Economic: Nyumba

This page is a section of Nyumba.

By most modern standards, Nyumba is a very weak or failed state economically. A relatively small group of powerful individuals controls the financial, trade, banking, and commodity sectors within the country. The main focus of this group is to ensure that they remain in power and control of the country and its economy.  Manipulation of all resources to further the wealth and gain of the group is a common theme. To this end the leadership maintains low levels of regulation and oversight of economic activities to gain the most revenue possible. Legitimate and illicit economic activities exist on equal footing in Nyumba with the poorer population bearing the burden.

Nyumba’s economy is best characterized as unbridled capitalism. The government has few economic control measures in place and has little influence over the financial dealings of its citizens. The ruling elite of the country use their position for personal gain with significant corruption and manipulation of the economy in all levels of government.  The country ranks high on the GINI index of the distribution of income within the economy with those in the ruling elite holding 85% of the wealth. There are some tribal influences in the government and its handling of the economy but by and large the main factor is those in power do whatever is necessary to remain in control. The group is characterized by a diplomat’s recent comment, “shameless looters who are living in luxury while showing breathtaking indifference [to their people].”

The country’s basic infrastructure does not support economic growth. Few modernized roads, no rail lines, power distribution grid, pipelines, or other basic infrastructure severely restricts the government’s ability to launch economic development. Lack of basic infrastructure does lend itself to development opportunities if the government can find the funds or investors interested in undertaking high risk projects. A recent railroad construction project between Kismaayo and Lamu is a prime example. The government is funding a $1.1B loan for the project through the Olvana Export-Import Bank and an Olvanan construction company is leading the project.

With oil as the main revenue generating resource for the country, the economy is subject to commodity value swings. The recent downturn in worldwide oil prices is reflected in the GDP trending downward and the government running an ongoing deficit.   To counter the trend, the Nyumba Finance Minister recently announced production targets for the coming year at double that of prior years and implementation of some economic austerity measures.

Economic characteristics include;

-         Comparatively low and declining GDP growth; Downward trend in GDP over the past 5 years

-         Exploitation of the financial sector;  

-         Very low level of government regulation of financial activities; labor laws are very rudimentary with child labor accepted as the norm

-         Government has difficulty curbing Illegal activity such as counterfeiting and in some cases government officials are actually the head of illegal activities.

-         Gross corruption and financial mismanagement

-         Hampered by lengthy internal conflict between tribal groups with little government control over much of the country

-         Runs a 62.5% budget deficit of the GDP, approximately $1.8B annually

-         Very limited infrastructure to support economic development

-         Vast and largely untapped natural resources; oil reserves in limited production; uranium reserves but no current production

-         Natural gas exploration underway

-         Foreign aid and humanitarian relief contributes to corruption in the involved government agencies

-         Foreign investment is very low due to the lack of stability and high risk environment caused by the on-going low-level conflict

-         Some infrastructure development projects that are funded, controlled, and performed by foreign sources; Olvana

Table of Economic Data

Measure	Data	Rank in World	Remarks (if applicable)
GDP	2.9 billion USD	127	Oil and agricultural products are the main exports; unrefined petroleum, cotton, peanuts, charcoal, and livestock; sheep, cattle, goats
Labor Force	5.3 million	72	65% Agriculture - 25% Oil - 10% Industry & services
Unemployment	26%	190	65% engaged in non-wage work (agriculture & livestock
Poverty	80%		Income poor and living on the equivalent of less than $1 per day
Investment	5.45% of GDP	142	Olvana is the largest investor to-date
Budget	$437 million revenue $1..8 billion expenditures	188	Deficit at 62.5% of GDP - ineffective tax collection
Public Debt	33.06% of GDP	39	Decreasing debt but also a decreasing GDP
Inflation	182.2%	226	Hyper inflation as the government attempts to deal with the debt

Participation in the Global Financial System

As the main international export, Nyumba’s oil production has lead its involvement in the global financial system. The reduced production caused by its internal conflict prevented the country from seeking membership in either regional or international oil production cartels. As the main income producing resource for the country, the ability to increase production in an effort to maintain income caused Nyumba to avoid membership that could reduce production based on group agreements. This circumstance also created the motivation for Nyumba to circumvent economic sanctions imposed by the United Nations on other countries in seeking markets for its oil. 

