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THE WORD BANKGROUP .. ov' - -15519 F46.19 76 - Public Disclosure Authorized 1995ANNUAL MEETINGS OF THE BOARDSOF GOVERNORS

SUMMARY

Public Disclosure Authorized PROCEEDINGS Public Disclosure Authorized Public Disclosure Authorized -WASHNGTON,D.C. OCrOBER 1-12, 1995

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C X tE 't 0 t; e ' ' ','i TIE WORLD BANKGROUP

1995 ANNUAL MEETINGS OF THE BOARDS OF GOVERNORS

SUMMARY PROCEEDINGS

WASHINGTON,D.C. OCTOBER 10-12, 1995 INTRODUCTORY NOTE

The 1995Annual Meetingsof the Boardsof Governorsof the World Bank Group, which consists of the InternationalBank for Reconstructionand De- velopment (IBRD), International Finance Corporation (IFC), International DeveloFpmentAssociation (IDA), MultilateralInvestment Guarantee Agency (MIGA) and InternationalCentre for the Settlement of InvestmentDisputes (ICSID), Seld jointly with that of the International Monetary Fund, took place in M'ashington,D.C., October 10-12, 1995 (inclusive).The Honorable Paul Dossou, Governor for the Bank and the Fund for Benin, served as the Chairman. The Summary Proceedings record, in alphabetical order by member countries, the texts of statements by Governors,and resolutionsadopted by the Boards of Govemors of the World Bank Group. The texts of statements concemintgthe IMF are published separately by the Fund.

ShengmanZhang Vice Presidentand Secretary THE WORLDBANK GROUP

Washington,D.C. February 1996

.i.i CONTENTS Page Remarks by Bill Clinton President of the United States ...... I

Opening Address by the ChairmnanPaul Dossou Govermorof the Bank And Fund For Benin ...... 8

Annual Address by James D. Wolfensohn President of the World Bank Group...... 16

Report by Mohamed Kabbaj Chairman of the Development Committee ...... 28

Statements by Governors and Altemate Governors ...... 3 1

Page Page Afghanistan ...... 31 Ireland ..... 108 *Argentina .34 Israel.1 l 10 Armenia.40 TlaI...... 1..... 113 Australia .4 1.. 41 Japan .116 Austria .44 Kazakstan .1 120 Bangladesh ...... 47 Korea .122 * Barbados .50 Lao People's Democratic Belgium .52 Republic ...... 125 *Brazil...... 55 *Lebanon ...... 127 Brunei Darussalan . 61 Libya .133 Cambodia63...... Malaysia .137 Canada ...... 65 Malta .141 China ...... 68 *Marshall Islands .145 Croatia .72...... 72 Myanmar .147 *Denmark ...... 76 Nepal.149 El Salvador ...... 80 Netherlands .152 *Estonia .82 New Zealand ...... 153 Fiji...... 83 Pakistan .... 156 France ...... 87 Papua New Guinea .159 *Gabon ...... 89 Philippines .164 Germany ...... 94 Poland.167 Greece .97...... 97 Portugal .168 India .99...... 99 Russian Federation .172 Indonesia .102 South Africa...... 176 ihan. Islamic Republic of. 105 *Spain .178

* Speaking on behalf of a gmoupof countries.

v Page Page SriLanka .186 Turkey ...... 200 *Sweden .189 Ukraine ...... 203 Switzerland .191 United Kingdom ...... 205 Thailand.195 United States ...... 208 Tonga ...... 198 Vietnam ...... 213

Concluding Remarks by James D. Wolfensohn.216 Concluding Remarks by the Chainnan Paul Dossou .219 Remarks by Eduardo Aninat, Governor of the Bank for Chile .221

Documents of the Boards of Goverors .222 Schedule of Meetings ...... 222 Provisions Relating to the Conduct of the Meetings .223 Agendas .224

Joint Procedures Committee .... 225 Report II .. 226 Report III .. 227 Report V .. 229

MIGA Procedures Committee ..... 231 Report I ...... 232

Resolutions Adopted by the Board of Governors of the Bank Between the 1994 and 1995 Annual Meetings...... 234 No. 495 ... Transfer from Surplus to Fund Special Emergency Assistance Grants for Rwanda ...... 234 No. 496 ... Direct Remuneration of Executive Directors and their Alternates ...... 234 No. 497 ... Worker'Compensation Benefits for Executive Directors and their Alternates ...... 235

Resolutions Adopted by the Board of Governors of the Bank at the 1995 Annual Meetings ...... 236 No. 498 ... Membership of Brunei Darussalam .236 No. 499 ... Finanical Statements, Accountants' Report and Administrative Budget ...... 239 No. 500 ... Allocation of FY95 Net Income .239

Resolutions Adopted by the Board of Governors of IFC Between the 1994 and 1995 Annual Meetings...... 240

* Speakingon behalf of a group of countries. vi No. 212 . Increase of Subscription by Chile to the Capital of the Corporation ...... 240 No. 213 . Increase of Subscription by China to the Capital ofthe Corporation ...... 241 No. 214 ... Increase of Subscriptionby Pakistan to the Capital of the Corporation...... 242 No. 215 ... Membership of St. Kitts and Ncvis. 243 No.216... Membership of Eritrea ...... 244 No. 217 ... Membership of Bahrain.246 No. 218 ... Membership of AzerbaijanRepublic .247 ResolutionAdopted by the Board of Governorsof IFC at the 1995Annual Meetings...... 250 No. 219 ... Financial Statements, Accountants' Report and AdministrativeBudget ...... 250 ResolutionAdopted by the Board of Governorsof IDA Between the 1994 and 199SAnnual Meetings...... 251 No. 181 ... Membership of the Azerbaijan Republic ...... 251 ResolutionAdopted by the Board of Governorsof IDA at the 1995Annual Meetings...... 253 No. 182 ... Financial Statements, Accountants' Report and AdministrativeBudget ...... 2 53 ResolutionAdopted by the Board of Governorsof MIGA Between the 1994 and 1995Annual Meetings...... 254 No. 51 ... Membership of Eritrea...... 254 Reports of the Executive Directorsof the Bank ...... 255 Transferfrom Surplus to Fund Special EmergencyAssistance Grants for Rwanda...... 255 Allocationof FY95 Net Income ...... 256 Reports of the Board of Directorsof IFC ...... 257 Increaseof Subscriptionsby Chile and China to the Capital of the Corporation ...... 257 Increaseof Subscriptionby Pakistan to the Capital of the Corporation ...... 272 AccreditedMembers of Delegations at the 1995Annual Meetings...... 284 AccreditedMembers of Delegations(MIGA) at the 1995Annual Metings...... 315

vii Obscrversat the 1995Annual Meetings ...... 325

ExecutiveDirectors, Altemates and Advisers IBRD, IFC, IDA ...... 329

Directorsand Alternates MIGA...... 331

Officersof the Boardof Governorsand Joint Procedures Committeefor 1995-96 ...... 333

Officersof the MIGACouncil of Governorsand Procedures Committeefor 1995-96 ...... 334

viii REMARKS BY HONORABLE BILL CLINTON PRESIDENT OF THE UNITED STATES

On behalf'of the UnitedStates, it's an honor to welcomeyou to Washing- ton for your 50th annual meeting.And I am especiallypleased to have the opportunityto speak to this group at a momentwhen you cun see the fruitsof your labors. Ordinarily,accomplishments of great institutionslike these come slowly. Yettoday, the visitof PresidentZedillo of Mexicoreminds us that in only nine months,with the helpof the internationalcommunity, Mexico has pulledback from the brink of financial disaster.After one of the most severe financial emergenciesin the postwarera, Mexicoagain is on the road to stabilityand growth.The Mexicanstock exchangehas recovered.Inflation is stable,interest rates are down, internationalmarkets have been reassured.And most impressively,in only seven months,Mexico was able to returnto private capital markets. As you have heard, President Zedillo has announcedthat Mexico will beginrepaying its short-termdebt with a $700-millioninstallnient this month, well ahead of schedule. Mexico's success is a tribute first to PresidentZedillo's leadership,his courage,and his government'ssteadfast commitment to carry throughtough economicreforns, though they have requiredgreat sacrificesfrom the Mexi- can people. They have borne these sacrifices-the austerity,the increased unemploymentin the short run-with the hope that they will pay off in long- term growthand to better lives that ordinaryMexican citizens deserve. That, of course,is the hope of peoplethroughout the world-the hope we must address;the hopeto whichwe mustgive reality as we moveinto the next century. The internationalfinancial institutions-the World Bank, the IMF, the Inter-AmericanDevelopment Bank-all yow-swift and decisive supportfor the stabilizationpackage played a vital role in bringingthis hopeful moment to pass. I particularly war, to thank Mr. Camdessus for his leadership. The United States also acted decisively.We acted decisivelyfor Mexico and for America.For helpingMexico help to protectone of our biggestexport marketsand 700,000jobs that dependupon our trade with Mexico.It helped to prevent an economiccollapse that could have caused serious dislocation along our 2,000-mileborder, and had a grave impacton our corr non efforts to limnitimmigration to legal immigration.But more importantly1 it was the right thing to do, becausethe United States and Mexico are neighbors.The truth is, in the globaleconomy of the 21st century,we are all neighbors. Helping Mexico not only preventeda national crisis, it preventedthis nationalcrisis from turninginto a multinationalcatastrophe, by arrestingthe spreadof uncertaintythroughout the world's emergingmarkets. At that time,

1 which many of you will remnemberwell, every sign on exchanges in South America, in Asia, in Europe, registereda loomingdisaster for tdiedeveloping countries.Those emergingmarkets support more than three millionAmerican jobs. They're essentialto our economyand to the well-beingof our pcople,but they're more important for our common commitmentto a more peaceful, more democratic,more free world. In manyof the nations embracingfree enterprisefor the firsttime, the very ideas that underpin market cconomies were thrown into doubt, into severe doubt, by the Mexican crisis. Open markets, privatization, deregulation- these things came under a cloudof suspicion.The decision of the countriesin the developingworld-Central and Eastern Europe, the Newly Independent States of the fonner Soviet Union, and other nations-to embracethese ideas has been one of the great achievementsof this century. No Americanleader could allow one setback in one nation to underminethis tremendouswave of history. But I ask you to rememberalso that the Mexican crisis put into high relief tensions that are less evident in many,manv emergingeconomies throughout the world in the new realities of the 21st century.It, therefore,provides for us a powerful reminder of why we must continue to lead in the face of these extraordinarynew challengesand these new opportunities. Historywill look back on us andjudge how well we respondedto this time of intense economic transformation.It is the most intensive period of economic change since the IndustrialRevolution. The revolutionsin communications and technology,the developmentof non-stop global markets, the vast currency flowsthat are now the tides of internationalbusiness-all these have brought enormousadvantages for those who can embrace and succeedin the new global economy. But these forces have also have made all our societies more vulnerable- to disturbancesthat once may have seemed distant, but which now directly affect thejobs and livelihoodsin every nation in the world, from the richest to the poorest. The unbridledforces of the global market make it more difficult for everynation to sustain the socialcontr2at; to sustainindividual opportunity for all citizens;to keep familiesstrong; to keep communitiesthriving; to keep hope alive. The truth is, in this new world there are powerfulforces of integrationand powerful forces of disintegration.And as we approach the 21st century, we must adaptour thoughtsand our actions to this new reality.No nation cai turn its back, and we will all have to work together if we want the promiseof the 21 st century to outweighits peril in every nation in the globe. The trend toward globalization,after all, has far surpassed anything the great figuresof BrettonWoods could have imagined.Interdependence among nations has grown so deep that literally it is now meaninglessto speak of a sharp dividing line between foreign and domesticpolicy. In the UnitedStates, when we think of economic policy, we can't divide that which is domestic

2 from that which is global. When we think of securitypolicy, wc know that our clforts to combatterrorism, whether it's in the WorldTrade Centerincident or in OklahomnaCity, have very much in common with our efforts to help our friends around the world to deal with a bus blowing up in the Middle East or a vial of saririgas beingbroken open in a Japanesesubway, or in so manyotlher instances that all of you can well relate to. We simply mustadjust the world's financialarchitecture to these new conditions. We must forge a system strong enough, yet flexibleenough, to make the most of the historicopportunities and the historic obligationsbefore us. Billionsof people,after all, in Asia, in Latin America,in Africa,in Europe, who are turning to democracyand free marketsneed to see that there can be tangiblebenefits from their decision,and a better life after breaking the shack- les of the past. Today,a child born in Bangkok,or Buenos Aires, or Johannesburgenjoys the possibilityof a vastly better life than his or her forebearscould -ver have imlL,ined.But to redeem that promise, we must work to exalt the forces of integration and to overcome the forces of disintegration that globalization bring. We must see that a future crisis like Mexico's does not rob children of the better lives before those lives ever get started. Fifty-one years ago, at another moment of historic change, President Roosevelt urged our Congressto approvethe Bretton Woodsagreements. He drew a dark picture of-or a clear picture of stark contrast.The choice he said then was-and I quote-"between a world caught again in a maelstromof panic and economicwarfare, or world that will movetoward unity and widely shared prosperity."'This point in history,"he said, "is full of promiseand of danger."Today, as we stand on the verge of a new century and confronta radically new internationaleconomy, I say to you that we are at a point of history full of promise and of danger. To masterthe challengebefore us, we must focusour efforts on expanding trade. irmprovinginvestment and capital flows and promoting sustainable developmenthere. And we mustdo it in the context of our devotion to human freedom and democracy. In the last two and a half years, our administration,working together with many of you in this room, has taken tremendousstrides toward openingworld marketsand promotingglobal growth. First, we tried to become a better inter- nationalcitizen by putting our own economichouse in order.When I became President, our govemment deficit was $290 billion a year, claiming capital from around the world that needed to be properly put to other uses, and keeping interest rates unnecessarily high. In three years, that deficit has been reduced to $160 billion a year, and we are working in good faith to bring our budget into balance across the party lines here in America. Second, we promoted a higher rate of growti, led by investrnentan,-' free of inflation,with the result that we now have the best combinedrates of unemployment and inflationin the United States in 25 years.

3 Third, we workedwitlh like-minded people tlhroughout the world to advance the cause of global trade. We have worked to increase our exports,to create high-wag. jobs, to improve our own standards of living snd those of other nations,and to sustaingrowth. We broughtthe UruguayRound into forcc.We madc NAFTAa 1eality.Our trade Ambassador,Mr. Kantor,has negotiatedovcr 80 oilier sepaiutc bilatcral trade agreements tu expand trade. We are forging agreementswith the AsianPacific region and with the Americasthat mcan that early in the next century trade will flowfreely over most of the Earth. The best way to grow our economics is to expand tradc. Our experience shows that. In the last three years, there has becn a stunning explosion in Americanexports, up four percentin 1993, 10 percentin 1994, 16 percent in 1995. At the same time, global trade has increased over 12 percent over the last three years, and the United States, as we have sold more, has been in a position to buy even more from other countriesall around the world. This is not an abstractconcept. This makes a differencein the real lives of people throughout the entire globe. Opening markets has helped to create almost two million Americanjobs here in our own economy.But as barriers fall elsewhere,our ability to trade, our ability to purchase others' exports, our ability to investin other countrieshave createdmany, many more jobs in other nationsaround the world. We have to do more, of course.We have to maintainour effortsto resolve trade disputes and to fight protectionism.I am pleased to say that with the establishmentof the World Trade Organizationwe have made real progress toward removingbarriers and preventingconflicts. Ironically,just when the advantagesof expanded trade have become so dramatic, we are again hearing the voices of retreat here in our own country. There are those who say that America should simply erect a wall and live within its own borders economically;and when it comes to foreignpolicy, we shouldjust go it alone. But, my fellow citizensof our sharedplanet, economic interdependenceis a fact of life. The goal must be to have it benefit all people, consistent with our shared vision for a world of freedom and peace and security and prosperity,consistent with shared values of responsibilityand opportunity for all people, of stronger families and stronger communities, of nations with sustainablelevels of economicgrowth that preserveour common environment. That is what is happening all over the world today. I could just give you one example that coincideswith PresidentZedillo's visit. We have a company called U.S. Filter in Palm Desert, California,with only 50 workers.But they havejobs becausethe Mexicancity of Cuemavacais buying a water treatment system from their company.We are fosteringgrowth, trade,jobs and sustainable development. We must do more of that, and turning away from one another is not the way to achieve that objective. Mexico understandsthis. Whenthe troublehit earlier this year, because of NAFTAMexico did not turn back and close its markets as it did during its

4 1980scrisis. Back then,it took Mexico aImosta decudeto recover.But becaiuseMcxico hias stayed on course, it is on Ihlcway to recoverynow. There will be no lostdecadc for Mexicobecaiuse ol' its owvnpolicies and because of tlIcwork donein theinitcrnationul comnmunity to assistit to recover.This can now bea decadeof'opportunity springing from short-letnisacrifice. Mexico'stroubles and thi otlierreccint evenits have shownthat reformsin thcinternational financial system liave to continuc:We don't havc this all workedout as it needsto be.We shiouldspread the benefitsof financialinte- grationaroutid the world so that more antd morc borrowers have access to capitalmarkets. We haveto devisc better ways to preventfinancial crises and to copewith the crisesthat inevitablyoccur. Pcople will turn away from free marketsif thicyfeel helpless, if theyfecl that they arc simplypawns in a global gameof winner-take-all,rather than partnersin a global endeavorthat seeks to make it possible for all to win. Since the peso crisis, we have moved from crisis managementto insLitu- tional relorm. At the G-7 Summit in Halifax,we put forwardIfar-rcaching proposals to help the international financial institutions meet these new necds. They aim to increase disclosureof nations' financialinformation and identify possiblecrises early, before they rock the world economy.And they include stepsto mobilize the inteniational community quickly when future crises occur.Next time there's a problem like Mexico's, the system will be better prepared. I am pleased that over the last few days, the broader membershipof the IMF has endorsed these proposals,made them more concrete, brought them closerto implementation.I thank you for that, and I congratulateyou for it. Fulfillingthe hopesof this momentdemands that we also renew our efforts to help those who still suffer the curse of poverty.Development that improves standardsof living, strengthensdemocracy, conserves resources and restrains populationgrowth; development that lifts people up and buildssocieties of citizens and consumers,not victims and dependence-these-these objectives benefit all nations, rich and poor. To succeed, we must change the approaches of the past to meet the demandsof the future. The internationalfinancial institutions, the multilateral developa.tentbanks, must continueto sharpentheir focus on giving all people the chance to make the most of their own lives. That means investingin education, in health care, in other programs that attack the roots of poverty. It means responding to the problems that were highlighted in such stark and clear relief at the BeijingConference on Women.It means encouragingprivate sector development. It means that our developmentprograms must support democracy,accountability and the rule of law. It means we must have a common globalcommitment to environmentalprotection and sustainabledevelopment. Developingnations must shouldertheir own responsibilities--stickingto soundeconomic policies, liberalizing trde practices,creating financial markets

5 that work, and aboveall, beingthe primaryinvestor in the humancapacity of their citizens.Achieving these goals will requirethe banksto continuereform- ing theirown operations and strivingfor greaterefficiency. Jim Wr'!fensohn is devodng all of his famousenergy to that task.I thankhim for it and for carryingforward the work of his fine predecessor,Lew Preston.I applaud Jim's progressand look forwardto furtheraccomplishments in the monthsand yearsahead fromthe WorldBank. Beforeclosing, I'd like to sayjust a few wordsabout the UnitedStates' commitmentto helping the poorest nations of the world help themselves through our partnershipin the InternationalDevelopment Association. It is simple-the IDA is essential.Its loans providea crucialtool for nationsthat seek to escapefrom povertyto sustaingrowth. It servesour fundamentalval- ues, as well as our economic interests, by lowering trade and investment barriers, supportingprivate sector growth, opening the marketsof tomorrowand giving peoplea chanceto succeed. A lot of people don't rememberthis, but the IDA was the brainchildof PresidentEisenhower. He believeddeeply that when, as he put it, "people despairthat their laborwill everdecently shelter their familiesor protectthem against disease,peace and freedomwill be in danger-and the seeds of conflict will be sown." For decades,Democrats and Republicansshared President Eisenhower's sentiments,and they supportedIDA. Unfortunately,that is no longer always the case. Many in the Congresshave forgottenthat IDA recipientsof yesterday-countries like SouthKorea, Indonesia, Turkey, China, Chile-are today amongAmerica's most importanttrading partners; are amongAmerica's most important strategic partners working for global security. Those who are remindedof this perhapswill be temptedto changetheir position.But I want to say clearlythat thosewho are determinedto makereckless cuts in thefund- ing of the UnitedStates for IDA shouldlook at the facts.They shouldremem- ber the visionof a great RepublicanPresident, Dwight Eisenhower. Today's despair breeds tomorrow'sconflicts. Resolving the fundingfor dealingwith today'sdespair will save the worldand the UnitedStates a lot of moneyand perhapseven preciois lives in the future. Restoringfunding for IDA is oneof our administration'stop prioritiesbecause it is theright thingto do. Of course,it serves our interest,but it is the right thing to do. And let me assure you, if you believeas I do that balancingour federal budgetwill permithigher levels of growthin the UnitedStates and throughout the world,then this is a good investment.And it is not necessary-not necessary-for the UnitedStates to walkaway from its commitmentto balancethe nation]-lbudget. Don't let anybodytell you that it is. Whenthese two institutionsopened for business,the IMF and the World Bank, there were 38 nationsstanding being them. Even then, John Maynard Keynes likenedthe affair to the Towerof Babel.Well, today, there are 179 nationsrepresented here. But even thoughwe are larger in numberand some

6 of us are larger and more wealthy than others, this increase in numbersdoes not mean that any one of us, including the United States can afford to detach itself from the business at hand and hope that others will take up the slack. More than ever, we must all participatein the reformnof the internationaleconomic system, and we must all do our part. In a world that grows rapidly closer,every one of us is called upon to help harness the forcesof integrationfor the benefitof our people and to make the forces work for all our communitiesand for the communityof nations that is increasingly bound together. Only then can we fulfill the potential of the advances in technologyand trade and knowledge. Only in that way will we defeat the forcesof disintegration,extreme nationalismand ethnic strife, isolation and protectionism. I believe that the 21st century will be the period of greatest possibilityin all human history.I hope it will be a period of unparalleledgrowth, achievement, prosperityand human fulfillment;it certainly has the potential to be. What these institutionsdo in the next 20 years will have a large say in what the 21 st century looks like for all the people of the world. What we do individually,as nationsand leaders,will have a large say in whatthat world lookslike. The institutionsthat we honor today and that you participatein deserve and requireour support.They also deserveand requireour best effortsto makecon- structivechanges to meetthe new opportunitiesand the new challengeswe face. We must-we must-lay the foundationfor prosperity,security and freedom that will benefit all the people of the world well into the next century. These next few years are a critical point, an historic turning point. And if we do our job, the history of the next century will be less bloody that the history of the 20th century, and even more filled with prosperity and freedom and common humandecency.

7 OPENING ADDRESS BY THE CHA[RMAN THE HONORABLE PAUL DOSSOU GOVERNOR OF THE BANK AND FUND FOR BENIN

It is indeed an honor for me to welcomeyou to these FiftiethAnnual Meet- ings of the WorldBank Group and the InternationalMonetary Fund. I would like to take this opportunityto remember fondly and with great appreciationthe life and work of Lewis Preston,whose dedicationto the goal of reducing povertyin the developingworld guidedthe WorldBank Group for nearly four years. Mr. Preston's vision of an open institution,flexible enough to respond to the different needsof member countries but also sufficiently accountableto its shareholders,is an ideal to which we all aspire. It is with great pleasure that I now welcome Mr. James D. Wolfensohn, who has taken up the mantle of leadershipof the Bank Group. 1 applaud the energy.enthusiasm, and vigor with whichyou have accepted the challengeof the responsibilityyou have assumed.This is a "chance of a lifetime"-as you have so aptly put it-to make a difference in the lives of millions of people throughoutthe world.I wish you success in the tasks ahead and assure you on behalf of the Boardof Governorsof our fullest supportand cooperationduring your tenure. Let me open these deliberationsby extending a warm welcome to the delegationfrom BruneiDarussalam, who will be joining our institutions during the course of these AnnualMeetings. We have come together once again at a time when the Bretton Woods ,"sisters," the World Bank and the International Monetary Fund, have an increasinglyimportant role to play in a world where economicrelations have grown ever more complex, multibilliondollar business transactions are car- ded out in record time, and Intemet reigns supreme, and still, 1 billion people live in abject poverty, 140 million people are unemployed,and I billion are underemployed.In these circumstances, what does this globalization of the world economy mean for our institutions, and for the developingcountries and countries in transition? It surely brings new challenges and opportunities for all countries, regardless of their stage of development. It also underscores the need for a global partnership among the players so that we all might benefit. We have some weightymatters to discuss in the next three days. The state- mentswe make and the decisionswe take will be scrutinizedand analyzed by the media,by our critics, and by our supporters.What will be importantis how we translateour words into concretemeasures that have measurableand sus- tainableresults. To set the stage for our discussions,please allowme, as Chair- man of these Meetings, to take a few rminutesto highlight some of the opportunitiesand challengesour ce,untries are facing, the progress made to date, and the role the Bank Group and the Fund should play in meetingthose challengesand sustainingthe achievements.

8 World Economic Outlook Following a brief pause this year, the economic expansion in the industrial countries now seems likely to continue. However, it is important to note the differences among countries. For example, while continental Europe, North America, the United Kingdom, and Australia are expected to enjoy moderate growth with continued low inflation in the months ahead, Japan continues to grapple with its most serious slowdown in half a century. Over the past year, exchange rates among the currencies of the major powers have shown marked changes. Given the keen interest of all our countries in exchange rate stability, we welcome the orderly correction of imbalances that has taken place recently, bringing the exchange rates of the dollar, the deutsche mark, and the yen closer to levels that are consistent with economic fundamentals. In order to make wise use of the present expansion and avoid repeating the mistakes of the 1980s, it is imperative for the industrial countries to reduce budgetary deficits and tackle structural weaknesses, particularly in their labor markets, health care systems, and public pension programs. Such action on their part would clearly represent an important contribution to the world economy as a whole. The current projections for continued buoyant growth in the developing countries are encouraging, but there is no room for complacency. Again, it is important to distinguish among the various groups of developing country members and the particular issues they face. Following the rapid expansion in Asia over recent years, some of these countries face the danger of overheating. Although the recent crisis in Mexico will undoubtedly weigh heavily on the short-term growth prospects of some Latin American countries, they stand to ,ain over the longer term if they heed the lessons learned-namely, by putting in place macroeconomic and structural policies geared toward promoting domestic savings and nondebt creating capital flows, and by adopting appropriate prudential banking and financial regulations. Indeed, we-as the international financial community-should carefully examine the events surrounding the Mexican crisis in order to glean important guidelines for the future. In welcoming the rescue package put forward by the international community-including the Fund, the Bank, and the United States-which seems to have successfully contained the contagion effects of the crisis and improved the prospects for an early recovery-we must heed the waming signals ema- nating from this earth-shaling event. It is, indeed, imperative for us, individually, to address domestic imbalances, correct financial sector weaknesses, and pursue prudent debt-management strategies; collectively, we must carefully study the parameters of our fully integrated world economy and quickly put in place the early warning devices and procedures needed to prevent such crises from occurring in the future. While the outlooklfor transition economies is encouraging on the whole, it is striking to note the extent to which performance has varied across countries

9 according to the progress they have made in macroeconomic stabilization and reform. Those who have lingered behind in the effort to address domestic imbalances and structural weaknesses can take clear encouragement from the early reformers. At the same time, however, we must recognize that considerable challenges remain for all the economies in transition. I call on the international community to help those countries attain the foreign investment and market access needed to propel the transition proccss forward and further strengthen their prospects for sustained growth. Africa in a Global Economy Let me turn for a moment to my own region. Unquestionably, the scale and intensity of human tragedy that has engulfed sub-Saharan Africa is tremendous. However, Africans do not accept this situation as irreversible. While the challenges facing African nations remain Herculean, progress has been made and continues to be made. Countries of sub-Saharan Africa are beginning to reap the fruits of their long-term efforts to put in place appropriate adjustment policies, often in the context of programs supported by the Fund and the World Bank. Macroeconomics reforms such as exchange rate realignments and price controls have proven effective. Thus, the historic devaluation of the CFA franc on January 11, 1994 has provided a platform for resumed growth in the CFAF zone. Per capita income is risino, especially in those countries implementing economic reform programs. But, this is not the time for self-congratulatory pats on the back. The road before us is long and hard. We must not lose sight of the fact that African countries continue to struggle under the burden of a heavy debt overhang. External debt has actually increased over the past decade, despite the debt relief efforts of the Paris Club and other creditors. The debt burden of sub-Saharan Africa totals $145 billion and annual debt service $10 billion. This represents 255 percent of the value of Africa's exports and 83 percent of its gross national product. We know that we cannot sit back and wait for the rest of the world to rescue us. We also know that we must resist the temptation to rely excessively on external sources of financing. Finally, we also know that a number of changes must occur if Africa is not to be totally marginalized in the global economy. Let me highlight three critical areas where greater effort on the part of Africans and their governments is absolutely necessary. First, while maintaining economic stability, African governments must improve the efficiency with which public funds are allocated and utilized for human capital development. Our most valuable resource is our people. Internal capacity building is a critical ingredient for development. Access to quality education and health facilities must be available to all of our citizens so that they are intellectually and physically prepared to participate fully in the local as well as the global economy. Second, public sector and civil service reform and institutional development efforts are key to the successful implementation of development prograns and must be accelerated. The management of basic public services must hence-

10 forth draw upon African capacity. Last, development strategies developed by African countries must be environmentally sustainable. Every effort must be made to protect our fragile ecosystems, our forests, and our waterways. These three key areas will require significant attention and greater effort in coming decades. I also could mention the need to promote private sector development more vigorously, the importance of ensuring that agricultural production is more efficient, and the need to pursue greater regional integration, among others. The African continent is rich in human and natural resources. With concerted effort, we can one day become economically viable. However, for the time being, African nations remain dependent on external finance-aid as well as loans and investmenL A dynamic partnership among the African people, African governments, donors, and international business is needed to realize the potential of Africa in the coming years. Benin I should now like to say a few words regarding the experience of my own country, Benin. Benin forms part of the West African Economic and Monetary Union, together with Burkina Faso, Cote d'Ivoire, Mali, Senegal, and Togo. With a total surface area of some 2.6 billion km2, the Union has a population of 60 mnillioninhabitants and per capita income of approximately US$360. In 1962, these sarn,: countries joined together in a monetary union known as the West African Monetary Union, or UMOA, so as to be able to exercise their monetary sovereignty within a broader framework. To this end, they adopted a common currency, the African Financial Community or CFA franc, the issue of which was made the responsibility of a single institution, the Cen- tx-alBank of West African States. Other functions of the UMOA are to central- ize exchange reserves, ensure the unrestricted circulation of currency and transfers, and harmonize monetary, banking, and financial regulations. Since 1989, this body of regulations has been liberalized, and monetary policy is now based on market mechanisms: * Interest rate policy, in conjunction with a system of reserve requirements, and central bank auctions on the money market are now the instruments of monetary policy. * Credit controls have been abolished and the terms applicable to bank deposits and lending have been liberalized. Banking and prudential regulations have been modernized in accordance with the principles and recommendations of the Basle Committee; a standardized chart of accounts reflecting international practices will come into effect on January 1, 1996, and establishment of a regional financial market is under consideration. In 1990, a regional supervisory organization, the UMOA Banking Commission, was set up to oversee banking activity. Finally, where financial relations with other countries are concerned, our exchange regulations impose no restriction on current payments or on capital inflows

11 that are in compliance with national regulations relating to investment. In particular, repatriation of employment and capital income is totally unrestricted. In the 1980s, Benin faced the most difficult economic and financial crisis of its history. The economy slumped, per capita income plummeted, and economic and social infrastructure deteriorated rapidly. Intemal and external imbalances worsened. These difficulties, caused by ill-suited policies over a prolonged period of time, were exacerbated by a steep fall in the terms of trade after 1985 and erosion of Benin's external competitiveness. Despite the seriousness of the crisis in this political context marked by a militaristic, Marxist, interventionist single-party system, the first Structural Adjustment Program was concluded in 1989 at a juncture in which the outlook for the Beninese economy was dismal indeed. The main objective of the program-to create the conditions for a sustainable recovery of economic activity-could not be achieved, owing to the severity of the crisis and impediments to the implementation of the necessary measures. The Government, headed at that time by Prime Minister Nicephore Dieudunn6 Soglo, undertook the dual challenge of political democratization and economic reform. In July 1991, the Second Structural Adjustment Program was launched with the firm support of the International Monetary Fund and the World Bank. Benin successfully implemented its economic reforms and, growth has not flagged since then. In point of fact, from a rate of -2.9 percent in 1990, we confidently expect growth between 6% and 7% by the end of 1995. The Government of Benin continues to face the same problems common to all of Africa: the need to increase investment, control inflation, resolve unemployment-particularly among the young and especially the recent grad- uates of our universities and vocational schools-and the persistent problem of indebtedness. It is to be hoped that the negotiations with the Paris Club will lead to an agreement that will make it possible to accord preferential treatnent to the outstanding debt of a country such as Benin, which has courageously and willingly embarked on a path of economic reform. But we are aware that much remains to be done, and we hope to accomplish this with the support of the intemational financial community and our development partners. Role of the Bank The case for development remains compelling, as demonstrated by the success stories in all regions and by the overwhelming poverty that still per- sists in many parts of the world. The multilateral development banks and other development agencies must coordinate their operations to maximize the benefits to the world's poor. Despite the increase in private flows to some parts of the world, multilateral development institutions have a major role to play in countries that do not attract such flows. The World Bank continues to spear- head development aid efforts. The role of the Bank Group has changed and

12 must continueto adjust to the increasedscale and complexity of the development agenda.Indeed, a messagethat has emergedloud and clear over the past year is that the need for a flexible and efficientBank Group is greater today than ever before. In this regard, I welcome the initiativesthat have been undertakenby the Bankto cooperatewith other agenciesand organizationsto address someof the new challengescreated by changing global circumstances.For instance, the Bank will contributeup to $30 million of programfinancing for the establishment of a ConsultativeGroup to Assist the Poorest (CGAP)-a micro finance Program will provide grants to qualified institutionsthat provide microcredit and savings services to the world's poorest people. The participationof the poor in credit and savings systemshas proved to be an effectivemeans of job creation and incomegeneration. In addition,the Bank has establisheda fund, the Initiativefor Informationand Development(InfoDEV), which will supply independentadvice to governmentsand others trying to join the information revolution.Given the growingimportance of informationinfrastructure to economic development,InfoDEV will help enable the developingcountries gain access to relevantand timely adviceabout telecommunicationsreform and the pc 'tial of new information technologies. In another critical area, I welcome 1 lolfensohn'scommitment to strengtheningthe Bank Group's partnership with the UN agencies, local communities,women's groups and NGOs that focus their effortson the educationof young women. He has said recentlythat contingenton an adequate IDA replenishment,the Bank Group will commit about $900 millionper year for the educationof young women.I welcomethe attention being given to the issue of the multilateraldebt of the poorestcountries. I stronglyurge that the discussionsabout a solutionto this critical problem, which were begun recently,be continued.All of the foregoing poin- to the same conclusion:our effortsto reducepoverty and improvethe living standards of the world's poorestmust be strengthened. I, therefore,urge the donors to conclude swiftly the negotiationsfor the IDA replenishmentand to agree on a satisfactory,i.e. sufficient,level in relation to ever-increasingneeds. Private capital flowsare welcome,but they are not a replacementfor IDA funding in many regions of the world. The growth of EFCactivities is a sign that more and more member countries are taking steps to promoteand strengthentheir private sectors.The Mul- tilateral Investment Guarantee Agency continues to promote the flow of foreign direct investmentto developingmember countries to financeand support their economicgrowth. Role of the Fund It is clear that surveillance over the international monetary system and members' policieswill remain the core of the Fund's work for the immediate future. In addition,the Fund's financialbase must be carefully monitored to ensure that it is well equipped to fulfill its functionsin an increasinglyuncer-

13 tain world economicenvironmenL In encouragingthe Fund managementand staff to strengthenthis surveillance,we mustbear in mindthat the effectiveness of Fund surveillanceultimately depends on the willingness of members to cooperatefully with the Fund,both in makingtimely economicdata available and in formulatingdomestic policies that are well designed in terms of their substanceand consistency.As the productionand timely publicationof accu- rate economicdata is essentialnot only for effectivesurveillance by the Fund, but also for efficient policymakingin individual countries, I encourage all membersto makeevery effortto improvetheir infrastructurefor data management. The Fund will also have to stand readyto providetechnical assistance to help membersproduce the key data requiredfor economicand financialanal- yses so that appropriatedecisions can be made. I encouragethe Fund management and staff to improve continuity in the surveillance process. Regular analysesof policy interactionsand the systemicimplications of domesticpolicies in the majorindustrial countries are critical to effectiveFund surveillance, given the impactof dleir policiesor. the global economicenvironment. I applaudthe recentefforts of the IMF-under the guidanceof its Manag- ing Director,Michel Camdessus-to adapt its policies and facilities to meet the growing demands of our globalizedworid economy.In the wake of the Mexicancrisis and recentevents in other countries.the ExecutiveBoard of the Fund has begun to pave the way for the creation of an emergencyfinancing mechanism, which-combined with strengthened surveillance-could enhance the Fund's ability to forestall crisis situationsand to respondrapidly with appropriate support for members facing external shocks. It has also begunto study appropriateoperational guidelines under which the Fund could provide temporarysupport for currency stabilizationfunds, when needed to underpinmembers' stabilization,efforts by helping to inspirenecessary market confidence. Over many years now,the enhancedstructural adjustment facility (ESAF) has proved to be invaluablein providingvital assistanceto many of the poorest developingcountries. Given the plight faced by these countries and the regrettablecontinuing decline in officialdevelopment assistance, the continuation of the ESAF-and, indeed, the establishment of a self-contained ESAF-will be essential as the centerpiece of any strategy to address the problems of those poor members who are heavily indebted, particularly to multilateralinstitutions. I would also like to encouragethe Fund to pursue its effortsio improvethe mechanismsfor coordinationamong intemational agencies, bilateraldonors, and creditorsinvolved in assistingcountries in post-conflict situations; I endorse the recent proposals to expand the guidelines on emergencyassistance to includesuch situations. Over the monthsahead, we must bear in mind that the need to strengthen the role of the Fund in the world economyis closely linked to the need to strengthen its financial base. Recent developmentsin global financial and exchangemarkets and the uncertaintiesconceming the Fund's current liquid-

14 ity projectionsunderscore the need to strengthenthe Fund's resources.In this context,the workon the EleventhGeneral Review of Quotasshould be accel- eratedto the extentfeasible, while paying due regardto the balanceddistribu- tion of quotas among different country groupingsand regions. The Fund shouldalso proceedwith furtherconsideration of a new allocationof SDRs, which could preservethe SDR as the main reserve asset while addressing equity issuesfor those memberswho have not participatedin previousalloca- tions.Finally. I encouragethe Fund to pursuean enlargementand extensionof the GeneralArrangements to Borrow as another means of safeguardingits liquidityposition as it faces the challengesahead. We have a heavy agendabefore us. Our deliberationsover the next three days could and shouldhave importantconsequences for the futureof the globaleconomy. I hopeeach of us will rededicateourselves to the pursuitof a global partnershipin which we all can benefit from the opportunitiesthat are presentedby the new worldorder. On this hopefulnote, I herebyopen the Fif- tieth AnnualMeetings of the WorldBank Group and the InternationalMone- tary Fund.

15 ANNUALADDRESS BY JAMES D. WOLFENSORN PRESIDENT OF THE WORLD BANK GROUP

In this, my firstAnnual Meeting, it givesme greatpleasure to welcomeyou to Washington-and a very special welcometo the delegationfrom Brunei Darussalam,which today will becomethe Bank's 179thmember country. I am greatly honoredby my appointmentas presidentof the WorldBank Group.and I wish to thank you for the confidenceyou have shownin electing me to this position.Elaine and I pledge to work hard and, with your help, to make a contributionto the dream that we all share: a better world for our children. Let me say at the outsetthat I feel greatlyprivileged to be workingW.ith my friend,Michel Camdessus, who is givingme so willinglythe benefitof his immenseexperience. The Bank Group has a distinguishedrecord of achievement.Since my arrivalfour monthsago, I have visitedmany countries and projects,and have beengratified and encouraged by the strongpartnership that existsbetween us, our clients,and our membergovernments. I have leaned that developmentis a toughand complicated business. After 50 yearsof operation,and with new leadership,it is a good time for the Bank Group to take stock.The world around us has changed,and its expectations from, and demandson, our institutionhave become ever more complex. I regardthis as a difficultperiod, but one of enormousopportunity. One thing is clear: we mustcontinue to act-so that povertywill be alleviated, our environment protected, social justice extended, human rights strengthened,and women's rights advanced-all in the cause of a morejust and peacefulworld. We must ensure that our organizationfunctions at the highestlevel to achievethese goals. In embarkingon this task, I am very consciousof the sadnesswe all feel at the tragic loss of my predecessor,Lew Preston.Ls was a great banker and humanitarian.He loved the Bank, and he and Patsy worked hard to improve its effectivenessand enhance its reputation.We are grateful for all that Lew gave to the institution,and we would like Patsy and the family to know that he will always be rememberedwith affection.In particular,Lew's belief that educatinggirls is the best investmentthat a country can make is recognizedin the special program for Girls' Education recentlyestablished in his honor. Whatthen willyou expectof me aftermy firstfew monthswith the Bank? Weightypronouncements? Massive reorganization plans? Headlinenews? I hopenot What I am aboutto give is a progressreport, an indicationof my approach to my new responsibilities,and some insight into the directionin which I wouldlike to lead the Bank.

16 A Sense of Direction To gain a sense of that direction, I have spent about a third of my time in these past four months traveling to our borrower and donor countries-talking and listening to government ieaders, business people, NGOs, farmers, trade unionists, students, mothers, and children. My wife and I have visited dozens of the projects that the Bank is supporting, and a number of images have stayed with me:

* the woman entrepreneur that I met in the small town of Katwe, Uganda, converting banana peels into charcoal briquettes for sale-and using the proceeds to improve her community; she had all the pride of the chair- woman of a multinational company, as she shared with me her pencil- written records; * villagers in the arid province of Gansu, China, to whom a Bank-financed project delivers water through a 50-kilometer system that traverses moun- tains and valleys; those villagers are using their own resources-in partnership with government experts-to invest in agriculture, roads, and education for their children; - I met slum dwellers in Port-au-Prince, Haiti and in Salvador, Brazil working-with our help-to install clean water and sanitation and thus contribute to their own health and productivity, while protecting their environment.

I saw enormous challenges: the monumental power and fragility of the Amazon and the damage done by people in need of land-and in need of hope. Schools in Africa, with 90 children in a class working ten-to-a-book and two- to-a-pencil. The appalling conditions facing the people of Gaza, where incomes have been stagnant for a decade, and yet, where investment and job creation must be part of any lasting peace. The islands of the South Pacific, where our environment is under attack as foreign entities seek to destroy natural forests for profit-without any long-term concern for the future of the islanders. While my odyssey is not complete, I have learned of the tremendous diversity among the Bank's clientele: dynamic growth in East Asia and parts of Latin America, but not enough growth in much of Africa; the unique challenges of transition in Eastern Europe and the former Soviet Union; and the special needs of states that are either failing or struggling to be born-from Burundi to Bosnia I have learned that the real test of development can be measured not by the bureaucratic approval process, but by the smile on a child's face when a project is successful. I have learned of the power of development when people are given the chance to participate in it. Most of all, I have learned that there

17 is nobility and capacity in the people we are trying to assist-and that there is a vital need for the World Bank Group to help with the huge, untinisheddevel- opment agenda. The developing countrics deserve our support for moral and social reasons. But they also need our supportbecause they represent futuregrowtlh for us all. And equitablegrowth means stability for our planet. If the Bank Group is to be as effcctive as it can be in contributing to this goal, it must adjust to new conditions.And the key questionguiding change is this: what are those client needs where we can make the critical difference? What do you, our members,need from us today, next year, and five years and more from now? As I attempt to give a sense of my current thinking,let me organizemy remarksalong the followinglines: * What is the context in which the Bank operates today? * What is the role of the Bank in developmentnow, and in the comingyears? - What can the Bank do to achieve its objectives in an effective and accountablemanner? and D What immediateand early initiativesare we taking? a. The Enivironmenitin which the Bank Operates We are, of course,operating in a context that is vastly differentfrom ten or even five years ago. The post-ColdWar era has witnessed perhapsthe most momentouschanges in economichistory: ccountry after countryhas movedaway from commandsand controlsto the greater use of markets; * the rapid expansion of trade and technologyhas accelerated global integration, with the developing countries contributing 75 percent of the growth in world exportsin recent years; * there has been a transformationin private capital flows, now three times officialdevelopment assistance; * and as democracyhas swept the world, a host of new players have added their differentstrengths to the cause of development:in the privatesector, amongNGOs, in local comrmunities,and in civil society.

All of this has raisedexpectations of development,and made the potential for development greater than ever before. And yet, the challenges, too, are growing. We have made good progress on poverty reduction in several areas-in East Asia and some parts of Latin America. But there are still 1.3billion peo-

18 pic living on a dollar a diayor less. Adequaitesanitation and electricityare still beyond thereach of'two-fi'rths ol' the world's pcople. This shockingpoverty is fueled by continuingrapid populaitiongrowtlh- increasing by more thanlbO million people a year, 95 percent ol' them in the developingcountries. And it is comilpoundedby teiethreLt to biodiversityand the cnviro(nment-with continuedprofligate waste in the developedworld ailid new challengesin the developingworld. Given current populationand urban growth rates ovcr the nexxtgeneration, industrialoutput and energy usc in thedeveloping countries will increaselive- fold-with the risk of irreversible environmental daimSage.Scicntists agree that the holc in the ozone laycr prcsents a threat to global warming,and they tlil us that 19(4 was the hottest year in 20,000)years. We must hccd the warnings or the Rio Summinit-andact to protect lhe world for our children. I have been encouraged by the high priority nlowbeing given to the environment by more and more developing countries, and by their increasing requcsts lor the Bank's assistance in this area. The richer nations-sinice they are the grcatest polluters-must share this burden. Progress is being made- through collaborationon the Global EnvironmentFacility, for instance. But much more remains to be done. Without environmentalprotection, development can be neither lasting nor equitable. My commitment to the task is unequivocal. The fundamentalproblems of equity between rich and poor nations also exist in regions that are growing dynamically.In Latin America. the poorest 20 percent of the population receives less than 4 percent of the income, and has even less of the assets.In other regionstoo, the gap betweenrich and poor is getting worse. The distributionof the benefitsof growth presentsone of the major challengesto stability in the world today. Social injustice can destroy economic and political advances. This is a challenge that must be addressed by the governmentsand leaders of the countrieswith whom we work. We must learn more about the "why" and the "how" of income distribution. We must measure progress not only in GDP per capita, but in social and environmental benefit per capita-as we are seeking to do in some of our most recent work.And we must be aware of the close relation between peace and development-and war. We cannot ignore crises such as Bosnia, Gaza, and Rwanda and the challengesthey present to the world developmentcommunity.

The Challenge to IDA: The Needfor a New Compact It strikes me as bitterly ironic that just as we are reaching a consensus on how to address these challengesin our changingworld, the threat to development assistancehas never been greater.I refer here specificallyto the funding crisis facing our concessionalaffiliate, the InternationalDevelopment Associ- ation-IDA.

19 As you know, IDA's basic constituency is the world's 3 billion poorest people.Ninety percent of its lending goes to countrieswith per capita incomes below $600. Using its global experience. IDA is the advisor to the poorest countries on their economic reforms; the largest investor in their education and environmental programs-and in other vital areas, such as helping to combatAIDS. With the help of IDA-supportedprojects, in the last several years alone, malnutritionamong infants was cut by half in 6,000 villages in India. Over 6 million textbooks were distributed to primary schools in Africa. And millions of women and children in CentralAmerica received basic nutrition. In these ways and more, ID is the backboneof the internationaleffort to help the world's poorestnations help themselves.And yet, despite the record, there is a serious question about the fulfillmentof some donor commitments under lDA-10. Budget cutting by the United States, Congress has led to delays, and probable large reductionsin the size of the contributionby IDA's leadingdonor. And for every dollar cut by the U.S., IDA could lose a total of five dollars-as other nations reduce their contributionsproportionately. T1hismeans that if Congressionalestimates of a U.S. cut of approximately 50 percentmaterialize, overall donor contributionsto IDA this coming twelve months could be reduced from $6 billion to under $3 billion. Achievingan adequate IDA-I1 for the next three years will be extraordinarilydifficult if IDA-1Ois reducedso drastically.This is not only a threat to IDA. it is a threat to the long-termviability of multilateralfinancing for development. As Michel Camdessus has pointed out, if there is a seriouslyunderfunded IDA, we will be faced with a world of increasinglyunstable nations. Some of the Ministers here today will have to abandon plans for building human resources, expanding education for girls, increasing clean water supply, investingin infrastructurc,or for moving soldiersout of the barracksand into small fanns. There are so many urgent tasks. The donor community needs to undertand the costs of an under-funded IDA, We must explain that world citizenshiphas a price, and that IDA is central to the whole de-velopmentprocess. National budget cutting exercises in the developedcountries must give due weightto internationalconsiderations. Money saved now for domestic purposes will lead to huge costs later. It is in the donors' own self-interestto maintain an adequate level of support. Obviously,IDA and its partners in govemmentand civil society must be accountable-and must be seen to spend scarce resources wisely and well. There must be a "compact": that in return for the donor communityensuring that IDA has adequate resources,recipient countries and the Bank must ensure that those resources are used even more effectively.Projects must be well managed and corruption eliminated. In addition, we need to provide better infonnationabout the benefitsof this importantwork. to donor governments- and to their voters.

20 ThiePmblern of Debt As well as resourceconstraints, some of the poorer countriesface serious problems of overhangingdebt. Yes, private capital flowshave exploded, but more than 80 percentof them have gone to only 12 countries.Private investment is not yet the answerfor these poorer countries. We know that there are no universalsolutions to the problemof overhang- ing debt. There mustbe a case-by-caseapproach. With currentinstruments, we are already providing resources to help the majority of indebted countries meet their needs for both debt service and repayment.But for a small number of countries, the debt overhang remainsjust too great. And as it grows, new lending becomes less effective. Roughly a quarter of the poorest countries' debt is owed to multilateral institutions.We must, therefore,review the options to address the problem of the countriesthat cannot escape from their debt overhang.You all know that the Bank and the IMF are studying the issue. Together,we expect to make some recommnendationsto our Boards-and bring our conclusions to the DevelopmentCommittee at the Spring meetings.The issue is difficultand the options are many.But we believe that it merits seriousattention and deserves a clear indicationof what the Bank and the Fund can recommend. But let me repeat:the crucial need to free up more resources-whether in reducing multilateraldebt or replenishingIDA-must be matchedby the track record and commitmentof the recipientsto sound policiesand effective,transparent implementation.This must be our compact. b. The Role ofthe Bank in Development What is the Bank's role in this compact-now and in the future? As you know, the Bank has evolvedthroughout its history,from an agencyfor postwar reconstruction50 years ago, to our role today as a global developmentinstitu- tion. Recently, I 'isited Japan, where evidence of the Bank's assistance is manifest-as it is in over two dozen other countries that have "graduated" from requiringour help. As the needs of our memnbershave changed,the Bank has changedto meet them. The Bankgroup of institutionsis one resultof that. I have already talked about the crucialimportance of IDA. But there is more to the Bank Group than IDA. And there is more to it thanjust lending. There is the International Bank for Reconstruction and Development (IBRD) whose original genius remains as valid, if not more valid, today than it was five decades ago: to borrow on the financial markets in order to fund long-term developmentthrough loans to governments;to use its guarantee power to mobilize additional private capital; and to transfer the lessons of developmentexperience across countries.Like my predecessors,I am committed to sustainingthe IBRD's triple-Astatus as a borrower-because that is

21 the bedrock of our effectiveness which allows us to play our triple role: as lender, adviser, and partner to our clients whose projects we assist. There is the International Finance Corporation (IFC), which last year made loan and equity commitments of close to $3 billion to help develop the private sector in 67 countries. For every dollar IFC invested, six additional dollars were leveraged from other sources. But this is far from being the only ineasure of IFC's effectiveness. The range of its services is growing dramatically: from advice on capital market development in Vietnam, to assistance with the privatization of agriculture in Russia And it continues to push ahead on "frontier' issues of private finance: support for small businesses in Africa, or establishing a biodiversity fund for Latin America. Looking to the future, I believe IEC can extend its reach-and expand its development impact. There is the Multilateral Investment Guarantee Agency (MIGA), also founded in 1988, whose goal is to stimulate private investment by insuring against non-commercial risk. In six short years of operation, MIGA has leveraged total investment of close to $9 billion in 36 countries. The only constraint on it doing more is its very conservative capital and gearing ratio-which I would hope to take up with our shareholders at a future point. LBRD, IDA, IFC, and MIGA are seeking to develop new products and instruments so that we can maximize the benefits for our clients. We have demonstrated our flexibility in a number of dramatic ways during this past year: from helping to strengthen Mexico's financial sector during the peso crisis, to helping establish a new rnicro-finance program for the world's poorest. To be even more responsive to our clients' diverse needs, however, we need to strengthen our organization along "group" lines-to take advantage of our collective services and experience. And that is one of my priorities. From our past experience, we have found in country after country that sound economic policies are essential for stimulating growth, creating jobs, and helping the poor. We have learned that investing in people, particularly through education programs, is the principal engine of social and economic progress. We have seen how powerful the contribution of women is-as the main agents for change in their families and communities. We know that infra- stucture-power, wansport, and telecommunications-is essential, and we will continue to support it as appropriate. At the same time, we have realized how critical the need is to protect the earth's fragile environment-our land, our forests, our water. And we recognize the great present dangers of drugs and organized crime. For me, the big lesson from a review of our history and from my travels is that there is no single solution. I have seen how interlinked the pieces of the development puzzle are. Our programs need to be part of a comprehensive development strategy, and rooted in a country's individual needs. It is in this context that our experience can be of critical importance to our clients. Let me take one example which I saw in a village in Mali, where an lIDA- supported agricultural project has helped farmers to increase their yields. Still,

22 they need storage capacity, and transportation to market. They need a marketplace which is fair, and a distribution system which is not monopolistic.They need access to credit, and training in how to run their own small businesses. Beyond this, they need a legal system to protect their rights, help in setting up facilities for education and health, and a stable economic and political climate. The government of Mali understandsall this. But each part of the puzzle poses different problems, and imposes different demands on capacities-both financial and managerial. What I have seen has brought home to me the complexity of development, and the benefits that can be realized when all the pieces fall into place. Solutions must be systemic. Learning from others' experience is one of the keys. The Bank Group- because it is global-is uniquely placed to assist with the networking of development experience: agricultural extension from India to LTganda;private pension funds from Chile to the Czech Republic; macroeconomics lessons from Malaysia to Ghana The ideas are legion. The lesson is straightforward:advice is as important as money. And one of the Bank's greatest strengths is that our advice is independent. Governments trust us. Looking to the future, I see the Bank Group's central role as helping to bring all this together in a systemic approach to development: the ideas, the financing, the people-and a knowledgeof all these components and of a successful development program. There is an extraordinary opportunity for this institution to leverage its unique capacity: to integrate development and make it truly sustainable. c. Greater Effectiveness and Accountability at the Bank/ A Results Culture While we have had notable success in the past, the Bank's senior management and I agree that we can be even more effective in the future: by sharpen- ing our focus on the issues we are tackling-and judging our performance by impact in the field. Of course, orderly process in the consideration of projects is critical. But results are what matter. I believe we can strengthenthe rigor of both our analysis and our implementation. We must be prepared to be held accountable-and to reward our colleagues by the tests of the marketplace. This will help us, in tum, to be more effective in achieving our basic mission: to reduce poverty and improve the quality of peoples' lives. You have heard me say that we can judge development impact by the smile on a child's face. We must organize ourselves-whether it be our private sector work, including IFC and MIGA, or our activities on environment and human development-to deliver on that smile. We must also acknowledge that we operate in the new world I have tried to describe-with new clients and new demands. Some of them have access to new alternatives in terms of money and advice. We think this is terrific. Our job is to make sure that we complement these alternatives-and stay relevant.

