Economic: Ziwa

This page is a section of Ziwa.

To the casual observer, Ziwa’s relative smallness in size masks an abundance of natural resources. It is one of the world’s largest sources of raw materials. From more than 30 functioning mines, the country produces more than 10 percent of the world’s gold. Other natural resources include mineral reserves of iron ore, copper, platinum, silver, manganese, titanium, chromium, and uranium. Ziwa possesses approximately two-thirds of the world’s platinum, and about half of its chromium.

Ziwa’s diamond trade is one of the largest in the world. It exports large quantities of diamonds each day to destinations around the world, including New York, Olvana, Dubai, and Bangkok. The diamond industry provides a livelihood for millions of people, within as well as outside the country. Many Ziwans have found employment opportunities in jewelry manufacturing, retail, mining, cutting, sorting, polishing, and valuation. Although Ziwa is most famously known for its mineral resources, the country also boasts exportable quantities of sugar and timber.

In descending order of importance, Ziwa’s main competitors in East Africa are Amari (the regional economic hegemon), Kujenga, and Nyumba. Although all of these nation-states are economic rivals, their diplomatic and military relationships are essentially stable. Militant non-state groups and organized criminal elements are the main source of political-military tension in the region.

Ziwa’s economic growth has decelerated in recent years, and last year slowed to a rate of 0.5 percent. Although some private enterprise is allowed to function in accordance with open market dynamics, a state-run electrical utility company underscores the reality of the government’s active role in managing the economy. The country’s Gross Domestic Product (GDP) for last year reached $740 billion, climbing from $715 billion three years ago. Its GDP growth rate last year stood at 0.2 percent. A chronic and pervasive lack of electricity generating capacity impedes economic growth. Powercom, the state-run utility company, is currently building two new power stations, and implementing new power demand management measures to improve electrical grid reliability. For the past three years, Ziwa’s lack of electricity generating capacity has caused rolling blackouts, as the demand for power consistently exceeds supply. Ziwa’s economic policy has focused on controlling inflation, but economic growth is impeded by factors such as skills shortages, the country’s declining competitiveness within the global economy, and episodic work stoppages due to strikes or other forms of labor protest. The government finds itself increasingly challenged to deliver basic essential services to urban constituencies, especially in low income areas. Other pressing demands on the government relate to a shortage of jobs, and a growing desire among the country’s youth to attain a university-level education at an affordable price. Infighting among Ziwa’s ruling party and its political competitors, jeopardizes the country’s future economic growth. Last year the most prestigious international credit monitoring agencies placed Ziwa’s credit rating at the same level as junk bonds.

Table of Economic Data

Measure	Data	Rank in World	Remarks (if applicable)
GDP
Labor Force
Unemployment
Poverty			Percent below poverty line
Investment
Budget
Public Debt
Inflation

Participation in the Global Financial System

Since gaining independence, Ziwa’s participation in the global financial system has increased to the point of becoming a cornerstone of world trade. It has established bilateral trading agreements with neighboring East African countries and other nations throughout the continent. It has also gained membership in regional and international trading communities with a view toward marketing its products, especially diamonds, minerals, sugar, and timber. Ziwa’s trade and industrial policy has moved away from a highly protected, inward looking economy to one that is much more internationally integrated and competitive, capitalizing on its comparative advantages in industrial capacity and natural resources. For years after initially gaining independence, international sanctions seriously curtailed its prerogative of trading with the outside world, mainly because of persistent and chronic infractions in the human rights arena. The adoption of somewhat more democratic and transparent policies about a quarter-century ago accelerated Ziwa’s assimilation into the international trading community.

The East African Development Community (EADC) is the centerpiece of Ziwa’s foreign economic policy. Members of this cooperative trading consortium include the neighboring countries of Amari, Kujenga, and Nyumba, and an assortment of other nation-states throughout the region. The Ziwan government’s main economic objective within the context of this trading organization is to strengthen trade and investment relationships between itself and other EADC countries. Mutual participation in the EADC by no means precludes competition among members, but does indicate a preference for gaining regional hegemony competing in the open marketplace, as opposed to fomenting cross-border political enmity or redressing grievances by resort to military force.

Europe is Ziwa’s biggest trading client. Seven out of 10 of Ziwa’s top trading partners are European countries. Within this group, the United Kingdom, France, Germany, and Switzerland are the most important. The United States is another of Ziwa’s largest trading partners. Ziwa is a beneficiary of the US Generalized System of Preferences, which grants duty-free treatment for more than 4,500 products. Ziwa also maintains important trading relationships with Belesia, Donovia, the Republic of Torbia, and selected countries in South America.