Nyumba is not a rival to its neighbors in terms of legitimate economic activities. Illicit activities on the other hand are a significant issue in that the country targets the financial sectors of its neighbors for penetration and exploitation using North Torbia’s cyber capabilities. Nyumba’s diaspora provide a critical source of income that helps meet national income requirements. International humanitarian aid and diaspora contributions do much to feed the population during famine conditions caused by severe drought throughout the country and on-going internal conflicts.

Nyumba’s poorly guided approach to trade, loans, and grants makes it particularly susceptible to economic manipulation from numerous sources. This is particularly true of Olvana and the tendency for its loans or aid to come with political baggage. Nyumba currently carries loans from the International Monetary Fund (IMF) and all quarters of the globe, including North America, Olvana, Donovia, Western Europe, and the Middle East. 

World Bank/International Development Aid

Nyumba is the most oil-dependent country in the world. Its long legacy of conflict and limited development leave it with significant economic challenges. Declining oil revenues from exports caused by declining oil prices, coupled with disruption of oil production by the continuing conflict, severely handicap the country's ability to progress economically. Prolonged conflict destroyed much of the infrastructure used to support financial operations or prevented new facility construction.

World bank programs comprise 8 projects totaling $141 million dollars at 37 locations throughout Nyumba. Local development projects for the country focus on construction and reconstruction of the necessary infrastructure to support financial activities and services. The three elements of the programs include: refurbishment or reconstruction of the pre-conflict regional facilities, financing of program implementation to establish interim regional administration (IRAs), and finally funding of emergency works to respond to natural disasters.

Foreign Direct Investment

Nyumba seeks FDI from all sources in an effort to expand the economy, particularly in the area of oil production and export. Further development of oil production capability is viewed as an initiative that will support development of other resources such as natural gas or uranium. Infrastructure projects such as new roads, ports, and power generation will serve to expand Nyumba’s ability to benefit from the export of natural resources. The government actively pursued FDI with Olvanan and North Torbian companies to support this development program.

Olvana’s development project involves several East African countries with Nyumba being principle among them. One of the largest components is the investment in the construction of a deep-water port at Lamu and supporting road network. The objective of the Lamu project is to facilitate the transfer of oil from the El Kuran fields to foreign markets. The multi-billion dollar projects provide significant FDI benefit to Nyumba but it also makes the country reliant on Olvana. Olvana used this to its advantage and the majority of the Olvanan companies use very little Nyumbaan labor and absolutely no supervision of the projects.

Trying to gain more control over FDI, Nyumba covertly approached North Torbia to develop potential interest in oil and uranium. North Torbia needs the resources offered desperately because of international sanctions but doesn’t have the funding levels of Olvana. Nyumba and North Torbia struck a reciprocal agreement that delivers the natural resources in exchange for Information, Communications, and Technology (ICT) assistance. The international sanctions against North Torbia make it critically important that the agreement remain secret, so Nyumba carefully segregates its dealings with Olvana and other foreign business partners. For its part, North Torbia uses a network of shell companies to create an outward image of legitimate business operations

Economic Activity

Corruption at the highest levels of leadership in the country remain the main detractor for Nyumba’s economic activity. That coupled with the downturn in worldwide oil prices caused the country’s economy to slow in recent years. Most economic activity centers on production of agricultural products and the slow development of the oil sector. Overall no specific sector serves as the driving economic engine for the country but the expectation is that the investment by Olvana will serve as a stimulus for the oil sector and all associated supporting businesses.