23 To do that, we have to change the way we do business. We must focus on our clients and results, and break the armlock that, I sense, bureaucracy has placed on this institution. If we do that, then we will create a more profound change than any structural reorganization. I am talking here of liberating the talent and commitmentof our wonderful staff-and harnessing that directly to development. In short, creating a results culture. Let me outline some of my early thinking on how to get there: * Externally, we can and must build stronger partnerships. * Internally, we can and must be a center of excellence.

The Power of Partnerships From my experience in the private sector, I know the power of partnership. This was reaffirmed during my recent travels: * In the Loess Plateau of China, I saw peasants working with government specialists, as well as with the Bank, to protect this immense part of the global commons.

* I saw partnerships too, in Chiapas, Mexico, where history has cruelly denied many people the chance of an adequate life. Working with the fed- eml and provincial authorities, the Inter-American Development Bank, the private sector, research institutes, and NGOs, we are making a new effort to alleviate poverty and relieve social tension. * In the West Bank and Gaza, I saw our expanding involvement with the UN and the European Union-to help build the bridge between peace and development. I know that the Bank is already an experienced partner. But I believe we can go much further. And we can start by working more closely with our shareholders and donors. Here, our Executive Directors play an indispensable role. We must also deepen our collaboration-as we have begun to do-with the UN system, the LMF,and the World Trade Organization (WTO). We can expand our cooperation with the private sector-which plays such an increasingly important role in development. And we can do much more to reach out to NGOs and civil society.Let me also pay tribute to the regional development banks with whom we work, and to their leaders who have given me so much advice and help. To be a good partner, we must be ready to listen to criticism and respond to constructive comment. There is no place for arrogance in the development business. As I said before, it is just too tough. I want to have a Bank which is open and ready to leam from others-and which holds itself accountable. In that context, I regard our independent Inspection Panel as a valuable asset.

24 We must listen as we fornulate our plans of action. Our friends are a great help. We cannot be fully effective, however, if our critics will not listen to us before they assess our positions and actions. Unconstructive and vitriolic criticism from outside does not help the people we are trying so hard to assist- and it creates a climate of resistance inside the Bank. Everywhere I have traveled, I have met with representatives of the GO community and civil society. We are really interdependent. But we must build our mutual trust. I am committed to this endeavor. Of all our partnerships, we must remember that the most important is that with the governments to which we lend-and the people that they serve. It is a point worth repeating: we must get closer to our clients. This will mean continuing to strengthen our field presence, while maintaining a very strong base at the.center. At the same time, we must be mindful that the projects we finance are not World Bank projects-they are Chinese, or Haitian, or Malawian projects. It is for the Bank to support and advise on them. But it is for the countries to own them and be responsible for them. Our commitment can only work with your commitment. Partnership is the key.

Erxcellence Let me turn from the Bank's search for new partnership, to the search for excellence. As I see it, there has been too much emphasis on lending volume, and not enough on results on the ground; too much focus on economic reports, and not enough on the effectiveness of the policy dialogue; sometimes we have thought that solutions to our clients' problems lie in Washington, rather than in the field. Making development impact the measure against which we want to be judged-and judge ourselves-is my most important task. As a step toward this, we must review our personnel and reward policies, and invest more time and money in education and training-for management and staff. I know that we have a long history in facilitating leaning for our clients. Last year alone, our Economic Development Institute reached 7,000 people from 137 countries through its seminars and programs-and a multiple of that number through its training of trainers. But much, much more can and will be done to create an internal learning culture-through exchange of best practices and expanded training in educational institutions and businesses throughout the world. It is also my intention to increase opportunities to enrich our culture inside the Bank through more appointments to management and staff from outside the Bank-both on a permanent and medium-term basis. We will accept nothing less than absolute standards of excellence. We wish to be the best in our business. Continual renewal of skills and constant focus on the needs of our clients will enable us to meet those standards.

25 d. Our ImnmediateInitiatives I have spoken of four main themes: the need for a new compact: to ensure that resources are sufficient to meet the needs of the world's poorest people-and to ensure that those resources are used with maximum efficiency; * the need to take an integrated approach to development, bringing together its different strands to ensure sustainability; * the need for the Bank Group to strengthen and expand its partnerships- global and local; * and the need for us to develop further our institutional culture-to focus on excellence and results.

If this is the general direction, my immediate priorities in the coming months will include: FFirst, doing everything in my power to ensure that IDA's funding is sufficient to meet the essential needs of its recipients-and to prevent the global effort to reduce poverty from suffering an irretrievable setback. I ask for your exceptional help in that effort-in both IDA-10 and in the planning for IDA-I 1. * Second, we will work with the IMF and others to help resolve the issue of multilateral debt for the most highly indebted, poorest countries. * Third, we will accelerate and deepen the effort to work with existing and new partners-with specific measures to reach out to the private sector, NGOs, and civil society. * Fourth, we will launch the process of institutional change. a Fifth, we will enhance our work with clients to attract private and public investment in high-quality projects. This will include initiatives in capacity building in governments, strengthening legal and accounting systems and property rights, the marketing of opportunities, and the assurance to investors that they will have no nasty surprises in carrying out their plans. * Sixth, we must anticipate and be organized for post-conflict economic development programs, when war is replaced by peace.

Conclusion: Call to Partnership A last word: I see the Bank itself, fundamentally, as a partnership- because it belongs to the world, to all of us. We who work here offer you our hard work and commitment. In retum, we need your support.

26 Once again, let me say how proud I am to head the Bank Group,and how much I appreciate the opportunity to contribute to the dream that we all share-of a better, more peaceful, and more just world. Together,we can make it a reality.

27 REPORT BY MOHAMEDKABBAJ CHAIRMANOF THE DEVELOPMENTCOMMITTEE

While this annualreport deals primarilywith the work of the Development Committeefor the year endedJune 30, 1995,1 includea sectionat the end concerning the new initiativeswe are introducingto strengthenthe work of the Committee. During the last fiscal year, the Committeehad its Fall 1994 meeting in Madrid and the Spring 1995 meeting in Washington,D.C. The first meeting was chaired by my distinguishedpredecessor, Minister Mourad Cherif of Morocco. The Committeein these meetings based its discussion on joint issues papers and reports preparedby the World Bank and the IMF as well as supplementarypapers provided by internationalorganizations and member countries. At the Fall 1994 meeting in Madrid, there were two main items on the agenda.The first item gave the Ministersan opportunityto concentrateon the issue of "Aid Effectiveness"in terms of achievingthe ultimate objectiveof development; that is to reduce poverty and to improve living standards throughenvironmentally sustainable growth and investmentin people. The Committeeagreed that increasing aid effectivenessrequires closer collaborationbetween recipient countries, international organizations,and donors; that "ownership"by the recipientgovernment is essential: and that gaining resultson the ground must be the goalof each partnerin each activity it undertakes.The Ministersemphasized the importancenot only of the quan- tity. but also the quality of aid. It was also stressedthat improvingthe effec- tivenesswith whichaid resourcesare spent was essential.The Ministerslook forwardto receivingat its April 1996 meetingthe report of its Task Force on MultilateralDevelopment Banks. On the second item, Ministersreviewed the results of the UruguayRound of multilateraltrade negotiations,completed in Marrakeshin April 1994. It consideredits impacton the developingand transitioncountries, as well as on the future work of the WorldBank and the IMF.The Comrnitteerecognized it was only possible to make a preliminaryassessment of the likely effects.The Ministers believed that in addition to positive global effects, the successful conclusionof the UruguayRound would bring significantbenefits to developing countries,over time, throughincreased market access,integration of new areas into the system, and through strengthenedrules and institutions.The Committeecalled for the early ratificationand implementationof the agreements. The Committeerecognized that on the basis of the evidenceavailable so far, it seemedlikely that the existinginstruments of the WorldBank and the IMF would be adequate to deal with any negative effects of the Uruguay Roundon countriesthat may suffer due to loss of preferencesor higher prices for food importsduring the transitionperiod. The Committeeasked the World

28 Bank and the IMF to be ready to address these problems. The Committee also asked them to encourage and assist the transition countries in Eastern and Central Europe and the Former Soviet Union (FSU) in their efforts to become more fully integrated into the multilateral trading system and to adopt policies that will facilitate their accession to the World Trade Organization (WTO). The Committee concluded that it is essential for the World Bank and the IMF to collaborate closely with the WTO. With respect to other items, the Committee asked the World Bank and the participants of the Cairo Conference on Population and Development to play an active part in implementing the Program of Action approved by the Con- ference. The Committee called for the early ratificationof the anti-desertifica- tion conventions (United Nations) and encouraged the World Bank to continue its active support for development and environmental management in dryland areas. At the Spring 1995 meeting, the main item on the agenda was "Financing of Infrastructure in Developing Countries".This item provided an opportunity for the Committee to focus on the provision of finance for infrastructure. ITe developing countries have been investing an average of 4 percent of GNP, about $200 billion a year, in infrastructure. Ministers recognized that current public sector methods cannot meet the present and future demand for basic infrastructure services. The Committee concluded that developing countries need to adopt a more businesslike approach to the management of infrastructure investment, including introducing realistic prices for infrastructure services, being more attentive to maintenance, and encouraging more private sector involvement.Ministers agreed that these reforms would facilitate better delivery of infrastructure services, promote development efforts, benefit the poor more directly and quickly, and also help improve environmental conditions. The Committee urged donor countries to continue to help meet the poorest countries' infrastructure needs. The Committee asked the multilateral institutions including the International Development Association (IDA) to continue to provide advice and financial support, but in addition to play a catalytic role in raising funds from a wider range of private sector sources, using all the means available, including World Bank guarantees, the International Finance Corporation (IFC) and the Multilateral Investment Guarantee Agency (MICA). In these meetings the Ministers also discussed a number of other issues, which were outlined in the reports of the IMF Managing Director and the World Bank President. These included the impact on developing countries of recent trends in the world economy; transfer of resources; the Global Environ- ment Facility; Special Program of Assistance for Africa; implementation of the debt strategy; responding to challenges in Eastern Europe and the FSU; International Bank for Reconstruction and Development (IBRD) and IDA commitments and disbursements; and the World Bank's information disclosure policy and poverty reduction strategy.

29 Traditionallythis report refers only to the previousfiscal year's meetings. My report would be incomplete,however, if it failed to mention the major changeswe are introducingto rejuvenatethe Committee. On October9 we completedour first meetingunder very differentproce- dures and with a changedfocus. The new proceduresare designedto enhance the efficiencyand effectivenessof the Committee's,work whichis now more clearly, but not exclusively,to focus on the work of the World Bank and its policies.We have had strong leadershipin these effortsfrom Mr. Wolfensohn and Mr. Camdessus,as well as completesupport from the Members. The resultsof the October9 meetingwere very constructive.The plenary session was limitedto one hour,including an address,for the firsttime, by the SecretaryGeneral of the UnitedNations. There was then a particularlyvalu- able exchange of views between Ministers in restricted session covering, interalia, multilateral debt issues and the funding problems of IDA. Ministers also indicatedtheir strong support and enthusiasmfor the new World Bank PresidentJames Wolfensohn and his initiativesto makethe Bank moreeffec- tive and transparent.Governors will findthe short Communiqueof the Octo- ber 9 meetinga usefulsumnary of our key conclusions. I believewe nowhave a goodopportunity to makEethe DevelopmentCom- mittee more usefulto all the Membersof the WorldBank and the IMF in the future. I look forward to reportingto govemors next year on the progress achievedin strengtheningthe work of the Committee.

30 STATEMENTSBY GOVERNORSAND ALTERNATEGOVERNORS

AFGHANISTAN:ABDUL QADER FITRAT Governorof tlheFund

On behalf of nry delegationand my country,I would like to wholeheartedly extend my deep appreciationand thanks to Mr. Chairman and to all World Bank and IMF staff for giving me the opportunityto speak on this occasion. Likewise,I would like to join my fellow Governorsin sincerely than-king you for the warrnwelcome and excellentarrangements made by the WoirldBank and IMF staffs in honor of delegatesattending the FiftiethAnnual Meetingsof the WorldBank and IMF in the beautifuland historiccity of Washington. In a world divided into haves and have-nots and in a world divided into technologicallyadvanced, prnsperous, and wealthy nations and poverty-rid- den, hungry,and poor nations, unaware of life's beauties,entertainments, and joys; some nationsproud of their achievementsnot only don't have the slight- est sympathy, care, and sense of pity for their brethren and fellow human beings but also target them inhumanelywith their iron hands. A country like Afghanistan which just recently undid the state of terror, killing,mass murdering,and devastationimposed by a world great power falls victim to another neighboring power which once embraced it in the path to self-determination,freedom, and democracy. Since 1992, whenthe cold war finallyended with the collapse of the com- munistregime in Afghanistan,there was a great sense of optimism that the era of animosity and conflict would give way to a new era of understanding, friendship,and cooperationamong our nationsin the region.In the light of this change it was perceivedthat the trade routes would be open for all, the unfair restrictionson bilateral and multilateraltrade would disappear altogether,the siege of cities and tenritoriescaused by the war-particularly the siege of Kabul city-would be eased or abandoned,trade would be expandedthrough- out the region, high economic growth would be achieved,and equal participation of women would be ensured. Unfortunately,none of these hopes and optimismwere translatedinto practical and sensiblerealities. Contrary to those ideals, the relationsbetween our countries have turned sour as more barriers have been imposed on bilateral trade, particuIarlyafter one of our neighborswithdrew all facilitieson Afghan transit trade agreed upon in 1965.The siege of Kabul city has been tightened; the role of womenhas been further marginalizedby closing girls schools and colleges,and banningwomen from workplacesoutside their homes by a myste- rious and fanatic group called Taleban,supported by one of our neighboring countries. This group has ordered Afghan women to stay indoors and avoid workingin officesand teaching in schoolsor collegesin the territoriescontrolled

31 by them, particularlyin Heratand Kandaharcities. Furthermore, because of the emergenceof this group and other radicalextremists, the southernand south- westemparts of our countryhave turned out to be used foropium cultivation and other narcotics.All these eventsprove that war and conflictare nothingbut disease,drug. and disasterwhich not only devastatcthie waring elements,but also engulfthe nationsthat one way or anotherarc involvedin those conflicts. Despite all these problemscaused by foreign interferencein our country, the IslamicState of Afghanistanis strugglinghard to alleviatethe painof our nationby introducingprograms which, if implemented,will lead to long-term stability,self-reliance, and economicgrowth. For instance,in order to reduce the budget deficit gap, the Governmenthas undertaken drastic measures to reducespending by eliminatingextravagant expenditures in some institutions, privatizinggovemment-owned subsidized companies, and cutting unnecessary governmentorganizations. Further,the Governmenthas set up a commissionto reviewthe prevailing tax structures,find new ways of taxation,and increasetax on a numberof lux- urious commodities.In addition,Usher and Zakah,which are two broad types of Islamictaxation levied on agriculturalcommodities and livestock,will be introducedin areas controlledby the Government,taking into consideration the people's sentiments and financial abilities. The Government also has a planto retakethe control andownership of mineralssuch as lapis lazuli,emer- aids, salt, coal, copper,and natural gas, which are currently utilizedby local commandersand warlords. Of particularinterest are the new economicpolicies aimed at liberalizingthe economyby easing the previouslyexisting system of tough government control. As an example, the Government has recentlyamended the country's investmentlaw which allows 100%foreign investmentand domesticprivate investmentto competewith the public sector in the market. In the past, domesticprivate sector and foreigninvestors were supposedto investonly up to, and not more than, 49% of the total company's share. Meanwhile,the banking law, which previouslydid not allow private sector and foreign banks to compete with local government banks, was amendedin 1994to permit both to enter our markets. If these measuresare successfullyimplemented, the budgetdeficit gap will narrow substantially,which in turn will result in a slowdownin the currently multi-digitrate of inflationin the country. For the past more than one and a half decades, Afghanistanhas not been able to receive any aid from both the IMF and the World Bank. To me it is greatly astonishingthat the world assisted us during the war, but abandoned us during the peace.The amount allocatedto financethe war and destruction in my countryboth by regional and internationalpowers is far more than their donationsto reconstructthis war-ravagednation. For the past coupleof years there has been an unexpectedsilence and neglect on the part of the international communityin general,the IMF and the WorldBank, and other multilateral financialinstitutions, in particular,regarding our country.This neglecthas

32 caused insurmountablepain and difficultyfor differcntsegments of the population. Children are the most likely and vulnerablevictims of this neglect by the international community.For many of our children, basic staple foods, clean dritikingwater, electricity,cducation, and hcalth carc arejust dreams. The World Bank and thleIMF and hlaveplayed a significantrolc in reconstruction and developmentaround the world cver since they came into exist- cnce. Wc hope that Afghanistan, as a longtimc mnemberof the IMF and the World Bank, will enjoy the required aid to reconstructits economy.Currently the Government is working to restore electricity in Kabul city. However,the completedestruction of two out of four substationsin the city has impededthe timely completionof the project,hencc forcingthe innocentcitizens of Kabul to live another cold winter without electricity. In addition, the Governmenthas started reconstructionof 210 factories in and around Kabul such as flour mills, textile mills, shoe factories,and cold drinks. Rebuildingthese factories will provide thousands of jobs both in the public and private sectors.Further, it will reduce the country's ever increasing volume of imports, which is a step forward towards self-relianceand improving the balance of payments deficit. However, the shortage of investment funds and equipment has made these objectives impossible to attain, at least in the short run. As far as the telecommunicationssector is concerned, ever since the destructionof our telecommunicationsequipment by rocket fire in 1992,there has been virtuallyno telecommunicationssystem working in the country.The telecommunicationssystem between differentcities, as well as with the outside world, has been cut off, due to which both private and governmentbusi- ness organizations,as well as the common public, face tremendoushardship dealing with their routine business.Afghanistan possesses a strategiclocation, stretchingfrom the Islamic Republicof Iran in the west to China in the east. It can be a desirable superhighwayand the shortest land route for trade and commerce between South Asia and the newly independent Central Asian republics,Russia, and Eastern Europe. As a matter of fact, reconstructionand improvementof our highwayswould ensure the smoothflow of transportation of goods and commodities across the region, providing the opportunityfor both the local and regional economiesto flourish. These are some basic and fundamentalinfrastructural needs of our nation that we have been unable to achieve .;aring the past one and a half decadesof devastating war. It would therefore be our desire to see a new initiative by the World Bank and the IMF towards financingthese projects, and other new priorities put forward by our Government which will address the most urgent technologicalneeds of our society in its journey towards needs fulfillment, gender equity, liberalizationof the ec 'aomy, and economic prosperity. Toconclude, once againI would like to give my sincereappreciation to both Mr. Wolfensohnand Mr. Camdessusfru their excellentleadership, and to all the WorldBank and the LMFstaff for their overwhelmingcooperation and support.

33 ARGENTINA:DOMINGO F. CAVALLO Governorof the Fund (onbehalf of the LatinAmerican Coun.tries)

It is an honorfor me to addressthese Annual Meetings of Govemorsof the WorldBank and the InternationalMonetary Fund on behalfof the other countries in LatinAmnerica and my own,Argentina. I would like to beginmy presentationby commendingMr. LewisPreston. I am pleased to inform you that the ArgentineGovemment has decidedto mak-ea contrbutionto the "Preston EducationProgram for Girls."We fully share Mr. Preston'sobjectives regarding the importanceof the educationof womento economicdevelopment and povertyreduction. Wealso wishto take this opportunityto welcomeMr. JarnesWolfensohn. He has been givena mandateand set the formidabletask of helpingour governmentsto fight againstpoverty, while, at the same time4 tryingto mitigate the damageto our environmentcaused by long yearsof poor economicpolicies. We fully agreewith these generalobjectives, and I wish to use this pre- sentation to discuss some specific points of the Bank's agenda. Before proceedingwith that, let me brieflytouch on the salient aspectsof the Latin Americansituation. For someyears now the LatinAmerican countries have been engagedin far-reachingfiscal and structural reform. The resultwas a fasterrate of growth for our region,which reached 5.1 percentin 1994.As you are well aware,this year,the financialcrisis triggered by thedevaluation of the Mexicanpeso has been a considerablecontractionary force. This contractionwas intensifiedby the major fiscaland monetaryadjustment measures implemented as a necessary and appropriateresponse to the problem. Thoughgrowth has slowedin LatinAmerica this year,we do see manyof these measuresas buildinga sounderfoundation for future growth.By this, I am referringto the efforts underwayto radicallyreform the financialsystems of many countries in the region. By making these systems sounder, the reformshave also givena boostto the rate of savingin the region. Owingto the crisis, we have had to redoubleour efforts to ensure that future growth will be more equitable.By implementingsocial safety nets, manyof whichare supportedby the WorldBank, social programns have been insulatedagainst the effects of adjustmentmeasures. There is alsogreater concern aboutthe importanceof betterproviding for society'sbasic needs,such as educationand health, and seriousefforts are being made to deviseand offer new incentivesfor the creation of more productiveemployment through investmentand growth. I mustalso stressthat, even though 1995was a difficultyear in economic terms,democratic elections in the region showedthat our nationsclearly pre- ferredstability and structuralreform. This experienceis an indicationthat, in future,the degreeto whichthe democratic governments in the regionsucceed

34 or fail will depend on how well, and with what degree of transparency, they are able to meet the economic and social demands of their populations, and this would include economic stability. In sum, we feel that 1995 has been a transition year for Latin America. Though the region has suffered the consequences of serious crises, the govern- mnentshave implemented the proper measures to overcome these crises. As a result of these efforts, the faster growth already apparent will be placed on a sounder and more equitable footing. I would now like to make some comments which are more relevant to the work and agenda of the World Bank. Role of the Private Sector In his opening address, Mr. Wolfensohn talked about the need to find a strategy for the World Bank Group to work more closely with the private sector. We support this initiative because the contribution the private sector can make to economic growth is largely conditional upon the access it has to sources of funding. The World Bank Group's ability to respond to these financing needs is restricted, to a certain extent, by its rules of operation. The private sectors of some borrower countries are finding that the possibility of receiving funding from these institutions may very soon be limited. For example, the IFC's exposure guidelines and MIGA's ceilings on guarantees to any one country are a clear indication of this trend. It is important to seek and to find ways to remove these barriers. If necessary, increasing the capital of these institutions could be considered. In the case of MIGA, we share the concem Mr. Wolfensohn expressed in his opening address, and I think that we could even consider immediately strengthening the reserves of that agency with funds from the World Bank's surplus account. A special allocation of funds to MIGA would certainly be a catalyst for promoting investment in the private sector. Public Budgets and Poverty Reduction An important topic of the Development Committee meeting this year is the role of public expenditures in poverty reduction. The nature of these expenditures are a reflection of economic growth strategies. In countries where there are state-owned enterprises systematically running a deficit and other unproductive expenditures, the government's ability to design and finance effective poverty reduction programs is considerably undermined. By contrast, many countries in our region have made considerable progress in their privatization programs. As a result, the govemrnmentsof these countries no longer have to finance high public entLrprise deficits and are increasing the budgetary items allocated to the social sectors. With financial and technical assistance from multilateral agencies, our countries are working to improve the design and focus of these programs.

35 This assistance is fundamental because, despite the region's achievements in combating inflationand economic stagnation, we are still facing very serious problems of poverty, education, and unemployment,which we musttackle and solve jointly. How successfulwe are in this struggle, will also be a major determinant of the degree of progress we can hope to make on other fronts, including the stability of our democracies and improvements in the environment. DevelopmnentFinancing Analysis of the statistics on Bank loans and disbursements in recent years shows that they have remained relatively stagnant. This stagnation is one of the main reasons why, for some time now, the Bank has been effecting net negative transfers to borrowingcountries. For example, between 1991 and 1995, in net terms, Latin America transferred some US$16 billion to the Bank.While in the throes of a serious financial crisis, the region transferred over US$3 billion to the Bank in fiscal 1995 alone. These figures bring some questions to mind, which I would like to share with you. What is the approximate amount of financing required by the borrowing countries and what are the projections? In which areas can we expect large inflows of private capital, and in which areas will financingfrom the multilateral institutions still be needed? Is the recent stagnation in the amount of loans and disbursements due to the increasing role of private capital, to a relative reduction in the demand for multilateral funding, or to a certain inertia on the part of the Bank in responding to new funding needs? In our opinion, a careful analysis of questions such as these should be the basis for determining the Bank's new positioning in the international capital markets. We believe that even in countries that have instituted far-reaching structural reforms, the World Bank can still play a more active role, for two main reasons. First, there are sectors, social and otherwise, which produce public goods and services-such as. justice, regulatory frameworks, and aspects related to the developmentof appropriateinstitutions-that depend essentially on public financing. Secondly, no matter how good the economic policies instituted by the governments are, the cost of domestic or bilateral borrowing for many of our countries continues to be higher than the cost of borrowing from multilateral institutions,and the terms much shorter. Lastly, the role that these institutions can play in crises, such as the one that occurred this year, merits scrutiny. Financial Instruments of the WorldBank With regard to the financialinstruments of the World Bank, I should like to mention two specificpoints. The first deals with the new single-currencylend- ing program.The second is a suggestionthat the Bank study the establishment of a quick-disbursingwindow, in order to overcome certain internal obstacles which,justifiably or not, at times delay the preparationand approval of loans.

36 With regard to the first point, multilateral agencies such as the World Bank can help the borrower countries by developing new financial instruments. In this connection, we applaud the launchi- and subsequent expansion of the single-currency lending program that the Bank has begun to offer at variable and fixed interest rates. Many Latin American countries would like to take advantage of the current economic climate to borrow primarily or exclusively in a single currency. Nevertheless, the 50 percent limit on the total amount of a single-currency loan is unnecessarilyrestrictive. We consequently ask Mr. Wolfensohnto have the Bank explore the possibility of expanding the ceiling to 100 percent as soon as possible. With regard to the second point, the financial crisis this year showed, among other things, that when the Bank wants to, it can move very quickly. For example, in late January of this year, I asked Mr. Preston to prepare an operation to support the privatization of provincial banks in Argentina. Imrne- diately, the Latin America region got preparation of the loan under way, and in early May the Bank's Board approved the operation. Little more than three months had elapsed between our request and approval. It is my understandingthat this is a record for the Bank. But we must recognize that crises arise unexpectedlyand that they may be acute. Therefore, despite the very efficient work of the Bank's staff and management have just mentioned, there is also a risk that in future crisis situations, the response inay not be as rapid as in this instance. Our proposal, therefore, is that serious study be given to the possibility that, for those countries with sound economic and social policies, the Bank open a quick-financingwindow. We feel that such a financial instrument could increase the effectiveness of the Bank's financial intermediation in times of crisis. We consider this proposal to be fully consistent with Mr. Wolfensohn's objective to eliminate all bureaucratic and legal barriers that merely delay the preparation, approval. and implementation of projects.

Distribution of the Bank's Net Earnings The borrower countries in our region benefit to some extent from the WorldBank's net earnings, essentially through interest rate waivers. The earnings are also allocated to reserves, the surplus account, and various grants. The countries of Latin America have supported a policy of sound reserves, as well as grants that have gone primarily to IDA countries. Nevertheless, we should like to note that for the borrower countries of the region proposals from Management with regard to the distribution of earnings must be balanced. If the net income of the Bank were to continue at the levels of recent years, we feel that interest rate waivers could be increased in order to reduce the actual cost of borrowing to our countries.

37 Trends in the ArgejntineEconomy I will now speak briefly about the economy of Argentina. In 1995, after four years of fast-paced growth and a significant reduction in inflation, our economy entered a phase of slower growth. Indeed, while the economy expanded on an average of 7.7 percent annually between 1991 and 1994, for 1995 we are projecting an increase of I percent As is well known, this slowdown was due to the crisis sparked by the devaluation of the Mexican peso, which resulted in major losses of bank deposits and international reserves, as well as a fall in the prices of bonds and securities. Our strategy in grappling with the crisis has been essentially to deepen structural reforms. We have viewed the crisis as an opportunity to improveour strategy for growth, based primarily on development of the private sector. First of all, in early March we announced a package of US$11.4 billion, which included a large fiscal adjustment component. That adjustment meant deep cuts in public spending, including a reduction in salaries. Many of the measures required new legislation and, given the emergency situation, it was approved in short order by the legislators. Additionally, two new trust funds received substantial support from the World Bank and the Inter-American DevelopmentBank. These funds were used to privatize many of the provincial banks and take the initial steps in financing the consolidation of the private banking system. Thus, whereas at the start of the crisis there were 205 financial institutions, by mid-Septemberthe number had fallen to 164, i.e., a shrink- age of 20 percent. This consolidation of the financial system and many other parallel efforts have meant a turnaround in projections. For example, bank deposits-which had fallen by an equivalent of US$37.8 billion-rose again to some US$41.6 billion. This figure is only a little lower than the deposits in the system when the crisis began. The prices of bonds and securities also recovered significantly. Lastly,Argentina has returned to intemational markets, securing funds on more favorable conditions than other countries affected by financial difficulties. The crisis demonstrated how the wide-ranging structural changes introduced in recent years have considerably increased the flexibility of Argen- tina's economy. By way of example, in several recent months, the inflation rate was negative. There have also been major changes in relative prices for internationally traded goods. Lastly, there has been a significant adjustment in international trade flows. Even though the convertibility system for the peso that was implemented in early 1991 did not change, during the first half of this year, exports grew by 45 percent and imports fell by 4 percent. In order to achieve changes of this magnitude in intemational trade flows, other countries have relied on major devaluations with serious effects on inflation and steep drops in output Given the trends in Argentina's intemational trade, instead of a trade deficit of US$5.8 billion in 1994, projections-indicate that this year we may have a surplus of some US$1.5 to 2 billion.

38 The far-reaching economic changes have meant significant headway in poverty eradication but, unfortunately, the crisis has boosted unemployment to untenable levels. With regard to efforts to reduce poverty, while in 1990 38 percent of the population was living in poverty, by 1994 the figure had fallen to 18 percent. These results were due, in addition to growth and an appreciable decrease in inflation, to the large-scale privatization operations that have already been completed. As we indicated, the privatization of deficit- running enterprises made it possible to increase social expenditures, particularly in education, which is a priority of the Govemment As part of the efforts to reduce unemployment, the Government and the legislative branch are working actively to bring even greater flexibility to employment conditions. For example, this year almost all labor contracts for small and medium enterprises have been made more flexible. Major legislation on bankruptcy and labor accidents has been passed, which will undoubtedly reduce labor costs. In sum, although 1995 was certainly a year of slowdown in Argentina's economy, we feel that, the unemployment problem notwithstanding, the best way to overcome the crisis is to take our growth strategy farther. All these changes have made us very optimistic about the future. We are confident that 1996 will see a rebounding of the economy based primarily on the vigorous growth of overall productivity, as well as increased aggregate demand. We expect GDP growth of at least 5 percent with inflation at intemational levels and a considerable increase in the economy's ability to generate productive jobs.

Conclusion

I would conclude with some thoughts about efforts to reduce poverty. These efforts do not aim solely to feed, educate, and clothe our less fortunate countrymen. We would be gaining very little if the progress in these areas were not accompanied by the creation of new jobs so that people can sustain and enhance their skills and physical resources. When the social problem is seen in this perspective, everything that the World Bank Group does to improve its projects in both public and private sectors is important. It is the collective efforts of govemments, private enterprises, the Bank, and countless non-governmental organizations working on social issues that determine the extent to which the funds we administer can significantly expand the opportunities of the less fortunate. President Wolfensohn, the countries in my region are ready to work with you to make maximum progress toward our chief objective, poverty eradication.

39 ARMENIA: HRANT A. BAGRATIAN Governorof the Fund

The worldhas becomeaccustomed to imagesof disasterand deprivationin Annenia.But whilethe world'sattention has beendiverted to conflictand block- ade. earthquakeand energy crisis, the independentRepublic of Armenia has been quietlyrecovering and developinginto a modernprogressive economy. We have defeated inflation and restoredeconomic growth, our exchange rate is stable, our government budget is under control, and our foreign exchange reserves are rising. Armenia is now an economyripe with opportunities for trade and for investment,ready to realize its considerablepotential to the fullest extent. Armenia is at the crossroadsbetween Europe and Central Asia, between the formerSoviet Union and the MiddleEast. With our traditionsof education and enterprise,with our knowledgeof the culturesand languages of our neighbors, we are poisedto become a providerof hi-tech productsand servicesfrom softwareto finance. We are fully aware that we can only achieve that goal through openness. We are undertaking a radical liberalizationof our economy.Privatization is well underway,our trade regime is free of restrictions,our currencyis convertible. Our private sector is subject to minimalregulation and our door is wide open to foreign investment.All this is taking place in the context of political stabilityand continuityrare in our part of the world. The legacy of the Soviet Union has left us with massive capital needs to rehabilitateand modernizeour economy.We are facing up to the challengeof transformingthe rigid and outmodedsystem we have inheritedinto a dynamic and competitiveone capable of respondingto the changing demands of the marketplacein the global economy. Wehave begunto receivesubstantial financial and technical assistance from the internationalcommunity to underpinthis transformationand have enjoyed a very productiverelationship with multilateraland bilateraldonors. The advice and funding we receive are playing a very critical role in the recovery and growthof our economyand integrationof our societyto the worldat large. This aid will remain important for our economic developmentfor a few years to come. However,we see aid very much as a transitionalphenomenon to help us to the living standardsof our people to recover and to improve our country's attractivenessto private capital. We seek to accelerateinvestment in our economyand achievehigher levels of growth.Meanwhile, we hope the InternationalFinancial Organizations would explore new instrumentsof assistance to the transition economies, which would provide concessionaiybridge financeduring this period of economic transition. We are fully confident that the world will leam to see us as we see ourselves and will see the enormousopportunities in investmentin a region rich

40 with potential both natural and human.And Armenia will be at the center of this recoveryof the Caucasus region from collapse and conflictand its emergence as a dynamicand interdependentregional economy.We are reaching out to our neighborsto join in realizing this ambition,and I invite you all to witness and participatein this phenomenon.

AUSTRALIA: RALPH WILLIS, M.P. Governor of the Bank and the Fund

Let me first add to the commentsthat have been made by others about the sad loss of Lew Preston.Lew was a great force in the Bank. He steered the Bank through a difficult period and introduced a number of very positive changes. Australia very much welcomesJim Wolfensohn'sappointment as Presi- dent of the WorldBank, not just because he was born and raised in Australia, but also becauseof the undoubtedattributeF he brings to the job. His highly successful private sector banking career, and the energy, commitmentand enthusiasmhe brings to the job, make him a most appropriateperson to lead the Bank into the twenty-firstcentury. Already his reforming influence is apparent.The meetingof the DevelopmentCommittee in a revised, less formal format,was certainlyconducive to constructivediscussion and a productive outcome. The success of the Bank over the next decade will dependon whetherit is able to sharpen its focus on its primary mandateof helping the world's poor. Many countriesin the world,particularly in Africa,have madelittle progressin reducing poverty,despite massivevolumes of developmentassistance. Eco- nomic growth has either been non-existentor insufficientto matchpopulation growth andsocial indicatorshave been lagging.This lack of progress,together with the needfor fiscalconsolidation in mostdonor countries,is leadingto pressures to reducebilateral and multilateralaid flows.These pressuresare evident in the currentdiscussions on the replenishmentof IDA, which is a vital facility for promotingeconomic development in the world'spoorest countries. Austra- lia stronglybelieves that all countriesneed to make good their commitmentsto previousIDA replenishmentsand help ensurethat IDA-Il is a success. For its part, Australiais prepared to considerpositively a supplementary contributionto IDA-11,in addition to its calculatedburden share,and hopes that some other donors will do likewise.At the same time, we need to ensure that we do not overburdenthe recipientcountries with debtsthat they will not be able to repay. Projectsfinanced by debt must producesufficient returns to service that debt. Much more needs to be done to improvethe quality of lending to ensurethat projectsmeet this basic requirement. Austalia is a strong supporterof the applicationof Naples Terms in the Paris Club. For most of the heavily indebted poor countries, applicationof

41 these terms will help reduce debt-servicing burdens to manageable levels. However, for a small group of countries with very high levels of debts to the international financial institutions, bilateral debt relief may not be sufficient. Australia recognizes that, for these countries, the burden of servicing multilateral debt is an impediment to meeting development objectives. We support further work being undertaken by the Bank, Fund and other multilateral development banks to develop a coordinated framework to assist these countries. Multilateral financial assistance needs to be used to the maximum benefit of the borrower. A critical problem in many of the world's poorest countries is poor economic management. The Bank and the Fund have an essential role in assisting member countries to improve their economic management. There has been much criticism of the impact of "structural adjustment" programs introduced to correct economic imbalances and unsustainable policies. Certainly, macroeconomics and structural reforms do have transitional consequences, and therefore it is important that we develop measures to alleviate negative impacts on disadvantaged segments of society. But none of this undermines the basic premise that sound macroeconomics and structural policies are prerequisites for economic development. A major contribution that the Bank and the Fund can make is to encourage better economic policies in borrowing countries. That means rigorous conditionality and an emphasis on performance. Within my own region, some of the South Pacific Island countries have been making heavy weather in economic development, despite substantial financial assistance. They suffer from special difficulties associated with their smallness, isolation and extreme susceptibility to external shocks. Some are maintaining living standards only by rapid depletion of natural resources and destruction of the environment. We need to look at what more we can do to make our assistance to these countries more effective, so that it delivers long-tenn gains and puts these countries on a sustainable development path. 1 would like to see the Bank and the Fund join with the Pacific Island countries and their development cooperation partners in a renewed effort to bring this about. Of course, the importance of sound macroeconomics and structural policies applies to all countries-industrial, developing, and those in transition. For those countries where recent economic growth has been strongest, it is important that the hard-won gains against inflation be maintained. Together with a number of other countries, Australia tightened monetary policy early in a pre-emptive strike against inflation. Although growth has now moderated to more sustainable levels, we still expect to achieve comparatively high growth. According to the IMF World Economic Outlook, Australias actual and expected growth in the period 1993-1996 is almost double the average of all industrial countries. This strong economic growth has been accompanied by rapid employment growth, which

42 has reduced Australia's unemploymentrate by about 3 percentage points over the last two years. Continuing world economic growth is essential to reduce unemployment, which remains too high in almost all industrialized countries. Fiscal policy needs to provide a sound medium-termbasis for sustainable economic expansion. For those of us enjoying strong economic growth, it is important that we implement credible programs of fiscal consolidation. Australia has taken advantage of the pick-up in economic activity,to reurn our budget to surplus, which in combination with reform of our private pension system is part of a deliberate strategy to boost national savings. To foster growth, we need to continue to open our economies and remove impediments to the efficient operation of markets. Australia is an enthusiastic participant in Asia PacificEconomic Coopera- tion, which promises to bring considerable benefitsto the global economy as members progress towards free and open trade and investment. I would like to take this opportunity to thank staff of both the Bank and Fund for their work in support of the APEC Finance Ministers processes. I also welcome Brunei Darussalam, a valued partner in APEC, to membershipof the Bank and Fund. The past year has demonstrated again how capital markets can-and will-react when they believe economic policies are unsustainable.The benefits associated with allowing business ready access to international capital markets are very important but they also carry additional risks. This will make it all the more important to maintain sound fiscal, monetary,and structuralpolicies. > The Fund has a vital role in monitoring and assessing the economic policies of its members. There is a need to strengthenFund surveillance.It is eco- noniic policies, not external financial assistance, that matter most Making surveillance by the Fund more continuous and intensive for those countries whose policy action, or inaction, could impact on the system is one of the lessons of the Mexican crisis and should help to reduce the number of future events of that kind. But because surveillance will not always prevent crises, it is essential the Fund be adequately equipped to deal with emergencies when they arise. The Mexican crisis is a reminder of the size and speed of the capital flows that can occur and therefore the magnitude of the resources required for effective intervention. Quotas are at the heart of the operation of the IMF and it is our firm belief that the IMF should remain a quota-based institution. Australia supports an increase in quotas and we encourage the Executive Board of the Fund to expedite its further work on this issue. Australia also supports the, .roposalsto double the General Arrangementsto Borrow.We would be prepared to participate in a broader arrangement only on the basis that: all participants should have the same rights and responsibilities-there should be no second class citizens;

43 * contributions should be based on the relative economic standingof participants; and * new participants should participate fully in the activation arrangements, and voting rights should be determined by the shares of commitments. In conclusion, it is clear to us that both Bretton Woods institutions have an important role to play in the rapidly-changing world economic environment. Australia, for its part, will do its best to continue to support both institutions in helping member countries to put in place policies aimed at achieving sustainable economic growth and higher standards of living.

AUSTRIA: ANDREAS STARIBACHER Governor of the Bank

I would like to join others in welcoming the new president of the World Bank, Mr. Wolfensohn, who has been confronted with an impressive agenda right from the start last June. Since we met last year in Madrid, the global economic development has, by and large, continued on a positive path. In some major economies the cycle appears to be at a mature stage, and inflationary dangers do not appear to be imminent. In most WesternEuropean countries, economic activity started to pick up in late 1993. Today, although a slowing of the trend is noticeable, I share the view that this slowdown does not yet warrant macroeconomnicspolicy action to stimulate the economy. Policies need rather to be geared towards ensuring low real interest rates, thus generating a virtuous cycle of high investment activity and reduced pressures on public budgets. Structural reforms remain essential to eliminate weaknesses in product and labor markets, welfare systems and ensuing high public deficits, and this applies not exclusively to developing or transition countries. It must be remembered, of course, that the meaning of the terT "structural reforms"+has acquired a dynamism of its own over the last years. In many instances "structural reform" means that regulations should be adjusted such that market flexibility is promoted. In others, those entitlements may need to be abrogated. And lastly, it is sometimes used as a "weasel word"'as my compatriot, the emi- nent economist Fritz Machlup has stated, meaning that politicians engage in unspecified "other" policies and call them 'structural1 , when the usual set of policies has proven to be ineffective. While Western European growth is on a steady path, the countries in transition have made considerable progress on their way towards market economies. The most advanced ones-as different as their particular situation may be-already have access to international private capital markets, a strong sign

44 of normalization. Other countries in Eastern Europe still have to see their reform attempts bear fruit, and some countries still have the bulk of required reforns ahead of them. A case apart is the area of the former Republic of Yugoslavia. While Slo- venia and, to a lesser extent, Croatia are on their way towards market economies, Serbia and Macedonia still have a long way to go. Especially tragic is the case of Bosnia where the international community will be called upon to help restore, after peace has finally arrived, the basic fabric of society- beyond the material infrastructure. Austria is ready to join a coordinated comprehensive international effort in this regard. Already in the past years, the Austrian people have accepted a more than proportional share in alleNiating the most basic needs of thousands of refugees. Developing countries outside of Europe can expect continued strong growth rates of on average 6 percent in 199511996."Contagion" effects of the Mexico crisis do not appear as having any longlasting consequences on markets. It remains to be seen, however, if long-run confidence effects vis-4-vis emerging markets might not become noticeable after all in due time. Austria's GDP growth performance is expected to slow down a bit from an annual rate of 2.4 percent in 1995 to 2.0 percent in 1996. Growth dampening factors are the effects of recent exchange rate shifts, and the demand effects of a restrictive budgetary stance in most European countries in order to comply with the Maastricht criteria. The government remains committed to a budget consolidation in accordance with a medium term program to reduce the budget deficit below 3 percent of GDP in 1997. Growth enhancing factors are high private investment and export expectations, especially towards Eastern Europe. Inflation will remain at a low level (2.3 percent in 1995, 2.2 percent in 1996), in line with other low-inflation countries of Europe. The unemployment rate will slightly rise a, by international standards, still low 4.7 percent in 1996. At present, a source of some concern is the Austrian current account balance which has deteriorated significantly during the current year (the deficit amounts to nearly 1.75 percent of GDP), but is expected to improve during 1996. The main reason for this deterioration lies in a 50 percent decline in the traditional surplus in the tourism balance. However, falling interest rates, the recovery of the US-Dollar, and increasing exports give reasonable hope that growth will persist despite budgetary pressures and foreign trade problemns. Turning to multilateral issues, I would like to recall thatAustria has always supported the concept to equip the International Monetary Fund with adequate financial resources and have the IMF financed in its nornal operations primarily through he quotas. With this in mind, we favor a capital increase in the framework of the ongoing general review of quotas. However, the recent Mexican crisis has demonstrated the need for the Fund to have access, in times of emergency, to financial means of extraordinary magnitude in addition to its normal resources. There are thus good reasons for

45 aigrecingwith some of the conclusionsin the Halifax-communique.The proposed GAB-enlargementaims at bringingit to a volume more consistentwith the changes in the world economysince the instrumentwas originallyestab- lished, The mcans by which one should take into account the new realitiesof countries' financialstrength and thus possibly their responsibilityfor risks in the global system remain an open question. As one of the potential candidates for participation in the GAB-enlargement,Austria takes it for granted that all participantswill be treatedaccording to the principleof equal rights and responsibilitiesand, in particular,that no distinctionwill be made with respect to new and old members. Unfortunately,certain provisions of the G-10 proposalseem to go in the direction of an asymmetricalarrangement, implying tougher rules and less voice for non-G-10members in the decision-makingprocess. These issuesneed further clarification,but we will also continueto study thoroughlythe alternativepro- posal madeby the FundManagement for fundingadditional lines of credit,one of whoseattractive features is that it is equitable.At this point,we can only say that we are open-mindedand will approachall optionsin a constructivemanner. Almostfifteen years after the debt crisis broke out, we are for the first time confrontedwith a proposalfor global debt treatment coming from the World Bank. We welcome the initiative for a comprehensiveconcerted approach, sinceAustria alwaysinsisted on debt solutionsinvolving all players andtaking into account the reimbursementcapacity of the debtor countries. The timely servicingof debts, especially those to InternationalFinancial Institutions,is, in my view, the best possible strategy for a stable integration into the world economy,even if this may imply sustainedadjustment efforts over many years. Before mak-ingjudgments on the merits or entering into negotiations of innovative approaches, there are a number of issues to be resolvedand clarified.First and foremost,we will need furtherclarification on the fundingof new schemes,on their implicationsfor other flowsof resources to the low-income countries, and on the prospects for achieving sustained developmentin the countries which would benefit from the scheme.We also need to clarifyhow a debt reductionscheme would affect the Bank's development mandatewith respect to the countries to which it would be applied. This is particularly important against the backgroundof budgetary constraints in many countrieswhich should not lead to a weakeningof the commitment to and financialsupport for multilateralinstitutions, in particularthe Bretton Woodsorganizations. In this context, we also urge the prompt fulfillment of donors' commitmentsto IDA-IO as well as a truly significantreplenishment of IDA resources. In this regard, I cannot overemphasize the importanceof the multilateralcharacter of IDA which can only be protected through fair burden sharingwith respect to resource mobilization.

46 BANGLADESH: M. SAIFUR RAHMAN Governorof /he Bank

Itis indeeda great picasure for me and my delegationto be here at the 1995 AnntualMcetings ol the Boardsof Governorsof theWorld Bank and the IMF. I take this opportunityto extend to Mr. Chairinan, my wanr feliciiationson his electionas the Chairmanof this august body. I join tihcother Governorsin welcomingthe new member ol' the Bank and the Fund. Lct me also extend a most hearty welcome to our new President, Mr. James D. Wollbensohn.I am confident that he will give more focus to the Bank's mission in a rapidly changingworld and steer the Bank 1o successfullymeeting, what he himself termied"the historic opportunityto help advance the human condition." I stand here today with a deep sense of loss at the sudden demise of our dear friend Lewis Preston.President Preston headed the World Bank at a time of tumultuouschanges in the internationalarena. He steered the Bank admira- bly to respond effectively to the new challenges of poverty reduction and human resource development. including the advancement of women. As Chairmanof the Forty-ninthAnniversary Meeting of the Boards of Govemors of the Fund and the Bank in Madrid, I had the great pleasure and honor of workingclosely with him. The memoryof PresidentPreston sitting nextto me sharingviews and ideas of a poverty-freeworld is still fresh in my mind. His dedication to the Bank's mission was most inspiring. May he find eternal peace. In 1994,the world economymade good progress.A numberof developing countriescontinued to show strong growth. However,growth was weak and the standard of living stagnated in the poorer countries. These countries require stronger international support to put them on a sustainablegrowth path.The poorercountries must also be allowedto benefit fully from the Uru- guay Round agreements.The threat of new trade barriers in the name of environmental,social, and employmentconsiderations is a matter of concern to us. We are also concernedat the threat posed by the debt problemsof low-income developingcountries. The lack of progress in fiscalX. 'nsolidation, particularly deficit reduction,and structural reform in the industrial countriesare causing real interest rates to be high and add to the volatilityof exchange rate movements.This poses a seriousthreat to capital flowsto the developingcountries, which are on the decline. It is, therefore,important that the major industrial countries achieve macroeconomicsconvergence. I urge an enhanced surveillance role of the IMF in this area. I would now like to turn to the situationin my country.We have made very good progress in a short time. Since 1991,we have stabilized an economythat was very much out of balance. We now have very low inflation.The current accountand fiscaldeficits have been reduced significantly.Exports are showing strong growth. Foreign exchange reserves have increased by more than sixfold in less than four years.The private sector has started to respondto the

47 broad spectrumof reform measuresimplemented by the Government,as dem- onstratedby a brisk rise in demandfor bank credit for new investment.Also, foreign portfolio investment is on the rise, and market capitalizationof the Dhaka Stock Exchangehas increasedthreefold in the last two years. This success in macroeconomics mnanagement,which has earned wide acclaim, provided a strong base to launch an attack on poverty. Reduction of hard-core poverty is the most important element of our socioeconomic agenda. We have adopted a holistic approach embracing economic, social, and environmental cleinentsto ensure participatory and sustainable development. We are preparing a 15-year perspective plan based on a participatory approach with inputs of the "clientele," the common people, as the critical building block of ownershipof the plan. This is a sharpbreak fromthe traditionalcen- tral planning exercise.The public investmentprogram has been reprioritized to give maximum focus on social sector and human resource development. Budgetary outlays are being supplemented by microcredit operations by Grameen Bank and other innovativeand enterprisingNGOs in Bangladesh funded to a great extentout of the Govemment'sexchequer. We recognizethe critical importance of gender equality. Programs have been initiated to empower women and to bring them into the mainstream of socioeconomnic life. Innovative programs like food for education and a female scholarship program have been launched in the areas of primary education and nutritional development. In the last three years, the coverage of the female scholarship program has increased to 2.3 mnillionwomen. It is expected to reach 3 million next year. The food for education program has raised prin- sy schonl enrollment to 90 percent. Government organizations and NGOs are acting in con- cert, whenever feasible, to achieve our socioeconomic goals. We have attained good progress in terms of social indicators such as access to safe drinking water, sanitation, nutritional intake, life expectancy, adult literac,, and school enrollment. Our success in reducing the population growth rate has been widely acclaimed. With successful implementation of stabilization and adjustment measures, Bangladesh and many developing countries have reached the threshold of breakingout of the poverty trap and are poised for higher economic growth. In the past,the multilateralinstitutions I ave playeda centralrole in supporting these countries, particularly through concessional lending to the low-income countries. The low-income developing countries, with their inadequate infrastructure,have not been able to attract adequateforeign direct investment.For these countries, official development assistance (ODA) remains a major source of external finance. The decline in the flow of ODA as a percentage of the industrial countries' GDP, as well as in real terrns, is, therefore, disappoint- ing. A continuing negative net transfer of resources by the World Bank Group is a matter of greater concern. We are concerned at the uncertainty over the IDA- I I replenishment. Any delay in adequate replenishment of IDA-I I resources would seriously hurt the

48 world's poorest and would also jeopardize the World Bank's main objectives. It is in this context that the Prime Minister of Bangladesh appealed to the heads of government of the G-7 countries urging them to contribute gener- ously towards the IDA-II replenishment to meet the growing demand for a concessional credit facility for the poorest countries. The Fiftieth Anniversary of the Bretton Woods institutions and the Annual Meetings of the Fund and the Bank in Madrid last year enjoined these institutions to respond to the challenges posed by changes in the global environment. One year after the anniversary, we have now the opportunity to review how these institutions have responded to these challenges. In this context, I soundly applaud the initiatives tak-enby the Bank in several directions. The creation of the "microcredit fund" to help the poorest and the formation of the 'Consultative Group to Assist the Poorest (CGAP)" are indeed commendable. However, I must point out that the emphasis on human resource and physical infrastructure development should be continued to make these new initiatives meaningful for the poor. I also commend the World Bank Group for organizing the Country and Thematic Seminars prior to these meetings focusing on private-sector development, investment potential of selected developing member countries, and global development issues. I aiso hope that the reported initiatives for the "debt management fund" will come to a satisfactory conclusion. We hope that the affiliates of the World Bank Group would also come up with similar initiatives. IFC, for example, has yet to respond adequately to the needs of the poorest. Greater attention needs to be given to a catalytic role. We would expect IFC to redirect its policies to develop innovative strategies and specialized vehicles to promote investment, even in countries where the investment climate is somewhat challenging. In conclusion, I would like to refer to the statement made by Mr. Wolfen- sohn at the inaugural session yesterday morning where he said that "we must continue to act-so that poverty will be alleviated, our environment protected, social justice extended, human rights strengthened, and women's rights advanced-all in the cause of a more just and peaceful world." We agree with his assessment that development today is at a critical juncture despite tremendous gains over the past generation. We also commend his appeal for a "stronger partnership" and urge that the concept be expanded among nations, and between nations and development institutions. Already a global vision has emerged for a basis for such partnership. The world summits on children, environment, population, social development, human rights, and women have given us a gloebl vision for our planet. This is a vision of a prosperous, equitable, safe, and peaceful world that we all share. Poverty, hunger, malnutrition, and deprivation have no place in such a vision, because poverty anywhere is a threat to prosperity everyw' . e. Let iis join our hands together and pool all our available resources to realize this vision. Let not posterity blame us for lack of will to realize this vision.

