 million bond (the first such issuance
was in September 1993 for USD 20 million).  The Bank of Jamaica
achieved a positive stock of net international reserves (NIR)
by the end of 1993 for the first time since the mid 1970's.
The NIR has remained positive through 1994 and has reached the
level of USD 316.4 million as of July 1994.
2.  Exchange Rate Policy
    On September 26, 1991, exchange controls were eliminated to
allow for free competition on the foreign exchange market.  The
principal remaining restriction is that foreign exchange
transactions must be effected through an authorized dealer.
Licenses are regulated.  Any company or person required to make
payments to the government by agreement or law (such as the
levy and royalty due on bauxite) will continue to make such
payments directly to the BOJ.  There is also a requirement that
20 percent of foreign exchange purchases by authorized dealers
must be paid directly to the BOJ.  This represents a
significant reduction from the earlier requirement, lifted in
July 1994, for 28 percent of foreign exchange purchases to go
to the BOJ.  A requirement that 25 percent of foreign exchange
purchases go to Petrojam (the government monopoly for imports
of petroleum) is still in effect but is not fully utilized
given the availability of foreign exchange in the system.  When
Petrojam is privatized, this requirement will, of course, be
terminated completely.
    With the increased use of foreign currency by importers and
other earners of foreign exchange, together with the decline in
official inflows, the Jamaican dollar lost ground by 47 percent
in December 1993 over December 1992.  In an effort to increase
the official inflows of foreign exchange, the government
introduced and increased the number of cambios as authorized
dealers in April 1994.  To date, 116 licenses have been issued,
although only 46 are in operation.  This increase in authorized
dealers, along with high interest rates offered on the
government securities, has had a positive impact on the inflows
of foreign exchange.  For the period January-September 1994,
foreign exchange inflow into the official trading market
increased remarkably by 93.5 percent over the corresponding
period in 1993 to USD 996.6 million.  The weighted average
selling rate of one U.S. dollar was JD 33.45 in September
1994.  If this positive trend continues, U.S. exports to
Jamaica are likely to increase.
3.  Structural Policies
    Pricing Policies:  Prices are generally determined by free
market forces.  However, prices of certain items such as
domestic kerosene and bus fares are subject to price controls.
Prices of these items can only be changed by ministerial
approval.  In addition, the margins of motor vehicle dealers is
restricted to 12.5 percent of CIF plus customs duty on motor
vehicles, and between 12.5 to 20 percent on motor vehicle
parts.  The Fair Competition Act was introduced in 1993 to
create an environment of free and fair competition and to
provide consumer protection.
    Tax Policies:  Taxation accounts for 90 percent of total
recurrent and capital revenue.  Tax revenue includes: personal
income tax (38 percent of tax revenue), value-added tax (29
percent), and import duties (12 percent).  Although no new
taxes have been imposed so far during FY 94/95, the government
proposes to raise additional revenue of about JD 723 million
through increases in the ad valorem tax on petroleum products,
the departure tax, and the general consumption tax on purchases
of motor vehicles.  Given the increase in the national minimum
wage from JD 300 to JD 500 per 40 hour workweek effective July
1994, the income tax threshold was raised from JD 18,408 to
JD 22,464 effective January 1994 and will be increased to
JD 35,568 effective January 1995.  Jamaica implemented the
Caribbean Economic Community (Caricom) Common External Tariff
(CET) on February 15, 1991 in order to enhance the region's
international competitiveness.  Under the CET, goods produced
in Caricom states are not subject to import duty.
Third-country imports are presently subject to import duties
ranging between 5 percent and 30 percent, with higher rates
applicable to certain agricultural items, "non-basic" and
finished goods.  The tariff rate is to be phased down to 5 to
20 percent by 1998.  The Government of Jamaica offers
incentives to approved foreign investors, including income-tax
holidays and duty-free importation of capital goods and raw
materials.  The United States and Jamaica signed a bilateral
investment treaty in early 1994.
    Regulatory Policies:  All monopoly rights of the state
Jamaica Commodity Trading Company (JCTC) ceased December 31,
1991, but it retains responsibility for concessionary sales
such as PL-480.  The U.S. Embassy is unaware of any government
regulatory policy that would have a significant discriminatory
or adverse impact on U.S. exports.
4.  Debt Management Policies
    Jamaica's stock of external debt fell to JD 3.65 billion in
1993, the lowest since 1986.  The average annual decline over
the past three years has been 4.2 percent.  Cancellation by
official bilateral creditors, conversions on commercial bank
debt, debt servicing, and reduction in contracting new loans
contributed to this debt reduction.  Half of the public debt is
owed to bilateral donors (the United States is the largest
bilateral creditor), 35 percent to multilateral institutions, 9
percent to commercial banks, and 6 percent to other entities.
    Actual debt servicing during 1993 accounted for 22.6
percent (USD 637.9 million), of which 8.42 percent represents
interest payments.  The debt service burden in 1993 was lower
than for any year since 1984.  The ratio of total outstanding
debt to exports of goods and services declined from 156.3
percent in 1992 to 150.59 percent in 1993 due mainly to debt
reduction and improvement in exports.  Although the debt per
capita improved by 14.6 percent to USD 1,475 over the last four
years, debt servicing continues to be a major burden on the
government budget (49 percent).  Jamaica passed the June IMF
test for its Structural Adjustment Program.  The current IMF
agreement is expected to be Jamaica's last.  Jamaica negotiated
a new Multi-Year Rescheduling Arrangement (MYRA) with the Paris
Club of OECD creditor countries and agencies in 1992.  The MYRA
provides for rescheduling of USD 281.2 million of principal and
interest for the period October 1992 to September 1995.
    Under the debt conversion program (reducing foreign
commercial debt), about 30 percent or USD 119.4 million of
outstanding commercial debt has been converted over the last
five years.
5.  Significant Barriers to U.S. Exports
    Government Procurement Practices:  Government procurement
is generally effected through open tenders.  U.S. firms are
eligible to bid.  The range of manufactured goods produced
locally is relatively small, so instances of foreign goods
competing with domestic manufacturers are very few.
    Customs Procedures:  Due to the efforts of the Government
of Jamaica, customs procedures are being improved and
streamlined.  In order to facilitate the movement of goods, the
government has simplified the documentation and clearance
requirements for exporters.  Computerization of the entire
system is underway.
6.  Export Subsidies Policies
    The Export Industry Encouragement Act allows approved
export manufacturers access to duty-free imported raw materials
and capital goods for a maximum of ten years.  Other benefits
are available from the Jamaican Government's EX-IM Bank,
including access to preferential financing through the Export
Development Fund, lines of credit, and export credit
insurance.  Jamaica does not adhere to the GATT subsidies code.
7.  Protection of U.S. Intellectual Property
    Jamaica is a member of the World Intellectual Property
Organization (WIPO) and respects intellectual property rights.
The Jamaican Constitution guarantees property rights and has
enacted legislation to protect and facilitate acquisition and
disposition of all property rights, including intellectual
property.  Jamaica is a member of the Bern Convention
(copyright) and intends to adhere to the Paris Convention for
the Protection of Industrial Property (i.e., patents and
trademarks).  The Government of Jamaica and the Government of
the United States signed a bilateral Intellectual Property
Rights Agreement in March, 1994.  The U.S. Embassy is not aware
of any complaint concerning the protection of intellectual
property in Jamaica.
    Patents:  There are plans to modernize the patents,
trademarks, and designs legislation.  Under the present
regulations, patent rights in Jamaica are granted for a period
of 14 years with the provision of extension for another seven
years.  The "novelty test" contained in the Jamaican patent
law, however, limits the definition of "novelty of invention"
to that which is novel in Jamaica, without reference to the
novelty of the invention abroad.  Further, patents granted in
Jamaica shall not continue in force after the expiration of the
patent granted elsewhere.  The periods of examination are long;
it can take years for a patent to be issued.
    Copyrights:  The Jamaican Senate passed the Copyright Act
in February 1993 which entered into force September 1, 1993.
The Act adheres to the principles of the Bern Convention and
covers a wide range of works, including books, music,
broadcasts, computer programs and databases.
    New Technologies:  There is no statute with regard to new
technologies.  Jamaica follows common law principles as
established in England.  Breaches of such laws can result in
either injunction or suit for damages.
    Impact on U.S. Trade:  Piracy of broadcasts and
pre-recorded video cassettes for distribution in the domestic
and regional market is widespread.  Video stores import a large
number of copyrighted motion pictures and television programs
each year.  However, a draft policy paper on cable television
was tabled in parliament in February 1994 which identified 100
unauthorized cable systems involving investment in Jamaica
valued at between JD 20-40 million.  The government is
presently examining submissions from the public before it
decides on the final licensing regime for the legal operation
of cable television.
8.  Worker Rights
    a.  The Right of Association
    The Jamaican Constitution guarantees the rights of assembly
and association, freedom of speech, and protection of private
property.  These rights are widely observed.
    b.  The Right to Organize and Bargain Collectively
    Article 23 of the Jamaican Constitution guarantees the
right to form, join and belong to trade unions.  This right is
freely exercised.  Collective bargaining is widely used as a
means of settling disputes.  The Labor Relations and Industrial
Disputes Act (LRIDA) codifies regulations on worker rights.
About 15 percent of the work force is unionized, and unions
play an important economic and political role in Jamaican
affairs.  In the Kingston Free Zone, none of the 18 factories
are unionized.  Jamaica's largest unions, including the
National Workers' Union, have been unable to organize workers
in the Free Zone.
    c.  Prohibition of Forced or Compulsory Labor
    Forced or compulsory labor is not practiced.  Jamaica is a
party to the relevant ILO conventions.
    d.  Minimum Age for Employment of Children
    The Juvenile Act prohibits child labor, defined as the
employment of children under the age of twelve, except by
parents or guardians in domestic, agricultural, or
horticultural work.  While children are observed peddling goods
and services, the practice of child labor is not widespread.
    e.  Acceptable Conditions of Work
    A 40-hour week with 8-hour days is standard, with overtime
and holiday pay at time-and-a-half and double time,
respectively.  Jamaican law requires all factories to be
registered, inspected and approved by the Ministry of Labor.
Inspections, however, are limited by scarce resources and a
narrow legal definition of "factory."
    f.  Rights in Sectors With U.S. Investment:
    U.S. investment in Jamaica is concentrated in the
bauxite/alumina industry, petroleum products marketing, food
and related products, light manufacturing (mainly in-bond
apparel assembly), banking, tourism, data processing, and
office machine sales and distribution.  Worker rights are
respected in these sectors, and most of the firms involved are
unionized with the important exception of the garment assembly
firms.  No garment assembly firms in the free zones are
unionized and only one firm outside the free zones is
unionized.  There have been no reports of U.S.-related firms
abridging standards of acceptable working conditions.  Wages in
U.S.-owned companies generally exceed the industry average.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                               (1)
Total Manufacturing                                     168
  Food & Kindred Products                     0
  Chemicals and Allied Products             157
  Metals, Primary & Fabricated                0
  Machinery, except Electrical                0
  Electric & Electronic Equipment             0
  Transportation Equipment                    0
  Other Manufacturing                        11
Wholesale Trade                                         (1)
Banking                                                 (1)
Finance/Insurance/Real Estate                             8
Services                                                 20
Other Industries                                        (1)
TOTAL ALL INDUSTRIES                                  1,077
(1) Suppressed to avoid disclosing data of individual companies
Source: U.S. Department of Commerce, Bureau of Economic
Analysis
(###)
JAPAN1
qU.S. DEPARTMENT OF STATE
JAPAN: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                              JAPAN
                     Key Economic Indicators
        (Billions of U.S. dollars unless otherwise noted)
                                     1992      1993      1994
Income, Production and Employment:
Real GDP                          3,322.6   3,786.7   4,110.0 1/
Real GDP Growth (pct.)                1.1      -0.2       1.0 2/
Nominal GDP                       3,662.5   4,214.1   4,595.3 1/
Real GDP by Sector:
  Agriculture/Fisheries              77.6       N/A       N/A
  Mining                              8.5       N/A       N/A
  Manufacturing                   1,034.3       N/A       N/A
  Construction                      291.9       N/A       N/A
  Electricity/Gas                   110.2       N/A       N/A
  Wholesale/Retail                  465.7       N/A       N/A
  Finance/Insurance                 192.3       N/A       N/A
  Real Estate                       327.6       N/A       N/A
  Transportation                    207.7       N/A       N/A
  Services                          470.0       N/A       N/A
Per Capita Income (USD)            22,861       N/A       N/A
Labor Force (millions)               65.8      66.1      66.4 3/
Unemployment Rate (pct.)              2.2       2.9       2.8 3/
Money and Prices:  (annual percentage growth)
Money Supply
  (M2+CD annual avg./pct.)            0.6       1.1       1.8 3/
Commercial Interest Rates
  (10-yr govt bonds/yr-end)          4.52      3.02      4.56 4/
Savings Rate (pct.) 5/               14.3       N/A       N/A
Investment Rate (pct.) 6/            26.3      25.3      24.1 1/
CPI (1990=100)                      105.0     106.4     107.1 3/
WPI (1985=100)                       97.8      95.0      93.2 7/
Exchange Rate (Yen/USD)            126.65    111.20    102.66 7/
Balance of Trade:
Total Exports (FOB)                 339.6     360.9     288.7 8/
  Exports to U.S. (FAS)              97.2     107.3      86.2 8/
Total Imports (CIF)                 233.0     240.7     198.4 8/
  Imports from U.S. (CIF)            47.8      48.0      46.7 8/
Trade Balance with U.S.              49.6      59.3      39.5 8/
Balance of Payments:
Current Account                     117.6     131.4      89.2 9/
Trade Account                       132.3     141.5      98.1 9/
Services/Transfers                  -14.8     -10.1      -9.0 9/
Long-Term Capital                   -28.5     -78.3    -24.4 10/
Basic Balance                        89.1      53.1     61.9 10/
Short-Term Capital                   -7.0     -14.4     -6.3 10/
Gold & FOREX Reserves (yr-end)       68.7      95.6     117.5 4/
N/A--Not available.
1/ Jan-June, S.A.A.R.
2/ Jan-June, year-over-year.  Estimated 1994 figure.
3/ Jan-August, average S.A.
4/ End of September.
5/ Savings as percent of personal disposable income.
6/ Public and private domestic fixed capital formation
and inventory investment/nominal GNP.
7/ Jan-August average, N.S.A.
8/ Jan-September cumulative, N.S.A.
9/ Jan-August cumulative, S.A.
10/ Jan-August cumulative, N.S.A.
1.  General Policy Framework
    In 1993, the Japanese economy, the world's second largest
at more than $4 trillion, posted its lowest calendar year GDP
growth since 1974, negative 0.2 percent for the year.  Output
declined slightly in 1994, the first time since the early 1970s.
    Japan is now recovering from the second longest economic
slowdown in Japan's postwar history.  Prior to the slowdown
that began in 1991 and lasted through 1993, Japan had never
experienced two consecutive years of less than 3 percent real
growth.  The surge in asset prices and high rates of capital
investment and hiring in the late 1980's gave way, by 1991, to
sharply slower growth, corporate restructuring, and balance
sheet adjustment by businesses and consumers.  Very low levels
of utilization for existing capacity suggest that business
investment will be a lagging factor in the current recovery.
    Japan's 1993 external accounts posted record global trade
and current account surpluses of $141 billion (BOP basis) and
$131 billion, respectively.  Sluggish domestic demand slowed
growth in import volume, while exports, especially to other
Asian markets, continued to grow steadily.  Yen appreciation
helped swell dollar-denominated surpluses in the short run
through the so-called "J-curve effect."  Over the longer run,
yen appreciation since 1990, plus eventual recovery in domestic
demand, is widely expected to contribute some downward
adjustment in Japan's external imbalance.
    In recent years, the Japanese government has used public
spending to counter the overall negative contribution of
private demand to domestic demand growth.  Four fiscal stimulus
packages between August 1992 and February 1994 injected a
substantial amount of public works spending into the economy,
some of which is still being disbursed in 1994.
    In 1994 the Diet passed tax reform legislation that will
extend FY 1994 income tax cuts totalling yen 5.5 trillion
($55 billion) through FY 1995.  A "permanent" portion of the
income tax cut (yen 3.5 trillion/$35 billion) will continue
thereafter.  The remaining "temporary" portion (yen 2
trillion/$20 billion) of the tax cut is currently scheduled to
be dropped after 1996, but may be dropped at the end of 1995.
To offset the tax cut, beginning in April 1997, the consumption
tax (a value-added tax) is to be raised from the current rate
of three percent to five percent.  In addition, the government
announced a new public works investment program totaling yen
630 trillion ($6.3 trillion) that will run from FY 1995 through
FY 2004.
    In order to ease credit conditions, the Bank of Japan
lowered the Official Discount Rate (ODR) seven times between
mid-1991 and September 1993, from 6.0 percent/year to 1.75
percent, a record low.  Nominal interest rates set new record
lows during 1994; yet demand for funds, particularly for
investment purposes, remained relatively weak, as shown by
year-on-year declines in bank lending from mid-1994.  The Bank
of Japan continues to focus on the ODR as its primary policy
adjustment tool, and, through its daily operations, on
provision of funds in the money market for "fine tuning."
2.  Exchange Rate Policy
    The yen has appreciated against the dollar over the past
year, moving above the 100/1 dollar level for the first time in
the summer of 1994.  On paper, Japan ended most foreign
exchange controls in 1980.  In practice, numerous controls
remain on foreign exchange-related transactions and impede the
provision of financial services by competitive foreign firms.
3.  Structural Policies
    The Japanese economy remains in transition.  Structural
change has been a market-driven response to domestic economic
conditions and the changing global competitive environment.  In
the past decade, efforts at economic deregulation also
contributed to change.
    The Japanese government, which formerly directed
considerable public and private resources to priority areas,
has been gradually moving away from such industrial policy
measures, partly in response to criticism of export-oriented
policies.  The government still has a direct role in promoting
and organizing cooperation among Japanese high technology
firms, using off-budget resources and small amounts of
appropriated funds to contribute to investment projects and
government-private sector efforts.
    From 1989 to 1992, United States-Japan structural economic
issues were handled under the Structural Impediments Initiative
(SII).  SII targeted structural problems in both countries that
impeded reduction of foreign payments imbalances.  Under SII
Japan agreed to liberalize elements of its distribution system,
liberalize its foreign direct investment regime, improve
disclosure rules governing transactions among related companies
(in order to help make business practices more transparent),
and strengthen anti-monopoly enforcement.  Moreover, under SII,
the U.S. and Japan conducted two joint price surveys to
demonstrate that Japan's structural impediments contribute to
unusually high price differentials between Japan and other
overseas markets.  The issues taken up in SII talks are now
addressed as appropriate under U.S.-Japan Framework discussions.
    Japan's economy remains heavily regulated, which reinforces
business practices that restrict competition and keep prices
high.  Price controls remain on certain agricultural products.
Bureaucratic obstacles to new firms' entry into businesses such
as trucking, retail sales and telecommunications slow
structural adjustment.  The Government of Japan has made
deregulation a key theme, issuing its "Policy for Promoting
Deregulation" on June 28, 1994.  In this connection, the Prime
Minister's Office is leading a government-wide effort to draft
a five-year deregulation action plan that is expected to set
the policy tone and scope of deregulation in Japan until 2000.
Implementation of the action plan will begin April 1, 1995.
    In 1993, the Clinton Administration announced the
U.S.-Japan Framework for a New Economic Partnership.  A goal of
the Framework is to make our economic ties with Japan more
balanced and mutually beneficial, as well as to promote global
growth, open markets, and a vital world trading system.  The
Framework addresses the wide range of U.S.-Japan economic and
trade issues through negotiations on macroeconomic, structural
and sectoral matters.  The structural and sectoral issues are
divided into five "baskets" for discussion:  government
procurement, regulatory reform and competitiveness, economic
harmonization, implementation of existing agreements and other
major sectors (including autos and auto parts).
    Structural negotiations are ongoing under Framework areas
such as deregulation and competition policy, foreign direct
investment, buyer-supplier relationships, and access to
technology.  In the deregulation and competition policy
discussions, the U.S. has provided detailed suggestions, on
areas ranging from telecommunications to retail policy, for
reforms to be included in Japan's five-year deregulation plan.
The goal of the Framework's foreign direct investment and
buyer-supplier talks is to increase the market presence in
Japan of U.S. and other foreign firms by encouraging a more
open and flexible investment regime.  The United States has
made many specific recommendations to the Japanese government.
4.  Debt Management Policies
    Japan is the world's largest net creditor.  It is an active
participant together with the United States in international
discussions of the developing country indebtedness issue in a
variety of fora.
5.  Significant Barriers to U.S. Exports
    The Japanese government has removed many formal barriers to
imports of goods and services.  Import licenses, still
technically required for all goods, are granted on a pro forma
basis, with limited exceptions (fish, leather goods and some
agricultural products).  Japan's average industrial tariff rate
(about two percent) is one of the lowest in the world, and
Japan has agreed to further tariff reductions in the Uruguay
Round.  The Uruguay Round Agreement will reduce but not
eliminate trade barriers in agriculture, manufactured goods,
and services.
    Traditional trade policy measures, however, are not the
greatest obstacles to penetrating Japanese markets.  Instead of
tariffs and official discrimination against imports, U.S.
exporters must deal with numerous factors that raise costs and
inhibit access in areas ranging from glass to auto parts.
These obstacles include archaic and multi-tiered distribution
systems, "keiretsu" (networks between manufacturers and
distributors linked by long-time business relationships and
often by cross-holding of shares) relationships, excessive
government regulation and the use of administrative guidance,
public procurement practices, and the high cost of land (which
inhibits new market entrants).
    In October 1994, the United States and Japan signed
important market-opening agreements under the Framework;
agreements were signed in insurance and government procurement
of medical technology and telecommunications goods and services
(including procurement by Japan's massive phone company, Nippon
Telegraph and Telephone (NTT)).  In December 1994, the United
States and Japan finalized an agreement to open Japan's flat
glass sector to foreign suppliers.  In addition, U.S. and
Japanese negotiators reached agreements in 1994 in a number of
other areas, including opening Japan's huge public works
construction sector to foreign firms; improving access to
Japan's cellular telephone market; eliminating barriers to
imports of apples; and streamlining and improving intellectual
property procedures.
    In the last few years, Japan also agreed to relax rules on
value-added telecommunications services, to strengthen
copyright protection for U.S. music recordings, and to resolve
a dispute involving amorphous metals, for which market entry
has been facilitated.  The United States continues to closely
monitor U.S.-Japan agreements including those in the areas of
commercial satellites, government procurement of
supercomputers, semiconductors, construction, wood products,
paper, medical products and pharmaceuticals, and computer
procurement.  In 1994, the United States announced that
impediments to U.S. market access for paper and wood products
in Japan may warrant future identification of these sectors for
action under the "Super 301" Executive Order.  In 1994, the
United States also initiated a Section 301 investigation of
regulatory barriers in Japan's market for replacement (after
market) auto parts.  Framework negotiations on autos and auto
parts continue.
    The governments of the United States and Japan announced on
January 10, 1995, a comprehensive financial services agreement
under the U.S.-Japan Framework Agreement that will further open
Japan's financial markets to foreign competition.  The
agreement will ensure that U.S. financial institutions have the
opportunity to compete more effectively in the Japanese
financial market.  Inter alia, the agreement opens the
$1 trillion Japanese pension market to effective participation
by foreign fund managers.  The agreement also creates greater
opportunities for foreign financial firms to participate in the
$500 billion Japanese corporate securities market by permitting
greater scope for the introduction of new financial
instruments.  Finally, the agreement will promote further
integration of Japan's capital market with the global capital
markets, and will create significant opportunities for
competitive financial institutions to help Japanese invest
abroad and Japanese firms to offer securities in offshore
markets.
    The ability of foreign architectural and construction firms
to access Japan's public works market continues to be closely
scrutinized by the U.S. government.  For many years, Japan has
engaged in exclusionary practices which have prevented foreign
firms from competing successfully on contracts for major
Japanese construction projects.  To remedy this situation, the
U.S. government negotiated the 1988 Major Projects Arrangements
(revised in 1991) which gave foreign firms improved access to
thirty-four major construction projects with the understanding
that experience gained on these would assist foreign firms in
winning contracts on other construction projects.  Despite
these agreements, U.S. architectural, engineering, and
construction firms continued to face difficulties in doing
business in Japan.  As a result, Japan was designated under
Title VII of the 1988 Omnibus Trade and Competitiveness Act for
discriminatory procurement practices.  Following months of
intensive negotiations with the United States, in January 1994
Japan adopted a new Action Plan to overhaul its current public
works procurement system.  The Action Plan replaces the
designated bidding system (under which only specified companies
could offer bids) with an open and competitive system, allows
foreign firms' international experiences to be considered when
determining a firm's qualifications, and applies to all
procurement above a certain threshold, not just the thirty-four
major projects.  A formal review of the implementation of this
Action Plan will occur during the spring of 1995.
    In addition to progress in the public works area, Framework
agreements in October 1994 improved access for foreign firms to
government procurement of medical technology and
telecommunications goods and services.  The United States
continues to monitor Japanese government procurement practices
to assure that U.S. firms are given an opportunity to compete
fairly and openly.
    Legal services remain on the U.S./Japan trade agenda.
Despite partial liberalization in 1987 which allowed U.S. law
firms to open offices in Japan, the Government of Japan
continues to maintain severe restrictions on the way in which
foreign firms can provide legal services.  For example, foreign
firms are prohibited from employing or entering into
partnership with Japanese attorneys, and lawyers who are not
qualified Japanese lawyers may not advise clients on points of
Japanese law.
    In December 1993, U.S. negotiators included legal services
in the U.S. package submitted to the GATT.  This decision
effectively froze the current practice regarding legal services
performed by foreign lawyers in GATT signatory countries which
had agreed to include legal services in the final agreement.
    Although the Japanese government has simplified, harmonized
and, in some cases, eliminated restrictive product standards to
follow international practices in a number of areas, many
problems remain.  The 1985-1987 Market-Oriented Sector
Selective (MOSS) Talks resolved many standards problems and set
in motion a continuing dialogue through MOSS follow-up meetings
of experts.
    In general, advances in technology make some current
Japanese standards outdated and restrictive.  In addition,
Japanese industry supports unique safety standards that limit
competition.  Lastly, bureaucratic inertia inhibits further
standards simplification.  Standards problems continue to
hamper market access in Japan.
    Japan's Office of the Trade Ombudsman (OTO) traditionally
only responded when an aggrieved party, such as a foreign
company or domestic importer, complained about Japanese
standards, certifications, and testing procedures.  Since 1993,
the OTO has brought its own cases to the attention of the
Japanese government bureaucracy.  Although the U.S. government
had hoped the new process would lead to greater pressure on the
bureaucrats to change, thus far, the OTO has accomplished very
little.  Of the twenty-one requests brought before the OTO in
1993, regulations in only seven areas were revised
satisfactorily (only two of which involved issues raised by the
United States).  The OTO seems to have made the most progress
in technical areas where the complainant made a good case and
where Japanese government bureaucratic resistance to changes
was light.  The OTO process has not been useful in pursuing
policy issues or politicized market access problems, e.g.
removal of the tariff on feedgrains.  In February 1994, the OTO
was upgraded when it was moved to the Office of the Prime
Minister, but it was still not granted any enforcement
authority.  While Government of Japan effort to strengthen the
OTO may have boosted the office's profile, it is unlikely to
significantly improve the OTO's effectiveness.
    Foreign investment into Japan in most sectors is now
subject to only ex post notification to the Ministry of Finance
(MOF), thanks to MOF commitments made under SII.  Previously,
all foreign investors were required to notify the MOF of their
intent to invest 30 days before any investment occurred.  Japan
still requires prior approval in certain sectors:  air and
maritime transport, space development, atomic energy, oil and
gas production and distribution, agriculture, fisheries,
forestry, leather and leather products manufacturing, and
tobacco manufacturing.
    Foreign investment in the banking and securities industries
is subject to a reciprocity requirement.  Japan gives foreign
investors national treatment after entry, with the Organization
for Economic Cooperation and Development (OECD) notified of
limited exceptions.  The Japanese government does not employ
local equity requirements, export performance requirements or
local content requirements.  The Japanese government has not
forced foreign individuals or companies to divest themselves of
investments.  Japanese law allows foreign landholding, and
foreign investors may repatriate capital and profits readily.
    At the same time, inward foreign direct investment in Japan
is much lower than that in its major G-7 trading partners.
There are a number of factors underlying the low level of
inward investment, including the legacy of many years of active
Japanese government discouragement of foreign investment.  A
major problem today, however, is the high cost of doing
business in Japan, particularly for new market entrants, that
makes the rate of return on investments far lower than other
alternatives.  In addition, foreign acquisition of existing
Japanese companies is difficult, due in part to crossholding of
shares among allied companies, leading to the limited
availability of publicly traded common stock.  This practice
complicates efforts of foreign firms to acquire existing
distribution/service networks through mergers and
acquisitions.  The Japanese government has taken some initial
steps to provide incentives to foreign investors.  This issue
is under discussion in Foreign Direct Investment sub-basket of
the Framework.
6.  Export Subsidies Policies
    Japan is a signatory to the OECD Export Credit Arrangement,
including the agreement on the use of tied-aid credit.  The
Japanese government subsidizes exports as permitted by the
Arrangement, which allows softer terms for export financing to
developing nations.  Of the $11.5 billion of official
development assistance that Japan disbursed in 1993, slightly
less than half of the bilateral assistance portion (excluding
Central Europe assistance) was in the form of concessional
loans.  In this area, Japan has virtually eliminated its
tied-aid credits and now extends over 95 percent of its new
loan aid under untied terms.  But U.S. exporters continue to
face difficulties in competing due to the use of (1) Less
Developed Country (LDC) untied aid, where bidding is only open
to Japanese and LDC firms, and (2) tied or partially tied
feasibility studies (provided by grant aid) for untied (loan
aid) projects which result in project specifications more
suited to Japanese than U.S. bidders.  These programs are the
subject of continued discussions within the OECD.  Japan
exempts exports from the three percent VAT-like consumption tax
initiated in April 1989.  This provision does not appear to
have any significant impact on a manufacturer's decision to
sell domestically or export.
7.  Protection of U.S. Intellectual Property Rights
    Japan is a party to the Berne, Paris and Universal
Copyright conventions and the Patent Cooperation Treaty.
Japan's Intellectual Property Rights (IPR) regime affords
national treatment to U.S. entities.  The United States and
Japan agree that uniform IPR standards and better enforcement
are needed.  To that end, U.S., Japanese, and European
negotiators are engaged in trilateral patent harmonization
talks.  Discussions, including the protection of semiconductor
mask works, are also taking place in the World Intellectual
Property Organization and the GATT.
    Many Japanese firms use the patent filing system as a tool
of corporate strategy, filing many applications to cover slight
variations in technology.  Public access to applications and
compulsory licensing provisions for dependent patents
facilitate this practice.  The rights of U.S. filers in Japan
are often circumscribed by prior filings of applications for
similar inventions or processes.  The need to respond
individually to multiple oppositions slows the process and
makes it more costly.  Japanese patent examiners and courts
interpret patent applications narrowly and adjudicate cases
slowly.  Japanese patent law lacks a doctrine of equivalence
and civil procedure lacks a discovery procedure to seek
evidence of infringement.
    Average patent pendency in Japan is one of the longest
among developed countries, averaging over five years from
application to grant.  The long pendency period, coupled with a
practice of opening all applications to public inspection
18 months after filing, exposes patent applications to lengthy
public scrutiny without effective legal protection.  Bilateral
talks on Japan's slow patent processing led to a reduction in
the average patent examination portion of the pendency period,
from about 37 months to 30 months.  Efforts to reduce this
period continue.
    A United States-Japan IPR agreement, signed in August 1994
under the Framework, will provide some relief to problems posed
by the lengthy pendency period and the practice of multiple
opposition filing.  The Japan Patent Office will introduce
legislation to revise the current system by April 1, 1995.  The
agreement is to be fully operational by January 1, 1996.  The
revised system will allow opposition filings only after a
patent is granted.  Multiple opposition filings will be
consolidated and addressed in a single proceeding, minimizing
time and costs.  There will also be a revised, accelerated
examination system, the major elements of which are:  (a)
patents already filed with accredited foreign patent
authorities will be eligible for accelerated examination in
Japan; (b) accelerated examination applications will be granted
or abandoned within 36 months of the request date; and (c)
there are limits on accelerated examination fees.
    Trademark applications are also processed slowly, averaging
two years and three months and sometimes taking three to four
years.  Infringement carries no penalty until an application is
approved.  In April 1992, Japan amended the trademark law to
protect service marks explicitly.
    Japanese copyright protection for programming languages and
algorithms is ambiguous.  Pirated video sales remain a problem,
although the Japanese police cooperate with the Motion Picture
Association of America in targeting video pirates, under 1988
Japanese IPR legislation that facilitates prosecution.  Japan
has committed to enforce vigorously national treatment rights.
A revised copyright law, which was passed in 1991 and took
effect in January 1992, extends copyright protection to 30
years.  Pre-1978 foreign recordings are now protected back to
1969; foreign recordings are provided with exclusive rights by
cabinet order.  Discussions by an advisory panel to the
Japanese government on a proposal to relax legal restrictions
against reverse engineering of software and decompilation of
computer programs took place in 1994, but the panel ultimately
took no action on the matter and instead recommended further
study.  The U.S. government and U.S. software companies
registered their strong objection to any change.
    Although Japan's 1990 Trade Protection Law is an
improvement over protection by ordinary contract, it is still
very difficult to get an injunction against a third party
transferee of purloined trade secrets.
8.  Worker Rights
    a.  The Right of Association
    This right as defined by the International Labor
Organization (ILO) is protected in Japan.
    b.  The Right to Organize, Bargain and Act Collectively
    This right is assured by the Japanese constitution.
Approximately 25 percent of the active work force belongs to
labor unions.  Unions are free of government control and
influence.  The right to strike is implicitly assumed by the
constitution, and it is exercised frequently.  Public
employees, however, do not have the right to strike, although
they do have recourse to mediation and arbitration in order to
resolve disputes.  In exchange for a ban on their right to
strike, government employee pay raises are determined by the
government, based on a recommendation by the Independent
National Personnel Authority.
JAPAN2
	U.S. DEPARTMENT OF STATE
JAPAN: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
    c.  Prohibition of Forced or Compulsory Labor
    The Labor Standards Law prohibits the use of forced labor,
and the law is vigorously enforced.
    d.  Minimum Age of Employment of Children
    Under the Revised Labor Standards Law of 1987, minors under
15 years of age may not be employed as workers, and those under
the age of 18 may not be employed in dangerous or harmful
work.  Child labor laws are rigorously enforced by the Labor
Inspection Division of the Ministry of Labor.
    e.  Acceptable Conditions of Work
    Minimum wages are set regionally, not nationally.  The
Ministry of Labor effectively administers various laws and
regulations governing occupational health and safety, principal
among which is the Industrial Safety and Health law of 1972.
    f.  Rights in Sectors with U.S. Investment
    Internationally recognized worker rights standards, as
defined by the ILO, are protected under Japanese law and cover
all workers in Japan.  U.S. capital is invested in all major
sectors of the Japanese economy, including petroleum, food and
related products, primary and fabricated metals, machinery,
electric and electronic equipment, other manufacturing and
wholesale trade.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                              5,429
Total Manufacturing                                   13,610
  Food & Kindred Products                     806
  Chemicals and Allied Products             3,189
  Metals, Primary & Fabricated                260
  Machinery, except Electrical              3,800
  Electric & Electronic Equipment           1,614
  Transportation Equipment                  1,824
  Other Manufacturing                       2,118
Wholesale Trade                                        5,859
Banking                                                  309
Finance/Insurance/Real Estate                          4,780
Services                                                 740
Other Industries                                         666
TOTAL ALL INDUSTRIES                                  31,393
Source: U.S. Department of Commerce, Bureau of Economic Analysis
JORDAN1
L]L]U.S. DEPARTMENT OF STATE
JORDAN: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                              JORDAN
                     Key Economic Indicators
        (Millions of U.S. dollars unless otherwise noted)
                                      1992      1993    1994  1/
Income, Production and Employment:
Real GDP (1985 prices)  2/         3,236.1   3,194.5   3,370.2
Real GDP Growth (pct.)                11.2       5.8       5.5
GDP (at current prices)  2/        4,851.3   5,034.0   5,523.0
By Sector:
  Agriculture                        330.6     342.9       N/A
  Energy/Water                       106.4     105.4       N/A
  Manufacturing                      610.1     632.0       N/A
  Construction                       231.0     252.3       N/A
  Rents                               11.1      11.2       N/A
  Financial Services                 770.3     819.6       N/A
  Other Services                     141.9     144.8       N/A
  Government/Health/Education        832.5     901.3       N/A
  Net Exports of Goods & Services -1,732.2  -1,648.2  -1,960.0
Real Per Capita GDP (1985 base)      807.0     770.0     802.2
Labor Force (000s)                     706       712       760
Unemployment Rate (pct.)                14        13        11
Money and Prices:  (annual percentage growth)
Money Supply (M2)                     12.8       9.3       6.0
Base Interest Rate  3/                 8.5       8.5       8.5
Personal Saving Rate                   7.0       8.0       8.0
Retail Inflation                       8.2       4.0       4.0
Wholesale Inflation                    4.8       0.7       2.0
Consumer Price Index                 100.0     103.3     107.3
Exchange Rate (USD/JD)
  Official  4/                         1.5       1.4       1.4
Balance of Payments and Trade:
Total Exports (FOB)  5/              950.6     967.8   1,100.0
  Exports to U.S.                      6.3      10.2      11.3
Total Imports (CIF)  5/            3,321.0   3,435.1   3,550.0
  Imports from U.S.                  369.3     436.1     470.0
Aid from U.S.                         50.0      90.0     120.0
Aid from Other Countries             206.1     198.8     347.0
External Public Debt               7,804.7   7,750.1   6,500.0
Debt Service Payments (paid)         490.2     612.6     400.0
Gold and Foreign Exch. Reserves    1,501.7   1,337.3   2,155.7
Trade Balance                     -2,280.4  -2,485.3  -2,450.0
  Trade Balance with U.S.           -363.0    -425.9    -458.7
N/A--Not available.
1/ 1994 figures are estimates based on IMF targets.
2/ GDP at producers' prices.
3/ Average rediscount rate.
4/ Actual exchange rate.
5/ Merchandise trade.
1.  General Policy Framework
    The Jordanian economy experienced sustained growth in
domestic output in 1993-94.  GDP increased by 5.8 percent in
1993, with the rate of investment to GDP stabilizing at 30
percent.  For 1994, the IMF forecasted GDP growth at 5.5
percent.  The construction sector has continued to dominate
economic activity, while the financial, manufacturing,
agricultural and trading sectors have also expanded.  Overall,
the Jordanian economy responded positively to the structural
adjustment program formulated by the Government of Jordan and
the IMF in 1992.
    The government is beginning to adjust its economic policies
in response to recent progress in the peace process.  It is in
the second year of implementation of a five-year Economic and
Social Development Plan for 1993-97, but is now considering
amendments to account for Jordan's peace treaty with Israel and
plans for cooperation on economic issues with the Palestinian
Authority.
    In May 1994, the government entered into a three-year
Extended Fund Facility with the IMF that requires a variety of
sectoral policy reforms.  Under this program, the government
projects annual GDP growth will reach 5.5 percent, the annual
inflation rate will fall below five percent, the current
account deficit will decline to 9.7 percent of GDP and Central
Bank reserves will rise to the equivalent of 2.4 months of
imports, or 665 million dollars.  To sustain development and
reach these targets, the government has announced that
increased public and private sector savings and sustained
investment levels are key priorities.
    In January 1994, the government announced its intention to
adopt an agenda of economic reforms affecting the legal
environment of doing business in Jordan.  The government plans
to introduce a new investment law, amend the customs and income
tax laws, harmonize the General Sales Tax with customs duties
and simplify tariff schedules.  In addition to reforming the
civil service system, the government also plans to limit the
growth of the public sector by freezing hiring during 1995.
    As for monetary policy, the Central Bank of Jordan
announced in July that it would begin exercising indirect
control over the banking system through the use of
dinar-denominated certificates of deposit.  It also has
encouraged holdings in dollar-denominated CD's by offering
interest at two points above the London Interbank Offered Rate
(LIBOR), a move intended to enhance reserves and discourage
capital flight.  The Central Bank also plans to streamline its
handling of deposit facilities and credits.  By early 1995, it
will eliminate commercial bank deposit requirements and no
longer compel local banks to adhere to credit/deposit ratios.
The Central Bank has not fully eliminated the double reserve
requirement on interbank deposits, but has announced its
intention to simplify its oversight of this market.
2.  Exchange Rate Policies
    The Central Bank regulates foreign currency transactions in
Jordan and sets the banking system exchange rate.  It also
restricts moneychangers to dealing within a specified range of
buying and selling rates.  On October 12, 1994, the average
exchange rate was one dinar equals USD 1.43, one cent lower
than the average rate in 1993.  The Central Bank has announced
that it will not float the dinar despite its application to the
IMF for assistance in implementing a system for partial dinar
convertibility.  In negotiations between the Jordanian
government and the Palestinian Authority, the Central Bank has
sought to assure West Bank residents holding dinars of the
currency's continued stability.
3.  Structural Policies
    Pricing Policies:  In general, market forces set prices.
However, the government imports and subsidizes the prices of
basic foodstuffs such as cereals, sugar, milk and frozen meat.
It also controls the prices of other non-strategic commodities
such as automobile spare parts, construction materials,
household cleaning materials and food and beverage served in
restaurants.  The Ministry of Supply may intervene and set a
maximum price ceiling on any consumer commodity.  It operates a
ration card system for consumer purchases of sugar, rice and
milk for citizens whose monthly income is less than 715
dollars.  Subsidized prices and controls have no impact on
Jordanian imports of U.S. food staples.  The Ministry of Supply
has submitted a proposal to the Cabinet to eliminate price
controls on non-subsidized, non-strategic commodities and
limiting food subsidies to employees in the civil service and
the military.
    Tax Policies:  The government remains dependent on customs
duties and import taxes as its primary source of domestic
revenue, which it collects on all imports.  To stimulate export
production, import tariffs are low for many raw materials,
machinery and semi-finished goods.  Although high tariff rates
are imposed on many consumer and luxury goods, tariff reducing
measures have recently been taken.  In November, for instance,
the government announced a duty reduction on automobiles,
previously ranging from 110 to 310 percent, to 44 to 200
percent.  Also announced were tariff reductions to 50 percent
on numerous consumer products.
    In recent years, customs collections have yielded a lower
percentage of total government revenues as other taxes have
assumed greater importance.  In June, 1994 the government
enacted a general sales tax to replace a previously-imposed
consumption tax.  The sales tax applies to all durable and
consumer goods except food staples and health care and
education-related products.  An income tax is levied at a
maximum marginal rate of 40 percent for all businesses.  The
marginal tax rate on individual income is capped at 55 percent,
with high personal, educational and medical deductions
permitted.  Interest, dividend and capital gains earnings are
exempt from taxation, except for income earned by financial
institutions.  In addition, income derived from agriculture is
exempt.  The government plans to submit changes to the income
tax law to parliament in November, 1994 that will extend its
coverage to capital gains in property and stock market
transactions and limit total liability to 35 - 40 percent of
income.
    Regulatory Policies:  Jordanian regulations pertaining to
the licensing and operations of regional offices of foreign
firms are fairly clear.  However, local American businessmen
complain of difficulties with customs authorities regarding
tariff exemptions and licensing.  Potential investors note that
cumbersome and time consuming procedures delay registration and
government approval of their projects.  In August 1994, King
Hussein announced the formation of a Royal Development and
Modernization Commission under the leadership of Crown Prince
Hassan.  One of the Commission's stated goals is the
facilitation of foreign investment through the elimination of
major regulatory and bureaucratic impediments and
disincentives.  In one of its first recommendations, the
Commission has proposed the establishment of a centralized
office for foreign investment applications.
4.  Debt Management Policies
    Jordan's external debt as of December 1, 1993 stood at 6.8
billion dollars, about 130 percent of GDP.  A week later, the
government reached agreement in rescheduling its $895 million
commercial debt under terms finalized with the London Club.
Commercial creditors agreed to sell up to 35 percent of
principal with a discount of 35 percent, on which Jordan would
pay 50 percent of outstanding interest.  The rest of the
principal (at least 65 percent) was converted into 30-year
par-value bonds guaranteed by U.S. zero interest coupon bonds.
Under this option, Jordan agreed to immediately pay ten percent
of outstanding interest while converting the remainder into
12-year dollar bonds payable in 19 semi-annual installments
after a three-year grace period.  The London Club agreement
helped Jordan reduce 60 percent of its debt to the Club, or 12
percent of its total external debt.
    Following successful negotiations in June 1994, Jordan and
its bilateral creditors in the Paris Club reached a $1.2
billion debt rescheduling agreement covering principal and
interest payments falling due between 1994 and 1997 in addition
to arrearages from the first half of 1994.
    Despite its success at rescheduling its foreign debt, the
Jordanian government continued to pressure its bilateral
creditors for debt forgiveness.  After the Washington
Declaration of King Hussein and Prime Minister Rabin of Israel
in July 1994, the United States agreed to write off $705
million of Jordanian debt over a three-year period.  An
agreement was signed in September 1994 to forgive the first
tranche of $220 million.  Other bilateral creditors have
followed the United States' example.  The United Kingdom,
Germany and France agreed to write off $90 million, $53 million
and $4.5 million, respectively.  Even with these commitments,
Jordan's total foreign debt remains above five billion dollars,
one of the highest in the world on a per capita basis.
5.  Significant Barriers to U.S. Exports
    Import Licenses:  The 1993 Import and Export Law abolished
import licensing requirement.  But due to the lack of
implementing regulations, the Jordanian Customs Department
continues to require licenses on all imports except for certain
exemptions for agricultural commodities and imports by the
royal family and government agencies.  The continued need for
import licenses, which are tied to the issuance of foreign
exchange permits controlled by the Central Bank of Jordan
(CBJ), hampers the free flow of trade between the United States
and Jordan.
    Standards, Testing, Labeling, and Certification:  All
imports to Jordan are subject to the approval of the Standards
and Measures Department.  Foodstuffs and medicines must undergo
laboratory testing and certification.  Local traders who
regularly import from the United States complain that Jordanian
testing standards for consumer and durable items are not fully
transparent.  They also complain that they are routinely fined
for importing U.S. products that contain parts and components
made outside the U.S.
    Investment Barriers:  There are no restrictions on the
degree of foreign ownership in manufacturing enterprises.
However, foreigners may not own more than 49 percent of hotels,
restaurants, banks and businesses engaged in trading and
transport.  Although the government officially encourages
foreign investment, an application requires prior approval by
the Council of Ministers, which is often a lengthy process.  To
facilitate foreign investment, the Jordan Investment Promotion
Department was separated from the Ministry of Industry and
Trade and made an independent agency in January 1994.  The
Jordan Investment Corporation, a government agency that manages
the pension fund of civil service employees, encourages foreign
participation in projects that it promotes.
    Government Procurement Practices:  All government
purchases, with a few exceptions, are made by the General
Supplies Department of the Ministry of Finance.  Foreign
bidders are permitted to compete directly with local
counterparts in international tenders financed by the World
Bank.  However, local tenders are not directly open to foreign
suppliers.  By law, foreign companies must submit bids through
their agents.  While Jordan's procurement law does not permit
non-competitive bidding, the law does not prohibit a government
agency from pursuing a selective tendering process.  In
addition to the review committees at the Central Tenders and
the General Supplies Departments, the law gives the tender
issuing department the right to accept or reject any bid while
withholding information on its decisions.  Foreign bidders may
seek recourse only through the Jordanian legal system.  In
response to a recommendation of the Royal Development and
Modernization Commission, a higher procurement commission was
created in October 1994 to monitor the procedures of the
Supplies Department.
    Customs Procedures:  Businessmen often comment that customs
procedures are the greatest impediment to doing business in
Jordan.  While the government has often promised to reform its
customs regime, overlapping areas of authority and numerous
signature clearance requirements remain in place.  Actual
commodity appraisal and tariff assessment practices commonly
differ from written regulations.  Customs officers often make
discretionary decisions about tariff and tax applications when
regulations and instructions are conflicting.  To secure tariff
exemptions, businessmen must document that imported raw
materials will be used in export production, and that the final
product will have at least a 40 percent Jordanian value-added
content.  The Director General of Customs may grant temporary
admission status to certain goods such as heavy machinery and
equipment used for executing government or government-approved
projects.  Foreign construction companies operating alone or
with Jordanian partners may apply for this temporary admission
status.  The government plans to present amendments to the
customs law to Parliament in November 1994.  These will
delegate greater authority from the Minister of Finance to the
Customs Department director, giving him increased discretionary
powers to investigate violations and order confiscations.
6.  Export Subsidies Policies
    Under Central Bank regulations, 70 percent of profits
earned from exports is exempted from corporate income tax, with
a maximum exemption of 30 percent of a company's total income.
Excluded are exports under bilateral trade protocols and
phosphate, potash and fertilizer exports.  The Central Bank has
also implemented other export financing measures, such as
reducing interest rates on advances from eleven to six percent,
reducing the value-added requirement for financing from 40
percent to 25 percent, excluding export advances from
outstanding lines of credit, offering long-term export
financing for up to five years, and permitting the Industrial
Development Bank to offer export financing loans on machinery
imports for up to five years at no more than 8.5 percent
interest.
7.  Protection of U.S. Intellectual Property
    Jordan is a member of the World Intellectual Property
Organization (WIPO) and a party to the Paris Convention for
Protection of Industrial Property.  Domestically, Jordan's
copyright law, passed by Parliament in 1992, is the country's
only recent effort to extend legal protection to foreign
intellectual property.  The Trademark and Patents and Designs
Laws have not been amended since the early 1960's.  The
Copyright law deals with all aspects relating to the exclusive
rights to 1) copy or reproduce works, 2) translate, revise, or
otherwise adapt or prepare program derivatives work, and 3)
distribute or publicly communicate copies of the work.
Royalties may be remitted abroad under licensing agreements
approved by the Ministry of Industry and Trade.  However, only
the intellectual property of Jordanian and foreign authors who
register their works inside the kingdom are protected by Law.
Infringement of U.S. intellectual property rights is not
subject to any penalties.
    The government has not yet begun to enforce its copyright
law.  The pirating of audio and video tapes for commercial
purposes is a widespread practice, over which the government
exercises no control.  Pirated books are also sold in Jordan,
although few, if any, are published within the country.
Although the government announced that it would issue strict
measures on copyright protection in January 1994, it has issued
only procedural notes for existing regulations thusfar.
    Patents (product and process) must be registered at the
Ministry of Industry and Trade to receive protection.  A
foreign company may register a patent by sending a power of
attorney to a local patent agent or lawyer.  Registration may
be renewed once for a period of 14 years.  Protection under the
law is only available to domestic and foreign patents that are
registered in Jordan.  Infringement of a foreign patent, such
as a manufacturing process for a chemical compound, is
considered to be a violation by Jordanian courts only if it is
proved to be an exact duplication.
    New Technologies:  Computer software piracy is rampant in
Jordan's small, but growing, computer market.  The Government
of Jordan has announced that it will give priority to
protecting computer software copyrights, but has not yet taken
any action or issued clear policy directives.
    There is no agreement between the United States and Jordan
concerning the protection of U.S. exports of intellectual
property.  Although the impact of this lack of protection may
not have been severe enough to cause losses to U.S. firms, it
has created lost opportunities.
8.  Worker Rights
    a.  The Right of Association
    While Jordanians are free to join labor unions, only about
10 percent of the work force is unionized.  Unions represent
their membership in dealing with issues such as wages, working
conditions and worker layoffs.  Seventeen unions make up the
General Federation of Jordanian Trade Unions (GFJTU).  The
GFJTU actively participates in the International Labor
Organization.
    b.  The Right to Organize and Bargain Collectively
    GFJTU member unions regularly engage in collective
bargaining with employers.  Negotiations cover a wide range of
issues, including salaries, safety standards, working
conditions and health and life insurance.  If a union is unable
to reach agreement with an employer, the dispute is referred to
the Ministry of Labor for arbitration.  If the Ministry fails
to act within two weeks, the union may strike.  Arbitration is
the usual means of resolving disputes, and labor actions are
generally low-key and do not lead to strikes.
    c.  Prohibition of Forced Compulsory Labor
    Compulsory labor is forbidden by the Jordanian constitution.
    d.  Minimum Age of Employment of Children
    Children under age 16 are not permitted to work except in
the case of professional apprentices, who may leave the
standard educational track and begin part-time (up to 6 hours a
day) training at age 13.
    e.  Acceptable Conditions of Work
    Jordan's workers are protected by a comprehensive labor
code, enforced by 30 full-time Ministry of Labor inspectors.
There is no comprehensive minimum wage in Jordan.  The
government maintains and periodically adjusts a minimum wage
schedule of various trades, based on recommendations of an
advisory panel consisting of representatives of workers,
employers and the government.  Maximum working hours are 48 per
week, with the exception of hotel, bar, restaurant and movie
theater employees, who can work up to 54 hours.  Working
conditions and minimum wage for foreign workers are stipulated
in bilateral treaties, but are not strictly enforced or
consistently adhered to.  Jordan also has a workers'
compensation law and a social security system which cover
companies with more than five employees.  A new draft labor law
is under consideration, but does not appear to be a high
priority.
    f.  Rights in Sectors with U.S. Investment
    Workers' rights in sectors with U.S. investment do not
differ from those in other sectors of the Jordanian economy.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                             (1)
Total Manufacturing                                   (2)
  Food & Kindred Products                     0
  Chemicals and Allied Products               0
  Metals, Primary & Fabricated                0
  Machinery, except Electrical                0
  Electric & Electronic Equipment             0
  Transportation Equipment                    0
  Other Manufacturing                        (2)
Wholesale Trade                                        0
Banking                                               (1)
Finance/Insurance/Real Estate                         (1)
Services                                               0
Other Industries                                       0
TOTAL ALL INDUSTRIES                                  16
(1) Suppressed to avoid disclosing data of individual companies
(2) Less than $500,000
Source: U.S. Department of Commerce, Bureau of Economic
Analysis
(###)
KAZAKHST1
^U.S. DEPARTMENT OF STATE
KAZAKHSTAN: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                            KAZAKHSTAN
                    Key Economic Indicators 1/
                   (1992 in millions of rubles)
   (1993-94 in millions of U.S. dollars unless otherwise noted)
                                       1992    1993    1994 2/
Income, Production and Employment:
Real GDP (1985 prices)                  N/A     N/A     N/A
Real GDP Growth (pct.)                -14.0   -15.6   -26.9
GDP (at current prices)           1,213,616 3,924.7    97.5
By Sector:
  Agriculture                       159,688   988.1     N/A
  Energy/Water                          N/A     N/A     N/A
  Manufacturing                     771,568 1,994.9     N/A
  Construction                       75,531   442.5     N/A
  Transport/Communication            80,716   321.6     N/A
  Housing                            14,899     N/A     N/A
  Financial Services                  9,032     N/A     N/A
  Trade/Other Branches              150,607   226.1     N/A
  Other Services                     25,177     N/A     N/A
  Government/Health/Education        53,575     N/A     N/A
  Net Exports of Goods & Services     1,399     3.4     0.1
Per Capita GDP                       71,541   231.0     5.8
Labor Force (000s)                    7,356   7,561   7,597
Unemployment Rate (pct.)               0.46    0.50    0.66
Money and Prices:  (annual percentage growth)
Money Supply (M2) 3/                  5,438 1,333.9   671.5
Base Interest Rate 4/                   N/A     240     300
Personal Savings Rate                   N/A     N/A     N/A
Retail Inflation                      938.6 1,296.8     N/A
Wholesale Inflation 5/
  Agricultural Products               1,032     776   1,817
  Industrial Products                 2,469   1,442   2,985
  Consumer Goods                      1,344   1,386   2,716
Consumer Price Index 6/               3,061   2,265     534
Exchange Rate (USD/tenge)
  Official                              N/A     5.7    49.5
  Parallel                              N/A     7.5    56.0
Balance of Payments and Trade:  (USD millions)
Total Exports (FOB)                 1,398.4 1,270.6   440.6
  Exports to U.S.                      94.0   135.5    37.1
Total Imports (CIF)                   468.8   358.3   242.5
  Imports from U.S.                     6.0    24.2    15.6
Aid from U.S. 7/                       49.1    42.4   144.2
Aid from Other Countries                N/A   115.5    12.5
External Public Debt 8/                 N/A     N/A   2,055
Debt Service Payments (paid)            N/A     N/A     N/A
Gold and Foreign Exch. Reserves         N/A   722.9   1,004
Trade Balance                         929.6   912.3   198.1
  Trade Balance with U.S.              88.0   111.3    21.5
N/A--Not available.
1/ Source:  Kazakhstan State Committee for Statistics
(GOSKOMSTAT), unless otherwise indicated.  Actual when
available, otherwise estimates.  Due to limited amount of 1992
information available (exchange rate), figures are in millions
of rubles.  1993 and 1994 figures are converted from tenge at
the official exchange rates as indicated above.
2/ First six months of 1994 only, unless otherwise indicated.
3/ Source:  International Monetary Fund (IMF) and GOSKOMSTAT.
1994 money supply is for nine months.
4/ Average weighted interest rate for six-month National Bank
of Kazakhstan credits.  Figures represent rates for December
1993 and June 1994.
5/ In percent to corresponding period of previous year.  1994
agricultural wholesale inflation for first three months only.
6/ December of previous year=100.
7/ Source:  U.S. Agency for International Development (U.S.
AID) and U.S. interagency estimates.  1994 figure represents
all U.S. government and private aid as of June 30, 1994.
8/ October 1994 estimate from the Ministry of Finance.
1.  General Policy Framework
    Kazakhstan continues to suffer through a severe economic
crisis.  Momentum for economic reform, however, is
accelerating.  Throughout 1993 and the first half of 1994,
industrial output declined, gross domestic product (GDP)
dropped, agricultural production decreased, and inflation
increased rapidly.  Cost of living increases outpaced the
salary rise of the average Kazakhstani worker during 1993 and
the first half of 1994.  In addition, the government's
financial crisis has resulted in cutbacks to many public and
social services.  To stabilize and reverse the economic
situation, the government has taken a number of steps,
including tightening monetary and fiscal policy after an
inflationary surge in early 1994.
    On October 11, 1994, President Nazarbayev accepted the
resignation of the entire Kazakhstan Cabinet of Ministers.
Many of the older and more conservative ministers were replaced
by younger, reform-minded individuals.  In general, the
government shake-up is viewed as a positive step towards
accelerating the pace and scope of economic reform in
Kazakhstan.  This action was preceded by the July 15 issuance
of a third (and largely inconsequential) anti-crisis program by
the government in the last two years, and by public statements
by Nazarbayev advocating the acceleration of market and
government reform and public acceptance of economic "shock
therapy."  It remains to be seen whether, especially in the
absence of further political reform, the new government can
implement economic reform quickly enough to meet public
expectations.
    Fiscal Policy:  The 1994 budget deficit was approximately
4.6 percent of GDP in 1994.  The 1994 deficit was funded
primarily by foreign loans and National Bank of Kazakhstan
(NBK) credit resources.  The proposed 1995 budget, released on
September 2, 1994, projects the deficit to be approximately
19.3 percent of GDP.  Only 12 percent of the projected 1995
budget deficit is planned to be financed through foreign loans
and NBK credit resources.  The remaining 88 percent currently
remains "without definite resources."  The International
Monetary Fund (IMF) is reportedly targeting the 1995 budget
deficit at 3.5 percent of GDP.
    The 1995 budget proposes a nominal 296.6 percent increase
in spending over 1994; revenues are projected to increase
nominally by 89.2 percent during 1995.  New legislation
addressing tax reform and relief are also planned.  If
approved, this new legislation would streamline the current tax
system and reduce overall tax rates.
    Monetary Policy:  During the first five months of 1994, the
money supply increased 270 percent; inflation increased during
the same period by 370 percent.  The NBK has attempted to
reduce inflation by regulating the distribution of direct
government credits, beginning in May 1994.  To date, the NBK
efforts appear to have been successful.  Monthly inflation
rates in August and September were 13.3 percent and 9.7,
respectively.  The inflation index for the first nine months of
1994 is 832 percent (December 1993 = 100).
    The sale of three-month and six-month government bonds
began on January 12, 1994.  As of October 31, 1994, over 45
auctions have been held by the NBK.
2.  Exchange Rate Policy
    When introduced in November 1993, the Kazakhstan national
currency, the tenge, was not initially traded and its exchange
rate against the dollar was artificially maintained by the
government.  However, upon advice from U.S. officials and
international observers, the government permitted the tenge to
be freely traded.
    On September 17 the governments of Kazakhstan and
Kyrgyzstan lifted restrictions on bilateral currency
transactions.  The agreement permits both currencies, the tenge
and the som, to be used as legal tender in investments
(securities) in either country and in interbank and trading
transactions.
    Currently, the government of Kazakhstan does not appear to
enforce any major foreign exchange controls, except that
enterprises earning foreign exchange are required to sell 50
percent of the total earnings on the local market.
3.  Structural Policies
    Pricing Policies:  Although the government continues to
exert price controls and provide subsidies for certain consumer
commodities, there appears to be little, if any, impact on U.S.
exports to Kazakhstan.  In general, consumer goods prices are
determined by market sources.
    Tax Policies:  According to the proposed 1995 budget,
government revenues will be derived primarily from corporate
income taxes, a value-added tax (VAT), and export duties.  At
the end of 1993 the government announced a series of tax
increases and enforcement upgrades with apparently little
visible success in either.  In February 1994 a tax decree
raised individual rates to 60 percent.  However, this was later
lowered to 40 percent.  The July 15 anti-crisis program calls
for the overhaul and simplification of the current tax system,
reduction of overall rates, and improved revenue collection.
The government has indicated that the maximum tax rate for
individuals and "legal entities" will not exceed 40 percent and
35-40 percent, respectively.
    On October 23, 1993 Kazakhstan signed a double taxation
treaty with the United States.  To date, the treaty remains
unratified by either the Kazakhstan Supreme Soviet or the U.S.
Senate.  However, the Kazakhstan government has indicated that
it will submit the treaty for parliamentary approval before the
end of 1994.
    Regulatory Policies:  Government regulation policies are
extensive and complex.  Implementation of these regulations
remains capricious (often varying between ministries) and a
major source of corruption.  U.S. and western business
representatives often complain about the lack of standard
licensing procedures.
4.  Debt Management Policies
    Kazakhstan has accepted liability for all Former Soviet
Union (FSU) debt.  Accordingly, Kazakhstan was assigned a 3.86
percent share of the FSU's total debt, or approximately $2.5
billion.  While acknowledging its formal obligations,
Kazakhstan negotiated a "zero option" agreement with the
Russian Federation.  Under this agreement, Russia accepted full
responsibility for FSU debt, in return for all foreign assets
of the FSU.  Kazakhstan has initially agreed, but since the
agreement must be accepted by all successor states, it has not
yet entered into force.
    To date, Kazakhstan has not paid-off its 1992, 1993, and
1994 debt obligations.  Kazakhstan has paid short-term
obligations, but commercial creditors have experienced some
repayment delays.  Currently, Kazakhstan has incurred over $1.5
billion in external debt, primarily to the Russian Federation
for gas and fuel payment arrears.  In the future, the $115
million Russian lease payment for Baykonur Cosmodrome is to be
applied directly to Kazakhstan's debt to Russia.  It appears
this arrangement will continue in 1995.  Barter also appears to
be growing as an alternative to hard currency payments.
    Excluding the United States, Kazakhstan has received
credits from a number of countries including Germany, Austria,
France, Japan, Hungary, and Turkey.  The U.S. Export-Import
Bank (EXIMBANK), the Overseas Private Investment Corporation
(OPIC), the Central Asian Enterprise Fund (CAEF), and the
Defense Enterprise Fund have indicated their willingness to
provide funding for U.S.-Kazakhstan commercial projects.
Funding for defense conversion projects is provided separately
under the Nunn-Lugar legislation.  In addition, international
financial organizations such as the International Monetary Fund
(IMF), World Bank, and the European Bank for Reconstruction and
Development (EBRD) have also indicated a willingness to support
commercial projects in Kazakhstan.
5.  Significant Barriers to U.S. Exports
    There appear to be no significant legal barriers to U.S.
merchandise exports to Kazakhstan.  The government appears to
have adopted a strategy of relatively low import barriers to
encourage international exports to Kazakhstan.  U.S. exports to
Kazakhstan are limited more by the logistical capabilities of
private firms to service the Kazakhstan market and the
unavailability of credit.
    Structural barriers include a weak system of commercial
law, including the absence of effective bankruptcy procedures,
a shortage of domestic capital to pay for U.S. goods, the lack
of an effective judicial process for breach-of-contract
resolution, and huge government bureaucracy.
    Import Licenses:  As of October 1994, U.S. companies were
not required to obtain import licenses.  Despite indications in
late 1993 that the government would limit imports and introduce
an import licensing system, no such action has yet occurred.
In addition, the government has also proposed restrictions on
the import of non-essential goods by means of protective
tariffs, duties, and quotas, beginning January 1994.  To date,
only duties for alcoholic beverages and cigarettes have been
increased under this policy.
    Service Barriers:  Certain restrictions on the import of
services exist.  In April 1993 the government banned foreign
insurance companies from providing foreign investment
insurance.  Excluding the single western reinsurance firm
designated by the government, no U.S. or western firms are
permitted to offer foreign investment insurance services in
Kazakhstan.  A number of U.S. firms offering accounting and
legal services, however, are currently operating in Kazakhstan,
and U.S. and foreign airlines are welcome.
    Standards, Testing, Labelling, and Certification:
Government observance of old Soviet standards, testing,
labeling and certification requirements are extensive in some
areas, non-existent in others.  Such requirements constitute a
barrier when these requirements differ significantly from U.S.
and western standards.
    Investment Barriers:  One of the most significant
investment barriers to U.S. firms in Kazakhstan is the severe
lack of domestic capital to service loans and to meet equity
percentages in joint ventures.  In addition, U.S. firms cannot
currently purchase land in Kazakhstan since this sector has not
yet been privatized.  U.S. firms, however, can obtain lease
rights for 99 years through a domestic partner.  Further,
government and local authorities have, at times, insisted that
U.S. firms support and invest in social programs for local
communities.
    Finally, phased privatization of state industries may
initially limit the foreign investment "share" in such
industries.  However, complete privatization, should it occur,
will have no such barriers.
    Government Procurement Practices:  Government procurement
practices are not limited by formal "Buy Kazakhstan"
regulations.  Western goods, particularly U.S. goods, are
favored by the Kazakhstani consumer.
    Customs Procedures:  Currently, Kazakhstan has a customs
agreement with Russia, amounting to a de facto customs union.
Kazakhstan still uses customs procedures from the old Soviet
Union, which can be cumbersome and frustrating.  Most imported
goods transit through other newly independent states, unless
they arrive by air or via China.  Foreign firms can import
items for their own use duty free.
6.  Export Subsidies Policy
    Rather than providing export subsidies to domestic
enterprises, the government currently levies an export tax.
The precise amount of the export tax varies according to the
product and can range up to 30 percent.  Kazakhstan has
protested antidumping restrictions on its exports (mostly
metals) imposed by the United States and the European Union
(EU).  In 1992, the U.S. Department of Commerce reached a
consent decree with Kazakhstan limiting uranium exports and
imposing a 104 percent antidumping duty on ferrosilicon.  In
1994, the uranium agreement was modified to permit some sales
of uranium into the U.S. market.  The Commerce Department
investigated Kazakhstani exports of titanium sponge and found
no direct impact on the U.S. market.  Virtually all of
Kazakhstan's exports went to Russia.
    In 1993, the government moved to further increase controls
on exports.  Beginning January 1, 1994 domestic enterprises are
not permitted to export goods directly and are required to
channel exports of 18 critical products through approximately
10 state trading organizations controlled by the government.
The critical products include oil and gas, coal and coke, ore
and concentrates, ferrous and non-ferrous metals, alumina,
precious metals and stones, organic and non-organic chemical
products, radioactive chemical elements, grain, cotton, and
caviar.  These goods are also subject to an export quota.  The
regulations include a 100 percent surrender requirement for
export proceeds, although this may be reduced to 50 percent.
7.  Protection of U.S. Intellectual Property
    In principle, Kazakhstan's civil code protects U.S.
intellectual property.  However, the absence of criminal
sanctions and lax enforcement have meant that U.S. and western
intellectual property rights are often unprotected.  In 1992
Kazakhstan acceded to the Geneva Convention on the Protection
of Intellectual Property and joined the World Intellectual
Property Organization.  In addition, the U.S.-Kazakhstan
Bilateral Trade Agreement, which came into force on January 12,
1994, requires Kazakhstan to protect U.S. intellectual property.
    Patents and Trademarks:  Current patent legislation
guarantees the right of inventors to the "name" of their
product, but financial rights of patent holders do not appear
to be protected.  A national patent department which registers
and regulates patents and trademarks was established in 1992.
In addition, old Soviet patents are apparently being converted
to Kazakhstani patents.
    The registration or trademarks began in July 1992.
Trademark violation is a crime and courts are empowered to
arbitrate trademark infringement cases.  However, enforcement
appears to be rare and arbitrary.
    Copyrights:  In 1992 Kazakhstan established a national
copyright agency with jurisdiction over copyrights in the arts,
music, science, and software.  In late 1993 the government
submitted to the Supreme Soviet a draft copyright law.  To
date, the copyright law has not been passed.  If passed, legal
sanctions against copyright violators could be implemented and
Kazakhstan would accede to the Berne Convention.
    New Technologies:  Pirated U.S. and western movies
routinely appear on every television station in Kazakhstan, but
are not apparently mass produced in Kazakhstan.  Sales of
pirated counterfeit goods including video and audio recordings
and clothing result in some loss to U.S. industry, but are
relatively insignificant.  Pirated computer software is
available but use is not yet widespread.  However, the use of
pirated desktop software, i.e., MicroSoft Windows, WordPerfect,
etc., does appear to be widespread and increasing rapidly.
Illegal software development and manufacture does not occur in
Kazakhstan due to limited local availability of advanced
products.  This appears to apply to other advanced technologies
as well.
    In addition, pirated satellite broadcasts are common and
availability and use appears to be generally widespread.  Many
television stations routinely broadcast U.S. and western
programs and news reports pirated via satellite dish.
    Despite lax enforcement of current laws and delays in
approving new legislation, overall intellectual property losses
to U.S. firms currently appear to be small.  However,
counterfeiting and pirating of U.S. and western goods is
increasing.  Without more rigorous enforcement of intellectual
property laws and new legislation, future losses to U.S.
industry could be significant and potential export and
investment opportunities could be lost.
8.  Worker Rights
    a.  The Right of Association
    The new labor code, along with the Kazakhstan constitution,
guarantees basic workers' rights, including the right to
organize and the right to strike.  The law does not, however,
provide mechanisms to protect workers who join independent
unions from threats and harassment from enterprise management
or from the state-run unions.  Kazakhstan joined the
International Labor Organization (ILO) in 1993, but the Supreme
Soviet has not yet ratified the ILO conventions.
    b.  The Right to Organize and Bargain Collectively
    There are significant limits on the right to organize and
bargain collectively.  Most industry remained state-owned in
1994 and was subject to the state's production orders.
Although collective bargaining rights are not spelled out in
the law, in some instances unions have successfully negotiated
agreements with management.  If a union's demands are not
acceptable to management, they may be presented to an
arbitration commission comprised of management, union
officials, and independent technical experts.  There is no
legal protection against anti-union discrimination.
    c.  Prohibition of Forced or Compulsory Labor
    Forced labor is prohibited by law.  In some places,
however, compulsory labor is used.  Some persons were required
to provide labor or the use of privately owned equipment with
no, or very low, compensation to help gather the annual grain
harvest.
    d.  Minimum Age of Employment of Children
    The minimum age for employment is 16.  A child under age 16
may work only with the permission of the local administration
and the trade union in the enterprise at which the child would
work.  Such permission is rarely granted.  Abuse of child labor
is generally not a problem, except that child labor is
reportedly used during the harvest, especially the cotton
harvest in the south.
    e.  Acceptable Conditions of Work
    As of October 1, 1994 the official minimum wage is 200
tenge (slightly less than four dollars) per month.  The legal
maximum work week is 48 hours, although most enterprises
maintain a 40-hour work week with at least a 24-hour rest
period.  Worker and safety conditions in Kazakhstan's
industries are substandard.  Safety consciousness is low.  The
regulations concerning occupational health and safety,
enforceable by the Ministry of Labor and the state-sponsored
unions, are largely ignored by management.
    f.  Rights in Sectors with U.S. Investment
    Rights and conditions in sectors with U.S. investment do
not differ substantially from other sectors.  However,
workplaces or enterprises with U.S. investment have
significantly improved working conditions.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                             (1)
Total Manufacturing                                     0
  Food & Kindred Products                   0
  Chemicals and Allied Products             0
  Metals, Primary & Fabricated              0
  Machinery, except Electrical              0
  Electric & Electronic Equipment           0
  Transportation Equipment                  0
  Other Manufacturing                       0
Wholesale Trade                                         0
Banking                                               (1)
Finance/Insurance/Real Estate                           0
Services                                                0
Other Industries                                        0
TOTAL ALL INDUSTRIES                                  (1)
(1) Suppressed to avoid disclosing data of individual companies
Source: U.S. Department of Commerce, Bureau of Economic
Analysis
(###)
KENYA1
tU.S. DEPARTMENT OF STATE
KENYA: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                              KENYA
                     Key Economic Indicators
        (Millions of U.S. dollars unless otherwise noted)
                                     1992     1993       1994 1/
Income, Production and Employment:
Real GDP (1982 prices) 2/           2,773    1,475      1,672
Real GDP Growth (pct.)                0.4      0.1        3.0
GDP (at current prices) 2/          8,562    4,627      6,257
By Sector:
  Agriculture                       2,226    1,219      1,648
  Energy/Water                         86       40         54
  Manufacturing                     1,164      626        653
  Construction                        265      142        381
  Rents                               N/A      N/A        N/A
  Financial Services                  745      401        580
  Other Services                      942      506        883
  Government/Health/Education         856      460        844
  Net Exports of Goods & Services    -256     -131        -94
Real Per Capita GDP (1982 base)       123       55         72
Labor Force (000s)                 11,100   11,800     12,300
Unemployment Rate (pct.) 3/           N/A      N/A        N/A
Money and Prices:
Money Supply (M2)                    34.6     28.1       15.0
Base Interest Rate (pct.)              25       27         19
Personal Saving Rate (pct.)          15.5     20.0       16.0
Retail Inflation                      N/A      N/A        N/A
Consumer Price Index                 27.5     41.0       13.0
Exchange Rate (USD/KSh)                32       65         45
Balance of Payments and Trade:
Total Exports (FOB) 4/              1,033      633      1,458
  Exports to U.S.                      58       53         58
Total Imports (CIF) 4/              2,011    1,208      2,078
  Imports from U.S.                   116      104        141
Aid from U.S.                        30.8     20.1       18.2
Aid from Other Countries              N/A      N/A        N/A
External Public Debt                5,600    6,300      6,700
Debt Service Payments (paid)          265      436        450
Gold & Foreign Exch. Reserves         255      150        800
Trade Balance 4/                     -978     -575       -620
Balance with U.S.                     -58      -51       -117
N/A--Not available.
1/ 1994 figures are estimates based on January - June data.
2/ GDP at factor cost.
3/ The Kenyan Government does not publish unemployment figures
but the 1994 is estimated at 35 - 40 percent.
4/ Merchandise trade.
1.  General Policy Framework
    Kenya's economy is basically agricultural, with a small
industrial base.  Agriculture contributes 26 percent to GDP,
provides 75 percent of total employment and 55 percent of
export earnings.  The main foreign exchange earners are coffee,
tea, horticulture and tourism.  The industrial sector, which
accounts for 14 percent of GDP, is dominated by import
substitution-oriented industries, many of which are agro-based
and highly dependent on the domestic market and neighboring
countries.  The public sector is still large in Kenya,
absorbing over 45 percent of all modern sector wage employees
and 40 percent of total investment.
    Kenya's current policy framework emphasizes the role of the
free market.  Features of the economy include the use of
market-based pricing incentives, a liberal investment code, and
a newly liberalized foreign exchange system.  Non-traditional
areas which have the most potential to augment incomes and
employment include horticulture, non-agricultural exports and
small-scale enterprises.
    Under a World Bank/IMF supported structural adjustment
program in 1993-94, the government made substantial progress
removing impediments to the development of a free market.
Price controls were abolished, import licensing requirements
removed, the foreign exchange system liberalized, and markets
were opened up to competition.  As a result of the economic
reforms undertaken in the last two years, the economy is on the
road to recovery.  GDP is expected to grow by over 3 percent in
1994, after two years of stagnation (0.4 percent in 1992 and
0.1 percent in 1993).
    The government brought down the annual inflation rate
(month-to-month) from 101 percent in July 1993 to 13 percent in
October 1994.  The Central Bank of Kenya (CBK) acted swiftly in
1993 to mop up excess liquidity and improve management of the
financial sector.  Starting in March 1993, the CBK offered
weekly sales of $125 million worth of Treasury Bills with
interest rates rising as high as 50 to 70 percent.  The
commercial bank cash ratio was raised steadily to reach 20
percent by the second half of 1994.  A number of weak banks and
non-bank financial institutions were either closed or brought
under statutory management.
    These policy measures worked.  Money supply, which grew by
28 percent in 1993 decreased substantially to an estimated 15
percent growth in the last quarter of 1994.  Commercial bank
interest rates followed the trends in T-Bill interest; rising
as high as 35 percent in July and then declining to below 20
percent in October, 1994.  In one year, the Kenya shilling
appreciated from KSh 68/USD in October 1993 to KSh 35/USD in
October 1994.  The government continues to rely on traditional
monetary policy instruments such as the cash ratio, discount
rates and open market operations.
    Under a tax modernization program, the government widened
the tax base, lowered income taxes and introduced the use of
personal identification numbers for tax-related transactions.
The government increased the range of goods and services
subject to the Value Added Tax (VAT), which accounted for over
50 percent of domestic revenue in 1994.  Most goods and
services are subject to an 18 percent VAT.  The government will
lower the maximum personal income tax rate from the current 40
percent to 35 percent effective January 1995.  It also reduced
corporate tax from 37.5 percent to 32.5 percent in 1994.
    Still in process are major government programs to privatize
parastatals and reduce the size of the civil service.  Fraught
with difficulties and political disagreements, parastatal
divestiture has been slow -- only 28 out of a possible 200 have
been privatized since 1991.  The big parastatals, identified as
strategic, are earmarked for restructuring ("commercializing")
in order to make them more cost effective and efficient.  A
three year program to lay off 48,000 civil service workers was
started in July 1993.  The program is roughly on target; 16,000
workers accepted golden handshakes and left by June 1994.
2.  Foreign Exchange Policy
    From 1981-1993 the Kenya shilling was pegged to the SDR.
In February 1993, the government suspended the Foreign Exchange
Control Act paving the way for a market determined exchange
rate.  Exporters may now use hard currency earnings directly to
meet import requirements and remit dividends.  By October 1994,
foreign exchange reserves at the Central Bank had risen to a
record high.  The officially acknowledged figure is over
$800 million, or enough to cover six months of import
requirements; but analysts estimate current reserves are
actually closer to $1.2 billion.
    Borrowing restrictions on foreign and local firms from both
domestic and off-shore sources have been eliminated.
Expatriates are permitted to operate foreign currency accounts
in Kenyan banks.  Investors may repatriate new investment
earnings without Central Bank (CBK) approval.  Travelers are
free to settle their bills, obtain air tickets and pay airport
taxes in either Kenya shillings or foreign currency.  The only
remaining restrictions, limitations on foreign direct equity
investment and the need for approval of capital gains
repatriations, may be withdrawn in the near future.
3.  Structural Policies
    After many years of delay, the government took bold steps
and implemented economic reform measures in the 1993-94 period
under a World Bank/IMF-sponsored structural adjustment
program.  The key goals of this program are to reduce the
budget deficit and inflation, provide market-based incentives
for private sector growth, and encourage investment and
exports.  An immediate benchmark of accomplishment is to
achieve a GDP growth rate of at least five percent.  To help
bring the budget deficit down to 3.0 percent of GDP from the
6.5 percent level of FY 93/94 (July 1 - June 30), the
government committed itself to adhere strictly to budget
ceilings.  To improve its performance on revenue collection,
the government introduced a pre-shipment import inspection
program geared toward apprehending tax evaders.  Inflation has
come down to 13 percent.
    These measures have helped to improve the country's general
investment climate.  Nevertheless, there are a number of
broad-based problem areas which must be ameliorated to ensure
that investor confidence is restored and the declining
investment trend reversed.  These include:  rehabilitation of
the deteriorating physical infrastructure, jump starting the
prodigious privatization and parastatal reform process,
streamlining the civil service and making it more "user
friendly," continuing to curb corruption, and augmenting
political stability.
    In the beginning stages of the current Structural
Adjustment Program (SAP), January 1993 - April 1994, the
government went through a turbulent economic period marked by
sharp increases in prices and interest rates, and depreciation
of the Kenya shilling.  The positive impacts of economic reform
kicked in during the second half of 1994.  Competition is now
working to lower prices.  Bazaars, once a rare event, have
become far more common.  Producers no longer require large
inventories of raw materials.  With no import licensing, firms
can program production and forecast sales more accurately.
Shortages of inputs and basic consumer items have become a
thing of the past.  The market for U.S. exports has
substantially improved.
    Despite these significant advances, numerous specific
problems remain for businessmen in Kenya.  Customs rules are
detailed and rigidly implemented.  This has complicated
manufacturing-under-bond schemes.  A strict constructionist
attitude among customs officials often leads to serious delays
in clearing both imports and exports.  Foreign firms are
excluded from some government tenders.  Kenyan importers must
use local insurance companies to insure imports.  Insurance
companies must reinsure part of their business with the local
parastatal reinsurance company.  All commodities imported into
Kenya are subject to pre-shipment inspection, including price
comparison, by a government appointed inspection firm.  Trade
barriers on certain products are maintained by high import
duties and value-added taxes.  Procurement decisions can be
dictated by donor-tied aid, or influenced by corruption.
    Although substantive economic reforms have been undertaken,
not all bilateral donors are reassured about Kenya's progress
towards political reform including progress toward general good
governance, democratization, protection of human rights and
elimination of corruption.  Persistent ethnic violence
complicates the political landscape.
4.  Debt Management Policies
    For the first time in its history, at the end of 1993,
Kenya had accumulated debt arrears of $715 million.  This
prompted the government to seek a rescheduling of outstanding
official debt at the Paris club in January 1994.  A
multilateral agreement was concluded under non-concessional
terms which rescheduled arrears accumulated from December
1991-1993.  Repayment is scheduled over seven years, starting
with a grace year in 1994 and ballooning to 25 percent in the
later years of the period.  Specific bilateral agreements have
been considered and granted throughout 1994.  This rescheduling
will help improve Kenya's capital account and has added to
Kenya's international credibility.  It is notable that Kenya
neither asked for, nor was granted, concessional terms.  Kenya
did not seek a London Club rescheduling.  Private arrears
accumulated during the 1991-93 period (approximately $70
million) were sufficiently small they could be repaid
directly.  Kenya could use some of its large stock of foreign
exchange reserves ($800 million - $1.2 billion) to pre-pay
international debt.
    Kenya's stock of international debt was $6.7 billion in
1994 and annual debt payments are in the $400-500 million
range.  Under current conditions of an appreciating currency
and large reserves, this debt is manageable.  Earlier exchange
controls, which provided incentives for Kenyans to keep their
hard currency out of the official system, made debt management
more problematical.  Kenya's adherence to the IMF Article VIII,
which became effective in 1994, forbids Kenya from returning to
exchange controls.
5.  Significant Barriers to U.S. Exports
    The liberalization of import controls and foreign exchange
rates are major positive steps towards removal of trade
barriers.  As a part of these reforms, in 1994 the government
instituted pre-shipment inspection for quality, quantity and
price for all imports with F.O.B. value of more than $1,613.
Inspection is done by a government appointed inspection firm
which has offices at major trading points such as New York,
Baltimore, Chicago, New Orleans and Houston.  Goods arriving in
Mombasa without pre-inspection documentation are subject to
inspection at the Port, for an additional fee.  This
requirement has contributed to major back-ups in port
operations during 1994.  Importation of animals, plants, and
seeds is subject to quarantine regulations.  Special labelling
is required for condensed milk, paints, varnishes, and
vegetable/butter ghee.  In addition, imports of prepacked
paints and allied products must be sold by metric weight or
metric fluid measure.
    Commercial banks are required to ensure that importers have
submitted Import Declaration forms, invoices, a Clean Report of
Findings, and a copy of the customs entry form before releasing
foreign exchange.  Prior exchange approval must be obtained for
imports of machinery and equipment which are regarded as part
of equity capital or are purchased with borrowed funds.   The
Clean Report of Findings is also required by authorized banks
before a shipping guarantee can be issued.  All goods purchased
by importers in Kenya must be insured with companies licensed
to conduct insurance business in Kenya.
    There are barriers to trade in services, in video tapes,
movies and cassettes, construction, engineering, architecture,
legal representation, insurance, leasing and shipping.  Films
are licensed, censored and sold by a government company, the
Kenya Film Corporation.  Foreign companies offering services in
construction, engineering and architecture may face
discrimination when bidding for public projects.  Kenya's draft
shipping law has been the subject of official protests by the
United States and the European Community for discrimination
against foreign shippers.
    Government procurement for ordinary supplies as well as
materials and equipment for public development programs is a
significant factor in Kenya's total trade.  The hand of
government is particularly evident in programs designed to
ensure citizen control of local commerce.  Because Kenya is a
former British Colony, U.K. firms dominate in the procurement
of government imports.  Many of these are purchased through
Crown Agents, a British quasi-governmental entity.  Sales of
major import items are frequently tied to the source country
providing official development finance.
    Government procurement is done through tender boards.  The
main boards are the Central Tender Board, Ministerial Tender
Boards, the Department of Defence Tender Board, and District
Tender Boards.  The Kenyan government supplies manuals
outlining procurement practices.  Goods worth over $4,000 must
be purchased through open tender.  Adjudication of the
quotations must be made by three or more responsible officers.
    In principle, the procurement regulations apply, without
discrimination, to all potential bidders, regardless of
nationality of supplier or origin of the product/service.
Nevertheless, preferential treatment for domestic
suppliers/products/services is included.  Up to 10 percent
preferential bias is allowed for all firms participating in
Kenyan government tenders whose share capital is at least 51
percent owned by indigenous Kenyans.  The government provides
preference to domestic suppliers for small procurements and
contracts.
    Practice often differs from government regulations.
Tenders have not infrequently been awarded to uncompetitive
firms in which government officials have a significant
interest.  Medical tenders are a frequent case in point.  The
incidence of corruption, particularly at lower levels, has
increased in the last year to compensate for the closure of key
"political banks" which were previously the major conduits for
ill-gotten gains.  This trend affects the allocation of
government tenders for construction and procurement.
Prosecution of corrupt officials above the lowest level has
been rare, but may be on the increase.  Recent charges levied
against the Goldenberg/Exchange Bank operation are a sign of
progress.  Corruption involving contract awards is a particular
problem for U.S. companies who are disadvantaged when competing
with non-U.S. firms less constricted in their ability to
provide "incentives" prohibited under U.S. laws.
    Kenyan law does not permit manufacturers to distribute
their own products.  Additionally they are required to submit
data and information about their distributors.  The Monopolies,
Prices and Trade Restriction Practices Act sets a legal
framework for dealing with restrictive and predatory practices
which might inhibit competitive markets, and controls mergers,
takeovers of enterprises, and monopolies.  This Act was most
recently cited by the government as a warning to oil companies
against collusion in the newly liberalized petroleum market.
6.  Export Subsidy and Tax Policies
    In April 1993, the Kenyan government scrapped an export
compensation scheme which officially paid up to 20 percent of
value to manufacturers whose products had less than 70 percent
import content.  This scheme was a major tool used by the
Goldenberg gold/diamond company (now under investigation) to
extract even higher payments of 35 percent from the government
for questionable, if documented, exports.  At the same time,
another controversial Pre-Export Financing scheme was
eliminated.  In their place, the government enacted a
duty/value added tax remission facility which allows exporters
to purchase tax-free inputs locally.  This facility is designed
to be less "corruptible" but is also less lucrative for
exporters.
    The government grants a one-time 85 percent investment
allowance tax deduction for the cost of industrial buildings,
fixed plant, and machinery for investments outside Nairobi and
Mombasa.  Thirty-five percent deduction is allowed for
investments within these cities.  This provision reduces income
taxes due during the start-up phase of a project.
    Exporters to the Preferential Trade Area (PTA) regional
market (19 countries of eastern and southern Africa) receive
tax advantages and have the option to trade in local
currencies.  The market has a total population of 190 million
and a GDP of $50 billion.  The aim of the PTA is to eventually
establish a common market with no barriers across member
countries' borders.  Kenya is also a signatory of major
international trade agreements such as the United Nations
Conference on Trade and Development (UNCTAD), the Lome
Convention and the GATT (soon to be the World Trade
Organization).  As such, Kenya is subject to various
requirements agreed to under these umbrellas.
    The government has two major export institutions -- the
Export Processing Zones Authority and the Export Promotion
Programs Office -- which coordinate export promotion
activities.  There is one private Export Processing Zone (EPZ)
which caters to over eleven companies.  This zone, the Sameer
Industrial Park, is a subsidiary of Firestone East Africa.  Two
government sponsored EPZs, one in Mombasa and another near
Nairobi, are nearing completion.
    The government has progressively reduced the corporate tax
rate from 45 percent in the 1980s to the current 35 percent.
Withholding tax (ranging from 12.5 percent to 30 percent) is
imposed on royalties, interest, dividends, and management
fees.  Kenya's tax treaties normally follow the Organization
for Economic Cooperation and Development (OECD) model for the
prevention of double taxation.  There is no tax treaty with the
United States.
7.  Protection of U.S. Intellectual Property
    Kenya is a member of the Paris Union International
Convention for the Protection of Industrial Property (Patents
and Trademarks), together with the United States and 80 other
countries.  Businesses and individuals from signatory states
are entitled to protection under this convention, including
national treatment and "property rights" recognition of
patents.  Although a unified system for the registration of
trade marks and patents for Anglophone Africa was signed in
1976, implementation has been stagnant due to the lack of
cooperation among the signatory states.  Another mechanism to
protect patents, trademarks, and copyrights is embodied in the
African Intellectual Property Organization.  Its enforcement
and cooperation procedures remain untested.
    Kenya also is a member of the African Regional Industrial
Property Organization.  The government of Kenya accepts binding
international arbitration of investment disputes between
foreign investors and the state.
    In 1990, the Kenyan government established an Industrial
Property Office (KIPO) for granting industrial property rights,
screening technology transfer agreements and licenses, and
providing patenting information to the public.  Models for
patents and utilities and industrial design certificates are
available through this office.  It also acts as a receiving
office for international applications.  An independent national
patent law to replace pre-independence British procedures was
also enacted in 1990.
    In March 1994, KIPO issued the first patent certificate
under the Kenya Industrial Property Act to three Kenyan
scientists for their work in the development of a tick
resistance vaccine, Novel Tick Resistance Antigenic Indicators
(TRAI).  In its fourth year of operation, KIPO has received 127
patent applications and 38 industrial designs which are being
processed.  Ninety-three of the patent applications are foreign
and 34 are local.  Fifteen of the 38 industrial design
applications are local.
    Protection of copyrights is not particularly extensive or
efficient in Kenya.  The Copyright Act of 1989 provides for
protection from audio copyright infringement.  Video copyright
infringements are not covered by the law, and are widespread.
    Trademark protection is available from the Kenyan
government for a period of seven years from the date of
application.  The first applicant for trademark protection is
entitled to registration.
8.  Worker Rights
    a. The Right of Association
    Other than central government civil servants and university
academic staff, all workers are free to join unions of their
own choosing.  At least 33 unions in Kenya represent
approximately 350,000 workers, or about 20 percent of Kenya's
industrialized work force.  Except for the 150,000 teachers who
belong to the Kenya National Union of Teachers (KNUT) and four
other smaller unions registered by the government, all other
unions belong to one central body, the Central Organization of
Trade Unions (COTU).
    Until early 1993, Kenyan labor enjoyed harmonious relations
with the central government.  In April 1993 this changed, as
workers experienced a large rise in the cost of living.
Blaming the government, COTU's leaders called for an
across-the-board 100 percent wage increase and dismissal of
Kenyan Vice President George Saitoti.  The call culminated in a
Labor Day (May 1) ceremonies walkout by the Minister for Labor,
the arrest of the COTU secretary-general and his senior
associates, a two-day national strike (which was observed in
key sectors nationwide, even after the Minister had declared it
illegal) and finally, a government-sponsored coup within COTU.
    Without waiting the normal seven-day period to verify the
so-called elections, and disregarding a legal challenge by the
existing COTU officers, the Registrar of Trade Unions
immediately registered the new COTU officers.  These officers
were allowed to occupy COTU headquarters.  The issues of both
the coup's legality and the act of the registrar were still in
court as of November 1994, but no international group has
recognized the new leadership.
    In theory, the Trade Disputes Act permits workers to strike
provided that 21 days have elapsed following the submission to
the Minister of Labor of a written report detailing the nature
of the dispute.  In 1993, however, the Minister of Labor
declared several strikes illegal.  A case in point was the KNUT
strike in July 1993, for which the required notice had been
given.  It was averted at the last minute.  Others included the
national two-day strike after Labor Day, a one-day strike
called by the Islamic Party of Kenya in Mombasa, and an air
traffic controllers' slowdown in November, 1993.  The military,
police, prison guards and members of the National Youth Service
are precluded by law from striking.  Kenyan labor legislation
is silent on the issue of national strikes.
    Internationally, COTU is affiliated with both the continent
wide Organization of African Trade Union Unity and the
International Confederation of Free Trade Unions (ICFTU).  COTU
affiliates are free to establish linkages to international
trade secretariats of their choice.
    b. The Right to Organize and Bargain Collectively
    The 1962 Industrial Relations Charter, executed by the
government, COTU and the Federation of Kenya Employers, gives
workers the right to engage in legitimate trade union
organizational activities.  This charter does not have the
force of law.
    Both the Trade Disputes Act and the Charter authorize
collective bargaining between unions and employers.  Wages and
conditions of employment are established by negotiations
between unions and management.  In 1994, government wage policy
guidelines which limited salary increments were relaxed as was
the employers' authority to declare workers redundant.
Collective bargaining agreements must be registered with the
Industrial Court.  The Export Promotion Zone Authority has
determined that local labor laws, including the right to
organize and bargain collectively, will apply in EPZs.  In
practice, exemptions and conditions have been granted within
the Zones, giving rise to public criticism in 1994.
    c. Prohibition of Forced or Compulsory Labor
    The Constitution proscribes slavery, servitude, and forced
labor.  Under the Chiefs' Authority provisions, people may be
required to perform community service in an emergency but there
are no known recent instances of this practice.  People so
employed must be paid the prevailing wage.  The International
Labor Organization's (ILO) committee of experts has found this
provision of Kenyan law in contravention of ILO conventions 29
and 105 on forced labor.
    d. Minimum Age for Employment of Children
    The Employment Act of 1976 proscribes the employment of
children under the age of 16 in any industrial undertaking.
The law does not apply to the agricultural sector, where about
70 percent of the labor force is employed, or to children
serving as apprentices under the terms of the Industrial
Training Act.  Ministry of Labor officers are authorized to
enforce the minimum age statute.  Given the high levels of
adult unemployment and underemployment, the employment of
children in the formal wage sector is not a significant problem.
    e. Acceptable Conditions of Employment
    In 1994, minimum unskilled worker salaries averaged less
than thirty dollars per month.  The normal work week, by law,
is limited to 52 hours, except for nighttime employees (60
hours) and agricultural workers (excluded).  Non-agricultural
employees receive a minimum of one rest day in a week, one
month's annual leave, and sick leave.  By law, total hours
worked (i.e., regular time plus overtime), in any two-week
period for night workers cannot exceed 144 hours; the limit is
120 hours for other workers.  The Ministry of Labor is tasked
with enforcing these regulations, but reported violations are
few.  The Factories Act of 1951 which sets forth detailed
health and safety standards, was amended in 1990 to encompass
the agriculture, service and government sectors.  Inspection of
work sites continued to improve, although "whistle blowers" are
not protected.  Kenya's worker compensation regulations do not
yet comply with the provisions of ILO Convention No. 17.
KENYA2
U.S. DEPARTMENT OF STATE
KENYA: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                              28
Total Manufacturing                                    32
  Food & Kindred Products                     3
  Chemicals and Allied Products              13
  Metals, Primary & Fabricated              (1)
  Machinery, except Electrical                0
  Electric & Electronic Equipment             3
  Transportation Equipment                  (1)
  Other Manufacturing                         1
Wholesale Trade                                         1
Banking                                               (1)
Finance/Insurance/Real Estate                         (1)
Services                                              (1)
Other Industries                                        0
TOTAL ALL INDUSTRIES                                  104
(1) Suppressed to avoid disclosing data of individual companies
Source: U.S. Department of Commerce, Bureau of Economic Analysis
KOREA__S1
qU.S. DEPARTMENT OF STATE
KOREA: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                           SOUTH KOREA
                     Key Economic Indicators
        (Millions of U.S. dollars unless otherwise noted)
                                     1992      1993      1994 /1
Income, Production and Employment:
Real GDP Growth (pct.)                5.1       5.5       7.6
GDP (at current prices) /2        307,919   330,819   371,600
By Sector:
  Agriculture/Forestry/Fisheries   22,807    23,402    26,012
  Manufacturing                    85,449    89,647   100,698
  Electricity/Gas/Water             6,770     7,575     8,509
  Construction                     42,104    45,133    50,696
  Financial Services               51,137    56,439    63,396
  Other Services                   57,887    62,431    70,127
  Government/Health/Education      60,048    65,662    73,756
  Net Exports of Goods & Services  -3,083     1,318    -1,900
Per Capita GDP (USD)                7,046     7,501     8,350
Labor Force (000's)                19,426    19,803    20,800
Unemployment Rate (pct.)              2.4       2.8       2.6
Money and Prices:  (annual percentage rate)
Money Supply (M2)                      18.4      18.6      15.0
Yield on Corp. Bonds (pct.) /3         16.2      12.6      12.5
Personal Saving Rate /3                27.1      26.4      27.0
Retail Inflation                        6.2       4.8       6.3
Wholesale Inflation                     2.2       1.5       2.5
Consumer Price Index (1990 base)      116.1     121.7     129.4
Average Exchange Rate
  (US$/1,000 won)                     1.281     1.246     1.245
Balance of Payments and Trade:
Total Exports (FOB) /4             76,632    82,234    92,500
  Exports to U.S.                  18,090    18,138    19,590
Total Imports (CIF) /4             81,775    83,800    97,208
  Imports from U.S.                18,287    17,928    20,384
Aid from U.S.                           0         0         0
Aid from Other Countries                0         0         0
External Debt /5                   42,819    43,870    46,000
Debt Service Payments               5,478     5,500     6,000
Gold and Foreign Exch. Reserves    17,154    20,262    23,500
Trade Balance /4 (cost. basis)     -5,143    -1,566    -4,708
  Balance with U.S. (cost. basis)    -197       210      -794
1/ 1994 figures are all estimates based on available monthly
data as of October 1994.
2/ GDP at factor cost.
3/ Figures are actual, average annual interest rates, not
changes in them.
4/ Merchandise trade.
5/ Includes non-guaranteed private debt.
1.  General Policy Framework
    The South Korean Government's economic policies have
traditionally emphasized rapid export-led development and the
protection of domestic industries.  Government intervention in
the economy to promote these objectives has been pervasive
throughout the post-Korean war era.  Restrictions on foreign
participation in the economy through trade and investment have
been common.  In the latter part of the 1980s, removal of
explicit import prohibitions and steadily increasing domestic
demand began to push Korea toward a more mature stage of
economic development.  Some Korean policy makers recognize the
need to deregulate and modernize, but are still influenced by
the dirigism of past governments.
    The Korean economy is on the rebound.  Growth has been
accelerating since mid-1993, and real GDP in the first half of
1994 rose 8.5 percent over year-earlier levels.  Industrial
production may climb about 10 percent in 1994, and the capacity
utilization rate in factories exceeds 80 percent.  The
expansion is investment-led, as the large conglomerates
implement ambitious plans to modernize and expand facilities.
Exports, aided by the strength of the yen, remain brisk in
1994, although imports are even more buoyant.  Imports from the
United States are growing at double-digit rates.  Consumption
spending, which accounts for over half of total GDP, is rising
along with optimism about the economy.  Real GDP growth, which
averaged 5.5 percent in 1993, will exceed 7 percent in 1994.
    Despite faster growth, the economy displays few signs of
overheating.  Consumer prices jumped 3.3 percent between
December 1993 and March 1994 due to food product shortages and
public service tariff hikes, but inflation has since
moderated.  To forestall serious inflation, the Bank of Korea
intends to hold money supply growth toward the bottom of its
14 to 17 percent target range in the latter half of 1994.
    ROKG macroeconomic policy was lauded in a 1994 OECD review
of the Korean economy.  Government spending and taxes as a
share of GNP, as well as the fiscal deficit, are low by
international standards.  Moreover, the quality of public
expenditure is high, with an emphasis on education and public
works rather than transfer payments.  The national savings rate
has climbed dramatically since the ROKG made inflation control
a priority in the early 1980s, and now roughly equals the gross
investment ratio at about one third of GNP.
    At the microeconomic level, however, government
intervention is extensive and costly in terms of economic
efficiency.  The prices of many products are de facto
controlled.  The ROKG allocates credit according to firm size
and must approve all bond and stock issuances.  Most overseas
capital transactions are tightly controlled.  Investment and
product safety regulations inhibit domestic competition and
discriminate against foreigners.  ROKG task forces have been
commissioned to rid the economy of obstructive and redundant
regulations, but thus far progress has been marginal.
2.  Exchange Rate Policies
    The won has appreciated against the dollar by about one
percent between January and October 1994.  On the other hand, a
sharp fall in the external value of the won against the yen has
given Korean heavy industries price advantages over their
Japanese rivals.
    The U.S. Treasury has reported to the U.S. Congress that it
finds no evidence of direct exchange rate manipulation by the
Korean authorities to gain competitive advantage.  However,
Treasury noted that stringent foreign exchange and capital
controls distort trade and investment flows and frustrate the
emergence of a truly market-determined exchange rate.
3.  Structural Policies
    South Korea's economy is based on private ownership of the
means of production and distribution.  The government, however,
has actively intervened in the South Korean economy through low
interest "policy loans," and discretionary enforcement of
regulatory policies.  This has resulted in a high degree of
concentration of capital and industrial output in a small
number of large business conglomerates, or "chaebols."  The
most recent Korean government estimates indicate that the
30 largest chaebols account for 45 percent of the total capital
of the domestic financial sector, and 28 percent of total
manufacturing capacity.  The Korean government uses tax audits
and a tight grip on the financial sector to maintain effective
control over Korean industry.
    Historically, the import regime in Korea was structured to
allow easy entry of raw materials and capital equipment needed
by competitive export industries while consumer imports were
severely restricted.  Since the mid-1980s the Republic of Korea
has eliminated most explicit import prohibitions outside of the
agricultural area.  Many of the problems U.S. exporters now
experience in South Korea are rooted in the maze of regulations
which make up complicated licensing requirements, rules for
inspection and approval of imported goods, country of origin
marking requirements, and other standards often inconsistent
with international norms.
    January 1992 marked the beginning of the Presidents'
Economic Initiative (PEI), a bilateral cooperative effort to
eliminate generic barriers in the areas of standards and
rule-making, customs and import clearance, technology, and
investment.  The PEI lists of recommendations in these three
critical areas built on the results of the 1989 Super 301
Agreements and addressed key doing-business concerns of U.S.
firms.  After more than a year of discussions, the PEI working
groups issued reports on implementation in June 1993.
Significant progress was made by Korea in carrying out the
recommendations in all areas except investment, but both sides
recognized the need for additional work on generic issues in
general and on investment in particular.  Also, both parties
agreed that the cooperative format had been a success and
wanted to continue talking.
    In June 1993, the undersecretary-level Economic Subcabinet
launched the Dialogue for Economic Cooperation (DEC), a
year-long intensive effort to address systemic issues of
deregulation and economic cooperation.  The DEC was endorsed by
Presidents Clinton and Kim during their July 1993 meetings in
Seoul.  The DEC established counterpart groups to examine
specific problems in the areas of taxation, administrative
procedures, import clearance, and competition policy, while the
plenary sessions dealt with foreign direct investment issues.
At the June 1994 Economic Subcabinet meeting, the U.S. side
assessed the DEC as moderately successful.  Both sides agreed
to use the following year to implement the results of the DEC,
including continued meetings of the counterpart groups.
4.  Debt Management Policies
    Foreign debt management is no longer a critical issue for
the ROKG.  Korea's gross foreign debt will total an estimated
$46 billion by the end of 1994, while debt service as a share
of goods and service exports is around six percent.  Net
foreign debt, taking into account Korea's numerous overseas
assets, is approximately $10 billion.
    In 1995 the Republic of Korea will graduate from its status
as a World Bank loan recipient.  In September 1991 the
government formally filed a graduation plan which included a
four-year phaseout period agreed upon with World Bank officials.
5.  Significant Barriers to U.S. Exports
    Formal barriers to imports have fallen, although Korea has
raised new, more subtle, secondary barriers that effectively
prevent the widespread liberalization envisioned under the
major trade initiatives of the late 1980s.  A five-year tariff
reduction plan ended in 1994, when Korean tariff rates averaged
7.9 percent.  As part of the Uruguay Round settlement, the
government will continue to reduce tariffs.  However, the
"tariffication" of some agricultural items formerly subject to
quotas may keep the average tariff rate high by international
comparison.  Korea ratified the Uruguay Round agreements and
became a founding member of the World Trade Organization (WTO)
on January 1, 1995.
    Korean safeguard regulations permit the government to
impose special "emergency tariffs" of up to 100 percent on
imported goods to protect domestic industry.  Seoul also uses
"adjustment tariffs" to cushion the impact of liberalization of
import restrictions.  In 1993 Korea removed canned pork from
the list of U.S. products affected by emergency tariffs.
Batteries and glass products remain on the list.
    One of the most pervasive remaining formal barriers to U.S.
exports to Korea is the restriction on the ability to import on
credit.  Use of limited deferred payment terms (generally 60-90
days) is restricted to items with a tariff of ten percent or
less, which are generally raw materials.  Use of deferred
payment terms for other goods requires a license from the
Foreign Exchange Bank and permission from the Governor of the
Bank of Korea; permission is rarely granted.  U.S. firms
estimate that they could increase exports by up to one third if
Korean firms were allowed to buy on credit.
    Licenses are required for all imports to Korea, but they
are usually granted automatically, except for prohibited or
regulated goods.  These goods now include around 150 mostly
agricultural products.  Under Korea's agreement to phase out
its GATT balance of payments (BOP) restrictions, the government
is committed progressively to eliminate most of these import
restrictions by 1997.  In April 1994, the government
reconfirmed this commitment and added a number of key items as
part of the Uruguay Round agreements; some of the items will
not be liberalized until the year 2000.
    Korea agreed in the Uruguay Round to eliminate balance of
payments restrictions on beef by December 31, 2000.  A July
1993 U.S.- Korea bilateral beef agreement outlines minimum
market access levels for 1993 through 1995.  Under this
agreement, operation of the current
"simultaneous-buy-sell-system" (SBS) portion of the market will
be greatly improved by the prohibition of the active
involvement of the Korean government.  The number of SBS
participants will also increase during the course of the
agreement to include non-tourist hotels, meat processors, and
many supermarkets, as well as the tourist hotels and others who
currently have access to the system.
    Standards, licensing, registration, and certification
requirements effectively limit U.S. exporters' access to the
Korean market.  Unreasonably tough and arbitrarily-enforced
standards and labelling requirements have adversely affected
U.S. exports of a wide variety of consumer products, including
appliances and electronic equipment.  Registration requirements
for products such as chemicals and cosmetics hamper entry into
the market and often require U.S. firms to release detailed
proprietary information on the composition of their products.
    Effective January 1, 1993, a Prime Ministerial Decree
outlined improved procedures for standards and rules-making,
including a requirement for public notice, minimum comment
periods, and an adjustment period prior to implementation.
However, the decree does not have the force of law.  The
government plans to introduce a full-fledged Administrative
Procedures Act in 1995.  Administrative procedures were one of
the principal topics of discussion in the DEC.  The United
States hopes to influence the plans for the Administrative
Procedures Act and has commented on intermediate regulations.
    The Korean government has begun to implement a five-year
program of financial sector reforms, announced in May 1993, to
reduce controls on banks and other financial institutions.
Measures taken to date include the lifting of many controls on
interest rates, removing documentation requirements on most
forward foreign exchange contracts, and easing slightly foreign
banks' access to won currency funding.  However, under the
timetable for reform some critical measures, such as full won
convertibility and freedom of capital movements, are not
scheduled to be achieved until 1997.  Moreover, in a number of
areas government restrictions continue to deny national
treatment to foreign banks and securities firms.  For example,
foreign banks face significant impediments in the form of a
variety of funding and lending limits tied to local branch (as
opposed to global) capital, difficulties in obtaining approval
for new financial products, and requirements to capitalize each
sub-branch separately.  Foreign securities firms must meet
extremely high capital requirements and may not place orders
for foreign securities on behalf of Korean clients.
    Changes in regulations announced in June 1994 resulted in a
streamlining of foreign investment applications procedures and
the easing of a number of barriers to direct foreign
investment.  At the same time the government announced
accelerated opening of several sectors that had previously been
closed to foreign investors.  Earlier changes to laws and
regulations governing foreign purchases of land made it easier
for foreign-invested companies to purchase land for staff
housing and business purposes.
    Despite these improvements, U.S. investment in Korea
continue to face a number of significant barriers.
Restrictions on access to offshore funding, including offshore
borrowing, intracompany transfers, and intercompany loans are
particularly burdensome for foreign-invested companies.
Foreign equity participation requirements remain in some
sectors, and licensing requirements, economic needs tests, and
other regulatory restrictions limit foreign investment in
sectors that are nominally open to foreign investors.
Investment in most professional services remains restricted for
foreign firms.  Downstream services by foreign firms remain
restricted.  Retail distribution by foreign-invested firms, for
example, is subject to limits on the number of outlets and
floor spaces.  These restrictions will not be lifted until 1996.
    The government has done little to educate a public
accustomed to a closed domestic market on the benefits of
imports, particularly to consumers.  Most Koreans have been
taught that imports are, by definition, luxury goods.  The
government has encouraged regular "frugality campaigns" against
"over-consumption" that hit consumer imports particularly
hard.  Domestic industry often puts pressure on the government
to use its authority against foreign companies.  In 1993, for
example, foreign firms in the recently-liberalized cosmetics
sector simultaneously underwent customs valuation audits and
investigation of their import procedures.  Numerous press
articles negatively highlighted the increase in sales of
foreign cosmetics and the amount of floor space devoted to
their display by department stores.  Such reports continue to
appear sporadically in the press, along with news that tax
offices will audit individuals who travel excessively abroad or
spend too much on "luxury goods," such as imported automobiles.
    The streamlining of Korea's complex import clearance
procedures is an important U.S. policy objective.  Korea is now
implementing PEI and DEC recommendations for improvement of
customs and import clearance procedures.  A new customs
subgroup has been established to deal with the long-term
implementation of improvements in the Korean import clearance
system.
    Korea has agreed to join the new GATT Government
Procurement Code.  For Korea, the Code will be effective
January 1, 1997.
6.  Export Subsidies Policies:
    Since the early 1960s, Korea has eliminated several
indirect export subsidies, including the special depreciation
allowance for large exporting firms and overseas construction
firms.  In 1988, Korea terminated the provision of export loans
to large firms not affiliated with business conglomerates.
However, in response to Korea's growing trade deficits, the
government resumed the provision of short-term export loans to
large exporting firms in April 1992.
    This measure was added to existing programs of support for
Korea's export industries, including customs duty rebates for
raw material imports used in the production of exports; short
term export loans for small and medium sized firms; rebates on
the value-added tax (VAT) and a special consumption tax for
export products; corporate income tax benefits for costs
related to the promotion of overseas markets; unit export
financial loans; and special depreciation allowances for small
and medium exporters.  Korea also maintains a special loan
program for small and medium business to facilitate exports to
Japan as a measure to curb its bilateral trade deficit with
that country.  Export subsidies to the shipbuilding industry
are within OECD guidelines.  Korea is a signatory to the GATT
code on subsidies and countervailing duties.
7.  Protection of U.S. Intellectual Property:
    In February 1993, Korea launched a new comprehensive plan
to strengthen intellectual property rights (IPR) protection and
the enforcement of IPR laws.  The so-called special enforcement
program was originally scheduled to run three months, but was
later extended to ten months.  It included the establishment of
an information network on cases and twice-weekly raids on
markets where counterfeit goods were prevalent.  Key trouble
areas, such as the electronics markets in Seoul and Pusan, were
targeted more often.  Korean authorities gave high priority to
the prosecution of IPR-related cases.  For the first time, IPR
offenders routinely spent time in jail and paid fines.  The
government also announced plans to increase the penalties for
copyright infringement and to amend the customs law to
strengthen IPR enforcement for imports and exports of copyright
and trademark goods.  The government has continued this
campaign into late 1994, dedicating extra budgetary resources
and sponsoring public awareness seminars.
    As a result of this concentrated push, the U.S. government,
in its 1993 and 1994 special 301 reviews, elected not to
upgrade Korea to "priority foreign country" status, but kept it
on the "priority watch list" with the possibility of further
"out-of-cycle" reviews.  The American business community,
encouraged by the new signs of a serious approach to IPR by the
Korean government, supported the U.S. government's decision.
    Patents:  Patents are one area that the new campaign has
not affected.  While Korea's patent laws are satisfactory, the
actual extent of patent protection in Korea depends on judicial
interpretation.  Problems include a lack of discovery
procedures, limits on the use of the "doctrine of equivalents,"
and a determination that "improvement patents" (whether
patentable or not) do not infringe on the pioneer patent.
Existing laws on compulsory licensing pose problems for some
U.S. firms because they specify that a patent can be subject to
compulsory licensing if the patent is not worked.
    Trademarks:  Trademark violations typically have been the
most visible area of infringement and were the prime target of
the 1993 crackdown, particularly since Korean law allows
prosecutors or police to investigate trademark infringement
cases without the filing of a formal complaint.  Problems
remain with the definition of "famous marks" in Korea.  Reviews
by the Korean authorities charged with deciding whether a
trademark has famous mark status have resulted in inconsistent
decisions.  Three dimensional characters still have no
protection at all.
    Copyrights:  Korea and the United States established
copyright relations when Korea joined the Universal Copyright
Convention in 1987.  Korean government administrative measures
outlined in the 1986 United States-Korea IPR agreement were
intended to provide retroactive protection for books
copyrighted from 1977 to 1987, software copyrighted from 1962
to 1985, and all pre-1987 sound and video recordings.
    Following the 1986 agreement, Korea had some immediate
success in curbing pirating activities, particularly in the
area of printed materials, through the use of tax and trademark
infringement laws.  However, until the advent of the 1993
special enforcement campaign, relatively little attention was
given to the problem of piracy in the area of sound
recordings.  One of the chief successes of the new IPR regime
has been the establishment of a mechanism for reviewing
registration applications that tracks the ownership of both
pre- and post-1987 works.  The continued effective management
of the registration system for these works -- and follow up in
order to destroy illegally-produced or imported copies -- will
be key concerns in future evaluations of Korea's IPR regime.
    Software piracy continues to be widespread.  The Korean
authorities have conducted raids on retailers and wholesalers,
but have given relatively low priority to large end-users.  The
few raids that have been conducted on training schools and
other end-users have sparked significant purchase orders to
legitimate vendors.  In 1994, the government sponsored a series
of public seminars on the importance of copyright protection
for software, and the number of raids and arrests continued to
rise.
    Korea agreed in 1993 to extend copyright protection to
textile designs.  Korean officials began to work with local
textile manufacturers to develop mechanisms for tracking rights
ownership and protecting Korean producers from liability.
    A key complaint of U.S. firms is that Korean law does not
permit the prosecutor or the police to undertake an
investigation of alleged copyright infringement unless a formal
complaint has been filed.  U.S. firms maintain that this
requirement causes delays which allow the alleged violator to
remove evidence from the premises before the authorities
arrive.  U.S. companies have welcomed the proposal to
significantly increase the penalties for copyright
infringement.  The Korean government currently has no plans to
change its complaint requirement.
    New technologies:  In November 1992, the National Assembly
passed legislation to extend IPR protection to semiconductor
mask works.  If the Korean law becomes compatible with U.S.
law, Korea could seek reciprocal protection for its chips under
U.S. law, provided it demonstrates that no "unauthorized
duplication" is occurring.  The Korean government has been very
responsive to U.S. government suggestions on how the law and
its implementing regulations should be changed to make its
compulsory licensing provisions acceptable to U.S. industry.
    Legislation to protect trade secrets took effect in
December 1992.  A Prime Ministerial decree effective January 1,
1993 mandates the handling of trade secrets, including business
confidential information, in such a manner that legitimate
commercial interests are protected.  In 1992, the Korean
government enacted new legislation to regulate cable
television.  The U.S. government views the legislation with
concern because certain provisions may inhibit market access
for U.S. firms.
    Korea is a party to the Paris Convention for the Protection
of Industrial Property, the Patent Cooperation Treaty, the
Universal Copyright Convention, the Geneva Phonograms
Convention, and is a member of the World Intellectual Property
Organization.  In November 1992, the National Assembly ratified
the United States - Korea Patent Secrecy Agreement signed in
January 1992.
8.  Worker Rights
    a.  Right of Association
    The Constitution gives workers, with the exception of most
public service employees and teachers, the right to free
association.  There are, however, blue collar public sector
unions in railways, telecommunications, the postal system, and
the national medical center.  The trade union law specifies
that only one union is permitted at each place of work, and all
unions are required to notify the authorities when formed or
dissolved.