World Bank/International Development Aid

The World Bank maintains an active portfolio for Ziwa. Last year, the International Bank for Reconstruction and Development (IBRD), in combination with the International Development Association (IDA) committed over $120 million in support of Ziwa’s future economic development. The World Bank lending program for Ziwa consists of three components funded by the IBRD and Global Environment Facility grants. These projects include the Enscom Investment Support Project, the Isimangaliso Wetland Park Project, and the Renewable Energy market Transformation Project. In addition, a $250 million grant from the Clean Technology Fund supports the building of renewable solar and wind energy sources.

Where Ziwa specifically is concerned, the intent behind World Bank assistance is to take advantage of a window of demographic opportunity in order to create jobs for the working population, and in tandem with that initiative, pushing annual economic growth to a level that reaches or exceeds 5 percent. A recent World Bank report judges Ziwa’s most pressing challenge to be job creation. The report claims that if 6 million jobs are created over the next 15 years, the country’s GDP growth could exceed 5 percent per year within that same timeframe.

Ziwa and the United States have enjoyed a solid bilateral economic relationship for the past 25 years, and Ziwa is a strategic partner of the US, particularly in the areas of health, security, and trade. The US is also a major donor country providing assistance to Ziwa. Most of this aid is channeled through the US Agency for International Development (USAID). Although Ziwa has made substantial economic progress over the past 25 years, its remaining challenges include slow GDP growth, high unemployment, and corruption. Current USAID programs in support of Ziwa focus on increasing the country’s capacity in the agricultural sector (to alleviate poverty and food insecurity issues), and strengthening small and medium-sized business enterprises.

Foreign Direct Investment

Ziwa has abundant natural resources to attract foreign investors. These resources include gold, chromium, antimony, coal, iron ore, manganese, nickel, phosphates, tin, rare earth elements, uranium, gem diamonds, platinum, copper, vanadium, salt, and natural gas. Ziwa’s geographical location is well suited to participation in East African markets. Although a landlocked country, its transportation infrastructure is fairly well developed, and arrangements with neighboring Amari and Kujenga afford outlets to the Indian Ocean. These ocean outlets allow Ziwa to capitalize on bulk shipments of export goods funneled into the major sea lanes that serve as major conduits of world trade.

The Ziwan government is generally tolerant of open market dynamics, and promotes public-private partnerships and strategic cooperative arrangements with prospective foreign investors. No government approval is required for foreign investors to establish a new business or to invest in Ziwa, provided that certain administrative conditions are met. Foreign companies are required to register as external companies before real property—as opposed to personal or moveable property—can be registered in their name. Companies are required to appoint a Ziwan resident as the company’s domestic legal representative, and also to designate a corporate auditor. Any given company is supposed to be registered within 21 days from the start of operations, and must also register with government tax authorities.

The sectors currently attracting the most FDI are energy, telecommunications, and services. Relative to other African countries, Ziwa offers abundant natural resources (as mentioned above), a measure of political stability with its concomitant marketplace predictability, and a sitting government generally sympathetic to attracting and protecting the interests of foreign investors. That said, challenges faced by companies investing in Ziwa include a long tradition of episodic labor unrest, opportunistic violent crime that sometimes targets foreigners, and a culture that historically condones a high degree of corruption and patronage. Infrastructure shortfalls also are becoming increasingly problematic, especially with regard to accessing a dependable and consistent supply of electricity. Although unemployment is high, skilled labor is in short supply, and immigration laws make hiring foreign workers difficult.

Economic Activity

Ziwa is an emerging, middle-income, mixed open market economy with an abundant supply of natural resources, well developed financial, legal and transport sectors, and a stock exchange that is among the top 10 on the continent, and second only to Amari in East Africa. Economic growth has slowed in recent years, as the country struggles to regain ground lost during a worldwide recession. Official unemployment persists at about 25% of the workforce, but runs significantly higher among urban youth.

Although Ziwa’s infrastructure suffices for distributing goods to its major urban centers, it lags behind Amari in developing a twenty-first century transportation network. Its status as a landlocked country renders it dependent on Amari and Kujenga for sustaining the flow of export goods to coastal ports of embarkation—the major regional gateways to sea-lanes and world trade. Despite the ruling party’s overall acceptance of open market dynamics, it has inherited some legacy state-run utility companies.

Ziwa Vanguard, foremost among the state-run enterprises, manages the country’s supply of electrical power. It is now building three new power stations and installing power management programs to reduce rolling blackouts and improve power grid reliability. Late last year Ziwa Vanguard requested bids to upgrade the country’s nuclear power generating capacity.