49 BARBADOS: OWEN ARTHUR Governorfor the Bank;and the Fund (on behalfof die Joit CaribbeanGroup)

I have the honorto speak on behalfof the CaribbeanCommunity and Com- mon Market(CARICOM) namely: Antigua and Barbuda,the Bahamas,Belize, Dominica,Grenada, Guyana,Jamaica, St. Kitts-Nevis,St. Lucia, St. Vincent and the Grenadines,Suriname and Trinidadand Tobago,and my own country, Barbados. We are very appreciativeof the work of the late LewisPreston and express our condolencesto his family. I join my fellow Governors in welcoming Mr. Wolfensohnto the first meetingin his capacity as Presidentof the World Bank Group.We pledgeour support to him and will be delightedto welcomehim at our next Heads of Government Meetingin Guyana,where we hope to provide him with a clear statementof our perspective on the peculiarproblems of CARICOMstates. The countrieson whosebehalf I speak have for some time nowbeen making net repaymentsto the internationalfinancial institutions. This situationhas its roots in the sometimescumbersome and often time-consumingapproval and disbursernentprocedures for investmentlending and in the conc'tntration on lendingfor adjustmenitin the previousdecade. But the crisis in Mexicohias shownthat the BrettonWoods institutions can respondquickly and effectively to extraordinarysituation.s. We believe that proposalsto reform the Bretton Woods and other multilateral financial institutions should emphasize the improvementof this capacity for quick response to crisis situationsof whatever nature. Since our last meeting, a number of outstandingissues in both the Bank and the i-und still claim our attention.We are pleased with the progressthat has been madeso far on most of these issuesand urgeboth institutionsto press on with their searchfor agreementon solutions. We give our full support to your efforts, Mr. ManagingDirector, to conclude an agreementto increasethe resourcesof the Fund.Accordingly: * We supportan equi-proportionaldoubling of Fund quotas under the Elev- enth General Review of Quotas, which shouldbe followedby a discussion on selectedquota increasesto correct any anomaliesthat may exist. * We support an immnediateallocation of SDRs, which is fully justified by the global need for reserve supplementation. * We supportthe agreementon the conditionsunder whichthe Fund should support currency stabilizationfunds, on a short-tern basis, in the context of an exchange-rate-baseddisinflation strategy and within limits and guidelinesof the current access policy.

50 * We support the proposals to make ESAF self-sustaining by using the income from the sale of some of the Fund's gold, as proposed by the UK authorities, to help finance the subsidy element. This facility should continue to be the centerpiece of the Fund's strategy to help lower income countries, including those that are heavily indebted. We endorse the efforts to strengthen the effectiveness of Fund surveillance, especially in light of the demonstrated volatility of the international capital markets. Surveillance, however, must be symmetrical in application to all members of the Fund. We also note the agreement on proposals to reacti- vate and simplify the General Arrangements to Borrow, but recognize that they are no substitute for the Fund's ordinary resources. Let me turn now to Bank issues. We regret the present threat to IDA- 10 and uncertain prospects for IDA-IL. But we are encouraged by your efforts, Mr. President, to secure a satisfactory outcome to the IDA-11 Replenishment It would be most deplorable if a narrow view of global responsibility should lead any donor to retreat from its comrnittment to IDA and from support for alleviating conditions in the poorest countries. We call upon all donors to give their full support to an increase in the resources of IDA and on terms that would protect the access of vulnerable small island states to concessional resources. We also support the ongoing work to find ways and means of easing the burden of multilateral debt on heavily indebted low income countries. We recognize the complexity of the issues involved and hope that acceptable solutions, which do not carry adverse implications for countries that have continued to service their debt, will be brought forward for adoption by the time of the Spring Meetings of the Development and the Interim Comnmittees. We look forward to an expanded role for the IFC in the development of the private sector in CARICOM, especially in a country like Barbados, which has been graduated from the status of a borrowing member of the Bank and yet has a long way to go in developing a private sector capable of playing an expanded role in economic growth and development and in employmient creation. The IFC can prrvide assistance to the private sector in areas such as project development, evaluation, and financing, and in financial sector development. The Bank should re-examine its graduation policies to ensure more even- handed application of its guidelines and to ensure that the decision to graduate is made when the graduating country is on a sustainable path. Review of the guidelines should also seek to avoid the dilemma of states being excluded from IDA resources while at the same time they are not deemed creditworthy for IBRD lending. But even in our own case, where graduation has taken place prematurely, in our judgment, we urge the Bank at a minimum to continue to provide critical technical assistance that is often needed. An unusual spate of hurricanes has destroyed both the entire productive capacity of Antigua and Barbuda, and the entire agriculture and significant

51 portionsof the infrastructureof Dominica,and has causedconsiderable damage in St. Kitts-Nevis.We, therefore, urge the internationalcommunity in general,and the Bankand the Fund in particular,to put in placethe mechanismto respond to natural disasters with the medium- and long-tenn assistance neededfor reconstruction.Such responsesto the specialneeds of smalldevel- oping countriesshould fit within the frameworkthat is so clearlyarticulated in the Programof Actionof the UN Conferenceon SmallIsland Developing Statesheld in Barbadosin 1994.

BELGIUM: PHILIPPE MAYSTADT Governor of the Bunk These AnnualMeetings are an ideal forumfor exchangingviews on our economicand financialsituations, for making the internationalcommunity moreaware of our individualaspirations and problems, and for coming together to discuss the current status of our cooperation,and ways to improve and deepenit, primarilywithin the frameworkof the BrettonWoods institutions. Belgium in the Economic and Monetary Union It is predominantlyat the nationallevel that measuresshould be implementedto permitsustainable growth that wouldredourd to the benefitof all our peoples.For my country,Europe's aim to adopta singlecurrency by 1999 has largelycharted the courseof adjustmentwe mustfollow. Belgium is firmly committedto the economicand monetaryunion. The Governmenthas just approveda budgetfor 1996that will bringdown the fiscaldeficit to 3 percent of GDP. In the coming months, it will also embark on the modermization of its social security system, so that it can continue to provide full protection against life's insecuritiesand meet the increasedcharges resulting from an agingpop- ulationin the nextcentury. In particular,the methodsof calculatingfuture pen- sions will be gradually adjusted to keep long-term growth of pension expenditureswithin sustainable limnits, while guaranteeing a decentretirement for everyone. Thoughcompliance with the convergencecriteria of the MaastrichtTreaty maybe key to the successof the monetaryuni' it is hardlya sufficientcondition for successfullycombating the seriousproblem of unemployment.To face this challenge,and becauseemployment promotion is its absoluteprior- ity, the BelgianGovernment has just adopteda multiyearemployment program. As we see it, providingaccess to jobs for a larger numberof people is the best way of ensuringsocial integration. IMF-ILO Dialogue On this subject,I am happy that the dialoguebetween the FinanceMinis- ters in the InterimCommittee and Mr. MichelHansenne, Director-General of the InternationalLabor Organization, was fruitfuland constructive.

52 Of course, my suggestion that the Interim Committee meet with Mr. Hansenne to explore the means of broader and more continued cooperation between the IMF and the ILO was based on the fact that the statutes of both the IMF and the ILO make the objectiveof full employmenta priority.In particular,the agreementwas that this cooperationshould be aimedat helping [MF missionsin the membercountries to better understandtheir labor markets and social protection problems and also at enabling ILO staff to better factor the IMFs macroeconomnicspolicy expertise into its recommendations.This new partnership,and the fact that the Fund gives greater considerationto the social implicationsof the economicreforms it prescribes,should better tailor adjustmentprograms and so make them more acceptableto the populations they affect. Strengthening of the IMF Let me now turn to the Fund's role in the intemational financialsystem. Last year in Madrid, at the fiftiethanniversary of the Bretton Woods institutions, the internationalcommunity applauded the IMF's ability to adapt to a changinginternational economic and politicalenvironment. The way in which the Fund reacted to the financialcrisis in Mexico at the beginningof the year, by quickly providing that country with exceptional financing, but also by quicklylearning from that crisis,is once again evidenceof the IMF's capacity to react to changesin the world economy.We learned three lessons from the Mexicancrisis for furtheranceof the IMF's objectives. The first lesson concerns the Fund's surveillancemission. The globalization of the intemational financialsystem and the increasing liberalizationof capital movements calls for closer surveillanceof all member countries, to enable the IMF to detect any emergingtensions early. The recentstudies of the Fund's Executive Board identified the improvements member countries neededto make in reportingtheir economicand financialdata to the Fund,and I am happy that the Interim Committeelhas confirmed the findingsof these studies. Substantialprogress has also been made with regard to the establishment of standardsto guide membercountries in disseminatingtheir economic and finanicialdata to the public, and I am pleased to note that most member countries considerthat the setting of such standards by the IMF is consistent with its objectivesand mission,as set forth in the Articlesof Agreement. Second,though priority should indeedbe given to crisis prevention-primarily throughstricter disciplinein membercountries and closer surveillance by the IMF-we know that this will not always suffice. A pre-emergency regime is therefore envisaged to enable action to be taken promptly in the event of serious financialcrises. The third lesson of the Mexican crisis involves the Fund's financial resources. Discussionsare nowunder way on a new parallelfinancing facility to supplementthe General Arrangementsto Borrow, in order to double the resources currently available under those Arrangements.However, the new

53 facility must be considered solely a safety net for exceptional circumstances and is not tantamount to a new increase in the normal resources of the Fund. The discussions on the increase of quotas must therefore be accorded priority. As the liquidity position of the IMF is likely to deteriorate markedly in the years ahead, it appears critical to me that, if the Fund's activities are to continue normally beyond 1998, an agreement must be reached on a substantial increase in quotas by the end of next year at the latest, given the necessary timeframe for approval by our national legislatures.

Prioritiesfor the Poorest Countries The global economy is rapidly mnovingtoward integration, but it is still shaped by greater inequalities among countries and groups of couniries. Ever-increasing numbers of countries are gaining access to international capital markets and playing larger roles in the world economy. However, too many countries are still experiencing what the Chairman termed yesterday .'mis6re odieuse," or abject poverty, and are not sufficiently reaping the benefits of globalization of the economy. This latter group of countries must receive our priority attention. The solidarity shown by the international community toward Mexico by granting that country unprecedented financial assistance and the vigor with which the Fund rallied and adapted to meet the challenges brought out by the Mexican crisis, that solidarity and vigor must also be tapped for the poorest countries. In this connection, I regret that monetary and financial turmoil is more fearful to the wealthy nations and intemational institutions than the mis- ery of 1.3 billion human beings who have to live on less than one dollar a day. Like Messrs. Camdessus and Wolfensohn,I deeply believe that the persistence of pockets of extreme poverty cannot but engender an increasingly unstable world. Let us not be as near-sighted as markets can be, but rather clear-sighted and clear-headed. The strategy we need to meet the challenge of poverty must be based on a new partnership among the three vital players: the governments of the poorest countries, the donor comrnunity, and the international financial institutions, particularly the Bank and the Fund. This new partnership involves mutual commitments: First of all, the governments of the poorest countries must guarantee macroeconomics stability at home. Experience shows amply that a government's inability to balance the budget and contain expansion of the money supply undermines development prospects. Moreover, it is clear that greater political stability and better management of public services also help create the conditions for sustainable development. Macroeconomics stabilization and rehabilitation efforts in the poorest countries must be able to count on adequate financing from the donor comnu- nity. I am concerned that, first of all, official development assistance from OECD donors now accounts for less than 0.3 percent of their GDP, second,

54 that IDA-lO may be radically truncated and, third, that the prospects for mobi- lizing the funds needed for the Enhanced Structural Adjustment Facility (ESAF) appear dim. Unless this trend is reversed, the investment rate in the poorest countries will no longer sustain their long-term growth, and the Bret- ton Woods institutions will no longer be able to play their proper role in development. Let us not forget that neither the poorest countries nor the Bretton Woods institutions can allow themselves to become the victims of the unwill- ingness or blindness of the wealthy nations, and especially the wealthiest among them. This brings me lastly to the new commitments that the Bank and the Fund must make in order to serve the poorest countries better. The two institutions must ensure the systematic evaluation of the adjustment programs they recommend. They must develop their capacity for self-review and strive to continue to tailor their programs to local realities, to the specific needs of each country. When there are governments that shoulder their responsibilities and implement rehabilitation and reform policies and when there are donor countries that, I hope, will increase their financial comnitments for development despite their budgetary difficulties, the Bank and Fund must continue to verify the effectiveness of the policies and reforms that they recommend. Greater responsibility on the part of the governments of the poorest countries, greater solidarity on the part of the wealthy countries, and greater effectiveness of the Bank and the Fund are the linchpins of this new partnership that alone will enable us to meet the challenge of poverty.

BRAZIL: PEDRO SAMPAIO MALAN Governor for the Bank and the Fund (on behalf of the Latin American Governors)

I am very honored to speak on behalf of Argentina, Bolivia, Chile, Colom- bia, Costa Rica, the Dominican Republic, Ecuador, El Salvador, Guatemala, Guyana, Haiti, Honduras, Mexico, Nicaragua, Panama, Paraguay, Peru, Spain, Suriname, Trinidad and Tobago, Uruguay, Venezuela, and my own country, Brazil. The current World Economic Outlook (WEO) preseirs an optimistic appraisal of the prospects of the world economy. Its assessment that global economic developments are largely as envisaged in the Madrid Declaration is encouraging. In the short and medium run, we ur likely to have robust growth, dluemainly to a high rate of expansion with subdued inflation in several Asiani and some Latin American economies. However, the Outlook acknowledges that, in the past 18 months, and I quote: 'the world has been buffeted by a number of financial market developments that have demonstrated the macroeconomic consequences of tht rapid

55 adjustment of investors in response to perceived changes in risks. The timing and extent of shifts in market sentiment are often difficult to explain in terms of changes in economic fundamentals." While we all appreciate the benefits of international capital flows, their volatility can be an obstacle to the sustainability of global expansion and is a matter of great concern to Latin America-and we are not alone on that. As a result of its continuing integratiot into the world economy, Latin America has become more exposed and vulnerable to the instability of financial markets. General positive results mask weaker performance in individual countries or regions. According to "The Economic Outlook for Latin America," recently published by the United Nations Economic CommTissionfor Latin America and the Caribbean, and the WEO, the region as a whole, albeit showing an average 25 percent annual rate of inflation-the best perfortmance in the last 25 years-will probably grow only by 2 percent in 1995, a percentage much lower than the figure reached in 1994. This regional economic slowdown, which contributed significantly to a rise in unemployment, is to a very large extent a consequence of the financial turbulence derived from last December's events. In the first eight months of 1995, there was a considerable decrease in the inflow of foreign capital to Latin America, as well as a significant change in its composition. This year, the net inflow of capital is expected to be only one half the average reached from 1992 to 1994. Direct investments and official loans to improve the balance of payments of some Latin American countries have increased, while portfolio investments have decreased very much for the region as a whole, especially in the beginning of 1995. There has lately been some reversal in this trend. The Halifax Summit communique, among other things, acknowledged that, under present conditions and even with better surveillance, financial crises may not always be prevented. For this reason, the G-7 and the IMF, according to the comnmunique,must be prepared to take rapid action in a well coordinated fashion to help a country to overcome the adverse consequences of such upheavals. For this purpose, the G-7 proposed in Halifax that the G-10 and other countries with an important stake in the financial system should provide loans with a view to doubling as soon as possible the credit lines currently available to the IMF through the General Arrangements to Borrow. In this regard, the Interim Committee emphasized the importance that all participants should be treated equally, and agreed that expanded borrowing should not be a substitute for a quota increase. Nevertheless, there seems to exist, from our point of view, the need for further international cooperation among all parties concemed so as to enable them to better handle the risks caused by the volatility of financial markets.

56 We would like, in this context, to share with you the following proposals aiming at strengthening and developing international mechanisms for consultation and coordination among Goverament, through a network of institutions and arrangements. They include both preventive and remedial measures, rest!rving for the IMF a central role in the process envisaged:

• 1(3 broaden the cooperation among monetary authorities. What is needed is a more structured procedure-with larger participation-which would make it possible to anticipate problems through a better exchange of views and information. It would be a sort of preventive consultation mechanism conducted in a discreet manner. The Bank of International Settlements has started a process with the participation of some developing countries along these lines which should be encouraged; * To enlarge the scope of coordination of macroeconomic policies among countries which may have a significant impact upon the international financial system. This could be done within the context of the IMR. Such an effort should lead to public disclosure by participating countries of the general policies they intend to pursue; • Taking into account such public expressions of intention, to improve international surveillance-which must become more symmetrical-over domestic macroeconomic policies. This would foster greater transparency and predictability in international financial markets; • To expand existing facilities to stabilize currencies under temporary speculative attacks, not warranted by fundamentals. In this regard, the proposed increase in the credit lines available to the IMF under the General Arrangements to Borrow and the obtention of contributions to this facility by new participants was viewed as a positive initiative. Furthermore, the Interim Committee's endorsement of the IMF's Board decision to establish an emergency financing mechanism and to pave the way for the creation of a Currency Stabilization Fund were considered as steps in the right direction which deserve our full suppoIt; * More basically, member countries should consider doubling IMF quotas, "inter alia," to meet new demands resulting from the need to assist countries facing abrupt reversals of capital flows and speculative attacks against their currencies.

We also support a new and very substantial allocation of SDRs on the basis of the system enshrined in the presentArticles. Moreover, we view with sympathy the transfornation of the Enhanced Structural Adjustment Facility (ESAF) into a permanent financing facility of the poorest countries. Finally, we consider that the growing debt faced by many developing countries should be addressed in an effective manner. In this context, we welcome the

57 steps taken by the World and the IMF to study mechanismsto alleviatethe burden of debt and to provide additionalconcessional resources to debtor countries. The supplyof savingsworldwide is anotherissue of great importancefor LatinAmerica. The surveyof worldsavings included in the IMF's WorldEco- nomic Outlook,May 1995, was particularlywelcome. It is still not clear whetherthe supplyof savingswill be, in the mediumrun, enoughto finance, at acceptableinterest rates, the potentialdemand for capitalderived from the continuinggrowth of industrialcountries, developing countries, and countries in transition.Excessive budget deficits in mostindustrial countries seem to be the root of the presentsavings slowdown,which can create problemsfor the worldeconomy in the near future. The establishmentof the WorldTrade Organization(WTO) and the successful outcome of the Uruguay Round clearly reflect the existenceof an internationalcooperative framework which must continueto be furtherpro- motedso as to enableus to makesignificant progress in facing thechallenges that lie ahead and in achievingthe policy aims set out in the MadridDecla- ration. In the 1980s,there was a wave of pessimismregarding Latin America. In the 1990s,this feelingin relationto the region'sfuture has changedradically, and strong optimismhas becomemanifest. The events of last Decemberhave cast someclouds on the horizon,which have startedto dissipatein the second quarterof 1995. Such short run changesin perceptionare misleading.What really matters is the sense of purpose and direction of the policies and of the structural reformsbeing implementedin Latin America.The reversalof capital flows followingthe eventsof last Decemberdid not abate the pace of these positive changes.On the contrary,they gainednew momentumand strength. Latin America, within a fully democraticsystem, has achieved great progressin its macroeconomicreforms, and specially in modernizationof the state.The region has also gonethrough a vigorousprocess of internationaliza- tion. The qualityof nontraditionalexports has significantlyimproved. Trade liberalizationand the increasingabsorption of new technologiesand direct investmentsare facilitatinga considerablerise in productivity.Financial markets have been liberalized.Previous restrictions against foreigninvestnents havebeen lifted. Privatization became an importantinstrument to attractdirect investnent to the region. We are awarethat manyproblems remain to be solved.For example,it is necessaryto monitorat all timesthe dimensionof the currentaccount deficit. Neither can countriesrely heavilyon short-termcapital inflows.Latin Amer- ica must in particularincrease domestic savings rates. Social sectordevelopment is an enormouschallenge for the region. More generally,we have to continueto reformthe state and build effectivepublic sectorsin orderto have healthy,efficient, and competitiveprivate sectors.

58 On the other hand, we are proud of the successfulsub-regional integration initiativesin LatinAmerica, which are contributingto an impressiveincrease in tradeflows not only withinthe region, but also withour internationalpartners. At the sametime, Latin America is participatingactively in theongoing negotiations at the hemisphericlevel, under the aegisof the Enterprisefor the Americas. Tradeamong the Mercosulcountries (Brazil, Argentina, Uruguay, and Par- aguay),for example,has continuedto flourishand is goingto show in 1995a figure higher than the approximately$10 billion reached last year. Besides participating in hemispheric initiatives,the Southern Common Market is negotiatingfree trade agreementswith other countriesof the region,under the umbrellaof theAssociation for Latin AmericanIntegration. The Mercosulis also negotiatingwith the EuropeanUnion a comprehensiveagreement to promote economicrelations and bilateraltrade. Allowme now to say a few wordsabout the economicsituation of Brazil. The Real Plan, introducedon July 1, 1994,is at presentin its sixteenthmonth. There is no doubt that it is the most successfulstabilization plan in Brazil's history.Previous attempts were overtakenby events within a few monthsof their implementationand failed to reach even a first anniversary. At the end of June lastyear-just priorto the launchingof the Real Plan-, inflationwas runningat the astonishingrate of 7000percent per year.In the first half of 1994, it reacheda monthlyaverage of 43 percent. Now, inflationis around 1 to 2 percenta month.Sixteen percentaccumulated in the first nine monthsof 1995.These are the lowestfigures in almosta quarterof a century. It is importantto stressthat this sharpand continuousdrop in inflationwas attained withoutprice or wage freezes,confiscations, breach of contracts,or recession. It has been a consequenceof a gradual process initiated back in June 1993, when the so-called Programof ImmediateAction (PAI),which pavedthe way for the introductionof the RealPlan, was announced.President FernandoHenrique was then Ministerof Finance. Behindthis programwas the idea that any seriouseffort at stabilizingthe Brazilianeconomy must start by addressingthe state of relativedisarray of our public sector.And we have made substantialprogress in this direction.Eco- nomic growthhas also contributedto the improvementhi the Govermnent's fiscalbalance. Tightpolicies are beingpursued not only in therealmn of moneysupply, but also in the fieldof credit, since the very inceptionof the Real Plan, to render the rate of growth in domesticabsorption compatible with price stabilityand a satisfactorybalance of paymentssituation. Yet,the rate of growthgreatly increasedin the firstquarter of 1995,when, in relationto the same periodof 1994,GDP grew bry10.4 percent, industry by 14.3percent, and salesby 28 percent,all in real terms.This representeda threat to macro-economicstability and, hence,the needfor additionalrestrictive measures adoptedat the end of the first quarterof 1995,which are becoming gradually more flexiblein the light of a coolingoff in domesticeconomic activity.

59 On the externalfront, Brazil took a major step forward by establishinga policy of exchangerate bands.The fact that Brazilianexports have continued to grow significantly,combined with the present low rate of inflation,is an indicationthat this exchangerate policy fits our stabilizationprogram. Brazil has, for some time, pursueda conservativepolicy with regard to its balanceof payments.The current accountshowed a deficitof only 0.2 percent of GDP in 1994, 0.1 percent in 1993,0.3 percent in 1991, and even a small surplus in 1992.The events of last December proved the correctnessof our position. As well pointed out by the IMF's World Economic Outlook, the dampeningof net capital inflowswas relativelymoderate, and the confidence of investorswas quickly restored. It is in this constructivelight that internationalobservers should look at the temporaryemergency provisions introduced earlier this year to reduceexces- sive imports of certain durable goods, such as automobiles.We are confident that our trade figureswill continueto improve.Our balance of trade showed, last July, an equilibrium after eight months of deficits, and in August, a US$328 million surplus. In September,the trade surplus was around US$500 million.There shouldbe no doubt aboutthe continuationof the policy of trade liberalizationin Brazil. The greatest challenge now facing my country in the economicarea is to achieve stabilityon a lastingbasis and to reach a one digit annualinflation rate in a gradual but firm manner. No other country in the world experienceda longerperiod of high and chronic inflationand went furtherthan Brazil in promotingthe indexationof its economyin a sort of vicious circlein whichinfla- tion and indexationfed each other.The gradual deindexationof our economy is essential. Importantmeasures in this direction have alreadybeen taken in the fieldsof salaries,public prices, exchangerate, and interestrates. Also essential, in order to consolidatestabilization and to attain self-sustained growth, is a successful reforn of our 1988 Constitution,which will enable, among other things, the modernizationof our public sector and the attainmentand maintenanceof fiscalequilibrium-the true anchorof any successful stabilizationprogram. Congress is supporting the proposals of the Executive Branch for the amendmentof our Constitution and, indeed, has already approvedmost of those which were brought to its considerationin the first half of 1995,such as the processes that lifted previous restrictions against foreign capital and opened up private investment,both Brazilian and foreign, the areas of telecommunications,energy, gas, transportation,petroleum, and mining. The ExecutiveBranch has recentlysent to Congresstwo proposals:one for the reformof the fiscaland tax systems,with a view to simplification,clarity, and the removalof burdens on investmentsand exports;and the other for the reform of public administration,aiming at streamlining,cutting and control- ling expenditure.

60 The BrazilianGovernment also gives high priority to the implementation of the privatizationprogram and to the reform of the social security system. They will create, among other things, the proper conditionsfor the lowering of our internal public debt and for the increase in our domestic savings rate. There remains much to be done in regard to bureaucracy,red tape, deregulation. a 'd more efficientpublic management. ,iie achicvementof the objectives on the present Administration'seco- nomicagenda will bring about the reductionof productioncosts in Brazil. By loweringthe so-called"Brazil Cost," it will be possible to increasethe absorption of direct investmcntand new tcchnologiesby the Brazilianeconomy, as welI as to promoteour exports of goods and services. We have turned the page of the foreign debt problem and all the positive implicationsof this achievementare nowstarting to be felt. After fifteenyears, the FederativeRepublic of Brazilwas againable to borrowdirectly from internationalcapital markets in two successfuloperations. The first, in May 1995, was an issue of 80 billion yen-denominatedbonds. The second, in June, was an issue of one billion Deutschemarks. Let my final words be to draw your attentionto a point made by President Fernando Henrique in his speech on July 1st, 1995, during the formal ceremony of celebrationof the Real Plan's first anniversary.In reality, the Real Plan did not change the Braziliansociety. The truth is that we, as a nation,had already changed before the launchingof the Real Plan, making possible its success. Braziliansociety was obviouslytired of inflationand became eager for stabilization.No serious analyst believestoday in the possibilityof a sudden sharp rise in inflationin Brazil. PresidentFernando Henriquereceived from the polls a clear mandate to carry on with the Real Plan. His Administrationwill not spare any effort to ensureprice stabilityand self-sustainedeconomic growth. And this is the most important contributionthat Brazil may give to the prosperity of its international partners and specificallyto its region, Latin America, where structural reforms are underway,perfertly in tune with worldwidedevelopments. I came here to leave a message of optinmismregarding Latin America and Brazil, but not a messageof naive optimism.We are aware, with a deep sense of humbleness,of the challengeswhich remain ahead in both the domesticand internationalfronts. However,even greater is our confidencein the future of our region.

BRUNEI DARUSSALAM: WALLY SKINNER Alternate Governor of the Bank ana the Fund At this outset, I would like to congratulateMr. Chairman,President of the WorldBank, Managing Director of the IMP,and honorableGovernors on your assumptionto the chair of these meetings.It is with great pleasurethat I

61 also congratulateMr. James Wolfensohnon his appointmentas the P-resident of the World Bank Group. I am extremelyprivileged and honoredto be here todayon this auspicious occasion to address the AnnualMeetings of the Boards of Governorsof the WorldBank Group and IMF for the firsttime. Just two days ago BruneiDarus- salam signed the Articlesof Agreementand becamea memberof the Bretton WoodsInstitutions. I take this opportunityto express my deepestappreciation to the Chairman, the Presidentof the Bank,the ManagingDirector of the Fund, and to fellow Governorsfor their warmestwelcome extended to BruneiDarussalam on the occasion of the admissionas a member.I also like to thank membersof the staff of the Bank and the Fund for their expeditiousmanner and professional- ism to makethis momentpossible. BruneiDarussalam is extremelyhappy to join the fold of the international financialcommunity and look forwardto play an active role in fulfillingthe primaryobjectives on which the BrettonWoods Institutions were established, objectives aimed at safeguardingfinancial stability and providing a framework for economiccooperation that servedto underpina remarkableperiod of growth and prosperity.We hope to work in close collaborationand to cooperate with membersand the internationalfinancial institutions to strivefor sustainability,growth, and equity. The Chairman'sappraisal of the WorldEconomic Outlook underlinedthe need for prudent budgetaryexpenditure, to implementmacroeconomic, and structuralpolicies and to adopt appropriatebanking and financialregulations. Needlessto say it is imperativeeach countrymust individually address its mac- roeconomicproblems, analyze them, and introducecorrect and prudentfiscal and monetarypolicies to promote sustainablegrowth, stability and employment. In this connection,I would like to say a few wordsabout the economyof Brunei Darussalam. The economy is heavily dependent on non-renewable oil and gas resources.About fifty percentof the total work force of about ninety thousand are employedin the public service.The non-oil economyis driven by Governmentexpenditure and capital investmentin infrastructureessential amenitiesand social services.Population growth is approximately2.8 percent per annum. It is a classical exampleof the "Dutch disease" wherebythe per capita incomehas reached a high thresholdwhich itself constrainsthe development of manufacturingindustries. Realizing the urgency to diversify the economy, the Government has embarkedon programs of economicdiversification based on the productive development of our other resources and utilization of our skilled human resources.To facilitate economicdevelopment investment in infrastructure, roads werebuilt, telecommunicationlines werelaid, educationand health services were providedand the bureaucracywas restructured. The expenditure for infrastructuraldevelopment and the provision of social serviceswere totally based on domestic financingwithout resortingto

62 foreign borrowing.This is possible, muchless because of abundantresources, but more due to prudent management of our monetary resources through sound fiscal and monetary policies and careful budgetary control.A balance budget remains our main goal. Surveillance over the international monetary system remains the core attention of the Fund. Effectivenessof this surveillancedepends very muchon the willingnessand capabilitiesto cooperatefully with staff of the Fund.Qual- ity, timely and comprehensivedata are essentialfor decision nmaldingby both the individualcountry and the Fund. It is in this area that Brunei Darussalam will be requestingthe assistancefrom the staff of the Fund to developan effective functioningsystem of data collection.I am encouragedthat this assistance will be readily available. Strengtheningsurveillance and the creation of an early warning mechanism will allow the Fund to respond quickly to avoid the destabilizationof the internationalmonetary system. We can draw lessons from the Mexican crisis. The EnhancedStructural Adjustment Facility (ESAF) has proved useful, to assist poorer countries. Its continuation must be ensured and improvement to it is essential in order that the ESAF will effectively address the financial problemsconfronting poorercountries. Howeverthe ESAF shouldnot be seen as the solution of the last resort. Problem countries must first undertake to resolve their problemsby themselves. I draw encouragementfrom the statement by the President of the World Bank Group at the opening ceremony.His call for a global partnershipshould be given serious considerationin order to meet changingconditions and new challenges. Brunei Darussalamsupports changes that are self-supnortingas well as contribute to reduce general world poverty.

CAMBODALL:KEAT CUHON Governor of the Bank

I deem it a great honor and privilegeto representthe Kingdomof Cambo- dia aLthis august assemblyof top-level macroeconomicpolicymakers of the world community.My delegation brings to you all the warm greetings and good wishes of the people and the Royal Governmentof Cambodia. As is widely known, after two decades of war and internationalisolation and neglect, Cambodiais now at the beginning of its fresh lease on life. We are beset by many daunting tasks and challenges in our eamest endeavors to rehabilitateour war-torneconomy, rebuild our political,economic, and social institutionsfrom scratch,and rapidly usher in an era of peace, prosperity,and growth for our people. In rebuildingour nation, which has one of the lowest per capita incomes in the world, multifariousinitiatives are to be launched all at the same time; everythingneeds to be fast-forwardedto make up for the lost decades. We are grateful for the internationalattention, advice, and financial

63 arid technical assistance to help us in our efforts. But we know that it is the clear vision, patriotic dedication, perseverance, and hard work on the part of all Cambodians which will determine our success. We want to assure the world community that we have this forward-looking vision, resolve, and discipline to overcome all odds and proceed steadfastly to reach our goals. This is the legacy we owe to our posterity. In choosing our path to progress, we have decided to follow some basic unalterable tenets. We are determined to follow a people-centered, participatory approach in full consultation with relevant groups in the civil society. We will ensure that nation building uses people's creativity, ingenuity, and inno- vation through a market-oriented approach, where each individual has the opportunity to realize his or her full potential and contribute to national progress. The goal is to achieve sustainable social and economic progress in the shortest possible time with an accent on poverty alleviation. Our overall vision for the future is articulated in the National Program to Rehabilitate and Develop Cambodia (NPRD), prepared in 1994 and updated this year. Flowing from it, we are preparing a five-year perspective and a three-year rolling Public Investment Program which will be presented to the first Consultative Group meeting to be held next year. To effectively realize the vision of the NPRD, the Royal Govemment is implementing strategies in seven specific operational fields: (I) to ensure overall security and political and social stability; (2) to re-establish the rule of law in which the Government will be the manager of development and will function in close partnership with the private sector. In this regard, the public sector is being reformed to enable it to fulfill its designated role; (3) to bring about economic stabilization and reform; (4) to develop human resource, including health and education; (5) to rehabilitate and construct physical infrastructure and facilities; (6) to integrate Cambodia into the regional and world economy; and (7) to achieve rural development, with an accent on optimization of natural resources and environment management, including the unique Tonle Sap Lake. In spite of the many handicaps with which we commenced our work, we have achieved much in the past two years. With technical and financial help from the international commnunity,and national determination and discipline on our part, we have achieved a measure of macro-economic stability. Infla- tion has been reined in and is under control. The national currency is stable vis-a-vis its external counterparts. National GDP has begun to grow and is slated for a steady 7 percent increase annually, towards doubling itself in less than a decade. Revenues have grown steadily. Although some parts of the country are beset by intermittent incursions by outlawed elements, calling for constant vigilance, the security situation has improved, thereby reducing expenditure on this account. The legal fiamework and an enabling environment are being built. Infrastructure is being rapidly upgraded, and rural development efforts are under way. All these have increased investor confidence, as manifested in large foreign direct investment interest in various fields.

64 The documentsprepared by the RoyalGovernment as well as the Bank and the Fund will give you more detailed infonnation on our situation and our future goals and prospects. I wished only to present to you the broad picture, to emphasize the enormity of the tasks and to renew our commitment to achieve our goals. We owe a great deal to the internationalcommunity for our success so far and in the future. As you know, in close collaborationwith the World Bank, the IMF, and the Asian DevelopmentBank (ADB), the Royal Government of Cambodia has formulated its medium-termmacroeconomic program as outlined in the Policy FrameworkPaper (PFP). We are convinced that these measures are necessary for establishing a firrn foundation for our future. We have taken several difficultsteps to strictly adhere to the stipula- tions in these agreements,and we are fully committedto pursuing this path. Coming from one of the world's poorest countries, which is emerging proudly and with determination from its two decades of tragic past, I would like to make three special appeals to this high-levelbody and, through it, to the internationalcommunity at large. First, even while world concern and daily headlines are focused on conflict-containingoperations in variousparts of the globe, it is extremelyimportant that priority attentioncontinues to be paid and that adequate funds, both throughgrants and concessionalloans, are allocated to assisting poorer countries to develop rapidly. It is not a mere slogan that "developmentis the best antidote to conflictand is the underwriterof security and stability."Therefore, my first plea is to ensure full allocationand conunit- ment to the InternationalDevelopment Association (IDA) and other mechanisms of concessional credit and grants. Second, countries like ours at the lower end of the economic ladder need special nurturing. The international community,including the Bank and the Fbnd, thereforeneed to apply special terms to their assistance to us so that we are able to lay firn foundationswith- out unduly overburdeningour future generationswith debt I would therefore urge that more funds be made availableon grant terms, especiallyfor capacity- building efforts through either trust funds or other mechanismsor through the creation of special windows.Last, but by no means least, I would appeal for maximum resources to be allocated under these two windows for prioritized assistance to the neediest countries, such as Cambodia. Finally, The Royal Government of Cambodia welcomes Brunei Darus- salam to the membershipof these organizations.

CANADA: DOUGLAS PETERS Temporary Alternate Governor of the Bank and the Fund Global Economic Situation and Policy Requirements A great deal has happened in the world economysince we met in Madrid one year ago. Not all of these developments have been positive. Exchange market volatility has forced many countries to raise interest rates above the

65 levels desirablebased on domesticeconomic considerations, thereby leading to slowergrowth. The most severeexample of this, of course,was the Mexi- can exchange rate crisis, which spilled over to many developingand other countries,There has also beenfinancial market volatility within the European Union,and Canadahas not been exempt. At the same time, we must not lose sight of some positiveaspects of the current situation. Inflationarypressures remain minimal in most industrial countries,and progresshas been made in reducingfiscal deficits. At the same time, however,unemployment remains uncomfortably high in many countries.These developments have in turn beenreflected in internationalfinancial markets:long-term interest rates have declinedover the last six months,and the declineof the U.S. dollarsince the beginningof the yearhas been reversed but the dollar has not returnedto previouslevels. How can we best respondto exchangemarket instabilityand high levels of unemploymentand build on the achievementsof low inflationand deficit reduction?Exchange mnarket instability, although sometimes having a life of its own, does developfrom marketconcerns about the stance of policiesin the major industrialcountries. This suggeststhat one way of respondingto turmoil is to redoubleour efforts at pursuing sound policies and establishing credibility.Employment policies must concentrateon spendingsmarter at a time of limited resources. In addition, structural policies are needed to improveemployment potential and to improveour economies'growth potential. The growing internationalconsensus on this policy prescriptionwas embodiedlast yearin the InterimCommittee's Madrid Declaration. Balanceof paymentsproblems, particularly current accounts that are consistently out of balance,add to exchange market instability.However, we must,also acknowledgethat whilea collectivecommitment to pursuingsound policiesmay reduceinstability, it will not guaranteethe absenceof problems. Instability in foreign exchange markets remains a threat to industrial and developingcountries alike. Developments over the last year also indicatethe need for an internationalfinancial structure to help in providinga smoothly functioninginternational economic and financialsystem. Canada's Policy Approach A policy fmmework,that includessound fiscal and monetarypolicies and structuralreforms summarizes the approachwe havefollowed in Canada. Oureconomic priorities are to succeedin puttingCanada's public finances on a sustainablefooting while encouraging growth and employment.Merely settinglong termgoals as somesuggest gives no assuranceof achievingthem. Whatwe have doneto achieveour deficit-reductiongoal has been to set rolling two-yeardeficit targets, on the way to a balancedbudget, and then to ensure that we achievethem. We are takinga similarapproach to maintaininglow inflation.The government and the Bank of Canadahave jointly establishedtargets of 1-3 percent

66 for inflationduring 1995-98, and have geared monetary policy to ensuring that inflationdoes not leavethis range. We are also making progress in structuralreform. We have reviewedall spendingprograms, asking the questions-Should the governmentbe doing this? Is it a priority? Can we afford it? As a result, we have dramatically reducedmany programs, including subsidies to business,and are takingaction on labor marketand other majorreforms. These reviewsare continuing. Our decisiveactions, and the difficultchoices we have made, are paying off and will continueto do so. They will pay even greaterdividends once the uncertaintyassociated with the Qu6becreferendum is behindus. Institutional Reform I will concludewith a few remarksabout institutional reform. Last April, at our meetingin 'Washington,Canada spokeat some length aboutthis subject and aboutCanada's ambitions for the economicsummit of the Groupof Seven in Halifax. The Halifaxsummit has been widelybeen as a constructiveexercise. It provided a useful forum in which to re-examine the current structures of interna- tonal cooperationand allowed Canada and its partners, the other major industrialcountries, to put forwarda numberof importantreform initiatives. But Canada'sinterest in reformshould not be interpretedas dissatisfactionwith the waythe IBRDand IMF have dischargedtheir mandates.Quite the contrary: widespreadsupport was shown at Halifaxfor the work of the BrettonWoods institutions.Generally speaking, there was broad agreementthat the [MF and multilateraldevelopment banks shouldcontinue to play an importantrole in ensuringglobal economicstability and internationalwell-being. Nevertheless, there are clearlyareas whereimprovements are buth possibleand desirable. In the contextof the IM, Canada and its sunmit partnersare lookingfor reformsin the followingkey areas: * Strengtheningthe IE!'s surveillanceof national policies and financial marketdevelopments and promotingfuller disclosureof this information to market participants.Such measureswill better help to identifyprob- lems beforethey reach crisis proportions. * Ensuringthat proceduresare in placeto shortenthe time that is neededto respondto hnancialcrises when they do occur. * Doubling the resources currently available under the IMF's General Arrangementsto Borrowto ensurethat the Fund has adequateliquidity to meet these crises. * Ensuringthat the Fund has sufficientresources to continueto financethe enhancedstructural adjustment facility for the benefitof the IME's poorest members.

67 While this is an ambitious list, the response to date has been extremely encouraging. These reform initiatives have struck a responsive chord with other shareholder governments. In fat, much of this agenda was at the core of the recent discussions in the Interim Committee. Let me turn now to key issues of importance to Canada for the World Bank and the regional development banks. In these constrained times, multilateral institutions, like the governments that are their members, must learn to do more with less. In this respect, there are four key areas where I believe room for improvement exists. First, the multilateral banks should take further steps to consolidate their budgets and to streamline their operations. In this respect, the actions of the World Bank in reducing its administrativebudget this year and next should be used as a model for similar streamlining in the regional development banks. Second, the growing diversity of the recipient countries requires an increasingly differentiated response from the muiltilateralbanks. Wherever possible, the market should be the dominant source of funding, especially for infrastructure projects. Scarce concessional resources should be targeted to the poorest countries, particularly those in Sub-Saharan Africa and those that have endured zevere natural disasters. Third, resource allocation should be more efficient. Inefficiencies undermine the ability of donors and recipients alike to make progress in poverty reduction. In particular, excessive military expenditures, particularly at the expense of social sector spending, are no longer acceptable. Multilateral institutions must directly tie their lending programs to commnitmentsfrom recipient countries to reduce unproductive expenditures. Fourth, overlap and duplication among the multilateral development banks must be reduced. Conclusion In conclusion, let me reemphasize the critical role that the IBRD and IMF must continue to play in the smooth operation of the international monetary system and in assisting the developmentprocess. The recent discussions in the Interim and Development Committees have helped define these roles. I have every confidence that, together, we can ensure that the Bretton Woods institutions will continue to have the tools to respond to their future challenges with flexibility and imagination.

CHINA: LIU ZHONGLI Governor of the Bank First of all, on behalf of the Chinese delegation and in my own name, I wish to express our warm congratulationsto Mr. Chairman on his assumption of the Chainnanship of the 1995 Annual Meetings. I believe that under his guidance, these meetings will be a great success.

68 AgainI wouldlike to take this opportunityto congratulateMr. Wolfensohn on his appointmentas the ninth Presidentof the WorldBank. We hope that underhis leadership,the WorldBank will makenew contributionsto the world development. The ChineseGovernment is committedto developmentand focusingon economicconstruction, with a fundamentalobjective of improvingthe living standardof 1.2billion people. 1994 witnessedthe deepeningof reform and the continuedencouraging progressof the Chineseeconomy. China's GNP grew by 11.8percent over the previousyear. In the firstsix monthsof thisyear, the economywent smoothly, resultingin a 10.3percent real GDPgrowth, as comparedwith the sameperiod of last year.Macroeconomic adjustment has been effective,investment structure has improved,and the inflationrate is slowingdown to the targetedlevel. Duringthe periodof 1991to 1995,China achieved the best economicper- formanceever since it was founded,fully reflectingthe tremendousimpact of the reformand opening-upprogram. The real averageannual growthrate of GNP in this period was 11.7percent, or 4 percentagepoints higher than the previousfive-year period. The nationaleconomy developed in a morehealthy and stable manner.As a result, China's economic strength has been enhanced and the people's living standard improved. Ever since the reform and openingup program was launched, China has succeeded in achieving its objectives targeted for each phase of development The Chinese people are proud of these well-deserved achievements. But this is not to say that everything is rosy. We are fully aware that China is still a developing country, and tough economic and social problems remain to be resolved,such as the relativelyweak agriculturesector, difficultiesof some state-ownedenterprises, and glowth disparitybetween the coastal and inland provinces. There is an urgent necd to further improve and deepen the reformprograms in variousareas. With full confidence,however, the Chinese people are able to address these issues and achieve a stable and sustainable development. Our confidenceis justified by the following:First, with the experienceof reformand opening-upover the past sixteen years,China has worked out an appropriate development approach-that is, to establish a socialist market economyin the contextof the actual situationof the country;Second, China enjoys political stability; Third, since the founding of the People's Republic of China 46 years ago, and since the start of reform and the opening-up program in particular, China has built up a solid economic foundation; Fourth, the relatively low starting level of the country's economy and the huge potential demand of its market, which is also open to the world, provides a lasting driving force for future development. We have nowmapped out the Ninth Five-YearPlan and a Long-TermPro- gram for 1996to 2010, with two majorobjectives. The firstobjective is to qua- druplethe per capitaGNP of 1980by the end of 2000; the second objectiveis

69 to double the total GNP of 2000 by the end of 2010. To achieve these objectives, two fundamental changes are necessary: Namely, the successful transition from a plannedeconomy to a socialist marketeconomy, and the transition from an expansion-orientedto an efficiency-orientedgrowth pattern.The successful implementation of the above-mentioned programs will lay a solid foundation for the country's sustainable development in the next century. Reform and development of more than a decade have given an entirely new face to China's economy: it is now an open economy and has become an indispensable part of the world economy. While bringing benefitsto the Chi- nese people, China's developmenthas also created favorableopportunities for other countries. China's fast-growingexports make it possible to increase imports, particularly of high technology and high value-added products, thereby creating high-income job opportunities for the industrial countries. And development in China has provided vast markets for foreign investors, attracting a steady flow of external capital into the country. The Chinese Govemmentencourages investors who aim at long-term return to invest in priority economic sectors by improving the investmentenvironment based on market-mechanism.We in China sincerely welcome foreign investors to share with us the opportunities made available as a result of our economic development. Facts have always shown and will continue to show that a prosperous China will not only benefit the development of the world economy, but also represent a strong force for maintaining world peace and stability. The World Bank, the International Monetary Fund and other multilateral institutions have in various ways made positive contributions to China's reform and development in the past 15 years. The successful cooperation between developing memnbercountries, including China, and multilateral institutions has demonstrated sufficientlythat these institutions can still make great a difference in the developing world. Both as a shareholder and a major borrower of the World Bank, China is very much concerned with the future of the WorldBank. It is our view that the role played by the institutionover the past 50 years should be fully recognized and its limitations should be evaluated in a historical context. The World Bank should undertake reform to adapt to changing circumstances, enhance efficiency, listen more readily to its developing members, and more adequately meet the actual needs of its borrowers. Nevertheless,we believe that whatever approach the Bank adopts to reform itself, the institution's fundamentalobjective of promoting development in its member countries should remain unchanged. The UN system should maintain a division of labor, with each member assumingits own responsibilities.The World Bank must adhere to its Articles of Agreement and continue to promote the transfer of resources to developing countries as its most fundamental objective. Here and now, we want to express our deep concern over the prospect of IDA-.1 . The experience in the past decade shows that, as a direct assistance to

70 the poorestdeveloping countries, The InternationalDevelopment Association (IDA) has played an irreplaceablerole in carrying out the developmentfunc- fionson the part of the WorldBank. We appreciatethe active effortsthe World Bank has been making for IDA. We call upon the major donorsto take a positive attitude to ensure that IDA reach a satisfactorylevel of replenishment. The IMF has made positive contributionsto the adjustnent programs of developingand economies transition.We support a large increaseof the IMF quotas in a timely fashionin order to provideadequate assistanceto the financial needs of its member countries. In our opinion, the growth of developing countriesshould be fullyreflected in the calculatedas well as the actualquotas of the IMF. In the past 16 years, economicgrowth rate in China has averaged 9 percent, which is muchhigher than the world average.China's foreigntrade has also been expandingrapidly. However,since the ninth GeneralReview, the share of quotas of China has beenon a continuousdecline and the present level does not truly reflect its growing economic strength.We are seriously concernedwith this anomaly and hope that it can be duly addressed by the IMF as early as possible. We have consistently held that the ID should obtain its financial resources mainly through quota contributions from its member countries. Withthis prerequisitein mind,we supportthe recommendationto increasethe total General Arrangement to Borrow (GAB) commitment and expand its scope. I wish to stresshere that, given the cooperativenature of the IMF as an intergovernmentalorganization, decisions on GAB-relatedissues should be made within the frmework of the IM. By the same token, new membersof the GAB must be on equal footing with old members; and participantsand non-participantsalike must be treated equally for the use of GAB resources. We would also like to reiterate our positionthat the Fund shouldrefrain from financingthrough channels other than officialsources of members. We support the provisionby the IMF of concessionalfinancial assistance to low-incomedeveloping countries through Enhanced Structural Adjustment Facility (ESAF).Industrial countries should fulfill their financialobligations toward the "Interim ESAF' so that the self-sustainableESAF would start on time. We continue to lend our support to the proposalof a generalallocation of SDR proposedby the ManagingDirector of the IMF. It is our hope that major industrialcountries will reconsidertheir positions in the spirit of cooperation, with a view to completingthe SDR allocationat an early date. The Chinesepeople pay close attentionto the situationof the world economy whiledevoting themselvesto the nationaldevelopment. The world economy in 1995 has been moving in a positive direction: many developing countries continue to maintain a high growth rate, most transitional economies have begun to gain net growth, and the majority of industrialcountries have fully recoveredfrom recession.Despite all these positive developments, the world economyis far from problem-free:the incidenceof poverty is still

71 prevalent in many developing countries; the exchange rates of major industrial countries remain volatile; trade protectionismpersists; and severe uncertainties continue to exist in the externalenvironment of developingcountries. And the most worrisome is the continued decline of Official Development Assistance(ODA). We call upon the industrial countriesto keep in mind the common interests in the developmentof global economy,take into full considerationthe impactof their policieson developingcountries, and fulfilltheir internationalobligations. We, in Chinaare making immenseefforts to developour nationaleconomy. We are well aware that developmentis notjust a task exclusivelyfor China and for the developingcountries; it is a noblecause for the entire mankind.

CROATIA: BOZO PRKA Governor of the Bank

It is a great pleasure indeedto be able to address such a prominentgroup of experts from all over the world. New Challengesfor Iniernational Financial Institutions Today, internationalfinancial institutionsare facing new challenges and are thinking about new strategiesin order to adapt themnselvesto the new global environment and to increase all areas of their operations. The fiftieth AnnualMeetings of the BrettonWoods institutionsare not only a time for celebration, but also a time to critically assess past achievements,and possible mistakes,and boldly look ahead to the future. In addition to my congratulationson this important anniversary,I would like to congratulateMr. James Wolfensohnon his appointment as the new President of the World Bank and to wish him all the best in his new position. The World Bank is trying to pursue more cost-effective,flexible lending due to the changingneeds of its members.Of course,its main activity,lending on the world capital marketsand to its membercountries, has not changed.World Bank activitiesare far too large to be even mentionedin a short address. But, two points deserve special attention. First, lending for education and health has tripled over the last three years. Croatia welcomes this change since we are fully aware of the long-termimportance of these areas for the well-being of the populationand for sustainedand sound economic growth. One cannot but recall the old Chinese saying: If you think a year ahead, sow a seed; If you think ten years ahead, plant a tree; If you think a hundred years ahead, educate people. The second point is lending for environmentalprotection. Though developing countriesano, especially,very poor countriesmay tend to think of the

72 environment as a superior good, which one consumes only at high levels of income, in our view, environmental protectioniis a wise, long-tenn orientation. Finally,recent internal changes in the World Bank, especially orientation toward a leaner and more cost-effective organization (by introducing tech- niques to control costs, removing layers of manugementstructures, and so on) should be particularly praised, as large organizations may have the image associatedwith careless spending and bureaucraticinertia. The InternationalMonetary Fund faces new challengesas well. Its gentral aim, which is to be prepared for the "crises of the twenty-firstcentury," is a tremendoustask indeed. In this connection, it tends to strengthen its surveillance so as to prevent future crises and, if they occur, be strengthened financially to intervenein a more efficientway. This basically means increasingits resources through the possible Eleventh General Review of Quotas and proposals for doubling the GeneralArrangements to Borrow.Globalization of the world financial markets and sophisticationof financial instruments (like the much talked about derivatives)point to the fact that crises in one country can very speedily spill over to other countriesas well. So, for a country,and especially for a small openeconomy like Croatia, it is not enough to pursue "sound policies at home:" but one has to watch world developmentsas well. In that regard, Croatia especially welcomes the orientation toward greater transparency between member countries. We have always regarded this as an important issue. Six Years of Transition Experience and What Lies Ahead It can be stressedthat, more than any other event, the fall of the Berlin Wall six years ago symbolized the beginning of the transformation of centrally planned economies to market-orientedones. One lesson that we have all learned is that transition is a multifacetedphenomenon that encompassesnot only fundamentaleconomic changes, but complex structural,behavioral, and institutionalchanges. And as we have seen from the experienceof the disintegration of all post-Versaillesfederations-the Soviet Union, Czechoslovakia, and 'Yugoslavia-the fall of socialism at the same time initiated the process of nation building as twenty-two new countriesemerged. The complexity of the transition process can be seen in a new branch of economics-economics of transition-which has emergedand in an entirely new internationalfinancial institution whichwas created to deal with the phenomenon(the EuropeanBank for Reconstructionand Development(EBRD)). Even existing institutionscreated new facilitiesfor transition (systemic trans- formationfacility), proving that transitionis a phenomenonwithout historical precedent. But, after the appearanceof numerousbooks on the subject,countless conferences,and newjournals, one can say that still no definite analytical framework has been agreed upon. In spite of the lack of simple answers, one common conclusionthat can be drawn is that macroeconomicstabilization is

73 crucialfor thesuccess oi transition.Almost all countriesstarted transition with variousdegrees of macroeconomicimbalance. The first years were marked with a tremendousfall in outputnever before experienced in modemhistory, high inflation,which sometimes turned to hyperinflation,and the collapseof externaltrade, especiallyin the formerCouncil for Mutual EconomicAssis- tance. Macroeconomicstabilization is a necessarybut not sufficientcondition for the success of transition. Countries must immediately embark on niicroeco- nomicreforrms, impose hard budgetconstraints, trim down or closelarge loss makers,and startbuilding sound finance. Onebig lessonthat can be learnedfrom existing experience is that transition is not a onetimeshot, not even a short-runeffort, but a lengthybattle, a marathonfor whichone needs to be well preparedboth psychologicallyand physically.As transitionhas no alternative(but to go back to the old system) on the way to a free-marketeconomy, it is better to be readyfor it. It is true that formidableobstacles lie ahead.But, it is equallytrue that thosereforms will be rewardedin the futurewith the increasedwell-being of the population withinthe global worldeconomy. The Croatian Economy and its Relations with the WorldBanik and the IMF Croatiais a new,sovereign economy that gainedmonetary independence only fouryears ago, and it is essentialto pointout that monetaryindependence was a necessaryprecondition for warrantedtransformations in the Croatian economy.Reforms, as in othertaansition economies, are neededto speed up economicgrowth and promoteprosperity. They are not possiblewithout: first, introducingits own currency; second, stabilizingthe economy;and third, implementingfinancial reforms and microeconomicrestructuring in the real sector. Some of Croatia's problemsare commonto other transitioneconomies, and some are country-specific.A commonfeature is that it is one of many countriesthat emergedafter the disintegrationof formerstates. The Croatian transitionprocess is markedby somevery specificfeatures. First, its economy was more market-orientedthan that of other former socialist and centrally plannedeconomnies. Second, disintegration was, unfortunately,linked to the war andthe occupationof part of Croatia'sterritory which has created,among other things,a tremendoussupply shock by destroyingproduction capacities, cuttingmain transportation lines, and seriously increasing the noncommercial risk for foreigninvestrnents in the country.Third, it achievedmacroeconomic stabilizationwithout any external support, but by relyingon its ownresources. Croatiaembarked on a stabilizationprogram in October 1993.Today we can proudlysay that we havea documentedrecord of two years of price stability,that is, negativeinflation in 1994(minus 3 percent)and expectedinfla- tion no higherthan 2-4 percentin 1995.This fact reflectsa high degreeof macroeconomicstability in the country. In the meantime, international

74 reserveshave increasedfrom zero at the momentof monetaryindependence to almostUS$2 billion by end-September1995. We considerthe continuationof the lengthyand difficultprocess of regu- lating externaldebt (complicated due to thedisintegration of the formerYugo- slavia)a big successas well. By mid-1995, Croatia's external debt was about US$3.6billion (includinginterest in arrears,but withoutthe so-calledunallo- cated debtof the formerYugoslavia to commercialbanks). This is not considered excessiveas it representsless than 25 percentof its GDP.By mid-1995, total arrears(principal and interest)were about US$1.2 billion. Croatia is current on its debt-servicepayments to internationalfinancial institutions. One shouldnote that an agreementwith Paris Clubcountries was reached in March 1995,and bilateralagreements with member _ intries of the Paris Club will be signedvery soon. It is expectedthat an agreementwith the Lon- don Club commercialbanks will be reachedsoon. Croatia'srelations with both the WorldBank and the IMF can be labeled as very good. Croatiahas both stand-byand systemictransformation facility arrangementswith the IM, whichmeans accessto 75 percentof quota until end-1995. It must be stressed that Croatia has benefitedfrom IMF technicalassistance in the past.We havereceived knowledgeable recommendations from the Fiscal Affairs, Statistics,and Monetary and ExchangeAffairs Departments during more thanten missions.Croatia has benefitedfrom educational facilities at the Fund, both in Washington,D.C. at the IMF Instituteand in Austria at the JointVienna Institute. Lately, Croatia has received loans from the WorldBank as well. They include the EmergencyReconstruction Loan in 1994 and HealthProject and Highway Sector Project loans approved by the World Bank Board at the beginningof 1995.We haveto mentionthe Istria Water Supply Loan approved when Croatiawas partof the formerYugoslavia. In additior, relationswith the WorldBank are expectedto improvein the future, as we will explainbriefly. Whatdeserves special attention in the future road to a marketeconomy? First,after price stabilityhas been achieved,the main goalis to keep infla- ton low.The inflationtarget for 1995 is 2-4 percent.To achievethis rangein the mediumterm, financialmarkets must be developedand microeconomic restructuringimplemented. For the time being,there are not enoughsecurities outstandingto conductopen marketoperations, that is, indirect monetarypolicy. It is expectedthat the Governmentwill start issuingshort-tern securities quite soon. Macroeconomicstabilization is neededin the long run.We highly regard the role of the Fund in helpingus to maintaina stableframework, and we will be commencingnegotiations with the Fund on furtherrelations iTmme- diately,as the presentprogram will expire soon. Second,the rehabilitationof banks is essentialfor furtherimprovement in monetarypolicy and the financialsector at large, as large banks are burdened with the consequencesof previousbad loans.Since independence, the Croat-

75 ian Governmenthas recapitalizedbanks, that is, has undertakena so-called linear rehabilitationof the bankingsector. By the end of 1994,more than40 percent of baniks'total assets were claims on central Government(public debt). Part of the remainingbanks' assets will be classifiedas nonperforming loans. Therefore,some banks are faced with sevcre liquidity and solvency problems.But, bankrehabilitation cannot be successfulwithout tlh restructuring of large loss-makingstate-controlled enterpiises. They must be stream- lined and exposed to market rules. Croatia is closely cooperatingwith the World Bank on a possible Enterpriseand FinanceSector AdjustmentLoan. We expectcooperation in the public sector in general(Public Sector Adjust- ment Loan) withan emplhasison the reformof the pensionand health systems. Numerous missionsare exploring the possibilityof agriculture assistance (AgricultureSector AdjustmentLoan) and assistance in other areas of the economy.Thus, Croatiais lookingforward to long-termcooperation with the WorldBank on financialsupport for structuralreforms and on its development path in general. Third, furtherreforms, aimed at changingthe behaviorof the economyby imposinghard budget constraints(increasing financial discipline) and opd- mizingresource allocation, are urgent.To achie'e this goal,organizing an efficient paymentssystem, which is necessaryfor good financialintermediation, is a prerequisite.Rules for exit out of the market,or bankruptcyprocedures, mustbe si. plitiedand the processspeeded up. In this area we will haveto rely on our determinationand will to achievethe final goalof sustainedand sound growth.We are awareof possiblemistakes, but as has been said before:"The only peoplewho neverfail are those who nevertry."

