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INTERNATIONAL BANK FOR
Public Disclosure Authorized RECONSTRUCTION AND DEVELOPMENT
SUMMARY Public Disclosure Authorized PROCEEDINGS NINTH ANNUAL MEETING OF THE BOARD OF GOVERNORS Public Disclosure Authorized
WASHINGTON, D. C.
SEPTEMBER 24-29, 1954
~
Public Disclosure Authorized ~~ ~ ~ ~~~ " ~·INTERNATIONAL~IJ {I ~-=*BANK ~~ OCTOBER 15, 1954 ~~/)tvELOt»~~ INTRODUCTORY NOTE
The Ninth Annual Meeting of the Board of Governors of the International Bank for Reconstruction and Development was held in Washington, D. C., from September 24 to September 29, 1954 under the chairmanship of J. van de Kieft, Minister of Finance of the Netherlands.
These Summary Proceedings cover generally the work of the Board in committee meetings and in five plenary sessions, two of which were held jointly with the Board of Governors of the Inter national Monetary Fund.
One informal session, in addition, was devoted to a panel discus sion on the subject of prospects for private international investment.
M. IVL MENDELS Secretary INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT
Washington, D. C. October 15, 1954 NINTH ANNUAL MEETING
FINAL SCHEDULE
THURSDAY -September 23- 3 :30 p.m.-Joint Procedures Committee
FRIDAY -September 24-10 :00 a.m.-Opening Ceremonies First Se~sion (Joint) Report of Procedures Committee -11 :30 a.m.-Fund Board-Annual Report: Address by Managing Director of Fund
SATURDAY -September 25-10 :00 a.m.-Bank Board-Annual Report: Address by President of Bank -10 :45 a.m.-Bank Committee on Finance and Organization -11 :30 a.m.-Discussion on Fund Annual Report - 3 :00 p.m.-Fund Committee on Finance and Organization
MONDAY -September 27-10 :00 a.m.-Discussion on Bank Annual Report - 3 :30 p.m.-Discussion on Fund Annual Report
TUESDAY -September 28-10 :00 a.m.-Bank Informal Discussion -12 :00 noon-Fund Board Managing Director's Concluding Comments Committee Reports - 3 :00 p.m.-Fund Board Committee Reports (Continued) Election of Executive Directors - 5:00 p.m.-Bank Board President's Concluding Comments Committee Reports Election of Executive Directors
WEDNESDAY -September 29-12 :00 noon-Joint Procedures Committee - 3 :30 p.m.-Closing Session (Joint)
ii
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Message from Dwight D. Eisenhower, President of the United States, to the Boards of Governors of the Bank and Fund, at the Joint Opening Ceremonies, September 24, 1954 1
Address by the Chairman, J. van de Kieft, Netherlands Minister of Finance, to the Boards of Governors, at the Joint Opening Session, September 24, 1954______2
Address by Eugene R. Black, President of the Bank, in Presenting the Ninth Annual Report to the Board of Governors, September 25, 1954______6
Address by the Chairman at the Joint Closing Session, September 29, 1954______12
Committee Reports:
Joint Procedures Committee Report N o. L______14
Annex IVl -Agenda______16
Annex V -Committee on Finance and Organization______16
Annex VI -Committee on Finance and Organization-Terms of Reference____ 17
Annex VII -Informal Panel Discussion-"Prospects for Private International In ves tment" ______17
Annex VIII -Provisional Schedule ______18
Annex IX -Provisions Relating to the Conduct of the Meeting______19
Joint Procedures Committee Report N o. 2______20
Report of Committee on Finance and Organization ______21
Report on Marketing Activities of the Bank______23
Resolution adopted by the Board of Governors between Eighth and Ninth Annual Meetings:
No. 85-Terms and Conditions on Which Israel shall be Admitted to Membership in the Bank______26
1 Annexes I-III related to business of the Fund. iii CONTENTS ( Continued)
Page
Resolutions adopted by the Board of Governors at Ninth Annual Meeting:
No. 86-Fifth Regular Election of Executive Directors______28
No. 87 -Financial Statements and BudgeL______28
No. 88-Terms and Conditions on which the Republic of Korea shall be Admitted to Membershi p in the Bank______28
No. 89-Terms and Conditions on which Afghanistan shall be Admitted to Member- ship in the Bank______. ______30
No.90-Place and Date of Tenth Annual Meeting______32
No. 91-0fficers of Beard of Governors for 1954-55______32
No. 92-Composition of Procedures Committee for 1954-55______32
Rules for the Conduct of the Fifth Regular Election of Executive Directors______33
Executive Directors Elected at Fifth Regular Election______37
Summary S tatements at Panel Discussi on______39
Accredited Members of Delegations at Ninth Annual Meeting______56
Observers at Ninth Annual Meeting______61
Officers of Board of Governors and Procedures Committee for 1954-55______63
iv MESSAGE FROM DWIGHT D. EISENHOWER, PRESIDENT OF THE UNITED STATES, TO THE BOARDS OF GOVERNORS OF THE BANK AND FUND, AT THE JOINT OPENING CEREMONIES, SEPTEMBER 24. 1954
To the Chairman and Governors of the International Bank for Reconstruction and Development and the International Monetary Fund:
I am delighted to send greetings to the Boards of Governors of the International Bank for Reconstruction and Development and the International Monetary Fund at their Ninth Annual Meeting in Washington.
The International Bank and the International Monetary Fund during the past year have again demonstrated that they are active and effective instruments in promoting international cooperation to ward the well-being of the free world. The United States heartily approves the Fund's efforts to free the world from restrictions on the flow of trade and money and to foster sound monetary policies and currency convertibility. The Bank has notably aided the member countries in their economic development and has helped promote conditions under which greater flow of private investments can take place.
The Fund and the Bank have our best wishes for success and the assurance of our support. I anticipate with confidence a successful year for both institutions.
[ 1 ] ADDRESS BY THE CHAIRMAN, J. VAN DE KIEFT, NETHERLANDS MINISTER OF FINANCE, TO THE BOARDS OF GOVERNORS, AT THE JOINT OPENING SESSION, SEPTEMBER 24, 1954
It is a great privilege for me to preside of the Bretton Woods twins: Camille Gutt, at this Ninth Annual Meeting of the Boards who as Managing Director, led the Fund of Governors of the International Monetary during the first six years of its existence, and Fund and the International Bank for Recon Eugene Meyer and John McCloy, the first two struction and Development. Especially so, presidents of the Bank. Their tasks were as this meeting gives us the opportunity of particularly difficult, but aided by an able commemorating the day on which, ten years and devoted staff they succeeded in estab ago, the representatives of forty-four na lishing our two institutions as going tions, still involved in a most tragic war, concerns. came together at Bretton Woods and created In comparing the achievements of Bank our two institutions, both dedicated to the and Fund, it has become commonplace to works of peace and to the closest cooperation stress the early achievements of the Inter between nations in the field of international national Bank and thereby, indirectly, to finance. underestimate the accomplishments of the It is a happy coincidence that this meet International Monetary Fund. I think that ing should take place in the same country those, who feel inclined to compare our two that acted as a host to the founding fathers. institutions in this way, are apt to forget that I wish to express our appreciation for the by their Articles of Agreement Bank and hospitality the Government of the United Fund were given very different tasks to per States of America is again extending to us form and that only the Bank was fortunate all. enough to be assigned a very active role in I also wish, in my own name and on the reconstruction period that was to follow behalf of my colleague Dr. Holtrop, to wel the devastation caused by the world war. come my fellow governors, alternate gover As both its name and the first of its nors, advisors, representatives of other Articles of Agreement indicate, the Interna international organizations and guests, who tional Bank had the purpose to help in the have come to participate in this conference. restoration of economies, destroyed or dis In particular I want to extend my greetings rupted by war. This task it set out to do to the representatives of Indonesia and from the very beginning. Israel, the two countries which joined the The earlier loans of the Bank, totalling Fund and the Bank since our last meeting. nearly 500 million dollars, given to a number Having arrived, as we now have, at an of European countries that had particularly important milestone on a long and difficult suffered from the consequences of war and road, one feels inclined to pause a moment occupation, had fully the character of recon and to reflect on what we set out to do, on struction loans. They made a substantial what has been accomplished and on what contribution to restoring the economy of tasks still lie ahead for the near future. Western Europe to its present healthy and Looking back on the years behind us, I active condition. know that I am speaking on behalf of all of It was only in the year 1949 that the you, when I first of all honour the men who Bank entered, to any appreciable extent, into were willing to take upon themselves the the second phase of its activities, the grant heavy responsibility of guiding the first steps ing of development loans. Since that year, [2 ] an impressive program has been carried out, On behalf of my fellow governors and leading to a total of loans of no less than myself I wish to express our admiration for 1400 million dollars, almost equally spread the leadership of Mr. Eugene Black during over all the continents of the world. Latin the past five years. We all feel happy that America, Europe, Asia, Australia and Africa he has been willing to accept the presidency have all shared in the beneficial activities of of our institution for five years more. the Bank and one can hardly be surprised In contrast to the International Bank, that, where so many needs were cared for, the International Monetary Fund was not appreciation rose high. meant to playa role in solving the financial The Bank, however, has not only suc problems arising out of the devastation of the ceeded in making loans, it has also succeeded war. As a matter of fact its Articles of in following lending policies which have re Agreement specifically stated that it was not sulted in a credit standing of the highest intended to provide facilities for relief or order. reconstruction. Whilst in the earlier years the funds It is true that in the first year of its available to the Bank had mainly to come out operations a number of European countries of the 18 per cent of the participation of the which, as a consequence of war conditions, United States and out of the funds that were particularly short of foreign exchange, could be raised in the U. S. bond market, were yet allowed to draw on the Fund. But recent developments have given an increas these drawings came definitely to an end ingly international character to its resources. after the initiation of the Marshall plan, by which the United States so generously re More and more countries have been able lieved the burden which threatened to crush to permit the use of the 18 per cent of their the economies of so many countries. capital subscription payable in local curren cies and in the past year substantial loans Rather than providing financial facilities were floated on the bond markets of Canada, for the postwar period, the prime task of the of the United Kingdom, of Switzerland and Fund was to lay the foundations for an or of the Netherlands. derly, stable and multilateral system of pay ments. How much more difficult has it Thus the Bank has been able to re proven to be successful in this task of a activate the flow of private capital from mainly educational and organisational char countries with a surplus of savings to less acter than to gain applause by allowing an developed areas in need of investment. This easy access to the Fund's resources. same purpose has been served by the Bank's selling out of its own portfolio bonds of its The very first purpose of the Fund, as borrowers to third parties. stated in the Articles of Agreement, is "to promote international monetary cooperation All in all, there is little doubt that we through a permanent institution which pro may feel satisfied with the results the Inter vides the machinery for consultation and national Bank has so far been able to achieve. collaboration on international monetary Loans of the Bank are becoming more problems". This purpose has been well and more both pivots and starters of over-all served. The close consultations between the development plans. This comes about, I be Governors at their Annual Meetings, between lieve, because every project is studied against the Executive Directors in Washington and the background of the development of the between the staff and the member countries country and its position in the world as a have proved their usefulness. Equally im whole. By making loans to stimulate pro portant is the functioning of the Fund "as a duction and overall economic activity in the centre for the collection and exchange of recipient country, the Bank is playing its information on monetary and financial prob part in fulfilling another of its basic objec lems". The Fund has in fact become one of tives: the diversification and the better the world's main centres for the study of balancing of world trade. monetary questions. [3 ] Not so easy to gauge is the contribution system of payments, that the Fund, so far, the Fund has been able to make to its second has least been able to achieve positive results. purpose: the expansion and balanced growth The Articles of Agreement do not refer of international trade. The vast expansion to the role of regional arrangements in the of international trade since the war, which achievement of a multilateral system of pay has led to a volume of trade far in excess of ments. This is to be regretted, for the the pre-war level, has been one of the remark experience of the European Payments Union able features of the post-war period. I feel has-I think-clearly shown that such an ap sure that the principle of fixed rates of ex proach to multilateralism was to play a change, established by the Articles of Agree helpful role in conditioning member coun ment of the Fund, has greatly contributed to tries for the rigours of convertibility. It this splendid achievement. seems to me that there are lessons in the EPU Also in its third purpose, the promotion experience that emphasize the need for of exchange stability, the maintenance of greater flexibility in carrying out the terms orderly exchange arrangements and the of the Articles of the Fund. avoidance of competitive devaluation, the A great deal has been done by the Fund Fund has met with a fair measure of success. in promoting the elimination of exchange re It is true that in several member countries strictions. By means of their consultations systems of multiple rates, which were con with member countries the staff have suc sidered anathema by the founding fathers, ceeded in exerting a wholesome influence in still prevail. But the Fund has succeeded in this field. I feel, however, that they have gradually bringing about some measure of often been somewhat hampered by the rather simplification in this field. Moreover, the formal character of the distinction between study of conditions in less developed coun exchange restrictions as applied to the field tries has resulted in a better understanding of commerce, and trade restrictions as such. of the function these systems may, under A still closer collaboration between the Fund special circumstances, perform in the in and the G.A.T.T. might, perhaps, be helpful ternal economies of the countries concerned. in bringing about a greater degree of effec In the field of par values, the ghost of tual liberalization. competitive exchange depreciation, which It is significant that making available seems to have so badly haunted the founding the Fund's resources to member countries is fathers, has so far never troubled the Fund only mentioned in the Articles of Agreement and on no occasion has the Fund found it as the very last of the Fund's objectives. We necessary to discourage devaluations. Devi therefore ought not to be surprised that al ations from realistic rates have rather been though occasional drawings-mainly within the other way round. Many countries have the member's gold subscription-do take preferred to protect their balance of pay place, no set of rules for more or less auto ments positions by quantitative restrictions matic drawing rights has yet been elaborated. or mUltiple rates, rather than to proceed to It is only when the other purposes of the outright devaluation. Such a policy, as a Fund have been more fully realized, and temporary expedient, may sometimes be a especially when a multilateral system of pay sound one if there is sufficient reason to ex ments has been established, that the time will pect that in the near future it will be possible have come to formulate such rules. to maintain the existing rate without re To my mind the wording of Article I (v) strictions. If, on the other hand, these of the Articles of Agreement clearly indi methods are used for longer periods, they are cates that the founding fathers have not harmful both to the country applying them meant access to the Fund's resources to con and to its trade partners and hardly less ob stitute by itself the cure for balance of pay jectionable than competitive depreciation. ments difficulties, but that they have looked It is in the realisation of its fourth pur upon the possibility of this access as a means pose, the establishment of a multilateral to provide the membE'r countries with the [4 ] time and opportunity to correct with other There is an increasing realization that methods the maladjustments in their balance this problem calls for joint efforts. Countries of payments. in need of development will have to follow policies conducive to the promotion of do The growing awareness that mistaken mestic savings and to the inflow of foreign internal fiscal and monetary policies are the capital. Countries with a potential surplus mainspring of balance of payments difficul of savings will have to allow the outflow of ties is, I think, one of the most important public and private funds. In all this the In achievements of the development of mone ternational Bank will have an important task tary thinking in the last few years. The to fulfill. It will have to continue aiding and Fund has played a significant part in the stimulating the less developed countries to propagation among member countries of this follow sound and balanced development poli old truth that had come to be somewhat cies. It will, on the other hand, be able to obscured by the experience of the great de serve as an instrument by which both private pression and by the impatience of the recon and public funds, available in the more de struction period. We owe a special tribute veloped countries, can find their way to the to Mr. Rooth for having stressed its funda place where they can yield the greatest mental significance. No doubt, this principle benefit. deserves to be made the cornerstone of that policy of standby arrangements, which Mr. In playing this role of intermediary, the Rooth has so fervently advocated and which Bank carries an immense responsibility. The has lately become one of the promising addi policies, pursued in the past, give me the tions to the Fund's instruments of action. conviction that this responsibility is keenly felt by both management and staff. This, I Having thus surveyed the past, it is well feel, will be the best guarantee for the Bank's to set our eyes upon the future of our two continued success. institutions. I do not doubt that this future holds out great possibilities for both of them. In recent years various proposals have been formulated to set up new institutions to As for the Bank, we have to realize that supplement the work of the Bank. There one of the greatest, but also one of the most may indeed be scope for a certain expansion complicated economic problems of our time of financial possibilities in the international is the difference in wealth between the richer field, but I believe that any new institutions and the poorer nations. This difference of should be connected closely with the Bank, wealth is accentuated by the fact that the in order to profit from its experience and to level of domestic savings in the poorer coun avoid duplication of effort. tries is by necessity lower than in the richer For the International Monetary Fund ones and that consequently the rate of invest the period now ahead will be of crucial im ment in these countries tends to lag behind. portance. The transitional period which, as Before the war a constant, though, perhaps, the founding fathers had foreseen, was still insufficient flow of private capital from needed to overcome the dislocation caused by more developed to less developed countries war, is now clearly drawing to an end. The helped to allay these differences. Since then impressive economic progress, made by so a number of new economic and political fac many countries, prostrate and exhausted only tors have sprung into being. Many of them nine years ago, bears witness to this fact. have, by themselves, no doubt been of a bene ficial nature. But yet, one cannot deny that The recognition or this new situation generally they have tended to slow down puts grave issues before the Fund. For most rather than to increase the flow of private of its members are still availing themselves capital to the regions that are most in need of the facilities offered by Article XIV of the of development. The flow of private capital Agreement, allowing member countries to at present is still far below pre-war rates of continue or even to extend exchange restric investment. tions. These facilities, however, were spe- [ 5 ] cifically created for the postwar transitional situation in which we live is very different. period only. Their prolonged continuation Inconvertibility is the rule and we cannot ex would imply a negation of the Bretton Woods pect that all member countries now availing agreement. Clearly, both the spirit of the themselves of the protection given by Article Fund Agreement and the implementation of XIV could be found willing to abandon these the Fund's purposes, make it desirable that rights all at the same time. The approach to many member countries should be found will convertibility must, of necessity, be a gradual ing to renounce the protection offered by one. Article XIV and place themselves under the The issue of a gradual approach to con rulings of Article VIII. Yet, it would be vertibility has been very much in discussion unrealistic not to recognize that the Articles since our last meeting. No one has doubted of Agreement offer few incentives for indi that no such approach could be made without vidual member countries to waive the rights the active cooperation of the International given by Article XIV, or to deny that the Monetary Fund. It is a challenge to the drafters of Article VIII have too easily ig Fund to find the ways and means to give such nored the risks to which countries, accepting cooperation and at the same time to make the obligations of this Article, expose them sure that the convertible system eventually selves. to be inaugurated shall become a truly con I understand that the Fund is studying vertible one in the sense of the Fund Agree this problem. Such a study should have the ment. If the Fund meets this challenge it purpose of finding a way to induce as many has a bright future before it. member countries as possible to accept, at an I want to conclude by expressing the early date, the general obligations of Article hope that our discussions and deliberations VIII, thereby making their currencies con at this meeting may add to a still better un vertible in the sense of the Articles of Agree derstanding of both the specific problems ment. with which member countries have to cope The draftsmen of the Fund Agreement and the general principles which should con have clearly been thinking of a world, in tinue to guide our two institutions, thus which convertibility would be the rule and helping Bank and Fund to live up to those inconvertibility the exception. It is for such high ideals of international cooperation, a world that the obligations formulated in which animated ten years ago the founding Article VIII were written. But the actual fathers at Bretton Woods.