    In the past the government did not formally recognize labor
federations which were not part of, nor affiliated with, the
country's legally recognized labor confederation -- the
Federation of Korean Trade Unions (FKTU).  In 1993, however,
the Labor Ministry officially recognized independent white
collar federations representing hospital workers, journalists,
financial workers, and white collar employees in construction
companies and government research institutes.  In practice,
labor federations not formally recognized by the Labor Ministry
existed and worked without government interference, except if
the authorities considered their involvement in labor disputes
harmful to the nation.
No minimum number of members is required to form a union,
and unions may be formed without a vote of the full,
prospective membership.  Korea's election and labor laws forbid
unions from donating money to political parties or
participating in election campaigns.  However, trade unionists
have circumvented the ban by temporarily resigning their union
posts and running for office on the ticket of a political party
or as an independent.
    Strikes are prohibited in government agencies, state-run
enterprises, and defense industries.  By law, enterprises in
public interest sectors such as public transportation,
utilities, public health, banking, broadcasting, and
communications must submit to government-ordered arbitration in
lieu of striking.  The Labor Dispute Adjustment Act requires
unions to notify the Ministry of Labor of their intention to
strike and mandates a ten day cooling-off period before a
strike may legally begin.  Overall membership in Korean labor
unions has been declining over the last several years largely
because the explosion in labor organizing in 1987-89 left the
movement divided but well compensated, and worker rights
significantly improved.
KOREA__S2
U.S. DEPARTMENT OF STATE
KOREA: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
    Since July 1991, South Korea has been suspended from U.S.
Overseas Private Investment Corporation (OPIC) insurance
programs because of the limits placed on the freedom of
association and other worker rights.
    b.  Right To Organize and Bargain Collectively
    The Constitution and the Trade Union Law guarantee the
autonomous right of workers to enjoy collective bargaining and
collective action.  Although the Trade Union Law is ambiguous,
the authorities, backed up by the courts, have ruled that union
members cannot reject collective bargaining agreements (CBAS)
signed by management and labor negotiators.  Nonetheless, union
members continue to reject CBAS agreed to by labor and
management negotiators.  Extensive collective bargaining is
practiced.  Korea's labor laws do not extend the right to
bargain collectively to government employees, including
employees of state or publicly run enterprises and defense
industries.
    Korea has no independent system of labor courts.  The
Central and Local Labor Commissions form a semiautonomous
agency of the Ministry of Labor that adjudicates disputes in
accordance with the Labor Dispute Adjustment Law.  The Law
authorizes labor commissions to start conciliation and
mediation of labor disputes after, not before, negotiations
breakdown and the two sides are locked into their positions.
Labor-management antagonism remains a serious problem, and some
major employers remain strongly anti-union.
    c.  Prohibition of Forced or Compulsory Labor
    The Constitution provides that no person shall be punished,
placed under preventive restrictions, or subjected to
involuntary labor, except as provided by law and through lawful
procedures.  Forced or compulsory labor is not condoned by the
government.
    d.  Minimum Age for Employment of Children
    The Labor Standards Law prohibits the employment of persons
under the age of 13 without a special employment certificate
from the Ministry of Labor.  Because education is compulsory
until the age of 13, few special employment certificates are
issued for full-time employment.  Some children are allowed to
do part-time jobs such as selling newspapers.  In order to gain
employment, children under 18 must have written approval from
their parents or guardians.  Employers may require minors to
work only a reduced number of overtime hours and are prohibited
from employing them at night without special permission from
the Ministry of Labor.
    e.  Acceptable Conditions of Work
    Korea implemented a minimum wage law in 1988.  The minimum
wage level is reviewed annually.  Companies with fewer than ten
employees are exempt from this law, but, due to tight labor
markets, most firms pay wages well above the minimum levels.
The Labor Standards and Industrial Safety and Health Laws
provide for a maximum 56-hour workweek, and a 24-hour rest
period each week.  Amendments to the Labor Standards Law passed
in March 1989 brought the maximum regular workweek down to 44
hours, but such rules are sometimes ignored, especially by
small firms.
    The government sets health and safety standards, but South
Korea suffers from unusually high accident rates.  The Ministry
of Labor employs few inspectors, and its standards are not
effectively enforced.
    f.  Rights in Sectors with U.S. Investment
    U.S. investment in Korea is concentrated in petroleum,
chemicals and related products, transportation equipment,
processed food, and to a lesser degree, electric and electronic
manufacturing.  Workers in these industrial sectors enjoy the
same legal rights of association and collective bargaining as
workers in other industries.  Manpower shortages are forcing
labor-intensive industries to improve wages and working
conditions, or move offshore.  Working conditions at U.S.-owned
plants are for the most part better than at Korean plants.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                                74
Total Manufacturing                                   1,236
  Food & Kindred Products                   268
  Chemicals and Allied Products             212
  Metals, Primary & Fabricated               50
  Machinery, except Electrical               39
  Electric & Electronic Equipment           186
  Transportation Equipment                   59
  Other Manufacturing                       422
Wholesale Trade                                         245
Banking                                               1,231
Finance/Insurance/Real Estate                           169
Services                                                 24
Other Industries                                         23
TOTAL ALL INDUSTRIES                                  3,001
Source: U.S. Department of Commerce, Bureau of Economic
Analysis
KUWAIT1
iU.S. DEPARTMENT OF STATE
KUWAIT: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                              KUWAIT
                     Key Economic Indicators
        (Millions of U.S. dollars unless otherwise noted)
                                    1992      1993      1994  1/
Income, Production and Employment:
Real GDP (1985 prices)               N/A       N/A       N/A
Real GDP Growth (pct.)              76.3      22.6       5.0
GDP (at current prices)  2/       18,762    23,000    12,076
By Sector:
  Agriculture                         46.0      71.0      39
  Energy/Water                     - 340.0     323.7     178
  Manufacturing                      723.8     761.3     418
  Construction                       703.4     738.4     355
  Rents                              N/A       N/A       N/A
  Financial Services                 755.0     796.0     438
  Other Services                     N/A       N/A       N/A
  Government/Health/Education      5,743.0   5,858.0   3,222
Net Exports of Goods & Services   -2,723     1,720       946
Real Per Capita GDP (USD)         13,420    15,674    17,500
Labor Force (OOOs)                   600       735       745
Unemployment Rate (pct.)             0.5       0.5       0.5
Money and Prices:  (annual percentage growth)
Money Supply (M2)                  -0.58       5.7      2.19
Base Interest Rate (pct.)            7.5       6.65     6.17
Personal Savings Rate                N/A       N/A      N/A
Retail Inflation                     5.0       5.0      3.0
Wholesale Inflation                  N/A       N/A      N/A
Consumer Price Index  3/             110       110      110
Exchange Rate (USD/KD)              3.40       3.32     3.40
Balance of Payments and Trade:
Total Exports (FOB)                6,693    10,554     5,400
  Exports to U.S.                    310     2,003       822
Total Imports (CIF)                7,239     7,052     3,500
  Imports from U.S.                1,327     1,009       498
Aid from U.S.                          0         0         0
Aid from Other Countries               0         0         0
External Public Debt               5,500     5,500     6,216
Debt Service Payments (paid)         N/A       N/A        60
Gold and Foreign Exch. Reserves    3,104     4,034     3,847
Trade Balance                       -546     3,502       968
  Trade Balance with U.S.         -1,017       994       324
N/A--Not available.
1/ 1994 figures are for the first and second quarters
only.
2/ For first half of year, annual rate would be USD 24,152.
These statistics are based on the Central Bank of Kuwait's "The
Economic Report 1990-1992" and "The Economic Report 1993."
These reports reflects a number of post-liberation revisions
and additions in statistics.  Hence, previous statistical
series should be revised to reflect current data.  The
estimates for the first two quarters of 1994 are U.S. Embassy
estimates based on Central Bank of Kuwait data and general
trends in the economy.  The publications cited are available
from the Central Bank of Kuwait.
3/ May 1990 equals 100 - actually the CBK domestic price index.
1.  General Policy Framework
    Kuwait is a politically stable emirate where rule of law
prevails.  The press is free and commercial advertising is
available.  Arabic is the official language but English is
widely spoken.  Kuwait has a small and relatively open,
oil-rich economy which has created an affluent citizenry who
benefit from a generous welfare state.  In 1989, Kuwait's
population was 2.3 million.  Its current population is
1,752,000, of whom approximately 669,000 are Kuwaiti citizens.
Kuwait's proven crude oil reserves amount to approximately 94
billion barrels (i.e., ten percent of total world reserves)
making Kuwait, potentially, a very rich nation well into the
next century.
    The Kuwaiti economy has been subject to several severe
shocks over the past two decades.  These include a massive
increase in government intervention and control of the
commercial economy during the late 1970's and early 1980's; the
collapse of the Souk al Manakh--an unregulated curbside
securities market--in 1982; the collapse of world oil prices
during the mid-1980's; the Iraqi invasion of 1990 and the
massive rebuilding effort undertaken after the liberation in
1991.  The Kuwaiti budget for FY 94/95 will be in deficit by
over 1.7 billion Kuwaiti Dinars (USD 5.8 billion).  Revenues
will be KD 2,637.2 billion, virtually all from oil.  FY 94/95
revenues will be 6.5 percent less than FY 93/94 projections
while expenditures will be 11 percent higher than FY/94.  The
deficit increase is caused in part by the inclusion in the
budget of almost KD 450 million (USD 1.5 billion) of arms
purchases that were included in supplemental budgets rather
than the regular budget.
    A World Bank report summary, published in the local English
press in the summer of 1993, advocates an economic program that
will reduce the deficit, privatize many government-owned
companies and services, reduce subsidies and promote employment
of Kuwaiti citizens in the private sector.  Most officials
agree with the overall conclusions of the report.  That said,
little has been done to date to move toward specific
implementation of the report's recommendations.
    A "difficult debts" law passed the National Assembly in
1993.  The Government of Kuwait purchased the commercial debts
of the banking system with USD 20 billion worth of government
bonds.  The debtors were given the option of a twelve-year
interest-free rescheduling of their debt or an "immediate
payment" of approximately 45 percent of the balance of the
debt.  Local banks are administering the program for the
Government of Kuwait.  The law contains a September 1995
"immediate payment" deadline which has led to a more
conservative investment posture on the part of the private
sector.  There may be revisions in the regulations governing
the law.
2.  Exchange Rate Policies
    There are no restrictions on current or capital account
transactions in Kuwait, beyond a requirement that all foreign
exchange purchases be made through a bank or licensed foreign
exchange dealer.  Equity, loan capital, interest, dividends,
profits, royalties, fees and personal savings can all be
transferred in or out of Kuwait without hindrance.  The Central
Bank maintained this policy during the uncertainties of October
1994 when Iraq mounted a serious threat on Kuwait's border.
The Kuwaiti Dinar itself is freely convertible at an exchange
rate calculated daily on the basis of a basket of currencies
which reflects Kuwait's trade and capital flows.  In practice,
the Kuwaiti Dinar has closely followed the exchange rate
fluctuations of the U.S. Dollar over the past year, as the
Dollar makes up over half of the basket.
3.  Structural Policies
    As a member of the Gulf Cooperation Council (GCC), Kuwait
plays a part in GCC efforts to promote economic integration
among its member states.  In practice, this means duty free
imports from other GCC states and adoption of some GCC product
standards.
    There are three basic points worth noting about the
government's structural policies in Kuwait.  First, policies as
a body tend to strongly favor Kuwaiti citizens and
Kuwaiti-owned companies.  Income taxes, for instance, are only
levied on foreign corporations and foreign interests in Kuwaiti
corporations, at rates that may range as high as 55 percent of
all net income.  Individuals are not subject to income taxes,
which eliminates one government tool used in other countries to
institute social or investment policies.  Foreign investment,
similarly, is welcome in Kuwait, but only in select sectors as
minority partners and only on terms compatible with continued
Kuwaiti control of all basic economic activities.  Moreover,
some sectors of the economy--including oil, banking, insurance
and real estate--have traditionally been closed to foreign
investment.
    There are proposals to allow foreign equity participation
in the banking sector (up to 40 percent) and in the upstream
oil sector (terms still to be determined).  Foreigners (with
the exception of nationals from some GCC states) are forbidden
to trade in Kuwaiti stocks on the Kuwaiti Stock Exchange except
through the medium of unit trusts.
    Foreign nationals, who represent a majority of the
population, are prohibited from having majority ownership in
virtually every business other than certain small
service-oriented businesses and may not own property (there are
some exceptions for citizens of other GCC states).  In past
years, as part of its deliberate demographic policy to reduce
the number of expatriates in the country, the government also
made it difficult for foreign workers to sponsor their families
for residency by installing high minimum wage requirements for
the individual workers wishing to apply for family visas.
Currently, third-country nationals employed in the private
sector must earn approximately $2,000 a month, while public
sector employees must earn $1,400 a month in order to sponsor
their families in Kuwait.  This is currently under review and
the income levels may be reduced to permit more families to
come to Kuwait.  Families may elect to stay in their country of
origin, however, since the cost of living is comparatively
higher in Kuwait than in other Arab or South Asian countries.
Finally, in labor markets, resident foreign nationals are
subject to stringent visa requirements, special taxes and fees
that are intended to both discourage their employ and limit
their tenure in Kuwait.
    Biases are also in place in regard to trade.  Government
procurement policies, for instance, generally specify local
products, when available, and prescribe a 10 percent price
advantage for local companies on government tenders.  There is
also a blanket agency requirement, which requires all foreign
companies trading in Kuwait to either engage a Kuwaiti agent or
establish a Kuwaiti company with majority Kuwaiti ownership and
management.
    Secondly, price signals are only partially operational in
Kuwait.  In many ways, Kuwait is still a welfare state in which
many basic products and services are heavily subsidized.
Water, electricity and motor gasoline are relatively
inexpensive.  Basic foods are subsidized.  Local telephone
calls are free (after payment of an annual subscription fee),
as is public education and medical care.  In most cases, these
subsidies are available to all residents of Kuwait; in some
cases, however, the so-called "first line commodities" (such as
medical care overseas, free or cheap building lots and
subsidized home mortgages) the subsidies are reserved for
citizens of Kuwait.
    Finally, and perhaps most importantly of all, some major
aspects of this system of preference and privilege may be under
scrutiny.  The budget deficit and Kuwait's share of the
additional expenses of the October 1994 "Vigilant Warrior"
exercise undertaken in response to Iraqi provocations has
highlighted the need for Kuwait to contemplate the World Bank
recommendations, particularly reduced subsidies, increased fees
and possible taxes on Kuwaitis and expatriates.  A proposal for
a short-term, emergency wage tax was quickly killed and
replaced with a system of voluntary donations for the national
defense.
4.  Debt Management Policy
    Prior to the Gulf War, Kuwait was a significant creditor to
the world economy, having amassed a foreign investment
portfolio, under the auspices of the Kuwait Investment
Authority, that variously have been valued at between USD 80
billion and USD 100 billion.  A current reasonable estimate of
the value of Kuwait's performing assets in the Future
Generations Fund would be in the range of USD 35 to 39 billion.
    Kuwait owes a USD 5.5 billion jumbo loan to foreign banks
and other amounts to official export credit agencies (ECA).
According to Government of Kuwait officials, these obligations
will be paid on schedule and according to terms.  In 1995,
Kuwait is scheduled to pay USD 2.486 billion which will
increase to USD 3.298 billion in 1996.
5.  Significant Barriers to U.S. Exports
    There are few significant barriers to U.S. exports in
Kuwait.  Tariffs are low (currently, no higher than four
percent on any product), although there are proposals to raise
some tariffs on January 1, 1995, as part of a GCC
"harmonization upward," which contradicts efforts in most other
countries to lower tariffs.  There are also revenue reasons for
considering tariff increases.
    Kuwait is a Muslim country and does not permit the import
of alcohol or pork from any country.  It continues to
participate in the Arab League primary boycott of Israel.
Kuwait has renounced the secondary and tertiary boycotts of
Israel.  Boycott questions involving U.S. firms should be
referred to the U.S. Embassy in Kuwait or to responsible U.S.
Government agencies in the U.S.  Finally, Kuwait has a new
offset program which will establish significant investment
and/or countertrade obligations for all foreign suppliers in
the case of all government contracts in excess of KD 1.0
million (USD 3.40 million).
6.  Export Subsidies Policies
    Kuwait does not directly subsidize any of its exports,
which consist almost exclusively of crude oil, petroleum
products and fertilizer.  Almost 98 percent of Kuwait's food is
imported.  Small amounts of local vegetables are grown by
farmers receiving government subsidies, and small amounts of
these vegetables are sold to neighboring countries.  However,
not enough of these vegetables are grown or sold to make any
significant impact on local or foreign agricultural markets.
Periodically, Kuwait cracks down on the re-export of subsidized
imports such as food and medicine.
7.  Protection of U.S. Intellectual Property
    Kuwait is a founding member of the new World Trade
Organization.  In keeping with related obligations under the
Uruguay Round/ Trade Related Intellectual Property Agreement
(TRIPS) it will have to begin to implement laws and practices
consistent with international conventions on intellectual
property protection (notably the Berne Convention for the
Protection of Literary and Artistic Works and the Paris
Convention for the Protection of Industrial Property.)
Currently, intellectual property rights protection is extremely
minimal in Kuwait.  Kuwait is not party to any worldwide
conventions for the protection of intellectual property
rights.  Kuwait's laws do not address important areas of
intellectual property and those areas which are addressed in
law do not provide adequate deterrents to piracy.
    Kuwait has no copyright law, with the result that there is
now a large, overt market for pirated software, cassettes and
videotapes, as well as unauthorized Arabic translations of
foreign language books.  A draft copyright law being prepared
by the Government of Kuwait was still not complete by the end
of 1994.  There is concern that the content of the draft may
still not include adequate protection for foreign works, sound
recordings or compilations of facts and data.  The adequacy of
terms of protection for various types of works and the need for
deterrent penalties for infringement are also concerns the U.S.
has raised with officials in the Kuwaiti government.
    Kuwait has had patent and trademark laws since 1962, but
the penalties under both are so low (a maximum fine of USD
2,100) as to be effectively irrelevant in deterring illegal
activities.  The patent law excludes certain products such as
chemical inventions involving foods, pharmaceuticals and other
medicines, from protection.  Among patentable products and
processes it offers a term of protection of only 15 rather than
the more conventional 20 years.  It also contains extraordinary
provisions for compulsory licensing whenever a patent is
insufficiently used in Kuwait or is of "great importance to
national industry."
8.  Worker Rights
    a.  The Right of Association
    Kuwait is a member of the International Labor Organization
(ILO) and has ratified the 1948 ILO Convention 87 on Freedom of
Association.
    Both Kuwaiti and non-Kuwaiti workers have the right to
establish and join unions but the government restricts the
right of association by limiting the number of unions which may
be established.  There are certain additional restrictions on
non-Kuwaiti workers.  In 1994, 28,400 workers in Kuwait were
organized as union members; non-Kuwaitis constituted 33 percent
of unionized workers.
    New unions must have at least 100 members, 15 of whom must
be Kuwaiti.  Expatriate workers, who comprise about 80 percent
of the labor force in Kuwait, are allowed to join unions after
five years residence, but only as nonvoting members.  In
practice, foreign workers can join unions after one year.
    One law requires that workers may establish only one union
in any occupational trade, and that the unions may establish
only one federation.  Both the ILO and International
Confederation of Free Trade Unions (ICFTU) have criticized this
requirement since it discourages unions in sectors employing
few Kuwaiti citizens (e.g. in construction).
    b.  The Right to Organize and Bargain Collectively
    Although legally unions are independent organizations, in
fact, the government maintains a large oversight role with
regard to their financial records:  90 percent of union budgets
are in the form of government subsidies.  Unions must also
follow a standard format for internal rules and
constitutions,
which includes prohibitions of any involvement in domestic
political, religious, or sectarian issues.  In practice, these
limitations have not prevented unions from engaging in a wide
range of activities.  A court (under certain circumstances) or
the Amir may dissolve a union.  In practice, no union has been
dissolved in either manner.  Kuwaiti citizen union members have
the right to elect representatives of their own choosing,
provided the candidates are also Kuwaitis and can demonstrate
that they have no criminal record.
    All but two unions, the Bank Workers Union and the Kuwait
Airways Workers Union, are affiliated with the Kuwait Trade
Union Federation (KTUF).  The KTUF consists of nine civil
service unions and three oil sector unions, but the oil unions
have equal representation (36 members) in the 72-member KTUF
Assembly.  The KTUF belongs to the International Confederation
of Arab Trade Unions and the formerly Soviet-controlled World
Federation of Trade Unions.
    The KTUF opened an "Expatriate Labor Office," responsible
for resolving problems between foreign workers and their
employers in the private sector.  The office is not connected
with the government.  It provides assistance to all foreign
laborers, regardless of whether or not they are union members.
    The right to strike is recognized, but limited by Kuwait's
labor law, which stipulates compulsory negotiation, followed by
arbitration if a settlement cannot be reached between labor and
management.  There are no specific legal provisos to prohibit
retribution against strikers and strike leaders.  Despite
limitations, strikes do occur.  In 1994, one strike was called
by cleaning personnel in Kuwaiti schools for a pay raise; the
second, by security guards at the Social Welfare Home over
unpaid wages.  The majority of these workers were expatriates.
    The ILO has critized: Kuwait's prohibition on more than one
trade union for a given field; the requirement that a new union
must have at least 100 workers; the five-year residence
requirement for foreign workers to join a trade union; the
denial to foreign trade unionists voting rights and the right
to be elected to union positions; the prohibition against trade
unions engaging in any political or religious activity; and the
reversion of trade union assets to the Ministry of Social
Affairs and Labor in the event of dissolution.
c.  Prohibition of Forced or Compulsory Labor
    The Kuwaiti Constitution prohibits forced labor "except in
the cases specified by law for national emergencies and with
just remuneration."  Nonetheless, there continue to be credible
reports that foreign nationals employed as domestic servants
have been denied exit visas absent their employers' consent.
Kuwaiti sponsorship is necessary in order to obtain a residence
permit and foreign workers cannot change their employment
without permission from their original sponsors.  Domestic
servants are particularly vulnerable to abuses from this
practice because they are not protected by Kuwaiti labor law.
In addition, domestic servants who run away from their
employers can be treated as criminals under Kuwaiti law for
violations of their work and residence permits, especially if
they attempt to work for a new employer without permits.
     Sponsors frequently hesitate to grant their servants
permission to change jobs because of the financial investment
(travel, medical examinations and visas) made before they even
arrive in Kuwait (often USD 700-1,000).  In many cases,
employers can exercise control over servants by holding their
passports.  The practice is prohibited, however, and the
government has acted to retrieve passports of maids involved in
work disputes.  There are some reports employers illegally
withheld wages from domestic servants to cover the costs
involved in bringing them to Kuwait.  The government has done
little, if anything, to protect domestics in such cases.
    d.  Minimum Age for Employment of Children
    Under Kuwaiti law, the minimum employment age is 18 years
for all forms of work, both full- and part-time.  Compulsory
education laws exist for children between the ages of 6 and
15.  The Minister of Social Affairs and Labor is charged with
enforcing minimum age regulations.  The laws are not fully
observed in the nonindustrial sector, although no instances
involving Kuwaiti children have been alleged.  Children may be
employed part-time in small family businesses.  There have been
unconfirmed reports of some South Asian domestics under 18 who
falsified their age to enter Kuwait.
    Employers may obtain Ministry permits to employ juveniles
(14-18 years old) in certain trades.  Juveniles may work a
maximum of six hours daily, provided they work no more than
four consecutive hours followed by at least an hour of rest.
e.  Acceptable Conditions of Work
    The Ministry of Social Affairs and Labor is responsible for
enforcing all labor laws.  A two-tiered labor market ensures
high wages for Kuwaiti employees while foreign workers,
particularly unskilled laborers, receive substantially lower
wages.  In 1993, the minimum wage in the public sector, set by
the government, was appropriately USD 630 a month (180 Kuwaiti
Dinars) for Kuwaitis and approximately USD 315 a month (90
Kuwaiti Dinars) for non-Kuwaitis.  There is no legal minimum
wage in the private sector although occasionally it has been
suggested.
    The labor law establishes general conditions of work for
both the public and the private sectors, with the oil industry
treated separately.  Women are permitted to work throughout the
oil industry, except in hazardous areas and activities, with
equal pay for equal work.  The civil service law prescribes
additional conditions for the public sector.  It limits the
standard workweek to 48 hours with one full day of rest per
week, provides for a minimum of 14 days of leave annually, and
establishes a compensation schedule for industrial accidents.
    Foreign laborers frequently face contractual disputes, poor
working conditions and, in some cases, physical abuse.
Domestic servants, excluded from the purview of Kuwait's labor
laws, frequently work hours greatly in excess of 48 hours.
Recourse is uneven.  Domestic servants from Asian countries
have complained in some cases of the lack of assistance from
their embassies.  In other cases, embassies have founded
shelters for abused domestics and worked with the Kuwaiti
government to repatriate workers who wished to return home.
    The ILO has urged Kuwait to guarantee the weekly
24-consecutive-hour rest period to temporary workers employed
for a period of less than six months and workers in enterprises
employing fewer than five persons. In November 1994, the
government received an ILO Expert Delegation for consultations
on possible labor reform.
    Laws and regulations do exist on health and safety, medical
care and compensation.  However, compliance and enforcement
appear poor, especially regarding unskilled foreign laborers.
While Kuwaiti employers have been known to exploit workers'
willingness to accept substandard conditions, workers can
remove themselves from hazardous work situations without
jeopardizing their jobs, and legal protections exist for
workers who file complaints.  The government periodically
inspects installations to raise awareness among workers and
employers and ensure that they abide by the rules.
f.  Rights in Sectors With U.S. Investment
    The only significant U.S. investment in Kuwait is in the
divided zone between Kuwait and Saudi Arabia, where one U.S.
oil company, working under a Saudi concession, operates under
and in full compliance with the Kuwaiti labor law that applies
to the oil sector.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                              (1)
Total Manufacturing                                     0
  Food & Kindred Products                    0
  Chemicals and Allied Products              0
  Metals, Primary & Fabricated               0
  Machinery, except Electrical               0
  Electric & Electronic Equipment            0
  Transportation Equipment                   0
  Other Manufacturing                        0
Wholesale Trade                                         0
Banking                                                 0
Finance/Insurance/Real Estate                          (2)
Services                                               (1)
Other Industries                                        8
TOTAL ALL INDUSTRIES                                   (1)
(1) Suppressed to avoid disclosing data of individual companies
(2) Less than $500,000
Source: U.S. Department of Commerce, Bureau of Economic Analysis
(###)
KYRGYZST1
<U.S. DEPARTMENT OF STATE
KYRGYZ REPUBLIC: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                         KYRGYZ REPUBLIC
                    Key Economic Indicators 1/
            (Millions of soms unless otherwise noted)
                                     1992      1993      1994 2/
Income, Production and Employment:
Real GDP (1990 prices)              7,100     5,800     4,205
Real GDP Rates (pct.)               -19.0     -18.7     -27.5
GDP (at current prices)               772     5,720     7,388
By Sector:
  Agriculture                         N/A     1,739     2,009
  Energy/Water/Manufacturing          N/A     2,963     1,899
  Construction                        N/A       232       750
  Services/Other                      N/A       785     2,730
Net Exports of Goods & Services       8.3     460.3     671.6
Real Per Capita GDP                   N/A       N/A       N/A
Labor Force (000s)                  1,525     1,500     1,450
Unemployment Rate (pct.)             0.17      0.29      0.70
Money and Prices:
Money Supply (M1)                     N/A       N/A       N/A
Base Interest Rate 3/                   6       N/A       N/A
Personal Saving Rate                  4.7     -11.5       N/A
Retail Inflation (pct.)           1,391.0   1,464.0     153.7
Wholesale Inflation (pct.)        1,754.0   1,106.0     516.8
Consumer Price Index              1,079.0   1,495.0     166.7
Exchange Rate (USD/som)
  Official                          ---        7.65     10.60
  Parallel                          ---        8.85     10.90
Balance of Payments and Trade:  (USD millions) 4/
Total Exports (FOB)                 131.9      77.6      63.6
  Exports to U.S.                     N/A       0.0       0.4
Total Imports (CIF)                 176.4      26.4      28.7
  Imports from U.S.                   8.9      15.7       2.1
Aid from U.S.                        18.8      83.6      83.6 5/
Aid from Other Countries             75.0       N/A      28.0
External Public Debt                 43.0      45.6      79.3
Debt Service Payments (paid)          0.0       2.2      24.1
Gold and Foreign Exch. Reserves       N/A       N/A        60
Trade Balance                       -44.5      51.2      34.9
  Balance with U.S.                   N/A     -15.7      -0.7
N/A--Not available.
1/ All figures used are from Kyrgyz government sources.
2/ Nine-month data in millions of Kyrgyz soms unless otherwise
noted.
3/ Average annual interest rate for 1994 was not available.
The base interest rate on October 15, 1994 was 185 percent.
4/ Six-month data for 1994.
5/ Fiscal year 1994.
1.  General Policy Framework
    After the disintegration of the former Soviet Union (FSU)
and the achievement of independence in 1991, the Kyrgyz
Republic (Kyrgyzstan) inherited an economy which had been
highly dependent on the Soviet economy and on budget subsidies
from Moscow.  Kyrgyzstan is one of the poorest of the FSU
republics both in terms of output and resource base.  As a
result, there was a sharp deterioration of economic activity in
1994.  GDP for the first nine months of the year dropped 27.5
percent over the same period of 1993, though it is expected
that 1994 GDP will reach the projected figure of 9.38 billion
soms (about $900 million) for the entire year.
    During 1992 and 1993 the Kyrgyz government took some major
steps in transforming the economy from one dominated by central
planning to a market oriented economy.  A number of progressive
changes were made to the legal system, including the adoption
of laws on privatization, joint ventures, foreign concessions
and investment, and free economic zones.  Most prices were
liberalized in January 1992, although bread prices were not
freed up until February 1994.
    In May 1993 an independent national currency, the som, was
introduced.  At the same time, a stabilization and structural
adjustment program was initiated with support and assistance
from the IMF, and the World Bank, the United States and other
donor countries.  Tightened monetary policy, beginning at the
end of 1993, resulted in a steady decline in monthly inflation
rates (from 33 percent in October 1993 to 0.2 percent in
September 1994).
    However, the government was unable to meet IMF inflation
targets and other performance goals for the end of 1993.  The
IMF stand-by facility was therefore replaced with an ESAF
(Enhanced Structural Adjustment Facility) in July 1994.  The
ESAF runs three years and its loans are at concessional rates.
    The system of government procurement at fixed prices (the
so called "state order") was abolished in early 1994 and was
replaced by a system where government procurement of a limited
range of goods will be accomplished through freely negotiated
contracts with suppliers.
    Kyrgyzstan's ESAF program requires the government to
finance the budget deficit primarily through foreign loans, not
the central bank.  The budget deficit was 8.2% of GDP in
September 1994.  The deficit arises from social programs (52.5
percent of all budget expenditures) and financing of state
owned enterprises (15 percent).  To increase revenues, the
Kyrgyz government is restructuring the entire tax system.  In
1994, the Ministry of Finance was empowered to exercise control
over all revenue raising agencies, such as the State Tax
Inspectorate and State Customs Administration, both of which
are now structural units of the Ministry of Finance.  The Tax
Police Department, also established in 1994, reports directly
to the government.  It is expected that a new treasury system
will cover all budget transactions nationwide by December 1994.
2.  Exchange Rate Policy
    Interbank foreign exchange auctions were held twice a week,
with the exchange rate of the som depreciating from 8.03 soms
to the dollar in January to 10.6 soms in October.  The highest
point of depreciation was observed in May when the dollar was
traded for 12.45 soms.
    Since early 1994 all foreign exchange bureaus along with
the commercial banks have been permitted to buy hard currency
without any restrictions.  This resulted in a sharp narrowing
to about three percent of the margin between the official
auction rate and those of the commercial banks, exchange
bureaus and the black market.  At the end of October the latter
ranged from 10.6 to 10.9.
    The NBK intends to eventually replace foreign exchange
auctions by direct sales and purchases in the fledgling
interbank market.
3.  Structural Policy
    In 1994 Kyrgyzstan continued its privatization program.  To
date, 4,800 small and medium size  enterprises, constituting
about fifty percent of all state enterprises, have been
privatized.  The rate of privatization is highest in the
service sector (99 percent), followed by trade and public
catering (93 percent), and then industry (46.5 percent).
Privatized enterprises make up 38.1 and 34.5 percent of the
construction and agricultural sectors, respectively, and a much
smaller percentage in the transportation and wholesale sectors.
    Pricing Policies:  Price liberalization continued in 1994.
The list of goods and services whose prices continued to be
regulated was further reduced.  Prices for electricity were
doubled both for residential and industrial consumers in
September 1994, whereas natural gas prices were raised
fivefold.  However, prices for electricity, natural gas, and
heat remain partially subsidized.  The government will adjust
them in stages with the objective of full coverage of the cost
of energy by the end of 1995.  Liberalization of bread prices
on February 17, 1994 caused prices to double; by September they
had risen another 50 percent.  State subsidies for bread are
scheduled to be eliminated by mid-1995 when state-owned
bakeries are privatized.
    Tax Policies:  Kyrgyzstan's major source of government
revenue is the value-added tax (VAT - 20 percent) and
enterprise profit taxes (35 percent).  In order to reverse the
rapid decline in tax revenues, the government intends to
broaden the base of the VAT, impose a higher excise tax on
imported luxury goods, and introduce other taxes and fees.  As
a temporary emergency measure, in September 1994, the
government introduced a five percent sales tax on retail
transactions.  Imported raw materials and components labeled
for foreign investment production are exempt from customs
duties.
    Foreign Investment:  Under Kyrgyzstan's foreign investment
law, "the legal status and conditions of foreign investment
will never be less favorable than the status and conditions of
investment by juridical persons and citizens of the Kyrgyz
Republic."  In May 1993, Kyrgyzstan's parliament adopted
several amendments to the law on foreign investment of February
1992.  The new version of the law extends tax exempt status to
foreign investors in all sectors with the following grace
periods: five years in manufacturing and construction; three
years in mining, agriculture, transportation and
communications; and, two years in trade, tourism, banking, and
insurance.  After expiration of the initial tax-free period,
the taxes imposed on profits will be reduced, as follows: by 50
percent on profits reinvested in Kyrgyzstan; by 25 percent if
no less than 50 percent of the enterprise's products and
services are exported; by 25 percent if not less than 50
percent of production is derived from imported raw materials
and components; and by 25 percent if no less than 20 percent of
the profit is spent on professional training.  The law also
guarantees the right of foreign investors to repatriate their
profits.  In 1993, a special commission on foreign investment
was created under the government (Goskominvest) with
responsibility for registering and assisting foreign investors.
    In September 1994 a presidential decree was issued amending
the Foreign Investment Law and providing further investment
incentives.  In particular, foreign investors are exempt from a
five percent tax imposed on exported profits.
4.  Debt Management Policies
    In a July 1992 bilateral agreement, the Russian Federation
took over responsibility for Kyrgyzstan's share of the former
Soviet Union's external debt in return for Kyrgyzstan's share
of the former Soviet Union's external assets.
    Loans from foreign countries and international financial
organizations amounted to $197.5 million, of which 24.1 million
(interest payments) were to be paid in 1994.  Thus as a
percentage of GDP, the external debt is expected to increase
from 17.9 percent in 1993 to 19.3 percent in 1994.
5.  Significant Barriers to U.S. Exports
    Kyrgyzstan lacks hard currency and, despite liberalized
foreign exchange laws, repatriation of earnings is difficult.
Kyrgyzstan's ability to import goods and technologies which
require payment in hard currency is therefore severely
limited.  In addition, inadequate telecommunications and
banking facilities as well as extremely high transportation
costs add further practical barriers to exporters.
    To normalize its trade and investment relations with the
Kyrgyz Republic, the United States has proposed a new network
of bilateral economic agreements.  The U.S.-Kyrgyz trade
agreement, which provides reciprocal most-favored-nation (MFN)
status, was concluded and entered into force in August 1992.
    The same year, the trade agreement was followed by the
conclusion of an Overseas Private Investment Corporation (OPIC)
incentive agreement offering political risk insurance and other
programs to U.S. companies interested in investing in
Kyrgyzstan.  In January 1993, a U.S.-Kyrgyz bilateral
investment treaty (BIT) was signed establishing a bilateral
legal framework to stimulate investment in each other's
country.  The Treaty came into effect in December 1993.
Further discussions are needed on the bilateral tax treaty,
which would provide businesses relief from double taxation.
    6.  Export Subsidies Policies
    Kyrgyzstan inherited the Soviet legacy of subsidization of
state enterprises but these subsidies are aimed at maintaining
employment and production, and not specifically at making
exports more competitive.
    In 1992, the U.S. Department of Commerce made a preliminary
finding that uranium from Kyrgyzstan was being dumped in the
United States.  In October 1992, Commerce signed an agreement
with Kyrgyzstan to suspend the dumping investigation.
    7.  Protection of U.S. Intellectual Property
    A package of laws intended to protect intellectual property
rights was introduced in Kyrgyzstan's parliament.  However, the
extraconstitutional dissolution of the parliament by the
president in September 1994 prevented the parliament from
completing action on the measure.  A newly structured
parliament is to be chosen in February 1995 and is expected to
review this proposed legislation.  The U.S.-Kyrgyz trade
agreement includes commitments on protection of intellectual
property.
8.  Worker Rights
    a.  The Right of Association
    In February 1992 the government adopted a comprehensive law
which included provisions protecting the rights of all workers
to form and belong to trade unions.  The law requires a minimum
of five workers to form a union.  There is no evidence that
government policy sought to obstruct the formation of
independent unions.  Unions are legally permitted to form and
join federations and to affiliate with international trade
union bodies.
    b.  The Right to Organize and Bargain Collectively
    The law recognizes the right of unions to negotiate for
better wages and conditions.  While the right to strike is not
codified, strikes are not prohibited.  In most sectors of the
economy, wage levels continued to be set by government decree.
Union members are protected by the law from antiunion
discrimination.
    c.  Prohibition of Forced and Compulsory Labor
    Forced or compulsory labor is forbidden except in
government prisons.
    d.  Minimum Age for Employment of Children
    The minimum age of employment is 18.  Students are allowed
to work up to six hours per day in the summer or at part time
jobs from the age of 16.  The law has been largely observed.
However, rapidly deteriorating economic conditions in the
country have resulted in a growing number of children working
to help support the family.
    e.  Acceptable Conditions of Work
    The standard workweek is 41 hours, usually within a
five-day week.  An April 1992 law established occupational
health and safety standards as well as enforcement procedures.
Nonetheless, safety and health conditions in factories are far
behind Western standards.
    f.  Rights in Sectors with U.S. Investment
    Rights and conditions in sectors with U.S. investment do
not differ substantially from other sectors.  However, work
places or enterprises with U.S. investment have much better
conditions of work than the norm.  U.S. companies have already
improved conditions at some job sites.
(###)
LATVIA1
MU.S. DEPARTMENT OF STATE
LATVIA: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                              LATVIA
                     Key Economic Indicators
        (Millions of U.S. dollars unless otherwise noted)
                                    1992      1993       1994
Income, Production and Employment:  1/
Real GDP (1993 prices) 2/         2550.5    2171.2     2171.2
Real GDP Growth (pct.)             -33.8     -15.0        0.0
GDP (at current prices)           1125.2    2171.2    3457.0 3/
By Sector:
  Agriculture/Forestry            181.05    230.16     345.70
  Energy/Water                     15.45    148.30     155.57
  Manufacturing                   296.56    454.49     594.60
  Construction                     52.99     83.77     183.22
  Rents                            27.64     73.77      79.52
  Financial Services               44.14     80.73     117.53
  Other Services                   67.54    360.41    1169.50
  Government/Health/Education      69.66    205.84     380.27
  Net Export of Goods & Services   34.94     53.90     -34.67
Real Per Capita GDP (USD) 2/         976       846        855
Labor Force (000s)                 1,502     1,458      1,450
Unemployment Rate (pct.)             2.3       5.6        8.4 4/
Money and Prices:  (annual percentage growth)
Money Supply (M2)  1/              169.2     684.4     1054.9 5/
Base Interest Rate                   120        27         27
Personal Savings Rate                N/A       N/A        N/A
Retail Inflation                     959        35         23
Wholesale Inflation                  N/A      36.3       24.0
Consumer Price Index                 N/A       N/A        N/A
Exchange Rate (USD/Lat)
  Official                          ---       ---       ---
  Market (average)                 0.892 6/  0.676      0.568
Balance of Payments and Trade:  1/
Total Exports (FOB)                641.4 7/  999.9 7/  2005.0 3/
  Exports to U.S.                    2.4      22.6       52.8
Total Imports (CIF)                606.5     946.0     2039.7 3/
 Imports from U.S.                  15.8      89.5      100.0
Aid from U.S.                        6.0       9.0       10.6
Aid from Other Countries              41        27         48
External Public Debt                67.2     236.4      387.2
Debt Service Payments (paid)         1.8      11.6       18.1
Gold and FOREX Reserves ?/          86.8     564.3      688.7 5/
Trade Balance                       34.9      53.9      -34.7 3/
  Trade Balance with U.S.          -13.4     -66.9      -47.2
N/A--Not available.
1/ Average exchange rate used (except for Real GDP):1992 -
USD 1 equals 0.893 Lat; 1993 - USD 1 equals 0.676 Lat; 1994 -
USD 1 equals 0.568 Lat.
2/ Real GDP for 1992-1994 at 1993 prices converted at average
1993 exchange rate.
3/ Ministry of Finance estimate.  Sector estimates based on
1994 nine months data (January-September, 1994).
4/ National Employment Service estimate.
5/ As of September 31, 1994.
6/ Latvia's currency, the Lat, was not put into circulation
until March 1993.  The 1992 exchange rate is expressed in Lats
converted from Latvian rubles at the official 200/1
ruble-to-lat rate.
7/ Data has not been corrected to reflect fuel imported by
Latvia for re-export.
1.  General Policy Framework
    When Latvia re-established independence in 1991, it also
abandoned the Soviet command economic system. Though still in
transition, the Latvian economy to a great extent operates on
free-market principles.  The private sector accounts for over
fifty percent of GDP.  Privatization has so far been most
successful in the agriculture and agribusiness sphere, followed
by very small scale manufacturing and retail trade previously
under the direction of local governments.  The government has
pursued monetary and fiscal policies in compliance with IMF
guidelines.  Consequently, the currency (the Lat), which is
fully convertible, is very stable.  The government's budget
deficit this year is projected to be within two percent of
GDP.  The decline in GDP, which saw production levels fall to
half of the pre-independence level, ended this year. Flat
growth is expected in 1994; three to five percent growth in the
next several years. Inflation has been brought down from nearly
one thousand percent in the first year of independence to
thirty five percent in 1993 followed by a gradual decline to
about 25 percent in 1994.
    Trade policy:  A GATT observer since 1992, Latvia submitted
a Foreign Memorandum in June 1994 in preparation for accession
to the GATT.   Latvia follows a liberal trading regime, though
its recently promulgated customs tariff law is more protective
of the domestic agricultural market.  However, the new tariff
levels probably do not negatively affect potential U.S.
agricultural exports.  Latvia signed a free trade agreement
with the European Union, which reduces tariffs on most
industrial products to zero and sets out a schedule of tariff
reductions over the course of three years for certain
agricultural products.  Latvia has already concluded free trade
agreements with the Nordic countries, Switzerland and
Liechtenstein.  In April, 1994, a free trade agreement on
industrial goods with its Baltic neighbors came into force.  A
further agreement on agriculture is expected shortly, as are
negotiations on a customs union.  MFN status with Russia was
granted as the result of an exchange of official letters
earlier this year.  However, as it is not governed by treaty,
the arrangement may not be binding.
    Latvian fiscal policy is prudent and financial management,
in light of the difficulties of adjusting to independent,
western-style accounting, is sound.  The Finance Ministry is in
the process of implementing the general budget law which was
passed in April 1994.  According to that law, the budget for
the next fiscal year is to be presented to the Parliament by
October 1.  However, submission has been delayed by the
government crisis in the summer, which was not resolved until
September.  In 1994 the government expects a 75 million dollar
deficit, about four percent of the total budget, or two percent
of GDP.  The deficit is caused by increases in pensions and
government salaries, and defaults on government backed loans.
It is financed primarily by the sale of treasury bills to
commercial banks.  Difficulties in tax collection and a low tax
base constrain revenue development.
    The independent central bank also pursues a very
conservative policy, with its chief aims being stability of
prices and currency.  Earlier this year, an inflow of foreign
exchange, which the central bank purchased to keep the currency
from appreciating (and thereby further eroding export
potential) helped to swell the money supply.  However, for a
number of reasons the flow has stabilized.  The bank's main
monetary instruments, which are still being developed, are
treasury bill sales and cash reserves auctions.  One
consequence of the tight monetary policy has been the
persistence of very high interest rates, which are an
impediment to new business activity.  Though the rates have
fallen over the past year, the average rate for three to six
month credit is around fifty percent.
2.  Exchange Rate Policy
    Though the Bank of Latvia has loosely pegged the currency
to the SDR at the rate of 0.7997 Lats to the SDR in order to
maintain stability, the exchange rate is largely determined by
market forces.  The Lat is fully convertible and there are no
restrictions on the import, export, exchange or use of foreign
currencies inside the country.
3.  Structural Policies
    The Latvian government has made great strides, but is still
in the process of developing the laws and institutions and
regulatory framework to support a market economy.  While Latvia
passed bankruptcy legislation in 1991, administrative
mechanisms and procedures are not yet functioning well in that
the law does not establish criteria for initiating bankruptcy
procedures or provide a mechanism for rehabilitating
enterprises on the brink of bankruptcy.
    Price Policies:  The Latvian government almost completely
decontrolled farm procurement and retail food prices in
December 1991 and removed restrictions on the pricing of
industrial goods in January 1992.  To safeguard producers,
indicative prices were set for the procurement of cereals,
sugarbeets, flax, meat, milk, and poultry.  However, the
mechanism has not been effective as farmgate prices have tended
to exceed support prices.  Moreover, the government has neither
the mechanisms to enforce indicative prices nor the
resources to compensate farmers for lower prices. Less than
eight percent of goods and services remained subject to
control, including energy, telecommunications, rents and other
public services.
    Tax Policies:  Latvia is in the process of implementing a
modern tax structure, which will include a value-added tax
(VAT), a profit tax, a graduated personal income tax, excise
and property taxes, customs duties, land and natural resource
taxes, and a social security tax.  Under the draft law, which
is expected to be passed shortly, the variable profit tax of 25
to 45 percent will be replaced by a corporate income tax of 25
percent.  Until a true VAT is implemented, the government is
collecting an 18 percent turnover tax on most goods and
services.  The existing law on foreign investment provides for
tax reductions for up to five years for qualifying foreign
investments, but the new law may repeal these tax breaks.  The
social security tax is collected on all wages, fees, royalties
and rewards for work; the general social security tax rate is
37 percent for employers and one percent for employees. The
agricultural sector is exempt from many of these taxes, or
taxed at a reduced rate.   According to the new law on customs
tariffs, import duties on some agricultural products are as
high as 55 percent (for countries without MFN status).
However, duties on industrial products are minimal or zero for
countries in a free trade agreement.  Latvia collects an export
duty on timber, metals, leather, paper and a few other products.
    Regulatory Policies:  Latvia is only beginning to create a
modern system to regulate economic activity.  The Bank of
Latvia is responsible for regulating the banking industry and
has created a supervisory structure.  An antimonopoly committee
supervises monopolies and examines the tariffs set by public
utilities.  It can recommend the break-up of large enterprises
with high market power and can investigate claims of unfair
competition and false advertising.  A regulatory body has been
set up to oversee the activities of the energy sector and
provide rate arbitration for district heating services,
electricity and natural gas, which are still provided by
monopolies.
    Privatization:  Privatization of large state enterprises,
which has lagged behind other reform measures, has begun to
accelerate with the creation of the Latvian Privatization
Agency in April 1994.  This entity assumed responsibility for
all privatization procedures, previously disbursed among
various ministries.  In early 1995, the first wave of
enterprises will be offered for "mass" privatization, i.e.,
auctioning of shares for privatization certificates
(vouchers).  This event will also kick-off full operation of
the Riga Stock Exchange.
4.  Debt Management Policies
    As of October 15, 1994, the Government of Latvia's external
debt was 329 million dollars, and could increase to 387 million
by the end of 1994.  G-24 credits constitute 55 million
dollars.  Latvia has concluded a second standby agreement with
the IMF (SDR 22.9 million) and two structural transformation
facility agreements (SDR 45.7 million).  Latvian compliance
with IMF programs has been strong, though a minor problem with
budget financing led to temporary suspension of disbursement of
the second tranche of standby credits.  On September 30, 1994,
Latvia's official foreign exchange and gold reserves were
valued at 688.7 million dollars, covering nearly six months of
exports.  The ratio of debt service to exports is a very modest
1.50 percent.
5.  Significant Barriers to U.S. Exports
    The main barriers to U.S. exports to Latvia are
structural.  While considerable improvement has occurred over
the last year, Latvia's business, banking and legal
infrastructures have not yet attained Western standards.
    Under the 1991 Investment Law, the laws of the Republic of
Latvia apply equally to domestic and foreign investors.
However, there are some restrictions on foreign investment.
Acquisition of controlling shares in a Latvian enterprise with
assets exceeding one million dollars must be approved by the
Cabinet of Ministers.  Foreign investors may engage in, but not
obtain control over enterprises engaged in activities related
to national defense; the manufacture and sale of narcotics,
weapons and explosives, securities, banknotes, coins and
stamps; the mass media; national education; acquisition of
renewable and nonrenewable national resources; internal
fisheries; hunting; and port management.  Latvia does not
restrict the repatriation of profits.  The Bank of Latvia must
approve the establishment of a foreign bank branch.   The
United States and Latvia signed a bilateral investment treaty
in January 1995.
    Latvia requires a license for the import of grain and sugar
to protect domestic production.  In the case of grain, the
importer is required to demonstrate purchases from domestic
producers.  The sugar licensing restrictions poses problems for
foreign (or domestic) producers of high quality food products
which use sugar, as the domestic product is considered to be of
inferior quality.  A special permit granted by the Cabinet is
required for the import or transit of weapons, explosives or
pornographic materials.
    Latvia is still formulating food safety standards.
Meat imports are subject to inspection by the state veterinary
department for infectious diseases.  As of June 1, 1994,
imported food products are required to have conformity
certificates to guarantee quality and wholesomeness of food
products.
6.  Export Subsidies Policies
    The Latvian government does not currently provide export
subsidies.  However, the Ministry of Agriculture intends to use
state funds allocated for improvement in animal husbandry to
subsidize the export of butter, cheese and rye.  (Export
subsidies for rye is intended to be a temporary measure to get
rid of excess stocks.)
7.  Protection of U.S. Intellectual Property
    The Government of Latvia is committed to attaining a level
of protection for intellectual property rights comparable to
that provided under international conventions.  Pursuant to
that commitment, the Latvian Parliament in 1993 passed
legislation to protect copyrights, trademarks and patents.
While the legal basis for intellectual property rights has been
established, Latvian law has not defined penalties for
violation of these rights nor established a judicial or
administrative mechanism through which foreign owners may seek
effective redress for violation of their intellectual property
rights.
    In July 1994, President Clinton signed an Agreement on
Trade Relations and Intellectual Property Rights Protection
with Latvia.  Latvia has been a member of the World
Intellectual Property Organization since January 1993 and
signed the Paris Convention in September 1993.  Latvia will
accede to the Madrid, Nice and Budapest Conventions in December
1994.  Latvia also intends to become party to the Bern
Convention not later than December 31, 1995.
    Unauthorized reproductions of copyrighted video recordings
imported from Russia are widely distributed in Latvia.  To halt
the use of pirated films imported from Russia by private
Latvian television stations, the Latvian Radio and Television
Board on October 27, 1992, adopted a ruling under which the
license of any domestic television company would be revoked if
it is unable to show that it has legally acquired the rights to
the films it broadcasts.  The board does not apply this ruling
to signals from the Russian television stations that are
rebroadcast directly by Latvian television.
    Latvia's intellectual property practices have not had an
serious impact on U.S. trade outside the film and video
industry.
8.  Worker Rights
    a.  The Right of Association
    Latvia's law on trade unions mandate that workers, except
for uniformed military, have the right to form and join labor
unions of their own choosing.  About 50 percent of the work
force belongs to unions; union membership is falling as workers
leave soviet-era unions that include management or are laid off
as soviet-style factories fail.  The Free Trade Unions
Federation of Latvia, the only significant labor union
confederation in Latvia, is non-partisan, although some leaders
ran as candidates for various smaller parties that failed to
enter Parliament in the 1993 elections.  Unions are free to
affiliate internationally and are developing contacts with
European labor unions and international labor union
organizations.
    The law does not limit the right to strike, but few strikes
were actually held in 1994.  On September 2, 1994, the majority
of Latvia's teachers participated in a one-day strike to
protest low wages.  Although many state-owned factories are on
the verge of bankruptcy and seriously behind in wage payments,
workers fear dismissal if they strike and non-citizens fear
striking may affect their residency status.  While the law bans
such dismissals, the government's ability to enforce these laws
is marginal.
    b.  The Right to Organize and Bargain Collectively
    Large unions have the right to bargain collectively and are
largely free of government interference in their negotiations
with employers. The law prohibits discrimination against union
members and organizers. Some emerging private sector
businesses, however, threatened to fire union members; these
businesses usually paid higher salaries and greater benefits
than were available elsewhere.
    No export processing zones exist in Latvia.
    c.  Prohibition of Forced or Compulsory Labor
    Forced or compulsory labor is banned and is not practiced.
    d.  Minimum Age for Employment of Children
    The statutory minimum age for employment of children is 15,
though 13-year-olds can work in certain jobs outside school
hours.  Children are required to attend school for nine years.
Child labor and school attendance laws are enforced by state
authorities through inspections.  The law restricts employment
of those under 18, such as by banning night shift or overtime
work.
    e.  Acceptable Conditions of Work
    The labor code provides for a mandatory 40-hour maximum
work week with at least one 24-hour period of rest, four weeks
of annual vacation, and a program of assistance to working
mothers with small children.  In October 1994, the minimum
monthly wage was set at about 50 dollars (28 Lats).  Latvian
laws establish minimum occupational health and safety standards
for the workplace, but these standards seem to be frequently
ignored.
    f.  Rights in Sectors with U.S. Investment
    The only significant U.S. investment is in the manufacture
of food and related products.  Conditions do not differ from
those in other sectors of the economy.
(###)
LITHUANI1
+U.S. DEPARTMENT OF STATE
LITHUANIA: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                            LITHUANIA
                     Key Economic Indicators
         (Millions of U.S.dollars unless otherwise noted)
                                     1992      1993    1994 1/
Income, Production and Employment:
Real GDP (1985 prices)                N/A       N/A     N/A
Real GDP Growth (pct.)              -37.7     -17.1   -13.0
GDP (at current prices) 2/        6,191.5   2,725.0   909.5
By Sector:
  Agriculture                       229.0     305.2   266.3
  Energy/Gas                          154       158     N/A
  Manufacturing                       228       733     275
  Construction                      340.9     215.2    48.6
  Rents                               N/A      19.1     N/A
  Financial Services                 52.9      98.1   771.7
  Other Services                    102.0     449.6     N/A
  Government/Health/Education         N/A     262.2     N/A
Net Exports of Goods & Services     852.3   1,242.2     N/A
Real Per Capita GDP (1985 base)     470.5     684.0   682.0
Labor Force (000s)                  1,879.0 1,859.3     N/A
Unemployment Rate (pct.)              1.2       3.6     3.2
Money and Prices:  (annual percentage growth)
Money Supply (M2) 3/                  N/A     680.2   771.7
Base Interest Rate 4/                 120        95      95
Personal Saving Rate                  N/A       N/A     N/A
Retail Inflation                    1,163       270     180
Wholesale Inflation
  Consumer Price Index                N/A      72.2    80.4
Exchange Rate (USD/LT)
  Official                           3.79      4.50    4.00
  Parallel                           3.79      4.50    4.00
Balance of Payments and Trade:
Total Exports (FOB)                 269.3   1,334.0   161.5
  Exports to U.S.                     4.0       4.8     9.0
Total Imports (CIF) 5/              192.9   1,402.2   230.0
  Imports from U.S.                   N/A      26.4    26.0
Aid from U.S.                          10        25      25
Aid from Other Countries            129.9     216.9   408.0
Debt Service Payments (paid)            5        25     N/A
Gold and Foreign Exch. Reserves       232       253     309
Trade Balance                        76.5     -68.2    68.5
  Trade Balance with U.S.             N/A     -21.6   -17.0
N/A--Not available.
1/ 1994 figures are all estimates based on available monthly
data in October 1994.
2/ GDP at factor cost.
3/ In broad money as defined by the IMF.
4/ Figures are actual, average interest rates, not changes in
them.
5/ Merchandise trade.
1.  General Policy Framework
    Since declaring independence in 1990, Lithuania has
implemented reforms aimed at eliminating the vestiges of the
former socialist system.  In 1992, with the help of the IMF and
other international institutions, Lithuania adopted a program
to restrain inflation, reduce price controls, lower the budget
deficit and privatize the economy.  Lithuania has undertaken a
series of price liberalizations, and most price controls have
been abolished.  Most businesses have been privatized and
private citizens are allowed to own land.  The government is
eager to encourage foreign investments and open new trade ties
with the West.  Trade ties with Russia and other former Soviet
republics are expected to continue, but at a reduced rate.
Lithuania is seeking to further liberalize its foreign
investment laws.  The Lithuanian government is following a
cautious, but Western-oriented program of economic reform in
banking and monetary policies, price structure, tax laws, land
ownership laws, fiscal policy and foreign trade legislation.
    Inflation subsided during 1994 as a result of tight
monetary policies.  Wage restraint, partly through the pursuit
of a tight incomes policy, and significantly reduced subsidies
to state agricultural and industrial enterprises have reduced
the budget deficit.  Tax reform, including the introduction in
mid-1994 of excise taxes and a value added tax, has increased
government revenues.  Social programs and subsidies consume the
bulk of budgetary expenditures.
    In April 1994, Lithuania adopted a currency board
arrangement under which central bank reserve money and
liabilities denominated in the local currency are fully backed
by foreign exchange at a fixed rate.  Growth in the money
supply is tied to growth in foreign exchange reserves.
2.  Exchange Rate Policy
    On June 20, 1993, Lithuania introduced its own national
currency, the litas.  In April 1994 the Lithuanian currency
board fixed the rate of exchange at four litas to one U.S.
dollar.
3.  Structural Policies
    Price Reform:  The Lithuanian government has dismantled
most of the centralized price controls formerly imposed by
Moscow.  Prices on most foodstuffs and manufactured goods have
been liberalized.  However, due to market monopolies and
oligopolies in several sectors, the Lithuanian government has
imposed measures to control anti-competition price fixing.
    Tax Policies:  Lithuania has begun to reform its entire tax
system.  In May 1994, Lithuania introduced an 18 percent value
added tax.  The value added tax is applied to most imports.
Taxes are levied on wages through the personal income tax and
through employees' and employers' contributions to the Social
Insurance Fund.  Enterprise profits are taxed at rates of
between 20 and 30 percent.  Reduced rates apply for
agricultural enterprises, small-scale enterprises, and
reinvested profits.  Joint ventures with foreign capital are
exempt from the profits tax for up to three years.  Profit
taxes of joint ventures are determined by the amount of foreign
investment in the authorized capital and the type of activity
(industrial or commercial).  Dividends to foreign investors
received in Lithuania are exempt from taxes.  Income received
legally by foreign investors and upon which a profit tax has
been paid may be repatriated without additional tax.
    Regulatory Policies:  There are no performance requirements
imposed by law as a condition for foreign investment.  However,
in tendering bids for purchasing privatized companies or
forming joint ventures with state companies, foreign companies
are often required to offer employment guarantees or
technology.  Lithuanian law gives foreign investors the right
to lease land for 99 years, but bars foreigners from owning
land.
4.  Debt Management Policies
    Lithuania has acknowledged only that portion of the Soviet
debt incurred by Lithuanian entities for use in Lithuania.
Negotiations on this matter are in progress.  Lithuania has
received balance of payments support from the European Union
and the G-24 countries.  The IMF has provided a stand-by
arrangement and a systematic transformation facility.  The
World Bank and the European Bank for Reconstruction and
Development have contributed infrastructure and import
rehabilitation loans.
5.  Significant Barriers to U.S. Exports
    There are no direct barriers to U.S. exports.  However,
U.S. exports are adversely affected by the absence of an
established infrastructure for trade, such as in
telecommunications and banking facilities.  U.S. exporters are
also hampered by the lack of import financing and other credit
facilities.  Customs procedures at border crossings are
time-consuming and burdensome owing to the lack of trained
personnel and inconsistent application of customs regulations.
    The May 1991 law on prohibited and limited spheres for
foreign investment determines the areas of economic activity
where foreign investment is prohibited or limited.  Foreign
investment is prohibited in areas of defense and security.
Foreign investment is also prohibited in state enterprises
holding a monopoly in the Lithuanian market.  These are defined
as enterprises producing more than 50 percent of their goods in
the Lithuanian market.  Enterprises which exploit existing
communications, electricity delivery, gas, oil and water
supply, heating and sewage systems are also considered to be
monopolistic.
6.  Export Subsidies Policies
    The government exercises controls on exports of certain
scarce commodities.  There are no export subsidies.
7.  Protection of Intellectual Property
    Upon regaining its independence, Lithuania declined to
assume formally any binding legal obligations undertaken by the
former Soviet Union.  In the area of intellectual property,
Lithuanian policy has been to observe international standards
and to consider subscribing to international conventions beyond
those accepted by the independent Lithuanian governments before
World War Two.  In 1990 Lithuania joined the World Intellectual
Property Organization (WIPO) and it plans to sign the Paris
Convention for the Protection of Industrial Property.  In April
1994 Lithuania signed an agreement with the U.S. for the
protection of intellectual property.  The Lithuanian parliament
is considering laws for copyright enforcement, including
amendments to the criminal and civil codes.
8.  Worker Rights
    a.  The Right of Association
    The 1991 Law on Trade Unions and the Constitution recognize
the right of workers and employees to form and join trade
unions and, with certain limitations, to strike.  There are no
restrictions on unions affiliating with international trade
unions.
    b.  The Right to Organize and Bargain Collectively
The Lithuanian Collective Agreements Law confirms the right to
organize and bargain collectively.  Lithuanian trade unions
engage in direct collective bargaining at the workplace as wage
decisions are increasingly being made at the enterprise level.
The government issues periodic decrees that serve as guidelines
for state enterprise management in setting wage scales.
    c.  Prohibition of Forced or Compulsory Labor
    The constitution prohibits forced labor, and this
prohibition is observed in practice.
    d.  Minimum Age of Employment for Children
    The minimum age for employment of children is 16.  Twelve
years of schooling are compulsory.  These requirements are
enforced through a system of inspections.
    e.  Acceptable Conditions of Work
    By law, white collar workers have a 40 hour workweek.  Blue
collar staff have a 48 hour workweek with premium pay for
overtime.  There are minimum legal health and safety standards
for the workplace.  However, worker complaints indicate that
these standards are sometimes ignored.  The minimum wage is
adjusted periodically by the parliament, but enforcement of the
minimum wage is almost nonexistent.
    f.  Rights in Sectors with U.S. Investments
    There is only a minimal level of U.S. investment in any one
sector.  Worker rights are applied uniformly throughout the
economy and there are no known exceptions.
(###)
MACEDONI1
U.S. DEPARTMENT OF STATE
FYRO MACEDONIA: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
          FORMER YUGOSLAV REPUBLIC OF MACEDONIA (FYROM)
    War in nearby Bosnia has severely hurt the FYROM economy
and complicated efforts at economic reform.  The FYROM has
suffered a breakdown of trade and capital flows, and lacks the
resources to shore up a weakened, inadequate infrastructure,
let alone to finance new east-west links that will be needed
for long-term development.  The Greek embargo, imposed in
February 1994, compounded the country's economic woes by
cutting access to the region's main port of Thessaloniki.
There has been limited success in efforts to reroute trade
along existing east-west routes; nevertheless, significant
bottlenecks remain at the border crossings with Bulgaria.  The
Greek embargo, in particular, has hurt industrial
competitiveness by raising input costs, as overcrowded
alternate transport routes are far more costly than shipping
through Thessaloniki.
    Despite a harsh economic climate, the FYROM government put
into place a modest economic stabilization program in the
spring of 1992.  This program has received much praise from IMF
officials.  Inflation recently dropped to 2 percent per month.
The average monthly salary was $126 by the end of 1993 -- less
than the cost of food for the average family, but still
considerably more than the average monthly salary in Serbia.
    The U.S. contributed $5 million to a multilateral effort to
clear the FYROM's arrears with the World Bank in early 1994,
which in turn unlocked the country's first Economic Recovery
Loan from the Bank.  The June 1994 World Bank Consultative
Group meeting only partially succeeded in filling the projected
1994-1995 balance of payments gap of $110 million.  Progress on
this count is needed to enable the IMF and IBRD to move ahead
with their planned programs in 1995.
(###)
MALAYSIA1
wrwrU.S. DEPARTMENT OF STATE
MALAYSIA: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                             MALAYSIA
                     Key Economic Indicators
        (Millions of U.S. dollars unless otherwise noted)
                                    1992      1993      1994 1/
Income, Production and Employment:
Real GDP (1978 prices)            36,498    39,237    41,744
Real GDP Growth (pct.)               7.8       8.3       8.5 2/
By Sector:
  Agriculture                      6,052     6,241     6,235
  Manufacturing                   10,533    11,814    13,089
  Mining/Petroleum                 3,172     3,102     3,108
  Utilities                          757       849       942
  Construction                     1,418     1,569     1,723
  Whole and Retail Trade           4,378     4,788     5,172
  Financial Services               3,767     4,188     4,541
  Government Services              3,712     3,869     3,967
  Other Services                   2,709     2,860     2,971
Net Exports of Goods & Services   -1,709       136       503
Real Per Cap GDP (1978 base)       1,962     2,065     2,197
Labor Force (000s)                 7,370     7,627     7,846
Unemployment Rate (pct.)             3.7       3.0       2.9
Money and Prices:
Money Supply (M2/pct.)              19.1      22.1      21.9  3/
Base Interest Rate (pct.)            9.5       8.5      7.84
Gross Nat. Savings/GNP (pct.)       33.3      32.7      32.3
Inflation (CPI) (pct.)               4.7       3.6       3.8
Exchange Rate (avg USD/RM)          2.55      2.57      2.62
Balance of Payments and Trade:
Merchandise Exports               39,573    46,057    55,194 5/
  Exports to U.S. (FAS)            8,293    10,568    11,413
Merchandise Imports               36,200    42,869    52,950 5/
  Imports from U.S. (CV)           4,396     6,061     6,550
Aid from U.S.                        1.5       0.3       0.3
Aid from Other Countries             N/A       N/A       N/A
External Debt                     16,784    20,121    24,431
  Public Sector                   12,667    14,163    16,995
  Private Sector                   4,117     5,959     7,436
Debt Service Payments (paid) 4/    1,995     2,184       N/A
Official Net Reserves 5/          18,068    29,741    31,184
Merchandise Trade Balance          3,373     3,188     2,244 5/
  Trade Balance With U.S.          3,897     4,507     4,863
N/A--Not available.
1/ Malaysian Government estimates.
2/ Calculated in ringgit to avoid exchange rate changes.
3/ U.S. Embassy estimates.
4/ Excluding prepayments.
5/ 1994 data to August only.
1.  General Policy Framework
    Malaysia has a relatively open, market-oriented economy and
real GDP growth ranged between 6 percent and 8 percent from
1964-1984.  Since independence in 1957, the Malaysian economy
has shown sustained growth and has diversified away from the
twin pillars of the colonial economy:  tin and rubber.  In
1985-1986, the collapse of commodity prices led to Malaysia's
worst recession since independence, with real GDP growth a
negative 1 percent and nominal GNP falling 11 percent.  Since
then, the economy has rebounded, led by strong growth in both
foreign and domestic investment and exports of manufactures
with real GDP growing at an average rate of over 8 percent.  In
1994, real GDP growth is expected to reach 8.5 percent.
Malaysia's 1995 Federal budget, tabled in Parliament October
28, 1994, introduced 2,600 tariff cuts and additional fiscal
policy changes.
    While the government plays a diminishing role as a producer
of goods and services, it continues to hold equity stakes
(generally minority shares) in a wide range of domestic
companies.  These entities are rarely monopolies; instead, they
are one (generally the largest) player among several
competitors in a given sector.  However, government-owned
entities are major players in some sectors, particularly
plantations and financial institutions.  Since 1986, the
government has been privatizing many entities, including
telecommunications, the national electricity company, the
national airline and the government shipping firm.  The
government sold off its remaining shares in Malaysia Airlines
Systems (MAS) in August 1994 and MAS is being reorganized to
improve profitability.  Seaports and government hospitals and
pharmaceutical supply centers are in various stages of
privatization.
    Malaysia supports global trade liberalization measures and
encourages direct foreign investment, particularly in
export-oriented manufacturing and high technology products.  It
has been very active in the Uruguay Round negotiations and
ratified the agreement on September 6, 1994.  Multinational
corporations control a substantial share of the manufacturing
sector.  U.S. and Japanese firms dominate the production of
electronic components (Malaysia is the world's third largest
producer of integrated circuits), consumer electronics, and
electrical goods.  Foreign investors also play an important
role in petroleum, textiles, vehicle assembly, steel, cement,
rubber products, and electrical machinery.
    Fiscal Policy:  The government follows a prudent and
conservative fiscal policy, with a surplus in its operating
account.  With the intention of improving the investment
climate, the government reduced the corporate income tax rate
by two percentage points from 34 to 32 percent in the 1994
budget and reduced it by another two percentage points, to 30
percent, in the 1995 budget.
    Monetary Policy:  Malaysian monetary policy is aimed at
controlling inflation while providing adequate liquidity to
stimulate economic growth.  Monetary aggregates are controlled
by the central bank through its influence over interest rates
in the banking sector, open market operations and,
occasionally, changes in reserve requirements.
2.  Exchange Rate Policy
    While the value of the Malaysian currency, the ringgit
(RM), is considered to be market determined, the Malaysian
government has intervened to offset significant upward pressure
on the currency when such pressure was perceived as a sign of
excessive foreign exchange speculation.
    In late 1993, following a prolonged period of strong
capital inflows (and upward pressure on the ringgit which was
resisted), the government of Malaysia intervened aggressively
in the market, bringing the value of the ringgit down nearly
six percent against the U.S. dollar in just a few weeks.
    By mid-January 1994, the policy of aggressive intervention
was abandoned and the set of controls were soon abandoned as
well, and the currency was allowed to gradually return to its
early December 1993 value against the U.S. dollar.  The current
monetary authorities believe the controls introduced
distortions that were not desirable in the longer term.
    Payments, including repatriation of capital and remittance
of profits, are freely permitted.  Payments to countries
outside Malaysia may be made in any foreign currency other than
the currency of Israel.  No permission is required for payments
in foreign currency up to RM10,000 (approximately $3,818).
Individual foreign exchange transactions above RM10,000
required an exchange control license.  For transactions up to
RM10 million ($3.8 million), a license is issued by any
commercial bank upon request without reference to the
controller of foreign exchange (part of Bank Negara).  An
individual transaction in excess of RM10 million requires
approval of the controller.  Individuals and companies may now
hold foreign currency accounts in resident commercial banks,
but only the first tier banks can offer such accounts.
3.  Structural Policies
    Pricing Policies:  Most prices in Malaysia's economy are
market-determined but the government controls prices of some
key goods, notably fuel, public utilities, motor vehicles,
rice, flour, sugar and tobacco.  Citing concerns about
inflation, it added 25 items temporarily to the price control
list on October 16, 1994.  Those price controls are slated to
be lifted as of June 10, 1995.  Overall tariffs average about
10 percent on a trade-weighted basis and import licenses are
required for a small range of goods, e.g., poultry, tobacco and
plastic resins.  In the 1993 budget, the federal government
lowered or eliminated tariffs on over 600 items in an attempt
to defuse domestic inflation, and took similar action for the
same reason on over 500 items in the 1994 budget.  On October
28, 1994 the government announced it would reduce import
tariffs on another 2,600 items in the 1995 budget, largely to
meet its commitments in the Uruguay Round and the Association
of South East Asian Nations (ASEAN) Free Trade Agreement (AFTA).
    The agricultural sector, however, does contain some
restrictive tariffs and nontariff barriers which distort
trade.  For example, the government fixes farm-gate prices for
rice and tobacco at levels above world prices to encourage
domestic production and to boost depressed rural incomes.  It
also sets the selling price for rice below the farm-gate price,
but still above market levels.  Despite this price incentive,
local rice production does not meet demand and the government
imports large quantities of rice.  It uses profits from sales
of cheaper imported rice to offset the subsidies for rice
producers.  In the case of tobacco, the government presses
cigarette manufacturers to use a high proportion of locally
grown tobacco.  Imports of tobacco are restrained by high
import duties and controlled through import licenses.
    Tax Policies:  Income taxes, both corporate and individual,
are the largest single source of revenue for the government,
accounting for about 40 percent of government revenue.
Indirect taxes, comprising export and import duties, excise
taxes, sales taxes, service taxes and other taxes account for
about 35 percent of government revenue.  The remainder of
government revenue comes largely from profits of state-owned
enterprises and petroleum taxes.  In 1994, the government
reduced the income tax rate on petroleum companies from 45 to
40 percent, and lowered the export tax on crude oil from 25 to
20 percent.  Sales taxes on imported food products are
uniformly collected at the port of entry while competing
domestic goods can escape the equivalent tax rates.  However,
the government has stepped up efforts to fine domestic
manufacturers that evade sales taxes.
    Regulatory Policies:  The Government encourages foreign and
local private investment.  Currently, a foreign investor can
hold 100 percent of the equity in a Malaysian subsidiary if it
exports at least half of its output, has at least 50 percent
value-added domestically (or, failing that, has RM50 million --
about $19 million -- in foreign-funded assets), and does not
produce items that compete with those now being made for the
local market.
    For companies exporting less than 50 percent of output,
foreign equity is generally limited to a 51 percent share.
Since the mid-1980s foreign investors have been able to buy a
maximum of 30 percent equity in firms in the insurance and
banking sectors.  However, some existing firms have been
allowed to retain their equity positions, including 100 percent
foreign ownership.
4.  Debt Management Policies
    Malaysia has strong credit ratings in international
financial markets and its public and private companies have no
difficulty accessing funds.  Malaysia's medium and long-term
foreign debt is expected to stand at $24.0 billion at the end
of 1994, about 20 percent of GDP.  Malaysia's debt service
ratio declined from a peak of 18.9 percent of gross export
earnings in 1986 to 5.7 percent in 1993.
5.  Significant Barriers To U.S. Exports
    Import Tariffs on Tobacco:  To encourage greater use of
local tobacco in cigarettes and to maintain high domestic leaf
prices, the government levies heavy import tariffs.  The
present import duty for unmanufactured tobacco is RM50 ($20)
per kilogram, plus five percent ad valorem.  While this policy
reduces leaf imports, the greatest impact appears to affect the
cheaper, lower quality leaf from suppliers other than the
United States.  Since the duty on imported leaf tobacco does
not vary by quality, it is more economical to import high-grade
U.S. leaf to blend with domestic tobacco.  In 1992, the
government first proposed an import quota for flue-cured
tobacco.  Although, Malaysia manages the quota rather
liberally, cigarette manufacturers are forced to buy up all the
locally produced tobacco which is generally considered to be
very low quality.  Cigarettes are taxed at a rate of RM162
($64.8) per kilogram.
    Duties On High Value Food Products:  Duties for processed
and high value products, such as canned fruit, snack-foods, and
many other processed foods, range between 20 and 30 percent.
In the 1994 budget, import duties on most fresh fruit and food
items were reduced to between 10 and 30 percent.  The abolition
or reduction in duties for numerous other food products
announced in the 1995 budget should have a positive impact on
imports of items such as tree nuts, citrus fruit, dairy,
livestock and poultry products.
    Plastic Resins:  In December 1993, tariffs were increased
for a five year period from 2 to 30 percent (for non-ASEAN
countries) and from 1 to 15 percent (for ASEAN countries) on
plastic resins.  In 1994, when tariff protection alone did not
provide the amount of protection desired, the government
instituted a licensing system for plastic resins to give
protection to the domestic industry for a five year period.
U.S. firms utilizing resins in their manufacturing process have
complained the system limits their ability to source the
products they want and has resulted in significant price
hikes.  U.S. manufacturers of resins say their ability to sell
to Malaysia has been sharply curbed.  The government says it
has implemented a transparent form of protection for a specific
period of time and will review the situation regularly.
    Protective Tariffs for Kraftpaper:  In April 1994 the
government raised tariffs on imported kraftpaper (used in
making cardboard boxes) to between 20 and 30 percent, depending
on the category.  These tariff increases are to be phased out
over a maximum of five years and are subject to review every
two years.  Following this action local manufacturers have
raised prices three times, affecting U.S. firms using cardboard
boxes for packing their export products.  U.S. suppliers of
kraftpaper to Malaysia have complained that they are losing
sales.
    High Import Duties On Alcoholic Beverages:  For the first
time in many years the tariffs on all alcoholic beverages
remain unchanged in both the 1994 and 1995 budgets.  Duties of
wine and beer remain at RM228 ($91.2) per decaliter and RM74
 ($29.6) per decaliter respectively.
    Ban on Imports of Chicken Parts:  In 1983, the government
effectively closed Peninsular Malaysia to imports of chicken
parts by ceasing to issue veterinary import permits.  The ban
was implemented because the European Economic Community
allegedly was dumping chicken parts into the Malaysian market.
Until January of 1991, the East Malaysian states of Sabah and
Sarawak maintained separate import regimes for poultry products
which permitted the import of U.S. chicken.  Now, however,
similar bans have been implemented in those states as well.
Since the implementation of the ban, a significant domestic
poultry industry has developed and Malaysia now exports
relatively large quantities of live poultry and poultry meat to
countries such as Singapore and Japan.  Although import
licenses are still required, import duties for poultry and
poultry products were abolished in the 1995 budget and Malaysia
has committed to opening its market to a modest import quota
under the Uruguay Round of the GATT.
    Rice Import Policy:  Because subsidized local production
satisfies only part of domestic demand, the National Rice
Authority (Lembaga Padi Negara or LPN), as the sole legal
importer, brings in substantial quantities of rice.  Purchases
generally are made on a government-to-government basis, which
places private U.S. suppliers at a considerable disadvantage.
A proposal to "corporatize" LPN is still being considered after
years of debate.
    Import Licenses:  Malaysia makes limited use of import
licensing.  In the few sectors subject to licenses, i.e.,
requiring approved permits, U.S. exports have not been
significantly impaired.  Some technical licenses (e.g., for
electrical products and telephone equipment) exist, but they
are administered fairly and do not appear to constitute
nontariff barriers.
    Service Barriers:  Malaysia protects most service sectors.
Foreign lawyers, architects, etc., are generally not allowed to
practice in Malaysia.  Television advertisements must be
largely produced in Malaysia with Malaysian performers unless
an exception is obtained.  Wholly-owned U.S. travel agencies,
air courier services, motion picture and record distribution
companies are permitted.
    Financial Services:  Banking, insurance and stockbroking
are all subject to government regulation which limits foreign
participation.  No new banking licenses are being granted for
either local or foreign corporations in the onshore market.
Foreign-controlled companies are required to obtain 60 percent
of their local credit from local banks.  Under the terms of the
1987 Banking and Finance Act, all foreign-controlled banks were
required to convert their Malaysian branch offices to locally
incorporated subsidiaries by September 31, 1994.  Foreign
shareholdings in insurance companies are limited to 30 percent
without government approval.  However, there are ten insurance
companies which are 100 percent foreign owned (one U.S.) and
another eight have foreign equity in excess of 50 percent.
Foreigners may hold in aggregate up to 49 percent of the equity
in a stockbroking firm.  Currently there are 11 stockbroking
firms which have foreign ownership and 20 representative
offices of foreign brokerage firms.
    Standards:  Malaysia has extensive standards and labeling
requirements, but these appear to be implemented in an
objective, nondiscriminatory fashion.  Food product labels must
provide ingredients, expiry dates and, if imported, the name of
the importer.  Electrical equipment must be approved by the
Ministry of International Trade and Industry,
telecommunications equipment must be "type approved" by the
Department of Telecommunications and aviation equipment must be
approved by the Department of Civil Aviation.  Pharmaceuticals
must be registered with the Ministry of Health.  In addition,
the Standards and Industrial Research Institute of Malaysia
(SIRIM) provides quality and other standards approvals.
    Government Procurement:  Malaysian government policy
requires countertrade provisions on government tenders above
RM1 million.  Below RM1 million, countertrade is welcomed and
even encouraged, but not required.  (Most government tenders
require that countertrade be offered as an alternative.)
Incentives exist for local procurement.  Many smaller civil
construction projects (RM50 million or less) are restricted to
local firms.
6.  Export Subsidy Policies
    Malaysia offers several export allowances.  The most
important is the Export Credit Refinancing (ECR) scheme
operated by the Central Bank.  Under the ECR, commercial banks
and other lenders provide financing to exporters at an interest
rate of seven percent for both post-shipment and pre-shipment
credit.
    Malaysia also provides tax incentives to exporters,
including double deduction of expenses for:
      overseas advertising and travel;
      supply of free samples abroad;
      promotion of exports;
      maintaining sales office overseas;
      export market research.
7.  Protection of U.S. Intellectual Property
    Malaysia is a member of the World Intellectual Property
Organization (WIPO) and, as of October 1, 1990, the Berne
Convention for the protection of literary and artistic works,
and the Paris Convention.
    The Trade Description Act of 1976, the Patent Act of 1983,
the Copyright Act of 1987, and the Copyright (Amendment) Act of
1990 have greatly strengthened protection for intellectual
property in Malaysia.  Under the Copyright (Amendment) Act of
1990, and the accompanying accession to the Berne Convention,
Malaysia now provides copyright protection to all works (inter
alia video tapes, audio material, and computer software)
published in countries that are members of the Berne Convention
regardless of when the works are first published in Malaysia.
Police and legal authorities have been responsive to requests
from U.S. firms for investigation and prosecution of copyright
infringement cases, though illegal videotapes continue to be
widely available.
    Patents registered in Malaysia generally have a duration of
15 years but may have a longer duration under certain
circumstances.  A person who has neither his domicile nor
residence in Malaysia may not appear before the patent
registration office or institute a suit except through a local
patent agent.  With regard to trademarks, "where any person has
registered or applied for protection of any trademark in any
foreign state designated by the Malaysian Government, such
person shall be entitled to registration of this trademark in
Malaysia provided that application for registration is made
within six months from the date of registration in the foreign
state concerned."  Trademark infringement has not been a
problem in Malaysia for U.S. companies.  Patent protection is
also good.
8.  Worker Rights
    a.  The Right to Organize and Bargain Collectively
    Unions may organize workplaces, bargain collectively with
an employer, form federations, and join international
organizations.  There were 519 unions registered in Malaysia as
of June 30, 1994, of which 60 percent are enterprise-level
unions, and twelve percent of the work force are members of
trade unions.  The Trade Unions Act's definition of a trade
union restricts it to representing workers in a "particular
trade, occupation, or industry or within any similar trades,
occupations, or industries."  A trade union for which
registration has been refused, withdrawn or cancelled is
considered an unlawful association.  Strikes are legal and
relatively few (18 strikes in 1993).  Government policy limits
the formation of unions in the electronics sector to in-house
unions.
    Collective bargaining is the norm in Malaysian industries
where workers are organized.  Malaysia's system of conciliation
and arbitration seeks to promote negotiation and settlement of
issues without industrial action.  Malaysian law, especially
the Industrial Relations Act, effectively restricts collective
bargaining rights through compulsory arbitration.  There are
1,600 collective bargaining agreements and 90 percent of
approximately 550 trade disputes referred to the Industrial
Court are settled annually.  Through legislative amendment, the
government is eliminating an exemption for firms granted
"pioneer" status which protected them from union demands for
terms of employment exceeding those specified in the Employment
Act of 1955.
    b.  Prohibition of Forced or Compulsory Labor
    There is no evidence that forced or compulsory labor occurs
in Malaysia, for either Malaysian or foreign workers.  In
theory, certain Malaysian laws, which date to pre-independence,
allow the use of imprisonment with compulsory labor as a
punishment for persons expressing views opposed to the
established order or who participate in strikes.  The
government maintains that the constitutional prohibition on
forced or compulsory labor renders these laws without effect.
    c.  Minimum Age of Employment of Children
    Employment of children is covered by the Children and Young
Persons (Employment) Act of 1966, which stipulates that no
child under the age of 14 may be engaged in any employment
except light work in a family enterprise or in public
entertainment, work performed by the government in a school or
training institution, or employment as an approved apprentice.
The Ministry of Human Resources maintains a staff to enforce
regulations prohibiting children from working more than 6 hours
per day, more than 6 days per week, or at night.  However,
according to non-governmental organizations, there may be as
many as 75,000 children between the ages of 10-14 working
full-time, mostly on plantations.
    d.  Acceptable Conditions of Work
    The Employment Act of 1955 sets working conditions, most of
which are at least on a par with standards in industrialized
countries.  The new Occupational Safety and Health Act was
promulgated in February 1994 and covers all sectors of the
economy except the maritime sector and the military.  Other
laws provide for retirement programs and disability and
workman's compensation benefits.  No comprehensive national
minimum wage legislation exists, but certain classes of workers
are covered by minimum wage laws.  Plantation and construction
work is increasingly being done by contract foreign workers.
Working conditions for contract workers often are significantly
below those of direct hire workers.  In addition, many of the
immigrant workers, particularly illegal ones, may not have
access to Malaysia's system of labor adjudication.  The
government has implemented programs to provide plantations with
legal foreign workers, largely to prevent the exploitation of
illegal workers.
    e.  Rights in Sectors with U.S. Investment
    The largest U.S. investment in Malaysia is in the petroleum
sector.  One U.S. company has two subsidiaries operating in
Malaysia.  One subsidiary, which is 100 percent owned by its
U.S. parent, handles offshore oil and gas production.  The
other subsidiary, which is 65 percent owned by the U.S. parent
and 35 percent by a range of Malaysian individuals and
institutions, refines and markets oil products in Malaysia.
Employees at both companies are represented by the National
Union of Petroleum and Chemical Industry Workers (NUPCIW),
which has negotiated collective agreements with management.
Some employees, however, have broken away from the NUPCIW and
formed a separate in-house union.  Pay and benefits at both
companies are considered excellent.
    The second largest concentration of U.S. investment in
Malaysia is in the electronics sector, especially the
manufacture of components, such as semiconductor chips and
various discrete devices.  (Electronic components are
Malaysia's largest single manufactured export.)  Wages and
benefits are among the best in Malaysian manufacturing.  Twenty
U.S. electronic components manufacturers operate 25 plants in
Malaysia, employing more than 52,000 Malaysian workers.
    Although there is no legal prohibition against organizing
unions in the electronics industry, government policy
effectively discouraged any unionization in this sector until
1988.  The Director General of Trade Unions ruled in the 1970s
that the Electrical Industry Workers Union (EIWU) could not
organize workers in the electronics sector, as the two
industries are different.  Other attempts to organize a
national union for the electronics industry failed on similar
grounds during the 1980s.  The Government registered several
company (or enterprise-level) unions in the electronics sector
during the late 1980s and early 1990s.  At present, workers at
seven electronics companies are represented by enterprise-level
unions.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                               303
Total Manufacturing                                   1,079
  Food & Kindred Products                   (1)
  Chemicals and Allied Products              49
  Metals, Primary & Fabricated                8
  Machinery, except Electrical              (1)
  Electric & Electronic Equipment           858
  Transportation Equipment                    0
  Other Manufacturing                       149
Wholesale Trade                                          92
Banking                                                  96
Finance/Insurance/Real Estate                           332
Services                                                  2
Other Industries                                         25
TOTAL ALL INDUSTRIES                                  1,928
MALAYSIA2
U.S. DEPARTMENT OF STATE
MALAYSIA: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
(1) Suppressed to avoid disclosing data of individual companies
Source: U.S. Department of Commerce, Bureau of Economic
Analysis
MEXICO1
rU.S. DEPARTMENT OF STATE
MEXICO: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                              MEXICO
                     Key Economic Indicators
        (Billions of U.S. dollars unless otherwise noted)
                                    1992      1993      1994 1/
Income, Production and Employment:
GDP (current)                      329.3     360.5     368.0
Per Capita GDP (current USD)      3897.3    4186.6    4116.6
Real GDP Growth Rate
  (pct. over previous year)          2.8       0.4       2.8
By Sector:  (current)
  Agriculture/Forestry/Fishing      24.7      26.8      26.5
  Mining/Oil/Gas                    11.3      12.5      12.5
  Manufacturing                     75.0      80.6      82.1
  Construction                      17.3      19.5      19.0
  Electricity                        4.9       5.5       5.5
  Commerce/Restaurants/Hotels       85.8      92.4      94.5
  Transport/Storage/Communications  23.1      25.8      26.3
  Financial Services/Insurance/
    Real Estate                     35.9      41.0      41.3
  Social Services                   56.7      62.5      66.7
Labor Force (millions)              27.4      28.0      28.6
Open Unemployment Rate (pct.)
    (year-end)                       3.0       3.7       3.7
Money and Prices:  (annual percentage growth)
Money Supply (M2)                   20.4      14.4      16.0
Banks' Average Cost of Funds        18.8      18.6      15.3
Financial Savings Rate
    (M4 as pct. of GDP)             45.6      52.7      57.4
Consumer Price Inflation
    (Dec-Dec pct. change)           11.8       8.0       6.8
Wholesale Price Inflation           10.6       4.6       6.4
Exchange Rate (year-end Interbank rate)
(new pesos. 1NP=1,000 old pesos)   3.115     3.106      3.40
Balance of Payments and Trade:
Merchandise Exports (FOB)           46.2      51.9      57.2
  Exports to U.S.(U.S. Customs Data)35.2      39.6      47.0
Total Imports (FOB)                 62.1      65.4      74.7
  Imports from U.S.(FAS)            40.6      41.4      49.0
Aid from U.S.                        N/A       N/A       N/A
Aid from Other Countries             N/A       N/A       N/A
External Public Debt                75.8      78.7      81.4
External Debt Service Payments
 (public sector amort. & interest)  18.4      13.9      16.0
Gold and Foreign Exch. Reserves     18.6      24.5      19.5
Trade Balance                      -15.9     -13.5     -17.5
  Trade Balance with U.S.           -5.4      -1.8      -2.0
N/A--Not available.
1/ Estimated.
1.  General Policy Framework
    The new Zedillo Government's decision in mid-December to
devalue and subsequently to float the peso provoked a deep
financial crisis in Mexico and highlighted the vulnerabilities
of the Mexican economy.  Principal among these were the
overvalued peso, excessive trade and current account deficits,
and undue reliance on short-term capital to finance the
government and current account deficits.  The December crisis
has led the Zedillo Government to reinforce its policy
commitment to economic reform and adjustment and to enter into
discussions with the International Monetary Fund (IMF) on a new
macroeconomic stabilization program supported by an IMF
stand-by arrangement.  The government has also promised greater
foreign access in key sectors such as ports, railroads,
satellites, telecommunications and financial services as part
of its renewed commitment to economic reform and market opening.
    In doing so, the Zedillo Government continues to rely on a
general understanding with key labor and private sector groups
to underpin its economic policy approach.  Economic goals have
been set and implemented since December 1987 through a series
of 14 government/labor/private sector agreements known as
economic pacts.  Heretofore, the pacts combined dramatic
increases in government revenues and reductions in government
expenditures, tight monetary policies, and a managed exchange
rate policy with voluntary price and wage controls.  As a
result, 12-month inflation fell from 159 percent in 1987 to a
rate of 6.7 percent as of October 1994.  At the same time, the
average annual rate of economic growth between 1988 and 1994 is
expected to be 2.6 percent.
    Responding to the December crisis, the signatories of the
pact agreed on January 3, 1995 to a new set of austerity
measures.  Key goals:  to temper the inflationary impact of the
peso devaluation by tough measures and limiting annual wage
increases to seven percent, with additional increases possible
for productivity and a negative tax for the lowest paid
workers.  To reduce Mexico's reliance on foreign financing, the
government's new economic program aims to halve the USD 30
billion 1994 current account deficit and to boost domestic
savings.  Moreover, the program calls for continuing structural
reforms within the economy, including a cut in government
spending equal to 1.3 percent of GDP and a further wave of
privatizations in key sectors.  Monetary policy is expected to
be tight.
    Mexico joined the General Agreement on Tariffs and Trade
(GATT) in August 1986 and unilaterally lowered its average
tariff level from 100 percent ad valorem to a structure with a
top rate of 20 percent.  At the same time it reduced or
eliminated many non-tariff barriers such as import licenses and
quotas.  Between 1986 and 1992, Mexico's merchandise imports
increased at an average annual rate of 25 percent, while its
exports increased at an average annual rate of only 13.5
percent.  Consequently, Mexico began to run trade deficits in
1990.  The trade deficit is expected to reach USD 17.5 billion
in 1994.  U.S. companies have been the primary beneficiaries of
Mexico's trade liberalization since about 70 percent of all
Mexican imports come from the United States.  In 1994, with the
implementation of the North American Free Trade Agreement
(NAFTA), U.S. exports to Mexico will be about USD 50 billion,
an increase of about 21.7 percent compared to 1993.  Mexico has
ratified the Uruguay Round agreements and became a founding
member of the World Trade Organization (WTO) on January 1,
1995.
2.  Exchange Rate Policies
    Prior to the mid-December decision to widen the exchange
rate band and subsequently to allow the free flat of the peso,
Mexico had relied since November 1991 on a regime by which the
peso was allowed to float within a designated band.  The rate
at which large foreign exchange transactions were conducted
fluctuated within a band that was defined by the rates at which
banks would buy and sell U.S. dollars on a cash basis.  Within
the band, the actual exchange rate was determined by market
forces with some government intervention.  In the run-up to the
December devaluation, Mexico's Central Bank reserves declined
substantially.  At the time of the decision to allow a 13
percent devaluation of the peso, the dollar sold in the
interbank market for 3.4647 new pesos.  In the final days of
December, the peso traded as low as six to the dollar.  It
closed the year at 5.505 to the dollar.
    The value of the peso in U.S. dollars changed little in
nominal terms between November 1991 and early 1994.  At the
same time, Mexican inflation was higher than that in the United
States.  As a result, during 1992 and 1993 the Mexican peso
appreciated in real terms by almost 10.5 percent against the
dollar.  This appreciation gave Mexican importers an incentive
to buy U.S. exports which gained a slight competitive advantage
over domestic goods, whose prices were rising more rapidly.
Due to political uncertainty in 1994, steady capital outflows
caused the peso to lose value against the U.S. dollar.  Between
January and July 1994, the peso depreciated by about eight
percent in real terms.  Despite the depreciating peso, U.S.
exports to Mexico grew at a faster pace during 1994 than in
1993.  Between January and July, Mexican purchases of U.S.
goods rose by 18.5 percent compared to a 2.3 percent growth
rate in the same period of 1993.   Sales of Mexican goods to
the United States rose by 19.2 percent in the first seven
months of 1994 versus 12.6 percent growth in the comparable
period of 1993.
3.  Structural Policies
    Prior to the financial crisis of the Zedillo Government's
early weeks, the Salinas Government sought during its six-year
tenure to modernize and increase efficiency of the Mexican
economy by promoting greater external and internal
competition.  The North American Free Trade Agreement (NAFTA)
implemented in January 1994, with its side accords for labor
and the environment, and a new dispute resolution mechanism,
represents the cornerstone of future Mexican trade policy.
Mexico also signed free trade agreements (FTA) with Chile,
Costa Rica, Bolivia and a trilateral (G-3) agreement with
Venezuela and Colombia.  Mexico is negotiating an FTA with the
"Northern Triangle" nations of Central America:  Guatemala,
Honduras, and El Salvador.  Mexico's other FTA's (except for
Chile, which was negotiated before NAFTA) track, with some
variation, the basic objectives of NAFTA.
NAFTA's key features include:
--  Progressive elimination of tariffs, non-tariff barriers and
quantitative restrictions on traded merchandise.
--  Phased and market-share limited opening of Mexico's service
industries, including financial services, to U.S. and Canadian
firms wishing to invest or provide cross-border services.
--  Gradual opening of Mexico's central government purchasing
and construction contracts to bidding by U.S. and Canadian
firms.
--  Establishment of clear dispute resolution and international
arbitration procedures to provide proper protection to U.S. and
Canadian investors in Mexico.
--  Commitment from all parties to afford effective protection
for intellectual property rights.
    The disincorporation (privatization or elimination) of
about 900 state-owned companies since 1986 stands as a major
achievement and testimony to the government's belief in the
benefits of private enterprise.  The process of privatization
of state-owned companies has generated USD 22 billion in
government revenues and shrunk the number of state-owned firms
to under 200 today.  During President Salinas' administration,
important privatization sales included all 18 government-owned
commercial banks, the telephone company, a television network,
airlines, film theaters, several sugar and food processing
plants, large copper mines, and steel production facilities.
The privatization drive also opened the door for private
investment in Mexico's surface transportation infrastructure
such as the modernization of air and maritime ports.  In its
early response to the December financial crisis, the Zedillo
Government has clearly signaled that it will continue to rely
on privatization as a key element of its structural reform
policy.
    Regulation of the Mexican economy has decreased
significantly since 1990.  In 1993, the government introduced
legislation to promote greater competition, limit monopolistic
behavior and prohibit practices to restrain trade.  A new
foreign trade law, adopted in July 1993, eliminated most
non-tariff trade restrictions and established procedures for
remedying unfair trade practices such as export subsidies and
dumping.  The number of unfair trade investigations has grown
steadily over the past five years, yet they are, with some
exceptions, considered to be conducted in an equitable and
transparent manner.  Most new regulations affecting U.S. trade
have been formulated in anticipation of increased trade under
NAFTA.  At times, however, these regulations have disrupted
trade as a result of poor drafting and/or lack of coordination
between various government agencies responsible for their
implementation.  The Mexican customs service has been
modernized and automated, and a program to professionalize
personnel and weed out corrupt practices is ongoing.
4.  Debt Management Policies
    Prior to the December financial crisis, Mexico had made
considerable strides in regaining access to international
financial markets.  During 1993, Mexico reaped the benefits of
a sound macroeconomic program and the successful renegotiation
of its external debt, concluded in February 1990.  Greater
confidence among investors and creditors has resulted in large
investment capital inflows in late 1993 and early 1994 and
increased access to international credit markets at
progressively more favorable terms.  During  1993, public and
private sector Mexican companies made 77 issues on
international debt markets valued at USD 9.8 billion, or 138
percent above the 1992 level.  This situation was largely
reversed following the assassination of Luis Donaldo Colosio,
the ruling Institutional Revolutionary Party's presidential
candidate in March, 1994.  The fear and political uncertainty
generated by this event resulted in massive capital outflows
which were hastened again nine months later by the devaluation
crisis.  International borrowing slowed over the course of 1994
because political conditions in Mexico and interest rate trends
internationally made the environment less hospitable to new
issues.  Debt flows became increasingly short-term.
    Mexico's external debt increased by USD 12.6 billion during
1993 to USD 130.2 billion, or 36 percent of GDP.  Most of the
increase was on the part of private companies and commercial
banks.  Public sector debt has been declining as a proportion
of total debt.  At year-end 1993, public sector debt was 83.5
billion, an increase of USD 3 billion for the year, but USD 2.3
billion below 1988 levels and only 64 percent of all external
debt.  The ratio of debt service to exports fell to 24.9 in
1993 from 34.0 in 1992.
5.  Significant Barriers to U.S. Exports
    Import Licenses:  Mexico eliminated its universal regime of
import license requirements in 1985 and has committed, under
GATT and the NAFTA, to eventually eliminate all import
licensing requirements.  The Mexican Government still requires
import licenses for slightly under 200 product categories, many
of which are in the agricultural sector.  For U.S. and Canadian
exporters to Mexico, NAFTA replaced agricultural import
licenses with tariff rate quotas and, it may be argued, in some
cases with phytosanitary and zoosanitary requirements.  The
agricultural sector of the NAFTA negotiations was one of the
most difficult, with the result that many products will be
slowly liberalized over a fifteen-year span.  Readers who wish
more information in this area should contact the U.S.
Department of Agriculture to obtain specialized information.
    Automobiles:  Investment and trade in the automobile sector
are subject to the restrictions of the Mexican Auto Decree,
including such performance requirements as local content,
foreign exchange balancing, and quantitative import
restrictions.  Foreign ownership in most auto parts
manufacturing companies is limited to 49 percent, rising to 100
percent in January 1999.  The Automotive chapter of NAFTA has
created new opportunities for U.S. automobile manufacturers and
parts suppliers in Mexico.  One of the eye-catching commercial
stories in Mexico in 1994 was the success of new imported
automobile models in the Mexican market.  Mexican automobile
imports jumped from 3,278 units in 1993 to 25,729 units in the
first six months of 1994, capturing 13 percent of the domestic
retail market.
    Insurance:  Foreign ownership of Mexican insurance
companies is limited by law to 49 percent.  Under NAFTA, U.S.
insurers will be allowed to increase their equity participation
in new joint ventures to 51 percent by 1998 and 100 percent by
the year 2000, with no limitations on market share.  U.S.
insurers will also be permitted to establish wholly-owned
subsidiaries in Mexico, subject to aggregate market share
limits which will be eliminated in 2000.  U.S. insurers that
have ownership in existing joint-ventures may increase their
equity participation to 100 percent by 1996.
    Telecommunications:  The main restriction in the
telecommunications sector is a limitation on foreign investment
in telephone and value-added services to a 49 percent equity
position.  In addition, under the Mexican constitution,
satellite services and the operations of earth stations with
international links are reserved for the Mexican Government.
In early 1995, the government announced it would open satellite
services to foreign participation.  Long distance telephone
service is reserved for Telmex until 1997 by a concession the
government announced in January 1995.  Numerous American
companies have shown interest in participating in this market
when it opens.
    Financial Services:  Mexico's Foreign Investment Law
permits foreign investors to own minority interests in most
Mexican financial services companies (banks, brokerages,
insurance companies, etc.) while they may not invest in foreign
exchange houses and credit unions.  The NAFTA provides an
exception for U.S. and Canadian companies which can establish
wholly-owned subsidiaries in most financial sectors, subject to
initial market share limits that will be eliminated in the year
2000.  U.S. and Canadian companies submitted 102 applications
to establish Mexican subsidiaries, and by late October 1994, 52
of these had been approved, including 18 requests to establish
banks.  Foreign banks and brokerage houses may also set up
representative offices in Mexico.  The government indicated in
early 1995 that it intends to accelerate the timetable for
foreign participation in financial services but full details
were not available as of the end of January.
    Motor Carriers:  As a result of bilateral consultations and
the Mexican Government's deregulation of truck and bus
operations, U.S. truckers and charter bus operators now have
substantial access to Mexico.  Although full trucking authority
for U.S. carriers is still limited to the border commercial
zone, U.S. freight carriers have open access for trailer entry
into Mexico and may thus deliver door-to-door.  Mexican
tractors and drivers are required by law to haul all trailers
bound for interior points, but this has not been considered a
major obstacle by U.S. transportation companies.  This
practice, however, does increase risks for shippers of goods.
U.S. charter tour buses now have full access to all points in
Mexico; regularly scheduled bus operations are restricted
reciprocally to the border zones.  Mexican authorities are
implementing new safety, weight and dimension regulations to
meet U.S. standards, and the two countries are preparing for
the standardization and reciprocal recognition of commercial
drivers' licenses.  A schedule for full liberalization has been
negotiated under NAFTA.  In December 1995, U.S. trucks will be
allowed access to all of Mexico's border states for the
delivery and haul-back of cargo.  By January 2000, this access
will be extended to all of Mexico's territory.
    Standards, Testing, Labeling and Certification:  The
Government of Mexico has traditionally been the primary actor
in determining product standards, labeling and certification
policy, with some input from the private sector and less from
consumers.  But the 1992 Law on Metrology and Standards
included a provision for the establishment of private
standardization and certification bodies, as well as for
private sector certification services to regulatory bodies.  A
U.S. Government officer will be stationed at the U.S. Embassy
permanently starting in January 1995 to cooperate in standards'
development.
    The 1992 law also provides for greater transparency and
access by the public and interested parties to the regulation
formulation process.  This exercise has resulted in a reduction
of obligatory product standards to just above three hundred.
    Under the NAFTA, Mexico has reaffirmed its GATT obligations
to base its obligatory norms on international standards.
Mexico is working to make its standards compatible with U.S.
standards in a number of sectors, and to recognize U.S.
standards-certifying entities beginning on the fourth year
after NAFTA's entry into force.  Toward the end of 1994, Mexico
revised its testing and certification procedures to require
more frequent re-testing of products or, in its stead,
certification of importers' quality control procedures to
ensure that tested products are representative of production
models.
    Investment Barriers:  The National Foreign Investment
Commission, chaired by the Secretary of Commerce and Industrial
Development, decides questions of foreign investment in
Mexico.  The country's constitution and new Foreign Investment
Law of December 1993 reserve certain sectors to the state (such
as oil and gas extraction and the transmission of electrical
power) and a wide range of activities to Mexican nationals (for
example, forestry exploitation, domestic air and maritime
transportation, and gas distribution).  Despite these
restrictions, the Foreign Investment Law greatly liberalizes
the investment process and eliminates the requirement for
government approval in around 95 percent of foreign investment
applications.
    Provisions contained in NAFTA will open Mexico to greater
U.S. and Canadian investment by assuring U.S. and Canadian
companies' national treatment, the right to international
arbitration and the right to transfer funds without
restrictions.  NAFTA will also eliminate some barriers to
investment in Mexico such as trade balancing and domestic
content requirements.  Mexico has already implemented its
commitment under NAFTA to allow, since June 1993, the private
ownership and operation of electric generating plants for
self-generation, co-generation, and independent power
production.  The NAFTA will also lift Mexican investment
restrictions in the chemical sector on all but eight basic
petrochemicals reserved to the state.
    Investment restrictions exist prohibiting foreigners from
acquiring title to residential real estate within 50 kilometers
of the nation's coasts and 100 kilometers of the borders.  The
new Foreign Investment Law eliminated these restrictions for
all non-residential property.  Foreigners may acquire the
effective use of residential property in the restricted zones
via a trust through a Mexican bank.  In addition, both
foreigners and Mexican citizens may encounter problems with
enforcement of property rights.  Only Mexican nationals may own
gasoline stations, whose gasoline is supplied by Pemex, the
state-owned petroleum monopoly.  These gasoline stations only
carry Pemex lubricants although other lubricants are
manufactured and sold in Mexico.
    Government Procurement:  There is no central government
procurement office in Mexico.  Government agencies and public
enterprises use their own purchasing offices to buy from
qualified domestic or foreign suppliers, subject to guidelines
issued by the Finance Ministry.  Suppliers from all countries,
whether GATT members or not, may bid on government tenders, and
requirements for participation are the same for foreign and
domestic suppliers.  In 1991, Mexico abandoned the rule that
state-owned enterprises give preference in procurement to
national suppliers.  But Mexico's new procurement law, enacted
in 1994, distinguishes between procurement contests open to
national versus international suppliers.  The law vaguely
acknowledges Mexico's procurement obligations under NAFTA and
other international trade agreements.  Still, Mexican nationals
enjoy preferential treatment, both official and unofficial, in
bidding for government orders.  A specific preferential
treatment in public procurement is granted to domestic drug
suppliers (which includes foreign companies established in
Mexico).  NAFTA will increase U.S. suppliers' access to the
Mexican Government procurement market, including the
state-owned oil company, PEMEX, and the Federal Electricity
Commission, CFE, which are the two largest purchasing entities
in the Mexican Government.  Under NAFTA Mexico immediately
opened 50 percent of PEMEX and CFE procurement to U.S.
suppliers and this percentage will increase in steps until all
PEMEX and CFE procurement is open by the tenth year.
    Customs Procedures:  The Mexican Government introduced in
1993 a system to combat under-invoicing of certain imports for
customs purposes.  The system, ostensibly aimed at Mexico's
large informal sector, established a "reference price" on which
duty would be charged, absent evidence that the lower declared
price was a valid arms-length commercial transaction.  Fine
tuning of this directive has allowed large, frequent importers
to be exempted from its bond-posting requirements.
    In September 1994, the Mexican Government began to require
certificates of origin for all goods subject to Mexican unfair
trading orders, and imposed more stringent proff of origin
requirements for textiles, apparel and footwear produced in
certain South and East Asian countries.  The directive has
disrupted some U.S. retailers' inventory and logistics systems,
precluding them from exporting such third-country goods to
stores in Mexico.  The Mexican Government is expected to come
to an understanding to exempt certain large volume U.S.
exporters from the directive's most burdensome requirements.
    Traders and Mexican customs brokers (by law, imports into
Mexico must be handled by Mexican customs brokers) agree that
Mexican customs procedures have improved in recent years.
Remaining complaints center on vaguely worded regulations that
prescribe excessively strict penalties, and a general increase
in customs' assessment of minor infractions and fines.
6.  Export Subsidies Policies
    The Mexican Government has no export subsidy program and
has informed the U.S. Government that it is in full compliance
with a 1986 bilateral understanding on export subsidies.  The
U.S. International Trade Commission found in April 1990 that
past Mexican export subsidy programs have either ended or the
subsidy element has diminished.  Provisions for promoting
exports in Mexico's new foreign trade law are limited to
training and assistance in finding foreign sales leads, project
financing (at market rates) for export oriented business
ventures, and special tax treatment for companies that have
significant export sales.  There is no provision for export
subsidies.
7.  Protection of U.S. Intellectual Property
    Mexico is a member of the major international organizations
regulating the protection of intellectual property rights (IPR)
-- the World Intellectual Property Organization, the Berne
Convention for the Protection of Literary and Artistic Works,
the Paris Convention for the Protection of Industrial Property,
the Universal Copyright Convention, the Geneva Phonograms
Convention and the Brussels Satellite Convention.
    The Mexican Government strengthened its domestic legal
framework for protecting intellectual property by amending its
1991 industrial property law (patents and trademarks),
effective October 1, 1994, to create the Mexican Institute for
Industrial Property (IMPI) and give this agency enhanced powers
to implement and enforce Mexico's IPR laws.  The amended law
clarifies the protections afforded inventions related to living
materials by excluding specific processes from patent
protection.  It also incorporates Mexico's IPR obligations
under NAFTA.  These NAFTA provisions will further strengthen
IPR protection by providing for nondiscriminatory national
treatment of IPR matters, establishing certain minimum
standards for protection of sound recordings, computer programs
and proprietary data, and by providing express protection for
trade secrets and proprietary information.  Product patent
protection was extended to all processes and products,
including chemicals, alloys, pharmaceuticals, biotechnology and
plant varieties.  The term of patent protection was extended
from 14 to 20 years from the date of filing.  Trademarks now
are granted for 10-year renewable periods.  One of the new
features of the amended law is that it is sufficient for a
company to have its mark recognized among the U.S. industry to
be protected in Mexico.
    At the same time, Mexico has requested and received over
600 pages of private sector comments on amending its copyright
law of August 1991 to bring it into accord with the most
up-to-date international practices.  The amended copyright law
should be promulgated in early 1995.  The 1991 copyright law
provides protection for computer programs against unauthorized
reproduction for a period of 50 years.  Sanctions and penalties
against infringements were increased and damages now can be
claimed regardless of the application of sanctions.
MEXICO2
U.S. DEPARTMENT OF STATE
MEXICO: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
    Although raids by federal authorities led to the
confiscation and destruction of several million pirated audio
and video cassettes between 1992 and the end of 1994, music
industry sources estimate that two out of every three audio
tapes sold in Mexico still are pirated products (an annual loss
of about USD 240 million).  These raids have affected street
vendors and have closed some pirate cassette fabrication
operations.  However, the ease in which pirate tapes may be
fabricated and the continued growth of the informal sector
economy create a major challenge for the Mexican Government.
In an effort to put teeth into its IPR laws, the Mexican
Government formed a commission in October 1993 to cut through
the bureaucratic obstacles hindering effective action.  Much
work remains to be done in combatting piracy in Mexico, but the
Mexican authorities have demonstrated their interest in making
substantial progress in intellectual property enforcement.
8.  Worker Rights
    For an introduction to the Mexican labor law, see "A Primer
on Mexican Labor Law" (USDOL) and "A Comparison of Labor Law in
the United States and Mexico an Overview" (USDOL 1992).  In
general, worker benefits mandated by law include paid
vacations, maternity leave, end-of-year bonuses, generous
severance packages, mandatory profit sharing and social
security coverage, including comprehensive medical care, plus
mandatory individual savings and retirement accounts to which
employees and employers must contribute.
    a.  The Right of Association
    The Mexican Federal Labor Law (FLL) gives workers the right
to form and join trade unions of their own choosing.  Mexican
trade unionism is well developed with thousands of unions and a
number of labor centrals.  Once formed, unions must register
with the labor secretariat or equivalent state government
authorities to acquire legal status to function.  In theory,
registration requirements are not onerous, involving the
submission of basic information about the union.  However,
there are allegations that the federal or state labor
authorities use this administrative procedure improperly to
withhold registration from groups considered disruptive to
government policies, employers, or unions.  Unions and labor
centrals are free to join or affiliate with international trade
union organizations and do so.
    b.  The Right to Organize and Bargain Collectively
    The FLL strongly upholds the right to organize and bargain
collectively.  On the basis of only a small showing of interest
by employees, or a strike notice by a union, an employer must
recognize the union concerned and make arrangements for a union
recognition election or to negotiate a collective bargaining
agreement.  The degree of private sector organization varies
widely by states; while most traditional industrial areas are
heavily organized, states with a small industrial base usually
have few unions.  Workers are protected by law from anti-union
discrimination.  Collective bargaining had been
institutionalized in many sectors in the "Contrato Ley,"
industry or sector-wide agreements that carry the weight of law
and apply to all firms in the sector whether unionized or not,
but this is less-and-less common.
    c.  Prohibition of Forced or Compulsory Labor
    The constitution prohibits forced labor.  There have been
no credible reports for many years of forced labor in Mexico.
    d.  Minimum Age for Employment of Children
    The FLL sets 14 as the minimum age for employment by
children.  Children age 14 to 15 may work a maximum of six
hours, may not work overtime or at night, and may not be
employed in jobs deemed hazardous.  In the formal sector,
enforcement is reasonably good at large and medium-sized
companies; less pervasive at small companies.  As with employee
safety and health, the worst enforcement problem lies with
small companies and the informal sector.  Eighty-five percent
of all registered Mexican companies have fifteen or less
employees, indicating the vast scope of the enforcement
challenge just within the formal economy.  In 1992, the Mexican
Government increased from six to nine the minimum number of
years that children must attend school and made parents legally
liable for their children's non-attendance.
    In 1991, the Secretariat of Labor and Social Welfare (STPS)
and the U.S. Department of Labor undertook joint studies of
both the child labor problems and the nature of the informal
economies in Mexico and the United States.  The studies were
published in late 1992 and are serving as a basis for
cooperative efforts to discourage child labor in both our
countries.  In 1993, the International Labor Organization (ILO)
was developing a national action plan against child labor with
the Mexican Government's Social Development Secretariat
(SEDESOL).  There were also Mexican government and
non-governmental organization media campaigns to convince
parents to keep their children in school.
    e.  Acceptable Work Conditions
    The Constitution and the FLL provides for a minimum wage
for workers, set by the Tripartite National Minimum Wage
Commission (government/labor/employers).  In December 1987,
this commission agreed on an accord to limit wage and price
increases, which has since been renewed annually.  Generally in
the private sector in the past few years, wages set by
collective bargaining agreements have kept pace with inflation
even though the minimum wage did not.  In January 1994, the
minimum wage was increased.
    The FLL sets 48 hours as the legal workweek and provides
that workers who are asked to exceed three hours of overtime
per day or work any overtime in three consecutive days be paid
triple the normal wage.  For most industrial workers,
especially unionized ones, the real workweek has declined to
about 42 hours.  Mexico's legislation and rules regarding
employee health and safety are relatively advanced.  All
employers are bound by law to observe the "General Regulations
on Safety and Health in the Work place" issued jointly by STPS
and Mexico's Institute of Social Security.  The focal point of
standard setting and enforcement in the work place is in
FLL-mandated bipartite (management and labor) safety and health
committees in the plants and offices of every company.  These
meet at least monthly to consider work place safety and health
needs and file copies of their minutes with federal or state
labor inspectors.  Government labor inspectors schedule their
own activities largely in response to the findings of these
work place committees.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                                (1)
Total Manufacturing                                   10,802
  Food & Kindred Products                   2,334
  Chemicals and Allied Products             2,392
  Metals, Primary & Fabricated                (1)
  Machinery, except Electrical                (1)
  Electric & Electronic Equipment             605
  Transportation Equipment                  2,218
  Other Manufacturing                       2,438
Wholesale Trade                                          823
Banking                                                  (1)
Finance/Insurance/Real Estate                            912
Services                                                 316
Other Industries                                       2,258
TOTAL ALL INDUSTRIES                                  15,413
(1) Suppressed to avoid disclosing data of individual companies
Source: U.S. Department of Commerce, Bureau of Economic
Analysis
(###)
MOLDOVA1
U.S. DEPARTMENT OF STATE
MOLDOVA: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                             MOLDOVA
                     Key Economic Indicators
      (Millions of U.S. dollars unless otherwise indicated)
                                    1992       1993      1994 1/
Income, Production and Employment:
Real GDP (1991 prices)             3,940      6,000       N/A
Real GDP Growth (pct.)               -27        -14        -3
GDP (at current prices)           53,750    583,610     2,138
Gross Output by Sector:
  Agriculture                     25,900    269,530       N/A
  Energy/Water                       N/A        N/A       N/A
  Manufacturing                   57,570    772,630       N/A
  Construction                     6,950     63,170       N/A
  Rents                              N/A        N/A       N/A
  Financial Services                 N/A        N/A       N/A
  Other Services                     144      1,540       N/A
  Government/Health/Education        N/A        N/A       N/A
Net Exports of Goods & Services      N/A        N/A       N/A
Real Per Capita GDP                  N/A        N/A       N/A
Labor Force (000s)                 2,460      2,448     2,479
Unemployment Rate (pct.)            16.7       15.5        30
Money and Prices:
Money Supply                      87,155    376,303   160,650
Base Interest Rate                   N/A         12        25 2/
Personal Saving Rate                 N/A        N/A       N/A
Retail Inflation (pct.)            1,500      2,000       100
Wholesale Inflation                  N/A        N/A       N/A
Consumer Price Index                 N/A        N/A       256 3/
Exchange Rate (USD/MDL)              401        364    403.96 4/
Balance of Payments and Trade:
Total Exports (FOB)                18.06        360       600
  Exports to U.S. 5/                   0          0       2.4
Total Imports (CIF)                25.81        513       759
  Imports from U.S. 5/                 2         31      26.4
Aid from U.S.                        N/A        N/A       N/A
Aid from Other Countries             N/A        N/A       N/A
External Public Debt                 N/A         38        29
Debt Service                         N/A        N/A       N/A
Gold and Foreign Exch. Reserves      N/A         76        68
Trade Balance                        -37       -162      -255
  Trade Balance with U.S. 5/          -2        -31       -24
N/A--Not available.