DENMARK: MARIANNE JELVED Govermorof tze Fund (on behaf of the Baltic and Nordic Cournries) I have the honor of addressingthis meetingon behalf of the three Baltic countriesand fiveNordic countries-Estonia, Latvia,Lithuania, Finland, Ice- land, Norway,Sweden and Denmark-on mattersrelating to the IMF. Since the AnnualMeetings last year, the upswingin the world economy has becomemore firmlyestablished. During 1994,economic gro"'th spreadto almost all industrialcountries. The economiesin transitionhave also shown enicouragingsigns of recovery,especially in those countrieswhere stabilization policieshave beenfirmly implemented. Furthermore, in manydeveloping countriesa rapid economicexpansion continues. Developments have, however, been marredby the Mexicancrisis and exchangerate turbulencein the firstmonths of this year. As a result of the recoverydurinig 1994, world trade expandedstrongly, recordingthe largestyearly gain since 1976.The UruguayRound trade agreement,which took effectfrom January, will givefurther impetus to globaltrade

76 and economicgrowti in the years to ome. All in all, prospectsfor the futuredevelopment of the world economyare good. Nevertheless,a numberof importantchallenges continue to face economicpolicies. First and foremost,the unemploymentrate is unacceptablyhigh in many industrialcountries, especially in Europe.A commonand determinedeffort is needed in Europe to solve this serious problem.In this regard,a number of importantinitiatives were launched by the Heads of State and Governmentof the EuropeanUnion when they met in Cannes,France this past June. During 1994, we have experienced growth in employmentdue to the higherrates of economicgrowth. Continued growth is a preconditionfor continued expansionin employment.Growth is also important to ensure that countries proceed with the crucial structural reforms of-among other things-labor markets.In the short termn,we must take furthersteps in the immediate future to achieve macroeconomicstabilization, especially as regardssustainability of public budgets.This is the basis for sustainedgrowth and furtherprogress in reducingunemployment. Environmentalproblems are growingglobally. Environmental consider- ationsmust be taken into account when fonnulatingeconomic policies. This is an integralpart of the overall economicpolicy guidelinesof the European Union,just as the need for safeguardingthe environmentwas emphasizedby the Groupof 7 countriesin their Halifaxcommunique. It is also one important elementin what Mr. Camdessushas labeled"hi-'h quality growth." One way in which economic policiescan ptomote growth and employment, whileat the same time protectingthe environment,is to shift the balance of taxationaway from laborand towardother taxes,for example,"green taxes." Where such environmentaltaxes take the form of energytaxes, they should not create new wedges between imported and domestic energy sources. "Highquality growth" and macroeconomicstability must go hand in hand. Wewelcome that the Fund is attachingmore importanceto environmentalfac- tors in its economicpolicy advice to memnberstates, where appropriate. The relationshipbetween the Eurol .-an Union (EU) and the Centraland Eastern European countrieshas undergoneradical changes during the last seven years.All analysespoint to the fact that Europe will reap considerable economic benefits from increased cooperation.Membership in the EU is regardedas essentialby the Balticand the other Centraland EasternEuropean countries.Thas, the EU must not, and cannot,be inward-looking. If these countriesare to reapthe full benefitsof EU membership,they must ensure stable macroeconomicconditions and continuethe necessaryinstitu- tional and structuralreforns. The EU, on its part, nust stand ready to furtherimprove access to its markets and providefinancial assistance. Let me now turnto the role of the Fund.Many things have happer.cd since

77 the AnnualMeetings in Madrid last year. Discussionsof the future role of the Fundand proposalsfrom the Halifaxsummit of the G-7 countrieswill contribute to enhancingthe policies of the IMF in the future. The disappointingdevelopments in Mexico in 1994 and their repercussions have sharpened the focus on an improved early warning system. An importantissue for the future role of the Fund is how the Fundcan assistcoun- tries to handle future crises like the Mexicancrisis. In a modem world in which economicrelations have become globalized, it is importantto strengthensurveillance to prevent future crises.This should be done, not only by reguilarsurveillance of all membersof the IMF,but also by payingparticular attention to those memberswhose economies can have a systemic impacton the rest of the membership. By strengtheningsurveillance, the Fund will be able to act as an "early warning instrument"and contributeto policy formulationin order to achieve sustainedstability, particularly in exchangemarkets. However,the effectiveness of Fund surveillanceand financialpolicies need to be clearly strengthened through regular and transparent information provided by member countriesto financialmarkets. The more transparentinformation from member countries is, and the more transparentpolicies are, the more gradual the reactionsof the marketswill be. This will allow countriesto be better prepared to take action in a timely way,rather than reactingto crises with the accompa- nying hardshipsfor their populations. Therefore,the Fund mustemphasize the need for membersto providebet- ter and more timely data both to the Fund and to markets.This issue is at the heart of the Fund's activities and the centerpiece of the present efforts to strengthensurveillance. The Nordic and Baltic countries support the Fund's setting standards to guidemember countries in providingdata to the public and encouragingcoun- tries to produce,and widely disseminate,key data. We supportthat the Fund give technical assistancein cases where the authoritiesneed help to produce or release the data usefulfor financialmarkets. We welcomethe endorsement of the InterimCommittee on this issue. We are also in full agreementwith the Fund's efforts to promote closer cooperationamong the key players in the global economyand to strengthen surveillanceas the central elementof the Fund's contributionto better economic policies. The IMF's role in surveillance over macroeconomicand exchangerate policy has to be emphasizedin the G-7 coordinationprocess. In this context,macroeconomic stabilization is needed to avoid excessivemove- ments in interestrates and exchangerates. We welcomethe concertedaction by the Groupof Three countriesto intervenein exchangemarkets and thereby reducevolatility. The Fund's role regardingthe heavily indebted poor countriesis to encourage and support the pursuit of strong economic programs for these member countriesthrough policy, technical advice, and financialsupport under a con-

78 tinuation of the EnhancedStructural Adjustment Facility (ESAF).ESAF is a convenientand useful instrumentfor the IMF to alleviateand smooththe necessary adjustments that have to be taken in poor countries-which was also endorsedby the InterimCommittee. In many African countries, unfavorable external conditions and high indebtedness,as well as domesticpolitical difficulties,have made it more difficult to attain macroeconomicstability. The high debt burdens of many low income countriesemphasize the continued need for technicalassistance and financingalso from the Fund, but it is critical to focus this assistance on the areas most in need and on countries that are ready to address the underlying problems. At the Social Summit in Copenhagenin May this year, there was a global consensuson the importanceof povertyreduction as the majorgoal of sustainable development The Fund has an important role in promotingeconomic policies oriented toward economic growth that bring lasting high employment, and growththat reduces povertyand incomeinequalities. This is indeed an ambitiousobjective, but we can go for nothingless when hundredsof millions of people in developingcountries still live in extremepoverty. In this connection, the Nordic and Baltic countries welcome the work underwayin the Bretton Woods institutionsregarding debt reduction for the poorest countries. The Nordic and Baltic countries consider the question of multilateraldebt in heavilyindebted poor countriesvery importantand central in the discussionon the possibilitiesto alleviatepoverty in the poorest countries. Resolvingthe debt problem for this limited group of countriescalls for a concertedand comprehensiveapproach. All measuresto assist the problem ccuntries shouldbe taken on a case-by-casebasis, and performanceon sound economicpolicies must be witnessedbefore debt relief can be granted. Another importantissue is the Fund's resources.It is essentialfor the Fund to have adequateresources to allow it to fulfill its mandatefor the future. The Fund has to strengthen its resources by expediting the Eleventh General Review of Quotas to obtain sufficientordinary resources to meet the needs of its members.We need to move quickly to completethe review of quotas. An increase in the Fund's borrowedresources is also under consideration, in particular the General Arrangementsto Borrow.The G-7 countries at the Halifax sumnit suggestedthat the Group of 10 (G-10), and other countries with the capacity to support the system, should increase the resources currently availableunder GAB.We find that GAB can be a useful instrumentin situations in which the Fund's ordinary financialresources are insufficientto deal with systemic crises. The Nordic and Baltic countries believe that it should play a supplementalfinancing role for the Fund, but negotiationson this issue shouldnot delay the EleventhGeneral Review. The Nordic and Baltic countriescontinue to support the Fund as the central internationalinstitution for laying down guidelinesfor global macroeconomic and exchange rate policies.The IMF is well placed among the international

79 organizationsto play a prominent role in furthering the prosperityand well being of the global economyand its populations.

EL SALVADOR: MANUEL ENRIQUE HINDS Governor of the Bank

I would like to take this opportunityto share with you sorne of the most significant achievements made by El Salvador and the challenges yet to overcome. The difficultyears of intemal conflictare behind us. El Salvador is now a countryat peace, thanksto the efforts of all Salvadoransand the supportof the UnitedNations systeni and friendlycountries. We are experiencinggreat vital- ity thanks to the efforts of the citizenry and the new conditionsthat allow the private sector to give free reign to its creativity and productiveforces. In the wake of opening up and liberalization,prestigious research institutionshave ranked the Salvadoraneconomy as being among the most liberal. Indeed, we have no price controls,the exchange rate is set by market forces,comrnercial bankcingis in private hands, and interestrates reflect the interactionof supply and demand.There are virtually no barriers to foreign trade, and the capital accountof the balance of paymentsis unrestricted. As a result of this process, El Salvador's economyhas grown by an average 7 percentin the last three years andwe hope to maintainthat pace this year and the next Inflation,which peaked at 31 percentin 1985-86,fell to less than 10 percent in 1994and will remain at about that level in 1995 and 1996. The public sector deficit declined from 4.6 percent of GAP in 1992 to 0.6 percent in 1994.It will remain at that level this year and will be virtually eliminated in 1996, largely owing to the increase in the tax burden, from 9.6 percentof GAP in 1992 to 12 percent in 1995.It is estimatedthat the rate will be some 13 percentin 1996,thanks to the unshakablecommitment of the Governmentto improvingtax administration,approving reforms to penalize tax evasion, and closing tax loopholes. The external sector has also performed well. Internationalreserves are equivalentto about four months of imports;exports have increased appreciably, led by in-bondprocessing, which today accountsfor one-thirdof our total exports. Importshave tripled in the last five years as a result of El Salvador's greater economicolrtward orientation and vitalityand its major inflowsof capital goods. Our basic cbjective at this dme is for El Salvadorto become a country of opportunity,where social mobilityand equity prevail.We do not envisioneco- nomic growth without social development To this end, we have significantly increased social spending,which is expected to accountfor 50 percent of the national budget in 1999. We are also in the process of making sweeping

80 reforms in education and health, as we want to significantlyincrease investment in human capital, in order to boost the productivityof our people and become more competitiveas a country.By investingin people, we hopeto create equal opportunitiesfor our advancementand to build durable social peace on the basis of humanprogress. We are also preparing to cut investmentand productioncosts that do not contribute value added to international prices. To that end, we have undertaken a number of reforms, notably the following: * A tariff roll-backprogram. The tariff on capital goods and inputs will be zero percent, while the tariff on consumer goods will be reduced from 20 percentto 15 percentin January 1996and will continueto be gradually loweredover the followingyears. * Public sector reform, aimed at reducing the costs of bureaucracyfor the private sector and improvingefficiency in service provisionto the public. * The introductionof competitionin the provisionof telephone,electricity, and port services,with a view to increasingthe efficiencyof these services by preventingmonopolies. * Privatizationof telephoneand electricityservices and ports, to change the structure of public investmentin such a way as to encourageinvestment in human capital. * Reform of the pension system to increase domestic saving, develop the capital market, and give workers more options in planning for their futures. In addition, resources are being allocated to further the developmentof local governmentsand the socioeconomicadvancement of their communities. These resources will fund social projects and local infrastructure,until such time as the investment in human capital bears fruit. Local development projects are aimed at creating new employment opportunities and options, especially in the rural areas; helping to break down the concentration of sources of production;decreasing migrationto urban areas; and fosteringbal- anced developmentnationwide, as far as possible. It is through this mix of economic, social, and environmentalprotection policies, the strengtheningof the democratic process, and the reform of the Salvadoranjudicial system that we are creating the conditionsfor attracting national and foreign investment. We believe that the World Bank and InternationalMonetary Fund policies should be geared toward helping countriesto become a part of the globalization process and efficientlyinvest in'human and physicalcapital, so as to raise levels of competitiveness. In concluding,we wish to invite foreigninvestors to visit and get to know

81 our country and to become partnersin the progress of our society.Our major national objective is to tum El Salvador into a country of opportunity;with equity and social mobility,so that we can rise to the challengesof the twenty first century.

ESTONA: MART OPMANN Governor of the Bank (on behalfof the Governments of Joint Baltic Group)

On behalf of the Governorsof Estonia,Latvia and LithuaniaI wish to welcome Mr. Wolfensohnas the new Presidentof the World Bank. As his first months in the office have shown, the World Bank has now a dynamic, committed and efficient leader. The Baltic countries look forward to further strengtheningof the Bank and a true partnershipbetween the Bankand its borrowers under his leadership. Estonia, Latvia and Lithuaniajoined the World Bank and the IMF three years ago at the midst of economicstabilization and liberalizationefforts, economic contraction,severe trade disruptionand other transitionaldifficulties in our countries.During these three years,all the Baltic stateshave gone through various Governmentreshuffles, elections and political debates on the reform agenda, but the general course on transitionto a market economysystem has remained firm. Today economic stabilization has been greatly achieved, growth in GDP has resumed,trade patternsare welldiversified and trade flows have significantlyincreased. In this process, guidance of the Bank and the IE4Fas well as their financialsupport has been valuable. Estonia, Latvia and Lithuania are presentlyentering a new stage in their development.All three countrieshave signed associationagreements with the European Union, aiming to become full membersin few years. The world is also opening up to us in other areas. While a few years ago the only credit source for the Baltic countries were the international financial institutions, then today we can access the internationalcapital markets.Latvia has already made its first foreignbond issue. Private capitalflows, especiallyinto Estonian economy,have also been substantialand are yet on the rise. This means that the Baltics now have alternativesand can better choose financingmost suited to their investmentneeds. All the Baltic countrieshave pursueda very conservative borrowing policy, so there should be no reason to believe that new financing opportunitieswould over time adversely affect the countries' debt servicing capacityor creditworthiness.These new opportunitiesdo not mean that the Baltic countrieswill give up cooperationwith the Bank. The World Bank's technical advice in project preparationand the Economic and Sector Work have been extremelyvaluable for each of the Baltic countries.Selective financialinterventions by the Bank in key sectors,which pose higher development challenge,are still needed.The Baltic countrieshave a high demandfor

82 infrastructure projects' financing. Bank's participation in these projects through the guarantee mechanism would be advisable. It will allow to attract new sources of financing, to reduce the costs and extend maturities. The first three years oP cooperation have been a mutual learning process, which is already bearing some fruit. The Baltic countries have been relatively comfortable partners for the Bank, providing useful input also for Bank's activities in the former Soviet Union. To date the Bank has approved six operations in Estonia, five in Latvia and four in Lithuania. Several other projects are now in the pipeline. Our experience shows that in small countries like the Baltics, absorptive capacity is always an important consideration. We have learned, that if due attention is not paid to project implementation in the early stages of project preparation, then delays and disappointments can not be avoided. During the transition period, the economic and political environ- ments change fast and so do the needs of the countries. Even if project implementation on average has been progressing well, the Baltic countries have also encountered difficulties and delays that occur when amnending already approved projects. Due to the rapidly changing and improving economic environment, more rapid preparation and a higher degree of flexibility is necessary. Transition still poses serious challenges both to the Bank and the countries involved. Estonia, Latvia and Lithuania are willing to share their experience and continue to lern together with the Bank. I look forward to the coming World Development Report on transition, which should help the concerned countries to analvse their achievements and efforts, but hopefully will provide them with valuable guidance for the future.

FIJI: BERENADO VUNIBOBO Governorof the Bank

It is an honor to attend the fiftieth Joint Annual Meetings of the World Bank Group and the International Monetary Fund. On behalf of the Govem- ment of the Republic of Fiji, I wish to take this opportunity to express our sincere regret on the untimely death in May this year of the former President of the Bank, Mr. Lewis Preston. I would also like to join other Govemors in welcoming the new President, Mr. James Wolfensohn, to his first Joint Annual Meetings and wish him well in his tenure. I warmly welcome Brunei Darus- salam to the membership of the Fund and the Bank. The global economic outlook has been adequately analyzed by fellow Gov- ernors and in staff documents. Economic trends seem to increasingly indicate that the upturn in the major industrialized countries during the last three years is in danger of losing momentum. The unsynchronized performance amongst the leading economies is a stark indication of the lack of economic convergence, which underlies the continuing turbulence in the international markets. I am convinced that the greatest risk to sustained global growth is still

83 inflation.I believe that price stabilitymust remain at the top of our economic agenda. Industrial countries must lead the way. Price pressures are building up. We must seize the opportunityto practively nip these inflationarypressures in the bud. On developingcountries as a group, I am encouraged by the continuing strong performance,although there are significantvariations amongst regions and individualcountries. The commendabletrack record of developingcountries is a testimony to the difficulteconomic and structural reforms that they have put in place.However, the effortsof developingeconomies have not been helpedby the intense and regularvolatility in the global exchangemarket. The contagiouseffects of this turbulenceare rapidly transmittedto emerging markets, destabilizesdebt servicing, and complicatereform implementation.We therefore welcome the proposed introduction of the currency stabilisation facilityby the Fund. However,we must realizethat the facilityon its own does not address the root of the problem.It must be accompaniedby proper macroeconomic strategies.Furthermore, as recent events have indicated, the establishmentof an informalexchange rate target zone will be difficultto maintain for any considerablelength of time. The only sustainableanswer is for industrialized countriesto activelypursue economic convergence through appropriate policies and structural reforms. Exchangerate stability is at the core of the Fund's charter.Surveillance is the main instrument of this objective. I welcome the strengtheningof the Fund's ability in this critical area. Nevertheless,I would like to suggest that the Fund's surveillancestill needs to be more focused.Development in small member countries such as Fiji can hardly cause a ripple on the world scene. The industrialcountries very muchhold the balanceof order in the world markets. The proposed dual standards of data reportingto the Fund must reflect this relativity.Furthermore, the Fund must pursue opportunitiesto represent its views in the main intemationalforums. The recent market volatilityhas been enhancedby greater capital mobility across borders and time zones. In developingcountries, the struggleto restructure and developa more efficienteconomy will take time. During this market liberalizationprocess, developingcountries become extremely vulnerable to large fluctuationsin world market conditions.Capital controls offer essential support.Therefore, I urge the Fund to resist the moveto make capitalliberaliza- tion mandatoryunder the Articlesof Agreement.Instead, the Fund could continue to advise memberson a case-by-casebasis under the currentArticle IV consultationframework. The recent Mexicancrisis has taught us manylessons. In particular,the crisis severely tested the resource availabilityand mobilizationcapability of the Bretton Woods structure. Is the current liquidity sufficient in the event of another majorcrisis? We musturgently buttress the liquidityof the Fund and the Bank.Although I join the call for a speedynegotiation of the EleventhReview of Quotas, I fully realize that this will take time. The strengthening of the Gen-

84 eral Arrangementsto Borrow(GAB) can offeran immediatefall-back solution. On the Bank side,I sharein the concernat the slowimplementation of IDA-10 and encourageindustrial countries to fullysuppcort IDA-1 I replenishment. At this juncture, I would like to highlight three special needs of small PacificIsland countries including Fiji. The first is the implicationof the Agri- cultural Liberalizationin the Uruguay Round. I am pleased that the Round appearsto have achievednew transparency through tariffication. However, we shouldnot quickly ignore the honorableobjectives of the agriculturalnegoti- ations under the Uruguay Round which were "to establish afair and market- oriented agricultural trading system, reverseprotection isrnand remove trade distortions in agricultural trade." Regrettably,I am disappointedthat the Round has brought about substantially less liberalization than had been expected.Instead, most developed coutntries have establishednew base tariffs that reflecteven higherprotection than had been providedby the nontariff barriers that they replaced.As a consequence,it is highlylikely that tariffrates in the year2000 and beyondwill remainvery highon manyagricultural products and, in manycases, as high as, or even higherthan, effectiverates prior to the agreemenL The implicationof suchdevelopments on predominantlyagro-based economies like Fiji can be devastating.As net food importers,Fiji will be confronted with higher world prices. At the same time, the loss in preferential treatmentfor its exportsmay not be offset fully by new access to the markets of industrialcountries. My secondpoint, concems the role of the BrettonWoods institutions in the promotionof private sector activitiesin the South Pacific region.I welcome the Bank and the Fund's increasingrecognition of the critical role of the private sector in development.I endorse the Bank's current strategies,which encompasspublic enterprisereforms and privatizationsas well as creatingan enablinginvestment environment through market liberalization and deregulation. However,I see a need for the Bank to sharpen its vision and to better coordinateits strategiesin these areas,especially for DDAand transitioncountries. I believethat one of the importantconditions for effectiveprivate sector developmentis the presence of a strong financialsector. In this regard,Fiji continuesto see many opportunitieswhere IFC's South PacificProject Facil- ity and the ForeignInvestment Advisory Service in Sydneycan gain morevis- ibility with private entrepreneursin the Islands. We also welcome IFC's decisionto establish a separatepilot PacificIslands Quasi-EquityInvestment Fund in Sydney,and we hope that this can becomea permanentfeature of the Bank's assistanceto the private sectorin the region. Fiji is among many South Pacific island countries that are undertaldng structuralreforms designedto facilitateexport-led growth, where the private sectoris the drivingforce of the economy.These adjustmentsare not easy,nor are they painless. However, these small island countries, despite limited resourceendowments, continue to persevereand, at the same time,honor all

85 their internationalobligations. They, therefore,deserve the active support of the internationalcommunity, particularly the Bankand the Fund.We call once again on the two institutionsto be innovativein generatingflexible solutions to the special situationsof small island countriesin the South Pacific.At the same time, we reiterate our caution to avoid treating all South Pacific island countries with the same generalities,as there are critical differencesin key areas such as industries, institutions,and market sophistication.Economic policy adviceand programs,including their implementationand sequencing, must thereforebe country specific. My final point is on the future direction of the Bank and the Fund in the Pacificregion. We have read with interestthe Bank's recent reviewof its operations in the region entitled "PacificIsland Economies:Building a Resilient Economic Base for the Twenty-FirstCentury." We fully endorse the salient featuresof the report. We are greatly encouragedby the main conclusionof the report, that "an4 outward oriented investment-led growth strategy is needed-but not necessarily along the path of labor intensive agriculture ai:d manufacturing witnessed in the early stages of East Asian growth." Such a strategicstatement has reassured us of the future of our tourism and services industries.The report has also put forward convincingarguments regarding the need to obtain higher returns from our naturalcapital such as fisheriesand forestry. In our assessment,the borrowingneeds of islandnations in the Pacific,by world standards,will remain modestand will be mainly for financingthe con- struction of our infrastructure,although we will welcome the Bank and the Fund's strongerinvolvement in humanresource development in the region.In Fiji, privatizationand the developmentof the financialsector are some of the specific areas where future assistance of the Bank and the Fund can be focused.However, the bulk of our needs will continueto be in policy advice and technicalassistance. Therefore we urge the BrettonWoods institutionsto avoid any reductionin their technical assistanceprograms. On the Bank side, we specificallyrequest that it continueto undertakeeconomic and sector work both on a country and regional basis. These studies should form the basis of the Bank's future lending activitiesin the region in the years to come. We fully support the efficiencymeasures being implementedin the Bank and the Fund. We, however, stronglyurge the twin institutionsnot to discard the needs of their smaller membersin their quest to streamlineresources. In the same token,while we fully supportthe efforts to make the Bankleaner and more cost conscious, we warn that the quality of its projects should not be compromised. I concludeby thanking the Bank and the Fund for their past and ongoing assistanceand support to Fiji. The Fund's TechnicalAssistance Centcr based in Suva has proved very effective, and we are keen to see continued Fund involvementin this area. Valuableassistance was also extendedto the country by both institutionsin the areas of economnicassessment and advice,review of

86 governmentincentive structure and bank supervision.

FRANCE: JEAN ARTHUIS Governor of the Bank and ti/e Fund

The outlook for the world economyis good. Althoughgrowth forecastsin industrialcountries have been reviseddownwards slightly since last year, they have improved in developingcountries, in spite of the Mexican accident, as well as in the countries in transition.We must do our utmost to ensure that these broad-basedprospects are further strengthened.The success of the fight against unemploymentand in favor of sustainabledevelopment, which are in the forefrontof our concerns,depends on it. In this respect, the irtustrialized countries have a major responsibility, which goes beyond the management of their domestic economies, as their internalor externalimbalances have a detrimentalglobal impactin view of the globalizationof financialmarkets. France,for its part, has addressedthe task of fiscal consolidationwith determinationso as to be ready for the transition to the single currency,a crucial step for Europe, but also because it is absolutely necessaryto consolidatethe current pattern of growth. The reduction of major external imbalancesof some countries is just as crucial because these imbalancesdisrupt the proper allocationof savings and are a permanentvector of monetary disorders. Over the past year, we have both worked and acted togetherto enable the IMF to strengthenits central role in the surveillanceof the worldeconomy and to provide it with the resources necessary to discharge the new tasks with which we have entrustedit, as well as its traditionaltasks which it does both competentlyand efficiently.I welcomethe significantprogress that has been made in this area and which was confirmedthe day before yesterday by the Interim Committee. Procedureshave been put in place and financialresources are available but they mustbe further increased.The IMF must attaina size commensuratewith the developmentof world trade and have resources appropriateto the requirements of its members and necessary for its own financial soundness. It is therefore importantthat 've reach rapid agreement on a substantial and equitable increase in IMF quotas.To me, this is the number one priority becauseit affects the Fund's equity and thereforethe solidityand financialcredibility of the institution. In accordance with the conclusions of the Halifax Summit, the resources available under the GeneralArrangements to Borrow are to be doubled very soon with the involvement,I hope, of new contributorsto the structure to be set up. These, however,are additionalresources which can in no way be a substitute for an increasein quotas. It is also necessary to explore solutions for an equitable distribution of

87 SDRs betweenall IMF members.I very much hope that, if all involvedare willing,we shallfind a solutionnext year. I turn now to a subjectof major importanceto my country:development aid. The internationalcommunity is, as I see it, at a crossroads.There have never been so manyencouraging signs, but at the same time there are very seriouscauses for concern. In recentmonths, France has had good reasonto strengthenits confidence in developmentassistance. It hasbeen gratified to see theincreasing capability of some developingcountries to attract private financialflows. It has been impressedby the resultsobtained by countriesthat are introducingthe necessary reformnof theireconomies with the involvementof the BrettonWoods institutions.1 am thinkingparticularly of countriesin Africa,many of which, since the beginningof 1994, have been implementingcourageous policies with skill and determinationwhich have resultedin very satisfactoryrates of economicgrowth. Theseresults are an incentiveto continueinternational development aid. I can assureyou that Franceremains as determinedas ever to participatein this internationaleffort. She will focusmore than everon increasingthe effectivenessof that aid. The conclusionsthat we can drawfrom recent success stories andthe work we have donehere together over the past few days showthat we can stil do more with the resourcesavailable. I think that it is particularly importantto concentrateaid on the poorestcountries which do not haveaccess to private flowsand whichare pursuingeffective econoiic and socialdevel- opmentpolicies. At the same time,France realizes that the countriesthat are pursuingthese developmentpolicies remain for the time being depeiadenton international solidarityfor their financialviability. She wouldwish to see the intemational communityrespond. And yet, in this area, I must recordmy concemthat the major negotiationscurrently under way are beingoverly influenced by pessi- mismand the temptationof isolationism. There is certainly some reason to be satisfied,however. My country warmly welcomes the agreement which has been reached to make the EnhancedStructural Adjustment Facility (ESAF) permanent.But I remain concernedabout the negotiationson InternationalDevelopment Association (IDA)replenishment. The recentsuccess stories that I havejust referredto are evidencethat IDA can be proudof its recordand yet we areencountering real difficultiesin main- tainingits resourcesat an adequatelevel. IDA is the cornerstoneof our common action in favor of development,enabling the financingof the most difficultand the mostcostly reforms. Without it, theimpact of internationalaid andin particularthat of the WorldBank Group, would be seriouslydiminished. For France,a significantreplenishment of IDA is an absoluteand urgent priority.It calls uponthe otherdonors and lenders,and in parTicularthe leading one, not to tum back but to continuetheir joint effortsto findingan equi-

88 table way of maintainingwhat remainsthe main source of long-termfinance for the poorestcountries and their development. Once IDA has been sufficientlyreplenished, we can introduceinnovations or improvementsto the existing instruments.We all know that there is no lack of ideas in this respect. We must mobilize all the available instrumentsto implement a strategy of stable financingfor the developmentof the poorest countries. In this respect,I can assure you that a country like France which has not hesitatedto forgive$11 billion worthof debt of its poorest partnerswili come up with new ideas.But we must not reversethe order of priorities:the finding must be securedfirst for without it the ideas will be little more than posturing. The world has taken major steps over the last few months and in the right direction.It is our duty to accompanyand support these developments.They must be a sourceof hope and confidencefor the peoples of the world.

GABON: MARCEL DOUPAMBY MATOKA Governor of the Fund (on behalf of the African Governors)

The celebration,a year ago, of the fiftiethanniversary of the foundingof the Bretton Woods institutionsrevealed the magnitudeof the challengesfacing these institutionsanJ also provided us with the opportunityto recommend ways and means to deal with these challengesin a spirit of enhancedintema- tional cooperation.The time now seemsripe for us to review the international economic developmentsthat have occurred since then and to place into a proper perspectivethe relationshipsbetween our countries, the World Bank and the IMF. The data currently available confirm that the international economy has indeedentered a new growthcycle and that its overall short- and medium-term prospectsseem promising.In the developedcountries, the process of consol- idating the recovery was accompaniedin 1994 by a relatively low level of inflationthat had not been attained in these countriesfor roughly thirty years. Among the developingcountries, Asia sustainedits high growth rate, while economic performancein other regions, including sub-SaharanAfrica, was encouraging. Nevertheless,we remain concernedabout the persistentdisparities among developingcountries, in terms of both economicgrowth and the standardof living of our respectivepopulations, despite recent statisticsof the WorldBank and the Fund showingthat these disparitiesare margi;t.ii shrinking.Further- more, recent trends in financial markets show reflows of resources not only from certain emergingcountries but also from many other developingcountries, which forces us to temper our optimismabout the continuedexpansion of the world economy.We are concernedabout the negative impactof these

89 trends,given the inherentweaknesses of theinternational financial system. The Mexicanfinancial crisis bearswitness to the precariousnessof this situation.In fact, we fear that growthin developingcountries, at leastin the short term,will be affectedby a slowdownin capitalflows to emergingand other developing countries.Added to this is the risk entailedby instabilityin internationalfinancial marketsand exchangerate distortionsof the major currencies. We urge the majordeveloped countries, working in concertwith the Bret- ton Woodsinstitutions, to identifysolutions that will mitigate,or even prevent, these problems. It is in this context that we welcomedthe decision of the Grou.pof Sevenmee.ting in Halifax to discussissues relatedto the role of the multilateralfinancial institutions in the new intemationaleconomic environment.While praising the outcomeof this meetingand in particular,the pledge made by the participantsin regarrdto strengtheningthe multilateralinstitutions, encouragingthe growth of the global economy,reducing poverty, and respondingto and if possiblepreventing crises, it is our hope that in common with all of the developingcountries, we will henceforthbe fully includedin all discussionsaimed at improvingthe internationalfinancial system, so as to ensure that our concernsand interestsare duly taken into account. The improvedprospects for consolidatinggrowth in our countriesare the resultof the untiringefforts and sacrificeswe have madein implementingrig- orous adjustmentand economicreform programs with the supportof international financial institutions including the Bretton Woods imtitutions. But muchremains to be doneby the who!einternational community to supportour effortsto place our economieson the road to sustainedgrowth. More than ever, Africa's major challengeis to improvethe living conditions of its peoples. In this respect, we fully endorse the heartfelt views expressedyesterday morningby the Managing Director of the Fund in his statement,in whichhe drew attentionto the scandalouspersistence of poverty in certainregions of the world. From our perspective,we are aware that the extentto whichthe livingstandards of our peoplescan be improvedis primarily dependenton our own efforts andthe implementationof a clearlydefined developmentstrategy. This strategy should be based on the developmentof basic infrastructures,-the developmentof human resources,a thrivingprivate sector, and the promotionof economicdiversification. It is our convictionthat no reformprogram can succeedunless it enjoysadequate social and political support.In this regard,we are thus heartenedby the outcomeof the Intema- tionai Conferenceon Populationand Developmentheld in Cairoin September 1994, the World Summit for Social Developmentheld in Copenhagenin March 1995, and the Beijing Conference on Women, which took place recently.We earnestlyhope that the conclusionsof these global conferences will translateinto effectiveactions tat can be incorporatedinto the designand financing of adjustmentprograms and economic reforms supported by the Bank and the Fund. Through their own experience, the Bretton Woods institutions have

90 learnedthe importanceof well-designedprograms. Although Africa must necessarily draw on the developmentexperiences of others, it must first rely on its own internal deliberationsand strategies.We must effectivelyposition our countries at the center of the developmentdebate. In this context, we draw your attentionto the necessityof adaptingthe assistance strategiesof the Bret- ton Woods institutionsto our own conditionsand our own growth objectives. These assistance strategies mustelucidate the economicand social objectives of our countries. The Bank and the Fund should support the economicstrate- gies, reform programs,and projectsidentified by the countriesthemselves. In other words, we earnestly hope that our adjustment programs will become more internally generated and that the assistance strategies will be jointly designed to ensure full nationalparticipation. Adjustment programs are more likely to succeedwhen they are effectivelydesigned by us and when a national consensus is reached in the contextof the political and economictransforma- tioniunderway in Africa. We emphasizedthese issues in the recent memoran- dums to the President of the World Bank and the Managing Director of the Fund. It is our hope that our views on these matters will be heeded.The issue of public expenditurereviews has been discussedextensively in the Develop- ment Committee within the contextof its review of the conclusionsand rec- ommendationsof the World Summitfor Social Development.While valuing the advisoryrole of the World Bank and IMF in public expenditurereviews, we are stronglyof the view that such reviewsshould not lead to the imposition of additionalconditionalities in areas in which the Bretton Woodsinstitutions have no mandates. While we are resolved to continue our macroeconomiicand structural adjustmentefforts, we also believethat these efforts must be supplementedby a sufficient volume of concessionalresources. We appeal to the international conmmunityfor this assistance,and specifically.call on the Fund membership to firmly support a permanentESAF, for the effectivenessand indispensability of the ESAF in our countriesis a matter of record.We are seriouslyconcerned about the uncertaintiessurrounding the replenishmentof IDA resources.As Mr. Wolfensohnhas said, IDA is the backbone of internationalefforts to help poor countries to help themselves.It is thus clear that if commitmentsunder- taken within the IDA frameworkare in doubt, our countries' effortsto achieve growth will be seriously undermined.In this context, we join the Presidentof the WorldBank and the ManagingDirector of the Fund in urging the international community,particularly the major contributors,to show greater com- mnitmentto developmentassistance, by helping secure the already comrnmitted IDA-10 and contributingmore substantiallyto the IDA- 1 Replenishmentand providinga sufficientvolume of resourcesfor financingthe SpecialAssistance Programfor Africa.We are deeply disappointedby the sharp drop in the level of official developmentassistance by the industrial countries, not only as a percentageof their GDP but also in real terms. We also deeply regret that net transfers of resources in real terms from the Bank Group to Africa were neg-

91 ative in 1994.These trends in resourcetransfers are all the more disturbingas mostAfricancountries still do not have accessto intemationalcapital markets. Whilegreater flowsof officialand concessionalassistance to our countriesare indispensable,we hope that the internationalcommunity will help us create the necessary conditions to attract private capital flows. We believe, in this regard,that the economicand institutionalreforms and the processof political liberalization in progress in our countries will serve to stimulate foreign investment. With regard to the serious structuralproblem of indebtedness,which is a majorobstacle to growthin our countries,we wish to draw the attentionof the internationalcommunity to the followingfacts: It is extremelydisturbing to note that despite debt reschedulingand forgiveness, our countriesare still confrontedwith an increasingheavy debt burden.In 1994,for example,the debt/ GDPratio of the sub-SaharanAfrican countries amounted to about400 percent. Although application of the Naples terms represents an encouragingstep towardsa solution to the problem of bilateraldebt within the Paris Club, the debtof low-incomeAfrican countries still remains a seriousimpediment to their developmentprospects. The situation is further exacerbated by the steady increasein the share of multilateraldebt in the total debt stock.That is why we welcomethe sensitivityto this problemshown by the WorldBank andthe Fund, and the importanceattached to identifyinginnovative solutions. We therefore urge the World13 ak and the Fundto establisha mechanismintended to provide a lasting and effective solutionto the problemof multilateraldebt, and also to provide additionalconcessional resources to the countriesconcerned. Indeed, whilereaffirming our determinationto continuethe adjustmentefforts that our economiesrequire, we appeal to the internationalcommunity to identifyinno- vatve solutionsaimed at reducingthe stockof debt Thesenew formulasshould be accompaniedby new infusionsof concessionalresources to supplement domesticsavings so as to promotethe resumptionof sustainedgrowth. We also wish to stress the need to enhance the effectivenessof our public administrationsin order to promotedevelopment. It is impossibleto overemphasize the importance of public investment,which, in tum, promotes the emergenceand sustaineddevelopment of the private sector in our countries. In this connection, it is our hope that the InternationalFinance Corporation will take more risks in Africa. The strengtheningof institutional capacities must go hand in hand with the process of economic integrationand cooperation at the regional level. We therefore urgently appeal to the international community to support regional and subregionalefforts in Africa, especially those aimedat strengtheningsubregional intergovernmental organizations, as well as those involved in the executionof communityprojects and programs. In this regard, we invite the Bank and the Fund to take into accountthe Treaty establishing the African Economic Community,and the Cairo Agenda for Action on the Socio-EconomicProblems of Africa. With respectto internationaltrade, studies conducted by the BrettonWoods

92 institutionsappear to indicate that ratificationof the Uruguay Round Treaty will have little impactin Africa. Otherstudies, however,particularly thlose carried out by institutionsin Africa, suggest that the impactwill be very negative in the short or medium term.In any case, it has been amply demonstratedthat the economicstructures of the African countriesare such that they would be unable to benefitin the short term from the free-markettrade provisionsadvo- cated by the UruguayRound Treaty.Thus, pendingthe diversificationof their economies,African countries which are net importersof food productswill see a substantial rise in the cost of their imports resulting from the reduction of agricultural subsidies. Furthermore, despite a brief improvement in export prices of certain primary products, the general outlook for the prices of com- moditiesexported by most of our countriesremains an uncertainone, and unfavorable movementsin commodity prices cannot be ruled out. This in itself is clear evidenceof imbalancesin the prevailinginternational trading systemthat require addressing.We hope that the World Trade Organization(WTO) will play a leading role in promoting a more fair, balanced, and equitable world trading system. Moreover, the privileges that the African countries enjoyed under the Lome Conventionwill also be curtailed.In these circumstances,we expect that the intemationalcommunity would ensure the orderly transitionof our economies.We particularlyappeal to the developedcountries not to erect protectionistbarriers that would adverselyaffect the Africancountries hat have begun to diversifythe structure of their exports. on the contrary,we hope that the developedcountries will take steps to facilitatethe access of Africanprod- ucts to their markets.This is a necessaryadjunct to the internationalassistance they can contribute toward the sustaineddevelopment of our countries. Fur- thermore,the resultingadditional costs to African net food importersand those countries who will lose preferential access to industrial countries' markets, should be compensatedfor during the transitionperiod. Our countries have embraced political changes currently in progress and the move towards political pluralism and democracy. These changes have raised our peoples' expectations beyond limlits sustainable by available resources.We are determinedto pursue these reformssteadfastly, with the aid of technical and financial assistancefrom the internationalcommunity. While the major economicreforms that we have been implementingover the past decade are beginning to bear fruit, we are well aware that many challenges still lie ahead of us. To confront these challenges,we know in particular that we must pursue our macroeconomic adjustment efforts, improve the financialand public enterprisesectors, and enhancethe private sector's participation in economic activities so as to achieve sustained economic growth over the medium term. The support of the intemationalcommunity is, however, indispensablein many respects.We are requestingbolder and more innovative actions to alleviate the burden of the African debt We, therefore,urge the internationalcommunity to sustain our efforts to build ihe economicinsti- tutions necessary to a well functioningmarket economy.Lastly, we need the

93 internationalcommunity's support to mobilizethe necessaryexternal financial assistance that is required to complement domestic saving for durable investment and growth.

GERMANY: THEO WAIGEL Altemate Governor of the Fund

The joint AnnualMeetings of the the WorldBank and the IMF presenta good opportunityto discusscurrent issues of internationaleconomic, mone- ta,y,and developmentpolicy in a cooperativeatmosphere in a globalforum. Withthe creationof theWorld Trade Organization (WTO) at the beginning of this year, the internationalcommunity has also set up a global forum to deal with trade policyissues. After 50 years,this has broughtto fruitionone of the central aims of the Bretton Woods conference. The World Bank,the IMIFand the WTO have to cooperateclosely in a spirit of trust on the basis of their respectivemandates. This is not only the responsibilityof the managementof each institution:member governments mustalso ensure a coordinateddivision of labor betweenthe institutionsand avoidduplication of tasks. The early and unexpecteddeath of LewisPreston was a great and painful loss for the WorldBank and for internationaldevelopment policy. President Preston made a decisivecontribution towards focusing the Bank's activities more closelyon its centraltasks of counteringpoverty and improvingthe situation of the sociallydisadvantaged. PresidentWolfensohn has taken on a difficultand challengingtask. I am convincedthat he will be ableto meet the challenges.I wishhim well in his endeavors. The A, Id economyhas continuedto expand in the current year. This should not be taken for granted. The developmentsin Mexico and the exchangerate movementsat the beginningof the yearinitially made the prospects look less favorable. However,the balancewe can draw todayis, all in all, a positiveone. The newly gainedstability in Centraland SouthAmerica is especiallywelcome. Privateinvestors have regained confidence there, and the prospectsfor growth have improved. Nonetheless,there is no reasonto relaxreform efforts. On thecontrary, the events at the beginningof the year have clearlyshown how swifty today's closely-linkedinternational capital markets can "penalize"misdirected policy decisions.Thus it is importantfor the reformsintroduced with great success over the past few yearsto be continuedand-where necessary-strengthened. I am very pleasedto note the increasinglyevident signs of stabilizationin the reformeconomies. Noteworthy growth rates arealready being achieved in many countriesof Centraland EasternEurope and the formerSoviet Union.

94 Progress is greatest and most readily perceptible where market-oriented reforms have been swiftly and comprehensivelyput into place. The people have identifiedthe newlycreated opportunities and are makinguse of them. The WorldBank and the IMF have madea decisive contributionto these successes.Both institutionshave again proven themselvesin this historical challenge.In many instancesit was only throughthe technicalassistance and help in mobilizingfinancial support from abroad, coupled with the deploy- ment of own resources,that reforms were made possible; the reticenceof internationalinvestors was overcome;and the processof transformationwas establishedin a consistentand credibleframework. Economicprogress can also be noticedin Africa.Here, however, light and shade lie close together.The financialaid of past decadeshas often failed to producethe desiredeffects. The reductionof povertymust remain a central objective.I expresslywelcome the reformconcept aimed at concentratingthe activitiesof the WorldBank and the regionaldevelopment banks even closer in the fightagainst poverty. But even in the poorestcountries it stillholds true that there can be no sustainableimprovement of living standards without structuralreforms and a stable macroeconomicframework. This also calls for continuingsupport by the internationalcommunity. It is a duty whichno prosperouscountry, let alone the majorindustrial economie., may back away from.The negotiationson the Replenishmentof the Interna- tional DevelopmentAssociation (IDA) are a decisivetest for the readinessof donorcountries to fulfill their internationalobligations. The ongoingIDA negotiationswill need to be concludedwit a significant replenishment.I would welcomeit if moreof the newly industrializedcoun- tries, whose notable economicachievements commnand our respect,were to contributeto the IDA Replenishment. In Germanywe shall not be able to fullyrepeat the good economicresults of last year.We expectgrowth to slow down to about 2.5 percent. Whilewe were somewhatmore optimisticat the beginning of the year, the following vigorousdeutsch Mark appreciation and a rising trend in pay settlementshave tendedto restraineconomic activity. However,the prospectsfor next yearremain good. Economicgrowth will continueunabated. Stronger private consumption, propelled by tax cuts, will also playa role here. Over the past few months, general conditionsfor fruther smooth and steadygrowth on a high level havefurther improved in Gernany: the inflation rate has continuedto declineand now standsat less than 2 percent,and interest rates have fallen appreciably. A key preconditionfor this favorabledevelopment and the improvedpol- icy mix wasconsiderable progress in the consolidationof publicsector budgets in Germany.Five yearsafter Germanreunification, we can draw a positivebalance: the rise in fiscaldeficits induced by unificationhas been corrected.In its WorldEconomic Outlook the LM!Fplaces Germanyamong the leadersof the

95 major industrialeconomies in terms of budget consolidation. We shall consistently keep to this consolidationcourse in the coming,year as well, despite a continuing need for high transfer payments to the zew Linder. The principal aim of German fiscal policy remains to reverse the rise in the government spending ratio induced by unification. We intend to bring down the government spending ratio from the present level of 50.5 percent to 46 percent of the gross domestic product by the year 2000. The resulting leeway for fiscal policy action will be divided equally and symmetricaily between the reduction of the fiscal deficit and bringing down the tax burden. A steady, stability-oriented consolidation policy is also the key requirement for stableexchange rate relations.This was again demonstratedwith particular force by events on global financial and currency markets at the beginning of the year. The attention of international markets is now focused more than ever before on national economic and monetary policies. In,rema- tional investors now respond almost instantly to misdirectedeconomic policy decisions. Policies have to take these new global circumstances into account. Sudden and massive capital movements present new and major challenges to national economic policies. We cannot and do not wish to undo the liberalization of capital movements. It would be a major mistake to believe that we could evade the discipline of the markets by means of govemment intervention or by postponing unavoidable liberalizationmeasures. Those who do not accept this risk welfare losses. The globalization of markets requires additional transparency and credibility of economic policy. Greater transparencyenhances market stability and reduces the target for speculators. Greater transparencyimplies first and foremost the up-to-date and comprehensive disclosure of key economic data. The IMF has formulated a number of recommendationson this. Putting them into effect in member countries will also constitute an important element of d successful early warning system. Of course, crisis situations will not always be preventable. We therefore want to speed up procedures for the allocation of IMF credits. But this cannot and should not be seen merely as a question of additional funding. The IMF must not become a financial "safety anchor" for all sorts of economic problems. Any risks principally have to be carried by market participants. A bailing out only increases the momalhazard effects. Only in the case of systemic risks for the global financialsystem may funds be committed. Cri- sis prevention must, however, be first priority. I expressly welcome the ongoing quota review. The IMF quotas are not only its general source of funds but also a reflection of the solidarity of its members and of their commitment to the institution. Over the past few months, the World Bank and the IMF have been in the limelight of international scrutiny. It should be emphasized here, and I quote the Heads of State and Government of the Group of Seven countries, that the

96 World Bank and the IMF have worked well and successfullyin the first 50 years of their existence. It is now importantthat the institutionsare made ready to meet the challenges ahead. Germanywill play a constructiverole in this.

GREECE: YANNOS PAPANTONIOU Governor of the Bank

Overall, the world economicsituation appears to be satisfactory.Growth expectations in industrial countries remain relatively high, notwithstanding their downwardrevision to more sustainable,non-inflationary levels. Devel- oping economiescontinue to experiencerobust growth, aided by international trade, structural reform, and adjustmentefforts. On the other hand, the transition economies, after six years of declining output, are now expected to achieve positive growth,although macroeconomicand financialstability have yet to be finmlyestablished in some of them. A balanced macroeconomicpolicy mix and continued efforts aimed at structural reform are the pillars on which sound economicpolicy rests. Bud- getary consolidation should remain a high priority in most countries as a means of increasingnational savings and reducinb real interest rates. Mone- tary policy should focus on disinflation, as well as financial and exchange rate stability. Such a policy mix is conducive to private investment and export growth, and strengthens the prospects for sustainable expansion in the medium term. Sound macroeconomicpolicies will not, however, automaticallylead to good economic performanceand improved standards of living if our economies maintain structural rigidities. Efforts to reduce unemployment,which remainshigh despite good growth conditions,should be intensified.However, this process should be accompaniedby improvingsocial and environmental standards in the developing world, while, at the same time, preserving the multilateral character of intenational trade relations. In financial markets, increasing integrationand globalizationmay require a strengtheningof market oversightactivities, in order to spread the essentialbenefits of free capital movements to wider segmentsof our societies. Finally,raising the efficiency of public administration,tax systems, and public corporations remainsa goal to be vigorouslypursued worldwide. Turning b?ieflyto Greece, the economy is in its second year of recovery, with growth projected to reach 2 percentin 1995,led primarilyby public and private investment. Inflationhas been substantiallyreduced-to 8.4 percent in September 1995 from 10.8 percent in December 1994-and is expected to decelerate further and fall to about 5 percent by the end of 1996. In fact, year-on-year inflation returned to a single digit figure last April, after 22

97 years.The generl governmentdeficit to GDP ratio will be less than 9 percent in 1995,down from 11.4percent in 1994-well within the limits set by our ConvergenceProgram. For the secondconsecutive year, the Greekecon- omy has performedquite well andenjoyed the benefitsof increasedcredibil- ity resulting from the policies pursued. This overall improvementin economicperformance was made possible with the applicationof appropriateincomes, fiscal, monetaryand exchange rate policies,as well as the prevailingsocial climate. Incomes policy provided relativelylimited nominalpay increr,sesin the public sector,while allowing for somereal incomeincreases linked to productivitygrowth. Strict fiscalpolicy, in line with our ConvergenceProgram, is being implementedwith success.The reductionof the centralgovernment's budget deficit is primarilythe result of increasedtax revenuefrom the applicationof the new presumptive taxationsystem on non-wagepersonal incomes, and the containmentof current expendituregrowth while allowinginvestment expenditure to rise sub- stantiallyin real terms. Monetary and exchangerate policies are aimed at reinforcingthe disinflationprocess. In fact, they have createdan interestrate differentialin favorof Greekassets, resulting in largecapital inflows. Never- theless, nominal interest rates have been substantiallyreduced, while the observeddecline in real interestrates reflectscredibility gains of the government's economicpolicies. Structural and development policies aimed at enhancing the supply potentialof the economyare also beingimplemented. These include,among others: * An extensivepublic investmentprogram, cofinancedby the European Union,for the modernizationof physicalinfrastructure and humancapital development; * A multi-facetedprogram to improvetax administration; * A program for enhancing labor mobility through vocationaltraining, regionaljob centers,retraining the long-termunemployed, and subsidized hiring,especially in areassuffering from deindustrialization or high youth unemployment; * Financial market reform, including dematerializationof government paperand reorganizationof the stockmarket and the securitiesregulatory framework; * A privatizationprogram through limited stock flotationof the Hellenic TelecommunicationsOrganization and the PublicPetroleum Corporation. sellingor liquidatingcertain firms belonging to state-controlledbanks and the IndustrialReconstruction Organization, and restructuringof certain state banksfor eventualprivatization; and * Finally,a program of large infrastructureprojects which is underway,

98 includingthe newAthens airport, highway networks, and the introduction of natural gas. Greeceis keenlyinterested in developingstrong economiclinks with the Balkan and other Centraland Eastern Europeancountries, as well as Com- monwealthof IndependentStates (CIS)countries. To this end, export credits and technicalassistance have been grantedby Greeceto some of these countries. Greecealso encouragesjoint entrepreneurialventures and supportsthe businessactivities of Greek firmsin the region. In closing,I wantto reiteratethe commitmentof the GreekGovernment to the pursuit of sound economicand financialpolicies with a view to creating the conditionsfor high sustainablegrowth and promotingthe welfareof our people.