There is wide separation between the majority of the population and the wealthy elite. Corruption is well entrenched and an expected part of Nyumbaan economic activities. Malfeasance and fraud rise to the highest levels in the government. Nyumba is working to be reinstated with the International Monetary Fund (IMF) and other international donors after it was suspended for senior leaders entering into $1.2B in government backed loans without the approval of parliament. After the old leadership was ousted by public outrage, the new government leadership agreed to an international audit and increased monitoring to facilitate reinstatement..

Economic Actors

Ariana’s military, charitable corporations, and government control large segments of its economy. Each one operates through a network of patronage and rules that favor its own operation and make  it difficult for others to become a competitor. These near-monopolies limit the efficacy of market competition as they give one group an advantage over another in various economic fields. These concentrations further self-interests that often prevent economic reforms intended to reduce regulation or improve market function.

The Arianian military is one of the country’s most prominent economic actors. It plays an increasingly active role on the domestic political scene and possesses extensive and diverse economic assets. President Ahmad Moudin served as an army commander in the 1980-88 Ariana-Iraq War,  and his presidency will most likely only enhance the military’s influence. Current military leaders and a network of current and former commanders operate Ariana's hydrocarbon industries and also dominate construction, agriculture, mining, transportation, defense, and import/export businesses. The military blatantly protects its business interests.

Charitable corporations operate as private holding companies but actually serve as quasi- governmental trust foundations. These corporations account for an estimated 33% to 40% of Ariana’s non-oil economy. Many of the charitable corporations predate the Council of Guardians Revolution and are custodians of Arianian Shia holy sites. Following the Revolution, their influence increased to the current level of significant economic and political influence. The Supreme Leader appoints the heads of these corporations, which control vast assets gained from Ariana’s confiscation of property during and after the Council of Guardians Revolution.

Charitable corporations provide social services to various elements of Arianian society, such as disabled war veterans, widows, and the indigent. The foundations have significant influence among the lower and lower-middle classes, and can exert tremendous political sway. As an ally of the conservative Arianian regime, charitable corporations give the government several avenues to exert social pressure and control when needed, including mobilizing citizens for protests, patronage, political indoctrination, and dissent repression.

As many as 123 different charitable corporations operate in Ariana. One of the largest and most important is the Foundation for Assistance to the Helpless. This corporation has amassed an estimated $12 billion in assets and employs more than 400,000 workers in its various enterprises.

The Arianian economy’s so-called “associations” also come under the control of key elites. In theory, the Ministry of Associations oversees their operations. In practice, however, allies or relatives of the regime elites control the larger associations and limit the ministry’s oversight powers. The best- known cooperative, the Ariana Pistachio Farmer’s Association, exemplifies the privileged status of these organizations. A former Arianian president runs this cooperative, which claims to represent over 70,000 pistachio farmers and generates an estimated $746 million annually in revenue.

Historically, Arianian merchants contributed significantly to the country’s economy. They seek economic stability and certainty, but are reportedly displeased with the current government. The merchants do not necessarily want a completely free trade system, however, as it might impinge on their privileged business status. They remain skeptical of increased foreign investment, fearing that Western factories and companies might operate more efficiently and compete effectively with the merchants. Some Arianians complain that the merchants try to control certain markets by group actions such as joint boycotts that force a supplier to make concessions.

Trade

International trade contributes significantly to the Arianian economy. Hydrocarbons constitute a major portion of the trade, as oil and natural gas represent 81% of Ariana’s total exports. Other import/export commodities include agricultural goods (fresh and dried fruits), petrochemicals, consumer goods, industrial raw materials, and military items. Ariana generally fosters its relationship with East Asian countries as a hydrocarbon resources exporter and finished goods importer. To avoid international sanctions on certain items, Ariana uses Limaria as a principal trade route for re-exporting goods.

Commercial Trade

During the last four years, Ariana’s total trade in goods (exports and imports) nearly doubled to $147 billion. Ariana benefits from a positive trade balance. Oil and natural gas, which dominate Ariana’s export revenue, provide the country’s most important foreign exchange earnings.