1/ 1994 Figures are estimated based on available eight-month
data.
2/ 1994 Interest rate is estimated based on five-month data.
3/ Consumer price index is reported in Mondovan lei (MDL).
4/ 1994 Exchange rate is estimated based on available
eleven-month data.
5/ 1994 figures are estimates based on January-October data.
1.  General Policy Framework
    Moldova is a small landlocked country located in the
extreme southwest region of the former Soviet Union (FSU).  The
economic life of Moldova was highly integrated with that of the
FSU, and disintegration of the FSU seriously affected Moldova's
economy.  The agriculture and industrial sectors each account
for about 42 percent of total economic output.  Moldovan
industry previously was organized to supply markets in the FSU,
with production concentrated in consumer goods and
defense-related products.
    In accordance with a presidential decree dated January 17,
1994, the National Bank of Moldova (NBM) was charged with
regulating the money supply.  The National Bank of Moldova
allocates about 80 percent its available credit through credit
auctions.  The volume of credit offered is determined by a
monetary-credit program.  Introduction of credit auctions has
helped reduce inflation and the cost of financing.
    The National Bank of Moldova has implemented faithfully the
program agreed to by the government and the International
Monetary Fund (IMF) to restrict growth of the money supply.  As
a consequence, the stability of the lei has improved
significantly in the first half of 1994.
2.  Exchange Rate Policy
    Moldova no longer has a policy of multiple exchange rates.
Since the introduction of the national currency the National
Bank of Moldova has moved to liberalize its currency market.
An interbank foreign stock exchange was established in August
1993.  Auctions are held three times a week for U.S. dollars,
Russian rubles, Romanian lei, and German marks.
3.  Structural Policies
    Moldova officially liberalized prices of most consumer
goods in January 1992, though some products continue to remain
subject to controls.  Imported goods were exempted from
regulation at the wholesale level, but can be subject to
controls at the retail level.
    Tax rates in Moldova are as follows:  income tax for
enterprises - 30 percent; value-added tax - 20 percent; import
tax, excise tax on wine and tobacco production, natural gas,
and luxury items - from 10 to 80 percent; agricultural
enterprises.  Farmers pay a land tax calculated on the basis of
the total land area and its quality.
    The government has developed much of the legal framework
needed to support a market economy.  The Moldovan parliament
has adopted laws covering private ownership of property,
foreign investments, bankruptcy, leasing, privatization of
state enterprises, as well as formation of joint-stock
companies.
4.  Debt Management Policies
    Moldova is a member of several international financial
organizations, including the IMF, the International Bank for
Reconstruction and Development (IBRD), and the European Bank
for Reconstruction and Development (EBRD).
5.  Significant Barriers to U.S. Exports
    Moldova has taken steps to simplify policies surrounding
its trade regime.  With the exception of unprocessed leather,
energy products, cereals and cereal products, all export quotas
were removed in June 1994.  Export licensing was eliminated,
except for national security, medical and cultural products.
except for national security, medical and cultural products.
MOROCCO1
LU.S. DEPARTMENT OF STATE
MOROCCO: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                             MOROCCO
                     Key Economic Indicators
        (Millions of U.S. dollars unless otherwise noted)
                                    1992      1993      1994  5/
Income, Production and Employment:
Real GDP (billions, in 1980 DHs)   110.3     109.1     117.8
Real GDP Growth (pct.)              -4.4      -1.1       8.0
GDP (at current prices)           28,253    26,636    30,419
By Sector:
  Agriculture/Fishing              4,220     3,809     5,333
  Mining                             592       524       576
  Energy/Water                     2,084     2,043     2,369
  Manufacturing                    5,118     4,800     5,184
  Construction                     1,410     1,252     1,327
  Commerce                         6,010     5,555     6,111
  Other Services                   3,411     3,370     3,707
  Transport/Communications         1,779     1,788     1,966
  Government                       3,628     3,496     3,845
Per Capita GDP (USD)               1,112     1,021     1,142
Labor Force (millions)  1/           4.1       4.3       4.6
Unemployment (pct.)  1/             16.0      16.0      16.0
Money and Prices:  (annual percentage growth)
Money Supply (M2)                    9.3       8.7      12.7
Maximum Lending Rate  2/            15.6      14.0      12.0
Private Savings Rate (pct. GDP)      4.9       6.1       8.0
Retail Inflation                     5.7       5.2       5.4
Wholesale Inflation                  2.8       4.5       2.7
Exchange Rate (year-end, DH/USD)     8.5       9.3       9.3
Balance of Payments and Trade:
Total Exports (FOB)                3,977     3,685     4,138
  Exports to U.S.                    149       126       N/A
Total Imports (CAF)                7,356     6,646     7,503
  Imports from U.S.                  435       672       N/A
Aid from U.S. 3/                     126       112        51
External Public Debt              20,422    20,246    20,525
Debt Service Ratio 4/               37.3      38.1      34.7
Foreign Exchange Reserves          3,948     4,105     4,100
Trade Balance                     -3,379    -2,961    -3,365
  Trade Balance with U.S.           -286      -546       N/A
N/A--Not available.
1/ Urban.
2/ Year-end rate, not change.
3/ Fiscal year.
4/ As a percent of goods, nonfactor services and private
transfers.
5/ Projections based on data available October 1994.
1.  General Policy Framework
    Morocco boasts the largest phosphate reserves in the world,
a diverse agricultural sector (including fishing), a large
tourist industry, a growing manufacturing sector (especially
clothing), and considerable inflows of funds from Moroccan
expatriate workers.  Most of Morocco's trade is with Europe,
with France alone accounting for about a quarter of Morocco's
imports and a third of its exports.
    The Moroccan Government has pursued an economic reform
program supported by the International Monetary Fund (IMF) and
the World Bank since the early 1980s.  It has restrained
government spending, revised the tax system, reformed the
banking system, followed appropriate monetary policies, eased
import restrictions, lowered tariffs and liberalized the
foreign exchange regime.  Further reforms are still needed in
some areas, notably trade and agriculture.
    The government eased slightly both monetary and fiscal
policy over the last year.  In late 1993 the Central Bank
reduced the reserve requirement from 25 to 10 percent, but
required the value of additional reserves made available by the
measure to be placed in interest-bearing treasury bonds.  The
growth in deposits after October 1993 is only subject to the 10
percent reserve requirement, and not to the treasury bond
requirement.  This led to an increase in the growth of the
money supply (M2) from 8.7 percent in 1993 to an annualized
rate of over 12 percent by late 1994.
    The government's budget deficit is running above initial
projections in 1994 due to unfulfilled expectations contained
in the budget, unfavorable exogenous developments and new
spending initiatives not included in the budget.  The
government took measures to reduce spending during the second
half of 1994 year in order to stem the growing deficit.  The
government also relies increasingly on the sale of assets under
its privatization program to offset higher spending.  The
deficit is financed largely through the domestic sale of
government paper.
    Overall, reforms have contributed to lower inflation,
narrower fiscal and current account deficits, and modest growth
in per capita income during the last decade.  While the overall
trend has been positive, there have been wide year-to-year
fluctuations due to exogenous factors such as rainfall and
conditions in Morocco's export markets.  The economy rebounded
sharply in 1994, with real GDP expected to grow by over eight
percent.  Virtually all of the growth is due to a record
cereals harvest following drought-depressed harvests in 1992
and 1993.  Nonagricultural GDP is only expected to grow by two
to three percent in real terms.
2.  Exchange Rate Policies
    The Moroccan dirham is convertible for all current
transactions (as defined by the IMF's Article VIII) as well as
for some capital transactions, notably capital repatriation by
foreign investors.  Foreign exchange is routinely available
through commercial banks for such transactions on presentation
of documents.  Moroccan companies may borrow abroad without
prior government permission.
    The Central Bank sets the exchange rate for the dirham
against a basket of currencies of its principal trading
partners, particularly the French franc and other European
currencies.  The rate against the basket has been steady since
a nine percent devaluation in May 1990, with changes in the
rates of individual currencies reflecting changes in cross
rates.  The large weight given to European currencies in the
basket means that the fluctuation of the dollar against those
currencies results in a greater volatility of the dollar than
the European currencies against the dirham.  This increases the
foreign exchange risk of importing from the United States as
compared to importing from Europe.
3.  Structural Policies
    Morocco's trade regime is in a flux.  A new foreign trade
act passed in 1992 reverses a legal presumption of import
protection, spelling out permissible grounds for exceptions to
the general principle of free trade and providing a legal basis
for antidumping and countervailing duties.  It replaces
quantitative restrictions with tariffs (both ad valorem and
variable) on the importation of politically sensitive items.
However, the new law has not been fully implemented as of late
1994 and nontariff barriers (i.e. licensing requirements)
remain on a number of goods, notably agricultural products and
crude oil.  Many of these requirements are scheduled to be
eliminated by January 1995 under the Uruguay Round agreement.
    Interest rate policy has also changed in recent years.  In
early 1994 the government revised the interest rate ceilings on
bank loans.  The ceiling had previously been set as a 2.5
percentage point markup over the average rate banks receive on
deposits, excluding the below-market-rates for some required
holdings.  The new ceiling is set as a three to four percent
markup over the rate received on deposits, including the
below-market-rates on required deposits.  The effect of the
change is to lower the interest rate ceilings, although real
rates remain high.
    Morocco has a three-part tax structure consisting of a
value added tax (VAT), a corporate profits tax, and an
individual income tax.  The investment code provides exemptions
from some taxes based on the type and location of investment.
In 1993 the government lowered the maximum personal and
corporate income taxes and reduced the tax on stock dividends.
4.  Debt Management Policies
    Morocco's foreign debt burden has declined steadily in
recent years.  Foreign debt fell from 128 percent of GDP in
1985 to about 67 percent of GDP in 1994.  Similarly, debt
service payments before rescheduling, as a share of goods and
services exports, fell from over 58 percent in 1985 to about 35
percent in 1994, which is roughly what actual rescheduled debt
service payments averaged in recent years.  The Moroccan
Government therefore does not foresee the need for further
Paris Club rescheduling.
5.  Significant Barriers to U.S. Exports and Investment
    Import licenses:  Morocco has eliminated import licensing
requirements on a number of items in recent years.  Import
licensing requirements for several items, including sugar,
cereals and edible oils, are slated to be eliminated in early
1995.  That will leave mainly motor vehicles, used clothing and
explosives covered by import licensing requirements.
    Tariffs:  Tariffs have been gradually reduced in recent
years.  By 1993 the maximum tariff was 35 percent and the
(trade-weighted) average tariff was about 13 percent.  That
trend is now being reversed as Morocco replaces quantitative
restrictions with higher tariffs on a number of products.  In
particular, tariffs of up to 300 percent were imposed in late
1993 on dairy and meat products in conjunction with the
elimination of licensing requirements on those items.  Tariffs
of between 73 and 311 percent may be imposed on cereals, edible
oils and sugar following the elimination of licensing
requirements and reference price systems on those goods early
next year.  There is also a 10 to 15 percent surtax on imports.
    Services barriers:  In November 1989 Parliament abrogated a
1973 law requiring majority Moroccan ownership of firms in a
wide range of industries, thus eliminating what had been a
barrier to U.S. investment in Morocco.  In 1993 the Moroccan
Government repealed the 1974 decree limiting foreign ownership
in the petroleum refining and distribution sector, which
allowed Mobil Oil to buy back the Moroccan Government's 50
percent share of Mobil's Moroccan subsidiary in 1994.
    Standards, testing, labeling and certification:  Morocco
applies approximately 500 industrial standards based on
international norms.  These apply primarily to packaging,
metallurgy and construction.  Sanitary regulations apply to
virtually all food imports.  Meat must be slaughtered according
to Islamic law.
    Investment barriers:  The Moroccan Government actively
encourages foreign investment.  The investment law contains
separate sectoral codes covering industry, tourism, housing,
maritime, mining, petroleum exploitation and exports.  These
codes generally provide incentives equally to both Moroccan and
foreign investors.  There are no foreign investor performance
requirements, although investors receive incentives such as tax
breaks under the various sectoral codes depending on the size,
sector, and location of the investment.  Investment screening
procedures, applicable to both domestic and foreign investors,
are implemented only when an investor requests benefits under
the applicable sector code.
    Government procurement practices:  While Moroccan
government procurement regulations allow for preferences for
Moroccan bidders, the effect of the preference on U.S.
companies is limited.  Virtually all of the government
procurement contracts that interests U.S. companies are large
projects for which the competition is non-Moroccan (mainly
European) companies.  Many of these projects are financed by
multilateral development banks which impose their own
nondiscriminatory procurement regulations.  U.S. companies
sometimes have difficulties with the requirement that bids for
government procurement be in French.
    Customs procedures:  In principle customs procedures are
simple and straightforward, but in practice they are sometimes
marked by delays.  A commercial invoice is required, but no
special invoice form is necessary.  Certification as to country
of origin of the goods is required.
6.  Export Subsidies Policies
    There are no direct export subsidies.  The centerpiece of
export promotion policy is a temporary admission scheme which
allows for suspension of duties and licensing requirements on
imported inputs for export production.  This scheme has been
extended to include indirect exporters (local suppliers to
exporters).  In addition, a "prior export" program exists,
whereby exporters can claim a refund on duties paid on imports
which were subsequently transformed and exported.
    The government maintains an export industry investment code
which provides up to five years' tax holiday on 50 percent of
profits for qualified Moroccan and foreign investors.  Morocco
is not a signatory of the GATT subsidies code.
7.  Protection of U.S. Intellectual Property
    Morocco is a member of the World Intellectual Property
Organization (WIPO) and is a party to several international
agreements including: (a) the Berne Convention for the
Protection of Literary and Artistic Works, (b) the Paris
Convention for the Protection of Industrial Property, (c) the
Universal Copyright Convention, (d) the Brussels Convention
Relating to the Distribution of Programme-Carrying Signals
Transmitted by Satellite Convention, (e) the Madrid Agreement
Concerning the International Registration of Marks, (f) the
Nice Agreement Concerning the International Classification of
Goods and Services for the Purposes of the Registration of
Marks and (g) the Hague Agreement Concerning the International
Deposit of Industrial Designs.
    Copyright:  Computer software is not specifically covered
by Morocco's copyright law and software piracy is a widespread
problem.
    Patents:  Morocco has a relatively complete regulatory and
legislative system for the protection of intellectual
property.  A quirk dating from the era of the French and
Spanish protectorates requires patent applications for
industrial property to be filed in both Casablanca and Tangier
for complete protection.
    Trademarks:  Counterfeiting of clothing, luggage, and other
consumer goods is not uncommon, however, anti-counterfeiting
measures have been increasingly enforced.  Counterfeiting is
primarily for local sales rather than for export.  Trademarks
must also be filed in both Casablanca and Tangier.
8.  Workers Rights
    a.  The Right of Association
    Workers are free to form and join unions throughout the
country.  The right is exercised widely but not universally.
Probably ten percent of Morocco's 4.6 million urban workers are
unionized, mostly in the public sector.  The selection of union
officers and the carrying out of their duties are sometimes
subject to government pressure.  The constitutional right to
strike was called into question in 1994 when the government
sought to ban a general strike proposed by one union.  The
government contended that the right to strike requires
implementing legislation, which has never been adopted.  Unions
and human rights groups rejected the government
interpretation.  The strike call was finally rescinded by the
union.  More narrowly focused strikes continue to occur,
although strikers often encounter police harassment and
arrest.  Many work stoppages are intended to advertise
grievances and last 24 hours or less.
    b.  The Right to Organize and Bargain Collectively
    While the protection of the right to organize and bargain
collectively exists in the constitution and labor law, the
government does not always enforce the protections fully.  Laws
protecting collective bargaining are not highly developed,
although an implied right is exercised.  The multiplicity of
trade union federations creates competition to organize
workers.  A single factory may contain several independent
locals.  Labor laws are observed most often in the corporate
and parastatal sectors of the economy.  In the informal
economy, labor regulations are routinely ignored.  As a
practical matter, the unions in Morocco have no judicial
recourse to oblige the government to act when it has not met
its obligations under the law.
    c.  Prohibition of Forced or Compulsory Labor
    Forced or compulsory labor is not practiced in Morocco.
    d.  Minimum Age for Employment of Children
    Children may not be legally employed or apprenticed before
age 12.  Special regulations govern the employment of children
between the ages of 12 and 16.  In practice, children are often
apprenticed before age 12, particularly in handicraft work.
The use of minors is common in the rug-making and tanning
industries.  Children are also employed informally as domestics
and usually receive little or no wages.  Child labor laws are
generally well-observed in the industrialized, unionized sector
of the economy.
    e.  Acceptable Conditions of Work
    The minimum wage was raised ten percent on July 1, 1994, to
about $168 a month.  This was the first raise in the minimum
wage in two years.  The minimum wage is not enforced
effectively in the informal sector of the economy.  It is
enforced fairly effectively throughout the industrialized,
unionized sector where most workers, except for those
employed
in garment assembly, earn more than minimum wage.  Moreover,
workers are customarily paid between 13 and 16 months' salary
for every 12-month year.  The law provides a 48-hour maximum
work week, with not more than 10 hours for any single day,
premium pay for overtime, paid public and annual holidays, and
minimum conditions for health and safety, including the
prohibition of night work for women and minors.  As with other
regulations and laws, these are observed unevenly, if at all,
in the informal sector.
    f.  Rights in Sectors with U.S. Investment
    Worker rights in sectors with U.S. investment do not differ
from those described above in the formal, industrial sector of
the Moroccan economy.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                              (1)
Total Manufacturing                                    71
  Food & Kindred Products                    27
  Chemicals and Allied Products               8
  Metals, Primary & Fabricated               (1)
  Machinery, except Electrical               (1)
  Electric & Electronic Equipment             0
  Transportation Equipment                    0
  Other Manufacturing                        (1)
Wholesale Trade                                         0
Banking                                                (1)
Finance/Insurance/Real Estate                           0
Services                                                0
Other Industries                                        0
TOTAL ALL INDUSTRIES                                   94
(1) Suppressed to avoid disclosing data of individual companies
Source: U.S. Department of Commerce, Bureau of Economic
Analysis
(###)
NETHERL1
g^g^U.S. DEPARTMENT OF STATE
NETHERLANDS: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                         THE NETHERLANDS
                     Key Economic Indicators
        (Millions of U.S. dollars unless otherwise noted)
                                     1992      1993      1994
Income, Production and Employment:
Real GDP (1990 prices) 2/         287,371   288,520   294,290
Real GDP Growth Rate (pct.)           1.4       0.4       2.0
GDP (current prices) 2/           302,806   308,779   320,564
By Sector:  3/
  Agriculture                      10,753    10,054    10,215
  Energy/Water                      4,839     5,000     5,107
  Manufacturing                   110,054   107,204   109,677
  Construction                     16,183    16,667    17,204
  Rents                            26,389    28,655    30,295
  Financial Services               13,871    14,677    15,054
  Other Services                   82,742    87,796    89,785
  Government/Health/Education      29,731    30,645    31,183
  Net Exports of Goods & Services  13,521    15,467    16,667
Real Per Capita GDP (USD)          18,995    18,900    19,153
Labor Force (000s)                  6,158     6,233     6,306
Unemployment Rate (pct.)              6.7       7.7       8.8
Money and Prices:  (annual percentage growth)
Money Supply (M2)                     6.6       8.5       6.0
Base Interest Rate 4/                 8.7       8.1       6.4
Personal Savings Rate                 9.1       8.7       9.0
Retail Inflation                      2.0       1.3       1.1
Wholesale Inflation                  -1.2      -1.9       0.0
Consumer Price Index                106.4     109.2     112.2
Exchange Rate (guilders/USD)
  Official                           1.76      1.86      1.85
Balance of Payments and Trade:
Total Exports (FOB) 5/            128,736   126,290   133,790
  Exports to U.S.                   5,287     5,451     6,000
Total Imports (CIF) 5/            122,269   117,500   124,516
  Imports from U.S.                13,746    12,839    14,000
Aid from U.S.                           0         0         0
Aid from Other Countries                0         0         0
External Public Debt                    0         0         0
Debt Service Payments (paid)       14,689    15,791    18,509
Gold and Foreign Exch. Reserves
  (end of period)                  35,086    40,449    40,806
Trade Balance 5/                    6,467     8,790     9,274
  Trade Balance with U.S.          -8,459    -7,388    -8,000
1/ Estimates based on available monthly data in October 1994.
2/ GDP at market prices.
3/ GDP at factor costs.
4/ Figures are actual, average annual interest rate.
5/ Merchandise trade.
6/ All of dollar figures have been converted to the exchange
rate of $1 = 1.86 guilders for 1993.
Sources: Central Bureau of Statistics (CBS), Netherlands
Central Bank (NB), Central Planning Bureau (CPB)
1.  General Policy Framework
    The Netherlands is a prosperous and open economy, and
depends heavily on foreign trade.  It is noted for: stable
industrial relations fostered through consultations among
employers, unions, and government; a large current account
surplus from trade and overseas investments; natural gas
exports making Holland a net exporter of a popular fuel; a
geographic location as a European transportation hub with the
world's largest port (Rotterdam), one of its top airports
(Amsterdam-Schipol), and an excellent road and rail system,
making it a prime production and distribution center for
foreign firms seeking access to Europe.
    Dutch trade and investment policy is among the most open in
the world.  The government has reduced its role in the economy
since the 1980s, and privatization continues with little debate
or opposition.  Nevertheless, the state dominates the energy
sector and plays a large role in transport, chemicals,
aviation, telecommunications, and steel.
    Elections in May 1994 produced a new, three-party,
left-right coalition government. The government inherits an
economy that moved out of shallow recession in 1993 (GDP grew
0.4 percent) and that has begun sustained, export-led growth.
Growth is expected to be at least 2 percent in 1994, and near
2.8 percent in 1995.  The consensus forecast is for annual
average growth of 2.2 percent over the next four years
(although the Finance Minister has warned of a possible
downturn in the international business cycle after 1996).
Inflation is low and falling;  1994 CPI inflation is expected
to be 2.8 percent, slowing to 2.7 percent in 1995.
Nonetheless, the government must grapple with a number of
structural economic problems if the Dutch economy is to fully
live up to its potential.
    A key government goal is to stimulate the creation of
350,000 new jobs over the next four years.  A cut in the
"collective burden" of taxes and social security contributions
is seen as key to boosting employment and improving
competitiveness, but Dutch industry is not convinced the
government is doing enough on this score.  The government also
plans to continue (and perhaps speed up) the process of
deregulation and antitrust reform begun under the previous
government.
    With much "fat" in spending already pared away, budget cuts
are getting into areas which were regarded as untouchable:
development aid, social security, defense, education.  The 1995
budget cut spending by 4.6 billion guilders ($2.5 billion).
Total planned cuts are 18.2 billion guilders ($10 billion) by
the end of 1998.  A combination of budget austerity and
economic growth will reduce the budget deficit from the
current 3.75 percent of GDP to 3.3 percent of GDP in 1995.
Public debt will rise from 79.4 percent of GDP at the end of
1994 to 79.9 percent in 1995.
    The deficit is largely funded by government bonds.  Since
January 1, 1994, financing has also been covered by issuing
Dutch Treasury Certificates (DTC).  DTCs replace a standing
credit facility for short-term deficit financing with the
central bank which, under the Maastricht Treaty, was abolished
in 1994.
2.  Exchange Rate Policies
    Since the European Monetary System (EMS) was introduced in
1979, the Netherlands Central Bank (NB) has maintained a stable
exchange rate between the guilder and the German mark using
interest rate policy.  The guilder is one of the strongest
currencies in Europe.  When the EMS fluctuation bands widened
to 15 percentage points in August 1993, the Dutch and Germans
agreed to keep the guilder in the original 2.25 point
fluctuation band.  Because Germany is the Netherlands' main
trading partner, the link with the mark is expected to stay
intact.  A strong guilder should encourage Dutch imports from
the United States and reduce exchange rate risks to U.S.
investors in the Netherlands.  There are no multiple exchange
rate mechanisms.
    The NB exerts control over money market rates by adjusting
short-term rates and by varying the terms of banks' access to
NB financing.  The NB's open market policy gives the bank a
tool to signal the market the way it wants it to develop.  For
this purpose the NB uses a three billion guilder portfolio of
Treasury issues from which it buys or sells.
    There are no exchange controls, although Netherlands
residents must obtain an exchange license for certain large
international financial transactions.
3.  Structural Policies
    Limited, targeted investment incentives have been a
well-publicized tool of Dutch economic policy to facilitate
economic restructuring, and to promote energy conservation,
regional development, environmental protection, research and
development, and other national goals.  Subsidies and
incentives are available to foreign and domestic firms alike
and are spelled out in detailed regulations.  Subsidies geared
to the previous objectives are in the form of tax credits which
are usually disbursed through corporate tax rebates, or direct
cash payments in the event of no tax liability.
    The Investment Premium Regulation (IPR), the only major
strictly investment incentive currently available, aims to
encourage investment in areas with high unemployment with
subsidies for new investments (industrial buildings and fixed
assets).  The IPR applies to investments of which at least 25
percent is the investor's own capital.  Grants range from 10 to
20 percent of the investment in buildings and equipment, and
sometimes land.  A 20 percent grant is available for new branch
and restructuring projects, and 15 percent for expansion
projects.  Local subsidies are also available from regional
development companies.
    To combat relatively low spending on research and
development by Dutch firms, the government set up "Senter", an
independent agency to encourage and financially assist firms in
innovative research and development projects in targeted
fields.  Senter's programs are open to firms without regard to
nationality of ownership that have Dutch-based research and
development operations. There are few restrictions on size and
other elements of participating firms, and selection for
funding is competitive.
    Senter emphasizes technology transfer, and many programs
are geared to linking firms from diverse sectors. Senter has a
700 million guilder (over $376 million) annual budget. A
similar agency, "Novem", has a 300 million guilder ($161
million) budget for energy and environment-related programs.
    In another effort to attract investment, in 1993 the
government established an office to give binding tax rulings to
foreign companies in advance of investment.  While normal taxes
are not relaxed, companies can clarify, often favorably, tax
situations that may be open to interpretation.
    In November 1993 the previous government set up a 900
million guilder (about $484 million) industrial fund to finance
restructuring projects by medium and large Dutch enterprises.
The money came from the government, commercial banks, insurance
companies, pension funds, and the National Investment Bank.
Financing for new projects is available up to a ceiling of 50
million guilders per project.  The fund was intended to improve
the structure and competitiveness of the economy, but has so
far been used by just one company.
4.  Debt Management Policies
    With a current account surplus of three percent of GDP in
1993 and no external debt (all public debt is denominated in
guilders), the Netherlands is a major creditor nation.
Nonetheless, since the early eighties, the gross public debt of
the public sector (EMU criterion) has grown sharply, to 79.4
percent of GDP in 1994.  If current policies are followed, most
observers predict little decrease in the debt as a percentage
of GDP in the next four years.  Debt servicing and rollover
have risen to nearly ten percent of GDP.  All of the
government's financing needs (budget deficit and debt
servicing) are covered on the Dutch domestic capital market.
There are no difficulties in tapping the domestic capital
market for loans.  Government bond issues are usually
over-subscribed, and public financing requirements have
recently been met long before the end of each fiscal year.
Since the late eighties, the Dutch have significantly improved
their fiscal balance.  The Netherlands is a participant in and
strong supporter of the IMF, IBRD, and other international
financial institutions.
5.  Significant Barriers to U.S. Exports
    The Dutch economy is an open one.  Dutch merchandise and
services exports represent more than 50 percent of GDP, making
the Dutch economy one of the most internationally-oriented in
the world.  The Netherlands is the ninth largest U.S. export
market, as well as being a country with which the United States
has one of its largest bilateral trade surpluses: $7.4 billion
in 1993.  Total U.S. exports to the Netherlands in 1993 were
down seven percent over 1992.  However, a nine percent increase
is forecast for 1994.  In 1993, imports from the U.S. accounted
for nearly 11 percent of total Dutch imports.  The Netherlands
is among the top three direct investors in the United States,
along with the United Kingdom and Japan; Dutch accumulated
investment in the United States in 1993 grew to 68.5 billion
dollars.  The U.S. is the largest investor in the Netherlands:
U.S. direct investment fell slightly, to about 19.9 billion
dollars in 1993.
    Most trade barriers that do exist result from common EU
policies.  The following are areas of potential concern for
U.S. exporters to the Netherlands:
    Agricultural Trade Barriers:  Agricultural trade bariers
are generally driven by the Comaon Agricultural Policy (CAP),
and common external tariffs that serve to severely limit
imports of U.S. agricultural products. Bilateral import
barriers are confined to the restrictive acceptable limits of
Aflatoxin in peanut imports.  These limits are independent of
EU directives and at times, serve to restrict U.S. peanut
imports.
    Offsets for Defense Sector Contracts:  The defense ministry
requires all foreign contractors to provide at least 100
percent offset/compensation for defense procurements over five
million Dutch guilders (about $2.7 million). The seller must
arrange for the purchase of Dutch goods or permit the
Netherlands to domestically produce components or sub-systems
of the weapons systems it is buying.
    Broadcasting and Media Legislation:  Liberalizing
amendments to the Dutch Media Act admitting local and foreign
commercial broadcasters into the Dutch cable network took
effect in 1992.  Dutch compliance with the EU Broadcasting
Directive and its 50-percent-EU-content-where-practicable
requirement is not primarily a bilateral issue, but one between
the United States and the EU.  U.S. television programs are
popular and readily available in the Netherlands.
    Cartels:  Although the export sector of the Dutch economy
is open and free of competition restraints, cartels exist in
the domestic sector of the economy.  Cartels have been legal in
the Netherlands if accepted for registration by the
government.  Cartel arrangements include restrictions against
market entry, restrictions on sales territories, and sales
quotas.  Cartels are not necessarily limited to Dutch
companies.  In order to comply with EU requirements to curtail
cartels, the government in 1993 and 1994 introduced legislation
to break up the cartel system.  The new government is expected
to proceed quickly with the anticartel bill.  For the time
being, cartels are a potential threat to foreign firms seeking
to do business in the Netherlands.  However, the U.S. Embassy
knows of only two complaints by U.S. firms of having been
disadvantaged by cartels in the Netherlands, and these did not
involve exports.
    Public Procurement:  Central government procurement is
generally open and transparent and complies with the EU
procurement directive and the GATT government procurement
code.  However, independent studies show that transparency and
enforcement in this area can be deficient, especially at the
local authority level, and with offset or local content
requirements.
    In this regard, the EU utilities directive may have a
positive effect.  It requires more public notification and
ending the virtual monopoly of two Dutch companies in public
utility construction for local authorities.  However, the U.S.
Embassy has received no complaints from U.S. firms since 1992.
Because U.S. firms operate primarily in the export-oriented
sector of the economy and at the central government level of
procurement, they appear to have experienced little
discrimination in public procurement sector since 1992.
6.  Export Subsidies Policies
    The EU is a signatory to the GATT subsidies code, making
the Netherlands subject to the provisions of this code.
    Under the Export Matching Facility, the Dutch government
provides interest subsidies for Dutch export contracts
competing with government-subsidized export transactions in
third countries.  These subsidies under the "matching fund"
seek to bridge the interest cost gap between a Dutch and
foreign export contract which has benefited from foreign
interest subsidies.  Under the Dutch scheme, the government
provides up to 10 million guilders (about $5.4 million) of
interest subsidies per export contract up to a maximum of 35
percent per export transaction.  To qualify, the export
transaction must have a Dutch content of at least 60 percent.
For defense, aircraft, and construction transactions, the
minimum Dutch content is one-third of the export portion of a
contract.
    The Dutch have a local content requirement of 70 percent
for exporters seeking to insure their export transactions
through the Netherlands Export Insurance Company (NCM).
    In the aerospace industry, the Dutch government has
indirectly supported Fokker, the Dutch aircraft manufacturer,
with loans and loan guarantees as well as with direct support
for development programs.  With the purchase of a majority
interest in Fokker by Deutsche Aerospace (DASA), it is expected
that the Dutch government (which had owned 31.8 percent of the
company) will reduce support of Fokker.
    There are some subsidies for shipping.  Under strict
conditions, Dutch shipowners ordering new vessels or buying
existing vessels not older than five years may be eligible for
a premium of 10 percent of the contract price distributed over
five years.  Subsidies for shipbuilding have been gradually
reduced since 1980.  The present guideline is the seventh EU
directive which allows a maximum aid level of nine percent for
shipbuilding after consideration of tax allowances.  In
conformity with the OECD understanding, the government grants
interest rate subsidies (maximum two percent) to Dutch
shipbuilders up to 80 percent of a vessel's cost with a maximum
repayment period of 8.5 years.  This subsidy is only available
when it will be "matching" similar offers by non-EU shipyards.
The government may also guarantee loans to Dutch shipping
companies for investment purposes.
7.  Protection of U.S. Intellectual Property
    The Netherlands has a generally good record on IPR
problems, with the exception of the enforcement of antipiracy
laws (see below).  It belongs to the World Intellectual
Property Organization (WIPO), is a signatory of the Paris
Convention for the Protection of Industrial Property, and
conforms to accepted international practice for protection of
technology and trademarks.  Patents for foreign investors are
granted retroactively to the date of original filing in the
home country, provided the application is made through a Dutch
patent lawyer within one year of the original filing date.
Patents are valid for 20 years.  Legal procedures exist for
compulsory licensing if the patent is determined to be
inadequately used after a period of three years, but these
procedures have rarely been invoked.  Since the Netherlands and
the United States are both parties to the Patent Cooperation
Treaty (PCT) of 1970, patent rights in the Netherlands may be
obtained if PCT application is used.
    The Netherlands is a signatory of the European Patent
Convention, which provides for a centralized Europe-wide patent
protection system.  This convention has simplified the process
for obtaining patent protection in the member states.
Infringement proceedings remain within the jurisdiction of the
national courts.  The enforcement of antipiracy laws remains a
concern to U.S. producers of software, audio and video tapes,
and textbooks.  The Dutch government has recognized the
problems in protecting intellectual property.  Legislation was
enacted in early 1994 to explicitly include computer software
as intellectual property under the copyright statutes.
8.  Worker Rights
    a.  The Right of Association
    The right of Dutch workers to associate freely is well
established.  One quarter of the employed labor force belongs
to unions.  Unions are entirely free of government and
political party control and participate in political life.
They also maintain relations with recognized international
bodies and form domestic federations.  The Dutch unions are
active in promoting workers' rights internationally.  All union
members, except most civil servants, have the legal right to
strike.  Even Dutch military personnel are free to join
unions.  Measures are pending which would grant the right to
strike to civil servants not involved in "life-essential"
activities; meanwhile, disputes involving this sector are
subject to arbitration.
    b.  The Right to Organize and Bargain Collectively
    The right to organize and bargain collectively is
recognized and well-established.  There are no union shop
requirements.  Discrimination against union membership does not
exist.  Dutch society has developed a social partnership among
government, private employers, and trade unions.  This
tripartite system involves all three participants in
negotiating guidelines for collective bargaining agreements
which, once reached in a sector, are extended by law to cover
the entire sector.  Such agreements cover about 75 percent of
Dutch workers.
    c.  Prohibition of Forced or Compulsory Labor
    Forced or compulsory labor is prohibited by the
constitution and does not exist.
    d.  Minimum Age for Employment of Children
    Child labor laws exist and are enforced.  The minimum age
for employment of young people is 16.  Even at that age, youths
may work full time only if they have completed the mandatory 10
years of schooling and only after obtaining a work permit
(except for newspaper delivery).  Those still in school at age
16 may not work more than eight hours per week.  Laws prohibit
youths under the age of 18 from working at night, overtime, or
in areas which could be dangerous to their physical or mental
development.  In order to promote the employment of young
people, the Netherlands has a reduced minimum wage for
employees between ages 16 and 23.
    e.  Acceptable Conditions of Work
    Dutch law and practice adequately protect the safety and
health of workers.  There is no legally-mandated work week; it
is set by collective bargaining.  The average workweek for
adults is 38 hours.  The legally-mandated minimum wage is
subject to semi-annual cost of living adjustments.
    f.  Rights in Sectors with U.S. Investments
    The worker rights described above hold equally for sectors
in which U.S. capital is invested.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                              1,055
Total Manufacturing                                    7,775
  Food & Kindred Products                     955
  Chemicals and Allied Products             3,406
  Metals, Primary & Fabricated                494
  Machinery, except Electrical                991
  Electric & Electronic Equipment             468
  Transportation Equipment                     80
  Other Manufacturing                       1,382
Wholesale Trade                                        3,090
Banking                                                  131
Finance/Insurance/Real Estate                          5,199
Services                                               1,845
Other Industries                                         791
TOTAL ALL INDUSTRIES                                  19,887
Source: U.S. Department of Commerce, Bureau of Economic
Analysis
(###)
NEW_ZEAL1
&\&\U.S. DEPARTMENT OF STATE
NEW ZEALAND: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                           NEW ZEALAND
                     Key Economic Indicators
        (Millions of U.S. dollars unless otherwise noted)
                                    1992      1993      1994
Income, Production and Employment:  1/
Real GDP (1983 prices)            19,883    19,256    21,078
Real GDP Growth Rate (pct.)         -1.3       2.9       5.3
GDP (at current prices)           41,290    40,742    45,157
By Sector:
  Agriculture                      2,524     2,525     2,668
  Fishing/Hunting/Forestry/Mining  1,712     1,763     2,708
  Manufacturing                    7,426     7,878     8,919
  Electricity/Gas/Water            1,204     1,074     1,315
  Construction                     1,212     1,166     1,580
  Trade/Restaurants/Hotels         5,977     6,182     6,617
  Owner-Occupied Dwellings         3,297     3,170     3,419
  Transport/Storage                2,072     1,891     1,785
  Finance/Insurance/Business Svcs  5,895     6,032     6,399
  Communications/Other Services    3,481     3,482     3,762
  General Government Services      4,978     4,565     4,804
Net Exports of Goods and Services  1,312     1,059     1,339
Real Per Capita GDP (USD)          5,821     5,578     6,038
Labor Force, June (000s)           1,634     1,648     1,685
Unemployment Rate, June (pct.)      10.1       9.9       8.4
Money and Prices:  (annual percentage growth) 1/
Money Supply (M2 July/July)         -1.7      -0.9      12.7
Base Lending Rate (actual Sept)     11.0       9.8      10.1
Personal Saving Ratio 2/             6.2       7.0       7.7
Consumer Price Index                 0.8       1.0       1.3
Producer Price Index (June-June)     1.9       2.5       1.5
Exchange Rate (USD/NZD)           0.5660    0.5324    0.5532
Balance of Payments and Trade:  3/
Total Exports (FOB) 4/             9,899    10,103    11,162
  Exports to U.S.                  1,272     1,202     1,256
Total Imports (CIF) 4/             8,591     9,230    10,407
  Imports from U.S.                1,558     1,704     1,872
Aid Receipts                           0         0         0
External Public Debt              15,163    14,202    16,022
Debt Service Ratio (March yr.) 5/   57.4      47.0      43.4
Gold and Foreign Exch. Reserves    2,983     3,337     4,011
Trade Balance                      1,308       873       755
  Trade Balance with U.S.           -286      -502      -616
1/   National income accounts reporting years ending March 31.
2/   Estimates by N.Z. Institute of Economic Research.
3/   Fiscal year ending June 30.  1994 data is provisional.
4/   Merchandise Trade.
5/   Principal payments on medium and long term debt plus
interest payments on total debt, as a percent of exports of
goods and services and investment income.
1.  General Policy Framework
    New Zealand is a modern developed economy, with a heavy
reliance on foreign trade.  Its manufacturing and export
sectors are still significantly based on a large and efficient
agricultural sector.  Tourism has become the single most
important foreign exchange earner, surpassing meat exports.
Since agricultural and processed agricultural product exports
are so important to the economy, New Zealand ratified the GATT
Uruguay Round agreements and became a founding member of the
World Trade Organization (WTO) on January 1, 1995.  After
several years of economic restructuring, the New Zealand
economy is now largely market driven.  Most formerly
government-owned industries have been privatized, with electric
power generation and transmission the primary remaining
government-owned industries.  In late 1994 economic growth was
strong, inflation was under control, unemployment was falling,
and the government was running budget surpluses for the first
time in seventeen years.
    While the New Zealand government is no longer running
deficits, it refinances its maturing debt (including
substitution of domestic for foreign debt) and manages its cash
flow through periodic issuance of government stock and treasury
bills, which are held by both domestic and foreign investors.
The government obtains most of its income from direct taxes
(about US $11.8 billion) on company profits and personal
incomes.  The maximum personal income tax rate is 33 percent.
The second largest revenue earner is a "goods and services"
(GST) tax of 12.5 percent on all sales of goods and services.
This appears as a sales tax to the consumer.
    The Reserve Bank of New Zealand Act of 1989 instructs the
Reserve Bank to direct monetary policy towards achieving and
maintaining price stability.  The Act requires the Reserve Bank
Governor and the Minister of Finance to agree on policy
targets.  The current agreement, reached in December 1992, set
a goal of maintaining a zero to two percent annual rise in the
consumer price index (CPI), with certain factors from this
"headline" inflation removed to arrive at "underlying"
inflation.  These factors include interest rate rises,
government taxes and charges, and one-off external shocks, such
as large oil price increases.  While the CPI increase has
remained below two percent per annum since late 1991, it is
expected to exceed that level by late 1994, and peak at about
three percent in early 1995.  Underlying inflation is expected
to remain below the two percent target.  The Reserve Bank uses
one day loans to banks of government receipts, daily open
market operations, and twice weekly Reserve Bank bill tenders
to implement its monetary policy.
2.  Exchange Rate Policy
    The New Zealand dollar has floated since March 1985 as part
of a broad based deregulation of financial markets.  The
Reserve Bank has not intervened in the foreign exchange market
since the float.  In mid-October 1994, the New Zealand dollar,
at about 61 U.S. cents, had reached its highest point against
the U.S. dollar since late 1990, having appreciated by almost
20 percent against the U.S. dollar since late 1992.  At these
levels, U.S. goods and services remain competitively priced in
the New Zealand market.
    In pursuing the objective of price stability, the Reserve
Bank uses the following check list of indicators:  exchange
rates; level and structure of interest rates; growth of money
and credit; inflation expectations; and trends in the real
economy.  The interest rate yield gap and the trade weighted
exchange rate are seen as the principal indicators.  While not
attempting to run a fixed exchange rate band, the Reserve Bank
does seek "comparative exchange rate stability."  The Reserve
Bank's control of primary liquidity influences the exchange
rate indirectly through its impact on short-term interest rates.
3.  Structural Policies
    Certain New Zealand manufacturers, primarily motor vehicle
assemblers and car tire, textile, carpet, footwear and apparel
manufacturers, retain high but decreasing effective rates of
tariff protection.  In March 1991, a program was announced to
cut most tariffs by one-third from 1993 to 1996.
Liberalization beyond 1996 will be determined by a review held
in 1994.  Most observers expect further gradual reduction in
tariff protection for these industries, in spite of stiff
opposition from those directly affected.
    In December 1990, the new National Party government
introduced industrial relations reform legislation, resulting
in the Employment Contracts Act, which came into effect on
May 15, 1991.  This law abolished compulsory unions and the
practice of nationwide occupational awards.  The removal of
these restrictive practices has generated more flexible
workplace arrangements with consequent improvements in
productivity.
    The National Party government also implemented reductions
in expenditures for social benefits through better targeting,
and a broad review of the social assistance structure.  This
process was extended in the July 1991 budget package through
the introduction of partial user charges for health and
education and rationalization of housing assistance.  In
August 1993, despite strong public resistance, the three major
political parties agreed to changes to the universal retirement
system to bring its costs to the government under control.
4.  Debt Management Policies
    Gross public debt grew from 45 percent of GDP in 1973 to a
peak of 77 percent of GDP in 1987.  In June 1994, total public
debt was US $27.2 billion, equivalent to 57 percent of GDP.
This improvement is largely due to the use of proceeds from
privatization to repay external debt, and to the improving
economy.  In the fiscal year ending March 1988, debt service on
the public debt reached US $3.3 billion, or 8.4 percent of GDP
and 20 percent of government expenditure.  Public debt service
dropped to US $1.97 billion in FY1994, or 4.4 percent of GDP
and 12.1 percent of expenditures.
    External debt accounted for 59 percent of the total in
mid-1994.  Interest on external debt in 1994 equaled 12.4
percent of exports of goods and services, and investment income.
5.  Significant Barriers to U.S. Exports
    New Zealand embarked on a unilateral tariff liberalization
program in 1985 with the announcement that tariffs on goods not
produced in New Zealand would be reduced to zero.  In 1988, the
government reported that 93 percent of imports entered duty
free.  In December 1987, a general tariff reduction plan was
announced for goods not covered by industry plans.  (Five
categories of goods were covered by industry plans:  footwear;
carpet; textiles; apparel; and motor vehicles.)  Tariffs on
other goods were reduced in four stages between July 1988 and
July 1992 from a range of 30 to 40 percent to a range of
between 16 to 19 percent.  In 1991 it was announced that tariff
reductions would be continued between 1993 and 1996.
    Under separate treatment for goods covered by the former
industry plans, present relatively high tariffs for apparel,
textiles, curtains, carpets, footwear, motor vehicles and car
tires will be reduced in stages to July 1996 by about one
quarter to one third of the existing tariffs.  However, even
after July 1996, passenger vehicles and original equipment
tires will still face a tariff of 25 percent; replacement
tires, 15 percent; and apparel, 30 percent.  A review for the
post-1996 period was conducted in 1994.  Most observers expect
further gradual reduction in tariff protection for these
industries, despite stiff opposition from some domestic
producers.
    One example of a protected industry is the car assembly
sector, where tariff protection will drop from the present
30 to 25 percent on July l, 1996.  The assemblers maintain that
further tariff reductions will jeopardize their ability to
maintain an employment level of 2,500, and kill a potential
export market to Australia.  Their opponents (importers of used
cars, mostly from Japan) counter that the present duties make
cars an average of US $3000 more expensive for every New
Zealand motorist.
    Thus, despite extensive reform, tariffs on goods competing
with domestic products remain relatively high.  With the entry
into force of the GATT Uruguay Round Agreement in 1995, tariffs
on only two categories of imports, used motor cars and used
clothing, will be unbound.  Items of particular export interest
to the United States subject to high tariffs include printed
matter for commercial use, aluminum products and wine.
Reductions in tariff levels in accordance with the
aforementioned plan should result in expanded commercial
opportunities for U.S. exporters.
    New Zealand has completed the dismantling of a highly
restrictive import licensing regime.  The remaining import
license controls for goods under the former industry plans were
eliminated in 1992.  This liberalization has benefitted U.S.
exporters.
    The New Zealand Apple and Pear Marketing Board, a producer
organization, had a monopoly right to import apples and pears,
except from Australia.  This monopoly was abolished effective
January 1, 1994.
    New Zealand welcomes and encourages foreign investment
without discrimination.  Approval by the Overseas Investment
Commission (OIC) is required for foreign investments over
NZD ten million or investments of any size in specific
sectors.  The review of investments above NZD ten million
applies to both acquisitions and greenfield investments.
Specified sectors are commercial fishing and rural land.
Foreign investment in commercial fishing is limited to a
24.9 percent holding, unless an exemption is granted by the
Ministry of Agriculture and Fisheries.  While the level of
ownership is not restricted for rural land, foreign purchasers
are required to demonstrate that the purchase is beneficial to
New Zealand.  In practice, the OIC approves virtually all
investment applications, and its approval requirements have not
been an obstacle for U.S. investors.  For example, the entire
national railroad system, including the only regular passenger
and rail ferry service connecting the two main islands, was
sold to a majority U.S. owned consortium in 1993.  In 1991, the
former government telecommunications monopoly was sold to two
U.S. telecommunications companies.  No performance requirements
are attached to foreign direct investment.  Full remittance of
profits and capital is permitted through normal banking
channels.
    The U.S. Government recognized the generally liberal
trading environment in New Zealand by signing a bilateral Trade
and Investment Framework Agreement (TIFA) in October 1992.  The
TIFA provides for periodic government to government
consultations on bilateral and multilateral trade and
investment issues and concerns.  The first TIFA meeting was
held in Washington in April 1993.
6.  Export Subsidies Policies
    New Zealand acceded to the GATT subsidies code in 1981.  At
that time, New Zealand undertook to eliminate seven export
subsidy programs that were inconsistent with the code by
March 1985.  While five of the programs were eliminated on
schedule, two programs were extended through March 1987,
leading the United States to deny New Zealand imports use of
the injury test in countervailing duty cases.  One of these
programs, the export market development taxation incentive, was
extended a second time, but expired in 1990.  The United States
reinstated the injury test for New Zealand once tax rebates
under this last inconsistent program were complete.
7.  Protection of U.S. Intellectual Property
    New Zealand is a member of the World Intellectual Property
Organization, the Paris Convention for the Protection of
Industrial Property, and the Berne Copyright and Universal
Copyright Conventions.  New Zealand has generally supported
measures to enhance intellectual property protection at
multilateral organization meetings.
    The Government of New Zealand strongly endorses the
protection of intellectual property and enforces effectively
its laws which offer such protection.  This is done to protect
New Zealand innovators both at home and abroad, and to
encourage technology transfer.  The government recognizes that
New Zealand is heavily dependent on imported technology and
that the country derives considerable benefit in providing
intellectual property protection.
    In 1992 New Zealand repealed Section 51 of the Patents Act,
1953, which contained permissive rules for compulsory licensing
of pharmaceutical products.  While no licenses had ever been
issued under these provisions, in 1990 a number of applications
were filed with the Commissioner of Patents, generating a great
deal of concern among international pharmaceutical companies.
The repeal of Section 51 brought New Zealand's patent act into
conformity with the intellectual property legislation in other
industrialized countries.
    The government is engaged in a full review of its
intellectual property rights regime.  It is expected that major
new copyright legislation, including provisions on parallel
importing, will be enacted in 1994, as well as new legislation
on layout designs.  In addition, some amendments to patent and
trademark laws, as required by the Uruguay Round's Trade
Related Aspects of Intellectual Property (TRIPS) Agreement,
were before the parliament in late 1994, as well as a new
regime for the protection of geographical indications, expected
to be enacted in 1994.  Draft legislation will also protect
certain data which are supplied to New Zealand regulatory
authorities who give marketing approvals for pharmaceuticals
and agrochemicals.  These reforms are mainly aimed at bringing
New Zealand's intellectual property rights law into conformity
with the TRIPS Agreement.  It is expected that further reform
legislation will be introduced in 1995 on trademarks, patents,
designs and plant variety rights.
8.  Worker Rights
    a.  The Right of Association
    New Zealand workers have unrestricted rights to establish
and join organizations of their own choosing and to affiliate
these organizations with other unions and international
organizations.  The principal labor organization, the New
Zealand Council of Trade Unions (NZCTU), is affiliated with the
International Confederation of Free Trade Unions (ICFTU).  A
second, smaller national labor federation, the New Zealand
Trade Union Federation (TUF), was established in 1993.  TUF is
not affiliated with any global international, although some of
its affiliates retain longstanding ties with the ICFTU's
international trade secretariats.  There are also a number of
independent labor unions.  Unions are protected by law from
governmental interference, suspension, and dissolution.
    Unions have and freely exercise the right to strike.
Strikes designed to force an employer to become party to a
multi-company contract are prohibited.  Moreover, police
officers are barred from striking or taking any form of
industrial action.  Police, however, do have freedom of
association and the right to organize and to bargain
collectively.
    b.  The Right to Organize and Bargain Collectively
    The right of workers to organize and bargain collectively
is provided by law and observed in practice.  Unions actively
recruit members and engage in collective bargaining.  Only
uniformed members of the armed forces are not permitted to
organize unions or to bargain collectively.
    Labor market deregulation intended to make New Zealand more
competitive internationally was initiated with the Employment
Contracts Act (ECA) of 1991, which marked a sharp break with
almost a century of pro-union industrial legislation.  Under
the ECA, unions lost their special legal status and have no
inherent right to represent any particular group of workers.
Compulsory unions and the closed shop were abolished.  Monopoly
union coverage was dropped and workers may not be forced to
join a particular union.
    The ECA ended a previous system of national "awards" under
which a wage agreement would apply to all employers and
employees in an industry whether or not they had been involved
in the award negotiations.  Under the ECA, employment
relationships are based on contracts.  Individual employees and
employers may choose to conduct negotiations for employment
contracts on their own behalf or may authorize any other person
or organization to do so as their representative.  Mediation
and arbitration procedures are conducted independently of
government control.  The Employment Court hears cases arising
from disputes over the interpretation of labor laws.  A less
formal body, the Employment Tribunal, is available to handle
wage disputes and assist in maintaining effective labor
relations.  There are no export processing zones.
    c.  Prohibition of Forced or Compulsory Labor
    Forced or compulsory labor is prohibited.  Inspection and
legal penalties ensure respect for these provisions.
    d.  Minimum Age for Employment of Children
    Department of Labour inspectors effectively enforce a ban
on the employment of children under age 15 in manufacturing,
mining, and forestry.  Children under the age of 16 may not
work between the hours of 10 P.M. and 6 A.M.  In addition to
explicit restrictions on the employment of children, New
Zealand's system of compulsory education ensures that children
under the minimum age for leaving school (now 16) are not
employed during school hours.
    e.  Acceptable Conditions of Work
    New Zealand law provides for a 40-hour workweek, with a
minimum of three weeks' annual paid vacation and eleven paid
public holidays.  Under the Employment Contracts Act, however,
employers and employees may agree to longer hours than the
40-hour per week standard.  The government-mandated minimum
wage of approximately US $3.75 an hour, applies to workers
20 years of age and older.  Effective April 1, 1994, a minimum
wage for younger workers was introduced at 60 percent of the
adult minimum.  A majority of the work force earns more than
the minimum wage.
    New Zealand has an extensive body of law and regulations
governing health and safety issues, notably the Health and
Safety in Employment Act of 1992.  Under this legislation,
employers are obliged to provide a safe and healthy work
environment and employees are responsible for their own safety
and health as well as ensuring that their actions do not harm
others.  Under the Employment Contracts Act, workers have the
legal right to strike over health and safety issues.  Unions
and members of the general public may file safety complaints on
behalf of workers.  Safety and health rules are enforced by
Department of Labour inspectors who have the power to shut down
equipment if necessary.
    f.  Rights in Sectors with U.S. Investment
    The conditions in sectors with U.S. investment do not
differ from conditions in other sectors of the economy.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                               339
Total Manufacturing                                     778
  Food & Kindred Products                   (1)
  Chemicals and Allied Products             110
  Metals, Primary & Fabricated                7
  Machinery, except Electrical                3
  Electric & Electronic Equipment            38
  Transportation Equipment                  (1)
  Other Manufacturing                       317
Wholesale Trade                                         108
Banking                                                 (1)
Finance/Insurance/Real Estate                           198
Services                                                (1)
Other Industries                                      1,587
TOTAL ALL INDUSTRIES                                  3,037
(1) Suppressed to avoid disclosing data of individual companies
Source: U.S. Department of Commerce, Bureau of Economic Analysis
NICARAGU1
_U.S. DEPARTMENT OF STATE
NICARAGUA: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                            NICARAGUA
                     Key Economic Indicators
        (Millions of U.S. dollars unless otherwise noted)
                                      1992      1993     1994 1/
Income, Production and Employment:
Real GDP (1991 dollars)            1,781.2   1,765.2    1,800.5
Real GDP Growth (pct.)                 0.4      -0.9        2.0
GDP by Sector:
  Agriculture 2/                     434.6     437.8      448.3
  Energy/Water                        55.2      56.5       57.6
  Manufacturing                      399.0     391.9      397.9
  Construction                        53.4      54.7       55.8
  Rents                               74.8      74.1       75.6
  Financial Services                  57.0      56.5       59.4
  Other Services                      78.4      79.4       81.0
  Government/Health/Education        199.5     195.9      198.0
Net Exports of Goods & Services 3/  -567.0    -430.0     -426.1
Real Per Capita GDP (USD)            430.4     414.4      410.1
Labor Force (000s) 4/              1,445.4   1,489.5    1,543.7
Unemployment Rate (pct.)              17.8      21.8       23.5
Money and Prices:
  (annual percentage growth unless otherwise noted)
Money Supply (M2)                     21.1       8.0       16.5
Rediscount Rate (pct.) 5/             13.0      13.0       10.5
Personal Saving Rate
  (pct. of GDP) 6/                   -15.2     -14.6      -13.3
Retail Inflation                       N/A       N/A        N/A
Wholesale Inflation                    N/A       N/A        N/A
Consumer Price Index                   3.5      19.5       13.5
Exchange Rate (cordobas:USD)
  Official                            5.00      6.32       7.08
  Parallel                            5.34      6.42       7.43
Balance of Payments and Trade:
Total Exports (FOB)                  223.1     226.9      328.9
  Exports to U.S. (FOB)               52.0     125.9      121.1
Total Imports (CIF)                  855.0     727.7      786.0
  Imports from U.S. (CIF)            220.0     149.8      164.5
AID from U.S. 7/                     114.7      80.5       80.9
AID from Other Countries 8/          644.8     306.2      482.1
External Public Debt              10,808.2  10,987.0   11,553.0
Debt Service Payment (paid)          194.0     178.0      272.0
Gold and FOREX Reserves (gross)      179.1      87.7      109.1
Trade Balance 9/                    -551.2    -390.0     -389.1
  Trade Balance with U.S. 9/        -147.2     -23.2      -28.6
N/A--Not available.
1/ Figures are all annual projections based upon 8-9 months of
data.
2/ Agriculture does not include livestock and fisheries.
3/ Does not include interest payments or debt service.
4/ Defined as working age population as reported by the
Nicaraguan Ministry of Labor.
5/ Central Bank rediscount rate.
6/ Based upon IMF figures.
7/ Includes all non-military aid granted.
8/ Includes total grants and credits received minus U.S. aid.
9/ Trade balance is calculated on FOB basis.
Sources:  International Monetary Fund (IMF), the World Bank,
and the Central Bank of Nicaragua unless otherwise noted.
1.  General Policy Framework
    Over the period 1990-93, the Government of Nicaragua
focused on making the transition from a centralized to a
market-oriented economy, and on reversing the severe
mismanagement of the economy during the Sandinista era, which
had resulted in a 25 percent drop in real GDP and 50 percent
drop in GDP per capita during the 1980's.
    During the first four years of the Chamorro Administration,
the currency was stabilized and inflation brought under
control.  The cordoba is presently devalued against the dollar
on a crawling-peg basis of 12 percent per annum, and inflation
has fallen from 13,490 percent in 1990 to an estimated 13.5
percent in 1994.  The executive implemented various structural
adjustment measures, including the successful privatization of
more than 300 of the 350 non-financial public sector companies
it inherited from the previous government.  A Superintendency
was created to supervise the banking sector, which now includes
nine private banks and three state-owned institutions.  The
Government of Nicaragua has also reduced tariffs, eliminated
most non-tariff trade barriers, and greatly relaxed foreign
exchange controls.
    All of these measures were designed to pave the way for
economic expansion.  To date, however, the anticipated growth
has failed to materialize, as real GDP growth has remained
stagnant, registering rates of 0.4 percent in 1992 and -0.9
percent in 1993.  Estimated growth of 4 percent in 1994 has
been revised downward to 2 percent due to a drought which
damaged the first agricultural  planting cycle and an
accompanying energy shortage which has resulted in mid-1994 in
power cutoffs of 4 hours per day.  The lack of credit to the
productive sector continues to be a major stumbling block to
growth, and private investment flows remain limited as concerns
over property rights and political stability persist.
    In June 1994, the Government came to agreement with the IMF
on an Enhanced Structural Adjustment Facility (ESAF) -- a
3-year program designed to maintain stability and generate
growth.  Consequently, the stage has been set for continued
lending from international financial institutions and other
bilateral donors, including an Economic Recovery Credit from
the World Bank.  These credit sources represent critical
elements for the nation@s economic stability, as Nicaragua
continues to suffer from a chronic balance-of-payments gap
estimated at 1.1 billion dollars for 1994.
2.  Exchange Rate Policy
    In January 1993, the Government of Nicaragua modified its
fixed official exchange rate system which since September 1991
had pegged the cordoba to the dollar at 5:1.  With its
devaluation, the Government set the cordoba at 6:1, with a
crawling-peg schedule adjusted daily, at an annual rate of 5
percent.  This schedule was accelerated in November 1993 to an
annual rate of 12 percent.  A parallel exchange market,
legalized in September 1991, continues to operate, supplying
foreign currency for virtually all types of exchange
transactions.  The spread between the official and parallel
markets has been generally maintained at 2-4 percent.
    Foreign exchange generated from the export of most
traditional products (e.g., beef, coffee, sugar, cotton) must
be surrendered to the Central Bank, although private banks can
accept the dollars as agents of the Central Bank.  Remittance
of profits generated through foreign investments, as well as
original capital 3 years following investment, is guaranteed
through the Central Bank at the official exchange rate for
those investments registered under the Foreign Investment Law.
Investors who do not register their capital may still make
remittances through the parallel market, although these
transactions are not guaranteed by law.  Embassy is aware of no
investor who has encountered remittance difficulties since the
inception of the Foreign Investment Law in 1991.
3.  Structural Policies
    Pricing Policies:  Since taking office in April 1990, the
Chamorro Administration has lifted price controls with the
exception of those imposed upon "fiscal" goods (e.g., tobacco,
soft drinks, alcoholic beverages), pharmaceuticals and medical
goods, petroleum products, and public utility charges.
However, the Central Government (i.e., the Ministry of Economy
and Development) commonly negotiates with domestic producers of
important consumer goods to establish voluntary price
restraints and, on several occasions, has purchased emergency
stores of important basic foods (sugar, beans, basic grains,
etc.) during periods of shortages to maintain domestic supplies
and moderate prices.
    Tax Policies:  Nicaragua maintains a maximum tariff level
(DAI) on virtually all imports of 20 percent of CIF value.  An
additional Temporary Protection Tariff (ATP) of 5-15 percent of
CIF value is levied on some 900 imported items, largely goods
also produced in Nicaragua.  Some 750 other products (whether
imported or locally produced) are assessed a Specific
Consumption Tax (IEC), generally limited to 15 percent of CIF
value.  A stamp tax of 5 percent (ITF) is levied on all
imports.  The country@s 15 percent sales tax (IGV) is charged
(in a cascading fashion) on entry of all imported goods that
are not categorized as basic food basket items.  Overall import
taxation levels on "fiscal" goods are particularly high.
    The highest income tax rate is 30 percent (for taxpayers
earning more than 180,000 cordobas yearly -- or about 25,000
dollars at the official exchange rate.  Individuals earning
between 100,000 and 180,000 cordobas are taxed at a rate of 26
percent; between 60,000 and 100,000 -- 20 percent; between
40,000 and 60,000 - 12 percent; and between 25,000 and 40,000
-- 7 percent.  Individuals earning less than 25,000 cordobas
yearly are exempt from income tax.  Corporations are levied
taxes at a flat rate of 30 percent.  In addition, busines
income is subject to a series of municipal and special taxes,
such as the 2 percent tax on sales charged by the Municipality
of Managua.
4.  Debt Management Policies
    Although it inherited an enormous foreign debt burden from
the previous government, the Chamorro Administration succeeded
in clearing its total arrears to the World Bank and IDB in 1991
with the assistance of grant contributions from the
international community.  This made Nicaragua eligible to
receive new credits from the multilateral development banks,
and the country began to renegotiate its bilateral debt.
Nicaragua entered into agreements with Mexico, the United
States, Venezuela, Colombia, and Argentina for rescheduling,
debt swaps, and/or debt forgiveness.  Over the past 2 years,
Nicaragua has held discussions with Russia over the large debt
owed to the former Soviet Union.  Similarly, Nicaragua
continues to seek renegotiation of its debt of roughly 1.7
billion dollars to private foreign banks, via a buy-back
mechanism.  However, Nicaragua's foreign debt still totals more
than six times its GDP and more than 35 times its annual
merchandise exports.
    In December 1991, the Paris Club creditors agreed to grant
Nicaragua the most favorable rescheduling terms offered by the
club to date.  In April 1993, Paris Club members made new
pledges of 46.8 million dollars, which, although significant,
still left Nicaragua with a substantial financing gap.  That
gap was closed by additional sources of assistance, new
austerity measures, and the suspension, beginning September
1993, of pre-cutoff day (October 31, 1988) Paris Club
obligations.
    In August 1994, Germany and Nicaragua reached agreement for
an overall 70 percent forgiveness of the 180 million dollars
subject to the 1991 Paris Club agreement.  This set the stage
for a second round of Paris Club talks to beheld in early 1995
to deal with the remaining bilateral debt, the majority of
which (approximately 500 million dollars) consisting of debts
to the former German Democratic Republic (East Germany).  It is
anticipated that Nicaragua will seek even more favorable
treatment ("enhanced Toronto Terms") at the talks, requesting
up to two-thirds forgiveness of its remaining debt.
5.  Significant Barriers to U.S. Exports
    Import Licenses:  In most cases the issuance of import
licenses is a formality, or at worst an inconvenience.  U.S.
pharmaceutical importers, however, continue to complain that
licensing procedures, continually under review due to a process
of regional harmonization of such regulations, can continue to
delay the entry of some U.S. pharmaceutical products.
    Service Barriers:  1991 legislation allowed the
establishment of the first private banks in Nicaragua in a
decade.  Nine private banks are now in operation in a
competitive financial market.  Although current banking law
does allow foreign banks to open and operate branches in
Nicaragua, no U.S. bank has initiated the necessary paperwork.
Insurance activities are currently in the hands of a state
monopoly.  However, legislation is pending in the National
Assembly that would allow private sector participation in the
insurance sector.
    Investment Barriers:  An investment law, passed in June
1991, allows 100 percent foreign ownership in virtually all
sectors of the economy, guaranteed repatriation of profits, and
repatriation of original capital 3 years after the initial
investment.  However, to benefit from this law, investments
must be approved by the Foreign Investment Committee which
analyzes the proposal based upon various criteria.  The fishing
industry remains protected by requirements involving the
nationality and composition of vessel crews and a requirement
for repatriation of 100 percent of the catch (i.e., domestic
processing for eventual export).  In early 1993, the Government
of Nicaragua lifted its moratorium on lumbering in state
forests (representing over 50 percent of the country@s forest
area); but authorities painstakingly review all project
proposals in this sector.
    The Government continues to move forward with privatizing
state-owned companies in government-dominated sectors.  In the
mining sector, a private worker-owned consortium is active, and
several foreign companies have initiated operations.  In
October 1993, the Government began the pre-qualification bid
process for privatization of the national telecommunications
company, which was scheduled to be finalized by October 1994.
However, the privatization still awaits National Assembly
approval and at this writing it is unclear when such approval
will be granted.  The Government also is in the process of
drafting legislation which would allow for the liberalization
of petroleum imports, establish an oil exploration regime, and
explicitly grant the private sector the right to generate
electrical power.  At this time, the legislation is still under
executive review.
    Definition of property rights continues to remain an
obstacle to both domestic and foreign investment.  Claims for
thousands of homes and businesses, as well as large tracts of
land, confiscated without compensation by the Sandinista
government of Nicaragua have yet to be resolved.  In early
1993, the Chamorro government's administrative property claim
resolution mechanism began to process claims for some
16,000-18,000 individual pieces of property.  A small number of
properties have been returned to original owners; other cases
have been settled through the issuance of long-term
compensation bonds.
    The current market value of these bonds remains a matter of
concern.  Trades of the securities on the stock market have
ranged from 17-28 percent of face value.  As of November 1994,
informal trading on the secondary market has settled at 19-21
percent of face value.  The bond compensation program remains
controversial, as the majority of U.S. citizen and Nicaraguan
claims have not been resolved, and most claimants believe their
properties should be more fully compensated.
    Customs Procedures:  Importers commonly complain of steep
"secondary" customs costs including custom declaration form
charges and consular fees.  In addition, importers are required
to utilize the services of licensed custom agents, adding yet
another layer of costs.  Legitimate importers also complain
that "black market" firms are able to bring in the same goods
at greatly reduced tariff rates and then offer these
under-priced goods on the open market.
6.  Export Subsidies Policies
    An export promotion decree, signed in August 1991,
established a package of fiscal exonerations and incentives for
exporters of non-traditional goods (for this purpose, goods
other than coffee, cotton, sugar, wood, beer, lobster, and
sea-harvested shrimp).  Export operations for such products
receive exemption on payment of 80 to 60 percent of income tax
liabilities on a sliding scale from 1991 to 1996, after which
the benefit will be eliminated.  In addition, exporters of both
traditional and non-traditional goods are allowed to import
inputs (used to produce exports goods) duty-free and are exempt
from paying the current 15 percent value-added tax on this
merchandise.  The decree also allows for preferential access to
foreign exchange at the official rate for exporters of
non-traditional goods.
    One of the more attractive benefits of the export promotion
law is the right to a Tax Benefit Certificate equivalent to 15
percent of the FOB value of exported non-traditional goods.
(The percent of FOB value eligible decreases to 5 percent in
1996.)  In May 1993, the first group of Nicaraguan exporters
received the certificates, valid for payment of tax and duties,
or payable 24 months from the date of issue.
7.  Protection of U.S. Intellectual Property
    In 1990, the Nicaraguan government committed itself to
"provide adequate and effective protection for the right to
intellectual properties of foreign nationals" in the context of
requesting designation as a beneficiary of the Caribbean Basin
Initiative Recovery Act.  Current levels of protection,
however, still do not meet modern international standards.
    Although unfortunately unable to dedicate extensive
resources to the protection of intellectual property rights,
the Government of Nicaragua is in the process of evaluating and
modernizing its intellectual property rights regime.  Drafts of
a new patent law and a new copyright law are under review.  The
trademark law in Nicaragua, codified in the Central American
Convention for the Protection of Industrial Property, is
currently undergoing revision by the four signatory countries
(Nicaragua, Costa Rica, Guatemala, and El Salvador).
    The Government has publicly committed itself to accede to
the Paris Convention for the Protection of Industrial Property,
and to the Bern Convention on Copyrights.  As of this writing,
the Government has acceded to neither convention.  However,
Nicaragua is a signatory to the following copyright conventions:
--Mexico Convention on Literary and Artistic Copyrights (1902)
--Buenos Aires Convention on Literary and Artistic Copyrights
(1910)
--Inter-American Copyrights Convention (1946)
--Universal Copyright Convention (Geneva 1952 and Paris 1971)
Brussels Convention on Satellites (1974)
    Trademarks:  Notorious trademarks represent a problem area
for Nicaragua.  Current Nicaraguan procedures allow individuals
to register a trademark without restriction, at a low fee, for
a period of 15 years.
    Copyrights/New Technology:  Pirated videos are readily
available in nation-wide video rental stores, as are pirated
audio cassettes.  In addition, cable television operators are
known to intercept and retransmit U.S. satellite signals -- a
practice which continues despite a limited trend of negotiating
contracts with U.S. sports and news satellite programmers.  One
of Managua's private television stations similarly transmits
(often from video cassettes) pirated U.S. films.  A report
prepared in September 1992 by the International Intellectual
Property Alliance estimated that losses in Nicaragua due to
copyright infringements involving books and the motion picture
industry cost U.S. firms 1.3 million dollars annually.
8.  Worker Rights
    a.  The Right of Association
    Legally, all public and private sector workers, with the
exception of the military and the police, are entitled to form
and join unions of their own choosing; they exercise this right
extensively.  New unions must register with the Ministry of
Labor and be granted legal status before they may engage in
collective bargaining with management.  Some labor groups
report occasional delays in obtaining legal status.  Nearly
half of Nicaragua's workforce, including agricultural workers,
is unionized.  Unions may freely form or join federations or
confederations and affiliate with, and participate in,
international bodies.
    b.  The Right to Organize and Bargain Collectively
    The Constitution provides for the right to bargain
collectively, and, despite unfamiliarity with the practice
following 10 years of central planning under the Sandinista
regime, collective bargaining is becoming more common in the
private sector.  The International Labor Organization@s
Committee of Experts on the Application of Conventions and
Recommendations issued a report in 1992 asserting that the
Nicaraguan law which requires collective agreements to be
approved by the Ministry of Labor before they come into force
violates the Convention on the Right to Organize and Bargain
Collectively, ratified by Nicaraguan in 1967.  No action has
been taken to modify this provision, although the Labor Code is
currently being revised by the National Assembly.
    c.  Prohibition of Forced or Compulsory Labor
    The Constitution prohibits forced or compulsory labor, and
there is no evidence that it is practiced.
    d.  Minimum Age for Employment of Children
    The Constitution prohibits child labor that can affect
normal childhood development or interfere with the obligatory
school year.  Education is compulsory to age 12, and children
under the age of 14 are legally not permitted to work.
Nevertheless, because of the prevailing economic difficulties
in Nicaragua, reportedly more than 100,000 children are members
of the workforce, particularly in the agricultural and informal
commercial sectors of the economy.  The child labor law is,
however, generally observed in the modern, formal segment of
the economy.
    e.  Acceptable Conditions of Work
    The standard legal work week is a maximum of 48 hours with
one day of rest.  Health and safety standards are extensive,
but not strictly enforced due to an insufficient number of
inspectors.  Sectoral minimum wages were set in mid-1991, but,
according to a study by the Government's National Commission on
the Standard of Living, the minimum wage does not provide a
family of four with the income to meet its basic needs.
Minimum wage levels were not adjusted following the 20 percent
devaluation of the cordoba in January 1993.  However, Ministry
of Labor surveys indicate that some 86 percent of urban area
workers earn more than the minimum wage.
    f.  Rights in Sectors with U.S. Investments
    The above rights are observed in sectors with U.S.
investment and overall working conditions do not differ
adversely from the general description above.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                              (1)
Total Manufacturing                                    (1)
  Food & Kindred Products                   (1)
  Chemicals and Allied Products               0
  Metals, Primary & Fabricated                0
  Machinery, except Electrical                0
  Electric & Electronic Equipment             0
  Transportation Equipment                    0
  Other Manufacturing
Wholesale Trade                                           2
Banking                                                  0
Finance/Insurance/Real Estate                            0
Services                                                 3
Other Industries                                         0
TOTAL ALL INDUSTRIES                                   (1)
(1) Suppressed to avoid disclosing data of individual companies
Source: U.S. Department of Commerce, Bureau of Economic
Analysis
(###)
NIGERIA1
gZgZU.S. DEPARTMENT OF STATE
NIGERIA: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                             NIGERIA
                     Key Economic Indicators
       (Millions of U.S. dollars unless otherwise noted) 1/
                                    1992      1993     1994 2/
Income, Production and Employment:
Real GDP (1984 prices)             5,632     4,542      N/A
Real GDP Growth (pct.) 3/          -0.41     -0.19      N/A
GDP (at current prices)           31,793    37,023      N/A
By Sector:  (1984 prices)
  Agriculture                      2,131     1,730      N/A
  Energy/Water                       775       588      N/A
  Manufacturing                      475       385      N/A
  Construction                       107        85      N/A
  Rents                              145       115      N/A
  Financial Services                 490       396      N/A
  Other Services                     956       772      N/A
  Government/Health/Education        553       470      N/A
  Net Exports of Goods & Services    N/A       N/A      N/A
Real Per Capita GDP ($US) 3/       618.9     488.4      N/A
Labor Force (millions)              42.8       N/A      N/A
Unemployment Rate (pct.) 4/          3.2       3.4      N/A
Money and Prices:
Money Supply (M2)                  7,386     8,843    9,534
Base Interest Rate (pct.)           25.7      27.0     21.0
Personal Savings Rate (pct.)        15.5      16.4     12.0
Retail Inflation (pct.)             46.0      57.2      N/A
Wholesale Inflation (pct.)           N/A       N/A      N/A
Consumer Price Index               478.4     751.9    985.9
Exchange Rate (USD/Naira):
  Official (annual average)         0.06      0.04     0.05
  Parallel                          0.05      0.02     0.02
Balance of Payments and Trade:
Total Exports (FOB) 5/            11,886     9,923      N/A
  Exports to U.S.                  5,074     5,301    3,970
Total Imports (CIF) 5/             7,204     6,665      N/A
  Imports from U.S.                1,001       891      524
Aid from U.S.                         17        23      N/A
Aid from Other Countries             N/A       N/A      N/A
External Public Debt              27,500    28,700      N/A
Debt Service Payments              2,700     1,600      N/A
Gold and Foreign Exch. Reserves      799       806      N/A
Trade Balance 5/                   4,682     3,258      N/A
  Trade Balance with U.S.          4,073     4,410    3,446
N/A--Not available
1/ All dollar figures are based on official exchange rates and
in some places reflect exchange rate fluctuations and not
internationally recognized development assessments.
2/ 1994 figures are estimates based on January-June data.
3/ In constant 1984 Naira, GDP grew 3.6 and 2.9 percent in 1992
and 1993, while GDP per capita in current dollars was $349 and
$398 for those years.
4/ CBN figure; Embassy estimates 28 percent unemployment.
5/ Merchandise trade.
1.  General Policy Framework
    Nigeria is Africa's most populous nation and the United
States' fifth largest oil supplier.  It offers investors a
low-cost labor pool, abundant natural resources, and the second
largest market in sub-Saharan Africa.  Nigeria's crucial
petroleum sector provides the government with over 95 percent
of all foreign exchange earnings and about 75 percent of
budgetary revenue.  Agriculture, which accounts for nearly 40
percent of GDP and employs about two-thirds of the labor force,
is dominated by small-scale subsistence farming.
    After a period of relative fiscal austerity in the late
1980's, the Nigerian government has run budget deficits
exceeding seven percent of GDP since 1990.  Proposals to reduce
the deficit include reducing large government fuel price
subsidies (the official price of gasoline was equivalent to
about 55 U.S. cents per gallon in October 1994), shelving a
number of government projects which are of doubtful economic
value, and reducing leakages from government income due to
corruption.
    Over the last several years, monetary policy has been
driven by the need to accommodate the government's budget
deficit and a desire to reduce the inflationary impact of the
budget deficit on the economy.  Deficits at the federal level
have been financed primarily by borrowing from the Central Bank
of Nigeria (CBN), which held 83 percent of the government's
domestic debt at the end of 1992.  Since the Central Bank
monetizes much of the deficit, budgetary shortfalls have a
direct impact on the money supply and on price levels, which
have risen rapidly in recent years.
    In conjunction with his 1994 budget announcement, head of
state General Sani Abacha announced the abandonment of most
1986 Structural Adjustment Program reforms, and instituted
tight government control over key economic variables.  The new
measures include:  fixing the value of the naira at 21.99 per
dollar; instituting strict and comprehensive foreign exchange
and import controls; eliminating the legal parallel foreign
exchange market; and setting caps on interest rates chargeable
on loans and deposits/savings accounts.
    The new economic policy regime created by these measures
has already had far reaching and damaging effects on the
Nigerian economy.  Not only have these measures discouraged
investment in Nigeria, but companies already present find it
increasingly difficult to operate profitably, while official
statistics show nonoil exports down sharply.
2.  Exchange Rate Policy
    In the first quarter of 1994, Nigeria changed its foreign
exchange regime back to the highly controlled system in force
prior to the structural adjustment reforms in the late 1980's.
The legal parallel foreign exchange market, which operated
through licensed exchange bureaus, was abolished, and the
official interbank foreign exchange market (IFEM), operated by
the Central Bank, became the only authorized source of foreign
currency in Nigeria for companies and individuals.  At the
mid-year budget review, bureaux de change were reauthorised to
conduct limited foreign exchange transactions at the official
rate plus ten percent.  The official exchange rate has been
held at 21.99 naira/dollar since April 1993, but the parallel
rate had climbed to over 70 naira to the dollar by October 1994.
    While there are no restrictions on imports of hard currency
into Nigeria, foreigners are obliged to declare such holdings
upon arrival, and must maintain records of naira purchases from
authorized banks in Nigeria in order to take their remaining
foreign currency out of the country.  The 1994 regime for
allocating hard currency at the IFEM is sharply limiting
official remittances.  Only 250 million dollars was allocated
in the 1994 budget to the so called invisibles account
(including remittances for services and other nonmerchandise
transfers).  This amount can largely be absorbed in meeting
remittance needs of the international airlines alone.  The
result has been a de facto clampdown on the repatriation of
corporate profits.
3.  Structural Policies
    As stated in the December 1989 circular, "Industrial Policy
of Nigeria," the government maintains a system of tax
incentives to foster the development of particular industries,
to encourage firms to locate in economically disadvantaged
areas, to promote research and development in Nigeria, and to
favor the use of domestic labor and raw materials.  The
Industrial Development (Income Tax Relief) Act of 1971 provides
incentives to "pioneer" industries, that is, industries deemed
beneficial to Nigeria's economic development.  Companies given
"pioneer" status may enjoy a nonrenewable tax holiday of five
years, or seven years if the pioneer industry is located in an
economically disadvantaged area.
    In December 1989 the government liberalized the Nigerian
Enterprises Promotion Decree to allow 100 percent foreign
equity ownership of Nigerian businesses in certain cases.  The
rule applies to new investments only and is not retroactive.
The government also allowed foreign firms to invest in the 40
lines of business normally reserved for 100 percent Nigerian
ownership if they invest a minimum of 20 million naira (about
$900,000 at the current official exchange rate).  Reserved
sectors include:  advertising and public relations, commercial
transportation, travel services, and most of the wholesale and
retail trade.  The list of reserved sectors is one factor that
has prevented the conclusion of a bilateral investment treaty
between Nigeria and the United States.  Banking, insurance,
petroleum prospecting, and mining continue in almost all cases
to require 60 percent Nigerian ownership.
4.  Debt Management Policies
    Nigeria's foreiqn debt ballooned from $13 billion in 1981
to $24 billion in 1986, when sharply lower oil revenues and
continued high import levels created large balance of payments
deficits.  By the end of 1993, total external debt (not
including arrears) had reached $28.7 billion, more than
Nigeria's entire GDP.  Debt service due is projected to be four
to five billion dollars annually for the next several years.
    In January 1992, in an effort to reduce its external stock
of debt, the Nigerian government concluded an agreement with
the London Club which gave commercial banks a menu of options
from which to choose in reducing Nigeria's commercial debt.
The menu included debt buy-backs (at 40 cents on the dollar),
new money bonds, and collateralized par bonds.  As a result of
the agreement, Nigeria was able to reduce its external debt by
$3.9 billion, but the accumulation of arrears on other debt
since that time has brought external debt back to previous
levels.  Including arrears, official foreign obligations
exceeded $30 billion as of October 1994.
    During the period 1986 to early 1992, Nigeria reached three
standby agreements with the IMF.  The most recent agreement was
approved in January 1991 and expired in April 1992.  Talks with
the IMF since then have failed to result in a new agreement.
    Nigeria's most recent rescheduling agreement with the Paris
Club expired at the same time as its standby agreement with the
IMF, and debt repayment obligations have grown significantly.
Nigeria's record on debt repayment, meanwhile, has also
deteriorated.  In 1992, Nigeria made debt service payments of
$2.7 billion, against interest and principal payment
obligations of $5 billion.  Faced with similar obligations in
1993, external debt service payments were only $1.6 billion and
the budgeted debt service payments for 1994 are $1.8 billion.
5.  Significant Barriers to U.S. Exports
    Nigeria abolished all import licensing requirements and cut
its list of banned imports in 1986.  As of October 1994, the
importation of approximately 20 different items is banned,
principally agricultural items and textiles.  These bans were
initially implemented to restore Nigeria's agricultural sector
and to conserve foreign exchange.  Although the bans are
compromised by widespread smuggling, the reduced availability
of grains has raised prices for both banned commodities and
locally produced substitutes.
    U.S. products are also hampered by high tariffs as
follows:  sorghum, 100 percent; cigarettes, 200 percent;
cotton, 60 percent; wheat, previously banned and now taxed at
10 percent; and passenger vehicles, from 30 to 100 percent.
Other import restrictions apply to aircraft and ocean-going
vessels.  Guidelines mandate that all imported aircraft and
ocean-going vessels shall be inspected by a government
authorized inspection agent. In addition, performance bonds and
offshore guarantees must be arranged before down payments or
subsequent payments are authorized by the Ministry of Finance.
    Nigeria requires that an international inspection service
certify the price, quantity and quality before shipment for all
private sector imports.  All containerized shipments
irrespective of value and all goods exported to Nigeria with a
cost, insurance, and freight (CIF) value greater than $1,000
are subject to preshipment inspection.
    An expatriate quota system is in place, and government
approval is required for residency permits for expatriates
occupying positions in local companies.  The number of
expatriate positions approved is dependent on the level of
capital investment, with additional expatriate positions
considered on a case by case basis.  In the past, this system
has caused relatively few problems, but in 1994 U.S. firms
reported increasing difficulties in securing and renewing the
necessary permits.
    Nigeria generally uses an open tender system for awarding
government contracts, and foreign companies incorporated in
Nigeria receive national treatment.  Approximately five percent
of all government procurement contracts are awarded to U.S.
companies.  Nigeria is not a signatory to the General Agreement
on Tariffs and Trade (GATT) Government Procurement Code.
6.  Export Subsidy Policies
    In 1976, the government established the Nigerian Export
Promotion Council (NEPC) to encourage development of nonoil
exports from Nigeria.  The council administers various
incentive programs including a duty drawback program, the
Export Development Fund, tax relief and capital assets
depreciation allowances, and a foreign currency retention
program.  The duty drawback or manufacturing-in-bond program is
designed to allow the duty free importation of raw materials to
produce goods for export, contingent on the issuance of a
bank-guaranteed bond.  The performance bond is discharged upon
evidence of exportation and repatriation of foreign exchange.
Though meant to promote industry and exportation, these schemes
have been burdened by inefficient administration, confusion,
and corruption, causing difficulty and, in some cases, losses
to those manufacturers and exporters who opted to use them.
    The NEPC also administers the Export Expansion Program, a
fund which provides grants to exporters of manufactured and
semi-manufactured products.  Grants are awarded on the basis of
the value of goods exported, and the only requirement for
participation is that the export proceeds be repatriated to
Nigeria.  Though the grant amounts are small, ranging from two
to five percent of total export value, they appear to be
subsidies as designated by GATT, and may violate GATT rules.
7.  Protection of U.S. Intellectual Property
    Nigeria is a signatory to the Universal Copyright
Convention (UCC) and the Paris Convention.  In 1993, Nigeria
became a member of the World Intellectual Property Organization
(WIPO).  Cases involving infringement of non-Nigerian
copyrights have been successfully prosecuted in Nigeria,
but enforcement of existing laws remains weak, particularly in
the patent and trademark areas.  Despite active participation
in international conventions and the apparent interest of the
government in intellectual property rights issues, little has
been done to stop the widespread production and sale of pirated
tapes, videos, computer software and books in Nigeria.
    The Patents and Design Decree of 1970 governs the
registration of patents.  Once conferred, a patent gives the
patentee the exclusive right to make, import, sell, or use the
products or apply the process.  The Trade Marks Act of 1965
governs the registration of trademarks.  Registering a
trademark gives its holder the exclusive right to use the
registered mark for a particular good or class of goods.
    The Copyright Decree of 1988, based on WIPO standards and
U.S. copyright law, currently makes counterfeiting, exporting,
importing, reproducing, exhibiting, performing, or selling any
work without the permission of the copyright owner a criminal
offense.  Progress on enforcing the 1988 law has been slow. The
expense and length of time necessary to pursue a copyright
infringement case to its conclusion are detriments to the
prosecution of such cases.
    In the past, few companies have bothered to secure
trademark or patent protection in Nigeria because it is
generally considered ineffective.  Losses from poor
intellectual property rights protection are substantial,
although the exact cost is difficult to estimate.  The majority
of the sound recordings sold in Nigeria are pirated copies and
the entire video industry is based on the sale and rental of
pirated tapes.  Satellite signal piracy is also common.
8.  Worker Rights
    a.  The Right of Association
    Nigerian workers, except members of the armed forces and
employees designated essential by the government, may join
trade unions.  Essential employees include, firefighters,
police, employees of the Central Bank, the security printers
(printers of currency, passports, and government forms) and
customs and excise staff.  However, unlike many other countries
with Essential Services Acts, utilities, the national airline,
public sector enterprises and the post office are not
considered essential services, are unionized, and may strike.
In May 1993 the government promulgated the Teaching Essential
Services Decree, declaring education an essential service and
calling for the dismissal of teachers who participate in a
strike longer than one week in duration.  Attempts to enforce
the decree proved unworkable, and it was subsequently
withdrawn.  Under Nigerian labor law, any nonagricultural
enterprise which has more than 50 employees is obliged to
recognize trade unions and must pay dues or deduct a checkoff
for employees who are members.
    The government has decreed a single central labor body, the
National Labor Congress (NLC), and deregistered other unions.
On August 24, 1994 the government dismissed the executives of
the NLC, and the two leading petroleum sector unions and
appointed "administrators" to run them.  It has attempted to
prevent withholding dues from oil industry union members'
paychecks.
    b.  The Right to Organize and Bargain Collectively
    The labor laws of Nigeria permit the right to organize and
the right to bargain collectively between management and trade
unions.  Collective bargaining is, in fact, common in many
sectors of the economy.  Nigerian labor law further protects
workers against retaliation by employers for labor activity
through an independent arm of the judiciary, the Nigerian
Industrial Court, which handles complaints of antiunion
discrimination.  The NLC has complained, however, that the
judicial system's slow handling of labor cases constitutes a
denial of redress to those with legitimate complaints.  The
government retains broad authority over labor matters, and can
intervene forcefully in labor disputes which it feels
contravene its essential political or economic programs.
    c.  Prohibition of Forced or Compulsory Labor
    Nigeria's 1989 Constitution prohibits forced or compulsory
labor, and this prohibition is generally observed.  However, on
August 24, 1994 the government promulgated the State Security
(Detention of Persons Amendment) Decree, number 11.  This
supercedes an earlier decree which allowed persons to be
detained for successive periods of six weeks without charge and
now allows for persons to be detained for periods of up to
three months without charge.  The International Labor
Organization (ILO) has noted that with the 1989 Constitution
suspended and Decree 11 in effect, Nigeria may not be able to
enforce the ILO convention against forced labor in the absence
of constitutional guarantees.
    d.  Minimum Age of Employment of Children
    Nigeria's 1974 Labor Decree prohibits employment of
children under 15 years of age in commerce and industry and
restricts other child labor to home-based agricultural or
domestic work.  The law further stipulates that no person under
the age of 16 may be required to work for longer than four
consecutive hours or permitted to work for more than eight
hours in one day.  The Labor Decree allows the apprenticeship
of youths age 13 to 15 under specific conditions.
Apprenticeship exists in a wide range of crafts, trades, and
state enterprises.  Service of apprentices over the age of 15
is not specifically regulated by the government.  Primary
education is compulsory in Nigeria though the law is only
sporadically enforced, particularly in rural areas where most
Nigerians reside.
    e.  Acceptable Conditions of Work
    Nigeria's 1974 Labor Decree established a 40-hour workweek,
prescribed two to four weeks of annual leave, and set a minimum
wage.  The last government review of the minimum wage,
undertaken in 1991, raised the monthly minimum wage from 250
naira ($11.36) to 450 naira ($20.45).  Nigerian labor law
stipulates that workers are to be paid extra for hours worked
over the legal limit.  The code also states that workers who
work on Sundays and statutory public holidays must be paid a
full day's pay in addition to their normal wages.  There is no
law prohibiting excessive compulsory overtime.  A 1974 labor
decree contains general health and safety provisions.
Employers must compensate injured workers and dependent
survivors of those killed in industrial accidents.
    f.  Rights in Sectors with U.S. Investment
    Worker rights in petroleum, chemicals and related products,
primary and fabricated metals, machinery, electric and
electronic equipment, transportation equipment, and other
manufacturing sectors are not significantly different from
those in other major sectors of the economy.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                             (1)
Total Manufacturing                                    50
  Food & Kindred Products                   (1)
  Chemicals and Allied Products              15
  Metals, Primary & Fabricated                2
  Machinery, except Electrical                0
  Electric & Electronic Equipment             2
  Transportation Equipment                  (1)
  Other Manufacturing                         1
Wholesale Trade                                       (1)
Banking                                               (1)
Finance and Insurance                                   2
Services                                                5
Other Industries                                        0
TOTAL ALL INDUSTRIES                                  527
(1) Suppressed to avoid disclosing data of individual companies
Source: U.S. Department of Commerce, Bureau of Economic Analysis
NORWAY1
/D/DU.S. DEPARTMENT OF STATE
NORWAY: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                              NORWAY
                     Key Economic Indicators
        (Millions of U.S. dollars unless otherwise noted)
                                     1992      1993      1994 1/
Income, Production and Employment:
Real GDP (1991 prices)            109,542   112,074   117,229
Real GDP Growth (pct.)                3.4       2.3       4.6
GDP (at current prices)           113,197   103,478   109,300
By Sector:  (1991 prices) 2/
  Agriculture/Forestry/Fishing      3,066     3,113     3,439
  Energy/Shipping                  25,069    25,948    27,994
  Manufacturing/Mining             14,815    15,057    15,358
  Construction                      3,812     3,695     3,880
  Dwellings                         5,243     5,295     5,417
  Financial Services                4,216     4,233     4,403
  Other Services                   35,430    36,185    37,484
  Government/Health/Education      17,890    18,383    19,141
Net Exports of Goods and Services   8,233     7,024     6,629
Real Per Capita GDP ($, 1991 base) 25,535    25,961    26,986
Labor Force (000s)                  2,130     2,131     2,145
Unemployment Rate (pct.)              5.9       6.0       5.5
Money and Prices:
Money Supply (M2) (pct. ch.)          7.3       0.5       5.0
Base Interest Rate /3 (pct.)         12.6       6.8       7.0
Personal Savings Rate (pct.)          5.2       5.3       4.3
Producer Prices (pct. ch.)           -0.4      -1.0       1.6
Prices (pct. ch.)                     2.3       2.3       1.3
Exchange Rate (NOK/USD)              6.21      7.09      7.00
Balance of Payments and Trade:
Total Exports (FOB)                35,376    32,136    33,971
  Exports to U.S. 4/                1,782     1,901     2,243
Total Imports (CIF)                26,793    24,930    27,800
  Imports from U.S. 4/              2,225     1,889     2,286
Aid from U.S.                           0         0         0
Aid from Other Countries                0         0         0
External Public Debt                8,552     9,789    12,335
Debt Service Payments (paid) 5/       454       448       437
Gold and Foreign Exch. Reserves    13,606    21,813    20,000
Trade Balance                       8,583     7,206     6,171
  Balance with U.S. 4/               -443        12       -43
1/ 1994 Figures are all estimates based on monthly data in
October 1994.
2/ Only available at constant 1991 prices.
3/ Central Bank overnight lending rate; not annual pct. growth.
4/ Norwegian foreign trade statistics.  Exports exclude
Norwegian oil shipped to the U.S. from U.K. terminals.
5/ Principal payments.
1.  General Policy Framework
    Oil, gas, and hydroelectric energy dominate Norway's
resource base, with no major changes expected in the next two
decades.  On the Norwegian continental shelf, the country has
crude oil reserves sufficient to last over 20 years and enough
natural gas to last nearly 100 years.  On the mainland, the
availability of abundant hydropower supports energy-intensive
industries such as metals and fertilizers.
    Norway has less than 5 million inhabitants.  A highly
centralized collective bargaining process and a restrictive
immigration policy limit its flexibility in increasing
industrial competitiveness.
    The petroleum sector and associated service industries will
likely remain the engine of economic growth for the next
several decades.
    Energy-intensive manufacturing industries will also remain
prominent.  Several inefficient sectors, including agriculture,
survive largely through generous subsidies and protection from
international competition.  These will likely experience a
painful period of adjustment in the years ahead as the
government adapts to provisions of the Uruguay Round trade
agreement and to the emerging EU single market.
    Norway and the other EFTA countries have concluded a free
trade agreement with the EU - the European Economic Area (EEA)
Accord - which came into effect on January 1, 1994.  Norway
concluded an EU accession accord on March 16, 1994, but in a
referendum held on November 28, Norway rejected EU membership.
    State intervention in the economy is significant.  The two
dominant industrial groups--Statoil and Norsk Hydro--are state
controlled, and the state retains majority stakes in Norway's
top three commercial banks.  Moreover, restrictions remain on
foreign ownership of Norwegian industry, including financial
institutions.  However, the EEA accord requires Norway to put
in place new foreign investment legislation granting national
treatment to EEA member states by January 1, 1995 at the
latest.  Policies vis-a-vis countries outside the EEA will
likely continue to be governed by reciprocity and by bilateral
or multilateral agreement.
    On budgetary matters, the government's dependence on
petroleum revenue has increased substantially over the past
decade.  On the budget's expenditure side, the most significant
development has been a rise in subsidies and social programs,
financed by petroleum revenues.  In 1986 budgetary pressures
increased because of slumping oil prices, and the subsequent
recession prompted stimulatory fiscal policy.  Despite the
rebound in world oil prices, the budget deficit increased
significantly between 1986 and 1993.  The budget deficit is
expected to narrow through 1994 and 1995 because of the impact
of economic growth and spending restraint.
    No general tax incentives exist to promote investment,
although tax credits and government grants are offered to
encourage investment in northern Norway.  Several specialized
state banks (e.g., the state agriculture and fisheries banks)
provide subsidized loans to industry.  Accelerated depreciation
allowances and subsidized power are also available to industry.
    The Government of Norway controls the growth of the money
supply through reserve requirements imposed on banks, open
market operations, and variations in the Central Bank overnight
lending rate.  Since the government strives to maintain a
stable exchange rate, its ability to use the money supply as an
independent policy instrument is weakened.
2.  Exchange Rate Policy
    On December 10, 1992, Norway unpegged the krone from the
ECU and let the Norwegian currency float.  Since then, the
krone has weakened over 10 percent vis-a-vis the U.S. dollar.
Norway plans to return to a "fixed" exchange rate regime at a
future date yet to be decided.
    As noted, Norway strives to maintain a stable exchange
rate.  Norway is not a member of the European Monetary System,
but in 1990 the Norwegian krone (NOK) was pegged to the
European Currency Unit (ECU).  Prior to this move, the NOK was
pegged to a trade-weighted basket of currencies in which the
weight of the U.S. dollar accounted for 11 percent.  The ECU
peg broke the direct link between the NOK and the U.S. dollar.
Under the ECU peg, Norwegian interest rates and inflation
tended to move toward EU levels.
    Norway dismantled most remaining foreign exchange controls
in 1990. U.S. companies operating here have never reported
problems to the U.S. Embassy in remitting payments.
3.  Structural Policies
    Norway remains highly dependent on its offshore oil and gas
sector. Many parts of the mainland economy are protected and
inefficient, although some structural reforms have been
implemented in the past five years.  Quantitative restrictions
on credit flows from private financial institutions were
abolished in 1987 and 1988 and, as noted above, most foreign
exchange controls were dismantled in 1990.
    A revised legal framework for the functioning of the
financial system was adopted in 1988, strengthening competitive
forces in the market and bringing capital adequacy ratios more
in line with those abroad.  Further reform occurred when Norway
accepted the EU's banking directives as part of its membership
in the EEA.  The Norwegian banking industry continues to
struggle with bad loan portfolios and overstaffing, although
they have returned to profitability in 1994.
    Over the past five years, limited income tax reform has
lowered personal income tax rates but broadened the tax base.
Although modest progress has been made in reducing subsidies to
Norwegian industry, Norway's farm sector remains the most
heavily subsidized in the OECD.  Norwegian subsidies and
nontariff barriers (e.g., quotas; the Norwegian alcohol and
grain monopolies) adversely affect U.S. farm exports.
    Norway has taken some steps to deregulate the service
sector. However, large parts of the transportation and
telecommunications markets remain subject to restrictive
regulations, including statutory barriers to entry.  Looking
ahead, the GON remains committed to an ambitious structural
reform program which may gradually improve U.S. market access,
but progress will likely be slow for political reasons.
4.  Debt Management Policies
    Norway has embraced a cautious foreign debt policy to limit
the state's exposure in foreign markets.  At the end of 1993,
the government's gross external debt (foreign liabilities)
stood at about $10 billion, but its external debt will likely
fall significantly through 1994 and 1995 because of reduced
government budget deficits.  Norway's total net foreign debt
(foreign liabilities less foreign assets), which was $6.5
billion in June 1994, is expected to evaporate in the 1994-96
period because of continuing balance of payments surpluses and
falling government budget deficits.
    Since 1990, the government has allowed the private sector
increased access to long-term foreign capital markets to
facilitate improvements in the term structure of its foreign
debt.  Following the floating of the NOK, foreign capital
inflows contributed to falling Norwegian interest rates.
5.  Significant Barriers to U.S. Exports
    Norway supports the principles of free trade and is quick
to condemn protectionist measures of other countries.  In
general, U.S. exporters experience few problems doing business
in Norway but some areas of tension exist.  While Norway is in
the process of reforming its agricultural support regime,
quantitative import restrictions and producer subsidies
adversely affect U.S. farm exports, as noted earlier.  With
Norway's approval of the Uruguay Round trade agreement, these
agricultural restrictions will be tarrified and gradually
reduced.  Due to the substantial GON ownership of major
Norwegian companies and the GON organization of business
groups, American companies that have a Norwegian subsidiary or
agent/distributor are able to operate in this market much more
effectively.
    The U.S. has in the past won two GATT panel determinations
showing that Norway had acted in a manner inconsistent with its
GATT obligations in the area of public procurement when it
discriminated against U.S. companies in the procurement of
electronic toll ring systems around Oslo and Trondheim.  On
November 27, 1992, Norway adopted new public procurement
legislation which made rules more transparent.  Nonetheless,
the directives governing the so-called excluded sectors (e.g.,
energy; transportation and communication) raise competition
issues.  On July 1, 1994, Norway adopted new regulations for
public procurement of services in order to comply with the
EEA accord.  According to these regulations, all services
procurements exceeding NOK 1.6 million (USD 235,000) are now
subject to international bidding and the granting of contracts
is to be based on nondiscriminatory criteria.
    The U.S. would like Norway to liberalize its procedures for
regulating telecommunications terminal equipment.  The
Norwegian Telecommunications Regulatory Authority (a separate
regulatory body under the auspices of the Ministry of
Transportation and Communications) has said it has improved the
speed and efficiency with which it approves telecommunications
devices used in Norway.  American companies without European
production facilities, however, report that it still takes up
to six months and significant fees to a Norwegian agent to
certify telecommunications equipment not used in large-scale
GON purchases.
    The Government of Norway is in the process of liberalizing
its telecommunications industry, although the country is
already relatively open to purchasing U.S. telecommunications
equipment and services.  GON control of this field, however, is
still maintained by majority Norwegian ownership as noted above.
    Recent deregulation of financial markets appears to have
eliminated many of the barriers facing U.S. financial
institutions which seek to operate in the Norwegian market.
U.S. financial firms can establish subsidiaries in Norway, but
cannot establish branches.
    Norway maintains reservations to the OECD Code of
Liberalization of Capital Movements with regard to inward
direct investment.  Foreign ownership in Norwegian corporations
remains restricted, and proposed acquisitions are reviewed on a
case-by-case basis.  Norway can expect to gradually liberalize
these regulations as it brings its national laws into
compliance with the EEA.
6.  Export Subsidy Policies
    As a general rule the Government of Norway does not
subsidize exports, although some heavily subsidized products
may be exported.  Dairy products fall into this category.
Indirectly, the government supports the export of chemicals and
metals by subsidizing the electricity costs of manufacturers.
In addition, the government provides funds to Norwegian
companies for export promotion purposes.
7.  Protection of U.S. Intellectual Property
    The impact of Norwegian intellectual property (IPR)
practices on U.S. trade is negligible. Norway is a signatory of
the main IPR accords, including the Bern and Universal
Copyright Conventions, the Paris Convention for the Protection
of Industrial Property, and the Patent Cooperation Treaty.
    Norwegian officials believe that counterfeiting and piracy
are the most important aspects of intellectual property rights
protection. They complain of the unauthorized reproduction of
furniture and appliance designs and the sale of the resultant
goods in other countries, with no compensation to the Norwegian
innovator.
    Product patents for pharmaceuticals became available in
Norway in January 1992.  Previously, only process patent
protection was provided to pharmaceuticals.
8.  Worker Rights
    a.  The Right of Association
    Workers have the right to associate freely and to strike.
The government can invoke compulsory arbitration under certain
circumstances with the approval of parliament.
    b.  The Right to Organize and Bargain Collectively
    All workers, including government employees and the
military, have the right to organize and to bargain
collectively.  Labor legislation and practice is uniform
throughout Norway.
    c.  Prohibition of Forced or Compulsory Labor
    Forced labor is prohibited by law and does not exist.
    d.  Minimum Age for Employment of Children
    Children are not permitted to work full time before age
15.  Minimum age rules are observed in practice.
    e.  Acceptable Conditions of Work
    Ordinary working hours do not exceed 37.5 hours per week,
and 25 working days of paid leave are granted per year (31 for
those over 60).  There is no minimum wage in Norway, but wages
normally fall within a national wage scale negotiated by labor,
employers, and the government.  The Workers' Protection and
Working Environment Act of 1977 assures all workers safe and
physically acceptable working conditions.
    f.  Rights in Sectors with U.S. Investment
    Norway has a tradition of protecting worker rights in all
industries, and sectors where there is heavy U.S. investment
are no exception.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                             3,136
Total Manufacturing                                     584
  Food & Kindred Products                   (1)
  Chemicals and Allied Products             (1)
  Metals, Primary & Fabricated                2
  Machinery, except Electrical               10
  Electric & Electronic Equipment            -2
  Transportation Equipment                    0
  Other Manufacturing                        53
Wholesale Trade                                         200
Banking                                                  85
Finance/Insurance/Real Estate                           141
Services                                                 29
Other Industries                                        179
TOTAL ALL INDUSTRIES                                  4,353
(1) Suppressed to avoid disclosing data of individual companies
Source: U.S. Department of Commerce, Bureau of Economic Analysis
(###)
OMAN1
JU.S. DEPARTMENT OF STATE
OMAN: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                               OMAN
                     Key Economic Indicators
        (Millions of U.S. dollars unless otherwise noted)
                                      1992      1993    1994  /1
Income, Production and Employment:
Real GDP (1988 prices)             8,563.1       N/A      N/A
Real GDP Growth (pct.)                -9.0       N/A      N/A
GDP (at current prices)           11,496.7  11,491.2      N/A
By Sector:
  Petroleum                        4,733.3   4,193.8   2,082.9
  Natural Gas                        142.0     157.6      75.7
  Mining                              16.1       8.8       9.9
  Oil Refining                        53.3      99.9      43.2
  Electricity/Water                  175.5     149.2      85.5
  Construction                       471.4     489.1     182.8
  Wholesale/Retail Trade           1,601.3   1,728.4     892.1
  Government Services              2,008.5   2,181.1     982.0
  Other Sectors                    2,418.5   2,625.0   1,536.9
  Less-Imputed Bank Charges         -247.5    -254.8    -162.8
Real Per Capita GDP (1988 base)    6,044.7   5,943.5      N/A
Labor Force (000s)                   530.0     521.3      N/A
Unemployment Rate (pct.)               N/A       N/A      N/A
Money and Prices:  (annual percentage growth)
Money Supply (M2)                  3,312.7   3,420.3      N/A
Weighted Average Interest
  Rate on Deposits                     4.2       2.9      N/A
Personal Saving Rate                   N/A       N/A      N/A
Consumer Price Inflation               1.4       1.9      N/A
Consumer Price Index (1990 base)     105.6     106.6      N/A
Exchange Rate                     1 rial equals USD 2.60
Balance of Payments and Trade:
Total Exports (FOB)                5,449.6   5,298.0  2,056.3  4/
  Exports to U.S. (non-oil)           26.4      42.1      N/A
Total Imports (CIF)                3,900.0   4,112.9  1,596.7  4/
  Imports from U.S.                  256.9     331.8      N/A
Aid from U.S.                         30.0       1.6      0.2
Aid from Other Countries              72.7       N/A      N/A
External Public Debt                   N/A       N/A      N/A
Debt Service Payments                  N/A       N/A      N/A
Gold and FOREX Reserves  /2        2,334.5   1,813.4      N/A
Trade Balance                      1,549.6   1,185.1      N/A
  Trade Balance with U.S.  /3        230.5     289.7      N/A
N/A--Not available.
1/ Unless otherwise indicated, all 1994 figures are for the
first six months only.
2/ Gold and foreign currency are Central Bank reserves.  State
general reserve fund figures are not publicly available.
3/ The trade balance with the U.S. does not include Omani oil
purchased by the U.S. on the spot market.  No oil is purchased
directly from Oman by U.S. companies.
4/ Figures through May.
Sources:  Annual Report-1993, Central Bank of Oman; monthly
statistical bulletins-main economic and social indicators,
Ministry of Development.
1.  General Policy Framework
    The Sultanate of Oman is a small nation of just over 2.0
million people (537,000 expatriates) living in the arid
mountains and desert plain of the southeastern Arabian
Peninsula.  Oil production is the foundation of the economy.
Oman is a small oil producer and its economy moves in lockstep
with the world price of oil.  When the price of oil falls,
Oman's oil revenues and government spending swiftly follow.
Although Oman has a per capita GDP of just under USD 6,000, a
significant proportion of its population lives in rural
poverty.  Oman and the United States have had diplomatic
relations for 150 years and commercial relations for even
longer.
    Sources of government income are relatively few in Oman.  A
corporate income tax has long been collected from companies
which are not 100 percent Omani-owned.  There is a corporate
income tax applicable to Omani-owned firms which has not been
implemented.  In 1993, however, the government proposed a
graduated system of taxes which applies to Omani-owned
companies.  There is no personal income tax nor are there
property taxes.  The most significant sources of income besides
oil revenues are the 5 to 20 percent tariffs levied on imports,
revenues from utilities, and revenues from the 100 percent
tariff on tobacco, liquor and pork.  Recently, the government
imposed substantial increases in the fees for labor cards and
fines were proposed for companies which do not reach specified
levels of "Omanization" by the end of 1996.  There is also a
tax on companies which employ expatriates which is used for
vocational training for Omanis.
    The 1993 budget deficit stood at 28 percent of net
government revenues due to weak oil prices and resulting
slowdown in revenues combined with only a 1.0 percent cut in
spending.  The government financed the shortfall by drawing
down reserves and issuing development bonds, which were first
sold in August 1991.  At least 34 percent of Oman's budget is
spent on defense and security, 35 percent on the activities of
the civil ministries and 22 percent on capital spending
projects.
    Oman promotes private investment through a variety of soft
loans (through three specialized development banks) and
subsidies, mostly to industrial and agricultural ventures.
    The government also grants five year tax holidays to
newly-established industries, with the possibility of an
additional five year holiday.  Incentive programs focus on
creating Omani investments.  Access by foreigners to the Omani
economy is generally through Omani agents or partners, although
restrictions on asset ownership are decreasing.  Fellow
nationals of the Gulf Cooperation Council (GCC) states can now
invest in Oman.  Oman and Bahrain are exchanging listings on
their respective stock exchanges.  In addition, a new
investment mutual fund has been established allowing non-GCC
nationals to buy Omani shares, at least indirectly through the
mutual fund.
    Oman's economy is too small to require a complicated
monetary policy.  The Central Bank of Oman directly regulates
the flow of currency into the economy.  The most important
instruments which the bank uses are reserve requirements, loan
to deposit ratios, treasury bills, rediscount policies,
currency swaps and interest rate ceilings on deposits and
loans.  Such tools are used to regulate the commercial banks,
provide foreign exchange and raise revenue, not as a means to
control the money supply.  Oman has no legal provision for
using government bonds to regulate the money supply.  The large
amount of money sent home by expatriate workers in the country
and by foreign companies in Oman helps ease monetary pressures.
2.  Exchange Rate Policies
    The rial is pegged to the U.S. dollar at a value of one
rial to USD 2.60.  Oman last devalued the rial in 1986.
3.  Structural Policies
    Oman operates a free-market economy, but the government is
the most important economic actor, both in terms of employment
and as a purchaser of goods and services.  Contracts to provide
goods and services to the government, including the two largest
purchasers, the National Oil Company and the Defense Ministry,
are on the basis of open tenders overseen by a tender board.
Private sector purchases of goods and services are made free
from government involvement, although for most private firms,
the government is the main client.  Oman has fairly rigid
health and safety and environmental standards (mostly British
origin), but these are enforced inconsistently.
    Wholly Omani-owned companies now face taxes on profits, but
at a low rate, giving them a clear advantage over companies
with substantial foreign ownership.  Firms which are 100
percent foreign-owned (international banks or other services)
are taxed at the highest rates.  For firms which are less than
51 percent Omani-owned, the tax schedule is higher than for
firms with 51 percent or more Omani ownership.
    A recent development in Oman is an increasing reliance on
privatization.  Companies currently owned by the government are
being privatized partially or completely.  In addition, new
major projects are being designed with a significant private
sector component.
4.  Debt Management Policies
    Oman's sovereign debt is estimated at USD 2.9 billion.  So
far, the debt is easily managed and is owed to a consortium of
international banks.  The consortium has no difficulty in
finding buyers of this debt.  There are no International
Monetary Fund or World Bank adjustment programs and there is no
rescheduling of official or commercial government debt.  Oman
gives little publicity to the foreign aid that it donates.  In
1993, modest aid packages went to Bosnia and Somalia.
5.  Significant Barriers to U.S. Exports
    A license is required for all imports to Oman.  Special
licenses are required to import pharmaceuticals, liquor and
defense equipment.  The licenses for general merchandise are
issued to the sole agents of individual products in order to
protect the exclusivity of the relationship.  Once entered
into, the agency agreements are difficult to break.  This may
cause problems for exporters who enter into agency agreements
without fully judging the qualifications of the agent.  For
instance, some local agents will not have strengths in all the
markets that a U.S. firm may want to tap.  Because the
agreements are hard to break, a firm dissatisfied with its
agent may be forced to endure a prolonged dissolution of the
agency relationship or withdraw from the market completely.
    There has, however, been one recent change affecting agency
agreements.  Individuals are now allowed to bring in goods
through the ports or airports without paying the agent's
commission.  This, however, is a policy more designed to
promote activity at the ports and airports than an attempt to
change fundamentally the agency requirements.
    Service barriers consist of simple prohibitions on entering
the market.  For example, entry by new firms in the areas of
banking, accountancy, law and insurance is not permitted.
    Oman uses a mix of standards and specifications systems.
Generally, GCC standards are adopted and used.  However,
because of the long history of trade relations with Great
Britain, British standards have also been adopted for many
items.  Oman is a member of the International Standards
Organization and applies standards recommended by that
organization.  U.S. firms sometimes have trouble meeting
dual-language labelling requirements or, because of long
shipping periods, complying with shelf-life requirements.
    With few exceptions, companies in Oman must be majority
Omani-owned, and foreign investment is allowed only through
joint stock companies or joint ventures.  In order to obtain a
waiver for more than 49 percent foreign ownership, a company
must petition the Minister of Commerce and Industry.  Even when
this privilege is granted, most foreign companies in Oman find
that their ownership is limited to 65 percent.  For foreigners
willing to invest in high-priority industries, such as food
processing, the government will provide subsidies and will
waive or reduce the usual requirements for majority Omani
ownership.  Use of foreign labor is permitted, but the
government demands that companies "Omanize" their work forces
as quickly as possible.  The government has recently set
minimum "Omanization" levels for many sectors of the economy
which must be achieved by the end of 1996.  Those companies
failing to meet those levels will have to pay a fine equal to
half the amount of the salaries being paid to the expatriates
who exceed the numbers permitted.
    Oman continues to promote "buy Oman" laws.  This is a slow
process as very few locally made goods meeting international
standards are available.  The tender board evaluates the bids
of Omani companies for products and services at 10 percent less
than the actual bid price.  In addition, the extremely short
lead times make it difficult to notify U.S. firms of trade and
investment possibilities which, in turn, makes it difficult for
those firms to obtain a local agent and prepare tender
documents in the alloted time.
    Oman's customs procedures are complex, and there are
complaints of unequal enforcement and sudden changes in the
enforcement of regulations.  Processing of shipments in and out
of the port can add significantly to the amount of time that it
takes to get goods to the market or inputs to a project.
6.  Export Subsidies Policies
    Oman's policies on development of light industry,
fisheries, and agriculture are geared to making those sectors
competitive internationally.  As noted above, investors in
those areas receive a full range of tax exemptions, utility
discounts, soft loans and, in some cases, tariff protection.
The government has also set up an export guarantee program
which both subsidizes the cost of export loans and guarantees
Omani exporters payment for exported products.  Oman is not yet
a member of the General Agreement on Tariffs and Trade (GATT)
but is considering joining.
7.  Protection of U.S. Intellectual Property
    Oman has a trademark law which the government enforces
actively.  Official registration of trademarks appear in most
issues of the Official Gazette.  Such application for trademark
protection, however, depends on whether the company has a local
agent.  There is no patent or copyright protection, although
draft laws on each are circulating through the Omani
government.  Oman is not a member of any major international
intellectual property protection conventions.  However, Oman
has shown an interest in other views and concerns on
intellectual property rights (IPR) issues.  A U.S. intellectual
property rights (IPR) delegation visited Oman in May 1992 and,
in early 1994, a World Intellectual Property Organization
(WIPO) team advised the Oman on its draft Copyright Law.