INDIA: MANMOHAN SINGH Governor of the Bank and Fund

May I congratulatethe Chairmanon assumingthe chairmanshipof these AnnualMeetings. I alsojoin my fellowGovernors in welcomingMr. Wolfen- sohn to his first AnnualMeeting as Presidentof the WorldBank Group and congratulatinghim on a truly inspiringaddress. The WorldBank Group is for- tunatein havingat its helm a personof his vision,deep commitment,and out- standingleadership. I share the view of fellow Governorswho have noted several favorable featuresin the contemporaryworld economy:the growthrates for developing countriesare higherthan projectedearlier; private capital flows to developing countriesare set to reboundquicker than had seemed likely; and the recent growthof world trade has also been better than expected.However, there are several disquietingaspects as well. Growthprospects for industrialcountries for both 1995and 1996have nowbeen scaleddown. Unemployment levels in industrialcountries remain unduly high and couldspur protectionist sentiment and action. Fiscal deficitsin many industrialcountries remain large, raising interestrates and therebyadversely affecting the availabilityof scarceinvert- ible resourcesfor developingcountries. Developingcountries all over the worldare todayengaged in an unprece- dentedrestructuring of their economiesand policiesto take advantageof the possibilitiesoffered by increasinglyintegrated world markets.These changes have the potentialto usher in a period of sustainedgrowth of incomein the developingworld, which is the only lastingsolution to the problemsof chronic poverty.But this can happen only if developingcountries have a supportive internationalenvironment. The BrettonWoods institutions can and mustplay a majorrole in providingsuch an environment. As economiesopen up and integratewith the world economythey will

99 face newchallenges or new uncertainties,especially in a worldof high capital mobility.The Fundcan play a vital role in identifyinglikely danger spotsand systemicweaknesses, providing resources to countriesin needon appropriate termsand also providingcredible safety nets whichcan be quickly deployed in the event of crisis. In this context, we welcome the progress made in improvingthe flowof informationto the Fund, and we also supportthe proposalfor institutingan emergencyfinancing mechanism. We also welcomethe decisionto makethe Enhanced Structural Adjustment Facility (ESAF) permanent. However,these initiativescan be effectiveonly if the Fund's resources are adequatelyenhanced. Progress in this area has beenless than expected. In April, the InterimCommittee had givena clear directionto the Execu- tive Board of the Fund on the EleventhGeneral Quota Review.Regrettably, not muchprogress has beenmade in this area.I amalso concernedthat the pre- liminarycalculations in Fund staff papers suggesta furtherreduction in the share of developingcountries as a group in Fund quotas.These calculations do not take into accountthe improvedeconomic performance of developing countriesin the last few years. Nor do they reflectthe growingawareness of the emerging role of developingcountries as a major locomotiveof world growth.Clearly, these formulaeneed to be reconsideredbefore they are used for determiiningquotas for the EleventhGeneral Review. While there is agreementto expand availableresources through the Gen- eral Arrangementsto Borrow,we have yet to see specificcommitments of financefor thispurpose. There is a dangerin allowinga wideninggap between the internationalcommunity's recognition of the need to augmentthe Fund's resourcesand its ability to provideresources to fulfillthe larger mandate.An inadequatelyfunded IMF will lose credibility,and this could compoundthe problemsof volatilityand uncertaintyin the internationaleconomic environment that is now on the horizon.This could weaken the reformist thrust in developingcountries and dampenthe growthof world output andtrade. Thus we must strivejointly to overcomethe hurdles in the path of the necessary increaseof the Fund's resources. This last yearhas been a periodof considerablechange and assessmentof the World Bank's role and operations.The Bank's organizationand operational focus are now increasinglyon poverty and concernslike environment, gender, and health. This is all welcome.But the future must also ensure an increased flow of long-terminvestment resources to developingcountries. And yet Bank lendingin real termshas not gone up since the early 1980s.In fact, the net resourcetransfer has alreadyturned negative. The Bankhas a specialrole to play in relievinginfrastructural constraints to rapidgrowth in developingcountries. Infrastructure services are crucial,not only for acceleratinggrowth but also for poverty alleviation.There is scope for inductingprivate capital flows into the developmentof infrastructure,and most developingcountries are strivingto maximizesuch inflows.But private flows will not be enough. Developingcountries have to look to expanded

100 flows from multilateralinstitutions in support of infrastructuralinvestment. The Bank should increas- lending beyond the 5 percent it now providesof total infrastructuralinvestments in developingcountries. We welcomethe newemphasis in the Bank's workon cnvironmentalcon- ccrns. We are deeply committedto integratingenvironmental concerns into our developmentstrategy. I would, however,repeat the concern that I had soundedin Madridlast yearon the needto ensurethat environmentalconcerns must not becomeobstacles to sustainingdevelopment or alibis for letting the poor remainpoor. A majorissue beforeus is the follow-upaction on the SocialSummit. Our Governmentis committedto a broad-basedprogram of poverty alleviation and integratedsocial development, placing particular emphasis on elementary educationand primaryhealth care; that ,indeed, is a -majorinspiration for our economicreforms, which, amongother things,seek to reorientpublic expenditure in favorof socialsectors. With regard to the SocialSummit, a majorrec- ommendationemerging from its deliberationswas that internationalfinancial institutionsmust complement adjustment lending with enhancedand targeted social developmentlending. New and additional financial resources must thereforebe robilized towardthis end.Apart frominternational finance, technologyand humanskills must be hanessed to eradicateglobal poverty. That is the missionand the visiontoward whichwe must work. I was deeply movedby PresidentWolfensohn's strong statementon the importanceof IDA as an effectiveinstrument for promotingdevelopment and poverty alleviationin the world's poorest countries. In a world of massive income disparitiesamong nations, where a quarterof the world's population still lives in abjectpoverty, the vital role of concessionalmultilateral development assistance,as providedthrough IDA, is self-evident.The scale of assistance providedby IDA is modestcompared to the enormousrequirements. I hope the internationalcommunity will recognizethe need for early actionto ensure adequatefinancing for IDA-I0 and IDA-11. A failure to do so will, in particular,hurt programsof povertyalleviation and socialdevelopment, without which we cannotmobilize the requisitepolit- ical and moral supportfor programsof adjustmentand structuralreforms. I would like to end with a few remarkson India's effortsto accelerateits economic growth by undertakingrapid structural changes. The depth and breadth of our reform program is well-known.Although we are still in the early stagesof economicrestructuring, the Indian economyhas alreadyreaped substantialgains from the reformmeasures. Economic growth has recovered to nearly 6 percent Industrialgrowth is strong and expectedto touch 10 percent in the currentyear. Food productionand foodstocksare at record highs. Exports are buoyantfor the third year in a row.Foreign investmenthas risen from a trickleto nearly$5 billiona year.Foreign exchange reserves are ample. Privatedomestic investment is buoyant.Inflation has been broughtdown to an annual rate of around 8 percentand is expectedto declinefurther. More new

101 jobs arc being created than ever before.Our objectiveis to build on this su>- cess and put the economy on a sustainablepath of around 7 percentgrowth. Many countriesin East Asia have achievedthis, and there is every indication that India can also do so. But, to realizethese aspirations,we mustbe able to count on a supportiveinternational environment of open marketsand strong, well-functioningintemational financial institutions, The world is changing exceedingly fast. The changes have opened up immenseopportunities. But these opportunitiescannot be tappedunless insti- tulions adapt to the alteredcirciumstances. This is the rcal challengebefore the Bretton Woods institutions.

INDONESIA: MAR'IE MUHAMMAD Governor of the Bank

It is an honor to address the Fiftieth AnnualMeetings of the World Bank and the InternationalMonetary Fund, especially in this, Indonesia's fiftieth year of independence.This year is an importantone for the Bank and the Fund. We all mourn the passing of the Bank's formerpresident, LewisPreston, who contributedso muchto this institution.We will sorely miss him.I would, however, like to welcomethe new presidentof the Bank, James Wolfensohn,who comes to us with an impressiverecord of accomplishmentsin a wide range of activities. We are confident that he will be successful in leading the Bank throughthe comingchanges. I would also like to welcomeBrunei Darussalam as a new member of the Bank and the Fund. The changesin the world economydemand that we rethinkthe role of the internationalinstitutions and reshape them to serve our future needs.This is essential if we are going to continuesuccessfully in our efforts to combine growth,equity, and stability. In 1994,real growth in Indonesia was 7.34 percent and inflationwas less than 10 percent. Our per capita incomereached $919, placing us amongthe middle-incomecountries. Foreign investors have approvedthe results of our policiesand performance.In 1994,the value of foreign investmentapprovals was nearly triple that of the previousyear. Indonesiais firmly comunittedto domesticand internationalpolicies that support rapid growth with.equity and stability.It is also our firmcommitment to fulfill all of our internationalfinancial obligations. We recognizethat our future lies in encouragingintemationally competitive industries. President Soeharto stated in his IndependenceDay address: "This encouragementand supportcan no longer be in the form of protection". We are committedto relaxing our trade and investmentbarriers. As part of this effort, we have detenmineda schedulefor reducing tariffs to very low levels in a seriesof carefullydefined steps ov 5r the next eight years.Almost no tariff will exceed 10 percentin the year 2003.

102 Moreover,we are also convinced that working with othereconomics in our region will encouragefrcer flowsof tradeand investment on a globalscaile, as long as the regionalgroupings operaite according to the global rules,As a result of these convictions,President Soceiurto assumed a leadershipposition ir the Asia Pacific EconiomicCooperation (APEC), that rcsulted in the mem- bereconomies issuing the Bogor Dcciltration,which expressesmembers'joint commitmentto frecand open traide and investiment in theAsia Pacific Region by 2010 lor the industrial cconomicsand by 2020 for the developingmem- bers. Rccognizingthat a ssmallergroup of developingcountrics may be ablc to movc still faster to dismantle barriers to trade, Indonesia has been a strong supporter of the ASEAN Free Trade Area (AFTA)as wcll. We have every reason to believe that the recent outstanding performance of the Indonesianeconomy will bL repeated next year. The forecasts for the world economy are still quite positive. Opportunities for exports from the developingcountries are encouraging.And, efforts to move toward more open markets in countrieswith which we trade will soon proside new opportunities for us. In spite of the cheery picture that I have painted, we and other developing countriesface growing challengesto our ability to manage our economiesand to maintainopenness and stability.The globalizationof financial markets has meant that we and other developing countries have been affected by events that only a few years ago would probably have had little impact on us. With daily foreignexchange transactionsnow running at some 70 times the volume ol world trade, what happens on one side of the world causes turbulencein countrieson the opposite side of the world. The volume of short-termmoney that now moves around the world threatens the ability of any single country, acting on its own, to maintain stability. Similarly, efforts on our part to use monetauypolicy to managethe economyare constrainedby interest rates elsewhere, particularlyin Europe and the UnitedStates. In sum, monetarypolicies can no longer be designed in isolation, and their power to encouragestability is being eroded. Even fiscalpolicies are affected. The globalizationof capital markets has meant that our government budgets and our foreign exchange positions are driven by exchange rates between currenciesother than our own. The recent shifts in the yen-dollar rates, for example, have increased and then lowered our debt-servicepayments. The resultof all this is that individualcountries are bouncedaround by unstableworld marketsand have less and less controlover their destinies. Only collectiveaction, with the support of multilateralinstitutions, can deal with unstable international financial markets and exchange rates. Of course, the multilateral organizationsrecognize the changes that are occurring in the world economy,and they have responded with some new initiatives. In this regard, we welcome particular actions, such as the Bank's institution of single currency loa;ns, which enable borrowing countries to

103 manage their exposures to exchange rates more effectively. Inspite of progress on some fronts, however, overall change on the part of the multilateral organizations has been slow. We recognizethat restructuringand reori- enting any large organizationis difficult.We are encuuragedby the fact that, in the past, the Bank and the Fund have indeed adapted to a changing world. They have shifted from their original focus on war damaged Europe and competitivedevaluations to promotingrapid growth in the developingcountries. And, with respectto this task, they have adaptedto changing paradigms and goals in the field of development. The current slow pace of change is, I believe, also partly due to a lack of consensuson the moves to be made. Outsidegroups have madenumerous suggestions;these have includedrecommendations that emergedfrom the Halifax meeting of the Group of Seven, cfforts on the part of the Non-AlignedMove- ment, and numerous studies and reports by various academic groups, think tanks, and NGOs. Webelieve that these effortscontain many valuablesugges- tions and urge the World Bank and the IMF to considerthem very seriously and to respond with concreteplans for change. The ultimate goal of reform is clear; the organizationsmust renew their significanceand their contributionto growth,equity, and stability in a newly globalizedworld economy.The reformedinstitutions should not competewith private sector institutions.We do not need multilateral organizationsto do what private institutionscan do perfectly well. It is indeed very heartening to learn of the initiative of Mr. Wolfensohn regardingthe setting up of a separate fund for the purposeof multilateraldebt reduction.Until recently,the very idea of multilateraldebt reductionwas considered, in some circles, unnecessay and irrelevant.Even the existence of a multilateraldecr problem was questioned. As chairman of the Non-Aligned Movement, Indonesia wishes to draw the attention of this distinguishedgathering to the fact that the debt burden and debt overhang of many developing countries,in particular the poorest countries, are far from being resolved. It is our belief that for the poorest developing countries repetitive rescheduling of debt diverts scarce administrative resources from addressing problems of economic developmentand poverty alleviation.What is required is not further debt reschedulingbut a once-and- for-all debt settlement,through the meaningfulreduction of all categories of debt. No major groupof creditors should be excluded,meaning that it is illog- ical and ultimatelycounterpro luctive to excludemultilateral creditors. For manypoor countries,the servicingof multilateraldebt has become the bulk of debt-servicepayments. At present, there is no possibility for debtor countriesto reschedule,let alone reduce their multilateraldebt. As a matter of fact, many poor, debt-distressedcountries are able to servicetheir multilateral debt because they do not service their bilateral debt fully. As a consequence, while they service their multilateraldebt, at the same time they are forced to accumulatelarge and growing arrearson their bilateraldebt. It also meansthat

104 whateverbilateral assistance these countriesreceive is channeledto service their multilateraldebt. It has also been assertedthat there is no way for the multilateralfinancial institutionsto considermultilateral debt reductionbecause it willjeopardize their credit rating.This argumentagainst multilateraldebt reductiondoes not hold water. The multilateralfinancial institutionsare not only financially strong, but their reputationin internationalmarkets depends on capitalguar- antees fromtheir members,in particularth major industrialcountries. The major industrialcountries have recognizedthe existenceof a substantial mnultilateraldebt problem and have askedthe BrettonWoods institutions to finda solutionto thisproblem. Allow me to quotethe relevantpart of the Com- muniqu6of the Groupof Seven summitin Halifax,Canada, on June 15-17, 1995: "Werecognize that some of the poorestcountries have substantialmultilateral debt burdens. We will encouragethe BrettonWoods institutionsto developa comprehensiveapproach to assist countrieswith multilateraldebt problemsthrough the flexibleimplementation of existinginstruments and new mechanismswhere necessaryand better use of all existingWorld Bank and IMF resourcesand adoptionof appropriatemeasures in the multilateraldevel- opmentbanks to advancethis objective. Thus, the Groupof Seven,the Non-AlignedMovement, other members of the WorldBank andthe Fund,the NGOs,and the rest of the internationalcom- munityare emphasizingthe urgencyto arriveat effectivesoltions to the debt problemsof thepoorest countries, in particulartheir debt to muitilateralinstitu- tions.We thereforeapplauid the initiativeof Mr.Wolfensohn and urgeall other institutionsand membergovermnents to give theirfull supportto thisendeavor.

[RAN: MORTEZA MOHAMMAD-KHAN Govemnorof the Bank

I wishto join other distinguishedGovernors in congratulatingMr. Wolfen- sohn for his appointmentas the Presidentof the World Bank.I should also express my condolencesfor the loss of Mr. Preston,1the formerPresident of the WorldBank. I note with pleasurethe recent membershipof BruneiDarussalam in the Bretton Woods institutions. I wishto proceedby acknowledgingthe achievements made by the Bretton Woodsinstitutions, while at the same time noting the great challengesthat lie ahead for these institutions.The upwardtrend in economicand trade growth amongdeveloped and developingworld is encouraging.However, economic growthremains confined to particularregions and countries;this imbalance is a causeof muchconcern. Growth imbalances in variousregions, continuation of huge debt overhangs in low-income countries, instability in foreign exchangemarkets, and finally,unanticipated movements of capitalduring the

105 past yearonce againconfirmned that theBretton Woods institutions should further equipthemselves with instrumentsand mechanismsdesigned to respond to suchdevelopments. An even more importantissue is the need to safeguardan apoliticalstatus originallyconceived for the BrettonWoods institutions. Many membercountries still activelysupport this notionwhich is incorporatedinto the founding chartersof the two institutions.The WorldBank should maintain its Fullinde- pendenceand self identityas explicitlystipulated in its foundingconventions, particularlyin section 10of Article4 of itsArticles of Agreement.This concern was a centralfocus of the internationalconsensus leading to its establishment. Another important,and relatedissue that causes concernsfor the Islamic Republicof Iran, and manyother membercountries, is the selectiveand dis- crinminatorytreatment in extensionof facilitiesto membercountries which is inconsistantwith the basic rules governingthe operationsof the IMEand the WorldBank. Such biases aggravateimbalances in economicgrowth among mernbercountries. Wesupport recent efforts by theFund in strengtheningits surveillancerole and capacityover foreignexchange and monetarydevelopments. We believe that suchfunctions need to be uniformlyapplied to developingand developed countries. Globaleconomic developments in recentyears necessitatean increasein intematonal liquidityand the resourcesof the Fund. In this connection,the generalallocation of the SpecialDrawing Rights enjoy our full support. We also support the Fund emergency mechanism designed to assist those membercountries facing transitoryadverse developments, as well as thefor- eign exchange stabilizationfund intendedto compensatefor unanticipated fluctuationsin exchangerates. With respectto the role of the WorldBank, I shouldnote with pleasurethe recentefforts towards promoting the role of the DevelopmentCommittee. The DevelopmentCommittee should assume a more active role in directing Bank's policiesin enhancingglobal development, poverty reduction and more even growth.Assistance to poor countries,specially the sub-SaharanAfrican countries, as well as those countries with reconstructiontasks following regionalconflicts, should be the centralfocus for theWorld Bank. In achieving these objectives,strengthening the financialresources of IDA shouldbe given specialtreatment. With regard to assistanceto poorerdeveloping countries, I would like to expressmy appreciationfor theWorld Bank and the M efforts in alleviatingthe debt problemsfaced by these countries. Among other issues deservingspecial attentionis the role of womenin development.Greater emphasis to the educationof womenis an effectivestep towardsdevelopment and improvement of livingstandards in low-incomeand poor counties. I now wish to presentan overviewof economicconditions in my country. The economicpolicies adopted in theFirst DevelopmentPlan resultedin aver-

106 age annualgrowth rate of 7.3 percent.The improvementin qualityand distribution of growthis also noteworthy.Non-oil exports have increased considerably, we are close to achievingself-sufficiency in many agriculturalcomunodities, and socialindicators have improvedmarkedly. The resuiltsof economicadjust- ment policiesand investments made during the said periodwere revealed in the last year.Reduction of the extemaldebt, noticeablesurplus in currentaccount of balanceof payments,balanced budget, more effective control over monetary aggregates,introduction of new financialinstruments, further privatization of public enterprises,were among achievementsrealized in the past year. In the sameyear, the overallreal GDPgrowth reached 3 percent,while the growthrate for the non-oilsector was 5 percent.The SecondFive-Year Development Plan that was initiatedin March 1995,places a very highpriority on economicstabilization.Maintaining a balancedbudget through sound fiscal policies, including improvementsin tax organizationand proceduresare amongmeasures that are beingstrongly pursued. Monetary policy is accordinglyformulated to confine credit expansionto lower the inflation.Price stability,targeting of consumer subsidies,and provisionof supportfor vulnerablegroups are amongthe priorities of the economicstabilization program in the second Five-YearDevelop- ment Plan. Strucural adjustmentpolicies are to be continuedunder the secondfive- yearplan. Economicand financialliberalization, strengthening market mechanism,reinforcing a greaterfiscal discipline, and finallyprivatization are among objectives being pursued. Obviously,unfavorable external environmentas well as the Government'semphasis on socialjustice and care for vulnerable segmentsof thepopulation require thatwe proceedwith geater subtletyin our economic programs. The Islamic Republic of Iran also continues to support and protect foreigninvestnent in the context of private sector development under relevantlaws and regulations. Fmally,I would like to emphasizethat in the area of intemationaleco- noiic and financialrelations, the IslamicRepublic of Iran is fuillycommitted to meet its extemalobligations. In this regard,I shouldpoint out that we had a sum of $6.4 billioncurrent account surplus and a $3.3 billionbalance of payments surplus last year.This trend is continuingaccording to latest monthly figures,leading to furtherimprovements in the externalreserve position which will ensuretimely paymentsin the future.

107 IRELAND: RUAIRIQUINN, T.D., Govenwrof Bankand the Fund Fifty Years On This time last year the Bretton Woodsinstitutions were celebratingtheir 50th year.There was a moodof congratulationsbut there was also a considerable amount of introspection.Much of this introspectionwas encouragedby criticismof the institutionsfrom the outside,but it is also fair to say that the institutionsthemselves were already responding to the need to keeppace with the changingenvironment in whichthey operated. In thiscontext, I wouldlike to paya specialtribute to thelate Mr. Lew Preston who,in his ownquite unassumingbut tellinglyeffective way, initiated this processin the Bank I knowthat his successoras president,Mr. Jim Wolfensohn,is intenton maintaining,and even accelerating, the momentumof reform.In this,I canassure him of my wholeheartedsupport as Govemorfor Ireland.

The InternationalSetting There is a need for rationalizationwhich clearlydefines the separatebut complementaryroles of the Bretton Woodsinstitutions in the international schemeof things. Equally,the problemof overlapbetween multilateral development banks, and betweentheir activitiesand those of bilateraldonors, and duplicationof functionsbetween organs of the same institutionneed to be tackled.In this context I look forwardto the final report of the Task Force on Multilateral DevelopmentBanks early next year and to the efforts of the World Bank Group to coordinateits own activitiesparticularly in relationto promotingthe privatesector in developingand transitionalcountries.

IDA One of the definingissues for the internationalcommunity is the degreeof solidaritybetween the "haves" and the "have-nots"as reflectedin the current negotiationson the replenishmentof the fundsof the InternationalDevelop- mentAssociation (IDA). Hard decisions will have to be takento copewith the prospectof a muchreduced new replenishment.I hope that the resultwill not be an underminingof the globaland multilateralnature of the facilitynor lead to irretrievablecutbacks in its activities. I would urge all IDA membersto makeevery effort to endowthe IDA-li with adequateresources and in a manner which shares the burden equally. This must nowbe our immediatepriority.

Adequacyof Resourcesof the IMF The questionof the adequacyof resources,not only for IDAbut also for the Fund,is very muchon the agendathis year.

108 I feel there is certainlya case for a substantialquota increase, structured so as to more accuratelyreflect the relative standingof membersin the world economy. An increasein resourcesunder the GeneralArrangements to Borrowand the developmentof an EmergencyFinancing Mechanism should increase the flexibilityof the Fund's responseto crises.I welcomethe currentdiscussion on the continuationof the EnhancedStructural Adjustment Facility (ESAF) in the contextof assistingthe poorercountries.

Debt I am pleased to see that, in the course of the past year, there has been a growingacceptance that the burden of debt, includingmultilateral debt, may be a cripplingconstraint on the economicand socialdevelopment of a number of very poor countries.I welcomethe joint statementof the Presidentof the WorldBank and the ManagingDirector of the IMP to the DevelopmentCom- mittee,and in particulartheir referenceto work in hands whichis lookingto waysto helppay part of the obligationsowed to multilateralcreditors for those countrieswhere action by commercialand bilateralcreditors is not sufficient to restoredebt sustainability.An approachwhich focuses on country-specific analysiswill help makethe best use of such resourcesas are availablefor this purpose.I wouldurge the institutionsto pressahead as quicklyas feasiblewith this work,with a viewto advancingthe matterat the latestby the nextmeeting of the DevelopmentComrnittee in April,1996. While I regret the prematurepublication of the contentsof a draftpaper preparedby Bank staffon the issue of multilateraldebt, I am very sympathetic to the option discussedin that paper.Nevertheless, I wouldnot wishthe con- siderationof newmechanisms to prejudicethe fundingof IDAwhich, as I said earlier,must remainour immediatepriority

Structural Adjustnent A sound macroeconomicframework is a prerequisitefor sustainable developmentand, thus, for a lastingreduction in poverty.At the same time, there is the need to maintainsocial cohesionand emnergingdemocratic structures, which can be put at risk where too deep or speedy an adjustmentis attempted.We should therefore encourage countries embarking on an adjustment process to have regard to certainminimum conditions. Access to food and to basic facilitiessuch as healthand educationshould be ensured.I welcome the increasingemphasis which the IBRD and IDA is putting on these factors in its adjustmentloans and I would encouragethem, as a matter of urgency,to generalizethis practicewhile tailoring it to specificcountry conditions.I wouldalso welcomeprogress in the areaof publicationin the interest of greatertransparency in the developmentprocess.

109 Iis/z Governor's Priorities for the Institutions In concluding,I would like to express what I see as prioritiesfor the institutions in the coming years. They should continueto refinetheir roles in global economicdevelopment and the maintenanceof economicand financialstability. They should continue their considerationon how they can best cooperate with the other agents involvedin this process: multilaterals,governments, the private sector,NGOs, and local communities.They should continuallyquestion their own relevance in an effort to increase it and they should continually seek to improve their own effectiveness,efficiency, and accountability. Ireland is currently commemoratingthe 150th anniversary of a famine which led to the halving of our population and which still lives on vividly in folk memory.This sensitizes us to the need to take positive action to ensure that people's basic needs are catered for in the process of development. In their developmentefforts the institutionsshould not lose sightof the fact that economic developmentis not an end in itself. The end is the well-being of the people they and we serve. In this spirit I look forward to a constructive Annual Meetingand to continuingprogress over the coming year in the directions I have indicated.

ISRAEL: AVRAHAM B. SHO CHAT Governor of the Fund

I am very pleased to be able to address this year's World Bank and Inter- national Monetary Fund meetings. This meeting gives me the chance to explain the excitingchanges occurring in Israel and in the Middle East. Since the beginningof the 1990s,Israel has been dealing with three main challenges. We have been reforming our economy to ensure growth and employment.Israel has absorbed 700,000 new immigrants,mainly from the Commonwealthof IndependentStates. And at the same time, we have been working to end the Arab-Israeli conflict.Much more still needs to be done. The region's economicdevelopment must be a high priority in order to secure a lasting peace in the Middle East. Peace Process Only two weeks ago, here in Washington,the world witnessedthe largest meeting of Arab and Israeli leaders. Prime Minister Rabin and Chairman Arafat signed anotherhistoric agreementin the presence of PresidentClinton, King Hussein of Jordan, PresidentMubarak of Egypt, Prime Minister Gonza- les, and importantrepresentatives of the Arab world. I believe this agreement signals a major step to ending the Arab-Israeliconflict as the agreementdeals with the heart of the conflict between Israel and the Palestinians. Another

110 importantstep to peace was the peace treaty with Jordan, and we have also been making every effortto make progresswith both Syria and Lebanon in order to createa newpeaceful Middle East. Israel plans to play its part in developingfully normalizedrelations with the Palestiniansand our Arab neighbors.To date, Israelhas suppliedthe Pal- estinians with nearly $200 million,as well as technicalassistance. We realize that Israelhas much to offer to the region. Our marketscan be an important importdestination for our neighbors' exports,our companiesa major source for regionalinvestment, and our trade linkswith the U.S. and WesternEurope can helpthe region's marketsgain access to these centralworld economies. At the same time,the region does not have the ability to solve all its own problems.Regional conflicts are the main threat to internationalpeace. The key solutionto many of these conflictsis economiccooperation and mutual interestin regional development.The inhabitantsof the region must feel the economicbenefits of peace. When this happens,the opponentsof peace will lose their ability to destabilizethe process. I believethat thisis the rightforum to call on the donorsto the Palestinians to stand by their commitmentsand to assist the region in its search for economic development The United States, thr -'ropean Union, and Japan have alreadyplayed important roles in the econr discussions.I call on the internationalcommunity to continueto expandits activities,especially with regard to the Palestiniansand in the creationof regionaleconomic institutions. I also want to take this chance to thankboth the WorldBank and the IMF for all the help they have given the Palestiniansin financialand technical assistance.Their role has been vital, and I hope they will continueto play a key part in the region's development.This does not mean that the region shouldnot establishits own economicorganizations; however, any new institutions should not seek to copy the work of the World Bank or the IME. Instead,they shouldadd to these efforts. The Israeli Economy The Israeli economyhas continuedto grow at an impressiverate. This growthhas allowedus to take risks for peace, and at the same time the peace process has created the conditionsto assistfuture economicgrowth. We are liberalizingand deregulatingour economyand have seen our populationjump by nearly 20 percentin the last fiveyears dueto the absorptionof 700,000new immigrants. The Israeli economyhas been one of the fastestgrowing economies in the world over the last five years.In 1994our GDP grew by 6.5 percent,and this year, we expect the economyto grow by another6 percent.By 1996,our per capita GDP will stand at $16,000.At the same time as experiencinggreat growth, inflationhas been reducedto under 10 percent, and unemployment has fallen to below6.5 percentfrom over 11.4percent three years ago, even though the labor supplyhas grownby 27 percentin the last fiveyears. Exports

111 have grown by nearly30 percentsince 1992,and in the first half of this year, foreigndirect investmentin Israelpassed $500 million. Israel's economicsuccess is due to far-re. ,hing economicrefonrms and a decreasein governmentinvolvement in the economy.The governmenthas set aboutlowering the tax burdenby nearly$3 billion,reducing tariffs, and opening up importanteconomic sectors to greatercompetition. In addition,we will have reducedthe government'sbudget deficit from over 6 percentto 2.5 percentby 1996.We have startedmajor structural reforms. These reformns include the introductionof competitionin the telecommunicationsfield, health care reform,reform of the pension system,liberalization of capital markets,and removalof nearly all currencycontrols. Still, Israelfaces important economic challenges. Israel has sufferedin the past from veryhigh levelsof inflation;therefore, we mustwatch carefully and make sure it never returnsto the levels of the 1980s.Today, we need to deal with our balance-of-paymentsdeficit This can be doneby limitingthe growth of governmentexpenditure, encouraging export-oriented growth, and finding cheapersources of imports.Between 1995 and 1996,over $1 billion worthof budgetarycuts will havebeen introduced even though we are enteringan election year. Israel has been developingformal trade ties with importantnew markets,and we areseeking to expandand deepen our tradeties with all areas, especiallyNorth America and Asia. Israel and Asia In order to make Israel more competitive,Israel needs to integrateitself into the global economy.In recent years,we have sought to do this through involvementin global institutions,as well as throughbilateral agreements. Israel has much to offer new trade partners.We have a sophisticatedand dynamichigh-tech sector. This sectorhas great experiencein joint ventures, especiallyin the fieldsof agriculture,telecommunications, and medicalequip- ment.The Israeli marketis the third largestin the MiddleEast and is the second largestimporter in the region.We haveunique market access agreements with the majoreconomic blocs anda skilledlabor force that is secondto none. In turn, Israel is seekingto find cheapersources of importsfor its economy. We feel that Asian economiescan offer us both cheaperproducts and high quality.To this end, we believethat govemment-to-govenmentcooperation is essentialto createthe frameworkof strategiccooperation. The peace process has offeredus new opportunitiesin this area. Conclusion Over thelast fiveyears, the internationalenvironment has changedgreatly, and we all needto adaptto an ever-changingworld. The MiddleEast is facing new and excitingchallenges. The region is leavingbehind its history of war and death.We are enteringan era based on peace and economicdevelopment The potentialfor stabilityand economicadvancement is great. Butwe cannot

112 ignorethe remainingdangers and threatsof extremistson all sides. The leaders of the regionhave madebold steps in the right direction.The processcan- not be reversed,but we still need your help. The remainingproblems and uncertaintiesnre large, and we expect the major economicblocs to plan an evergreater role to help stability. Israelis willingto playits part. Oureconomicachievements have made the peace process possible,and so our continuedeconomic success is important to all. Israelin turn expectsto receivethe support our politicalactions deserve. This region, rich in history and proud traditions,stands at the dawn of a newera Here at thejunction of three continents,at the meetingplace of great culturesand religions,we can create a new centerfor prosperityand cooperation. Beforeus, we have the chanceto integratethe economiesof the Middle East into the mainstreamof the global economy.For this, we seek your support Do not let this opportunityslip throughour grasp.

ITALY: LAMBERTO DIM Governor of the Fund

Global Policy Challenges and Opportunities Despite somerecent slowdownof growthin industrialcountries, there is broad consensusthat the prospectsfor the world economyremain favorable. Growthin thedeveloping nations is proceedingat a rapid pace whileinflation- ary pressuresare generallydiminishing. After encountering serious difficulties at the start, most of the transitioneconomies of EastemEurope are achieving remarkableresults in terms of growthand inflationcontrol. Good progress is also being made in Russia. Worldtrade is growingat a pace rarely seen in the recentpast and the outlook remains good. The rapid ratificationof the Uruguay Round and the launchingof the WorldTrade Organization should help preventthe emergence of new protectionistpressures, thereby fosteringthe furtherdevelopment of trade and competitionworldwide. The internationalcommunity's successful action in preventingthe Mexi- can crises from havingdisruptive effects and spillingover to other countries in the regionhas shownthat collectiveresponses to destabilizingcapital flows can be effective when they are prompt and resolute as MinisterRubin has pointedout and has furtherelaborated upon just a few minutesago. Whilethe growthof economicactivity in the industrialcountries is slower than previouslyprojected, there are still groundsfor optimism.Last year's increasein long-terminterest rates has beenlargely reversed in recentmonths, and the monetaryeasing in many countries,which reflectsimprovement in inflationexpectations, should help investmentand maintainthe pace of real growth at levels compatiblewith low inflationand increased employment

113 There is room in the meantimeto take advantageof favorablecircumstances to acceleratethe pace of fiscalconsolidation. The gains in termsof credibility resultingfrom similar resolute action would undoubtedly strengthen the prospects for furthernon-inflationary growth. Markets' growing sensitivityto domestic and extemal imbalanceshas addeda newdimension to the challengesconfronting policymakers. While the disciplinemarkets impose is a powerfulincentive to implementsound macroeconomicpolicies, their overreactionto uncertaintyor delayedpolicy actions may prevent the attainmentof socially desirablegoals, and even result in financialand real instability. Structuralunemployment, particularly in Europe,remains very high.This is unacceptable,not only from the standpointof equitybut also of efficiency, owingto thehigh coststhat unemploymententails in terns of foregoneoutput. High structuralunemployment makes everything more difficultin our societies: from socialcohesion to fiscalbalance and the maintenanceof consumer confidence. Labormarket rigidities are a factorbehind the high levelof unemployment as they reduce the ability of economiesto respondto adverseshocks and to adjust to the pace of technical progress. Measures aimed at increasing labor marketflexibility are thereforecrucial. Many industrialcountries have taken steps in thisdirection, but morefundamental reforms are neededto addressthe roots of the problemrL The Situation in Italy Italy's public financeshave improvedconsiderably thanks both to favorable cyclicaldevelopments and to the structuralmeasures that have reduced current budgetexpenditure, especially with regard to health and public pension systems.The adjustmentprocess has built up considerablemomentum. The Govermmenthas sought to achievea careful,but firm balancebetween financialdiscipline and social sustainabilityof budgetdeficit reduction,but there is no intentionto relent in the effortto cut the budgetdeficit further to a minimum,consistent with the policypursued by other industrialcountries. A better fiscalposition is an importantobjective in itself,but it is not the final goal of policy.Ultimately, what counts is the contributionthat smaller budget deficitsand lower inflationcan make to enable the private sectorto generategrowth and employment. In recentmonths, Italy has improvedits growthperformance and, with it, its employmentsituation. But whathas beenachieved on thejob creationfront fails short of what is needed,and the pictureremains uneven. Disparities in employmentrates and disposableincomes between age groupsand different regionsof the countryremain too large.Unemployment is far too high among the young and in the South. This calls for a two-prongedapproach: higher, non-inflationary growth, and reformof the labor market to accommodatenew entrants,especially the

114 young, and to encourage private-sector investment in the South. Naturally, public investment in education, professionaltraining, and infrastructurecan help this process, and will be used to complementprivate investment. The Developing Countries and Transition Economies The best assistancethat industrialcountries can offer to developingnations and the economies in transitionis an open and growing world economy: that is, an environmentoffering opportunities, the possibilityto benefitfrom them, and the stability required by investors.Most of these conditions are present today and a large number of developingcountries are taking good advantage of them. Their economicgrowth continues to be impressivein the aggregate and there are signs of its spreadingto laggard regions such as Africa.Transi- tion economies are also posting impressive progress, and in many instances output gains for the second and third year running. Continued growth, however, is to a large extent to be generated internally. It requires good policies,a stable domesticenvironment, and art outward orientation and openness. Policies favoring capital accumulatioinare among the most important, for rapid growthrequires high rates of investmentand domestic saving.Achieving these conditionsin Africa and Latin Americais essential if the growth momentum that now exists is to be maintained.This is the responsibilityof public policy. Growth also requires good governance,both in the sense of honest and efficientadministration and in that of public participation.There are no short- cuts that really work in the long run. Public confidenceis a very hard commodity to obtain and to conserve, but it is essential to stability and to social and economic progress.This applies to all countries, without exception. Lasting economic progressrequires a proper divisionof roles between the public and the private sectors.The private sector is the creator of wealth. The public sector is the facilitator of economic progress and the guardian of its equity. Developmentof the private sector is a key ingredientof growth in both developing countries and transition economies. We are carefully monitoring the progress being made, since there is no alternativein emergingcountries to a healthy, competitive,employment-creating private sector. Both individually and coIlectively,our countries are striving to provide adequate resources for the assistance of needy countries and their pursuit of worthwhile goals. The replenishmentof the European DevelopmentFund is proof of this common commitment within the European Union. But public resources are scarce and face strongly competingcalls at home and abroad. Italy supports the International Development Association (IDA) and resource transfers to low-income countries that need them most and whose economies perform adequately.We will do our best to contributeto the Elev- enth Replenishment of IDA, together with our partners in Europe, North America, and Asia But expectationsabout the transfers that will be possible must be realistic and donors mut be convinced that the allocation of these

115 resourceswill be sound and fair. Our judgment on the allocationand utilization of earlier IDA resourceswill largelydetermine the extent of our participation in current and future mobilizationefforts. We wish PresidentWolfensohn well in this and other endeavors.

JAPAN: YASUO MATSUSHITA Alternate Governorof the Bank and the Fund

It is a great pleasurefor me to givethis addressat the FiftiethAnnual Meet- ings of thLeWorld Bank Group and the InternationalMonetary Fund. Beforemaking my policy remarks,I would like to extenda warm welcome to Brunei Darussalam,which has just joined both the Bank and the Fund. I must express our respect and gratitude to the President of the World Bank, Mr. Wolfensohn,and to the IMF ManagingDirector, Mr. Camdessus,as well as to the ExecutiveDirectors and staffsof these two institutionsfor the excellent work they always do. Now allow me to take this opportunityto express our most heartfeltcon- dolences over the passing of Mr. Preston, who served as an excellent leader and as the eighth presidentof the WorldBank for four years. I also welcome our new president, Mr. Wolfensohn,and extend to him our best wishes. I believethat the expertiseand influenceMr. Wolfensohnhas acquiredas a leading internationalinvestment banker and financierwill be valuableassets for all of us. State of the WorldEconomy and PolicyCoordination Let me begin by reviewing the state of the world economy.After hitting bottom in 1991,the growth of the world economyas a whole has accelerated, while price levels generally have stabilized.Growth in the emergingeconomies of Asia and of other developingcountries has undoubtedlybeen the main engine for this. Also, with economies in transition generally on a path of recovery,the world economynow seemsready to draw on the peace dividend followingthe end of the cold war era. For continuedgrowth of the world economy,it is essentialthat our member countrieswork jointly on three policy priorities:sustained noninflationary growth of industrial economies; strengthened stability in the policies of emergingeconomies as well as in the economiesin transition;and sustainable growth of developingcountries. While economies of the industrialcountries are generally expanding,the pace of growth has slackenedsomewhat Many industrialcountries are bur- denedwith high levels of structuralunemployment and fiscaldeficit, yet inflation remains at the lowest level since the early 1960s. In order to maintain momentum, industrial countries must carry out structural reforms while implementingpolicies to achieve sustainednoninflationary growth.

116 Above all, fiscalconsolidation should be, I believe, the main policy priority for all industrial countries. Continued, large fiscaldeficits will underminc the flexibilityof fiscalpolicy, and only add to theburden of future gencrations, thus serving as a major obstacle to the developmentof the world economy. The fiscal situation in Japan, in particular,hls noticeablydeteriorated. Japan must, thercfore,actively pursuc fivscalconsolidation. Stabilizing exchange rates is also an urgent priority for the entire world economy. It is thus imnperativcfor industrial countries to strengthen their efforts in reducing intemal and extcrnal imbalancesand to continue to cooperate closcly in exchange markets, so that exchange rates will reflect underlying cconomic conditions of cach cconomy.With lthis avowed intent, the G-7 Finance Ministers and Centrl Bank Governorsstated on October 7 that they had welcomedthe orderly reversal in the movementof the major currencies that began followingtheir April meetingand that they would welcomea continuation of these trends consistent with underlyingeconomic fundamentals. We firmly intend to maintain close cooperation with relevant countries in exchange markets. I now turn to the Japanese economy,whose pace of recoveryappears gradual. Recently, however, we have seen some positive signs, such as a move toward the orderly reversal of the cxchange rate of the yen and a rise in the stock market. On September 8, the Bank of Japan cut the officialdiscount rate to 0.5 percent, the lowest rate ever, and on September 20 the Government of Japan announced a package of economic measures worth a total of over 14 trillion yen, the largest ever in terms of working expenditures.These policy measuresare expected to steer the Japanese economyonto a steady recovery path, by restoring market confidence, and to contribute to the sustained growth of the world economy as a whole. I am fully aware that the stability of Japan's financial system is a subject of growing interest to the world in the context of deepened integrationof the world's financialmarkets. Japanese financial institutionsare steadilyaddress- ing the problem of nonperforming loans, and the Japanese authorities are determined to take appropriate actions to make our financial system more stable. The authoritiesha'.z responded swiftly to cases of some failed financial institutions on the basic principle of protecting depositors. We are further deliberating on an amendment to the deposit insurance system, and also on public interventionin this issue including the temporary use of public funds, while respecting the principle that such an issue should be addressed within the financial system as much as possible. For the Stability of EmergingEconomies and of Economiesin Transition The dramatically expanding flows of capital in private sectors and the emergence of new financial products have contributed, I am sure, to the growth of the world economy, by rapidly expandingthe intemational capital markets and furtheringintegration. However, the expansionand integrationof

117 the financialmarkets has created new risks in which a financialcrisis in one marketcan have an immediateand contagiouseffect on other markets. To date, the InternationalMonetary Fund has playeda pivotal role in the internationalmonetary system. I hope and trust that the Fund will also play a leadingrole in copingwith this new risk. To cope with a liquiditycrisis with systemicrisks, prevention is the best course of action. For that, it is essential that each member country pursue a sound fiscaland monetarypolicy of its own. Whenappropriate, however, it is expected that the Fund, while making the most of its hard-won mutual trust with members, will use its influenceto promote policy discipline with its membersat an early stage throughenhanced surveillance, including data provisionto the Fund and standardsto guide membersin the publicationof data, as well as via an improvedearly waning system of nationaleconomic policies and financialmarket developments. Should such a crisis occur, it is essentialthat the Fund play a central role in coordinatingconcerted action L'ythe whole internationalcommunity. And, in this sense, the exceptionallyswift and bold actiontaken by the Fund and its membersin responseto a series of developmentsin the emergingeconomies last Januaryshould be taken as an exampleof our firm commitmentand determinationto contain crises. T-fallow us to remain fully prepared for possible future crises, we should establish the Emergency Financing Mechanism (EFM) and develop new financing arrangementsin a flexible manner with the aim of doubling the resources currently available under the General Arrangement to Borrow (GAB),taking into accountthe intentionsof potentialparticipants. The new financing arrangements alone, however, will not allow us to maintain the resourcesof the Fund at requiredlevels, when we consider the diverse roles of the Fund, such as support for strengtheningstability of economies in transition and of emerging economias.Economies in transition,in particular,deserve continued support for their effortsto privatizepublic sector corporations and to implement structural adjustments, regardless of the improvementin the macroeconomicsituation. Accordingly, candid discussions mustbe held amongmember countries to makethe Fund's resourcessuf- ficient throughthe Eleventh GeneralReview of Quotas.

Supportfor Develop:ng Countries I would now like to outline Japan's views on assistance to developing countriesthrough multilateral development institutions. First, I would like to express our views on developmentassistance strategy, focusingon the importanceof respecting "uniqueness"and "diversity." The ultimate goal of developmentassistance strategy is, I believe, to ensure that the effects of current developmentendure, so that they will last through and benefitfuture generations.The problemsfacing developingcountries and

118 their needs for developmentare diverse, reflectingtheir stage of economic developmentand socioculturalconditions, which vary by region.Appropriate policiesto increaseand sustainthe effectsof developmentdo, of course,vary, reflectingregional diversities. At the same time,the improvementof economic infrastructureremains essential to sustainabledevelopment in many parts of the world. And, in most developingcountries, environmental considerations and the developmentof human resources are also among impendingisslues that need to be addressed. In responseto the uniquenessand diversityof each developingeconomy, the developmentassistance strategy of multilateraldevelopment institutions must, I believe,be equallydivcrse, because a static,unified approach simply will not work. In fact, developmentbanks in each region have long tailored their missions,policies, and methodsof doing businessto the uniquenessand diversityof their particularregion. The World Bank and developmentbanks in eachregion shouldfurther develop strategies focusing on theuniqueness of each region through the active exchange of experience and ideas, while enhancingcooperation as a whole. That will be the most appropriateway, I believe,to ensurethat developmentassistance has maximumimpact. Second,I would like to emphasizethe importanceof the exchangeof ideas and experience.Both industrialand developingcountries, as wellas the development financeinstitutions, have continuedto acquireextensive development experience.It will be extremelymeaningful for us to share this experienceand promoteintellectual exchange in sucha waythat this wealthof experiencecan be fully drawn upon. Particularlyfruitful is the sharingof experienceamong developingcountries. To furtherpromote such an exchange,I would like to announce that, in addition to the current working-levelmeetings of related officials,Japan will offer furtheropportunities for the exchangeof ideas and experiencein whichexperts from the privatesector, as well as fromacademia, can participate. Third, I would like to make some remarks on the immediatepriorities relatedto developmentassistance. Many developing countries still suffer from extreme poverty.The need for concessionalassistance thus remains enormous. This means that the intemationalcommunity as a whole should continue to support the activitiesof the multilateraldevelopment institutions. With regardto theongoing negotiations for the EleventhReplenishment of the InternationalDevelopment Association, all countriesmust make their utmost efforts so that appropriateagreements can be reached.It is also importantfor us to reach an early agreementon the SeventhReplenishment of the African DevelopmentFund and, last but not least, to begin our work on the Sixth Replenishmentof the AsianDevelopment Fund. In the process of the negotiationsmentioned above, we shouldhold talks to identifywhat policy changesare necessaryto ensure the maximumeffect of the efforts by multilateraldevelopment institutions. I am grateful to the members of the DevelopmentCommittee's Task Force for their year-long

119 effort, and I sincerely hope that the points 1have made today will be reflected in their future discussions. With regard to the issue of the poorest countries facing a heavy debt-service burden, I believe the basic approach should be to study the specific conditions of each country and then to address the issues on a case-by-case basis while making the best use of existing frameworks, respecting the confidence and financial integrity which the international financial institutionshave won in the past. Conclusion For sound development of the world economy, each member must continue to address its own priorities. For its part, Japan is detennined to do its best in dealing with its priorities. One of Japan's priorities is to steadily implement the latest packageof economic measures in order to ensure the recoveryof the Japanese economy,thus contributing to continuous growth of the world economy. Another priority for Japan is to take a continuously active part in Asia- Pacific Economic Cooperation (APEC), an open forum for regional coopera- dionfor the economnicgrowth of this diverse and dynamiicregion, recognizing that many of the Asian and Pacificeconomies are the centerpieceof world eco- nomricgrowth, and that promoting both steady economic growth of the region and trade and investment liberalization is indispensable to further growth of the world economy. As the host country for the APEC Economic Leaders Meeting, to be held in Osaka next month, as well as for the APEC Third Finance Winisters Meeting to be held in Kyoto next March, Japan will make the maximum effort to ensure the success of these two meetings. Last but not least important, under an international regime of cooperation led by the Bank and the Fund, Japan will also contribute, together with other member countries, to building a safety net to cope with potential risks in global financial markets.This is a new priority that requires global initiatives,and it is an urgent task indeed; it is crucial to preserve the stability of the world's financial marklets,especially when their dramatic expansion and integration mean that the economic policy of one nation can have a greater impact than ever on other economies. All of us who are gathered here in Washington,D.C. on the fiftieth anniversary of the end of World War II must confirm that the challenges lying ahead will require our wisdom, coumge, and commitment

KAZAKSTAN: VIKTOR VASILYEVICH SOBOLEV Governor of the Fund It is indeed a great honor for me to take part for the first time in such a distinguishedgathering. A few comments in memory of Mr. Preston, who visited our county in 1994.This was perhaps his last business trip, and he impressed us with his sin-

120 cerity,his wisdom,his ability to understandone and all, and the joy that he took in meetingwith commonfolk. We will alwaysremember this remarkable and innovativeman, who committedhis heart and talentto Kazakstan. It is indeedthe task of internationalagencies like the WorldBank and the IMF to improvethe living standardsof peopleand achievesocial harmony.In light of this task, we are deeply impressed by the plans and programs announcedby Mr. Camdessusand Mr.Wolfensohn for the futureactivities of these institutions.They give us clear guidancefor our analysisof the present global situationand for our own developmentof new activitiesand mecha- rnismsfor achievingour country's goals. Nowlet me brieflydescribe the presenteconomic situation of my country. Kazakstanis one of the largestof the formerSoviet republics. We are now an independentsovereign state. We have embarkedon radicaleconomic reforms beginningin 1992.It was not until November1993, when we introducedour own nationalcurrency, that the nationalbank began to operatein an autono- mous and independentfashion. Aidedby vigoroustechnical and financialsupport from the IMF, the World Bank, the EBRD, the Asian Development Bank and other international lending agencies,we were able to developby mid-1993an overallprogram aimed at stabilizingKazakstan's economic crisis and radically reformingits economy. Under this program, we have followedvery rigorous anti-inflationpoli- cies. Priceshave been liberalizedand we have beguneliminating monopolies and liberalizingdomestic and external trade. The governmentand national bankare bringinginflation under control.By dint of muchmore stringentfis- cal policies, we have managed in a year to reduce inflation to 2 percent a month,which is half the rate during previousyears. We have stabilizedon market principlesthe exchangevalue of our currency and we have also regulatedthe gold narket Wehave strengthenedthe autonomyof the nationalbank and increasedits role in monetarytransactions. Weare graduallyreforming the banking system. We have doubledour currency assets, and one of the main results of our economicreforms has been that we managedto curb inflation.This has curtailedthe constantdrop in real wages and incomeof our population.We have stabilizedpopulation income and in other calculationsit has been doubled. We stimulatedexports in 1994, and exports increasedtwo-fold. For the first time, we have had a positive trade balanceand also positivebalance of payments. We have effecteda number of institutionalreforms. We are carryingon with large-scaleprivatization. We have demonopolizedthe main industries. We have created new banking institutions,new trading institutions,and we have a constantincrease in our industrialoutput. And upon the initiativeof the government,we have introduceda number of measures to restructure the enterprisesector. We have strengthenedthe

121 n;3nagerialfunctions of these enterprises,and we have doneaway with deficit mnking companies. We are now embarkingon a new stagein our economicdevelopment. This is characterizedby macroeconomicstabilization, and we have movedon to an investmentperiod now. In our republic we have created favorableeconomic and legalconditions to attract foreigninvestment Under thosecircumstances, we will certainlycomplete successfully the standby annualprogram, and we will moveon to a newstage in our work with the Bank and the Fund regarding the developmentof a medium-termplan betweennow and 1998. We intend to further bolster our macroeconomicstabilization, strengthen our economic reforms as well as improve their quality.And we intend, of course, to improve the lot of our population, especially the low-income groups. We thankthe Bank and the Fund for their support,and we intend to further cooperatewith the IlEs. Rest assured,Mr. Camdessus,that the agreementon loans that we have achievedtoday regardingreforming the financialstructure and a number of social measures will be duly implemented. Additional projectsintended for the developmentof small and medium-sizedbusinesses and for privatizationare but the logicalcontinuation of an overallpackage of economicreforms in my country.And we intend to be furtherintegrated into the world economy. To conclude,I would like to stressthat our three-yearexperience in working togetherwith the Bank and the Fund is a clear exramplethat the assistance of the Bank can be adaptedto transitioneconomies.

KOREA: JAE-HYONG HONG Governor of the Bank and the Fund

It gives me great pleasureto have this opportunity,on behalf of the Korean Government,to addressthe FiftiethJoint Annual Meetings of the WorldBank and IMI. On this occasion,I would like to join the other Governorsin extending a warrnwelcome to BruneiDarussalam. Challenges Facing the World Economy At the last two AnnualMeetings, I brought to your attention the need to strengthen surveillance,the need to step up international support for environmental issues, and the need to increase efforts in supportingcountries in tansition. Today,I wouldlike to reemphasizeour continuedefforts in these areas and also address some of the new challengesfacing the world economy. The last decadehas witnessedthe increased integrationand globalization of financialmarkets. Indeed, this has encouragedan efficientallocation of global savingsand has promotedeconomic growth. But this has poseda new risk

122 as well: the possibility of a financial crisis spillover has increased, and the speed at which it can spread has accelerated.The volatility of cap: ad flows in and out of the developingcountries has also increased. Such developmentsrequire the Fund to take on some importantnew roles. Risks must be mitigated,while integrationcontinues to be fostered. In addition, the Fund must be aware that the rising uncertainty of exchange rate movementsmay hamper the sound economicgrowth of developing countries. Policy Directionsfor the World Bank and IMF In the face of new challenges, the Bank and the Fund must be willing once again to adapt their roles and operations. Today, I would like to underscore some of the essentials for the effective managementof those challenges. Policy Directionsfor IMF First of all, I would like to highly commendthe recent efforts of the Fund to strengthen its surveillance.And. to effectivelyprevent a crisis in the future, we support the Fund in the further adaptationand strengtheningof its surveillance. In particular,we support the adoption of a standardformat for the timely release of key economicindicators and financialmarket data of membercountries. Furthermore, I strongly urge the Fund to provide policy suggestions to improve the stability of capital flows into developingcountries. In particular, capital flows must be balanced with a country's economic fundamentals.In addition, the Fund must strengthen the means by which it can manage any future financial crisis. In this respect, the Fund's resourcesshould be augmentedto sufficientlev- els. To augment the resources, I believe that the Eleventh General Review of Quotas should be given the first priority. The Korean Government strongly supports an ad hoc increase of quotas for countries with a divergencebetween the actual and calculatedquotas. It is importantthat the quota, as the basis for the rights and obligationsof a member country,should keep pace with the relative economiicposition in the world economy. Another essential element is for key currency countries to work closer in their macroeconomicpolicies with due awarenessof the interests of the developing countries.The Fund, which representsthe interests of all membercountries, should participatein the process of such policy coordination. Policy Directions for the World Bank Recently, the level of Official DevelopmentAssistance (ODA) has been decreasing,while poverty and the burden of debt service have been an increasing threat to the Least DevelopedCountries (LDCs). Therefore, I would like to welcome the Bank's efforts, led by its new president, to enhance the effectiveness of developmentassistance programs. It is our hope that the Bank wil

123 continueits efforts to increasemultilateral cooperation to ease the burdens of the LDCs. To this end, active participationshould be encouragedin the Elev- enth Replenishmentof the InternationalDevelopment Association (IDA). To promoteactive participation,I would like to proposethat a special capital increasebe given to those countrieswhich significantlycontribute to this replenishment.The Bank should also be a catalyst in mobilizingprivate capital for infrastructureand environment developmentprojects in developing countries.