ADDRESS BY EUGENE R. BLACK, PRESIDENT OF THE BANK, IN PRESENTING THE NINTH ANNUAL REPORT TO THE BOARD OF GOVERNORS, SEPTEMBER 25, 1954
This is the sixth of the Annual Meetings We look forward here not only to the of the Board of Governors that I have had formal deliberations of this Annual Meeting the honor to address, and I am glad to have but also to the renewal of personal contact yet another opportunity of meeting so many with the Governors that has proved so re old friends again at the Bank's headquarters warding in the past. We greatly value the here in Washington. opportunity which discussion, formal and in I am particularly happy to greet two formal, gives us to evaluate the Bank's work, new member countries, Indonesia and Israel, and to exchange and develop new ideas that both of whom have joined us since we last can be translated into action in the perform met. ance of the Bank's day-to-day tasks. [6 ] Let me say a special word of welcome to of Mission; and one to Syria, under the dis· our guests. We are favored at this meeting tinguished leadership of our good friend, a by the attendance of many distinguished former Governor of the Bank, Dr. Pieter private citizens of our host country and of Lieftinck. The report of the mission to 16 other countries in both hemispheres. I Nigeria was made available earlier this week, hope these few days will give our guests the in Lagos and Washington, and the other re opportunity to meet each other and to com ports are nearing completion. pare notes on matters of common interest, as Two features of the Bank's operations well as to acquaint themselves with the af during the year seem to be particularly sig fairs of the Bank. nificant and encouraging. The Bank was In its eighth full year of operations, the established, among other things, to mobilize Bank has continued to be a growing institu capital on an international basis, and to do it tion. The statistics in which we customarily in close cooperation with private capital. summarize our activities are still moving We have done both with increasing success. along upward curves. I should like to men Most of our lending during the year was tion a few of the figures to you quickly: based on funds raised in the private market. Our annual report shows more loans- This, of course, was not new: the Bank's 26-and a greater amount of lending-the bonds for some time have served as one of equivalent of some $324 million-than in any the chief means whereby private loan capital other fiscal year. Since the end of the fiscal is deployed internationally. year, we have maintained that pace and a What was new, however, was the scale little bit better, with $90 million more of on which the Bank was able to put portions lending. Our gross total of loan commit of its loans into private hands. We lent, as I ments, since the beginning of operations, have mentioned, $324 million during the now amounts to something over $2 billion. year. At the same time, we had sales from Disbursements on loans, at $302 million our portfolio and direct participations by in the last fiscal year, moved faster than at private investors in new loans amounting to any time since the exceptional requirements more than $34 million. of the reconstruction loans made in 1947. One striking fact about these transac Disbursements repayable in currencies other tions was that in nearly 80 percent of them, than United States dollars, equivalent to $82 the other investors assumed the risk, without million, were markedly higher than in any any guarantee by the Bank. A second preceding year. striking fact was that participations, all of It was the Bank's most active year of these without Bank guarantee, were enlisted borrowing. In the 12 months since the last in five of our seven most recent loans. I Governors' Meeting, we have sold eight issues think it is safe to say that private participa of bonds in various currencies amounting to tions, rare in preceding years, will become a nearly $300 million. continuous and growing part of the Bank's The Bank has continued, at the request operations from now on. of member countries, to give advice on for A still more conspicuous development ward steps in development-particularly in during the year was the increasing interna the formulation of development programs tionalization of the Bank's financial re and on the mobilization of local capital. sources. The operations of the Bank, in the Three of our general survey missions were beginning, were inevitably based on dollars organized during the year to draw up pro drawn from the United States capital sub gram recommendations: one to Nigeria, scription and from the capital market in the headed by Mr. Broches, a senior member of United States. From this base-which is the Bank's staff; one to Malaya and Singa still, and for some time must continue to be, pore, for which we were fortunate enough to our most important base-we took important have the services of Sir Louis Chick as Chief forward steps in 1951, when we sold our [ 7 ] first public offering of non-dollar bonds, in system of bilateral payments agreements and the United Kingdom, and in 1952, when the of barter arrangements is being dismem whole of the original Canadian dollar sub bered. The dollar problem, if not finally scription to our capital became available for solved, seems to be coming under control. lending. The Netherlands is an outstanding ex At our Annual Meeting in 1953, I was ample of the extent of the improvement in able to report that the European members of the economic position of our European mem the Bank were releasing their currencies to bers. The Bank's second largest loan was us in encouraging amounts. N ow I can re granted to the Netherlands in 1947 to aid in port a like development in the Bank's access reconstruction. Since then the Dutch posi to capital markets outside the United States. tion has so improved that the government Of the eight bond issues I mentioned a has been able to agree to the release to us of moment ago, three were sold for United 100 million guilders from the Dutch subscrip States dollars; but investors outside the tion to our capital as well as to the flotation United States took up nearly half the amount by the Bank of a 40 million guilder bond offered-more than $100 million of a total of issue in the Dutch capital markets. Recently $225 million. Our most recent issue, a $50- the Netherlands government has also made million placement of five-year 2% percent prepayments on the 1947 loan amounting to bonds concluded earlier this week, was a $52% million. United States dollar issue sold entirely out I would like also to call your attention to side the United States. Subscriptions the case of Austria. After the end of the amounting to approximately $78 million war, Austria was beset by difficulties, not of were received for these bonds and allocations her own making, which were discouraging to made to investors in 23 different countries. any foreign investor. In 1949 she needed Bonds of this issue traded yesterday in New almost $200 million in foreign aid to cover York at 101, a full point premium over the her external deficit; but today she has issue price of par. Five other offerings, achieved equilibrium in her balance of pay during the twelve months, were sold for cur ments. rencies other than United States dollars: one issue for Canadian dollars, two for Swiss In July the Bank made its first loan to francs, one for sterling, and one for Nether Austria and this loan, incidentally, is another lands guilders, which was our first quotation illustration of how the improvement in Eu in that currency. rope's economic position has affected the Bank's operations. It will be disbursed en Of all Bank bonds sold in the last twelve tirely in European currencies, largely in months, investors outside the United States Italian lire, Dutch guilders and Swiss francs have bought three-fifths. and it is the seventh of the Bank's loans to And of every $1 million which the Bank be disbursed entirely in currencies other than has had available for lending since the be dollars. ginning of its operations, $400,000 has now These are examples of encouraging originated outside the United States. progress. Especially during the past two These important developments in the years, our European members have more operations of the Bank are symptomatic of and more resumed their role of exporters of the improvement in world production and capital to the world. They are once again trade during the last five years, especially in able to produce and finance their share of the Europe. With some regrettable exceptions, capital equipment needed to hasten the de financial stability has largely been achieved. velopment of other countries. The Bank The debilitating effects of inflation, both on welcomes this greater availability of credit the balance of payments and in distorting and, to the extent that private capital cannot patterns of production, have been largely directly meet the needs, we expect to play our eliminated. The complex and uneconomic full part in promoting this increased flow of [8 ] capital into the channels where it will do the form not only of competition in terms of most good. price, quality and delivery date, but also competition in the offer of medium-term sup The Bank itself has large amounts of pliers' credits. The Bank does not know member currencies which so far have been nor, I think, does anyone know-the exact wholly or partly inconvertible and therefore volume of credits of this kind now outstand of limited use. Let me repeat what I have ing. But, as one positive measure toward said so often, that I consider the liberal re meeting the situation, I plan to explore the lease of these currencies to be of extreme possibility of establishing an information importance. I want to add now that I service which would centralize all available believe that the time has come when the con data on the total volume of suppliers' credits ditions attached to the Bank's use of these outstanding. currencies should be reviewed and relaxed to the greatest extent possible. The Bank, as Suppliers' credits, I need hardly say, are well as the Fund, has a vital interest in all an appropriate type of international financ evidence of progress toward convertibility ing when applied to the proper transactions. because it is at the same time the promise of But they can be misused and over-used, and further expansion of long-term investment there is some disturbing evidence that this is in development. happening-too much credit given, under the Some of the currencies we need will pressure of competition, sometimes on inap come, I hope, from the greater availability, propriate terms and for the wrong purposes. without restriction, of the capital subscrip The situation, in my view, is becoming tions of member countries. We will also go serious. The danger is that bad credit will on raising capital by issues of our bonds. drive out good, and tend to bring interna There is still another way in which we tional investment back into disrepute-this may utilize these capital resources. It is en at a time when the world is still negotiating tirely natural that, in a world in which finan adjustments of debts incurred during the cial equilibrium has been disturbed for a earlier period of excessive borrowing, over long time, the confidence of investors re eager lending and mis-investment to which I turns only gradually and that capital is referred just now. therefore lent at short term. We offer a ve Suppliers' credits can serve a useful hicle for capital of thi'3 kind in the form of purpose in financing the normal, short-term loan participations and sales of our bor flow of imports or in financing investment rowers' securities from our portfolio; and as projects which can pay their way within the I mentioned some moments ago, these activi term for which the credit is given. But, ties are increasing rapidly. If private funds although the availability of these credits are still hesitant about undertaking long may seem to present an opportunity to speed term commitments, loan participations can the rate of development, there is a risk that be arranged with such funds taking short the use of short-term finance may be pressed and medium term maturities while the Bank beyond these limits. When this happens, the itself takes the long maturities. result is likely to be unfortunate. We must, at this stage of the world's N or can the balance of payments aspects recovery, I think, remember the conse of these transactions be overlooked. Expe quence of what happened in the 1920's and, rience teaches us that it is imprudent to count bearing that example in mind, we must real on a steady flow of capital year after year. ize that the growth of credit brings its own Reliance on suppliers' credits, indeed, in gen problems. As the availability of capital and eral means reliance on something particularly capital equipment has risen, we have passed volatile. The importing country may run from a seller's to a buyer's market and a into payments difficulties that check further competitive race is developing among sup investment from outside. The exporting pliers all over the world. This takes the countries themselves may experience pay- [ 9 ] ments difficulties that force them to insist on The increase in competition in suppliers' cash payment. Or a boom in the world or credits also has its dangers for the exporting home market may make it possible to sell for countries. Suppliers' credits are usually cash and reduce the need to extend credit. financed only in minor part by the suppliers There is the risk, in other words, that the themselves. Most of the industrial nations borrower may have raised his rate of invest and I include not only European countries ment only to find that he must later make, but the United States, Canada and Japan perhaps. a drastic cutback and that what was now have one or both types of official insti looked forward to as a period of sustained tutions to give financial aid to exports. One economic advance may end as a period of type finances the export of capital goods; the stagnation or, even, of retrogression. other, without supplying capital, underwrites the risk. These suppliers' credits are usually The manner in which suppliers' credits made largely at the ultimate risk of the gov are offered, moreover, sometimes results in projects being undertaken which are far ernment of the exporting country. from the highest priority in developmental I would like to make clear, of course, needs. The exporting country wishes to that I am not talking primarily about the boost its exports and therefore offers credits flow of private investment capital. If the for financing a project using its equipment. supplier were venturing more of his own The manufacturing supplier of equipment capital, he would necessarily have to be more naturally welcomes any opportunity to in concerned with the financial soundness of the crease his sales and he can certainly not be investment and with the creditworthiness of blamed if he takes advantage of whatever the country. But the result of the supplier's credit facilities may be made available. And relative freedom from risk is that he is con the importing country may feel that the stantly entreating his own government to credit, being available, should be accepted grant more liberal credit facilities. In each even if not for the most useful of purposes of the exporting countries governments hear nor on the best of terms and even if, as often the complaint that other governments are happens, under these arrangements a higher being more liberal. So a race is developing, price for the goods must be paid. This is a race in which none of the competitors can contrary to the interests of the importing win because the faster each one goes, the country and may result in slower rather than faster all the others go. faster development. Indeed, I think we are approaching a sit Long-term capital funds represent, in uation about which a warning was sounded general, the most appropriate method of fi ten years ago at Bretton Woods. The spokes nancing development projects reqUIrmg man of one of the delegations there pointed heavy capital equipment, from the point of to the danger, saying that, in a time of pres view both of the nature of the projects them sure for exports, "countries would embark selves and of the impact on the borrowing on bilateral credit arrangements no doubt country's balance of payments. But any po linked with deals relating to the purchase tential long-term investor-and not only the and sale of goods; and as soon as certain International Bank-must take into account countries began to adopt this course others the total external debt burden of the borrow would find that they had to follow suit to ing country. So an excessive use of short or protect their trade interests. It is difficult," medium term credit must necessarily dimin the spokesman went on to say, "to imagine a ish a country's access to long-term capital more fruitful source of international dissen funds. In short, the indiscriminate use of sion than a competitive trade and credit credit of this kind may increase the costs of expansion program of this character." development, may interrupt the continuity of I certainly do not wish my remarks effort, may upset the balance of investment, about the dangers inherent in an undiscrim and may make the goals of investment inating use of credit to be interpreted as a harder, and not easier, to reach. warning against a sound increase in credit [10 ] accompanying a healthy expansion of inter factor in the exchange of goods throughout national investment, particularly in the pri the world at a rate never before experienced. vate sector. At the moment, I am happy to Advances in the underdeveloped coun say, the world is enjoying relatively prosper tries have been harder to observe-if for no ous conditions of high employment and trade other reason than that these countries extend and the total volume of international credit over so much of the earth-and the advances is probably still expanding. But, if these have in any case been uneven. But to me conditions are to continue and if the flow of they are a source of immense encouragement. international trade and investment is to re flect a growing and dynamic world economy, The process of economic development is the world's trade policies will need to be not easy to set in full motion, involving as it liberalized. Last year I said that "merely to does a host of technical skills and a complex refrain from reversing the downward trend of behavior patterns that took centuries to in United States import tariffs over the last evolve in the industrial world of today. Yet two decades would not be enough to put in the process is accelerating. ternational trade on an even keel"; and that If we had a magic carpet here this there was need for a further reduction in the morning to take us all around the globe, I obstacles to imports. think we would be struck by the many evi I share the disappointment of many of dences of this progress. We would see trac you that the United States Government did tors working on land that before had only not find it possible to put into effect this year known the bullock, and we would see small the trade liberalization features of its foreign factories working where industry had never economic policies, and I welcome the Presi appeared before. We would see truck roads dent of the United States' recent statement, replacing donkey and camel trails and new which was reaffirmed by Secretary Hum farms being cleared along these roads. In phrey, that it is his intention to give high the mountains, we would see streams being priority to them in next year's legislative harnessed to produce energy, and, in the program. deserts, hundreds of miles of pipe bringing natural gas to productive use. Down in the The first of the Annual Meetings of the villages, we would see grain being milled by Governors at which I had the honor of ad machinery, instead of being pounded out by dressing the Governors was six years ago. hand, and electric light replacing the old oil I hope the Governors will forgive me if, as a lamp. privileged witness of some of the events of the past six years, I end these remarks I'd like to give you one small illustration briefly with a personal and impressionistic of what I am talking about. This concerns retrospect. one of our loans to the Federal Electricity Commission in Mexico--and the installation In 1949, the ruins of war were still ap of a small diesel power plant of only 600 parent in Europe. Famine was abroad in kilowatts generating capacity. We financed some parts of the world and the threat of it the installation of this plant in the rural town was only thinly veiled in other parts. Recon of Tecuala, in Mexico's west coast area. In struction was far from complete; the or three years' time, with this small diesel plant, ganized attack on development problems, here are some of the results: industrial users evident in many countries now, had scarcely of electricity in Tecuala have risen from 3 to at that time begun. 33; the town has acquired a public library, a The contrast today, as we all know but daily newspaper, a radio station, and a night perhaps too seldom remember, is quite re school; Tecuala's population has tripled, and markable. The facts about recovery in Eu the number of students in its schools has rope are too familiar to need repetition; let increased seven times. The municipal hos me remark only on the obvious: that the pital has installed refrigerators and put in a revival of production there has been a major modern fluoroscope, which is the only one [11 ] within a radius of 60 miles. The mayor of from the mobilization of capital, internally the town recently said: "I have witnessed and internationally, to the application of our emergence from the dark ages into an capital to bring about new production and age of light." trade. Indeed, in this Report, you can sur vey our technical and financial assistance to Now, as I said, the advance in develop development institutions in many countries, ment has been uneven. In SOme areas it has to the construction of electric power capacity not occurred at all, and in others the gains of something over three million kilowatts, to have as yet been meager. And we must re the improvement of some millions of acres of member, as one of the Governors well said farm lands, to the improvement of services here a year ago, that we are faced today by a on railways in a dozen countries in five revolution of expectancy. continents. In many parts of the world, people are By comparison with what usefully can less and less content to live in the past or to be done, these figures are modest enough, and think in the past. The way to deal with a I have no illusions about the magnitude and revolution of expectancy is to turn it into a the difficulty of the tasks that face our mem revolution of achievement and progress. ber countries and the Bank. What I do have It is in this kind of a revolution that the is evidence that convinces me, more than Bank can see itself playing a part. In the ever, that these tasks can be accomplished, Annual Report before you, you will find the and that the revolution of achievement can full range of the Bank's interests displayed- be won.