    In the past, there have been one or two cases of U.S. firms
refusing to do business with Omani companies because of the
lack of IPR protection.  The local audio and video cassette
markets are comprised almost exclusively of pirated copies.
Pirated versions of computer software are also available.
Nevertheless, local agents of foreign companies seek to limit
pirating when it cuts into their business marketing legitimate
products.  In terms of computer software, major companies and
government agencies buy only legitimate products.
8.  Worker Rights
    a.  The Right of Association
    Omani labor law does not presently address the formation of
labor unions.  Although Oman's labor law does not expressly
grant workers the right to strike, in practice, a few strikes
have occurred.  In 1994 Oman joined the International Labor
Organization and received a visiting ILO delegation in the fall
of 1994.  Legislation amending the labor law is currently under
review by the government which may liberalize regulations with
respect to the right of association which includes the right to
strike.
    b.  The Right to Organize and Bargain Collectively
    There are no provisions for collective bargaining for wages
and working conditions in Oman.  The 1973 labor law (as
amended) imposes a statutory obligation on employers with over
50 employees to propose the creation of a representative body
of worker and management representatives and to relay to the
Ministry of Social Affairs and Labor the proposed constitution
for the body.  Wages are set by employers within guidelines set
by the Ministry.  The labor law is a comprehensive document
defining conditions of employment for both Omanis and foreign
workers, who constitute 50 percent of the work force.  Work
rules must be approved by the Ministry and posted conspicuously
in the workplace.  Any employee, Omani or expatriate, may file
a grievance with the Labor Welfare Board.  The Board operates
impartially and generally gives workers the benefit of the
doubt in grievance hearings.  Disputes that the Board cannot
resolve go to the Minister of Social Affairs and Labor for
decision.
    c.  Prohibition of Forced or Compulsory Labor
    Forced or compulsory labor is prohibited by law.
    d.  Minimum Age of Employment of Children
    Under the law, children, defined as those under the age of
13, are prohibited from working.  Juveniles, defined as those
over 13 years and under 16 years of age, are prohibited from
performing evening or night work or strenuous labor.  Juveniles
are also forbidden to work overtime or on weekends or holidays
without Ministry permission.  Education is not compulsory, but
the government encourages school attendance.  More than 90
percent of eligible school age children enter primary school.
    e.  Acceptable Conditions of Work
    The labor law allows the government to set minimum wage
guidelines.  These guidelines do not cover domestic servants,
farmers, government employees, or workers in small businesses,
categories with many foreign workers.  The minimum wage is
sufficient to provide an Omani worker in the capital area with
a decent living with something left over for rural relatives.
The same applies to expatriate manual laborers or clerks who,
likewise, send money home.  The private sector workweek is
40 to 45 hours (less for Muslims during Ramadan).  The
workweek is five days in the public sector and generally
five and one-half days in the private sector.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                              (1)
Total Manufacturing                                     0
  Food & Kindred Products                   0
  Chemicals and Allied Products             0
  Metals, Primary & Fabricated              0
  Machinery, except Electrical              0
  Electric & Electronic Equipment           0
  Transportation Equipment                  0
  Other Manufacturing                       0
Wholesale Trade                                         0
Banking                                                (1)
Finance/Insurance/Real Estate                           3
Services                                                4
Other Industries                                        0
TOTAL ALL INDUSTRIES                                  123
(1) Suppressed to avoid disclosing data of individual companies
Source: U.S. Department of Commerce, Bureau of Economic
Analysis
(###)
PAKISTAN1
WGWGU.S. DEPARTMENT OF STATE
PAKISTAN: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                             PAKISTAN
                     Key Economic Indicators
        (Millions of U.S. dollars unless otherwise noted)
                                  FY1992    FY1993    FY1994 1/
Income, Production and Employment:
GDP (current prices)              49,044    51,813    52,877
Real GDP Growth (pct.)               7.7       2.3       4.0
GDP Share by Sector:  (pct.)
  Agriculture                       26.1      24.2      23.9
  Power/Gas Distribution             3.5       3.7       3.7
  Manufacturing                     17.8      18.3      18.6
  Construction                       4.1       4.2       4.2
  Services 2/                       48.0      49.1      49.1
  Rents                              N/A       N/A       N/A
  Financial Services                 N/A       N/A       N/A
  Government/Health/Education        N/A       N/A       N/A
Net Export of Goods & Services       N/A       N/A       N/A
Real GDP Per Capita (USD)            422       428       426
Labor Force (millions)             32.97     33.97     34.98
Unemployment Rate (pct.)            5.85      5.85      5.85
Money and Prices:
Money Supply (M2)                  4,525     3,345     3,088
Commercial Interest Rate (pct.) 3/  15.5      18.0      16.8
Saving Rate (pct. of GDP)           17.1      13.6      15.4
Investment Rate (pct. of GDP)       20.1      20.7      20.1
Retail Inflation
  (cpi - annual pct. change)
  12 month average basis             9.6       9.3      11.2
Wholesale Inflation
  (wpi - annual pct. change)
  12 month average basis             9.3       7.1      15.0
Exchange Rate (rupee/USD)
  Official (FY avg.)                24.7      25.9      29.4
  Parallel                          25.5      27.9      32.2
Balance of Payments and Trade:
Total Exports (FOB)                6,762     6,782     6,715
  Exports to U.S.                    891       948     1,003
Total Imports (FOB)                8,998    10,049     8,549
  Imports from U.S.                  977       942       931
Aid from U.S. 4/                      40        20         0
Aid from Other Countries           2,471     2,493     2,481
External Public Debt              18,384    20,810    22,761
Debt Service Payments 5/           2,199     2,332     2,285
Foreign Exch. Reserves (FY end)      952       461     2,305
Trade Balance                     -2,236    -3,267    -1,834
  Trade Balance with U.S.            -86         6        72
N/A--Not available.
1/ Pakistan's fiscal year (PFY) is July 1 - June 30.  PFY 1994
data covers period July 1, 1993-June 30, 1994.
2/ Includes banking, insurance, commerce, housing, storage,
transportation, communication and other services.
3/ Average annual interest rate on commercial bank loans to
private sector borrowers.
4/ Aid from U.S. in 1993 consisted exclusively of PL-480 funds.
5/ Excludes interest on short-term loans and IMF charges.
Source:  Pakistan Economic Survey 1993/94 and State Bank Report
1993/94.
1.  General Policy Framework
    Pakistan has been on a generally steady course toward
market liberalization and structural reform for the past five
years.  These efforts intensified in response to a
deteriorating financial situation which developed in 1992/93,
and as a result of the efforts of the interim government headed
by former Prime Minister Moeen Qureshi (July-October 1993).
Qureshi, an apolitical technocrat, pushed forward a number of
economically sound but politically difficult initiatives and
set a high standard for subsequent political governments.  A
three-year agreement concluded by the present government with
the International Monetary Fund (IMF) in early 1994 provides a
policy framework and economic targets that have helped the
Government of Pakistan (GOP) stay that course.
2.  Exchange Rate Policy
    The Pakistan rupee has been on a managed float since 1982;
the central bank regularly adjusts the value of the rupee
against a basket of major international currencies and uses the
U.S. dollar as an intervention currency to determine other
rates.  The black market in foreign exchange has largely
disappeared since private foreign exchange transactions are now
legally sanctioned.  There is an informal parallel market for
foreign exchange that is not illegal.  On this parallel market,
there is a modest premium for attractive foreign currencies;
the premium, which has decreased over the past year, generally
amounts to approximately an additional .7 to 1.5 rupees per
dollar (or roughly two to five percent).
    In 1993-94, the GOP removed several additional foreign
exchange restrictions.  Effective July 1, 1994, the rupee
became fully convertible on current account under IMF rules.
Exchange rate reforms instituted in 1991 had essentially
created convertibility on the capital account.  Exchange rate
policy under the managed float has contributed to an
improvement in Pakistan's trade performance.  Following a
two-stage devaluation totaling about nine percent in July 1993,
and a tightening of fiscal and monetary policy, the value of
the rupee has stabilized.  In a series of incremental
adjustments between late July 1993 (29.85 rupees to the dollar)
and late October 1994 (30.62 rupees), the rupee has depreciated
against the dollar by less than three percent.
3.  Structural Policies
    A succession of Pakistani governments over the past six
years has implemented structural reform policies which have
made the economy more free and market-oriented.  The two
principal political parties agree on the direction of economic
policy, and shifts in government have, consequently, had
remarkably little impact on the overall liberalizing trend.
    One principal element of structural reform has been trade
liberalization.  The GOP is now engaged in a sweeping tariff
reduction program to force domestic firms to improve their
competitiveness and take advantage of Uruguay Round benefits.
From the Pakistani perspective, the key aspect of the Uruguay
Round is the integration of textile trade into the GATT.  The
GOP is aware that, in order to benefit from global trade
liberalization, Pakistan must shift to tariffs in those
industrial sectors, especially textiles, which are now
protected by import bans or quotas.  The GOP is also reducing
the maximum "all inclusive" tariff rate from 92 percent in
1993-94 to 70 percent at the start of the 1994-95 fiscal year.
The maximum tariff rate is scheduled to be further reduced to
45 percent at the start of the 1995-96 fiscal year and to 35
percent one year later.
    A second pillar of structural reform has been the
dismantling of state control over key sectors of the economy
through privatization.  The GOP's role in the economy continues
to shrink.  In 1990, the public sector, which includes many
enterprises which were nationalized in the 1970s, accounted for
about 30 percent of value added in manufacturing.  As of
October 1994, the GOP has sold off nearly 80 of its original
list of 118 public industrial companies and plans to advertise
the remaining units over the next few months.
    The GOP is also in the process of identifying additional
units for privatization and encouraging private sector
participation in the power generation and distribution, mining,
utilities, insurance, banking, and airlines industries.  With
World Bank technical assistance, the government is setting up
regulatory bodies to permit privatization of various
utilities.  The GOP is proceeding with a phased divestiture of
Pakistan Telecommunications Corporation (PTC) and has already
sold the first tranche of PTC vouchers.  It is also moving
forward with plans to sell two thermal power plants and one
area electricity board as the first stage in the privatization
of the Water and Power Development Authority (WAPDA), which
provides over 80 percent of Pakistan's electricity.  Portions
of Pakistan's two natural gas distribution companies are also
slated for divestiture.
4.  Debt Management Policies
    Pakistan's foreign debt continues to increase and the
debt-service ratio is forecast to exceed 30 percent of export
earnings in 1995.  High fiscal and current account deficits
over the past several years were financed by a steady increase
in external debt, which reached $28 billion in 1993.  This debt
level was 16 percent higher than the previous year and entailed
a debt-service ratio of 27.3 percent of export earnings.
Pakistan has consistently met its debt service obligations in a
timely fashion, even during the foreign exchange crisis of July
1993, when foreign exchange reserves dipped to $185 million, or
just over one week's worth of imports.
5.  Significant Barriers to U.S. Exports
    Pakistan has traditionally maintained a complex system of
indirect taxes in the trade sector.  High basic tariffs,
additional surcharges, a variety of excise taxes, and a sales
tax, with different applicability on domestic and foreign
goods, combined to distort prices in domestic markets.  These
tariffs, established for protectionist reasons and to raise
revenue, had largely become counterproductive.  Many tariff
rates were so high that they served principally to stimulate
smuggling and corruption.  Revenue collections were similarly
undermined by many exemptions and concessions, both formal and
informal.
    Pakistan has significantly liberalized its restrictive
import regime by reducing tariffs and somewhat streamlining
import and export rules.  However, despite efforts to
streamline the import process, there continue to be complaints
about complex customs clearance practices, which slow entry of
goods and provide numerous opportunities for discretionary
decision-making by a variety of relatively low-level
bureaucrats.
6.  Export Subsidies Policies
    Pakistan seeks to encourage exports through rebates of
import duties, sales taxes, and income taxes, as well as
through concessional export financing.  The GOP has an export
processing zone (EPZ) scheme, under which industrial units
producing value-added items are exempt from payment of customs
duties, sales tax, and iqra (an Islamic education tax)
surcharge on imports, provided that the industrial unit exports
50 percent of the value of its production in the first two
years and 60 percent in the third year and beyond.  One EPZ, in
Karachi, is currently in operation.  These policies appear to
apply equally to both foreign and domestic firms producing
goods for export.  For many exports, Pakistan's nationalized
commercial banks offer financing at concessional rates.
7.  Protection of U.S. Intellectual Property
    Pakistan is a member of the World Intellectual Property
Organization (WIPO) and a party to two  major international
intellectual property rights conventions:  the Berne Convention
and the Universal Copyright Convention.  However, it is not a
party to any major conventions on patent protection.  While the
United States has a Treaty of Friendship and Commerce with
Pakistan which guarantees national and most-favored nation
(MFN) treatment for patents, trademarks and industrial
property, intellectual property rights enforcement in Pakistan
remains weak.
    Infringement on copyrights and trademarks and the lack of
coverage of product patent protection remain serious U.S.
concerns.  As such, in accordance with the intellectual
property rights provisions of the Omnibus Trade and
Competitiveness Act of 1988, Pakistan was placed on the Special
301 "watch list" in May 1989.  Since that time the United
States has continued to encourage Pakistan to extend laws
covering intellectual property protection and to provide
adequate enforcement.
    Copyrights:  U.S. firms have complained that, although
Pakistan is a member of the Universal Copyright Convention,
enforcement of its copyright law is ineffective and the
penalties for violation are not severe enough.  Videotape
piracy is widespread and of concern to U.S. firms which are
current or potential marketers of film videos in Pakistan.
Pakistan recently amended its copyright statute to strengthen
penalties for infringement of rights to printed texts, film
works, sound recordings, and computer software; however, there
has been little evidence of more vigorous enforcement.
    Patents:  Pakistan's patent law protects processes but not
products.  U.S. pharmaceutical companies have complained that
this regime makes it difficult to pursue infringement cases in
local courts.  The language of the statute permits applications
for compulsory licenses, although this seldom happens in
practice.  The United States has urged Pakistan to provide
product patent coverage and to amend its legislation to extend
the patent term and to restrict or abolish the procedure for
compulsory licensing.
8.  Worker Rights
    a.  The Right of Association
    The right of industrial workers to form trade unions is
enunciated in statute, but in practice there are significant
constraints on the formation of industrial unions and their
ability to function effectively.  Workers in EPZs are
prohibited from forming trade unions.  The Essential Services
Maintenance Act permits workers in government services and
state enterprises (including education, health care, oil and
gas production, and transport) to form unions, but restricts
some normal union activities, including the right to strike.
There is no provision in Pakistani law granting the right of
association to agricultural laborers.  Union members make up
only about 13 percent of the industrial labor force and 10
percent of the total labor force.
    b.  The Right to Organize and Bargain Collectively
    The right of industrial workers to organize and freely
elect representatives to act as collective bargaining agents is
established in law.  However, the right to bargain collectively
is limited to legally constituted unions and is therefore
constrained by the limitations on union formation described
above.  Collective bargaining occurs at the plant level.  The
Essential Services Act restricts collective bargaining and
where the government determines to bar collective bargaining,
individual wage boards (made up of industry, labor, and
government members) determine wage levels.
    c.  Prohibition of Forced or Compulsory Labor
    Forced labor is specifically prohibited by law and the
Pakistani Constitution.  However, bonded labor is reported to
be common in the brick, glass, and fishing industries and to be
found in rural construction and agricultural work.  The Bonded
Labor System (Abolition) Act, adopted in March 1992, outlawed
the bonded labor system, cancelled all existing bonded debts,
and forbade lawsuits for the recovery of existing bonded
debts.  However, the provinces have not yet developed a
credible enforcement system to implement this statute.
    d.  Minimum Age of Employment of Children
    Child labor is common and results from a combination of
severe poverty, weak laws, and inadequate enforcement.  A key
factor is the absence of compulsory primary education.  Child
labor is limited by at least four statutes and Article 11 of
the Pakistani Constitution.  The Employment of Children Act,
1991, defines a "child" as "a person who has not completed his
14th year of age", prohibits their employment in hazardous
industries, and generally limits the length of their workdays.
Although much child labor occurs in the traditional areas of
family farming or small business, it also occurs in larger
industries, such as carpet making.
    e.  Acceptable Conditions of Work
    Federal statutes govern labor regulations.  The current
monthly minimum wage is approximately $50 (1,500 rupees), but
an extensive list of exempted activities limit minimum wage
applicability to a minority of the work force.  Statutes
provide for a maximum workweek of 54 hours, rest periods, and
paid annual holidays, but exempt large segments of the labor
force.  Enforcement of labor regulations, a responsibility of
the provincial governments, has generally been ineffective.
Enforcement is hampered by limited resources, corruption, and
inadequate regulatory structures.  In general, worker health
and safety standards are poor, and little is being done to
improve them.
    f.  Rights in Sectors with U.S. Investment
    Sectors with U.S. investment are characterized by generally
better conditions and more free exercise of worker rights than
in other sectors.  These sectors tend to add greater value to
production and exclude sectors with particularly poor labor
records (brick kilns, carpet making, traditional agriculture,
and family-run small businesses).
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                              71
Total Manufacturing                                    28
  Food & Kindred Products                    2
  Chemicals and Allied Products             29
  Metals, Primary & Fabricated              -2
  Machinery, except Electrical               0
  Electric & Electronic Equipment            0
  Transportation Equipment                   0
  Other Manufacturing                        0
Wholesale Trade                                         3
Banking                                               152
Finance/Insurance/Real Estate                         (1)
Services                                                0
Other Industries                                        0
TOTAL ALL INDUSTRIES                                  254
(1) Less than $500,000
Source: U.S. Department of Commerce, Bureau of Economic
Analysis
(###)
PANAMA1
eU.S. DEPARTMENT OF STATE
PANAMA: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                             PANAMA
                     Key Economic Indicators
        (Millions of U.S. dollars unless otherwise noted)
                                   1992      1993 1/   1994 2/
Income, Production and Employment:
Real GDP (1985 prices)            5,477     5,801     6,091
Real GDP growth (pct.)              8.6       5.9       5.0
GDP (at current prices)           6,001     6,562     6,975
GDP Share by Sector:  (pct.)
  Agriculture/Forestry/Fisheries   10.6      10.1       9.8
  Manufacturing                     9.2       9.3       9.1
  Utilities                         3.2       3.2       3.2
  Construction                      5.1       6.7       7.7
  Commerce/Hotels/Restaurants      11.8      11.9      11.9
  Panama Canal                      9.2       8.6       8.4
  Oil Pipeline                      1.7       0.8       0.3
  Colon Free Zone                   8.1       8.6       9.0
  Transport/Communications          7.2       7.4       7.3
  Finanace/Insurance/Real Estate   14.6      14.9      15.4
  Government Services              11.7      10.8      10.6
  Other                             7.5       7.4       7.3
Real GDP Per Capita (1985 prices)  2041      2167      2256
Labor Force (000s) 3/               921       949       979
Unemployment (official rate) 3/    13.1      12.5      11.9
Money and Prices:
Money and Quasi-Money (M2)        3,535     4,300     3,916
Commercial Interest Rates
  Fixed deposit (pct.)              5.5       5.0       5.3
  Average lending (pct.)           11.0      10.5      10.8
Gross Savings (pct. GDP)           17.3      16.0      16.7
Gross Investment (pct. GDP)        22.7      20.0      21.4
Consumer Prices
  (pct./annual average CPI)         1.8       0.9       1.4
Wholesale Prices
    (pct./annual average)           2.7       2.5     (2.6)
Exchange Rate (balboa:USD)          1:1       1:1       1:1
Balance of Payments and Trade:
Total Merchandise Exports (FOB)     481       500       520
  Exports to U.S. (pct.)             45        45        45
Total merchandise imports (CIF)   1,827     2,007     2,205
  Imports from U.S. (pct.)           40        40        40
Aid from U.S. Government            234        42        21
External Public Debt              5,204     5,369     5,539
Debt Service Paid 4/                230       234       238
Foreign Assets                      504       566       636
Balance of Payments
  Current Account                   -41       -16       N/A
  Foreign Investment                  1         2       N/A
N/A--Not available.
1/ Estimated.
2/ Projected.
3/ Data revised October 31, 1994.
4/ Excludes clearance of arrears to International Financial
Institutions (IFI's) in 1992.
1.  General Policy Framework
    Panama's economy is based on a well-developed services
sector that accounts for 70 percent of gross domestic product
(GDP).  Services include the Panama Canal, banking, insurance,
government, the transisthmian oil pipeline, and the Colon Free
Zone (CFZ).  Manufacturing, mining, utilities, and construction
together account for approximately 20 percent of GDP.
Agriculture accounts for about 10 percent of GDP.  Growth of
Panama's economy continues to slow from the previous four years
(the high point was reached in 1991, with a high point of
9.6%), with 1994 growth projected at 5.0%, down from 1993's
5.9% and 1992's 8.6%.  As in preceding years, private
construction and capital goods spending plus CFZ activity and
certain services exports have been the main sources of growth.
A slight upswing in Panama Canal traffic and revenues has also
boosted growth.
    The new government, which took office September 1, 1994 has
announced its intention to address directly a past failure by
policy-makers to follow through on key economic policy
reforms:  reduction of the public sector payroll,
liberalization of the trade regime, privatization of
state-owned enterprises, and encouragement of job-creation
through labor code reforms.  Decisive government action in
these areas will be key to Panama's current application to join
the GATT and the soon-to-be-formed World Trade Organization,
the establishment of increased investor confidence, and the
resolution of Panama's large outstanding foreign debt.  In the
absence of effective action, growth in all sectors is likely to
be negatively affected, and job creation will begin to lag
behind population growth.  Although a comprehensive national
economic plan has been released which incorporates the above
concerns, as of the date of this report there had been no
specific implementation of proposed reforms.  Medium-term
prospects for strong economic growth and job-creation are
therefore uncertain, pending further policy developments.
    The use of the U.S. dollar as Panama's currency means that
fiscal policy is the government's principal macroeconomic
policy instrument.  Because Panama does not "print" a national
currency, government spending and investment are strictly bound
by tax and nontax revenues (including Panama Canal receipts)
and the government's ability to borrow.
2.  Exchange Rate Policies
    Panama's official currency, the Balboa, is pegged to the
U.S. dollar at one Balboa to one U.S. dollar.  The fixed parity
means price and availability of U.S. products in Panama depend
on transport costs and tariff and non-tariff barriers to
entry.  At the same time, the fixed parity means that U.S.
exporters have zero risk of foreign exchange loss on sales to
Panama.
3.  Structural Policies
    The newly elected Government of Panama, which took office
on September 1, 1994, has declared its policy commitment to
trade liberalization, and has published an ambitious but
disciplined national economic plan.  The plan has as its
centerpiece Panama's accession to GATT/WTO, and the associated
trade liberalization measures which accession will require.
The new government is also emphasizing fiscal discipline,
internal savings, partial privatizations of some public
entities and utilities, revision of the inflexible labor code,
elimination of price controls and establishment of an antitrust
law and enforcement authority, and health and housing programs
to ease the severe rural and urban poverty and high
unemployment which reflect Panama's very uneven distribution of
wealth and income.
    In the area of trade liberalization, any lowering of tariff
and non-tariff barriers would build on the previous
government's conversion from specific tariffs to an ad valorem
system on about 280 tariff line items.  Current tariff rates
for industrial products are set at 40 percent for
agroindustrial products.  Some 227 product classifications
carry a 50 percent tariff, while a 60 to 90 percent rate
applies to some 60 sensitive agricultural products.
    Panama is an observer to the General Agreement on Trade and
Tariffs (GATT), but applied for full GATT membership in May
1993.  Bilateral and multilateral working party meetings on
Panama's application have already been held.
    Panama enacted a new tax law in December 1991 and a
privatization framework law in July 1992.  The tax reform act
reduced corporate income tax rates to 30 percent effective as
of 1994.  The 1991 privatization law resulted in very few
actual privatizations.  It is likely that any of the
privatizations being considered by the new government will, if
carried out, be performed pursuant to fresh legislation.
4.  Debt Management Policies
    Panama is current on interest and principal due to the IMF,
World Bank, Inter-American Development Bank, and International
Fund for Agricultural Development.  It cleared $645.8 million
in arrears with these institutions during February/March 1992,
and took steps in 1993 and 1994 towards normalizing relations
with foreign commercial creditors (bondholders, commercial
banks, and suppliers); Panama's accrued commercial debt,
including interest, stands at about 5.3 billion dollars.
    Panama remains current on interest and principal payments
to U.S. government creditor agencies.  Some 1994 disbursements
from International Financial Institutions of previously agreed
credits were suspended, however, due to the previous GOP's
failure to satisfy all IFI conditions, most prominently a
failure to privatize and to reduce the size of the public
sector sufficiently.  The GOP remains committed to reaching an
agreement with its external commercial creditors.  In October
1994, shortly following announcement of its national economic
plan, the GOP signed an agreement with the Inter-American
Development Bank (IBD) whereby IBD will provide up to 750
million dollars between 1995-1996 for a variety of social
welfare and infrastructure improvement projects.
5.  Significant Barriers to U.S. Exports
    The new government's economic reform program is still
largely inchoate, but appears strongly oriented toward
export-led policies designed to attract increased foreign
investment.  At the same time, the Panamanian economy remains,
for now, one of the most heavily protected ones in Latin
America.
    The Panamanian agricultural sector is protected by
significant non-tariff barriers.  Agricultural products such as
rice, corn, beef, dairy products, soybeans, and wheat are
controlled by the Ministry of Agriculture and the Agricultural
Marketing Institute (IMA).  Import permits are required from
the Ministry of Agriculture for imports of animal products,
animal by-products, and seeds.  In 1993, the government passed
a law restricting imports of poultry products based on
zoosanitary restrictions and trade reciprocity.  The new
government's agriculture ministry has announced its intention
to enforce strictly the prior approval requirement (Decree 15
of May 18, 1967) for all imports of meat products, in addition
to phytosanitary requirements.
    IMA maintains a list of 48 agricultural products under
import quota and 30 products under import permit.  The prior
government issued several decrees (effective December 1, 1993)
eliminating seven products from the list of products under
quota and two from the list of products under import permit.
    Non-agricultural product registration requirements, which
were previously applied prior to market entry (by customs
authorities) now become effective six months after initial
product entry.  Thus, importers can establish product sales
potential prior to an investment of financial and staff
resources in the registration process.
    The Panamanian Government officially promotes foreign
investment and affords foreign investors national treatment, as
well as actively promoting specific investment opportunities in
agriculture, industry, tourism, and an expanded range of
services.  A limitation in Panamanian law on foreign government
ownership of land affects a few U.S. government investment
insurance programs, but places no legal limitations on foreign
private investment or ownership.
    While the Government of Panama does not officially present
any barriers to U.S. suppliers of banking, insurance,
travel/ticket, motion picture, and air courier services, some
professionals can expect certain technical/procedural
impediments, i.e., architects, engineers, and lawyers have to
be certified by Panamanian boards.
    Panama does not have an investment screening mechanism, and
the Panama Trade Development Institute works to attract
investment to priority areas.  Under the terms of its Bilateral
Investment Treaty with the United States, Panama places no
restrictions on the nationality of senior management.  Panama
does restrict foreign nationals to 10 percent of the
blue-collar work force, however, and specialized foreign or
technical workers may number no more than 15 percent of all
employees in a business.  Disinvestment may be difficult for
foreign (and Panamanian) companies involved in labor-intensive
production, because of labor code regulations, which restrict
dismissal of employees and require large severance payments.
The current government is considering modifications to the
labor code.
6.  Export Subsidies Policies
    Export subsidies policies benefit both foreign-owned and
domestic export industries.  The tax credit certificate (CAT)
is a major export subsidy.  CATs are given to firms producing
nontraditional exports when the exports' national content and
national value added both meet minimum established levels.
Exporters receive CATs equal to an amount that is 20 percent of
the exports' national value added.  The certificates are
transferable and may be used to pay tax obligations to the
government.  They can also be sold in secondary markets at a
discount.
    A number of industries that produce exclusively for export
also are exempted from paying certain types of taxes and import
duties.  The Panamanian government uses these exemptions as a
way of attracting investment to the country.  Companies that
benefit from these exemptions are not eligible to receive CATS
for their exports, however.
7.  Protection of U.S. Intellectual Property
    Panama recently passed major legislation (Law No. 15 of
August 8, 1994) intended to modernize its copyright protection
regime and is also considering legislation to strengthen
industrial property (patents, trademarks, and trade secrets)
protection.  Panama is a member of the World Intellectual
Property Organization, the Geneva Phonograms Convention, the
Brussels Satellite Convention, and the Universal Copyright
Convention, but it is not a member of the Bern Convention for
the protection of Literary and Artistic Works, the Paris
Convention for the Protection of Industrial Property, or the
Central American Copyright Convention.
    Panama signed with other Central American countries a
declaration of intent to join the Paris Convention in October
1992.  Officially, Panama's adherence to some of the major
international conventions governing intellectual property
rights offers more protection than that which is given to
domestic Panamanian interests under Panamanian law.
    The new copyright law, which takes effect January 1, 1995,
strengthens copyright protection, facilitates prosecution of
copyright violators and makes copyright infringement a felony,
punishable by fine and incarceration.  The bill also protects
computer software as a literary work.  The next major challenge
for Panama in the copyright is establishment and funding of the
new Copyright Directorate called for in Law 15, the drafting
and application of detailed implementing regulations, and the
creation of the judicial expertise necessary to enforce the new
    The Legislative Assembly's Commerce and Industries
Committee during the legislative session ending June 30 had
taken under consideration an industrial property law, modeled
after the Mexican industrial property rights law.  The
Assembly, however, did not take final action on the bill before
adjourning.  The draft law would have established a standard of
20 years of protection for all patent holders, in place of the
current range of 5 to 20 years for Panamanians and 5 to 15
years for foreigners.  The bill also would protect processes.
The draft law would impose a working requirement on patent
holders, although the patent holder can satisfy the working
requirement by importing the product.  Under the draft law, the
government would be able to issue compulsory licenses only
after notice to and a hearing for the patent holder.  In
addition, a patent holder would still preserve his rights by
beginning manufacture or importation within one year of the
initial notification of the compulsory licensing proceeding.
The recipient of a compulsory license would have the capacity
to manufacture the product himself in Panama.
    The draft industrial property law also provides for
protection of trademarks and trade secrets.  The bill would
simplify trademark registration, and give protection for 10
years, renewable for an unlimited number of additional 10-year
periods.
    The newly elected Assembly, which was sworn in September 1,
has not yet placed the bill on its agenda.  The government will
likely re-introduce the bill no later than 1995, since its
passage is an important element of Panama's application to join
GATT.  It is possible there will be significant modifications
made in the draft bill to strengthen its protections before the
National Assembly takes final action.
    Video piracy is a major concern in Panama.  Some firms are
illegally reproducing videos and distributing them from the
Colon Free Zone (CFZ) to Panama, Central America, and elsewhere
in South America.  Recently, some U.S. firms have also
complained about trademark infringement by firms in the CFZ and
about use of the CFZ as a transshipment point for pirated
products.  GOP police authorities recently have raided several
CFZ warehouses, in response to concerns about illegal
transshipments and illegal assembly activity.
8.  Worker Rights
    a.  The Right of Association
    Panamanian private sector workers have the legal right to
form and join unions of their choice, subject to registration
by the government.  Unions have criticized, however, government
requirements for registration, including the minimum number of
workers necessary for union formation (currently 51).  With a
large percentage of small-scale shops and businesses in Panama
having less than the required number of employees, many work
forces fall below this number.  The only option for such
employees is to affiliate themselves with an existing trade
union in another company, which is often difficult.  Easier
registration requirements are one demand that the unions have
been making in Panama.  Despite being legally allowed, attempts
over the past twenty years to organize in the banking sector
have not been recognized by the government.  No organizing
efforts also have been successful in the Colon Free Zone
either.  Unions claim that the government will never allow
organizing efforts to succeed in these important economic
sectors.  Some economists, on the other hand, argue that these
sectors have flourished in part precisely because the unions
have been excluded.
    The ILO's Committee of Experts (COE) has criticized the
excessively high numbers of members required to establish a
union along with the requirement that 75 percent of union
members be Panamanian nationals, and the automatic removal from
office of trade union officials dismissed from their jobs.  The
COE also has noted that Panama's Constitution and the Labor
Code require that the executive board of a trade union be
composed exclusively of Panamanians.  The ILO feels that
government legislation should be made more flexible to permit
organizations to choose leaders without hindrance and should
allow foreign workers to hold trade union office.
    According to Ministry of Labor statistics, approximately 11
percent of the total employed labor force is organized.  There
are 289 active unions, grouped under six confederations and 48
federations representing approximately 82,000 members in the
private sector.  From January to August, two new unions
registered with the Government.  Some unions formerly
affiliated with federations and confederations have chosen to
function independently in recent years.  Organized labor, which
received various benefits from and was largely coopted by the
military regime from 1968 to 1989, is no longer identified with
nor controlled by the Government or political parties.
Although the new Perez Balladares PRD government has closer
ties with organized labor than did the Endara Administration,
union organizations at every level may and do affiliate with
international bodies.
    Prior to the passage of Panama's new Civil Service Law (Ley
Administrativa) or Law 9 of June 20, 1994, most government
workers were not permitted to organize unions or bargain
collectively.  The exception was workers in certain state-owned
companies, such as public utilities, which have been allowed to
organize unions--rights they carried over from when their
companies were private sector entities--and these unions are
among the strongest in Panama.  FENASEP (the umbrella
organization for the public employee associations) was
especially active in the debate leading up to the passage in
June of the Civil Service Law which established the basis for
the creation of a career civil service for the first time in
Panama, formalized the formation of public employee
associations and federations and established their right to
represent their members in collective bargaining with their
respective agencies.
    Most workers have the right to strike.  Some key groups,
however, do not (i.e., certain government workers in areas
vital to public welfare and security such as the police and
health workers and those employed by the U.S. Military Forces
and the Panama Canal Commission).  Unionized employees of
formerly private and telephone companies, retain their original
right to strike when certain criteria are met.  For example, a
notice of intention to strike must be served at least eight
calendar days in advance and strikers must continue working in
reduced shifts to prevent public services from being completely
paralyzed.
    b.  Right to Organize and Bargain Collectively
    As noted above, the Panamanian labor code grants
individuals the right to organize labor unions and employee
associations.  On January 13, President Endara signed Law 2 of
1993 which restored full freedom of association and collective
bargaining rights to workers in the private sector.  Earlier,
Law 25 of November 1992 amended Law 16 of 1990 by reimposing
the obligation of firms operating in export processing zones to
enter into collective bargaining agreements with workers.
Panama's labor code prohibits anti-union discrimination by
employers.  Disputes or complaints may be brought to a
conciliation board in the ministry of labor for resolution.
The Labor Code provides a general mechanism for arbitration
once conciliation procedures have been terminated.
    c.  Prohibition of Forced or Compulsory Labor
    The Panamanian labor code prohibits forced or compulsory
labor, and there are no reports of either practice.
    d.  Minimum Age for Employment of Children
    The Panamanian labor code prohibits the employment of
children under the age of 14, or under the age of 15 if the
child has not completed primary school.  The code also
prohibits the employment of persons under age 18 in night
work.  Children between the ages of 12 and 14 may perform farm
or domestic labor as long as the work is light and does not
interfere with the child's schooling.  Enforcement of these
provisions is triggered by a complaint to the Ministry of
Labor.  which can order the termination of illegal employment.
Child labor provisions were generally enforced in Panama in
1993, although less so in the interior of the country because
of insufficient resources to monitor any abuses.
    e.  Acceptable Conditions of Work
    The labor code establishes minimum wage rates for most
categories of labor and requires substantial bonuses for
overtime work.  Panama has a substantial informal sector in
which some workers earn below the minimum wage.  In December
1992, the government decreed a 20.5 percent nominal increase in
the minimum wage effective January 1, 1993.  While the minimum
wage varies according to region and type of work, the prevalent
minimum wage increased from $.78 per hour to $.94 per hour.
    The labor code establishes a standard legal workweek of 48
hours throughout Panama and provides for at least one 24-hour
rest period.  The Labor Code also sets numerous health and
safety standards for all places of employment.  However, The
Ministry of Labor, which is responsible for insuring that
employers comply with these regulations, does not have enough
inspectors and resources to enforce these laws effectively.
    f.  Rights in Sectors with U.S. Investment
    Although Panamanian labor laws differ from sector to
sector, within each sector U.S. firms adhere to the prevailing
laws.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                                724
Total Manufacturing                                      169
  Food & Kindred Products                   (1)
  Chemicals and Allied Products             (1)
  Metals, Primary & Fabricated              (2)
  Machinery, except Electrical                0
  Electric & Electronic Equipment             0
  Transportation Equipment                    0
  Other Manufacturing                        21
Wholesale Trade                                          578
Banking                                                  (1)
Finance/Insurance/Real Estate                         10,926
Services                                                 (1)
Other Industries                                         (1)
TOTAL ALL INDUSTRIES                                  12,575
(1) Suppressed to avoid disclosing data of individual companies
(2) Less than $500,000
Source: U.S. Department of Commerce, Bureau of Economic
Analysis
(###)
PARAGUAY1
6?6?U.S. DEPARTMENT OF STATE
PARAGUAY: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                             PARAGUAY
                     Key Economic Indicators
                                     1992      1993      1994
Income, Production and Employment:
Real GDP (1982 prices) 2/           7,113     7,407      7,681
Real GDP Growth (pct.)                1.8       4.1        3.6
GDP (at current prices)2/           6,447     6,841      7,000
By Sector:
  Agriculture                        26.3      26.6       26.1
  Energy/Water                        3.8       4.1        4.3
  Manufacturing                      15.6      15.3       15.1
  Construction                        5.4       5.3        5.8
  Rents                               N/A       N/A        N/A
  Financial Services                 26.5      26.5       26.8
  Other Services                      9.6       9.4        9.5
  Government/Health/Education         4.8       4.8        4.9
Net Exports of Goods & Services 2/ -821.3    -805.6        N/A
Real Per Capita GDP (1982 base)     1,574     1,595      1,640
Labor Force (000s)                  1,627     1,672      1,725
Unemployment Rate (pct.)              9.8      11.0       11.2
Money & Prices:  (annual percentage growth)
Money Supply (M2)                    35.1      27.2       19.8
Base Interest Rate 3/                36.3      39.6       39.4
Personal Saving Rate/GDP             18.3      19.5       18.9
Retail Inflation                      N/A       N/A        N/A
Wholesale Inflation                  13.9      14.8       14.2
Consumer Price Index                 17.8      20.4       18.3
Exchange Rate (USD/Gs)              1,509     1,754      1,915
Balance of Payments and Trade:
Total Exports (FOB) 4/              656.5     725.2      715.5
  Exports to U.S.                    34.4      50.3       46.5
Total Imports (CIF) 4/            1,237.1   1,477.5    2,853.3
  Imports from U.S.                 414.9     520.9      580.5
Aid from U.S.                         2.9       4.4        5.0
External Public Debt                1,249     1,217      1,265
Debt Service Payments (paid)        628.4     233.0      125.0
Gold and Foreign Exch. Reserves     610.7     697.7      983.6
Trade Balance 4/                   -580.6    -752.3   -2,137.8
  Trade Balance with U.S.          -380.5    -470.6     -534.0
N/A--Not available.
1/ 1994 figures are all estimates based on available monthly
data in October 1994.
2/ In millions of U.S. dollars.
3/ Figures are actual, average annual interest rates, not
changes in them.
4/ Merchandise trade.  Exports exclude unregistered re-exports.
1.  General Policy Framework
    The Paraguayan economy continues to be dependent on
agricultural exports and the re-export of goods to Brazil and
Argentina.  Because of this, it is particularly susceptible to
external factors, such as bad weather or economic malaise in
its neighboring countries.  Since 1989, the government has
liberalized and deregulated the economy, eliminating foreign
exchange controls and implementing a free floating exchange
rate.  Paraguayan authorities have also established tax
incentives to encourage and attract investment, reduced tariff
levels, launched a stock market, reformed the tax structure,
and started a process of financial reform.  The Wasmosy
government has continued these policies, and has taken
important steps forward in joining the international economy
through the ratification of GATT and acceptance of the Paris
Conventions on intellectual property.   It has also
strengthened Paraguay's economic base by keeping government
expenditures in line with revenues, combating inflation,
eliminating restrictions on capital flows, reforming and
deregulating the financial sector, keeping customs duties low
and uniform, encouraging production and exports, privatizing
state owned enterprises and condemning official corruption.
The government provides national treatment to foreign investors
and business people.
    Paraguayan imports of U.S. made products have increased
steadily.  According to the U.S. Department of Commerce,
exports to Paraguay totaled 520 million dollars in 1993.
United States products and services enjoy wide acceptability
among the Paraguayan public.  Major sectors for U.S. exports
include computers and peripherals, machinery, automobiles, auto
parts, and consumer goods.  Other areas for business are home
entertainment equipment, communications equipment, and office
machines and equipment.  A healthy trade surplus is maintained
with Paraguay.
    Several large government investment projects could offer
interesting opportunities for U.S. firms in the future.
Paraguay and Argentina are considering a hydroelectric project
at Corpus.  The two governments plan to establish a concession
to let private sector companies construct and manage the
project.  Another ambitious project will be the Hidrovia, a
long-term river transportation project that aims to improve the
navigation system of the River Plate region, including the
Paraguay and Parana rivers.  The project will be financed with
funds provided by the Interamerican Development Bank.  The
Hidrovia Project will fund improvements in roads and ports, and
may include some river dredging.  A U.S. consulting firm is
preparing a feasibility study for the recuperation of the
Ypacarai lake basin and the bay of Asuncion funded by a Trade
Development Agency grant.  The final report will include
recommendations for the installation of wastewater treatment
plants and the construction of dikes to prevent flooding of
land bordering the bay of Asuncion.
    The scheduled privatization of four state companies
including the national steel company, the state merchant fleet,
the Paraguayan railroad, and an alcoholic beverage plant could
also offer attractive investment opportunities to prospective
U.S. investors.  The government has also recently announced its
intention to privatize the state telecommunications, and water
and sewage companies, although the legislature has yet to
approve these plans.  Despite high-level support within the
government, opposition from many parts of society long
accustomed to a large public sector may stall privatization.
    Paraguay is a member of the Latin American Association for
Regional Integration, the Southern Cone Common Market
(MERCOSUR) and the GATT.  The Paraguay has ratified the
Uruguay Round agreements and became a founding member of the
World Trade Organization (WTO) on January 1, 1995.
2.  Exchange Rate Policies
    All foreign exchange transactions, public and private, are
settled at the daily free market rate.  The value of the
Guarani vis a vis the U.S. dollar and other foreign currencies
is established by market forces, with some minor intervention
by the Central Bank.  The free market rate on September 30
stood at 1,915 guaranies to the dollar.  It is legal to hold
savings accounts in foreign currency and in October 1994 the
executive promulgated a decree legalizing contractual
obligations in foreign currencies.  At present the majority of
savings accounts are denominated in dollars.
3.  Structural Policies
    Consumer prices are generally determined by supply and
demand, except for public sector utility rates (water,
electricity, telephone), petroleum products, pharmaceutical
products, and bus fares.  As a step to slow down inflation the
government implemented in April 1994 a number of economic
measures, including a stringent monetary policy, foreign
exchange market interventions to prevent sharp fluctuations in
the value of the guarani, a voluntary price freeze, and a tight
rein on government expenditures that has generated a sizable
budget surplus.  Monthly inflation declined from slightly more
than three  percent in January to 0.3 percent in September,
1994.
    The Ministry of Finance overseas all tax matters.  With the
implementation of the new tax system (Law 125/91), corporate
incomes are subject to a 30 percent tax rate.  As an incentive
to investment, the income tax rate on reinvestment profits is
10 percent.  The fiscal incentive package (Law 60/90) includes
total exemption from certain taxes on the establishment of
operations and reduction of customs duties on imports of
capital goods.  There is a 95 percent corporate income tax
exemption for five years.  The government expanded the tax base
with the implementation of a value added tax (IVA) in 1992.
Compliance has been lower than expected, primarily as a result
of inexperience in its administration.
4.  Debt Management Policies
    In 1992 the government reduced external debt with both
official and commercial creditors.  The full payment of arrears
was accomplished without assistance from the IMF or the Paris
Club by drawing down reserves.  The Government of Paraguay
currently has approximately 1.2 billion dollars of debt.  About
half of the debt is to multilateral lending institutions, with
the rest to Paris Club members.  Since 1992, Paraguay has been
meeting its obligations with foreign creditors in a timely
fashion.
5.  Significant Barriers to U.S. Exports
    U.S. manufactured goods face strong competition from Far
East producers.  U.S. companies have been kept out of
government procurement through purchasing practices which grant
a 15 percent preference to local bidders (bids are let on all
purchases in excess of 60,000 U.S. dollars).  Paraguay
prohibits the imports of certain foods and agricultural
products.  Although the list is reviewed every six months, it
normally stays the same.  The potential for U.S. computer
software products is limited by widespread piracy.
    In general, financing for both imports and exports is
limited.  High nominal and real interest rates due to inflation
present a major obstacle to the availability of medium and long
term credit.  The banking system also enjoys a wide spread
(over 20 percent) on its funds.
6.  Export Subsidies Policies
    There are no discriminatory or preferential export
policies. Paraguay does not subsidize its exports.  In fact,
export taxes and duties represent a significant source of
central government revenues.
7.  Protection of U.S. Intellectual Property
    Despite signing the Paris Conventions in early 1994 and a
legal framework which affords protection to intellectual
property, protection for intellectual property is lax in
Paraguay.  The lack of effective enforcement of existing IPR
laws and the slow pace of the judicial system in issuing timely
and clear decisions has encouraged the development of a sizable
business of counterfeiting, particularly sound recordings and
video movies.  The U.S. Government has ongoing discussions with
the Paraguayan Government on issues that must be addressed in
order to establish an adequate intellectual property regime.
    The outdated patent law of 1925 established an office of
patents and inventions and the requirements and procedures for
obtaining patents.  The law does not meet modern standards.
The law grants patents for 15 years and may be renewed.
    The procedure for registering a trademark resembles the
U.S. system.  The illegal appropriation of well-known
trademarks presents a serious problem.  Anyone may register a
trademark and the process is relatively simple and
inexpensive.  The law grants trademark rights which may be
renewed before its expiration.  Ownership of a trademark may be
transferred by contract or inheritance.
    In 1991, Paraguay became a signatory to the Bern Convention
for the protection of literary and artistic works.  Although
the government has taken measures to fight piracy, widespread
production and trade in pirated recordings, computer software,
and video cassettes remains a problem.
8.  Worker Rights
    A Generalized System of Preferences (GSP) program was
reinstated in February 1991.  Paraguay's status as a
beneficiary under the U.S. GSP was suspended in 1987 for
violation of labor rights under the Stroessner regime.  The
restoration of trade benefits was in recognition of
improvements in worker rights under the Rodriguez Government
and the promise that the government would pass a new labor code
with internationally accepted protections for labor.  In 1993,
the AFL/CIO filed a petition requesting suspension of GSP
benefits for worker rights violations and for failure to
approve a new labor code.  On October 28, 1993, the Paraguayan
parliament approved a new labor code that met international
labor organization standards.
    a.  Right of Association
    The Constitution allows both private and public sector
workers, excepting the armed forces and police, to form and
join unions without government interference.  It also protects
the right to strike and bans binding arbitration.  Strikers and
leaders are protected by the constitution against retribution.
Unions are free to maintain contact with regional and
international labor organizations.
    b.  Right to Organize and Bargain Collectively
    Collective bargaining is protected by law.  When wages are
not set in free negotiations between unions and employers, they
are made a condition of individual employment offered to
employees.  Collective contracts are still the exception rather
than the norm in labor/management relations.
    c.  Prohibition of Forced or Compulsory Labor
    Forced labor is prohibited by law.  Domestics, children,
and foreign workers are not forced to remain in situations
amounting to coerced or bonded labor.
    d.  Minimum Age of Employment of Children
    Minors from 15 to 18 years of age can be employed only with
parental authorization and cannot be employed under dangerous
or unhealthy conditions.  Children between 12 and 15 years old
may be employed only in family enterprises, apprenticeships, or
in agriculture.  The labor code prohibits work by children
under 12, and all children are required to attend elementary
school.  In practice, however, many thousands of children, many
under the age of 12, work in urban streets in informal
employment.
    e.  Acceptable Conditions of Work
    The labor code allows for a standard legal work week of 48
hours, 42 hours for night work, with one day of rest.  The law
also provides for an annual bonus of one month's salary and a
minimum of six vacation days a year.  It also requires overtime
payment for hours in excess of the standard.  Conditions of
safety, hygiene, and comfort are stipulated.
    f.  Rights in Sectors with U.S. Investment
    Conditions are generally the same as in other sectors of
the economy.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                               9
Total Manufacturing                                     9
  Food & Kindred Products                   (1)
  Chemicals and Allied Products               0
  Metals, Primary & Fabricated                0
  Machinery, except Electrical                0
  Electric & Electronic Equipment             0
  Transportation Equipment                    0
  Other Manufacturing                                 (1)
Wholesale Trade                                       (1)
Banking                                               (1)
Finance/Insurance/Real Estate                           0
Services                                                0
Other Industries                                        0
TOTAL ALL INDUSTRIES                                   64
(1) Suppressed to avoid disclosing data of individual companies
Source: U.S. Department of Commerce, Bureau of Economic Analysis
(###)
PERU1
SU.S. DEPARTMENT OF STATE
PERU: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                               PERU
                     Key Economic Indicators
        (Millions of U.S. dollars unless otherwise noted)
                                    1992      1993      1994 est
Income, Production, Employment:
Real GDP (1985 prices)            19,946    21,318    23,637
Real GDP Growth (pct.)              -2.4       6.5      10.0
GDP (at current prices) 1/        25,587    28,047    31,800
By Sector:
  Agriculture                      3,045     3,332     3,865
  Fisheries                          273       344       447
  Mining/Petroleum                 2,856     3,175     3,334
  Manufacturing                    5,696     6,257     7,195
  Construction                     1,716     2,002     2,500
  Government                       1,587     1,635     1,650
  Others                          10,413    11,302    12,809
Net Exports of Goods & Services   -2,144    -2,216    -2,500
Real Per Capita GDP (1985 USD)       888       930     1,011
Labor Force (000s)                 8,184     8,400     8,500
Unemployment Rate (pct./year-end)   9.4        9.9       9.5
Money and Prices:  (end of year)
Money Supply (M2) 2/               1,435     1,530     2,084
Discount Rate (pct.) 3/             80.3      56.8      33.0
Consumer Prices (pct. change)       56.7      39.5      18.0
Wholesale Prices (pct. change)      50.5      34.1      15.0
Exchange Rate                       1.63      2.16      2.25
Balance of Payments and Trade:
Total Exports (FOB)                3,484     3,464     4,100
  Exports to U.S.                    739       750       760
Total Imports (FOB)                4,051     4,042     5,100
  Imports from U.S.                1,002       900     1,050
Aid from U.S.                        123       146       150
External Public Debt              21,409    22,157    22,400
Debt Service Paid 4/                 725       886       900
Foreign Exchange Reserves          2,001     2,701     6,000
Merchandise Trade Balance           -566      -578    -1,000
1/ Because of recent hyperinflation, the current dollar value
of Peru's GDP is a subject of debate.  These figures represent
official Central Bank estimates.  They do not equate to nominal
GDP in soles converted at the market exchange rate.
2/ Figures are for money supply in national currency only.  The
majority of financial system liquidity consists of dollars.
3/ Annualized rate of interest commercial banks charge each
other on loans denominated in soles.  The rates on dollar loans
are significantly lower.
4/ Does not include lump-sum payments in 1993 connected with
Paris Club rescheduling.
Source:  Central Reserve Bank, National Institute of
Statistics, Ministry of Labor and U.S. Embassy estimates.
1.  General Policy Framework
    Peru has taken dramatic steps to stabilize and liberalize
its economy since the inauguration of President Alberto
Fujimori in July 1990.  Bureaucratic procedures have been
streamlined, price controls terminated, the tax system
simplified, and labor laws made more flexible.  Exchange
controls have been lifted, and there are no restrictions on
remittances of profits, dividends or royalties.  By mid-1995,
the government expects all remaining state-owned firms to have
been privatized or liquidated.
    Import licenses have been abolished for practically all
products and non-tariff barriers eliminated.  The average
tariff rate has been cut to 16 percent, compared with 80
percent in 1990.  The government plans to move to a flat
15-percent tariff in 1995.  Currently, 98 percent of imports
enter at the 15-percent rate, the rest at 25 percent.  Peru
maintains import surcharges on five basic agricultural
products, which reduces the competitiveness of U.S. farm
products.  But these surcharges are scheduled to be phased out
by 1997.
    The economy is recovering from the deep recession and
hyperinflation of the late 80s and early 90s, but it has yet to
produce significant job growth.  Real gdp growth could exceed
10 percent in 1994, and inflation is likely to fall below 20
percent (versus 39 percent in 1993 and 7,650 percent in 1990).
In September 1994, consumer prices rose just 0.5 percent -- the
lowest monthly inflation rate in 19 years.
    The Central Bank manages the money supply and affects
interest and exchange rates through emission, open-market
operations, rediscounts and reserve requirements on dollar and
sol deposits.  Dollars still account for more than 60 percent
of total liquidity (the legacy of hyperinflation), which
complicates the government's efforts to manage monetary
policy.  The central bank does not finance the fiscal deficit.
Current government expenditures have been in balance with
revenues since late 1990, and the combined fiscal deficit
(resulting fromdebt payment) has been financed by external
sources.  Over the last two years, a strong inflow of foreign
capital, primarily from privatizations, has more than offset
the merchandise trade deficit, and net foreign reserves have
grown to nearly USD 6 billion (they were negative when Fujimori
took office).
    Peru has ratified the Uruguay Round agreements and became
a founding member of the World Trade Organization (WTO) on
January 1, 1995.  President Fujimori faces re-election in April
1995.  His principal opponent is former UN Secretary General
Javier Perez de Cuellar, running as an independent.
2.  Exchange Rate Policy
    The exchange rate for the Peruvian New Sol is determined by
market forces, with some intervention by the central bank to
stabilize movements.  There are no multiple rates.  The 1993
constitution guarantees free access to and disposition
offoreign currency.  There are no restrictions on the purchase,
use or remittance of foreign exchange.  Exporters conduct
transactions freely on the open market and are not required to
channel their foreign exchange transactions through the central
bank.
    Since the end of 1992, the Sol has declined 27 percent
against the dollar in nominal terms.  However, when differences
in inflation rates are taken into account, the Sol has
appreciated in real terms.
3.  Structural Policies
    In the short span of four years, Peru has been converted
from an economy dominated by a protectionist and
interventionist state to a liberal economy dominated by the
private sector and market forces.  Several major state-owned
businesses have been privatized in the past two years,
including the phone company, the national airline (Aeroperu),
electrical utilities and a number of mining properties.  By the
middle of 1995, the government intends to have sold off all
remaining state-owned enterprises, including the petroleum
company (Petroperu), the remaining electrical utilities, the
water and sewage utilities, the fish-processing operations
(Pescaperu), the ports (ENAPU), the airport authority (Corpac),
tourist hotels and the remaining mining properties, including
the largest, Centromin.  There is some public sentiment against
privatization, especially the privatization of Petroperu.  But
the government is determined to go ahead with its plans.
    Price controls, subsidies and restrictions on foreign
investment have been eliminated.  A major revision of the tax
code was enacted at the end of 1992, and the corrupt and
inefficient tax authority (Sunat) was completely revamped, as
was the customs authority.  Tax collection has improved from 4
percent of gdp in 1990 to between 10 and 12 percent in late
1994.  Customs collections in 1994 were running at a record
pace, despite the sharp cut in tariff rates.  Although income
tax collection has increased, the government still relies
primarily on consumption taxes, including an 18 percent
value-added tax.  There are also surtaxes on certain big-ticket
luxury items, such as automobiles.  As a result, the total tax
levied on an imported car, including VAT, luxury tax and
15-percent tariff, exceeds 40 percent.
    Regulatory regimes have been streamlined in most sectors.
For example, registration of a new company now takes about a
month in most cases, compared with two years under the previous
regime.  There are exceptions for certain regulated industries,
such as casinos, which require approval of the Gaming
Commission.  Under the new automatic registration process,
companies may open for business if they do not receive a
negative reply to their license applications within 60 days.
The 1993 constitution guarantees national treatment for foreign
investors.  However, many U.S. investors continue to have
problems because of Peru's unpredictable judicial system.
4.  Debt Management Policies
    Peru's public external debt at the end of June 1994 totaled
USD 22.4 billion -- roughly two-thirds of gdp.  Total service
payments on the debt in the first half of 1994 totaled USD 460
million, or 23 percent of merchandise exports.
    Peru cleared its arrears with the Interamerican Development
Bank in September 1991.  In March 1993 it cleared its USD 1.8
billion in arrears to the IMF and World Bank and negotiated an
extended fund facility with the IMF for 1993-95.  The Paris
Club rescheduled almost USD 6 billion of Peru's official
bilateral debt in 1991.  A second Paris Club rescheduling in
May 1993 lowered payments for the period March 1993 to March
1996 from USD 1.1 billion to about USD 400 million.
    In September 1994, the Peruvian congress voted to recognize
the government's obligation to repay the debt to Chemical Bank
and American Express dating to 1983 for the lease of two ships
-- the Mantaro and the Pachitea.  The settlement of this
longstanding dispute paves the way for Peru to renegotiate its
debt with the foreign commercial banks -- estimated at between
USD 6 billion and USD 9 billion, including arrears and
penalties.  Peru hopes to negotiate a Brady Plan agreement with
the commercial banks that will significantly lower its
debt-service obligations.  Preliminary discussions with the
banks were underway in October 1994.  The government is also
accepting cancelled debt as partial payment in selected
privatizations.  In October 1994, Peruvian debt was trading at
about 60 percent of face value.
5.  Significant Barriers to U.S. Exports
    Almost all barriers to U.S. exports and direct investment
have been eliminated over the past four years.  There are no
quantitative or qualitative ceilings on imports.  The
investment law is extremely liberal.  Customs procedures have
been simplified and the customs administration made more
efficient.
    Import licenses have been abolished for the vast majority
of products.  The only remaining products requiring licenses
are firearms, munitions and explosives; chemical precursors
(used in cocaine production); and ammonium nitrate fertilizer,
which has been used as a blast enhancer for terrorist car bombs.
    Import surcharges imposed in May 1991 remain in effect on
18 categories of agricultural products, covering five basic
commodities: wheat, rice, corn, sugar and milk products.  The
surcharges on wheat (including wheat flour), rice (milled and
paddy), corn and sugar are variable import levies, based on
price bands determined weekly by the Ministry of Agriculture,
tied to world market prices.  Whole and skimmed milk powder and
milk fat are subject to per-ton surcharges. The Peruvian
government defends the surcharges as necessary to protect
Peruvian farmers from subsidized international competition and
cushion the effect of an overvalued Sol and structural
adjustment.  In March 1993, the government agreed to phase out
the surcharges over a three-year period as a condition for
disbursement of an Interamerican Development Bank trade-sector
loan.  The surcharge levels were reduced by about 5 percent in
April 1994 and by an equal amount in October 1994.  Further
cuts are scheduled to take place in January and July 1995, and
every six months thereafter until the surcharges are
eliminated.  At present, however, it is difficult for U.S.
grain exporters to effectively compete in the Peruvian market.
6.  Export Subsidies Policies
    The Peruvian government provides no export subsidies.  The
Andean Development Corporation, of which Peru is a member,
provides limited financing to exporters at rates lower than
those available from Peruvian banks (but higher than those
available to U.S. companies).  Exporters of non-traditional and
mining products can apply certain sales and consumption taxes
paid on inputs as a credit against income and asset taxes.
Exporters also can receive rebates of the value-added tax on
their inputs.
7.  Protection of U.S. Intellectual Property
    Intellectual property protection in Peru has improved in
recent years but still falls short of international standards.
Enforcement mechanisms are in the early stages of development
and are still unproven for the most part.  Peru remains on the
Special 301 Watch List.
    Peru is a signatory to the Berne Convention for the
Protection of Literary and Artistic Works and to the Universal
Copyright Convention and is a member of the World Intellectual
Property Organization.  In October 1994, the Peruvian congress
ratified the Paris Convention on Industrial Property.  The
government plans to implement the GATT TRIPs provisions once
the Peruvian congress ratifies the Uruguay Round agreement.
    As of January 1, 1994, Peruvian law provides patent
protection for all classes of inventions, without exception.
This exceeds the protection provided under Andean Pact Decision
344.  Peru does not provide transitional (pipeline)
protection.  Decision 344, which went into effect on January 1,
1994, lengthened the patent protection period to a straight 20
years (compared with the 15-plus-5 regime under the old law).
It permits member countries to improve patent and trademark
protections beyond those provided by the pact.  Decision 344
contains compulsory licensing provisions, but these provisions
are unlikely to be used in Peru because of the numerous
requirements that must first be fulfilled.
    Counterfeiting of trademarks is prevalent, because there is
only rare, disjointed regulatory enforcement.  At times the
local courts have failed to back enforcement efforts in
clear-cut cases.  Some U.S. companies have spent years in
fruitless litigation attempting to secure protection for their
trademarks in Peru.
    Copyrights are widely disregarded, but enforcement is
improving, particularly with regard to software, videos, and
musical recordings.  Textbooks and books on technical subjects
are rampantly copied, and illegal copies of audio cassettes are
widely available.  Pirated copies of motion picture videos
constitute the inventories of nearly all video rental outlets.
As soon as a film is in general release in Lima, its bootleg
appears in local video stores.  Although computer software is
now protected by Peruvian copyright law, pirated software is
widely available.  Recently, however, authorities have raided
large-scale software users, such as computer schools and
economic consulting firms, to check for pirated software, and
pirated software has been destroyed in well-publicized public
burnings.
    Peruvian law does not protect semiconductor chip layout
designs, but the Embassy is not aware of any infringement of
integrated circuits or semiconductor chips.  Private
freebooting of broadcast satellite signals may exist, but the
commercialization of the captured signals without a license
appears to have ended.
8.  Worker Rights
    Articles 28 and 42 of the Peruvian constitution recognize
the right of workers to organize, bargain collectively and
strike.  Out of an estimated economically active population of
8 million, only about 7 percent belong to unions.  Roughly
two-thirds are employed in the informal sector, beyond
government regulation and supervision.  Strike activity
increased in 1994 as the economy picked up and workers demanded
better pay and conditions.  The beginning of the campaign for
the 1995 presidential election also inspired labor actions.
    a.  Right of Association
    Peruvian law allows for multiple forms of unions across
company or occupational lines.  Workers in probational status
or on short-term contracts are not eligible for union
membership.  Public employees exercising supervisory
responsibilities are excluded from the right to organize and
strike, as are the police and military.  The amount of time
union officials may devote to union work with pay is limited to
30 days per year.  Membership or non-membership in a union may
not be required as a condition of employment.  Although some
unions have been traditionally associated with political
groups, unions are prohibited by law from engaging in
explicitly political, religious or profit-making activities.
    b.  Collective Bargaining
    Bargaining agreements are considered contractual
agreements, valid only for the life of the contract.
Productivity provisions must be included in any collective
bargaining agreement.  Unless there is a pre-existing labor
contract covering an occupation or industry as a whole, unions
must negotiate with each company individually.  The government
has set up a system of conciliation and arbitration to resolve
disputes in collective-bargaining impasses.  Strikes may be
called only after approval by a majority of all workers (union
and non-union) voting by secret ballot.  Unions in essential
public services, as determined by the government, must provide
sufficient workers, as determined by the employer, to maintain
operations during the strike.  Companies may unilaterally
suspend collective bargaining agreements for up to 90 days if
required by force majeur or economic conditions, with 15 days
notice to employees.
    c.  Forced or Compulsory Labor
    Forced or compulsory labor is prohibitted, as is
imprisonment for debt.  There are periodic reports of forced
labor in remote mountainous and jungle areas, which the
government claims it cannot control.
    d.  Minimum Age of Employment
    The minimum legal age for employment is 16.  Workers aged
16-21 may not exceed 15 percent of a company's workforce.
However, although education through the primary level is free
and compulsory, many school-aged children must work to support
their families, usually in the informal economy without
government supervision of wages or conditions.
    e. Acceptable Conditions of Work
    The 1993 constitution provides for a maximum eight-hour
work day, a 48-hour work week, a weekly day of rest and 30 days
annual paid vacation.  The labor code also sets a 45-hour work
week for women.  Workers are promised a just and sufficient
wage  (to be determined by the government in consultation with
labor and business representatives) and adequate protection
against arbitrary dismissal.   No labor agreement may violate
or adversely affect the dignity of the worker.  These and other
benefits are readily sacrificed in exchange for regular
employment, especially in the informal sector.  The current
minimum wage is 130 Soles per month (about USD 57 at the
current exchange rate).
    f.  Rights in Sectors With U.S. Investment
    U.S. investment in Peru is concentrated primarily in the
mining and petroleum sectors.  Labor conditions in those
sectors compare favorably with other parts of the Peruvian
economy.  Workers are primarily unionized, and wages far exceed
the legal minimum.  Oil and mining workers called a number of
strikes in 1994 to demand higher pay and to protest government
privatization plans.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                             (1)
Total Manufacturing                                    20
  Food & Kindred Products                    5
  Chemicals and Allied Products             -4
  Metals, Primary & Fabricated               9
  Machinery, except Electrical               0
  Electric & Electronic Equipment            1
  Transportation Equipment                   0
  Other Manufacturing                        9
Wholesale Trade                                        51
Banking                                               (1)
Finance/Insurance/Real Estate                           0
Services                                                8
Other Industries                                      (1)
TOTAL ALL INDUSTRIES                                  631
(1) Suppressed to avoid disclosing data of individual companies
Source: U.S. Department of Commerce, Bureau of Economic
Analysis
(###)
PHILIPPI1
=r=rU.S. DEPARTMENT OF STATE
PHILIPPINES: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                           PHILIPPINES
                     Key Economic Indicators
        (Millions of U.S. dollars unless otherwise noted)
                                    1992      1993      1994 1/
Income, Production and Employment:
Real GDP (1985 prices)            38,632    39,393    41,047
Real GDP Growth (pct.)               0.3       2.0       4.2
GDP (current prices)              52,982    54,068    62,364
By Sector:  (current prices)
  Agriculture                     11,561    11,723    13,533
  Energy/Water                     1,284     1,343     1,497
  Manufacturing                   12,812    12,891    15,092
  Construction                     2,664     2,952     3,368
  Dwellings/Real Estate            3,380     3,633     4,054
  Financial Services               2,084     2,159     2,495
  Other Services                  18,559    18,755    23,979
  Government Services              3,670     3,491     3,804
  Health/Education (private)       1,169     1,329     1,534
Net Exports of Goods & Services   -2,403    -4,612    -5,301
Real Per Capita GDP (1985 prices)    595       592       602
Labor Force (000s)                26,290    26,884    27,600
Unemployment Rate (pct.)             9.8       9.2       9.0
Money and Prices:  (annual percentage growth)
Money Supply (M2) 2/                11.0      24.5      19.0
Weighted Ave. Loan Rate 3/          19.4      14.6      15.0
Weighted Ave. Savings Rate 3/        0.6       8.3       8.5
Retail Price Index (Manila)          5.1       2.0       7.8
Wholesale Price Index (Manila)       4.5      -1.2       8.5
Consumer Price Index (Phil.)         8.9       7.6       9.9
Exchange Rate (Pesos/USD)
  Official (interbank rate)        25.51     27.12     26.95
  Parallel (and buying rate)       25.40     27.07     26.90
Balance of Payments and Trade:
Merchandise Exports (FOB)          9,824    11,375    13,050
  Exports to U.S. (Phil. data)     3,832     4,371     4,950
Merchandise Imports (FOB)         14,519    17,597    20,600
  Imports from U.S. (Phil. data)   2,620     3,522     4,100
Bilateral Aid, U.S. 4/               322       160       179
Bilateral Aid, Others              1,312     1,727     1,530
External Public Debt              30,934    34,282    36,300
Debt Service Payments (paid)       3,137     3,533     4,270
Gold and Foreign Exch. Reserves    5,218     5,801     7,250
Trade Balance                     -4,695    -6,222    -7,550
  Trade Balance with U.S.          1,212       849       850
1/ 1994 figures are estimates based on partial data available
as of October 1994.
2/ Growth rate of year-end M2 levels.
3/ Actual ave. annual interest rates, not changes in them.
4/ Inflows of bilateral official loans and grants per balance
of payments.  Figures for U.S. are net of inflows from the U.S.
Veterans Administration (USVA).
Sources: National Economic and Development Authority, Bangko
Sentral ng Pilipinas, Department of Finance.
1.  General Policy Framework
    The Philippines is an archipelago of over 7,000 islands
with an estimated population of 68 million.  Poverty remains a
major concern, with nearly 40 percent of Filipino families
estimated to be living below the poverty threshold.
Agriculture contributes about 23 percent of Gross Domestic
Product (GDP) -- less than industry (33 percent) and services
(44 percent) -- but absorbs the bulk (45 percent) of the
employed.  The country also has had to grapple with a boom and
bust economic growth pattern, with high growth periods
subsequently slowed by the emergence of macroeconomic
imbalances.  For the past decade and more, low savings,
investments and exports have contrasted with the performance of
Asia's economic dragons.  In the past year, however, a more
soundly based economic rebound has begun to emerge.
    The Ramos Administration, inaugurated in 1992, has
continued and expanded the reforms initiated by its
predecessor:  liberalizing the trade, foreign exchange and
investment regimes; privatizing parastatals; reducing entry
barriers in vital industries (most recently in banking,
telecommunications, and insurance); and encouraging private
sector investments in much needed infrastructure.  Real GNP,
which grew 5.1 percent during the first half of 1994, reflects
this rebound from a combination of exogenous shocks, political
disturbances, macroeconomic imbalances and crippling power
shortages which kept average real GNP expansion at 2.2 percent
from 1990 to 1993, slower than the rate of population growth.
Although some political and social resistance remain, there is
a growing realization among government officials, private
sector leaders and legislators that the liberalization process
must continue for the economy to sustain its recent strong
recovery.  Many question marks remain, but optimism is growing
that the Philippines may, at last, be embarking on a path of
sustained strong growth.
    The Philippines is a member of the GATT, participated
actively in the Uruguay Round (UR), and became a founding
member of the World Trade Organization (WTO) on January 1, 1995.
    The government is working to achieve fiscal balance and
discipline as part of an overall program to improve and sustain
macroeconomic stability.  The fiscal deficit has been reduced
by a combination of new taxes and spending cuts.  In 1995, the
government hopes to achieve its first fiscal surplus in over
two decades.  Debt service's share of the budget pie has
declined in recent years from almost half to under a third
today.  The government has had some success with the issuance
of three-year floating rate treasury notes, but short-term debt
still makes up nearly 70 percent of outstanding government
securities.
    In 1993, the government financially restructured the
Central Bank.  Previously, the instruments available for
monetary management were severely limited by the Central Bank's
mounting financial losses, compelling monetary authorities to
keep reserve requirements at high levels.  Now armed with a
clean balance sheet and a 220 billion peso portfolio of new
treasury securities, the "new" Central Bank (officially known
as the "Bangko Sentral ng Pilipinas") is in a position to
undertake open market operations effectively.  Since the 1993
restructuring, the Bangko Sentral has lowered bank reserve
requirements by six percentage points, from 25 to 19 percent.
2.  Exchange Rate Policy
    Except for a few remaining restrictions on foreign
investments and on foreign debt, most foreign exchange
restrictions were liberalized starting 1992.  The foreign
exchange rate is now set freely in the interbank market.
    The new regulations now allow immediate repatriation and
remittance privileges without requiring Bangko Sentral
approval.  Foreign exchange earners are generally free to buy
and sell foreign exchange, maintain foreign currency accounts
and transfer foreign exchange out of the country for deposit or
investment abroad.  To further liberalize the foreign exchange
system and encourage greater competition, the government
reintroduced off-floor forex trading in April 1992 using a
computerized dealing system.  However, the Bangko Sentral
imposes ceilings on individual banks' foreign exchange
positions, requiring excess forex holdings to be sold to the
Bangko Sentral or to other banks.  Investment abroad by
Philippine residents using foreign exchange purchased from the
banking system is limited to $3 million per investor per year.
3.  Structural Policies
    Prices of goods and services are generally determined by
internal market forces, with the exception of fuel and basic
public utilities such as transport, water and electricity.  The
government grants certain incentives (such as tax holidays
and/or tax and duty-free privileges on inputs and capital
equipment) to investors in government-preferred activities.
While there are exceptions, private and government-owned firms
generally compete on equal terms.  An ongoing privatization
program is markedly reducing the government's role in many
sectors.
    The Foreign Investments Act of 1991 allows full foreign
ownership of companies engaged in activities not covered by
investment incentives.  Previous regulations used to limit
foreign ownership in Philippine companies generally to
40 percent.  A much reduced "negative list" of sectors where
foreign ownership is either banned or limited remains.  (See
Section 5)
    Trade liberalization and tariff reform programs continue.
The major exception is in agriculture, where 70 percent, by
value, of major production remains protected from import
competition.  Recent reforms have improved access to important
service industries, most recently in telecommunications,
banking and insurance.  In May 1994, the government improved
its build-operate-transfer (BOT) law, first launched in 1990,
by expanding the number of BOT variations, simplifying rules
and regulations, and allowing more flexibility in pricing.
    Over the last two years, the government adopted a number of
tax measures to beef up revenues.  It increased stock
transaction and documentary stamp taxes, restructured cigarette
taxes, imposed a minimum three percent tariff, and increased
various government fees and charges.  In May 1994, legislation
expanding the value added tax base (VAT) was signed into law,
extending the VAT to goods and services such as
telecommunications, lease and sale of real property,
restaurants/caterers/hotels, books, imported meat and,
eventually, to professional and financial services.  (Note:
The constitutionality of the expanded VAT has been challenged
in the courts and implementation remains suspended by a Supreme
Court temporary restraining order.)
4.  Debt Management Policies
    The Ramos Administration has continued the firm commitment
to servicing the country's foreign obligations despite
occasional congressional and other political rhetoric calling
for debt repudiation and/or debt service caps.  Between 1990
and 1992, the government repurchased $2.5 billion in
obligations owed foreign commercial banks and converted
$3.2 billion dollars of eligible debt to long term bonds.
These efforts enabled the Philippines to re-enter the voluntary
international capital markets in 1993 after a decade's absence,
issuing about $900 million dollars in Eurobonds.
    The International Monetary Fund (IMF) approved a three-year
extended arrangement in mid-1994, which the Philippines
envisions as an exit arrangement.  The agreement paved the way
for the fifth Paris Club debt rescheduling round, which was
limited to debt not previously rescheduled.  However, due to
upward pressure on the peso caused by a strong inflow of
foreign exchange, the Philippines decided not to pursue the
Paris Club agreement, but to make payments on schedule.  The
Philippines continues to benefit from various sector-specific
assistance and structural adjustment programs provided by
multilateral institutions such as the Asian Development Bank
and the World Bank Group.
    The growth of the Philippines' foreign debt has slowed
markedly since the mid-1980s, and foreign debt servicing is no
longer a severe problem.  As of March 1994, the debt was
$35.3 billion, or 50 to 55 percent of gross national product.
The ratio of debt service to export receipts is now below
20 percent, from nearly 40 percent in the early 1980s.
5.  Significant Barriers to U.S. Exports
    Tariffs:  Independent of the Uruguay Round, in 1991, the
Philippines began programs to reduce, modify and simplify
tariffs into four tiers of 3, 10, 20 and 30 percent.  With its
scheduled completion in November 1994 of the current tariff
reform program (Executive Order 204), the Philippines' nominal
tariff will average 20 percent.  The government is already
actively considering further comprehensive tariff reductions
stretching to the end of the decade.  The Philippines also
agreed to eliminate quantitative restrictions on agricultural
imports but will be implementing compensating tariffs (at an
estimated 100 percent level), applicable except for minimum
access quotas, which will continue to protect much of that
sector.
    Effective May 1, 1994, a minimum three percent tariff was
established for all imports.  While only 50 tariff lines had
been duty free, 2.5 percent of 1993 imports from the U.S.,
worth $88.5 million, were in those categories.  Electrical
generating sets, which made up 67 percent ($59.4 million) of
duty-free imports from the U.S. in 1993, will be subject to a
10 percent tariff beginning July 1, 1995.
    As part of a structural reform program intended to spur
investments in export industries, Executive Order 189 which
took effect August 22, 1994, lowered tariffs on capital
equipment, components and parts to a range of 3 to 10 percent.
Equipment covered are used in various sectors including
garments and fashion accessories, electronics, pulp and paper,
sporting goods and processed foods.
    To boost the competitiveness of the domestic textile
milling and garments industry, Executive Order 204 will lower
import duties on 790 tariff lines including chemical inputs to
textile manufacturing, textile material inputs and garments,
effective November 17, 1994.
    About 208 "strategic" products will remain subject to
50 percent tariff and in some cases quantitative restrictions.
This group, which includes rice, sugar, fruits, coconut oil,
and luxury goods such as liquor, tobacco, candy and leather
goods, represents about 3.5 percent of tariff lines.
    Imports of U.S. agricultural products have also been
constrained by the "Magna Carta of Small Farmers" which allowed
the Agriculture Department to ban import of goods produced in
"sufficient quantity" locally.  The government has acknowledged
this is in conflict with the implementation of the UR
Agreement/WTO and is making plans for necessary changes.
    Of particular interest to the U.S. is that the sale of
domestically produced meat is exempt from the expanded VAT
while imported beef (high-grade or manufacturing grade cut) is
subject to the tax.  The Finance Secretary has acknowledged
this too may contravene a GATT provision, and has indicated a
change will be made in accordance with the Agreement.
    Import Licenses:  Prior clearance is still required for
more than 100 restricted and controlled items (mostly
agricultural and industrial commodities) generally for reasons
of health, safety or national security.  The National Food
Authority remains the sole importer of rice.  A Board of
Investment (BOI) "authority to import" is required for
commercial vehicles and parts covered by its Progressive
Industrial Development Program.  A Garment and Textile Export
Board (GTEB) "authority to import" is required for imports of
pre-cut fabrics and accessories for processing into finished
garments and textile products for export.
    Commodity imports financed with foreign credits still
require prior approval from the Bangko Sentral ng Pilipinas
(BSP).  The Philippines is a signatory to the GATT Import
Licensing Code.
    Services Barriers:  Banking - A new law, signed in May
1994, will relax restrictions in place since 1948.  A foreign
investor can enter either on a wholly owned branch basis or own
up to 60 percent of an existing domestic bank or new locally
incorporated banking subsidiary.  However, only six foreign
banks (plus four more with presidential discretion) will be
allowed entry on a full service, branch basis.
    Securities - Membership in the Philippine stock exchange is
open to any company (foreign or Filipino) incorporated in the
Philippines.  A foreign investor wishing to purchase shares of
stock is subject to foreign ownership limitations specified by
the constitution and other laws.  Foreign ownership in
securities underwriting companies is limited to a minority.
Foreign firms are not allowed to underwrite securities for the
Philippine market, except under the provisions of the new
Banking Law, (which allows foreign bank branches to operate as
universal banks).  Foreign firms may underwrite Philippine
issues for foreign markets.
    Insurance and Travel Agencies - For at least two years
effective October 24, 1994, these sectors were opened to full
foreign ownership (See Section 5 - Investment Barriers).
However, the implementing rules and regulations have not yet
been made public, so the conditions on market entry are not yet
known.
    Legal Services:  Specific requirements to practice law in
the Philippines are Philippine citizenship, graduation from a
Philippine Law School, and membership in the Integrated Bar of
the Philippines.
    Standards, Testing, Labelling, and Certification: The
Philippine government, for reasons of public health, safety and
national security, implements regulations that affect U.S.
exports of drugs, food, textiles and certain industrial goods.
Notable examples follow:
    (a) The Department of Health's (DOH) renewed campaign for
the full implementation of the "Generic Act" of 1988 focuses on
the vigorous promotion of cheap generic drugs.  The generic
name must appear above a drug's brand name.
    (b) Imports of high-grade beef, fresh fruits, vegetables
and seeds are controlled through phytosanitary certification
which is often costly.
    (c) Labeling is mandatory for textile fabrics, ready-made
garments, household and institutional linens and garment
accessories.
    (d) Local inspection for standards compliance is required
for imports of about 30 specific industrial products, including
lighting fixtures, electrical wires and cables, sanitary wares
and household appliances, portland cement and pneumatic tires.
For other goods, however, U.S. manufacturers'
self-certification of conformance is accepted.  The Philippines
is a signatory to the GATT Standards Code.
    Investment Barriers:  A more liberal foreign investment law
(the Foreign Investment Act of 1991, or FIA) for activities not
eligible or not seeking investment incentives allows foreign
equity beyond the 40 percent ceiling imposed by previous
investment regulations.  However, there are important
exceptions, one being that foreigners are not allowed to own
land except in partnership with Filipinos (in which case the
foreign investor's share is limited to 40 percent).  The FIA
also contains a foreign investment "negative list" with these
categories:
    A)  List A specifies activities in which foreign
participation is either excluded or limited by the Constitution
and other statutes.  Investments in mass media, the practice of
licensed professions (including legal services), retail trade,
cooperatives, small scale mining and private security agencies
are exclusively for Filipinos.  Varying foreign ownership
ceilings are imposed on companies engaged in, among others,
advertising, employee recruitment, construction, financing, and
the exploration and development of natural resources.
    B)  List B limits foreign ownership (generally to
40 percent) for reasons of public health, safety and morals,
and to protect local small and medium-sized firms.  To protect
small domestic enterprises, non-export firms must be
capitalized at a minimum of $500,000 to exceed the 40 percent
foreign ownership requirement.
    C)  List C limits foreign ownership in activities
"adequately served" by existing Philippine enterprises.
    Until October 23, 1994, the FIA was guided by a three-year
"transitory" foreign investment negative list.  The government
released the first "regular" negative list in June 1994, which
took effect on October 24, 1994.  Activities included under
lists A and B were unchanged.  Effective October 24, List C was
"empty", opening activities and services such as insurance,
travel agencies, tourist lodging establishments,
conference/convention organizers, and import and wholesale
activities not integrated with production to full foreign
ownership.  An "empty" list C also gives existing foreign
licensors in the Philippine market the option to establish
their own majority-owned subsidiaries.  In 1996, sectors can
petition for inclusion in negative list C under a process which
includes public hearings.
    The government imposes a foreign ownership ceiling of
40 percent for firms seeking incentives with the Board of
Investment (BOI) under the government's annual Investment
Priorities Plan (IPP).  While this ceiling may be exceeded in
certain cases -- i.e., the activity is defined as "pioneer", or
least 70 percent of production is for export, or the enterprise
locates in an area classified as "less developed" -- divestment
to the 40 percent foreign ownership ceiling is required within
30 years.  Industry-wide local content requirements are also
imposed under the government's progressive development program
for automobiles.  Current guidelines also specify that
participants in the automobile development program generate,
via exports, a certain ratio of the foreign exchange needed for
import requirements.
    Current Philippine regulations restrict domestic borrowings
by foreign firms.  The limits are set as maximum debt-to-equity
ratios (depending on the type of activity) which must be
maintained for the term of the debt.
    Government Procurement Practices:  In general, Philippine
government procurement policies do not discriminate against
foreign bidders.  However, preferential treatment is given in
the purchase of medicines, rice for government employees, corn
for domestic consumption, and iron and steel products for use
in government projects.  Petroleum requirements by government
agencies must be procured from government-owned sources.
    Awarding of contracts for government procurement of goods
and services have to pass competitive bidding.  For
infrastructure projects which require a public utility
franchise (e.g. water and power distribution, public telephone
and transportation system), the contractor must be at least
60 percent Filipino.  For other major contracts, such as
build-operate-transfer (BOT) projects, where operation may not
include a public utility franchise, a foreign constructor must
be duly accredited by its government to undertake construction
work.  To the benefit of U.S. suppliers, areas of interest
including power generation equipment, communications equipment
and computer hardware do not generally confront significant
restrictions.  The Philippines is not a signatory to the GATT
Government Procurement Code.
    Customs Procedures:  All imports valued at over US $500 are
permitted only with a pre-shipment inspection report called a
"Clean Report of Findings" issued by the authorized outport
inspector.  To fix import duties, the Bureau of Customs
utilizes Home Consumption Value (HCV).  This permits arbitrary
valuation which in many cases (according to extensive anecdotal
evidence) does not reflect the selling price.  Valuation is
inconsistent from country to country.
    The government has committed to replace HCV to conform to
its GATT obligations.  The shift is to be phased in over
several years, first by a move to a modification of the
Brussels definition of value in 1995.  Legislation to replace
the HCV system is pending before the Congress, and it is
doubtful that a change will be implemented before the year
end.  The Philippines is not a signatory to the GATT Customs
Valuation Code.
6.  Export Subsidies Policies
    Enterprises (dominated by exporters) which register with
the BOI to obtain incentives are entitled to tax and duty
exemptions under the Philippine Omnibus and Investment Code of
1987.  These include income tax holidays, tax and duty
exemptions for imported capital equipment, as well as tax
credits for purchases of domestically sourced capital equipment
and raw materials.  Export traders are entitled to tax credits
for imported raw materials required for packaging.
    Financing is available to all Philippine exporters and
there is no preferential rate for domestic companies.  Without
prior BSP approval, exporters may avail themselves of foreign
currency deposit unit (FCDU) loans from local commercial banks
up to 100 percent of the letter of credit, purchase order or
sales contract.  To cushion the impact of a strong peso
(between January and August 1994 the peso appreciated against
the US dollar by five percent from 27.724 to 26.313), the BSP
further eased export financing rules.  Recently, FCDU loans
were made available also to indirect exporters who are now
allowed to spend the dollar loan to cover not only their dollar
requirements, but also their peso requirements provided
proceeds of the loans will be used for the production of export
goods.
    An Export-Import Banking Program of the Development Bank of
the Philippines, launched primarily to address the needs of the
exporting community, reduced interest rates from 13 to
11.5 percent between August and September 1994.  In particular,
export-oriented activities that are labor-intensive and which
will utilize local raw materials benefit from this program.
The Philippines is a signatory to the GATT Subsidies Code.
7.  Protection of U.S. Intellectual Property
    While Intellectual Property Rights (IPR) protection is
improving, serious problems remain, and the issue remains a
bilateral trade concern.  Current penalties for infringement
and counterfeiting are not real deterrents.  Insufficient
funding hampers the effective operation of agencies tasked with
IPR enforcement.  Joint government-private sector efforts have
improved administrative enforcement, but when IPR owners must
use the courts, enforcement is slower and less certain.
    In February 1993, President Ramos created the Inter-agency
Committee on Intellectual Property Rights as the body charged
with recommending and coordinating enforcement oversight and
program implementation.  The Philippine government is a party
to the Paris Convention for the Protection of Industrial
Property, the Patent Cooperation Treaty, and the Bern
Convention for the Protection of Literary and Artistic works.
It is a member of the World Intellectual Property Organization.
    The Philippines was moved from the U.S. Trade
Representative's special 301 "priority watch list" to the
"watch list," following a bilateral IPR agreement signed in
April 1993 which commits the Philippine government to improve
its legislative protection and to strengthen enforcement
significantly.  The Philippine government has generally
complied with the agreement, except for legislative
improvements.  Legislation incorporating all legislative
commitments under the bilateral was targeted for submission to
Congress before June 1994.  The government did not, however,
meet the deadline, but remains committed to submitting the
legislation.
    Patents:  The present law recognizes the possibility of
compulsory licensing two years after registration with the
Patent, Trademark and Technology Transfer Board, if the
patented item is not being utilized in the Philippines on a
commercial scale, or if domestic demand for the item is not
being met to an "adequate extent and on reasonable terms."
Compulsory licensing is easier for pharmaceutical and food
products, because use, inadequate production for domestic
demand, etc. need not be established.  In the bilateral IPR
agreement of April 1993, the government committed to submit to
the Philippine Congress an amendment to the patent law which
will allow importation to satisfy "working requirements" for
patented goods.  Starting March 15, 1993, rules on royalty
payments were relaxed somewhat, granting automatic approval for
royalty agreements not exceeding five percent of net sales.
Royalty rates higher than five percent may be allowed in
meritorious cases.  Naturally occurring substances (plants or
cells, for example) are not patentable.
    Trademarks:  Trademark counterfeiting is widespread.  Many
well-known international trademarks are copied, including denim
jeans, designer shirts, and personal beauty and health care
products.  Some US firms--for example Disney--have had success
in curbing piracy in cooperation with Philippine enforcement
agencies.  The National Bureau of Investigation (the Philippine
equivalent of the FBI) has been cited by the private sector for
its excellent cooperation recently in conducting raids against
trademark violators.  Under the terms of the U.S.-Philippine
IPR agreement, the government will seek amendments to the
Philippine trademark law to provide protection for
internationally well-known marks.
PHILIPPI2
&U.S. DEPARTMENT OF STATE
PHILIPPINES: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
    Philippine law requires trademark owners to file an
affidavit of use or justified non-use with the Patents,
Trademark and Technology Transfer Board every five years to
avoid cancellation of trademark and registration.  Non-use of a
mark must be for reasons totally beyond the control of a
registrant.  (Import bans, for example, constitute justified
non-use.)  Current practice provides that internationally
well-known marks should not be denied protection because of
non-registration or lack of use in the Philippines.  Pending
legislation seeks to incorporate this practice into Philippine
law.  Trademark protection is limited to the manufacturing or
marketing of the specific class of goods applied for, and to
products with a logical linkage to the protected mark.
    Copyrights:  Philippine law is overly broad in allowing the
reproduction, adaptation or translation of published works
without the authorization of the copyright owner.  A
presidential decree permits educational authorities to
authorize the reprint of textbooks or other reference materials
without the permission of the foreign copyright holder, if the
material is certified by a school registrar as required by the
curriculum and the foreign list price converts to 250 pesos
(about US $10) or above.  This decree, especially for
textbooks, is inconsistent with the appendix of the 1971 text
of the Berne Convention.  However, the Philippine government is
expected, under the terms of the bilateral IPR agreement with
the U.S. reached in April 1993, to correct these deficiencies
through accession to the Paris Act of the Berne Convention, and
through amendments to its domestic legislation.
    Video piracy is a serious problem, but has declined from
about 80 percent of the market a few years ago to about
60 percent now.  The government's Videogram Regulatory Board
(VRB) is tasked with fighting video piracy.  Due to budget
constraints, the bulk of its efforts are focused in Metro
Manila.  Copyright protection for sound recordings, currently
30 years, is shorter than the internationally accepted norm of
50 years.  The government has committed to submitting
amendments to the Philippine Congress to bring the term of
copyright protection into conformity with international norms.
Industry sources estimate that piracy of recorded music--mostly
cassettes, although imported pirated CDs from the UAE and China
are starting to show up in Metro Manila shops--has fallen to an
average of about 40 percent.  About 98 percent of all computer
software sold is pirated.  Computer shops routinely load
software on machines as a free "bonus" to entice sales.  The
Philippine government is probably the largest user of pirated
software, although some agencies are reportedly considering
shifting to legitimate versions.
    New Technologies:  Many shops rent video laser discs
purchased at retail stores in the United States without payment
of commercial rental fees.  More recent issues involve
copyright infringement complaints against cable television
stations which re-transmit copyrighted works without
authorization from or payment to the copyright owners.  The
bilateral IPR agreement of April 1993 commits the government to
fully enforce the protections afforded to audio-visual works
under Philippine laws and regulations.
8.  Worker Rights
    a.  The Right of Association
    The right of workers, including public employees, to form
and join trade unions is assured by the Constitution and
legislation, and is freely practiced without government
interference throughout the country.  Trade unions are
independent of the government and generally free of political
party control.  Unions have the right to form or join
federations or other labor groupings.  Subject to certain
procedural restrictions, strikes in the private sector are
legal.  Unions are required to provide strike notice, respect
mandatory cooling-off periods, and obtain majority member
approval before calling a strike.  A 1989 law stipulates that
all means of reconciliation must be exhausted, and the strike
issue has to be relevant to the labor contract or the law.
    b.  The Right To Organize and Bargain Collectively
    The right to organize and bargain collectively is
guaranteed by the Philippine constitution.  The Labor Code
protects and promotes this right for employees in the private
sector.  The same right is extended to employees in
government-owned or controlled corporations.  A similar but
more limited right is afforded to employees in most areas of
government service.  Dismissal of a union official or worker
trying to organize a union is considered an unfair labor
practice.  Nevertheless, employers sometimes attempt to
intimidate workers by threats of firing or closure.  Although
labor law and practice are uniform throughout the country,
including export processing zones (EPZs), unions have been able
to organize workers in only one of the EPZs.  Work stoppages
and total man-days lost to labor strife have been trending
downward, with 64 work stoppages (involving 390,000 workdays)
recorded in the first 8 months of 1994.  On an annualized
basis, this suggests current year totals some 20 to 30 percent
lower than those in 1993.
    c.  Prohibition of Forced or Compulsory Labor
    The Philippines prohibits forced labor.  As the world's
foremost "exporter" of both unskilled and trained labor, it is
sensitive to reports of abuse of Philippine workers overseas.
    d.  Minimum Age for Employment of Children
    Philippine law prohibits the employment of children below
age 15, except under the direct and sole responsibility of
parents or guardians, or where employment in
cinema/theater/radio or television is essential.  The
parent/guardian or employer is required to ensure the child's
health, safety, and morals, to provide for the child's
education or training, and to procure a work permit.  The Labor
Code allows employment for those between the ages of 15 and 18
for such hours and periods of the day as are determined by the
Secretary of Labor but forbids employment of persons under
18 years in hazardous work.  However, a significant number of
children are employed in the informal sector of the urban
economy or as field laborers in rural areas.
    e.  Acceptable Conditions of Work
    The Minimum Wage Act of 1989 authorized Tripartite Regional
Wage Boards to set minimum wages.  Rates were last revised in
late 1993, with the highest in Manila and lowest in rural
regions.  The minimum wage for workers in the National Capital
Region (NCR) was approximately US $5.60 (145 pesos) per day.
Wage boards outside the NCR, in addition to establishing lower
minimum levels, also exempted employers according to such
factors as establishment size, industry sector, involvement
with exports, and level of capitalization.  This approach
excludes substantial numbers of workers (especially
agricultural workers, domestics, laborers, janitors,
messengers, and drivers) from coverage under the law.  Detected
minimum wage violations surged in the immediate aftermath of
1993 rate revisions, when inspectors found one in four
employers paying less than the minimum.  The standard legal
work week before overtime is 48 hours for most categories of
industrial workers and 40 hours for government workers.  The
law mandates a full day of rest weekly and overtime for any
hours worked over an eight per day limit.  Employees with more
than one year on the job are entitled to five days of paid
annual leave.  A comprehensive set of occupational safety and
health standards exists in law.  Enforcement statistics suggest
a downtrend in "technical safety standard" violations, from
20 percent of inspected units in 1992 to 18.2 percent in 1993,
and 15.4 percent in the first five months of 1994.  Statistics
on work-related accidents and illnesses are incomplete, as
incidents (especially in regard to agriculture) are
under-reported.
    f.  Rights in Sectors with U.S. Investment
    American and other established multinational firms apply
U.S., European, or Japanese standards of worker safety and
health to meet the requirements of their home-based insurance
carriers.  They also treat their work force according to
professional employee management principles.  Firms in the EPZs
have resisted efforts to unionize their workers.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                               (1)
Total Manufacturing                                     960
  Food & Kindred Products                   275
  Chemicals and Allied Products             386
  Metals, Primary & Fabricated               27
  Machinery, except Electrical               -2
  Electric & Electronic Equipment           161
  Transportation Equipment                    0
  Other Manufacturing                       114
Wholesale Trade                                         151
Banking                                                 368
Finance/Insurance/Real Estate                           (1)
Services                                               -196
Other Industries                                          6
TOTAL ALL INDUSTRIES                                  1,170
(1) Suppressed to avoid disclosing data of individual companies
Source: U.S. Department of Commerce, Bureau of Economic
Analysis
POLAND1
qU.S. DEPARTMENT OF STATE
POLAND: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                              POLAND
                     Key Economic Indicators
                    (Millions of U.S. dollars)
                                    1992      1993       1994
Income, Production and Employment:
Real GDP (1990 prices)            56,305    58,474     61,105
Real GDP Growth (pct.)               2.6       3.8        5.1
GDP (at current prices)           84,323    85,759     88,559
GDP By Sector:  (pct.) 1/
  Agriculture                        6.8       7.0        6.5
  Energy/Water                       N/A       N/A        N/A
  Manufacturing                     38.0      32.9       37.6
  Construction                       8.6       7.0        10
  Rents                              N/A       N/A        N/A
  Financial Services                 N/A       N/A        N/A
  Other Services                     N/A       N/A        N/A
  Government/Health/Education        N/A       N/A        N/A
 Net Exports of Goods & Services     N/A       N/A        N/A
Real Per Capita GDP (1990 base)    1,468     1,520      1,585
Labor Force (000s)                17,329    17,321     17,320
Unemployment Rate (pct.) 2/         13.6    15.7/16.4    16.7
Money and Prices:  (annual percentage growth)
Money Supply (M2)                   56.5      37.0       34.0
Base Interest Rate                    38        35         31
Personal Saving Rate                22.4      20.7        N/A
Wholesale Inflation                 31.5      35.9       21.9
Consumer Price Index                44.3      37.6       27.0
Exchange Rate (PZL/USD)
  Official                          28.8      33.1       30.1
  Parallel                          27.2      31.8       28.8
Balance of Payments and Trade:  (USD millions)
Total Exports (FOB)               13,187    13,471     14,280
  Exports to U.S.                  374.4     410.7        650
Total Imports (CIF)               15,913    15,761     16,126
  Imports from U.S.                636.6     974.5        960
Aid from U.S.                        179        96         75
Aid from Other Countries             270       370        330
External Public Debt              47,044    47,246     41,000
Debt Service Payments (paid)       2,393     2,509      2,000
Gold and Foreign Exch. Reserves
   (end of year/USD billions)       4.20      4.28       6.07 3/
Trade Balance                     -2,726    -2,290     -1,846
  Trade Balance with U.S.           -262.2    -563.8     -310.0
N/A--Not available.
1/ In some cases the statistical systems and methods applied in
Poland differ from those used in U.S.  The GDP by sectors is
presented in Polish statistical publications as follows:
                                  1992      1993      1994
    Industry                       39.6      32.9      37.6
    Agriculture                     7.3       7.0       6.3
    Construction                   11.2      11.3      10.0
    Transportation/Communications   3.5       3.5      n/a
    Trade                          15.0      15.0      n/a
2/ Basis of calculation changed in December 1993.
3/ End of August 1994.
1.  General Policy Framework
    In 1994 the Polish economy continued its strong recovery
from recession.  Most of the trends seen in recent years
continued.  Statistically, industrial output was the
fastest-growing sector of GDP, pulling along the rest of the
economy (most economists believe growth of the services sector
was also strong, but this is not adequately measured by Polish
economic statistics).  Agriculture remained handicapped by its
structural problems and its output was depressed by drought for
the second time in three years.  Inflation remained high, but
once again was lower than in the previous year.  One important
change was that the trade deficit was substantially less than
in the last two years, largely because of strong growth of
exports, particularly to the former Soviet Union.
    After a year of government by the post-communist coalition
which came to power after the 1993 elections, the main outlines
of economic policy remain unchanged.  Despite many pressures
from its supporters for increased spending, the government has
held the line on deficit spending.  However, progress on
privatization and other structural reforms has been slow and
uncertain.  A number of sectors highly attractive to foreign
investors have so far been held off the market, including
telecommunications and the tobacco industry.
    Monetary policy remains in the hands of the National Bank
of Poland (NBP), which continues to focus on control of
monetary aggregates to maintain economic stability and reduce
inflation.  The main challenge the NBP faced in 1994 was to
restrain money-supply growth caused by the rapid build-up of
foreign exchange reserves.
    Poland's main foreign economic policy goal remains
membership in the European Union.  Together with Hungary,
Poland filed an application for membership in the EU in April,
1994.  Poland's association agreement with the EU, signed in
1991, was finally ratified by the EU and came into force in
1994, although this was largely symbolic, since the trade
provisions had been provisionally applied since 1992.
Relations with the EU warmed considerably, but remained
strained by the EU's reluctance to speed integration of Poland
or to open some of its most protected markets to Polish
products.  The Polish government continued to seek an end to
anti-dumping actions by the EU, as well as improved market
access for Polish food products, coal, steel, and textiles.
Poland's imposition of a variable levy on a number of
agricultural products has been hotly protested by the EU,
although the levy seems to have had minimal impact on trade.
It is uncertain whether this is because, as the Polish Ministry
of Agriculture claims, it covered very little trade, or because
the mechanism was designed in a way that made it highly
vulnerable to fraud, or if the bulk of covered imports were
always for processing and re-export, and subject to drawback of
the levy.
    Poland completed negotiation of a Uruguay Round tariff
schedule and signed the Marrakesh Agreement in April, 1994.
However, the United States and several other trading partners
used the related process of Poland's re-accession to the GATT
to continue negotiations seeking further concessions on a few
items.  The Polish government has indicated it will not seek
ratification of the Marrakesh Agreement until GATT re-accession
is completed, changing Poland's status from a non-market to
market economy, and its schedule of concessions from
quantitative import quotas to a bound tariff schedule.
    A major component of Poland's economic recovery has been
the sale of goods to non-residents visiting Poland.  Estimates
of this trade range as high as over $4 billion a year (about
five percent of GDP).  Because of the relatively low price of
gasoline in Poland (about $1.75/gallon, versus $3.50/gallon in
Germany), there is essentially no cost for Germans living up to
300 kilometers from Poland to come shopping in Poland.  For the
last three years, Germans have come to Poland by the millions
to buy food, clothing, and gasoline.  In 1994, it became
increasingly evident that Russians were also engaging in this
trade, although they were often importing as well as exporting,
and while the Germans came looking for bargains, the Russians
often were looking for imported luxury goods, such as designer
fashions and household appliances.  Receipts from this trade,
recorded in the Polish balance of payments as short-term
capital flows, are the largest source of the increases in
Poland's foreign exchange reserves seen since mid-1993.
2.  Exchange Rate Policies
    The zloty has been internally convertible for all current
transactions since January, 1990.  This includes full
repatriation of profits on foreign investments.  Since October,
1991 the NBP has managed the exchange rate through a crawling
peg mechanism.  This devalues the zloty by small daily
increments (currently totalling 1.5 percent per month) to
offset domestic inflation and keep Polish exports competitive.
Exporters have long felt that the rate of devaluation was too
slow, although their pressures for faster devaluation have been
weaker this year than in the preceding two years.  The exchange
rate is set against a basket of reserve currencies, currently
the dollar (45 percent), the D-mark (35 percent), sterling (10
percent), and the French and Swiss francs (five percent each).
Zloty rates against individual currencies fluctuate in
accordance with changes in cross rates within the basket.
    Capital transactions remain controlled.  A license from the
NBP is required for Poles to receive foreign credits, except
for credits up to $1 million to be used to purchase goods or
services abroad.
3.  Structural Policies
    Prices:  Most subsidies and controls on the prices of
consumer goods have been eliminated.  Subsidies remain on a few
items, including pesticides and fertilizers.  Prices for fuel,
public transportation, and rents for publicly owned housing
(the bulk of the housing stock) are set administratively.
Housing rents are set well below the cost of maintaining the
buildings.  There is an anti-monopoly office, responsible for
policing the competitive practices of Polish enterprises and
keeping them from exploiting their monopoly positions on the
domestic market.
    Taxes:  Although many administrative problems remain,
Poland has been highly successful in introducing a modern tax
system.  The largest source of government revenue is the
value-added tax introduced in 1993, and the second-largest is
the personal income tax introduced in 1992.  Customs duties
remain a significant source of revenue, contributing about nine
percent.
    Regulatory Policies:  Any person or firm registered as a
business may engage in foreign trade.  State-owned trading
companies compete with private traders.  Many of the state
trading companies have been privatized, and one, Elektrim, is
Poland's largest private company.
    Few restrictions are placed on foreign trade, except on
items in strategic areas.  Import licenses are required only
for the import of radioactive materials, munitions and military
goods, internationally-controlled strategic items, fuel,
cigarettes, and liquor.  Imports of some high-proof spirits,
cars over ten years old, and commercial vehicles and farm
machinery over three years old are banned.
    Export licenses are required for products in the following
areas:
    --petroleum products: fuels for engines other than
    aircraft; fuel for self-ignition engines; fuel oil;
    --metals: non-ferrous scrap; lead, aluminum;
    --soil products: nitrogenous fertilizers; peat and peat
    products; phosphatic fertilizers; potassic fertilizers;
    --plastics: polyethylene; polypropelene; copolymer
    ethylene; propylene;
    --polyvinyl chloride;
    --synthetic rubber and synthetic fiber;
    --chipboards; wood cellulose; waste paper;
    --preserved and half-tanned hides;
    --munitions;
    --internationally controlled strategic goods.
The export of live geese and goose eggs is banned.  The law
does not distinguish between foreign and domestic investors for
purposes of trade.
4.  Debt Management Policies
    In 1994 Poland concluded a debt-reduction deal with its
London Club group of commercial banks.  This reduced its debt
to foreign commercial banks from $14.4 billion to $8 billion,
and stretched out repayment to 2024.  Poland had previously
rescheduled its debt to the Paris Club group of Western
official creditors.  In 1994 the Paris Club executed the second
(and last) tranche of its 50 percent reduction of Poland's
official debt.
5.  Significant Barriers to U.S. Exports
    U.S. exports have been disadvantaged by Poland's
association agreement with the EU because of the tariff
preferences given to the EU by the trade provisions of that
agreement.  However, the damage was alleviated by a package of
concessions implemented by the Polish government in 1993.
Additional relief is provided in Poland's Uruguay Round tariff
schedule and the tariff schedule still being negotiated for
Poland's GATT re-accession.
    Standards of testing, labelling, and certification in some
cases have presented barriers to U.S. exports.  In some cases
they are more rigid and specific than equivalent regulations in
Western countries.  Existing regulations are being revised to
reflect Poland's new open trade regime and to conform to EU
standards, but periodically modifications are introduced which
are quirky, hard to understand, and difficult to comply with.
Standards enforcement remains in need of improvement.  The
Ministry of Health's Central Inspectorate of Sanitation
(Sanepid) inspects and tests food and cosmetic imports to
ensure they meet health standards.  Sanepid has been
overwhelmed by the increase in food imports since 1990, and
much food enters the Polish market without inspection.  U.S.
firms have not encountered difficulties getting approval to
sell pharmaceuticals in Poland, providing the products have
been approved for sale in Western countries.
    Service Barriers:  Foreign banks are permitted to establish
subsidiaries in Poland, either wholly-owned or in partnership
with Polish investors.  Out of a feeling that there are already
too many small banks in Poland, the NBP has sought to pressure
foreign banks to buy ailing Polish banks instead of opening new
subsidiaries.  While the law provides for foreign banks opening
branches in Poland, the NBP dislikes the regulatory
complications of this form of organization and is unlikely to
license branches in the near future.
    Foreign insurance firms are able to enter the Polish
market.  Foreign companies are prominent in the travel and
tourism industry, but entry is regulated by the Ministry of
Industry and Trade.
    Investment Barriers:  The present law on foreign investment
aims at creating a level playing field for foreign investors,
and eliminated most of the investment incentives previously
granted.  Requirements for incorporating foreign-owned firms
are now the same as for Polish-owned firms.  Foreigners are
limited to investing via corporations, not partnerships or sole
proprietorships.
    One hundred percent foreign ownership is permitted.  No
registration of an investment with the government is required,
nor is any screening applied, except in the following cases:
    --Real Estate:  Foreign acquisition of real estate, by
purchase or long-term lease, or foreign acquisition of 49
percent or more of a Polish enterprise owning real estate,
requires a permit from the Minister of the Interior.
Foreigners may lease forests and agricultural land for up to 99
years, but may not buy it outright.  Reports to parliament show
that several thousand permits are applied for each year.  While
a majority are issued, a substantial number are refused.
    --Strategic Industries:  A permit from the Minister of
Privatization is required for foreign investment in:
       -operation of sea- or airports;
       -real estate agency transactions;
       -defense industries;
       -wholesale trade in consumer goods;
       -performance of legal services.
A permit can only be denied when a proposed investment would
threaten the economic interests of the state or state security.
    Present law provides only limited incentives for foreign
investment.  An investor may apply to the Ministry of Finance
for a tax holiday if his equity exceeds ECU 2 million and one
of the following conditions is met:
    --The company will operate in regions of high structural
    unemployment;
    --The company will introduce new technologies;
    --The company will export at least 20 percent of its output.
However, the Ministry of Finance takes the position that even
if these conditions are met, granting of a tax holiday is at
its discretion.
    In addition to the tax holidays provided in the foreign
investment law, the Polish government has used provisions of
the customs law providing duty free entry for parts and
components of goods to be assembled in Poland as an incentive
for foreign investors.  This has been especially significant in
the automobile industry, where the government has sought
partners for its many financially ailing car and truck
factories.  Beneficiaries of tariff rate quotas to import
automobile, truck, or bus parts and components have included
Fiat, Opel, VW-Skoda, Peugeot, and Volvo.
    Poland is eligible for political risk investment insurance
and credit guarantees from OPIC, and for EXIM Bank export
credits and guarantees.
    Government Procurement Practices:  Improvement of
government procurement practices is an important issue for the
Polish government.  It is preparing a new law governing
procurement.  Large procurements are already usually done by
some sort of tender process, but in the absence of a law or
regulations there are often questions about the procedures
used.  Poland has not signed the GATT Code on Government
Procurement because of inconsistencies in its legislation.  It
may sign the code after adoption of the new legislation.
    Customs Procedures:  The Polish Customs Service has been a
leading victim of economic reform.  The rapid growth of imports
over the last four years, as well as the proliferation of
traders, has strained Customs' capabilities.  Customs'
facilities and personnel are overloaded by the volume of cargo
they must process.  The competence of personnel is not high.
Communications between headquarters and field offices is poor,
leading to inconsistent application of the rules.  The greatest
problems have occurred at road crossings on the German border,
where officials are overwhelmed by the volume of traffic
entering Poland, much of it in transit to the former Soviet
Union.  Poland signed the GATT Customs Valuation Code in 1989.
While it has never been ratified, the substance has been
incorporated into Polish customs law.
6.  Export Subsidies Policies
    Poland has signed the GATT Subsidies Code, but never
ratified it.  Present plans are to ratify the new code embodied
in the Uruguay Round.  Poland has eliminated its past practices
of tax incentives for exporters, but it still offers some tax
holidays to foreign investors who plan to export.  A new law on
restructuring the sugar refining industry has the potential for
creating export subsidies for sugar, financed out of high
domestic prices.
7.  Protection of U.S. Intellectual Property
    Intellectual property is an area of concern, particularly
in copyright matters.  However, the Polish government has made
major strides in improving protection.  The enactment of a new
copyright law in February 1994 gave it a complete set of modern
intellectual property laws.  Full adherence to the 1971 Paris
Act of the Berne Convention in July, 1994 was also an important
step in guaranteeing protection to foreign authors.  There is
still a question whether the new copyright law protects the
rights of foreign producers and performers of sound
recordings.  Ultimately, entry into force of the Uruguay Round
TRIPS agreement will guarantee that protection, but in the
meantime there is a question, which the Polish government could
remove by reversing its position and signing the Geneva
Convention on Phonograms.
8.  Worker Rights
    a.  The Right of Association
    The Polish government has ratified Convention 87 of the
International Labor Organization (ILO).  Laws concerning
employment, trade unions and collective bargaining were revised
in early 1991.  Currently, all workers, including the police
and frontier guards, have the legal right to establish and join
trade unions of their own choosing, the right to join labor
federations and confederations, and the right to affiliate with
international labor organizations.  Independent labor leaders
reported that these rights were largely observed in practice.
    Regarding the right to strike, the Trade Union Act of 1991
is less restrictive than the 1982 version passed soon after
imposition of martial law, but still prescribes a lengthy
process before a strike can be launched.  When strictly
observed, the law provides several opportunities for employers
to challenge a pending strike, including the threat of legal
action.  An employer must start negotiations the moment a
dispute begins.  In August 1994, the government announced that
this process would be shortened.
    Under existing law, negotiations end with either an
agreement or a protocol describing the differences between the
parties.  If negotiations fail, a mandatory mediation process
ensues; the mediator is appointed jointly by the disputing
parties or, absent agreement between them, the Ministry of
Labor and Social Policy.  If mediation fails, the trade union
may launch a warning strike for a period of up to 2 hours or
seek arbitration of the dispute.  Both employers and employees
have frequently questioned the impartiality of the mediators.
    A full-fledged strike may not be launched until 14 days
after the dispute is announced (strikes are prohibited entirely
in the Office of State Protection, in units of the police,
firefighters, military forces, prison services and frontier
guards).  If the strike is organized in accordance with the
law, workers retain their right to social insurance benefits
but not pay.  If a strike is "organized contrary to the
provisions of the law," workers may lose social benefits and
organizers are liable for damages and may face civil charges
and fines.  Laws prohibiting retribution against strikers are
not consistently enforced; the fines imposed as punishment are
so minimal that employers can easily afford to pay them.
    In September 1994, the government announced that
legislation proposing important changes in existing laws
governing trade unions, employers and the resolution of labor
disputes would be sent to the Sejm before the end of the year.
Senior officials proposed re-defining a "legal" strike to
prohibit "occupation," hunger and "political" strikes as well
as raising the threshold necessary for a successful strike vote
to a minimum of 50 percent of all enterprise workers.  The
government also announced its intention to raise the number of
workers necessary to form a trade union.
    These and other proposals grew out of the government's
"strategy for Poland," announced in June, 1994, which included
a comprehensive attempt to adapt the many existing, and
outdated, laws governing labor activity to Poland's emerging
market economy.  In August, the government sent a revised labor
code to the Sejm under the "strategy" framework, in effect
abandoning the landmark February 1993 "State Enterprise Pact,"
which had set forth a detailed framework for dealing with
labor-related issues and to which the unions, employers and
government had agreed.  In the interim, legal ambiguities
continued, leading to some labor tensions.
    b.  The Right to Organize and Bargain Collectively
    Poland has ratified ILO Convention 98 on the right to
organize and bargain collectively.  The 1991 law on trade
unions created a favorable environment to conduct trade union
activity through provisions for time off with pay, as well as
facilities and technical equipment in the enterprise, provided
by the employer.  In August, the government announced its
intent to reduce some employer-provided, union-related costs in
enterprises which have a large number of unions (some
have as many as 50).
    Notable weaknesses included weak sanctions for anti-union
discriminiation.  Polish law also lacked specific provisions to
ensure that a union has continued rights of representation when
a state firm undergoes privatization, commercialization,
bankruptcy, or sale.  Labor leaders claimed that this ambiguity
led to underrepresentation of unions in the large and growing
private sector.  There were also a number of confirmed cases
where Solidarity activists were dismissed for labor activity
permitted under Polish law, including organizing strikes.
    Unions, management and workers' councils currently set
wages in ad hoc negotiations at the enterprise level.
Collective bargaining as a system of industrial relations is
expected to encompass an ever larger percentage of the
workforce.  By fall 1994, both unions and employers were
preparing themselves for such a relationship.  During 1994, the
government repeatedly stated its intention not to be drawn into
labor disputes, as has been the tendency historically.
    The government continued its ceiling on wages in state and
private enterprises (except May-August when the Sejm and the
President disputed the law) by means of a penalty tax, the
so-called "neo-popiwek."  In an attempt to link wages to
increased productivity and reduce inflationary pressures in the
state sector, the government charged a penalty to any firm
(which does not produce for export) that increased its average
wage in excess of a government-set "coefficient."  Enforcement
of the neo-popiwek effectively discouraged enterprise or
sectoral-level collective bargaining on wages.  Both Solidarity
and OPZZ challenged the tax in the Polish constitutional court.
    Current government policy aims to liberalize investment
procedures for both domestic and foreign firms rather than
promote special incentive programs.  Special duty-free zones
exist in or have been contemplated for some  5-20 locations
throughout Poland but, with the exception of one zone in Poznan
and one in Mielec (in south-eastern Poland), have not attracted
much attention.  Thus, traditional export processing zones that
relax legal guarantees do not, at this time, comprise a threat
to workers' rights to organize.  However, collective bargaining
either does not exist there or is in its early stages of
development.
    c.  Prohibition of Forced or Compulsory Labor
    The Polish government has ratified Conventions 9 and 105 of
the ILO on forced labor.  Compulsory labor does not exist in
Poland, although it is not prohibited by law.  Drafts of the
new constitution proposed by some political parties contained
explicit prohibitions, but a new constitution is not expected
to be approved until 1995.
    d.  Minimum Age for Employment of Children
    Poland has ratified ILO Convention 138 on child labor.  The
labor code forbids employment of persons under the age of 14.
Persons aged 14-18 may be employed only if they have completed
basic schooling and if the proposed employment constitutes
vocational training and is not harmful.  The age floor rises to
18 if a particular job might pose a health danger.  The
government enforces legal protection of minors, but its
inability to monitor the growing private sector, which now
accounts for some 60 percent of all Polish employment, leaves
officials less certain the problem does not exist.
    e.  Acceptable Conditions of Work
    A national minimum wage is negotiated every 3 months on a
tripartite basis by the government, employers and the trade
unions.  Minimum wages for state-owned enterprises were roughly
$90 (ZL 2,050,000) per month at the October 1 exchange rate,
which was insufficient to provide a worker and family a decent
living.  Minimum wage has the force of law, but a significant
number of foreign guest workers received less than the minimum
wage, especially in the construction amd agricultural sectors.
The average gross monthly wage rose in 1994 to roughly $220.
Despite several recent annual increases in GNP, however, real
wages declined.
    The Polish legal code defines minimum conditions for the
protection of workers' health and safety.  Enforcement is a
growing problem because the state labor inspectorate is unable
to monitor the increasing portion of Polish economic activity
which is in private hands and where a growing percentage of
accidents take place.  In addition, there is a lack of clarity
concerning which government or legislative body is responsible
for enforcing the law.  In 1993, 655 work-related deaths were
reported, representing a slight upward trend over 1992.  The
government itself has noted that work conditions in Poland are
poor and sanctions are minimal.  Standards for exposure to
chemicals, dust, and noise are routinely exceeded.
