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

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.  A diplomat recently characterized the group as, “shameless looters who are living in luxury while showing breathtaking indifference [to their people].”  Leaders and government officials manipulate economic policies to enhance their personal benefit. Only because of pressure from the population are they interested in economic improvements that ensure they will remain in power. Government leaders influence humanitarian aid shipments as a tool to retain power as well. Contracts for food or aid distribution flow to those supporting the leadership whenever the opportunity develops. 

The people of Nyumba are adept at navigating through these risky financial seas. Using tribal influence and leverage they are able to maintain day-to-day existence. Dealings with businesses outside the tribe typically involve an alternate producer price for commodities they sell. The outsider price includes a markup in anticipation of the inevitable “baksheesh” payments necessary to successfully complete a business transaction. Business reciprocity is actively practiced as well. Bargaining and negotiating involve expected concessions that create and maintain relationships that will be repaid at some future time. Balanced reciprocity creates an informal balance ledger between trusted businesses that characterize normal transactions.Nepotism and cronyism, as defined by the West, are both strongly entrenched in not only the government but also in many leading businesses in Nyumba.  Both practices are normal and expected in Nyumban business dealings. 

Legitimate business owners struggle to establish and maintain normal operations in Nyumba. Only by joining in and using the influence of power brokers in the government are they able to remain competitive. Illegitimate operators find that there are few government policies or laws related to financial activities that hinder their enterprises. Customs officials can easily be bribed to authorize shipment of what would otherwise be seized contraband.  These common arrangements also allow criminals to siphon off humanitarian aid donations from other countries or aid organizations for sale on the black market. 

Financial institutions maintain dual business positions. They have legitimate business operations for dealing with national and international businesses and illegal operations that conduct money laundering, predatory loan practices, or other illegal activities. As Nyumba seeks outside investment, the presence of foreign businesses is more prevalent in large transactions. Principally, Olvanan businesses operate in Nyumba with backing from both governments that gives Olvanans a significant advantage over local firms attempting to compete. This advantage allows the Olvanans to strike advantageous agreements for commodities and labor. 

Trade

Nyumba’s trade continues to be dominated by agricultural and growing oil exports. Oil trade partners are in the lower tiers of international oil consumers but are critical to Nyumba’s economic health. Worldwide declining oil prices have a significant impact on the country’s economy. Even through Nyumba runs an increasing trade deficit it is essentially trapped in the cycle because of the limited commodities available for international trade.

Hoping to relieve the growing deficit, Nyumba is actively working with international investors to develop other sectors such as mining, natural gas, and fishing. To secure these sectors the government launched security programs to protect the resources in anticipation of the development.

Internal security forces actively patrol known mineral fields to prevent or stop illegal mining operations. In several instances those forces engaged and arrested foreign groups engaged in illegal mining. Security forces are also patrolling coastal waters to secure fishing grounds in the country’s’ territorial waters by policing international fishing fleets. Reports are that Nyumbaan coastal patrol boats open fire on international fishing trawlers under the cover of darkness in efforts to sink or damage the vessels.

All finished products must be imported because Nyumba does not possess process or manufacturing facilities to refine those commodities it produces. Even though agricultural products are a major export for the country it must still import many of the foodstuffs necessary to meet the needs of the population. The same is true for oil as all fuel and petrochemicals must be imported.

As a result, the government maintains very liberal trade policies with few tariffs on products in an effort to simplify and encourage trade. This approach extends to practices that include allows Nyumbaan businesses to trade with international partners that are under UN or US sanctions. North Torbia is a key trading partner for oil and a growing consumer of Nyumbaan fishing production.

Commercial Trade

Commercial trade for Nyumba totals 1.6 billion; exports of $550 million and imports of $1.05 billion. The large negative trade balance is the result of low oil prices, limited refining and manufacturing capabilities, and limited markets for agricultural products. Nyumba’s’ largest trading partners are the countries of Olvana, Oman, Saudi Arabia, UAE, Yemen, and covertly North Torbia. Oil (64%) is the primary export, agricultural products (20%), livestock (12%), seafood (3%), and charcoal (1%). Approximately one quarter of the exported oil makes its way to North Torbia through commercial shippers to shell companies in Asia that transship the cargo to eventually arrive at North Torbia ports.

Leading imports are fuel (35.3%), petrochemicals (4.1%), other vegetables (30.9%), sugar (10.0%), rice (9.6%), wheat flour (9.3%), and agricultural implements (.8%).  Principle trading partners for imports are India, Olvana, Oman, and European Union.  As Nyumba currently has only the one port facility at Kismaayo, cargo transfer and customs processing often causes lengthy delays for import commodities to clear to their final destination. In many instances, humanitarian food aid is delayed until the aid organization pays an expediting fee to a government official for assistance in resolving the delay. Food aid is often diverted to the black market during these delays. North Torbian technological expertise and services as well as some petrochemicals are not officially tracked but are agreed compensation for oil shipments. North Torbian hackers live and work in Nyumba to provide training and operational skill for Nyumba's cyber activities.