ADDRESS BY THE CHAIRMAN AT THE JOINT CLOSING SESSION, SEPTEMBER 29, 1954
It is my pleasure and privilege before The Governor for the United Kingdom, adjourning this meeting to make a few clos inspired by the name borne by this hotel, has ing remarks on behalf of my colleague, Mr. alluded to the atmosphere of puritan sim Holtrop, and myself. plicity in which the old Pilgrim Fathers lived Let me first of all thank Mr. Rooth and and worked. It is not given to us to work in Mr. Black and the Executive Directors of the such an atmosphere-but pilgrim fathers in Fund and Bank for the able manner in which a sense we are. Our journey on the path of they have conducted the affairs of our two international cooperation may well be com institutions during the past year. pared to a pilgrimage. Our progress on that path may be slower than we would wish it to I should like to extend our thanks also to be, but progress there is, clear and unmis the staffs of the Fund and the Bank and takable. particularly to Mr. Horne and Mr. Mendels, for the efficient work they have done. On the road of this pilgrimage, our Annual Meeting is like an oasis, a place As to the preparation of this meeting, where everyone profits from food and drink, our sincere gratitude is due to the Executive and not only in the material sense but, more Directors of both Fund and Bank for their important, in the spiritual sense, the ex excellent Annual Reports and to Mr. Rooth change of ideas. and to Mr. Black for the valuable addresses with which they have presented these docu Our discussions on various problems ments. These reports and addresses have have been interesting and instructive. Espe given us the foundation on which to base our cially valuable, in my opinion, was the panel discussions. discussion on prospects for private interna- [ 12] tional investment. But I am sure we have could have foreseen the outcome of their en greatly benefited by all of the deliberations terprise. To a certain extent, the often held in the formal sessions and also privately. referred to founding fathers of the Fund and Those among us who might feel some Bank could not foresee the outcome, and perhaps are of the opinion that our genera what disappointed because we have not solved our major problems I should like to remind tion did not fully live up to their expecta tions. That may be the case. But they are of the fact that these problems are not such that can be solved overnight. perfectly sure that all of us are convinced that their conception of a world-wide col I think there is no one here who expected laboration in monetary and financial fields to be able to return to his country and tell was fundamentally right. the people at home that convertibility was going to be an established fact. Weare We have still to go a long way. If we gratified that Mr. Rooth has promised that are to make any headway, we must not forget the suggestions at this meeting will be that in the background of all our technical studied. We are looking forward to the consultations and discussions there must be Fund's constructive proposals. the inspiring conviction that the people we represent will only benefit by close coopera The other major problem, as I see it, is tion; that means, by better understanding, the problem of the effective and balanced good will, and friendship among all who work development of the world's productive re in international institutions. sources. The Bank, starting from the bot tom, is working towards that end. We all I trust that this meeting has furthered have been encouraged by the discussion of the willingness to cooperate and has formed the Bank's Report and it is obvious that the ties of friendship between Governors and Bank will successfully follow the way out officials, and a willingness to understand each lined by Mr. Black and the Executive Di other's point of view. rectors. I ask my fellow Governors to keep in In this connection I may perhaps refer mind the big issue we stand for. That is to the expression by Mr. Black of his anxiety peace and good will amongst our nations. about the growing tendency of exporting In the name of all of us, I should like to countries to compete by granting excessive place on record our gratitude and apprecia medium-term credits. tion for the hospitality shown to us once The Bank's achievement in the field of again by the Government of the United development is a solid one. We all realize States. I wish to thank the members of the that, even if we have made progress and will Board of Governors, the Executive Directors, continue to make progress in this direction, the managements and staffs of Fund and there always will be more miles to go as we Bank, in short, all who have participated in raise our standards along with the progress this conference, for their contribution. we make. And now I use the souvenir gavel which I want to conclude by saying that when has been presented to me to say that this the Pilgrim Fathers sailed out for America Ninth Annual Meeting of Fund and Bank is not even the most imaginative amongst them adjourned.
[13 ] COMMITTEE REPORTS
JOINT PROCEDURES COMMITTEE Chairman ______NETHERLANDS Vice Chairman ______CEYLON Reporting M ember______EL SALVADOR
Other Members: CANADA, CHILE, CHINA, ETHIOPIA, FRANCE, INDIA, NORWAY, UNITED KINGDOM, UNITED STATES
Report No.1 September 23, 1954 The Joint Procedures Committee, at its first meeting at 3 :30 p.m., on September 23, 1954, considered the matters of business which had been proposed for the Ninth Annual Meeting of the Boards of Governors of the Fund and the Bank. I have the honor to submit the following recommendations of the Committee:
I. Business of the Board of Governors of the Fund1 II. Business of the Board of Governors of the Bank A. Agenda
The Committee recommends: 1. That the agenda attached as Annex IV2 be adopted. 2.. That, after the adoption of the initial agenda, proposed additions to the agenda be submitted in writing to the Joint Procedures Committee, through the Chair man, for its recommendations.
B. Committee The Committee recommends: 1. That a Committee on Finance and Organization be established as shown in Annex V.3 2. That the items shown in Annex VI4 be referred to the Committee on Finance and Organization for report to the Board of Governors, including the report of the Executive Directors, dated August 24, 1954, on the status of the unpaid portion of the capital subscription of China, submitted for the information of the Board of Governors. C. Bank Discussions The Committee recommends: 1. That there be a discussion by the Governors on the Annual Report and on the activities of the Bank. 2. That there be an informal panel discussion on the subject of "Prospects for Pri vate International Investment", as described in Annex VII.6
1 Fund business omitted. ~ See page 17. 2 See page 16; Annexes I-III related to business of the Fund. 6 See page 17. S See page 16. [14 ] D. Fifth Regular Election of Executive Directors The Committee considered the Report of the Executive Directors of the Bank dated Au gust 10. 1954, regarding the Fifth Regular Election of Executive Directors of the Bank. The Committee recommends the adoption of the draft resolution relating to the Fifth Regular Election of Executive Directors of the Bank,1 attached thereto, and the proposed rules for the conduct of that election2 referred to in said draft resolution.
III. Procedural Matters of Joint Concern to the Fund and the Bank A. Order of Business The Committee recommends: 1. That the order of business tentatively scheduled in Annex VIIP be adopted. 2. That the Secretaries of the Fund and Bank, when authorized by the Chairmen, may change the schedule as necessary.
B. Conduct of Meeting The Committee recommends that the provisions relating to the conduct of the Meet ing, as contained in Annex IX,4 be approved.
C. Procedural Items A later report of this Committee to the Joint Boards of Governors will deal with: 1. Place and date of Tenth Annual Meeting. 2. Election of Officers and Joint Procedures Committee for 1954-55.
Approved:
/s/ J. VAN DE KIEFT /s/ M. W. HOLTROP /s/ CARLOS J. CANESSA Chairmen Reporting Member (NETHERLANDS) (EL SALVADOR)
This Report was approved and its recommendations were adopted by the Boards of Governors at the Joint Session on September 24, 1954.
1 See page 28. 2 See page 33. S See pages 18 and ii for provisional and final schedules, respectively. 4 See page 19. [ 15] ANNEX fVt
AGENDA
1. Ninth Annual Report 2. Financial Statements and Annual Audit (Appendices A - H of Ninth Annual Report) 3. Administrative Budget for Fiscal Year ending June 30, 1955 (Appendix I of Ninth Annual Report) 4. Allocation of Income to Reserve 5. Fifth Regular Election of Executive Directors 6. Application of the Republic of Korea for Membership in the Bank 7. Application of Afghanistan for Membership in the Bank 8. Place and Date of Tenth Annual Meeting 9. Election of Officers and Procedures Committee for 1954-55
ANNEX V
COMMI'ITEE ON FINANCE AND ORGANIZATION
C hairma n ______SYRIA Vice Chairman ______J APAN
Reporting M emb er______NICARAGUA
AUSTRIA DENMARK LEBANON
BELGIUM FRANCE SOUTH AFRICA
BRAZIL GREECE THAILAND
CHINA INDIA UNITED KINGDOM
COSTA RICA IRAN UNITED STATES
1 Annexes I-III related to business of the Fund. [ 16 ] ANNEX VI
COMMITTEE ON FINANCE AND ORGANIZATION Terms of Reference For consideration and report to the Board of Governors: 1. Financial Statements and Annual Audit (Appendices A - H of Ninth Annual Report) 2. Administrative Budget for Fiscal Year ending June 30, 1955 (Appendix I of Ninth Annual Report) 3. Allocation of Income to Reserve 4. Application of the Republic of Korea for Membership in the Bank 5. Application of Afghanistan for Membership in the Bank 6. Status of Unpaid Portion of Capital Subscription of China
ANNEX VII
INFORMAL PANEL DISCUSSION
Subject of Discussion
Prospects for Private International Investment
Chairman of Panel: GEORGE M. HUMPHREY Secretary of the Treasury of the United States
RICHARD AUSTEN BUTLER Chancellor of the Exchequer of the United Kingdom
CHINTAMAN DESHMUKH Minister of Finance of India
EUGENIO GUDIN Minister of Finance of Brazil
[ 17 ] A.NNEX VIII
PRO V I S ION A L S C H E D U L E'
Friday, September 24-Wednesday, September 29 (Thursday, September 23-3 :30 p.m.--Joint Procedures Committee)
FRIDAY -September 24-10 :00 a.m.-Opening Ceremonies First Session ( Joint) Report of Joint Procedures Committee -11 :30 a.m.-Fund Board-Annual Report: Address by Managing Director of Fund -Afternoon -(FREE for private conferences)
SATURDAY -September 25-10 :00 a.m.-Bank Board-Annual Report: Address by President of the Bank -10 :45 a.m.-Bank Committee on Finance and Organization -11 :30 a.m.-Discussion on Fund Annual Report - 3 :00 p.m.-Fund Committee on Finance and Organization
MONDAY -September 27-10 :00 a.m.-Discussion on Bank Annual Report - 3 :30 p.m.-Discussion on Fund Annual Report
TUESDAY -September 28-10 :00 a.m.-Bank Informal Discussion -12 :00 noon-Fund Board Managing Director's Concluding Comments Committee Reports - 3:00 p.m.-Bank Board President's Concluding Comments Committee Reports - 4:00 p.m.-Fund Board Election of Executive Directors - 5 :00 p.m.-Bank Board Election of Executive Directors
WEDNESDAY -September 29-Morning -(FREE for private conferences) -12 :00 noon-Joint Procedures Committee - 3 :30 p.m.-Closing Session (Joint)
1 The provisional schedule was subsequently amended; for final schedule see p. ii. [18 ] ANNEX IX
PROVISIONS RELATING TO THE CONDUCT OF THE MEETING
Attendance 1. Joint sessions of the Boards of Governors of the Fund and the Bank, the sessions at which the Annual Reports are presented and discussed, and the informal discus sions shall be open to the press and public. Other sessions of the Boards of Gov ernors and committee meetings shall be closed to the press and public. 2. Meetings of the Joint Procedures Committee shall be open only to Governors and Alternate Governors and one adviser for each member country represented on the Committee. 3. Committee meetings, with the exception of those of the Joint Procedures Committee, shall be open to Delegations who are not members of the Committee. 4. Accredited observers may attend all sessions of the Boards of Governors and their committees, other than the Joint Procedures Committee, unless decided otherwise. Observers wishing to speak at a meeting are requested to consult the Chairman in advance. 5. Sessions of the Boards of Governors a.nd committee meetings shall be open to such members of the joint secretariat and the technical staffs as may be necessary for the conduct of their business.
Public Information 6. The Chairmen of the Boards of Governors, the Managing Director of the Fund and the President of the Bank are authorized to communicate to the press such infor mation concerning the proceedings of the Ninth Annual Meeting as they deem suit able. Copies of such communications shall be available to any Governor on his request.
Records 7. The Secretaries of the Fund and the Bank are authorized to prepare verbatim tran scripts of the proceedings of sessions of the Boards of Governors and their commit tees, and of informal discussions. The transcripts of committee proceedings, and any summary records thereof, will be confidential and available only to the Chair men, the Managing Director of the Fund and the President of the Bank, unless otherwise decided. 8. Reports of committees shall be signed by the Committee Chairman and the Reporting Member.
[ 19 ] JOINT PROCEDURES COMMITTEE
Report No.2
September 29, 1954
I have the honor to 8ubmit the Report of the Joint Procedures Committee on its second meeting which was held at 12 :00 noon on September 29, 1954.
I. Place and Date of Tenth Annual Meeting The Committee considered the place and date of the Tenth Annual Meeting. The Committee noted that last year the Boards of Governors had approved the Commit tee's recommendation that the Tenth Annual Meeting be held outside Washington, the place to be determined this year. Several invitations were considered and the Committee decided to recommend that the invitation of Turkey be accepted. The Committee also decided to recommend that the Tenth Annual Meeting should be convened in the latter part of Septem ber, 1955. I have the honor, in the name of the Committee, to recommend the adoption of the draft resolutions attached hereto as Annex V
II. Officers for Ensuing Year The Committee next considered the question of officers of the Boards of Governors for the ensuing year, and recommends that the Governor for Egypt be elected Chairman and the Governors for China, France, India, the United Kingdom and the United States be elected Vice-Chairmen. In the name of the Committee, I recommend to the Boards of Governors the adoption of the draft resolutions attached hereto as Annex IV
III. Composition of Procedures Committee for Ensuing Year The Committee then considered the composition of the Procedures Committee for the ensuing year. I have the honor, in the name of the Committee, to recommend to the Boards of Governors the adoption of the draft resolutions attached as Annex 111.1
/s/ J. VAN DE KIEFT / S / CARLOS J. CANES SA /s/ M. W. HOLTROP Reporting Member Chairmen (EL SALVADOR) (NETHERLANDS)
This Report was approved and its recommendations were adopted by the Boards of Governors at the final Joint Session on September 29, 1954.
1 See Resolutions Nos. 90 to 92 on page 32. [20 ] REPORT OF COMMITTEE ON FINANCE AND ORGANIZATION
September 27, 1954
C hairma n ______------______SYRIA Vice C hairman ______J APAN Reporting M emb er ______NICARAGUA Other Members: AUSTRIA, BELGIUM, BRAZIL, CHINA, COSTA RICA, DENMARK, FRANCE, GREECE, INDIA, IRAN, LEBANON, SOUTH AFRICA, THAILAND, UNITED KINGDOM, UNITED STATES.
I have the honor to report that the Committee on Finance and Organization met at 10 :45 a.m. on Saturday, September 25, 1954, and considered the following Agenda items: 1. Financial Statements and Annual Audit 2. Administrative Budget for Fiscal Year ending June 30, 1955 3. Allocation of Income to Reserve 4. Application of Republic of Korea for Membership in the Bank 5. Application of Afghanistan for Membership in the Bank 6. Status of Unpaid Portion of Capital Subscription of China The President of the Bank commented briefly on several of the matters before the Com mittee.
Financial Statements, Annual Audit and Administrative Budget The financial statements and annual audit attached as Appendices A to H inclusive, to the Ninth Annual Report, were then considered. The Committee also considered the Administrative Budget for the fiscal year ending June 30, 1955, attached as Appendix I to the Annual Report, and a supplemental Report giving additional information concerning the Budget. The Budget was prepared in accord ance with Section 19 of the By-Laws and approved by the Executive Directors. In the name of the Committee, I have the honor to recommend to the Board of Governors the adoption of the draft resolution on the Financial Statements and Budget attached hereto as Annex 1. 1
Allocation of Income to Reserve The Committee considered the Report of the Executive Directors, dated August 10, 1954, on the allocation of income to reserve and concurs in the recommendations of the Executive Directors. In the name of the Committee, I have the honor to recommend that the Board of Gover nors note with approval the allocation of the net income of the Bank for the fiscal year ended June 30, 1954, to the supplemental reserve against losses on loans and guarantees, in accord ance with resolutions previously adopted by the Board of Governors and by the Executive Directors.
1 See Resolution No. 87 on page 28. [ 21 ]
-_.. " ------Application of the Republic of Korea for Mem bership in the Bank The Committee then considered the Report of the Executive Directors, dated August 6, 1954, concerning the application of the Republic of Korea for membership in the Bank and recommends the adoption by the Board of Governors of the draft resolution attached to that Report.1 The Governor for India abstains from this recommendation of the Committee.
Application of Afghanistan for Membership in the Bank The Committee then considered the Report, dated September 23, 1954, of the Executive Directors concerning the application of Afghanistan for membership in the Bank. I have the honor, in the name of the Committee, to recommend the adoption by the Board of Governors of the draft resolution attached to that Report.2
Unpaid Portion of Capital Subscription of China The Committee next considered the report of the Executive Directors, dated August 24, 1954, concerning the unpaid portion of the capital subscription of China and recommends that the Board of Governors note that Report. The Governor for India abstains from this recommendation.