POLAND2
U.S. DEPARTMENT OF STATE
POLAND: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
    f.  Workers Rights in Sectors of U.S. Investment
    As with the rest of the Polish private sector, it is
impossible to comment authoritatively on workers' rights
because of inadequate monitoring.  Although there were
labor-management disputes in firms with U.S. investment in
1994, there was no consistent pattern and none were protracted
or serious.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                               0
Total Manufacturing                                   232
  Food & Kindred Products                    95
  Chemicals and Allied Products             (1)
  Metals, Primary & Fabricated                4
  Machinery, except Electrical              (1)
  Electric & Electronic Equipment           (2)
  Transportation Equipment                    0
  Other Manufacturing                       (1)
Wholesale Trade                                       -22
Banking                                               (1)
Finance/Insurance/Real Estate                         (1)
Services                                                2
Other Industries                                      (1)
TOTAL ALL INDUSTRIES                                  256
(1) Suppressed to avoid disclosing data of individual companies
(2) Less than $500,000
Source: U.S. Department of Commerce, Bureau of Economic Analysis
(####)
PORTUGAL1
DU.S. DEPARTMENT OF STATE
PORTUGAL: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                             PORTUGAL
                     Key Economic Indicators
        (Millions of U.S. dollars unless otherwise noted)
                                    1992      1993 1/   1994 2/
Income, Production and Employment:
Real GDP (1989 prices) 3/         65,178    54,173    54,030
Real GDP Growth (pct.)               1.1      -1.0       1.1
GDP (at current prices)           96,129    85,107    88,494
By Sector: (pct.)
  Agriculture                      5,190     4,340     4,160
  Energy/Water                     3,749     3,404     3,717
  Manufacturing                   25,089    21,104    21,687
  Construction                     5,191     4,595     4,868
  Services (net)                  56,910    51,664    54,062
Net Exports of Goods,
  Services and Transfers 4/          -20       693      -500
Real Per Capita GDP (USD)          6,974     5,794     5,779
Labor Force (000s)                 4,528     4,504     4,541
Unemployment Rate (pct.)             4.1       5.5       6.7
Money and Prices:  (annual percentage growth)
Money Supply (M2)                   16.1       7.6       5.0
Base Interest Rate 5/               16.0      11.0       9.0
Personal Savings Rate 6/            10.9       8.1       8.8
Retail Inflation 7/                  8.9       6.5       5.3
Consumer Price Index 7/            108.9     116.0     122.1
Exchange Rate (USD/PTE)            135.0     160.8     163.0
Balance of Payments and Trade:
Merchandise Exports (FOB) 4/      18,275    16,699    18,000
  Exports to U.S.                    590       679       750
Merchandise Imports (CIF) 4/      27,675    23,663    24,500
  Imports from U.S.                  916       745       800
Aid from Other Countries           4,129     3,851     3,712
External Public Debt              19,098    19,721    19,500
Debt Service Payments              4,920     5,001     4,500
Gold and Foreign Exch. Reserves   24,335    21,005    21,000
Trade Balance                     -9,400    -6,964    -6,500
  Trade Balance with U.S.           -326       -66       -50
1/ Estimated.
2/ Projected.
3/ GDP at market prices.
4/ As of 1/1/93 on a cash basis.
5/ 91-day Treasury Bills -- primary market.
6/ On new national accounts basis (1986 base).
7/ New Series: 1991 = 100.
1.  General Policy Framework
    The government's economic goal is to modernize Portuguese
markets, industry, infrastructure, and workforce in order to
match the productivity and income levels of its more advanced
European Union (EU) partners.  Portuguese per capita GDP (on a
purchasing power parity basis) reached 64.5 percent of the EU
average by the end of 1993.
    The government's medium-term objective is to be in the
first tier of EU countries eligible to join the Economic and
Monetary Union (EMU) as early as 1997.  To be eligible,
Portugal must reduce inflation, budget deficits, public debt,
and interest rates in line with convergence criteria set by the
European Commission.  The current policy mix to meet these
criteria includes modestly stricter fiscal policy; continued
tight monetary policy in defense of a broadly stable exchange
rate; conservative incomes policies to support the disinflation
process; and privatization and trade policies to increase the
efficiency and productivity of the economy.
    An unexpectedly severe recession, significant fiscal
slippage, and turmoil in the EU exchange rate mechanism
undermined Portugal's EU convergence strategy in 1993.  Faced
with higher unemployment, a markedly weaker government fiscal
position, and dimmer growth prospects than originally
anticipated, financial markets repeatedly tested the
government's commitment to disinflation in 1994.  In response,
the government consistently reaffirmed its commitment to
exchange rate stability.  As a result, inflation is much
reduced, interest rates have come down, and the economy appears
headed for recovery of 1.1 percent in 1994 and 3 percent in
1995.
    Prime Minister Cavaco Silva and the Social Democratic Party
(PSD) face parliamentary elections in 1995.  Some observers
believe the Prime Minister remains committed to the discipline
of EU convergence despite domestic political pressures to boost
the economy in an election year.  They point out that the
government has thus far resisted union demands for a 5 percent
minimum wage increase as part of a one-year social pact and is
letting financial markets set a cautious pace for interest rate
reductions even at the cost of slower growth and higher
unemployment in the short-term.  In addition, they say the
government is aware that the European Commission is linking
disbursement of politically-important EU cohesion funds to
demonstrated progress on meeting EU convergence criteria.
Other observers believe electoral considerations are already
evident.  They point out that government is not planning to cut
the FY-1995 budget deficit as much as might be expected and is
conceding to pressure groups such as local bankers and small
merchants.  Furthermore, they say accelerated declines in
interest rates and a generous off-cycle salary boost cannot be
counted out as electoral concerns build.
2.  Exchange Rate Policy
    Portugal participates with Belgium, Denmark, France,
Germany, Ireland, Luxembourg, the Netherlands, and Spain in the
exchange rate and intervention mechanism (ERM) of the European
Monetary system (EMS).  In accordance with this agreement,
Portugal maintains the spot exchange rates between the
Portuguese escudo and the currencies of the other participants
within margins of 15 percent above or below the cross rates
based on the central rates expressed in European Currency Units
(ECUs). The wider 15 percent band replaced a 6 percent band in
August 1993.
    Portuguese authorities continue to maintain a stable
exchange rate to anchor wage and price expectations.  The
authorities have thus far not used the wider 15 percent margins
to ease policy, but rather have reacted to bouts of exchange
rate pressure by raising interest rates and intervening in the
market.  In particular, since August 1993, the authorities have
kept the escudo well within the old 6 percent band against the
deutsche mark, at approximately PTE 102/DM.  The government
believes the general upward trend in Portugal's export market
shares in recent years indicates the exchange rate continues to
be consistent with maintaining international competitiveness.
3.  Structural Policies
    The Portuguese Government continues to liberalize the
economy to stimulate growth and convergence with EU standards.
EU assistance programs designed to facilitate structural
adjustment in Portuguese agriculture, industry, commerce, and
regional development will approach 4 percent of GDP in 1994.
EU transfers are expected to increase by 8 percent per year
during 1994 to 1999.  Since the Portuguese government must
provide significant counterpart funding of EU transfers, the
structure of government spending is expected to shift markedly
away from current spending to make room for rising public
investment.
    In the labor market, the sharp slowdown in nominal wage
settlements has supported the disinflation effort.  More
broadly, the government is investing in worker training
programs to enhance the quality and mobility of the workforce
and improve its productivity.
    The government's privatization program slowed in 1993 after
advancing rapidly in 1992.  The government took in revenues of
only 400 million dollars in nine privatizations in 1993.  The
pace picked up in 1994, however, with six privatizations
yielding over 700 million dollars in revenues through August.
By year-end 1994, "denationalization" of the banking and
insurance sector will be virtually complete, and major
non-financial state-owned enterprises (including energy and
telecommunications) will be partially or wholly privatized.
The government normally sets maximum foreign ownership
percentages on a case-by-case basis and may retain a
substantial voice in management of selected firms.
4.  Debt Management Policies
    Total external debt stood at $19.7 billion at the end of
1993, or equal to about 23 percent of GDP.  As recently as
1989, external debt represented almost 40 percent of GDP.
Portugal's debt is well structured and can be comfortably
serviced.  Large international reserves, and the ability to tap
international financial markets on favorable terms, will enable
Portugal to manage balance of payments pressures and maintain
financial stability as the economy recovers and imports for
investment revive.  Portugal is an aid donor nation and closely
follows development issues in its former African colonies.
Portugal's aid as a proportion of GDP exceeds the average for
the OECD Development Assistance Committee.
5.  Significant Barriers to U.S. Exports
    As of January 1, 1993, all barriers to trade, capital flows
and labor mobility between Portugal and its EU partners were
eliminated.  Most barriers to U.S. exports, therefore, are
common to all EU member states.
    Policymakers see foreign investment as a crucial pillar in
building a more competitive economy.  The government offers a
very generous package of incentives to investors, including 100
percent foreign-owned subsidiaries.  The package of incentives
can range from 25 to 35 percent of the total investment.
However, the government restricts or excludes private and
foreign participation in some sectors, including sewage
treatment, postal, transportation and water.
    Portugal follows EU directives for standards, testing,
labeling, and certification.  The Portuguese Quality Institute
establishes national standards and implements EU directives.
Portugal has already adopted most EU directives into Portuguese
law.  The Portuguese Telecommunications Institute sets
standards for telecommunication products, and the National
Laboratory Civil Engineering sets Construction Standards.
    Low voltage electrical and electronic equipment must meet
the requirements of EC directive 73/23/EEC.  Imported textiles,
apparel, and leather goods must carry a label indicating
country of origin and composition by percentage of the fabric.
    Government procurement legislation makes no distinction as
to country of origin.  In July 1993, the GATT accepted
Portugal's list of entities covered by the Government
Procurement Code.
    Quantitative import restrictions remain for the following
products:  automobiles, fabrics and nets, fuses, parts of
footwear, iron and steel tubes and pipes, and weaving machines
for certain countries.  Textiles are covered by the Multi-Fiber
Arrangement (MFA) and protected by EU-wide quotas that will be
phased out under the Uruguay Round over 10 years.
6.  Export Subsidies Program
    Portugal has no programs designed to directly subsidize its
exports.  However, EU grants to modernize Portuguese industry
and agriculture may indirectly subsidize Portuguese exports.
Also, government support to public firms, primarily designed to
make them more attractive for eventual privatizations, may be
considered an indirect subsidy.
7.  Protection of U.S. Intellectual Property
    On October 20, 1994, Decree Law 252/94, which transposes
the EU software law, entered into effect in Portugal.  This law
explicitly offers copyright protection for computer programs
and stipulates stiff fines for software piracy.  The government
has undertaken great efforts to improve enforcement, but
small-scale copying occurs.  Business and software
organizations have taken a proactive role in the fight against
piracy.  Portugal is a member of the World Intellectual
Property Organization and is party to the Berne and Universal
Copyright Conventions and the Paris Industrial Property
Convention.
    Trademarks are granted for 10 years and are renewable.
Duration of copyright is life of the author plus 50 years.
Computer programs are not explicitly protected under
copyright.  Enforcement action against unauthorized copying of
software and audio and video cassettes has become more common.
    Patents are granted for 15 years and are not renewable.
Enforcement is sometimes weak, but enforcement agencies are
being strengthened.  In 1991, Portugal enacted patent
protection for chemical products, pharmaceuticals, and food
products.  Portugal's patent law also contains compulsory
license provisions for insufficient use.
8.  Worker Rights
    a. The Right of Association
    Workers in both the private and public sectors have the
right to associate freely and to establish committees in the
workplace to defend their interests.  Unions may be established
by profession or industry.  Strikes are permitted for any
reason, including political causes.  They are common and are
generally resolved through direct negotiations between
management and the unions involved.  There are two principal
labor confederations.  The General Confederation of Portuguese
Workers Intersindical (CGTP-IN) is linked to the Communist
party.  The CGTP is in the process of joining the European
Trade Union Congress (ETUC); ratification of its membership is
now expected to occur in 1995. The General Union of Workers
(UGT) is a pluralist, democratic federation affiliated with the
International Confederation of Free Trade Unions and the ETUC.
    b.  The Right to Organize and Bargain Collectively
    Unions are free to organize without government or employer
interference.  Collective bargaining is guaranteed by the
constitution and practiced extensively in the public and
private sectors.  When collective bargaining disputes lead to
prolonged strike action in key sectors, the government is
empowered to order the workers back to work for a specific
period.  Under a modification of the strike law, a "minimal
level of service" must be provided during certain strikes,
including in the public health, energy, and transportation
sectors.
    c.  Prohibition of Forced or Compulsory Labor
    Forced labor does not exist.  This prohibition is enforced
by the General Labor Inspectorate.
    d.  Minimum Age for Employment of Children
    The minimum employment age is 15 years.  It will be raised
to 16 when the period for 9 years of compulsory schooling takes
effect on January 1, 1997.  The UGT and CGTP-IN have charged
that a number of "clandestine" companies in the textile, shoe,
and construction industries in northern Portugal exploit child
labor.  Despite improvements in the number of inspections
carried out by the General Labor Inspectorate, however, the
government does not allocate resources sufficient to fully
address the problem, which remains unresolved.
    e.  Acceptable Conditions of Work
    The national monthly minimum wage was last adjusted on
January 1, 1993, and is generally enforced but legally does not
apply to workers below the age of 18.  Current legislation
limits regular hours of work to 8 hours per day and 44 per
week, but the workweek will be reduced to 40 hours by 1995.
Overtime is limited to two hours per day, up to 200 hours
annually.  Workers are guaranteed 30 days of paid annual
leave.  Employers are legally responsible for accidents at work
and are required to carry accident insurance.  Accidents
average between 70,000 and 75,000 per quarter.  These figures
have focused government attention on improving worker safety in
the construction sector.  There is also considerable concern
about the poor environmental controls in the textile industry.
    f.  Application of Worker Rights in Various Sectors
    Legally, worker rights apply equally to all sectors of the
economy.  As noted above, child labor and worker safety are
problems in the textile and construction sectors.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                               (1)
Total Manufacturing                                     340
  Food & Kindred Products                   160
  Chemicals and Allied Products              93
  Metals, Primary & Fabricated              (1)
  Machinery, except Electrical                3
  Electric & Electronic Equipment            46
  Transportation Equipment                  (1)
  Other Manufacturing                        43
Wholesale Trade                                         266
Banking                                                 195
Finance/Insurance/Real Estate                           127
Services                                                145
Other Industries                                        (1)
TOTAL ALL INDUSTRIES                                  1,162
(1) Suppressed to avoid disclosing data of individual companies
Source: U.S. Department of Commerce, Bureau of Economic
Analysis
(###)
ROMANIA1
qU.S. DEPARTMENT OF STATE
ROMANIA: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                             ROMANIA
                     Key Economic Indicators
         (Million of U.S. dollars unless otherwise noted)
                                      1992      1993      1994
Income, Production and Employment:
Real GDP (billion 1992 lei)        5,982.3   6,060.0   6,181.2
Real GDP Growth (pct.)               -13.8       1.0       2.0
Nominal GDP (billion current lei)  5,982.3  19,737.2  50,000.0
Nominal GDP                       18,407.0  25,901.8  30,300.0
By Sector:
  Industry                         8,227.3   9,505.9  12,784.0
  Agriculture/Forestry             3,477.5   5,568.7   7,990.0
  Construction                       803.0   2,590.1   1,053.9
  Transport/Telecommunication      1,176.9   1,295.1   1,663.4
  Trade/Tourism                    2,430.7   2,745.5   3,533.2
  Other Services                   2,291.6   4,196.5   3,275.5
Net Exports of Goods & Services     -1,588    -1,239      -300
Real GDP Per Capita (USD)              807     1,136     1,328
Labor Force (millions)                11.4      11.3      11.3
Unemployment (pct.)                    5.4       9.3      10.2
Money and Prices:
Lending Interest Rate (pct.)          39.1      56.7      88.7
Rate on Deposits (pct.)               29.7      34.3      72.5
Retail Inflation                     210.9     256.1      70.0
Official Exchange Rate (lei/USD)
    (annual average)                   325       762     1,652
Balance of Payments and Trade:
Total Merchandise Exports            4,363     4,892     5,900
  Exports to U.S.                       84        39       144
Total Merchandise Imports            6,260     6,521     6,600
  Imports from U.S.                    223       202       220
Trade Balance                       -1,846    -1,631      -700
  Trade Balance with U.S.             -139      -163       -76
Aid from U.S.                         20.1      34.7      44.1
Aid from Other Countries             156       180       180
Debt Service Payments                185.9     369.2     958.1
Gold and FOREX Reserves Net (1)       44.0     315.0     951.5
(1) Total banking system net foreign assets; end of period.
1.  General Policy Framework
    With a population of 22.8 Million, a highly educated labor
force, and substantial exploitable natural wealth, Romania
offers a potentially attractive market for U.S. trade and
investment.  For the next several years, however, Romania's
economic performance -- and thus its demand for imports -- will
continue to be constrained by the slow pace of privatization
and the decline of its traditional heavy industries.
    In the years immediately following the December 1989
revolution, the Romanian economy was buffeted by the shock of
adjustment to international price levels (especially for energy
and raw materials), the elimination of the former central
planning apparatus, and the collapse of its traditional COMECON
markets.  From 1989 to 1992, Romania's GDP contracted by 29
percent; industrial production declined 38 percent; and output
in the transport and telecommunications sector fell 50
percent.  Exports dropped 60 percent (from $10.5 To $4.3
billion), limiting the country's ability to pay for much-needed
imports of fuel and capital goods.  More than one million
workers lost their jobs in the state sector and open
unemployment -- not seen for decades in Romania -- rose to
about 10 percent of the labor force.  Job-holders also suffered
as average monthly wages fell to around $115 per month -- about
one-half the pre-revolution level.
    The economy bottomed out in 1993 and may have grown by up
to 1.0 percent due to a 14-percent weather-related surge in
agricultural output and anemic growth in industry.  However,
declines continued to be registered in construction activity
and especially in services, where the growth of private retail
and service establishments failed to offset the continuing
decline in some consumer services and in goods and passenger
transport volume.
    Preliminary estimates for 1994 indicate that the economy
may have finally turned the corner, to achieve unambiguous
growth in most sectors.  The consensus is that the nation's GDP
will have grown by about 2.0 percent in 1994 due to an
anticipated 5-percent jump in agricultural production, the
small private sector's growth, a revival of building activity,
and a mild export-led recovery in industry.  However, the pace
of growth is unlikely to be sufficient to prevent a further
rise in unemployment, to perhaps 11 percent, by the end of 1994.
    Although Romania is committed to the development of a
market economy, state ownership of most means of production
continues five years after the overthrow of communism.
Nevertheless, steady -- if slow -- progress toward
privatization is being made.  Ninety-six thousand square
kilometers of arable land have been returned to private farmers
(benefitting over 5 million individuals in the process), nearly
400,000 new private companies have been created, and some 850
state enterprises have been privatized through management and
employee buy-outs.  In September, 1994, the government
submitted its long-awaited mass privatization legislation to
the parliament, proposing the privatization of an additional
3,000 state-owned enterprises via a modified voucher system.
This law cleared the Senate in December 1994.  If implemented
in its entirety, the bill would transfer an estimated 10-12
percent of Romania's GDP to private hands by the end of 1995.
    Progress has been much more visible in the non-state
sector, which now makes up an estimated 35 percent of Romania's
economy.  In late 1994, private firms and individuals accounted
for about five percent of industrial output, 25 percent of
construction activity, 40 percent of services turnover, and 80
percent of farm production.  More significantly, the private
sector now employs an estimated 50 percent of Romania's
occupied labor force (5.0 million out of 10.1 million)
including 3.0 million farmers, 1.5 million owners and employees
of private firms, and 0.5 million self-employed individuals.
    The reintegration of Romania into world markets is a
central feature of the government's economic policy.  Romania
signed an association agreement with the European Union in
December 1992.  The European Union is by far Romania's most
important trading partner.  In 1993, it took 39.3 percent (or
$1.924 billion) of Romania's total FOB merchandise exports of
$4.892 billion, and provided 42 percent ($2.741 billion) of its
total CIF merchandise imports of $6.525 billion.  In contrast,
the United States accounted for only 1.3 percent ($61.9
million) of Romania's exports and 4.3 percent ($282.1 million)
of its imports in 1993.
    Despite this difference in relative trade flows, Romania
places special emphasis on improving bilateral economic
relations with the United States.  As a result of the
restoration of most-favored-nation tariff status with the
United States in November 1993; U.S. ratification of a
bilateral investment treaty in December 1993; and the return to
Romania of the U.S. Export-Import Bank and the U.S. Overseas
Private Investment Corporation; prospects for expanded
bilateral trade and investment are much improved.  For example,
in the first nine months of 1994, Romanian exports to the
United States increased 182 percent, while imports from the
United States rose 12 percent.
    Since late 1993, the National Bank of Romania has
implemented a tough IMF-backed macroeconomic stabilization
package that has succeeded in cutting annual inflation from
around 300 percent in 1993 to less than 70 percent in 1994,
restored real positive interest rates in the financial sector,
increased domestic bank deposits, and stabilized the leu.  A
parallel Government of Romania austerity program is holding the
central government fiscal deficit to about 3.0 percent of GDP.
In the Fall of 1994, the Romanian government implemented
painful budget-driven personnel reductions in the headquarters
staffs of most non-defense-related ministries.  For example,
the Bucharest staffs of the Ministries of Agriculture and Food,
Industry, Transportation, and Commerce were all reduced between
40-55 percent.
2.  Exchange Rate Policy
    As a part of its macroeconomic stabilization package, the
National Bank of Romania liberalized the foreign exchange
auction system in April 1994.  The reform, which replaced the
former administered rate with a market-clearing rate,
substantially eliminated the gap between the official rate and
that prevailing in the system of legalized exchange houses.
The relative stability of the leu since that time (it has gone
from lei 1650 to lei 1750/$) has generally restored public
confidence in the national currency and allowed the National
Bank to implement a second-stage liberalization -- involving
the creation of an interbank market -- beginning in August 1994.
    As of November 1994, six commercial banks have been
authorized to freely trade the Romanian currency.  However, any
number of corporate customers can theoretically buy hard
currency through these authorized broker/dealers.  In late
1994, the interbank market appeared to be performing well
without any noticeable shortage of dollars.  Moreover, the
spread between the leu/dollar rate of exchange on the interbank
market and the exchange house rate was holding stable at around
6-8 percent.
    Despite the substantial liberalization of the foreign
exchange regime, the leu is not yet freely convertible.  The
National Bank of Romania maintains a number of restrictions
aimed at preventing capital flight.  Thus, the removal of more
than token amounts of lei from Romania remains illegal.
Romanians are prohibited from holding foreign bank accounts,
though they are permitted to own U.S. dollar-denominated bank
accounts in local banks.  Foreign exchange restrictions, though
somewhat liberalized, also remain in effect.  For example,
Romanian citizens are allowed to buy only $1,000 worth of hard
currency per year on an unrestricted basis.  For those
traveling abroad, the limit is set at $5,000 per person per
trip.  Furthermore, commercial companies must obtain an import
license prior to buying hard currency, though this appears to
be less of a problem in late 1994.  In September 1994, the
National Bank issued a directive requiring all domestic
transactions between Romanian individuals and/or legal entities
to be conducted in lei.
3.  Structural Policies
    Economic reform has entailed creating new laws in virtually
every sphere: finance, commerce, privatization, intellectual
property, banking, labor, foreign investment, environment, and
taxation.  Among the more recent developments are the July 1,
1993 introduction of an 18-percent value added tax; the May 24,
1994 government ordinance reforming local taxation, the August
11, 1994 passage by the parliament of a securities and exchange
act; and the August 31, 1994 promulgation of a new tax
ordinance on corporate profits.  Despite these achievements,
several gaps remain in the legal framework.  Chief among these
are the absence of a modern bankruptcy code, a modern copyright
law which includes protection for software, legislation on the
restitution of properties nationalized during the communist
era, and the previously-mentioned mass privatization bill.
Draft bills on all of these subjects were before the parliament
in late 1994.
    Since 1989, Romania has gradually liberalized prices and
eliminated most direct producer and consumer subsidies.  The
main areas of exception are coal production, public
transportation, and household energy and heating.  In food
products, the principal remaining subsidies by summer 1994 were
on bread and milk.  However, in October 1994, the government
announced its intention to reimpose "temporary" wholesale price
controls on pork, chicken, eggs, cooking oil, and sugar.
    The major sources of central government revenue in Romania
are an 18-percent value added tax, a 38-percent tax on most
corporate profits, and a salaries tax which rises to 60 percent
for the portion of salary in excess of 816,000 lei per month
(about $470).  Together these three taxes accounted for about
83 percent of total central government revenues in the first
half of 1994.  Romania's generally high customs duties make up
only 6 percent of total central government revenues.  Gradual
adjustments to the tariff schedule will be required to bring
Romania into harmony with the European Union by the end of the
decade.  As a result, rate differentials will increasingly
favor imports from the European Union.
4.  Debt Management Policies
    During the 1980's, former dictator Nicolae Ceausescu
directed the liquidation of all foreign debt via accelerated
repayments and forced exports in order to reduce foreign
influence over Romania.  By April 1989, Romania's debt was
virtually zero and the country was a net external creditor.
After December 1989, foreign borrowing was resumed, and by the
end of 1994, medium and long-term external debt amounted to
about $4.3 billion (and overall the country was again a net
debtor).  Nonetheless, in 1993, debt service payments still
amounted to a mere six percent of Romania's exports of goods
and services.  However, debt service is now growing and in 1994
is expected to reach about 15 percent of exports of goods and
services.
    Romania signed a standby agreement with the IMF in May
1991, which provided for $500 million in balance of payments
assistance plus up to an additional $400 million in contingency
and compensatory assistance.  This program was terminated in
February 1992 by mutual agreement when, as a result of the
buildup of debt among state-owned enterprises (essentially soft
supplier credits), it became evident that Romania would not be
able to meet the IMF target for monetary growth.  Another
standby agreement was negotiated in May 1992, providing for
assistance totaling $440 million.  This program was also
terminated by mutual agreement before the final tranche of
assistance had been drawn.
    Negotiations for a third program began in March 1993.  In
February 1994, the Romanian Parliament approved the draft
"memorandum on economic policies" and a preliminary 1994 budget
in line with the proposed program.  In May 1994, the IMF
approved Romania's request for a 19-month standby arrangement
in the amount of SDR 131.97 million and a first drawing under
an SDR 188.5 million systemic transformation facility.
5.  Significant Barriers to U.S. Exports
    There are no laws which directly prejudice foreign trade,
investment, or business operations in Romania.  Traditionally
defined trade barriers are generally not a major problem,
though there exist areas of exception.  In mid-1994, Romania
imposed a system of reference prices for imports of chicken
parts (about 85 percent of which came from the United States)
in order to protect its largely state-owned chicken industry.
In fall 1994, Romania also sharply increased import tariffs on
new and used automobiles in order to support its struggling
domestic manufacturers.
    The Government of Romania welcomes foreign investment and
generally makes good faith efforts to assist in resolving
disputes involving U.S. and Romanian firms.  However,
impediments to bilateral trade and investment can arise from
cultural differences, the nature of the reform process, or
attitudes and practices carried over from the days when
Romania's economy was centrally planned.
    Formal investment barriers are few in Romania.  The foreign
investment law allows up to 100-percent foreign ownership of an
investment project (excluding land), and there are no legal
restrictions on the repatriation of profits and equity
capital.  Foreigners are permitted to lease land, but under the
constitution are prohibited from owning land.  Governmental
approval of joint ventures is required but has not impeded the
formation of such ventures.  The Romanian Development Agency
attempts to match foreign investors with Romanian partners.  In
1994, the Government raised the minimum investment requirements
for registering foreign investment to $10,000 from $100.
    Despite the best efforts of the Government of Romania, a
number of problems continue to restrict the level of foreign
investment to relatively low levels.  For example, gaining
clear title to property remains problematical and any purchases
are potentially subject to legal challenge by former owners or
managers.  The situation is further complicated by the absence
of bankruptcy legislation and, hence, a means for pressing
claims against debtors.
    The large amount of red tape which accompanies many
transactions and the need to deal with overlapping local
bureaucracies can prove frustrating to foreign investors.
Corruption is a major problem and, in certain instances, can
pose an actual business risk.
    The changing legal and regulatory environment has created
difficulties which affect foreign participation in the Romanian
economy.  There are few legal specialists qualified to
interpret the commercial implications of recent Romanian legal
developments and there is little experience in Western methods
of negotiating contracts.  Once concluded, there is often no
effective means of enforcing agreements.
    The cost of doing business in Romania can also be
unexpectedly high, particularly rents for offices and charges
for telecommunications and business services.  The lack of an
efficient modern payments system (checking accounts do not yet
exist) further complicates transactions in Romania.  Payments
can only be made in cash.
    Corporate income is generally taxed at a rate of 38
percent.  In addition, the government levies a 10 percent
dividend withholding tax.  The recent revision of the corporate
profits tax eliminates nearly all future investment tax
holidays.  However, foreign companies investing over
$50 million may still qualify for a seven year tax exemption.
Romania has no income tax, but instead imposes a steeply
progressive salary tax which rises to a 60 percent marginal tax
rate on all salaries above $470 per month.
    Since 1990, Romania has registered over 38,000 commercial
companies with foreign capital participation.  The total value
of foreign investment surpassed $940 million in October 1994.
The overwhelming majority of the investment is small scale.
U.S. company investments range from a few hundred dollars to
many millions and are increasing in value and number steadily.
As of October 17, 1994, U.S. investments in Romania were worth
$95.7 million, a virtual tie with the value of investments from
Germany, Italy, and France.
6.  Export Subsidies Policies
    The Romanian government does not provide export subsidies
but does attempt to make exporting attractive to Romanian
companies.  For example, the government provides for the total
or partial refund of import duties for goods that are processed
for export or are incorporated into exported  products.  A
September 1994 government decision permits the Romanian
Export-Import Bank to engage in trade promotion activities on
behalf of Romanian exporters of goods produced in Romania.
    There are no general licensing requirements for exports
from Romania, but the government does prohibit or control the
export of certain goods and technologies.  For example, the
Government has, on occasion, banned the export of various
commodities (especially foodstuffs) due to domestic shortages.
There are also export controls of imported or indigenously
produced goods of proliferation concern.
    Romania is not a signatory to the GATT subsidies code or
government procurement code but has indicated its eventual
intention to subscribe to both codes.
7.  Protection of U.S. Intellectual Property
    Romania has made significant progress in the area of
intellectual property protection since the end of the communist
era.  New patent and trademark laws have been enacted.  A new
revised copyright law, which will provide protection for
software, is expected to be submitted to the parliament shortly.
    All legislation in this field has been modeled after
international standards and norms and has been reviewed by
international experts.  The Government of Romania has expressed
its intention to have in place in 1995 a complete set of
intellectual property laws consistent with European Union
norms.
    Nonetheless, the lack of copyright protection has caused
some American firms to be reluctant to invest in Romania.
Pirated copies of audio and video cassette recordings are
openly marketed and inexpensive.  Some are apparently produced
locally, but many appear to be imported from elsewhere in the
region.  The U.S. Embassy in Bucharest is not aware of pirated
goods being produced in Romania for export.
8.  Worker Rights
    a.  The Right to Association
    Current labor legislation adopted in 1991 guarantees all
workers except government employees, police, and military
personnel the right to associate, to engage in collective
bargaining, and to form and join labor unions without previous
authorization.  The right to strike is specifically guaranteed,
although union members have been frustrated with the courts'
propensity to declare illegal the major strikes on which they
have been asked to rule.  Legal limitations on the right to
strike exist only in certain critical industries involving the
public interest, such as defense, health care, transportation,
and telecommunications.
    Union members have continued to criticize certain aspects
of the 1991 legislation, but no consensus has been reached on
how the laws should be amended.  Past studies have indicated
that the legislation falls short of International Labor
Organization (ILO) standards in several areas, including the
free election of union representatives, binding arbitration,
and financial liability of strike organizers.  Although the
legislation is supportive of collective bargaining as an
institution, the contracts that result are not enforceable in a
consistent manner.  This situation is caused in part by
inadequacies in the law itself and by problems created by
continued state ownership of most major industries.  In 1994,
the government and the major labor confederations moved to
promote a new tripartite collective bargaining relationship
among the government, labor, and private sector.
    Current legislation stipulates that labor unions are
independent bodies, free from government or political party
control, with the right to be consulted on labor issues.  No
worker can be forced to join or withdraw from a union, and
union officials who resign from elected positions and return to
the regular work force are protected against employer
retaliation.  In practice, the government does not seem to
exert any control or influence over labor union activities.  In
1994, however, several steps were taken toward politicization
of the Romanian labor movement.  In July, Miron Mitrea, the
Executive President of CNSLR-Fratia, Romania's largest labor
confederation, was selected as the president of a dormant
political party created by the trade unions.  Fearing that
party might merge with the ruling Party of Social Democracy,
Victor Ciorbea, President of CNSLR-Fratia, announced in August
that he had formed an alliance with the opposition Democratic
Convention and the National Trade Union Bloc, another major
confederation.  In a declaration signed by the three parties,
each pledged to develop joint programs but to maintain
"complete independence."   In October, Ciorbea set up a new
labor confederation, "The Confederation of Democratic Trade
Unions of Romania."
    The majority of Romanian workers are members of some 18
nationwide trade union confederations and smaller independent
trade unions.  Virtually all unions concentrate on economic
issues to protect their members' standard of living, which has
continued to decline because of increases in consumer prices
and uncertainty caused by the transition to a market economy.
    Labor unions may freely form or join federations, and
affiliate with international bodies.  The Alfa Cartel and
CNSLR-Fratia are affiliated with the World Confederation of
Labor and the International Confederation of Free Trade Unions,
respectively.  Representatives of foreign and international
organizations freely visit and advise Romanian trade unionists.
    The Committee of Experts at the 1994 ILO Conference
observed that the treatment of the Roma and Magyar minorities
continued to be the subject of debate in the UN Human Rights
Committee.  It noted that the government, which asserted there
were no discriminatory standards against the Roma, had reported
that some 22 percent of Roma men and 71 percent of Roma women
were unemployed.  The committee noted with interest the
measures taken by the Government to promote better integration
of the Roma in the society and the government's establishment
of the Council for National Minorities, which monitors the
problems of persons belonging to those minorities.  The
committee urged the Government to supply information about the
work of that council, and information about the programs being
taken to provide education, training, and employment for the
ethnic Hungarian population.
    b.  The Right to Organize and Bargain Collectively
    Current legislation permits workers to organize into unions
and to bargain collectively.  In January, the Locomotive Engine
Drivers Federation lost an appeal in which it tried to overturn
an original court decision that had declared its August 1993
strike illegal.  As a result of that strike, several union
leaders and strikers were summarily fired.  The absence of
effective employer groups, because of continued state control
over most industrial resources, complicates collective
bargaining efforts.
    c.  Prohibition of Forced or Compulsory Labor
    The constitution prohibits forced or compulsory labor.  The
Ministry of Labor and Social Protection (MOLSP) effectively
enforces this prohibition, and no instances of abuse were
recorded in 1994.
    d.  Minimum Age for Employment of Children
    The minimum age for employment is 16, but children as young
as 14 may work with the consent of their parents or guardians
but only "according to their physical development, aptitude,
and knowledge."  Working children under 16 have the right to
continue their education, and employers are obliged to assist
in this regard.  The MOLSP has the authority to impose fines
and close sections of factories to enforce compliance with the
law.  No violation of this policy was documented in 1994, and
child labor did not appear to be a problem.
    e.  Acceptable Conditions of Work
    Most wage scales are established through collective
bargaining.  However, they are based on minimum wages for given
economic sectors and categories of workers set by the
government after negotiations with industry representatives and
the labor confederations.  Minimum wage rates are generally
observed and enforced, although employers' financial
difficulties often result in nonpayment of wages or
postponement of payment.
    The labor code provides for a work week of 40 hours or five
days, with overtime to be paid for weekend or holiday work or
work in excess of 40 hours.  Paid holidays range from 15 to 24
days annually depending mainly on the employee's length of
service.  Employers are required by law to pay additional
benefits and allowances to workers engaged in particularly
dangerous or difficult occupations.
    Draft legislation regarding occupational health and safety
is still pending in parliament.  The MOLSP has established
safety standards for most industries and is responsible for
enforcing them.  Enforcement, however, is not good because the
MOLSP lacks sufficient trained personnel, and employers
generally ignore its recommendations.  Some labor organizations
have pressed for healthier, safer working conditions on behalf
of their members.  Though they have the right to refuse
dangerous work assignments, workers seldom invoke it in
practice, appearing to value increased pay over a safe and
healthful work environment.  Neither the government nor
industry, still mostly state owned, has the resources necessary
to improve significantly health and safety conditions in the
work place.
ROMANIA2
U.S. DEPARTMENT OF STATE
ROMANIA: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
    f.  Rights in Sectors with U.S. Investment
    The U.S. Embassy has no information to suggest that
conditions differ in goods-producing sectors in which U.S.
capital is invested with respect to application of the five
worker rights discussed in A through E above.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                               0
Total Manufacturing                                   (1)
  Food & Kindred Products                   (1)
  Chemicals and Allied Products             (1)
  Metals, Primary & Fabricated                0
  Machinery, except Electrical              (2)
  Electric & Electronic Equipment             0
  Transportation Equipment                    0
  Other Manufacturing                         0
Wholesale Trade                                         0
Banking                                               (1)
Finance/Insurance/Real Estate                           0
Services                                                0
Other Industries                                        0
TOTAL ALL INDUSTRIES                                   25
(1) Suppressed to avoid disclosing data of individual companies
(2) Less than $500,000
Source: U.S. Department of Commerce, Bureau of Economic Analysis
(###)
RUSSIA1
tU.S. DEPARTMENT OF STATE
RUSSIA: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                              RUSSIA
                     Key Economic Indicators
           (Billions of rubles unless otherwise noted)
                                    1992       1993      1994 1/
Income, Production and Employment:
Real GDP (1990 prices) 2/            459        409       344
Real GDP Growth (pct.)               -12        -11       -16
GDP (at current prices) 2/        18,063    162,301   600,000
By Sector:
  Manufacturing                   10,068     88,087   157,888
  Services                         6,089     64,216   188,898
  Agriculture                        N/A        N/A       N/A
Real Per Capita GDP (1990 prices)  3,095      2,763     2,332
Labor Force (000s)                75,600     74,900    74,800
Unemployment Rate (pct.)             4.8        5.1       6.0
Money and Prices:  (annual percentage growth)
Money Supply (M2)                    743        480       324 3/
Central Discount Rate 4/              80        210       170
Personal Savings Rate 4/              16         26        39
Consumer Price Index               2,501        840       104 3/
Exchange Rate (USD) 1/               415      1,247     2,204 5/
Balance of Payments and Trade:  (millions of U.S. dollars)
Total Exports (FOB)               39,972     46,300    48,200
  Exports to U.S.                    500      1,700     2,800
Total Imports (CIF)               34,984     34,300    33,200
  Imports from U.S.                2,100      3,000     2,600
Aid from U.S.                      2,380      1,700     1,625
Aid from Other Countries             N/A        N/A       N/A
External Public Debt 6/           87,000     83,700    85,000
Debt Service Payments (paid)       1,815      2,000     4,700
Gold and Foreign Exch. Reserves    3,014      5,875     4,100 5/
Merchandise Trade Balance          4,988     12,000    15,000
  Trade Balance with U.S.         -1,600     -1,300      -200
N/A--Not available.
1/ Figures are from the State Statistical Committee
(Goskomstat) and U.S. Embassy estimates.  The rapid
depreciation of the ruble over the past four years makes it
meaningless to delineate this data in dollar terms.
2/ GDP at factor cost.  1990 GDP was 644 billion rubles.
3/ First eight months, not annualized.
4/ Figures are actual, end of period.
5/ As of September 1, 1994.
6/ Russian officials have recently quoted debt stock as high as
$112 million in 1994.  However, this figure includes debt to
former Soviet Union countries and is generally not included in
Russia's hard currency debt stock.
1.  General Policy Framework
    The Russian Federation (Russia) is the largest of the
republics of the former Soviet Union and also the wealthiest,
with oil, timber, natural gas, minerals, and fertile soil.
After the collapse of the Soviet Union in October 1991,
however, Russia was left with serious economic problems
stemming from decades of a planned economy and the disruption
of its traditional commercial and industrial ties.  This was
compounded by sharp cutbacks in defense spending and an influx
of foreign competition, particularly in consumer goods, at very
low import tariff rates.  Real GDP fell by 19 percent in 1991,
12 percent in 1992, 11 percent in 1993, and a projected 17
percent in 1994, for a cumulative decline of 47
percent--greater than that experienced by the United States
during the Great Depression.  However, Russian statistics fail
to capture much of the emerging private sector activity, and
thus overstate the decline.
    The "ruble zone" of the states of the former Soviet Union
collapsed in 1993.  Following the July 26, 1993 Central Bank
decision to withdraw old ruble notes from circulation, other
republics of the Commonwealth of Independent States (CIS) moved
to establish their own currencies.  This helped bring the ruble
under control of the Central Bank of Russia (CBR) and reduced
inflationary pressures from other republics.
    Massive government credit emissions in 1992 and 1993
produced a surge in inflation, leading the Central Bank to
raise the discount rate to 210 percent and tighten issuance of
credits in 1993, achieving a monthly inflation level of 15
percent by the end of that year.  In 1994 the discount rate was
gradually lowered to 130 percent as inflation fell to 4 percent
monthly in August, rising sharply to 15 percent in October
after the ruble's crash.  The CBR interest rate was increased
to 170 percent in October and then to 180 percent in November.
The government aims at a monthly inflation rate of five to
seven percent by the end of 1994.
    Despite falling demand for their products, Russian
enterprises continued to borrow money either to maintain the
work force or for speculative investments.  State subsidies and
cheap government credits, massive during 1992 and 1993,
declined in 1994 but remain significant for agriculture,
defense and the northern territories.  Widespread failure of
enterprises and the government to pay for purchases produced a
chain of inter-enterprise arrears which remained unresolved in
December 1994.
    Russia's mass privatization program utilized individual
vouchers issued to each citizen in its first phase from October
1992 through June 1994.  According to the State Property
Committee, 70 percent of Russian enterprises are now in the
non-state sector.  The majority of enterprises were privatized
under the so-called "option two," through which enterprises
managers and employees purchased 51 percent of the shares.
Local state property committees, the central State Property
Committee or federal government ministries typically retained a
significant interest (up to 30 percent of the shares).  The
remaining shares were auctioned publicly for vouchers (through
June 1994) or cash, a process in which foreign investors were
able to participate.  Under the second phase of the
privatization program, enacted by a July 1994 presidential
decree, the remaining 30 percent of state enterprises will be
privatized for cash, primarily through auctions and tender
offers, aimed at attracting foreign investment.  The remaining
shares in privatized firms still held by the government will
also now be sold.  The privatization in this phase will include
the land on which enterprises are located.
    The right of Russian citizens to own, buy and sell, lease
and mortgage land was established by presidential decree in
October 1993 and is protected by Russia's constitution,
although Russia still lacks a comprehensive law on land
ownership to implement these rights.  Beginning in 1992, the
government formally shifted ownership of land and property to
workers and pensioners of state and collective farms.  All farm
land and other property is now in one of several forms of
private ownership.  The 1993 presidential decree established
the right of farm workers wishing to leave the collective to
receive their share of farm property or monetary compensation.
So far about 300,000 individual farms have been established,
but Russian agriculture is still dominated by the former
collectives, which own over 90 percent of arable land and
produce over 90 percent of the country's total agricultural
output.
    The 1994 federal budget, which was approved by the
parliament in June 1994, called for a budget deficit of 70
trillion rubles, or roughly 9.6 percent of projected GDP.  The
actual federal deficit reached 11.8 percent of GDP in the first
three quarters of 1994, and is unlikely to fall below 10
percent of GDP by the end of the year.  The majority of the
deficit (76 percent) in the first three quarters of 1994 was
financed by credits of the Central Bank of Russia at
below-market rates.  The remainder of the deficit was financed
equally through government bond offerings and foreign credits.
The government's draft federal budget for 1995 calls for zero
Central Bank monetary financing of the projected deficit of 7.8
percent of GDP.  The government intends to finance 60 percent
of the 1995 deficit through government securities' offerings
and 40 percent through foreign credits.
    Due to lower than expected inflation and GDP and optimistic
revenue assumptions, budget revenues for 1994 were down 43
percent from that projected in the 1994 budget law.  In
response, the government undertook large scale expenditure
sequestration in an attempt to keep the budget deficit under 10
percent of GDP.  Actual revenues for 1994 can be broken down
into tax revenue (70 percent), revenue from foreign trade and
foreign operations (10 percent), and non-tax revenue (20
percent--mostly income from the sale or use of government
property).
    Nearly half of Russia's 1994 exports by value were
concentrated in energy and another quarter in raw materials.
Trade with industrialized countries in 1994 comprised over 70
percent of total Russian exports and nearly two-thirds of total
Russian imports in nominal terms; each was up about 20 percent
from 1993 levels.  Trade with former Comecon countries,
developing countries, and the Baltic states continues to fall,
and remains at a fraction of Soviet-era levels.
    Russia has several trade agreements with CIS states
involving barter or guaranteed delivery of specified
commodities, and is in the process of creating a customs union
among CIS states.  Russia has agreed to a free trade zone with
Belarus.  A Partnership and Cooperation Agreement signed with
the European Union in 1994 awaits ratification.  Russia has
declared its intention to accede to the GATT (General Agreement
on Tariffs and Trade), and is a member of the World Bank and
the International Monetary Fund (IMF).  The U.S.-Russian Trade
Agreement of June 1990 provides mutual most-favored-nation
(MFN) status.  The U.S.-Russian Bilateral Tax Treaty, effective
from January 1994, eliminated double taxation of U.S. citizens
and firms.  The U.S.-Russian Bilateral Investment Treaty,
signed in June 1992, awaits ratification by the Russian
parliament.
2.  Exchange Rate Policy
    The Central Bank of Russia quotes a daily official unified
ruble exchange rate in dollars and several other hard
currencies, based on market exchange rates determined in daily
auctions held at the Moscow Interbank Foreign Currency Exchange
(MICEX), a private corporation where the bulk of on-exchange
hard currency trading occurs.  Auction markets are also
organized in St. Petersburg, Yekaterinburg, Novosibirsk,
Vladivostok, Rostov-on-the-Don and other major cities.  The
Central Bank intervenes on the MICEX and other exchanges, as
well as on the larger interbank market outside the auctions, to
smooth currency rate fluctuations and regional supply
distortions.  While relatively little trading actually occurs
on-exchange, the markets are important in setting official
prices since CBR intervention occurs there.
    The ruble depreciated against the dollar in nominal terms
from 1250 to 2200 rubles per dollar but appreciated slightly
against the dollar in real terms between January and August
1994.  It then took several sharp falls in September and
October and, after recovering with the help of extensive
Central Bank intervention, declined gradually to 3250 rubles
per dollar by the end of November.  Central Bank reserves
before the October crash stood at 4 billion dollars.
    Exporters are required to convert into rubles 50 percent of
export earnings at the free market rate.  Through a system of
"passports" recording all export transactions, the commercial
banking system cooperates with official efforts to monitor the
repatriation of export earnings.  Purchases of property,
transfers of capital abroad, and foreign borrowing of resident
juridical persons require authorization of the Central Bank.
Without Central Bank permission it is illegal for Russian
companies or citizens to maintain bank accounts outside of
Russia for purposes other than operating expenses.
Non-residents can open individual ruble accounts and commercial
ruble accounts for servicing foreign trade operations and for
investment.  Both citizens and non-residents can maintain
domestic hard currency accounts.
3.  Structural Policies
    Russia's rudimentary antitrust law was implemented in
December 1993 by presidential decree.  A November 1993
presidential decree requires larger companies to establish
stock registries to record ownership in the company.  The
government is preparing securities and brokerage legislation
and a commercial code, part of which is encompassed in the
recently adopted civil code.
    By the end of 1994, prices had been freed on virtually all
wholesale and retail goods, and the government planned to free
prices on oil (roughly one quarter of the world market price at
the time) and oil products in 1995.  In November 1994 the
government preliminarily approved a policy to restrict the
number of products and services subject to federal controls to
natural gas, utilities, freight and passenger rail
transportation, precious metals and diamonds, airport services,
and postal, telephone, radio and television communications.
    A new tax code is in preparation to replace the obsolescent
one of December 1991.  Taxes are confusing, constantly revised
and inconsistently applied.  Currently all major taxes are
collected by a single federal agency and divided between the
center and regions according to a revenue-sharing formula,
although much ad hoc bargaining still occurs.  A 23 percent
value-added tax (VAT) is imposed on Russian and foreign firms
conducting commercial activities in Russia.  Corporate profits,
taxed at a rate of 32 percent in 1993, were taxed at 13 percent
on the federal level and up to 25 percent by the regions in
1994.  Personal income tax rates in 1994 ranged from 12 percent
through 30 percent.  Wages were subject to social security
taxes totalling 39 percent.  A 38 percent tax is levied on
"excess wages" (above the equivalent of $38 per month as of
November 1994).  Russian-sourced "passive" income earned by
foreigners is subject to a 15 percent withholding tax on
dividends and interests and a 20 percent tax on royalties and
rents.
    The rate of excise tax on imported goods differed
considerably from the rate on domestic goods and was assessed
on a different basis at the end of 1994, although an April 1994
decree requires that the two systems be unified.  Import taxes
have risen steadily over the past three years.  The latest rise
in July 1994 doubled duties on average across the board and
raised the average weighted tariff to about 15 percent ad
valorem, with some duties well above 30 percent.  These have
affected U.S. exports including aircraft, automobiles and
confectionery.  The tariff law promulgated in July 1993
establishes types of duties and provides for establishing
preferential tariffs on a reciprocal basis.
    All enterprises above 100 million rubles capitalization
($80,000 as of December 1993, $30,000 as of December 1994) must
be registered with the government, which can involve extensive
delays.  Noncompetitive bidding is sometimes used to award
contracts for very large government projects involving natural
resources.  Cases exist of tenders awarded to U.S. companies
being subsequently revoked by the government in the interests
of domestic competitors.  An established and transparent set of
regulations regarding bidding is lacking, but a law on
concessions for development of raw material reserves, as well
as a production-sharing agreement regulating oil export rights
are in preparation.
    Export taxes, introduced in 1992 because of vast
differentials between domestic and international prices, were
gradually lowered in 1993 and 1994 and are applied to a
diminishing list of commodities, primarily oil and oil
products, natural gas, certain non-ferrous metals, timber and
wood products, some fertilizers, rare fish and fish products.
Special agreements with certain CIS countries, notably Belarus
and Ukraine, further reduce or waive these export taxes.  Oil
exports by some joint ventures have been exempted from the
export tax.
    Annual quotas and licensing of exports of "strategically
important" commodities (e.g. gas, oil, metals, fertilizers,
timber), which were designed to limit export volumes and
support prices beginning in 1992, were abolished in July 1994
except for oil and oil products (until January 1995) and
commodities subject to international agreements.  The right to
export these commodities remains limited to about 500 "special
exporters" certified annually by the Trade Ministry.  Since the
abolition of quotas and licensing, all export contracts for
"strategically important" commodities still require
registration with the Trade Ministry, which has proposed
extending this system to all exports.  The Trade Ministry also
is abetting the formation of industry-specific cartels called
"unions of exporters," nine of which exist so far, to
collectively maintain export prices of "strategically
important" commodities and prevent antidumping actions.
4.  Debt Management Policies
    Russia and the other former republics of the USSR agreed in
October 1991 to become "jointly and severally" liable for the
Soviet foreign debt.  Russia's share of the debt was set at 61
percent.  Russia subsequently reached agreement with the other
republics to manage or assume liability for their respective
shares of the Soviet debt in exchange for their relinquishing
their respective claims on Soviet assets.  Russia has reached
agreement with Ukraine on debt repayment.
    Russia has succeeded in gaining significant temporary
relief from its debt burden during the transition to a market
economy.  An April 1993 agreement with Paris Club creditors
rescheduled virtually all of Russia's official bilateral debt
arrears and maturities falling due in 1993.  The United States
and Russia in October 1994 signed a $900 million debt
rescheduling agreement, formally putting into effect the Paris
Club rescheduling accord reached in June between Paris Club
official creditors and Russia.  The Paris Club agreed to
reschedule $7 billion in official debt owed by Russia in 1994,
thus easing the repayment burden.  A preliminary agreement with
the London Club of commercial creditors followed in October,
but a final agreement was still pending as of the end of 1994.
    Russia's total external debt to Western creditors is
approximately $85 billion, of which half is owed to governments
 (Paris Club), a third to commercial banks (London Club), and
the remainder to foreign exporters.  Servicing of the debt in
1994, after rescheduling, was about $4.7 billion.  In order to
ensure control of contracting for new foreign lending, the
Russian government has formed an inter-ministerial committee to
limit the amount of borrowing, and the parliament has imposed
the requirement that it must approve new Russian government
loans exceeding $100 million.  The Russian government claims
that it is owed $150 billion from Soviet-era deals.  Although
most of the debt will probably never be paid, Russia has begun
to arrange repayment from some countries in the form of goods;
approved traders may bid for the right to import these goods at
discounted prices.
    Russia became a member of the International Monetary Fund
in 1992 and made a first credit tranche drawing of $1 billion.
In 1993, based on Russian efforts to limit credit expansion and
the budget deficit, the IMF approved a $1.5 billion drawing
under the new Structural Transformation Facility (STF).  Russia
did not meet its 1993 targets, but renewed stabilization
policies in the fall of 1993 opened the way for a second $1.5
billion STF drawing approved in the spring of 1994.  Russia is
engaged in negotiations with the IMF for a Standby Agreement of
about $6 billion.
5.  Significant Barriers to U.S. Exports
    The June 1993 Customs Code, which offers 15 alternative
regimes for handling external trade, standardizes Russian
customs procedures in accordance with international norms.
However, customs regulations change frequently, often without
sufficient prior notice, are implemented unevenly, and are
subject to arbitrary application.  There is no journal similar
to the Federal Register which comprehensively covers changes in
standards and border restrictions.  In December 1993 the United
States and Russia implemented a 1990 Customs Mutual Assistance
Agreement (with the Soviet Union) which was replaced in
September 1994 by a new U.S.-Russian agreement.
    Russia's July 1993 Consumer Protection Law stipulates
official certification (by Gosstandart) of imported products
for conformity to Russian technical, safety and quality
standards.  Certification is based on a combination of
international (notably European Union) and Russian standards.
All food items imported into Russia are subject to food quality
and safety standards and require a certificate for each
shipment.  Manufactured items can receive certificates allowing
import of a good over a three-year period.  Import licenses are
required on the normal range of dangerous and harmful materials
and goods.  U.S. companies have complained of costly procedures
and arbitrary certification requirements.  Russia is
establishing reciprocal standardization with the U.S. and other
countries and acceptance of foreign certification by accredited
institutions.  A joint Russian-U.S. communique of December 1993
pledges cooperation on improving and simplifying certification,
testing and quality assurance of U.S. and Russian products in
each other's markets.  A February 1994 memorandum of
understanding between the U.S. Food and Drug Administration and
the Russian Ministry of Health and Medical Industry established
a framework for cooperation and exchange of information on
drugs and biological products in order to facilitate their
importation.
    Most service industries still require comprehensive
regulatory legislation.  Although little of Russia's services
legislation is overtly protectionist, the banking, securities
and insurance industries have secured concessions in the form
of presidential decrees.  In practice, foreign companies are
often disadvantaged vis-a-vis Russian counterparts in obtaining
contracts, approvals, licenses, registration and certification,
and in paying taxes and fees.
    State procurement plays a limited and declining role for
non-defense industries, although production subsidies and
government grain purchases continue in agriculture.  A December
1993 decree abolished state agricultural purchases at fixed
prices.  The federal government has earmarked the equivalent of
$15 billion for purchase of Russian domestic aircraft to be
leased at a discount to domestic airlines.  Rail transportation
prices have been allowed to rise steadily over the past three
years but remain indexed to the cost of inputs.  The grain and
aircraft programs are supported from a government fund
equivalent to $5 billion.  The few remaining import subsidies
and centralized imports for nongovernment purposes were
eliminated in 1994, and the 1995 draft budget contains no
provisions for subsidized imports.  The U.S. Bilateral
Investment Treaty with Russia would provide substantial
assurances to U.S. investments if the Russian parliament
ratifies it.
6.  Export Subsidies Policies
    The 1995 budget has no provisions for centralized purchases
for exports except military technology, coordinated through a
single state organization, Rosvooruzhenie, in accordance with
an April 1994 presidential decree.  The export of oil, oil
products and natural gas is still extensively centralized, and
provides a significant portion of federal budget revenue.  The
government auctions rights to conduct centralized exports of
"strategically important" commodities in return for waiving
export taxes, although such exports "for state needs" have
fallen short of targets due to diminishing margins between
domestic and international market prices.  Privatized former
Soviet foreign trade organizations continue to handle a large
share of exports.
7.  Protection of U.S. Intellectual Property
    In 1992-93, Russia enacted laws strengthening the
protection of patents, trademarks and appellations of origins,
and copyright of semiconductors, computer programs, literary,
artistic and scientific works, and audio/visual recordings.
    The Patent Law, which accords with the norms of the World
Intellectual Property Organization, includes a grace period,
procedures for deferred examination, protection for chemical
and pharmaceutical products, and national treatment for foreign
patent holders.  Inventions are protected for 20 years,
industrial designs for ten years, and utility models for five
years.  One must wait four years before applying for a
compulsory license.  The Law on Trademarks and Appellation of
Origins introduces for the first time in Russia protection of
appellation of origins and provides for automatic recognition
of Soviet trademarks upon presentation of the Soviet
certificate of registration.
    The Law on Copyright and Neighboring Rights, enacted in
August 1993, protects all forms of artistic creation, including
audio/visual recordings and computer programs as literary works
for the lifetime of the author plus 50 years and is compatible
with the Berne Convention.  The September 1992 Law on
Topography of Integrated Microcircuits, which also protects
computer programs, protects semiconductor topographies for ten
years from the date of registration.
    Russia has acceded to the obligations of the former Soviet
Union toward the Universal Copyright Convention, the Paris
Convention, the Patent Cooperation Treaty, and the Madrid
Agreement.  In November 1994, the government gave authorization
for accession to the Berne Convention and the Geneva Phonograms
Convention.  Under the U.S.-Russian Bilateral Investment Treaty
(not yet ratified by the Russian side) Russia has undertaken to
protect investors' intellectual property rights.  The Bilateral
Trade Agreement obligates protection of the normal range of
literary, scientific and artistic works through legislation and
enforcement.  Still ahead are a comprehensive revision, now
underway, of the Russian Criminal and Civil Codes, including
sections pertaining to intellectual property rights;
strengthened penalties; and the establishment of specialized
courts, particularly a Patent Court, with trained and
experienced judges and attorneys, and trained police and
customs officers.  Legal enforcement of property rights has
been a low priority of the Russian government, as is evident in
the widespread marketing of pirated U.S. video-cassettes,
recordings, books, computer software, clothes and toys.
8.  Worker Rights
    a.  The Right of Association
    The right of workers to form or join trade unions is
guaranteed by the Russian constitution and the Russian Labor
Code, but full exercise of that right is limited in practice.
The legacy of centralized economic management and communist
state trade union structure continues to retard the development
of a workers' movement and independent trade unions in Russia.
Independent trade unions began to form in 1989 and continue to
develop slowly, but the official unions, reorganized as the
Federation of Independent Trade Unions of Russia (FNPR),
continue to predominate and remain subservient to enterprise
managers.  The right to leave an official union and join a new
one is guaranteed, but in practice many workers are reluctant
to take this step because official unions have retained control
over the social insurance fund, supported by a 5.4 percent
payroll tax and providing short-term disability, maternity,
leave, and annual leave benefits.  Most Russian workers have
little understanding of western concepts of worker rights and
do not view trade unions as their advocates.  The independent
unions have found it difficult to overcome this cynicism and to
educate workers about their rights and the role of unions in
protecting those rights.
    Russian law guarantees Russian workers the right to strike,
but numerous restrictions severely limit the exercise of that
right.  The law prohibits strikes which are for political
reasons, which pose a threat to people's lives or health, or
which might lead to "severe consequences."  This ambiguous
language has meant the de facto prohibition of strikes in key
sectors of the economy including defense, communications, civil
aviation, and railroads.  The law also requires a multi-stage
process of notification and negotiation before striking, which
gives employers ample time to coerce, intimidate or bribe
workers.  The Russian government has made little effort to
protect trade union leaders and strikers from retribution.  The
ambiguity of Russian labor laws provides employers with
opportunities to punish trade union members, and there were
numerous cases in 1994 of enterprise managers firing workers
for union activities.  However, free trade unions have had
increasing success obtaining favorable verdicts in labor
violations suits in the Russian courts.  With U.S. government
assistance, the free trade unions have established two labor
law centers in Russia to help free trade unions defend their
rights.
RUSSIA2
U.S. DEPARTMENT OF STATE
RUSSIA: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
    b.  The Right to Organize and Bargain Collectively
    Collective bargaining is protected by Russian law but is
not practiced widely in Russia.  Many enterprises refuse to
negotiate collective bargaining agreements, and many agreements
are not the product of genuine collective bargaining, given the
subordinate relationship of official unions to enterprise
management.  Free trade unions have been more aggressive in
demanding genuine collective bargaining.  Enforcing management
compliance with contracts remains problematic.  In several
sectors of the economy, wages, benefits and general conditions
of work are established by industry-wide tariff agreements
reached in talks between trade unions, management and
government.  This arrangement reinforces the traditional
tendency of Russian workers to expect the government to
establish wages and other workplace conditions.
    c.  Prohibition of Forced Labor
    Russian law prohibits compulsory labor, and there were no
reports of its occurrence in 1994.
    d.  Minimum Age for Employment of Children
    The Labor Code does not permit the regular employment of
children under the age of 16.  In certain cases, children aged
14 and 15 may work in intern or apprenticeship programs.  The
Labor Code regulates the working conditions of children under
the age of 18, including prohibiting dangerous work and
nighttime and overtime work.  Government enforcement is largely
ineffective, and there is anecdotal evidence to suggest that
the protections for children under 18 are violated.  The
responsibility for the protection of children at work is shared
by the Labor Ministry and the Ministry for Social Protection.
    e.  Acceptable Conditions of Work
    The Russian legislature sets the minimum wage, which
applies to all workers.  The minimum wage in Russia ranged
between $5 and $10 per month during the second half of 1994,
but the average salary was about $100.  The primary purpose of
the minimum wage is to serve as a baseline for computing
benefits, pensions and some wages scales.  For example, the
wage scale for government workers, who are among the
lowest-paid in Russia, is based on a multiple of the minimum
wage.  The labor code provides for a standard workweek of 40
hours, which includes at least one 24-hour rest period, premium
pay for overtime or holiday work, and minimum conditions of
workplace safety and worker health.  However, these standards
are widely ignored and government enforcement of safety and
health regulations is inadequate.  Industrial deaths and
accidents continue to rise dramatically in Russia.  The Labor
Ministry reported that 30 Russian workers die and another 50
are injured each day as a result of workplace accidents.
    f.  Rights in Sectors with U.S. Investment
    In the petroleum, food and telecommunications industries
where U.S. investment is significant, observance of worker
rights does not differ markedly from other sectors.  The
petroleum and telecommunications sectors are highly unionized,
but the official unions predominate.  The food sector is less
unionized but working conditions there are no worse than
elsewhere.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                             227
Total Manufacturing                                    -3
  Food & Kindred Products                    -1
  Chemicals and Allied Products               0
  Metals, Primary & Fabricated                0
  Machinery, except Electrical              (D)
  Electric & Electronic Equipment             0
  Transportation Equipment                    0
  Other Manufacturing                       (D)
Wholesale Trade                                         2
Banking                                                 0
Finance/Insurance/Real Estate                           0
Services                                                3
Other Industries                                      (*)
TOTAL ALL INDUSTRIES                                  230
(D) Suppressed to avoid disclosing data of individual companies
(*) Less than $500,000
Source: U.S. Department of Commerce, Bureau of Economic
Analysis
(###)
SAUDI_AR1
MU.S. DEPARTMENT OF STATE
SAUDI ARABIA: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                                   SAUDI ARABIA
                               Key Economic Indicators
                  (Billions of U.S. dollars unless otherwise noted)
                                             1992      1993      1994  1/
          Income, Production and Employment:
          Real GDP (1990 prices)            115.8       N/A       N/A
          Real GDP Growth (pct.)              1.0       N/A       N/A
          GDP (at current prices)  2/       121.4     122.6     119.2
          By Sector:
            Oil                              47.1      45.6      44.3
            Private Sector                   41.7      43.8      45.0
            Government                       32.6      33.2      30.2
          Real Per Capital GDP  3/          7,175     7,000     6,575
          Money and Prices:  (annual percentage growth)
          Money Supply (M2)  4/               5.5      -0.8       4.8
          Base Interest Rate  5/              3.5       3.5       3.9
          Wholesale Inflation  4/             1.3       0.6       1.4
          Consumer Price Index  4/           -0.4       0.8       0.5
          Exchange Rate (SR/USD)             3.75      3.75      3.75
          Balance of Payments and Trade:
          Total Exports (FOB)                47.0      44.9      41.1
            Exports to U.S. (FAS)  4/        10.3       7.8       4.0
          Total Imports (FOB)                30.2      25.9      23.3
            Imports from U.S. (FAS)  4/       7.0       6.7       3.2
          Aid from U.S.                       0.0       0.0       0.0
          Aid from Other Countries            0.0       0.0       0.0
          External Government Debt            4.5       4.5       N/A
          Debt Service Payments (paid)        0.0       0.0       N/A
          Gold and FOREX Reserves  4/         4.8       5.9       5.3
          Trade Balance                      16.8      19.0      17.8
          N/A--Not available.
          1/ Embassy estimates.
          2/ In purchasers' values.
          3/ Based on the official 1992 census data and current GDP.
          4/ For 1994, data for the first half of the year.
          5/ Average annual rate for 1-month deposits, 1994 average for
          first half of the year.
1.  General Policy Framework
    Saudi Arabia has an open, developing economy with a large
government sector.  Its regulations favor Saudis and citizens of
the Gulf Cooperation Council (GCC) states.  This bias is
reflected in virtually all government policies, including those
affecting taxation, credit, investment, procurement, trade, and
labor.  But the government's interest in promoting economic
development, defense, and technology transfer helps reduce
favoritism toward Saudis and the GCC over foreign investors in
the domestic economy.
    Oil dominates the Saudi economy, comprising an estimated 37
percent of GDP, 75 percent of budget receipts, and 90 percent of
exports in 1993.  Much of the non-oil GDP is tied to oil, as
consumption and investment are dependent on oil receipts and
services and supplies are sold to the oil sector.  The government
sector plays a significant role in influencing resource
allocation within the Saudi economy.  Non-oil budget revenues
include customs duties, investment income, and fees and charges
for services.
    The Government of Saudi Arabia has recorded budget deficits
annually for the last decade, with the shortfall for 1993
estimated at USD 13 billion--11 percent of GDP.  The government
originally financed its fiscal shortfalls by drawing down
deposits in the Saudi Arabian Monetary Agency (SAMA), the
country's central bank, and began borrowing in 1988 through
government bonds and bills to conserve its remaining assets.
Defense and security account for nearly one-third of all budgeted
expenditures, and the government also makes large outlays for
salaries, capital projects, services, and operations and
maintenance programs.  The government embarked on a major
austerity program in 1994--reducing planned spending by 19
percent over the level planned for 1993--but will likely record
its twelfth consecutive budget deficit for the year.  King Fahd
openly endorsed privatization in 1994, and the government has
begun studying the sale of some state-owned firms.
    SAMA allows the growth of money supply to be dictated by
government fiscal operations and the growth of the economy.  SAMA
has the statutory authority to set legal reserve requirements,
impose limits on total loans, and regulate the minimum ratio of
domestic assets to total assets for the banks.  It is also able
to conduct open market operations through repurchases of Saudi
government development bonds and treasury bills.  SAMA oversees a
financial sector of 12 commercial banks, five specialized credit
banks, and a variety of nonbank financial institutions.
2.  Exchange Rate Policy
    The Saudi Riyal (SR) is officially pegged to the IMF's
Special Drawing Right (SDR) at a rate of SR 4.28255 to SDR 1,
with margins of 7.25 percent on either side of the parity.  SAMA
suspended the margins in 1981 and, in practice, pegs the Riyal to
the Dollar.  Saudi Arabia last devalued the Riyal in June 1986
when it set the official selling rate at SR 3.75 to USD 1.  There
are no taxes or subsidies on purchases or sales of foreign
exchange.
    Saudi Arabia imposes no foreign exchange controls on capital
receipts or payments by residents or nonresidents, beyond a
prohibition against transactions with Israel.  In accordance with
UN resolutions, the prohibition has been
expanded to include transactions with Iraq and Serbia.  Sanctions
against South Africa ended this year.  Local banks are prohibited
from inviting foreign banks to participate in Riyal-denominated
transactions inside or outside Saudi Arabia without prior
approval of SAMA.  The monetary authorities and all residents may
freely and without license buy, hold, sell, import, and export
gold, with the exception of gold of 14 karat or less, which is
prohibited.
3.  Structural Policies
    The Saudi government has traditionally eschewed price
controls, with the exception of those for basic utilities and
energy.  Water, electricity, and petroleum products are heavily
subsidized, with prices often substantially below the costs of
production in order to share the wealth and spur development.  In
agriculture, government procurement prices for wheat (now USD 400
and 533.33 per ton to large and small farmers respectively) are
substantially above world market levels.  The government adjusted
its pricing policy for wheat in 1993 in an attempt to reduce
wheat production and encourage crop diversification.  Farmers
must now have prior government approval to produce and sell wheat
at the support price, and the government is no longer encouraging
the establishment of new wheat farms.
    Saudi taxes take three major forms:  income taxes, fees and
licenses, and customs duties.  The income tax is payable only by
foreign companies and self-employed expatriates.  The income tax
rate on business income on foreign companies and expatriate
shareholders of Saudi firms ranges from 25 percent on profit of
less than USD 26,667 to a maximum rate of 45 percent for profits
above USD 266,667.  Foreign investors receive tax incentives,
including a 10-year tax holiday for approved agricultural and
manufacturing projects with a minimum of 25 percent Saudi
participation.  Saudis and Muslim residents are subject to the
"zakat," an Islamic net worth tax levied at the flat rate of 2.5
percent.  Import tariffs are levied at a general minimum rate on
12 percent ad valorem, except for products originating in Gulf
Cooperation Council states and essential commodities.  There is
also a maximum 20 percent tariff on products that compete with
local infant industries.
4.  Debt Management Policies
    Saudi Arabia is a net creditor in world financial markets.
SAMA manages a foreign portfolio of over USD 50 billion in its
issue and banking departments and an estimated USD 15 billion for
the autonomous government institutions:  the pension fund, the
Saudi Fund for Development, and the General Organization of
Social Insurance.  Under SAMA's current conservative definitions,
only about USD 10 to 15 billion of its more than USD 50 billion
portfolio is available.  The remainder is earmarked to guarantee
the currency or letters of credit.  In addition to the overseas
assets managed by SAMA, Saudi Arabia's commercial banking system
had a net foreign asset position of USD 19.7 billion at the end
of 1993.  The Saudi government began 1994 with a foreign debt of
USD 4.5 billion from a
syndicated loan signed in 1991.  As of November 1994, it had made
principal payments of USD 2.7 billion on that debt.  The domestic
banks, Saudi Aramco and other state-owned enterprises have
overseas liabilities.
    Saudi Arabia has become dependent on borrowing to finance its
budget deficits after having liquidated much of the government's
deposits in SAMA.  The Saudi government began direct borrowing in
1988 through a domestic government development bond program.  The
bonds have a two- to five-year maturity.  In 1991, following the
Gulf War, the Saudi government expanded its borrowing when it
signed loan syndications with international and domestic banks
and introduced treasury bills.  By the end of 1993, total Saudi
government domestic and foreign debt was an estimated USD 80
billion, or 65 percent of GDP.  Over 90 percent of this debt is
owed to domestic creditors:  the autonomous government
institutions, commercial banks, and private Saudis.  Total
interest payments on the debt were estimated at eight percent of
expenditures in 1993.
5.  Significant Barriers to U.S. Exports
    Although the U.S. is the Kingdom's largest supplier and
investor, trade and investment barriers appear in a variety of
forms.  The foreign capital investment code requires that foreign
investment be made in line with the nation's development
priorities and include some technology transfer.  While there are
no legal limitations on percentage of foreign ownership, prior to
1994, wholly foreign-owned ventures were unlikely to receive
government approval.  Foreigners may not invest at all in joint
ventures engaged solely in advertising, trading, distribution or
marketing.  Real estate ownership is restricted to wholly-owned
Saudi entities or citizens of the Gulf Cooperative Council (GCC).
    Saudi labor law requires companies registered in the Kingdom
to give preference to Saudi nationals when hiring.  The
expatriate workforce in the Kingdom is approximately four
million.  Saudi Arabia announced implementation of a Business
Entry fee of Saudi riyals 1,000 (USD 267) in 1995 for working
involving Saudi and non-Saudi companies.
    On September 30, 1994, the GCC foreign ministers publicly
announced that the GCC was no longer enforcing the secondary and
tertiary aspects of the Arab League boycott of Israel.  Some
Saudi commercial documentation continues to contain references to
the Arab League boycott.  U.S. firms often have to seek revision
of these documents before they sign the documentation.  The
primary boycott against products and services from Israel remains
in force.
    Import licensing requirements designed to protect domestic
industries or restrict importing to nationals are an obstacle to
free trade.  Saudi Arabia requires a license to import
agricultural products.  In addition, contractors of civilian
projects may not import directly and instead must purchase
equipment and machinery from Saudi agents.
    Restrictive shelf-life standards for food products act as de
facto discrimination in favor of European and Asian products,
which take less time to ship than products made in the United
States.
    In 1987, Saudi Arabia enacted regulations favoring GCC-made
products in government purchasing.  GCC items now receive up to a
ten percent price preference over non-GCC products.  Under a 1983
decree, foreign contractors must subcontract 30 percent of the
value of the contract, including support services, to majority
Saudi-owned firms, a restriction which U.S. businessmen consider a
serious barrier to exports of U.S. engineering and construction
services.  Saudi Arabia negotiates offset requirements in
connection with certain military purchases and, recently, for
some major civilian projects.
    In addition, the government reserves certain services for
government-owned companies.  Insurance services for government
agencies and contractors are reserved for the national company
for cooperative insurance.  A "fly-Saudia" (Saudia Airline)
policy applies to government-funded air travel.
    Saudi Arabia applies a "fly-Saudia" policy to foreign Muslims
traveling to the Kingdom to visit the holy city of Mecca during
pilgrimage every year, as well.  The government reserves a
percentage of foreign pilgrim traffic for Saudia Airline, and
enforces this policy by regulating the number of foreign carriers
permitted to land during the pilgrimage period.  The government
also gives a preference to national shipping companies: up to 40
percent of governmental purchases must be shipped in Saudi-owned
vessels.
    Saudi customs rules require that incoming goods be
accompanied by documentation certified by an approved member of
the Arab-U.S. Chamber of Commerce and the Saudi Embassy or
Consulate in the United States.  The latter requirement slows
shipping, adds man-hours and fees, and ultimately increases the
cost of the product to Saudi customers.
6.  Export Subsidies Policies
    Saudi Arabia has no export subsidy programs specifically
targeted at industrial products, though many of its industrial
incentive programs indirectly support exports.  Agricultural
export subsidies are discussed above.
7.  Protection of U.S. Intellectual Property
    The United States Trade Representative placed Saudi Arabia on
the Special Section 301 Priority Watch List in 1993 mainly
because the Kingdom's copyright law does not protect foreign
works.  On April 13, 1994, Saudi Arabia acceded to the Universal
Copyright Convention (UCC).  It began enforcing reciprocal
protection for UCC signatories July 13, 1994, although pirated
products may still be commonly found in shops.
    The Kingdom's copyright law went into effect in 1990.  The
law provides protection for the life of the author plus fifty
years in the case of books, and in the case of sound and audio
visual works, for the life of the author plus twenty-five years.
Computer programs are also covered, although the law
does not specify a period of protection.  The law does not apply
to Western works, however, Saudi authorities have indicated that
through the Kingdom's accession to the Universal Copyright
Convention, they will be able to extend protection to Western
works.  As of November 1994, overt computer piracy has decreased,
but many pirated videos and sound recordings are still available
in the marketplace.
    Saudi Arabia enacted a patent law in 1989.  The criteria for
determining whether an invention is patentable are similar to
those applied in the United States.  Saudi law prohibits the
unlicensed use, sale or importation of a product made by a
process subject to patent protection in Saudi Arabia.  At the
same time, the law allows the government to declare that certain
areas of technology are unpatentable.  It also permits compulsory
licensing of patented products and processes, with or without
compensation to the patent holder, for non-use of the patent or
for public policy reasons.  As of November 1994, the Saudi Patent
Office had not yet acted on any of the 3,000 applications it had
received.
    The Kingdom's trademark laws and regulations conform to
international norms, but U.S. businesses have complained of
excessive registration and search fees, as well as problems with
enforcement.  Counterfeiting in spare auto parts, cologne,
pharmaceuticals and other consumer products is widespread.
Infringement proceedings are spotty.  Some proceedings can take
years and cost tens of thousands of dollars, while others can be
resolved in less than two weeks.  Moreover, many Saudi judges are
trained only in religious law and are perceived as unsympathetic
to trademark claims brought by foreigners.
    U.S. industry groups have estimated losses due to lack of
copyright protection at over USD 110 million in 1992.  When
losses from trademark counterfeiting and patent infringement are
included, this figure is substantially higher.
8.  Worker Rights
    a.  The Right of Association
    Government decrees prohibit both the formation of labor
unions and strike activity.
    b.  The Right to Organize and Bargain Collectively
    This right is not recognized in Saudi Arabia.
    c.  Prohibition of Forced or Compulsory Labor
    Forced labor is prohibited in Saudi Arabia. However, since
employers have control over the movement of foreigners in their
employ, forced labor, while illegal, can occur, particularly in
the case of domestic servants and in remote areas where workers
are unable to leave their places of employment.
    d.  Minimum Age for Employment of Children
    The labor law provides for a minimum age of 13, which may be
waived by the Ministry of Labor with the consent of the
child's guardian.  Children under 18 and women may not be
employed in hazardous or unhealthy industries such as mining.
Wholly-owned family businesses and family-run agricultural
enterprises are exempt from the minimum age rules, however.
    e.  Acceptable Conditions of Work
    Saudi Arabia has no minimum wage.  The labor law establishes a
48 hour work week and allows employers to require up to 12
additional hours of overtime, paid at time and one-half.  It also
requires employers to protect employees from job-related hazards
and diseases.
    f.  Rights in Sectors with U.S. Investment
    Major U.S. companies operating in the oil, chemicals, and
financial services sectors are good corporate citizens and adhere
strictly to Saudi labor law.  Conditions of work at major U.S.
firms are generally as good or better than elsewhere in the Saudi
economy.  U.S. firms normally work a five and one-half day week
(44 hours) with paid overtime.  Overall compensation tends to be
at levels that make employment in U.S. firms very attractive.
Safety and health standards in major U.S. firms in Saudi Arabia
compare favorably with non-U.S. firms in Saudi Arabia.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
(Millions of U.S. dollars)
    Category      Amount
Petroleum       (1)
Total Manufacturing       (1)
  Food & Kindred Products(1)
  Chemicals and Allied Products    (1)
  Metals, Primary & Fabricated     (1)
  Machinery, except Electrical      2
  Electric & Electronic Equipment   5
  Transportation Equipment0
  Other Manufacturing    35
Wholesale Trade 27
Banking         (1)
Finance/Insurance/Real Estate       (1)
Services       104
Other Industries(1)
TOTAL ALL INDUSTRIES    2,567
(1) Suppressed to avoid disclosing data of individual companies
Source: U.S. Department of Commerce, Bureau of Economic Analysis
(###)
SERBIA_A1
U.S. DEPARTMENT OF STATE
SERBIA/MONTENEGRO: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                      SERBIA AND MONTENEGRO
    Serbia's economy continues to face stringent UN sanctions
on trade and financial transfers imposed in May 1992 for
support of the war in Bosnia-Herzegovina.  In October 1994,
after Serbia agreed to seal its Bosnian border, the UN lifted
restrictions on international commercial flights and
participation in sporting and cultural exchanges; the other
sanctions remained in place.
    In January 1994, Dragoslav Avramovic, the new Governor of
the National Bank of Yugoslavia, introduced an economic
stabilization program which dramatically changed Serbia's
economic condition.  The program established a new currency,
the "super-dinar," which is formally pegged on a 1:1 basis with
the Deutsche mark.  The program also set new curbs on monetary
emissions which, according to the Belgrade Institute of
Economic Sciences, cut 1993's record hyperinflation to a
monthly level of 0.2 percent by September.  The National Bank
of Yugoslavia reported that between January and August
industrial output increased by 26 percent and maintained an
average monthly growth rate of 3.4 percent per month.
According to some reports, wages have reached the level of
early 1992, and increased by a monthly rate of 17 percent from
June to September.  In the first six months of 1994, foreign
exchange reserves increased by over DM 600,000.  By April,
shops stocked a wide variety of Western goods which were
smuggled in despite the tight international sanctions.
Although goods were available, questions remained as to whether
average citizens could afford them.
    Yet the sustained growth of the economy is uncertain;
cracks in the stabilization program's facade are becoming more
apparent with time.  A black market in foreign currency emerged
briefly in the spring of 1994 and threatened to reduce
confidence in the super-dinar and reignite inflation; similar
indications arose in late October 1994.  On the labor front,
the monthly wage hikes seen in 1994 may also constitute a new
inflationary factor.  The Belgrade Department of Labor reports
over 100,000 unemployed in Belgrade, and over 40 percent of
government workers placed on leave.  Discontent among workers
has resulted in several mini-strikes, and threats of major
strikes.  Over two thirds of the 1994 wheat crop could only be
sold by barter.  Holding the line on monetary emissions, the
government is running out of money with which to pay its
employees.  In July the Minister of Energy confirmed suspicions
that funds were low for necessary pre-winter maintainance and
repairs on power plants.
    After years of economic suffering, the Montenegrin
president announced in September that for the first time in
Montenegrin history there would be a balanced budget.
Production in the region was increasing at 0.8 percent a
month.  Tourism had returned in full swing, yet high prices
kept most of the shops empty.
(###)
SINGAPOR1
+F+FU.S. DEPARTMENT OF STATE
SINGAPORE: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                            SINGAPORE
                     Key Economic Indicators
        (Millions of U.S. dollars unless otherwise noted)
                                    1992      1993      1994 1/
Income, Production and Employment:
Real GDP (1985 prices) 2/         39,761    44,072    51,301
Real GDP Growth (pct.) 2/            6.0       9.9       9.5
GDP (at current prices) 2/        48,547    55,085    66,462
By Sector:  (1985 prices)
  Agriculture                        100        98       111
  Energy/Water                       831       898     1,598
  Manufacturing                   10,981    12,161    14,659
  Construction                     2,707     2,947     3,510
  Rents                              N/A       N/A       N/A
  Commerce                         7,218     7,892     9,061
  Transport/Communications         5,843     6,453     7,573
  Financial/Business Services     10,391    11,849     3,868
  Government/Health/Education/
    Other Services                 4,053     4,315     4,839
  Net Exports of Goods & Services  1,164       512     4,104
Real Per Capita GDP               12,504    13,519     15,360
Labor Force (000s)                 1,620     1,634     1,675
Unemployment (pct.)                  2.7       2.7       2.1
Money and Prices:  (annual percentage growth)
Money Supply (M2)                    8.9       8.5      12.0
Base Interest Rate 3/                5.6       5.3       5.9
Personal Saving Rate 3/              1.8       1.6      2.15
Retail Inflation 4/                 -6.8      -3.8      -3.2
Consumer Price Index                 2.3       2.4       4.0
Exchange Rate (SD/USD)              1.63      1.62      1.52
Balance of Payments and Trade:
Total Exports (FOB) 5/            40,723    44,661    58,311
  Exports to U.S.                 11,234    12,744    14,656
Total Imports (CIF) 5/            49,427    57,881    64,573
  Imports from U.S.                8,949    10,655    12,897
Aid from U.S.                          0         0         0
Aid from Other Countries               0         0         0
External Public Debt                14.9       7.2       3.0
Debt Service Payments               10.6      10.2       3.6
Gold and Foreign Exch. Reserves   40,386    48,191    53,145
Trade Balance 5/                  -5,782    -8,066    -3,820
  Trade Balance with U.S.          1,497     1,932     2,332
N/A--Not available.
1/ Data for 1994 estimated based on first half of 1994 data and
current expectations for second half of 1994.
2/ Based on market prices, factor cost data not available.
Growth is based on local currency to remove exchange rate
effect.
3/ Average of rates quoted by 10 leading banks.
4/ Based on retail sales.
5/ Merchandise trade.
1.  General Policy Framework
    Sitting astride one of the major shipping lanes of the
world, Singapore has long adopted export-oriented free-market
economic policies that encourage two-way flows of trade and
investment.  These policies have allowed this small country to
develop one of the world's most successful open trading and
investment regimes.  Over the past decade real GDP grew at
average annual rate of seven percent; 1993's economic growth
rate was 9.9 percent.  Singapore actively promotes trade
liberalization in the region through its activities in APEC and
ASEAN.  It ratified the Uruguay Round GATT agreement in October
1994 to become one of the founding members of the World Trade
Organization.
    Taking into account a lack of natural resources and a small
(3.2 million population) domestic market, Singapore's policies
have created a climate encouraging economic growth, including
an open trade environment, a corruption-free pro-business
regulatory framework, political stability, public investment in
infrastructure, high savings and prudent fiscal management, a
trained labor force, and significant tax concessions to foreign
investors.  Singapore's fiscal policies have enhanced export
and investment growth.  The government has had a budget surplus
for most years since the 1970's.  The country's reserves
(US $48.2 billion in 1993) are conservatively invested by the
Singapore Government Investment Corporation.  The Central
Provident Fund (CPF) compulsory savings program is the basis
for the national savings rate of 47 percent of GDP.
    The Monetary Authority of Singapore (MAS), the country's
central bank, engages in limited money-market operations to
influence interest rates and ensure adequate liquidity in the
banking system.  Strict financial discipline is the
government's most important tool for controlling inflation.
Although inflation is moderate by international standards
(2.4 percent last year and 3.5 percent so far this year), an
acute labor shortage and rising property values have
intensified inflationary pressures.  The MAS maintains a strong
currency to check inflation, particularly imported inflation,
given Singapore's extreme exposure to international trade.
    Singapore has become a major center for electronics, oil
refining and financial services, acting as a hub for the
growing southeast Asian market.  Singapore's sound economic
policies which promote private investment have attracted about
900 U.S. companies to Singapore, with cumulative investments of
US $18.9 billion in 1993.  The United States is Singapore's
largest trading partner, accounting for 18 percent of total
trade in 1993.  U.S. imports to Singapore in 1993 were
US $10.7 billion and Singapore's exports to the United States
were US $12.7 billion.
2.  Exchange Rate Policy
    Singapore has no exchange rate controls.  Exchange rates
are determined freely by daily cross rates in the international
foreign exchange markets.  The MAS uses currency swaps and
direct open market operations to keep the Singapore dollar
within a desired trading range, guarding against the
internationalization of the Singapore dollar so as not to lose
control over its monetary and economic policies.
    The Singapore dollar appreciated 17 percent against the
U.S. dollar from 1989 to 1993.  Since the end of 1993 to
mid-October 1994, the Singapore dollar has strengthened another
8 percent.  This has not adversely affected Singapore's economy
as nearly all of its production inputs are imported.  The
strong Singapore dollar has helped to make U.S. products more
competitive in the Singapore market.
3.  Structural Policies
    Singapore's prudent economic policies have allowed for
steady economic growth and the development of a reliable
market, to the benefit of U.S. exporters.  Singapore was the
ninth largest customer for U.S. products in 1993, up from 11th
in 1992.  Prices for virtually all products are determined by
the market.  The government lets bids by open tender and
encourages price competition throughout the economy.
    Singapore's tax policy is designed to maintain its
international competitive position.  Foreign firms are taxed on
the same basis as local firms.  The corporate tax is currently
at 27 percent.  The government aims to bring the corporate tax
down to 25 percent in the next few years.  There are no taxes
on capital gains, turnover, or development.  The Government
implemented a 3 percent value-added Goods and Services Tax
(GST) in 1994 but reduced corporate and personal taxes.
Tariffs exist for only a few products.  Excise duties are
levied on cigarettes, alcohol, petroleum products and motor
vehicles primarily to control social behavior and restrict
motor vehicle numbers.  There are no nontariff barriers to
foreign goods.
    Many of Singapore's public policy measures are tailored to
attract foreign investments and ensure an environment conducive
enough for their efficient business operations and
profitability.  Although the government seeks to develop more
high-tech industries, it does not impose production standards,
require purchases from local sources, or specify a percentage
of output for export.
4.  Debt Management Policies
    Singapore's external public debt was a negligible US $7.2
million at the end of 1993, and its debt service ratio is less
than 0.1 percent.  Singapore's budget surpluses and mandatory
savings have allowed the government wide latitude in supporting
infrastructure, education, and other programs contributing
significantly to national development.
5.  Significant Barriers to U.S. Exports
    Singapore has one of the world's most liberal and open
trade regimes.  Nearly 99 percent of imports enter duty free.
Import licenses are not required, customs procedures are
minimal and highly efficient, the standards code is reasonable
and the government actively encourages foreign investment.  All
major government procurement is by international tender.  The
Government ratified the Uruguay Round GATT accord on October
18, 1994.
    Singapore maintains some market access restrictions in the
services sector.  Local retail banking is limited to those
foreign banks with full or restricted licenses - the Monetary
Authority of Singapore has issued no new ones to foreign or
domestic banks since 1970, as it considers Singapore
over-banked.  Foreign banks hold over half the retail
licenses.  Foreign retail banks are not allowed additional
branches or ATM machines although local banks are allowed to
expand.  No new licenses for direct (general) insurers are
being issued, although re-insurance and captive insurance
licenses are freely available.  Foreign companies hold about
three-quarters of the 58 direct insurance licenses.  Foreign
securities firms are not permitted to have full membership in
the Stock Exchange of Singapore.
    The telecommunications sector has been steadily liberalized
since 1989.  There are no restrictions on the sale of
telecommunications consumer goods except that they must meet
the technical standards set by the Telecommunications Authority
of Singapore (TAS).  Provision of value-added network services
(VANS) have also been liberalized.  Newly listed on the stock
exchange, Singapore Telecom's monopoly to provide basic
telecommunication services will end in 2007.
6.  Export Subsidies Policies
    Singapore does not subsidize exports although it does
actively promote them.  The government offers significant
incentives to attract foreign investment, almost all of which
is in export-oriented industries.  It also offers tax
incentives to exporters and reimburses firms for certain costs
incurred in trade promotion, but it does not employ multiple
exchange rates, preferential financing schemes,
import-cost-reduction measures or other trade distorting policy
tools.
7.  Protection of U.S. Intellectual Property
    Singapore has taken concrete measures in recent years to
improve its level of intellectual property protection.
Singapore recently became a member of the World Intellectual
Property Organization (WIPO), and has already ratified the
Uruguay Round Accord including the TRIPS provisions.  Singapore
is not a party to the Berne Convention or the Universal
Copyright Convention.  In 1987, following close consultation
with the U.S. Government, Singapore enacted strict,
comprehensive copyright legislation which relaxed the burden of
proof for copyright owners pressing charges, strengthened civil
and criminal penalties and made unauthorized possession of
copyrighted material an offense in certain cases.  In January
1991, Singapore similarly strengthened its Trademark Law.  In
1994 Singapore enacted a new Patents Act.
    Problem Areas
    Patent Law:  Singapore enacted a new Patents Act in
October 1994 which was designed to introduce local patent
registration (previously patents had to be registered in the
United Kingdom before being registered in Singapore).  U.S.
companies dislike several provisions of the new law (chiefly in
the compulsory licensing area) and a number of provisions do
not conform to the TRIPS agreement.  The Singapore government
has pledged not to invoke the new compulsory license
provisions, and has promised to bring the patent law into full
compliance with TRIPS provisions within the next several years.
    Copyrights:  The problem of pirated computer software in
Singapore has significantly lessened in the past year as the
government has taken a more active stance.  In response to
concern expressed by the U.S. government and several
intellectual property protection associations, Singapore
markedly stepped up enforcement of copyright protection in
1994, including government prosecution of one case which
resulted in a felony conviction and jail sentence.  As a result
of stepped up enforcement, copyright infringement in the
computer and software areas has been significantly reduced in
1994.  In response to motion picture and phonographic industry
complaints that the Singapore government is not doing enough to
stem the importation and transshipment of pirated videos and
compact disks, Singapore's Board of Censors has begun to screen
for pirated materials before issuing censorship seals.
    Industry associations have estimated losses due to
compulsory licensing provisions of the patent law total
approximately US $5 million.  Software piracy losses have been
significantly reduced since last year when the industry loss
estimate was US $32.2 million.  We have no industry estimates
for this year.
8.  Worker Rights
    Article 14 of the Singapore's constitution gives all
citizens the right to form associations, including trade
unions.  Parliament may, however, based on security, public
order, or morality grounds impose restrictions.  The right of
association is delimited by the Societies Act and, labor and
education laws and regulations.  In practice, communist labor
unions are not permitted.  Singapore's labor force numbered
1.64 million in 1993, with some 236,000 workers organized in
85 trade unions.  Ninety-nine percent of these workers in
80 unions are affiliated with an umbrella organization, the
National Trades Union Congress (NTUC), which has a symbiotic
relationship with the government.  The NTUC's leadership is
made up mainly of Members of Parliament belonging to the ruling
People's Action Party (PAP).  The Secretary-General of the NTUC
is also an elected Minister without Portfolio in the Prime
Minister's Office.
    The Trades Union Act authorizes the formation of unions
with broad rights.  Collective bargaining is a normal part of
labor-management relations in Singapore, particularly in the
manufacturing sector.  Collective bargaining agreements are
renewed every two to three years, although wage increases are
negotiated annually.
    Under sections of Singapore's Destitute Persons Act, any
indigent person may be required to reside in a welfare home and
engage in suitable work.  The Government enforces the
Employment Act which prohibits the employment of children under
12 years and restrict children under 16 from certain categories
of work.  The Singapore labor market offers relatively high
wage rates and working conditions consistent with international
standards.  However, Singapore has no minimum wage or
unemployment compensation.  Because of a continuing labor
shortage, wages have generally stayed high.  The government
enforces comprehensive occupational safety and health laws.
Enforcement procedures, coupled with the promotion of
educational and training programs, reduced the frequency of
job-related accidents by one-third over the past decade.  The
average severity of occupational accidents has also been
reduced.
    U.S. firms have substantial investments in several sectors
of the economy, including petroleum, chemicals and related
products, electric and electronic equipment, transportation
equipment, and other manufacturing areas.  Labor conditions in
these sectors are the same as in other sectors.  The growing
labor shortage has forced employers mainly in the electronics
industry to hire many unskilled foreign workers.  Over 360,000
foreign workers are employed legally in Singapore, 22 percent
of the total work force.  The government controls the number of
foreign workers through immigration regulation and through
levies on firms hiring them.  Foreign workers face no legal
discrimination, but, because they are mostly unskilled, they
are general paid less than Singaporeans.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                             1,937
Total Manufacturing                                   4,632
  Food & Kindred Products                      86
  Chemicals and Allied Products               525
  Metals, Primary & Fabricated                 30
  Machinery, except Electrical              1,796
  Electric & Electronic Equipment           1,873
  Transportation Equipment                    (1)
  Other Manufacturing                         (1)
Wholesale Trade                                       1,076
Banking                                                 469
Finance/Insurance/Real Estate                           356
Services                                                187
Other Industries                                        125
TOTAL ALL INDUSTRIES                                  8,782
(1) Suppressed to avoid disclosing data of individual companies
Source: U.S. Department of Commerce, Bureau of Economic
Analysis
SLOVAKIA1
kU.S. DEPARTMENT OF STATE
SLOVAK REPUBLIC: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                       THE SLOVAK REPUBLIC
                     Key Economic Indicators
        (Millions of U.S. dollars unless otherwise noted)
                                   1992      1993      1994 1,2/
Income, Production and Employment:
Real GDP (1984 prices) 3/         6,295      5,223     5,686
Real GDP Growth (pct.)             -7.0       -3.2       3.9
GDP (at current prices) 3/        9,554     10,212    12,062
By Sector:  4/
  Agriculture                       541        582       721
  Industry                        5,354      4,003     4,529
  Services                        3,659      5,320     7,027
  Other                             N/A        307      -215
Real Per Capita GDP (USD)         1,186        982     1,063
Labor Force (000s)                2,764      2,347     2,506
Unemployment Rate (pct.)           10.4       14.0      14.6
Money and Prices:
Money Supply (M2: pct. gwth.)      7.91       7.63      8.19
Base Interest Rate (pct.) 5/       13.4       12.0      12.0
Personal Saving Rate (pct.)         3.3        3.3       2.7
Retail Inflation (pct.)            10.0       23.2      14.2
Wholesale Inflation (pct.)          5.3       17.2       9.4
Consumer Price Index                N/A       23.2      14.2
Exchange Rate (SK/USD)
  Official                        28.26      32.97     31.46
  Parallel                        30.50        N/A       N/A
Balance of Payments and Trade:
Total Exports (FOB) 6/            3,624      5,086     6,435
  Exports to U.S.                    47         58       105
Total Imports (CIF) 6/            3,564      5,914     6,385
  Imports from U.S.                  58        106       168
Aid from U.S. 7/                  28.51        N/A       N/A
Aid from Other Countries 7/         N/A        N/A       N/A
External Public Debt              2,322      3,600     4,150
Debt Service Payment (paid)         N/A        110       390
Gold and Foreign Exch. Reserves     790      1,400     2,300
Trade Balance 6/                     60       -828        50
  Trade Balance with U.S.           -11        -49       -63
N/A--Not available.
1/ 1994 figures estimated from latest available monthly data in
October 1994.
2/ Growth rates calculated in SK before converting to dollars.
3/ In 1993 ESA replaced MPS method of measuring GDP.
4/ Industry includes energy, manufacturing, and construction;
services include rents, financial and government services;
other is a residual.
5/ Discount rate of National Bank of Slovakia.
6/ Merchandise trade; figures for 1993 and 1994 include trade
with the Czech Republic.
7/ Assistance is substantial but current figures unavailable.
1.  General Policy Framework
    On January 1, 1993, the Slovak Republic gained
independence, following the breakup of the Czech and Slovak
Federative Republic (CSFR).  The economic structure of the new
Slovak state resembles that of the former state in many
respects, and all former federal laws were adopted in Slovakia
in early 1993.  A customs union providing for free movement of
goods and services and prohibiting tariff barriers within the
former CSFR remains in existence.  In addition to the ongoing
difficulties of converting a centrally-planned economy to a
modern market economy, Slovakia has had to create new
government institutions with limited resources.  Data
collection and analysis have improved considerably but remain
occasionally insufficient (or incompletely converted to
international standards).  Most of the former CSFR's
competitive industry, foreign investment and financial
expertise were located in the Czech Republic.  The
once-powerful armaments industry now produces at less than ten
percent of its 1988 level.  In consequence, unemployment is
much higher in Slovakia than in the Czech Republic.
    After elections in Fall 1994, former Prime Minister
Vladimir Meciar's HZDS party won a large plurality and formed a
new government in December together with two small coalition
partners.  The new Meciar government replaced the coalition
government led by Jozef Moravcik that had ruled since March
1994.  The Association of Slovak Workers (ZRS), one of the
coalition partners in the new Meciar government, has voiced
concern about privatization.  An official from ZRS is the new
Privatization Minister.
    Slovakia has expressed formal interest in EU and OECD
membership.  Slovakia signed an EU association agreement in
October 1993, and the attendant trade provisions have been
implelented.  The government adheres to EU standards wherever
possible in modernizing infrastructure and legislation.
Slovakia emphasizes its central location, skilled and low-cost
labor force, industrial tradition, and familiarity with its
eastern neighbors in advertising itself as a bridge between
East and West for business.
    In 1993 the general government fiscal deficit fell to 7.5
percent of GDP, above the IMF target but substantially below
the underlying 13% deficit in 1992 under the Federation.  The
deficit was aggravated by insufficient tax revenues due to the
creation of a new tax system, high levels of social spending in
response to the dislocations caused by economic transformation,
and debt service obligations.  The government's deficit target
for 1994 was 4 percent of GDP; by November it appeared that
this target would be reached.  Certain large items (including
$94 million for education and health) remain off-budget.  The
government has been trying to reduce the generous levels of
social payments.  A new insurance system was established in
January 1993, intended to become self-financing (and
off-budget) in 1994.  The deficit was primarily financed by
domestic banking sources, leading to a severe shortage of
credit available to private sector borrowers.  Borrowing from
the IMF, World Bank, EBRD, and other international lenders was
also significant.
    A restrictive monetary policy has succeeded in increasing
foreign exchange resources and limiting inflation.  The central
bank (National Bank of Slovakia, or NBS) maintained a tight
refinancing policy.  The NBS uses mostly indirect controls as
policy instruments.  Reserve requirements remained stable; open
market operations and currency swaps are undeveloped and little
used.  Banks themselves (28 in Slovakia, of which nine are
branches of foreign banks) tended to purchase low-risk
government securities as their liquidity increased, thereby
reducing credit available to private borrowers.
2.  Exchange Rate Policy
    After the division of Czechoslovakia, an initial monetary
union dissolved and the two currencies separated in February
1993.  Czechoslovak banknotes with Slovak stamps have been
replaced completely by newly-printed Slovak notes.  Since July
1994 the Slovak crown has been pegged to the Deutsche mark (60
percent) and the U.S. dollar (40 percent), under the
supervision of the NBS.  The crown was devalued by ten percent
in July 1993 but has since remained stable at approximately 32
crowns to the dollar.
    The crown is internally convertible and may move toward
full convertibility by the year 2000.  The Moravcik government
committed to Article VIII status with the IMF by January 1996,
and by the end of 1995 to define a clear timetable for ending
the Czech-Slovak bilateral payments agreement.  Individuals may
maintain hard currency accounts and are entitled to purchase
9000 crowns' ($285) worth of hard currency a year, an amount
that has been rising annually.  Companies registered in
Slovakia may earn hard currency but must deposit it in crown
accounts; they may purchase hard currency for business reasons,
subject to some limitations (see section 5).  Foreign investors
may keep their initial investment in hard currency and may
repatriate 100 percent of their profits in hard currency.
3.  Structural Policies
    Restitution:  The CSFR passed laws during 1990-92 governing
return of private property seized by the government after
February 1948.  Deadlines for filing claims have expired,
except in the case of religious community property, for which
new legislation took effect in January 1994.  The new
legislation includes provisions for restitution claims on
Jewish community properties seized after November 2, 1938.
Laws on agricultural restitution permit claims of up to 250
hectares of land (150 hectares for arable land).  By the end of
September 1994, 156,702 hectares of land had been returned to
roughly 24,000 claimants; an additional 32,379 hectares
representing joint claims were returned to communities.
Restrictions on land usage by existing owners have been lifted
for 461,810 hectares of arable and wooded land.
    Privatization:  Both small- and large-scale privatization
began in 1991 (prior to the breakup of the CSFR); the former is
complete.  Approximately 9500 small enterprises, including 6500
retail shops, have been privatized; privatization of urban
housing has begun.  Large-scale privatization has been
repeatedly delayed by political and conceptual changes within
the Slovak government, along with bureaucratic bottlenecks.
The Moravcik government pursued a mixed approach to
privatization which included standard methods and renewed
emphasis on use of the voucher method.  The first wave of
large-scale privatization ended in September 1993, with 703
enterprises valued at $5.3 billion at least partially
privatized.  The new Meciar government has decided to postpone
launching the second wave of voucher privatization, scheduled
to start in December 1994.  Government officials stated that
the second wave would be delayed by only a few months.  Prime
Minister Meciar planned to remove energy-producing companies
and certain other firms from the list of firms to be
privatized.  Originally, over two billion dollars worth of
firms were to be privatized.  Almost 3.5 million Slovaks, over
80 percent of those eligible, have registered to participate in
the second wave.  Overall, the private sector now generates
over 40 percent of GDP versus less than ten percent in 1988.
    Commercial Code:  The Code adopted in Czechoslovakia in
1992 remains valid in Slovakia.  Key points for U.S. investors
include a low level of government screening of foreign
investment, other than for privatization of certain state
enterprises; equal treatment with Slovak citizens for
conducting business; and elimination of most restrictions on
foreign investment.  The 1992 United States - Czechoslovakia
Bilateral Investment Treaty remains in force in Slovakia.
    Taxes:  Slovakia introduced a new tax system in January
1993, with later modifications.  Taxes are measured by the
calendar year and consist of a Value Added Tax (VAT) of 25
percent on most items and 6 percent on basic foodstuffs and
essentials; an excise tax; personal income tax of 15 to 47
percent and corporate income tax of 45 percent; and taxes on
real estate, auto registration, inheritance, gifts, etc.  VAT
accounts for about 30 percent of central government revenue;
the government is considering a lowering of rates.  Measures
are also being taken to improve collection and increase
penalties for evasion.  Significant tax incentives exist for
companies (especially banks) founded in Slovakia after December
31, 1992, depending on the location and level of foreign
capital invested.  The United States and Slovakia signed a
dual-taxation treaty in October 1993 which entered into force
in early 1994.
    Price Liberalization and Subsidies:  In July 1994,
selective wage controls were implemented in loss-making
enterprises and the energy and finance sectors; most private
enterprises are exempt from these controls.  Nearly all (96
percent) price controls have been removed; controls on food,
fuels, energy, heat, etc. remain but will be phased out by
December 1995, with periodic price increases during the next
two years to bring prices to market levels.  Government-granted
monopoly rights no longer exist.  Direct subsidies to
enterprises have fallen to about five percent of GDP.  In July
1994 selective wage controls were implemented in loss-making
enterprises and the energy and finance sectors; private
enterprises are exempt from these controls.
    Bankruptcy:  Slovakia adopted the 1991 federal law on
bankruptcy with additional amendments in June 1993.  Under the
law, a board of creditors (maximum of seven) formed upon court
recommendation may take control of enterprises in bankruptcy
proceedings; the board has three months to work out a recovery
program before liquidation occurs.  The board is elected by
domestic creditors, each of whom has one vote regardless of the
share of debt held; foreign creditors may not participate on
the board.  By January 1994 unresolved long-term claims of
Slovak companies totaled $2.3 billion, with short-term
unresolved claims at $9.1 billion.  Some claims have been
settled by a mandatory clearing system for enterprise debt
(focused on companies in "secondary insolvency," i.e. those who
could operate successfully if their debtors paid them).  This
has been an important hindrance to economic reform,
complicating efforts of efficient companies to attract
investment due to their unresolved claims, while inefficient
companies continue to receive government subsidies.
4.  Debt Management Policies
    Slovakia has a low level of foreign debt, 80 percent of
which is medium-term and the rest long-term.  As of late 1994,
gross foreign debt was $4.1 billion (roughly one-third of GDP),
down slightly from December 1993.  Of this, about 56 percent
represented debt of the government and the NBS.  In September
the NBS estimated that 40 percent of Slovakia's foreign
exchange reserves are from foreign loans.  Debt service for
1994 represents six percent of export earnings, a figure which
will increase in 1995.  Slovakia holds claims of $2.5 billion
on various countries around the world; all bilateral repayment
agreements were canceled prior to the dissolution of the CSFR.
The former Soviet Union is by far the largest debtor, owing
$1.7 billion, half of which is in convertible currency.
Payments to and from the Czech Republic are handled through an
ECU-based clearing system.
    Bad Debts:  In September 1994 the Slovak Finance Minister
characterized 25 percent ($1.6 billion) of all bank loans as
bad.  Much of the problem dates back several years to the
communist era.  In 1991 Czechoslovakia established a
Consolidation Bank to centralize part of the debts and
liabilities of the banking system, and subsequently the federal
National Property Fund issued bonds to aid debt writedowns and
bank recapitalization.  The government is considering an
extensive program to address the related problems of bad debts,
inadequate corporate governance, enterprise restructuring, and
commercial law reforms.  Foreign investors are concerned that
Slovak legislation does not permit tax deductions for bad debt
reserves and has no provision for reclaiming value-added tax on
bad debts.  Loss carry-forward provisions are also unclear.
    Loan Guarantees:  Slovakia has increased its outlays on
government loan guarantees (on both domestic and foreign
loans), primarily for infrastructure projects; as a share of
the budget these rose to 20 percent in 1994.  Commercial banks
were slightly more active in providing loan guarantees in 1994,
providing about $95 million (up 14 percent from 1993).
    Adjustment Programs:  The IMF approved a credit under the
Systemic Transformation Facility (STF) of approximately
$89 million for Slovakia in July 1993; an IMF advisor is
resident in Bratislava.  The STF is designed to facilitate
Slovakia's adjustment to the fiscal and external imbalance
resulting largely from the end of fiscal transfers from the
federal government in Prague, and to accelerate structural
reform.  In July 1994 the IMF approved $263 million in
additional credits, including $169 million under a 20-month
standby arrangement and $94 million as a second credit under
the STF.  The World Bank approved an Economic Recovery Loan of
about $80 million in November 1993, with Japanese cofinancing
of a like amount; the purpose of the loan is balance of
payments support and broad economic reform including the social
safety net.  Talks were under way in 1994 with the World Bank
for an Enterprise and Financial Sector Adjustment Loan.  Since
1992 Slovakia has received over $200 million in technical
assistance and other aid from various donors.
5.  Significant Barriers to U.S. Exports
    In December 1993 Slovakia canceled a temporary measure
(implemented earlier in 1993) designed to check the flow of
scarce foreign exchange.  Payment conditions are now negotiated
directly between Slovak importers and their foreign suppliers.
    Import Licenses:  Import licenses are governed by the 1991
decree of the former Czechoslovak Ministry of Foreign Trade,
which remains valid under Slovak law.  The decree divides
commodity items into "general" and "specific" categories for
the purpose of licensing.  For most of the approximately 100
groups of items in the "general" category, obtaining a license
is a formality.  In the remaining ten percent of cases (in
which a favorable decision of the Ministry of Economy is
required) obtaining a license may be more difficult, for
reasons related to environmental concerns, existing quotas, etc.
    Items in the "specific" category fall into three groups:
pharmaceuticals, weapons, and COCOM items.  In these cases a
favorable decision from the Ministry of Economy is required.
Among its criteria for decision the Ministry includes
consideration of environmental and health factors as well as
the impact on domestic producers.
    Services:  Permission from the NBS is required to offer
banking services.  Insurance companies must obtain a license
from the Ministry of Finance.  Permission from the Ministry of
Finance is required for stock exchange services.  Foreign
entities are welcome to join existing stock and options
exchanges, but no provisions exist under the 1992 law for
establishing new exchanges.  Lawyers may be licensed either by
the Chamber of Advocates or by the Chamber of Commercial
Lawyers.  Advocates may practice in any field, including
commercial law.  Commercial lawyers may not practice criminal
law.  Lawyers may practice as individuals, associations or
general partnerships, but not under a limited liability
(professional corporation) form.  No special permission is
required to offer travel or ticket services or air courier
services.
    Standards, Testing, Labelling, and Certification:  Slovak
legislation in this area closely follows EU legislation.  The
Slovak Office of Standards, Metrology and Testing is the
responsible office for compulsory and voluntary testing of a
wide range of products at 20 testing centers.  Testing is
compulsory for products in the "regulated" sphere (defined as
those which may pose threats to health, life, safety, and the
environment) which mainly comprise foodstuffs, kitchen devices,
medicines, electrical equipment, engineering products,
agricultural machinery, plastics, paints, polishes, cosmetics,
and sporting goods.  Voluntary testing may be done at the
request of the producer or importer wishing to obtain a
certificate.  Slovakia intends to introduce its own system of
labelling in early 1995, replacing the old federal system.
    Investment:  To date Slovakia has taken a positive stance
toward foreign investment, though in practice some obstacles
exist.  Foreign citizens may not own land in Slovakia, but may
form legal entities in Slovakia which in turn are permitted to
purchase land.  There are no significant barriers to
participation of foreign equity or personnel; no barrier to
repatriation of profits or capital; no restrictions on
downstream services; and no lack of national treatment.
Investment incentives do not provide sufficient provision for
accelerated depreciation, in the view of some foreign
investors.  The government has made clear that certain sectors
(e.g., telecommunications, energy) will not be privatized in
the short run.  It is still uncertain whether considerations of
employment or development of favored industries will adversely
affect the interests of foreign investors.
    Government Procurement Practices:  No "buy Slovak" law
exists, but the government is sensitive to the concerns of
local producers whose existence is threatened by the pace of
economic reform and the emergence of efficient competitors.
The government has stated that in certain instances, the
potential for local job creation will weigh heavily in judging
bids for newly-privatized enterprises.
    Customs Procedures:  Procedures are not intrinsically
complicated or burdensome.  The basic form required is the
"Unified Customs Declaration" which conforms to EC standards.
Occasional problems have arisen in individual cases, usually
due to the unfamiliarity of one or more parties with the new
procedures.
    The Slovak Republic succeeded to Czechoslovakia's
membership in GATT, and bases its foreign trade policy on GATT
principles, including the GATT subsidies code.  Slovakia is a
participant in the following agreements:  Multi-Fiber
Arrangement, Technical Trade Barriers Agreement, Licensing
Procedures Agreement, and Agreements on GATT Articles VI and
VII.  Slovakia ratified the Uruguay Round agreement and joined
the World Trade Organization as a founding member.
    Tax Concerns:  Foreign investors have expressed concerns
over several tax issues in Slovakia.  Under current law there
is no provision for establishment of purely representative
(informational) offices exempt from normal tax and accounting
requirements.  Holding companies are subject to a 15 percent
withholding tax on intra-group dividend payments.  Since
dividends are paid from after-tax profits, they are doubly
taxed.  Expatriate employees of Slovak entities are not
exempted from (relatively high) social security and health
insurance payments even when they remain covered under their
home-country system.
6.  Export Subsidies Policies
    Slovakia is a member of the GATT subsidies code.  The
tariff schedule is inherited from the Federation; rates are low
and average about six percent.  Imports from developing
countries enjoy GSP preference.  There are currently no direct
subsidies for Slovak exports, though indirect subsidies exist
in areas such as housing, agriculture, and energy.  An import
surcharge of ten percent on consumer goods was implemented in
March 1994 and is to remain in effect into 1995.
7.  Protection of U.S. Intellectual Property
    The Slovak Republic is a signatory to the same conventions
as the former Czechoslovakia, e.g. the Berne, Paris, Stockholm,
Madrid, Nice, Lisbon, Locarno, Washington, Strasbourg, and
Budapest conventions.  Slovak laws and regulations on
intellectual property are identical to those of the former
Czechoslovakia.  Slovak laws in this area are compatible with
western European legislation.  A new law on administrative fees
was passed in 1993; a law on trademarks is expected in 1995,
which will be harmonized with EU legislation.  Slovakia is a
successor to Czechoslovak membership in the World Intellectual
Property Organization (WIPO).  The U.S. Embassy is not aware of
disputes involving U.S. interests in the area of intellectual
property protection; however, Slovakia's trademark legislation
is based on "first to register" rather than "first to use,"
which poses potential difficulties for foreign investors.
8.  Worker Rights
    a.  The Right of Association
    There are no government restrictions on the constitutional
right of workers to form or join unions in Slovakia, except
that the armed forces are excluded from this right.  Unions are
independent of the government and political parties; roughly 70
percent of the labor force is organized.  All workers enjoy the
right to strike, except those in sensitive positions such as
judges, prosecutors, members of the armed forces, police, and
firefighters.  At present the policy of the Confederation of
Trade Unions regarding collective bargaining excludes strikes
as a tactic, and there have been none in 1994.
    b.  The Right to Organize and Bargain Collectively
    Collective bargaining is protected by law and freely
practiced throughout Slovakia.  Wages are set by free
negotiation.
    c.  Prohibition of Forced or Compulsory Labor
    Forced or compulsory labor is prohibited by law.  There is
no evidence that violations have occurred.
    d.  Minimum Age for Employment of Children
    The labor code forbids employment of children under the age
of 16.  Exceptions are made for 15-year-olds who have completed
elementary school and for 14-year-olds who have completed
courses at special schools for the disabled.  Workers under 16
may not work more than 33 hours per week and are covered by
legislation to protect their safety and well-being.
    e.  Acceptable Conditions of Work
    The Office of Labor Security issues standards on security,
and the Office of Hygiene issues standards on health at the
workplace.  The minimum monthly wage is SK 2450.  The law
mandates a standard workweek of 42.5 hours, which may be
modified by collective bargaining.  Caps exist on overtime and
workers are assured of at least 30 minutes' paid rest per work
day, and annual leave of three to four weeks per year.
    f.  Rights in Sectors with U.S. Investment
    Workers' rights in sectors with U.S. investment are the
same as in other enterprises in Slovakia.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                               0
Total Manufacturing                                   (1)
  Food & Kindred Products                   (1)
  Chemicals and Allied Products               0
  Metals, Primary & Fabricated                0
  Machinery, except Electrical                0
  Electric & Electronic Equipment             0
  Transportation Equipment                    0
  Other Manufacturing                         0
Wholesale Trade                                         0
Banking                                                 0
Finance/Insurance/Real Estate                           0
Services                                                0
Other Industries                                        0
TOTAL ALL INDUSTRIES                                  (1)
(1) Suppressed to avoid disclosing data of individual companies
Source: U.S. Department of Commerce, Bureau of Economic
Analysis
(###)
SLOVENIA1
%G%GU.S. DEPARTMENT OF STATE
SLOVENIA: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                             SLOVENIA
                     Key Economic Indicators
        (Millions of U.S. dollars unless otherwise noted)
                                    1992      1993      1994 1/
Income, Production and Employment:
Real GDP (1985 prices)               N/A       N/A       N/A
Real GDP Growth (pct.)              -5.4       1.3       6.0
GDP (at current prices):          12,365    12,672    13,800
By Sector:
  Agriculture                        590       563       570
  Energy/Water                       289       322       360
  Manufacturing                    4,095     3,870     3,900
  Construction                       458       521       510
  Rents                            1,445     1,421     1,600
  Financial Services                 409       443       450
  Other Services                   2,637     2,821     3,400
  Government/Health/Education      2,368     2,734     3,000
  Net Exports of Goods & Services     92        50       200
Real Per Capita GDP (1985 base)      N/A       N/A       N/A
Labor Force (000s)                   783       760       748
Unemployment Rate (pct.)             8.3       9.1       9.0
Money and Prices:  (annual percentage growth)
Money Supply (M2)                    2.8       2.5       1.9
Base Interest Rate 3/                 25        18        16
Personal Saving Rate                  48        30        24
Retail Inflation                     201.3      32.3      20.5
Wholesale Inflation                  215.7      21.6      18.5
Concumer Price Index                 201        32        21
Exchange Rate (USD/Sit)
  Official                            83       115       125
  Parallel                            87       117       115
Balance of Payments and Trade:
Total Exports (FOB)                6,681     6,083     6,500
  Exports to U.S.                    195       216       233
Total Imports (CIF)                6,141     6,501     6,696
  Imports from U.S.                  167       188       197
Aid from U.S.                        N/A       N/A       N/A
Aid from Other Countries             N/A       N/A       N/A
External Public Debt               1,741     1,873     2,000
Debt Service Payments (paid)         388       374       390
Gold and Foreign Exch. Reserves    1,163     1,566     2,800
Trade Balance                        791.1    -154.2     -40
  Trade Balance with U.S.             28        28        35
N/A--Not available.