Military Exports/Imports

Nyumba is under an arms embargo by the United States due to the country’s continuing 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

Nyumba’s economy consists of limited sectors, including hydrocarbon, agriculture, and services sectors. Of these, the hydrocarbon sector is the largest income generator accounting for 57% of the GDP. It is also the main target for diversion and smuggling. Production of crude oil is the only portion of the sector currently active; exploration and development of natural gas is a major economic goal of the government. The abundance of oil resources is the country’s economic lifeline and also a major challenge.

Although oil exports and revenues are a lucrative source of national income, they make the country vulnerable to fluctuations and volatility in the international commodities market. Largely for that reason, Nyumba’s main goal in the economic arena is to diversify—strengthen other sectors in order to lessen the country’s dependence on oil.  It accounts for more than half of the governments’ revenues and over 70 percent of its export earnings.

Meanwhile the agriculture sector employs 65 percent of the population with a seasonal surge to 70 percent during harvests.  The sector contributes over 31 percent of Nyumba’s GDP. Markets for Nyumba’s agricultural products are limited to the Arab states. The sector is also vulnerable to the weather extremes in much of the country.

The services sector operates at a low level, providing only 6 percent of the GDP. Working with Olvana, the government hopes to significantly change the services sector standing with the construction and operation of a new shipping port at Lamu.

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

Natural gas (NG) is not in commercial production but international consortiums are working with Nyumba to develop the discovered reserves. Initial natural gas exploration indicates there are significant fields on land and in territorial waters. Recent exploration discovered an additional 75 trillion cubic feet (tcf) that can be economically exploited. This find compliments the proven recoverable land-based reserves of 6 tcf.

Agriculture

Nyumbaan agriculture employs 65 percent of the labor force full-time and an additional 5 percent part-time, producing 31% of the national GDP. The western region plays a very important role in this sector. Only 7.1% of Nyumba’s land is arable. Most farming takes place near Turkana and the western coastal regions along the Juba River; much of the remainder of the country is either used for pasture or primarily consists of desert scrub vegetation. Due to reasonable rainfall, most irrigation in the country occurs in the drier eastern region. Crops produced in Nyumba include bananas, sugar, sorghum, cow peas, sesame, maize, wheat, cassava, groundnuts, millet and beans. Sorghum, millet, cassava, maize, and wheat are exported, primarily to the Arab states. Despite the large agricultural economy, the country does not grow enough cereal grains to feed its populace and is often subjected to famines in times of drought. Climatic conditions are not optimal for agriculture due to prolonged periods of drought or seasonal heavy rains resulting in flooding.

Mining

The mining sector is in a state of idleness due to the civil war and lack of risk tolerant investment. The continuing low level of conflict throughout the country makes geological exploration problematic. In an effort to energize the economy the government is not only working to expand the oil sector but also to restart mining operations that existed prior to the start of the war.

The mining restart mainly focuses on establishing the uranium ore extraction from pit mines in the Amsas-Coriole-Afgoye (ACA) Block. Prior to the civil war the known uranium reserves were set at 73,000 mt of 0.2% high grade U₃O₈ ore deposits. The ACA mineral exploration group, Da’an Coriole, estimates that the untapped reserves may be as high as 280,000 mt.

Teaming with an Olvanan investment firm and ACA exploration, the government provides forces for security. While uranium ore prices are generally in decline worldwide, Nyumba hopes to use its relationship with Olvana to sell ore at a higher price to North Torbia.

Other mineral resources of potential value mostly remain undeveloped due to the risk associated with further exploration and investment in infrastructure necessary to access the resource.

Manufacturing

Large scale manufacturing does not presently exist in the country with only low-level hand-labor type manufacturing of very basic items. Basic production using local resources supports local markets with no surplus for wider distribution and sale. 

Steel

There is no steel production in Nyumba with all of required refined metals being imported.

Automotives

There are no vehicle manufacturing operation in Nyumba nor is there any production of repair parts. 

Petrochemicals

Although recent exploration indicates that Nyumba is apparently rich in oil and natural gas there is insufficient development to create an organic petrochemical industry.  Oil production stands at a stagnant 152,500 bbl/day that is 39^th in the world. Proven oil reserves stand at 3.75 billion bbl which is 28^th in the world. Natural gas reserves stand at 6 tcf with potential of another 75 tcf but the country also lacks any natural gas processing plants to use the resource to produce petrochemicals. All oil produced is exported because Nyumba has no refining plants making it necessary to import petrochemicals.

Defense Industries/Dual Use

There are no legitimate defense industries in Nyumba. There are indicators of illegal groups adapting   existing systems and resources but nothing of significant volume.

Services

From the standpoint of Gross Domestic Product (GDP), services comprise the smallest sector of the national economy—accounting for 6 percent of GDP last year.  The government is working to expand port services for the western Indian Ocean and worldwide shipping by developing the port at Lamu.

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.