Instead of its traditional European partners, Ariana now trades primarily with East Asian countries (especially China and Japan) that are hungry for petroleum resources and can provide finished consumer goods for the Arianian market. Limaria serves as a vital link to the rest of the world’s trading market.

Military Exports/Imports

Nyumba is under an arms embargo by the United States due to the country’s continuing low level of conflict and the resulting on-going humanitarian crisis. In spite of the embargo, the government was able to spend $8 million on purchase of conventional weapons. This amount is a significant reduction from the expenditure five years ago of $61 million for aircraft, armored vehicles, artillery, radar systems, missiles, small arms and ammunition. The declining economy caused the precipitous reduction in arms expenditures with the country unable to maintain or replace many of the damaged systems. This is another area where North Torbia attempted to fill the gap in order to gain some much needed hard currency.  

Economic Diversity

Ariana’s economy demonstrates diversity across multiple sectors: manufacturing, agriculture, and extractive industries. However, the country almost exclusively depends on its hydrocarbon industries to sustain its economy. Oil exports serve as Ariana’s chief revenue producer internationally, while internally the Arianians rely on natural gas for most of their energy needs. Ariana works to increase its domestic reliance on natural gas due to its lower cost, and focuses on increasing its higher-priced oil exports to maximize revenues. The Arianian government created programs in its recent five-year plans to re-establish its agriculture and manufacturing sectors, but with only limited success.

Energy Sector

The Arianian government watches energy more closely than any other sector of its economy. Ariana’s hydrocarbon resources and revenue remain key to the country’s domestic economy and stability. Its large hydrocarbon resources are one of Ariana’s few levers when dealing with the international community.

Ariana’s energy sector continues to deteriorate from increasingly antiquated practices and equipment, as sanctions have limited international investment in Arianian hydrocarbon infrastructure and technology. The Ministry of Petroleum, through its system of nationally-owned subsidiaries, maintains responsibility for all Arianian oil and natural gas production and exploration. Ariana has an estimated 10% of the world’s oil reserves and 15% of the world’s natural gas reserves.

Oil

The Dastet region, near the Iraqi border, contains the vast majority of Ariana’s onshore crude oil reserves. Ariana operates 40 oil production fields—27 onshore and 13 offshore. Currently, Ariana exports about 2.4 million barrels per day (bbl/d) primarily to Asian markets, making it the world’s fourth-largest exporter. The remaining 1.7 million bbl/d is used domestically. Ariana produces about 4.5% of all global oil, and its primary crude oil export market is East Asia, followed by Europe.

Currently, Ariana meets half its domestic energy needs with oil and the remainder with natural gas. Ariana refines most of its internal use oil into gasoline or diesel fuel. Because of its limited domestic refinery capability, Ariana imports much of its refined gasoline requirements. The Arianian government intends to shift a greater share of its domestic energy requirements to natural gas, hoping to become self-sufficient for gasoline and possibly a refined-gasoline exporter. Currently, however, substantial governmental gasoline subsidies encourage wasteful domestic gasoline use.

Natural Gas

Ariana has massive natural gas resources along the Persian Gulf coastline and shares the large South Pars gas field with Qatar, which is in the center of the Persian Gulf between  the  two countries. South Pars is Ariana’s largest natural gas field and represents an estimated 27% of Ariana’s total natural gas reserves. In addition to these developed natural gas fields, another two- thirds of Ariana’s total natural gas resources are in undeveloped fields. Ariana has the world’s second-largest known natural gas reserves after Donovia.

Over the last 20 years, Ariana has increased both its natural gas production and consumption. Natural gas currently accounts for nearly half of Ariana's current total energy consumption, and the government plans to invest billions of dollars to increase this share. To encourage consumption, the Arianian government significantly subsidizes natural gas prices for residential and industrial consumers. Despite large gas reserves, the artificially low domestic price promotes consumption and encourages waste, leaving only a minimal supply for export. The Arianian government hopes to increase its gas exports as a means to increase its revenue.