Marketing Activities of the Bank A statement on the marketing activities of the Bank was made to the Committee by the Director of Marketing.8 /s/ HUSNI A. SAWWAF /s/ ALEJANDRO BACA-MuNOZ Chairman Reporting Member (SYRIA) (NICARAGUA)
This Report was approved by the Board of Governors on September 28,1954.
1 See Resolution No. 88 on page 28. 2 See Resolution No. 89 on page 30. B See page 23. [22 ] REPORT ON MARKETING ACTIVITIES OF THE BANK
Statement by the Director of Marketing of the Bank to the Committee on Finance and Organization, September 25, 1954
Two of the most important developments in the Bank's operations in the past year oc curred in the Bank's financing. One was a considerable geographical expansion in the market for the Bank's bonds; the other was the increasing participation of investors in the Bank's loans, both through direct participations and through purchases from portfolio. President Black has already mentioned these developments to the Governors; this report describes them in somewhat more detail, and covers other activities in the field of financing that have been of interest to the Bank. Since the last meeting of the Board of Governors, the Bank has sold eight new issues of bonds amounting to the equivalent of nearly $300 million. This was a larger total of bonds than the Bank has sold in any other twelve months. They were offered in more capital mar kets than in any previous year, and resulted in the broadest distribution of its bonds that the Bank has ever had. Of the amount sold, investors outside the United States purchased 59 per cent. Three issues were of United States dollar obligations. These amounted to $225 million. One issue, of $100 million in January, was sold primarily in the United States market. Of a $75 million issue of three-year bonds sold just a year ago, however, more than half were bought outside the United States. And the Bank's most recent dollar issue, $50 million of five-year bonds, was sold entirely outside the United States. This last issue was oversubscribed by $28 million. It was sold in 23 different countries on five continents, and achieved the widest geographical distribution of any World Bank is sue. It is interesting to note that some of this issue has found its way back to the United States, and currently a good premium over the issue price is bid for them in the New York market. Five issues were sold during the twelve months for currencies other than United States dollars, an unparalleled experience in the Bank. The Bank sold two Swiss franc issues to taling 100 million Swiss francs, one issue of 25 million Canadian dollars, a sterling issue of five million pounds, and a Netherlands issue of 40 million Dutch guilders. It is encouraging that the European issues were heavily subscribed not only in Switzerland, where the Bank is well known, but in the London market, where the Bank had not had a sterling issue for more than three years, and in the Netherlands market, where the Bank was selling guilder bonds for the first time. Taken together, these five issues amounted to the equivalent of $75 million, and they raised the percentage of the Bank's bonds outstanding in currencies other than United States dollars from 10 per cent at June 30, 1953 to 16 per cent now. The total indebtedness of the Bank today amounts to the equivalent of $851 million. It is interesting to note that only three corporations in the United States, according to available information, have outstanding a larger amount of long-term debt. Of the Bank's direct obli gations, approximately 41 per cent were held outside the United States, with the 59 per cent of United States holdings divided as follows: insurance companies, savings banks, and pen sion and trust funds, in about equal proportion, about 54 per cent; commercial banks and miscellaneous investors, the remainder.
[ 23 ]
---'-"------_.... In the United States market, favorable conditions have prevailed over the past year. As a result, the price of United States Treasury and other high-grade bonds rose sharply above the levels prevailing in the previous fiscal year. The Bank's issues participated fully in this price movement and won wider acceptance by practically all types of investors. To continue developing a market capable of absorbing enough bonds to meet the growing needs of the Bank, the Bank still requires legislation in some states of the United States to make the bonds legal for purchase by additional types of investors. 'l'here is definite prog ress in this direction, the most recent example being legislation passed by the United States Congress to permit insurance companies in the District of Columbia to buy the Bank's bonds. This is of real importance, since in certain states legal investments for particular funds are based on the District of Columbia requirements. The new law will open the door to many more worthwhile purchasers. The majority of state legislatures next meet in 1955, and efforts will be continued to ob tain the necessary legislation in those important areas in which the Bank's securities are not fully eligible for investment. This legislation will be designed in some cases to cover in surance companies and commercial banks, but especially will be intended to cover various state pension funds. These funds are continuing to increase at a very rapid rate. They are becoming one of the most important segments of the investment market, especially for high grade bonds. While these funds used to be interested primarily in obligations of the munici palities within their own state borders, they are now seeking larger returns through the pur chase of public utility and other corporate securities. And compared with these securities, the Bank's bonds are particularly attractive. One of the outstanding developments in the past year, as mentioned earlier, has been the growing interest of other investors in participating in new loans by the Bank and in pur chasing borrowers' obligations from the Bank's portfolio-both without the guarantee of the Bank. These transactions, of course, serve to augment the Bank's lendable funds and, of far greater importance, they give evidence of increasing confidence in the soundness of its operations. The total of such transactions, at present, amounts to $65 million equivalent, and of this, $35 million has been effected during the eight months since January first. Much of this increased interest in purchasing or participating in Bank loans has been shown by leading commercial banks and other investors in the United States; but in its loan of some months ago to the Sui Gas Transmission Company in Pakistan the Bank had its first direct participation by banks outside the United States, in this case from six British banks. These transactions furnish an important opportunity for private capital to participate in interna tional investment, and are expected to become an increasingly important part of the Bank's operations. It was reported to the Board last year that the Director of Marketing had had the privi lege of visiting certain member countries to study their local capital markets. He revisited some of these countries this year, and for the first time went to a number of Central American countries with the same objective in mind. The progress seen in some of these markets is very encouraging and marked by many interesting possibilities. There have also been many helpful visits, both in New York and in Washington, from central bank and other officials interested in marketing methods and procedures. The methods employed in the United States, or in any other country with a highly active capital market, nat urally cannot be adopted entirely by the underdeveloped countries; but nevertheless, these visitors have found that there are basic principles that apply in any case, and that there are procedures in the United States which, with the necessary adaptations, give some promise of success in their own countries. [24 ] What has been particularly encouraging to the Bank is the evidence found of the growing importance that is being attached to mobilizing local resources for investment. More and more government and business leaders appreciate that the greater the available supply of local savings, the better basis there will be for attracting outside capital as well. This whole question of mobilizing local capital is a complex one, but one whose importance, in the Bank's view, is second to none in the field of economic development. Wherever a member country re quests help in its approaches to the problem, the Bank stands ready to be of assistance.
[25 ] RESOLUTION ADOPTED BY THE BOARD OF GOVERNORS BETWEEN EIGHTH AND NINTH ANNUAL MEE'I'INGS
Resolution No. 85
TERMS AND CONDITIONS ON WHICH ISRAEL SHALL BE ADMITTED TO MEMBERSHIP IN THE BANK
WHEREAS, the Government of Israel has applied for admission to membership in the In ternational Bank for Reconstruction and Development in accordance with Section 1 (b) of Article II of the Articles of Agreement of the Bank; and WHEREAS, pursuant to Section 20 of the By-Laws of the Bank, the Executive Directors, after consultation with representatives of the Government of Israel have made recommen dations to the Board of Governors with regard to the application of that country for admis sion to membership in the Bank; Now, THEREFORE, the Board of Governors, having considered the recommendations of the Executive Directors, hereby RESOLVES: THAT the terms and conditions upon which Israel shall be admitted to membership in the Bank shall be as follows: 1. Definitions: As used in this resolution: (a) The term "Bank" means International Bank for Reconstruction and Devel opment. (b) The term "Articles" means the Articles of Agreement of the Bank. (c) The term "dollars" or "$" means United States dollars of the weight and fineness in effect on July 1, 1944. (d) The term "subscription" means the capital stock of the Bank subscribed to by a member. (e) The term "member" means member of the Bank. 2. Subscription: By accepting membership in the Bank, Israel shall subscribe to 45 shares of the capital stock of the Bank at the par value of $100,000 per share. 3. Membership in the Fund: Before accepting membership in the Bank, Israel shall accept membership in and become a member of the International Monetary Fund. 4. Payments on Subscription: (a) Before accepting membership in the Bank, Israel shall pay to the Bank: (i) Gold or United States dollars equal to 20/0 of its subscription; and (ii) An amount in the currency of Israel which, at the appropriate prevailing exchange rate, shall be equal in value to 18 % of its subscription. [26 ]
---_.. _-----_._ .._------(b) Israel shall agree that, if it tenders any part of the payment called for in paragraph (a) (i) above in gold, the Bank shall have the right to reject any such gold which, in its opinion, may not be sold freely and uncondition ally by the Bank to members requiring certification or other evidence as to the origin of gold purchased by them.
5. Representation and Information: Before accepting membership in the Bank, Is rael shall represent to the Bank that it has taken all action necessary to sign and deposit the instrument of acceptance and sign the Articles as contemplated by paragraph 6 (a) and (b) of this resolution and Israel shall furnish to the Bank such information in respect of such action as the Bank may request.
6. Acceptance of Membership: After the Bank shall have informed the Government of the United States of America that Israel (i) has made the payments called for by paragraph 4 of this resolution; (ii) has made the representation called for by paragraph 5 of this resolution; and (iii) has furnished the information re quested by the Bank pursuant to said paragraph 5, and after Israel shall have become a member of the International Monetary Fund, Israel shall become a member of the Bank, with a subscription as set forth in paragraph 2 of this resolution, as of the date when Israel shall have complied with the following requirements: (a) Israel shall deposit with the Government of the United States of America an instrument stating that it has accepted in accordance with its law the Articles and all the terms and conditions prescribed in this resolution, and that it has taken all steps necessary to enable it to carry out all its obliga tions under the Articles and this resolution; (b) Israel shall sign the original copy of the Articles held in the Archives of the Government of the United States of America.
7. Limitation on Period for Acceptance of Membership: Israel may accept membership in the Bank pursuant to this resolution until July 12, 1954; provided, however, that, if extraordinary circumstances are deemed by the Executive Directors to warrant an extension of the period during which Israel may accept membership pursuant to this resolution, the Executive Directors may extend such period until such later date as they may determine.
Adopted January 11, 1954
[27 ] RESOLUTIONS ADOPTED BY THE BOARD OF GOVERNORS AT NINTH ANNUAL MEETING
Resolution No. 86
FIFTH REGULAR ELECTION OF EXECUTIVE DIRECTORS
RESOLVED: (a) THAT the proposed Rules for the Conduct of the Fifth Regular Election of Execu tive Directors,! attached to the Report of the Executive Directors, are hereby adopted as the rules for the conduct of said election; and (b) THAT the Sixth Regular Election of the Executive Directors shall take place at the Annual Meeting of the Board of Governors in 1956. Resolution No. 86 was adopted by the Board of Governors on Septem ber 24, 1954.
Resolution No. 87
FINANCIAL STATEMENTS AND BUDGET
RESOLVED: THAT the Board of Governors consider the Financial Statements, Auditors' Report and Administrative Budget, included as exhibits "A" to "I" inclusive, of the Ninth Annual Re port, as fulfilling the requirements of Article V, Section 13, of the Articles of Agreement and of Section 19 of the By-Laws.
Resolution No. 88
TERMS AND CONDITIONS ON WHICH THE REPUBLIC OF KOREA SHALL BE ADMITTED TO MEMBERSHIP IN THE BANK
WHEREAS, the Government of the Republic of Korea has applied for admission to mem bership in the International Bank for Reconstruction and Development in accordance with Section 1 (b) of Article II of the Articles of Agreement of the Bank; and WHEREAS, pursuant to Section 20 of the By-Laws of the Bank, the Executive Directors, after consultation with representatives of the Government of the Republic of Korea, have made recommendations to the Board of Governors with regard to the application of that country for admission to membership in the Bank; Now, THEREFORE, the Board of Governors, having considered the recommendations of the Executive Directors, hereby RESOLVES: THAT the terms and conditions upon which the Republic of Korea shall be admitted to membership in the Bank shall be as follows:
1 See page 33. [28 ] 1. Definitions: As used in this resolution: (a) The term "Bank" means International Bank for Reconstruction and De velopment. (b) The term "Articles" means the Articles of Agreement of the Bank. (c) The term "dollars" or "$" means United States dollars of the weight and fineness in effect on July 1, 1944. (d) The term "subscription" means the capital stock of the Bank subscribed to by a member. (e) The term "member" means member of the Bank.
2. Subscription: By accepting membership in the Bank, the Republic of Korea shall subscribe to ]25 shares of the capital stock of the Bank at the par value of $100,000 per share.
3. Membership in the Fund: Before accepting membership in the Bank, the Republic of Korea shall accept membership in and become a member of the International Monetary Fund.
4. Payments on Subscription: (a) Before accepting membership in the Bank, the Republic of Korea shall pay to the Bank: (i) Gold or United States dollars equal to 2% of its subscription; and (ii) An amount in the currency of the Republic of Korea, which, at the appropriate prevailing exchange rate, shall be equal in value to 18% of its subscription. (b) The Republic of Korea shall agree that, if it tenders any part of the pay ment called for in paragraph (a) (i) above in gold, the Bank shall have the right to reject any such gold which, in its opinion, may not be sold freely and unconditionally by the Bank to members requiring certification or other evidence as to the origin of gold purchased by them.
5. Representation and Information: Before accepting membership in the Bank, the Republic of Korea shall represent to the Bank that it has taken all action neces sary to sign and deposit the instrument of acceptance and sign the Articles as contemplated by paragraph 6 (a) and (b) of this resolution and the Republic of Korea shall furnish to the Bank such information in respect of such action as the Bank may request.
6. Acceptance of Membership: After the Bank shall have informed the Government of the United States of America that the Republic of Korea (i) has made the payments called for by paragraph 4 of this resolution; (ii) has made the repre sentation called for by paragraph 5 of this resolution; and (iii) has furnished the information requested by the Bank pursuant to said paragraph 5, and after the Republic of Korea shall have become a member of the International Monetary Fund, the Republic of Korea shall become a member of the Bank, with a sub scription as set forth in paragraph 2 of this resolution, as of the date when the Republic of Korea shall have complied with the following requirements: [29 ] (a) The Republic of Korea shall deposit with the Government of the United States of America an instrument stating that it has accepted in accordance with its law the Articles and all the terms and conditions prescribed in this resolution, and that it has taken all steps necessary to enable it to carry out all its obligations under the Articles and this resolution; (b) The Republic of Korea shall sign the original copy of the Articles held in the Archives of the Government of the United States of America.
7. Limitation on Period for Acceptance of Membership: The Republic of Korea may accept membership in the Bank pursuant to this resolution until March 31, 1955; provided, however, that, if extraordinary circumstances are deemed by the Executive Directors to warrant an extension of the period during which the Republic of Korea may accept membership pursuant to this resolution, the Executive Directors may extend such period until such later date as they may determine.
Resolution No. 89
TERMS AND CONDITIONS ON WHICH AFGHANISTAN SHALL BE ADMITTED TO MEMBERSHIP IN THE BANK
WHEREAS, the Government of Afghanistan has applied for admission to membership in the International Bank for Reconstruction and Development in accordance with Section 1 (b) of Article II of the Articles of Agreement of the Bank; and WHEREAS, pursuant to Section 20 of the By-Laws of the Bank, the Executive Directors, after consultation with representatives of the Government of Afghanistan, have made recom mendations to the Board of Governors with regard to the application of that country for ad mission to membership in the Bank; Now, THEREFORE, the Board of Governors, having considered the recommendations of the Executive Directors, hereby
RESOLVES: THAT, the terms and conditions upon which Afghanistan shall be admitted to mem bership in the Bank shall be as follows:
1. Definitions: As used in this resolution: (a) The term "Bank" means International Bank for Reconstruction and Devel opment. (b) The term "Articles" means the Articles of Agreement of the Bank. (c) The term "dollars" or "$" means United States dollars of the weight and fineness in effect on July 1, 1944. (d) The term "subscription" means the capital stock of the Bank subscribed to by a member. (e) The term "member" means member of the Bank. 2. Subscription: By accepting membership in the Bank, Afghanistan shall subscribe to 100 shares of the capital stock of the Bank at the par value of $100,000 per share. [30 ] 3. Membership in the Fund: Before accepting membership in the Bank, Afghanis tan shall accept membership in and become a member of the International Monetary Fund.
4. Payments on Subscription: (a) Before accepting membership in the Bank, Afghanistan shall pay to the Bank: (i) Gold or United States dollars equal to 2% of its subscription; and (ii) An amount in the currency of Afghanistan, whieh, at the appropriate prevailing exchange rate, shall be equal in value to 18 % of its sub scription. (b) Afghanistan shall agree that, if it tenders any part of the payment called for in paragraph (a) (i) above in gold, the Bank shall have the right to re ject any such gold which, in its opinion, may not be sold freely and uncon ditionally by the Bank to members requiring certification or other evidence as to the origin of gold purchased by them.
5. Representation and Information: Before accepting membership in the Bank, Af ghanistan shall represent to the Bank that it has taken all action necessary to sign and deposit the instrument of acceptance and sign the Articles as contem plated by paragraph 6 (a) and (b) of this resolution and Afghanistan shall furnish to the Bank such information in respect of such action as the Bank may request. 6. Acceptance of Membership: After the Bank shall have informed the Government of the United States of America that Afghanistan (i) has made the payments called for by paragraph 4 of this resolution; (ii) has made the representation called for by paragraph 5 of this resolution; and (iii) has furnished the infor mation requested by the Bank pursuant to said paragraph 5, and after Afghani stan shall have become a member of the International Monetary Fund, Afghani stan shall become a member of the Bank, with a subscription as set forth in paragraph 2 of this resolution, as of the date when Afghanistan shall have com plied with the following requirements: (a) Afghanistan shall deposit with the Government of the United States of America an instrument stating that it has accepted in accordance with its law the Articles and all the terms and conditions prescribed in this reso lution, and that it has taken all steps necessary to enable it to carry out all its obligations under the Articles and this resolution; (b) Afghanistan shall sign the original copy of the Articles held in the Archives of the Government of the United States of America. 7.. Limitation on Period for Acceptance of Membership: Afghanistan may accept membership in the Bank pursuant to this resolution until March 31, 1955; pro vided, however, that, if extraordinary circumstances are deemed by the Executive Directors to warrant an extension of the period during which Afghanistan may accept membership pursuant to this resolution, the Executive Directors may ex tend such period until such later date as they may determine.