Korea 's Role in the Bretton Woods Instirutions The KoreanGovernment has been implementingbroad deregulation,stimulating the private sector based on market principleswhile expeditingfinan- cial liberalizationand market opening. Under the auspicesof these liberalizationefforts, the KoreanGovernment has actively participatedin the World Trade Organization(WTO) financial service negotiationsand contributedto their successfulconclusion. And we will further accelerate the financialmarket openingpolicy. Next year,the issuanceand listingof foreignstock in the domesticstock marketwill be allowed. The issue of won-denominatedbonds by the World Bank will also be allowed, followingthe successfulissuanice the Asian DevelopmentBank this year. (Foreigners will also be allowed to establish branch officesof Security AdvisoryCompanies or SecuritiesTrust ManagementCompanies by 1996. After that, joint venturesor subsidiarieswill also be allowed.) (With respect to direct foreign investmentliberalization, all business sectors will be liberalizedby 1997, except for those related to national security and public interest.) With regardto economiccooperation with the developingcountries, Korea will increase its official developmentassistance. As in past IDA exercises, Korea plans to actively participatein the forthcomingEleventh Replenish- ment of IDA. Moreover,the governmentwill furtheractivate our ODAvehicle, the Eco- nomic DevelopmentCooperation Fund (EDCF),through substantialreplenishment of up to $500 million next year.

Concluding Remarks We are all facing an increasinglyintegrated world economy.Therefore, multilateralcooperation through the Bretton Woods institutions, as well as through the newly born WTO, has become essentialfor sustainedand stable economicprosperity for all member countries.Through continuedstructural reformand marketopening, the KoreanGovernment will maintainits commitment to free trade and multilateralismin the spirit of economiccooperation.

124 LAO:XAYSOMPHONE PHOMVIRANE Governorof the Bank

First, the delegationof the Lao People'sDemocratic Republic would like to express its sincere condolencesfor the passingaway of Mr. LewisPreston, formerPresident of the WorldBank Group. Our delegationis pleased and very honored to participatein the Fiftieth AnnualMeetings of the World Bank Group and the InternationalMonetary Fund,especially myself, recently appointed Minister of Financeand Governor of the Bank for the Lao PDR, as I attend the Meetingsfor the first time. On behalf of the Governmentof the Lao PDR, we wish to welcomethe new President,Mr. JamesWolfensohn. We alsoconvey our warm greetingsto the Chairof theseMeetings and to the managementof theWorld Bank Group, the ManagingDirector of the Fund, and to the Governorsand delegatesof all membercountries. We join our fellowGovemors in welcomingBrunei Darus- salam, the new member of the two institutions.On this occasion, we also would like to thankthe host country for its warmhospitality. Overall,the globaleconomic growth carriedon in 1995,especially in the developingcountries such as those of the East Asia region. But growth in industrial countries was sustained at a lower pace than the forecasts.The unevengrowti amongregions is partiallydue to the foreignexchange volatility that caused a deteriorationof the balance of payments and affected the weight of the debt either because of the depreciationof the dollar or the strengtheningof the yen. Besidesthe economicgrowth in someregions, poverty and natural calam- ity are still tremendousobstacles to development.Among others,our country is affectedby naturalcalamities, which affect negatively the living conditions and the assets of our people, as our growth rate is highly susceptibleto the fluctuationsof our agriculturalsector. To face those problems,more extemal fundsare needednot only to sustain economicdevelopment but also to maintain equitablesocial developmentand to spur the preservationof the environment.Therefore, the Governmentof the Lao PDR, as a memberof the World Bank, requests aIl donors and membercountries to continue their contributions to the TenthRepleniishment of IDA to reach the total approvedamount, as well as that of IDA-l1. We also support the Bank's strategic priorities, particularlyon poverty alleviation,human resource development, use of natural resources,and envi- ronmentalsustainability. The socioeconomicdevelopment policies of our Governmentallow all economicsectors to participatein development.Special attentionis given to strengtheningthe role of the private sector and to increasingthe participation of the people,and concurrentlyto attract foreigninvestrnent. In order to support these policies,the NationalAssembly is about to adoptnew laws such as a law on domesticinvestment promotion and a new tax law.

125 In the social andeconomic development plan to the year 2000, our Gov- ernmenthas focused on eight priorityprograms: food production, stabilization Oa cultivation,commercial production, rural development,human resource development,expansion of foreigneconomic relations, infrastructure development,and upgradingthe qualityof the servicesystem. To overcomethe poverty status of our country,our Govemmentwill concentrateon the developmentof hydropowerwhich is our majornatural potential if we preserveour environment.Concomitantly, we also set out a plan for the developmentof adequatephysical infrastructure, such as roads,to benefit from our geographicalposition as a crossroadsfor regionaltrade routes and to ensure the expansionof foreignrelations, in particularwith SoutheastAsian countries.Our Governmentwill improvethe tariff systemand will enter into discussionson tax and tariff issueswith friendlycountries. Our Government is focusing on investmentin agro-forestryprocessing to exploit natural resourcesin a sustainableand efficientway. This leadsnaturally to otherimportant concerns of our Govermnent,which are the preservationof the enviromnent,human resource development, promotionof women,and socialprograms to improvethe livingconditions of the people. The Govemmentand the peopleof the Lao PDRrecognize that the continued assistancefrom the World Bank and the InternationalMonetary Fund is a substantialresource that activelycontributes to the developmentand the eco- nomricreform of the Lao PDR.Particularly, structural and adjustmentcredits supportour economicreforms with somesuccess to date. In the lastyears, our economyis on a good trend. Inflationrates were satisfactorilyreduced. For- eign exchangerates have remainedstable, and the deficitin the balance of paymentshas been reduced due to increasingexports. Furthernore, foreign investmentincreased in all sectors.The macroeconomictargets were attained thanksto the overallefforts of our Governnent. 1995is the year for the Lao peopleand the Lao Governmentto celebrate the TwentiethAnniversary of its foundation.This was the year also whenthe Governmentrevised the price policy,the tariffstructure, and the taxationsystem, and adoptedfloating of the exchangerate and trade liberalizationalong with a rationalmanagement of the macroeconomy. Macroeconomicstability depends not only on economicreform, but also on the extemal environment,such as a favorableworldwide economic climate,extemal financial support and the expansion of externaltrade. We, therefore, call on industrialcountries to providefor flexibletrade policy towards developingcountries and to continueto increasetheir financial'support, espe- ciallyto contributeto ADF-7of the AsianDevelopment Bank. Our Governmentsincerely thanks all countries,international organizations, nongovernmentalorganizations, and internationalinstitutions such as the WorldBank Group and the Intenational MonetaryFund for their continued and increasedassistance. We especiallythank the World Bank for con-

126 firmingconcessional loans amountingto a total of US$341 millionfrom 1996 to 1998. The Asian Development Bank has committed to providing grant funds and concessionalloans for 1995-98of US$328 million. By implementing a consistent policy of expanding foreign economic relations, we believe that internationalinstitutions and other donor countrieswill continue and will increase cooperation in providing grants, concessional loans, and technical assistance; promoting private investment;and creating opportunitiesin trade relations with our country. To conclude, I would like to present our best wishes of success to the Meetings.

LEBANON: FUAD A. B. SINIORA Governorfor the Bank (on behalf of the Arab Governors)

I am pleased and honored to address you on behalf of the Arab Govemors of the World Bank and the InternationalMonetary Fund. I would like to begin by expressingmy congratulationsto Mr. President,on being chosen to preside over the Boards of Governors this year, and to Mr. Wolfensohnas he takes over the presidency of the World Bank Group. I would also like to extend a welcome to the State of Brunei Darussalamn,which has recently become a member of the BrettonWoods institutions. The past year witnesseda series of unfavorabledevelopments in the international financial markets,beginning with the a sharp rise in long-terminterest rates in many industrial countries, continuing with the severe financial crisis that shook the Mexican economy,and ending with the extremedisorder that overtook currency markets during the first half of this year. These developments added to the importance of the extensive discussionson increasing the scope of internationaleconomic cooperation, which began in the context of the 50th anniversaryof the Bretton WoodsConferenre. While we certainly appreciatethe efforts made by the Bank and the Fund over the past few months to come up with proposals for increasingtheir effectiveness,we must stress the importanceof perseveringin the ceaselesseffort to make these institutions better able to meet the challengesposed by the radical economicand political changesthat have taken place in the world over the past few years. In view of the significant and direct effect of actions resulting in many eases from the proposals made to developing countries, we would also like to stress the importanceof holding seriousjoint consultationswith these countriesand giving them the opportunityto participatein the decision-makingprocess. In our opinion, this can be accomplishedby giving both the InterimCominittee and the DevelopmentCommittee, in addition to the Boards of Governors of both the Bank and the Fund, a more central and effective role in internationaleconomic management.

127 While we appreciate the accomplishmentsthat have been made with respectto the worldeconomy as a wholeand the manyachievements of developing countriesin raising the standardof living of their citizens,it is clearthat much remains to be done. Despite the success of certain efforts, the gulf between the industrial and developingcountries is still very wide, on the whole. The ability of developingcountries to join the ranks of the industrial nations continues to appear more and more unlikely in many parts of the world. It is evident that both the responsibilityand the long-terminterest of those concerned with the world economicsystem require that this challenge be met effectively.It is only naturalthat the BrettonWoods institutions should play a leadingrole in this arena. We believethat the best way to meet this challengeis throughclose cooperation and continuoussupport for the efforts of member nations to develop the technicalskills of their citizens and improvethe level of necessarysocial services. In short, the only way to begin bridging the existing gap between industrialand developingcountries is by supportingthe effortsof developing countriesto invest in the developmentof human resources, helping them to keep pace with rapid technologicaladvancements and thus participatein the advancementof the world's society as a whole. Each of the Bretton Woodsinstitutions has an importantrole to play in this respect,based on the responsibilitieslaid out in their charters.Through cooperationwith membernations, the LMFcan assist in ensuringthe stabilityof the world economy,by helpingto prevent local economicdifficulties and providing assistance to overcomeany problemsthat might occur as a result of foreigneconomic difficulties. Likewise, the WorldBank Groupstrives to achieve its basic goal, which is to reduce poverty, assist developing countries in advancingtheir economicsectors and help ensurean adequate supplyof official and private resources. The Mexican economiccrisis clearlyshowed the importanceof efforts to create sound economicpolicies, and being preparedto modify these policies at an early stage, in light of new developments.This concept is reflectedin many of the proposalsthat have recentlybeen studiedby the IMF, including thoserelated to strengtheningits abilitiesto detectat an early stage sources of tensionin the economiesof its membernations and in the intemationalmonetary system in general.We support this concept,but it is importantto remember that these efforts should be focused on those countries which have an importantimpact on economicperformance in other countries.We believethat a se!ectiveprocedure should be followedwith respect to monitoringrequire- ments, such as providingthe IMF with reports and other information.This is entirely in keepingwith the principleof reciprocityas appliedto the IMP and its role in monitoring,in view of the great disparity amongthe economiesof membercountries, especially in termsof the extent to which the performance of any one countrymay affect the economiesof other countries.On the subject of information,we must not forget the importanceof non-interferencein the

128 policies of member countries with respect to the diffusion of information.No pressure of any sort should be placed on these countries, even indirectly,to comply with particularstandards for the diffusion of information. While it is true that preventionis better than cure, we cannotdispense with cures. We must rememberthat efforts aimed at strengtheningthe ability of the Fund to foreseepossible financialcrises do not dispensewith the need to make every possible effort to raise sufficientfinancial resources, which enables the Fund to effectivelyperform its role as a source of financing.This requires,first and foremost,that the Fund ensure the sufficiencyof its own resources.We are aware that the EleventhGeneral Review of Quotasis currentlyunderway at the IMF. We must refrainfrom distributing any surplusthat may be agreedupon in the contextof this review,in such a waythat will causea reductionin thepercent- age of quotas held by developingcountries out the total numberof Fund quotas. In addition to ensuring the availability of a sufficient amount of its own resources, we believe that it is importantto strengthenthe role of the General Arrangementsto Borrow (GAB) as a backup to these resources.We welcome the efforts that have been made to increase the financial resources available through the GAB, and we hope they will meet with success in the near future. But we must also point out that strengtheningthe role of GAB as a backup for the Fund's own resources will require, in addition to increasingthe amount of resources available, simplificationof the procedures that govern the use of these resources in order to make them more manageable,along with imrnedi- ate and decisive efforts to overcomethe negative effects of economic crises. With respect to increasing the ability of the Fund to respond rapidly to financing requirements,I would like to mention the efforts recently made to create a mechanism for urgent financing. But we must remember that this mechanism,in its current form, is no more than a group of guidelinesand procedures which, althoughextremely important,cannot be effectivelyapplied in the absence of sufficientfinancial resources. We support the efforts that have been made to extend facilities to promote structural reform, which allow the Fund to offer concessionalloans on a continuous basis to low-incomemember countries.We are disturbedby the reluc- tance of certain industrial countries to provide sufficient financial assistance to ensure the success of these efforts, and we wish to stress the importanceof internationalcooperation at the highestlevels to address withoutdelay the task of reducing the disparity between North and South. The inability to reach an agreementon the reallocationof special drawing rights over the past fifteenyears is only one manifestationof the weaknessthat characterizesthe current state of internationaleconomic cooperation.Despite the fact that the great majority of member countries have supporteda reallocation for several years, it has not been carried out due to the oppositionof a limited number of industrial countries.It is truy regrettablethat this continued failure to reach an agreement on reallocation has meant that over 20 percent of the Fund's member countriescontinue to be excluded from participationin

129 the system of special drawing rights.On behalf of the Governorsof the Arab World,I herebycall for puttingan end to this unnaturalsituation. As we are in agreementthat there is a need to increasethe amountof internationalreserve funds, a general reallocationrepresents in our opinion-from both a logical and practical point of view-the best way to incorporateall the Fund's new membercountries into the system of special drawingrights. Despitethe fact that cxpectationsregarding the progressof the worldeconomy over the medium term are somewhatencouraging, we must not forget that manydeveloping countries and countriesin transitionstill face great economic challengesand difficulties. Meeting these challengesand solving these difficultieswill require, first and foremost,that the countriesinvolved persist in their effortsat reform.The successof these efforts will depend to a large extent on the availabilityof outside financial assistance in sufficientquantities and under favorablecondi- tions. Foreignsupport of reformefforts in the indebtedcountries must include fundamentalprograms to relievethe burdenof indebtedness.In this regard,we welcome the Paris Club creditors' application of the Naples concessional termnsto address the indebtednessof an increasing number of low-income developingnations. We also hope to see an expansionin the scope of activities to reduce bilateral public debt to include more countrieswhose indebtedness hindersthem from restoringtheir credit status. In addition to the availabilityof sufficientfinancing under favorablecon- ditions,the successof developmentand reformefforts in developingcountries also depends on increasedopportunities for selling the exportsof these countries in the marketsof the industrialcountries. In this regard,we hope that the effective applicationof the agreementsreached within the contextof the Uru- guay Roundwill be followedby a concentratedeffort to remove the non-tariff barriers that block access to the marketsof industrialcountries and hinder the effortsof developingcountries to expandand diversifytheir exportsaccording to the principleof comparativeadvantage. Here I feel I must expressthe great apprehensioncaused us by the continuedsupport of the industrialcountries for tariff policies that discriminateagainst petroleum and the petroleumderiva- tives exported by our countries. Such policies are entirely at odds with the need for close cooperationamong the petroleumproducing nations and those that consumeit, to ensure stabilityin the price of oil and guaranteethe supply of sufficientquantities to meet the rising world demandfor this vital commodity. Likewise, another matter that disturbsus and other developingcountries involves the protective policies and other measures taken by the industral countries,allegedly for the purpose of achievingnon-commercial objectives. Whilewe are on the subject of internationaltrade, I would like to draw attention to the particularimportance we attachto taking effectivemeasures to prevent the impositionof excessive additionalcosts to be borne by developing countriesthat import foodstuffs,due to the increasedprices of these commodities as a result of the Uruguay Round.

130 On behalf of thc Arab Govemors, I welcomethe creationof the World TradeOrganization (WTO) and the participationof its DirectorGeneral in our annual meetingthis year, I would like to express our hope that this strategic organizationwill be able to impose an approl.iate system of regulationson internationaltrade and help strengtheninternational cooperation in this vital field.We are confidentthat cooperationbetween WTrO and the BrettonWoods institutionswill prevent duplicationof servicesand interferencein carrying out their variousresponsibilities. Wc also hope that WTO will take into considerationthe circumstancesof the Arab countries, as developingcountries, with respectto conditionsfor membership,and will help these countriesmeet the challengesresulting from the agreementto establishthis organization. Please permit me to address at presenta numberof issues relatedto the WorldBank and the transferof resources. The decline in the transfer of resourcesto developingcountries over the past few years is cause for concern,and prospectsfor future developmeritsdo not indicateany improvement,especially in terms of the transfer of official assistanceto low-incomecountries. While the overall flowof resources,both publicand private,increased greatly from 1991-93,there has been no significant increasein SouthAsia or Sub-SaharanAfrica, where poverty has reached an unprecedentedlevel, or in our region,the Arab World.Last year there was a decreasein the total flow of resourcesdue to a great reductionin public resources.Moreover, documents presented at the last meetingof the Develop- ment Committeepredict another large reductionfor the current year with no prospectsof improvementin the transferof public resourcesin comingyears. In light of the above, we call upon the advanced donor countries to increase their efforts to summon the political will required to ensure an increase in the flow of resources to developingcountries, especialiy official concessionalresources and resourcesof the InternationalDevelopment Asso- ciation(IDA), concering which we hope the discussionscurrently underway will bring positiveresults. We are pleased to cite the increased numberof loans and credits granted by the Bank and IDA during the past fiscal year, and we hope to see an increase in the activitiesof the InternationalFinance Corporation (IFC) and the MultilateralInvestment Guaranty Agency (MIGA) to support private investment.However, we must also draw attentionto the fact that the number of loans and creditsissued by the Bank and IDA to the MiddleEast andNortb Africa decreasedover the last fiscalyear to a level less than half that of fivn years ago. We support the World Bank Group's focus on the objectiveof alleviating povertyand promotingdevelopment that ensurespreservation of the environment, and we fully support expansionof the private sector. We also applaud the Bank's great interest in human development,especially in the fields ot health, basic educationand women's education,and the Bank's intention to increase significantlyits financingof activities in these areas over the next

131 three years.We supportthe effort to ensuri:comprehensive and effectivepar- ticipation on the part of the groups that are affectedby the projects of the World Bank Group, during preparation,implementation and supervisionof the projects.While we endorsethe strengtheningof relationshipsbetween the Bank and non-govenimentalorganizations, we hope this will not lead to a non-objectiveinfluence of these organizationson the lending policies of the Bank. We also applaud the efforts being made to enhance the role of the DevelopmentCommittee and to focus its attentionon issuesrelated to the policies of the WorldBank Group.In this regard,we look forwardto the realization of the basic goal for which the Committeewas created, that is, effective participationin the increasedtransfer of resourcesto developingcountries. I commend the progress that has been made in the areas of reform and developmentin an increasirignumber of developingcountries over the past few years,drawing particular attention to the great stridesthat have been made by the Arab countries.I would also like to cite the high degree of economic and financialopenness prevailing in many of these countries,along with the efforts being made to establish closer ties among the economiesof our countries and the world economyas a whole. But I mustalso mentionthat despite the progressachieved by our countries,they continueto face-as do the other developingcountries-a numberof citallenges,including those relatedto fluctuationsin the worldfinancial markets and prices of primarycommodities. On this subject,we shouldmention that the sharpdecline in the valueof the dollar compared to the other leading currencies during the first half of this year, and the subsequentsteep drop in the price of crudeoil, will no doubt have a significant negativeeffect on the economicperformance of manyof the countriesin our region,at least in the short term. In light of the challengesthat we expect will continueto face thesecountries over the mediumand long terms, we must work together to continue our reform and developmentefforts, in order to firmly establishthe foundationsof world stabilityand economic growth, helping our peoples realizetheir aspirationsfor progressand prosperity. While on the subjectof our region, I wish to applaudthe role of the Bank and the Fund in providingtechaical assistance,and the financialsupport of the Bank to developmentprojects in the West Bank and Gaza, along with the activitiesof both institutionsin coordinatingthe assistanceefforts of the donor countriesand institutions.We call on both institutionsto increase their assistance, to encouragethe donor countries and institutionsto make every possible effort to provide sufficientresources and to simplify the proceduresthat govern the use of these resources, not only in the Arab countries,but for all the developingcountries of the world. In conclusion,I wish to mention that my country,Lebanon, through the effortsof its citizens,the support of itsArab brothersand sisters and its friends throughoutthe world,has made great strides towardsachieving its ambitious goals in the areas of reconstruction,institutional development, investnent in human resources and developing the abilities of the Lebanese people to

132 increaseproduction and improvetheir standardof living.The generalfocus of the government'seconomic policy has been and continuesto be restoringcon- fidenceand stabilityto tLe Lebaneseeconomy, which is the first step towards stimulatingeconomic activity and creatingan environmentfavorable to sustainableeconomic growth. This has in tum helpedfocus the attentionof both the privatesector and foreignassistance on reconstruction.In thisconnection, I would like to state that, despite the expectationthat reconstructionefforts will placea heavyburden on the public treasuryover the mediumterm, we are determninedto achievea significantreduction in the deficitbeginning with the next fiscalyear. This intentionis clearlyreflected in the draft budgetfor 1996 which was recendy passedby the Council of Ministersand includessignifi- cant reform efforts, which we expect will lead to achievinga surplusin the preliminaryfinancial balance. We believe that this focus, with its concomitant effortsat structuraland organizationalreform, has helpedcreate a suitablecli- mate for reopeningthe financialmarket aftermany years of inactivity,and for strengtheningthe confidence of non-Lebaneseinvestors in the performanceof the country's economy,thus restoringto Lebanonthe uniqueposition it once occupied on the investment map of the Arab World.

SOCIALIST PEOPLE'S LiBYANARAB JAMAH:YA: MOHAMED A. BAIT ELMAL Governorof the Bank

On behalf of the delegationof my country,the LibyanArab Jamahiriya,I am pleased to congratulateMr. Chairman, for being selected to chair the Boardsof Governorsthis year. I wish you success in movingthese meetings towardthe achievementof goodresults-all peoplesof the worldbenefit from the programsand policiesimplemented by the BrettonWoods institutions, as well as from the coordinatedeconomic, financial, and monetary policies to which member countriesadhere, taking into considerationthe interests and needs of the variouscountries of the world,without any discrimination.It also pleasesme to welcomethe new membercountry, Brunei Darussalam , which has recentlyjoined both of our institutions. While commendingthe great and distinguishedefforts undertakenby the late World Bank President Mr. Lewis T. Preston, I would like to welcome Mr. James D. Wolfensohaand extend my congratulationsto him on being appointedas Presidentof the WorldBank. I wish him successin fulfillingthe responsibilityof leadingthis majorinternational institution. Despite the rates of growthachieved by the global economylast year, the notable growth in world trade, and the containment of inflation Mtes by many industrial nations, there have been certain developmentsand events which have had some adverse economicrepercussions on developing countries. Notablein this respectis the Mexicancrisis and its adverseeffects on financial

133 markets, particularlyin developingcountries. Also notable are the dramatic changesin the rates of exchangeof major world currencieson a scale unwarranted by economicindicators or economicrealities in the industrialcountries. Such developments and events-particularly the fluctuations in the exchange rates of major world currencies-would not have occurredhad the relevantcountries whose currencies are involvedshouldered their responsibility to maintain the stability of the values of their respective currencies. Certain countriesshould have taken appropriatemeasures to rectify the situation. Such developmentsare sources of major concern for developingnations, making it incumbenton industrial countriesto adopt more crediblepolicies that take into account the conditionsprevailing in other countries-particularly the developingnations. Undoubtedly,fluctuations in capital flows pose many risks, not only to developingcountries but to the entire internationalfinancial system, especially in the contextof the globalizationand integrationof financialmarkets. Hence, it is incumbentupon the internationalcommunity to stand ready to help membercountries that are faced with the problem of capital flightcaused by dramaticspeculations on capital marketsor by externalfactors over which the relevantauthorities have no control. In this context, it is necessaryto bolster and strengthenthe IiMFfinancial base through appropriate increases in quotas thereby enabling the IMF to extend tirnelyassistance to member countries facing crises. Therefore, we deem it necessaryto advocate the need for expeditingthe Eleventh General Reviewof Quotasin order to ensurethat developingcountries have reasonable quota increasesproportionate to their financingneeds. In this respect,we repeat our call-and that of the developingcountries- for a new allocationof SDRs to strengtheninternational reserves and meetthe financingneeds of developingcountries. Certainindustrial countries which opposed such a new allocationover the past years should recognizeand appreciatethe need of developingcountries for such reserves and, accordingly,cease opposingthe wishesof the majority of IMF member countriesin this regard. Undoubtedly,the conclusionearly this year of the UruguayRound of Mul- tilateralTrade Negotiationsand the establishmentof the WorldTrade Organi- zation (WTO) were significantachievements. More significant,however, is the ability of the WTO to establish the mechanismsnecessary to enable it to play an important role in emphasizing respect for the principlesof international trade and increased trade coupled with increased equitable market access opportunities.This will contributeto strengthenedgrowth opportunities for all membercountries. In this respect,we call once againon all industrialcountries to eliminate- in compliancewith the principlesenshrined in the Uruguay Roundand WTO agreements-all formsof barriersimposed on the exportsof developingcountries, be they tariff or nontariff barriers or discriminatorytreatment against

134 certain countries. Moreover, we call upon the international community to establish a mechanismfor extending the requisitefunding to food-importing developingcountries, which will be affected adverselyby the expectedrise in prices of agricultural goods, due to implementationof the Uruguay Round agreement,during the transition period. The Libyan Arab people are making steadfast efforts to extricate themselves from the cycle of backwardnessand to build an advanced society.Our resources are being used to implementtransformation and developmentprograms through the establishment of agricultural, industrial, and service projects. Recognizing the seriousness of the outlook for future water resources,the Libyan Arab people have completedthe first phase of a major man-maderiver, while the second phase is slated for completionnext year, to carry about 6.5 million cubic meters of fresh water from the southernto the northernregion. Land reclamationefforts are currently underwayfor approximately 200,000 hectares which are suitablefor perennialirrigation. A ceremonywas held this year in celebrationof the distributionof the first 1,000fanus ,which will benefit from the waterfrom this giant project that will change the face of the Libyan landscape.Furthermore, this project will create numerousjob opportunitiesfor Libyan citizensand for nationals of neighboring and other countries and will meet the needs of residents for agricultural and food products. Libya will continue its efforts to complete infrastructure projectsin the fields of energy,transportation, housing, public utilities,health, and education. Investment in manufacturing industries has witnessed an annual growth of 7.5 percent. This year, the Libyan Jamahiriya entered the pharmaceuticalindustry with the opening of Al-Rabitapharmaceutical plant to produce numerous miedicines with international trade marks to meet domesticmarket needs and export surpluses. Even as the LibyanArab people have been endeavoringto achieve development objectives, they have been subjected to coercive measures initially imposedby the United States in January 1986.Such measureshave involved an economicblockade, the freezing of Libyan funds at Americanbanks and their foreign branches, and coercive restrictions requiring that payments for transactions to which Libya is a party be made in dollars. These American measuresviolate not only the spirit of the IMP agreement,but also its explicit provisions, accordingto which member nations may not impose restrictions on internationalpayments and the normal flow of goods and services,particularly when the currencyof the country initiatingsuch measuresis an intemational reserve currency used in settling a large proportion of intemational exchangesand payments. We have drawn to the attention of the authoritiesconcerned within the IMF and its Executive Board, the necessity of opposing and condemning such behaviorbased on the spirit of the BrettonWoods Agreement, which prohibits member countriesimposing restriction on making paymentsfor cutrent international transactions. If certain member countries proceed on the basis of

135 Fund DecisionNo. 144of 1952and their interpretationof securityrestrictions to justify this policy, the delegationof my country believe:sthat Decision No. 144 of 1952 entails real problemsof interpretationand applicationand that the IMF shouldnot acceptrestrictions that are not motivatedby economic and financialconsiderations; otherwise, the membercountries might resort to imposingsanctions which would threatenthe intemationalpayments system andjeopardizethe spiritof the BrettonWoods Agreement for politicaland private reasons. Wecall upon the IMF andits ExecutiveBoard to reviewDecision No. 144 of 1952,and to put it in its proper perspectivein termsof interpretationand application. The Arab Libyanpeople-small in numberbut strong in their faith in lib- erty, democracy,political independence,and adherenceto the principlesof internationaljustice and peace-continue to be exposed to all kinds of pressure that threatentheir lives and stability.The most recentexample is what came to be known as the LockerbieCrisis which-through the pressureof some Westem countries-led the UN SecurityCouncil to impose coercive measuresagainst the Jamahiriya involving a ban on airlineflights to and from Libya,and a ban on exportsof essentialcommodities to Libya,in additionto someother financialmeasures. Such measureshave led to manyhardships, some of whichare citedhere- under as examples: Human impact • Inabilityto referto foreignhospitals about 13,500patients requiring med- ica care abroadand surgical interventions such as openheart surgery, kid- ney transplants,retinopathy corrective surgery, brain and nervesurgery, spinal rupture, correctivesurgery, and treatmentof serious burns and malignanttumors. As a result, most of the indi-. duals involveddied in difficultcircumstances. * The deati of about685 infants due to delays in obtainingthe necessary serums,vaccines, and prophylacticmedicines. * Increased incidenceof diabetes and mortalityamong diabetics due to inadequateserums for timelytreatment of patients. * Growingshortages in serumsand vaccinesfor infants,which adversely affectedall healthprograms related to immunizationcampaigns. Economic Impact Total losses resultingfrom the ban on airline flights amountedto about $10,009,217,240comprising losses incurredin the sectors of health, social security,agriculture and animal resources, transportation, and industryas well as economyand trade.

136 Many countries, as well as international and regional organizationsand groups, have expressed opposition to coercive measures imposed on the Jamahiriya;they still call for abolishingsuch measuresand for resolvingthese issues through dialogue without recourse to blockades, asset freezing, and other means of international terrorism which are fraught with catastrophes and disasters and which are an obstacle to developmentin our country.These measures indeed reflect new means of terrorism supportedby some Western countries. Hence, the internationalcommunity, particularly the Bretton Woodsinsti- tutions, must endeavorto appreciate the Libyanposition and adopt a fair economic stance based on reason and intemationallaw.

MALAYSIA: ANWAR IBRAHIM Governor of the Bank and the Fund

The Malaysiandelegation would like to join our other colleaguesin con- gratulatingMr. Chairmanon his chairmanshipof this Joint AnnualMeeting of the WorldBank and the MBF.We would also like to welcome and congratulate Mr. James Wolfensohnon his appointmentas the new Presidentof the World Bank. We welcome the improvedprospects for world econor,r;,,Arowthand global economicintegration. The growth in trade is now significantlyfaster than output in almost all regions of the world, bringing about substantial and widespread benefits in terms of increased opportunitiesfor specialization,greater incentives to invest, and more rapid technologicaltransfer. The outlook for most countriespoints to continuedgrowth, with the industrialcountries showing a sustainablegrowdt momentum.For the developing countries, the outlook continues to be favorable. Growth in South Asia is expected to remain favorable,while East Asia and LatinAmerica are expectedto record strong but slowergrowth. Against this favorable environmentof economic growth and increasing globalizationand integration of markets, however, serious policy challenges still remain. In the industrial countries, the strong expansion comes with associated risks that need to be contained, particularlythe possible negative effects arising from the foreign exchange turbulencein the first six months of 1995,following the adverse financial market reaction to the poor state of public financesin severalcountries bringing about higher interestrates, and possibly more restrainedconsumer spending. Given these risks, it is importantthat the gains made in loweringinflation be preserved,while the difficultbut necessarytask to reduce high public deficits needs to be vigorouslypursued, given increases in fiscalburdens associated

137 with increasingsocial demands.With private savings lowor decliningin many developedcountries, efforts need to be intensifiedto ensure that this does not becomean impedimentto the growth momentum. Amongthe developingcountries, the stronggrowth performance in recent years continues to mask considerablediversity. We are concernedthat many countries continue to experience weak growth and poor or even declining standardsof living.Although favorablecommodity prices have improvedthe prospects of some countriesin Sub-SaharanAfrica, several countriesremain vulnerableto adverseexternal conditions.Of course,divergence in economic prospects reflects varying commitment to stabilization programs, difficult political conditions,and poor governance. For some countries like ours in South and East Asia and in some Latin Americancountries, economic performnance remains robust. In order to sustain stable growth, fiscal consolidationand monetaryrestraint have been pursued to reduce the risk of overheatingas well as to moderatecapital flow volatility. There is also a need among developingcountries where the capital and financial marketsremain quite robustto be vigilant to safeguarddomestic financial stability. Macroeconomic management also needs to take into account the destabilizingimplications of such flowson the domesticeconomy in terms of higher consumptionexpenditure, thereby contributingto price pressures. Over the past few years, there have been unprecedentedsurges of pdvate capital flowsinto developingcountries leadingto excessive liquidity expansion and upwardpressures on real exchangerates. These flowshave, however, been concentratedin a few selected developingcountries and their sustain- abilityis questionableand worrisome.The risk of suddenreversal looms large as investment decisions react to perceived or real dangers to domestic or extemal stability.Financial discipline therefore needs to be strengthened.We thereforesupport the initiativeof the IMF to play a more activerole in surveillance and in developinga mechanism to assist such countries to cope with these situations.These institutionsmust also seek to improve the access for those countriesthat have not been able to attract private capital flows, especially low-incomecountries undergoing structural adjustments. The volatility and uncertainty of private capital flows underscores the importanoeof developmentassistance which is vital to manypoor developing countries. Officialdevelopment assistance (ODA) provides resources based on long-termconsiderations as well as a transferof technologyand technical assistance that are essential to the developmentof these countries.We consider it a matter of grave concern that real ODA has declinedfor the fourth consecutiveyear. The growing pressureto reduce officialdevelopment assistance amongmajor donor governmentsat a time of more promisingsituations in many lesser developedcountries is very disturbing.There is nowincreasing uncertainty over the fulfillmentof IDA-10 commitments.In particular,the shortfall of the U.S. Governmentcommitment in IDA-10 is regretted. The prospectof a larger size 1DA-Il is cloudedwith pessimism.Greater commit-

138 ment by all donors in the IDA-il Replenishmentwill thereforebe crucial. Major countries should uphold their stated commitmentsto provide the resourcesrequired by the developingcountries in SouthAsia to overcomeeco- nomicdistress and to pursuestructural adjustments now underway.Otherwise, the poorercountries will be pushed furtherinto poverty. In the past few years,there has been a trend towardsgreater liberalization of marketsby some developingcountries in order to enhanceefficiency and competitiveness.This trend is expectedto strengthenefforts of theseeconomies to integrateinto the world's financial,trading and capitalmarkets. However, these efforts are sometimesimpeded by protectionistand unfairmeasures by developedcountries. We believethat a strongercommitment to an openmulti- lateralrules-based trading system would prevent a slippageinto inward-looking policies,especially in thoseeconomies whose liberalization efforts are still at a fragilestage. Multilateralism and openregionalism should be pursuedto capi- talizeon the achievementsof the UruguayRound. However, we must always be preparedthat serioussituations like theMexican crisis can occurat anytime. We are reassuredthat the Bank has once again reemphasizedits central themeof povertyreduction with the focus discussionson the implicationsof the SocialSummit on the Bank at the DevelopmentCommittee. We welcome the establishmentof the ConsultativeGroup to Assist The Poorest (CGAP) with the establishmentof microfinanceinstitutions. We hope that this program,to whichthe Bank will makecash contributions,will be truly effective and open up new opportunitiesfor the poor. The Bankhas increasinglyrecognized the criticalrole of the privatesector in development.The closercoordination and infonnationsharing between the Bank and IFC is most welcome. Current initiatives to develop two new instruments,IDA guarantees and IDA privateinvestment, is definitelya movein the right directiontowards the expandedrole of privatesector financingof priva- tizedsectors in its membercountries, especially in infrastructure,utilities, and urban development. The decisionto expandthe singlecurrency loan programis a reflectionof the Bank's increasingemphasis on clientorientation. However, we wouldlike to call on the Bank to liberalizeaccess to the programLThe currentprogram, whichlimits access to singlecurrency loan terms for eachcountry to only half of theplanned annual program or US$100million, whichever is greater,is too restrictiveand unnecessary. Wewould also like to lend supportto the continuousefforts of the Bankto reduce its administrativebudget by 8 percent in real terms for FY96 and FY97. We understandthat innovationand streamliningprocedures will be encouragedand that there will not be across-the-boardcuts. However, we would like to cautionthat staff reductionsbe carefullycarried out so as not to affect the generalmorale of the staff.A flexibleapproach, taking into consideration the demandfor and supplyof skills and competence,staffing levels, and regionalbalance is required.

139 We arevery concernedover the fragilityof the bankingsystem in a number of countries.We fear that the failure of some banks could have contagious effectson the internationalbanking system which could undermine the stability of the internationalfinancial system. Therefore, supervisory authorities must take appropriatemeasures to strengthenthe institutionsunder their regulation to help restoreconfidence and avoidbroader financial instability. In light of this, we feel reassuredthat there are a number of proposalsto enhance the future role of the Fund to maintainstability in the international monetarysystem. The decisivemove by the Fundin handlingthe recent Mex- ican crisishas beenencouraging indeed, thereby limiting the contagioneffects on other countries.Nonetheless, there is an urgentneed to put in place early warning systems to detect impendingdangers. We therefore welcome the; ongoing work in the Fund to strengthenits surveillanceover membercountries,including establishing standards for the provisionand publicationof data by membercountries. However, we wouldlike to emphasizethat there should not be any differentiationbetween surveillance over borrowingand non-borrowingcountries. All countriesmust be treatedalike and relevantdata made transparentto the internationaleconomic community. History has shown that no matter how cautious we are, crises can still occur. To deal with such an eventuality,we supportthe Fund's proposalto establishthe EmergencyFinancing Mechanism. In this regard,a clear guide- line of what constitutesan exceptionalcase should be drawn up to ensureuni- form and fair treatmentof membersfacing similarcircumstances. Wenote that there has been a rise in the demandfor Fund resources,given the growthof the worldeconomy, the needs of the formerlycentrally planned economies,as wellas theresponse to new situations.In addressingthis issue, we are awarethat the Fund is currentlyconsidering a numberof measuresto augmentits resources.Although we are supportiveof the enlargementof the GeneralArrangements to Borrow,we are of the viewthat an increasein quotas underthe EleventhGeneral Review of Quotasshould also be accordedutmost priority.Given that growthin the world economyhas far outpacedgrowth in the size of the Fund,an increasein quotasis imperative,not only to enablethe Fund to adequatelymeet the financingneeds of the membership,particularly the low-incomedeveloping countries, but also to enhanceits capacityto deal effectivelywith systemicfinancial crises. Furthermore,the Fund has yet to make progresson the issue of an SDR allocation,pardcularly in dealingwith the issueof equityand distribution.Our view remainsthat a generalallocation of SDRsshould be part of any agreement on the matter.In addition to the general allocation,a post-allocation redistributionscheme could be adoptedto addressthe specialliquidity problems of some of the membercountries. To conclude,I would like to touchone other issue, that is the funds for multilateraldebt reduction.We supportthese effortsalthough we understand that there may not be a single all-embracingapproach. Nonetheless, one can

140 certainlydevise country-specificapproaches to ensure debt sustainability.We would welcomeproposals on this issue at the earliest possible time.

MALTA: JOHN DALLI Governor of the Bank It is indeeda privilegeand an honor for me to address the AnnualMeetings of the World Bank and the InternationalMonetary Fund. I will immediately take this opportunityto express my deep sorrow at the passing away of the formerPresident, Mr. LewisT. Preston, who gave such a valid contributionto the work of this institution.I feel sure that the Bank will continueto go forward under the leadershipof Mr. Preston's successor,Mr. James Wolfensohn, whom I congratulateon his appointmentand wish him all success in this challenging post. I would also like to join other countries in welcomingBmnei to membershipin the Bank and in the Fund.The past year has been an eventful one with developmentsin the world economy and the internationalfinancial markets showingboth positiveand negativefeatures. The global economicsituation has been generallypositive and encouraging. Industrial economies have continuedto recover steadily against a backgroundof low inflation;the developingworld has also registeredstrong growth while there has been visible progressin many of the economiesin transition. This optimisticeconomic situationis mainly attributableto the pursuance of sound macroeconomicstabilization policies which have provedto be the most effectivestrategy to achieve long term economicgrowth. Nevertheless,we should not overlook the fact that a number of serious problemsstill exist. A substantialnumber of less developedcountries, espe- dally in Sub-SaharanAfrica, are still suffering from widespread poverty, unsustainableexternal debt burdens and subdued levels of economicgrowth. This calls for urgent action to be taken. It is the responsibilityof the international financial Communityto support structuraland institutionalreforms in these countries through adequate levels of resource transfers and debt relief even though the latter course of action does not always attract broad support in internationalfora. This notwithstanding,we welcome the initiativestaken by the Paris Club to ease the debt burden of the poorest countries. We also observe with interest the proposalby the WorldBank to create the Multilateral Debt Facilityto pay principal and debt service paymentson multilateralloans to the least developedeconomies. It is hoped that an agreementon the setting up of this fund is reached among all parties concerned for its speedy implementation. In this regard, priority in the allocation of resources should be given to those countrieswhich have demonstratedthe ability and comrnitment to use them effectivelyThe implementationof basic social programs should be encouragedespecially if these contributeto the eradicationof poverty. Attention should also be given to the countries in transition where economic performancevanes considerably,depending on the stage of economic

141 stabilizationand restructuringachieved by these countries. The process of structuralreform must be pursuedvigorously in order to consolidatethe gains which have been attained. Their integrationin the global trade and financial systemis also of paramountimportance. However, while it is observedthat the amount of capital inflowsto these countrieshas increasedsubstantially, sig- naling investorconfidence in their economicpotential, it is essentialthat foreign capital flowsare also accompaniedby growthin domesticsavings which ultimatelywill serve as the basis for long term investment. Other problemsfacing the worldeconomy should not be overlooked.In the past monthsthere were cases of interestrate andexchange rate volatilityamong themajor currenciesand rapidlyshifting sentiments n intemationalcapital markets.A case in pointis the suddenand sharpreversal of capitalflows to Mexico. In this instance, the 1MFacted quickly and effectivelyto support Mexico's strong adjustmentprogram and to isolateemerging markets from the resultant spillovereffects. With few exceptionscapital inflowsto developingcountries were sustainedat relativelyhigh levels,thanks to the actionby the Fund. On the one hand, the Mexicancrisis demonstratedthe firmnesswith which internationalcapital markets deal with policieswhich fail to mirror economic realities.On the other hand, it showedhow much more effective it is to avoid rather than resolve a crisis. In this regard it is crucial for the BrettonWoods institutionsto have the necessarymeans to deal with any crisis that threatens to arise. For this purposethe Fund in particularneeds to strengthenits surveillance over its membercountries to ascertain itself that sound fiscal and monetary policies are being pursued. In fact, the need to strengthen the IMF surveillancefunction was an importantissue discussedlast June at the Halifax summitof the Group of Seven industrialcountries. The mechanismfor the prevention of crises requires a system whereby early warning is give- of any impendingdanger to the economic system. In this regard, we support the declarationby the Group of Seven nations urging the IMF to establishbenchmarks for the timely publicationof key economic and financialdata and to insist on full and timely reportingby membercountries of standardsets of data. In focusingon the activitiesof the World Bank over the last year, we note 'with satisfactionthat furtherprogre's has been achievedin the area of human resourcesdevelopment Human resourcesdevelopment is no doubt a vital element of economicand social development,particularly where effective primary services in education and health are concerned.Not only has Bank lending for such development increased substantially,but it has also been noted that the Bank has given increasing attention to safety nets and social impactin the design of its economicreform programs.My country,although not eligible for World Bank financialassistance, fully supportsthe expansion of such lendingprograms. In the field of private sector development,it is interestingto observethat WorldBank guaranteesare now a part of the Bank's regular packageof sup-

142 port.This shouldenhance the attractivenessof projectsin developingcountries that require substantial amounts of private capital. Apart from privatization, which remains a major focus of its assistance policy, the Bank is providing support in other related areas notably in the creation of an attractivebusiness environment.In this regard, it appears that the Bank's support is also focused on the reformof public institutionsand the regimesthat regulateproduct, capital and labor markets. This is certainlyan approachwhich can contributeeffectively to the business environmentin countrieswhere, until a few years ago, economicactivity was dominated almost totally by the central government and public se-tor organizations.My country passedthrough this experiencein the early to mid- eighties but this trend has been decisively reversed in recent years. The government in Malta has continuedto reduce the role of the public sector in most activities that could easily be undertakenby the private sector. We have taken this policy a step further earlier this year with the privatizationof one of the major commercialbanks. We are, however.ensuring that before the privatization of a company is undertaken. a study of the market environment in which that company operates is conducted to ensure that the presence of market forces is guaranteed. To strengthen competitionand the role of market forces, we have liberalized to a large extent the product and labor market through the almost total removal of price controls and restrictive practices.We have enacted a Com- petition Act and are in the process of discussinga new CompaniesAct in Par- liament. Our efforts at reform have also been centered on the public institutions themselves.These have come under close scrutiny to ensure that the services they provide are efficient and at the least cost. The civil service has been reorganizedand its proceduresreviewed to ensure as much as possible a high degree of transparencyAll these reformsare aimed at moderniz- ing our economy, so that it will be in a position to face international competition in an open environment. We are convincedthat long term economicprogress can only be achieved if the policies we adopt encouragecompetition and the removal of protective barriers.Trade controlshave in fact been completelydismantled and customs tariffs have been reduced considerably.The ultimategoal of our liberalization strategy is now the total removal of exchange controls. I am glad to say that Malta was one of those countrieswhich last year accepted the obligationsof Article VIII of the LMF'sArticles of Agreement, thus undertakingto refrain from imposing restrictionson the making of payments and transfersfor current international transactions.We intend acceleratingthe pace of financial liberalizationin the coming year by removingall ceilings on domesticinterest rates. This will pave the way for a further relaxation of controls on capital flows. Since the liberalization of capital account transactions can create exchange rate pressuresthrough the effect of destabilizingspeculative flows, we cannot but agree with the ExecutiveBoard of the IMF that more attention

143 should be paid to capitalaccount issueswhere IMF surveillanceand technical assistanceis concerned.We also favorthe setting up of currencystabilization funds which make resources available to help counter short-tenn capital movementswhich may create difficultieswhen stabilizationand reformprograms are being implemented.Such a facility will strengthenthe ability of a countryto maintainthe levelof its exchangerate when this comes under pressure as a result of capitalaccount liberalization.We also support the call made by the Group of Seven for an EmergencyFinancing Mechanism that would provide faster access to IMF arrangementswith strong conditionalityand larger up-front disbursementsin crisis situationsinvolving such outflows of capital. With regard to some of the major IMF issues under discussion,I would like to mentionthat the IMF's resourceshave been subjectedto exceptionally heavydemands during the past yearas the Fund acted swiftly to provideassis- tance to a number of developingcountries, most notably Mexico,Algeria and Argentina,as well as Russia, Ukraineand other economiesin transition.This strain on resourceshighlights the importanceof monitoringthe IMF's liquidity position. We therefore welcome the support extended by the Group of Seven nations in their Halifax summitcommuniqu6' for the provisionof sufficientresources to allowthe Fundto meet its responsibilities.In particularwe note the request made to the Group of Ten and other countries to develop financingarrangements with the objectiveof doubling the amount currently availableunder the GeneralArrangements to Borrow in responseto financial emergencies.We also hope that the EleventhGeneral Review of Quotas will be completedas soon as possible to ensure that the IMF is adequatelyfunded. On the subject o7 SDRs, we note that the debate on whethera new allocation should be selective or generalizedhas not yet been resolved. We would like to re-affirmour view that, ideally,a consensusbe reachedso that a gener- alizedincrease be allocatedin additionto special allocationsto those countries which have not benefitedfrom previousissues of SDRs. I concludeby attestingthat our country'will continueto pursuefiscal and monetary policies that ensure econornicstability. We are happy to say that since becomingmembers of the IMF in the late sixties, we have never sought recourse to the Fund's lending facilities. On the contrary,we have always maintaineda creditorposition with the Fund and contributedin a modestway to the Fund's Enhanced StructuralAdjustment Facility (ESAF) facility.We have however taken advantage of the Fund's technical assistance and so I would like to take this opportunityto expressmy gratitudeto the Fund for the expert advice which they have extended to our country time and again. I would also like to thankthe Directorsand Alternates representing Malta on the ExecutiveBoards of both the Bank and the Fund for their kind cooperation throughoutthe year. On our part we will continueto do our utmostto support these institutionsso that they will be able to achieve the goal of international monetarystability and cooperation.

144 MARSHALL ISLANDS: RUBEN R. ZACKHRAS Governiorof :heBatik (on behalf of the FiederatedStates of Micmoesia, Kiribati, i/le MarshallIslands, the Solomon Islands,Vanuatu, and WesternSamoa)

I am mostpleased and honored to bc abic to address thesc FifticthAnnual Meetingsof the Boards of Governorsof the Bank and the Fund on belhalfof thc Pacific constituency members:the FederatedStates of Micronesia; Kiri- bati; the MarshallIslands; the SolomonIslands; Vanuatu; and WesternSamoa. First of all, on behalf of our constituency,I would like to welcomeBrunei Darussalamas the newest mcmberof the Bank and the Fund. I also would like to congratulateMr. James Wolfensohnon his appointmcntas the new Prcsi- dent of the World Bank Group and wish him well in his challengingtask. We welcomethe new initiativestaken by the WorldBank and the Fund to deal with the monetary,economic. and social challenges facing the world economy today. We support the Fund's proposalto increase its liquidity by doubling the quotas and urge the Executive Board to conclude the Eleventh General Review at an early date. It is desirable, however, that the quota increase be allocated equiproportionatelyto all members. While the quota increase shouldbe the main sourceof the Fund's resources,we encourage the mobilization of supplementary resources through expanded borrowing arrangements.We welcome the emerging consensusto convert the Enhanced StructuralAdjustment Facility (ESAF)into a permanentarrangement and support the option of selling part of the Fund's gold holdingsto financethe subsidies for ESAF lending in view of the decline in the real level of aid. We support the Fund's proposal to improve its surveillance activities by obtaining reliable and timely data. However, we would like the Fund to take note of the need for technicalassistance in the case of manydeveloping countries, especially the small Pacific island countries which do not, at present, have the necessarycapabilities to meet these reportingrequirements. Turning now to the World Bank, we welcome President Wolfensohn's expression of his desire to lead the Bank in a new direction in an attempt to alleviatepoverty, protect the environmentand promote greater socialjustice. The role of IDA in assisting the developmentof developingisland economies and of the least developedcountries needs to be reemphasized.We therefore urge the donor countries to conclude the IDA- lI replenishmentnegotiations early and to meet their commitmentsunder IDA-10 on a timely basis. We welcome the statement made.by President Wolfensohnin his most inspiringopening address Tuesday,about the need for protectionof the fragile environmentof the Pacific islands. Our respectivegovemments have already taken some measures towards environmentalconservation. However, this is an area where further assistanceshould be providedby the Bank. Our economies are relatively small and are geographicallyisolated from the main centers of world trade. This makes it extremely difficultfor us to be

145 fully integrated into the world economy and to take full advantageof the expansionof global trade. We recognizethat, in order to obtain the maximumbenefit from the posi- live global developmentsthat are taking place now, we have to strive hard to enhance the productiveutilizalion of our limited resourcesand to create the ncessary macroeconomicframework that would assist the efficient utilization of our resources. Our constituencymembers have taken noteof the Bank and the Fund advice on bringingabout macroeconomic adjustment. They remaincommitted to implementing these policies.However, our efforts will require additionaltechnical assistancein view of our limitedcapabilities to effectivelyimplement reforms. We support the strengtheningof the private sector and we are committed to taking the necessarymeasures to create an environmentconducive to the growth of this importantsector. These includemeasures designed to promote both domestic and foreign investment. This year's meetingof the PacificForum leaders mandateda careful study of the implicationson the future growth prospects of our region, of the Uru- guay Round,and the formationof the WorldTrade Organization as well as the decisionby theAPEC Group to reducetariffs. The study will also examinethe actions tat our respectivecountries should implement in order to take advantage of the benefitsthat would result from these importantdevelopments. Sec iringhigher returns on our fisheriesand forestryresources is one of our prime concerns.In thisrespect, a draft regionalcode of conducton logginghas been adopted. In the meantime, efforts are continuing on regional management of fisheries,enhancing multilateralfisheries access arrangements,and developinga regionalvessel-monitoring system. A major constraintlimiting economicdevelopment in our countries continues to be the problem of sea and air transport.Intensive efforts are under way,at both regionaland subregionallevels, to rationalizethe use of resources and tu improve the managementand performanceof the airline industry to enhanceits contributiontowards national economic development and regional social needs. Similarefforts are being pursued in shippingand tourism. We are conscious that our economic developmentrests upon uur own nationalefforts and regional cooperation.However, we recognizethe fact that our uniqueproblems and developmentneeds cannotbe fully addressedwith- out the support of our developmentpartners. However, we would be very concerned if the level of assistance to the region were to decline below its present level. We have noted the expedient response of the Fund and the Bank to requestsfor assistancefrom other countries in our region.Some of our membercountries are yet to receivesuch assistance. It is important,therefore, for the Fund and the Bank to maintain their present levels of assistanceto the region. In this regard, I would like to take this opportunityto express the appreciation of our constituencymembers for the excellent support provided by the

146 Pacific Financialand TechnicalAssistance Centre based in Fiji. We understand that discussionsare under way to provide additionalsupport for the center.We urge the donors to continueto support this importantproject.