Ariana likely will face stiff natural gas competition given that many current gas suppliers—Oman, Qatar, and the UAE—have locked up much of the Far East market. International sanctions also limit Ariana to non-US liquefaction technology, an outdated process as most liquid natural gas  (LNG) plants use newer US-developed processes. Ariana has no modern LNG facilities. Because of this, Ariana continues to court China, Donovia, and India to invest in its natural gas development.

Agriculture

Agriculture constitutes approximately one-tenth of Ariana’s GDP and employs one-quarter of its labor force. The country is a major world exporter for caviar and pistachio nuts, and Ariana’s climate and terrain also support tobacco, tea, wheat, barley, and smaller amounts of other food crops. Ariana emphasizes agriculture as an important development focus in its governmental five-year plans but still struggles to become self-sufficient in subsistence crops because of resource underfunding, climatic issues, and rural population migration to urban areas.

Traditionally, Ariana has paid for agricultural imports with oil revenue. Despite recent high oil prices, international food price increases and a population growth surge continue to place pressure  on the country’s economy. The Arianian government supports substantial agricultural subsidies, which create artificially low food prices. If Ariana converted to a market-driven agricultural  economy, it would likely cause domestic unrest due to higher food prices.

Mining

Despite large reserves of minerals like zinc, copper, iron, uranium, and lead, mining in Ariana is generally underdeveloped, accounting for less than 1% of GDP. Mining is likely to increase in importance, as the US government estimates that Ariana possesses 7% of global mineral reserves.

Manufacturing

Arianian industrial development shows tremendous promise coupled with extraordinary handicaps. Ariana has the most mature steel, automotive, and petrochemical industries in the Middle East. However, Arianian companies remain dependent upon oil export profits despite various government reforms to spur industrial growth.

Steel

Ariana produces nine million metric tons of steel, the most in the Middle East and 20th in the world. Despite this high production level, Ariana still must import steel to meet its domestic demands. Steel requirements continue to increase because of the rising need for project infrastructure and construction expansion throughout the Middle East.

Automotives

Ariana produces the most vehicles, both light and heavy, in the Middle East. However, outdated technology that depends on repair parts supplied through third-world countries hinders production, especially for the two largest automakers—Ariana Automobile and Nalia. Domestically produced cars are fuel inefficient and contribute to the country’s pollution problems. Since Ariana’s automobile demands outpace its domestic production, the country must import a variety of cars ranging from basic to luxury models.

Petrochemicals

Ariana manufactures many petrochemicals. The government funds petrochemical industrial development as part of efforts to diversify its exports.

Defense Industries/Dual Use

Ariana has a significant defense construction capability, and the government has identified increased defense industry self-reliance as a key strategic goal. Though Ariana has had few new, homegrown accomplishments in military production or design, the Arianian industrial base has proven its ability to reverse-engineer and build foreign military aircraft, radios, and vehicles.

Services

Domestic services continue to grow in importance, especially as sanctions limit Arianian capabilities to source needed capabilities, particularly financial services, from abroad. Of the Caucasus countries, only Gorgas has a higher service level. The Arianian service industry currently accounts for 43% of GDP.

Banking and Finance

Public Finance

Ariana struggles with high inflation for a number of reasons, including government price controls, inefficient and cumbersome government regulations, pervasive consumer subsidies, expansionary government  development programs,  and financial  policies  that favor  selected  organizations, e.g. charitable corporations. International sanctions have also resulted in high inflation, contributing to the economic imbalance.

Inflation has risen into the double-digit range in recent years and currently stands at 13.5%, a decrease from 25.6% just two years ago. Ariana uses price controls for consumer products such as gasoline, electricity, wheat, and a myriad of other articles and services. The country maintains multiple price subsidies as a result of the Council of Guardians Revolution and its ambition to provide social services for Arianians. Although inflation is prevalent throughout the Middle Eastern countries (usually around 10%), Ariana possesses the second-highest inflation rate behind Iraq.