Resolutions Nos. 87 to 89 were adopted by the Board of Governors on September 28, 1954. [ 31 ] Resolution No. 90
PLACE AND DATE OF TENTH ANNUAL MEETING
RESOLVED: THAT the Chairman shall convene the Tenth Annual Meeting of the Board of Governors of the International Bank for Reconstruction and Development in Istanbul, Turkey, in Sep tember, 1955, preferably in the latter half of the month.
Resolution No. 91
OFFICERS OF BOARD OF GOVERNORS FOR 1954-55
RESOLVED: THAT the Governor for Egypt is hereby elected Chairman, and the Governors for China, France, India, the United Kingdom and the United States are hereby elected Vice-Chairmen of the Board of Governors of the International Bank for Reconstruction and Development, to hold their respective offices until the election of officers of the International Bank for Recon struction and Development takes place at the close of the next annual meeting.
Resolution No. 92
COMPOSITION OF PROCEDURES COMMITTEE FOR 1954-55
RESOLVED: THAT a Procedures Committee be hereby established, to be available after the termina tion of this meeting, and until the election of officers of the International Bank for Reconstruction and Development takes place at the next annual meeting, for consultation at the discretion of the Chairman, normally by correspondence, and also if occasion requires by convening immediately before the annual meeting of the Board. The Procedures Committee shall consist of the Governors for the following members: China, Costa Rica, Egypt, France, Germany, India, Japan, Paraguay, South Africa, Turkey, the United Kingdom and the United States. The Chairman, Vice-Chairman and Reporting Member shall be the Governors for Egypt, Costa Rica and Germany, respectively. Resolutions Nos. 90 to 92 were adopted by the Board of Governors on September 29, 195"-.
[32 ]
... ,.-.... - -.. -..----.------RULES FOR THE CONDUCT OF THE FIFTH • REGULAR ELECTION OF EXECUTIVE DIRECTORS
1. Definitions: Whenever used in these rules, unless the context shall otherwise re quire, the following terms shall have the respective meanings hereinafter set forth: (a) The term "Articles" means the Articles of Agreement of the Bank. (b) The term "Schedule B" means Schedule B of the Articles with the adjust ments specified in these Rules. (c) The term "Board" means the Board of Governors of the Bank. (d) The term "Chairman" means the Chairman of the Board of Governors or a Vice Chairman who may at the time in question be presiding as Chairman of the Board. (e) The term "Governor" includes the Alternate Governor or any temporary Alternate Governor, designated in accordance with Section 12 of the By Laws, when acting for the Governor. (f) The term "Secretary" means the Secretary of the Bank. (g) The term "election" means the fifth regular election of Executive Directors. (h) The term "meeting" means the meeting of the Board at which the election is held.
2. Date of Election: The election shaH be held during the Ninth Annual Meeting of the Board at a time to be set forth in the schedule of the meeting as approved by the Board.
3. Schedule B: Subject to the adjustments hereinafter set forth the provisions of Schedule B shall apply to the conduct of the election.
4. Number of Executive Directors to be Elected Under Article V, Section .!db): At such election, eleven Executive Directors shall be elected under Article V, Section 4 (b) .
5. In view of the number of Executive Directors to be elected under Article V, Sec tion 4 (b), (a) The percentage of the eligible votes required for election as specified in paragraphs 2 and 5 of Schedule B shall be nine percent. (b) The maximum percentage of eligible votes for anyone nominee as specified in paragraphs 3, 4 and 5 of Schedule B shall be twelve percent.
6. Nominations: (a) A person shall be eligible f or election as Executive Director when nomi nated by one or more Gover nors. [33 ] (b) Each nomination shall be made on a Nomination Form to be obtained from the Secretary and signed by the Governor or Governors making the nomi nations. (c) A Governor shall nominate only one person. (d) On the day preceding the session at which the election is to take place, the Chairman shall, preferably at a session of the Board, announce the nomi nations received, ask for any further nominations, and close the nomina tions. The Secretary shall post a list of the persons nominated.
7. Tally Sheets: The Secretary shall post at the meeting and distribute to each Governor and Alternate Governor prior to the election a Tally Sheet sub stantially in the form of Annex Al attached hereto and a list of the persons nominated.
8. Form of Ballut: The Secretary shall have available a sufficient number of ballot forms substantially in the form of Annex Bl attached hereto.
9. Supervision of the Election: The Chairman shall supervise the election and shall appoint such tellers and other assistants as he deems necessary. 10. Distribution of Ballots: One ballot form shall be furnished to each Governor eligible to vote immediately before a ballot is taken. On any particular ballot only ballot forms distributed for that ballot shall be counted.
11. Balloting-General: Each ballot shall be taken as follows: (a) The roll of members whose Governors are eligible to vote shall be called in alphabetical order. (b) Immediately after a member's name is called, the Governor for such mem ber shall deposit his signed ballot in the ballot box. (c) When the roll call shall have been completed and the ballots cast, the Chairman shall cause the ballots to be counted and shall cause to be an nounced (i) the names of the members whose Governors voted for each nominee and the total number of votes received by such nominee, (ii) the name of each person elected, and in case the votes of any members counted toward, but were not cast for, his election, the names of such members, and (iii) the names of the members whose Governors are eligible to vote on the next ballot, if any. (d) In the event that the tellers shall be of the opinion that any particular ballot is not properly executed, they shall, if possible, afford the Governor casting such ballot an opportunity to correct it before tallying the results; and such ballot, if so corrected, shall be deemed to be a valid ballot.
12. Recess: After any ballot, J~he Chairman may recess the meeting for such period as he may deem necessary, if in his opinion such action will facilitate the election.
13. Balloting-Second and Following Ballots: (a) If as a result of any ballot and the preceding ballots (if any) the number of Executive Directors to be elected in accordance with paragraph 4 above
1 Not included herein. [34 ] shall not have been elected, a succeeding ballot shall be taken. The Governors eligible to vote on such succeeding ballot shall be only (i) those Governors who voted on the preceding ballot for any nominee not elected, and (ii) those Governors whose votes for a nominee elected on the preceding ballot are deemed under paragraph 4 of Schedule B to have raised the votes cast for such nominee above the maximum percentage of the eligible votes as specified in paragraph 5 (b) above.
(b) The votes of a Governor shall not be deemed under paragraph 4 of Schedule B to have raised the total votes for a nominee over the maximum percentage of the eligible votes as specified in paragraph 5 (b) above if without the votes of such Governor such total would be more than the minimum per centage of the eligible votes but not more than the maximum percentage of the eligible votes.
(c) If on any ballot two or more Governors having an equal number of votes shall have voted for the same nominee and the votes of one or more, but not all, of such Governors could be deemed under paragraph 4 of Schedule B to have raised the total votes received by such nominee above the maximum per centage of the eligible votes, as specified in paragraph 5 (b) above, the Chair man shall determine by lot the Governor or Governors, as the case may be, who shall be eligible to vote on the next ballot.
14. Elimination of Nominees: (a) If two or more nominees shall receive the lowest number of votes within the meaning of paragraph 3 of Schedule B, no nominee shall be dropped from the next succeeding ballot, but if the same situation shall continue on such succeeding ballot, the Chairman shall eliminate by lot one of such nominees from the next succeeding ballot. (b) When on any ballot the number of nominees shall not exceed the number of ExecutivE' Directors remaining to be elected, each nominee shall be deemed to be elected by the number of votes received by him on such ballot; pro vided, however, that if on such ballot the votes of any Governor shall be deemed under paragraph 4 of Schedule B to have raised the votes cast for any nominee above the maximum percentage of the eligible votes, as speci fied in paragraph 5 (b) above, no nominee shall be deemed to have been elected who shall not have received on such ballot the required percentage of votes under these rules and a succeeding ballot shall be held on which all nominees not elected on the preceding ballot shall be eligible.
15. Abstention from Voting: If a Governor shall abstain from voting on any ballot, he shall be ineligible to vote on any subsequent ballot; and his votes shall not be counted, within the meaning of Section 4 (g) of Article V, as counting toward the election of any Executive Director; provided, however, that if such absten tion shall have first occurred on the last of several ballots, the votes of such Governor shall be deemed to have been cast for the election of the Execu tive Director elected on such ballot by the least number of votes. If at the time any ballot is taken a member shall not be represented by a Governor at the meet ing or session at which the ballot is taken, the member, and its Governor, if any, shall be deemed for the purpose of this paragraph to have abstained from voting on that ballot. [35 ] 16. Announcement of Results of Election: After the last ballot of the election, the Chairman shall cause to be distributed to each Governor a ~tatement setting forth the results of the election. - 17. Effective Date of Election of Executive Directors: The effective date of the elec tion shall be November 1, 1954. Incumbent elected Executive Directors shall serve through the day preceding such date.
18. General: Any question arising in connection with the conduct of the election shall be resolved by the tellers, subject to appeal, at the request of any Gover nor, to the Chairman and from him to the Board. Whenever possible any such question shall be put in general terms without identifying the members or Governors concerned.
The Rules for the Conduct of the Fifth Regula.r Election were ap proved by Resolution No. 86, page 28. -
r 36] EXECUTIVE DIRECTORS ELECTED AT FIFTH REGULAR ELECTION
1. LUIS MACHADO (Cuba), elected by votes of: Costa Rica______270 Cuba ______600 Dominican RepubIic______270 EI Salvador______260 Gua tern ala ______270 H 0 n d uras ______260 Mexico ______900 Nicaragua ______258 P anama ______252 P eru ______425 Uruguay ______355 Venezuela ______355 4,475
2. THOMAS BASYN (Belgium), elected by votes of: A ustria ______750 B elgiu m ______2,500 Luxembourg ______350 Turkey ______680 4,280
3. MOHAMMAD SHOAIB (Pakistan), elected by votes of: Egypt ______783 Ethiopia ______280 I r an ______.. ______586 Iraq ______310 Jordan ______280 Leban on ______295 P aki stan ______1,250 S yria ______315 4,099
4. JORGE MEJIA-PALACIO (Colombia), elected by votes of: B 0 Iivi a ______320 Brazil ______1,300 Chi Ie ----______600 Colomb i a ______600 Ecuad 0 r ______282 H ai ti ______270 Paraguay ______264 P hili p pines ______400 4,036 [37 ] E X E CUT I VE D IRE C TOR S E L E C TED A T F 1FT H REG U L ARE L E C T ION (Continued)
5. D. CRENA DE IONGH (Netherlands), elected by votes of: Israel ______295 Netherlands ______3,000 Yugoslavia ______650 3,945
6. TAKEO YUMOTO (Japan), elected by votes of: Burma ______400 Ceylon ______400 Japan ______2,750 Thailand ______375 3,925
7. SOETIKNO SLAMET (Indonesia), elected by votes of: Greece ______500 Indon esi a ______1,350 Italy ______2,050 3,900
8. JON ARNASON (Iceland), elected by votes of: Denmark ______930 Finland ______630 Iceland ______260 N orway ______.______750 S wed en ______1,250 3,820
9. OTTO DONNER (Germany), elected by votes of: Germany ______3,550
10. L. H. E. BURY (Australia), elected by votes of: A ustralia ______2,250 Union of South Africa______1,250 3,500
11. LOUIS RASMINSKY (Canada), elected by votes of: Canada ______. ------3,500
Total Votes Cast ______43,030
[38 ] Prospects for Private International Investment
SUMMARY STATEMENTS AT PANEL DISCUSSION • NINTH ANNUAL MEETING September 28, 195-'+
J. VAN DE KIEFT Chairman of the Board of Governors, Minister of Finance of the Netherlands
In the course of the meetings, encouraging been traditionally capital exporters, and references have been made to the general simultaneously an increased capacity on the improvement that has taken place in the part of the capital-deficient countries to world economic situation. It is reasonable receive and service new foreign investments. to expect that one of the consequences of What contribution is private foreign in this improvement will be an increased ca vestment likely to make to the capital needs • pacity to export capital on the part of those of the underdeveloped world? That is the member countries of the Bank who have theme of the discussion.
EUGENE R. BLACK President of the International Bank for Reconstruction and Development
The subject is of vital interest and con United Kingdom. The United Kingdom at cern not only to the World Bank as an long last has been able to emerge from the institution but to every member country of grim austerity of the war and postwar the Bank and to the financial community years, and better times at home should at large. enable the United Kingdom to maintain and The Chairman of the discussion and the expand her role as a provider for the capital first speaker will be Mr. George Humphrey, hungry nations of the world. the Secretary of the United States Treasury Chintaman Deshmukh is the Minister of and the United States Governor of the Bank. Finance of India, and his very able manage Mr. Humphrey for almost two years has ment of India's finances during the years held the purse strings of the Government of has earned the admiration of all. India has the Bank's largest stockholder. embarked upon a comprehensive plan to de He is no stranger in the field of interna velop her resources and to raise the standard tional investment, for before taking over his of living of the millions of her people. The portfolio at the Treasury he was associated cost will be great by any standard of com with a large corporation in this country parison, and for part of that cost she looks with very important investment interests to an inflow of capital from abroad. abroad. The final speaker is Mr. Eugenio Gudin, Mr. Butler is the latest of a long line of the newly appointed Minister of Finance of distinguished Britons to fill the venerable Brazil, another of the large and populous office of Chancellor of the Exchequer of the countries in another quarter of the globe, [39 ] faced also with great development needs and in his competent hands the present diffi great development problems. Mr. Gudin is culties that confront Brazil in the financial by profession an economist with a reputa and economic fiel~s may be surmounted and tion that has traveled far beyond the bound that she will be able to move forward along aries of his own country. It is hoped that the road to better things.