1/ 1994 figures are all estimates based on available monthly
data in October 1994.
1.  General Policy Framework
    In 1991, Slovenia set out on the path of complete political
and economic transformation.  In the first phase, after market
reforms and a stabilization policy were introduced, the
immediate consequences were predominantly lower employment and
somewhat lower standards of living.  In the second phase, the
positive effects at the macroeconomic level have appeared step
by step.  But Slovenia is still at the beginning with regard to
some crucial elements of its economic transformation, above all
with regard to efficient affirmation of property rights
(privatization, sanctioning of contracts) and the development
of a financial market.
    The main reason for the economic depression in 1991-1992
was a dramatic decrease in aggregate demand (the collapsed
trade flows with other regions of former Yugoslavia, a decrease
of trade with eastern European markets).  Likewise the revival
of activity in 1993 was also caused by the increase of demand.
The contraction of markets in the former Yugoslavia stopped at
a low level, but the growth of exports to other countries was
high.  A very restrictive monetary policy was loosened up to a
more neutral one.  The credibility of the Slovene currency and
domestic institutions significantly increased.
    After five years of decline, the GDP increased by one
percent in 1993.  In the first eight months of 1994, positive
growth continued, but under conditions of the declining import
of consumer goods and the increasing import of semifinished
materials, while the current balance of payment shows a larger
surplus again.  The actual annual growth rate as of August 1994
was five percent.
    The public debt of the Republic of Slovenia, including
potential obligations stemming from the state succession
negotiations was estimated at 33 percent of GDP at the end of
1993.  For loan servicing, 0.8 percent of GDP or 1.6 percent of
total public receipts was spent in 1993.  Comparable figures
for 1994 are 1.1 and 2.3 percent, respectively.  Slovenia's
public debt is still relatively small.
    The Bank of Slovenia has successfully realized its primary
goals, lowering inflation and supplying the required quantity
of stable money.  Other goals were the decreasing of interest
rates, facilitating liquidity conditions in commercial banks,
and a fluctuation of the tolar's exchange rate on the foreign
exchange market.  The most often used instruments were the
liquidity loans given on the basis of papers of value as
collateral.  Both M1 and primary money increased in real terms
in 1993, while the real growth of money in 1994 is slowing
down.  In the structure of primary money, the share of giro
accounts and bank reserves is increasing at the expense of
currency in circulation.  Financial assets of the population in
banks are increasing very quickly, both in tolar and foreign
exchange deposits.
    Slovenia signed an accession agreement with the GATT on
September 27, 1994.  Slovenia has also started negotiations to
join the new World Trade Organization.
2.  Exchange Rate Policy
    When creating its currency (launched on October 8, 1991),
Slovenia opted for a managed float of the tolar against the
Deutsche mark, rather than a straight peg.  A peg remains the
long term objective.  In real effective terms, the tolar has
appreciated strongly against the mark throughout 1992, by 3.3
percent in 1993, and by an additional 6.8 percent in the first
eight months of 1994.  This is due to a surplus in the balance
of payment as well as to a high net inflow of foreign exchange
in foreign exchange offices in the country.  The mentioned data
are valid for the exchange rate for business transactions,
which grew at a slightly slower pace than the rate of the Bank
of Slovenia ("the official rate").  The latter reflects actual
movements of different money aggregates in the previous month
and is used for administrative purposes only (customs, etc.).
3.  Structural Policies
    Slovenia has made significant progress across a broad
spectrum of structural reforms. Slovenia is undertaking a
rehabilitation and reform of the financial sector and a
privatization of "socially-owned capital" to make the economy
more market-oriented.  Structural reforms in these two areas
are interrelated.  New prudential regulations (e.g.,
provisioning, capital adequacy, large borrower limits) and
accounting standards (e.g., nonaccrual of late interest) were
put in place along with the establishment of Bank of Slovenia
supervision activities.  The necessary legal framework was
erected with the passage of key implementing legislation for
ownership transformation; a bankruptcy law; a company law; a
banking law; and a securities market and mutual fund law.
    With regard to bank rehabilitation, the three most
important banks were put under the rehabilitation program.  By
the end of September 1994, 625 programs for privatization were
submitted to the Rehabilitation Agency.  These programs cover
approximately 850 "socially owned" companies (out of around
2,500).  304 programs were approved (first round of
approvals).  The programs submitted represent about 55 percent
of GDP and an equal percentage of employees.
    In 1993, changes were introduced in the personal income
tax, effective January 1, 1994.  With regard to the corporate
income tax, tax holidays have been eliminated and the
depreciation schedule has been liberalized.  The carry-forward
period for losses has been extended to five years from the
previous regulation that allowed carry-forward for only one
year.  A new corporate income tax law has been prepared and is
expected to become effective in the Fall of 1994 with the rate
lowered from 40 percent to 25 percent.  Overall payroll tax
rates were lowered considerably during 1993, from 50.35 percent
to 44.60 percent on average, as of the second quarter of 1994.
    Prices are mainly market driven.  Prices for electricity,
gas and telecommunications are the only prices still controlled
by the government.
4.  Debt Management Policies
    Public debt of the Republic of Slovenia, including
potential obligations stemming from the succession
negotiations, is estimated at 33 percent of the GDP at the end
of 1993.  For loan servicing, 0.8 percent of GDP or 1.6 percent
of total public receipts was channeled in 1993.  Comparable
figures for 1994 are 1.1 and 2.3 percent, respectively.
Slovenia's public debt is still relatively small.
    According to the Monthly Bulletin of the Bank of Slovenia
from August 1994, the latest actual data for foreign debt and
foreign exchange reserves are $1,985 million and $2,208
million, respectively.  The debt servicing ratio was 5.4
percent at the end of 1993.
    From a total debt of $1,985 million, $1,891 million
represents long term debt, $84 million accounts for short-term
debt, and $10 million is IMF credit (all data are stipulated
according to the World Bank methodology).  The debt data apply
only to loans used directly by Slovene beneficiaries.  The
division of federal (old Yugoslav) debt (approximately $2.6
billion - obligations to the IMF already excluded) is the
subject of ongoing negotiations on Yugoslav succession.
    The Republic of Slovenia became a member of the IMF in
January 1993.  By the decision of the Executive Board of the
IMF in December 1992, Slovenia was declared a successor state
to a percentage share of assets and liabilities of the former
Yugoslavia.  At the moment of succession, total liabilities
were SDR 51 million dollars, of which disbursed credits
amounted to SDR 25.5.
    A breakdown by creditors of the external long-term debt
follows (millions of dollars): 1) multilateral 442 (IBRD 120,
EBRD 14, EIB 204, IFC 65, EUROFIMA 39); 2) Paris Club 227; 3)
Refinancing: commercial banks 418; 4) Other long-term loans 804.
    Following the Slovene Government's decision of January 13,
1994, payments related to the following obligations are, until
final agreement is concluded, made to a fiduciary account of
the Bank of Slovenia in the Dresdner Bank, Luxembourg SA: 16.39
percent of interest due under the "Yugoslav New Financing
Agreement" (NFA) from 1988 for the amounts for which the
obligor is the National Bank of Yugoslavia; principal and
interest due under the NFA, for live credits only, where the
beneficiary is a Slovene entity; and amounts on deposit with
the Ljubljanska Banka d.d. under the Trade and Deposit Facility
Agreement from 1988.  The balance of this account as of July
31, 1994 is $68 million.
5.  Significant Barriers to U.S. Exports
    Traditionally, Slovenia had a relatively market oriented
economic system with liberalized prices and a high degree of
openness to foreign trade.  With the beginning of its
transition to a market oriented economy, Slovenia gradually
loosened the remaining obstacles in its foreign trade regime.
However, some statutory barriers to foreign investment remain.
    In October 1994, Slovenia became a member of the GATT.
Slovenia has started negotiations to join the new World Trade
Organization.  Slovenia had prepared all the necessary measures
to comply with GATT by the first half of 1994.
    Foreign Investment:  Two major barriers to U.S. investment
exist.  First, any company incorporated in Slovenia must have a
managing director of Slovene nationality, or the majority of
the board of directors must be Slovene.  Second, a foreign
registered company or individuals of foreign nationality are
not allowed to buy (own) land in Slovenia.  However, any
company incorporated in Slovenia, regardless of the origin of
its founding capital, may buy real estate in Slovenia.
    Slovenia's exchange system is free of restrictions on the
making of payments and transfers for current international
transactions, following the removal of a restriction limitating
transferability of tolar balances held by certain nonresidents.
6.  Export Subsidies Policies
    Slovenia has no special export subsidies policy.  The
Slovene economy has always been export oriented.  It is driven
by the exchange rate of domestic currency only.  As a fledgling
nation, Slovenia lacks different tools to stimulate exports.
Slovenia adopted new legislation in 1994 on tax exemptions on
imported inputs.  This helps domestic companies compete with
foreign competition on a more equitable basis.
7.  Protection of U.S. Intellectual Property
    Intellectual property is well protected in Slovenia, and
the governments's commitment to such protection is high.  Two
bills were submitted to the Parliament in 1994.  The bills are
the Act on Protection of Topography of Semiconductors Circuits
(which is harmonized with the American Patent Office) and the
Copyright and Related Rights Act.
    Slovenia is a member of all major relevant conventions such
as the Bern, Paris, WIPO, Madrid Arrangement of Internationally
Registered Marks, PCT, and two classification arrangements:
Locarno, and Nice.  By the end of 1995 Slovenia will fulfill
all obligations from the Uruguay Round's Trade Related Aspects
of Intellectual Propertry Rights agreement (TRIPs), including
Trade in Counterfeit Goods.
    Some years ago, computer software and video piracy was
present in the country.  However, several successful court
cases in the late eighties helped remedy the situation.  The
first and best known case involved the U.S. company Autodesk.
Today Slovenia's position is comparable to that of the West.
8.  Worker Rights
    a.  The Right of Association
    The Slovene constitution provides that trade unions, their
operation, and their membership shall be free.  Workers, except
for some in the public sector, enjoy the right to strike.
Virtually all workers, except for the police and military, are
eligible to form and join labor organizations of their own
choosing.
    The former Yugoslav government-sponsored and controlled
unions disappeared with Slovenia's independence in 1991.
Slovenia now has two main labor groupings, with constituent
branches throughout the country.  There is a third, much
smaller, regional labor union on the Adriatic coast.  Unions
are independent of government and the political parties.  The
constitution provides that the state shall be responsible for
"the creation of opportunities for employment and for work."
There are no restrictions on affiliating with like-minded
international union organizations.
    b.  The Right to Organize and Bargain Collectively
    Slovenia's economy is in transition from the command
economy of the communist system, which included some private
ownership of enterprises along with state and "social"
ownership.  In the transition to a fully market based economy,
the collective bargaining process is changing.  Formerly, the
Yugoslav government had a dominant role in setting the minimum
wage and conditions of work.  The Slovene government still
exercises this role to an extent, although private businesses,
growing steadily in number, set pay scales directly with their
employees' unions or employee representatives.  The U.SS
Embassy has received no reports of anti-union discrimination.
    c.  Prohibition of Forced or Compulsory Labor
    There is no forced labor in Slovenia.
    d.  Minimum Age for Employment of Children
    The minimum age for employment is 16 years.  Children must
remain in school until age 15.  During the harvest on the farms
younger children do work.  In general, urban employers respect
the age limits.  The constitution specifically prohibits
exploitation of children.
    e.  Acceptable Conditions of Work
    Slovenia has a minimum wage of $240 (gross wage) per month,
with a 40 hour work week.  Slovenia has an active concern for
occupational safety.  In general, Slovene enterprises provide
acceptable conditions of work equal to standards in force in
other European countries.
    f.  Rights in Sectors with U.S. Investment
    The information given above on the five areas of concern
for worker rights, applies equally in all sectors of the
economy.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                              0
Total Manufacturing                                   -4
  Food & Kindred Products                    0
  Chemicals and Allied Products             -4
  Metals, Primary & Fabricated               0
  Machinery, except Electrical               0
  Electric & Electronic Equipment            0
  Transportation Equipment                   0
  Other Manufacturing                        0
Wholesale Trade                                        0
Banking                                                0
Finance/Insurance/Real Estate                          0
Services                                               0
Other Industries                                       0
TOTAL ALL INDUSTRIES                                  -4
Source: U.S. Department of Commerce, Bureau of Economic
Analysis
(###)
SOUTH_AF1
hU.S. DEPARTMENT OF STATE
SOUTH AFRICA: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                           SOUTH AFRICA
                     Key Economic Indicators
        (Billions of U.S. dollars unless otherwise noted)
                                   1992      1993      1994 1/
Income, Production and Employment:
Real GDP (1990 prices) 2/          83.7      74.1      67.6
Real GDP Growth (pct.)             -2.1       1.1       1.9
Real GDP (at current prices) 2,3/ 111.0     111.8     115.2
By Sector:
  Agriculture                       4.5       4.8       4.9
  Mining                            9.3       9.2       9.2
  Energy/Water                      4.5       4.3       4.2
  Manufacturing                    26.1      24.5      23.8
  Construction                      3.6       3.4       3.3
  Wholesale/Retail Trade           17.2      16.9      16.5
  Financial Services               17.2      17.2      17.3
  Other Services                    2.3       2.3       2.5
  General Government               16.6      16.1      15.8
Net Exports of Goods & Services     1.3       1.7       .08
Real Per Capita GDP (1985 rand)   2,412     2,084       N/A
Labor Force (millions) 4/          12.0      12.3      12.6
Unemployment Rate (pct.) 4/        40.0      46.0      46.0
Money and Prices:  (annual percentage growth)
Money Supply (M2)                  10.8       3.9      17.4
Prime Overdraft Rate
  (pct./year-end)                  20.5      16.9     17.25
Personal Savings To
  Disposable Income (pct.)          3.8       4.7       4.4
Producer Price Index
  (year-end pct. change)            8.3       6.6       7.9
Consumer Price Index
  (year-end pct. change)           13.9       9.7       8.2
Exchange Rate ($:rand/year avg.)
  Commercial Rand                   .35       .31       .28
  Financial Rand                    .21       .23       .22
Balance of Payments and Trade:
Total Exports (FOB)                23.5      24.0       6.2
  Exports to U.S.                   1.7       1.6       0.9
Total Imports (FOB)                18.2      18.0       5.0
  Imports from U.S.                 2.4       2.4       1.0
Aid from U.S. (millions/FY)        80.0      80.0     166.0
Aid from Other Countries            N/A       N/A       N/A
External Public Debt               17.3      16.7       N/A
Debt Service Payments (paid)        1.6        .8       N/A
Gold and FOREX Reserves (gross)    11.2      11.1       9.7
Balance of Payments on the
  Current Account                   1.4       1.8        .7
Trade Balance with U.S.            -0.7      -0.1      -0.7
N/A--Not available.
1/ 1994 figures are all estimates based on monthly data as of
June 1994.
2/ GDP at factor cost.
3/ Department of Commerce statistics.
4/ Statistics depending on population data are unreliable;
official black population and unemployment rates are
understated.  While the Central Statistical Services no longer
attempts to quantify black unemployment, most economists
believe the rate is in excess of 40 percent.  Unemployment
among other racial groups is lower.
1.  General Policy Framework
    South Africa is a middle-income developing country with a
modern industrial sector, well-developed infrastructure, and
abundant natural resources.  Most economists agree that South
Africa has the potential to grow at an annual rate above five
percent; yet annual economic growth over the past decade
averaged less than one percent in real terms; no new net jobs
were created in the manufacturing, mining, or agricultural
sectors; and per capita incomes declined sharply.  The rate of
real GDP growth turned negative in early 1989, and contracted
by one-half percent in both 1990 and 1991.  The decline in the
economy became more severe in 1992, as the nation battled the
longest recession in over eighty years.  Besides being affected
by the recent worldwide recession and the worst drought of the
century, the South African economy's poor performance during
this period could be explained by several structural factors:
    --Apartheid policies led to inefficient use of human
resources, underinvestment in human capital, labor rigidities,
and large budgetary outlays for duplicative layers of
government and facilities;
    --Consumer inflation persisted at double digit levels
(since the early 1970s) until 1993 when it dropped into the
single digits;
    --Labor productivity was low and declining, outstripped by
high average wage increases;
    --The government intervened extensively in the economy to
protect inefficient industries, provide employment to its
constituents, and combat foreign economic sanctions;
    --Foreign and domestic investment was limited by political
uncertainty, continuing violence, labor unrest, and the concern
over the role of the private sector in a post-apartheid South
Africa.
    In 1993, GDP registered positive growth for the first time
in four years with 1.1 percent growth.  Two principal factors,
including a substantial increase (six percent) in the volume of
merchandise and net gold exports and a significant recovery in
agricultural production made a major contribution to this
revival in economic activity.  Although the agriculture sector
accounted for most of the growth during the early part of 1993,
the increase in economic activity spread to other sectors in
the second half resulting in growth in the mining,
manufacturing, electricity, gas and water, and commerce and
finance areas.  In 1994, the economy got off to a sluggish
start due to uncertainty surrounding the election and
transitional period and a large number of public holidays.
Economists estimate that the South African economy will
register 2 - 2.5 percent growth over the full year of 1994.
    The new South African government has already taken steps to
address some of the structural problems within the economy.
While there is a long way to go in eliminating apartheid's
legacy and meeting the black community's aspirations, some
progress has been made in reducing economic distortions caused
by the past's racial policies.  Legal restrictions which
prevented black South Africans from owning businesses,
obtaining skilled jobs, or living in major urban centers have
been lifted.  Black trade unions have been recognized.
Spending on socio-economic development for blacks, including
education and health care, has increased in recent years,
although it still remains far below spending on white
services.  Much remains to be done, and the effects of past
policies, particularly the legacy of the "bantu" education
system, will be felt for many years.
    Over the last decade, quantitative credit controls and
administrative control of deposit and lending rates largely
disappeared.  The South African Reserve Bank now operates
similarly to Western central banks.  It influences interest
rates and controls liquidity through its rates on funds
provided to private sector banks, and to a much smaller degree
through the placement of government paper.  In the past three
years, restrictive monetary policy -- primarily the maintenance
of a relatively high central bank lending rate -- has sought to
curb domestic spending on imports and to reduce inflation.
Nevertheless, high growth in the money supply along with large
increases in food prices have resulted in higher producer and
consumer inflation which are now approaching double digits.
    Traditionally, South Africa has adopted conservative fiscal
policy.  In the late 1980's, however, revenues lagged behind
spending, leaving large deficits to be financed through
borrowing and putting pressure on private capital markets.
After 1990, the government of F.W. de Klerk adopted more
restrictive fiscal policies, and the new Government of National
Unity (GONU) has continued a fiscally conservative approach.
Although the 1993/94 budget ended in a deficit of R31.4 billion
(approximately 8.6 percent of GDP as spending outpaced
revenues), estimates for the deficit before borrowing in fiscal
1994/95 are somewhat lower reaching R29.3 billion, roughly 6.8
percent of GDP.  (These figures are based on a GDP growth rate
of 3 percent).  The GONU says it will resist pressure to use
fiscal policy to address socio-economic needs in education,
health care and housing for the majority of South Africans.
    The South African government controls substantial portions
of the economy, including much of the petroleum,
transportation, armaments, electric power, communications,
aluminum, and chemical sectors.  Privatization of some state
assets has gained favor more recently, particularly as a way to
reduce the government's high level of indebtedness and to pay
for the new government's Reconstruction and Development Program
(RDP).
2.  Exchange Rate Policy
    Faced with large scale capital outflows in 1985, the
Reserve Bank reimposed comprehensive exchange controls,
including a dual exchange rate.  The Bank maintains one
exchange rate (the financial rand) for foreign investment flows
and outflows, and another (the commercial rand) for all other
transactions.  This effectively cushions the economy from the
effects of international capital flows.
    Under South African exchange regulations, the Reserve Bank
has substantial control of foreign currency.  The Reserve Bank
is the sole marketing agent for gold, which accounts for about
30 percent of export earnings.  This provides the Bank with
wide latitude in influencing short term exchange rates.  Except
for a period in 1987 when the bank followed an implicit policy
of fixing the rand against the dollar, monetary authorities
normally allow the rand to adjust periodically with an aim to
stabilize the external accounts.
    The ailing foreign reserve position of the country and
socio-political uncertainties caused the nominal effective
exchange rate of the commercial rand to depreciate by 4.1
percent in the first quarter of 1994 and by a further 8.3
percent by the end of July 1994.  (The real effective exchange
rate of the rand declined by 7.5 percent from December 1993 to
July 1994).  In this period the rand depreciated against all of
the currencies of South Africa's main trading partners.
However, it also depreciated fairly sharply against the U.S.
dollar and British pound over this period.  Concern over
political developments, labor unrest and profit-taking led to a
sharp depreciation of the financial rand in the beginning of
1994 to an all time low of R5.58 per dollar in April 1994.
However, when it became apparent that the political transition
would be achieved peacefully, the finrand appreciated again to
R4.55 per dollar in May.  The most recent data put the discount
of the financial rand to the commercial rand at about 10
percent.
    Pressure and speculation on abolishing the dual currency
system has been intense.  Nevertheless, Bank Governor Chris
Stals and other leading economists dispute its eminent
abolition.
3.  Structural Policies
    Prices are generally market determined with the exception
of petroleum products.  Purchases by government agencies are by
competitive tender for project or supply contracts.  Bidders
must pre-qualify, with some preferences allowed for local
content.  Parastatals and major private buyers, such as mining
houses, follow similar practices, usually inviting only
approved suppliers to bid.
    The primary source of government revenue in South Africa is
income tax.  Although the government planned to lower both
individual and company tax rates over five years, the present
recession-induced revenue crisis ended the plan after its first
year.  The 1994/5 budget kept the maximum personal income tax
rate at 48 percent on incomes above R80,000 for married and
R56,000 for single taxpayers.  However, it reduced the
corporate primary income tax rate to 35 percent from an earlier
rate of 40 percent.  Corporations' secondary tax rate on
dividends was nevertheless increased by 10 percent.  The
1994/95 budget also imposed a "once-off" levy of 5 percent on
all income (both corporate and individual) over R50,000 to pay
for transition cost overruns.
    In September 1991, the government shifted from a 13 percent
general sales tax to a 10 percent value added tax levied on
many additional goods and services that had been exempt from
GST.  In April of 1993, the VAT rate increased to 14 percent in
an attempt to cover the shortfall in current government
revenues and to meet increasing demands for social spending.
The government is also negotiating with labor and consumer
groups over the taxation of basic foods.  South Africa raises
additional revenue through customs duties, excise taxes, import
surcharges, and through estate, transfer, and stamp duties.
There are no export taxes, but import duties as high as 100
percent in the case of certain luxury goods protect local
industry and provide substantial revenue.
4.  Debt Management Policies
    South Africa's external debt situation has continued to
improve in recent years.  At the end of 1993, foreign debt
amounted to $16.7 billion, with the private sector accounting
for about 10.7 billion of this total.  The ratio of total
foreign debt to GDP in 1993 was 14.2 percent, and interest
payments to total export earnings was 7.1 percent.  Debt
repayment obligations in 1994 are estimated to be R4 billion to
R5 billion, although increasing access to international capital
markets should allow South Africa to refinance at least one
half of that debt.
    In 1985, faced with large capital outflows, intense
pressure against the rand, and a cutoff of its access to
foreign capital, the South African Government declared a
unilateral standstill on amortization payments.  Interest
payments were continued, and amortization payments due to
international organizations and foreign governments were not
affected, obviating the need for a Paris Club rescheduling.
The debt "standstill" was regularized in an arrangement with
private creditors in 1986.  In 1990, South Africa and its
private creditors negotiated a third extension of that
arrangement through the end of 1993.  In September of 1993, the
government, with the consensus of South Africa's major
political parties, finalized a debt agreement with major
Western banks on $5 billion worth of mostly private debt caught
inside the "standstill net."
    South Africa is a member of the World Bank and
International Monetary Fund (IMF) and continues Article IV
consultations with the latter organization on a regular basis.
With the establishment of a democratically elected government,
South Africa is now eligible for Bank loans.  Moreover, after
some twenty-seven years of relative economic isolation, South
Africa became another IMF borrower country. In December 1993,
the IMF approved the government's application for a
$850 million drought reserve loan.  Gaining access to the
drought facility enabled the government to replenish its
foreign exchange reserves and normalize relations with the
international financial community.
5.  Significant Barriers to U.S. Exports
    Under the terms of the Import and Export Control Act of
1963, South Africa's Minister of Trade and Industry may act in
the national interest to prohibit, ration, or otherwise
regulate imports.  Current regulations require import permits
for a wide variety of goods, including foodstuffs, clothing,
fabrics, footwear, wood and paper products, refined petroleum
products and chemicals.  Surcharges on imported goods, which
range as high as 40 percent on some items, are the most
significant barriers for U.S. exports.  The Department of Trade
and Industry is attempting to simplify its system of tariffs,
but some tariffs have been increased in the process, including
hikes of up to 180 percent on certain steel products.  Local
content requirements also apply in certain industries, most
notably in motor vehicle manufacturing.
    The lifting of Title III sanctions in the Comprehensive
Antiapartheid Act eased restrictions on the import of certain
U.S. products into South Africa and permitted U.S. nationals to
make new investments in South Africa.  With the removal of the
arms embargo against South Africa in May 1994, U.S. firms may
now export to the South African police and military
organizations, excluding Armscor/Denel and any of their
subsidiaries.  The State Department currently maintains a
denial policy on these firms pending the satisfactory
resolution of a criminal case involving Armscor.  At this time,
American firms are prohibited from trading munitions list items
with these companies.
    Responsibility for administering controls on dual use
nuclear technology rests with the Directorate of System
Co-ordination with the Department of Trade and Industry.
Legislation on the regulation of such technology is however
still pending and has only recently been published for public
comment (October 14, 1994).
6.  Export Subsidies Policies
    South African Government incentives to export are divided
into four categories:  compensation for a portion of import
duties; a proportion (10 percent) of value added during
manufacture; financial assistance for activities such as market
research and trade promotion; and income tax allowances.  Other
direct and indirect export subsidies are available to local
manufacturers, particularly for factories located in designated
development areas.  Subsidies include electricity and transport
rebates, export finance and credit guarantees and marketing
allowances, although these export policies are presently under
review.
    Several different programs provide incentives for local
exporters.  The General Export Incentive Scheme (GEIS)
encourages the export of manufactured products with a high
value-added content.  The South African Government recently
revised GEIS on October 1, 1994.  Under this most recent
revision, subsidies for fully manufactured products will be
lowered from 25 percent to 14 percent of export value on
October 1; 12 percent on April 1, 1996 and 10 percent on April
1, 1997.  The subsidy for partially manufactured goods will
drop from 12.5 percent to 3 percent on October 1; 2 percent on
October 1, 1996 and zero a year later.  The subsidy for raw
materials will drop from 7.5 percent of export value to 2.5
percent on October 1 and below 2 percent on April 1, 1995.  The
subsidy for raw materials will drop from 7.5 percent of export
value to 2.5 percent on October 1 and below 2 percent on April
1, 1995.
    Provisions of the Income Tax Act provide tax allowances for
capital goods and property used to add value to base metals and
intermediate products for export.  Income tax allowances are
also provided for expenses incurred in promoting or maintaining
an export market.  The Export Marketing Assistance Scheme, a
limited program, provides assistance for export market research
and trade fairs and missions.  The Structural Adjustment
Program provides export incentives tailored to specific
industries, most notably motor vehicles and textiles and
clothing.  Under the Regional Industrial Development Program, a
new or relocating business can apply for establishment
incentives or tax breaks under a uniform, five year program by
locating anywhere outside the Johannesburg-Pretoria and Durban
areas.
7.  Protection of U.S. Intellectual Property Rights
    South Africa's attendance at meetings of the World
Intellectual Property Organization (WIPO) was barred in the
past by a resolution of that organization, but it remains a
member.  As with South Africa's participation in all UN
specialized agencies, its status is currently under review.
The country is also party to the Paris and Berne Conventions.
South Africa's intellectual property laws and practices are
generally in conformity with those of the industrialized
nations, including the United States.  There is no
discrimination between domestic and international holders of
intellectual property rights.  The basic objective of South
African government policy with respect to foreign intellectual
property rights holders is to secure access to foreign
technology and information.  Copyright legislation in 1992
provides further protection for computer software.
    Nevertheless, software piracy occurs frequently in South
Africa.  The Business Software Alliance (BSA), a worldwide body
with active anti-piracy programmes in over 50 countries,
estimates that as much as 60 to 70 percent of South Africa's
software is pirated.  Its investigations reveal that for every
legal software program in use, between three and four are
illegal.  In October 1993, the BSA brought the first legal
action against software pirates under the terms of the new
copyright legislation.  The U.S. motion picture industry also
reports that piracy, including unauthorized public performance,
video piracy, and "parallel imports" pose a problem for doing
business in South Africa.  U.S. pharmaceutical firms operating
in South Africa express similar concerns regarding "parallel
imports."
    In addition, trademark concerns are becoming increasingly
evident.  Local companies and street vendors often "own" the
trademarks of internationally known concerns.  New trademark
legislation was passed in January 1994 and is now awaiting
implementation regulations.
8.  Worker Rights
    a.  The Right of Association
    Current South African labor law entitles all workers in the
private sector to join labor unions of their choosing.
However, the patchwork nature of that law effectively inhibits
trade union activity.  The result is an uneven and sometimes
volatile labor relations climate, in which trade unions must
rely as much on their own organization and strength as on their
legal rights to achieve their objectives.
    The recently-elected government of national unity is
drafting a new Labor Relations Act designed to consolidate and
simplify South African labor law.  The new law will conform to
the right of freedom of association declared in the interim
constitution, and promote quick and effective industrial
dispute resolution by clarifying the rights and
responsibilities of workers and employers.
    Historically, public sector employees have been legally
prohibited from striking.  The 1993 passage of a Public Sector
Labor Relations Act, while clarifying the collective bargaining
process for public sector employees, still sharply restricts
strike activity.  Until a transparent and fair system of
dispute resolution is in place, the public sector will continue
to be a labor relations flashpoint.
    b.  Right to Organize and Bargain Collectively
    The South African government does not interfere with union
organizing in the private sector and has generally not
intervened in the collective bargaining process.  South African
law prohibits discrimination by private sector employers
against union members and organizers.
    In spite of recent legislative changes, collective
bargaining still does not apply to farm workers and domestic
workers.  Recent passage of the Public Sector Labor Relations
Act (PSLRA) clarifies dispute resolution in the public sector,
but has been criticized by the Congress of South African Trade
Unions (COSATU) as undermining collective bargaining by
unnecessarily restricting public sector strike activity.  That
said, the Ministry of Labor's plans to consolidate the PSLRA
into a single labor relations act has been resisted by
independent public sector unions and associations.
    Private mediation services are available and have been
voluntarily resorted to by management and black trade unions to
resolve industrial disputes.  The Labor Relations Act
establishes an industrial court to rule in labor-management
disputes.  The most common complaints filed with the court
concern dismissals, followed by unfair labor practices.  A
labor court of appeals oversees the industrial court and can
overturn its decisions.
    c.  Prohibition of Forced or Compulsory Labor
    Forced labor is specifically prohibited by the interim
constitution.
    d.  Minimum Age of Employment of Children
    South African law prohibits the employment of minors under
age 15 in most industries, shops and offices.  It prohibits
minors under 16 from working underground in mining.  There is
no minimum age at which a person may work in agriculture.
    e.  Acceptable Conditions of Work
    There is no national minimum wage in South Africa.  The
Labor Relations Act provides a mechanism for negotiations
between labor and management to set minimum wage standards
industry by industry.  At present over 100 industries covering
most non-agricultural workers come under the provisions of the
act.  The Occupational Safety Act sets minimum standards for
work conditions and employment.
    f.  Rights in Sectors with U.S. Investment
    The worker rights conditions described above do not differ
between the goods-producing sectors in which U.S. capital is
invested and other sectors of the South African economy.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                             (1)
Total Manufacturing                                   544
  Food & Kindred Products                   (1)
  Chemicals and Allied Products             149
  Metals, Primary & Fabricated               41
  Machinery, except Electrical              124
  Electric & Electronic Equipment           (1)
  Transportation Equipment                   22
  Other Manufacturing                       156
Wholesale Trade                                        76
Banking                                                 0
Finance/Insurance/Real Estate                         (1)
Services                                                6
Other Industries                                       32
TOTAL ALL INDUSTRIES                                  925
(1) Suppressed to avoid disclosing data of individual companies
Source: U.S. Department of Commerce, Bureau of Economic
Analysis
SPAIN1
oU.S. DEPARTMENT OF STATE
SPAIN: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                              SPAIN
                     Key Economic Indicators
        (Billions of U.S. dollars unless otherwise noted)
                                    1992      1993      1994 1/
Income, Production and Employment:
Real GDP (1986 prices) 2/          393.2     312.0     303.0
Real GDP Growth (pct.)               0.8      -1.0       1.7
GDP (at current prices) 2/         576.3     478.4     479.1
By Sector:
  Agriculture                       20.3      16.5      17.2
  Industry                         133.8     108.3     108.3
  Construction                      49.5      39.2      38.3
  Services                         334.9     286.7     285.7
Net Exports of Goods and Services  101.4      94.6     105.3
Real Per Capita GDP (USD:1986)    10,082     7,980     7,728
Labor Force (000s)                15,193    15,406    15,550
Unemployment Rate (pct.)            20.1      23.9      24.5
Money and Prices:  (annual percentage growth)
Money Supply (M2)                    1.5     -15.8      -3.8
Base Interest Rate 3/               13.5      12.6      10.2
Personal Saving Rate                19.3      19.4      20.0
Retail Inflation                     5.9       4.6       4.5
Wholesale Inflation                  1.4       2.4       4.0
Consumer Price Index               100.4     105.0     109.3
Exchange Rate (Pta/USD)            102.1     127.4     133.0
Balance of Payments and Trade:
Total Exports (FOB) 4/              64.7      59.5      70.0
  Exports to U.S.                    3.1       2.9       3.0
Total Imports (CIF) 4/              99.9      78.6      85.0
  Imports from U.S.                  7.4       5.6       5.7
External Public Debt                79.8       N/A       N/A
Debt Service Payments (paid)        21.8       N/A       N/A
Gold and Foreign Exch. Reserves     50.5      45.3      45.0
Trade Balance 4/                   -35.2     -19.1     -15.0
  Trade Balance with U.S.           -4.3      -2.7      -2.7
1/ 1994 Figures are all estimates based on available monthly
data in October 1994.
2/ GDP at factor cost.
3/ Actual, average annual interest rates, not changes in rates.
4/ Merchandise trade.
1.  General Policy Framework
    Following the economic boom of 1986-90, the Spanish economy
slowed down and, along with the economies of most other western
European countries, fell into recession during the second half
of 1992.  Unemployment reached over 24 percent, and is not
expected to decline significantly during 1994.  Devaluation of
the peseta since 1992 and the beginning of economic recovery in
Spain's major European markets are contributing to an
export-led economic recovery; real GDP is expected to grow by
around 1.7 percent in 1994.
    Spain's accession to the European Union (then called the
European Communities) in 1986 established the framework for its
subsequent economic performance.  EU membership has required
Spain to open its economy, modernize its industrial base,
improve infrastructure, and revise economic legislation to
conform to EU guidelines.  Furthermore, the 1992 Maastricht
Treaty, calling for eventual Economic and Monetary Union (EMU)
among the EU member states, established specific criteria for
economic performance which now serve as official objectives for
the Spanish government.  In particular, those criteria call for
reduced government deficits, lower inflation and foreign
exchange stability.  Foreign investors, principally from other
EU countries, have invested over 60 billion dollars in Spain
since 1986.
    Inflation continues to be a problem.  Despite the recession
and massive unemployment, Spanish inflation declined only to
4.5 percent by the end of 1993, and is generally expected to
stay close to that level in 1994, some two percentage points
above the EU average.  In years past, high wage settlements
contributed significantly to inflation.  Wage settlements in
1994, following modest reforms to the labor market at the
beginning of the year, have been more moderate.  Inflationary
pressure from the fiscal deficit continues, however, as the
public sector deficit reached 7.3 perent of GDP in 1993, and
will stay close to seven percent in 1994.  Spanish economists
also note that structural rigidities -- basically a lack of
competition in certain service sectors -- also contribute to
inflationary pressures.
2.  Exchange Rate Policy
    Spain joined the European Monetary System (EMS) in
mid-1989.  The peseta played a role in the turmoil disrupting
the EMS beginning in September 1992 and resulting in expansion
of EMS "bands" to 15 percent around the European Currency Unit
(ECU) in August 1993.  Since September 1992, the peseta has
declined by 18 percent against the ECU and 25 percent against
the Deutsche mark; the peseta has remained among the weakest
currencies within the EMS, although it has not tested the
boundaries of the 15-percent band.
    The Government of Spain removed the few remaining capital
controls on February 1, 1992.  The controls were temporarily
reimposed in the wake of the September 1992 EMS crisis, but
were rescinded shortly thereafter.
3.  Structural Policies
    Joining the EU in January 1986 required Spain to open its
economy.  By December 1992, Spanish tariffs were phased out for
imports from other EU countries, and lowered to the EU's common
external tariff level for imports from non-EU countries.  Many
nontariff barriers also had to be reduced or eliminated.  While
areas of dispute remain (see section 5) the trend is strongly
toward a more open economy.  The EU program to establish a
single market has accelerated Spain's integration into the EU.
    Spain's membership in the EU also required liberalization
of its foreign investment regulations and the foreign exchange
regime.  In July 1989, a securities market reform went into
effect.  The reform has provided for more open and transparent
stock markets, as well as for licensing of investment banking
services.  The reform also liberalized conditions for obtaining
a stock brokerage license.  A new foreign investment law passed
in June 1992 removed many of the administrative requirements
for foreign investments.  Investments from EU resident
companies are free from almost all restrictions, while non-EU
resident investors must obtain authorization from the
authorities to invest in broadcasting, gaming, air transport,
or defense.
    Faced with the loss of the Spanish feed grain market as a
result of Spain's membership in the EU, the United States
negotiated an Enlargement Agreement with the EU in 1987 which
establishes a 2.3 million ton annual quota for Spanish imports
of corn, specified nongrain feed ingredients and sorghum from
non-EU countries during a four year period.  The agreement was
extended through 1994.  The Uruguay Round agreement had the
effect of extending this agreement indefinitely.  The United
States remains interested in maintaining access to the Spanish
feed grain market and will continue to press the EU on this
issue.  U.S. exports of corn and sorghum, of about $200 million
annually, are an important part of U.S. trade with Spain.
    Spain was obliged under its EU accession agreement to
establish a formal system of import licenses and quotas to
replace the structure of formal and informal import
restrictions for industrial products existing prior to EU
membership.  The United States objected that the new import
regime for non-EU products was illegal under GATT.  In response
to U.S. concerns, in October 1988, Spain initiated an
automatic, computerized licensing system for Spanish imports of
the affected U.S. products.  Since the system became effective,
no U.S. exporters have reported market access impediments to
their products covered under the automatic approval system.
    EU ratification of the Uruguay Round trade agreement will
deepen trade liberalization and apply it to new sectors.  The
Government of Spain also ratified the Uruguay Round package and
joined the World Trade Organization (WTO) as a founding member.
4.  Debt Management Policies
    Spain's external debt totalled $79.8 billion in December
1992 (latest data available).  Foreign investors bought heavily
into Spanish government long-term debt during 1993, profitting
as interest rates declined from 12.2 percent in January 1993 to
eight percent in February 1994.  Foreign investors held about
$38 billion of this debt in March 1994, but have since reduced
their position in this market as interest rates have trended
upwards.  The Spanish government has signed standby loan
arrangements in foreign currency with consortia of private
banks, and reached agreement with investment banks to float
bonds in foreign markets, as alternatives to domestic financing.
    International reserves totalled $4.8 billion in July 1994,
equivalent to six months of imports.  Moody's rates debt of the
Kingdom of Spain as AA2.
5.  Significant Barriers to U.S. Exports
    Import Restrictions:  Under the EU's Common Agricultural
Policy (CAP), Spanish farm incomes are protected by direct
payments and guaranteed farm prices that are higher than world
prices.  One of the mechanisms for maintaining this internal
support are high external tariffs and variable levies (as much
as 200 percent for some commodities) that effectively keep
lower priced imports from entering the domestic market to
compete with domestic production.  However, the Uruguay Round
agreement established that these variable levies will be
replaced by fixed import duties beginning on July 1, 1995.  In
addition all import duties on agricultural products will be
reduced during the five year period from 1995 to 2000.
    In addition to these mechanisms, the EU employs a variety
of strict animal and plant health standards which act as
barriers to trade.  These regulations end up severely
restricting or prohibiting Spanish imports of certain plant and
livestock products.  One of the most glaring examples of these
policies is the EU ban on imports of hormone treated beef,
imposed with the stated objective of protecting consumer
health.  Despite a growing and widespread use of illegal
hormones in Spanish beef production, the EU continues to ban
U.S. beef originating from feedlots where growth promotants
have been used safely and under strict regulation.
    One important aspect of Spain's EU membership is how
EU-wide phytosanitary regulations, and regulations that govern
food ingredients, labeling and packaging, impact on the Spanish
market for imports of U.S. agricultural products.  The majority
of these regulations took effect on January 1, 1993 when EU
"single market" legislation became fully implemented in Spain,
and now agricultural and food product imports into Spain are
subject to the same regulations as in other EU countries.
    While many restrictions that had been in operation in Spain
before the transition have now been lifted, for certain
products the new regulations impose additional import
requirements.  For example, Spain now requires any foodstuff
that has been treated with ionizing radiation to carry an
advisory label.  In addition, a lot marking is now required for
any packaged food items.  Spain, in adhering to EU-wide
standards, continues to impose strict requirements on product
labeling, composition, and ingredients.  Like the rest of the
EU, Spain prohibits imports which do not meet a variety of
unusually strict product standards.  Food producers must
conform to these standards, and importers of these products
must register with government health authorities prior to
importation.  In 1994, a shipment of squid from the U.S. had
difficulty entering Spain as authorities were concerned that it
exceeded maximum levels of copper, which is considered a heavy
metal under Spanish food and drug law.  Neither the U.S. nor
the EU impose a standard regarding copper.
    Telecommunications:  Spain's telecommunications policy is
in flux, as the Government of Spain simultaneously seeks to
assure the continued strength of Telefonica, the state
controlled public telephone operator, and to liberalize the
market in order to attract foreign investment and comply with
EU guidelines.  Although regulations liberalizing value-added
services were issued in 1991, U.S. companies trying to
establish these services, particularly international virtual
private networks (IVPNs), closed user groups, and real-time fax
and voice data service, have encountered obstacles.
    Recently, progress has been made.  In October 1994, the
Government of Spain began taking bids on its second digital
cellular license.  (Under the terms of its 30-year contract
with the government, Telefonica will be awarded the first
digital cellular license on a non-competitive basis.)  The
Government of Spain has stated that it hopes to award the
permit by the end of 1994, which would allow the winning
company to begin operating in mid-1995.  Telefonica has already
been offering analog cellular services for over two years, and
therefore begins the battle for the digital market with a
substantial advantage.
    In its role as public telephone operator, Telefonica has
embarked on an ambitious project to upgrade Spain's
communications infrastructure.  It plans to lay 2,500
kilometers of fiber optic line in the next one to two years.
The Spanish firm is also a major buyer of U.S. switching and
transmission equipment, and has indicated interest in forming
alliances with U.S. companies.
    Banking Services:  Spain's transposition of the EU second
banking directive in March 1993 placed U.S. banks with branches
in Spain at a potential competitive disadvantage with respect
to branches of EU banks in Spain.  Spanish regulatory
authorities temporarily waived the most onerous restrictions,
however, and negotiations are underway for a permanent solution.
    Government Procurement:  During the May 1992 GATT
Government Procurement Code Committee meeting, signatories
agreed to extend code benefits to Spain by July 22, 1992.  This
required Spain to fully implement the corresponding EU
directives.  As a result, American suppliers having contracts
with Spanish government entities covered by the GATT Code are
protected with respect to discrimination, transparency, and
appeal procedures.
    Offset requirements are common in defense contracts and
some large nondefense-related and public sector purchases (e.g.
commercial aircraft and satellites).  Recent large commercial
contracts have contained offset provisions in the 30 to 60
percent range.
    Television Broadcasting Stations:  The government
transposed the EU broadcast directive in July 1994.  It imposes
a requirement that 51 percent of broadcast time be reserved for
European products.  The EU is considering revisions in this
directive.  Should the revisions result in further increases in
the European content reservations, this would, of course,
further restrict the Spanish market for U.S. products.  Spanish
legislation imposes restrictions on foreign ownership of the
three private TV concessions allowed.  These restrictions are
aimed at developing the local Spanish program industry and
encouraging Spanish language productions.  The government plans
to introduce legislation to regulate cable T.V.  Two operating
concessions would be granted in each specified geographical
area.  One concession would be reserved for Telefonica, the
state controlled public telephone operator, while one would be
assigned to a private firm through competitive bidding.
    Motion Picture Dubbing Licenses and Screen Quotas:  Spain
requires issuance of a license for dubbing non-EU films into
Spanish for distribution in Spain.  Dubbed movies are
commercially more successful than subtitled original language
films in the Spanish market.  To obtain a license, distributors
must contract to distribute an EU film.  Changes in the Cinema
Law, implemented in December 1993, increased the number of
viewers which the EU film must attract for it to confer a
dubbing license, and imposed requirements for dubbing into
minority languages.  The law also requires cinemas to show one
day of EU films for every two days of non-EU films.  Efforts
are underway to seek administrative revisions in the law to
limit its prejudicial effects on non-EU producers and
distributors.
    Product Standards and Certification Requirements:  While
product certification requirements (homologation) have been
liberalized considerably since Spain's entry into the EU,
problems remain for U.S. exporters in three areas.  First,
cumbersome certification requirements remain for some
telecommunications products, terminal equipment, certain
computer peripherals, and some building materials.  Second,
there is a lack of transparency and consistency in the
application of certification requirements.  There are no
published norms for the documentary evidence needed to
establish that an item has met certification requirements of
another EU government and that a product is in "free
circulation" in an EU market.  Third, the local interpretation
and application of some EU directives and regulations have
caused disruption in trade with the U.S.  For example, U.S.
exporters of gas connectors have had difficulty in obtaining
permission for the entry of their products into Spain.
    Another example of such stringent procedural requirements
has to do with the import of live bivalve mollusks.  Since July
of 1993 a new purification process for the mollusks is required
along with an acceptable certification from recognized U.S.
authorities.  All this can delay the shipment of clams to the
Spanish market, increase production cost and adversely affect
product quality.
    The Spanish government generally holds that it does not use
product certification procedures to hinder trade.  It has been
cooperative in resolving specific trade issues brought to its
attention.  The United States has encouraged Spain to simplify
its certification procedures and make them more transparent.
In this regard, mutual recognition of product standards and
testing laboratory results is being pursued at the EU level.
6.  Exports Subsidies Policies
    Spain aggressively uses "tied aid" credits to promote
exports, especially in Latin America, the Maghreb, and more
recently, China. Such credits reportedly are consistent with
the OECD arrangement on offically supported export credits.
    As a member of the EU, Spain benefits from EU export
subsidies which are applied to many agricultural products when
exported to destinations outside the Union.  Total EU subsidies
of Spanish agricultural exports amounted to $551 million in
1993.  Spanish exports of grains, olive oil, other oils,
tobacco, wine, sugar, dairy products, beef, sheep and goat
meat, and fruits and vegetables benefitted most from these
subsidies in 1993.
7.  Protection of U.S. Intellectual Property
    Spain adopted new patent, copyright, and trademark laws, as
agreed at the time of its EU accession.  It enacted a new
patent law in March 1986, a new copyright law in November 1987,
and a new trademark law in November 1988.  All approximate or
exceed EU levels of intellectual property protection.  Spain is
a party to the Paris, Bern, and Universal copyright conventions
and the Madrid Accord on Trademarks.  Spanish government
officials have said that their laws reflect genuine concern for
the protection of intellectual property.
    The patent law greatly increased the protection accorded
patent holders.  In October of 1992, Spain's pharmaceutical
process patent protection regime expired, and product
protection took effect.  Industry sources have advised that the
impact of the new product protection law will not be felt until
early in the next century when new pharmaceutical product
patents applied for after October 1992 enter the market after
the 10 to 12 years research and development period normally
associated with the introduction of a new product into the
market.  U.S. makers of chemical and pharmaceutical products
have complained that this provides effective patent protection
only for approximately eight years.  The U.S. pharmaceutical
industry would like to see some lengthening of the patent term.
    The copyright law is designed to redress historically weak
protection accorded movies, video cassettes, sound recordings
and software.  It includes computer software as intellectual
property, unlike the prior law.  In 1991, judicial sanctions
for violations increased significantly again.  The law provides
a clear legal framework for copyright protection.  The new
copyright law has been useful in alleviating abuses of authors'
rights.  For example, the home video industry trade association
reported improved ability to secure court orders after the
copyright law was enacted.
    Nevertheless, U.S. software producers complain of losses
from business software piracy and are taking legal action under
the new intellectual property law to correct this.  The Spanish
government has responded to concerns over software piracy by
sending instructions to prosecutors calling for rigorous
enforcement of the law and urging private industry to pursue
pirates aggressively through the courts.  In December 1993,
legislation was enacted which transposed the EU software
directive.  It includes provisions that allow for unannounced
searches in civil lawsuits.  Some searches have taken place
under these provisions.
    Continuing Spanish government enforcement efforts have
reduced video and audio cassette piracy although it remains a
significant problem.  Operators of small neighborhood cable
networks, called "Community Video," broadcast video programs
without broadcast rights, but the Spanish government has
prohibited them from running cables across public ways and is
attempting to phase them out.  This process would be speeded up
if, as the government has proposed, a new cable television law
is enacted which grants exclusive franchises over large areas.
The copyright law has clearly established that no motion
picture can be publicly exhibited without the authorization of
the copyright holder and that "Community Video" is to be
considered as public exhibition.
    The trademark law is intended to facilitate improved
enforcement.  It incorporates by reference the enforcement
procedures of the patent law, defines trademark infringements
as unfair competition, and creates civil and criminal penalties
for violations.  Aggressive Spanish enforcement efforts have
resulted in numerous civil and criminal actions; however, the
infringement of trademark rights in Spain is still a problem,
particularly in the textile and leather goods sector.
8.  Worker Rights
    a. The Right of Association
    All workers except military personnel, judges, magistrates
and prosecutors are entitled to form or join unions of their
own choosing without previous authorization.  Self-employed,
unemployed and retired persons may join but may not form unions
of their own.  There are no limitations on the right of
association for workers in special economic zones.  Under the
constitution, trade unions are free to choose their own
representatives, determine their own policies, represent their
members' interests, and strike.  They are not restricted or
harassed by the government and maintain ties with recognized
international organizations.  About 11 percent of the Spanish
work force belongs to a trade union.  While no official data
are available on the percentage of union affiliation in Spain's
free trade zones, a trade union official has stated that union
membership in these zones is higher than the average for the
whole economy.
    b. The Right to Organize and Bargain Collectively
    The right to organize and bargain collectively was
established by the Workers Statute of 1980.  Trade union and
collective bargaining rights were extended to all workers in
the public sector, except the military services, in 1986.
Public sector collective bargaining in 1989 was broadened to
include salaries and employment levels.  Collective bargaining
is widespread in both the private and public sectors.  Sixty
percent of the working population is covered by collective
bargaining agreements although only a minority are actually
union members.  Labor regulations in free trade zones and
export processing zones are the same as in the rest of the
country.  There are no restrictions on the right to organize or
on collective bargaining in such areas.
    c.  Prohibition of Forced or Compulsory Labor
    Forced or compulsory labor is outlawed and is not
practiced.  Legislation is effectively enforced.
    d.  Minimum Age for Employment of Children
    The legal minimum age for employment as established by the
Workers Statute is 16.  The Ministry of Labor and Social
Security is primarily responsible for enforcement.  The minimum
age is effectively enforced in major industries and in the
service sector.  It is more difficult to control on small farms
and in family owned businesses.  Legislation prohibiting child
labor is effectively enforced in the special economic zones.
The Workers Statute also prohibits the employment of persons
under 18 years of age at night, for overtime work, or for work
in sectors considered hazardous by the Ministry of Labor and
Social Security and the unions.
    e.  Acceptable Conditions of Work
    Workers in general have substantial, well defined rights.
A 40 hour work week is established by law.  Spanish workers
enjoy 12 paid holidays a year and a month's paid vacation.  The
employee receives his annual salary in 14 payments--one
paycheck each month and an "extra" check in June and in
December.  Based on a 1994 average exchange rate of 133 pesetas
to the dollar and full days and years of work, the legal
minimum wage for workers over 18 is $15.18 per day or $455.41
per month.  For those 16 to 18 it is $10.03 per day or $300.90
per month.  The minimum wage is revised every year in
accordance with the consumer price index.  Government
mechanisms exist for enforcing working conditions and
occupational health and safety conditions, but bureaucratic
procedures are cumbersome.  Safety and health legislation is
being revised to conform to EU directives.
    f.  Rights in Sectors with U.S. Investment
    U.S. capital is invested primarily in the following
sectors: petroleum, automotive, food and related products,
chemicals and related products, primary and fabricated metals,
non-electrical machinery, electric and electronics equipment,
and other manufacturing.  Workers in those sectors enjoy all
the rights guaranteed under the Spanish constitution and law,
and conditions in these sectors do not differ from those in
other sectors of the economy.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                               140
Total Manufacturing                                   3,481
  Food & Kindred Products                   622
  Chemicals and Allied Products             549
  Metals, Primary & Fabricated              122
  Machinery, except Electrical              415
  Electric & Electronic Equipment           237
  Transportation Equipment                  946
  Other Manufacturing                       590
Wholesale Trade                                         984
Banking                                               1,090
Finance/Insurance/Real Estate                           160
Services                                                405
Other Industries                                        176
TOTAL ALL INDUSTRIES                                  6,437
Source: U.S. Department of Commerce, Bureau of Economic
Analysis
(###)
SWEDEN1
xNxNU.S. DEPARTMENT OF STATE
SWEDEN: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                              SWEDEN
                     Key Economic Indicators
    (Billions of Swedish kronor (SEK) unless otherwise noted)
                                     1992      1993    1994 est.
Income, Production and Employment:
Real GDP (1985 prices)              943.7     971.9   1,001.5
GDP Growth (pct.)                    -1.7      -1.7      -2.8
GDP (at current prices )          1,438.2   1,436.5   1,431.7
GDP by Sector: (value added 1985 prices)
  Agriculture/Fishing                 4.8      13.9      14.9
  Forestry                           14.1      14.7      14.7
  Energy/Water                       25.4      25.2      25.2
  Mining/Manufacturing              194.3     188.5     190.4
  Construction                       57.0      52.6      48.4
  Bank/Insurance Services            41.8      41.7      39.8
  Other Services                    327.5     325.3     313.8
  Net Exports of Goods & Services    -3.5      -0.5      31.1
Real Per Capita GDP (SEK)         110,700   108,200   104,700
Labor Force (000s)                  4,516     4,429     4,305
Unemployment Rate (pct.)              2.9       5.3       8.0
Money and Prices:  (annual percentage growth)
Money Supply (M3)  1/               661.8     682.8     673.65
Base Interest Rate
  (3-month STIBOR)                   13.69     11.87      7.95
Personal Saving Rate (pct.)           3.4       8.1       9.9
Producer Prices                       4.5       1.0       2.2
Consumer Prices                       9.4       2.3       4.6
Exchange Rate (SEK/USD1.00)          6.05      5.81      7.75
Balance of Payments and Trade:
Total Exports (FOB)                 332.1     339.9     335.2
  Exports to U.S. 2/                 30.9      29.2      30.3
Total Imports (CIF)                 316.2     323.6     307.1
  Imports from U.S. 2/               25.9      28.0      30.2
Aid from U.S.                           0         0         0
Aid from Other Countries                0         0         0
External Public Debt 1/              59.0     243.5     359.2
Debt Service Payments 3/             22.1      17.5      55.4
Gold & Forex Reserves 1/             99.7     163.6     177.2
Balance on Current Account          -20.3     -29.0       0.0
1/ Year-end and 09/30/94.
2/ Annualized 1994 figure based on first half-year data.
3/ Interest and amortizations on central government external
funded debt.  For 1994, first half year.
1.  General Policy Framework
    Sweden is an advanced, industrialized country with a high
standard of living, extensive social services, a modern
distribution system, excellent internal and external
communications, and a skilled and educated work force.  The
Swedish economy has evolved from a centuries-old resource base
of ore, timber, and hydropower into an economy based
increasingly on high-technology goods and post-industrial
services.  A third of GDP is exported, and Sweden supports
liberal trading practices strongly.  Sweden formally applied
for membership in the European Union (EU) in 1991, completed
accession negotiations early in 1994, and became a member on
January 1, 1995.
    Instruments used to achieve economic policy goals are the
traditional monetary and fiscal ones, including an active labor
market retraining policy.  The Swedish Central Bank exercises
considerable autonomy in the realm of monetary policy, chiefly
by adjusting the overnight lending rate it charges commercial
banks in order to influence levels of liquidity in the
economy.  On the fiscal policy side, a determination to lower
tax rates, combined with the maintenance of expensive
government social programs, has led to a swelling of the
government budget deficit.  Some of this is financed by foreign
loans, but the bulk is covered by government bonds, treasury
notes, a national savings scheme, and so forth.
    During 1994 Sweden was slowly but clearly pulling out of
her worst and most protracted recession since the 1930s.  (GDP
declined by some six percent in the three-year period
1991-93.)  Unemployment in 1994 averaged 13 to 14 percent,
generally trending downward during the year.  (Swedish practice
is to quote two unemployment figures, open and disguised.
"Disguised" unemployment, those in training and work programs,
accounts for six percent of the total unemployment.)  Interest
rates rose to very high levels in the wake of general unrest in
European financial markets, hastening bankruptcies and
hampering investment, and even after falling back have remained
at levels well above those of Germany.  This development helped
ease the ongoing financial crisis somewhat.  After defending
the krona's fixed exchange rate through several waves of
speculation in late 1992, Sweden floated the krona on
November 19, 1992.
    Though the export sector is strong, the domestic economy
remains weak.  Structural changes in recent years have prepared
the way for future economic growth.  This process was begun by
the former Social Democratic government, which: deregulated the
credit market; began deregulating agriculture; removed foreign
exchange controls; introduced a broad tax reform; won consensus
on nuclear power policy; abolished foreign investment barriers;
applied for EU membership; and pegged the krona to the European
Currency Unit.  The moderate-led coalition government that came
to power in 1991, while moving rapidly down the path of
European integration staked out by the Social Democrats, also
achieved some tax reduction, began the privatization of
government-owned corporations, stepped up investment in
infrastructure, and increased investment in education and
research.
    Budgetary constraints are governing the speed with and
extent to which some of the government's programs can be
implemented.  Until the economy picks up sufficient momentum,
the watchwords of both the former moderate-led coalition and
the new Social Democrat government are fiscal restraint and
continued public sector austerity.
2.  Exchange Rate Policies
    Between 1977 and 1991, the Swedish krona was pegged to a
trade-weighted basket of foreign currencies in which the U.S.
dollar was accorded double weight.  During that period there
were, nonetheless, two devaluations of the krona of 10 and 16
percent.  As a step on the road to eventual membership in the
EU, Sweden unhooked from the dollar-heavy basket and pegged the
krona unilaterally to the European Currency Unit (ECU) in
mid-1991.
    After defending the krona during turbulence on European
foreign exchange markets in late 1992, which for a brief period
sent overnight interest rates rocketing into three digits, the
government was eventually forced to float the krona.  The
currency has since depreciated by around 30 percent of its
value against the U.S. dollar, the Deutsche mark, and the pound
sterling, and by more than 50 percent against the yen.
    The stated monetary policy of the Central Bank is to see
that the depreciation of the krona does not result in an
increase in the underlying inflation rate (i.e., when the
effects of changes in indirect taxes and the depreciation are
excluded).  Inflation is to be held close to 2 percent
beginning after the direct effects of the float and various
indirect tax increases have worked through the system.
    Sweden applied a battery of foreign exchange controls until
the international deregulation process, particularly that
occurring in the EU, forced it to follow suit in the latter
half of the 1980s.  The only remaining restriction of this
legacy comprises routine Central Bank screening for statistical
purposes of both incoming and outgoing direct investment.
3.  Structural Policies
    The Swedish tax burden is the heaviest in the OECD,
equivalent to around 50 percent of GDP.  Current central
government expenditure during the severe recession ran at
almost 75 percent of GDP, versus an average for OECD Europe of
under 50 percent.  A broad tax reform in 1990-91 reduced the
marginal income tax rate on individuals to a maximum of around
50 percent.  On the corporate side, effective taxes are
comparatively low and depreciation allowances on plant and
equipment are generous, though social security contributions
for the work force add a further one-third or so to employers'
gross wage bills.  Swedish value-added tax is two-tiered, with
a general rate of 25 percent and a lower rate of 21 percent for
food, domestic transport, and many tourist-related services.
    Trade in industrial products between Sweden, the EU and
EFTA partners is not subject to customs duty, nor is a
significant proportion of Sweden's imports from developing
countries.  Import duties are among the lowest in the world,
averaging less than five percent ad valorem on finished goods
and around three percent on semi-manufactures.  (Swedish
tariffs, on average, will increase slightly due to EU
membership.)  Most raw materials are imported duty free.
    There is very little regulation of exports apart from
control of arms exports and a law governing the export and
re-export of certain high technology products.
    Sweden implemented a new food and agricultural policy in
mid-1991 aimed at deregulating its complicated postwar system
of agricultural price regulation.  EU membership, though, will
require Sweden to adhere to the EU's Common Agricultural Policy
and apply its regulations, in effect re-regulating the
agriculture production sector.
4.  Debt Management Policies
    Sweden's traditional external debt policy, dating back to
the mid-1980s, was to incur no net foreign borrowing by central
government for the purpose of financing budget deficits.  When
the policy was introduced, central government external debt
amounted to roughly one-quarter of the national debt.  However,
a heavy drain on foreign exchange reserves in conjunction with
the turbulence in European financial markets in the fall of
1992 ended the policy.  The Central Bank and National Debt
Office have since borrowed heavily in foreign currencies,
increasing the central government's external debt fivefold
virtually overnight to the equivalent of approaching one-third
of the national debt.  The new guidelines for central
government borrowing in foreign currencies state that the
lion's share of the national debt should continue to be in
Swedish kronor; that the borrowing should be predictable in the
short term yet flexible in the medium term; that the government
shall direct the extent of the borrowing; and that it shall
report each year on developments to the parliament.  Management
of the increased debt level so far poses no problems to the
country, but interest payments on the burgeoning national debt
as a whole are growing rapidly.
5.  Significant Barriers to U.S. Exports and Investment
    To help ensure free Swedish access to foreign markets,
Sweden has opened its own markets to imports and foreign
investments, and campaigns vigorously for free trade in GATT
and elsewhere.  Import licenses are not required in Sweden,
except for items such as munitions, hazardous substances,
certain agricultural commodities, fiberboard, ferro-alloys,
some semi-manufactures of iron and steel, etc.  Sweden enjoys
licensing benefits under Section 5(k) of the U.S. Export
Administration Act.  Sweden makes wide use of EU and
international standards, labeling, and customs documents, in
order to facilitate exports.
    Having adjusted its laws and regulations to EU practices in
preparation for EU membership, Sweden is now open to virtually
all foreign investment and allows 100-percent foreign ownership
except in areas of air and maritime transportation and the
manufacture of war material.  In recent years Sweden has done
away with laws governing foreign acquisitions of domestic firms
and has relinquished all controls over foreign purchases of
real estate for business purposes.  Any shares listed on the
Stockholm Stock Exchange may now be acquired by Swedes and
foreigners alike.  Corporate shares in Sweden can still have
differing voting strengths, however.
    Sweden does not offer special tax or other inducements to
attract foreign capital.  Foreign-owned companies enjoy the
same access as Swedish-owned enterprises to the country's
credit market and government-sponsored incentives to business.
    Government procurement is usually open to foreign
suppliers, and the Swedish government has no official policy of
imposing countertrade requirements.  Sweden participates in all
relevant GATT codes on government procurement, standards, etc.
    Public procurement regulations have been harmonized with EU
directives in light of Swedish obligations under the EEA
Agreement.  The new regulations, which apply to central and
local government purchases in excess of ECU 400,000, now cover
procurement by entities in previously excluded sectors, i.e.,
the water, transport, energy, and telecom sectors.  Under the
EEA Agreement, Sweden must publish all government procurement
opportunities in the European Community Official Journal.
6.  Export Subsidies Policies
    The Swedish Government provides basic export promotion
support through its financing, jointly with Swedish industry,
of the Swedish Trade Council.  The Swedish government and
Swedish industry also jointly finance the Swedish Export Credit
Corporation, which grants medium- and long-term credits to
finance exports of capital goods and large-scale service
projects.  Working with the Swedish Agency for Technical and
Economic Cooperation, the Export Credit Corporation also
provides LDCs with concessionary trade financing.
    At year-end 1993, Swedish farmers were still receiving
government support for exports of surplus grain and meat
production, although these subsidies are being phased out.  The
government recently instituted new export subsidies for some
processed foods, among them hard cheeses.  As a member of the
EU, Sweden's agricultural support policies will have to be
adjusted to comply with the EU's Common Agricultural Policy,
including intervention buying, production quotas, and increased
export subsidies.
    In Sweden there are no tax or duty exemptions on imported
inputs; no resource discounts to producers; and no preferential
exchange rate schemes.  Sweden is a signatory to the GATT
Subsidies Code.
7.  Protection of U.S. Intellectual Property
    Sweden strongly protects intellectual property rights
having to do with patents, trademarks, copyrights, and new
technologies.  The laws are adequate and clear, enforcement is
good, and the courts are efficient and honest.  Sweden supports
efforts to strengthen international protection of intellectual
property rights, often sharing U.S. positions on these
questions.  Sweden is a member of the World Intellectual
Property Organization and is a party to the Berne Copyright and
Universal Copyright Conventions and to the Paris Convention for
the Protection of Industrial Property, as well as to the Patent
Cooperation Treaty.  As a signatory to the EEA Agreement,
Sweden has undertaken to adhere to a series of other
multilateral conventions dealing with intellectual property
rights.  Swedish intellectual property practices have no
adverse impact on U.S. trade.
8.  Worker Rights
    a.  Right of Association
    Swedish workers have the right to associate freely and to
strike.  Unions conduct their activities with complete
independence from the government and political parties,
although the Confederation of Labor Unions (LO), the largest
federation, has always been allied with the Social Democratic
Party.  Swedish trade unions are free to affiliate
internationally and are active in a broad range of
international trade union organizations.
    b.  Right to Organize and Bargain Collectively
    Workers are free to organize and bargain collectively.
Collective bargaining is carried out in the form of national
framework agreements between central organizations of workers
and employers, followed by industry and plant-level agreements
on details.  In 1993, after a two-year wage stabilization
agreement expired, a new national agreement with small wage
increases was signed for the manufacturing industry.  As
structured, the settlement represents a step toward the
decentralization of the wage formation process favored by
business.
    Swedish law fully protects workers from anti-union
discrimination and provides sophisticated and effective
mechanisms for resolving disputes and complaints.
    c.  Prohibition of Forced or Compulsory Labor
    Forced or compulsory labor is prohibited by law and does
not exist.
    d.  Minimum Age of Employment of Children
    Compulsory nine-year education ends at age 16, and full
employment is normally permitted at that age under supervision
of local municipal or community authorities.  In effect,
however, very few 16-or 17-year-old children are employed,
except in summer vacation jobs.   Those under age 18 may work
only during daytime and under a foreman's supervision.
Violations are few, and enforcement--by police and public
prosecutors, with the assistance of the unions-- is considered
good.
    e.  Acceptable Conditions of Work
    There is no national minimum wage law.  Wages are set by
collective bargaining contracts, which typically have been
observed even at nonunion establishments.  There is substantial
assistance available from social welfare entitlements to
supplement those with low wages.
    The standard legal work week is 40 hours or less.  The
amount of permissible overtime is also regulated, as are rest
periods.  Since 1991, Sweden's vacation law guarantees all
employees a minimum of 5 weeks of paid annual leave, and many
labor contracts provide more.
    Occupational health and safety rules, set by the
governmental National Board of Occupational Health and Safety
in consultation with employer and union representatives, are
closely observed.  In companies with 50 or more employees,
trained safety stewards monitor observance of regulations
governing working conditions.  Safety stewards have the
authority to stop life-threatening activity immediately and to
call for a labor inspector.
    f.  Rights in Sectors with U.S. Investment
    The five worker-right conditions addressed above obtain in
all firms, Swedish or foreign, throughout all sectors of the
Swedish economy.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                                 1
Total Manufacturing                                   1,166
  Food & Kindred Products                    17
  Chemicals and Allied Products              66
  Metals, Primary & Fabricated                5
  Machinery, except Electrical              (1)
  Electric & Electronic Equipment           -10
  Transportation Equipment                  (1)
  Other Manufacturing                        95
Wholesale Trade                                         370
Banking                                                 (1)
Finance/Insurance/Real Estate                           167
Services                                                 70
Other Industries                                        (1)
TOTAL ALL INDUSTRIES                                  1,802
(1) Suppressed to avoid disclosing data of individual companies
Source: U.S. Department of Commerce, Bureau of Economic
Analysis
(###)
SWITZERL1
dXdXU.S. DEPARTMENT OF STATE
SWITZERLAND: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                           SWITZERLAND
                     Key Economic Indicators
                    (Millions of U.S. dollars)
                                     1992      1993      1994
Income, Production and Employment:
Real GDP (1980 prices)            148,689   140,044    72,988(1)
Real GDP Growth (pct.)               -0.3      -0.9       1.8(1)
GDP (at current prices)           241,354   232,179   123,464(1)
Real Per Capita GDP                21,729    20,448       N/A
Labor Force (000s)                3,572.8   3,552.1   3,503.1(2)
  of Which are Foreigners           948.5     935.3     944.8(2)
Unemployment Rate (pct.)              2.5       4.5       4.6(2)
Money and Prices:
Money Supply (M2/pct. gwth.)          0.5      -7.9      -2.8(3)
Base Interest Rate (pct.)             6.0       4.0       3.5(2)
Personal Saving Rate (pct.)          12.7      12.0      11.7(4)
Retail Inflation (pct.)               4.0        .3       1.2(3)
Wholesale Inflation (pct.)            0.1       0.2      -0.7(3)
Consumer Price Index                133.9     138.3     140.0(3)
Exchange Rate (USD/Sfr)             0.712     0.677     0.699(3)
Balance of Payments and Trade:
Total Exports                      61,377    58,653    30,996(1)
  Exports to U.S.                   4,989     5,020     2,693(1)
Total Imports                      61,798    56,695    30,083(1)
  Imports from U.S.                 3,660     3,247     1,739(1)
External Public Debt               91,715   102,159       N/A
Debt Service Payments ($Bil.)         7.0       7.4       7.8(4)
Gold and Foreign Exch. Reserves    26,691    27,648    30,022(3)
Trade Balance                        -421     1,957       913(1)
  Trade Balance with U.S.           1,329     1,773       954(1)
N/A--Not available.
(1) First half of 1994.
(2) End of June 1994.
(3) Average of first six months of 1994.
(4) Estimated.
1.  General Economic Framework
    As a country that has only its famous mountains as natural
resources, Switzerland derives its wealth from international
trade in goods and services.  Swiss exporters of goods mainly
operate in hi-tech niche markets, where they often have a clear
competitive advantage over foreign rivals.  In services, Swiss
banking and other financial services are reputed for their
efficiency, performance and customer privacy.  But when Swiss
voters decided in December 1992 to reject the European Economic
Area (EEA) treaty, Switzerland found itself in the awkward
position of being located in the heart of Europe, without being
part of the EEA, nor being a member of the EU.  With over 60
percent of its exports going to Europe, the Swiss government is
making every effort to limit the negative effect on the
domestic economy that may result from the EEA rejection.  In
this respect, the conclusion of the Uruguay Round was
considered by experts as a way to avoid possible discrimination
against Swiss products in EU markets.  Parliament will discuss
the ratification of the GATT agreement in December 1994, and if
no referendum delays the process of ratification, Switzerland
should join the WTO by May 1995.
    In general, Switzerland does not use any fiscal policy
tools to stimulate the economy.  The exception to the rule was
a $400 million investment bonus, launched by the Federal
government in 1993, which stimulated construction activity in
1994.  As a result of economic recession and excessive
government spending toward the end of the 1980's, Switzerland
had combined budget deficits on all three government levels of
over $10 billion, or 4.2 percent of GDP, at the end of 1993.
Financed by government bonds, the large budget deficits also
caused public debt to increase.  Federal and cantonal
governments initiated measures to curb expenditures in order to
reduce budget deficits from 1994 on.
    The main objective of Swiss monetary policy is price
stability.  Under the responsibility of the Swiss National Bank
(SNB), monetary policy is carried out through open market
operations.  Besides being independent from the government, the
SNB keeps its independence from other central banks.  However,
the small size of the country, and the free movement of
capital, make Switzerland highly vulnerable to events in Europe
and other world financial centers.  Lately, the large budget
deficits and public debt raised concerns over possible negative
influences on interest rates.
2.  Exchange Rate Policies
    In the mid and long-term, the SNB does not follow any
exchange rate policy, and the Swiss franc is not pegged to any
foreign currency.  However, in cases where the Swiss currency
would be likely to appreciate considerably over a short period,
the SNB takes measures to prevent further appreciation.
3.  Structural Policies
    Because of Switzerland's high level of dependence on
international trade, few structural policies have a significant
effect on U.S. exports.  One exception is the field of
services, where Swiss telecommunication policy has a
significant impact on demand for U.S. exports.  The PTT (a
public corporation within the government) still has a monopoly
over voice transmission, and telecommunication equipment has to
be approved by an (independent) Federal office.
    Agriculture is heavily regulated and supported by the
Federal government.  Farmers' revenues are pegged to those of
blue collar workers in industry through guaranteed prices or
direct payments. Prices of agricultural imports are raised to
domestic levels by variable import duties and by requiring
importers to buy domestic products at high prices as a
condition of importing.  In parallel to the Uruguay Round, the
Swiss government started to reform agricultural policy by
switching from price subsidies to direct payments.  As a result
of the Uruguay Round, Switzerland will have to convert all
non-tariff barriers into tariffs and reduce them by an average
of 30 percent within six years.  These changes are likely to
have a favorable effect on U.S. agricultural exports.
    In November 1993, the Swiss electorate voted in favor of a
change from a 6.2 percent turnover tax on goods to a 6.5
percent value added tax (VAT) on goods and services.  The
introduction of the new tax system at the beginning of 1995 is
expected to add 1.5 percentage points to the consumer price
index.  If the SNB can ward off the beginning of a wage-price
spiral, the one-time impact of the VAT on prices should have no
influence on the growth of the economy.
4.  Debt Management Policies
    As a net international creditor, debt management policies
are not relevant to Switzerland.  The country participates in
the Paris Club for Debt Rescheduling and is an active member of
the OECD.  Switzerland joined the International Monetary Fund
and the World Bank in 1992 and holds a seat on the Executive
Board.
5.  Significant Barriers to U.S. Exports
    Import Licenses:  In general, import licenses are required
for all imports of goods.  They are granted freely and serve
primarily statistical purposes.  However, import licenses for
agricultural products are subject to quotas and tied to the
obligation for importers to take a certain percentage of the
domestic production.  The implementation of the Uruguay Round
will remove some of these restrictions that also affect U.S.
agricultural exports (asparagus, wine).
    Services Barriers:  With the exception of
telecommunications, the Swiss services sectors feature no
significant barriers to U.S. exports.  A new banking law,
entering into force on January 1995, allows foreign banks to
open up subsidiaries, branches, or representative offices in
Switzerland without approval by the Federal Banking
Commission.  This liberalization is based upon reciprocity, and
the Government of Switzerland, vis-a-vis countries where it
does not have extensive contacts already, will require written
assurance that reciprocal access is provided.  In addition, a
new Federal law on stock exchanges, which should enter into
force in mid-1995, will replace the existing system of cantonal
regulations.  The new law is characterized by a high degree of
self regulation and contains the principle of national
treatment.
    Insurance is subject to an ordinance which requires the
placement of all risks physically situated in Switzerland with
companies located in the country.  Therefore, it is necessary
for foreign insurers wishing to do business in Switzerland to
establish a subsidiary or a branch here.  Government
regulations do not call for any special restrictions on foreign
insurers established in Switzerland.
    Attorneys and lawyers, like members of other professions
which require certification (physicians, pharmacists,
therapists, engineers, and architects) must pass a federal, or
in some cases a cantonal, examination and obtain appropriate
certification before they may set up a business of their own.
    The most serious barriers to U.S. exports exist in the
domain of telecommunications.  The Swiss PTT controls the
public network and all services related to voice transmission.
Satellite communication requires licensing by the PTT, and
telecommunication equipment has to be approved by the Federal
Office of Telecommunication (separate from the PTT).  The Swiss
PTT has the possibility to take stakes in private companies
operating in the domain of Value Added Network Services (VANS),
which have been liberalized, whereas the private sector has no
access to markets controlled by the PTT.
    Standards, Testing, Labeling, and Certification:  As
mentioned before, telecommunications equipment has to be
certified by the Federal Office of Telecommunication.
Household electrical appliances must be tested and approved by
the Swiss electrotechnical association, a semi-official body.
Cars, motorcycles and trucks have to comply with Swiss
technical standards.  Finally, drugs (prescription and
over-the-counter) must be approved and registered by the
intercantonal Drug Agency.  Other standards and technical
regulations in force in Switzerland are based on international
norms.  Labels are required to be in German, French and Italian.
    Investment Barriers: In most cases, foreign investment in
Switzerland is granted national treatment.  Some restrictions
on foreign investment apply to the following areas:  Ownership
of real estate by foreigners; limits on the number of foreign
workers; and restrictions concerning the number of foreign
directors on the boards of corporations registered in
Switzerland.  For reasons of national security, foreign
participation in the hydro-electric and nuclear power sectors,
operation of oil pipelines, transportation of explosive
materials, television and radio broadcasting, operation of
Swiss airlines, and maritime navigation, are restricted by law.
    According to Article 711 of the Code of Obligations, the
Board of Directors of a joint stock company (with the exception
of holding companies) must consist of a majority of members
permanently residing in Switzerland and having Swiss
nationality.  Swiss corporate shares are issued as registered
shares (in the name of the holder) or bearer shares.  In the
past, Swiss corporations often imposed restrictions on the
transfer of registered shares to limit foreign ownership.  But
new legislation introduced in July 1992 and the increased
reliance of public companies on the international capital
markets forced Swiss companies to open their shares to foreign
investors.  At present, to prevent or hinder a takeover by an
outsider, public corporations must get governmental approval,
citing significant reasons relevant to their survival or the
conduct and purpose of their business.  Public corporations may
limit the number of registered shares that can be held by any
one shareholder to a certain percentage of the issued
registered stocks.  Most corporations limit the number of
shares to between two and five percent of the relevant stock.
    Strict regulations govern the admission of foreigners
seeking to enter the Swiss labor market.  Nevertheless, the
foreign labor force represents more than a quarter of the total
workforce.  Sectors like construction and tourism rely on a
pool of unskilled, low-paid seasonal workers.  High-tech and
research-intensive sectors depend on highly skilled and
specialized foreign workers.  In the chemistry industry, for
instance, the proportion of foreigners working in research
departments exceeds 40 percent.
    In September 1994, parliament agreed to liberalize to some
extent the law governing the purchase of property by foreign
nationals or foreign-owned companies.  Under the modified law,
foreigners would no longer need an authorization from cantonal
governments to acquire real estate.  However, to avoid
speculation, ownership of property by foreigners will be
limited to the purpose of 'own use', which means that only
foreigners working and living in Switzerland, or companies
located in Switzerland, are allowed to buy property.  The
system of quotas for the acquisition of secondary residences by
foreign nationals was maintained under the new law.
    Government Procurement Practices:  On the federal level,
Switzerland fully complies with GATT rules concerning public
procurement.  On the cantonal and local level, however,
procurement practices are still subject to certain restrictions.
    Customs Procedures:  Customs procedures in Switzerland are
straightforward and not burdensome.  All countries are afforded
GATT most-favored-nation treatment.
6.  Export Subsidies
    Switzerland's only subsidized exports are in the domain of
agriculture, where exports of dairy products (primarily cheese)
and processed food products (chocolate products, grain-based
bakery products, etc.) benefit from state subsidies.  Rare
temporary surpluses of domestic products, like beef or
concentrated apple juice, are also subsidized.  The
implementation of the Uruguay Round will require a gradual
reduction of export subsidies in Switzerland.
7.  Protection of U.S. Intellectual Property.
    Switzerland has one of the best regimes in the world for
the protection of intellectual property, and protection is
afforded equally to foreign and domestic rightsholders.
Switzerland is a member of all major international intellectual
property rights conventions and was an active supporter of a
strong IPR text in the GATT Uruguay Round negotiations.
    Patent protection is very broad, and Swiss law provides
rights to inventors that are comparable to those available in
the United States.  Switzerland is a member of both the
European Patent Convention and the Patent Cooperation Treaty,
making it possible for inventors to file a single patent
application in the United States (or other PCT country, or any
member of the European Patent Convention, once it enters into
force) and receive protection in Switzerland.  If filed in
Switzerland, a patent application must be made in one of the
country's three official languages (German, French, Italian)
and must be accompanied by detailed specifications and if
necessary by technical drawings.  The duration of a patent is
20 years.  Renewal fees are payable annually on an ascending
scale.  Patents are not renewable beyond the original 20-year
term.
    According to the Swiss Patent Law of 1954, as amended, the
following items cannot be covered by patent protection:
surgical, therapy and diagnostic processes for application on
humans and animals; inventions liable to disturb law and order
and offend "good morals."  Nor are patents granted for species
of plants and animals and biological processes for their
breeding.  In virtually all other areas, coverage is identical
to that in the United States.
    Trademarks are also well-protected.  Switzerland recognizes
well-known trademarks and has established simple procedures to
register and renew all marks.  The initial period of protection
is 20 years.  Service marks also enjoy full protection.
Trademark infringement is very rare in Switzerland -- street
vendors are relatively scarce here, and even they tend to shy
away from illegitimate or gray-market products.
    A new copyright law in 1993 improved a regime that was
already strong.  The new law explicitly recognizes computer
software as literary works and establishes a remuneration
scheme for private copying of audio and video works which
distributes proceeds on the basis of national treatment.
Owners of television programming are fully protected and
remunerated for rebroadcast and satellite retransmission of
their works, and rights-holders have exclusive rental rights.
Collecting societies are well established.  Infringement is
considered a criminal offense.  The term of protection is life
plus 70 years.
    The Swiss also protect layout designs of semiconductor
integrated circuits, trade secrets, and industrial designs.
Protection for integrated circuits and trade secrets is very
similar to that available in the U.S., and protection for
designs is somewhat broader.
8.  Workers Rights
    a.  The Right of Association
    All workers, including foreign workers, have freedom to
associate freely, to join unions of their choice, and to select
their own representatives.  The change from an industrial to a
service-based economy, the high standard of living shared by a
prosperous workforce, and the Swiss system of direct democracy,
which accords citizens a voice on important political, social,
and economic issues, are some of the reasons for the limited
interest in union membership.  Unions are free to publicize
their views and determine their own policies to represent
member interests without government interference.  The Swiss
Trade Unions Federation belongs to the International
Confederation of Free Trade Unions and the World Confederation
of Labor, as well as to the European Trade Union Confederation.
    The right to strike is legally recognized, but a unique
informal agreement between unions and employers--in existence
since the 1930's--has meant fewer than 10 strikes per year
since 1975.  There were no significant strikes in 1994.
    b.  The Right to Organize and Bargain Collectively
    Swiss law gives workers the right to organize and bargain
collectively and protects them from acts of anti-union
discrimination.  The government encourages voluntary
negotiations between employer and worker organizations.  There
are no export processing zones.
    c.  Prohibition of Forced or Compulsory Labor
    There is no forced or compulsory labor, although there is
no specific statute or constitutional ban on it.
    d.  Minimum Wage for Employment of Children
    The minimum age for employment of children is 15 years.
Children over 13 may be employed in light duties for not more
than 9 hours a week during the school year and 15 hours
otherwise.  Employment between ages 15 and 20 is strictly
regulated.  For example, youths may not work at night, on
Sundays, or under hazardous or dangerous conditions.
    e.  Acceptable Conditions of Work
    There is no national minimum wage.  Employer associations
and unions negotiate industrial wages during the collective
bargaining process.  Such wage agreement are also widely
observed by non-union establishments.  The labor act
established a maximum 45-hour workweek for blue- and
white-collar workers in industry, services, and retail trades,
and a 50-hour workweek for all other workers.   Overtime is
limited by law to 120 hours annually.
    The labor act and the Federal Code of Obligations contain
extensive regulations to protect worker health and safety.  The
regulations are rigorously enforced by the Federal Office of
Industry, Trades, and Labor, providing a high standard of
worker health and safety.  The government is in the process of
completely revising the labor law dating from 1948.  It plans
to abolish the ban on night and Sunday work for women in
industry.  Instead, it proposes to introduce provisions which
will ensure adequate working conditions for all workers, male
and female, who are employed on night shifts.  These provisions
will include specific measures designed to protect their safety
and health, assist them to meet family and social
responsibilities, and provide appropriate compensation.  There
were no allegations of workers' rights abuses from domestic or
foreign sources.
    f.  Rights in Sectors with U.S. Investments
    Except for special situations (e.g. employment in dangerous
activities regulated for occupational, health and safety or
environmental reasons), legislation concerning workers rights
does not distinguish among workers by sector, by nationality,
by employer, or in any other manner which would result in
different treatment of workers employed by U.S. firms from
those employed by Swiss or other foreign firms.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                                629
Total Manufacturing                                    1,923
  Food & Kindred Products                   (1)
  Chemicals and Allied Products             234
  Metals, Primary & Fabricated              132
  Machinery, except Electrical              303
  Electric & Electronic Equipment           (1)
  Transportation Equipment                   10
  Other Manufacturing                       594
Wholesale Trade                                        9,482
Banking                                                1,791
Finance/Insurance/Real Estate                         17,823
Services                                               1,156
Other Industries                                          98
TOTAL ALL INDUSTRIES                                  32,901
(1) Suppressed to avoid disclosing data of individual companies
Source: U.S. Department of Commerce, Bureau of Economic
Analysis
(###)
SYRIA1
sU.S. DEPARTMENT OF STATE
SYRIA: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                              SYRIA
                   Key Economic Indicators  1/
                                     1992      1993      1994
                                             (est.)    (est.)
Income Production and Employment:  2/
Real GDP (1985 prices)              9,778    10,560    10,982
Real GDP Growth (pct.)                 10         8         4
GDP (at current prices)            33,124    35,774    37,205
By Sector:
  Agriculture                       1,870     2,020     2,100
  Energy/Water                      2,500     2,700     2,808
  Manufacturing                     3,015     3,256     3,386
  Construction                        240       259       270
  Rents                               N/A       N/A       N/A
  Financial Services                  407       440       458
  Other Services                      143       155       161
  Government/Health/Education       1,351     1,459     1,518
  Net Exports of Goods & Services   3,100       N/A       N/A
Real Per Capita GDP (1985 base)       752       782       784
Labor Force (000s)                  3,600     3,900     4,300
Unemployment Rate (est./pct.)           7         7         7
Income Production and Employment:  3/
Real GDP (1985 prices)              2,607     2,816     2,929
Real GDP Growth (pct.)                 10         8         4
GDP (at current prices)             8,833     9,540     9,921
By Sector:
  Agriculture                         499       539       560
  Energy/Water                        667       720       749
  Manufacturing                       804       868       903
  Construction                         64        69        72
  Rents                               N/A       N/A       N/A
  Financial Services                  108       117       122
  Other Services                       38        41        43
  Government/Health/Education         360       389       405
  Net Exports of Goods & Services   3,100       N/A       N/A
Real Per Capita GDP (1985 base)       201       208       209
Labor Force (000s)                  3,600     3,900     4,300
Unemployment Rate (est.)                7         7         7
Money and Prices:
Money supply (M2) (million SP)    182,125   191,322   191,322
Base Interest Rate  4/                  9         9         9
Personal Saving Rate                  4.8       4.8       4.8
Retail Inflation                     12.5      16.0       8.0
Wholesale Inflation                   9.6      12.0       6.0
Consumer Price Index                  486       564       609
Exchange Rate (USD/SP)
  Official                          11.20     11.20     11.20
  Blended                           26.60     26.60     26.60
  "Neighboring Country Rate"           42        42        42
  Offshore market                   46-52     47-52     49-52
Balance of Payments and Trade:  (USD millions)
Total Exports (FOB)                 3,100     3,400     3,600
  Exports to U.S.                    45.8     144.7     120.0
Total Imports (CIF)                 3,498     4,100     4,000
  Imports from U.S.                 214.0     267.2     300.0
Aid from U.S.                           0         0         0
Aid from Other Countries          1,753.0   1,358.0     701.9
External Public Debt               18,000    19,400       N/A
Debt Service Payments (paid)        1,399       N/A       N/A
Foreign Exchange Reserves             N/A       N/A       N/A
Gold Holding
  (millions of troy ounces)         0.833     0.833     0.833
Trade Balance                      -398.0    -700.0    -400.0
  Trade Balance with U.S.          -168.2    -122.5    -180.0
N/A--Not available.
1/ The Syrian Government has not published its 1993 statistics
as of the completion of this report.  Further, the government's
1992 economic statistics remain estimates.  All figures in the
preceding tables are estimates based on the government's 1992
estimates, other sources in the public domain, and the U.S.
Embassy's own calculations.
2/ Millions of U.S. dollars converted at the official rate of
11.2 Syrian pounds/ 1 U.S. dollar.
3/ Millions of U.S. dollars converted at the "Neighboring
Country" rate of 42 Syrian pounds /1 U.S. dollar.
4/ All banks in Syria are nationalized and interest rates are
set by law, ranging from two percent for financing of the
export and storage of barley to nine percent for certain
private sector loans.  Savings rates range from two percent on
public sector "current accounts and sight deposits" to nine
percent on "other investment bonds".  Most rates have not
changed in 10 years.
1.  General Policy Framework
    In the past year, the Syrian government, except for
tightening exchange rate controls, has acted to reduce
administrative barriers to U.S. exports.  The private sector,
responding to these and other reforms, has increased its
imports beyond those of the public sector; however, increases
of U.S. exports to Syria have lagged behind those of other
countries, probably due to continued U.S. Government foreign
policy sanctions and remaining Syria administrative and legal
barriers to trade.  As a reward for participation in the Gulf
War, Arab Gulf states have contributed large, but declining
amounts of aid, to Syria over the past three years.  These
allocations, over USD 1.7 billion in 1992, and USD 1.3 billion
in 1993, have gone to rehabilitate Syria's telecommunications
and electrical power generation sectors.
    Prospects for Syrian private sector investment and imports
continue to improve, spurred by economic reforms, including an
investment encouragement law.  Recent liberalization actions of
the Syrian government permit private exporters to retain some
foreign exchange export earnings to finance permitted imports
for manufacturing inputs, as well as other listed products.
The rate of retention depends on the type of products exported:
75 percent of industrial export earnings, 100 percent of
agricultural sales.  Although retaining a monopoly on
"strategic" imports, such as wheat and flour, the Government
continued to expand the list of permitted imports during 1994,
including items, such as sugar and rice, formerly reserved for
public sector importing agencies.  During 1993 the government
attempted to interdict many of the goods imported for the
"unofficial market" and succeeded briefly in reducing supplies.
Ultimately it discontinued the activity because of inadequate
resources to enforce the interdict and the strong public demand
for such goods.  Responding to the demand, the government began
expanding the list of importable goods.
    The United States imposed trade controls in 1979 as a
response to Syria's involvement with terrorism.  The U.S.
Government expanded sanctions against Syria in 1986, following
Syria's implication in the attempted bombing of an Israeli
airliner at London Heathrow Airport.  Among the affected items
are aircraft, aircraft parts, and computers of U.S. origin or
containing U.S. origin components and technologies.  The
Syrians have sought alternate suppliers of these products.
Under the 1986 sanctions, Syria is ineligible for the Export
Enhancement Program (EEP) and the Commodity Credit Corporation
(CCC) Program in all agricultural products, rendering U.S.
wheat uncompetitive in the Syrian market.  The Syrian-U.S.
Bilateral Aviation Agreement expired in 1987 and has not been
renewed.  Finally, the EXIM Bank and OPIC suspended their
programs in Syria, further disadvantaging U.S. exporters in
meeting competition from other suppliers.
    The Syrian government uses its annual budget as its
principle tool for managing the economy.  Through 1992, the
Syrian government's ability to raise official prices on many
consumer items (effectively reducing subsidies), improve tax
collections, and increase transfers from state enterprises,
while reducing commitments of Syrian resources to capital
expenditures, enabled it to reduce budget deficits, leading to
a balanced budget in 1992.  However, the last two annual
budgets have been in deficit, due the cost of maintaining
Syria's large military establishment (both domestically and in
Lebanon) and its recently reduced, but still heavy,
subsidization of basic commodities and social services.
    Given Syria's anachronistic and nationalized financial
system and its inability to access international capital
markets, monetary policy remains a passive tool used almost
exclusively to cover fiscal deficits.  All four of the
country's commercial banks are nationalized.  Interest rates
are fixed by law.  Most rates have not changed in the last
several years, even though current real interest rates are
negative, which exerts additional inflationary pressures in the
economy.
2.  Exchange Rate Policies
    The Syrian government continues to maintain a multiple
exchange rate system.  The official exchange rate remains
fixed at Syrian pounds 11.20 to USD 1 for the government,
certain public sector transactions and valuations for some
customs tariff rates.  A second exchange rate, called the
"Blended Rate", SP 26.6 to USD 1, can be used by the U.N. and
diplomatic missions.  A third rate, the "Neighboring Country"
rate, SP 42 to USD 1, applies to most state enterprise imports
except certain basic commodities and military/security items.
Recently, a foreign oil company signed an exploration contract
allowing it to transact contract-related business at the
"Neighboring Country" rate, a first for the oil sector.
Outside Syria, a thriving offshore market for Syrian pounds
operates in Lebanon, Jordan, and the Arab Gulf countries.
During 1994, the value of the Syrian pound fluctuated between
SP 49 and 51 to the dollar in these locations.
    Exchange controls are strict.  Syrian currency may not be
exported, although it may be imported physically.  Almost all
exchange transfers must be by letter of credit opened at the
Commercial Bank of Syria.  Outward private capital transfers
are prohibited, unless approved by the Prime Minister or
transacted under the new investment law noted below.  Prior to
1987, Syrian law required private exporters to surrender
100 percent of foreign exchange earnings to the Central Bank at
the official rate.  Now, private exporters may retain 75 to 100
percent of their export earnings in foreign exchange to finance
imports of inputs and other items designated on a short list of
basic commodities, surrendering the balance to the Commercial
Bank of Syria, generally, at the "Neighboring Country" rate.
Since 1991, the Commercial Bank of Syria may convert cash,
travellers checks and personal remittances at the "Neighboring
Country" rate.
3.  Structural Policies
    By law, the Ministry of Supply controls prices on virtually
all products imported or locally produced, although enforcement
in most sectors is spotty.  The ministry also sets profit
margin ceilings, generally up to 20 percent, on private
sector imports.  Local currency prices are computed at the
SP 42 to USD 1 rate.  In the agricultural sector, production
of strategic crops (cotton, wheat) is controlled through a
system of procurement prices and subsidies for many inputs,
including seeds, fuel, and fertilizers.  Farmers may retain a
portion of production, but the balance must be sold to the
Government at official procurement prices.  Since 1989, the
Government has increased farm gate prices to encourage
production and to enable state marketing boards to purchase
larger quantities of locally produced commodities.  In 1994,
the local price of wheat was 25 percent above the world price
computed at the free market rate.
    With the surge of private industrial investment, especially
in textile and clothing manufacturing, private sector capital
goods imports exceeded the public sector's in 1993.  However,
public sector demand remains significant.  Contracts are
awarded through the official tender system.  These are open to
international competition with no restrictions, other than
language pertaining to the Arab League boycott of Israel and
the requirement to post a bid bond.  Syrian public sector
entities will accept positive statements of origin to deal with
the boycott issue.
    Syria's tariff system is highly escalated, reaching
200 percent for passenger cars.  Income taxes are highly
progressive.  Marginal rates in upper brackets are 64
percent.  Salaried employees also pay a graduated wage tax,
reaching 17 percent.  Tax evasion is widespread.
4.  Debt Management Policies
    Syrian authorities have been unwilling to provide data on
non-civilian debt, as well as accumulated obligations under
bilateral clearing arrangements.  Guaranteed civilian debt is
officially estimated at approximately USD 3.4 billion.  The
diplomatic community estimates Syria's total external public
debt at about USD 18 billion dollars.  Very little Syrian
commercial debt is held by U.S. companies, but sovereign debt
is about USD 250 million.
    In 1992, the government established various committees to
negotiate settlements of supplier credit claims against public
sector importing agencies.  However, progress has been slow.
Debt to the former Soviet Union and Iran (both clearing account
arrangements) is estimated to be more than USD 12 billion.  The
government has had some recent success in settling with
bilateral creditors, while refusing to deal with the Paris Club
as a group.  Syria suspended payments to the Russian Republic
in 1992, but is negotiating a settlement.  The government
remains badly in arrears on payments to official export credit
agencies and bilateral donors, including the U.S. Agency for
International Development.  Syria has been in violation of the
Brooke Amendment since 1985.  Syria resumed payments to the
World Bank in 1992, and, except for a brief interval in 1993,
has been making payments to the World Bank sufficient to
prevent increases in its arrears.
5.  Significant Barriers to U.S. Exports
    Any product legally imported into Syria requires an import
license, which is issued by the Ministry of Economy and Foreign
Trade according to a policy aimed at conserving foreign
exchange and promoting local production.  Strict standards on
labeling and product specifications are non-discriminatory and
fairly enforced.  Customs procedures are cumbersome and tedious
because of complex regulations.  In addition, duty rates are
extremely high.  Tariff exchange rates depend on the type of
good.
    Government procurement procedures pose special problems.
Although foreign exchange constraints have eased, many public
sector companies continue to favor barter arrangements which
can be unattractive to US suppliers.  In addition, problems
remain in the prompt return of performance bonds.
    Current bid bond forms stipulate that the guarantee becomes
null and void if the tender is not awarded upon its expiry
date, without need for any other procedure.  Some government
tenders include a clause allowing the bidder to cancel his bid
at six-month intervals, provided a written notice is received
within a stipulated time frame.  If such a clause is not
included in the tender, it can often be negotiated.  Tenders
for wheat and flour stipulate that bids are invalidated after
one month, if no contract is signed.
    Syria participates in the Arab League boycott of Israel.
Many Syrian government tenders contain language unacceptable
under U.S. anti-boycott laws.  Public sector agencies
reportedly accept positive certification from U.S. companies in
response to tender application questions.  Once interested
parties obtain tender documents, they would be well advised to
obtain competent advice regarding the anti-boycott regulations
before proceeding.  One source of such advice is the U.S.
Department of Commerce Office of Anti-boycott Compliance
(telephone advice line (202) 482-2381).
    Given the centralized structure of the economy, specific
"buy national" laws do not exist.  Strategic goods, military
equipment, wheat, sugar, and items not produced locally or in
sufficient quantities are procured by public sector importing
agencies from the international market, provided foreign
exchange is allocated by the Supreme Economic Council.
    The government requires its approval for all foreign
investments and theoretically encourages joint-ventures with
itself.  Concessions and services must be explicitly
negotiated.  The number and position of foreign employees in a
company are usually negotiated when the contract or agreement
is signed.  Land ownership laws are complex.  In principle,
only Syrians may own land.  The right to repatriation of
capital is legally recognized.  The new investment law
provides for tax holidays and exemptions on duties, as well as
guarantees for the remission of profits.  However, the law
requires that repatriated foreign exchange be generated from
export company operations.  Despite the new legislation, poor
infrastructure, lack of financial services, and complex foreign
exchange regulations, including Law No. 24, which makes it a
criminal act to conduct unauthorized foreign exchange
transactions, continue to pose serious barriers.
    Government monopolies in banking, insurance,
telecommunications, and other public sector service industries
preclude foreign investment.  Motion pictures are distributed
by a government agency and subject to censorship.
    Petroleum exploration and oil service companies operating
in Syria are required to convert their local currency
expenditures at the over-valued official exchange rate with the
exception noted in Paragraph 6. (See below.)  Despite cost
recovery schemes, this requirement has inflated company
operating costs, exposing them to greater risk and contributed
to the departure of two more foreign petroleum exploration
companies in 1994.
6.  Export Subsidy Policies
    Export financing and subsidies are not available to either
the public or the private sectors.  In fact, some exports are
subject to special taxes.  Recent government decisions allowing
private firms to transact exports and imports at the
"Neighboring Country" rate, instead of the unfavorable official
rate, have encouraged private trade through official channels.
Similar concessions to public sector companies to complete
export transactions have enhanced the foreign exchange position
of these companies.
7.  Protection of U.S. Intellectual Property
    Syria's legal system recognizes and facilitates the
transfer of property rights, including intellectual property
rights.  There is, however, no copyright protection.  Syria is
a member of the Paris Union for the International Protection of
Industrial Property.  Prior registration of intellectual
property is required to bring infringement suits.
    Due to the unsophisticated industrial structure and
existing limits on private industry, there are few major
infringement problems.  Local courts would likely give
plaintiffs fair hearings, but any financial awards would be in
Syrian pounds.  Requests for payment in foreign exchange would
probably be delayed indefinitely.
    Most books printed in Syria are in Arabic and by Arab
authors.  The publishing industry is not well developed.
Despite the lack of legal protection, major commercial
infringements do not appear to be a problem.  There are,
however, individual entrepreneurs who copy records, cassettes,
and videos, and sell them.  In any event, enforcement and the
associated litigation would be, if not impossible, extremely
costly compared to any positive benefits which might result.
    The U.S. motion picture industry estimates the home video
market in Syria is 100 percent pirated.  The industry is also
concerned with unauthorized hotel video performances, which are
said to be common.  However, only a few hotels have internal
video systems.
8.  Worker Rights
    a.  The Right of Association
    The 1973 Constitution provides for the right of the
"popular sectors" of society to form trade unions.  Although
the General Federation of Trade Unions (GFTU) is purportedly an
independent popular organization, in practice the government
uses it as a framework for controlling nearly all aspects of
union activity.  According to GFTU officials, the secretaries
general of the eight professional unions, some of whom are not
Ba'th Party members, are also each elected by their respective
union's membership.
    The Syrian government contends that there is in practice
trade union pluralism.  However, workers are not free to form
labor unions independent of the government-prescribed
structure.  Legislation is still pending which would grant the
right of any trade union to be governed by its own by-laws
without requiring that union rules correspond to those of the
GFTU.
    Strikes are not prohibited (except in the agricultural
sector), but in practice they are effectively discouraged.
There were no reported strikes in 1994, as was also the case in
1993 and 1992.  There is at least one person who has been in
detention for 13 years for involvement in a strike in 1980.  He
was tried only at the end of 1992.  Some members of the Syrian
Engineers' Association who were arrested because of the strike
action in 1980, along with Doctors' Association members
arrested at the same time reportedly remain in detention.
    As with other organizations dominated by the Ba'th Party,
the GFTU is charged with providing opinions on legislation,
devising rules for workers, and organizing labor.  The elected
president of the GFTU is a senior member of the ruling Ba'th
Party and a member of the party's highest body, its regional
command.  With his deputy, he participates in all meetings of
the cabinet's ministerial committees on economic affairs.
While the unions are used primarily to transmit instructions
and information to the labor force from the Syrian leadership,
elected union leaders also act as a conduit through which
workers' dissatisfaction is transmitted to the leadership.  The
GFTU is affiliated with the International Confederation of Arab
Trade Unions.
    In June 1992, the U.S. Trade Representative suspended
Syria's duty-free privileges under the U.S. Generalized System
of Preferences (GSP) due to its worker rights practices.  The
Syrian government has not made sufficient legislative and
practical changes to prompt a reconsideration of the suspension.
    b.  The Right to Organize and Bargain Collectively
    In the public sector, unions do not normally bargain
collectively on wage issues, but union representatives
participate with the representatives of the employers and the
respective ministry to establish sectoral minimum wages
according to legally prescribed cost-of-living levels.  Workers
serve on the board of directors of public enterprises, and
union representation is always included on the boards.  Unions
also monitor and enforce compliance with the labor law.
    In the private sector, unions are active in monitoring
compliance with the laws and ensuring workers' health and
safety.  Under the law, unions may engage in negotiations for
collective contracts with employers.  The International Labor
Organization's Committee of Experts (COE) noted Syria's
continuing resistance to revising a section of the labor code
which allows the Minister of Labor and Social Affairs to refuse
to approve a collective bargaining agreement and to annul any
clause likely to harm the economic interests of the country.
Unions have the right to litigate contracts with employers and
the right to litigate in defense of their own interests or
those of their members (individually or collectively) in cases
involving labor relations.  Union organizations may also claim
a right to arbitration.  In practice, due to the relatively
small size of Syrian private sector enterprises, labor disputes
are generally settled informally.  Social pressure to be seen
as fair and generous are powerful factors in determining
owners' treatment of workers.
    Workers are protected by law from anti-union
discrimination, and there were no reports that it was
practiced.  (See also Section 6.E).
    There is no union representation in Syria's seven free
trade zones, and firms in the zones are exempt from Syrian laws
and regulations governing the hiring and firing of workers,
although some provisions concerning occupational health and
safety, hours of work and sick and annual leave do apply.
    c.  Prohibition of Forced or Compulsory Labor
    There is no Syrian law banning forced or compulsory labor;
such practices may be imposed in punishment, usually in
connection with prison sentences for criminal offences, under
the Economic Penal Code, the Penal Code, the Agricultural Labor
Code and the Press Act.  There were no reports of forced or
compulsory labor involving children or foreign or domestic
workers.
    d.  Minimum Age for Employment of Children
    The minimum age in the predominant public sector is
fourteen, though it is higher in certain industries.  The
minimum age varies more widely in the private sector.  The
absolute minimum age is 12, with parental permission required
for children under age 16 to work.  Children are forbidden to
work at night.  The Ministry of Social Affairs and Labor is
responsible for enforcing minimum age requirements, but the
number of labor investigators is not adequate.
    e.  Acceptable Conditions of Work
    As mandated in the constitution, the government
legislatively establishes minimum and maximum wage limits in
the public sector and sets limits on maximum allowable overtime
for public sector employees.  The minimum wage does not enable
a worker and his family to survive, and, as a result, many
workers take additional jobs, open businesses, or rely on
extended families for support.  There is no single minimum wage
in the private sector for permanent employees.  According to
the 1959 Labor Law, minimum wage levels in the private sector
are set by sector and are fixed by the Minister of Social
Affairs and Labor.  Recommendations are put to him by a
committee, including representatives of both the Ministries of
Industry and Economy, as well as representatives of the
employers' association and the employees' unions.  Following
substantial cuts in government subsidies of foodstuffs in
April, the government raised public sector minimum wages to $50
per month.  Shortly thereafter, the Minister of Labor decreed
an average private sector minimum wage of $44 per month.  In
practice, private sector monthly minimums are not less than
that in the public sector.  In both the public and private
sector, the Ministry of Social Affairs and Labor is responsible
for enforcing minimum wage levels.
    The Syrian labor law extensively regulates conditions of
work.  There are regulations that severely limit the ability of
an employer to fire an employee without due cause, an issue
that the employer may take to a labor committee.  Labor
committees are composed of representatives of the municipality,
the Ministry of Social Affairs and Labor, and the union, as
well as a judge and the employer.  In the majority of cases,
such labor committees have decided in favor of the employee.
Workers, once hired, can not easily be fired.  In practice,
workers also have exercised their right to contest even planned
dismissals in the labor committees.  One exception in the
heavily regulated labor field relates to day laborers.  They
are not subject to minimum wage regulations and receive
compensation only for job-related injuries.  Small private
firms and businesses commonly employ day laborers in order to
avoid the costs of permanent employees who are well protected
even against firing.
    The statutory workweek consists of six 6-hour days,
although in certain fields in which workers are not
continuously busy, a 9-hour day is permitted.  Labor laws also
mandate a full 24-hour rest day per week.  Public laws mandate
safety standards in all sectors, and managers are expected to
implement them fully.  A draft legislative decree is pending
with the president of the council of ministers to provide
compensatory rest for those who have to work on the weekly rest
day, thus bringing the law into conformity with the
international labor code.  The ILO has also noted that a
provision of the labor code allowing workers to be kept at the
workplace for up to 11 hours per day could lead to abuse.  In
practice, the public sector is in conformity with the schedule
noted above.  There were no reports of private sector employees
having to work as many as 11 hours per day.  A special
department of the Social Security Establishment works at the
provincial level with inspectors at the Ministries of Health
and Labor to ensure compliance with safety standards.  In
practice, workers have occasionally taken employers to
judicially-empowered labor committees to win improvements in
working conditions that affect their health.
SYRIA2
U.S. DEPARTMENT OF STATE
SYRIA: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
    Foreign workers theoretically receive the same benefits but
are often reluctant to press claims because employees' work and
residence permits may be withdrawn at any time.  Moreover, many
work illegally and are not covered by the government system.
Some foreigners are employed illegally as domestic servants in
Syria.  Residence permits are legally granted only to diplomats
who employ servants, but some senior officials are also able to
acquire the necessary permits.
    f.  Rights in Sectors with U.S. Investment
    There is no direct U.S. investment, other than oil
exploration and development, in Syria.  US firms are required
to comply with Syrian labor law.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                              (1)
Total Manufacturing                                     0
  Food & Kindred Products                   0
  Chemicals and Allied Products             0
  Metals, Primary & Fabricated              0
  Machinery, except Electrical              0
  Electric & Electronic Equipment           0
  Transportation Equipment                  0
  Other Manufacturing                       0
Wholesale Trade                                         0
Banking                                                 0
Finance/Insurance/Real Estate                           0
Services                                                0
Other Industries                                       (1)
TOTAL ALL INDUSTRIES                                  355
(1) Suppressed to avoid disclosing data of individual companies
Source: U.S. Department of Commerce, Bureau of Economic
Analysis
(###)
TAJIKIST1
UU.S. DEPARTMENT OF STATE
TAJIKISTAN: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                            TAJIKISTAN
                     Key Economic Indicators
                                   1992        1993      1994 1/
Income, Production and Employment:
Real GDP Growth (pct.)            -76.4       -28.0       N/A
GDP (at current prices) 2/        279.2       305.7     251.7
By Sector:
  Agriculture                     217.0       116.4       9.4
  Energy (bil. KWHs)               16.3        17.7      13.8
  Manufacturing 3/                207.0       378.6     506.7
  Construction                     16.5        17.8      14.4
  Rents                             N/A         N/A       N/A
  Financial Services               13.5        13.6      20.0
  Other Services                   0.53        0.40      0.20
  Government/Health/Education      59.5        43.6      34.8
Net Exports of Goods & Services   -11.1       -25.0     -28.8
Real Per Capita GDP (USD)         267.5        26.6       N/A
Labor Force (millions)             1.86         N/A      1.40
Unemployment Rate (pct.)              4         N/A       N/A
Money and Prices:  (annual percentage growth)
Money Supply (M2/bil. rubles)      15.3       145.2     130.0
Base Interest Rate 4/               N/A         N/A       N/A
Personal Saving Rate                 14          14        60
Retail Inflation                  406.6       555.4       N/A
Wholesale Inflation                 N/A         N/A       N/A
Consumer Price Index              823.2     1,065.0     110.8
Exchange Rate (USD/ruble)
  Official                        188.0     2,064.3   2,287.0
  Parallel                        188.0     2,064.3   2,287.0
Balance of Payments and Trade:
Total Exports (FOB) 5/             55.9        97.2     241.5
  Exports to U.S.                   N/A         6.8       5.5
Total Imports (CIF) 5/             12.6       122.2     269.7
  Imports from U.S.                71.9         3.9      12.9
External Public Debt              787.0     1,021.0   1,461.7
Debt Service Payments (paid)        N/A         N/A       N/A
Gold and Foreign Exch. Reserves     N/A         N/A       N/A
Trade Balance 5/                  -39.4        57.3     -70.1
  Trade Balance with U.S.         -71.9         2.9      -7.4
Note:  Reliable income, production and employment, money supply
and balance of trade data are not available in Tajikistan.
While a country memorandum was produced by the World Bank in
April 1994, even that document notes the unreliability of data
due to inaccuracies in government accounting methods and poor
government information collection.  The figures provided, a
combination of both government and World Bank data, should be
used with caution and primarily as a basis for comparison.
N/A--Not available.
1/ 1994 figures are all estimates based on available monthly
data in October 1994.
2/ GDP at factor cost.
3/ Includes the cost of material expenses - net figures not
available.
4/ Figures are actual, average annual interest rates, not
changes in them.
5/ Merchandise trade.
1.  General Policy Framework
    The severing of trade links with the countries of the
former Soviet Union (FSU) after the breakup of the USSR,
continuing uncertainty over Tajikistan's entry into the Russian
ruble zone and the complete shutdown of all inter-republican
banking payments have exacerbated a situation already in crisis
after two years of civil conflict and natural disasters.  The
economy continued to contract sharply throughout 1994,
affecting even the industrialized, highly productive region of
Leninabad in the north.  Some estimates put 1994 industrial
production at no more than 30 percent of 1988 levels and in
some sectors, such as construction, estimates are even lower.
The collapse of domestic production has led to an almost total
dependence upon imports of consumer goods, particularly grain,
to the exclusion of capital goods and investments.
    While the government has taken some steps toward reform,
these have been to a large extent legislative exercises, with
no active implementation or enforcement.  A governmental
preoccupation with political stability combined with the
entrenched bureaucratic opposition to reform made the economy,
however dire the situation, a lesser priority.  In addition, no
resolution could be reached regarding the establishment of a
separate Tajik currency until the political situation
stabilized.  Approximately 90 percent of the economy remains
government-controlled and that which has been privatized has
gone, in the majority of cases, into the hands of the work
collective of that particular enterprise.  The government
further restricted the market in Tajikistan by increasing the
state orders for cotton and aluminum and limiting the issuance
of export licenses.
    Tajikistan's adoption of the Russian ruble as its official
currency without integration into the ruble zone has led to a
situation whereby Tajikistan is completely dependent upon the
largesse of the Russian Federation in order to obtain bank
notes.  This untenable situation has been precariously
maintained throughout 1994, although there is some hope that
the government elected in November 1994 may take more
aggressive steps to resolve the current crisis.
    The money supply has shrunk to the point that the economy
has reverted to a barter system, particularly in rural areas.
Salary and pension payments lag months behind and workers are
paid on account as the liquidity of the Tajik economy is
completely dependent upon the delivery of ruble notes from
Russia.  The reliance on imports together with the decline in
domestic production have led to the flight of rubles out of
Tajikistan almost as soon as they arrive.  Agreement has not
yet been reached with the Russian Federation on the rate of
exchange for pre-1993 rubles and hence all previously held
currency is literally frozen in bank accounts and not
convertible.  The government's debt to the population for
salary and pension payments in the first half of 1994 was over
220 billion rubles.
    Tajikistan's massive debt, totaling over $440 million or 31
percent of GDP for the first half of 1994, is financed for the
most part by credit from the National Bank.  Inflation has
remained fairly constant, even dropping over the summer, due to
the extreme shortage of banknotes in circulation.  Government
expenditures are largely for grain, the supply of fuel and raw
materials for industry, and expenditures for the military which
is maintained in response to attacks both along the
Tajik-Afghan border and against pockets of opposition
resistance within Tajikistan.  In addition, the government
still subsidizes inefficient state enterprises and provides
subsidized prices for food, fuel and other consumer items.
While the government remains dependent on the Russian
Federation for about 80 percent of its trade and 14 percent of
its budget, 1994 saw the successful shift of a large proportion
of Tajik exports to Western partners, particularly in cotton
and aluminum.
    In 1994, virtually all of the aid which Tajikistan received
continued to be devoted to humanitarian assistance rather than
technical or development assistance or concessional financing.
The World Bank donor conference scheduled for February was
postponed in September.  Uncertainties remain and hence
reconstruction loans valued at $20 million which were to have
become available in 1994 have been put on hold pending
resolution of Tajikistan's fundamental questions of political
stability and viable currency.  In November 1994, however, the
European Bank for Reconstruction and Development decided to
initiate a limited technical assistance project in the banking
sector.  The bulk of the proposed technical assistance
projects, however, have yet to find donors.