Despite the subsidies, inflation hurts average Arianian citizens, particularly those in rural areas. Prices for food and services continue to rise, making the cost of living ever higher. Rural voters supported Ahmad Moudin for president because his populist message appealed to lower-class people who suffer from high inflation. President Moudin attempted to address high inflation rates by capping bank loan interest rates, but raised the financial sector’s ire. Whenever the government attempts to reduce subsidies and force the people to pay more for commodities, the Arianian people demonstrate in the streets until the government rescinds the reductions.

Taxation

Ariana’s tax law is complex, and governmental officials apply the tax code inconsistently. The country has a high income tax rate that maxes out at 35% and a moderate corporate tax rate of up to 25%. In recent years, the government enacted some modest structural tax reforms to help integrate Ariana into the global market and to attract investment. However, the government still issues many tax privileges to special interest groups such as charitable corporations. The national sales tax currently stands at 3%.

Currency Reserves

Ariana’s international currency reserves, including PWF assets, have continued to increase in recent years. International currency reserve levels often are tied to international oil prices. Ariana’s international reserves grew from $70.8 billion two years ago to $85.2 billion this year. In retribution for American efforts to limit its access to the foreign investment system, Ariana rejected payments in US dollars and moved to other currencies, such as the euro and yen.

Private Banking

Ariana’s financial sector remains dominated by large, state-owned banks with extensive regulations, overlapping bureaucracies, and policies that inhibit the efficient trade of capital. The appearance of a modern banking system is misleading despite Ariana’s establishment of private banks and increased accessibility of banking functions for the populace. The government’s policy of preferential treatment for semi-governmental foundations and its limitation on the free functioning of financial markets  will continue to hamper the financial system’s ability to contribute to economic growth. Consequently, the populace struggles with high interest rates only made bearable by considerable product subsidies that keep prices artificially low. The governmental restrictions, borne from  distrust of foreign intervention, limit any large-scale investment by foreign firms. The Moudin Administration will continue its current monetary policy, which is well-liked by his populist political base but hampers any significant financial reform.

Banking System

The country’s state-owned banks, which hold 90% of deposits, include six commercial banks, four specialized banks, and one postal bank. The Arianian government has licensed six private banks in the past decade. All must operate under Islamic law principles.

Ariana’s Central Bank, the Bank Naket, calls itself an independent institution. However, the government directly manipulates all commercial lending and investment. The Bank Naket cannot establish its own policies and has no influence over the government’s direction. In addition, the Central Bank only has limited options to combat inflationary pressures. The Central Bank must obtain approval from the Arianian parliament in order to issue participation papers.

State-owned banks function poorly as financial intermediaries, and private banks are hampered by extensive regulations and the government’s populist policies, including subsidized credit for specific regions. Four years ago, President Ahmad Moudin capped lending rates at 12% for state-owned banks and 13% for commercial banks, despite strong opposition from the Bank Naket. With interest rates below the inflation rate, many banks found themselves under financial duress. Additionally, state-owned enterprises and quasi-government agencies, such as charitable corporations, can obtain low-interest loans that further undermine commercial bank viability. Some believe the financial system stifles domestic business and lowers Ariana’s attractiveness to foreign businesses.

Stock/Capital

The Arianian Stock Exchange (ASE), which began operating in 1967 with six companies, has over 300 members today. The ASE can only conduct capitalization for the automotive, mining, petrochemical, and financial sectors. Six years ago the ASE began allowing foreign investment, but these investors can only hold a maximum of 10% of the shares for any company. Additionally, foreign investors cannot withdraw their capital until three years after purchase.

In recent years, the ASE demonstrated considerable volatility. The ASE index performed robustly and tripled during the three-year period prior to President Ahmad Moudin’s election, but declined immediately afterward. Four years later, the ASE stabilized 20% lower than before Ahmad Moudin’s election. ASE market capitalization now stands at $46 billion. Ahmad Moudin’s government hopes that privatization plans will help revive the ASE, though potential foreign investors are concerned about liquidity, transparency, the poor legal environment, and international sanctions.