Chronic endemic corruption hampers government efforts to craft policies in support of creating and sustaining an open market economy. Passive resistance typically assumes the guise of foot-dragging in meeting implementation guidelines, or raising phony issues contrived to undermine the implementation process. A legacy oligarchy grounded in nepotism and entrenched patronage hierarchies has stifled development programs in the past, and still taints Ziwa’s business environment. Overlapping political, economic, and military elites inform and comprise this oligarchy, in which functional lines of responsibility become blurred to the point of obscuring legal and constitutionally mandated accountability guidelines.

Economic Actors

Ziwa’s current leader is a 65-year-old former labor leader who later became a businessman before achieving prominence as one of the nation’s wealthiest entrepreneurs. Foreign investors generally applauded the fact that this erstwhile successful business leader was elected on a platform that promised to fight rampant corruption and revitalize the economy. However, just as his predecessor faced allegations that business cronies wielded undue influence over public affairs, the current president is weighed down by similar criticisms leveled by political opponents.

Ziwa, East Africa’s second largest economy, is also the region’s leading exporter of gold and platinum. That said, many Ziwans remain poor, and the mining industry struggles with falling commodity prices and labor unrest that have driven up production costs. A national unemployment rate of 25 percent combined with woes unique to the mining industry make managers willing to turn a blind eye toward safety constraints while making prospective employees willing to work for what amount to slave wages.

The rise of illicit mining as a reflection of these economic stressors is hardly surprising, and not totally unrelated to similar hardships faced by populations in neighboring countries. An economic underclass comprised of approximately 30,000 refugees operate mines across Ziwa under deplorable safety conditions. These hapless immigrant laborers in turn become objects of scorn from native Ziwans who regard them as subhuman scavengers who deprive locals of the means to earn a livelihood. The same immigrants often fall prey to criminal elements willing to exploit their indigent circumstances through bribery, extortion, and human trafficking.

Charitable organizations in Ziwa typically assume the guise of nongovernmental organizations (NGOs). They make a significant contribution to the economy and greater society at large by filling the void between the government’s ever-tightening budgets and the pressing need to provide a shard of economic protection to a longsuffering population. Because NGOs are non-profit organizations usually staffed by volunteers and funded by donations, they function somewhat independently of provincial and national bureaucracies. That said, the government passively monitors their activities through a centrally run system of registration, ostensibly to maintain accountability and ensure transparency in operations. All NGOs in Ziwa are required to register with the Department of Social Uplift (DSU), which acts as a clearing house for establishing assistance priorities and delivering basic essential services to disadvantaged populations. The DSU maintains a national database that accounts for more than 50,000 nonprofit groups. Collectively, these groups employ about 500,000 people who specialize in various fields of social services, community development and housing, religion, and education and health. Influential NGOs in Ziwa include:

Women Ascendant: advocates gender equality and justice, especially with regard to equal opportunity in management and the job market.
International Education Group: a venue where NGOs and other charitable organizations analyze and prioritize a range of education, conservation, and community action projects in order to arrive at a consensus on which projects are most deserving, and on how to best utilize limited financial resources.
The Uhuru Foundation: approaches wealthy potential philanthropists throughout the country in order to bring their private resources to bear in support of NGOs and other charitable organizations.
Oppressed Peoples’ Defense Fund: provides pro bono legal services to marginalized, disadvantaged, and undereducated individuals and groups with a view toward safeguarding rights guaranteed under the Ziwan constitution.
The Ziwa SWET Trust: focuses on providing rural populations access to potable water, sanitation services, electricity, wastewater for irrigation, and trash removal services.

The history of marginalized groups in Ziwa provides a cautionary tale for prospective foreign business interests, because such groups have demonstrated a tendency to periodically employ strikes, boycotts, and violent protests as viable methods for influencing government policy.

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

Last year Ariana exported over $100 million worth of military hardware. Many countries across the globe import Arianian military equipment, goods, and services (includes training, technical support, and construction). Ariana recently signed defense cooperation agreements with Tajikistan and Algeria that include defense equipment sales, manufacturing or repair facility construction, and military unit training.

Ariana continues to increase its military spending through a growth in arms imports. Ariana carefully focused its military purchases to improve important capabilities like INFOWAR, naval combat, and armored vehicles. However, these recent purchases have not offset the steady aging of Ariana’s military inventory. Without parts and upgrades for much of its Western-supplied equipment, Ariana has not achieved parity with the weapons and technology found in US, British, and many other Gulf forces, although its military inventory matches or exceeds other regional opponents. Ariana has attempted to compensate for its technology gap by creating its own military industries, but with only limited impact.

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.