2.  Exchange Rate Policy
    Tajikistan is the only FSU state that still has the Russian
ruble as its national currency.  On January 5, 1994, Tajikistan
officially exchanged all of its old Russian rubles for new 1993
rubles.  Exchange rates in Tajikistan are tied to the MIREX
rate in the Russian Federation and are adjusted bi-weekly.  The
government maintains only one official exchange rate.  This
tracks fairly closely with the unofficial or black market rate,
differing only by 100 to 200 rubles.  Delayed entry into
monetary union with the Russian Federation resulted in an acute
cash shortage which is becoming increasingly severe with the
passage of time.  Unfortunately, with the conversion to new
Russian rubles, the Russian Federation and Tajikistan did not
agree upon an official exchange rate for the new and old rubles
and this issue is still outstanding between the two countries.
The Government of Tajikistan has shied away from introducing a
national currency; this decision as prolonged the economic
crises and complicated decisionmaking.
    The introduction of the new Russian ruble without
Tajikistan's entry into the ruble zone has further resulted in
a segmentation of the money supply.  The scarce cash component
is made up of Russian currency which is internally and
externally convertible into cash or goods.  Enterprises are
charging as much as ten times the asking prices for purchases
made by non-cash transactions.  The result of this impasse is
that all "old" money deposited in accounts at the time of the
ruble changeover has been, in effect, "frozen" and is
inaccessible to both enterprises and individuals.  Throughout
1994, wages routinely lagged six months behind, and often as
much as eight to ten months.
    The impact of Tajikistan's exchange rate policies upon U.S.
exports is slight for the simple fact that there is little
substantial trade between the two countries.  Government
requirements for the sale of hard currency to the government
hard currency fund remain.  Depending upon the export product,
exporters are technically required to sell between 30 and 70
percent of their hard currency earnings to the fund.  The rate
of exchange, however, has been changed to match the market rate
and is adjusted bi-weekly to coincide with the official rate.
The percentage of profit that must by law be exchanged varies
according to the percentage of the enterprise owned by the
foreign entity.
3.  Structural Policies
    1994 has seen an unfortunate acceleration of the
continuation of the return to centralized economic planning in
Tajikistan.  The government announced a new foreign trade
regime which concentrates virtually all export activity in the
Ministry of Foreign Economic Relations.  This ministry has the
exclusive right to issue export licenses in accordance with
quotas issued by the Ministry of Economy for all export
products, of which cotton and aluminum are the two main
strategic resources.  The impact of this legislation falls
primarily upon U.S. joint ventures or producers doing business
in Tajikistan.
    The new government came to power on a platform which
clearly stated the necessity to restrict imports of hard
liquor, tobacco products, and cotton oil.  There was also a
call for the regulation of all food prices.  In November,
however, Tajikistan adopted a new constitution which codifies,
for the first time, the right of the individual to own
property.  This could provide for the intensification of
privatization efforts, particularly in agriculture.
    Since 1992, Tajikistan has enacted numerous laws aimed at
broadening its economic reform efforts.  These laws have not
yet been effectively implemented for a number of reasons, chief
of which is the lack of political will among both the
government's top leaders and mid-level functionaries.  Tax
policy in Tajikistan was substantially revised in 1994, with an
overhaul of the tax code and an attempt to increase tax revenue
by the imposition of several new taxes.
4.  Debt Management Policies
    Tajikistan is a signatory to the zero-option accord with
the Russian Federation and is thus not liable for its share of
the debts of the former Soviet Union.
    Estimates from the Ministry of the Economy place
Tajikistan's budget deficit at over $440 million or 31 percent
of GDP.  This debt is financed for the most part by the
National Bank, but Tajikistan has also borrowed on unfavorable
terms in the world markets.  Russia is Tajikistan's primary
creditor, with current debts totaling $127 million.  The
Russian Federation supplied Tajikistan with a 120 billion ruble
loan in January as well as a second tranche of 30 billion
rubles in October.  Technical credits valued at 80 billion
rubles are promised but have not yet been delivered.  These
loans were guaranteed by Tajik assets in the form of major
industrial enterprises.  As of July 1994, debts to Kazakhstan
totaled $22.3 million while debts to Uzbekistan topped $96
million.  Russia has postponed Tajikistan's repayment of the
loans until January 1, 1996, but Tajikistan must repay $10.73
million to Uzbekistan and Kazakhstan in 1994.  Other debt
includes $27.5 million in P.L. 480 concessional food credits,
$50 million in Turkish commercial credits, and $5 million each
in Chinese and Indian commercial credits.
5.  Significant Barriers to U.S. Exports
    Tajikistan has several serious barriers to U.S. exports,
but these are more related to geography and the general
economic crisis than any deliberate targeting of U.S. goods and
services.  Tajikistan's geographical isolation, devastated
economy and, most importantly, lack of a national currency,
severely undermine Tajikistan's ability to trade effectively,
even with neighboring CIS states.  Interest in U.S. products is
precluded by the lack of banking transfers or cash payments
with which to purchase them.  Yet another contributing factor
is a business culture in Tajikistan which emphasizes personal
contacts over competitive bidding.  In general, legislation
encourages foreign investment but contradictory decrees and a
newly expanded tax burden make doing business in Tajikistan a
complex process.
    The government conducts virtually all trade in Tajikistan.
Fine fiber cotton and aluminum are the two main sources of
government hard currency and trade deals are characterized by
the amount of tonnage the government has allocated.  The
government trade association "Somonion" is given an annual
quota of cotton and aluminum to sell in exchange for grain,
medicine and consumer goods.  With some effort, foreign
investors are able to negotiate very favorable deals with the
government and can receive benefits such as tax relief,
long-term land leases and resource allocations without which it
would be exceedingly difficult to do business in Tajikistan.
6.  Export Subsidies Policies
    Tajikistan is not a member of the GATT export subsidies
code.  Tajikistan retains to a large extent the Soviet practice
of indirect subsidies through inefficient socialist pricing
mechanisms.  In the case of aluminum, a major export, concrete
data is difficult to obtain, due to the common practice of
dealing through a third party or country.  U.S. Department of
Commerce figures, however, claim that Tajikistan accounts for
approximately one percent of aluminum imports to the United
States.  Subsidized government rates for energy (both gas and
electricity) and other operating and raw material costs, give
aluminum produced in Tajikistan a distinct advantage over
aluminum produced in the United States or elsewhere.
    In general, though, the government of Tajikistan has only
limited opportunity to use export subsidies as a means of
providing either direct or indirect support for exports - a
situation exacerbated by the economic crisis.  That
notwithstanding, the government is publicly committed to
supporting export-oriented state enterprises, chiefly by the
provision of scarce financing and government credits.  These
credits have gone largely to the agriculture, energy, mining
and textile sectors.
7.  Protection of Intellectual Property
    Protection of intellectual property is not a high priority
of the Government of Tajikistan, but neither is the need for
protection very severe.  While many laws designed to protect
intellectual property rights already exist, the government has
limited means by which to enforce them.  Piracy of video and
audio cassettes which are brought in from neighboring CIS
countries is the most common abuse of intellectual property.
There is no evidence that Tajikistan exports any locally
produced pirated goods.  The small amount of piracy which
occurs in Tajikistan has a negligible effect, if any, on U.S.
exports.
    However, Tajikistan is undertaking the appropriate measures
to align itself with international intellectual property rights
standards.  Tajikistan is a signatory to the Universal
Copyright Convention.  The copyright agency created by the
government has little knowledge as to how best to approach its
task, and as yet its committee is not very active.  On February
14, 1994 Tajikistan became a member of the World Intellectual
Property Organization (WIPO).  In 1993, the government created
a national patent information center.  This center is charged
with the preparation of legislation required to enter into
international covenants.  In February 1994, the government
enacted legislation on the regulations governing inventions,
utility models and industrial samples.  These regulations cover
the creation, legal protection and use of the above.
Tajikistan also maintains a state standards agency, which has
the main responsibility for trademarks.
8.  Workers Rights
    a.  The Right of Association
    All citizens are guaranteed the right of association.  Also
guaranteed is the right to form and join associations without
prior authorization, to organize territorially, to form and
join federations and affiliate freely with international
organizations, and to participate in international travel.
    The Confederation of Trade Unions, a holdover from the
Communist era, remains the dominant labor organization,
although it has since shed its subordination to the communist
party.  The Confederation consists of 20 individual trade
unions and currently claims to have 1,500,000 members -
virtually all non-agricultural workers.  The separate labor
union of private enterprise workers has registered 3,241 small
and medium-sized enterprises, totaling 60,000 members, some of
whom have dual membership in the Confederation.  Both labor
unions are formally consulted by the Council of Ministers
during the drafting of social welfare and worker rights
legislation.
    b.  The Right to Organize and Bargain Collectively
    The right to organize and bargain collectively is codified
in the Law on Trade Union Rights and Guarantees, the Law on
Social Partnerships and Collective Contract and the Law on
Labor Protection.  Although collective bargaining is guaranteed
by law, as the economic situation declines, enterprises are
finding it increasingly difficult to engage in effective
collective bargain. Any anti-union discrimination or the use of
sanctions to dissuade union membership is prohibited.
    C.  Prohibition of Forced or Compulsory Labor
    Neither the Law on Labor Protection nor the Law on
Employment specifically prohibit forced or compulsory labor.
However, these laws do provide that a person has the right to
find work of his or her own choosing.  This principle is
enforced in the local trade union structure by the labor
inspectors.  The Soviet practice of compelling students to pick
cotton was officially banned in 1989.  However, due to the lack
of fuel and mechanical harvesting equipment in the fall of
1994, students were again sent to the fields to pick cotton as
they were in 1993.
    d.  Minimum Age for the Employment of Children
    According to labor laws, the minimum age for the employment
of children in Tajikistan is 16, the age at which children may
legally leave school.  With the concurrence of the local trade
union, employment may begin at age of 15.  Those less than 18
may not work more then six hours a day and 36 hours a week.
However, agricultural work, which is classified as "family
assistance," is routinely done by children as young as seven.
Trade unions are responsible for reporting any violations
involving the employment of minors.
    e.  Acceptable Conditions of Work
    The legal workweek for adults (over age 18) is 40 hours,
with a 48 hour rest period.  Overtime payment is mandated by
law with the first two hours of overtime to be paid at one and
one half times the normal rate and the remaining overtime at
double time.  The government has established occupational
health and safety standards, but these fall far short of
international norms and are not actively enforced.  Relative to
former Soviet standards, however, it is virtually certain,
given the continuing economic decline, that the one-fifth
working in substandard conditions reported in 1993 greatly
underreports the number working in substandard conditions in
1994 (although reliable new statistics are not available).
There are occasional reports of armed militia forcing villagers
to perform agricultural work on private plots.  There are no
known instances of the use of child labor, other than in the
case of picking cotton.
    f.  Rights in the Sectors with U.S. Investment
    There is no significant U.S. investment in Tajikistan.
(###)
THAILAND1
rU.S. DEPARTMENT OF STATE
THAILAND: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                             THAILAND
                     Key Economic Indicators
        (Millions of U.S. dollars unless otherwise noted)
                                     1992      1993      1994 1/
Income, Production and Employment:
Real GDP (1988 prices)             89,934    97,595   104,857
Real GDP Growth Rate (pct.)           7.9       8.2       8.0
GDP (at current prices)           111,495   124,772   140,321
By Sector:
  Agriculture                      13,446    12,472    13,838
  Energy/Water                      2,579     3,053       N/A
  Manufacturing                    31,233    35,578    38,975
  Construction                      7,523     8,578       N/A
  Rents                             3,008     3,237       N/A
  Financial Services                7,079     9,019       N/A
  Other Services                   42,438    48,162       N/A
  Government/Health/Education       4,189     4,673       N/A
  Net Exports of Goods & Services  -5,533    -6,310       N/A
Per Capita GDP (current USD)        1,930     2,130     2,351
Labor Force (000s)                 32,420    33,100    33,800
Unemployment Rate (pct.)              3.0       3.2       3.3
Money and Prices:  (annual percentage growth)
Money Supply (M2)                    15.6      18.4      12.6 1/
Base Interest Rate                   11.5     10.25      11.5
Personal Savings Rate                 4.9       N/A       N/A
Retail Inflation                      N/A       N/A       N/A
Wholesale Inflation                   0.2      -0.4       3.1 5/
Consumer Price Index                  4.1       3.3       4.9 3/
Exchange Rates (B/USD avg.)
  Official                          25.40     25.32     25.22 2/
  Parallel                             -- Not Applicable --
Balance of Payments and Trade:
Total Exports, (FOB)               32,466    37,159    28,360 2/
  Exports to U.S.                   7,284     7,287     6,046 2/
Total Imports (CIF)                40,679    46,242    34,448 2/
  Imports from U.S.                 4,772     5,373     3,985 2/
Aid from U.S. (FY-DA obligation)      0.7       6.4       5.1
Aid from Other Countries (FY)         N/A       N/A       N/A
External Public Debt (LT)          12,518    14,171    14,973 4/
Debt Service Payments (paid)        4,713     5,391     1,658 4/
Gold and Foreign Exch. Reserves      21.2      25.4      29.1
Trade Balance                      -8,213    -9,083    -6,088 2/
  Trade Balance with U.S.           2,512     2,614     2,061 2/
N/A--Not available.
1/ Preliminary estimates based on data available, October 1994.
2/ January through August (eight months).
3/ January through September (nine months).
4/ First Quarter 1994
5/ June 1993-June 1994
Sources:  Bank of Thailand, Thai Ministry of Commerce, Thai
National Economic and Social Development Board, U.S. Department
of Commerce and U.S. Embassy estimates.
1.  General Policy Framework
    Thailand's economic development policies are based on a
competitive, export-oriented, free market philosophy.  Its
economy is in transition from an agricultural economy to a more
open and broadly based one with a large manufacturing sector.
Although the majority of the Thai labor force remains engaged
in agricultural production, this sector now accounts for only
12 percent of GDP.  Manufacturing, wholesale and retail trade
and service industries are the most rapidly growing sectors and
now account for almost two-thirds of Thailand's GDP.
    Real economic growth averaged over 10 percent from 1987 to
1991 and has since hovered around eight percent.  Economic
growth and investment have slowed modestly and the political
events of May 1992, which culminated in violence, temporarily
undermined domestic and foreign investor confidence.  However,
the Thai economy remains fundamentally strong and has rebounded
in the intervening two years.  Recorded flows of foreign direct
investment fell to $1.5 billion in 1993, down from $2 billion
in 1992.  Exports continued to expand to record levels during
the first eight months of 1994, to $28 billion.  The Thai
government estimates that total Thai exports for 1994 will
reach almost $48 billion, up 18.5 percent over 1993.  Barring
further domestic or external shocks, Thailand should maintain
solid economic growth in the seven to eight percent range for
the foreseeable future.
    The Chuan government, which took office following free
elections in September 1992, has maintained the general
direction of economic liberalization, making modest additions
in some areas.  It has also stressed addressing imbalances
created through rapid industrialization by emphasizing rural
development and reducing disparities in the distribution of
income.
    Rapid growth has had its drawbacks:  infrastructure
bottlenecks remain a problem and environmental degradation has
worsened considerably in recent years.  If unresolved,
Thailand's infrastructure bottlenecks and shortages of skilled
personnel will limit the pace of future growth.  Metropolitan
Bangkok's public works (communications facilities, roads and
mass transit) are already overtaxed and will come under
increasing pressure.
    A drought in northern provinces during 1993 reduced
agricultural output dependent on irrigation and reduced water
supplies to the Bangkok metropolitan area in 1994.  Abundant
rainfall in 1994, however, has largely refilled reservoirs to
capacity.  Severe flooding in the north of Thailand during
August 1994 destroyed some crops.  Added to changes in Thai
policies which reduced production, this has led to increased
prices for agricultural goods in 1994.
    The average amount of schooling for the Thai work force is
less than six years, the lowest in the Association of Southest
Asian Nations (ASEAN).  The level of education of the work
force will have to be raised to maintain Thailand's development
pace and competitiveness with neighboring countries which have
lower wage rates.  The Thai government is fully aware of this
problem and is in the process of expanding mandatory years of
schooling from six to nine.  Wage gains continue to outpace
substantially the growth of the consumer price index.
    For the past six years Thailand has experienced a
substantial government budget surplus as revenues were fueled
by growth and government investment expenditures for major
infrastructure projects lagged.  For 1993 the government's
overall surplus reached $2.7 billion, 2.2 percent of GDP.
2.  Exchange Rate Policy
    Since November 1984 the Thai baht has been pegged to a
basket of currencies of principal trading partners.  The
composition of the basket is a closely guarded secret, but the
U S. dollar appears to represent well over half of the value of
the basket.  The Exchange Equalization Fund, chaired by a
Deputy Governor of the Bank of Thailand, determines the
exchange value of the baht each working day.  There is no
parallel market in Thailand.  Global currency realignments
since 1985, and especially the recent appreciation of the
Japanese yen and the Thai baht against the U.S. dollar, have
tended to make U.S. exports to Thailand more price competitive.
    In May 1990 the Thai government announced a series of
measures to liberalize significantly the exchange control
regime.  It accepted the obligations of the International
Monetary Fund's Article VIII which prohibits members from
restricting current international transactions.  Commercial
banks were given permission to process all foreign exchange
transactions and substantial increases were allowed in ceilings
on money transfers not requiring Bank of Thailand preapproval
and on spending by Thai tourists and businessmen abroad.  In
April 1991 and May 1992 additional rounds of foreign exchange
liberalization substantially simplified foreign exchange
reporting requirements and allowed banks to offer foreign
currency accounts to individuals and businesses.  The central
bank also raised limits on Thai capital transfers abroad and
allowed free repatriation (net of taxes) of investment funds,
dividends, profits and loan repayments.  It allowed exports to
be paid for in baht without prior permission and companies to
transfer foreign exchange between subsidiaries without having
to change those funds into baht.
3.  Structural Policies
    The appointment of the first Anand administration in March
1991 set the stage for a flurry of legislative and regulatory
reforms.  The Anand government reduced market distortions, made
tax policies more transparent and, in general, liberalized the
domestic market.  Although the nation's trade and current
account deficits are large in relation to total GDP, the
overall balance of payments remains in surplus because of
tourism earnings and large inflows of foreign capital.  This
payments surplus and a substantial budgetary surplus have
allowed the Thai government to reduce customs duties and
liberalize its import regime.  A wider reform of the import
regime, reducing the number of tariff rates and eliminating
most tariffs above 30 percent, is being pursued.  Thailand
began implementing the ASEAN Free Trade Area's (AFTA) tariff
reductions in January 1993.  Although it began slowly, AFTA has
picked up speed as the six member nations (Brunei, Indonesia,
Malaysia, Philippines, Singapore and Thailand) have started
seeing results.  At the September 1994 meeting of the ASEAN
Economic Ministers in Chiang Mai, the AFTA members agreed to
reduce the 15 year implementation schedule to 10 years,
gradually to eliminate the exclusion list of protected items
and generally to expand AFTA from a tariff reduction scheme
into a real free trade area.  Thailand has been one of the
leading proponents of this effort.  Thailand's trade relations
have traditionally been oriented toward distant markets,
particularly North America, Europe, and Japan, but the
government sees the ASEAN Free Trade Area increasing
intra-ASEAN trade as well.
    Beginning in 1992 the Thai government implemented a major
reform of its taxation system.  In 1992 the government
increased personal income tax deductions and lowered the top
marginal tax rate to 37 percent and unified the corporate
income tax rate at 30 percent.  The government is considering a
further reduction to 25 percent to attract more investment.  On
January 1, 1992 Thailand implemented a value added tax (VAT)
system, replacing a multi-tiered business tax with a single
rate of seven percent on value added.  U.S. transportation and
shipping companies in Thailand are at a competitive
disadvantage vis-a-vis firms from third countries which "zero
rate" Thai companies under their own VAT systems.  Since the
United States does not have a VAT system, U.S. firms are
"exempt" from the Thai system and unable to claim rebates for
taxes paid on inputs.  Firms which are "zero rated" are able to
offset VAT paid on inputs in paying their own taxes.
4.  Debt Management Policies
    Domestic credit is expanding, helping fuel some of the
growth in consumption in the economy.  Domestic credit expanded
18 percent in 1992, 19.6 percent in 1993 and is projected to
grow by over 30 percent in 1994; growth for the first nine
months of 1994 has been greater than in all of 1993.  The prime
rate has declined from 14 percent in 1991 to 12 per cent in
1992 and 11 percent in 1993.  It will be between 11 and
11.5 percent for 1994.  Rates for one-year fixed deposits have
declined from 10.5 percent to seven percent over the same
period.  With the disparity between relatively high domestic
rates and declining international lending rates, Thai private
sector external borrowing has grown rapidly since 1990, when
private external debt was almost $14 billion, reaching
$25 billion in 1991, $30 billion in 1992 and $36 billion in
1993.  Net capital inflows, almost completely via the private
sector, rose from $9.8 billion in 1992 to $11 billion in 1993
and reached $10.5 billion as of August 1994.  Total public
sector debt was about $13 billion in 1992 and $14 billion in
1993.  The total debt service ratio (including private and
short term debt) was 10.5 percent in 1991, 11.2 percent in 1992
and 11.3 percent in 1993.  The public sector debt service ratio
was about four percent in 1993.
5.  Significant Barriers to U.S. Exports
    Import duties range from zero to 68.5 percent ad valorem,
along with other specific taxes of an equivalent or higher
rate.  These import duties, which have a weighted average of
only 16.03 percent, were assessed on all imports in 1993,
including agricultural imports, especially processed food
products, and many manufactured goods, greatly limiting the
market for these goods.  The Thai government is pursuing a
broad reform of its import regime and customs duties overall
will be significantly lower, but it remains unclear how
agricultural products will be affected.  Thailand has also
offered to lower duties on some agricultural products as part
of the Uruguay Round.  There are presently six classifications
of import duties:  zero to five percent on raw materials; one
percent for special items such as medical instruments, ships
and aircraft; up to 10 percent for intermediate products;
20 percent for finished products; 30 percent for special
production items; and, 68.5 percent for luxury sedans.
    Arbitrary customs valuation procedures sometimes constitute
a serious import barrier.  The Thai Customs Department keeps
records of the highest declared prices of products imported
into Thailand from invoices of previous shipments.  Those
prices can then be used as "check prices" for assessing tariffs
on subsequent shipments of similar products from the same
country.  Customs may disregard actual invoiced values in favor
of the check price for assessment purposes, a practice which
may particularly affect agricultural products with seasonally
fluctuating prices.  For products shipped from other than the
country of origin, the Customs Department reserves the option
of using the check price of either the country of origin or the
country of shipment, whichever is higher.  These rules are
applied to imports from all nations.
    The Thai Food and Drug Administration issues import
licenses for food and pharmaceutical imports.  This licensing
process can pose an important barrier because of its cost,
duration and demand for proprietary information.  Licenses for
importers of food products cost 15,000 baht (about $600).
These licenses must be renewed every three years.  Licenses for
importers of pharmaceuticals cost 10,000 baht (about $400) and
must be renewed every year.  Sample products imported in bulk
require laboratory analysis at a cost of 1,000 to 3,000 baht
(about $40 to $120) per item.  Food products imported in sealed
containers (consumer ready packaged) require laboratory
analysis at a cost of 5,000 baht (about $200) per item.
Registration as "specific controlled food items" is required
for 39 food products at an additional cost of 5,000 baht (about
$200) per item.  Registration of pharmaceutical imports costs
2,000 baht (about $80) per item, with the cost of inspection of
each item an additional 1,000 baht (about $40).  Although the
Thai Food and Drug Administration has made efforts to
streamline the registration process, it usually requires three
months or more to complete.  All controlled items must be
accompanied by a detailed list of ingredients and a description
of the manufacturing process.  Some U.S. suppliers have
declined to export to Thailand rather than provide the
proprietary information requested.
    The Thai Ministry of Commerce requires import licenses on
certain raw materials, petroleum, industrial, textile and
agricultural products.  These licenses can be used to protect
uncompetitive local industry, encourage greater domestic
production, maintain price stability in the domestic market and
for phytosanitary reasons.  Import licensing is also used to
protect intellectual property rights and to comply with
international obligations.  Import licensing is required for
43 categories of items.  In the food products area, licensing
requirements remain for powdered skim milk and fresh milk,
potatoes, soy beans and soy bean oil, refined sugar, coffee and
others.  Corn for animal feed is among those 10 categories
which do not need import licenses but must comply with
concerned agencies requirements for surcharges, fees or
certificates of origin.
    Largely by restricting foreign bank entry, branching and
acquisition of Thai banks, Thai authorities limit all foreign
banks to a very small share of the total Thai banking market.
That share comprises around seven percent of total commercial
banking assets at present.  Although an existing foreign bank
license was bought in 1994, no new foreign bank licenses have
been issued since 1978.  However, Thai authorities regularly
approve representative offices of well established foreign
banks.  In aggregate, foreigners are limited to a maximum
25 percent shareholding in each Thai bank; no person or group
of related persons, whether Thai or foreign, may hold more than
five percent of the shares of each Thai bank.  The Thai
government has indicated it is reviewing its regulations on
foreign bank activities as part of the extended Uruguay Round
negotiations on services and may allow new foreign bank
branches during the next three to seven years.
    Foreign banks do not receive national treatment in
Thailand.  Foreign banks are prohibited from opening branches
and are not permitted to operate off-site automated teller
machines (ATMs).  Recently, regulations were changed to permit
foreign banks to participate in the local ATM network.
However, they have been unable to negotiate agreements to
participate in the ATM network with domestic banks.  Foreign
banks are allowed to participate in the Bangkok International
Banking Facility (BIBF), created to develop an offshore banking
industry in Thailand.  Thai officials are considering allowing
foreign banks participating in the BIBF additional access to
the Thai banking market.
    Thai law and regulations limit foreign equity in new local
insurance firms to 25 percent or less.  This denies new U.S.
property/casualty and life insurers access to the local market
on terms equal to local insurers.  A long established U.S.
firm, however, controls a major share of the Thai life
insurance market.
    Under Thai law aliens are forbidden to engage in the
brokerage business.  A 1979 law limits all foreign ownership of
Thai finance and credit foncier companies to 25 percent;
however, a maximum of 40 percent participation in firms already
licensed when the law was enacted is permitted.
6.  Export Subsidies
    The Government of Thailand ratified the Uruguay Round
agreements before the end of 1994, and became a founding member
of the World Trade Organization (WTO).  However, it is not a
signatory to the GATT subsidies code.  It maintains several
programs which benefit manufactured products or processed
agricultural products and may constitute export subsidies.
These programs include:  subsidized credit on some government
to government sales of Thai rice; preferential financing for
exporters in the form of packing credits; and, tax certificates
for rebates of taxes and import duties on inputs for products
made for export.  Thailand established an export-import bank in
September 1993 which took over some of these functions,
particularly the packing credit program.  Thai officials say
that Thailand is considering acceding to the GATT subsidies
code.
7.  Protection of Intellectual Property
    Improved protection for U.S. copyright, patent and
trademark holders has been one of our most prominent bilateral
trade issues over the past several years.  Thailand has made
significant progress in intellectual property protection over
this period.  Most importantly, Thailand passed a revised
copyright law which addresses most of the U.S. concerns
(especially protection for computer software).  The law is
expected to go into force in early 1995.  This will bring the
Thai copyright regime into conformity with international
standards of the Uruguay Round agreement (TRIPS) and the Berne
Convention (Paris Act).  In addition, the Thai government has
agreed to provide protection through administrative means for
certain pharmaceutical products not entitled to full patent
protection under Thai law.  In recognition of this progress,
Thailand was downgraded from the "priority watch list" to the
"watch list" in November 1994.  The U.S. Trade Representative
(USTR) has begun a review of Thailand's status under the
Generalized System of Preferences (GSP) program to determine
whether to restore any of the GSP benefits lost in 1989 due to
inadequate intellectual property protection.
    Efforts on the part of the Thai government to enforce
existing copyright laws have also improved since 1991, when
most enforcement activities against intellectual property
infringement were centralized and relatively ineffective.  In
December 1991 the U.S. formally concluded a Section 301
investigation of Thailand's copyright enforcement in response
to a petition filed by three U.S. trade associations.  Efforts
by both governments to reduce copyright piracy increased in
early 1993, with raids by police expanding to cover computer
software and into the provinces.  U.S. industry associations
have been instrumental in securing more energetic enforcement.
While considerable improvements have been made, especially
during 1993, copyright piracy of audio and video tapes and
computer software remains extensive.  The government of Prime
Minister Chuan Leekpai has publicly stated its commitment to
continuing vigorous enforcement.  The Ministry of Commerce set
up a special Intellectual Property (IPR) Department in 1992
which is active in coordinating both the legal structure and
enforcement efforts against all forms of violation of
intellectual property.  The Prime Minister receives a weekly
briefing on the status of enforcement efforts and has seconded
an official to the IPR Department to keep him thoroughly
informed.
    Concerns remain that Thailand's legal procedures do not
provide adequate deterrence against copyright infringement.
The government has established a special division in the courts
to concentrate on intellectual property matters and has
proposed the creation of an entirely separate intellectual
property court, with judges trained in intellectual property
matters.  This court, to be known as the Intellectual Property
and International Trade Court, was proposed to the Thai
Parliament in September 1994.  Thai officials expect that these
measures will speed up consideration of copyright and other IPR
cases and improve the efficiency of the legal system in dealing
with them.
    Legislation extending patent protection to pharmaceutical
products and agricultural machinery and increasing the length
of protection to 20 years became effective September 30, 1992.
The United States then formally concluded a Section 301
investigation of Thailand's patent protection of
pharmaceuticals, begun in response to a petition filed by the
U.S. Pharmaceutical Manufacturers Association.  Both
governments continue to discuss ways to resolve remaining U.S.
concerns over Thailand's patent protection.  Chief among these
are finalizing measures to provide the transitional protection
lacking in the law.
8.  Worker Rights
    a.  The Right of Association
    The Labor Relations Act of 1975, Thailand's basic labor
law, guarantees to workers in the private sector most
internationally recognized worker rights, including freedom of
association.  Workers have the right to form and join unions of
their own choosing, to decide on constitutions and rules, and
to formulate policies without outside interference.  Once a
union is established, the law protects members from
discrimination, dissolution, suspension, or termination because
of union activities.  In addition, unions have the right to
maintain relations with international labor organizations.  In
April 1991 the government passed the State Enterprise Labor
Relations Act (SELRA) which denied state enterprise workers
many of the labor association rights they had enjoyed under the
1975 law.  The Chuan government, which came to office in 1992,
promised to amend the SELRA and restore those rights.  The new
legislation was introduced in the fall 1994 session of
Parliament.
    b.  The Right to Organize and Bargain Collectively
    The 1975 Act grants Thai workers the right to organize
unions and employee associations without outside interference
and to bargain collectively over wages, benefits and working
conditions.  There are about 600 private sector unions
registered in Thailand.  Until the SELRA is amended, state
enterprise workers, like civil servants, may not form unions,
but are allowed membership in employee associations.  The law
currently denies the right to strike to civil servants, state
enterprise workers and workers in "essential" services such as
education, transportation and health care.  In the private
sector, collective bargaining usually occurs in individual
firms; industry wide collective bargaining is almost unknown.
    c.  Prohibition of Forced or Compulsory Labor
    The Thai Constitution prohibits forced or compulsory labor
except in the case of national emergency, war or martial law.
    d.  Minimum Age for Employment of Children
    The minimum employment age in Thailand is 13.  Thailand
restricts the employment of children between 13 and 15 to
"light work" in nonhazardous jobs and requires Department of
Labor permission before they can begin work.  Employment of
children at night is prohibited.  The government has announced
its intent to increase compulsory education from six to nine
years in the next few years; this will make possible further
raising of the minimum employment age to 15.  In the last three
years, the government has also more than doubled the size of
the labor inspector corps concerned with child labor law to
enhance enforcement of those laws.
    e.  Acceptable Conditions of Work
    Working conditions vary widely in Thailand.  Medium and
large factories, including those of most multinational firms,
generally meet international health and safety standards,
although a May 1993 fire in a factory producing toys for export
in which nearly 200 workers were killed demonstrates
significant gaps in enforcement.  The government has sought to
address these gaps by increasing the number of safety
inspectors and by increasing the penalties for violations.
Eight hour days are the norm and wages and benefits in export
industries usually exceed the legal minimum.  However, in
Thailand's large informal sector, wage, health and safety
standards are often ignored.  Most industries have a legally
mandated 48 hour maximum workweek.  The major exception is
commercial establishments, where the maximum is 54 hours.
Transportation workers are restricted to no more than 48 hours
per week.
    f.  Rights in Sectors with U.S. Investment
    U.S. capital investment is substantial in several sectors
of the Thai economy, including petroleum (exploration,
production, refining, and marketing), electronic components
assembly and consumer products.  Workers in these sectors,
especially those working for U.S. and other western firms,
usually enjoy labor conditions superior to those of the average
Thai worker:  the degree of unionization is greater, wages and
benefits are higher, and health and safety standards are
better.  Child labor is rare or nonexistent among large
multinational firms.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                             1,011
Total Manufacturing                                     863
  Food & Kindred Products                    49
  Chemicals and Allied Products             228
  Metals, Primary & Fabricated              (1)
  Machinery, except Electrical              (1)
  Electric & Electronic Equipment           221
  Transportation Equipment                  (2)
  Other Manufacturing                        79
Wholesale Trade                                         250
Banking                                                 300
Finance/Insurance/Real Estate                           (1)
Services                                                 59
Other Industries                                        (1)
TOTAL ALL INDUSTRIES                                  2,893
THAILAND2
U.S. DEPARTMENT OF STATE
THAILAND: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
(1) Suppressed to avoid disclosing data of individual companies
(2) Less than $500,000
Source: U.S. Department of Commerce, Bureau of Economic
Analysis
TRINIDAD1
]U.S. DEPARTMENT OF STATE
TRINIDAD/TOBAGO: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                       TRINIDAD AND TOBAGO
                     Key Economic Indicators
        (Millions of U.S. dollars unless otherwise noted)
                                      1992      1993     1994 1/
Income, Production and Employment:
Real GDP (1985 prices) 2/          3,827.6   3,770.2   3,883.3
Real GDP Growth (pct.)                -0.6      -1.5       3.0
GDP (at current prices) 2/         4,846.2   4,161.4   4,745.8
By Sector:
  Agriculture                       132.66    108.37    102.68
  Energy/Water                    1,227.79  1,122.26  1,138.53
  Manufacturing                     484.14    389.65    386.34
  Construction                      450.71    344.58    344.92
  Transport                       1,446.73  1,288.33  1,334.10
  Rents                                N/A       N/A       N/A
  Financial Services                472.38    393.93    408.31
  Other Services                    369.88    310.63    304.39
  Government/Health/Education       620.33    510.45    513.26
  Net Exports of Goods & Services   138.60     39.10    500.00
Real Per Capita GDP                3,189.7   3,141.8   3,236.1
Labor Force (000s)                   505.2     504.6     508.4
Unemployment Rate (pct.)              19.6      19.8      18.0
Money and Prices:  (annual percentage growth)
Money Supply (M2)                     -6.6       5.1      -1.8
Base Interest Rate 3/                15.50     15.50     15.50
Personal Saving Rate                   N/A       N/A       N/A
Retail Inflation                       6.5      10.8       9.0
Wholesale Inflation                    0.8       5.3       3.0
Consumer Price Index                 247.0     273.6     295.3
Exchange Rate (USD/TT)                4.25      5.39      5.83
Balance of Payments and Trade:
Total Exports (FOB) 4/             1,868.9   1,632.8   1,933.9
  Exports to U.S.                    879.0     735.0     874.1
Total Imports (CIF) 4/             1,435.6   1,390.6     996.9
  Imports from U.S.                  594.4     540.9     470.5
Aid from U.S.                         0.60      0.15      0.70
Aid from Other Countries               N/A       N/A       N/A
External Public Debt               2,214.7   2,095.8   2,000.0
Debt Service Payments                612.1     613.5     594.0
Gold and Foreign Exch. Reserves       40.2     207.4     117.6
Trade Balance 4/                     433.3     242.2     512.6
  Balance with U.S.                  284.6     194.1     253.8
N/A-Not available.
1/ 1994 figures are all estimates based on available monthly
data in October 1994.
2/ GDP at factor cost.  Figures reflect the exchange rates
applicable in each year.  1992 exchange rate: US$1.00/TT$4.25.
Exchange rate for 1993 is a period average which includes the
post-float devaluation:  US$1.00/TT$5.39.  Exchange rate for
1994 is an average of the period January - September 1994:
US$1.00/TT$5.83.  Sector indicators:  Financial Services
includes finance, insurance and real estate; Transport includes
transport, storage and communication, and distribution.
3/ Figures are actual, average annual interest rates, not
changes in them.
4/ Merchandise trade.
1.  General Policy Framework
    The dual-island Republic of Trinidad and Tobago is endowed
with rich deposits of oil and natural gas.  During the oil boom
of the 1970's, Trinidad and Tobago became one of the most
prosperous countries in the Western Hemisphere.  Oil revenues
enabled the nation to invest in state-owned and
state-controlled corporations, which became a drain on the
nation's resources.  The oil wealth also fueled a dramatic
increase in domestic consumption.  The collapse of the oil boom
in the 1980's and concurrent decrease in Trinidadian oil
production, caused a severe recession from which Trinidad and
Tobago is only now beginning to emerge.  Prospects for
continued economic growth, however, remain closely tied to oil
prices and oil and gas production in the short term as the
government's structural reforms require time to stimulate
growth.
    Since January 1992, the Government of Trinidad and Tobago
has moved decisively to lay the foundations for private-sector
based, export-led growth and to reform its state-controlled
economy to a market-controlled one.  On April 13, 1993, the
government removed currency controls, floating the TT dollar.
In 1992, it undertook a large scale divestment program and has
since divested several previously state-owned companies.  In
addition, the government began dismantling trade barriers in
1991 eliminating the import licensing requirement for most
manufactured goods in July 1992, and for most agricultural
goods in September 1994.
    The Government of Trinidad and Tobago has aggressively
courted foreign investors and on September 26, 1994, signed a
Bilateral Investment Treaty with the United States, which
provides national treatment for U.S. investors.  New U.S.
investment in Trinidad and Tobago increased from US$428 million
in 1993 to about US$660 million in 1994.
    The Government of Trinidad and Tobago uses a standard array
of fiscal and monetary policies to influence the economy,
including a 15 percent value-added tax (VAT) and relatively
high corporate and personal income taxes.  Improvements in
revenue collection in 1993 and 1994 have boosted VAT,
income-tax and customs duty revenues dramatically.
Nevertheless, a public sector budget deficit of approximately
US$52 million is projected for 1994 because of
lower-than-projected oil prices resulting in less revenue from
the energy sector.  The 1994 budget based oil revenues on a
price of US$19/barrel, but prices hit a five-year low in
February and have not sufficiently recovered to
budget-projected levels.
    To protect the exchange rate, which has several times
neared the TT$6.00 - US$1.00 rate, the Central Bank has
attempted to manage liquidity by keeping aggregate demand
consistant with balances.  The Central Bank continues to rely
primarily on reserve requirements to control the money supply,
despite its stated goal of moving to open market operations as
a more market-oriented means of influencing the money supply.
The Central Bank has raised the reserve requirement for
commercial banks twice in 1994, to a current 20 percent.  The
tight money supply, combined with a weakening of the
inflationary effects of the 1993 float, are keeping inflation
low.  The year-on-year rate of inflation was 7.8 percent from
June 1993 to June 1994 compared with 11.2 percent in the twelve
months preceding June 1993.
2.  Exchange Rate Policy
    On April 13, 1993, the Government of Trinidad and Tobago
removed exchange controls and floated the TT dollar which had
been pegged to the U.S. dollar at the rate of TT$4.25 equals
US$1.00 since 1988.  The average rate of exchange for the first
three quarters of 1994 is TT$5.83 equals US$1.00.  Foreign
currency for imports, profit remittances, and repatriation of
capital is freely available.  Only a few reporting requirements
have been retained to deter money laundering and tax evasion.
3.  Structural Policies
    Pricing Policies:  Generally, the free market determines
prices.  The government maintains domestic price controls on
sugar, schoolbooks, and pharmaceuticals.  Controls on rice and
counter flour were lifted in September 1994 and remaining
controls are expected eventually to be eliminated entirely.
    Tax Policies:  In an effort to curb consumption, the
government instituted a 15 percent VAT on January 1, 1990.
Corporate tax rates were raised by five percentage points to 45
percent in 1992, but a revision in the 1993 budget allows
incremental profits of a company over a given base year to be
taxed at 30 percent.  The government's 1993 budget included
substantial tax breaks for construction activity in 1993 and
1994, as well as for export-oriented venture-capital
companies.  The petroleum tax regime was revised in 1992 to
index tax rates to oil prices, and to make Trinidad and Tobago
a more competitive location for investment.  A tax of 0.25
percent was imposed on business sales on January 1, 1993.
Additional taxes in the 1994 budget hit motorists with a five
percent gasoline tax for road improvements, a new used-car
transfer tax and an increase in the motor-vehicle tax applied
to new purchases.
    Regulatory Policies:  All imports of food and drugs must
satisfy prescribed standards.  Imports of meat, live animals
and plants, a large percentage of which come from the United
States, are subject to specific regulations.  The import of
firearms, ammunition and narcotics are rigidly controlled or
prohibited.
4.  Debt Management Policies
    From 1988 to 1991, the government negotiated International
Monetary Fund (IMF) standby agreements, rescheduled Paris Club
debt and concluded an agreement for a World Bank
structural-adjustment loan.  From 1992 to 1994 Trinidad and
Tobago's high debt-service payments averaged about US$600
million per annum.  The government has met these payments by
relying on bond issues, proceeds from the divestiture of state
enterprises and the offset effects of substantial loans from
the Inter-American Development Bank.  The country should emerge
in 1995 with a manageable debt burden of approximately US$450
million per annum, and, as of 1996, a debt-service ratio of
15.1 percent down from 27.7 percent in 1994.
    Total foreign debt now stands at approximately US$2
billion, or 42 percent of GDP, down from a high of 59 percent
in 1989.  With the government meeting its debt payments, the
elimination of trade barriers and the economy edging toward
growth, prospects for increased trade with the United States in
the years ahead are excellent.
5.  Significant Barriers to U.S. Exports
    Trinidad and Tobago is highly import-dependent.  Products
imported cover a broad range of consumer and industrial goods
from its major supplier, the United States, and other developed
countries.  Only sugar, poultry parts, left-hand drive
vehicles, small boats and firearms remain on the "Negative
List" of products requiring import licenses.  Current import
surcharges and stamp duties required on most manufactured goods
will be reduced to zero on January 1, 1995, although Caricom
Common External Tariff (CET) rates will continue to apply.
Surcharges on agricultural goods removed from the negative list
in September 1994, will be phased to zero on January 1, 1998.
    Liberalizing agricultural trade will eventually open the
market for more U.S. commodity exports into Trinidad and
Tobago, raising concerns among local farmers that the domestic
agricultural sector will suffer from the cheaper foreign
products making farming unprofitable.  However, the government
firmly expects the introduction of competition to result in a
more efficient agricultural sector.
    The removal of import-licensing requirements has also
forced local manufacturers, traditionally accustomed to
producing only for a protected domestic market, to look outward
and become more efficient.  The government actively encourages
export industries and small business development as a means of
employment generation.  In 1994, government officials
championed the role of the private sector in the generation of
economic growth.  The government now views its role to be more
a facilitator than an engine of growth.
    Trinidad and Tobago's exports remain concentrated in oil
and downstream petrochemical products (chiefly anhydrous
ammonia, urea and methanol), and processed iron ore and steel
wire rod (both produced using local natural gas and gas-derived
electricity).  The float and resultant depreciation of the TT
dollar has made local manufactured and agricultural exports
more competitive and imported goods more costly for local
consumers.  As a result, Trinidad and Tobago's overall trade
balance has improved.  During the first quarter of 1994,
Trinidad and Tobago's merchandise trade surplus was US$256.3
million compared with a US$4.5 million deficit in the first
quarter of 1993 before the currency was floated.  1994's first
quarter surplus was Trinidad and Tobago's fourth consecutive
quarterly surplus.
    Trinidad and Tobago signed the Uruguay Round Agreement on
April 15, 1994 in Marrakech, Morocco.
    Foreign ownership of service companies is permitted.
Trinidad and Tobago currently has one 100 percent U.S.-owned
bank, several U.S.-owned air-courier services, and one U.S.
majority-owned insurance company.  The government has expressed
interest in attracting another U.S. bank.
    Standards, labelling, testing and certification, to the
extent that they are required, do not hinder U.S. exports.  The
Trinidad and Tobago Bureau of Standards (TTBS) is responsible
for all trade standards except those pertaining to food, drugs
and cosmetic items, which the Chemistry, Food and Drug Division
of the Ministry of Health monitors.  The TTBS uses the ISO 9000
series of standards and is a member of ISONET.  Trinidad and
Tobago is not a party to the GATT Standards Code.
    Foreign direct investment is actively encouraged by the
government.  Generally speaking there are no de facto
restrictions on investment and the government is actively
removing all disincentives to investment.  On September 26,
1994 the Government of Trinidad and Tobago signed a Bilateral
Investment Treaty with the U.S., granting national treatment to
U.S. investors in Trinidad and Tobago on a reciprocal basis.
Foreign investment is screened only for eligibility for
government incentives, and assessment of its environmental
impact.  Foreign investors are eligible for tax concessions in
the form of tax holidays and concessions in the manufacturing
and hotel industries.  Both tax and nontax incentives may be
negotiated with the government for investments in the
manufacturing, tourism, and energy sectors.  The repatriation
of capital dividends, interest, and other distributions and
gains on investment may be freely transacted.
    Government procurement practices are generally open and
fair, and the government and government-owned companies
generally adhere to an open bidding process for procurement of
products and services.  However, some government entities
request prequalification applications from firms, then notify
prequalified companies in a selective tender invitation.
Trinidad and Tobago is not a member of the GATT Government
Procurement Code.
    Customs clearance can consume much time because of
bureaucratic inefficiency and administrative procedures can be
burdensome.  Local importers often complain that it takes
several working days to get import documents approved and their
goods released.  In October 1993, the Government of Trinidad
and Tobago engaged three full-time U.S. Customs Service
consultants for two years to improve efficiency and revenue
collection.  The Trinidad and Tobago Customs Service has
implemented several consultant recommendations.
Computerization of the Trinidad and Tobago Customs Service
import clearance process is under consideration but no date is
set for implementation.
6.  Export Subsidies Policies
    There is no evidence of directly subsidized exports to the
United States.  However, the government offers incentives to
manufacturers operating in a Free Zone or Export Processing
Zone (EPZ) to encourage foreign and domestic investors.  Such
manufacturers are exempt from customs duties on capital goods,
spare parts and raw materials imported to construct and equip
their premises.  They are also exempt from all corporation and
withholding taxes on profits from manufacturing and
international trading in products or export services.
    On January 1, 1993, the government implemented the five
percent CET on all factors of production.  Manufacturers that
export, however, may reclaim the duty on the re-export of an
imported product or receive vouchers, equal in value to the
tariffs paid, that can be applied against duties owed on
further imports.  Trinidad and Tobago is not a member of the
GATT subsidies code.
7.  Protection of U.S. Intellectual Property
    Few resources are currently devoted to intellectual
property rights, a situation that is expected to change during
the two-year phase-in period for compliance with provisions in
the Intellectual Property Rights (IPR) agreement, signed with
the United States September 26, 1994.  The agreement will, in
most instances, provide IPR protection equivalent to that in
the U.S., and is part of the Trinidad and Tobago government's
drive to attract more U.S. investment to Trinidad and Tobago.
Failure in law to provide for minimum statutory damages,
recovery of legal costs, and criminal penalities for willful
infringement undermines the deterrent value of existing
legislation.
    Trinidad and Tobago is a member of the Universal Copyright
Convention; the Universal Copyright Convention, Revised; and
the Convention for the Protection of Producers of Phonograms
Against Unauthorized Duplication.  Trinidad and Tobago is also
a party to the Bern Convention, Paris Act of 1971, the Paris
Convention for the Protection of Industrial Property, and the
Rome Convention for the Protection of Performers, Producers of
Phonograms, and Broadcasting Organizations.  As a member of the
Caribbean Basin Initiative, the government is committed to
prohibiting unauthorized broadcasts of U.S. programs.
    Current copyright protection is governed by the Copyright
Act of 1985, which complies with the revised Bern and Universal
copyright conventions.  A copyright is valid for a period of
fifty years.  Although the Act provides for protection of
literary, musical and artistic works, computer software, sound
recordings, audio-visual works and broadcasts, it is not
enforced.  Video rental outlets in Trinidad and Tobago are
replete with pirated videos and operate openly.
    The existing law on patent protection is the Patents and
Design Act, which establishes a registration system with no
form of examination of patentable subject matter, novelty,
inventive step, or industrial applicability.  Patents are
currently valid for a period of 14 years and may be extended
before expiry for any period not exceeding seven years without
limit.  Infringement of patents is not a discernible problem in
Trinidad and Tobago, but the existing law is outdated.  A new
patent law to provide for new technologies is being drafted.
    Trademarks can currently be registered for a period of 14
years, and renewed by application before the expiration of the
registration for an unlimited number of 14 year periods.  The
current Trademark Act is also slated for review.
Counterfeiting of trademarks is not a widespread problem in
Trinidad and Tobago.
    New Technologies:  Larger firms in Trinidad and Tobago are
scrupulous about obtaining legal computer software while many
smaller firms are believed to use wholly or partially pirated
software.  Licensed cable companies are faced with unlicensed
cable operators and satellite owners who connect neighborhoods
onto private satellites for a fee.  Even licensed cable
companies are not exempt from piracy since they regularly
provide customers with U.S. "premium" cable channels for which
they have not obtained rights.
    Given the popularity of U.S. movies and music, and the
dominance of the United States in the software market, U.S.
copyright holders are the most heavily affected by the lack of
copyright enforcement in Trinidad and Tobago, although the
market is relatively small.  By signing the IPR agreement, the
government has acknowledged IPR infringement is a deterrent to
additional U.S. investment in Trinidad and Tobago and is
committed to improving both legislation and enforcement.
8.  Worker Rights
    a.  The Right of Association
    The right of association is respected in law and practice.
Approximately 26 labor unions were active in Trinidad and
Tobago in 1994. The unions are independent of government or
political party control and freely represent their members'
interests.  There are no excessive or arbitrary registration
requirements, nor restrictions on selections of union officers
or advisors.  Union members are free to choose representatives,
publicize their views and determine their own programs and
policies.  All employees except those in "essential services"
have the right to strike.
    b.  The Right to Organize and Bargain Collectively
    The rights of workers to collective bargaining is
established in the Industrial Relations Act of 1972.
Anti-union discrimination is prohibited by law.
    c.  Prohibition of Forced or Compulsory Labor
    Forced or compulsory labor is not explicitly prohibited by
law and is not a problem in EPZs since the same labor laws
applied in the country at large are also applied in in EPZs.
Some prison inmates sentenced to hard labor are involved in
subsistance agriculture and dairy farming and fishing.
    d.  Minimum Age for Employment of Children
    Legislation prohibits the employment of children under the
age of 12 years, and children aged 12 to 14 years are permitted
to work only in family businesses.  General employment is
permitted after 14 years.
    e.  Acceptable Conditions of Work
    A minimum wage structure is in place for gas station
employees, domestic assistants, retail-sales personnel and
hotel workers.  These wage rates are adjusted for cost of
living increases at regular intervals, every few years.  In
1994, the parliament considered legislation which would set a
minimum wage for security guards.  There is no national or
general minimum wage.  The standard work week in Trinidad and
Tobago is forty hours with no cap on overtime.  The Factories
and Ordinance Bill of 1948 sets occupational health and safety
standards in certain industries; state inspectors monitor
conditions in work places and workers who refuse to perform
work because of hazardous conditions are protected from
retribution under the Industrial Relations Act of 1972.
    f.  Rights in Sectors with U.S. Investment
    Employee rights and labor laws in sectors with U.S.
investment do not differ from those in other sectors.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                             469
Total Manufacturing                                   (1)
  Food & Kindred Products                     7
  Chemicals and Allied Products             (1)
  Metals, Primary & Fabricated                0
  Machinery, except Electrical              (2)
  Electric & Electronic Equipment             0
  Transportation Equipment                    0
  Other Manufacturing                         4
Wholesale Trade                                         0
Banking                                                 5
Finance/Insurance/Real Estate                         (1)
Services                                                1
Other Industries                                        3
TOTAL ALL INDUSTRIES                                  693
(1) Suppressed to avoid disclosing data of individual companies
(2) Less than $500,000
Source: U.S. Department of Commerce, Bureau of Economic Analysis
(###)
TUNISIA1
dU.S. DEPARTMENT OF STATE
TUNISIA: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                             TUNISIA
                     Key Economic Indicators
        (Millions of U.S. dollars unless otherwise noted)
                                    1992    1993  1/   1994  2/
Income, Production and Employment:
Real GDP (1990 base)  3/          14,581     14,960     15,723
Real GDP Growth (pct.)               8.1        2.6        5.0
GDP (at current prices)  3/       16,470     15,190     15,965
By Sector:
  Agriculture                      2,560      2,003      1,410
  Manufacturing                    2,474      2,211      2,909
  Nonmanufacturing                 1,824      1,575      1,752
  Tourism                            720        676        887
  Services                         3,964      3,582      4,788
Real Per Capita Income             1,742      1,496      1,846
Labor Force (millions)              2.50       2.56       2.77
Unemployment Rate (pct.)            16.0       16.2       16.4
Money and Prices:
Money Supply                       3,392      2,866      3,101
Commercial Interest Rates         Max 14     Max 14     Max 14
Savings Rate (pct.)                Avg 8      Avg 8      Avg 8
Consumer Price Index               187.8      196.2      205.4
Wholesale Price Index                N/A        N/A        N/A
Official Exchange Rate (USD/TD)     1.20       1.02       1.02
Balance of Payments and Trade:
Total Exports (FOB)  4/            4,283      4,073      4,989
  Exports to U.S.                   36.7       31.0       27.2
Total Imports (CIF)  4/            6,827      6,366      6,640
  Imports from U.S.                338.8      415.2      354.0
Aid from U.S. (FY basis)            26.2       14.9        1.1
Aid from Other Countries             N/A        N/A        N/A
External Public Debt               8,220      7,655      9,009
Debt Service Payments              1,387      1,391      1,637
Gold Reserves                        5.2        4.4        4.4
Foreign Exchange Reserves          1,080        816      1,133
Balance of Payments                 60.0      102.0      204.4
N/A--Not available.
1/ Some 1993 figures are less than 1992 figures when converted
into USD values due to a devaluation of the Tunisian dinar in
1992-93.
2/ 1994 Annual figures are estimates based on data available
through June, 1994.
3/ GDP at factor cost.
4/ Merchandise trade.
1.  General Policy Framework
    Tunisia has a mixed economy composed principally of
agriculture, tourism, manufacturing, hydrocarbon extraction and
phosphate mining.  The largest sector is services, comprising
about 33 percent of GDP.  Textiles are now the largest source
of foreign exchange, earning an estimated USD 1.9 billion in
1994.  Tourism will bring another USD 887 million of foreign
exchange into Tunisia this year.  The manufacturing sector
comprises about 15 percent of GDP, and consists primarily of
textiles and food processing.  The nonmanufacturing industrial
sector accounts for 12 percent of GDP, and consists principally
of phosphate mining and hydrocarbon extraction.  Agriculture
comprises about 15 percent of GDP.  A severe drought caused
widespread crop failures in 1994.  The cereal harvest was down
60 percent from 1993.  In addition, the citrus and olive crops
were hurt by adverse weather conditions.
    In late 1994, the government predicted 5.0 percent GDP
growth for the year.  This decrease from the 6.1 percent growth
rate predicted at the start of the year is largely the result
of the poor agricultural harvests.  However, exports are up
22.5 percent, and inflation is being held to 4.7 percent.
    Tunisia completed a seven-year structural reform program in
1993 which emphasized export-led growth through price and
import liberalization, privatization of publicly held
companies, financial sector reform, the attraction of foreign
investment, and diversification of the economy.  In 1994,
Tunisia continued to liberalize its economy.
    The United States and Tunisia have two major bilateral
treaties affecting trade:  a double taxation treaty in which
each country has agreed to avoid double taxation on
corporations or individuals active in both countries; and a
bilateral investment treaty (BIT) dealing with the treatment of
American companies in Tunisia, expropriation issues, remittance
of profits and international arbitration of disputes.
    Fiscal Policy:  The 1994 Tunisian government budget
provided for 11.4 percent increase in expenditures and 11.4
percent increase in revenues.  The deficit was financed through
both international and domestic borrowing.  Government policy
called for an expanding economy to cope with deficit problems,
and the trend in recent years is favorable.  In 1993, the
deficit was USD 364 million, equal to 2.4 percent of GDP; in
1994, it was USD 326 million, 1.9 percent of GDP.
    Monetary Policy:  The principal objective of the Central
Bank remains the effective control of inflation.  Between 1987
and 1991 the inflation rate varied from six to eight percent.
In 1993, it was 4.5 percent.  In 1994, it was only slightly
higher at 4.7 percent.  This trend is largely the result of the
price and import liberalization policies which have encouraged
greater international and domestic competition.
2.  Exchange Rate Policy
    On March 1, Tunisia instituted a foreign currency market,
making it possible for individual banks to set currency prices
and trade with other banks.  Although the Central Bank of
Tunisia (BCT) issues a reference rate each day, the majority of
Tunisian banks bypass the BCT, marginalizing the role of the
BCT in foreign currency transactions.  Earlier this year,
industry sources described a smooth transition to an open
currency market.  The principal currencies quoted against the
Tunisian dinar (TD) are the U.S. dollar, the deutsche mark, and
the French franc.  The rate has varied considerably over the
past 13 years from a high in 1979, when the Tunisian dinar
equaled USD 2.47, to a low in 1993, when it equaled USD 0.98.
In 1994, the rate average was about TD 1 to USD 1.02.
3.  Structural Policies
    In the mid-1980s, Tunisia faced rising unemployment,
stagnant economic growth, and dwindling foreign exchange
reserves.  The domestic economy was protected and inefficient,
and the government ran unsustainable budgetary deficits.  A
severe balance of payments crisis in 1986 finally prompted the
government to undertake structural reforms sanctioned by the
International Monetary Fund (IMF) and the World Bank.  To date,
those reforms have enjoyed significant success, and the
Tunisian government plans further reform, especially in
privatizing still numerous state-controlled enterprises.
    Tax Policies:  Import regulations were loosened
considerably this year.  Fully 90 percent of the products on
the import list can now be imported freely as compared to 23
percent in 1986.  Customs tariffs on imports of capital goods
were cut considerably.  Tunisia decreased the maximum customs
tariff almost 80 percent by 1991.  Total taxes on imported
goods have not decreased at the same rate because a value added
tax (VAT), introduced in 1988, is equally applied to imports
and local products.
    The only taxes significantly effecting U.S. exports to
Tunisia are import tariffs.  Through the structural adjustment
program, Tunisia reduced the maximum basic tariff to 43
percent.  However, when faced with dwindling revenues because
of the adverse economic impacts of the Gulf War, the government
imposed a "temporary" five percent surcharge on all merchandise
imports.  Although the government planned to end the surcharge
December 31, 1991, it was extended through 1992.  Despite
repeated assurances during 1992 and 1993 that the surcharge
would be terminated, it still remained in effect during 1994.
    In addition, Tunisia imposed a system of custom duty
increases for the period 1992 through 1994 on certain items
which compete with locally produced goods.  Prior to this
action, the maximum basic customs duty was 43 percent.  The new
policy authorized an additional duty of 30 percent in 1992,
reduced to 20 percent in 1993, 10 percent in 1994, and
eliminated by 1995.  By 1995, the average tariff rate is
expected to decline to 25 percent.
    Tunisia acceded to full GATT membership in 1990.  All taxes
now remaining on imports also apply to locally produced goods
and are not considered to be tariff barriers.  The only
additional minor charge on imports is a very small customs user
fee of USD 4.08 per declaration.  However, in 1993 Tunisia
revised its list of tariff concessions by modifying the tariff
or provisional compensatory duty on nearly 280 items.
According to the government, the action was taken to protect
the competitiveness of certain domestic industries, and the
Tunisian GATT representative expressed willingness to enter
into GATT Article XXVIII and XIX negotiations as appropriate
concerning these changes.
    Investment Policy:  Tunisia's Unified Investment Code,
effective since January 1, 1994, replaced five former codes.
The Code is intended to simplify investment and direct it into
high priority industries.  The financial services, mining and
energy industries are considered unique, and are covered by
existing legislation.
    The new code applies to both domestic and foreign investors
with two exceptions.  Foreign investors may only lease
agricultural land and any enterprise with foreign ownership of
over 50 percent must receive government approval for
investment.  Under the new code, potential investors do not
need prior government approval.  They will receive a tax
exemption on 35 percent of reinvested profits and income.  The
customs duty on imported capital goods is reduced to 10
percent.  Purchases of capital goods are exempt from the value
added tax (VAT) and the consumption tax.  Finally, investors
may use an accelerated depreciation schedule for long-term
capital.
    In addition, businesses producing solely for export have
special benefits.  They may claim a 10 year tax exemption on
100 percent of income and profits, reduced to 50 percent of
income and profits after 10 years.  Exporting businesses may
import all needed materials, and may sell up to 20 percent of
their production on the domestic market without losing their
status as an exporter.  Finally, these companies may employ
four foreign executives without prior government approval.
    Regulatory Policies:  Production standards are not a major
obstacle for foreign investors.  The quality of goods
manufactured solely for export is often superior to items
produced for the local market.  The Tunisian Office for
Commercial Expansion (OFFITEC) carries out quality control
procedures on items for export.  Imported and exported food
items are subject to sanitation and health controls.
4.  Debt Management
    In 1994, total public debt service increased by 17.7
percent.  External debt service increased by 19.4 percent while
service on internal public debt increased by 15.7 percent.
This increase stems principally from the devaluation of the
Tunisian dinar in 1993.  Approximately 73 percent of the
country's foreign debt is in U.S. dollars or dollar-linked
currencies and the dinar fell 25 percent against the U.S.
dollar between September 1992 and September 1993.  The
USD 1.64 billion dollar debt service payment constitutes
27 percent of the government budget.  Debt service as a
percentage of exports of goods an services is approximately 21
percent.
    The Central Bank closely monitors the level of external
debt and tries to keep it as low as possible.  One indication
of Tunisia's prudent overall debt management policy is that
Tunisia has never rescheduled any of its debt.  The deficit is
financed through concessionary lines of credit from its major
trading partners, and loans from official multilateral
creditors such as the World Bank and the African Development
Bank.  The Central Bank has also moved toward more
sophisticated debt portfolio management by aligning debt
service payment dates with anticipated receipts from sectors
characterized by seasonal variation (e.g., tourism), and by
aligning debt service payments with the currencies of
anticipated export receipts.
5.  Significant Barriers to U.S. Exports
    There are no significant barriers to U.S. exports in
Tunisia and the United States enjoys a traditional bilateral
trade surplus.
    Historical and geographical factors have given Tunisia a
special relationship with Europe.  It has bilateral trade
agreements with all of its major European trading partners,
France, Germany and Italy being the largest.  Tunisia also
frequently adopts European product standards, a policy that
works to the disadvantage of U.S. exporters.
    The 1992 Helsinki Accord among OECD countries limited their
concessional aid financing.  However, France, Italy and others
maintain credit facilities to promote exports of their
products.  In addition, EXIM Bank financing is available for
government sales.  Exporters to private concerns may be able to
take advantage of a new Citibank credit facility.
    Tunisia's leading supplier in 1993 was France (USD 1.6
billion), followed by Italy, (USD 1.15 billion), and Germany
(USD 821 million).  The United States was in fourth place with
USD 303 million in exports.  Agricultural products (much of it
financed by U.S. aid and export credit programs) accounted for
one-third of U.S. exports to Tunisia in 1993.
    There exist real possibilities for increasing the level of
U.S. exports to Tunisia in areas such as environmental
services, construction equipment, telecommunications, and
packaging machinery and equipment.
6.  Export Subsidies Policy
    Tunisia has a wide range of export subsidy policies,
including a special Export Promotion Fund (FOPRODEX).  FOPRODEX
provides preferential financing and funding to improve the
productivity and competitiveness of companies producing for
export.  Only companies legally incorporated in Tunisia are
eligible for these subsidies:  these can receive transport
subsidies of 50 percent for air freight and 33 percent for sea
freight.  There is also a government agency to promote exports,
the Export Promotion Center (CEPEX), and a program providing
long-term financing for exports of capital goods and durable
consumer goods.
7.  Protection of U.S. Intellectual Property
    Tunisia is a member of the World Intellectual Property
Organization (WIPO) and a signatory of the Universal Copyright
Convention, the Paris Convention for the Protection of
Industrial Property, and the Berne Convention for the
Protection of Literary and Artistic Works.
    The Tunisian National Institute of Standardization and
Industry (INNORPI) processes and grants patents, trademarks and
registration of designs.  It also regulates standardization,
product quality, weights and measures and the protection of
industrial property.  Foreign patents and trademarks are
registered with INNORPI.
    There are no active cases of intellectual property rights
disputes with Tunisia.  However, the unauthorized use of
foreign trademarks, especially in cheap copies of clothing and
sporting goods, continues to be a problem as does the
unauthorized duplication of music and video cassettes.
8.  Worker Rights
    a.  Right of Association
    The Tunisian constitution and the labor code stipulate the
right of workers to form unions.  The Central Labor Federation,
the Tunisian General Federation of Labor (UGTT), claims about
15 percent of the work force as members, including civil
servants and employees of state-owned enterprises.  The UGTT
and its member unions are legally independent of the
government, the ruling party and other political forces but
operate under government regulations which have to some extent
restricted their freedom of action.  The UGTT's membership
includes persons associated with all political tendencies,
though a campaign against Islamists was effective in removing
Fundamentalist holding union offices.  The current leadership
follows a policy of cooperation with the government and its
structural adjustment program.  There are credible reports that
the UGTT receives substantial subsidies from the government to
supplement the modest officially-mandated monthly contributions
from UGTT members and funding from the national social security
account.
    Dissolution of a union requires action by the courts.
There is no requirement for a single trade union structure; the
fact that Tunisia has a single labor organization (the UGTT) is
a result of historical circumstances, not government action.
However, establishment of a rival labor union would require
government authorization.  The government has decreed that UGTT
member federations are the labor negotiators for collective
bargaining agreements that cover 80 percent of the private
sector work force, whether unionized or not.
    Unions, including those of civil servants, have the right
to strike, provided 10 days' advance notice is given and the
UGTT approves.  However, these restrictions on strikes are
rarely observed in practice.  In recent years, the majority of
strikes were illegal because they were not approved in
advance.  In 1993, there were 68 legal strikes and 445 illegal
strikes.  The government did not prosecute workers involved in
illegal strike activity.  Tunisian law prohibits retribution
against strikers, but some employers punish strikers who are
then forced to pursue costly and time-consuming legal remedies
to protect their rights.  Labor disputes are settled through
conciliation panels on which labor and management are equally
represented.  The 1994 labor code reform set up tripartite
regional arbitration commissions, which settle industrial
disputes when conciliation fails, to replace the former single
arbiter system.
    The 1994 report of the International Labor Organization's
(ILO) Committee of Experts (COE) mentioned possible government
violations of ILO Convention 29 on forced labor, but noted the
stated intention of the President to abolish the penalty of
"rehabilitation through work" on state work sites.
    Unions in Tunisia are free to join federations and
international bodies.  The UGTT is a member of the
International Confederation of Free Trade Unions (ICFTU) and
various regional groupings.
    b.  The Right to Organize and Bargain Collectively
    The right to organize and bargain collectively is protected
by law and practiced throughout the country.  Wages and working
conditions in Tunisia are set through negotiation by the UGTT
member federations and employer representatives of
approximately 47 collective bargaining agreements which set
standards applicable to entire industries in the private
sector.  The UGTT is by law the labor negotiator for these
agreements, which cover 80 percent of the private sector work
force, whether unionized or not.  The government's role in
concluding these agreements is minimal, consisting mainly of
lending its good offices if talks appear to be stalled.  The
government must approve the collective bargaining agreements
(although it cannot modify them) and publish them in the
official journal before these agreements acquire legal
validity.  No agreement between a union and an individual firm
may be concluded unless there already exists an agreement
applicable to that firm's economic sector.
    The UGTT also negotiates with various ministeries and 208
state-run enterprises on behalf of public sector employees.  By
1994, the UGTT had concluded three-year public and private
sector collective bargaining agreements calling for an average
5 percent annual wage increase.
    Anti-union discrimination by employers against union
members and organizers is prohibited by law, and there are
mechanisms for resolving such disputes.  However, the UGTT has
complained about what it claims are increasingly vigorous
anti-union activities by private sector employers, particularly
the firing of union activists and, as a pretext to avoid
unionization, employers' use of temporary workers, which in
certain factories, especially in the textile sector, account
for up to 80 percent of the work force.  The labor code extends
the same worker rights protection to temporary workers as to
permanent workers, but its enforcement in the case of the
temporary workers is much more difficult.  A 1994 labor code
revision called for the creation of a tribunal to hear cases
involving alleged unjustified firing of workers.  Compensation
floor and ceiling levels were set.
    Two export processing zones, authorized by a 1992 law, have
not yet begun operations.  Workers in other export firms have
the same right to organize, bargain collectively, and strike as
those in non-export firms.  The unionization rate is about the
same.  The state pays the employer contribution to the social
security system if the firm produces primarily for export.
    c.  Prohibition of Forced or Compulsory Labor
Compulsory labor is not specifically prohibited by local law,
but there have been no reports of its practice in recent years.
    d.  Minimum Age of Employment of Children
    For manufacturing, the minimum age for employment is 15
years; in agriculture it is 13.  Tunisian children are required
to attend school until age 16.  Over 2.1 million children
enrolled in Tunisian schools in fall 1994.  Inspectors from the
Social Affairs Ministry check the records of employees to
verify that the employer complies with the minimum age law.
Despite this law, young children often perform agricultural
work in rural areas and sell food and other items in urban
areas.  UGTT officials report that small enterprises in the
informal sector (street vendors, day laborers, etc.) violate
the concern that child labor - frequently disguised as
apprenticeship - still exists, principally in the traditional
craft sectors such as ceramics and stone carving.  Young girls
from rural areas are sometimes placed as domestics in urban
homes by their fathers, with the fathers collecting their
children's wages.  Workers between the ages of 14 and 18 are
prohibited from working from 10 p.m. to 6 a.m.  Children over
14 may work a maximum of 4.5 hours a day.  The combination of
school and work may not exceed 7 hours.
    e.  Acceptable Conditions of Work
    The labor code provides for a range of administratively
determined minimum wages.  An agricultural and industrial
minimum wage increase in August kept pace with the rise in the
cost of living.  When supplemented by transportation and family
allowances, the minimum wage covers essential costs for a
worker and his family.  Effective August, 1994, the minimum
monthly industrial wage is roughly USD 130 (129 TD) for a
40-hour work week and USD 147 for a 48-hour week.  The minimum
agricultural wage was set at nearly USD 4.50 per day.
    Tunisia's labor code sets a standard 48-hour workweek for
most sectors and requires one 24-hour rest period.  The
workweek is 40 hours for those employed in the energy,
transportation, petrochemical and metallurgy sectors.
    Regional labor inspectors are responsible for enforcing
standards.  Most firms are inspected about once every two
years.  However, the government often encounters difficulty in
enforcing the minimum wage law, particularly in non-unionized
sectors of the economy.  Moreover, according to a 1992 UGTT
study, there are approximately 240,000 workers employed in the
informal sector, which falls outside the purview of labor
legislation.
    The Social Affairs Ministry has an office with
responsibility for improving health and safety standards in the
work place.  There are special government regulations covering
many hazardous jobs - e.g. mining, petroleum engineering, and
construction.  Although the ministry maintains offices
throughout the country, these regulations are enforced more
strictly in Tunis than in other regions, where much work,
especially in construction, is performed in the informal
sector.  Working conditions and standards tend to be better in
firms that are export-oriented than in those producing for the
domestic market.  Occupational safety improved considerably in
1993.  Reported work place accidents declined 17 percent to
30,645, perhaps due to an intensive public awareness campaign
in the media.  Workers are free to remove themselves from
dangerous situations without jeopardizing their employment, and
then may take legal action against employers who retaliate for
exercising their right.
9.  Extent of U.S. Investment in Goods Producing Sectors
    U.S. investment in Tunisia is growing, but an accurate
sectoral breakdown is unavailable.  Currently, total U.S.
investment in Tunisia is an estimated USD 50 million.  The
majority is invested in the petroleum sector, but U.S.
corporations are increasing investment in other areas including
telecommunications and pharmaceuticals.
(###)
TURKEY1
fbfbU.S. DEPARTMENT OF STATE
TURKEY: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                              TURKEY
                     Key Economic Indicators
        (Millions of U.S. dollars unless otherwise noted)
                                     1992      1993      1994 1/
Income, Production and Employment:
Real GDP (1987 prices)            104,440   112,254   107,988
Real GDP Growth (pct.)                6.0       7.5      -3.8
GDP (current prices)              158,735   174,144       N/A
By Sector:
  Agriculture                      23,784    25,045       N/A
  Energy/Water                      4,152     4,683       N/A
  Manufacturing                    34,346    37,539       N/A
  Mining/Quarrying                  2,170     1,986       N/A
  Construction                     10,817    12,357       N/A
  Dwelling Ownership                5,984     6,206       N/A
  Financial Services                6,314     7,145       N/A
  Other Services                   48,939    52,680       N/A
  Government/Health/Education      16,237    18,562       N/A
  Net Exports of Goods & Services  -4,687   -10,228       N/A
Real Per Capita GNP (USD 1987)      1,802     1,896       N/A
Labor Force (000s)                 21,015    20,196       N/A
Unemployment Rate (pct.)              7.9       7.6       8.3
Money and Prices:  (annual percentage growth)
Money Supply
  (M2/TL trillions at mid-year)     143.3     224.5     469.3
Base Interest Rate                    N/A       N/A       N/A
Personal Saving Rate                 21.3      21.3       N/A
Retail Inflation                      N/A       N/A       N/A
Wholesale Inflation                  62.1      58.4     116.0
Consumer Price Index                 71.1      66.0       N/A
Average Exchange Rate (TL/USD)      6,888    10,986    31,000
Balance of Payments and Trade:
Total Exports (FOB) 3/             14,715    15,349    17,500
  Exports to U.S.                     865       986     1,450
Total Imports (CIF) 3/             22,871    29,428    24,000
  Imports from U.S.                 2,601     3,351     2,280
Aid from U.S.                         528       578       526
Aid from Other Countries              N/A       N/A       N/A
External Debt                      55,592    67,360    65,000
Debt Service Payments
  (medium & long-term/paid)         6,494     8,085     6,895
Gold and FOREX Reserves (mid-year) 12,355    17,429    15,254
Trade Balance 3/                   -7,440   -14,079    -6,500
  Trade Balance with U.S.          -1,736    -2,365      -830
N/A--Not available.
1/ 1994 figures are all estimates based on available monthly
data in October 1994.
2/ GNP at producer's value.
3/ Merchandise trade.
1.  General Policy Framework
    From the establishment of the Republic in 1923 until 1980,
Turkey was an insulated, near autarkic, state-directed
economy.  In 1980, however, the country embarked on a new
course.  Increased reliance on market forces, decentralization,
export-led development, lower taxes, foreign investment, and
privatization became the basis for the new economic
philosophy.  These reforms have brought Turkey impressive
benefits: in 1993, Turkey's seven percent real gross national
product (GNP) growth rate was the highest of any OECD country.
    The Turkish government's inability to limit burgeoning
fiscal deficits and high transfers to inefficient state
economic enterprises, however, led to an economic crisis in
early 1994.  From January to April, the Turkish Llra
depreciated 135 percent against the dollar and inflation rose
to a record 33 percent for the month of April.  Interest rates
also skyrocketed to record levels as the Central Bank of Turkey
attempted to combat exchange rate fluctuations by increasing
interbank rates.  The overnight rate briefly exceeded 1000
percent at the heart of the crisis.
    The Turkish government implemented an austerity program on
April 5 and signed a standby agreement with the IMF in July.
The government curbed expenditures sharply and reduced
inflation in the months immediately following the program's
implementation.  Recession followed and real GNP will decline
by approximately four percent in 1994.  The Turkish government
has committed itself to structural reforms in the area of
privatization, social security and taxation, but had made no
progress in these areas by the end of October 1994.
    Inflation, Growth: Inflation, fueled by massive public
sector deficits, worsened in 1994.  In 1993 consumer prices
(CPI) increased by 71 percent, four points higher than in
1992.  The CPI rose 111 percent in the twelve months ending
September 30, 1994, with wholesale prices increasing by 130
percent during the same period.
    The Turkish economy contracted by nearly eleven percent in
the second quarter of 1994 (compared to the second quarter of
1993) as the austerity program took effect.  The economy has
demonstrated a remarkable dynamism in the second half of the
year and a surge in exports indicated the economy was beginning
to recover.  The nine-month balance sheets of Turkey's large
companies also show high profit margins in apparent
contradiction of the contraction in national economic activity.
    Fiscal Policy: The Turkish government limited current
expenditures significantly in the months immediately following
the implementation of the austerity program.  As the end of
1994 approached, however, expenditures again outstripped
revenues and tax receipts.  In 1993 the public sector borrowing
requirement (PSBR) reached a record 16 percent of GNP.  The
PSBR includes the borrowing requirements of budgetary
departments, state economic enterprises (SEEs), and off-budget
funds.  The government continues to incur sizable debt to pay
current expenses, finance major infrastructure projects, and to
support the SEEs.  Both major rating agencies have lowered
Turkey's country risk rating to below investment grade, forcing
the government to rely entirely on domestic borrowing and
advances from the Central Bank to finance its deficits.
    Monetary Policy: Turkey's Central Bank has not published a
monetary policy since 1992.  In early 1994, the Central Bank
focused on foreign exchange rates, attempting to limit exchange
rate volatility through regular interventions in the currency
and open money markets.  Since the implementation of the April
5 austerity program, the Central Bank has limited its
interventions in currency markets.  The Central Bank does not
use interest rates as a tool against inflation, conceding
control of interest rate policy to the Turkish Treasury.
2.  Exchange Rate Policy
    The Turkish Lira (TL) is fully convertible and the exchange
rate is market-determined.  The Central Bank intervenes in
money markets to dampen short-term exchange rate fluctuations
and to provide liquidity during extraordinary events (e.g. the
Gulf War and the January - April 1994 financial crisis).
    The TL appreciated significantly vis-a-vis the dollar in
real terms (adjusted by relative CPI changes) in 1989 and 1990,
and depreciated slightly in real terms in 1991 and 1992.  In
1993, the TL appreciated by about three percent in real terms.
The TL declined by 135 percent against the dollar in the first
nine months of 1994.  The Government of Turkey expects real
depreciation of the TL in 1994 will be 19 percent.
3.  Structural Policies
    Since 1980 Turkey has made substantial progress in
implementing structural reforms and liberalizing its trade and
foreign exchange regimes.  In contrast, the Turkish government
has moved forward marginally in privatizing the SEEs, which
account for some 35 percent of manufacturing value added.
Government transfers to SEEs constitute a substantial drain on
the economy.  SEE inefficiencies in production and product
pricing continue to distort the market and contribute to high
inflation rates.  Policies related to SEEs, however, do not
have a direct effect on U.S. exports.
    After a liberalization of the import regime in 1989,
imports climbed dramatically, rising some 41 percent in 1990.
Strong economic growth plus further liberalization of the
regime in 1993 resulted in another dramatic increase.  The
April 5 austerity program, accompanied by the sharp devaluation
of the lira, dampened import demand in 1994.
    Turkey's largest source of imports in 1993 was Germany,
which accounted for 15 percent of total imports, followed by
the United States, with 13 percent.  In the first eight months
of 1994, total imports declined by 23 percent.  The Turkish
government estimates that imports will decline to $24 billion
in 1994, from $29 billion in 1993, although most analysts
anticipate a rebound in 1995 as the economy begins to grow
again.  Imports from the United States declined by 32 percent
during the same period, resulting in a U.S. trade surplus of
$633 million from January to August.
    By the terms of its Association Agreement with the European
Union (EU), Turkey is scheduled to form a customs union with
the EU and to adopt the EU's Common External Tariff (CET) by
January, 1996.  This should result in generally lower tariffs
and fees on U.S. imports than those currently in effect.
Turkey will reduce its tariff schedule in two stages during the
course of 1995 in order to eliminate all customs duties for EU
countries and bring it in line with the CET.
4.  Debt Management Policies
    At year-end 1993 Turkey's gross outstanding external debt
was $67 billion -- an increase of $12 billion over 1992.  Debt
service obligations for 1994 increased from $6.8 billion in
1993 to $8.5 billion.  Turkey has had no difficulty servicing
its foreign debt, and the current account may achieve a surplus
of approximately $2 billion in 1994.  Turkey's official
external debt payments will only increase by about $500 million
in 1995, but total external debt payments will exceed $11
billion.
    The Turkish debt service ratio reached a high in 1988 when
it equaled 35.6 percent of foreign exchange revenues.  In 1994,
the debt service ratio was 26 percent.  The public sector,
including state economic enterprises and local governments,
remains the major borrower, accounting for about 78 percent of
total outstanding debt and 96 percent of medium and long-term
debt in 1993.  Bilateral official lenders, principally OECD
member countries, accounted for approximately 27 percent of
Turkey's 1993 external debt.  World Bank committments to Turkey
total $3.6 billion, with $100 million in new credit approved
in 1994.  The IMF standby agreement signed with Turkey is for
$720 million (SDR 509.3 million), which will be allocated in
five quarterly tranches.
5.  Significant Barriers to U.S. Exports
    Import Licenses: While there is generally no requirement
for government permission or licenses in the importation of new
products, there is sometimes a problem introducing new
foodstuffs and foodstuff ingredients.  The Turkish government,
however, does impose requirements for import licenses on
agricultural commodities, depending on the domestic supply of
various grains and foodstuffs.  The Turkish government also
requires certification that quality standards are met in the
importation of human and veterinary drugs and certain
foodstuffs.  Import certificates are necessary for most
products which need after-sales service (e.g. photocopiers, EDP
equipment, diesel generators).
    Import Regime: The Turkish government is progressively
reducing import duties.  In 1993 the Import Regime introduced a
new tariff system that streamlined a confusing array of duties,
taxes, and surcharges.  There are now only two tariffs -- one
for EU/EFTA and one for other countries -- and one fund charge
on imports, whereas imports faced eight types of duties and six
types of fund charges in the past.  The government's 1994
Import Regime continued efforts begun in 1993 to reduce import
duties and harmonize Turkey's tariff system with that of the
EU.  Tariff rates are now lower for EU/EFTA-origin goods than
for goods from the U.S. and third countries.  U.S. firms
exporting to Turkey may now find themselves disadvantaged
compared to European competitors.  In 1996, as Turkey enters
the Customs Union, tariffs for products from EU and EFTA
countries will disappear altogether; Turkey will lower tariffs
on third-country products to the EU's Common External Tariff.
    The Turkish Government has imposed restrictive non-tariff
barriers on agricultural commodities, particularly high value
livestock and meat products.  The representatives of U.S. food
industry companies which wish to expand their investment in
Turkey have expressed concern over this trend.
    Government Procurement Practices/Countertrade: Turkey
normally follows competitive bids procedures for domestic,
international and multilateral development bank-assigned
tenders.  U.S. companies sometimes become frustrated over
lengthy and often complicated bidding/negotiating processes.
Some tenders, especially large projects involving coproduction,
are frequently opened, closed, revised, and opened again.
There are often numerous requests for "best offers."  In some
cases, years have passed without the selection of a contractor.
    The Government of Turkey withholds 15 percent of the total
amount of services (including any work performed in the U.S.)
in government contracts for taxes.  As no bilateral tax treaty
between the United States and Turkey exists, this can
significantly add to the cost of U.S. bids, making them
non-competitive.  U.S. and Turkish negotiations on a bilateral
tax treaty are ongoing and an agreement may be reached in 1995.
    Investment: The Foreign Investment General Directorate of
the Undersecretariat for Treasury and Foreign Trade evaluates
all non-petroleum foreign investment projects and can
independently approve foreign capital investments up to a fixed
investment value of $150 million.  Investments in excess of
$150 million require the permission of the Council of
Ministers.  The United States-Turkey Bilateral Investment
Treaty entered into force in May 1990.  The treaty guarantees
MFN treatment on establishment, and the better of MFN or
national treatment after establishment, for investors of both
countries; assures the right to transfer freely dividends and
other payments related to investments; and provides for an
agreed dispute settlement procedure.  The Turkish government
provides a variety of incentives to investors of all
nationalities to encourage investment in certain regions and
sectors.
6.  Export Subsidies Policies
    Turkey employs a number of incentives to promote exports,
including export credits and a variety of tax incentives.
Turkish Eximbank provides exporters with credits, guarantees,
and insurance programs.  Foreign-owned firms, including several
U.S. companies, make use of TurkExim's programs, especially for
trade with the republics of the former Soviet Union.
    Turkey eliminated its export tax rebate system in 1989 in
conjunction with its accession to the General Agreement on
Tariffs and Trade Subsidies Code.  A partial deduction for
corporate tax purposes allows exporters to deduct eight percent
(down from 16 percent in 1991) of their industrial export
revenues above $250,000 from their taxable income.  Exported
products are not subject to the VAT.
    In 1994, the government reviewed its subsidy programs for
consistency with the GATT and EU standards.  As a result, it
will phase out a number of programs, including one which
discriminates against foreign-flag shippers.
7.  Protection of U.S. Intellectual Property
    Turkey could strengthen its copyright and patent protection
as well as institute greater penalties and enforcement of
existing legislation.  As a result of inadequate protection for
intellectual property, the United States placed Turkey on the
"priority watch list" in 1992, 1993 and 1994 under the "Special
301" provision of the 1988 Trade Act.  The EU has made adequate
IPR protection a pre-condition to the Customs Union.  The
government has given assurances it will modernize its
legislation, but the process has been painfully slow.  The
government has said it will abide by IPR standards agreed to in
the Uruguay Round when the agreement goes into effect in 1995.
    Copyrights: Turkey's copyright law ("Intellectual and
Artistic Works Law") dates back to 1951.  Unauthorized copying
and sale of U.S.-origin books, videos, sound recordings, and
computer programs by local producers is widespread.  The 1987
Cinema, Video, and Music Works Law provided greater protection
for these artistic works through a registration system.  It has
helped reduce piracy, but enforcement has been problematic and
penalties are not harsh enough to act as a deterrent.  In 1991
Turkey passed a law prohibiting computer software piracy.  The
Turkish government has submitted bills amending both the
copyright and cinema and video laws to parliament, although
both contain provisions unsatisfactory to U.S. industry.
    Patents (Product and Process): Turkey's 1879 Patent Law
does not provide protection for human or veterinary drugs or
for the processes for making them.  Nor are biological
inventions, including plant varieties, patentable.  Turkey's
Seed Registration, Control, and Certification Law does not ban
unauthorized propagation of foreign firms' proprietary seed.
The patent term in Turkey is only 15 years from the date of
filing.  The Turkish government presented new draft patent
legislation to parliament in 1993, but as of October 1994 that
body was still considering it.  The draft legislation contains
a ten year delay before pharmaceuticals would be covered.
    Trademarks:  Counterfeiting of foreign trademarked
products, such as jeans, perfumes, and spare car parts, is
widespread.  Trademark lawyers generally believe that the
relevant laws are adequate, but that the criminal justice
system, overwhelmed by more serious crimes, is not willing to
devote the effort necessary to prosecute offenders.
Counterfeiters are generally small operations rather than large
companies.
    It is difficult to assess the amount of U.S. export loss
attributable to lack of adequate protection for intellectual
property.  The U.S. motion picture industry estimates a loss of
$35 million per year.  It claims the home video market is 45
percent pirate in large cities and between 60 to 65 percent
elsewhere, where enforcement is less strict.  The computer
industry claims its losses exceed $100 million annually.  U.S.
pharmaceutical company representatives hesitate to put a dollar
value on potential sales lost due to the lack of patent
protection for U.S. pharmaceuticals.  They cite loss of market
share, inability to launch new products, and limits on new
investments due to the lack of protection.  One U.S. firm
estimates losses range from $30 to $40 million annually.  The
United States has worked closely with Turkish officials to
prepare new intellectual property rights draft laws.
8.  Worker Rights
    a.  Right of Association
    Most workers have the right to associate freely and form
representative unions.  Teachers, military personnel, police
and civil servants (broadly defined as anyone directly employed
by central government ministries) may not organize unions.
    Except in stipulated industries and services such as public
utilities, the petroleum sector, protection of life and
property, sanitation services, national defense and education,
workers have the right to strike.  Turkish law and the labor
court system require collective bargaining before a strike.
The law specifies a series of steps which a union must take
before it may legally strike, and a similar series of steps
before an employer may engage in a lockout.  Nonbinding
mediation is the last of these steps.  Once a strike is
declared, the employer involved may respond with a lockout.  If
the firm chooses to remain open, it is prohibited from hiring
strikebreakers or from using administrative personnel to
perform jobs normally done by strikers.  Solidarity, wildcat,
and general strikes are illegal.
    In 1993, the Turkish Parliament ratified seven
International Labor Organization (ILO) Conventions, including
Convention 87 on labor's freedom of association and right to
organize.  The Government of Turkey has drafted legislation to
permit civil servants to organize.  The government has
presented legislation to parliament, where it is still under
discussion.  Permission for civil servants to form trade unions
will require amendments to the constitution.  Constitutional
amendments that would grant all categories of employees the
right to form unions and would also expand the right to strike
were submitted to parliament for consideration in late 1992.
    The 1984 law establishing free trade zones forbids strikes
for ten years following their establishment, although union
organizing and collective bargaining are permitted.  The High
Arbitration Board settles disputes in all areas where strikes
are forbidden.
    b.  Right to Organize and Bargain Collectively
    Apart from the categories of public employees noted above,
Turkish workers have the right to organize and bargain
collectively.  The law requires that in order to become a
bargaining agent a union must represent not only 50 percent
plus one of the employees at a given work site, but also 10
percent of all workers in that particular branch of industry
nationwide.  After the Ministry of Labor certifies the union as
the bargaining agent, the employer must enter good faith
negotiations with it.
    c.  Prohibition of Forced or Compulsory Labor
    The constitution prohibits forced or compulsory labor, and
it is not practiced.
    d.  Minimum Age of Employment for Children
    The constitution prohibits work unsuitable for children,
and current legislation forbids full time employment of
children under 15.  The law also requires that school children
of age 13 and 14 who work part time must have their working
hours adjusted to accommodate school requirements.  The
constitution also prohibits children from engaging in
physically demanding labor, such as underground mining, and
from working at night.  The laws are effectively enforced only
in organized industrial and service sectors.  Unionized
industry and services do not employ underaged children.  In the
informal sector, many children under 13 work as street vendors,
in home handicrafts, on family farms, and in other enterprises.
    e.  Acceptable Conditions of Work
    The Labor Ministry is legally obliged, through a tripartite
government-union-industry board, to adjust the minimum wage at
least every two years and has done so annually for the past
several years.  Labor law provides for a nominal 45-hour work
week and limits the overtime that an employer may request.
Most workers in Turkey receive nonwage benefits such as
transportation and meal allowances and some also receive
housing or subsidized vacations.  In recent years fringe
benefits have accounted for as much as two-thirds of total
remuneration in the industrial sector.  Occupational safety and
health regulations and procedures are mandated by law, but
limited resources and lack of safety awareness often result in
inadequate enforcement.
    f.  Rights in Sectors with U.S. Investment
    Conditions do not differ in sectors with U.S. investment.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                             (1)
Total Manufacturing                                   606
  Food & Kindred Products                   128
  Chemicals and Allied Products             142
  Metals, Primary & Fabricated              (1)
  Machinery, except Electrical              (1)
  Electric & Electronic Equipment             7
  Transportation Equipment                  113
  Other Manufacturing                        71
Wholesale Trade                                        23
Banking                                                98
Finance/Insurance/Real Estate                         (2)
Services                                              (1)
Other Industries                                      (1)
TOTAL ALL INDUSTRIES                                1,023
(1) Suppressed to avoid disclosing data of individual companies
(2) Less than $500,000
Source: U.S. Department of Commerce, Bureau of Economic
Analysis
(###)
TURKMENI1
zOzOU.S. DEPARTMENT OF STATE
TURKMENISTAN: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                           TURKMENISTAN
                     Key Economic Indicators
            (Billions of manat unless otherwise noted)
                                     1992      1993      1994 2/
Income, Production and Employment:
GDP (at current prices) 1/          302.0      13.2     222.5
By Sector:
  Agriculture 1/                     44.3       1.8      42.4
  Industry 1/                       215.4       5.4      84.5
    Electrical Energy 1/              9.0       0.4       7.2
    Oil/Gas 1/                       60.0       1.1      49.3
    Construction 1/                  25.6       2.0      57.8
    Production/Non-Production
      Services 1/                    16.7       4.0      37.8
Per Capita GDP
  (manat/at current prices) 3/     71,800     3,065    50,400
Labor Force (000s)                1,991.5   2,053.2   2,075.0
Unemployment Rate (pct.)              N/A       N/A       N/A
Money and Prices:  (annual percentage growth)
Money Supply (M2)                     N/A       N/A      12.8
Base Interest Rate 4/                2-15     40-50       150
Personal Saving Rate 4/             10-40      4-50    20-160
Retail Inflation                      8.1      18.7      15.8
Wholesale Inflation                  10.9      17.1       5.1
Consumer Price Index                  8.3      18.6      16.0
Exchange Rate:  (USD/ruble)
  Official                            N/A         2        10
  Commercial                          N/A       N/A        75
Balance of Payments and Trade:
Total Exports (FOB/mil. USD) 5/   1,870.6   2,600.0   2,300.0
  Exports to U.S. (mil. USD)          N/A      0.12     20.40
Total Imports (CIS/mil. USD) 5/     1,123     1,600     1,540
  Imports from U.S. (mil. USD)        N/A      29.1      63.2
Aid from U.S.                         N/A       N/A       N/A
Aid from Other Countries              N/A       N/A       N/A
External Public Debt 6/               N/A     288.2     180.0
Debt Service Payment (paid)           N/A       N/A       4.4
FOREX Reserves (bil. USD)             N/A       N/A       N/A
Trade Balance (mil. USD) 5/         747.6   1,000.0     760.0
  Balance with U.S. (mil. USD)        N/A    -28.98     42.80
N/A--Not available.
1/ 1992 Figure in million rubles.
2/ 1994 Figures are all estimates based on available monthly
data in October 1994.
3/ 1992 figure in rubles.
4/ Figures are actual, average annual interest rates, not
changes in them.
5/ Merchandise trade.
6/ Foreign credits.
Note:  On October 1, 1994, attracted foreign credits consisted
of $468.2 million for the 1993-94 period.
A new currency, the manat, was introduced on November 1, 1993.
Since that time, as the following report will reflect, the rate
of the manat has fluctuated so greatly as to make the
conversion of domestic data to USD almost meaningless.  At any
one time there are three exchange rates: an official rate, a
commercial rate, and a black market rate.  Converting any given
data into USD could reflect incorrect information.
1.  General Policy Framework
    Turkmenistan declared independence following a national
referendum on October 27, 1991.  Saparmurad Niyazov, head of
the communist party since 1985 and president since the creation
of the position in October 1990, was elected president of the
new country in a direct election on June 21, 1992.
Unchallenged, he won 99.5 percent of the vote.  The 1992
constitution declares Turkmenistan to be a secular democracy in
the form of a presidential republic.  In practice, it remains a
one-party state dominated by a strong president and his closest
advisors within the Cabinet of Ministers.  On January 15, 1994,
a referendum was held which extended Niyazov's presidential
term until the year 2002.
    President Niyazov has declared his intention to develop a
market economy while maintaining the state's role in sectors
involving oil and gas, electrical energy, rail and air
transportation, communications, information, education,
science, health, and culture.  Privatization began with a
leasehold program for development of new agricultural lands by
private farmers, which was approved by the government and put
into effect in early 1993.  In practice, undeveloped plots of
land were distributed among those intending to grow
agricultural products in exchange for forfeiting the right to
freely sell or give away such products.  Farmers must sell most
of their crops to the state at fixed prices and do not own
their land.  There are currently 200 such landowners, each
possessing no less than 50 hectare plots of land.  The state
has encouraged them through construction of irrigation systems,
favorable tax and credit policies, etc.  Niyazov also declared
a small business privatization process, which began in December
1993, through auctions of state services and, later on,
privatization of trade and public catering enterprises.  Most
of the enterprises are being bought by labor collectives and
individuals.  The government claims that 818 enterprises were
privatized by October 1, 1994.  The Ministry of Economics and
Finance is overseeing the privatization process which is
expected to continue through 1996.
    Turkmenistan's economy is highly dependent on the
production and processing of energy resources and cotton.
Natural gas provides 69 percent or $1,235 million of total
exports.  Energy reserves are estimated at 15.5 trillion
cubic meters of natural gas and 6.3 billion tons of oil.
Turkmenistan possesses large deposits of various minerals and
salts, with indications of commercially exploitable gold,
silver and platinum.
    Despite this abundance of fuel and natural resources,
agriculture accounts for nearly one-third of Turkmenistan's
gross national product and more than two-fifths of the
country's total employment.  Cotton is the dominant crop,
covering more than 45 percent of arable land and constituting
56 percent of total agricultural production.  The 1994 target
is to harvest 1.5 million tons through improved technology.
Grain production is the second priority.  Turkmenistan hopes to
harvest one million tons of wheat in 1994.  By 1996,
Turkmenistan hopes to be self-sufficient in wheat production.
    Turkmen farmers rely heavily on irrigation.  Agricultural
yields are 2-3 times lower than might be expected due to years
of inefficient water use, salinization, inappropriate land
irrigation, and over-development of cotton cultivation.  The
government has reduced the area occupied by cotton fields and
encourages research into more efficient water usage.  Water
distribution among farmers is limited and strongly controlled
by the state.  The ration of water usage varies and is free of
charge; however, extra supplies beyond the ration can be bought
at low state-subsidized prices.  Limited water resources do not
allow development of the remaining 90 percent of this highly
arid country.
    Large scale specialization of agriculture creates a heavy
reliance on food imports.  In 1992, Turkmenistan imported 32
percent of its grain, 45 percent of its milk and dairy
products, 70 percent of its potatoes, and 100 percent of its
sugar.  To reduce dependence on food imports, the government
promotes domestic grain and sugar beet production and is
investing in dairy and sugar processing plants and equipment.
    As a member of the Commonwealth of Independent States
(CIS), Turkmenistan is affected by the economic decline in
neighboring countries.  Non-payment from Ukraine and other CIS
countries for natural gas deliveries led to reduced state
investment activities.  In turn, this caused production of GDP
to decrease 25 percent compared with 1993.  Payment defaults,
primarily caused by currency non-convertability and lack of
hard currency in CIS countries, make inter-republican trade
much too complex, non-profitable and, thus, minimal.
Turkmenistan continues to focus on clearing payments.  Rail and
road transport, pipeline routes, and shipping via Russia and
other CIS countries remain the major export routes of Turkmen
goods.  Turkmenistan, Iran, and Turkey have signed a political
agreement to build a gas pipeline through from Turkmenistan to
Turkey via Iran.  Financing, however, has not been secured, and
may prove difficult due to political considerations.
Turkmenistan and Iran are building a rail link between Serakhs
and Meshed, which is scheduled for completion in 1996.  The
Government of Turkmenistan is also considering building a
railroad through Afghanistan to Pakistan, but once again
financing is a problem.  The new international airport in
Ashgabat is expected to reach full operation by the end of 1994.
    Turkmenistan's 1994 budget was projected including hard
currency payments owed for gas shipments by Ukraine and the
Caucasus (in accordance with previously concluded agreements).
Turkmenistan's tax base is quite small; in 1994 some 70 percent
of budget revenue came from exports of natural gas.  Payment
defaults have left the budget in deficit.  As a result, the
government has had to toughen its financial policy by denying
credits, reducing numerous construction activities, maintaining
high percentage rates on foreign exchange surrenderings from
state-owned enterprises, and strengthening control over budget
expenditures.  Forty percent of budget revenues are proceeds
from a value added tax on goods and services.  Twenty percent
of budget revenues also come from a natural resources tax and
15 percent from a profit tax on gross profit.  About 60 percent
of budget expenditures go to support price subsidies and 7.3
percent is designated for defense purposes.  The government
also maintains a foreign exchange fund to control hard currency
movement in and out of the country.
    With respect to monetary policy, the main instruments of
credit control include reserve requirements and refinance
policy.  In practice, the level of commercial bank access to
central bank credit is determined by the Cabinet of Ministers.
The government hoped that the establishment of foreign exchange
auctions would introduce a more efficient financial market;
however, this attempt failed due to a shortage of hard
currency.  On August 1, 1994, the Commodity and Raw Material
Exchange (CRME) was set up to regulate and control hard
currency revenue from exports and imports.  All CRME
transactions are in manats; foreign buyers/sellers can exchange
money through the Central Bank.  Only transactions which take
place through the CRME receive export licenses.
    Turkmenistan joined the IMF, World Bank, and European Bank
for Reconstruction and Development in 1992.  It is a member of
the Economic Cooperation Organization (ECO), along with other
central and south Asian countries, Iran, and Turkey.
Turkmenistan became an observer to the GATT in June 1992.
    The Uruguay Round agreements are not currently under
discussion in Turkmenistan.
2.  Exchange Rate Policy
    On November 1, 1993 the government introduced a new
national currency, the manat.  The initial exchange rate was
set at an unrealistic two manat = one dollar.  The government
also established a currency auction to assist in setting the
exchange rate for the manat.  However, due to limited foreign
exchange availability, the last auction was held in May 1994.
For purposes of trade with Russia, the manat, the dollar, and
the Russian ruble are equally valid.  The official manat/dollar
exchange rate is determined by Turkmenistan's Central Bank.  On
April 15, 1994, the official foreign exchange rate was changed
to ten manat = one dollar, where it has remained ever since.
In an attempt to attract investors, commercial banks introduced
a new commercial rate at sixty manat = one dollar.  On August
15, 1994 the commercial exchange rate was raised to 75 manat to
one dollar in connection with the establishment of the
Commodity and Raw Material Exchange.
    The government plans to reintroduce the foreign exchange
auction once sufficient foreign exchange has been collected.
The government is depending on the successful operation of the
CRME to provide this hard currency to the Central Bank.
3.  Structural Policies
    The government is anxious to attract foreign investment to
develop Turkmenistan's substantial energy, mineral, and
agricultural resources.  Laws concerning foreign investment,
banking, taxation, foreign exchange regulation, and property
ownership, which were passed in October 1993, are intended to
create a legal commercial framework.
    In 1993, the Khalk Maslakhaty (People's Council) created
"economic zones of free entrepreneurship" in seven regions
through Turkmenistan.  These zones offer favorable taxation and
production terms for private enterprises.  According to
Turkmenistan's tax laws, every enterprise is required to pay a
25 percent profit tax and a 20 percent value-added tax.  Fifty
percent of foreign exchange proceeds from the export of goods
and raw materials, and 60 percent of the proceeds from gas
exports, are surrendered to support the government's foreign
exchange fund.  Foreign investments are exempt from this export
    The government continues to regulate salaries.  Following
the introduction of the manat and the subsequent increase in
inflation (about 23 percent by October 1994) the president
announced a mandatory salary increase effective July 1, 1994.
The minimum and average salaries were set at between 250 and
1,200 manat per month.  Pensions, stipends, and allowances were
also increased slightly.
    The government also continues to control prices for
staples, medicines, rent, public transportation services, and
some production costs.  Price liberalization, which began in
1992, is expected to continue.  Only 50 to 60 kinds of products
will be subsidized in 1995, at which time the remainder of
prices will be freed.
4.  Debt Management Policies
    In the "zero-option" agreement signed with Russia on July
31, 1992, Russia assumed all of Turkmenistan's former Soviet
Union (FSU) debt obligations, while Turkmenistan surrendered
all claims to FSU assets.
    Turkmenistan currently faces difficulties collecting hard
currency payments for gas deliveries to Ukraine and the
Caucasus.  The overall debt of these countries to Turkmenistan
is $1.5 billion.  Despite these payment problems, Turkmenistan
is forced to continue supplying these countries with gas due to
pipeline and storage constraints and a lack of other options.
Turkmenistan hopes that the IMF agreement with Ukraine, and the
expected economic improvement in Ukraine's economy, will result
in Ukraine resuming hard currency payments to Turkmenistan.
    Turkmenistan purchased $10 million worth of PL-480 Title I
wheat in FY 1993 and 1994.  Turkmenistan also took advantage of
$5 and $10 million in GSM-102 credits which were granted in FY
93 and 94, respectively.  A new FY 95 Title I agreement is
currently under consideration by the government.  Turkmenistan
has also concluded long-term credit deals with American,
European and Turkish companies, the European Bank for Economic
Development, and the Iranian government.  The World Bank is
exploring a proposed $25 million credit extension to
Turkmenistan in order to strengthen Turkmen economic potential.
5.  Significant Barriers to U.S. Exports
    Turkmenistan's lack of a freely convertible currency,
absence of an efficient banking system, rudimentary business
infrastructure, and centralized decision-making system all
present obstacles to U.S. exports.  With Russia and the other
CIS countries, a clearing arrangement exits.  But even with
these neighbors, trade remains based primarily on the barter
system.  To normalize its trade and investment with
Turkmenistan, the United States concluded the first of a series
of bilateral economic agreements in 1993.  In October 1993, a
Bilateral Trade Agreement, which provides reciprocal most
favored nation status, went into effect.  To date, numerous
U.S. companies are involved in feasibility studies and contract
discussions.  Approximately eight U.S. firms have permanent
representatives resident in Turkmenistan.
    Discussions on a U.S. - Turkmenistan bilateral investment
treaty, which would establish a bilateral legal framework to
stimulate investment, continued throughout 1993-1994.  The
United States has also proposed a bilateral tax treaty, which
would give U.S. businesses relief from double taxation of
income.  An Overseas Private Investment Corporation (OPIC)
agreement, which allows OPIC to offer political risk insurance
and other programs to U.S. investors in Turkmenistan, was also
concluded in 1992 and is currently in force.
6.  Export Subsidies Policies
    The government provides substantial subsidies to state
enterprises, including transportation and communications, which
support production and employment.  Subsidies also are focused
in the export-oriented energy sector.
7.  Protection of U.S. Intellectual Property
    A law on the protection of intellectual property was signed
by President Niyazov in September 1992.  The law is designed to
provide adequate protection, although enforcement is untested.
A copyright law, effective October 1993, was also approved.
The U.S. - Turkmenistan trade agreement contains commitments on
protection of intellectual property.
8.  Worker Rights
    a.  The Right of Association
    The government restricts the freedom of peaceful assembly.
Unregistered organizations, including all political groups
critical of government policy, or any of those with a political
agenda, are not allowed to hold demonstrations or meetings.
Citizens theoretically have the right to associate; however,
such action may result in being fired from a job and/or having
one's home and other property confiscated.
    b.  The Right to Organize and Bargain Collectively
    Turkmen law does not protect the right to organize and
bargain collectively.  The government continues to prepare
guidelines for wages and specifically sets wages in some,
though not all, sectors.  In other areas, there is some
leeway.  The predominantly state-controlled economy seriously
limits the worker's ability to bargain collectively.
    c.  Prohibition of Forced or Compulsory Labor
    Turkmenistan's constitution forbids forced or compulsory
labor.
    d.  Minimum Age of Employment of Children
    The minimum age for employment is 16, with the exception of
working in a few heavy industries, in which case it is 18.
While the average work day is eight hours, those between the
ages of 16 and 18 are not permitted to work more than six hours
per day.  Fifteen-year old children may be allowed to work with
the consent of their parents and the trade union.  In such
cases, which are rare, they work four to six hours per day.
Violations of child labor laws occur in rural areas during the
cotton harvest season.
    e.  Acceptable Conditions of Work
    The national minimum wage is set quarterly and continues to
fall far short of the amount required to meet the needs of an
average family.  Turkmenistan inherited an economic system and
sub-standard working conditions from the Soviet era, when
productivity took precedence over the health and safety of
workers.  Industrial and agricultural workers are particularly
exposed to unsafe environments.  The government recognizes that
problems exist, but has not moved effectively to deal with them.
    f.  Rights in Sectors with U.S. Investment
    U.S. investment in goods-producing industries continues to
be very limited in Turkmenistan.  To date, one investor is
planning the construction of two cotton processing facilities.
There is no indication that, once in operation, the conditions
of work, or rights, will be different in these facilities than
those in other industries.
(###)
UKRAINE1
aU.S. DEPARTMENT OF STATE
UKRAINE: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                             UKRAINE
                     Key Economic Indicators
         (Billions of karbovanets unless otherwise noted)
                                   1992       1993       1994 1/
Income, Production and Employment:
Real GDP Growth (pct.) 2/         -17.0      -14.2      -34.0
Nominal GDP (trillions kbv) 2/     4.09     153.00    1,055.0 3/
Labor Force (millions)             24.4       24.5        N/A
Unemployment (000s)                70.5       83.9      125.8
Unemployment Rate (pct.)            N/A       0.18       0.77
Money and Prices:  4/
Personal Savings Rate (pct.)       28.5       N/A         N/A
Retail Inflation (pct.)           2,100     10,300        210
Wholesale Inflation (pct.)        4,230      9,770        N/A
Consumer Price Index              2,100     10,258        N/A
Exchange Rate (KBV/USD/end of period)
  Official                          638     12,610     44,000
  Parallel                          N/A     31,970     90,000 5/
Balance of Payments and Trade:
(USD millions, unless otherwise noted)
Total Exports (USD billions) 2/    11.3       14.9        N/A
  Exports to U.S.                    75        132        295 6/
Total Imports (USD billions) 2/    11.9       16.6        N/A
  Imports from U.S.                 156        272        193 6/
Aid from U.S.                       N/A        330        700
Foreign Exchange Reserves           N/A        207 7/     N/A
Trade Balance                       N/A      510.6     -123.7
  Trade Balance with U.S.           -81       -140        102 6/
N/A--Not available.
1/ 1994 Figures are nine-month data unless otherwise marked.
2/ IMF statistics.
3/ IMF staff estimate for 12-month period.
4/ Ukrainian Ministry of Statistics, 1994.
5/ As of October 20, 1994.
6/ 1994 Figures are estimates based on January-October data.
7/ Ukrainian Ministry of Finance, 1993.
1.  General Policy Framework
    Ukraine declared independence on August 24, 1991, and the
population overwhelmingly ratified this in a national
referendum on December 1, 1991.  Ukraine is the second largest
nation of the former Soviet Union in terms of population and
economic power, and the third largest in terms of area.
Stretching across 603,700 square kilometers, it has a
population of  52 million, of which three-quarters are ethnic
Ukrainians and one-fifth are ethnic Russians.  Ukraine's
principal resources include fertile "black earth" agricultural
land and significant coal reserves.  The nation's broad natural
resource endowment has led to the development of a diversified
economy with a strong agricultural and food processing
industry, large heavy industries, and a substantial capital
goods sector oriented toward military production.
    Despite its natural wealth, for the past three years
Ukraine has faced inflation and a declining economy.  The
decline of production in most sectors of the economy continues,
though the rate of contraction appears to have slowed in some
spheres.  In 1992 and 1993 market oriented reforms were
implemented at a slow and half-hearted pace.  Ukrainian
officials appeared determined to move towards an efficient
economy without creating social upheaval and a decline in the
standard of living, even if it included a reliance on central
administrative planning.  Unfortunately, this policy produced a
decrease in industrial production, spiralling inflation, little
privatization, and overall economic gridlock.  In 1993,
attempts at stabilizing the economy were overwhelmed by the
weight of collapsing production, ruptured trade links within
the former Soviet Union, and the lack of political will within
all levels of the national government.
    In 1994 the economic situation in Ukraine remains grim, but
the policy outlook has brightened considerably.  Country-wide
elections, which produced a new President, Parliament and every
governor and mayor in the nation, helped provide new thinking
and fresh ideas.  Ukraine has now unambiguously signaled its
determination to embark on a comprehensive economic reform
program.  President Leonid Kuchma's October 11, 1994 address to
the Ukrainian Parliament registered a welcome and drastic
change in economic policy.  Ukraine is committed to unifying
its exchange rates, reforming the tax and banking systems,
liberalizing prices, reducing inflation, eliminating subsidies,
lifting export and currency controls, attracting more foreign
investment, speeding up privatization efforts, and cutting the
budget deficit.  On October 27, 1994, the International
Monetary Fund announced the approval of a $371 million Systemic
Transformation Facility loan to help implement the first stage
of this radical economic reform program.
2.  Exchange Rate Policies
    For the past two years Ukraine has utilized a system of
multi-use, legal tender coupons as a response to two problems:
a complete cut-off in the supply of rubles from the Russian
central bank and concern over exports of lower priced Ukrainian
goods to other newly independent states.  The coupon, or
karbovanets (KBV), became the sole legal unit of currency in
Ukrainian territory on November 12, 1992, when the Government
eliminated the ruble from use in all cash and non-cash
transactions.  The Ukrainian government considers the coupon a
transitional currency, until the new currency, the Ukrainian
hryvnia, can be introduced in 1995.
    On August 23, 1994, President Kuchma issued a decree "On
Improvement of Currency Regulation" under which the official
exchange rate was to be brought closer to its true market value
by year-end 1994 in order to stop the sharp slide of the KBV.
This decree also reduced the proportion of hard currency
earnings businesses must sell to the state to thirty percent,
down from fifty percent originally mandated.  On October 1,
1994, the interbank auction market for foreign exchange was
reopened.  The official rate for the surrender of foreign
exchange was abolished on October 21; in addition, the
government tender committee, which previously allocated foreign
currency, was disbanded.  The exchange rate is now unified and
the rate is determined in the inter-bank market.  The
government will obtain the foreign exchange it needs in the
auction at the unified rate.
3.  Structural Policies
    To date the Ukrainian privatization process has proceeded
unevenly, not so much due to lack of a legislative base but to
a lack of political will.  For example, in the housing sector,
23 percent of all eligible dwellings have been privatized to
date.  The privatization of small-scale enterprises continues
in several cities including Kharkiv, Zaporizhiya and Luhansk,
but most other enterprise privatization has come to a halt due
to a parliamentary review of the privatization process begun in
late summer 1994.  However, President Kuchma has outlined an
ambitious privatization strategy for 1995, including completion
of small-scale privatization throughout the country and
privatization of some 8,000 medium and large-scale
enterprises.  The Ukrainian government has approved the use of
a privatization certificate, which will be distributed free of
charge to enable all Ukrainian citizens to take part in mass
privatization beginning in 1995.
    In 1993, Ukraine's tax policies were one of the most
difficult elements in the business environment.  High tax
burdens, unclear legislation, and a multitude of different
taxes caused confusion and increased tax evasion.  In response
to heavy criticism from the business sector, both state-owned
and private, the government and parliament have agreed to a
comprehensive reform of tax policy to ensure it stimulates
investment and productivity rather than suffocates business.
Most joint ventures are shielded from income tax by Ukrainian
legislation which offers tax holidays to qualified investments.
    Until October 1994, the Ukrainian government maintained
price controls on approximately 17 percent of production.
However, in October 1994, the government liberalized prices for
all but a few specific items including the output of natural
monopolies.  Prices for certain communal services have
increased and further increases are expected through 1995.
4.  Debt Management Policies
    Ukraine's share of the debt and assets of the former Soviet
Union is 16.37 percent, as agreed in an inter-Republic treaty
dated December 4, 1991.  In November 1992, Ukraine and Russia
signed a protocol assigning Russia's management responsibility
for Ukraine's share of the debt, pending a bilateral agreement
to resolve outstanding issues.  The protocol was terminated on
December 31, 1992 and negotiations continue between Russia and
Ukraine on issues surrounding the division of the external
assets and debt.
    Since independence, Ukraine has incurred a modest foreign
debt with the west, but an increasingly large debt with Russia
and Turkmenistan for deliveries of oil and gas.  According to
Ukrainian statistics, the officially acknowledged debt is $2.71
billion to Russia and $855 million to Turkmenistan.  The
government established a hard currency credit committee to
consider all governmental hard currency debt obligations and
issuance of state guarantees on credits.
5.  Significant Barriers to U.S. Trade
    The single most important barrier to trade and investment
in Ukraine is the country's painful transition from a command
economy to one based on market economics.  As a result,
successful export and investment activity in Ukraine requires a
long term outlook and strategy, as well as a "frontier
mentality."
    Ukraine's shortage of hard currency earnings,
underdeveloped and inefficient banking system, poor
communications infrastructure, and lack of legal, shipping and
other key infrastructure are the most significant impediments
restricting U.S. exports to Ukraine.  These barriers are
further worsened by Ukraine's inexperience in trading in an
open market environment and its general unfamiliarity with U.S.
suppliers and their products, technology and business practices.
    Since gaining its independence, Ukraine has asserted its
right to establish and maintain its own system of standards and
product certification.  In fact, Ukraine is currently
developing a wide range of national standards and many of these
are being strongly influenced by European Union standards.  In
the interim, Ukraine's domestic production standards and
certification requirements are based on those of the former
Soviet Union and apply equally to domestically produced and
imported products.  Product testing and certification generally
relate to technical, safety and environmental standards as well
as to efficacy standards for pharmaceutical and veterinary
products.  At a minimum, imports to Ukraine are required to
meet the certification standards of the country of origin.  In
cases where Ukrainian standards are not established, country of
origin standards may prevail.
    Imported goods are not considered to have legally entered
Ukraine until they have been processed through the port of
entry and been cleared by Ukrainian customs officials.  Duties
on goods imported for resale are subject to varying ad valorem
rates and import license requirements.