Informal Finance

The hawala system, an informal trust-based money transfer system commonly found in Muslim countries, offers an alternative to the Arianian formal banking system for loans. These transactions work on an honor system without paper transactions or promissory notes. Because of the lack of paperwork, terrorists use the system to fund their activities.

Following recent US and UN financial sanctions, Arianians have increased their use of hawala. Many Arianians view it as a more efficient means to transfer money since it avoids the added expenses of the formal financial system. Some analysts argue that increased hawala use demonstrates the effectiveness of international sanctions, though others say it circumvents the sanctions and renders them useless.

Employment Status

Despite inefficient business and market regimes and the bulge of young adults entering the labor pool, the Arianian employment environment actually shows signs of improvement due to private industry growth. Even the increased number of Arianian women who recently entered the labor market did not increase the country’s unemployment rate. Employment status is high in Ariana.

Labor Market

Although Ariana’s population growth rate began to slow in 1991, those born during the prior decade now find themselves reaching adulthood, and their presence puts a strain on the labor market. For the past quarter-century, the number of Arianians entering the labor force has continued to increase, while the number leaving has remained constant. In addition, Ariana shows a decided shift in the attitudes toward employment of women. Immediately following the Council of Guardians Revolution, women who worked outside the home dropped from a high of 12.9% in 1979 to a low of 8.2% in 1989. After that, the trend reversed; currently 14.8% of Arianian women work outside the home. Many Arianian women now acquire a higher education than in previous generations and begin a career before marriage. Analysts project that the number of Arianians entering the labor market will soon begin to decline. Within four years, new Arianian workers will return to levels last seen in 1991. The number of men leaving the labor force due to age (usually 64) will increase over the next decade. Just five years ago, 1.3 million Arianians turned 64, but within another half-decade, two million men will reach that age.

Employment

Arianian unemployment continued to decrease in the past decade despite an increase in the number of young adults. Employment rose at a 3.6% rate in the early years of the decade, more rapidly than the overall labor market increase. This employment abundance came from the private sector and through privatization of industries, in contrast to the years immediately after the Revolution when public sector jobs accounted for the majority of employment. Public sector jobs continue to decline, currently representing about one-quarter of total employment.

Unemployment

The unemployment rate dropped from approximately 16% in 2001 to 10.2% in 2006, and currently stands at 11.8%. Growth in recent years has primarily been due to private sector jobs. Public sector job growth has been hampered by cumbersome regulations and a job market that restricts labor movement between industries. Arianian industrial GDP growth occurs more slowly than in other countries with more efficient financial systems.

Illegal Economic Activity

Both legal and illegal organizations use illegal activities such as smuggling, black market, and piracy to finance other activities. While the Arianian government frowns on this corruption and works to prevent it, the government is hampered by the sheer prevalence of illegal activity. As long as it does not threaten the government’s legitimacy, this type of illegal activity will continue. The illegal economy is exemplified by a vast network smuggling subsidized products throughout Ariana, with gasoline as one of the top commodities. Some experts estimate that smugglers move 3.5 to 4.5 million liters of gasoline and two million liters of diesel fuel daily to countries with high gasoline prices—mainly Afghanistan, Pakistan, Kalaria, and even Iraqi Kurdistan.

Summary

Complex economic interplay between the Caucasus countries binds them together. Limaria, Gorgas, and Atropia were strongly affected by the reduction of Donovian influence two decades ago. The oil- rich countries of Ariana and Atropia must use their Limarian and Gorgan neighbors to transship hydrocarbon resources to other countries. Limaria and Gorgas must develop a free-standing economy despite significant corruption, lack of developed industries, and natural resource shortages. Over all of this, Donovia seeks to limit Arianian influence and return to its former position as unquestioned regional hegemon. This economic interdependence will likely drive regional conflicts as the nations struggle amongst themselves to exploit riches created by oil and natural gas.