Economic: Belesia

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The Federated States of Belesia.

The Belesian economy is an emerging economy attempting to expand from its original agrarian base. Seeking to follow the example of other Pacific nations that have developed strong economies, Belesia has created manufacturing base centered on goods processing. A combination of a relatively skilled but low-cost labor force and policy changes that opened up the country to greater foreign investment created a fast growing economy, expanding in the range of 6-7% annual over the last five years despite both international market fluctuations and domestic political turbulence.

Despite these advances, Belesia still lacks a sophisticated manufacturing structure, adequate infrastructure, or full access to international markets. Wealth distribution is extremely inequitable and while the unemployment has steadily declined over the past decade, the majority of available jobs are tedious and for low wages with high underemployment. The government still faces challenges in improving governance and reforming the judicial system and regulatory environment. The political system suffers from institutional weaknesses, including personality-based political parties and political domination by a few influential landholding families, as well as divisions among reformers, conservatives, religious advocates, and traditional politicians.

Possible territorial disputes, particularly with regarding to fishing, have also strained relationships between Belesia and its neighbors. A fractured topography and an unevenly distributed population exacerbate the risk. Unsettled islands, of which Belesia has over 1000, are vulnerable to competing declarations of sovereignty and economic exploitation. Belesia attempts to maintain strong diplomatic ties both with its immediate neighbors and with more powerful regional stakeholders.

Despite these challenges, the overall economic outlook for Belesia is positive. The country possesses a large supply of human capital and significant natural resources. The industrial transformation to manufacturing of electronic components is beginning to show profitability, although at the expense of traditional agricultural output. Economic and government reforms are generally seen as positive increasing the likelihood of both international trade and foreign investment.

Table of Economic Data

Measure	Data	Remarks (if applicable)
Nominal GDP	$460.55 billion
PPP/Capita	$8229	Purchasing Power Parity
Real GDP Growth Rate	6.5%	5 year average 6.6%
LFPR	61.8%	Labor Force Participation Rate
Unemployment	26.3%
Poverty	40.0%	Percent below poverty line
Net FDI	$8.75 billion	$6.13 million outflow
Budget	$89.07 billion in revenue $99.29 billion in expenditures
Public Debt	36.2% of GDP
Inflation	3.1%	5 year average 3.3%
Value of Exports	$80.37 billion
Value of Imports	$92.06 billion

Gross domestic product is produced by agriculture (9.7% from 29.6% of employment), industry (30.8% from 16.3% of employment), and services (59.5% from 54.1% of employment).

Participation in the Global Financial System

The economy of Belesia has been relatively resilient to global economic volatility. The nation retains a substantial domestic consumption rate, making the overall economy less reliant than others in the region do on exports. Additionally, the nation has a smaller exposure to international securities than many Pacific nations, with a stable banking system. The cost of this stability, however, is difficulty in maintaining economic growth as other nations recover and expand following economic downturns.

World Bank/International Development Aid

The World Bank’s partnership with Belesia spans nearly 60 years, providing longstanding support for infrastructure, water resources, and disaster risk management. The World Bank is also an active partner in helping spur private sector growth. Belesia retains $1.9 billion of International Bank for Reconstruction and Development loans to be disbursed—approximately one-half of the original principal. Over the past decade, the nation has used $1.77 billion to develop trade with special consideration given to pro-poor growth strategies. Trade is included as a macroeconomic strategy to achieve this development.

Over the last decade, disaster relief and recovery has also become an increasingly important area of assistance to Belesia. The United States has provided over $143 million in assistance to date to the people of Belesia after Typhoon Haima in 2013. The European Commission released the equivalent of $4 million in emergency aid funds and the United Kingdom Rapid Response Facility sent a team of experts to the Philippines, along with a shipment of emergency equipment, and an additional $8 million in emergency aid funds.