GEORGE M. HUMPHREY Secretary of the Treasury of the United States
I have been asked to speak to you about from foreigners; that is, they paid us this some of the problems which face the pri amount to settle their accounts. In 1949, vate investor in a relatively young capital we were approximately in balance. But in exporting country. This does not mean I the past four years, from 1950 through 1953, am unaware that there are two sides to this the reversal was pronounced, and our trans question, but merely that I am sure my actions with the rest of the world added colleagues from India and Brazil can present about $7.7 billion to foreigners' assets in the picture as it appears to the capital gold and dollars. Thus, for the postwar importing countries much better than I. period as a whole, we have not drawn re They will be followed by the Chancellor serves away from the rest of the world but, of the Exchequer, whose broad perspective instead, have contributed to them. is based on the United Kingdom's long This has been the end result of our trade experience in making investments in so policy, our customs reforms, our aid policy, many places in the world. our military expenditures, and our private Before discussing the obstacles which con and public investments abroad. In the front the investor, I should like to say a few current year the same trend is continuing, words about the improvements we have been and at present rates another billion and one witnessing abroad, and the very substantial half dollars will be available for building up accomplishments private investment is foreign assets in 1954. making despite the difficulties which still Durability in the balance of payments in exist in some areas. a world subject to events changing as As has been said before at this confer rapidly as those of our generation is not ence, confidence has been increasing. Cur an easy thing to assure. But the record rencies have grown stronger as reserves have of the past four years is favorable. increased. There has been progress in re In many countries, however, there is moving quantitative restrictions on trade. scarcity of investment capital and a pressing Payments in many of the world's currencies demand for funds for development. are becoming freer as governments relax All of us in the free world must be ever the grip of their exchange controls. These mindful of the extremely low standards of are all marks of an improvement in the living which exist in many parts of the financial position of many countries of the globe. In some countries, very low stand free world. ards of living exist where natural resources These changes have been reflected in a are bountiful. In others, rapidly growing profound shift in our own balance of pay populations are pressing hard 'on existing ments. During the years 1946 through 1948 resources, but even in these cases the ab the transactions of the rest of the world sence of modern techniques of cultivation with the United States resulted in our col and tools of production, low standards of lecting four and one-half billion dollars in education, and poor conditions of health, gold and in dollar balances and investments present a challenge and offer an opportunity [40 ]
------,-',-,------for improving the lot of many millions of thus do not appear in either of the two mankind. We must keep these problems to figures I have just cited. In all, new capital the forefront and cooperate in every practi provided by private sources from this coun cal way to bring modern science, tools and try has reached at least one and one-half technology to bear upon them. But private billion dollars a year. This total is about investment is not made for philanthropic three times the rate of public lending by reasons. It is made for profit that is freely Government agencies during the same available to the investor on principal that is period, net of amortization and repayments safe. of principal on U.S. Government loans. Chairman van de Kieft in his opening A very substantial proportion of our pri address called attention to the complicated vate investment has been made in Canada, economic problem of differences in wealth where conditions have been particularly at and savings among countries, and the flow tractive. Nevertheless, we estimate that of private capital which is needed to help private investors in the United States have allay these differences. He noted that there been placing as much as $900 million a year are "new economic and political factors" in in the rest of the world during the past six the postwar period, which in some cases years, including the re-invested earnings al "have tended rather to slow down than to ready mentioned. Even if we make a rough increase the flow of private capital to the estimate and take out all investments in regions that are most in need of develop Canada and all investments anywhere in ment." petroleum enterprises, we would have left What he has said is quite true. National about $600 million a year which has financed istic trends resulting in laws that dis a wide variety of other enterprises outside criminate against investors from other of Canada. These amounts represent a very lands and restrictions jeopardizing either substantial supplement to local savings. principal or the receipt of income slow down Some concern has been expressed that investment from outside. Vacillating poli the rate of new private investment ap cies of governments can be warnings to peared to slacken rather sharply in 1953. prudent investors to look elsewhere. Actually, this appearance was accounted Nevertheless, in many places private in for largely by security transactions and a vestment has been making a substantial reduction in commercial credit; direct in attack on the problem of promoting develop vestments by U.S. corporations continued ment. at about the rate of previous years. I am happy to report that during the first half At the end of 1953, our private investors of 1954 our private investors placed had approximately 23.7 billion dollars in $644 million in new capital abroad, even vested in foreign lands, on which we have re without allowing for re-invested earnings. cently been averaging earnings of approxi At an annual rate this is a larger outflow mately 1.5 billion dollars a year, much of than in the peak post-war year of 1950. which came to us in the form of needed goods imported through foreign subsidiaries and What about the prospects for continuance branches of United States corporations. of this flow or its increase? The prime factor which will determine this is the At the same time, during the past six establishment of confidence in the country years, our private investors were providing seeking investments among investors to other countries about $900 million a year abroad. in newly exported private funds, net of repatriation of capital. In addition to these Ordinarily it takes time to build confi exports of new dollars, about $600 million a dence. As with individuals, it is best estab year in earnings by foreign subsidiaries of lished by a definite course of good conduct U.S. corporations abroad were re-invested over a period of years. The old saying that directly without being brought home and "actions speak louder than words" was [41 ] never more apt. Moreover, as frequently The private investor has a choice between pointed out, the progress of years in estab his own market and opportunities in foreign lishing confidence can be shaken overnight. countries. Where, as here, there are good But long-continued good behavior is not al possibilities open to him in his own country ways required. Governments change and, every day, he will need some additional in even more important, the thinking of the ducement to undertake the extra risks of great mass of the people of a country can going to foreign lands to cope with the also change either for better or for worse. differences in language, law and customs. It is the real spirit of the people that is most He will want to be doubly sure of his busi important. They either resent the foreigner ness associates abroad. And he will be slow and his operation or welcome him as a well to go if he feels that his activities will be recognized means of more rapidly im approached in a general atmosphere of criti proving their own lives, and so express cism rather than one of warm welcome. themselves by their conduct and through their governments. That is the real flag Of our own substantial direct private in of invitation or of warning. Moreover, vestments abroad, more than $6 billion is foreign capital is not so different from capi connected with petroleum and mining enter prises. These funds go where the resources tal at home. It is attracted to countries are to be found, and when they are needed, where conditions are also favorable to the and when the pulling power is great enough local investor. No country can reasonably to overcome the many obstacles, both hope to attract foreign investors if its own natural and man-made. savings are seeking shelter abroad. Infla tion or unfair treatment from popular re In the area of manufacturing or mer sistance affects all investors whatever their chandising, such considerations are much nationality. less compelling. The economic inducements It is hardly necessary to discuss in detail must persuade the foreign investor that his the familiar types of deterrents which ad chance for profit is greater. versely influence the investor today. It is On the other hand, there may well be more probably enough to mention that some of resistance from a feeling of nationalistic the principal ones are threats or a history possession in the case of the development of of confiscation or discrimination. natural resources than when only manu There are also the risks associated with facturing or merchandising is involved. And exchange restrictions and multiple rate sys the large size of the investment required tems which are both complex and subject and the length of time in which it can nor to considerable instability. An abrupt and mally be returned is far greater for natural sharp depreciation can seriously impair the resources than in manufacturing or trading fruits of past efforts for the foreign in lines so that greater security of principal vestor. Restrictions on transfer present a and return of profit must be assured. But constant fear to the investor that he will there is no way in which a country can find himself queueing up at the end of the develop faster for the rapid improvement of line to receive permission to transfer his the lives of its own citizens than by the use income into the currency he needs. In many of foreign capital in turning its natural re of these areas the members of the Interna sources otherwise lying dormant into jobs tional Monetary Fund are cooperating to and homes and better living for the numbers provide a better basis for the flow of inter of its people that will be so employed. national capital. The high yields on common stocks in the Sound large-scale private investment United States have been a powerful attrac abroad can only result from assurance of the tion for the private investor. During the security and the right of ready repatriation past year, the growth in confidence and the of principal and an opportunity for greater supply of capital for investment here have profit than at home. brought somewhat lower yields. This may [42 ] provide some stimulus to interest in invest fair share of the original basis on which the ment abroad where the assurance of security joint enterprise was begun. and the lure of higher profits is sufficiently attractive. Special tax consideration and If governments and laws are responsive other methods of stimulation can also con to such a conviction of the people, their tribute to increased interest in foreign country will have little trouble in obtaining fields. private foreign investment for any venture within their borders that can properly earn What are the policies which attract pri an attractive return. vate capital from abroad? I think they can best be summed up in a simple way: se I want to emphasize that we have been curity and the right of ready repatriation of discussing private investment abroad as dis principal and attractive return. tinguished from Government programs. While many of the criteria for investment It is not unlike the conditions which in are equally applicable to both there may well duce two individuals to embark on a com be inducements in the latter case which mon venture. There must be mutual con would go beyond those to be properly con fidence. The private foreign investor must sidered in the former. be really wanted and welcome not just by the government at the time, but by the For our part-that is, in the United people as well and for a long time, because States-surely our greatest contribution will they are truly persuaded and believe that be to maintain a high level of economic by the use of his money they can better activity and income in the United States, themselves faster and further than they can and thus to provide a reservoir of venture alone. They must be willing and glad to capital. If we can proceed with mutual pay a reasonable price for the risk involved trust and confidence, we will, through the and show by a history of fair dealing that channel of private investment as well as after the risk has been once undertaken and the efforts of the International Bank, suc when success for both has been won, that ceed in converting a revolution of expectancy they will then not go back on their bargain into first a practical business-like approach and, through direct action or ruse or sharp and then into a real revolution of achieve practice of any kind, seek to enlarge their ment.
CHINTAMAN DESHMUKH Minister of Finance of India
Very appropriately we are discussing the of emphasis from government programs to prospects for private international invest private international investment. Such a ment at this juncture. We seem to be shift, in our view, is to be welcomed, as passing from one economic era to another, such private investment implies in the re with economic stability established or ceiving countries more disciplined economic within sight once again, and with an in management and between the parties con creased likelihood of international capital cerned a free and objective assessment of seeking investment on one hand and greater advantages and risks. hunger for such capital on the other in The phrase "private international invest countries bent on developing their backward ment" is all right as a shorthand descrip economies. tion of the phenomenon, but concretely the There are also signs that in the new problem is one of providing a meeting milieus that are arising there will be a shift ground for particular lenders and particu- [43 ] lar borrowers. There is not, in other What we call international private in words, a given over-all supply of savings or vestment today is the aggregate of such indi investment funds to be apportioned to vari vidual transactions. These individual ous claimants. The problem is one of transactions presuppose a certain economic matching the availabilities, which again are and institutional framework, but in many not fixed or determinate, in a set of coun cases each transaction presents special tries with the requirements of other coun problems. tries and in terms of particular investment Historically, we often regret the disap propositions. pearance of the alleged palmy days of the The flow of investment capital from sur nineteenth century where surplus capital plus countries to deficit countries does not flowed freely over national boundaries, in follow, we recognize, what might be called some cases along with surplus population, the "laws of economic gravitation." It is and contributed to the development of new not as if such capital is distributed or tends continents and to the opening up of old ones to get distributed as between different coun for international commerce. Undoubtedly tries or as between different users so as to these capital exports were historically im equate the returns at the margin. Some portant. Looking back, one cannot but re capital flows from metropolitan to colonial cord with appreciation the fact that much countries, and instances are not wanting of of this investment was portfolio capital, metropolitan countries having made a part that a great deal of it went into basic of their scarce resources available to developments like railways and public utili colonies or dependencies even by borrow ties, and that the rate of return was on an ing abroad or by stinting on domestic in average a little above five per cent. vestment. Now, conditions today are different. The Then some countries, though independent, political ties which in the old days promoted are able to attract investment from abroad such capital movements between advanced because of geographical proximity or be and underdeveloped countries have grown cause these investments are in some way weaker or have been sundered. Some of the complementary to domestic investments in old creditor countries have no longer much the capital-exporting countries. of a surplus to speak of. The needs of large parts of the world which have, often There is, furthermore, very little today of with the advent of political freedom, be portfolio investments by the relatively small come development-conscious have on the investor in one country in the scripts of other hand increased rapidly and are bound another country. to increase progressively if any significant Then, on the side of capital-receiving improvement is to be achieved in the piti countries which have some sort of program fully low standards of living of their teem of development, what they need is capital ing millions. for particular projects or in particular fields, and capital which contributes in It is obvious that the task of building up some way to the furtherance of their plans the new channels required to facilitate and or programs either in the public or in the promote the flow of investment capital from private sector. wherever it is available to wherever it is needed has hardly begun. Some of the I am not suggesting that the problem of figures have been quoted by the Governor over-all availability and aggregate needs is for the United States. not important. My point is that we shall not get far in the matter unless we visualize I am convinced that what we are facing the problem in its concrete setting, keeping now is a new situation and that in finding in view particular needs and assessing the an answer to it we ought to bear in mind the prospects of availability in terms of these need to adapt the terms and conditions of needs. investment to the political and psychological [44 ] situation in the underdeveloped countries. profits and repatriation of capital and also for any compensation paid on acquisition. I shall not venture an estimate of require ments. Several estimates of questionable Now, these are the principles which are reliability have been made. And, in any the basis of the Government of India's for case, what is more important in the present eign investment policy, although the con context is availabilities rather than require ception of the manner in which foreign ments. investment should be regulated has under gone some minor modifications from time You have just heard the figures quoted to time and clarifications have been made. in regard to capital export from the United States. N ow, the bulk of it, I think it is Now, there is reference to foreign invest correct to say, is direct investment, and of ment being welcome on mutual terms. In this roughly 38 per cent goes to Latin each case foreign investment should be ex America, about 28 per cent to Canada, some amined on the merits and permitted only if 17 per cent to Western Europe and its de it is considered to be in the national in pendencies, and the rest is distributed terest. This scrutiny is conducted by a widely over a number of countries in Asia committee of the section of the Ministries and Africa. of Finance, that is to say, the Department of Economics, Commerce and Industry As is also pointed out, petroleum has at Ministries, and weight is given to the fol tracted a very large per cent of invest lowing factors: ment-about 45, I think-and manufactur ing about 32. Public utilities, which used to That there is a genuine program of manu figure so largely in the nineteenth century facture; that foreign investment is in fields investments abroad, have ceased to attract where indigenous capital is not adequate or such capital. technical know-how is not available in India; that the investment would lead to a saving Now, as a case study, I should like to of foreign exchange by reducing imports or illustrate the character of the problem with a direct gain in foreign exchange through reference to our own experience in India. increased sales abroad, and the proj ect First a word about our policy regarding would be needed to increase productivity. foreign investment. I will summarize it in the following propositions: Generally speaking, investment of foreign capital is not permitted in trading and dis Foreign capital is welcome on terms mu tributing concerns except in such cases tually advantageous to the investor and the where technical know-how is an essential country. As far as possible, the majority aspect of the trading activities. interests in ownership and effective con trol should be in Indian hands. This is, Now, it is not the policy of our govern however, not a hard and fast rule, and ex ment to encourage investment where the ceptions are made where necessary in the majority investment control is in foreign national interest. hands, but I hasten to point out that that is not a hard and fast rule, not a statutory Then, there should be adequate provision rule, and exceptions have made different for the training of Indian personnel for results in several cases where the proj ect taking over technical and administrative was considered to be in the national in posts in the enterprise. terest, despite this shortcoming, as in the Foreign enterprises will, after admission, case of oil refineries. Thus, India's interest have equality of treatment with Indian en is to be the touchstone on which each proj terprises. Fair and equitable compensation ect involving foreign investment is to be will be paid if the Government acquires any tested. foreign enterprises. Foreign enterprises are The extent of India's interest in owner assured of reasonable facilities for remitting ship and control of an undertaking by [45 ] foreign investment would remain an im vestors have in India, and which confidence portant consideration in the scrutiny of a has been referred to by the Chairman. This foreign investment project, but it will not is not an unsatisfactory picture; but judged be regarded as the most important consider in the light of India's requirements the net ation. The policy of the Government of contribution that private capital from India is flexible in this regard. Where na abroad has so far made to India's develop tional interests are likely to be furthered by mental needs is still small. In spite of occa making a concession in the matter of major sional manifestations to the contrary, which ity Indian control, this condition would not are often capable of reasonable explanation, be insisted upon. India, I dare say, is a good risk, and condi tions are favorable in our opinion for invest N ow as regards the present position, we ment from abroad. India would appear to are often asked if there are any predeter satisfy all the conditions which have been mined spheres for foreign investment. The indicated in the opening remarks, and which answer is "No," because it has not proved international chambers of commerce have feasible to define such spheres, and a pro also from time to time referred to as con posal involving foreign investment is scru tributing a favorable climate: equality of tinized with reference to its general useful treatment in domestic and foreign invest ness to the national economy. Preference is ments, non-discriminatory legislation, no given to foreign investment in specialized restrictions on import of foreign equipment industries requiring a high degree of tech for investment purposes, and so on and so nical skill and know-how which have not al forth. ready been developed in the country, and industries for which domestic capital shows Now, other factors also seem favorable. definite shyness over a period of years. This I quote them, as I said, because they are does not, however, mean that foreign invest representative of some internal stability and ment is not permitted in fields where Indian maintenance of law and order and of fairly capital has made some headway on its own. efficient administrative machinery, although If internal capacity is insufficient because of I admit that in the beginning this process of considerations of quality and technique of capital control involved a certain amount of production, the question of allowing foreign administrative delay which is gradually capital to enter the field of production in being eliminated. We have an independent which Indian capital also is functioning is judiciary, safeguarding of contractual rights considered on the merits. of individuals and companies, reasonably smooth labor-management relations, and Now as regards the actual results, the net finally a potentially large domestic market. total investment of external capital in India So I do not find that there are any ob since 1948 to the end of 1953 has been of stacles or impediments to investment from the order of a little over a hundred million abroad in India of India's making which one dollars in the aggregate, about $18 million could put one's finger on and ask for the per annum. A large part of this total is removal of. I believe foreign investment accounted for by the two new oil refineries, will come in as business contacts grow and and there has been, in addition, an increase there is better appreciation of mutual needs in other investments in existing concerns. and requirements. It is in these directions, These figures are net of the repatriation of I think, that special effort is called for. capital in recent years, which means that the gross investment from abroad was much There has been frequent reference to the larger. It was approximately $280 million, of inconvenience of screening of investments by which nearly two thirds represented invest governmental machinery. The object is to ment of branches of foreign concerns al allocate limited physical resources so as to ready established in India, an indication of derive the maximum benefit for the national the confidence which established foreign in- economy. [46 ] I must also point out that as far as I can and I have no doubt that similar assurances, make out criticism of the screening proce if considered appropriate, could be given in dure is not general. A number of inter the case of other important fields of private national bodies have, as a matter of fact, investment. accepted the validity of the need of a screen In any case, there are, in India, very large ing process. In a sense, screening should fields left entirely free to private enterprise. give some assurance to the investor that his project will succeed in an environment dif N ow, as regards government interference, ferent from that to which he is accustomed, or what is called social control, the aim of and generally I can say that the criteria used the regulations is to safeguard the interests in India are objective and the approach is of, for instance, the depositors in the case of flexible. There are exchange, import, and banks, the policyholders in the case of insur export controls; but these are a feature of ance companies, or the general public in the what we call the transitional stage and are case of certain industries which are re due to the need of conserving foreign ex garded as important from the point of view change resources. Now, here, as in the case of the community. of political risks, the remedy is greater flow N ow, these instruments of social control of foreign investment if the risks are to be are like hedges. To a good driver, they are lessened. hardly noticed, except in the distance, and Convertibility of external maj or curren they are only there to keep in order those cies will, of course, lead significantly to freer whose antecedent record of conduct is not exchange, and this, as has been pointed out, so good. frequently requires both in the creditor and Now, in my opinion, the most important the debtor countries more understanding. obstacle in the way of foreign investment is But, as I have pointed out, India has no re lack of facilities to establish contacts be striction on imports of capital in the form tween the lenders and borrowers and the of foreign exchange risks. In some countries absence of a machinery for informing in they have proved to be a serious inconven vestors of investment opportunities. ience, and I entirely agree that it is one of Private investment has to be coaxed. and the basic conditions for attracting foreign oftentimes that final, crucial determination investment that exchange soundness and ex to investigate a proposition is lacking, and it change stability be maintained. is this which has to be stimulated. Then there are some minor matters, minor Now, one way in which all these difficulties not in their importance so much as in the can be met is by providing an institutional sense that they are capable of solution, such arrangement for which there is great need. as the lack of double taxation agreements We referred yesterday to the proposal for between the countries. Now, this requires an International Finance Corporation, which negotiation between the governments, and in could provide a meeting ground between in this direction, some progress has already vestors in capital-exporting and capital been made within India and some of the importing countries. other countries concerned. This Corporation would also channel pri Some apprehensions have been expressed vate investment which is not prepared to in regard to the alleged threat of nationali take the risks on its own. zation and government interference. Now, in India the policy of nationalization affects Complementary to such a Corporation only certain strategic industries, and it is would be indigenous investment corpora not inflexible. For example, with regard to tions. And in this regard, I would like to oil, although oil is included within these in refer to an experiment which is about to be dustries, we have given assurances to the oil established almost on the initiative, certainly refineries that no attempt will be made to under the guidance, of the World Bank, and nationalize them for a period of 25 years, with its active assistance. Leaders in this [47 ] case from India have combined or are likely industrialists from three countries, capital to combine with prominent industrial inter exporting, capital-importing and capital ests in the United States and in the United experienced, for the establishment and Kingdom, the last consisting of the Com widening of contacts and for the promotion monwealth Development Corporation, to of wider understanding and knowledge for participate and make such an institution. carrying out continuous scrutinies of proj Apart from the actual functions of this cor ects and for furnishing guidance to pro poration in providing finance for industrial spective investors. projects, the scheme itself is a very novel We feel that it is along these lines that and potentially useful one, as it sets up a the channels of private international invest meeting ground for seasoned investors and ment can be significantly widened.