MYANMAR: WIN TIN Governor of the Bank It gives me great pleasure to be privileged to address the Fiftieth Joint Annual Meetings of the Governorsof the World Bank and the Fund. I wish to express my deep regreton the passingaway of the formerWorld Bank President, Mr. Lewis Preston. He will be long remembered for his dedicatedservices to the Bank. I also wish to extend my congratulationsand warm welcometo the new President,Mr. JamesWolfensohn, and wish him all success in the important tasks ahead. I would like to join other Governors in welcomingBrunei Darussalam as a new member of the Bretton Woods institutions. I wish to begin wit a brief look at the world economy, which indicates encouraging trends in many aspects. Real GDP has continued to rise since 1991,with inflationon the decline, this trend is more pronouncedin the developing countries. RRecently,the slowing pace of economic expansion in the industrial countriesand possible overheatingin a numberof developingcountries may be observed. However, problems remain and challengesneed to be addressed.We are also reminded of the haunting memory of the Mexican crisis, which rudely awoke us to the bitter lesson of how investorsentiment can upset the expected benefits from financialmarkets' liberalization. Another lesson is the need for timely effective policy adjustmentsbefore being forced into action by the market.We, therefore,endorse a proactiverole of the Bank and the Fund in surveillanceand in assistingand advising developing countriesin the managementof capital inflows. Over the years we have seen the revolviingrole of the Bank and the Fund, to meet the demand for their services. Their financial involvement has increased manifold with comparablebenefits accruing to the recipient member countries. But, we are concernedover the prospectof a fall and the growing sentiments against officialdevelopment assistance among donors. We followed with keen intereston how the Bank and the Fund have taken pains in attending to the needs of the countries in transition.We wholeheartedly endorse the Fund's idea that "it is vital that the internationalcommunity continue to support the transition process in those countries that implement and perseverewith appropriatestabilization and reform policies". Although we appreciate the Fund's idea, we wish to remind the intemational community that these countries faced different circumstances and adapted their support with flexibilityto enhanceaid effectiveness.At t& ;ame time, we urge the donor governmentsto adopt a more global view aud take actions to increase officialflows.

147 Let me now turn to the Myanmareconomy. Myanmar has overcomethe stagnationand low growth in the aftermathof the 1988 disturbancesand is nowon a steadygrowth path. The fouryear planfrom FY93to FY96has been formulatedand implementedto acceleratethe rate of economicdevelopment with the aim of buildinga new, modem,developed nation. In the first three years,the growth rates were9.7 percent,5.9 percentand 6.8 percent,respectively,exceeding the projectedgrowth rates for these years. This economicprogress is attributableto the reformmeasures undertaken. Decontrollingof prices, encouragingprivate sector development,allowing direct foreign investments,removing some of the restrictionson foreign exchange transactions, improving and enhancing tax administrationand allowingfarmers to cultivatecrops of their choice are the salient measures amongstothers. Foreigninvestments surged, and at the end of August1995, foreign invest- mentsapproved amounted to $3 billion.Sector-wise, foreign investment in the oil and gas industryis the highest followedby the hotel and tourist industry. Major foreign investors in Myanmar as of August 1995, are from U.K., France,Singapore, Thailand, Malaysia, U.S and Japan. Myanmaris bendingits effortsfor the developmentof its forestrysector. Like others, we wish to give priority considerationsto environmentalconcerns and have, therefore,decided not to compromniseour environmentalsta- tus in the causeof seekingto furtherour forestryproduction. The progresswe have madeso far has not, however,blunted our awareness of the fact that muchremains to be done.Like other countriesin transition,we have our problemstoo. We have recognizedthe recommendationshighlighted by the Fund and have taklensteps in all these areas. In our effortsto establishnational reconsolidation, priority has beengiven to the developmentprojects of the nationalraces residingin the far-flungbor- der areas.Roads, bridges, schools, hospitals and dispensarieswere built, com- municationfacilites, informationservices including television and electricity wereprovided and basicneeds of thelocal national races werefulfilled and the standardof living was enhanced.Over $300 millionhave alreadybeen spent for the border areas developmentproject As a resultof thesesubstantial investments intended for long term benefits, togetherwith other heavy expendituresfor infrastructuredevelopments, we are not yetable to reducebudget deficit to belowthe desired4 percentof GDP. The past half century has witnessedthe impressivecontribution that the Bankand theFund havemade to the socialand economic development of their membercountries. As we moveinto the nexthalf century,there will be a greater demandfor their servicesand we are confidentthat the twin institutionswill comeup with aneven betterperformance. What these two institutionsmanaged to achieveso far, restedmuch on thecooperation of the membercountries. In looldng ahead to meet the challengesof the future,the Bank and the Fund will need to evolve accordingto the demandsof a changingworld. In

148 this task theyshall need, above all else,the continuedcooperation and support of their members.I wouldlike to join other membersin pledgingour cooperation and supportfor these two institutionsin their task aheadto forgea better worldfor all of us.

NEPAL: RAM SHARAN MAHAT Governor of the Bank

It is a greatpleasure and privilegefor meto addressthe Joint Annual Meet- ings of the InternationalMonetary Fund and the WorldBank. I welcomethe new Presidentof the Bank,Mr. JamesWolfensohn to the BrettonWoods institutions.I am confidentthat his leadershipand rich experiencewould significantly contribute in economic development,particularly in the poorer countries.Allow us to express our deep sorrow for the passing away of the formerPresident of theBank, Mr. Lewis T. Preston. I am surethat his contribu- ton to the W,VorldBank Group and its membercountries will be recognizedfor a longtime. Let mealso join otherspeakers to welcomeBrunei Darusalaam to theBretton Woods insfitutions and lookforward to an effectivepartnersnip with the new member. We notethat the globaleconomy has continuedto improvethis year.This trend is expectedto enhancethe scopefor trade expansionand to improvethe conditionsfor larger net resourceflows to developingcountries. However, a deeperfinancial problem in Japan and the fiscalsituation in the UnitedStates are still signs of concern.It has now been obviousthat the sustenanceof the giobal economicrecovery is crucialfor the continuedsuccess of the reform processin developingcountries. We, therefore, urge all majorindustrial country governmentsto strengthentheir macroeconomicpolicies and stepup monitoring as well as follow vp actions in order to achieve greater global interdependancein economicrelationships. Althouighthe process of privatizationis picking up, the need for official developmentassistance is still great,partcularly in the poorestcountries, for investmentin infrastructureand humanresourcen development, and to help createthe institutionsand policiessupporting economic growth. These investments, no doubt,are essentialto create an enablingenvironment for private sectorgrowth. Furthermore,as poverty alleviationhas been the overridingobjective of the poorer countries,they have put enormousefforts in creatingopportunities for the poor to eam and enhance their capacity to work. Both these tasks requirehuge amountsof resources.Many of these countrieshave madegreat effortsin raisingintemal resources.Nevertheless, the internalresource avail- abilityis inadequateto theirrequirements. Moreover, as these countrieshave yet to establishtheir creditworthiness,foreign grants and concessionalassistance are the only realisticmeans of supportfor these countries.

149 We feel that IDA resourcesshould bi devoted solely to the poorest and least developedcountries, whose institutional and technicalcapacity is weak and lacks easy access to intemationalcapital markets.It shouldparticularly take care of the prioritydevelopment issues which cannot be addressedby the private sector. The most importanttask is to make developmentassistance more efficientand effective.Its allocationshould be madein such a way that priority needs of recipientcountries are met. We commendthe Bank for its endeavorto respondto challengesposed by widespreadpoverty in developing countries.We broadly agree witi the Bank's initiativeto attackpoverty which has been identifiedas the major issue confrontingmanldnd. We expressdeep concern over the likelyshortfall in IDA-10 fundingdue to the contributionbelow the level of the comumittedfigure by the UnitedStates. Wealso urge forgreater efforts by a]I donorsin theIDA-I l Replenishmentand to maketimely decisions to ensurecommitment in the IDA replenishment. Nepal has been utilizingvarious concessional facilities provided by the Fund. The Fund's EnhancedStructural Adjustment Facility (ESAF) played a crucialrole to the adjustmentprocess in Nepal.We would, therefore,like to continuewith the ESAFarrangement. We wouldalso like to take this opportunityto urge the donor community to live up to the expectationsof theworld in attainingthe goalset by theSocial Summitin substantiallyreducing poverty. Now I wouldlike to brieflystate the economicsituation of Nepaland outline the Government'sprograms and policiesfor economicreform. Important economic gains achieved during previous years have been eroded due to undisciplinedand irresponsibleeconomic policies in the last nine monthsdue to politicalchanges. The processof economicdevelopment lost momentum.Scarce public resources were spent recklessly,motivated solelyby politicalpurpose. Fiscal and foreigntrade imbalanceswidened as a result of increasedexpenditure against sluggishinternal revenuegeneration and high importsagainst a massivefall in exports.The exportsector which was growingsteadily during the same period,registered a net declinein 1994/95. Business confidenceweakened, and the unprecedentedgrowth in private investmentwitnessed since 1991 came to a halt. The exchangerate, which remainedfirmly stable for morethan three years,started depreciating. The primary objectiveof the new Government,which took power last month,is thereforeto correctthese problems and workto raisethe livingstan- dard of the poor and deprivedpeople. We are alreadycommitted to launch rural development,with a strengthenedimplementation modality and appropriate control mechanism.We consider that it is essentialto promoteself-reliance, self-governanceand self-developmentin each and every corner of the nation. We recognizethat the establishmentof a liberal-orientedeconomy firmlystands as the needof the hour.Therefore, we will acceleratethe process of market reformsand privatizationof publicenterprises. Nepal has achieved satisfactoryprogress in the mobilizationof internal revenuein recentyears.

150 The introductionof a value-addedtax system is next on our reform agenda. Strict controls on spending will be exercised.We are also committed to provide a much needed boost to exports and its diversification.Emphasis on social sectordevelopment and infrastructurebuilding, containing inflation and deilcit financing,and promoting transparencyand simplicity in expenditure management,reforms in trade, industry,foreign investment, tariffs, finance, the banldngand public sectors will all be includedin our reform agenda.Due attention will be paid to build humancapital by providing training and skills tp reap the benefitsof development Similarly,the technicaland institutional capacity will be upgraded in order to prepare and implement complex and sweepingeconomic reforms over a broad front. The strategy that we are pursuing aims to achieve a strong private sector led expansion in agriculture, manufacturing and tourism, supported by improvedefficiency, management, and use of public resources and development of hydropower,rural infrastructure,as well as the social sector. These initiativeswill entail an enormoustask of restructuringthe economy encompassinga host of austerity measures, prioritizationand allocation of governmentexpenditures, and strengtheningof managementand administration. Such steps are a must in order to put the economy toward a sustainable growingpath. Nepal's long-termeconomic development depends largely on how quickly we can utilize our hydro potential for the country's benefit The Arun m HydropowerProject, which had undergonerigorous scrutiny and appraisalsin the last 10 years, has now been unilateraflycanceled by the WorldBank management when the project was at the final stage of the Board of Directors' approval. It has given a big setback to our developmentefforts. Substantial financial resources and efforts were already put in the preparation of the project.Implementation of the Arun m HydropowerProject would have paid a high social profitfor investmentin priority areas and would have provided a dependable power supply which is urgently required for private sector growth in Nepal. Its cancellationhas nowcreated business uncertainty. I therefore take this opportunityto request the Bank to reconsider the decision on Arun III HydropowerProject. Finally, the Bretton Woods institutionshave served us well. We consider that the technicaland financialcooperation extended by these institutionshas been vital to our economicdevelopment and we believe that they have a par- allelrole in our future prosperity.Therefore, I expressour sincere appreciation to the InternationalMonetary Fund and the World Bank for valuablecooper- ation in our developmentefforts and look forward to a strengtheneddevelop- ment partnershipwith them in the days to come.

151 NETHERLANDS: GERRIT ZALM Governorof the Bank

I would like to use this opportunityto welcomeMr. Wolfensohnas the new Presidentof the WorldBank. He has alreadyplaced himself firmlyat the helm1 which I welcome,as importantchallenges are facing the World Bank, as well as the IMP. Strong cooperationbetween both institutionsis needed, particularly on topical issuessuch as multilateraldebt. Intemnationaldevelopments since our meetinglast year have underscored the importanceof pennanent flexibilityof the WorldBank and the IMF.More effective instrumentsand proceduresare beingdeveloped. Now, the continued availabilityof sufficientfinancial reqources needs to be ensured.This calls for early progresson the Eleventh Quota Review and IDA-Il negotiations. Financial crises are better prevented than cured. Thus, after the Mexico crisis, the NIF has rightly given priority to a strengtheningof surveillance. Already,substantial progress has been madetoward making surveillancemore continuous,more critical and frank.A prerequisitefor a frank policy dialogue is the provisionof sufficienteconomic and financialdata by the member states to the Fund,as well as to the public at large. Statisticalstandards and publication guidelineswill be useful. Furthermore,I welcome the fact that the Fund itself is becomingincreasingly open about its work, for example, through the publicationof backgrounddocuments and the rich contentof its recentAnnual Report.Through this increasedopenness the Fund will gain strengthand credibility. It would be an illusionto expect that strengthenedsurveillance can guarantee that new crisis situationswill not occur in the future. In such cases the Fund shouldbe enabledto respond quicklyand in an orderly manner.The procedure set out in the EmergencyFinancing Mechanism is thereforewelcome. Its success will depend very much on the timely and continuousinvolvement of the Executive Board- A doubling of the General Arrangementsto Borrow (GAB) will further enhance the Fund's flexibilitywhen faced with sudden and exceptional balance of payments crises. I would welcome an agreementbetween the Fund, present GAB participantsand prospectivecontributors on the modalitiesof a new parallel borrowingarrangemenL However, a doubling of loanable funds is no substitutefor a quota increase. We feel that swift progress is needed on the Eleventh Quota Review.The [MF sees itself confrontedwith an increasingcomplexity of the global monetary system. The world economy and trade have grown considerably.Ade- quate resources to support strong adjustment programs are essential. Therefore,if we want to continuerelying on the I1MF,an early agreementon a substantialquota increase is absolutelyneeded. In our view a doubling of the quotas would be warranted.We call on membercountries to participatein the discussionin the coming monthsin a pragmatic and constructivemanner.

152 Tuming to multilateraldebt, the role of the internationalfinancial institutions in the debt strategy up to now has been to provide new concessional loans in supportof developmentand adjustmentprograms. This strategy com- plements the efforts from the Paris Club and bilateral donors and has been essentialboth from a developmentand from a debt-alleviationperspective. Nevertheless,I have notedwith interestrecent thinking on newapproaches for a restorationof overall debt sustainability.I encouragethe Bank and Fund to work closely together and explore the options to deal with the multilateral debt burden of a number of the poorest countries, including the implications for mobilizationof donor resources.This analysis shouldrespect the different characterof the Bank and the Fund, and in particulartake accountof the monetary characterof the Fund. Furthermore,the consequencesof any new initiatives in this field for the IDA-I I replenishmentmerit serious consideration.In our view, a satisfactory IDA replenishmenthas priority at this stage. After all, the majority of poor countriesare still primarilydependent on new concessionalresources for their development.We should, therefore,be very careful that new initiativesdo not complicatethe alreadydifficult climate for resource mobilization. Turning to IDA itself and the current state of IDA-lI negotiations. The Netherlandsis deeply concernedabout the fact that the largest donor does not honor its obligations concluded under IDA-10. Inability to honor commitments endangers the multilateralframework which has served the world so well in the past fifty years. I sincerelyhope that the U.S. will resume the constructiverole it has played so often in the past. It would be regrettable if IDA were denied the necessary financial resources,especially at a time when there is a broad consensusamong donors on IDA1slending policies.This is not the time to abandon IDA and its recipient countries.Therefore, the Netherlandsurges all donors to avoida deadlock in the IDA-Il negotiationsand provideIDA with the necessarymeans. How- ever, the Netherlandsis ready to support alternative approachesfor IDA-I 1, shouldthis be necessary.I hope other donorsare in the positionto do the same. The multilateralsystem needs all the support it can get.

NEW ZEALAND: BILL BIRCH Governor of the Fund

May I express my Government'sand my own personal condolenceson the passing of Mr. Preston,who led the WorldBank communitythrough a difficult period. I welcomePresident Wolfensohn and look forward to a long and productive relationshipwith him. At last year's meetings,I outlinedNew Zealand's reformexperiences over the past decade. Today, I would like to elaborate on the lessons we have leamed-

153 New Zealand'seconomic indicators continue to be very favorable.The economyis well into its fourthyear of growth.Over the past few years,production-basedGDP has grownby 5 to 6 percent.All sectorsexcept the government sectorhave grownstrongly, and growthis expectedto continueat 3 to 4 percentover the three-yearforecast period. Althoughthe underlyinginflation rate roseto 2.2 percentin June-slightly abovethe 0-2 percenttarget band-the rate is projectedto re-enterthe target band laterthis year and to remaincomfortably within it for the forecastperiodl. NewZealand has oneof the lowestunemployment rates in the OECD.Sea- sonally-adjustedunemployment stands at 6.3 percentof the labor force,down from a peak of about 11 percentfour yearsago. Labormarket reforms, introduced in 1991,have contributedstrongly to bringingunemployment down. The recentdeterioration in thecurrent account to around3 percentof GDP has resultedlargely from increased imports due to stronginvestment and con- sumptiongrowth. The currentaccount is expectedto improvein the second half of 1995. A feature of New Zealand'seconomic performance has been progressin consolidatingthe fiscalposition. The Government'soperating balance for 1994/95was a surplusof 3.1 percent of GDP,and thisis expectedto increaseto 7.7 percentof GDPin 1997198. Tax revenueis forecastto grow strongly,government spending is expectedto remainrelatively stable, and net publicdebt is projectedto declinerapidly. Abroad rangeof approacheshave been usedto achievethis consolidation, including: * Implementationof a broad base/lowrate tax system; * Adoptionof user-paysprinciples in manyareas; * Expenditurereductions through better-targetedbenefits and efficiency gains in coregovernment departments;

E Commercializationand sale of peripheralCrown activities; and * Concentrationon debtrepayment. Fiscal consolidationis alreadyreaping rewards. There have been several creditrating upgrades since 1990.The cost of capitalin NewZealand has been falling,with the real differentialbetween New Zealandand Group of Three long-terminterest rates fallingfrom over 5 percentin 1989to under2 percent this year. The Governmentis now preparingfor significanttax reductions.These will still allowfor ongoingdebt reductionand extra investmentin socialpri- orities like healthand education. The ReserveBank Act establishedprice stabilityas New Zealand'spri- mary monetarypolicy objective. Price stabilitymeans inflation should be low on averageand not vary too muchover time.

154 The current agreement between the Reserve Bank and the Minister of Finance defines price stability as maintaining inflationwithin a 0-2 percent band. Our new Fiscal Responsibility Act aims to improve fiscal policy by encouraging responsible fiscal management. The Act requires governments to:

• Follow a legislated set of principles of responsible fiscal management; * Publish a budget policy statement well before the annual budget, containing strategic priorities for the upcoming budget as well as short-term fiscal intentions and long-term fiscal objectives; * Fully disclose the impact of fiscal decisions over a three-year forecasting period in regular economic and fiscal updates, and present projections of fiscal trends over at least a ten-year period; and * Present all financial information in a manner consistent with private sector accounting rules.

lThesereforms also introduced accrual accounting to government. This has played an important part in cementing the reform gains. The Parliament and public of New Zealand now have more financial infornation about the Gov- ernment's position than shareholders of most publicly-listed companies. The financial management and accountability framework provides incentives for public sector managers to improve their own performance, making them more accountable for their actions and outputs. These important legislative changes have been accompanied by equally significant rnicroeconomic reforms over the past ten years like trade liberalization, labor market reforms and deregulation. These reforms, were essential to remove the regulations and interventionist policies which inhibited eco- nornic performance and living standards. The changes have underpinned the improvement in New Zealand's international competitiveness, from eighteenth in the OECD in 1991 to sixth now, as measured by the World Competitiveness Report. The New Zealand public is now reaping the benefits of strong growth spurred by the reforms. The next Parliament will be elected under a new mixed-member proportional electoral system. In spite of this change, it is encouraging to note that the essential elements of the reform agenda are likely to remain intact. But more needs to be done to continue improving our long-term growth potential. Reviewing the Government's direct and indirect involvement in the economy has been an important part of improving our performance. Some former govemment-owned enterprises have been converted into companies. Some of these have been sold, while others have been retained and run as commercial operations. Remaining government departments are required to operate in a business-like manner using accrual-based financial management.

155 Lastyear, I said the BrettonWoods institutions needed to avoidduplication,and I wouldreiterate that againtoday. It is importantthe institutionsiden- tify key objectivesand focuson theircore business. Thereis a worldwide trend towardincreasing the efficiencyand effectiveness of public bodies,and the BrcttonWoods institutions should follow this trend. Whereappropriate, authority should be devolvedand resultantautonomy should be accompaniedby greater accountabilityfor perforrmance.There should be greater flexibilityover managementof inputs, providedthere is credibleaccountability for outputs,and there shouldbe a more flexibleand market-responsivesystem of laborcontracting. NewZealand believes the BrettonWoods institutions have a valuablerole in helpingpoorer countries. As New Zealandreaps reform benefits, we have raisedour relativeOverseas Development Assistance contribution. Fundingof IDA now representsabout 7.5 percentof New Zealand'stotal ODA budgetand is our largest multilateralcontribution. We are concerned that outstandingIDA-10 obligations are met and satisfactoryprogress is made in IDA-II negotiations. I was encouragedthis moringto hearPresident Clinton talk of the commitmentof hisAdministrationto meetingtheir IDA 10obligations and in contrib- utingfully to IDA-1. New Zealandstrongly supports the global trend toward more open and integrated national economies.As governmentspress ahead with these reforms, we must also ensure the Bretton Woods institutionsare clearly focusedand cost-effective.

PAKISTAN:V. A. JAFAREY Governor of the Bank

It is anhonor for me, onceagain, to representPakistan at theAnnual Meet- ings of the WorldBank Group and the Fund.May I take hidsopportunity to join other speakers in extending my country's warm felicitations to Mr. Wolfensohnon assumingthe positionof Presidentof the World Bank Groupand to wish himsuccess in steeringthe Bankin thesedifficult and challenging times.Let me also welcomeBrunei Darussalam to the familyof the BrettonWoods institutions. Globaleconomic performance has generallybeen good and the near-term prospectsare encouraging.Output and trade are expectedto grow at reason- ablerates, and inflationhas comedown to low levels.This favorableoutcome derives from the successful implementationof the cooperativestrategy embodiedin the MadridDeclaration and the strongcontribution by developing countries.A growing number of these countries have made striking progressin pursuingtheir agendasof adjustmentand reform, and theirdyna-

156 mism has contributedmarkedly to continuedglobal growth in recent years. Even the transitioneconomies have begun to experiencegrowth after several years of stagnationand decline. Despitcthis genemllyfavorable outlook, many policy challengesremain, and the currentstrength of the global economyoffers an opportunityfor further actionto deal with policyshortcomings. In the industrialnations, further effortsat fiscalconsolidation so as to bolsterglobal savings and lowerinterest rates, and mcasuresto tackle the problemof high levels of structuralunem- ploymentthrough labor market reforms, are calledfor. The recentepisodes of turbulencein financialmarkets are a reminderthat marketsremain highly sensitive to economicimbalances, and progressin these areas would therefore help alleviatean importantsource of financialmarket instability.On the trade front, even with the new multilateralagreements in place,there is little room for complacencyon trade relations. Protectionism,unilateralism, and the excessiveuse of antidumpingactions are still with us and will requirestrong politicalwill to ensurethat trade frictionsare resolvedwithin the framework of trade rules overseenby the WorldTrade Organization (WTO). Many speakershave touchedon the globalizationof financialmarkets. This increasedopenness to internationaltrade and financialmarkets has been a welcomeand positivefeature and has contributedto the growthand welfare of countriesand their partnersin trade. However,it has also madecountries more vulnerableto sudden shifts in market sentiment,be they favorableor adverse,arising from changingperceptions in world capital marketsand in investorsentiment towards emerging markets. The potentialvolatility of capital in a globalizedworld economycarries importantimplications both for economicpolicies in all countriesand for the IMF as the centralinstitution of the internationalmonetary system. In this regard, we welcomesteps that have been taken recentlyto make surveillancemore effectivethrough the two tier requirementfor regular and timelydata on key economicindicators to fostera closerand more continuous policy dialoguewhich is better focusedon countriesof systemicimportance as well as on internationalfinancial flows and their sustainability.The Fund must stand ready to help countriesimprove their economicpolicies so that currency misalignmentsand balance of paymentscrises are less likely to occur; equallyimportantly, it musthave the financialresources for corrective policy actionwhen there are crises.In both these spheres,therefore, the Fund must ensurethat it is strong enoughto serve its purposein the new environment of globalizedmarkets. We feel it is essentialthat the Fund have the means to provide countries with financialassistance and contributeeffectively to the oiderlyresolution of crises whenthey do arise,and one way to ensurethis wouldbe to expeditethe conclusionof the next generalreview of Fund quotas,which is the essential basis of theIMF's financialassistance to membercountries. I amgratified that the InterimCommittee has asked that the exercisepertaining to the Eleventh

157 GeneralReview of Quotas be moved forwardexpeditiously. We hope that the size of the increase in quotas will be of a magnitudethat will ensure that thle Fund keeps pace with the growth of the world economy and reflects the increasedscale of internationalfinancial flows. We note the InterimCommit- tee's endorsement of the Executive Board's decisions on the emergency financingfacility and currency stabilizationfunds. However, it is a matter of great regret that a consensuson the SDR issue remains as elusive and contro- versial as before. We fervently hope that a solution can be found at an early date and look forwardto the results of the wide-rangingreview of the role and function of the SDR. The suggestionby the Managing Director of the IMF- of utilizingSDRs as a last-resortfinancial safety net, by issuingthem on a temporary basis or by lending them to countries in support of strong policy programs in the context of liquidity crisis, is one that we find worth careful consideration. The recent compression of aid budgets in many donor countries and the prospect of further declines in real aid flows is deeply troubling.While countries such as my own have been extremelysuccessful in attmctingprivate capital, including foreign direct investment inflows, our dependence on concessinnalaid flowsis expected to remain at a significantlevel. Indeed, for the poorest countries, there is no credible alternative to the availability of IDA-type resources in sufficient volume with the World Bank. Without a siz- able replenishmentof IDA resources,a critical componentof the development strategy would be lacking, and the IMF's efforts to put in place the macroeconomic conditionsfor growth, through its ESAF,would be in vain. We believe that an adequate IDA replenishmentis a major priority because a failure to provide sufficientfunding for IDA would be a severe setback to our common objective of enhanced growth and poverty alleviation. On ESAF,we are pleased to note the consensus that exists on the continuation of ESAF,including the establishmentof a self-sustainingfacility in view of the vital role that this facility has played in assisting the developingcountries implementadjustment policies. The ESAF must remain at the heart of any Fund strategywhen dealing with the financingneeds of the poor countries. We support the sale of a modest amount of the Fund's gold to permit a continuation of ESAF-type operations. Permit me to make a commenton issues raised in the paper for the Devel- opment Committee entitled, 'The Role of Public Expenditures in Poverty Reduction." We are consciousof, and have responded to, the urgent need for increasing resoturcesdevoted to the social sectors and for enhancingthe efficiency of pialiiCexpenditures. In this regard,we have welcomedthe adviceof the Bank and the Fund on the quality of fiscaladjustment and the implications this has for the compositionof public expenditures.I am, however, troubled over the trend toward the growing proliferationof policy conditionsemanat- ing from multilateral financial institutionsand donors to include democratic pluralism,demilitarization, and good governance.We do not dispute the desir-

158 ability or the need for countries to address these issues. But these are extremely difficultand sensitive areas of public policy.I would thereforelike to echo the views of the Ministers of the Group of TWentyFour when they say that the Bretton Woods institutionsshould not be drawn into making value judgments on delicate and complex issues that do not fall within their mandates. Nor should such matters becomethe basi' for additionailconditionality. One must remainmindful of the fact that thejntut demandsof complex policy conditionalityby the Fund and the Bank can often overwhelm governments, lead to a loss of ownershipand, consequently,result in a prematureabandon- ment oFadjustment programs. Let me concludewith a few wordson the economicsituation and prospects in Pakistan.We have continued to implementour agenda of adjustmentand reform centered on the pursuit of sound macroeconomicpolicies and structural reformsaimed at promotingan efficientuse of resources,an open trade and exchange system, and active and effectivc social policies. We are also hopeful that, in the year 1995-96,we will see a strong rebound in agricultural production after three successive years of below-averagegrowth-an outcome that will be helpful not only in moving the economy back towards its potential growth mte but also in easing inflationarypressures. We are, however, concerned to see indications in recent months of a build-up of resource pressures and an associated weakening of the extemal position. We are accordinglydetermined to take whatevercorrective measures are required to address, in a prompt and comprehensivefashion, these emerging imbalances so as to maintaindiscipline in a stable medium-termframework and to foster market confidencein the overall soundnessof our economic policies.

PAPUA NEW GUINEA: CHRISTOPHEtR HAIVETA Governorof the Bank

I regret that I am not able to be personallypresent in Washington,DC on the occasion of the 1995 Annual Meetingsof Governorsof the Bank and the Fund. I wish the meetingevery success.I wish to extend my complimentsto both the Bank and the Fund for the effic;ent manner in which the meetings have always been organized. My delegationextends our appreciationto the staff of the Bank and the Fund for the predictableefficiency with which they continueto organizethese Annual Meetings. We were saddenedto hear of the passing of the late PresidentLewis Pre- ston in May this year and pay tribute to him for his contributionsto enhancing the effectivenessof the Bank's contributiensto development.We would also like to take the opportunityto wish Mr JamesWolfensohn, our new President, every sluccessin the challengingtasks that lie ahead. May I also extend a warm welcome to BrunmeiDarussalam, our newest memberof the Bankand the Fund. Wealso congratulatethe Republicof Korea

159 on its graduation from "borrowert"status to a financierin the Bank and the FuLnd. In my first address to the joint meetingsin Spain last year, I reported that a peaceful, tranquil and democraticchange of Governmentoccurred in Papun New Guinea in August 1994. I am further pleased to advise that political stability has since been successfully maintainedover the past year, with the coalition Governmentcon- tinuing to enjoy a large majority in the Parliament.This coalition Government appears certain to lead the present Governmentinto the next elections due in mid 1997.Over the past year we have continuedto make, gradual but consistent progress in resolvinglongstanding difficulties oni Bougainville. In the final quarter of 1994 a ceas.;fire came into effect and a peace conference was convened with supporLfrom a regional peace keeping force. An interim Governmenthas since beenestablished for the Provinceand many dis- tricts have since returned to near normalcy.However, pockets of resistance and opposition still remain, and there have recently been renewed efforts at political resolutionthrough the conveningof negodationsof all interestedpar- ties in Cairns, Australia.It is hoped that the initial Cairns talks will lead to a series of follow up negotiationsand hopefullyu,timately a political resolution of the conflict.Attainment of real peace is of great significancefor Papua New Guinea's economic future. It will allow for reduced expenditureson defence and an increase in agriculturalproduction from what was onceour most boun- teous agriculturalexport region. The question of resumptionof gold and copper mining in the region is not of early priority and will take longer to resolve, with a need to ensure that future solutionsare socially and politically sustainable. Over the past year developmentsin the internationaleconomy have bezXn generally favorable for Papua New Guinea. Long term sustainable growth with low inflation has been experiencedin most of our key trading partners, includingAustralia, the United States of America,Western Europe and most of South East Asia. The one worryingspot in our region has been the stalled economic recovery in Japan. Set backs in Japan have reduced demand for some of our key commodities,especially timber, following the downturnin the Japanese property and buildingsectors. The Papua New GuineaGovernment supports fiscal, monetary and exchange measures being taken by the Japanese authoritiesto stimulatetheir economy.Providing growth can re-emergein Japan in 1996 the outlook for the World economyover the next year or two remains sound. We appearto be at an unusualstage of the worldeconomy where things look to be rather rosy and wherethere is not too muchto complainabout. These cir- cumstanceshave resultedin sharp terms of trade improvementsfor PapuaNew Guinea through 1994,which have largely been sustainedto date through 1995. Improvementshave come mainly through rises in our key commodity export prices, including prices of copper, coffee, copra, cocoa and palm oil and to a lesser extent the prices of gold and petroleumwhich have been stable,

160 though not spectacular.Our main recent price disappointmenthas been with regard to log cxports. In Papua New Guinea we have come to be very cautious with regard to upturns in the commodity price cycle, which based on past history is the time to save, and not to spend.The current high stage of the cycle is being used as an opportunity to repay debts which most of the key commodity groups accumulated in the early nineties. Savings from mining and petroleum windfalls are also being built up in the Mineral Resources Stabilisation Fund and through a sharp reduction in debts of the Mineral Resources Development Corporation, which has accumulated very significant net worth over the past decade, and which now represents the Government's main vehicle for accu- mulating savings and wealth from mining and petroleum activitiesfor the benefit of future generations. Following the emergence of fiscal and external strains in the economy in the first half of 1994, significantreforms have been made to economic policies over the course of the past year. These reforms have largely aimed to correct past imbalances and to orovide for a more stable and sustainable macroeconomic climate in the immediate term, which can then be used as a solid base for pursuing longer term social and economic reforms. Papua New Guinea has a long record of pursuing stable and conservative economic policies, having achieved stable macroeconomnicoutcomes in around sixteen of the twenty years which have elapsed since our independence. Our flirtation with more high risk, expansionary policies, over the period 1992 to 1994is now over. We have moved back to a more sustainable policy framework. Unfortunately, while we are well schooled in finding the path to more stable outcomes,as we all know there is a lot of pain to be suffered by many people before ariving at the end of this path. This has certainly been the case in Papua New Guinea in the past year, where the population has been confronted by higher than normal inflation; Government services have had to be seriously curtailed and urban wage earners have experienced substantial real declines in wage levels. The main macro economicreforms which have been pursued over the past year have included the following: * Firstly, the PNG currency ha. been floated, without Central Bank intervention, and after consistently moving lower for most of the year, the currency has in the past two months stabilised at levels against the U.S. Dollai approximatelythirty percent lower than a year ago; * Secondly, monetary policy has been tightened through open market operations and by increases in the required Minimum Liquid Assets Ratio to 32 percent. Recent 182 day Treasury Bill Rates have approached 20 percent which are very high by Papua New Guinea historical standards; * Thirdly, public sector wages policy has been very tightly constrained with increases in 1995 limited on average to three percent; and

161 * Finally,the Budgethas been very greatlytightened on both revenueand expendituresides. The overalldeficit which averaged 5.3 percentof GDP in the three years 1991to 1993was reducedto 2.8 percentof GDP in 1994 and we are currently projecting a small surplus for 1995. Over the mediumterm we proposeto operatefiscal deficits approximately equivalent to 1-2 percentof GDP,with low levels of domesticfinancing. While the macroeconomicadjustments have bcen painful they are now commencingto achievethe expectedresults. Followingstabilisation of the currencyover the past two monthsinflation is now expectedto peak at around 15 percent in 1995and to then gradually drop back to levelsclose to the major industrialcountries from 1996.Growth in the non miningand petroleumsectors of the economyis projectedto con- tract by I percentin 1995 but to then resumeits recent trend of 4-5 percent growthover the mediumterm. The externalsituation has nowbeen stabilised, in part through a return to positive officialflows for the first time in some years.Significant overall surpluses are beingprojected on the externalaccount for 1995 and 1996, which will assist to consolidatestabilisation of the currency, and to moderate inflation.At the same time that macro economic reformshave been pursuedlonger term microeconomicand structuralreforms are also being put in place. These longerterm reformsinclude: * Firstly, a reprioritisationof Governmentexpenditure policy to allocate additionalresources to investment,especially in improvingservices to priority areas of education,health, law and order, agriculturaldevelopment and physicalinfrastructure; * Secondly,a reinvigorationof attemptsto improvemanagement of our natural non-renewableresources sector to ensuremaximum national benefits are being obtained from our key resourcecommodities of gold, petroleum,copper and gas; and * Finally,taxation, tariff, industrypolicy, trade and other market reforms are beingpursued with the aim of makingthe econormymore efficient and more conduciveto private investment,in the quest for higher growth in productionand employment. Followingthis briefreview of our economicdevelopments let me nowtum brieflyto reviewour relationswith the Bankand the Fund over the last year. To assist with our economicreform progran the InternationalMonetary Fund approveda StandbyFacility of SDR71.5 million in July this year.While this modestfacility took a very long time to negotiateand involvessignificant conditionalityfor modestamounts, Papua New Guineais neverthelessappre- ciative of the financialand technicalsupport providedby the Fund over the past year.

162 The World Bank has assisted Papua New Guinea to finance rehabilitation work followingthe Rabaul volcano eruption in 1994 by allowing the pooling of various slow disbursing loans into one rehabilitationloan of US$35 nlillion. The Bank's rapid response on this loan has been appreciated. A small Eco- nomic Recovery Loan to assist in the pursuit of longer term social and economic reforms was also recently approved by the Bank following very extended discussions. We have noted that at the same time as our EconomicRecovery Loan was being approved, the Bank's Country Assistance Strategy for Papua New Guinea was also being endorsed by the Board. This strategy provides, apart from other conditions, a specific provision for the withdrawal of the Bank's financial assistance to Papua New Guinea in the event that agreed policy reforms are not implemented. Papua New Guinea, given its consistent record of debt repayment finds this approach contradictory to ongoing work in the Bank particularly with regard to multilateral debt problems of the heavily indebted countries. Whilst we are sympathetic to the problemsof the heavily indebted countries, we find it ironical that while special treatment is being engineered to facilitate new lending to poor debtors, the Bank is threatening to disengage itself from activities in countries who make timely loan repay- ments anidwhere political or policy views of the country may from time to time be at variancewith those of the Bank. I belive that the recent decision by the Bank to establish an operational office in Port Moresby will go along way in creating better understanding between the Government and the Bank. We look forward to the upgrading of this office to full Residential Representative status. On MIGA's assistance to Papua New Guinea, we appreciate MIGA's Board of Directors' approval for the issuanceof upto US$50 million coverage for the major Lihir gold project which is set to commence constructionin the final quarter of this year. We also look forwardto the finalisationof outstandingarrangements relating to a US$13 million first investmentby IFC in a tuna canning operation in Papua New Guinea I thank you for this opportunity for Papua New Guinea to outline recent economic developments and provide a frank assessment of its relationship with the Bank and the Fund. For Papua New Guinea, the Bank and the Fund will remain very importantinstitutions and we are fully committed to continuing the close and frank working relationship in the years ahead. I again congratulate the organizers of the meeting and compliment all other Governorson their enlightening presentations.I trust that the sum of all our contributions will eventually provide tangible benefits for the developing nations of the world.

163 PHILIPPINES: ROBERTO F. DE OCAMPO Governiorof th1eBatik

The delegationfrom the Republic of the Philippinesenthusiastically welcomes the admissionto the Bretton Woods institutionsof Brunei Darussalam. With the Sultanate's entry, all the member counties of the Association of SoutheastAsian Nations will be representedin these organizations.The countries of this fastest-growingregional market will be participatingvigorously in the mainstreamof global trade and development. The delegationalso congratulatesthe Hon. James D. Wolfensohn,the new Presidentof the World Bank. Mr. Wolfensohn'sremarkable background in the private sector will no doubt assure the World Bank of quality leadershipas we enter a new century where markets, rather than governments, will be playing the decisive role in shaping societies. Today we face a rapidly changingglobal environment,propelled by rapid developments in the area of information and telecommunicationstechnolo- gies. With a few taps on computer keyboards, billions of dollars may be instantaneously relocated by large .inancial organizations whose resources dwarf those of many small countries. Advances in these technologies have caused global market integration and interdependenciesto proceed at a rate unimaginableonly a few years ago. Ours is a global technologicalenvironment where market forces capital and labor move with little regard for formal political boundaries. Increasingly, portfolio funds, rather than direct investmentsdominate global capital flows. These funds are extremely sensitive to market returns. This reality commands that countries exercise greater coordinationin macroeconomicpolicies. It is a reality that also requires augmentationof the resources available to multilateral institutionsthat play even more valuable roles in assuring the continued stability of the global financial system. The new global reality that we must deal with underscores the need for closer surveillance of the performance of member countries. It requires a more profound appreciation of the principles of transparency and accountability that enlightenpolicymakers in each of the member countriesof the two institutions. In turn, more determined effort will have to be exercised in evolving decision-makingprocesses in the twin institutions towards greater coherence with the new configurationscharacterizing the presentworld order. While more intensive internationalmarket integration has introducedvast opportunities for the world's population,it has also created new vulnerabilities. Much of the vulnerabilitiesrecently exhibited by the world financialsystem has been due to national policies that respond to domestic political pressures at the sacrifice of the stability of the entire global financial order. Through strengthened mechanisms for consultation and coordination, we should be able to reduce the significanceof these vulnerabilities.But national governments as well must evolve a new level of sensitivity to the extent of

164 interdependence of the world's economies particularly the financial markets. In the face of the new global realities, the Philippines supports moves to augment the resources of multilateral institutions. We likewise endorse the initiative to establish an emergency funding mechanism as a means to reinforce global financial stability and reduce the threat of external shocks on the emerging markets in particular. We expect, however, that the availability of an emergency funding mechanism will not diminish the prudence of economic managers. The significance of international labor flows is a matter that will eventually require the attention of multilateral institutions involved in the formulation of financial and monetary policies that affect such flows. As labor shares in the more pronounced mobility of factors of production, multilateral institutions should be capable of reinforcing present initiatives to implement a universal standard of labor rights that pays due itspect to the cultural distinctions present in every society. In the interest of broadening the base of global economic growth, the Phil- ippines supports the initiative to relieve the multilateral debt load of heavilyindebted poor countries. We encourage these countries to continue adopting strong adjustment and reform policies even as multilateral support is undertaken to relieve their debt burdens. This will assure, as the Philippine case demonstrates, that the debt relief effort will translate into self-sustaining growth. The Philippines hopes that, with the sustained growth it is now experiencing, the country may eventually be able to more actively support alleviation of the poorer economies. This is a critical period in the development of a highly integrated global economy. Lest we forget that development finance is as much about development as it is about finance, particularly in a year that has been fashionable to describe as one that began with the Mexico and Barings crises; let us also reememberthat it is a year tat continues to see rnillions perish from hunger, too many of our children suffer from malnutrition, and still comparatively more living in squalor rather than affluence. This is not the moment for the more maturely developed economies to diniinish the roles they play in assuring greater global equity, a more even development for mankind, and a world economnicsystem that is characterized by stability. This is not the time to indulge in endless debates over what appears to some as self evident. In this regard, the Philippines echoes Presi- dent Wolfensohn's call for a new compact that will assure adequate funding for the IDA. Assurnce of adequate funding for the IDA is essential to realize the global crlr.;sensusthat places importance on poverty reduction as the major goal of sustainable development. In the Philippines, poverty reduction is the central goal of aIl economic development initiatives. The Philippines has gone through the most difficult phases of adjustment and reform. The adjustments and reforms being undertaken share the perspective that the entire global community requires faster fiscal consolidation, reduction

165 in unemployment,rapid structuralreforrn, and the evolutionof stable financial systems. These adjustmentsand reforms bring market disciplinesto bear on domestic cconomicprocesses in ci'der to hasten our transition towards coherence with the global economicmainstream. Many of the reformpolicies were met with initial public resistance because of the short-termcosts that they entailed. But with persistentand public educationin the frameworkof democratic governance,the reform policieshave been increasinglyaccepted by our people. The reforms and adjustmentshave now begun to bear fruit, strengthening the confidenceof our people in the long-termbenefits that the new policies will bring. We have learned from past experiencethat hesitationin the introduction of an economic reform package will cause the domestic economy to miss opportunitieso;' red by a rapidly changingglobal environment. Today,the Philippineeconomy has achieveda momentumof growth sustained by a dramaticrise in investmentsand exports. Defyingthe unwarranted burdens imposedby a string of natural calamities,the relative volatilityof the global financialenvironment, and a few external shocks, the Philippineshas pushed ahead with its liberalizationprograms. With a more outward-looking, trade-orientedeconomy, the Philippinesexpects to keep pace with the rapid growth of its neighboringeconomies. In the Philippines,we have ceased waiting for economic miracles,realizing that these simply do not exist. As more recent studies bear out, the so- called East Asian "economic miracle" is, at bottomline,the outcome of hard work in a market-friendlyenvironment. In short, there simply is no quick fix. The early successes that the reform process in the Philippineshas begun to reap is a testament to the necessityfor sound fiscalmanagement. An important milestonehas been achievedby our reform process with the attainmentof a budgetary surplus last year. With determinationto keep prudence in com- mand, we expect to produce a consolidated public sector surplus in due course. We recognize as well that sustained growth can be achieved only on the basis of raisingthe efficienciesof the domesticmarket and providingfor dramatic improvementsin the savings rate. The PhilippineGovernment will not relent in improvingon these aspects, which are crucial to enhancing investments in our economy. The Philippineexperience at reform, within the frameworkof democratic governanceand guided by the principleof enhancingsocial equity,will hopefully serve as encouragementto other countrieswho must, within the terms of a more optimisticglobal economy,pursue their own programs of adjustment and reform. There is every reason to be confident that private sector-ledgrowth in an environmenthospitable to efficientbusiness will deliver both equity and prosperity to developingcountnes. The lead engine of growth must be the private sector, the private sector and the private sector. In the Philippinesit is central

166 to our aspirations for economic prosperityand the hallmark of our unshakable belief in democracy.

POLAND: HANNA GRONKIEWICZ-WALTZ Gvernor of the Bank

It is an honor for me to participate for the fourth successivel year in the Annual Meetingsof the Boards of Governorsof the WorldBank Group and the InternationalMonetary Fund. These meetingsprovide an excellentopportunity to exchange views and grasp the recent developmentsin the world economy. In today's world we are living in times of change. Changesoccuron almost a day-to-day basis; they are part of our life. The pace and quality of adjustments to the changing environment determine the position of individuals or countries. The timely reaction to challenges may be a source of success, whereas delays in reaction usually bring failure. In most cases, reforms need to be foward-lookingand require strength,vision, and determinationfrom policymakers.Many areas of the world are undergoing radical reform. However, I still consider the simultaneous change in both political and economic systems as one of the most challengingtasks we are likely to face. Poland is often cited as the most successfultransition economy. Our country is currently one of the fastest growing in Europe, showing a growth trend since mid- 1992. For the last two years, this growth has been led primarily by exports, which have shown a remarkable increase of almost 40 percent this year. The second growth factor is investment,whose volume has also risen by two-digit figures. We are justified then in believing that we have embarked on a path of sustainable and viable growth which recently reached the level of 6 percenL In the environment of strong growth, it has neverthelessbeen possible to maintain the downward trend of inflation since 1991. This strong growth made it possible first to stabilize and then to decreasethe rate of unem- ploymnent.Developments in the balance of payments led to a healthy increase in our official foreign exchange reserves, which dramatically improved our financial position; the high rate of our new sovereign debt and repayment of our IMF credits before maturity are the most visible signs of this new situation. Although this new situation is an unqualified success, it poses a major challenge for monetary and fiscal policy. Notwithstandingthese positive developments,our transition to a market economy is still not complete. The most imnportantmeasures we have yet to introducemay be describedas belongingto the realmsof structumalpolicies. The share of the private sectorin the Polisheconomy is close to two-thirds,however, some brnches of our industry are still dominatedby state-ownedenterprises, Polish agricultureis still insufficientlysensitive to market forces, and the public financesector is heavilyburdened by obligationsinherited from the past system. All these structural deficienciesare reflected in the volume and structure

167 of budget revenues and expenditures.The public sector borrowing requirement will rapidly grow in the years to come unless deep changes are fully implementedin major areas. One of the key problems faced now by Poland, and quite a few developingcountries, is how to financea pension system. The need for the reforms in this area was recognized several years ago. However, neither of the that have held power governments initiated real changes. These reformsare even more difficultnow when it could be possible to grasp some of the fruits of growth, but reformshave to be painful for some part of the society.Nevertheless, the final shape of the pension system and its initial capitalizationshould be implementednow. Privatizationappears to be the only feasible mechanismto provide initial capital, through either the allocation of the proceeds from privatizationor the transfer of shares of privatized companies. Recentlythe cabinetagreed upon a programfor capitalizationthat may form the starting point for definingthe new shape of the social security system. The Bretton Woods institutions are dedicated to supporting market- oriented and professionallysound reforms. Both the World Bank and the IMF have already thoroughlyresearched our economy.with many of their studies focusing on these structuralproblems. We hope that we may count on further support, based on their expertise in resolvingsuch problemsin the world and their knowledge of the Polish economy. I am fully convinced that Poland's structural problems should be vigorously tacklednow. The art of adaptabilityis to be able to predict the future and react well in advance.In this context, I would like to express my appreciation to Mr. James Wolfensohn,in his capacity as the President of the World Bank, for tak-ingup the challengefacing the future of the WorldBank. I do hope that the proposed reforms targeted at professionalexcellence, effectiveness,and accountability,will be implementedin the near future, to the advantageof the World Bank, its shareholders,and clients, and to the global stability.

PORTUGAL: EDUARDO CATROGA Governor of the Bank

In the last decade,Portugal implementeda catching-upprocess within the European Union (EU). It transformneditself into a developedsmall open economy while participatingfully in the constructionof the EU. One can hardly find other examples of such a thorougheconomic restructuring and liberalization in such a short span of timre. In terms of macroeconomicstabilization and of catching up with wealthy European patterns,results wereviewed as impressiveby internationalanalysts. Inflationfell from a high of 30 percent in the beginning of the 1980sto a low of 4 percent at present. Gradualand persistent fiscalconsolidation brought the overall governmentdeficit down from 1'0percent to 5.5 percent in the current

168 year. As a consequence, the debt-to-GDP ratio remained moderate-around the EU average. Unemploymentexhibited a high correlation with the business cycle, and the reforms introduced in the labor market helped the unemployment rate to remain the lowest in the EU, after Luxembourgand Austria. Current account stability, combined with the persistence of net capital inflows,created a history of high levels of foreign reserves. Growing credibility of the policy mix has also put interest rates on a downward trend. Economic growth, coupled with a sustainablereal exchange appreciation, increased wealth at one of the fastest paces in Europe. Translatedinto relative purchasing power parity. the Portuguese GDP per capita, between 1986 and 1994, exceed the EU average by 10 percentagepoints-reaching 63 percent at present. The properuse of importantstructural funds receivedfrom the EU since Por- tugal's membershipin 1986 was instrumentalin acceleratingthis development However,the performanceof the economy was primarily due to two factors: * The consistency of the policy mix, which combines demand policies for macroeconomic stabilization with strong supply side policies for structural change and economic liberalization; and * The responsiveness of private entrepeneurship, which gained a renewed dynamics with the full liberalization of the economy and the wave of privatization of public companies. Along with structural change, the regulatory framework changed dramatically. Supply side policies were primarily important in four major areas: * Increased concentrationof resources on higher value added sectors; * Monetaryand financial liberalization; * Privatizations;and * Developmentof capital markets. Rapid modernization is noticeable in the sharp increase of higher value added segments in all sectors, primarily in industry, where technological and managerialpatterns are rapidly improving. Employment in agriculturehalved in ten years, to a low of 10 percent at present, and will continue to fall in the years ahead. On the contrary, services are rapidly growing in importance and are the major source of new jobs, especially those linked to new demands from industry and consumers. The ratio of public investment to GDP-in physical and social infrastructures as well as in education-became one of the highest in the EU. This effort sharply reduced historical gaps and created opportunities for new enterprise demanding higher skills of the labor force. In spite of pressure on the budget, the fiscal position improved gradually

169 accordingto a medium-runstrategy. Prudent debt management,with a moderate increaseof externalindebtedncss, was an elementof this strategy. Increasingcredibility of the policymix was recognizedin 1993,when Por- tugal's credit ratingwas upgradedto AA- by Standard& Poors.This enlarged the optionsfor managingpublic debt and, since then, Portugalhas launched severallarge issues.These issues wereplaced in internationaland global bond marketswith lowerspreads than expectedand are tradingquite well in the sec- ondary markets. Neverthelessexternal debt remainsquite modest. It is only 17 percent of total debt, half of foreignreserves and 12 percentof GDP. Major steps of monetaryand financialliberalization were implementedin the last three years,after careful preparation. In 1991, monetarypolicy was implementedthrough open market operations. Monetaryfinance of the Treasuryended, anda new regulatorybody and Code were introducedfor securitiesmarkets, totally in line with the standards of maturemarkets. In 1992,the Escudobecame a full memberof the ExchangeRate Mecha- nism of the EuropeanMonetary System. Capital controls were fully eliminated.And the bankingsector regulation was fully integratedwith the one of the EuropeanUnion. In 1993 and 1994, following the upgrading of the internationalrating already mentioned,the external debt managementwas aligned by international standards.Withholding tax for non-residentswas abolished,and the insurancesector becamefully integratedwithin the European market.Inde- pendenceof the Bankof Portugalimproved with the adaptationof its organic law, in accordancewith the MaastrichtTreaty. In the last five years, Portugal implementedan ambitious Privatization Program,according to four basic objectives: * Improvecompetitiveness of the economywhile reducing State involvement; v Reduce public indebtedness; * Widen domesticshare ownership;and * Enhancethe internationalstature of PortugueseStock Market After privatizing about one hundred companies, Portugal became the third largest privatizerwithin OECD. The weight of public corporationsin GDP shrunkfrom 20 percent in 1990 to 8 percent in 1995,the most striking examplebeing the bankingsector, where the marketshare of public banks fell from 87 percent to 30 percent at present. In the insurance sector, the move was similar, and mergersand acquisitionswith banks have been very active recently.

170 A few of the largest industrial corporations are already partially privatized-cement, telecommunications,oil refinery and distribution, and paper pulp are among the major sectors contributing to market capitalization. All together, the targets of the Privatization Progrmmhave been quite well attained. But the process is still incomplete. Its pace should be pursued and its range enlarged to reach one of the lowest weights of public companiesin GDP within Europe by the end of the century, so as to fully accomplish the goal of improving economic efficiency. Capital markets which were traditionallyvery modest had to be virtually created ex novo. With the view of continuouslyincreasing market efficiency,a program of gradual institutional changes was implemented. Major changes were: a Creation of a continuous equity market and of an over-the-countermarket for large bond transactions; * Deregulationof primary debt issuance by non-residents; * Improvement of domestic settlement systems in line with international standards; and a Abolition of stamp duty on all security transactions and of withholding tax on debt interest. Market capitalizationas percentageof GNP reaches now 18 percent, a figure close to most of the emergentcapital markets. With the coming to the market of major companies, which are partially privatized at present, the size of the market will increase considerably.Continuous progress in liquidity and market efficiency may permit Portugal's stock market to rank with the group of small but mature markets of the world. The process of modernizationis still at an incomplctestage. Much remains to be done and the challengesof the years ahead will present as many difficulties as the ones experienced and overcome in the last years. The completion of macroeconomic stabilization requires pursuit of the present economic policies of wage moderation, fiscal consolidation,and disinflation. This strategy is a necessarycondition to enhance the rate of potential economic growth on a sustainablebasis. Therefore, it would be pursued even if there was not the challenge of meeting the Maastricht criteria designed for the European Monetary Union. This view is the object of a broad social consensus, which acknowledges the importance for Portugal to be in the core group of countries that lay the foundationisof the European Monetary Union. There are also important structural changes to be implemented requiring pursuit of active supply-side policies. All in all, one can say that the significantsuccess that Portugal achieved in the last decade is largely due to the consistency of the policy mix and to the

171 unusually-prominentrole that supply side policies have playet. it. Furthermore,the results clearly supporLthe benefits from rapidly increasing flexibility and free competition in the domestic mrkets and full integration in the world economy. On this grounds, Portugal's experience in the last decade may be an interesting case study for small open economiesattempting to run a process of fast modemizationwith f'ull liberalization of the international trade and capital flows.