Foreign Direct Investment

Improving the foreign investment climate is essential to strengthening Belesia’s domestic productive capacity. A decade ago, FDI dramatically decreased due to an unfavorable business and economic situation. Global financial downturns meant that corporations were unwilling to make investments in risky political environments fraught with corruption and instability. Recent government reforms to improve the business climate and reduce endemic corruption have already had a meaningful effect, leading to rising foreign direct investment (FDI). Yet, the eventual outcome remains clouded by uncertainty. The country's poor infrastructure remains a serious challenge for investors seeking to establish production facilities, yet expanding the productive capital base is exactly what the country needs to reduce dependence on consumer demand. The government is likely to lower the corporate tax rate to bring it in line with its Asian neighbors. At 30%, Belesia has one of the highest corporate tax rates in Asia and lowering corporate taxation is part of a broader government plan to review the tax system.

In addition to reforms, Belesia has also been working to liberalize of the economy. However, nationalist interests and significant barriers to foreign ownership have stymied these reforms. Belesia lags behind its regional peers despite a record quantity of FDI last year. The Belesian constitution restricts foreign ownership in important activities/sectors such as land ownership and public utilities. In other sectors, such as retail and financial services, foreign investment is restricted to minority ownership. Even in areas where the government encourages foreign investment, like transportation and infrastructure, the State keeps a strong presence. For example, majority government-owned national carrier dominates the air services industry, another state-run company retains the monopoly to develop and manage airports and airport services, and a government agency is in charge of all cargo handling and port services. The country boasts of one of the longest road networks in Southeast Asia, however, it is of inferior quality and does not provide efficient connectivity. Foreign investment in rural improvement projects such as irrigation, rural roads, and rural ports have dwindled due to the failure of the government or domestic private sectors to support these projects, significantly raising costs of rural access. Even when the government encourages investment through tax breaks and other incentives, these are often contingent on export performance and Belesian ownership.

In other sectors, however, laws liberalizing business practices have opened up more fields to foreign investments. Two years ago, a new law lifted restrictions on foreign ownership of banks. This resulted in overseas banks almost immediately investing in the country’s banking sector due to its record of being one of the fastest-growing Southeast Asian economies with a rising demand for bank loans. Full foreign ownership is now allowed in banking, insurance, finance, construction, telecommunications and information technology, and petroleum distribution.

Charity

Poverty and inequality remain major issues in Belesia. The government’s anti-poverty programs have failed to produce the desired results with little change in poverty rates over the past five years. A wide range of activist groups and NGOs emerged through recent political upheavals, with over two dozen international charitable corporations currently operating in Belesia. These, coupled with an active labor movement, peasants' organizations, and student and youth groups, exert a pressure on Belesian politics that partly counters the power of elite families and interest group.

Economic Activity

In the past three years, Belesia has emerged as one of the stellar economic performers in the Pacific region. The country’s GDP expanded at a 6.5 percent compound annual growth rate, compared with 6% for the Southeast Asia region as a whole. Domestic demand has been providing the key impetus to economic growth during recent quarters as consumer and business sentiment remains resilient, while investment and government spending surged on the back of election-related spending.

The receding effect from election spending, the lingering damage from unfavorable weather conditions, a clouded world economic outlook, and lackluster global demand will raise downside risks to otherwise upbeat near-term prospects. Meanwhile, upholding growth momentum will remain the key challenge to the economy. This is reflective of the country's historical inability to sustain rapid growth for more than a couple of years at a time. Consumption rather than investment traditionally drives growth in Belesia, a pattern that is less sustainable than the successes in evidence in Olvana and South Torbia.

Recently, Belesia has suffered a significant slowdown amid continuing political turmoil, slowing momentum in Olvana, and the sudden flight of capital back to developed economies. An absence of entrepreneurial dynamism makes long-term economic development a challenging task and unemployment remains a persistent problem. The overall low-income level and inadequate infrastructure hampers economic diversification and growth.

Economic Actors

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Trade

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Commercial Trade

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Military Exports/Imports

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Economic Diversity

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Energy Sector

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Oil

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Natural Gas

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Agriculture

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Mining

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Manufacturing

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Services

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Banking and Finance

Public Finance

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Taxation

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Currency Reserves

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Private Banking

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Banking System

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Stock/Capital

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Informal Finance

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Employment Status

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Labor Market

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Employment

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Unemployment

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Illegal Economic Activity

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