EUGENIO GUDIN Minister of Finance of Brazil
The subject of international capital and Now, then we come to the two real plagues international investments has been so widely which I think are serious and should really discussed, has been the object of so many be considered. The first is inflation. Natu reports, especially by the United Nations, rally, as you all know, inflation means a that one is perhaps somewhat diffident in serious disturbance and disequilibrium of discussing it with the idea of performing the balance of payments. something useful. If the foreign investment takes the form If there is any advantage in discussing it, of foreign investment expressed in the cur it must be done with an entire impartiality. rency of the importing country-for in It is a subject that must be approached on stance, if it is American groups that make the lines of the great French writer, Renan, an investment in Brazilian cruzeiros-then who wrote "J'ecris pour ceux qui cherchent of course the balance of payments trouble la verite"-"I write for those who are seek which finally results in a devaluation is di ing for truth." rectly applicable to that investment. N ow, even if the investment is not ex It must be done with complete impartial pressed in the currency of the capital-im ity, with no passion. Otherwise, it becomes porting country, the remittance of dividends useless. gives rise to balance of payments difficul First of all, let us see in what respects the ties, and makes the situation difficult and underdeveloped countries are to blame. unattractive for the investment of foreign capital. I think there are three plagues that must be mentioned, one of which I will mention It is curious that even some capable econo first, because I think it should be excluded. mists believe that progress in the under This is the supposed expropriation of developed countries can only be made under foreign or private property without pay the pressure of inflation and disorder. Even ment. If the standards of conduct of a in my country, where our flag has got its country are so low that there is a real special feature-an inscription on it saying danger that the property will be expro "Order and Progress"-there are a good priated without payment, that country many people who think that somehow prog should be excluded from the list to which ress can only be made with a certain amount international capital should flow, and that of disorder. stops it. Inflation is a really very serious plague. [48 ] In my country some people call me a de plagues, one of which is inflation and the flationist. I have never been any such thing. other is nationalism. Rather to the contrary. One of my great N ow let us look at the problem as it exists teachers in economics, Professor Denis in the capital-exporting countries. I'm Robertson, is in favor of what he called the really impressed by the very small amount "gentle rise in the price level." I would of flow of capital from the developed to the rather adopt that line than any deflationary underdeveloped countries. line. Let's take what happened in Great Inflation is incompatible with a regular Britain. In the 1880's-1881-1883-in flow of foreign capital because of balance of Great Britain, in portfolio alone you find in payments disturbances. these days about 65 million pounds, about Underdeveloped countries must take the 330 million of U. S. dollars of a purchasing responsibility and must take care of this power which represents today about $1,300 plague; otherwise they become unattractive million a year. That means Great Britain to foreign capital. used to supply in portfolio alone around the The second point is of a political nature or 1880's about $1,300 million a year of capital psychological nature,-the second "plague" exports. And at that time Great Britain is nationalism. It is curious that while the was a country of only 30 million people. nineteenth century was, as compared to the The United States had a population of about present century, a century of economic im 50 million. perialism, it is now in the twentieth century Now, what are the corresponding figures, that one sees a development of nationalism which I take from the 1953 balance of pay perhaps stronger and more forceful than ments figures published by the Fund? The what happened in the nineteenth century. United States had an income from foreign Whereas in this century one may say eco investment of $2,154 million on direct in nomic imperialism has practically disap vestment, and income from other types of peared, nationalism in some places, in some investments, including government loans, of countries, in some conditions, seems to have $468 million. Therefore, the total net in become worse than before. come from investments was $2,622 million We all have seen the differences between of income. the Mexican Government, for instance, and Now, in the same period, how much did the oil companies. We have seen the differ the United States invest? Abroad, in long ences between Great Britain and the Iranian term investments-let's take direct invest Government over the question of oil. But ment first-direct investment, including re none of us has heard of an American battle investment of profits, amounted to $1,413 ship going to Mexico or a British fleet going million. And on securities account the to Iran. balance is minus $64 million-in other words, So the twentieth century as compared to it had $64 million less of portfolio invest the nineteenth century should not be of a ment than the year before. nationalistic mind, since that is, of course, a serious plague for the investment of foreign Now, official and banking long-term loans capital. net amount to $117 million. If I remember well, the figure for actual disbursements of For foreign capital to migrate from a de the World Bank is about $160 million. veloped country into an underdeveloped country it must find a favorable climate and So the total from the United States, ex receptivity. Otherwise it has no business to cluding the World Bank, I should say, is go there. Therefore, after excluding the around about $1,500 million during 1953 as possibility of expropriation without pay compared with $2,622 million of income. In ment, underdeveloped countries should take other words, the net flow of transfers from very great care in getting rid of these two countries to the United States was appre- [49 ] ciably more than the outflow from the developed country should be or is able to United States to the rest of the world. And provide 70 per cent of the savings necessary, if you consider that the great part of this when the fact of "underdevelopment" itself outflow is for investment in oil, you will see means that the country does not have the that the figures are really not encouraging. savings at its disposal. If one compares this small amount of I think these two points are what I shall capital invested abroad with the size of the call the minor misconceptions. gifts that this very generous country has Now going to the major causes, we must given, some $30 billion to $40 billion of realize: That the leadership of the economic gifts, including Marshall Plan and Mutual world has passed from Great Britain to the Security Plan, one is led to think somewhat United States; that is, the leadership has that the United States has more ability to passed from an extrovert country to an give than to lend. introvert country. Now, in analyzing the reason why, let us By "extrovert country" I mean a coun try to see why such features are taking try looking to the outside world. Great place. I will divide it between what I shall Britain was a country for which foreign call minor and major causes. trade meant 20 per cent, more or less, of The minor causes, I should say, are rather national income, whereas the United States technical but they are simple. First of all is a country in which foreign trade means is the fact that the only kind of investment, 6 per cent, more or less, of the national in foreign investment, which is supposed to be come. The stake of Great Britain in the out sound is one that must contribute to a side world was much more than that of the balance of payments improvement. Well, United States. inasmuch as a good many economists are The second point for us to realize-I am here, I do not need to go into details to ex not criticizing; I am just stating facts-is plain that a foreign loan may be granted that while Great Britain was not competitive foreign investment may take place-in an with primary producing countries in any underdeveloped country which neither pro way, the United States, with its tremendous duces an increase of exports nor a decrease size and possibilities, both in industrial and in imports and still does not amount to a in agricultural production, is competitive balance of payments disequilibrium-pro with several primary producing countries. vided there is no inflation. The beast is in The third point, which I think is very im flation. The investment may be of a nature portant, is that Great Britain had an ex that produces an excellent amount of activ tremely comprehensive understanding of ity. It can have excellent results for the what I shall call the multiplier. The multi country and still may not have a direct plier I have in mind is not the foreign trade action on the balance of payments. That multiplier that you economists have in mind misconception I think should be put aside. perhaps now; it is another multiplier. I The second technical point which has rele have had a great deal to do with the British vance, which I would like just to mention, and dealt with them for some thirty years, is the investment criterion which thinks that and always found they have a very good loans should only cover the foreign exchange understanding of this multiplier concept. It requirements. That's in connection with means that a loan granted to an under Article IV of the World Bank charter. developed country meant employment, There seems to be there a lamentable con meant increase of trade, meant development fusion between the physical items of capital of markets, meant acceptance commissions, and capital for savings. The fact that of a meant money market discounts, meant in certain scheme or a certain proj ect only 30 surance, meant freight, meant coal. These per cent is composed of goods which must other activities represent the multiplier, i.e., be imported does not mean that the under- advantages to be taken from the foreign in- [50 ] vestment in a good many ways outside the understanding; he has the language; he profit of the investment itself. understands the mentality of the people. In order to go to another country, there must The United States, by the nature of its be some sort of inducement for him to do so. economy, is too busy with the development The Rockefeller Report indicates seventeen of its own country to take care and have a countries which do not charge tax on income proper understanding of these secondary but produced outside the countries. I dare hope most important concepts, which I have that the United States will be an eighteenth called the multiplier advantage of foreign investment. one. I would like to conclude by a final remark As a final remark I would like to point out on the absolute meaning of the figures that the important question of income tax. This has been referred to so many times, but we see-when I say "we", I am referring to really is a very important point. Take, for the founding fathers of the 1944 Bretton instance, capital that goes to Brazil. That Woods Agreement, such as Mr. Rasminsky means American equipment goes there, of Canada, and others that I see here. American know-how is exported to Brazil, When the meaning of the 1944 figures is and Brazil supplies labor, raw materials. and compared to their meanings today, it must so forth. In the end, we have a Brazilian be borne in mind that international trade American undertaking. If successful, i.e., if has since then increased by some 40 per cern, it produces a profit, the Brazilian Govern and the purchasing power of the dollar has ment comes and says, "Please give me my 10 decreased by 40 per cent. Therefore, the per cent of those profits, which is my income figures that we had in mind both for the tax." Now, the richer country, here repre Fund and for the Bank should be reviewed. sented by my distinguished colleague, Mr. In conclusion, I repeat, that under Humphrey, says, "Give me my share of this developed countries should maintain the profit," which sometimes amounts to 30 per climate of receptivity for foreign capital and cent or more. combat inflation and nationalism. The This is quite harmful to foreign capital, capital-exporting countries should sincerely because, after all, if you don't give the consider that when the conditions of recep American businessman some sort of induce tivity in the underdeveloped countries are ment to go outside his country, why should satisfactory, the figures of migrating capital he go? He has so many interesting possi should be multiplied by a very large factor, bilities right in his very country; he has the as compared with what they are today.
R. A. BUTLER Chancellor of the Exchequer of the United Kingdom
I speak to you following the very witty firm the extent and amount to which you and distinguished speech which we have just referred. listened to. I am a confirmed extrovert, and We had built up to the beginning of the one whose country is likely to remain so. Our small island, the center as it is of the first World War foreign investment which sterling area, cannot live and survive unless at the outbreak of that war was worth about we look out on the "perilous seas and faery 4,000 million sterling. That would be in lands forlorn." We have a very consider current values today, about three times that able record of foreign lending. You were amount. This was, of course, mostly private bold enough to give some impression of our investment. Government intervention in portfolio in the 1880's. My own figures con- those days, those happy days, was on a very [ 51] small scale. But when we came to struggle which sticks, or credit which is long-term alone for a period in the second World War, that is, funds which connote resources which and then brought ourselves and our gallant confer a durable benefit on the borrower and partners to victory, we found that our posi enable him to concentrate the more on in tion was changed overnight at the end of the creasing wealth, production and trade. Second World War from being the world's Before the First World War, in those greatest creditor to being the world's most happy days, and to a decreasing extent after distinguished debtor. it, capital was allowed to go where it wished. In the course of that war, our external Conditions then were pretty different from capital position deteriorated to the tune of what they are now. There was comparative 4,000 million sterling, (including an increase freedom from exchange restrictions, and of nearly 2,900 million sterling in our ex there weren't quite so many of the features ternal liabilities)-which shows the nature to which my distinguished predecessor has of the struggle. And so in the early years referred in some countries concerned. after the war transfusions of capital were Governments sometimes have to interfere needed from abroad to help restore our necessarily at present, in preventing a free United Kingdom economy, and I am glad flow of capital and the rewards of invest to say that the picture I shall be able to give ment. And we might ask ourselves, why do you today is one not only of an extrovert, we devote a session now to this question, but one whose blood transfusion has resulted why is it the subject of continuing discussion in a condition in which we can start letting at the UN and in the OEEC, and at the it out again. Bank's meetings? The United Kingdom, therefore, has run What are the practical steps already taken the gamut of investment experience. We by the Bank, and what is happening under are now both a lender and a borrower, and the Colombo Plan; what is happening about we are therefore acutely aware of both sides the United States Government long-term of the investment problem. loans and our own U.K. colonial and develop I quoted in a previous speech of mine, or ment welfare loans? rather repudiated, an English classical I think the reason why we are right in quotation. On this occasion I should like to concentrating on this question today is that say that in my opinion Polonius in his advice despite all that has been done by the Bank, was quite wrong when he said "Neither a despite all the discussion which takes place borrower nor a lender be, for loan oft loseth at these distinguished international gather both itself and friend, and borrowing dulls ings, I support Sir Chintaman Deshmukh in the edge of husbandry." saying that we are failing to secure any We find we get along pretty nicely as a thing like the full benefits that international borrower and a lender, and in the realm of capital can provide to the world. husbandry, we are now accumulating our N ow, we must consider this overseas in savings once more. vestment not only from the aspect of profit, N ow, our experience covers every type of but because it is important socially and in capital investment. London has always human terms, it is important politically in been a short-term banking and a long-term the international field, and of course it is im investment center. portant from the economic point of view. I understand that this discussion is not Self-help from internal capital is, of concerned so much with capital movement of course, a most healthy and attractive method a short-term character, such as movements of encouraging development within a par caused, for example, by changes in exchange ticular country. But if we were to impose or interest rates, or short-term credits, or upon our own citizens, particularly we banking accommodations. We are con Finance Ministers, who have a hard enough cerned, in simple English, with capital time already, the extra sacrifices that would [52 ] be necessary to finance all our own develop U.S. private investor. In fact, the Bank is ment, we would, by ignoring the possibility the biggest single channel for the U.S. pri of importing foreign capital, be imposing vate investor abroad. unnecessary restrictions and hardships on In addition to this, the Bank has probably our own people. been the main institution to give confidence I think the flow of international capital is to private investors. And haven't I heard important politically, because in the present enough since I have been in the United state of the world it is one of the great ties States of some of the fears and anxieties of which can prevent the growing disparity of the introverts on this matter. Let them standards of living between one nation and therefore take the opportunity of consulta another. tion with the Bank and realize what good Those of us who listened to Mr. Black's they can, perhaps unwittingly, do. opening address at this Annual Meeting will I was recently in Pakistan, and while I know that that was the theme, the theme of was visiting that country, there came up tying the nations together and of under for consideration this vast project of standing one another's problems. carrying natural gas from the Sui Fields Of course, the argument for the economic through pipes-which we shall naturally value of overseas investment is obvious, be hope to be British-to the centers of popu cause it brings up production and consump lation in that rapidly developing country. tion