    Ukrainian law allows for virtually all forms of foreign
direct investment, including wholly-owned subsidiaries.  In
fact, Ukraine has attempted to encourage foreign investment
through a "State Program for Encouraging Foreign Investment,"
which extends the length of existing tax holidays and import
duty exemptions to qualifying investors in a number of priority
sectors.  However, the depressed local market and numerous tax
disincentives weigh heavily on foreign investors.  In addition,
U.S. companies, under the Foreign Corrupt Practices Act, are
often at a significant disadvantage in the Ukrainian business
environment where bribery and corruption can be common tools of
business.
    It is important to note that the Kuchma government's new
export liberalization policies, attempts at overall financial
stabilization and proposed tax policy reforms are welcome
changes that should attract more foreign investors to Ukraine.
    A broadening of trade and investment relations with Ukraine
is a high priority of the U.S. government and a key to economic
reform and development in Ukraine.  The U.S.-Ukraine Trade
Agreement signed in June 1992 provides for reciprocal most
favored nation (MFN) status and establishes a basic framework
for broadening this relationship.  Furthermore, this agreement
provides for the establishment of the Joint Commission on Trade
and Investment (JCTI), which held its inaugural session on
November 23, 1994.  The Commission will work to reduce barriers
to trade and investment and promote expansion of commercial
relations.
6.  Export Subsidies Policies
    For the first nine months of 1994 government subsidies to
state-owned industries were an integral part of Ukraine's
economy.  These subsidies were not designed to provide direct
or indirect support for exports, but rather to maintain full
employment and production during the transition from a
centrally controlled to a market-oriented system.  However, in
October 1994, in order to reform on the macroeconomic level,
Ukraine agreed in principle to International Monetary Fund
recommendations to cut these subsidies.  As a result of these
recommendations and price liberalization measures, all
government subsidies were drastically reduced.
7.  Protection of U.S. Intellectual Property
    A new set of laws on intellectual property rights
protection was adopted by the Ukrainian Parliament in December
1993 and came into force in July 1994.  They are as follows:
the Ukrainian Copyright Law, the Law on Inventions, the Law on
Trademarks, the Law on Industrial Patterns, and the Law on The
Protection of the Information in Automated Systems.  According
to the World Organization of Intellectual Property and the
European Patent Organization's experts, the Ukrainian
legislation in terms of industrial property rights protection
is the most market-oriented relative to other former Soviet
Union countries.
    According to the Ukrainian Patent office, there are over
300 licensing agreements, most of them concluded between local
entities.  There are no cases of compulsory licensing to local
companies of rights held by foreigners in Ukraine.  As of
October 1994, 6,000 trademarks were registered in Ukraine,
including about 1,500 trademarks of U.S. entities.
    In terms of industrial property, there is no data on the
infringement or counterfeiting of trademarks.  According to the
Ukrainian Copyright Agency, there are also no statistics on the
extent of piracy of books, records, videos, or computer
software.  Computer software and sound recordings are legally
determined as products and shall be copyrighted according to
Article 18 and 19 of the Ukrainian Copyright Law.  According to
Article 17 of the Ukrainian Law on Foreign Economic Activities,
importing and exporting products in violation of intellectual
property rights is strictly prohibited.
    Ukraine is committed legislatively to the protection of
intellectual property, though enforcement remains inadequate
and sporadic.  Two Ukrainian state agencies are working to
ensure intellectual property rights:  the State Ukrainian
Copyright Agency (literary and artistic works) and the State
Patent Office of Ukraine (intellectual property).  Ukraine is a
successor state to many of the conventions and agreements
signed by the former Soviet Union, and is a member of the World
Intellectual Property Organization (WIPO).  In fact, Valeriy
Petrov, who is the head of the Ukrainian Patent Office, is a
Deputy Head of the WIPO General Assembly.  Ukraine is a party
to the Paris Convention for Protection of Industrial Property,
the Madrid Agreement on the International Registration of
Trademarks and the Agreement on Patent Cooperation.  In March
1994, Ukraine signed the Universal Copyright Convention.
Furthermore, the Ukrainian Parliament is considering ratifying
the Berne Copyright Convention.  In September 1994, Ukraine
became a party to the Eurasian Patent Convention which includes
ten of the New Independent States.  Adoption of this convention
facilitates exchanges of new technologies and property rights,
reduces customs duties, and provides for a unified patent valid
in these ten countries.  Ukraine has property agreements with
25 countries, including the United States, on exchanging
relevant information.
8.  Worker Rights
    a. The Right of Association
    Soviet Law, or pertinent parts of the Ukrainian
Constitution, continue to regulate the activities of trade
unions.  The Law on Citizens' Organizations passed in 1992
guarantees non-interference by public authorities in the
activities of citizens' organizations and the right of these
organizations to establish and join federations, and to
affiliate with international organizations on a voluntary
basis.  In negotiating wages with the government, all unions
are permitted to participate.  In principle, all workers and
civil servants including members of the armed forces are free
to form unions, but in practice, the government discourages
certain categories of workers (e.g., nuclear power plant
employees) from doing so.  A new Ukrainian Constitution and new
trade laws are currently being drafted and debated which will
affect the future status and activities of trade unions.
    A successor to the former official Soviet trade union known
as the Federation of Trade Unions (FTU), has begun to work
independently of the government and has been vocal in opposing
draft legislation that would restrict the right to strike.  The
FTU is considered a partner with management in the running of
state enterprises.  Although the FTU has no official or legal
relationship with any political party, the government provides
this organization with office buildings and resort properties.
    Many independent unions now provide an alternative to the
official unions in most sectors of the economy.  Some, such as
the Independent Miners' Union of Ukraine (NPGU), emerged out of
the 1989 strike committees and were instrumental in creating
the independent miners' unions of the Soviet Union.  When
Ukraine became independent, these unions followed suit and also
split from the Soviet Union.  Independent unions were also
established in the Black Sea Fleet, among the military officers
of Ukraine, and among the scientific workers of the Academy of
Sciences.  In early 1992, the NPGU, pilots, civil air
dispatchers, locomotive engineers, and aviation ground crew
unions formed the Consultative Council of Free Trade Unions, an
entity which acts independently of the FTU.
    The Law on Labor Conflict Resolution guarantees the right
to strike to all but members of the armed forces, civil and
security services, and employees of "continuing process plants"
(e.g., metallurgical factories).  This Law prohibits strikes
that "may infringe on the basic needs of the population" (e.g.,
rail and air transportation).  Furthermore, strikes based on
political demands are illegal.  However, this did not stop
miners and transportation workers from making political as well
as economic demands during their September 1993 strikes that
forced the government to hold elections at every level in
1994.  Although the government has often relied on the courts
to deal with strikes that it feels violate the law, the courts
have not always ruled in the government's favor.
    There are no official restrictions on the right of unions
to affiliate with international trade union bodies; the NPGU is
a member of the international miners' union, and independent
trade unions have not been pressured to limit their contacts
with international nongovernmental organizations.  The American
Federation of Labor - Congress of Industrial Organizations has
a permanent representative in Kiev who interacts freely with
the Consultative Council of Independent Trade Unions.
    b.  The Right to Organize and Bargain Collectively
    In accordance with the Law on Enterprises, joint
worker-management commissions should resolve issues concerning
wages, working conditions, and the rights and duties of
management at the enterprise level, but overlapping spheres of
responsibility often impede the collective bargaining process.
Wages in each industrial sector are established by the
government in consultation and agreement with the appropriate
trade unions, and all of the trade unions are invited to
participate in negotiations.  In case a labor-management
dispute cannot be resolved at the enterprise level, the
National Mediation and Reconciliation Service, empowered by the
Law on Labor Conflict Resolution, will arbitrate the dispute.
The President of Ukraine appoints the head of this service.
    The Collective Bargaining Law often prejudices the
bargaining process against the independent trade unions and
favors the official unions.  The Collective Bargaining Law
provides for dues to be taken from the pay of every worker in a
collective and paid to the official union.  The social welfare
benefits received by workers, including huge pension benefit
funds, are administered for the enterprise by the unions.
    Most workers are never informed that they are not obligated
to join the official union, and joining an independent union
can be bureaucratically onerous as well.  Three steps must be
followed to direct one's dues to a independent union.  First,
the worker must submit a form to the official union stating
that the worker does not wish the official union to represent
him.  Second, the worker must submit a form to the independent
union declaring the worker's desire to join it.  Finally, a
third form must be submitted to the enterprise directing that
payroll deductions be given to the independent union instead of
the official one.  Independent unions are not given resources
to administer social welfare benefits, and enterprise directors
discourage departures from the official union by meeting with
workers to discuss the benefits of an official union membership.
    The collective bargaining law prohibits anti-union
discrimination, and the courts resolve disputes under the law.
Unfortunately, there have been cases in which such disputes
have not been resolved in a fair and equitable manner.
    c.  Prohibition of Forced or Compulsory Labor
    The Constitution prohibits compulsory labor, and it is not
known to exist.
    d.  Minimum Age for Employment of Children
    The minimum employment age is seventeen.  However, in
certain nonhazardous industries, enterprises can negotiate with
the government to hire employees between fifteen and seventeen
years of age.  Education is compulsory up to age fifteen, and
the Ministry of Education vigorously enforces the Law on
Education.
    e.  Acceptable Conditions of Work
    In 1992, the Government established a country-wide minimum
wage.  Prior to the onset of high inflation, the minimum wage
and numerous other mandatory subsidies provided a decent income
for a family.  However, during 1994 monthly inflation rose
dramatically and seriously eroded incomes.  Officially over
half the Ukrainian population now live below the poverty level,
with further declines expected.  In theory, the Law on Wages,
Pensions, and Social Security provides for mechanisms to index
the minimum wage to inflation, but in practice, the government
has paid most salaries several months late and at pre-inflation
rates.
    The Labor Code provides for a maximum 41 hour work week and
at least 15 days of paid vacation per year, but stagnation in
some industries (e.g., defense) has significantly reduced the
work week for some categories of workers.
    The Constitution and other laws contain occupational safety
and health standards, but these are frequently ignored in
practice.  Lax safety standards enforcement was the principal
cause of many serious mine accidents resulting in over 100
deaths and injuries in 1993.  In theory, workers have the legal
right to remove themselves from dangerous work situations
without jeopardizing their employment; however, in reality,
labor experts say that continued employment would be in
question.  The Labor Ministry is currently rewriting the Mine
Safety Law and the NPGU is demanding that the Government
improve worker safety in the mines.
(###)
UNITED_A1
aU.S. DEPARTMENT OF STATE
UAE: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                       UNITED ARAB EMIRATES
                     Key Economic Indicators
        (Millions of U.S. dollars unless otherwise noted)
                                     1992      1993     1994
Income, Production and Employment:
Real GDP (1985 prices)              29,523    29,041    N/A
Real GDP Growth (pct.)                -0.9      -1.6    N/A
GDP (at current prices)             35,456    35,865    N/A
By Sector:
  Agriculture                          744       774    N/A
  Mining
    Crude Oil                       14,470    13,988    N/A
    Others                              95       101    N/A
  Manufacturing                      2,708     2,966    N/A
  Electricity/Water                    782       806    N/A
  Construction                       3,029     3,154    N/A
  Wholesale/Retail Trade/
    Restaurants/Hotels               3,547     3,645    N/A
  Transport/Storage/Communication    1,953     2,013    N/A
  Finance/Insurance                  1,752     1,814    N/A
  Real Estate                        2,228     2,310    N/A
  Other Services                       798       847    N/A
  Imputed Bank Service Charges        -730      -781    N/A
  Government Services                3,917     4,053    N/A
  Household Domestic Services          163       174    N/A
Net Exports of Goods & Services  1/   3,043      183    N/A
Real Per Capita GDP
  (1985 prices/USD 000s)              17.63    17.22    N/A
Labor Force (000s)                   769.30   794.40    N/A
Unemployment Rate (pct.)               N/A       N/A    N/A
Money and Prices:  (annual percentage growth)
Money Supply                           4.4     -1.6     1.6  2/
Base Interest Rate                     N/A      N/A     N/A
Personal Saving Rate                  22.8     17.1     N/A
Retail Inflation                       3.5      4.5     N/A
Wholesale Inflation                    N/A      N/A     N/A
Consumer Price Index (1985=100)      120.1    123.5     N/A
Exchange Rate (USD/dirham)           3.671    3.671     3.671
Balance of Payments and Trade:
Total Exports                       23,944    23,563    N/A
  Exports to U.S.                    871.9     774.5   231.1  3/
Total Imports                     17,434.0  19,613.0     N/A
  Imports from U.S.                1,552.4   1,811.4   748.6  3/
Aid from U.S.                            0         0    0
Aid from Other Countries                 0         0    0
External Public Debt                     0         0    0
Debt Service Payments (paid)             0         0    0
Gold and Foreign Exch. Reserves    5,893.8  6,286.2  6,824.6  4/
Trade Balance                      6,510.5  3,949.9       N/A
  Trade Balance with U.S.            680.5  1,036.9    517.5  3/
N/A--Not available.
1/ Net exports of goods and services is the current account
balance.
2/ 1992 and 1993 December to December; 1994 December to June
3/ 1994 figure is January-June.
4/ 1992 and 1993 figures are fourth quarter; 1994 figure is for
Source:  All figures are from UAE Ministry of Planning and UAE
Central Bank sources, with the exceptions of those on trade
with the U.S., which are from U.S. Department of Commerce, and
gold and foreign exchange reserves, which are from the
International Monetary Fund (IMF) International Finance
Statistics (IFS).
1.  General Policy Framework
    The UAE is a federation of seven emirates.  The individual
emirates retain considerable power over legal and economic
matters, most significantly over ownership and disposition of
oil resources.  The federal budget is largely derived from
transfers from the individual emirates.  Abu Dhabi and Dubai,
the most prosperous emirates, contribute the largest shares.
    Oil production and revenues from the sale of oil constitute
the largest single component of GDP.  Consequently, rising or
declining oil prices have a direct effect on GDP statistics and
an indirect impact on government spending but may,
nevertheless, be less obvious in terms of overall economic
activity.  In 1993, real per capita GDP in Abu Dhabi, the
emirate with the most oil, was $20,664.  Ajman Emirate's real
per capita 1993 GDP of $4,257 was the smallest of the seven.
Real per capita GDP fell in every emirate in 1993, for the
third consecutive year.
    Economic activity in the UAE depends on developments in the
oil sector, which accounted in 1993 for 39 percent of GDP, 51
percent of export revenue, and 79 percent of government
revenues, according to Ministry of Planning and Central Bank
sources.
    Government fiscal policies aim to distribute oil wealth to
UAE nationals by a variety of means.  Support from the
wealthier emirates of Abu Dhabi and Dubai to less wealthy
emirates is done through the federal budget, largely funded by
Abu Dhabi and Dubai, and by direct grants from the governments
of Abu Dhabi and Dubai.
    Federal commercial laws promote national ownership of
business throughout the country.  Foreign business, except
those seeking to sell to the UAE Armed Forces, must have a UAE
national sponsor.  Agency and distributorship laws require that
a business engaged in importing and distributing a foreign-made
product must be 100 percent UAE national-owned.  Other
businesses must be at least 51 percent owned by nationals.  A
1994 law extended these requirements to service businesses for
the first time.
    Within the Emirate of Dubai, companies locating in the
Jebel Ali Free Zone (JAFZ) are exempted from
agency/distributorship, sponsorship, and national ownership
requirements.  However, if they lack 51 percent national
ownership, they are treated as foreign firms and subjected to
these requirements if they market products in the UAE outside
the JAFZ.
    Certain sectors are closed to new private sector
investment, including oil and gas operations and related
industries, such as petrochemicals, and electricity
generation/water desalination.
    The Abu Dhabi and Dubai governments sustain the non-oil
sector in part by spending oil revenues on development
projects.  Foreigners are not permitted to own real estate in
Abu Dhabi or Dubai, and in Abu Dhabi 90 percent of residential
and commercial construction is carried out by a government
agency that builds and manages commercial and residential
rental property on behalf of nominal national landlords.
    There are no taxes on UAE nationals and no income taxes on
the large expatriate population, although fees for government
services, including health care, were increased substantially
for expatriates and slightly for nationals in 1994.  Most
services, including utilities, health care, education, and food
remain heavily subsidized by the government, although more so
for nationals than expatriates.  Most salaried nationals work
in the public sector, where salaries are higher than in the
private sector and work is less demanding.
    The authorities attempt to maintain wealth distribution
without generating inflation or drawing down reserves
accumulated in years of higher oil prices.  This is not always
possible.  The authorities' response to the oil price decline
of 1985-86 was to draw down foreign assets and decrease capital
spending.  The oil price decline of 1993-94 is comparable to
that of 1985-86.  This time, while we believe the authorities
are drawing down reserves, they are also adopting new and
previously untried measures to raise revenue and cut
expenditures.
    These include, as indicated, raising fees, primarily on
expatriates, who make up about 70 percent of the population.
Services expatriates will pay more for include visas, residence
permits, water, electricity, and medical care.  Expatriates now
pay an annual tax of $1300 for each employed household
domestic.  The federal government budget has been frozen at its
1993 level through 1995.  Abu Dhabi emirate announced in
mid-1994 that its budget would be cut by 20 percent from
planned levels.  Emirate authorities announced later that an
additional 20 percent would be cut in 1995.
    Privatization had not been implemented by October 1994,
although there is scope for it and many observers believe that
it will be introduced in the near to medium term.  The federal
and individual emirate governments own many enterprises
outright and own shares in others.  A likely candidate for
early privatization is government-owned bank shares.  The
Central Bank in 1994 drafted a bill authorizing an official
stock exchange, but as of October the cabinet had taken no
action on it.
    The principal function of the UAE Central Bank is to
regulate commercial banks.  Within the past three years, the
Central Bank has increased the degree of its regulatory
activities, through issuing circulars and then following up on
them with enforcement measures.  The Bank's ability to regulate
is limited however by the fact that some of the banks are owned
by interests that are more powerful than the Bank and over whom
it has little or no authority.
    The Bank seeks to maintain the dirham/dollar exchange rate,
which has not changed since 1980, and to keep interest rates
close to those in the U.S.  Given these goals, the Bank does
not have the scope to engage in independent monetary policy.
Trends in domestic liquidity continue to be primarily
influenced by residents' demand for UAE dirhams relative to
foreign exchange.  Banks convert dirham deposits to foreign
assets and back again in search of higher rates of return and
in response to fluctuations in lending opportunities in the
domestic market.  To a limited extent, domestic liquidity can
be influenced by the Central Bank through its sale and purchase
of foreign exchange, use of its swap facility and transactions
in its certificates of deposit.
    The provision of government statistics in the UAE is
limited.  Little information is available on oil and gas output
or pricing, inflation, service and capital transactions in the
balance of payments, or the UAE's foreign assets.
2.  Exchange Rate Policy
    Since November 1980, the UAE dirham, has been formally
pegged to the IMF's Special Drawing Rights (SDR) at the rate of
one SDR equals 4.76190 dirhams, with a margin of fluctuation
set initially at 2.25 percent and widened in August 1987 to
7.25 percent.  However, the dirham's relationship with the U.S.
dollar has been kept at a fixed rate.  Since November 1980, the
buying and selling rates for the U.S. dollar have been 3.6690
dirhams and 3.6730 dirhams, respectively.
    Commercial banks are free to enter into foreign exchange
transactions, including forward contracts, at rates of their
own choosing.  In practice, these rates have followed closely
the rate quoted by the Central Bank.  The UAE maintains a
liberal exchange system which is free of restrictions on both
payments and transfers for current and capital transactions.
    The weakness of the U.S. dollar in 1994 has given U.S.
exports an edge in the UAE market, as the dirham prices of
competing products from industrialized Europe and Japan have
risen.
3.  Structural Policies
    There have been several notable changes in the regulatory
framework in 1994.  New customs rules took effect on August 1,
1994.  A customs duty of four percent on the CIF value of
imports is to be collected in full on items that are not
exempt.  This duty does not apply to the higher tariffs on
tobacco and alcohol.  The list of exempt items is lengthy and
includes items imported by the rulers or the government, items
imported from Gulf Cooperation Council (GCC) states, religious
materials, items imported by airlines, items imported by
charitable institutions, medicines and pharmaceuticals, many
different kinds of food, items to be re-exported, farm
machinery, construction materials, and newspapers and
periodicals.
    Other changes in 1994 include:  a ban on issuance of
licenses authorizing the establishment of 42 different kinds of
small business; increased fees, particularly for expatriates;
a reduction in the number of expatriates permitted to bring
family members with them to the UAE; and an increase in delay
penalties applicable to contracts with the UAE federal
government.
    The UAE Central Bank in 1994 issued an update of a circular
it had issued in 1993 on regulation of large exposures.  The
1993 circular had restricted exposure to one individual or
group to seven percent of a bank's capital.  The revised
circular defined exposure as funded exposure.  It also exempts
UAE governmental borrowers from the limits and permits larger
exposures in interbank lending.  Foreign banks, which had
objected to the 1993 circular, are somewhat more satisfied with
the changes, but will still have to reduce their funded
exposures to the principal customers or move their assets
offshore.
    The UAE began issuing ten-year, multiple entry visas to
U.S. passport holders in 1994.  In addition, the UAE now
permits certain nationalities of expatriate residents of other
Gulf Cooperation Council countries, among them U.S. citizens,
to enter the UAE without having first obtained visas.
    With the exceptions of those levied on foreign banks and
oil companies, there are no income taxes levied in the UAE.
    Prices for most items are determined by market forces.
Exceptions include utilities, educational services, medical
care, and agricultural products, which are subsidized.
4.  Debt Management Policies
    The UAE federal government has no official foreign debt.
Some individual emirates are believed to have foreign
commercial debts, and there is private external debt.  While
there are no reliable statistics on either, the amounts
involved are not large.  The foreign assets of Abu Dhabi and
Dubai governments and their official agencies are believed to
be significantly larger than the reserves of the Central Bank.
    External assistance is provided by the federal government,
individual emirate government agencies, individual rulers, and
private contributors.  No comprehensive figures are available.
The largest aid donor within the UAE, the Abu Dhabi Fund for
Development (ADFD), currently is providing financing worth
almost DH 2.8 billion (USD 763 million) for 29 developmental
projects in 13 Arab countries.
5.  Significant Barriers to U.S. Exports
    The regulatory and legal framework favors local over
foreign business.  There is no national treatment for investors
in the UAE.  Except for companies located in duty free zones,
at least 51 percent of a business establishment must be owned
by a UAE national.  A business engaged in importing products
for distribution within the UAE must be 100 percent owned by a
UAE national.  Subsidies for manufacturing firms are only
available to those with at least a 51 percent local ownership.
    By law, foreign companies wishing to do business in the UAE
must have a UAE national sponsor, agent or distributor.  There
is some disagreement between the federal and local authorities,
however, over the meaning of "national".  The federal Ministry
of Economy and Commerce stipulates that a national sponsor is a
sponsor for the entire country.  Local chambers of commerce,
however, see "national" as meaning UAE citizen, and often will
not allow a business to operate within their emirate if the
sponsor is from another emirate.  Once chosen, these sponsors,
agents, or distributors have exclusive rights.  Sponsors can be
replaced, if the sponsor agrees.  This happens, but not often.
    Foreign companies do not press claims, knowing that to do
so would jeopardize future business activity in the UAE.
Foreigners cannot own land or buy stocks.  Foreign companies do
not pay taxes, except for banks, whose profits are taxed at a
rate of 20 percent, and oil producers, which pay taxes and
royalties on their equity barrels.
    The tendering process is not conducted according to
generally accepted international standards.  Retendering is the
norm, often as many as three or four times.  To bid on federal
projects, a supplier or contractor must either be a UAE
national or a company in which at least 51 percent of the share
capital is owned by UAE nationals.  Therefore, foreign
companies wishing to bid for a federal project must enter into
a joint venture or agency arrangement with a UAE national or
company.  Federal tenders are required to be accompanied by a
bid bond in the form of an unconditional bank guarantee for
five percent of the value of the bid.
6.  Export Subsidies Policies
    The UAE Government does not use subsidies to provide direct
or indirect support for exports.  The UAE joined the GATT in
1994.
7.  Protection of U.S. Intellectual Property Rights
    In 1992, the UAE passed three laws pertaining to
intellectual property rights (IPR) protection:  a copyright
law, a trademark law and a patent law.  The UAE began enforcing
the copyright law on September 1, 1994.  The government began
registration of  trademarks and patents in 1993.  Most losses
to U.S. firms in the UAE have been to owners of copyrights, not
trademarks or patents, although there have been occasional
problems with trademark fraud and in obtaining IPR protection
for certain products, such as pharmaceuticals.  Since UAE
patent law protects processes, not products, some U.S. firms
are concerned that there could be unauthorized manufacture and
distribution of their products.  In late 1994 UAE authorities
were considering revisions to the patent law to address
coverage of product patents.
8.  Worker Rights
    a.  The Right of Association
    UAE law does not grant workers the right to organize unions
or to strike.  Similarly, it is a criminal offense for public
sector workers to strike.  Foreign workers, who make up the
bulk of the workforce, would risk deportation if they attempted
to organize unions or to strike.
    b.  The Right to Organize and Bargain Collectively
    UAE law does not grant workers the right to engage in
collective bargaining, and it is not practiced.  Workers in the
industrial and service sectors are normally employed under
contracts that are subject to review by the Ministry of Labor
and Social Affairs.  The purpose of the review is to ensure
that the pay will satisfy the employee's basic needs and secure
a means of living.  For the resolution of work-related
disputes, workers must rely on conciliation committees
organized by the Ministry of Labor and Social Affairs or on
special labor courts.  Domestic servants and agricultural
workers are not covered by UAE labor laws and thus have great
difficulty in obtaining any assistance in resolving labor
disputes.
    c.  Prohibition of Forced or Compulsory Labor
    Forced or compulsory labor is illegal and not practiced.
However, foreign workers may be recruited in their own
countries by unscrupulous agents who bring them into the UAE
under conditions approaching indenture.
    d.  Minimum Age for Employment of Children
    Labor regulations prohibit employment of persons under age
15 and have special provisions for employing those aged 15 to
18.  Laws prohibiting the employment of children are enforced
by the Department of Labor.  Labor regulations allow contracts
only for adult foreign workers.
    e.  Acceptable Conditions of Work
    There is no legislated or administrative minimum wage.
Supply and demand determine compensation.  However, according
to the Ministry of Labor and Social Affairs, there is an
unofficial, unwritten minimum wage rate which would afford a
worker and family a minimal standard of living.  As noted in
Section 6.B., the Labor and Social Affairs Ministry reviews
labor contracts and does not approve any contract that
stipulates a clearly unacceptable wage.
    The standard workday and workweek are set at eight hours
per day, six days per week, but these standards are not
strictly enforced.  Certain types of workers, notably domestic
servants, may be obliged to work longer than the mandated
standard hours.  The law also provides for a minimum of 24 days
per year of annual leave plus 10 national and religious
holidays.  In addition, manual workers are not required to do
outdoor work when the temperature exceeds 45 degrees Celsius
(112 Fahrenheit).
    Most foreign workers receive either employer-provided
housing or a housing allowance, medical care, and homeward
passage from their employers.  The vast majority of such
workers, however, do not earn the minimum salary of DH 5000
(approximately USD 1370) per month currently required for them
to sponsor their families for a UAE residence visa (the UAE
increased the minimum requirement from USD 1000 to USD 1370 in
August, 1994).  Further, employers may petition for a one-year
ban from the workforce of any foreign employee who leaves his
job without fulfilling the terms of his contract.  Absent
careful oversight, such an option could be misused to inhibit
legitimate complaints on working conditions or reasonable
requests to change employers.
    The government sets health and safety standards, which are
enforced by the Ministry of Health, the Ministry of Labor and
Social Affairs, municipalities, and civil defense units.  Every
large industrial concern is required to employ an occupational
safety officer certified by the Ministry of Labor.  If an
accident occurs, a worker is entitled to fair compensation.
Health standards are not uniformly observed in the housing
camps provided by employers.  Workers' jobs are not protected
if they remove themselves from what they consider to be unsafe
working conditions.  However, the Ministry of Labor may require
employers to reinstate workers following an investigation of
the alleged unsafe working conditions.  All workers have the
right to complain to the Labor Ministry, whose officials are
accessible to any grievant, and an effort is made to
investigate all complaints.  The Ministry, which oversees
worker compensation, is, however, chronically understaffed and
underbudgeted so that complaints and compensation claims are
backlogged.
    Foreign nationals, especially from India, Pakistan, the
Philippines, Bangladesh, and Sri Lanka, continue to seek work
in the UAE in large numbers.  There are many complaints that
recruiters in the country of origin use unscrupulous tactics to
entice manual laborers and domestic servants to the UAE,
promising unrealistically high salaries, housing and other
benefits and may even bring them in illegally.  Such complaints
may be appealed to the Labor Ministry and, if this does not
resolve the issue, to the courts.  However, many laborers
choose not to protest or to engage in such a lengthy process
for fear of reprisals or of deportation.  Moreover, since
the UAE tends to view foreign workers through the prism of
their various nationalities, the employment policies, like
immigration and security policies, have, at times, been
conditioned upon national origin.
    A number of accounts, including some in the local press,
continue to call attention to abuses suffered by domestic
servants, particularly women, perpetrated by individual
employers.  These have included allegations of excessive work
hours, extremely low wages, verbal abuse, and, in some cases,
physical abuse.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                             291
Total Manufacturing                                    (2)
  Food & Kindred Products                     0
  Chemicals and Allied Products              (2)
  Metals, Primary & Fabricated               (2)
  Machinery, except Electrical                0
  Electric & Electronic Equipment             0
  Transportation Equipment                    0
  Other Manufacturing                         0
Wholesale Trade                                       142
Banking                                                (1)
Finance/Insurance/Real Estate                          (1)
Services                                               23
Other Industries                                       45
TOTAL ALL INDUSTRIES                                  537
(1) Suppressed to avoid disclosing data of individual companies
(2) Less than $500,000
Source: U.S. Department of Commerce, Bureau of Economic
Analysis
(###)
UNITED_K1
BU.S. DEPARTMENT OF STATE
UNITED KINGDON: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                        THE UNITED KINGDOM
                     Key Economic Indicators
                  (Billions of U.S. dollars) 1/
                                     1992      1993      1994 2/
Income, Production and Employment:
Real GDP (1990 prices) 3/           825.9     713.9     752.3
Real GDP Growth
  (pct. based on BPS)                -0.5       2.0       3.4
GDP (at current prices) 3/          913.3     819.2     876.7
By Sector:  4/
  Agriculture                        16.5      15.6      16.6
  Energy/Water                       42.5      39.2      41.7
  Manufacturing                     197.5     177.5     189.4
  Construction                       52.7      43.8      46.8
  Rents                              67.3      61.7      64.8
  Financial Services                153.1     139.4     148.8
  Other Services                    261.8     233.9     249.6
  Government/Health/Education       163.4     143.6     153.2
Net Exports of Goods and Services   -15.9     -12.5      -9.1
Real Per Capita GDP ($US)         16404.4   14145.0   14916.4
Labor Force (millions)               28.4      28.2      28.0
Unemployment Rate (pct.)              9.8      10.3       9.4
Money and Prices:
Money Supply (M2)                   920.8     820.2     862.7
Base Interest Rate (pct.)             9.6       6.0       5.5
Personal Saving Rate (DI)            12.8      12.2      11.0
Retail Inflation (CPI in pct.)        3.7       1.6       2.4
Wholesale Inflation (pct.)            3.1       3.9       2.5
Exchange Rate (USD/BPS)              1.77      1.50      1.54
Balance of Payments and Trade:
Total Exports (FOB) 5/              189.9     182.1   200.7
  Exports to U.S. 6/                 20.1      21.7    22.8
Total Imports (CIF) 5/              213.1     201.9   217.3
  Imports from U.S. 6/               22.8      26.4    28.8
Trade Balance                       -23.2     -19.8   -16.6
  Trade Balance with U.S.            -2.7      -4.7    -6.0
Foreign Exchange Reserves            41.4      42.9    43.6
1/ Converted from British pound sterling (BPS) at the average
exchange rate for each year.
2/ Data for 1994 are annualized estimates based on available
quarterly data through July 1994.
3/ GDP at factor cost.
4/ Sectoral total contains adjustment factor of approximately
BPS 23 billion.
5/ Merchandise trade (does not include services)
6/ U.S. Department of Commerce figures.
Source: U.K. Central Stat. Office: Survey of Current Business
1.  General Policy Framework
    The United Kingdom (UK) has a free market economy and an
open financial services environment which encourage open
competition.  Most formerly government-owned industries have
been privatized.  Among the few remaining barriers to
international trade and investment are preferential treatment
for UK firms in broadcasting, telecommunications and utilities
procurement.
    The economy is in its second year of recovery.  The
government refocused its economic policy after leaving the
European Community Exchange Rate Mechanism (ERM) at the
beginning of 1993.  Low inflation with sustainable growth is
now the primary goal.  Inflation fell dramatically in 1993 and
has remained subdued in 1994.  It should average less than 2.5
percent for the year.  The base interest rate was reduced to
5.25 percent at the beginning of 1994, but it was raised to
5.75 percent in August to slow the rate of expansion.
    After declining in 1992, real GDP growth was two percent in
1993 and is expected to exceed three percent in 1994.  The
unemployment rate continues to fall sharply; it stood at 9.1
percent in September 1994 compared to the 1993 average of 10.3
percent.  (Note that the depreciation of the pound sterling
means that the UK's 1993 GDP expressed in dollars appeared to
contract even though real GDP in national currency expanded.)
    Fiscal Policy:  Although the government entered the
recession with a fiscal surplus in 1990, the loss of revenue
during the recession substantially increased cyclical spending
on unemployment benefits, and pre-election spending in 1992 led
to a record budget deficit level and Public Sector Borrowing
Requirement (PSBR) by 1993.  Seized by the need to rein in the
spiraling PSBR, the government initiated a series of stringent
fiscal measures to take effect over the three fiscal years
starting April 1, 1994.  Partially due to falling employment
and faster than expected growth, PSBR performance for 1993/94
was better than projected by the government.
    In 1994/95, the current fiscal year, progress in reducing
the PSBR is being maintained, again due to higher than expected
growth and falling unemployment.  However, fiscal tightening
appears to be slowing consumption expenditure.
    The Conservative government retains its goal of reducing
the basic personal income tax rate to 20 percent as soon as
possible.  Current tax rates are 20, 25 and 40 percent.  For
tax purposes, capital gains are adjusted for inflation.  The
first five thousand pounds in capital gains are tax free, and
the remainder is generally taxed at regular income tax rates.
Gains from the sale of a primary home are exempt.  Corporate
tax rates vary between 25 and 33 percent.  Other domestic tax
revenue sources include the value-added tax (VAT, currently set
at a rate of 17.5 percent), and excise taxes on alcohol,
tobacco, retail motor fuels, and North Sea oil production.
    Monetary Policy:  The UK manages its monetary policy
through open market operations by buying and selling in the
markets for overnight funds and commercial paper.  There are no
explicit reserve requirements.
2.  Exchange Rate Policy
    The UK withdrew from the ERM in September 1992, and the
pound sterling floats freely in the exchange market.  The Prime
Minister has publicly disavowed any return to the ERM in the
foreseeable future.  Sterling's trade-weighted exchange rate
index initially fell from 92 in 1992 to 76 in early 1993 and
hovered at around 80 for most of 1994.
3.  Structural Policies
    The UK economy is characterized by free markets and open
competition.  Prices for most goods and services are
established by market forces.  Prices are set by the government
in those few sectors where the government still provides
services directly, such as passenger railway and urban
transportation fares, and government regulatory bodies monitor
the prices charged by electric, natural gas and water
utilities.  The UK's participation in the European Union Common
Agricultural Policy significantly affects the prices for raw
and processed food items, but prices are not actually fixed for
any of these items.
    Over the past 15 years Conservative governments pursued
growth and increased economic efficiency through structural
reform, principally privatization and deregulation.  The
financial services and transportation industries were
deregulated.  The government sold its interests in the
automotive, steel, aircraft and air transportation sectors.
Electric power and water supply utilities were also
privatized.  Coal mining, rail transportation and local bus
transportation are in the process of being privatized.
Subsidies were cut substantially, and capital controls lifted.
Employment legislation increased market flexibility,
democratized unions, and increased union accountability for the
industrial acts of their members.
    Although there has been great progress, some challenges
remain.  Social welfare programs and the business community are
still adjusting to job losses and changes in the business
climate resulting from deregulation and privatization.  The
government has not been able to achieve sustained success in
reducing the budget deficit, and consequently has not been able
to lower tax rates as expected.
    The current UK government strongly supports free trade and
open markets.  It has ratified the Uruguay Round agreement and
joined the World Trade Organization (WTO) as a founding member.
4.  Debt Management Policies
    The United Kingdom has no meaningful external public debt.
London is one of the foremost international financial centers
of the world, and British financial institutions are major
intermediaries of credit flows to developing countries.  The
British government is an active but cautious participant in the
development of a coordinated debt strategy.  British banks are
prominent members of bank advisory committees on developing
country debt and debt of former communist countries.  They
recognize a need in many countries for debt and debt service
relief, but generally object to mixing new money with debt
relief.
5.  Significant Barriers to U.S. Exports
    Although structural reforms have made it easier for U.S.
exporters to enter UK markets, some barriers still remain in
broadcasting, telecommunications and utilities procurement.
Problem areas and specific regulations resulting in trade
barriers in these areas are profiled below.
    Broadcasting: The 1990 Broadcasting Act, which implements
the 1989 European Community Broadcast Directive, requires that
"a suitable proportion" of television programs broadcast in the
UK be produced locally and that a "proper proportion" be of
European origin.  The EC directive itself calls for a majority
(50 percent) of EC content "where practicable."
    Telecommunications: The UK domestic telephony market was
opened for competition in 1991.  In the past year, the UK
telecommunications regulatory body has made a number of
favorable rulings on issues such as the high cost and
difficulty of negotiating interconnection agreements with
British Telecom (the former government monopoly, now
privatized), number portability (ability to keep a specific
phone number when changing service provider), and other equal
access issues.  These rulings have significantly reduced the
main market barriers with the aim of completely eliminating
some of the most onerous by 1996.  Sufficient progress was made
to allow the FCC to make an initial determination in September
1994, that the UK market was "equivalent" to the U.S. market.
This was followed up in October by a similar decision on the
part of the UK.  This mutual action will pave the way for
significant increases in competition in trans-Atlantic
telecommunications.  Some U.S. companies believe, however, that
the UK still has some distance to go, particularly regarding
Access Deficit Charges as well as refusing to permit new
entrants to operate international long distance services using
their own facilities in the near term.
    Utilities Procurement:  The UK implemented the EC Utilities
Directive in 1992 by instituting a series of regulations based
on the Directive.  The regulations allow government-owned and
private utilities to favor EC over foreign suppliers.
6.  Export Subsidies Policies
    The Conservative government opposes subsidies as a general
principle, and UK trade-financing mechanisms do not
significantly distort trade.  The Export Credits Guarantee
Department (ECGD), an institution similar to the Export-Import
Bank of the United States, was partially privatized in 1991.
    Although much of ECGD's business is conducted at market
rates of interest, it does provide some concessional lending in
cooperation with the Overseas Development Administration (ODA,
the British equivalent of our own Agency for International
Development) for projects in developing countries.
Occasionally the United States objects to financing offered for
specific projects.
    The UK's development assistance (aid) program also has
certain "tied aid" characteristics.  To minimize the distortive
effects of such programs, particularly when used in conjunction
with ECGD-type credits through the Aid and Trade Provision
(ATP), the United States negotiated the 1987 "Arrangements on
Officially Supported Export Credits" with the UK and other
developed countries.  It appears that Britain has adhered to
the Arrangement.
7.  Protection of U. S. Intellectual Property
    UK intellectual property laws are strict, comprehensive and
rigorously enforced.  The UK is a signatory to all relevant
international conventions, including the Convention
Establishing the World Intellectual Property Organization
(WIPO), the Paris Convention for the Protection of Industrial
Property, the Berne Convention for the Protection of Literary
and Artistic Works, the Patent Cooperation Treaty, the Geneva
Phonograms Convention and the Universal Copyright Convention.
    New copyright legislation simplified the British process
and permitted the UK to join the most recent text of the Berne
Convention.  The United Kingdom's positions in international
fora are very similar to the U.S. positions.
8.  Worker Rights
    a.  Right of Association
    Unionization of the work force in Britain is prohibited
only in the armed forces, public sector security services, and
police force.
    b.  Right to Organize and Bargain Collectively
    Over 10 million workers, about 38 percent of the work
force, are organized.  Employers are not legally required to
bargain with union representatives.  However, they are legally
barred from discriminating based on union membership (except in
the armed forces, police force, or security services where
union membership is prohibited).  The 1993 Trade Union Reform
and Employment Rights Act limited that prohibition under
certain special circumstances in matters short of dismissal.
    The 1990 Employment Act made unions responsible for
members' industrial actions, including unofficial strikes,
unless union officials repudiate the action in writing.
Unofficial strikers can be legally dismissed, and voluntary
work stoppage is considered a breach of contract.
    During the 1980s, Parliament eliminated immunity from
prosecution in secondary strikes and in actions with suspected
political motivations.  Actions against subsidiaries of
companies engaged in bargaining disputes are banned if the
subsidiary is not the employer of record.  Unions encouraging
such actions are subject to fines and seizure of their assets.
Many unions claim that workers are not protected from employer
secondary action such as work transfers within the corporate
structure.
    c.  Prohibition of Forced or Compulsory Labor
    Forced or compulsory labor is unknown in the UK.
    d.  Minimum Age for Employment of Children
    Children under the age of 16 may work in an industrial
enterprise only as part of an educational course.  Local
education authorities can limit employment of children under 16
years old if working will interfere with a child's education.
    e.  Acceptable Conditions of Work
    With the exception of wages in agriculture, the setting of
minimum wages in the UK was abolished by the Trade Union Reform
and Employment Rights Act of 1993.  Daily and weekly working
hours are not limited by law.
    Hazardous working conditions are banned by the Health and
Safety at Work Act of 1974.  A health and safety commission
submits regulatory proposals, appoints investigatory
committees, does research and trains workers.  The Health and
Safety Executive (HSE) enforces health and safety regulations
and may initiate criminal proceedings.  This system is
efficient and fully involves workers' representatives.
    f.  Rights in Sectors with U.S. Investment
    All U.S. corporations operating within the UK are obliged
to obey legislation relating to worker rights.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                             13,802
Total Manufacturing                                   22,855
  Food & Kindred Products                   2,314
  Chemicals and Allied Products             3,722
  Metals, Primary & Fabricated              1,591
  Machinery, except Electrical              4,265
  Electric & Electronic Equipment           2,247
  Transportation Equipment                  1,906
  Other Manufacturing                       6,810
Wholesale Trade                                        4,408
Banking                                                4,122
Finance/Insurance/Real Estate                         44,401
Services                                               4,447
Other Industries                                       2,396
TOTAL ALL INDUSTRIES                                  96,430
Source: U.S. Department of Commerce, Bureau of Economic
Analysis
(###)
URUGUAY1
7D7DU.S. DEPARTMENT OF STATE
URUGUAY: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                             URUGUAY
                     Key Economic Indicators
       (Millions of U.S. dollars unless otherwise noted) 5/
                                      1992      1993    1994 1/
Income, Production and Employment:
Real GDP (1983 prices) 2/            6,802     6,903     7,042
Real GDP Growth (pct)                  7.7       1.5       2.0
GDP (at current prices) 2/        11,676.8  13,144.9  15,034.5
By Sector:
  Agriculture                      1.164.9   1.159.4   1,341.2
  Energy/Water                       283.6     336.3     374.7
  Manufacturing                    2,687.9   2,471.3   2,761.3
  Construction                       566.6     748.4     887.6
  Rents                            1,667.6   2,194.4   2,544.4
  Financial Services               1,153.0   1,267.5   1,459.6
  Other Services                   3,056.2   3.525.6   4,008.9
  Government/Health/Education      1,097.0   1,442.0   1,656.8
  Net Exports of Goods & Services     99.0    -155.4    -161.7
Real Per Capita GDP
  (1983 prices/USD)                2,172,8   2,192.3   2,223.4
Labor Force (000s)                   1,382     1,395     1,409
Unemployment Rate (pct.)               9.0       8.3       9.0
Money and Prices:  (annual percentage growth)
Money Supply (M2)                     50.9      49.7      45.3
Base Interest Rate 3/                 50.1      42.7      45.6
Personal Saving Rate 3/               24.5      17.2      20.1
Retail Inflation                      58.9      52.9      41.0
Wholesale Inflation                   46.9      31.1      35.0
Consumer Price Index                  58.9      52.9      41.0
Exchange Rate (USD/New peso)
  Interbank Floating Selling Rate     39.9      26.9      34.3
Balance of Payments and Trade:
Total Exports (FOB) 4/             1,702.5   1,645.3   1,780.0
  Exports to U.S.                    177.8     148.8     160.0
Total Imports (CIF) 4/             2,045.1   2,324.4   2,460.0
  Imports from U.S.                  203.2     222.6     245.0
Aid from U.S.                          1.2       1.2       1.0
Aid from Other Countries               N/A       N/A       N/A
External Public Debt                 4,136     4,291     4,430
Debt Service Payments (paid)           620       645       665
Gold and FOREX Reserves (net)        946.8   1,201.8   1,290.0
Trade Balance 4/                    -342.6    -679.1    -680.0
  Trade Balance with U.S.            -25.4     -73.8     -85.0
N/A--Not available.
1/ 1994 figures are all estimates based on available monthly
data in October 1994.
2/ GDP at producer price.
3/ Figures are actual, average annual interest rates, not
changes in them.
4/ Merchandise trade.
5/ Data in Uruguayan pesos was converted into U.S. dollars at
the average interbank selling exchange rate for each year.
1.  General Policy Framework
    Uruguay has a small, relatively open economy.  The
historical basis of the economy has been agriculture,
particularly livestock production.  Agriculture remains
important both directly (wool and rice) and indirectly for
inputs for other sectors (textiles, leather and meat).
Industry, which diversified beyond agro-industry into chemicals
and consumer goods for local consumption, has declined in the
face of greater competition, and now accounts for 21% of GDP.
Services, particularly tourism and financial services, now
dominate the economy, accounting for over 60% of GDP.  Banking
benefits from Uruguay's open financial system.
    The Government has been relatively successful in reducing
its fiscal deficit from 7.4 percent in 1989 to 1.6 percent in
1993.  Principal sources of the deficit are losses by the
Central Bank on nonperforming loans purchased from private
banks, foreign debt payments and transfers to the social
security system.  Inflation peaked at 129 percent in 1990, and
is expected to fall to 41 percent in 1994.
    Seeking to reverse a long-term economic deterioration and
to prepare itself for the formation of the Southern Common
Market (MERCOSUR) comprising Brazil, Argentina, Uruguay and
Paraguay, the Government is attempting to implement a program
of economic reform.  Major elements of the Government program
are privatization of state enterprises, financial sector reform
and reform of the costly social security system.  The progress
of reform, however, has been slow.
    Uruguay is the beneficiary of large inflows of capital,
principally from neighboring Brazil and Argentina.  The
Government has been able to finance a substantial portion of
its deficit through the issuance of dollar-denominated treasury
bills.  The Central Bank of Uruguay uses the adjustment of
reserve requirements as the main tool to control the money
supply.  However, the lack of instruments to neutralize capital
inflows makes control of the money supply difficult.
    On April 1994 the IMF approved the Uruguayan government
economic program for 1994 which will be subject to the IMF
staff monitoring procedure.  Uruguay has ratified the Uruguay
Round trade agreements and became a founding member of the
World Trade Organization (WTO) on January 1, 1995.
2.  Exchange Rate Policy
    The Uruguayan government allows the peso to float freely
against the dollar within a declining 7 percent band.  The band
currently declines by 2 percent per month.  Up to mid August
1994, the Central Bank regularly bought dollars to keep the
peso value from rising above the band.  For a period
thereafter, the value of the dollar was floating close to the
top of the band pushed by high liquidity and expectation of
formal devaluation.  By the end of October, the speculative
burst ended and the Central Bank was again buying dollars.  The
lag between devaluation and inflation decreased from about 21
percentage points in 1993 to 16 percentage points for the
twelve-month period ended October 1994 continuing to make
Uruguayan exports less competitive and imports more attractive.
    Uruguay has no foreign exchange controls.  The peso is
freely convertible into dollars for any transaction and much of
the economy is dollarized.
3.  Structural Policies
    Price controls are limited to a small set of products and
services for public consumption, such as bread, milk, passenger
transportation, utilities and fuels.  The Government relies
heavily on consumption taxes (value-added and excise) and taxes
on foreign trade (export taxes and tariffs) for its general
revenues.  A substantial social security tax, sometimes equal
to 50% of the base wage rate, is assessed on workers and
employers.  The top tariff rate was lowered from 24 percent to
20 percent in January 1 1993.  This has a positive effect on
U.S. exports.  Tariffs for products from Mercosur countries
will reach zero on January 1, 1995.  There are no plans for
further reductions of tariffs on products from third countries
at this time.
4.  Debt Management Policies
    Uruguay is a heavily-indebted middle-income country.  As of
March 1994, its total external debt was $7.8 billion, almost
$300 million over the amount in March 1993.  Of this amount,
$4.4 billion was public sector debt and $3.4 billion
represented debts of the private sector.  The public sector
external debt included 1.6 billion of dollar-denominated
Uruguayan government bills and bonds, $269 million of foreign
currency deposits of nonresidents, $2 billion of long term
loans of the nonfinancial public sector and $158 million of
suppliers credits.  The balance, amounting to $373 million,
represents liabilities reserves and other credits of the
Government of Uruguay financial sector.  International reserves
of the public sector banking system amounted to $2.5 billion,
resulting in a net public sector foreign debt of $1.9 billion.
    The $3.4 billion of the private sector foreign debt were
primarily made up of $2 billion of foreign currency deposits by
nonresidents and $359 million of supplier credits.  The balance
amounting to $1 billion represented liability reserves of the
private banks.  International reserves of the private sector
banks amounted to $3 billion resulting in a net private sector
foreign debt of $452 million.
    The debt service in 1992 was $750 million, equivalent to
45.6 percent of total merchandise exports, 26.7 percent of
combined merchandise and service exports and 5.7 percent of GDP.
5.  Significant Barriers to U.S. Exports
    Certain imports require special licenses or customs
documents.  Among these are drugs, certain medical equipment
and chemicals, firearms, radioactive materials, fertilizers,
vegetable materials, frozen embryos, livestock, bull semen,
anabolics, sugar, seeds, hormones, meat and vehicles.  To
protect Uruguay's important livestock industry, imports of bull
semen and embryos also face certain numerical limitations and
must comply with animal health requirements, a process which
can take years.  Bureaucratic delays also add to the cost of
imports, although importers report that a "debureaucratization"
commission has improved matters.
    Few significant restrictions exist in services.  U.S. banks
continue to be very active in off-shore banking.  There are no
significant restrictions on professional services such as law,
medicine or accounting.  Similarly, travel and ticketing
services are unrestricted.  A law allowing foreign companies to
offer insurance coverage in Uruguay was passed in October, 1993.
    There have been significant limitations on foreign equity
participation in certain sectors of the economy.  Investment in
areas regarded as strategic require Government authorization.
These include electricity, hydrocarbons, banking and finance,
railroads, strategic minerals, telecommunications, and the
press.  Uruguay has long owned and operated state monopolies in
petroleum, rail freight, telephone service, and port
administration.  Passage of port reform legislation in April
1992 allowed for privatization of various port services.
Recently approved legislation also allows for the private
generation of electric power and the privatization of the
state-owned gas company.  Cellular telecommunications are
operated by both private consortiums and the state-owned phone
company.  Privatization of the telephone company was rejected
in a referendum in 1992.
    Government procurement practices are well-defined,
transparent and closely followed.  Tenders are generally open
to all bidders, foreign or domestic.  In the past year,
however, several important government bids appeared to have
been awarded to non U.S. companies based on other than
objective criteria such as price and quality.  A Government
decree also establishes that in conditions of equal quality or
adequacy to the function, domestic products will have
preference over foreign ones.  Among foreign bidders,
preference will be given to those who offer to purchase
Uruguayan products.  The Government favors local bidders even
if their price is up to 10 percent higher.  Uruguay is not a
signatory to the GATT government procurement code.
    Following a recent reduction in the top rate, Uruguay's
tariff structure now varies between 0 and 20 percent.  Imports
from MERCOSUR member countries (Brazil, Argentina, and
Paraguay) enjoy significantly lower rates and will become 0
percent on most products as of January 1, 1995.  The only
exemptions to tariff regulations, in the context of
anti-dumping legislation, are reference prices and minimum
export prices, fixed in relation to international levels and in
line with commitments assumed under GATT.  These are applied to
neutralize unfair trade practices which threaten to damage
national production activity or delay the development of such
activities and are primarily directed at Argentina and Brazil.
Minimum export prices are scheduled to be phased out in 1995.
6.  Export Subsidies Policies
    The Government has provided a 9 percent subsidy to wool
fabric and apparel using funds from a tax on greasy and washed
wool exports.  This subsidy will be totally eliminated by May
1, 1995.  Uruguay is a signatory of the GATT subsidies code.
7.  Protection of U.S. Intellectual Property
    The Government of Uruguay recognizes intellectual property
rights in a number of areas, and there is no discrimination
against foreign companies seeking to register intellectual
property rights.  Uruguay has generally sufficient laws to
protect most intellectual property rights except with regard to
new technology and pharmaceuticals.  However, enforcement of
these laws is weak in certain areas such as software, due in
part to the fact that little of the domestic industry relies on
intellectual property protection.  Uruguay has been generally
supportive of efforts to strengthen the rules governing
intellectual property protection in international fora such as
the World Intellectual Property Organization (WIPO) and the
Uruguay Round of GATT.
    The Government does not discriminate between foreign and
domestic patent holders.  Owners and assignees of foreign
patents may obtain confirmation of patents in Uruguay, provided
application is made within 3 years of registration in country
of origin.  Confirmed patents are protected for 10 years, less
the period of protection already enjoyed in the country of
origin.  Compulsory licensing is not practiced.  Medicines and
chemical products are not patentable, although production
processes for such products are patentable.  Although no
figures are available, the lack of patent protection for
pharmaceuticals has had a marked effect on U.S. trade and
investment in the sector.
    Foreign trademarks may be registered in Uruguay and receive
the same protection as domestic trademarks.  Protection is
afforded for 10 years initially, renewable indefinitely.
    Uruguay affords copyright protection to, inter alia, books,
records, videos, and software.  Despite the legal protection,
enforcement of copyright protection for software is still weak
and pirating of software is substantial.  Software suppliers
have estimated that losses due to pirating could amount to $10
million.  There is also considerable pirating of videotapes and
cassettes.  The International Intellectual Property Rights
Alliance estimates trade losses from copyright piracy of motion
pictures, sound recordings and musical compositions, and books
at $9.9 million.
8.  Worker Rights
    a.  The Right of Association
    The Constitution guarantees the right of workers to
organize freely and encourages the formation of unions.  Labor
unions are independent of government or political party control.
    b.  The Right to Organize and Bargain Collectively
    Under a policy instituted in March 1992, collective
bargaining takes place on a plant-wide or sector-wide basis,
with or without government mediation, as the parties wish.
    c.  Prohibition of Forced or Compulsory Labor
    Forced or compulsory labor is prohibited by law and in
practice and there is no evidence of its existence.
    d.  Minimum Age for Employment of Children
    Children as young as 12 may be employed if they have a work
permit.  Children under the age of 18 may not perform
dangerous, fatiguing, or night work, apart from domestic
employment.
    e.  Acceptable Conditions of Work
    There is a legislated minimum wage.  The standard work week
is 48 hours for six days, with overtime compensation for work
in excess of 48 hours.  Workers are protected by health and
safety standards, which appear to be adhered to in practice.
    f.  Rights in Sectors with U.S. Investment
    Workers in sectors in which there is U.S. investment are
provided the same protection as other workers.  In many cases,
the wages and working conditions for those in U.S.-affiliated
industries appear to be better than average.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                               8
Total Manufacturing                                    73
  Food & Kindred Products                   (1)
  Chemicals and Allied Products              -1
  Metals, Primary & Fabricated                2
  Machinery, except Electrical                0
  Electric & Electronic Equipment             0
  Transportation Equipment                    0
  Other Manufacturing                       (1)
Wholesale Trade                                       111
Banking                                               (1)
Finance/Insurance/Real Estate                          25
Services                                              (1)
Other Industries                                        0
TOTAL ALL INDUSTRIES                                  316
(1) Suppressed to avoid disclosing data of individual companies
Source: U.S. Department of Commerce, Bureau of Economic
Analysis
(###)
UZBEKIST1
WU.S. DEPARTMENT OF STATE
UZBEKISTAN: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                            UZBEKISTAN
                     Key Economic Indicators
      (Millions of U.S. dollars unless otherwise indicated)
                                    1992       1993      1994 1/
Income, Production and Employment:
Real GDP (1985 prices)               N/A        N/A      N/A
Real GDP Growth (pct.)              -9.6       -2.4     -2.6
GDP (at current prices) 2/         447.2    4,428.1      N/A
By Sector:
  Agriculture                        N/A        N/A      N/A
  Energy/Water                       N/A        N/A      N/A
  Manufacturing                      N/A        N/A      N/A
  Construction                       N/A        N/A      N/A
  Rents                              N/A        N/A      N/A
  Financial Services                 N/A        N/A      N/A
  Other Services                     N/A        N/A      N/A
  Government/Health/Education        N/A        N/A      N/A
Net Exports of Goods and Services  1,424      2,205      N/A
Real Per Capita GDP (1985 base)      N/A        N/A      N/A
Labor Force (000s)                10,448     10,631   10,800
Unemployment Rate (pct.)             N/A        N/A      N/A
Money and Prices:  (annual percentage growth)
Money Supply (M2)                    N/A        N/A      N/A
Base Interest Rate                   N/A        N/A      N/A
Personal Savings Rate                N/A        N/A      N/A
Retail Inflation                     787        867      900
Wholesale Inflation                2,688      1,033      N/A
Consumer Price Index                 N/A        N/A      N/A
Exchange Rate (USD/som) 3/
  Official                          0.59    0.00095   0.0436
  Parallel                        0.0044    0.00098   0.0322
Balance of Payments and Trade:
Total Exports (FOB)                1,424      2,205      N/A
  Exports to U.S.                     38          7        3
Total Imports (CIF)                1,659      2,667      N/A
  Imports from U.S.                   21         73      100
Aid from U.S.                        7.4        8.9       19
Aid from Other Countries             N/A        N/A      N/A
External Public Debt                 123        N/A      N/A
Debt Service Payments (paid)          20        N/A      N/A
Gold and Foreign Exch. Reserves      N/A        N/A      N/A
Trade Balance                       -236       -463      N/A
  Trade Balance with U.S.             18        -66      -97
N/A--Not available.
1/ 1994 Figures are estimates based on data available in
October 1994.
2/ Figures for GDP are in billions of current rubles.
3/ Exchange rates are averages for 1992 (in rubles), averages
for the first 10 months of 1993 (i.e., before the introduction
of the som-coupon), and actual figures for end October 1994.
1.  General Policy Framework
    The Republic of Uzbekistan declared independence in 1991.
Since that time, like the other former Soviet republics, it has
been engaged in the arduous transition from a planned to a
market economy.  Although the Government of Uzbekistan
regularly states its determination to complete this process, it
just as steadfastly maintains that the process must be done
slowly, carefully, and in keeping with Uzbekistan's unique
conditions in order to maintain social stability.  The result
has been slower and more centrally-managed reform than in some
other former Soviet republics.  Restructuring of the economy
and the breakdown of trade links with the other former
republics has resulted in a declining GNP.  However, the
decline has been less sever than in some of the other
republics, and officials say production started to recover in
the second half of 1994.
    Uzbekistan's economy is primarily based on agriculture and
agro-processing, accounting for about half of GNP.  Uzbekistan
is the world's fourth largest producer (second largest exporter
after the United States) of cotton, and cotton accounts for
over 40 percent of agricultural production.  Much of the
industrial production is linked to agriculture, including
cotton harvesting equipment, textiles, and chemical fertilizers
and pesticides.
    Uzbekistan also has promising mineral reserves.  It is the
world's eighth largest producer of gold and has rich reserves
of uranium, silver, copper, lead, zinc, wolfram, and tungsten.
It is a net exporter of natural gas.  Petroleum and petroleum
products, at 3-4 mmt per year, currently account for the
largest share of Uzbekistan's imports.  However, Uzbekistan's
oil production is increasingly rapidly, and the government
hopes to achieve self-sufficiency in petroleum in 1996.
    Uzbekistan is slowly shifting its direction of trade away
from total reliance on the former Soviet Union (FSU)
countries.  Trade with the Commonwealth of Independent States
(CIS) still accounts for about 50 percent of Uzbekistan's total
trade (chiefly cotton exports and oil imports, but also
including machinery and other inputs for Uzbekistan's
factories).  Although Uzbekistan is a net exporter of fruits
and vegetables to the FSU, it must import about four million
tons of wheat each year, including from the U.S.  Uzbekistan
hopes to reach wheat self-sufficiency by increasing yields and
moving land from cotton to wheat cultivation, but it is likely
to remain a net importer for at least the near future.
Aside from wheat and petroleum, other major imports include
machinery and consumer goods.
    Fiscal Policy:  With independence, Uzbekistan lost budget
subsidies from Moscow which accounted for approximately 20
percent of the republic's budget.  As a result, the government
budget deficit increased to 13.8 percent of GDP in 1992, and
almost 16 percent in 1993, before declining to an estimated 3.2
percent during the first nine months of 1994.  The increase in
the deficit was largely due to the government's decision to
heavily subsidize prices of basic consumer goods and services,
such as bread, flour, fuel, and public transport.
Government-owned banks also supported failing state enterprises
through the provision of heavily subsidized credit.  The
improvement in 1994 is credited largely to the government's
decision to eliminate or sharply reduce most consumer
subsidies.  The budget deficit has been covered primarily by
borrowing from the Central Bank and credits (particularly for
food purchases) from abroad.
    Monetary Policy:  Uzbekistan was a member of the ruble zone
from independence in September 1991 until November 1993, when
it introduced a transitional currency, the som-coupon.  After
the introduction of the som-coupon, inflation, chiefly fueled
by sharply negative real interest rate credit to state
enterprises, continued at about 20 percent per month during the
first half of 1994.  In July 1994, the government introduced
its new currency, the som.  Through a combination of
administrative controls on the value of bills and withdrawals
from bank deposits, cutbacks in credit to state enterprises, a
sharp increase in the discount rate, and reduced government
borrowing from the Central Bank, the inflation rate fell to
about five percent per month from July through October 1994.
At the beginning of October, the government also announced a
fourfold increase in savings bank interest rates, making real
rates positive for the first time since independence.
2.  Exchange Rate Policy
    Since August 1994, there has been a two-tier legal exchange
rate system in Uzbekistan.  The official rate is set by the
Central Bank based on the outcome of a biweekly auction of
dollars to authorized commercial banks by the governmental
Republican Currency Exchange.  The rate is used for government
imports and exports, as well as non-cash transactions,
totalling about 70 percent of Uzbekistan's trade.  The
commercial rate is determined by the Central Bank on the basis
of its own unpublished calculations.  Authorized commercial
banks have a small degree of latitude to charge different
rates.  Although initially far apart, the two exchange rates
converged in October, and were identical at the start of
November.  A parallel, or "black" market operates openly and
vigorously.  At the end of October it carried a premium of
about 25-30 percent over the legal rate.
    In August, citizens of Uzbekistan were given the right to
purchase up to $250 in foreign exchange through the commercial
banking system; this was later increased to $1,000.  A
substantial portion of commerce in Uzbekistan was conducted in
hard currency during 1994, but a government decision in October
made the som the only legal tender for domestic sales
transactions.  Uzbekistan's investment law protects the right
to fully and freely repatriate profits in hard currency.
However, the limited supply of foreign exchange available
through the commercial banking system has made this difficult
in practice.  As a result, many foreign businesses rely on
barter or countertrade arrangements to repatriate profits.
Local private businessmen rely to a large extent on the
parallel market to finance imports of consumer goods.
3.  Structural Policies
    Pricing Policies:  The government officially decontrolled
almost all prices during 1994.  The state order system was
abolished for all agricultural commodities except wheat and
cotton, of which the majority must still be sold to the
government at set prices.  However, the government still
controls a major share of industrial production, transport
infrastructure, and the distribution network, and so exercises
a strong influence on pricing and marketing policies.  The
government remains the primary exporter and importer of
agricultural commodities (cotton exports and wheat imports) and
capital goods.
    Tax Policies:  Tax policies are confusing and often
ill-administered.  Value-added tax (VAT, 26 percent) and
enterprise (i.e., corporate, 26.9 percent) taxes accounted for
over 50 percent of tax collections in 1993.  Excise (14.8
percent) and personal income (10.7 percent) taxes play a
smaller role.  The government has suspended customs duties
through at least January 1995 in an effort to provide cheaper
consumer goods to the population.  The current enterprise tax
law uses the wage base plus profits, rather than simply
profits, in calculating the tax base.  The government currently
is working on a new draft law that will change this.  Income
tax laws were changed several times during 1994, and the
current top marginal rate of 40 percent takes effect at a
relatively low level of income by western standards.  Exports
carry a 15 percent hard currency tax and a further 15 percent
cash surrender requirement, which together are a major factor
impeding exports.  Joint ventures which invest in priority
sectors are eligible for tax holidays ranging from two to five
years.  Large foreign firms often are able to negotiate
individual tax deals with the government, but this is more
difficult for small and medium-sized firms.
    Regulatory Policies:  Uzbekistan inherited many production
standards and environmental regulations from the former Soviet
Union, but enforcement is spotty.  Issuance of regulations by
one government body absent coordination with other affected
government organizations has caused problems for some foreign
business interests.  Although almost all price controls
technically have been abolished, the state plan system still is
partially in place, and still determines quantities (and,
indirectly, prices) for many industrial inputs.
4.  Debt Management Policies
    Uzbekistan signed the "zero option" agreement with Russia
in 1992, and so assumed no responsibility for any of the former
Soviet Union's external debt.  Since independence, it has
pursued a very cautious policy on assuming debt, partly of its
own volition and partly because of western creditors'
reluctance to deal with an unknown new client.  As a result, it
has a very low foreign debt, although the actual amounts (and
thus debt/export and other ratios) are not public.  Uzbekistan
principally has relied on short-term commercial debt,
collateralized by its gold reserves or cotton.  It has also
received trade credits from the United States, Turkey, and
European countries, chiefly for purchase of agricultural
commodities.  Thus far, Uzbekistan's repayment record on its
limited debts has been good.  It has not rescheduled any
official or commercial debts to date.
    Uzbekistan is a member of the World Bank, IMF
(International Monetary Fund), and EBRD (European Bank for
Reconstruction and Development).  It has applied to join the
Asian Development Bank, for which it is eligible.  The World
Bank thus far has only approved one $21 million loan for
Uzbekistan, although several others are in the planning
stages.  The EBRD has made loans totalling $112.2 million to
Uzbekistan.  IMF currently has no adjustment program with the
IMF, but an IMF team was in Tashkent in November to finalize a
$140 million Structural Transformation Facility (STF) with the
government.
5.  Significant Barriers to U.S. Exports
    Import Licenses:  The Government of Uzbekistan says that no
import licenses are required for any goods.
    Services Barriers:  Foreign company involvement in the
services sector remains limited, and government officials say
they would like to increase it.  Under current legislation,
foreign banks may be registered by the Central Bank to conduct
banking operation and participate in commercial bank joint
ventures.  There is only one foreign joint venture bank in
Uzbekistan, and it has authority to conduct only limited
commercial banking operations.  The original monopoly of the
national tourist company UZBEKTOURIZM in travel services is
gradually being eroded.  The national airline Uzbekistan
Airways still has a virtual monopoly on domestic air travel and
ticket services.  Several foreign accounting firms are
operating in country as foreign aid contractors, and there
appear to be no barriers to them setting up private business
without local partners.  Foreign insurance companies are
limited to participation in joint ventures, which must be
registered by the state insurance company.  A major American
insurance company has successfully negotiated two joint
ventures, and found the process easier than in other CIS
countries.
    Standard, Testing, Labelling, and Certification:
Uzbekistan inherited many standards and testing requirements
from the Soviet Union, but often they are disregarded.
Ministries sometimes issue standards requirements that conflict
with other government commitments.  However, in cases where the
political will to complete a transaction exists, the problems
are usually overcome.
    Investment Barriers:  Uzbekistan has a very liberal
investment code which allows for, among other things, free and
full repatriation of profits and tax holidays of from two to
five years, depending upon the type of investment.  However, in
practice, negotiating and registering a joint venture is a
cumbersome process which requires the approval of numerous
government agencies and (usually) approval at the highest
levels of the government.  The registration process alone can
take 3-6 months, but hundreds of foreign companies have
completed it.  Repatriation of funds is complicated by the lack
of foreign exchange in the country.
    The government has targeted oil and gas, mining, processing
of agricultural commodities, textiles, and tourism as priority
areas for foreign investment.  It has stated it will allow up
to 100 percent foreign ownership in all but "strategic"
industries, where it will not allow majority foreign
ownership.  "Strategic" industries include, but are not limited
to, the mining, energy, and cotton processing sectors.  The
Government of Uzbekistan has indicated that it will seek few
exemptions from national treatment for some sectors of the
economy in the bilateral investment treaty (BIT) which it is
currently negotiating with the U.S. government.
    Government Procurement Practices:  Much of Uzbekistan's
trade with the states of the former Soviet Union is governed by
bilateral agreements that provide for countertrade in essential
commodities such as petroleum products, food and grain,
fertilizers, metals, and cotton fiber, but these have not
prevented U.S. firms from being active traders in cotton and
grain.  Efforts to forge closer economic cooperation with the
CIS and particularly other Central Asian states have not yet
proved to be obstacles to U.S. exports in some sectors, even
where the government is the customer.  Noncompetitive bidding
is still common, with trade deals often based on relationships
between government officials and foreign firms.  However, the
government has begun to make more use of tenders and
competitive bid processes.
    Customs Procedures:  customs procedures are bureaucratic,
often arbitrary and sometimes complicated by corruption.
6.  Export Subsidies Policies
    Many goods in Uzbekistan, and particularly those destined
for export, such as cotton (which provides 70 percent of
Uzbekistan's export revenues) are not bought and sold at market
prices, and the government directly or indirectly controls most
exports.  However, government policy primarily is directed at
import rather than export subsidies.  All exports are subject
to an export tax, and the most important ones require export
licenses as well.  Export goods are also subject to VAT on the
cost of their inputs, although not on the final product.  A
dual exchange rate is in effect, but the two exchange rates
currently are the same; earlier disparities in the rates
favored imports rather than exports.  There are no specific
promotional export financing programs, but the government does
give preferential tax treatment to foreign investors in
priority sectors, including production for export.  Uzbekistan
is currently a GATT observer, and it has applied for full GATT
membership.  It is not a member of the GATT subsidies code.
7.  Protection of U.S. Intellectual Property
    Uzbekistan is not a party to any international agreements
protecting international property rights.  Copyright and
trademark violations are not uncommon in Uzbekistan,
particularly involving western films, music cassettes, computer
software, and clothing trademarks.
8.  Workers Rights
    a.  The Right of Association
    Uzbekistan law specifically proclaims that all workers have
the right to voluntarily create and join unions of their
choice.  It also provides that trade unions themselves can
voluntarily associate territorially or sectorally, and may
choose their own international affiliations.  Unions are also
legally independent of the state's administrative and economic
bodies.  However, to date the country's de facto centralized
trade union structure has not changed very much following the
shift of power from Moscow to Tashkent.  A council of the
Uzbekistan Federation of Trade Unions provides central
leadership.  Although the labor law gives unions oversight for
both individual and collective labor disputes, the law does not
mention strikes or the right to strike.
    b.  The Right to Organize and Bargain Collectively
    Unions are empowered to conclude agreements  with
enterprises.  However, there still is no practice of unions
carrying out adversarial negotiations with private employers.
The private sector is growing, but the state still remains the
major employer, and the unions function more like professional
associations than adversarial groups in dealing with the state.
    c.  Prohibition of Forced or Compulsory Labor
    Uzbekistan's constitution specifically prohibits forced
labor.  However, the semi-mandatory exodus of students and
government workers to rural areas to help with the cotton
harvest for low wages is an annual phenomenon.
    d.  Minimum Age of Employment for Children
    Officially, the minimum working age is 16.  15-year olds
can work with permission, but have a shorter work day.
However, much younger children work with their families on
farms or participate in street trade.
    e.  Acceptable Conditions of Work
    The work weeks is set at 41 hours.  Some workers are
entitled to overtime pay, but rarely receive it.  Occupational
health and safety standards are established by the labor
Ministry in consultation with the unions.  There is a health
and safety inspectorate within the Labor Ministry.  However, as
with the other former Soviet republics, enforcement of
standards is very poor, and working conditions are well below
western standards.
    f.  Rights in Sectors with U.S. Investment
    U.S. investment is too limited at this time to permit
comment on any differences.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                               0
Total Manufacturing                                     0
  Food & Kindred Products                   0
  Chemicals and Allied Products             0
  Metals, Primary & Fabricated              0
  Machinery, except Electrical              0
  Electric & Electronic Equipment           0
  Transportation Equipment                  0
  Other Manufacturing                       0
Wholesale Trade                                         0
Banking                                                 0
Finance/Insurance/Real Estate                           0
Services                                                0
Other Industries                                      (1)
TOTAL ALL INDUSTRIES                                  (1)
(1) Suppressed to avoid disclosing data of individual companies
Source: U.S. Department of Commerce, Bureau of Economic
Analysis
(###)
VENEZUEL1
sU.S. DEPARTMENT OF STATE
VENEZUELA: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                            VENEZUELA
                     Key Economic Indicators
        (Millions of U.S. dollars unless otherwise noted)
                                     1992      1993      1994 1/
Income, Production and Employment:
Real GDP (1985 prices) 2/          72,999    72,297    68,393
Real GDP Growth (pct.)                6.8      -1.0      -5.4
GDP (at current prices) 2/         60,414    58,973    57,158
By Sector:
  Agriculture                       3,223     3,146     2,857
  Energy/Water                     11,969    11,684    11,800
  Manufacturing                     8,786     8,576     7,916
  Construction                      3,939     3,845     3,480
  Rents                             3,807     3,716     3,456
  Financial Services                1,540     1,503     1,398
  Other Services                   23,203    22,650    22,668
  Government/Health/Education       3,947     3,853     3,583
  Net Exports of Goods & Services  -1,169       273     1,522
Real Per Capita GDP (1985 base)     3,587     3,473     3,212
Labor Force (000s)                  7,538     7,546     7,622
Unemployment Rate (pct.)              7.1       6.3      12.0
Money and Prices:  (annual percentage growth)
Money Supply (M2)                    18.4      25.7      62.7
Base Interest Rate 3/                42.1      61.5      56.5
Personal Saving Rate 3/              11.9       8.5       6.1
Retail Inflation                     31.9      45.9      75.0
Wholesale Inflation                  26.0      47.3     109.0
Consumer Price Index (1984=100)   1,071.6   1,563.5   2,736.1
Exchange Rate (USD/Bs) 4/
  Official                          68.40     91.15     153.4
  Parallel                          68.40     91.15     161.9
Balance of Payments and Trade:
Total Exports (FOB) 5/             13,955    14,222    15,100
  Exports to U.S. (CV)              7,564     7,782     8,000
Total Imports (FOB) 5/             12,266    11,013     7,400
  Imports from U.S. (FAS)           5,178     4,395     3,800
Aid from U.S.                           0         0         0
Aid from Other Countries              N/A       N/A       N/A
External Public Debt               27,083    27,297    26,700
Debt Service Payments (paid)        2,695     2,989     3,200
Gold and Foreign Exch. Reserves    13,001    12,656    11,000
Trade Balance 5/                    1,689     3,209     7,700
  Trade Balance with U.S.           2,386     3,387     4,200
N/A--Not available.
1/ U.S. Embassy estimates based on information available in
October 1994.
2/ GDP at factor cost.
3/ Figures are actual, average annual interest rates, not rates
of change.
4/ Annual averages.  Venezuela adopted a fixed single exchange
rate of 170 bolivars to the dollar on July 11, 1994.  A
parallel exchange market is currently illegal.
5/ Merchandise trade.
1.  General Policy Framework
    Venezuela's long-term potential as a market for U.S.
business remains positive, although 1995 will be difficult.
The country has a moderately well-established economic
infrastructure and an impressive potential for economic growth
in petroleum, natural gas, hydroelectric power, iron ore, coal,
bauxite, and gold.  Venezuela is a major oil producer/exporter
and a founding member of OPEC.  The petroleum sector dominates
the economy, but the government is encouraging the development
of nontraditional basic export industries, such as
petrochemicals, aluminum, steel, cement, forestry, manufactured
consumer products, and mining.
    The bulk of accumulated foreign investment in Venezuela is
from the United States.  The United States remains Venezuela's
chief trading partner, absorbing 55 percent of its exports and
supplying 51 percent of its imports in 1993.  In December 1994
ratified the G-3 Free Trade Agreement between Venezuela,
Colombia and Mexico.  Venezuela has also ratified the Uruguay
Round agreements and became a founding member of the World
Trade Organization (WTO) on January 1, 1995.
    After three years of solid economic growth, Venezuela's
economy went into recession in 1993 with real GDP falling by 1
percent.  This contributed to a major financial sector collapse
in early 1994, followed by an even more severe contraction of
the economy.  GDP is expected to drop by more than 5 percent in
1994.
    The government recorded a fiscal deficit of about 3.6
percent of GDP for the consolidated public sector in 1993.  Tax
revenues from the petroleum sector as a share of GDP have
declined substantially in recent years as international
petroleum prices in real terms have fallen and non-oil revenues
have increased.  As a result, oil revenues are expected to
provide less than 50 percent of total revenues in 1994.  As a
result of the federal government bailout of the banking sector,
the government's fiscal deficit could climb to 15 percent for
1994.
    Financing of the deficit has been accomplished primarily
through the issuance of treasury bills ranging in maturity up
to two years, but heavily weighted toward the short-term.
Substantial financial support to the commercial banking sector
in 1994 has principally been supplied through borrowing from
the Central Bank.  The government has forecast a modest rebound
in output and a budget surplus for 1995.  Economic and fiscal
performance will depend on several factors, including ongoing
application of price and exchange controls, continuing problems
in the financial sector, proceeds from the privatization
process, and international petroleum prices.
    The Central Bank operated a tight monetary supply in 1993.
In real terms, M2 lost 18.84 percent.  However, in 1994
government assistance to the financial sector overwhelmed
attempts to restrict liquidity.  From the end of 1993 through
August 1994, although M2 decreased 8 percent in real terms, it
expanded by 33 percent in nominal terms.  During 1993 and 1994,
the government has relied primarily on 91- and 181-day zero
coupon bonds to soak up excess liquidity.  Inflation has been
on the rise the last several years, climbing from 32 percent in
1992 to 46 percent in 1993.  Prices for items in the CPI basket
increased by about 50 percent for the first eight months of
1994.  For the year, inflation is expected to reach 60 percent.
    The Caracas Stock Exchange has fluctuated in recent years.
The broad market index decreased 32 percent in 1992, but
climbed 10 points in 1993.  Foreign investment in the stock
market dropped in 1994 with the imposition of exchange controls
in July, but the market index hit a new high in September 1994,
bid up by local investors without dollar instrument investment
alternatives.
2.  Exchange Rate Policy
    From November 1992 to April 1994, Venezuela's Central Bank
implemented a crawling peg exchange rate regime of daily
minidevaluations.  In May, an auction system was introduced to
stem capital flight prompted by a lack of confidence in the
economy following a massive bailout of troubled banks and
resignation of the Central Bank President.  Central Bank
reserves, which stood at $12.7 billion at the end of 1993,
dropped to $9.0 billion by the end of June 1994.  On July 11,
1994 a fixed exchange rate system was established with a single
rate of 170 bolivars to the dollar, compared to an exchange
rate of 115 at the beginning of April.
    In addition to a fixed exchange rate, access to foreign
currency is strictly controlled under the new regime.  All
requests for foreign currency must be submitted to the
Technical Exchange Management Office (OTAC).  An Exchange
Control Board sets general policy.  Importers, exporters,
private debt holders, and foreign investors must register with
OTAC prior to submitting an application for currency.
Procedures under the new exchange control regime are still
evolving.  Currency transactions conducted outside the official
system are illegal and legislation is pending that would impose
heavy penalties for violations.  The Venezuelan government has
characterized the new controls as temporary, but after six
months of controls has not yet set a date for their elimination.
3.  Structural Policies
    In 1994, the Venezuelan government adopted a mix of
heterodox measures to respond to the economic recession and
collapse of the financial sector.  The government suspended
constitutional economic guarantees, using this mechanism as the
basic framework to implement foreign exchange and price
controls on a variety of goods (primarily essential goods
such as foods) and services (parking, funeral services, laundry
and drycleaning, and cinemas).  The stringent government
regulations for obtaining foreign exchange have disrupted lines
of credit for the private and public sector.  No progress has
been made on raising the domestic price of gasoline, which is
below the marginal cost of production; on reforming the
severence pay system; or in trimming public sector
participation in the economy through privatization of state
enterprises.
    A major income tax reform designed to improve government
tax collection and increase revenues in the nonpetroleum sector
was implemented in mid-1994.  The maximum rate for individuals
and corporations increased from 30 to 34 percent.  Venezuelan
tax law does not differentiate between foreign-owned and
Venezuelan-owned companies, with the exception of the petroleum
sector.  Hydrocarbon revenues of the state petroleum company,
PDVSA, are subject to a tax rate of 67.7 percent.  However,
joint-ventures between PDVSA and private companies in the
production and processing of off-shore natural gas and
extra-heavy crudes and bitumens are taxed at the lower
34-percent rate.  Venezuela imposes a one percent assets tax,
assessed on the gross value of assets (with no deduction for
liabilities) after adjustments for depreciation and inflation.
It is deductible for income tax purposes.  An investment tax
credit of 10 percent is available for the purchase of capital
goods to be used in manufacturing processes.
    The government also has implemented a temporary,
controversial 0.75 percent financial debit tax on financial
transactions that covers credit card charges, withdrawal of
funds and other debits to checking accounts, saving accounts,
trust funds, and other money market funds; it may be continued
beyond the end of 1994.  A value added tax, which was applied
at the wholesale level in late 1993, was converted to a
"wholesale" tax in August 1994 and applied to all goods and
services, including imports.  The wholesale tax rate is to be
defined each year within a range of 5 to 20 percent.  The rate
through the end of 1994 is 10 percent.  An additional luxury
tax of 10 or 20 percent for certain items was also established
in mid-1994.
    The Venezuelan tariff schedule has been substantially
liberalized, and quantitative restrictions have been almost
completely removed (prohibitions remain on used vehicles, used
tires and used clothing).  With its accession to the General
Agreement on Tariffs and Trade (GATT) on September 1, 1990,
Venezuela agreed to bind its tariff rate to a 40-percent
ceiling.  Venezuela's present maximum tariff rate is 20
percent, with the exception of a 35-percent tariff rate applied
to passenger vehicles as part of the Andean Pact Common
Automotive Policy.  The country's average import tariff on a
trade-weighted basis is around 10 percent.  Sensitive
agricultural products (milk, meat, rice, wheat, feedgrains,
oilseeds, and sugar) are subject to a price band system which
imposes a variable surcharge in addition to the duty when the
futures market for these commodities drops below trigger
prices.  In addition, the Venezuelan tariff legislation permits
the duty to be temporarily increased by 60 percent (e.g., from
20 percent to 32 percent) should the Economic Cabinet determine
that import of these products pose a particular threat.
4.  Debt Management Policies
    As of December 1993, Venezuela's public sector external
debt totaled $27.3 billion, which included $6.7 billion in
nonrestructured external debt (including commercial bank debt
and military promissory notes).  Medium-term private sector
debt totaled an estimated $5.3 billion.  External debt
represents about 54 percent of GDP.  In 1993, Venezuela's debt
service payments totaled about $2.7 billion, or 19 percent of
total exports.  Debt service payments for 1994 are estimated to
reach $3.2 billion, or 21 percent of total exports.
    Relations with commercial creditors have deteriorated
because the high inflation rate has increased the cost of
servicing external debt obligations.  In addition, stringent
foreign exchange controls have slowed debt payments to official
and commercial creditors.  Due to higher US interest rates and
downgrading of Venezuelan debt, the cost of borrowing has also
risen.
    In December 1990, the government rescheduled $19.8 billion
in commercial bank debt within the context of the Brady Plan.
Current government policy does not include an adjustment
program with the IMF; The World Bank and Inter-American
Development Bank are providing multi-year sectoral loans to
assist with economic restructuring and infrastructure programs.
5.  Significant Barriers to U.S. Exports
    Import Licenses:  Venezuela no longer has an import
licensing regime.  Sanitary and phytosanitary certificates from
the Ministries of Health (Nota 3) and Agriculture (Nota 6),
however, are required for most agricultural and pharmaceutical
imports.  The nota 6 requirement is used aggressively by the
Ministry of Agriculture, in effect banning U.S. poultry and
pork imports.
    Service Barriers:  Foreign equity participation in
enterprises engaged in television, radio, Spanish language
press, and professional services subject to licensing
legislation, is limited to 19.9 percent.  As of January 1,
1994, banks from countries that provide reciprocal access to
Venezuelan institutions may establish branches and 100 percent
foreign-owned subsidiaries or acquire 100 percent equity in
existing banks.  Foreign companies now receive national
treatment in the insurance sector.  The sector was opened to
foreign investment through reforms to the Insurance and
Reinsurance Law, which were gazetted on December 23, 1994 in
the Extraordinary Gazette Number 4.822.
    Standards, Testing, Labeling and Certification:  The
Venezuelan Commission of Industrial Standards (COVENIN)
requires certification from COVENIN-approved laboratories for
imports of over 300 agricultural and industrial products.  U.S.
exporters have experienced difficulties in complying with the
documentary requirements for issuance of COVENIN certificates.
    The Consumer Law, which went into effect in May 1992,
contains provisions regulating labeling.  All goods placed on
sale must bear a label indicating price to the public and
expiration date (where appropriate).  In the event of future
price increases, goods in stock with previous price labels must
be sold at no more than the prior price.
    Investment Barriers:  Pursuant to Executive Decree 2095,
published February 13, 1992, foreign equity participation is
unlimited in all sectors of the economy, except those
specifically restricted.  Prior government approval is not
required for investment in those sectors covered by the
decree.  Investors must simply register with the Superintendent
of Foreign Investment within 60 days following the investment.
Decree 2095 also guarantees the right of foreign investors to
repatriate profits and permits shares of foreign companies to
be publicly sold.  The repatriation of capital has been
complicated by the imposition of foereign exchange controls in
June 1994.  However, the Venezuelan govenment is attempting to
resolve these difficulties through the publication of a series
of specific relolutions by the Foreign Exchange Board.
    In addition to the sectorial restrictions noted above under
"Service Barriers," foreign investment is restricted in the
petroleum sector.  The exploration, exploitation, refining,
transportation, storage, and foreign and domestic sales of
hydrocarbons are reserved to the Venezuelan government or to
its entities.  When in the public interest, the government may
enter into agreements with private companies, as long as the
agreements guarantee state control of the operation, are of
limited duration, and have the prior authorization of the
legislature meeting in joint session.
    The Andean Pact Common Automotive Policy, which entered
into force on January 1, 1994, obligates auto assemblers in
Venezuela to satisfy a minimum percentage foreign exchange
contribution, to offset foreign exchange spent on imports, and
a minimum precentage regional content.  An addendum to the
policy, which will take effect on January 1, 1995, eliminates
the Venezuelan foreign exchange balancing requirement and
modifies the formula for calculating regional content.
    The Organic Labor Law, passed on May 1, 1991, limits
foreign employment in companies with ten or more employees, to
10 percent of the payroll.  Remuneration for foreign workers
must not exceed 20 percent of total wages paid.  Foreigners are
prohibited from offering any of the professional services
subject to licensing legislation (e.g. attorneys, architecture
and engineering, medical professions, veterinary practice,
economists, business administration/management, and accounting)
unless they revalidate their title at a Venezuelan university.
    Government Procurement Practices:  The Law of Tenders,
published on August 10, 1990 and subsequently modified though
Decree 1906 on October 30, 1991, provides for three methods of
procurement, depending mainly on the value of the goods and
services being procured.  For general or selective tenders
which are within a reasonable range, this law permits, but does
not require, preference to be given in awarding contracts to
offers based on the extent to which they include national
content, labor, investment, technology transfer, etc.  PDVSA is
required to purchase national materials and supplies; foreign
purchases are permitted only if domestic firms cannot meet
quantity, quality, or delivery requirements.  Imported
materials supplied by local representatives of foreign
manufacturers are classified as "domestic purchases."  Foreign
firms that supply PDVSA must register with PDVSA's unified
suppliers register or with the unified contractors registry.
Venezuela is not a signatory of the GATT Government Procurement
Code.
    Customs Procedures:  Customs clearance procedures are time
consuming, and delays can occur if documents are not in order.
Venezuela is not a signatory of the GATT Customs Valuation Code.
6.  Export Subsidies Policies
    Venezuela has reduced the number and type of export
incentives, but has retained a duty drawback system which
enables exporters to receive a rebate on duties paid on
imported inputs.  The current system was established under
Finance Ministry resolution 2603, dated June 10, 1994.  Under
the program, exporters must submit to Venezuelan customs
information on the quantity of exports, imported and national
inputs, and waste.  The duty drawback is calculated by means of
a formula which takes into account the exporter's production
efficiency.  Maximum rebates, which are expressed as a
percentage of the export free-on-board (FOB) price, have been
established by productive sector.  Rebates are given in the
form of Certificados de Reintegro Tributario (CERTs), which are
denominated in local currency.  CERTs are negotiable and
transferrable, and can be used to cancel duty payments.  The
Wholesale and Luxury Tax Law, enacted August 1, 1994, also
provides for a rebate of the wholesale tax paid on imports used
in producing goods for export.  The rebate is in the form of a
tax credit, which is negotiable on the secondary market.
    A joint resolution of the Foreign and Finance Ministries,
published June 13, 1991, lists those agricultural products for
which an export bonus is available.  The program provides a
credit against an exporters tax liability of one percent for
certain agricultural items whose national value added is from
30 to 98 percent.  For products whose value added is from 99 to
100 percent, exporters are eligible for a credit of 10 percent
of the FOB value.
7.  Protection of U.S. Intellectual Property
    Venezuela does not yet provide an adequate and effective
level of protection of intellectual property rights.
Traditionally, Venezuela's intellectual property rights (IPR)
regime has tended to protect national industries and firms.
Nonetheless, recent changes have taken place which may benefit
U.S. and other foreign firms by improving IPR protection.
Specifically, on October 1, 1993, a new copyright law entered
into force which strengthens copyright protection and increases
sanctions for violation of the law.  Andean Pact Decisions 344
and 345, which became effective January 1, 1994, have improved
protection for patent and trademarks, and plant varieties,
respectively.
    Venezuela is a member of the World Industrial Property
Organization (WIPO) and is a signatory to the Bern Convention
for the Protection of Literary and Artistic Works, the Geneva
Phonograms Convention, and the Universal Copyright Convention.
The Chamber of Deputies approved legislation for Venezuela's
accession to the Paris Convention for the Protection of
Industrial Property on December 8, 1994, following Senate
approval of the measure on October 31.  President Caldera is
expected to sign the law before the end of the year.  Venezuala
is not yet a signatory to the Patent Cooperation Treaty and the
Brussels Convention Relating to the Distribution of
Program-Carrying Signals Transmitted by Satellite.  Venezuela
signed the Uruguay Round TRIPS Agreement and plans to implement
it, along with the World Trade Organization, from January 1,
1995.  The U.S. Trade Representative has placed Venezeula on
the Special 301 "Watch List" as a result of its annual
assessment under Section 301 of the 1988 Omnibus Trade and
Competitiveness Act, most recently, in April 1994.
    Patents:  Although Decision 344 extended the patent term to
20 years; narrowed compulsory licensing arrangements; and
lifted the ban on patentability of pharmaceutical products
(except for those included on the World Health Organization
list of essential medicines), deficiencies remain.  Among
these, the Decision did not grant transitional or pipeline
protection for technologies previously excluded from patent
eligibility (particularly pharmaceuticals and agricultural
chemicals), working requirements were retained (although
importation can be used to satisfy the requirement), and
parallel imports are allowed.  Few patents have been enforced
under past and current law.
    Trademarks:  Decision 344 strengthened protection for
well-known trademarks, prohibits the coexistence of similar
marks, and provides for cancellation of trademark registrations
for "nonuse" within the Andean Pact for three years or on the
basis of "bad faith."  However, problems remain with the
registration process.  Application procedures enable local
pirates to continue producing and selling counterfeit products
during lengthy opposition proceedings, often lasting for
years.  Trademark piracy is common in the clothing, toy, and
sporting goods areas and enforcement remains poor.
    Copyrights:  Venezuela's Copyright Law is modern and
comprehensive (Andean Pact Decision 351, which was adopted in
December 1993, complements the Venezuelan law).  Venezuela's
law extended copyright protection to all creative works,
including computer software.  The law is currently in force and
is being used aggressively by private concerns to combat
piracy.  However, the Venezuelan government has yet to pass
regulations establishing a National Copyright Office, as
mandated under the law.  The National Copyright Office is to
play a key role in enforcement efforts.  Computer software and
videotape piracy is still rampant and unauthorized interception
and retransmission of U.S. satellite signals and services is
widespread.  A local association of computer program companies
estimates that 72 out of every 100 programs used in the country
is pirated.  According to the International Intellectual
Property Alliance (IIPA), some of the largest pirate videotape
manufacturing laboratories in South America are located in
Venezuela.  Pirate copies are sold on the domestic market as
well as exported to a number of countries in the region,
including the United States.
    New Technologies:  Computer software, satellite signals and
cable television are covered under Venezuela's Copyright Law
and Decision 351.  Decision 344 excludes from patent protection
diagnostic procedures, animals, genetic material obtained from
humans, and many natural products.  However, Decision 344
includes provisions for the protection of industrial secrets.
    The IIPA estimated that U.S. trade losses due to inadequate
copyright protection in Venezuela were approximately $123
million in 1993.  Piracy of computer programs accounted for the
largest losses ($51 million), followed by motion pictures ($40
million), books ($20 million), and records and music ($12
million).  Comprehensive estimates for losses due to patent and
trademark infringement were not available.  However, at least
one company has estimated its losses due to trademark piracy in
Venezuela at $170 million between 1987 and 1993.
8.  Worker Rights
    a. The Right of Association
    Both Venezuela's Constitution and its labor law recognize
and encourage the right of unions to exist.  The comprehensive
labor law enacted in 1990 extends to all public sector and
private sector employees (except members of the armed forces)
the right to form and join unions of their choosing.  There are
no restrictions on this right in practice and no special rules
or laws governing labor relations in export processing zones.
One major union confederation, the Venezuelan Confederation of
Workers (CTV), and three small ones, as well as a number of
independent unions, operate freely in Venezuela.  About 25
percent of the national labor force is unionized.
    b.  The Right to Organize and Bargain Collectively
    Collective bargaining is protected and encouraged by the
1990 labor law and is freely practiced throughout Venezuela.
According to the law, employers "must negotiate" a collective
contract with the union that represents the majority of their
workers.  It contains a provision stating wages may be raised
by administrative decree, provided Congress approves the
decree.  The law prohibits employers from interfering with the
formation of unions or with their activities and from
stipulating as a condition of employment that new workers must
abstain from union activity or must join a specified union.
    c.  Prohibition of Forced or Compulsory Labor
    There is no forced or compulsory labor in Venezuela.  The
1990 labor law states that no one may "obligate others to work
against their will."
    d.  Minimum Age for Employment of Children
    The 1990 labor law allows children between the ages of 12
and 14 to work if given special permission by the National
Institute for Minors or the Labor Ministry.  Children between
the ages of 14 and 16 can work if given permission by their
legal guardians.  Minors may not work in mines, smelters, in
occupations "that risk life or health" or in occupations that
could damage intellectual or moral development, or in "public
spectacles."  For those under 16, the work day may not exceed
six hours or the work week, 30 hours.  Minors under 18 can work
only during the hours between 6 a.m. and 7 p.m.
    e.  Acceptable Conditions of Work
    Venezuela has a national urban minimum wage rate ($90
monthly) and a national rural minimum wage rate ($60 monthly).
(To this should be added mandatory fringe benefits that vary
with the workers' individual circumstances but, in general,
would increase wages by about one-third.)  Only domestic
workers and concierges are legally excluded from coverage under
the minimum wage decrees.  The 1990 labor law reduced the
standard work week to a maximum of 44 hours.  Overtime may not
exceed two hours daily, ten hours weekly, or 100 hours annually
and may not be paid at a rate less than time-and-a-half.
Sundays are declared to be holidays, and those who must work on
Sundays are entitled to a full day of rest during the following
week.  The 1990 labor law stated that employers are obligated
to pay specified amounts (up to a maximum of 25 times the
minimum monthly salary) to workers for accidents or
occupational sicknesses regardless of who is responsible for
negligence.  It also declared work places must maintain
"sufficient protection for health and life against sicknesses
and accidents," and it imposed fines from one-quarter to two
times the minimum salary for first infractions.
VENEZUEL2
U.S. DEPARTMENT OF STATE
VENEZUELA: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
    f.  Rights in Sectors with U.S. Investment
    Labor rights and conditions of work in sectors in which
there is U.S. investment are provided the same protection as
other workers.  In many cases, the wages and working conditions
for those in U.S.-affiliated industries appear to be better
than average.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                               198
Total Manufacturing                                   1,371
  Food & Kindred Products                   221
  Chemicals and Allied Products             255
  Metals, Primary & Fabricated              (1)
  Machinery, except Electrical              (1)
  Electric & Electronic Equipment            35
  Transportation Equipment                  438
  Other Manufacturing                       316
Wholesale Trade                                         223
Banking                                                 (1)
Finance/Insurance/Real Estate                           156
Services                                                (1)
Other Industries                                        281
TOTAL ALL INDUSTRIES                                  2,295
(1) Suppressed to avoid disclosing data of individual companies
Source: U.S. Department of Commerce, Bureau of Economic
Analysis
(###)
TAIWAN1
bU.S. DEPARTMENT OF STATE
TAIWAN: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS
                              TAIWAN
                     Key Economic Indicators
        (Billions of U.S. dollars unless otherwise noted)
                                     1992      1993     1994 1/
Income, Production and Employment:
Real GDP (1991 prices)              176.3     178.6     188.6
Real GDP Growth (pct.)                6.5       6.2       6.2
GDP (at current prices)             206.6     216.4     234.2
By Sector:
  Agriculture                         7.3       7.8       7.9
  Energy/Water                        5.9       6.0       6.4
  Mining/Quarrying                    1.1       1.3       0.8
  Manufacturing                      67.9      68.5      72.5
  Construction                       10.7      11.9      13.2
  Commercial Services                33.7      35.7      15.4
  Transport/Communications           13.0      13.9      15.4
  Financial Services                 39.7      43.3      49.5
  Government/Other Services          27.3      28.0      29.4
  Net Exports of Goods & Services     5.1       4.0       3.4
Real Per Capita GDP (USD - 1986 prices)
                                    8,538     8,568     8,936
Labor Force (000s)                  8,765     8,864     9,100
Unemployment Rate (pct.)              1.5       1.5       1.5
Money and Prices:  (annual percentage growth)
Money Supply (M2)                    16.6      15.1      15.0
Base Interest Rate 2/                 8.2       7.9       7.6
Personal Savings Rate                -7.4      -1.6      -2.9
Retail Inflation                      4.5       2.9       3.8
Wholesale Inflation                  -3.7       2.5       1.9
Consumer Price Index (1991 base)   104.47    107.54    111.66
Exchange Rate (Dollar/NTD) 3/
  Official                        0.03946   0.03787   0.03789
  Unofficial                      0.03964   0.03779   0.03794
Balance of Payments and Trade:
Total Exports (FOB) 4/               81.5      85.1      90.5
  Exports to U.S.                    23.6      23.6      23.9
Total Imports (CIF) 4/               72.0      77.1      83.5
  Imports from U.S.                  15.8      16.7      18.0
Aid from U.S. 5/                     43.0      34.2      26.5
Aid from Other Countries                0         0         0
External Public Debt                  0.5       0.4       0.3
Debt Service Payments (paid)          2.1       1.8       1.7
Gold and Foreign Exch. Reserves      88.3      89.3      97.0
Trade Balance                         9.5       8.0       7.0
  Trade Balance with U.S.             7.8       6.9       5.9
1/ 1994 figures are estimates based on data from the
Directorate General of Budget, Accounting and Statistics, or
extrapolated from data available as of September 1994.
2/ Yearly average of the prime rate listed by the Bank of
Taiwan.
3/ Average of figures at the end of the month.
4/ Taiwan Ministry of Finance figures for merchandise trade.
5/ Outstanding debt owed.  AID disbursements stopped in 1968.
1.  General Policy Framework
    Over the past four decades, Taiwan has produced one of the
world's major economic success stories, achieving annual
economic growth averaging nine percent between 1952 and 1993.
Real gross national product (GNP) increased six percent in 1993
and is expected to expand by another six percent in 1994.  Per
capita GNP was $10,553 in 1993.  Taiwan holds foreign exchange
reserves of about $91 billion, more than any country except
Japan.  Prices rose 2.9 percent in 1993 and are expected to
rise about 3.5 percent in 1994.
    Taiwan's increasing economic prosperity has been
accompanied by a major structural transformation.  Appreciation
of the New Taiwan Dollar (NTD) and rising labor and land costs
have led many manufacturers of labor intensive products such as
toys, apparel and footwear to move offshore, mainly to
southeast Asia and mainland China.  Industrial growth is now
concentrated in capital and technology intensive industries
such as petrochemicals, computers, and electronic components,
as well as consumer goods industries such as food processing.
Taiwan's economy continues to be export oriented, with exports
accounting for 44.5 percent of GNP.  In the past several years,
GNP growth has been driven by increases in domestic
consumption, increased public spending on infrastructure, and
private investment.
    Falling official savings and growing public expenditures
have caused public debt to increase steadily.  This has
compelled the local authorities to rely more on bonds and bank
loans to finance major expenditures.  Consequently, outstanding
public debt has climbed, fast reaching almost 109 percent of
the total central budget for Taiwan's fiscal year of 1995 (July
1, 1994 to June 30, 1995).  While defense spending still
accounts for the largest share of public expenditures, it is
falling in both absolute and relative terms.  The greatest
pressure on the budget currently comes from growing demands for
social welfare spending.
    In the course of multilateral General Agreement on Tariffs
and Trade (GATT) negotiations, Taiwan has committed to
liberalize its trading regime in many sectors:  manufactured
products, agricultural products, and services.  Taiwan hopes to
accede to the GATT and its successor organization, the World
Trade Organization (WTO), by early 1995.
2.  Exchange Rate Policy
    Taiwan has a floating exchange rate system in which bankers
and their customers set rates independently of the
authorities.  Taiwan authorities, however, control the largest
banks authorized to deal in foreign exchange.  Foreign banks
account for one-quarter of foreign exchange business, and the
number of private domestic banks obtaining permits for foreign
exchange dealing is increasing steadily.  The exchange rate has
been fairly stable at about one U.S. dollar equals 25-27 NT
dollars since the major appreciation from one U.S. dollar
equals 40 NT dollars in 1985.
    The Central Bank of China (CBC) intervenes in the foreign
exchange market when it feels that speculation or "drastic
fluctuations" in the exchange rate may impair the normal
function of the market.  Two tools the CBC uses to influence
the foreign exchange market are restrictions on banks'
overbought and oversold positions and limits on the foreign
liabilities banks can incur.  Trade-related funds flow freely
into and out of Taiwan, although the CBC maintains restrictions
on the movement of funds in capital accounts.  In the past year
the local authorities have, however, relaxed a number of
restrictions on capital account transactions.
3.  Structural Policies
    The Taiwan authorities have committed themselves to further
reducing state direction of the macroeconomy and to pursuing a
policy of privatization.  At present, however, large state-run
enterprises still account for nearly one-third of the economy.
Electricity, water, petroleum products, transportation, sugar,
steel, the domestic production of cigarettes and alcoholic
beverages, and banking are all either partly or entirely in the
hands of state-owned firms.  To meet the goal of accession to
the GATT, the authorities said they will reduce the scope of
state control by permitting private firms to generate up to
20 percent of electricity.  A private firm has already begun to
build a naphtha cracker.
    Pricing is generally left to the private sector, but is
distorted by high tariffs on some sectors.  The authorities
have set up the Fair Trade Commission to thwart noncompetitive
pricing systems, but state-run firms can apply on a
case-by-case basis to obtain five-year exemptions.
    In March 1994, the Taiwan authorities cut tariffs on
industrial products at the behest of the United States, the
latest in a series of tariff cuts Taiwan has implemented in
recent years.  The authorities have not, however, reduced
tariffs on another 758 items requested by the United States.
Taiwan's tariff and pricing structure on agricultural products
in particular pose obstacles for U.S. exports, with tariffs on
some agricultural goods running as high as 40-50 percent, and
imports of products such as rice, peanuts, small red beans,
sugar, chicken meat, duck parts and some pork products being
banned.  Retail food prices are higher than those that would
prevail in a more liberalized market due to high import duties,
commodity taxes on diluted fruit and vegetable juices,
protected agricultural production, and an inefficient
distribution system characterized by layers of high markups.
The Taiwan Tobacco and Wine Monopoly Bureau (TTWMB), which has
a monopoly on the domestic production of cigarettes and
alcoholic beverages, guarantees artificially high prices for
tobacco, rice, grapes, and other products.
4.  Debt Management Policies
    Taiwan is virtually free of foreign debt.  By the end of
June 1994, Taiwan's long term outstanding external public debt
totaled $389 million, compared to gold and foreign exchange
reserves of nearly $96 billion.  These international reserves
suffice to meet Taiwan's capital requirements for 15 months of
imports.  Taiwan's debt service payment in 1993 totaled
$1.8 billion, accounting for only 1.9 percent of exports of
goods and services.  With these huge international reserves in
hand, Taiwan's central authorities and state-owned enterprises
see little need to incur foreign debt, even with the spending
anticipated for the six-year national development plan and
growing demands for domestic welfare spending.  As of June 30,
1994, the outstanding external public debt accounted for less
than one percent of the central authorities' total outstanding
public debt.
    Loans committed by the Taiwan authorities to the world
exceeded $1 billion at the end of 1993.  This number includes
credit supplied by the Ministry of Foreign Affairs and the
International Economic Cooperation Development Fund (IECDF) but
does not include credit from state-owned banks.  In 1993 and
1994, the IECDF offered low-interest loans to the Philippines
to convert Subic Bay into an industrial zone.  Through a
relending arrangement, it provided low-interest loans to
Vietnam to build highways and industrial parks and finance
small business firms' imports from Taiwan.  Taiwan has also
made contributions to the Central American Bank for Economic
Integration, European Bank for Reconstruction and Development,
and Asian Development Bank (ADB).  In addition, the ADB has
floated bonds in Taiwan.
5.  Significant Barriers to U.S. Exports
    The persistent U.S. trade deficit with Taiwan has been
steadily shrinking.  Taiwan's accession to GATT/WTO will open
markets for goods and services in which the United States is
competitive but will also remove area restrictions which
favored U.S. suppliers by restricting some other nations'
imports to Taiwan.
    Import licenses:  On July 1, 1994, Taiwan simplified its
import procedures for its 8,500 import categories by
implementing a negative list.  This list increases the
percentage of import categories exempt from controls from 34
percent to 85 percent.  There are 765 items that require
approval documentation from relevant authorities for Customs
examination during customs clearance.  Another 474 items are
imported under special conditions:  320 items require import
permits from the Board of Foreign Trade (BOFT) and 154 require
pro forma notarization by banks.  Imports are banned for 247
items, including ammunition, rice, chicken meat and some fruits
(bananas, papayas, guavas, pineapples and mangoes).
    Services Barriers:  In the past one and a half years,
Taiwan has removed many discriminatory limits on foreign
securities firms, insurance companies, and banks, including
those affecting branching, NT dollar deposits, and scope of
business.  Remaining services barriers include:
    Financial:  The local authorities limit foreign ownership
of securities investment and trust companies, local brokerage
firms dealing in offshore futures, and local companies listed
on the Taiwan Stock Exchange (TAIEX).  Foreign individuals are
prohibited from trading in shares on the TAIEX.
    Legal:  Foreign law firms that wish to operate in Taiwan
must either set up as a consulting firm or enter into a
partnership with a local firm.
    Insurance:  Taiwan prohibits mutual insurance companies.
Under current regulations, setting up a branch for a foreign
newcomer can be a lengthy process:  the foreign applicant must
have one year of experience in Taiwan as a representative
office before applying to become a branch, and it needs five
years of experience dealing with Taiwan before it can establish
a representative office.
    Transportation:  Taiwan does not permit foreign ocean
carriers to truck containers to their ultimate destinations on
the island.
    Telecommunications:  U.S. firms are not allowed to provide
basic or "type II" value-added network (VAN) services such as
information storage and retrieval, information processing,
remote transactions, and electronic data interchange.
    Motion Pictures:  Taiwan restricts the import of foreign
film prints to 24 per title (up from 16 as of October 1,
1994).  No more than nine theaters in any municipality may show
the same foreign film simultaneously.
    Standards, Testing, Labeling, and Certification:  Taiwan
has committed to join the GATT Code on Technical Barriers to
Trade as part of its GATT/WTO accession process.  Among the
existing requirements which particularly affect U.S. products
are those pertaining to agriculture.  Taiwan's lack of an
internationally accepted set of pesticide tolerance levels for
imported fruits and vegetables sometimes impedes trade in these
products.  For example, stringent microbiological and chemical
testing of imported food products such as turkey, pork, and
game meat limits imports.  Standards on preservatives for soft
drinks preclude the import of certain beverages.  Imported
agricultural goods are routinely tested while local
agricultural products usually are not.  The authorities
determine the purity of imported fruit juices using an amino
nitrogen test, a purity standard that is uniquely stringent.
    Investment Barriers:  Taiwan welcomes foreign investment,
which it recognizes contributed to its development.  It is
reducing remaining investment barriers both as part of its
GATT/WTO accession process and as part of its drive to become a
regional operations center.  Foreign investment is prohibited,
however, in such industries as agriculture, basic
telecommunications, broadcasting, cigarette manufacture and
liquor distilling.  Equity participation is limited in several
other industries, including shipping, mining and securities
trading.  Local content requirements, phased out for most
manufacturing industries, remain in place for the automobile
and motorcycle industries.  Foreign administrative personnel
are limited to no more than five per company, with the exact
number allowed dependent on business volume and the size of the
investment.  Foreign individuals are not allowed to purchase
shares on Taiwan's stock market.  An institutional investor may
invest no more than $200 million on the stock market.  A
ceiling of $7.5 billion exists for all foreign institutional
investment.  A foreign institutional investor may only remit
invested principal three months after his funds have arrived in
Taiwan.  Capital gains may only be remitted one year after
funds have arrived in Taiwan.
    Procurement Practices:  In theory, public procurement which
exceeds NTD 50 million ($1.87 million) should go through the
state-owned Central Trust of China.  However, numerous
exceptions to this policy have created a situation in which
most procurement actions (by value) are not done by the Central
Trust of China.  In addition, each agency has its own set of
procurement regulations and practices (often unwritten), making
the process cumbersome, confusing, and lacking in
transparency.  Furthermore, Taiwan commissioning agencies
frequently impose unprofitable contract terms such as lengthy
warranties, unlimited potential damages and contingent
liabilities, and expensive bond requirements.  Short lead times
on major tenders further tend to restrict foreign
participation.  Taiwan's Industrial Cooperation Programs (ICPs)
represent a form of offset and are becoming more prevalent.
The ICPs require foreign vendors to propose programs that
transfer technology, procure locally, and assist with
marketing.  Taiwan has informed GATT members of its desire to
negotiate adherence in the Uruguay Round Agreement on
Government Procurement.
    Customs Procedures:  Taiwan has agreed to abide by the GATT
customs valuation code, but still uses reference prices for
certain agricultural imports.  In order to simplify customs
procedures, Taiwan's customs authorities have implemented an
automated clearance system for air cargo whereby firms and
forwarders can process documents with customs by computer
linkup.  The authorities planned to implement a similar
automated system for sea cargo in November 1994.  Importers who
open a deposit with customs can clear merchandise first and pay
tariffs later.
6.  Export Subsidies Policies
    The Taiwan authorities generally refrain from using
subsidies and tax policies to subsidize exports, but exceptions
do exist.  Exports of rice and sugar enjoy indirect subsidies
through guaranteed purchase prices higher than world prices.
Producers of some fruit, poultry, and livestock receive
financial assistance with packaging, storage, and shipping via
marketing cooperatives and farmers associations.  Rice exports
are primarily humanitarian aid and the small amount of sugar
exports (produced solely by a state-run company) virtually all
go to the United States to maintain the U.S. quota for Taiwan.
The TTWMB guarantees prices for products which are used as
materials for tobacco and alcoholic goods.  In addition, Taiwan
authorities offer guaranty prices for a part of rice and other
cereal crops produced by farmers.
7.  Protection of U.S. Intellectual Property
    Taiwan's protection of intellectual property rights (IPR)
has improved substantially in the past few years.  A series of
important laws have been passed since 1992, including revised
copyright, patent and trademark laws, a U.S.-Taiwan bilateral
copyright agreement, and a cable television law.  Together with
new legislation currently under consideration to protect
integrated circuits and trade secrets, these laws give Taiwan
an IPR legal structure consistent with GATT TRIPS text
standards.  Improved enforcement efforts, including the
establishment of computerized export monitoring systems for
computer software and trademark goods, have led to a reduction
in computer software, video, laser disc and compact disc
piracy.  Inconsistent decisions by Taiwan's trademark and
patent examiners highlight the need for better training and
more standardized examination and registration procedures.
Taiwan is on the Special 301 watch list.  Taiwan is not a
member of any major multilateral intellectual property
conventions.
    Patents:  The revised patent law replaced most criminal
penalties for patent infringement with tougher civil
penalties.  U.S. companies are concerned that, in light of
Taiwan's relatively undeveloped civil law system, penalties are
insufficient to deter infringement.
    Trademarks:  Counterfeiting of famous name products has
decreased, but remains a problem.  Taiwan's voluntary export
monitoring system for trademarked goods should help if enough
U.S. firms choose to participate.
    Copyrights:  The export of counterfeit copyrighted goods
has dropped markedly.  The unauthorized copying of computer
software and manufacture of counterfeit video games remain
problems.
    New Technologies:  Inspection and monitoring efforts by the
authorities have sharply reduced the unauthorized use of
copyrighted programming on cable television.  Taiwan courts
have not yet taken a clear position on the legality of the
retransmission of unencoded satellite signals.
    The International Intellectual Property Alliance estimated
that the piracy of software, movies, music recordings and books
in Taiwan cost U.S. companies $150 million in 1993.
8.  Worker Rights
    a.  The Right of Association
    As a democracy, Taiwan has a large number of independent
labor organizations.  Many of these organizations, however,
lack a firm legal footing and the right to demand collective
bargaining, because they are not registered under Taiwan's
Labor Union Law (LUL).  According to the LUL, all workers
(except for civil servants, teachers, and defense industry
workers) can organize trade unions, but only after obtaining
the approval of the authorities.  The LUL forbids the emergence
of competing trade unions and confederations.  Most of the
3,654 officially registered labor unions have close relations
with management and the ruling Kuomintang (KMT) party.
    b.  The Right to Organize and Bargain Collectively
    The LUL, the Law Governing the Handling of Labor Disputes,
and the Collective Agreement Law give workers the right to
organize and bargain collectively.  These laws further
stipulate that employers may not refuse employment to, dismiss,
or otherwise unfairly treat workers on the basis of their union
membership or participation in mediation and arbitration.  In
practice, however, employers have at times ignored these laws
without suffering any legal action.  As of June 1994, 293
formal collective agreements were in force, about the same
number as in 1993.  Collective bargaining agreements exist
mainly in large-scale enterprises, which account for less than
five percent of the enterprises on Taiwan.
    c.  Prohibition of Forced or Compulsory Labor
    Under the Labor Standards Law (LSL), forced or compulsory
labor is prohibited.  Violation of the law is punishable by a
maximum jail sentence of five years.  The only reported cases
of forced labor involved prostitution.
    d.  Minimum Age of Employment of Children
    The LSL stipulates that the minimum age for employment is
15 years (i.e., after compulsory education ends).  Child labor
is rare in Taiwan.  As of October 1994, the authorities had
approved the employment of 11,915 minors between 15 and 16
years old by manufacturing industries.
    e.  Acceptable Conditions of Work
    The LSL limits the work week to 48 hours (8 hours per day,
6 days per week).  The LSL also has provisions for leave,
overtime pay, retirement pay and minimum wages.  In August of
1994, the authorities raised the minimum monthly wage by about
5 percent from the equivalent of $510 to $540.  The average
monthly wage in the manufacturing sector averaged the
equivalent of $1,110 in 1993.  In addition to wages, employers
typically provide additional payments and benefits, including
an 80 percent labor insurance premium, the distribution of
labor welfare funds, and meal and transportation allowances to
workers.
    f.  Rights in Sectors with U.S. Investment
    U.S firms and joint ventures generally abide by Taiwan's
labor regulations.  In terms of wages and other benefits, U.S.
firms tend to provide model work conditions.  Worker rights do
not vary significantly by industrial sector.  Working
conditions, however, tend to be relatively better in the
information and electronics industries and relatively worse in
the footwear and sporting goods industries.
  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993
                    (Millions of U.S. dollars)
              Category                          Amount
Petroleum                                               (1)
Total Manufacturing                                   1,896
  Food & Kindred Products                    80
  Chemicals and Allied Products             802
  Metals, Primary & Fabricated              (1)
  Machinery, except Electrical               87
  Electric & Electronic Equipment           775
  Transportation Equipment                  (1)
  Other Manufacturing                        72
Wholesale Trade                                         454
Banking                                                 401
Finance/Insurance/Real Estate                           144
Services                                                 79
Other Industries                                        (1)
TOTAL ALL INDUSTRIES                                  3,096
(1) Suppressed to avoid disclosing data of individual companies
Source: U.S. Department of Commerce, Bureau of Economic
Analysis
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World Factbook 1996 Edition
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