in international trade. And I cannot describe what an encourage I should have thought, therefore, that we ment it was, not only to the Pakistanis them are discussing something which is at the selves, but also to those of us in London who present moment of first-class importance are interested in this, and I believe to the in cementing international cooperation. And world in general, that the International it is our job, as I see it, as finance ministers, Bank stepped in to help. gathered here today, not to forget the three I cannot make it clear enough to this aspects, the human and social, the political gathering that there is no question for us and the economic. in the sterling area of a sort of dog-in-the And that is the tie between those of us manger attitude about foreign investment. who are sitting here on this platform, be We do not wish to keep all our own preserves tween what is sometimes described as the for our own capital and our own private underdeveloped countries-although I often investors. We warmly welcome those of wish I were one myself-and those which are you who come in from outside. And I described, like that of my prosperous friend know that I am not offending the countries on my left, Mr. Humphrey, as the developed principally concerned when I say that our countries. absolute and definite wish is to develop the Now, we are not here today to consider life and prosperity of the peoples in our governmental investment. There is obvi countries, and to use whatever capital we ously a good deal to be said about that. can get from any part of the world in the It generally takes the form of loans on common good. which a rigid service payment has to be I therefore hope that this particular ex made, a payment not variable with the for ample will be followed up, and that the tunes of the concern or with the country. fabulous resources within the sterling area We are concerned with private invest itself can be the subject of foreign in ment, which can be in equities, which is vestors' attention, and especially that of more flexible in every way. And private private investors in the United States. funds are those upon which I think we I thought in view of the laudatory remarks should rely more than any other. of my immediate predecessor in this conver The Bank is already doing excellent work sation, that I would say something about in this field. Its dollar funds are derived the current policies in the United Kingdom, mostly from market issues and from the so as to show that we have not shed our [ 53 ] mantle, that we are going forward again don an efficient and skilled machinery for on the path which made our greatness, and lending money abroad. The real limitations will ensure it in the future. of lending are the limitations imposed by The great bulk of U.S. investment over the rate of internal saving and the state seas is still on private account, and I think of the balance of payments. But we have this is quite a remarkable figure. United made a special effort to provide capital for Kingdom long-term investment overseas has, development in the Commonwealth, and since the end of the war-that is, between here's an interesting figure: 1946 and 1953-averaged at least 200 mil Grants and loans in 1953 for Common lion sterling a year. This represents over wealth development totaled over 120 million 1% percent of the United Kingdom national pounds sterling, and in the first half of 1954 income in that period. I am sure my friend, they reached the figure of 70 million sterling. Mr. Humphrey, wouldn't mind me putting We have also made 60 millions available in the point in perspective. If U.S. investment sterling to the Bank, and we know the abroad were flowing in the same proportion Bank's help for the Commonwealth and the to the U.S. national income, it would amount sterling area. That is why we are so pleased to over five thousand million dollars per in our way to do what we can to back the annum. That is a very much greater figure Bank. Here is indeed a fruitful coopera than it is at present. Let us live in hopes. tion. May you, sir, cast your bread upon the waters, and it will return to you. Now, I thought that I might with great audacity try to sum up the sort of code of There has, of course-and this I must behavior which experience has taught us remember in the presence of so many dis in the United Kingdom is the best for foreign tinguished economists-been what is called lenders. What are the lessons to be drawn in basic English a certain degree of disin from the history of a capital-exporting and vestment, not all of it voluntary. So that capital-importing country? They may the net investment averaged about 120 mil sound humdrum, but it is an unfortunate lions. realization of all public men that the truth I think it is very satisfactory that there is very often trite. should have been this resumption of the If others here, as a result of what I say, United Kingdom's traditional lending for de can produce a better code, I will leave my velopment overseas at so early a stage after mailing address and be glad to hear from the herculean efforts that have been made in them. the last two wars; and this has, of course, been made possible by the singular gener So here are some of the articles of our osity at a critical period, of the people and belief and the indications of our United administrations of the United States and Kingdom practice. of Canada, without which we could not have First, there must be respect for contracts made this recovery. and pledges. This does not mean that every When Canada is mentioned, we too are thing must remain unalterable in the beginning to resume our share in this great changing world. It does mean that there market which is of such vital importance should not be unilateral or arbitrary inter not only to us but to the world as a whole. ference with contracts and the rights of in Recently, despite the very heavy burden vestors. It means that when the rights are of rearmament we are carrying, the United taken away there should be fair compensa Kingdom earned a substantial surplus on tion, and that the foreign investor should current account, and thus we have been be treated at least as well as the home able, and hope to be able, to maintain a nationals. substantial capital outflow. And that is the practice we've been trying The history and experience of the United to follow together in recent unhappy inci Kingdom have built up in the City of Lon- dents. [54 ] Second, investors should not look on the buy imports from the host country at any country of their investment merely as a price, in order to provide the exchange to place in which to get rich quick, and subse service the investment. quently to clear out. To that I attach very That, sir, is the result of our experience, great importance indeed. And I would and, as I say, I shall be only too glad to assure Sir Chintaman Deshmukh that there hear whether it can be amended or improved. is no longer any question of shaking the It's not intended to be a comprehensive pagoda tree, but rather of planting fresh code of good behavior for those who indulge woods and opening up pastures new. in foreign investment. Third, the reinvestment of profit and pro International organizations have worked ceeds is as good as new investment. It in out detailed codes of this type. But, put creases the stake of the investor in the simply, the important contributions to your country, and his desire to remain, and the thought that I can make are, first, that confidence in the host government in him. countries needing capital should act in a way From our experience, it was this plowing that will give confidence to the investor back of profits and proceeds that made and that countries able to lend capital possible the great increase in the United should not arrange their affairs in such a Kingdom investment before the First World way that service of the capital is made War. extremely difficult or impossible. Fourth, in addition, we consider that the We cannot allow ourselves to think in host country should be willing to allow the terms of complete freedom of the move remittance of profits and the repatriation ment of capital. That comes only after the of capital. Free remittance of profits is of freedom, towards which we intend to work, particular importance. It's something which to convert one currency into another, and the United Kingdom has always main an era of freedom of trade without quota tained, even through very difficult times restrictions. Both of these would greatly immediately after World War II. It's some assist and aid capital movement. thing which all governments should regard We intend to press forward with these as a prime charge on their balance of pay two objectives. Of course, I have no wish ments, and not as a luxury which can be to encourage reckless lending or borrowing. easily suspended, or a concession to foreign There are limits to the influence of inter capitalists which should be obstructed by national capital in promoting expansion and special remittance taxes, multiple rates of development, and in promoting production exchange, or other devices. and trade. But it is clear that those of us Complete freedom for capital repatria taking part in this discussion today are tion may sometimes be more difficult; but engaged not only in examining, but looking if investors are fairly treated it should not, forward down the one imaginative path in practice, prove insuperable. ahead for the statesmen of the free world. The fullest and best use of the international We are constantly examining ways of capital resources which are undoubtedly removing disincentives to foreign invest available will not only tie the interests of ment in the United Kingdom, and we al capital and labor more closely together in ready grant repatriation for approved in our various countries-it will tie our coun vestment. tries themselves closer together. And it My last point is that the lending country will provide that background against which should so arrange its affairs that the service we can show the world that we are in fact of the investment, and its transfer across working towards one free world, and that the exchanges, will not be made extremely we finance ministers are not just engaged difficult or impossible. This means that the in basic economics, but have the major creditor country must be receptive to im foresight to help keep the world not only ports; but it does not mean that it must free, but united and strong. [55 ] ACCREDITED MEMBERS OF DELEGATIONS AT NINTH ANNUAL MEETING
AUSTRALIA BRAZIL Governor Governor SIR ARTHUR FADDEN EUGENIO GUDIN Alternate Governor Temporary Alternate Governor ROLAND WILSON GLYCON DE PAIVA Advisers Advisers L. H. E. BURY WALTER BLOMEYER (Executive Director) J. C. GOUVEA, Fo. B. B. CALLAGHAN OCTAVIO PARANAGUA (Alternate Executive Director) S. F. A. BRYSON C. W. CONRON BURMA B. E. FLEMING Governor H. R. WOODROW U TIN Temporary Alternate Governor AUSTRIA U HLA MAUNG Governor Advise't REINHARD KAMITZ V OHN KHIN Alternate Governor (Alternate Executive Director) WILHELM TEUFENSTEIN Advisers ROBERT BAIER CANADA HANS KLOSS Governor WALTER E. HARRIS BELGIUM Alternate Governor Governor A. F. W. PLUMPTRE HENRI LIEBAERT Advisers Alternate Governor LOUIS RASMINSKY MAURICE FRERE (Executive Director) Temporary Alternate Governor J. H. WARREN HUBERT ANSIAUX • (Alternate Executivf Director) Advisers G. FREEMAN THOMAS BASYN A. HOCKIN (Executive Directo1") JEAN GODEAUX (Alternate Executive Director) CEYLON ROGER OCKRENT Governor MAURICE TOUSSAINT M. D. H. JAYAWARDENE Alternate Governor BOLIVIA R. S. S. GUNEWARDENE Governor Advisers AUGUSTO CUADROS SANCHEZ D. P. H. P. ABEYSEKERA Alternate Governor GAMANI COREA FERNANDO POU MONT WILLIAM TENNEKOON [56 ] •
CHILE DENMARK (Continued) Governor Advisers ARTURO MASCHKE ERLING SVEINBJORNSSON Temporary Alternate Governor (Executive Director) JULIO VON MUHLENBROCK HANS F. BOSERUP Adviser V. HOELGAARD H. H. STEVENIUS NIELSEN JORGE SCHNEIDER (Alternate Executive Director) DOMINICAN REPUBLIC Governor CHINA S. SALVADOR ORTIZ Governor Temporary Alternate Governor PEH-YUAN Hsu JOSE JOAQUIN GOMEZ Alternate Governor TSE-KAI CHANG ECUADOR Advisers Governor KAN LEE LUIS ERNESTO BORJA (Executive Director) Temporary Alternate Governor Tsoo-WHE CHU JOSE C. CARDENAS T. Y. LEE EGYPT BEUE TANN TSWEN-LING TSUI Governor Kuo-HwA Yu MOHAMED AMIN FIKRY Alternate Governor COLOMBIA AHMED NAZMY ABDEL-HAMID Governor Advisers MARTIN DEL CORRAL GAMAL EL-DIN ANIS Adviser ABDEL GALEEL EL EMARY FERNANDO GAVIRIA HUSSEIN F AHMY ALY GRITLY
COSTA RICA EL SALVADOR Governor Governor JORGE ROSSI CARLOS J. CANESSA Alternate Governor Alternaf;e Governor MARIO SABORIO LUIS ESCALANTE-ARCE
ETHIOPIA CUBA Governor Governor ATO MENASSE LEMMA LUIS MACHADO Alternate Governor (Executive Director) WALTER ROZELL, JR. Alternate Governor JOAQUIN E. MEYER FINLAND Governor KLAUS WARIS DENMARK Temporary Alternate Governor Alternate Governor GUNNAR PALM ROTH HAKON JESPERSEN Advisers Temporary Alternate Governors VEIKKO MAKKONEN SIEGFRIED HARTOGSOHN (Alternate Executive Director) ERLING KRISTIANSEN JOHAN NYKOPP [57 ] FRANCE GUATEMALA Governor Governor EDGAR FAURE GUSTAVO MIRON Alternate Governor Alternate Governor ROGER HOPPENOT MANUEL BENDFELDT J. (Executive Director) Adviser Advisers MAX JIMENEZ-PINTO MAURICE PEROUSE (Alternate Executive Director) PAUL BERTIN HAITI FRANCOIS DE LA BOULA YE Alternate Governor PIERRE CALVET CHRISTIAN F. AIME PAUL DELOUVRIER Adviser PIERRE ESTEVA GERARD MARTINEAU JULIEN PIERRE KOSZUL JEAN DE LARGENTAYE HONDURAS ANDRE DE LATTRE Governor GUY DE LAVERGNE RAFAEL HELIODORO VALLE GABRIEL LEFORT Adviser ROBERT MONOD PAUL VI NELLI PIERRE-FRANCOIS QUEUILLE JEAN SADRIN PIERRE-PAUL SCHWEITZER ICELAND JEAN-PIERRE SUSSEL Governor MAURICE VIAUD JON ARNASON Temporary Alternate Governor GERMANY SVANBJORN FRIMANNSSON Governor LUDWIG ERHARD Temporary Alternate Governors INDIA Governor JOACHIM VON SPINDLER CHINTAMAN D. DESHMUKH LUDGER WESTRICK Advisers Temporary Alternate Governors G. R. KAMAT OTTO DONNER (Executive Director) (Executive Director) G. L. MEHTA KARL-HEINZ DRECHSLER Advisers OTMAR EMMINGER V. G. PENDHARKAR CURT ERBSTOESSER (Alternate Executive Director) ROLF GOCHT P. D. KASBEKAR GUENTHER GROSSE P. S. NARAYAN PRASAD KARL HOHMANN HANS RANNOW FRITZ STEDTFELD INDONESIA GEORG VOGEL Governor ONG ENG DIE GREECE Alternate Governor Governor LOEKMAN HAKIM GEORGE A. MANTZAVINOS Advisers Alternate Governor KHOUW BIAN TIE GREGORY ZARIFOPOULOS A. FRANS OMP! Adviser TAN SlOE THAY COSTA P. CARANICAS ZAIRIN ZAIN [58 ]
...... _----- ...... •.•_--_. IRAN JAPAN (Continued) Governor Advisers ALI ASGHAR NASSER TAKEO YUMOTO Alternate Governor (Executive Director) DJALALEDDIN AGHILI KANICHI OSHIMA TAKAYOSHI TSUDA KATSURO VEDA HIROMU YAMAMOTO IRAQ TAKAYUKI YOSHICKA Governor T AROICHI YOSHIDA AWN I KHALIDY Alternate Governor JORDAN MUDHAFFAR H. JAMIL Governor SAAD NIMRY Alternate Governor EL-SHERIF MOHAMMAD SHARAF ISRAEL Governor LEBANON DAVID HOROWITZ Governor Alternate Governor ANDRE TUENI MARTIN ROSENBLUTH Alternate Governor Advisers RAJA HIMADEH ELIAHU A. COHEN LUXEMBOURG ERNST A. LEWIN Governor PIERRE WERNER Temporary Alternate Governor ITALY PIERRE GUILL Governor MEXICO DONATO MENICHELLA Governor Alternate Governor ANTONIO CARRILLO FLORES GIORGIO CIGLIANA-PIAZZA Temporary Alternate Governors Advisers RAuL MARTINEZ OSTOS FELICE PICK ALFREDO NAVARRETE (Alternate Executive Director) PAOLO BAFFI NETHERLANDS ENRICO CARRARA Governor MARIO FERRARI-AGGRADI J. VAN DE KIEFT CARLO GRAGNANI Alternate Governor ATTILIO JASCHI A. M. DE JONG MASSIMO MAGISTRATI Advisers EGIDIO ORTONA D. CRENA DE IONGH GIOVANNI RIVANO (Executive Director) ALDO ZIGLIOLI L. R. W. SOUTENDlJK (Alternate Executive Director) WILLEM DREES MISS G. A. KOEN JAPAN Governor H. M. H. A. VAN DER VALK SANKURO OGASA WARA NICARAGUA Temporary Alternate Governors Alternate Governor TORAO IGARASHI ALEJANDRO BACA MUNOZ GENGO SUZUKI Adviser TAKES HI WATANABE JORGE A. MONTEALEGRE [59 ] NORWAY SWEDEN Governor Governor GUNNAR JAHN N. G. LANGE Alternate Governor Alternate Governor OLE COLBJORNSEN K. A. LUNDGREN Advisers Advisers ALF ERIKSEN S. T. G. AKERMALM HALLVARD HILLESTAD E. VON SYDOW GABRIEL KIELLAND
PAKISTAN SYRIA Governor Governor MOHAMAD ALI HUSNI A. SAWWAF Alternate Governor Temporary Alternate Governor SYED AMJAD ALI ADNAN FARRA Advisers MOHAMMAD SHOAIB THAILAND (Executive Director) Governor ZAHEERUDDIN AHMAD SERM VINICCHAYAKUL A. G. N. KAZI Advisers PANAMA LUANG CHAMNAN AKSARA Governor CHINTAMYE AMATAYAKUL CHALERM CHEO-SAKUL MARIO DE DIEGO Adviser CHALOKE KOMARAKUL PIPAT KRAIRIKSH JULIO E. HEURTEMATTE (Alternate Executive Director) BUA SAJISEVI BOONMA WONGSWAN PARAGUAY Alternate Governor TURKEY JULIO C. KOLBERG Governor Adviser FERIDUN CEMAL ERKIN PERSIO DA SILVA Alternate Governor MUNIR MOSTAR PERU Adviser Governor EMIR SENCER FERNANDO BERCKEMEYER Alternate Governor EMILIO FOLEY UNION OF SOUTH AFRICA Advisers Temporary Alternate Governor PEDRO CASO J. E. HOLLOWAY CARLOS GIBSON Advisers A. A. M. HAMILTON PHILIPPINES H. L. T. TASWELL Governor MIGUEL CUADERNO, SR. Temporary Alternate Governor UNITED KINGDOM AUGUSTO FRANCISCO Govern01' Advise1's R. A. BUTLER MARIANO LAUREL Alternate Governor VICENTE L. PERALTA SIR LESLIE ROWAN AMADEO R. QUINTOS Temporary Alternate Governor NICANOR TOMAS REGINALD MAUDLING [60 ] I
UNITED KINGDOM (Continued) UNITED STATES (Continued) Advisers MARSHALL M. SMITH D. H. F. RICKETT BRENT SPENCE (Executive Director) LYNN U. STAMBAUGH M. T. FLETT HAROLD E. STASSEN (Alternate Executive Director) M. S. SZYMCZAK R. T. ARMSTRONG SINCLAIR WEEKS A. W. FRANCE JESSE P. WOLCOTT SIR ROBERT HALL LORD HARCOURT URUGUAY J. E. HERBECQ Governor P. J. KEOGH NILO R. BERCHESI S. C. LESLIE G. DE MOUBRAY Alternate Governor J. G. OWEN ROBERTO A. FERBER L. PETCH F. J. PORTS MORE VENEZUELA D. SPIERS Governor M. STEVENSON J. J. GONZALEZ-GORRONDONA UNITED STATES Alternate Governor Governor HECTOR ESTEVES, JR. GEORGE M. HUMPHREY Adviser Alternate Governor FELIX MIRALLES SAMUEL C. WAUGH YUGOSLAVIA Temporary Alternate Governors Governor W. RANDOLPH BURGESS VOJIN GUZINA ANDREW N. OVERBY (Executive Director) Alternate Governor FRANK A. SOUTHARD, JR. NIKOLA MILJANIC Advisers Advisers JOHN S. HOOKER ANTONIJE TASIC (Alternate Executive Director) (Alternate Executive Director) HOMER E. CAPEHART SVETOZAR MARKOVIC GLEN E. EDGERTON VLADIMIR PRITA GABRIEL HAUGE ZIGA VODUSEK WILLIAM McC. MARTIN, JR. A. WILLIS ROBERTSON CHARLES E. SALTZMAN
[61 ] OBSERVERS
AFGHANISTAN ORGANIZATION FOR EUROPEAN ABDUL RAUF HAIDER ECONOMIC COOPERATION J. F. CAHAN BANK FOR INTERNATIONAL ATTILIO CATTANI SETTLEMENTS FRANCOIS CORBASSON ROGER AUBOIN H. J. B. LINTOTT ANTONIO RAINONI
CONTRACTING PARTIES TO THE ORGANIZATION OF GENERAL AGREEMENT ON AMERICAN STATES TARIFFS AND TRADE L. M. DOMINGUEZ HAROLD PILVIN ERIC WYNDHAM WHITE
FOOD AND AGRICULTURE TECHNICAL ASSISTANCE BOARD ORGANIZATION OF THE WILLIAM MCCAW UNITED NATIONS E. BURTIS UNITED NATIONS INTERNATIONAL LABOUR Roy BLOUGH ORGANISATION G. GEORGES-PICOT THACHER WINSLOW FOLKE HILGERDT PAUL JOHANSEN KOREA SIDNEY MERLIN PRAYAD BURANASIRI RAOUL PREBISCH WAN Mo HONG Yoo TAlK KIM DUK CHOO MOON WORLD HEALTH ORGANIZATION CHANG SOON Yu R. L. COIGNY
[62 ] OFFICERS OF THE BOARD OF GOVERNORS AND PROCEDURES COMMITTEE FOR 1954-55
OFFICERS Chairman______EGYPT V ice Chairmen______CHINA FRANCE INDIA UNITED KINGDOM UNITED STATES
PROCEDURES COMMITTEE Chairman ______EGYPT Vice Chairman______COSTA RICA Reporting Member______.GERMANY Mem bers ______CHIN A FRANCE INDIA JAPAN PARAGUAY SOUTH AFRICA TURKEY UNITED KINGDOM UNITED STATES
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