RUSSIAN FEDERATION: ANATOLI CHUBAIS Governorof trheBank and threFuid

I welcome this opportunityto address you. In my brief statement,I would like to touch on three issues: the state of the world economy, the roles of the Bank and the Fund, and the state of Russia's economy. State of t/1e World Econtomny We view the state of the world economyas generallyquite favorable.Most countriesare pursuing responsiblefinancial policies that ensure a combination of sustainableeconomic growth and low rates of inflation.The recent unwarranted fluctuationsin exchange rates have been successfullyrectified through the coordinatedactions of the central bank-smanaging the key reserve currencies. Clearly,the greatest possible advantageshould be taken of the favorable state of the world economy to resolutely redress the accumulatedfiscal and structural imbalances. Most industrial countriescontinue to show potential for furthersustainable growth. It would seem that the slight moderationof growth in the countriesof North Americaand WesternEurope in the first half of this year was temporary and shouldnot be viewed as a signal for loosening financialpolicy. A number of industrialcountries have succeededin achievinga measureof improvement in fiscal indicators:budget deficit reductionsand a slowdownin the growth of public debt. Nonetheless,considerable additional efforts need to be made to overcomethe accumulatedimbalances. Pension reform is a pressing issue in most industrialcountries. The need for resolute action to increaseflexibility in labor markets is underscored by unemployment rates which remain high, especially in West Europeancountries. We have already grown accustomed to seeing high rates of economic growth in those developingcountries whose economies are marked by a high degree of opennessand integrationin the world economy. It is gratifyingth Et the number of such countries keeps growing, and that taken together, this group, which includes most East Asian and Latin American countries, has already become a significantgrowth factor in the world economy. It is also gratifyingthat the unfavorableeffects of the financial crisis in Mexico turned

172 out to be of short duration and did not bring about a substantial slowdown in growth in this group of countries as a whole. Nonetheless, the experience of Mexico halsshown yet again that a high degree of openness in the economy maakesparticularly strict demands on the quality of national financial policy. Those countries wishing to replicate the success of' the most dynamic developing countries should ponder this. In particular,the liberalization of capital account transactionsdefinitely requires establishmentof the necessaryprereq- uisites, both macroeconomicand institutional. It appears that the state of affairs in those developing countries whosc economies stagnated for many years has been gradually changing for the better. I refer primarilyto a number of countries in Sub-SaharanAfrica, where we now observe an acceleration in economic growth. I trust that this trend will continue. I believe that this year will see a turnaroundin many transitioneconomies. Virtuallyall of them have made conspicuousprogress in overcoming inflation and, therefore, in providing an environment for the resumption of economic growth. Of course, it is still premature to speak of a successfulcompletion of reforms because there still exist a great numberof financial,structural, social, and other problems. It is important that the resumption of economic growth should facilitate stepped-upefforts in these countriesto overcomethe remaining imbalances. The Roles of the Bank and the Fund The acceleratedglobalization of capital marketshas sharply reinforced the economic interdependenceof all countries of the world, as evidenced by the financial crisis that occurred in Mexico. This particular factor serves as the point of departure for our assessment of the roles of the Bank and the Fund and their policies. It is our view that the key task of the Fund is to improve the effectiveness of its surveillance. In this regard, we wholeheartedly support the Fund's efforts to introduce stricter requirementsfor the provision of statistical information by its members.This approach is in keeping both with the Fund's traditions and with the letter and spirit of its Articles of Agreement. In our opinion, the Executive Board of the IMF is on the right track on this issue. Of course, the willingness of the Fund itself to provide the necessary technical assistance to national statistical services will be important, if progress is to be made in L'is area. We also support the Fund's efforts to develop standards to guide members in the publicationof statisticaldata. The set of statisticalindicators proposed for regular publication seems to us reasonable and warranted. Of course, a restrained reaction to these proposals might be expected from those central banks which, in the past, pursued a policy of caution in publishingdata on the level of their foreign exchange reserves. The experience of many countries, however,including Russia, demonstratesthat it is a dangerousmisconception to

173 believethat stabilitymay be maintainedin the currencymarkets by concealing data on the levelsof foreignexchange reserves. On the contrary,the lack of accurateinformation serves only to makemarket participants more nervousand to heightenthe risk of a panic. Strengtheningthe Fund's surveillanceshould help prevent new financial criscs. Nonetheless,in the event that such crises do develop,the possibilityof t'le Fund's participatingfinancially in surmountingthem cannot be ruled out. This is why we support the developmentof an emergencyfinancing mechanism for the Fund, toward which, to my knowledge,substantial progress has alreadybeen made.Of course,such financingshould be providedonly if strict financialpolicy conditionsare met in the countriesconcemed. With regard to the Fund's possiblefinancial participation in surmounting new financialcrises, we supportthe conceptof increasingits capital under the Eleventh Review of Quotas. Our preference,both with a view to the most speedy resolutionof this issue and in light of the discussionsalready held by the Executive Board, is for the version increasingquotas on a proportional basis. As fa, as the size of the capital increase is concerned,we are prepared to show flexibilityin order to achievethe necessaryconsensus. As I move on to our assessmentof the WorldBank's role, I would first of all like to say that we deeply mourn the loss of PresidentLewis Preston who did much for the reorganizationand reorientationof thn Bank's activities. Certainly, the policy of reorganizationand reurientationof the Bank's activitiesmust continuie,and we supportthe effortsof the new managementof the Bankin this area. t1iparticular, we welcomethe reorientationof theBank's activities with a view to resolving global social problems, especially as regardsthe eliminationof poverty and environmentalconservation. The main guidelines for such actions have been set forth in the Social Summnitdocu- ments, although muchwork lies ahead here on the refinementof approaches. Supportfor private sector developmentis anotherimportant aspect of the reorientationof the Bank's activities.Some progresshas already been made here. In this regard, we view favorably the operationsof the International Finance Corporationin Russia. Nonetheless,further efforts are necessaryin this matter. Finally, we should menitionthe need to strengthencoordination of the Bank's and the Fund's activities.We know that the managementof the Fund and the Bank considers this .sue very important, and we welcome their efforts.Successful coordination of the Fund's and the Bank'sactivities is exem- plifiedby their joint participationin the developmentof the Govermmentof Russia'smedium-tenn economic program, which we expectto completeshortly.

The State of Russia's Economy in conclusion,I would like to say a few wordsabout the state of Russia's economy.This year,the Governmentof Russiahas been implementingan eco-

174 nomic programaimed at accomplishingfinancial stabilization and providin: an environmentfor the resumptionof economicgrowth. The main objectives of the programare to sharplyreduce the federal budgetdeficit, lower the inflation rate, increase official foreign exchange reserves, and stabilize the exchangerate of the ruble.We believe that fulfillmentof this programwill foster greater investmentactivity in Russia. I must say that, in the main, the targetsset have been met thus far. In the firstnine monthsof this year,the federaibudget deficit came to about3 percent of GDP,compared with 10 percentof GDP last year.The monthlyrate of inflation declined, over the same period, from 18 percent in January to approximately 4 percent in September. The volume of official foreign exchange reserveshas more than doubledsince the beginningof the year.The introduction of a bandfor exchangerate fluctuationshas madeit possibleto ensure relative stability for the ruble. At the same time, the declinein output has slowed, and economicgrowth has resumed in certainindustries, primarily export-oriented ones. The overall decline in GDP over the first nine monthscame to 4 percent, comparedwith 16 percentlast year. Next year,we expecteconomic growth to be registeredin Russia for the first time since the beginningof economicreforms. Unfortunately,the rate of inflation has dropped rather slowly than we expected.This is due primarilyto the growth of base money being substantially greater than expected.The Central Bank of Russia has pursued a tight monetarypolicy, and the growthof the net domestic assets in the first half of the year camneto 12 percent,or about 2 percenta month.Nonetheless, as early as spring we encountereda sharp increasein capital inflowsto Russia, which complicated the conduct of monetary policy considerably.As a result, net internationalreserves grew beyondprojections, and the growthof base money in the first half of dheyear came to 52 percent. The Government and the Central Bank of Russia made the necessary adjustments to the program at mid-year.Introduction of the exchange rate band made it possibleto slow the growth of base money,which fell to 5 percent in July and August;according to preliminarydata, it was as low as 2 percent in September.At the same time, the Governmentundertook a number of measuresto strengthenfiscal discipline and increase federal budgetrevenues through, among other things, a one-time grepeal of all forms of previously grantedtax exemptions.We believethat the rate of inflationwill fall very soon as a result of these measures. We also believethat the implementationof our privatizationprogram will be stepped up decisively in the very near future. The Governmentof Russia has devoted great effort to establishingthe stock market infrastructures,both legal and institutional,which are necessary to sell the blocks of shares still owned by the state. Such work has now been mostlycompletedl. The Governmenmof Russiafirmly intends to carry out this year's economic programin full, and is alreadyworking on a medium-termeconomic program.

175 SOUTHAFRICA: CHRISTO F. LIEBENBERG Governor of fire Bank

May I first welcome Brunei to this family as a new member.Second, may I extend my congratulationsto Mr. Wolfensohnon assuming the presidency of the World Bank. We support your efforts and vision for Africa and wish you every success in your termnof office. May we also extenidour condo- lences to the family of our friend, the late Lew Preston, who so successfully guided the World Bank through a critical period in the institution's history. We also extendour condolencesto the familyof our colleague,the Honorable Ariston Chimbati, Minister of Finance for Zimbabwe, who passed away on Saturday. Since the democratisationof South Africa, we have adopted an economic strategy that emphasizes sustainability,monetary and fiscal discipline, value for money in government spending, and a commitment to human resource development.To date, the macroeconomicresults are encouraging.Our policies have clearly not gone unnoticed, and I am proud that our Central Bank Governor,Dr. Chris Stals, is the recipient this year of Euromoney's international "'CentralBanker of the Year" award. Various initiatives are under way that are designed to increase the competitivenessof the South African economy.Our first steps have been encouraging, and, in the year to June 1995, we attracted net capital inflows of R18.6 billion. But the future is not without enormous challenges, including large backlogs in social infrastructure, basic needs such as education, housing, and health care, the eradication of poverty,improvements in capital and labour productivity, higher savings, and institutional reform.

Regional Development We are deeply cognisantof our role and responsibilitieswithin the southem African region, of which we are such an integral part We realize fully that domestic macroeconomicsuccess will be insufficientfor long-termeconomic development without parallel developments within the region. With the encouragementand goodwill of our neighbors,we have taken importantsteps to reintegrateour economy into and to promotegreater economiccooperation within, southernAfrica. South Africa has becomea full member of the South- emnAfrican DevelopmentCommunity, and we plan to conclude membership of the African DevelopmentBank during 1995.We also have great pleasurein using this opportunityto announcethat we are formalizingour membershipof the English-speakingAfrican constituencyof the IMF and World Bank. We recognise that in the successful regional development of southern Africa, South Africa has a unique opportunityto contribute to the emerging growth and prosperityon our continent.This excites us, and we have committedour- selves to this vision with great enthusiasm.

176 International Developments There are a number issues of intemational importance that concern us. First the multilateraldebt problem.As we are all aware,this issue has assumed alarming proportions for our continent. No less than 33 of 41 severely indebtedlow-income countries are from the Africancontinent, and we would like to call upon the BrettonWoods institutions and the Group of Seven countries to redoubletheir effortsto finda solutionto this problemin a mannerthat is equitableand even-handed,and that providesa feasibleexit strategyfor the mostseverely indebtednations. Wemake this appeal,because for the firsttime in many years, there are encouragingpolitical and economic signs that the African continentis on the upturn and that structuralreforms are progressing briskly. Second, IDA replenishments.We share Mr. Wolfensohn'sconcerns. We recognizeand are thankful for the considerableefforts of the donor countries, and specificallythe U.S. government,to secure the financialresources for IDA 10 and to ensure an adequate replenishmentof IDA 11. As a donor, we stronglyencourage the successfuloutcome of these efforts. It would be a sad and indeed an unnecessaryirony if, owing to a lack of resources,this aspect of the World Bank's activitieswere curtailedprecisely at the point when there is hope for an economicand political breakthrough.Nevertheless, in southem Africa we accept that responsibilityfor sustainableeconomic growth-based on trade policy and investor-friendlypolicies and sound macroeconomicprin- ciples-lies in our own hands. Third, SouthAfrica supports manyof the new directivesto stabilizeinter- nationalcapital flows and financialmarkets, in particular,that the IMF develop an appropriateearly-warning system. Fourth we fully endorse the recommendations of the Commonwealth ministers of finance and urge a redoubling of international efforts against money laundering. In line with intemational developments,our own systems are being improved,and we are planning to introducestrong measuresto combatthis evil, on a regionalbasis also. Conclusion South Africa has benefitedenormously from internationalexperience. We have looked West and endeavoured,within our own circumstances,to incor- porate the importantlessons of fiscaland monetaryprudence; we have looked East, noted the crucial role of technology,human resourcedevelopment, and the role of the state in econoniicdevelopment; iimmediately north to our neighbors to focus on the developmentalnature of our task; and inwardly,to remind ourselvesof the enduringchallenges and major social and basic needs that we confront. In fashioninga coherent policy approach which incorporatesthese lessons, we are building a set of macroeconomicpolicies relevant to our experience and circumstances.We are doing so with the enormousgoodwill, cooperation, and assistanceof the entire internationalcommunity. In doing so, we

177 are beginningto undergoan amazingsocioeconomic transformation. We hope that you will continueto support us and walk with us as new opportunities unfold in Africa.

SPAIN:PEDRO SOLBES Governor of tie Bank and the Fund (on behatfof tle Member States of the European Union)

As Spain currentlyholds the Presidencyof the Councilof the European Union (EU), I have the honor to address this meetingon behalf of the Union and, for the first time, its 15 MemberStates. In the first half of 1995, some decelerationin the growth of the industrial countries as a whole was expected,mainly owing to a moderationof GDP increase in the United States. Meanwhile,a sustained path of growth was expectedto continuein the EU and a recoverywas forecastfor Japan. Since the beginning of the year, several factors have influenced the performance of the industrial countries' economies; the Mexican crisis and the financialinstability and exchangerate turbulencein the first quarterof 1995 adverselyaffected economic activity. After high GDP growth and emerging inflationaryexpectadons in 1994, the U.S. economyis movingtowards more sustainablegrowth ratesthis year. Stability-orientedmonetary policies have contributedto this pattern and the effectsof tightermonetary policies in 1994seem to be materializingnow. Fur- thermore,the economicimpact of the recessionin Mexico mayhave affected the U.S. economy.In Japan, the situationhas deteriorated.The strong appreciationof the yen as wellas largeamounts of nonperformingloans in the banking sector and dwindlingconsumer confidence are hamperingthe recovery. Wit lower growthof world economicoutput, the export performanceof the European economies will slow down and GDP growth can be expected to moderateas well. From the end of March, calm was progressivelyrestored in the international financialmarkets, partly due to the cooperationamong the major industrial countries.Interest rates and exchangerates now providea more favorable settingfor sustainedeconomic growth in the industrialeconomies as a whole. Continuedcooperation among the major industrialcountries, based on sound domesticpolicies, could prove helpfulin stabilizingexchange markets further. Employmentresponded to the cyclical improvement,but unemployment rates in the EuropeanUnion are still high. This highlig.ts the need for additional effortsto reform our labor marketsand to increase the number of jobs whichcan be createdduring the recovery. Inflationremains subdued in most industrialcountries. Some of those that have experiencedsizeable currency depreciationsare witnessinginflationary pressures,which in some cases have promptedmonetary authorities to react

178 by increasinginterest rates. In these countriesin particularfiscal policy should be, and in some cases has been, geared to reducingdomestic absorption.Due to high deficits, further fiscal adjustmentis needed in most EU countries in order to reduce inflationarypressure and to strengtheneconomic growth. Furtherfiscal adjustmentis also needed in the UnitedStates, to help raise the extremelylow savings ratio, which may be one of the structuralcauses of the weaknessof the dollar.In Japan, whilethere has been a welcomeeasing of monetarypolicy, there may be some scope for a furthereffective easing of the fiscal stance in order to provide additional stimulus for recovery.The most importanttask, however,will be to strengthenbusiness confidence and to support the process of balance-sheetadjustment of the bankingsector. Structural policies aimed at a rapid deregulationand liberalizationof the economy are also warranted. In the EuropeanUnion, a higher degreeof convergence,as required by its Treaty,remains pivotal to setting up the monetaryunion and to ensuring integrationand reaping the full benefitsof the intemal market.Progress toward the fulfilmentof the convergencecriteria has in some cases been less than satisfactory.The EU and its member states will therefore continue focusingcon- siderable efforts on improvingprice stability and on ensuring sound public finances,fully convincedthat the policiesfor sustaininglong-term growth, for reducingunemployment and for strengtheningconvergence are mutuallysup- portive.Exchange rate instabilityat the beginningof the year, due partly to the weaknessof the US dollar, affected member states unevenly,reflecting continuing structural problems, persistent fiscal imbalances,uncertain inflation prospects, and other uncertaintiesin some Member States. Adopting strict measuresto address macroeconomicimbalances, in particular in the field of public finance,has proved the only effective way of regaining market confidence and thus improvingexchange-rate stability. Guidelinesfor the economicpolicies of the memberstates and of the Com- munityrecently endorsed by the EuropeanCouncil in Cannes,in continuation of the economicpolicy objectiveshitherto pursued, aim in particularat tuming the presentrecovery into strong, sustainablenoninflationary growth in order to reduce unemploymentand budget deficits.Moreover, they underscorethe commitmentto price stability and stress the need for a number of Member States to increasetheir efforts to meet the guidelinesfor reducing inflationto between 2 and 3 percentor less. However,to be effective,efforts by the monetary authoritiesneed to be accompaniedby substantialimprovements in fiscal performance in most EU countries. The Guidelines urge that budget deficitsbe broughtbelow 3 percentof GDP as soon as possible,as a first step towards the sound medium-termgoal of close to balance. In this contextbud- get consolidation,in particular the reduction of structural deficits, is seen as an essential conditionfor sustainedand balancedeconomic and employment growth. Further, the Broad Guidelinessignal the need for member states to reinforce structural policies and to keep the increase of real wages below the

179 increase of productivity in order to achieve stronger employment growth and to reduce unemployment. The excessive deficit procedure conducted this year has provided a measure of the results achieved so far. Although this year an improvement in general government deficits is expected, with twelve member states making some progress, nonetheless public deficits are still much too high and debt ratios are expected to increase in most EU countries. The persistence of fiscal imbalances could undermine the credibility of policies; it is contributing to high-risk premiums on interest rates; and it will adversely affect economic growth and job creation in the medium term. Fiscal consolidation is the major task con- fronting the economic policies of a good number of Member States. Indeed, most member states are committed to exploit any room to accelerate the process of budget consolidation. A sound macroeconomic framework is one of the pillars necessary to support the reduction of unemployment, being an important priority in the EU. The Union has agreed-most recently in its Broad Guidelines and in the conclusions of the European Council in Cannes-that for growth and employment to be sustainable we also have to take into account inter alia the interrelationship between economic growth and the environment and the consequences this has for economic policy. The subject was also an important part agreed by the G-7 Halifax conclusions. Several decisions were taken at the meeting of the European Council in Cannes with a view to reducing unemployment. One of these called on member states to present multiannual employment programs in the autumn of this year Packages of structural reforms emphasizing active policies should be at the forefront of such efforts. Also, measures will be aimed at the groups most affected by the unemployment problem, namely unskilled workers, young people, and the long-term unemployed. Reports on the implementation of these policies will be submitted to the European Council and the first of these will be presented in December 1995 in Madrid. Member states have already achieved some progress with respect to improving the functioning of goods and factor markets. According to the different situation in member states, each country will decide independently about the necessity, the design, and the implementation of additional reforms and labor market activities. In the past year, the EU has made significant progress in the preparatory work for economnicand monetary union. The European Council in Cannes restated its firm resolve to prepare the transition to the single currency by Jan- uary 1, 1999 at the latest, in accordance with the Maastricht Treaty. As regards the preparatory work for the establishment of monetary union, the economic and finance ministers were asked by the European Council in Cannes to deliver to that Council's next meeting a report on a reference scenario for the introduction of the single currency. This report will be prepared in consultation with the Economic and Monetary Union (EMU) and the Com- mission and will be discussed by the European Council in Madrid. The deft-

180 nition of the referencescenario will help answertechnical questions raised by the introductionof the single currency.It will seek to provide all economic agents with a transparentand practical scenario and thus promote a smooth transitionto a singlecurrency. In emphasizingthe importanceof these technical aspects,we must not forget the centralimportance of additionalefforts of the member states to improveconvergence perfonnance as the precondition for the success of the monetaryunion. The EU will continueto provide support for the completionof the transformationprocess in Central and Eastern Europe, in order to promotegrowth and to assist the associatedcountries in the preaccessionprocess. The white paperon the preparationof the associatedCentral European countries for integration into the single market focuses on the adjustmentsneeded to adapt to the situationin the Union. The Europe agreementsand the refocusingof the Phare program toward medium-termobjectives and infrastructurefinancing are designedto assist the path toward membership.At the political level, this action is being supplementedby the structureddialogue which will allow for discussionof issues of common interestin a multilateralframework. The internationalcommunity and Europein particularhave a strong interest in the successof the transformationprocess in the countriesof the former Soviet Union.The EuropeanUnion attachesgreat importanceto strengthening relationswith these countries.It welcomesthe reforms undertakenby them in close collaborationwith the IMF and will continueits policyof supportingthe reformprocess. In other areas,the Unionwill endeavourto strengtheneconomic and political links. Special attention will also be devoted to the Mediterraneancoun- tries, with whom the Union seeks a new type of relationship.The Union looks forwardto the Barcelonaconference in November,aiming to intensifycoop- eration within the frameworkof close good-neighborlyrelations. The Euro- pean Council in Cannes has established the financial framework-for the commitments in both the Mediterraneanregion and Central and Eastern Europe. The creationof a new financingmechanism for the MiddleEast and North Africa is being discussed, in accordancewith the conclusionsof the year's Casablancasummit The European Union strongly supports the Middle East Peace Process and is actively engaged in considering proposals for new financingmechanisms which would help underpinthe PeaceProcess and promote regionaldevelopment. The EuropeanUnion will continueits supportto povertyalleviation in the developingcountries, especially in Africa. In 1995, the Union continuedits special relations with African, Caribbean and Pacific countries; these are linked to the Union by the Lome Conventionwhich has been reviewed in order to make it more effective.Here too, the EuropeanUnion has provided, and will continueto provide,support for the adjustmentprocess conductedin these countries.In this framework,the EuropeanCouncil in Cannes decided

181 to increase the global amount dedicated to this end (from ECU 12 to 15 billion over a five-year period). The European Union has reinforced this commitment by replenishing at a high level the resources of the European Development Fund. With South Africa the EU is working towards a new agreement encompassing amongst others close political, economic and financial cooperation, and which will emphasise the new era which the relationship between the two parties has entered. The EU is paying increasing attention to the development and the strengthening of its relations with Latin America, in particular with Chile and Mexico, and with MERCOSUR. Moreover, the Euro-Asiatic Summit in the second half of 1996 may be expected to reinforce the Union's relations with Asia as well. The EU reiterates its firm support for the multilateral and binding liberalization of world trade, based on the principles of nondiscrimination and non- reciprocity, and for the recently created World Trade Organization. Its multilateral character and the nondiscrimination principle to which it is committed make the WTO the appropriate forum for sustaining the momentum of liberalization and for solving trade disputes. The interim financial services arrangement reached last July is welcomed indeed, as it will promote multilateral liberalization of the greater part of all business in banking, securities, and insurance, which account for a significant part of world output. With a view to advancing and protecting global free wrade,the necessary efforts must be made to negotiate improved, permanent comniitments to liberalization on a full most-favored-nation basis in 1997. The European Union looks forward to the full participation of the United States in the multilateral process. The IMF continues to serve as the central forum of international monetary cooperation and to contribute to sound economic and monetary management in member countries. High on the agenda for the IMF should be to continue strengthening its surveillance in order to prevent, or improve the chances for a better handling of, financial crises. In this connection, the member states of the EU welcome the progress made by the Fund in establishing standards to guide members in die timely publication of key economic and financial information and urge all members to join in the efforts. They also strongly support the decision at our last Interim Committee to increase the IMF's focus on surveillance of capital flows and to expand its advice on capital liberalization, not least in order to make members more aware of the risks attached to overreliance on easily reversible capital flows. We welcome the discussion by the Fund Board of the value and possibilities of extending the IMF's jurisdiction, drawing on OECD expertise, to capital account transactions. Finally, the member states support the work on the establishment of an "emergency financing mechanism" in order to strengthen the IMF's ability to respond quickly with strong adjustment programs to exceptional balance of payments crises. Following the request made by the Interim Committee this spring and by the Halifax summit, the Fund has continued reviewing the adequacy of the

182 amount of financialresources at its disposal.The Eleventh Review of Quotas is in progressand the member statesof the EuropeanUnion welcomethe fact that a majorityof IMF membersare in favor of an appropriateincrease of quotas. Provisional views expressed in the Board suggest that many members have a certainpreference that the distributionof the quota increase should be largelyequiproportional and yet shouldbe carefullybalanced with the aim of keeping quotas roughly in line with the changingeconomic weight of countries. In this regard,the MemberStates welcomethe broad support that Board discussionshave revealedfor an ad hoc increase in quotas for a reducednum- ber of countries with the largest deviations between actual and theoretical quota shares.Lastly, the memberstates note with satisfactiontat a very broad majority of members is of the view that, in general, the quota formulae are working broadly as intended. In parallel with the Eleventh Quota Review,an increase of the Fund's borrowed resources is also under considerationin order to ensure the financial capacityof the Fund when large and exceptionalassistance is needed.Follow- ing the InterimCommittee's request of this spring,the IMF Board of Directors had a firstdiscussion on the role of borrowingand, in particular,the role of the General Arrangementto Borrow (GAB). The G-7 has asked the G-10 and other countries with the capacity to support the system to develop financing arrangementswith the objectiveof doubling as soon as possible the amount currently availableunder the GAB to respondto financial emergencies. We hope the seminarannounced for March 1996 on the future of the SDR will make an important contributionto the broad review by the Fund of the role of the SDR in the internationalmonetary system. Regardingthe extensionof the EnhancedStructural Adjustment Facility (ESAF),the memberstates note the work done by the ExecutiveDirectors and request them to proceed with their examinationof the options for continued financingand adaptationof the ESAF. With the active support of its new President,Mr. Wolfensohn,the World Bank Group continuesto reshape its activitiesin order to tailor them better to the primary goal of reducing poverty in the poorest countriesof the world. A more focused and flexible client-orientedstrategy, based on fruitful dialogue with the developingcountries and on a more global approach of the World Bank Group as a whole, is reinforcingthe key role of the Group in the overall development agenda. Regarding the multilateral development banks, it is importantto study and make proposals which would facilitate a better focusing of their activities. The member states of the EU therefore attach great importanceto the work of the DevelopmentCommittee's Task Force on Mul- tilateral DevelopmentBanks and look forwardto its recommendationsat the next meetingof LhatCommittee in the Spring of 1996. On multilateraldebt issues, the memberstates welcomethe efforts undertaken to review the adequacyof existing tools to help those poorestcountries with substantialmultilateral debt problems. In this contexta continuationof the

183 ESAF would providegreater certainty of appropriatefinancing. On bilateral debt, we urge the full and constructiveimplementation of the Naples terns. The member states also congratulatethe World Bank on its flexibility towardsthe special and urgent needs in developingcountries. Its support of measuresdealing with the financialturbulence in some Latin Americancoun- triesafter the Mexicancrisis, and its valuablework in the MiddleEast to sustain the Peace Process are notableexamples of the leadingrole whichthis institution,in whichwe all have a stake,has to play in today'schanging environment. We, the memberstates, lend active supportto the WorldBank Group in its responsibilities.In this context, the prompt fulfilmentof donors' commitmentsto IDA-1Oas well as a significantreplenishment of IDA resourcesto be agreed upon within the plannecdtime schedule are of the utmost importance. The memberstates are strongly committedto ensuringa successfuloutcome from these negotiations.Moreover, we urge all donors to demonstratethe strongest possible commitmentto fulfillingour common responsibilitiesas membersof the Association.IDA's distinctivemandate to target the very poor and promote sustainablegrowth in countriesneeding concessional resources merits our wholeheartedsupport. The memberstates also welcome,recent changes in the frameworkfor discussions in the DevelopmentCommittee. We are convinced that allowing more direct interactionamong members will lead to effectiveand productive discussionsand thereforeimprove the overall impactof agreements. The protblemsof ensuringan efficientand equitableworld monetary system and reducingthe gap betweenthe developedand less developedcountries presenta major challengeto the institutionsand their members and will call for furtherflexibility and opennessto change.We must continueto ensure that we can respondto the demandsof a rapidlychanging environment. Let me conclude,by expressingthe great respectin whichthe 15 members of the European Union hold the Bretton Woods institutions.They are the major points of referencefor continuouseconomic policy dialogueand cooperation.In particular,given its uniquenature and structure,we would like the Interim Committeeto be strengthenedeven further as the central forum for discussionson global systemic economicproblems and policies. I shouldnow like to spend a few momentsgiving an overviewof the economic situationof my own country,Spain, by brieflymentioning the problems it has had to face, the policiesthe Governmentis now pursuing to overcome them, and our prospectsfor the future. As you may be aware, the Spanisheconomy went througha brief but very severe recessionin 1992 and 1993, accompaniedby a decline in output and especiallyby a major loss of jobs and a sharp increase in the unemployment rate. These factorscontributed to a majorpublic sectordeficit, exacerbated by both an increasein expenditureand a drop in revenue. Confrontedwith this difficult situation,the Govemmentformulated and put into effect a medium-termeconomic policy programset out in July 1994

184 in its revisedConvergence Program. There were two clear objectives:to pull the Spanish economy out of the recession into which it had fallen; and to return to rates of growth exceedingthose of the other Europeanieconomies; and to bring Spain's inflationand interest rates into line with theirs. This was expected to result in significantgeneration of employment,which was and is the chief goal of the Government's policy.

Spail 's Convergence ProgranmFocuses on Three MaintAreas of Action. First, reductionof the public sectordeficit. Second, a packageof anti-inflation measures,among them autonomyfor the Bank of Spain.Third, structural reforms to make the economy more flexibleand competitive,the most important being refonn of the labor market. This set of policies has broughtthe economyout of crisis and p aced it on a stable growth path. It has also brought it more closely in line with the other Europeaneconomies, with a viewto economicand monetaryunion with them as of January 1, 1999. I am gratifiedto be able to tell you that since late 1993,the Spanishecon- omy, like the other continentalEuropean economies,has begun a process of marked expansion,which by this third quarter of 1995 has led to GDP growth rates in excess of 3 percent.At the same time,the fiscaladjustment process has reduced the public sector deficit from its 1993 level of 7.3 percent of GDP to 5.9 percent, the figurewith whichwe shallclose 1995,and a projected4.4 percent for 1996. The inflation rate, dowrnto less than 4 percent, is projected to reach 3.5 percentby the end of 1996.And for the last twelve months,we have been creating a thousandjobs a day. Despite its difficulties,I believe that Spain can be proud of the success attributable to the economic policy the Government has pursued with such determination.There is no denyingthe distance covered, or the fact that today we are closer to beingamong the firstto embark on the third phase of the Mon- etary Union. I see no other alternativefor Spain, and that, together with what we have achieved recently, highlights the importance of the 1996 budget, recently submittedto Parliament. Given the imminentadvent of the single EU currency,and the impact and influence of the internationalfinancial markets on midsized economies like that of Spain, it is implausiblethat partisanpolitical interests could endanger twelve months of growth, fiscalconsolidation, and structural reform. Although 1996 is an election year in Spain, the Govermnenthas presented a tough budget focused on cost cutting and deficit reduction, in keeping with the ConvergenceProgram I have referred to, and which predicatesthe existence of a primary surplus as a necessarycondition for an initial reduction of the public sector debt. Those who becauseof short-termelectoral considerationsreject this budget, which is precisely the one Spain needs, threaten to underminethe effort

185 madeby Spanishsociety in recentyears, delayour catchingup with the rest of'Europe, and disruptthe process of growthand employment generation. However,I am convincedthat we shallbe able to continuewith our economic policy of the last few years, and extend the current expansionphase until the end of this decade. The worldeconomy is in the courseof a majorprocess of integration,evidenceof whichis to be seen,for instance,in thelarge-scale inclusion of developing and transitioncountries in internationaltrade and finan,cialflows. This createsnew challenges, opens new vistasof growth,and, providedwe adhere to the appropriatepolicies, I am certainwe shall ultimatelysucceed in taking full advantageof them.

SRI LANKA: GAMINI LAKSHMANPEIRIS Governtorof theFund

It is my privilegeand pleasure to addressyou on behalfof theGovernment of Sri Lanka at this plenary session of the fiftiethAnnual Meetings of the Boardof Governorsof theWorld Bank Group and the InternationalMonetary Fund.There is littledoubt that duringthe last 50 years theWorld Bank and the IMF have playeda significantrole in safeguardingthe orderlyfunctioning of the intemationalmonetary system and by promotingtransfer of resourcesfor equitabledevelopment worldwide. As an independentnation of 47 years,Sri Lankahas been happyto be a part of this internationaleffort. It is encouragingto notethat worldeconomy is in muchbetter shape now than it has been for manyyears. The worldeconomy has performedrobustly in the recentpast with signiificantrecovery in industrialcountries, continuing strong growthin developingcountries and a tum-aroundin transitioncountries. We are happy that most Asian countrieshave performedwell despite adversitiesand SriLanka is proudto havebeen one of thepioneers in the field of economicliberalization. Widespreadacceptance of market friendlypolicies, increasingly liberal trade policies,sound structural reforms and healthyinternational cooperation have been the cornerstonesof this success.We mustcontinue to work for a moreopen trading environment in whichthe developingcountries have ready accessto the marketsof thedeveloped countries. In this connection,it is heart- eningto notethat by end-July1995 as manyas 105 countrieshave ratified the Uruguay Round and become members of the World Trade Organization (WTO).However, the prospectsfor internationalfood prices are worrying. With the phasingout of nationalsubsidies to agriculture,prices are expected to rise; imposingsevere pressureson net food importingcountries. Some understandingsto tide over the problemshave to be reached. However,we cannotbe complacentabout current prospects of the world economy.There is persistentpoverty and rampant unemployment with widen-

186 ing income inequ,llitiesin many parts of the world. These constitute basic challenges that should demand urgent attention of the multilateml institutions. We have to ensure that the benefits of economic advancement reach all parts of the globe and all segments of society, consistent with the political, economic and social objectives of our countries. We do hope that the Bretton Woods twins stand up to this great challenge as they design their operational strategies over the coming years. Meanwhile, in a fast-changing economic environment, the business of internationaleconomic housekeepinghas becomeever more demanding.This was dei 'onstrated clearly by the recent events following the financialcrisis in Mexico. The sweeping deregulation of financial markets, the liberalization of capital movements and the revolution in communication technology has knit- ted the world economy ever more tightly.As a result, market disturbancestend to travel quickly across the global economy. In this environment, any major realignment of currencies can cause problems for the developing countries. Consequently, the supervisory function of the multilateral institutions has become ever more important. In the past, the application of surveillance and conditionality to ensure good economic behavior had been mostly on the debtor countries.We are glad to note that this is fast changing and the IMF surveillance is now being extended to encompass macroeconomicpolicies of all countries. We welcome the continuing efforts on the part of Bretton Woods institutions to provide concessional resources to developing countries-in the IMF through the continuation of Enhanced StructuralAdjustment Facility (ESAF) and in the Bank through IDA lending. However, we are disturbed by the recent tendencies to impose cut backs in contributions to these important programs. We urge the authorities in the surplus member countries to remain conmnitted to the cause of the needy members in the global community by supporting these programs, particularly to current IDA-10 and prospective IDA-11. Next, a word about adjustment programs. There is little disagreement on the basic propositionthat macro-economicstabilization and structural reforms are vital for promoting durable economic growth.At the same time, we should be mindfulto protect the most vulnerable sections of the population, including women and children and to safeguard the einvironment.In other vwords, meaningful macro-economic adjustment has to be more people-oriented. Other- wise, developmentmight signify an empty word to the majority of the world's people. In 1994, there was a change of government in our country after 18 years. When the new Governmenttook officeunder the leadershipof Her Excellency Chandrika Bandaranaike Kumaratunga, it gave high priority to a political agenda aimed at restoration of democracy, elimination of harsh emergency laws and promoting transparency of government. At the same time, it was fully committed to promoting rapid export-led economic development based upon market-friendlyeconomic policies as the only means of amelioration of

187 chronic unemployment. The Government was also committed to protecting the vulnerable during periods of macru-economic stabilization. Accordingly, the Government launched a well-targeted consolidated single welfare program last month called the "Samurdhi" or Prosperity Program which seeks to alleviate poverty on a sustainable basis. Unfortunately, the conflict in the North and East of Sri Lanka during the last decade or so has meant a heavy burden, preempting large resources which could have gone to improve living conditions. Although confined to a small part of the country, the conflict was a serious downside risk to achieving rapid economic growth. Our new Government lost no time in seeking a negotiated political settlement to provide an environment for all communities in our mul- tiracial society to live in peace: and harmony-as they did for thousands of years before the conflict. This process suffered set-back because dissidents reverted to violence, for reasons best known to them. The conduct of the dissidents in breaking the negotiations was unreservedly condemned by the entire international community. The whole nation is tired of this conflictand we hope that the setback will be temporary.We have now unfolded a set of proposals for the devolution of political power to regions with a view to elicitng political consensus for a resolution of the conflict. The peace package has been strongly endorsed by the international community as fair and just, and is now before the people. fc r their verdict. We are hopeful of an early break-through in ending the lingering conflict. Sri Lanka has received generous support from the international community in the past, specially since she became the first country in the region to adopt open liberal economic policies 18 years ago. Our new adm;nistration has improved on these policies by restoring democratic freedoms and by open transparent government. Support from Bretton Woods institutions has helped catalyze assistance from other multilateral and bilateral sources. This has kept debt service at manageable levels and has made sustained economic reforms and progress possible. There is strong interest shown by foreign direct investors in the infrastructure sector, which has been opened for private investment. Our privatization programs are gathering momentum. But we are yet to realize the true potential of our economy. And the IMF and the World Bank can ben- eficially complement Sri Lanka's efforts at catalyzing foreign investment. In concluding, let us make this fiftieth Annual Meetings a time for reflection- -a tine for renewed resolutions. Both institutions have demonstrated remarkable resilience to respond rapidly to changing circumstances and resolving wany a crisis. But crisis management should not detract them from the visionary goals of their founding fathers. The mandate of the Fund calls for rekindling of the cooperative spirit to ensure better economic performance around the world, particularly in the poorer regions. For the Bank, the challenge is to help build-up infrastructure as an incentive to promote private capital investment, which will ultimately promute economic growth and reduce poverty. We look forward to a resolute dedication to the spirit of Bretton Woods.

188 SWEDEN: GORAN PERSSON Goveniorof the Bank (onl BehaIf of tle Bank Nordic Counrltries)

I am honoredto speak on behalfof the Nordiccountries, Denmark, Finland, Iceland,Norway, and my own country,Sweden. Let me start by weicomingthe new Presidentof the Bank. OverallEconaomnic P-ospeuts Many developingcountries have continuedto improvetheir performance through macroeconomicstabilization and restructuringof their economies. Today,developing countries are expected to grow by more than 5 percent a year during 1995-97.This bright outlook, however,masks wide differences across regionsand countries,and not least within countries. The main problem is that progresscontinues to be uneven,bypassing hun- dreds of millions of the world's poorest. Helping the poor to realize their potential presupposesredistribution of resources.Real progressin addressing poverty can only be achieved by a balanced and just social and economic development,allowing the expectedeconomic growth to benefitall. I note with satisfactionthe rebound of private capital flows to rapidly growing economies and medium-incomedeveloping countries. This shows that macroeconomicstabilization with the emphasis on fiscal consolidation and structuralreforms pay off. Improvedaccess to private investmentin some faster developingregions should be used to make room for a larger share of official developmentassistance (ODA) and further debt relief to the poorest and most indebtedcountries. But supportivemeasures should above all includeimproved access to the markets of industrial countries. In that regard, a multilateraland rule-based trade regime is importantfor both developingcountries and countriesin transition. The Bank's catalytic ability to mobilize resources, both private and concessional,will continue to be important for all developingcountries. In order to strengthen its impact, the Bank should also take steps to further develop its financialmenu offeredto borrowingmember countries. The Social Aspects of Adjustment Experience has shown that sound policy reforms do produce economic growth. But in many cases the opportunityto reduce poverty has not been seized and incomeinequalities remain high or even growing.This gives cause for deep concern.The Bank must be preparedto engagein seriousdiscussions on the sensitiveissue of reducing incomeinequalities. Substantialattention must also be devoted to the social consequencesof adjustmentand transition.Far too often,it is the poorestwho have sufferedthe most from publicexpenditure cuts. Adjustment programs should contain measuresto protectthe interestsof thepoor and improvetheir incomeopportunities

189 during the transitional period. Thereby, they will also be in a better position to participate in and benefit from economic growth when i! resumes. Urgent priority needs to be given to human resources and skills development. Education is perhaps the most fundamental factor for combating pov- ertr. Focusing on women and girls is especially important since their large potential is often untapped, due to the many constraints they face. The Bank's policy conditions must be viewed as necessary and sustainable by the government concerned. Without ownership, adjustment will not work. Only by actively involving all parties in the process can the impact of policy change be sustainable. The greatest challenge for the Bank lies perhaps at the local level where achievement of true partnership is Peeded the most. Developmnentsin tfheTransition Countries Output performance of the transition countries that advanced early and rapidly on the road toward stabilization and structural reform are beginning to show positive rates. Where reform has been delayed, output decline has been extremely sharp. The prospects for many countries indicate a need for pressing ahead with the necessary adjustment. Yet progress remains slow, in particular in some republics of the former Soviet Union. The World Bank, with its systemic approach to reform, is the key institution in this area. Sustaining output recovery will require renewed efforts to address the structural issues. It is important that the Rank gives high priority to this central task, for example by assisting transition countries with enterprise restructuring and financial sector reform. The transformation from a centrally planned system to a market economy implies far-reaching enterprise restructuring, which in turn depends on the existence of functioning financial institutions. Recent turbulence in the financial sector of several transition countries illustrates the need for fundamental changes. Together with donors, the World Bank should support financial sector operations in these economies, aimed at strengthening their payment systems and developing a sound institutional framework. The process of transition also involves an integration into the international economy. In this regard, the Bank has an important role to play, not least in post-conflict countries. In such countries the Bank, together with other international organizations, can promote vigorous reconstruction of economies destroyed or disrupted by war-the purpose of the Bank 50 years ago. In post-conflict countries and societies where peace is still fragile, the Bank's analysis and advice need to bear this state of affairs in mind and apply an appropriate timeframe. One of several such complex and important aspects when working together with other institutions to rebuild post-conflict societies, is to facilitate the gradual return of refugees to productive employment in their countries of origin. Throughout history, it is well-known that foreign direct investment effectively contributes to an integration into the international economy. It brings

190 with it transfer of know-how, enhancement of mark-etaccess and expansion of international trade. It is the most valuable form of private external finance, yet many countries in transition still show a certain ambivalence toward F.D.Is. A change of attitude is therefore needed if more countries are to benefit from these investments. Here too, the World Bank, through its active policy dialogue, can make an important contribution. ThleCrisis in Multilateral Cooperation The Nordic countries share the priorities of the International Develop- ment Association (IDA) and strongly believe IDA plays a pivotal role in reducing poverty. We view IDA as the primary multilateral channel for the promotion of sustainable development in the world's poorest countries. We are therefore deeply concerned about the drastic cutbacks that are threatening the IDA program. The failure of the Bank's largest shareholder to honor its commitments to IDA would not only lead to a shortfall in resources, for the current IDA pro- gm, but would also question the long-term viability of IDA. This lack of resources cannot be compensated for by other member countries. For example, in my country taxpayers are already now contributing almost four times as much to IDA as the American taxpayer. In addition, and this is even more serious, the problem we are facing goes beyond IDA. The most basic pillar of the multilateral system is the mutual respect of common agreements. If the most important member of this system fails to honor its commitments and is unwilling to share the burden with the rest of the donor community, the whole system will stan to crumble. Therefore, I would like to take this opportunity, a few days before the next replenishment meeting, to urge the U.S. Congress not to take an unfortunate decision that might have negative repercussions on the entire multilateral system, and in the end affect the new democracies and the poorest people.

SWITZERLAND: OTTO STICH Governor of tie Bank and Alternate Governor of the Fund

It is always a pleasure to announce one's departure at a point when everything seems to be running smoothly. Fortunately for me, this is the situation right now. Perspectives for the world economy are better than at any other time since the beginning of my term in office, in 1984. What do I base my optimism upon? Allow me to mention four points: firstly, the increasing adherence to stabilization-oriented policies in many industial countries. Secondly, the consolidation of reform efforts in many developing countries. Thirdly, the success of countries in transition, which is gathering momentum. And fourthly, the determination to work together to find common solutions to economic and monetary policy issues.

191 On the firstpoint: for the firsttime in a longtime, in manyindustrial countries,a reasonablelevel of economicgrowth coexists with a moderateinflation rate.The determinationof centralbanks to makeprice stabilitythe overriding aim of their activityis an importantfactor behind this development.But gov- ernmentshave recognized that livingbeyond one's meansdoes not pay off in the long run, and theyare tryingto reducetheir budget deficits to a level that the economycan sustain. Secondly,developing countries. I rememberwhen I was a newlyelected FinanceMinister, I was confrontedwith the overindebtednessof important developingcountries. Many debtors had a very hard time acceptingthe necessity of comprehensivereforms. And the creditorsfound it difficultto determine whatthe natureof the crisiswas. For a longtime, theybelieved that the wholething just boileddown to a problemof liquidityand would take careof itself once the economywas backon course.Admittedly, the problemis still of primaryimportance to a numberof countriestoday, and we musttake up this issue. Nevertheless,for manycountries who were in deep troubleat that timne.particularly in LatinAmerica, the situationhas changedfundamentally. In SoutheastAsia, an entiregroup of developingcountries can lookback on a decadeof impressivegrowth rates. In anotherregion, the Middle East, entirely new prospectsare openingup as years of hostilitiesare comingto an end. Also, in Afiica, manycountries are beginningto reap the benefitsof tough reform measures. The third sourceof my optimisticoutlook is the improvementin the situationof manycountries in transition.Several of them have succeededin stabilizing their economiesand in establishingvital institutionaland legal foundations.After years of recession, in many places the downward trend in economicgrowth is in the processof tumingaround. Fourthly,the determinationto worktogether to findcommon responses to economicand monetarypolicy issues.At an early stage,the BrettonWoods institutionshave beenable to recognizenew problems-whether theybe the debt crisis,the structuralproblems of poorermemberc, or the transformaton of nationaleconomies-as challengesfor the world economy.Coordinated actionsundertaken by the BrettonWoods institutions make it possibleto use the extensiveknow-how and the financialresources of the individualinstitu- tions to respond to new questions in the best way possible. In this context we wouldalso encouragethe institutionsto playan appropriaterole in the recon- structioiiefforts in Bosnia. To further enhance their credibility with member's governmentsand the public opinion, the IMFand theWorld Bank must ensure a high degree of transparencyregarding their activities and the results achieved- So muchfor the optimisticpart of my speech.More optimismthan that wouldnot becomeme; after all, as a FinanceMinister, I havehad to become accustomedto alwaysemphasizing the dark sideof the economy.Let us therefore turn to this side.

192 A first concern: many industrial countries are unfortunately no longer capable of offering a job to all those who would like to work Here we must do far more than we have up until now. I am disappointedwhen I think of how little progress we have made on this in recent years, in spite of a multitude of conferences and officialdeclarations of intentions. In the second place, we are still making excessive use of natural resources-whether they be raw materialsthat are to be found in the ground or clean Sir or forests-and this underminesour ability to achieve the economic growth we are striving for. In this area as well, we have produceda lot of paper and few results. I would wish that the Bretton Woods institutions assume a far more active role in promotingsustainable growth. A last point the globalization and liberalization of capital movements allow a more efficient allocation of savings and, thus, increase the growth potential of the global economy.However, in a context of increasingly integrated financialmarkets, unpredictableand large fluctuationscan occur.Such fluctuationscan normally be lirnited,especial!y if expectationsof market participants can be stabilized by a strong economic policy in a medium-term framework.However, markets can overreact,in the short run, putting individual countries,in particulardeveloping countries with emergingmarkets, under severe pressure.In such situations,it is importantthat countries avoid resort- ing to measuresdestructive of nationalor internationalprosperity. Regarding the International Monetary Fund, developments are taking place in two areas which will considerablystrengthen the basis upon which it will build in order to meet the challengesof the future. One of these consists in the efforts to improve the ability of the InternationalMonetary Fund to perform one of its core tasks, namely the surveillanceof economicpolicies. We are convinced that, precisely in an environment of increasingly integrated markets for goods, services, and capital, it will become yet more important that we succeed in convincingall member countries to commit teemselves to orienting their economic policies toward stabilization.Only in tais way can the positive effects of increasingintegration be fully captured. Measures to improvethe provisionof dataand public access to economicand financialdata on membercountries, as well as to deepen the dialog between the Fund and its members, will constitute an important contributionto this end. An effective surveillanceof economic policies also constitutes an important element that can help to reduce the likelihood and the consequencesof future balance of paymentscrises. The second area concerns the financialbasis of the Fund. It is clear to us that the resources available to the Fund should keep pace with the growth of the world economy.We therefore support the endeavorto increase the Fund's main source of financing-the quotas of its members-in the context of the ElevendtGeneral of Quotas Review.We are also convincedthat, after having fully utilized the resources available under the Extended StructuralAdjust- ment Facility in 1998, the Fund will need another option tat will allow it to

193 provide support to its poorer membersin their reform efforts.In our view, it will be necessary to further supplementthese resources, makiriguse of the financingscheme of the existing facility which has been shown to be a valid one. Simultaneously,however, the group of those benefitingfrom the facility should be carefullyexamined. We are also convincedthat, in exceptionalcases involving systemicrisk, the Fund needs additional resources that can be made readily available. We therefore support increasing the resources available under the General Arrangementsto Borrow througha supplementary,parallel agreementwith a largergroup of creditors. I should not wish to fail, at this point, to mention Switzerland's great appreciationfor the vision, the energy, and the professionalismwith which Michel Camdessusand his staff have steeredus throughdifficult and, in some ways, new waters.I would particularlylike to thankthe Fund for the technical and financialsupport that it has providedto the membersof our constituency. Regardingthe World Bank, it is a matter of great importanceto me to pay honor to the man who played such a vital role in shaping the destiny of the WorldBank in recentyears: Lewis Preston,who passedaway last spring while still in office. One could certainlynot say of PresidentPreston that he was all bluster and no action. On the contrary,he knewwhat needed to be done to help the disadvantaged, and he simply went about doing it, with no further ado. He was clear-sightedand he was deternmined.It was under his guidancethat the social programsof the World Bank developedin what can truly be called a spectacular way. Today,the Bank is, by far, the most importantinternational source of financein the fields of healthand education.We owe him our gratitude. I would like to congratulateMr. James Wolfensohnon his assumingto the position of Presidentof the World Bank and to assure him that he can count on Switzerland'ssupport alongthe path towardthe realizationof his predecessor's vision of sustainabledevelopment. Mr. Wolfensohnis not inheritingan easy task.The trust of our parliaments in the success of develo-pmentcooperation, in particular in multilateralaid, mustbe won back. Also, importantstrategic and operationaldecisions have to be made. The WorldBank must becomecustomer orientated; increased delegation of decisions from the World Bank to its branches in the borrowing countriesis inevitable.The Bank must make a greater point of setting priori- Liesand definingits activity in a more precise way.This will enable the Bank to work more closely,and in a complementaryway, with other actors in the developmentprocess. Private industry,bilateral development agencies, other muliilateral developmentorganizations and relief organizations are among these actors. This is all the more importantbecause the danger exists-especially at a time of tight budgetconstraints-that the needs of the developingworld will be neglected.This must not be. We cannot be indifferenttoward the existing

194 and growingsocial inequalities within and betweencountries. These inequalities havebeen a major factorbehind migration, refugee flows,and wars. In this context we are conerned about the fact that the outlook for the eleventh extension of the InternationalDevelopment Agency (IDA-Il) is uncertain. Some industrial countriescould fail to fulfill their international responsibilitiesin the area of burden-sharingand thus create a dominoeffect in the donorcommunity. Othercountries, which havc achieved a levelof prosperity that would allowthem to take part in burden-sharing,should become consciousof their new responsibilitiestoward poorer countries. The successful conclusionof the IDA-I I negotiationswould constitutea clear testimony in supportof internationalsolidarity. It would also reward the poorestcountries of the Bretton Woodsinstitutions which have persistedon the path of reformin spiteof immensedomestic economic and politicaldifficulties. Swit- zerlandwill participatein the furtherfinancing of IDA in accordancewith its commitments. Apartfrom the IDAnegotiations, the World Bank's agendafor thecoming month holds another major issue: multilateraldebt. Researchdone by the WorldBank and the InternationalMonetary Fund indicatesthat, for the group of poorestcountries debt and debt servicinghas takenon unsustainabledimen- sions or could do so in the future. In some cases, debts toward multilateral institutionsplay a significantrole. I am gladto hearthat theInternational Monetary Tund and theWorld Bank have begunto work closely to tackle this problem.We expect the Executive Boardsof theBretton Woods institutions and the delegatesof IDAto elaborate proposalscontaining comprehensive and sustainablesolutions to the problem. I have enjoyedbeing able to participatein these institutionsfor so many years; whilefor a long time,only as an observer,in the end also as a full member.I am moreconvinced than ever of the importanceof both of these organizationsand 1 deeplyhope that they will continueto tacklethe problemsof the future with the same determinationthat can be witnessedtoday. I would like to expressmy heartfeltgratitude to the managementand the staff of both institutions for all the good work they have accomplishedand wish the Bretton Woodsinstitutions continuing success in carryingout their importantmission.

THAILAND: SURAKIART SATHIRATHAI Governor of the Batik

It gives me a great honor and pleasureto address the 1995 Joint Annual Meetingsof the Boardsof Governorsof the WorldBank Groupand the Inter- nationalMonetary Fund. First of all, allow me to join fellowGovernors in expressinga deep regret on the passingaway of Mr.Lewis T. Preston.We will all rememberhim as one of the mostdistinguished Presidents of the WorldBank. Please also allowme

195 to welcomeMr. James D. Wolfensohnas the Bank's new President.I am sure that his great expertisewill serve the Bank and membercountries well. At this Joint Annual Meetings,Thailand is very pleased to join all other membersin welcomingBrunei Darussalamas a new memberof our Bretton Woodsinstitutions. This year, the world economy has continued its upward momentum despitea numberof systemicdisturbances and a slowdownin most industrial countries. Inflationarypressures have generlly subsided. Robust growth is observed in developingcountries, particularlyin Asia. These developments have been supportedby sound economicfundamentals and progress in economic reforms that have helped the countries concernedto better withstand external shocks and sudden shifts in market sentiment Meanwhile,through determined reforms, economies in transition continue to make progress towarda market-basedeconomic system. Those in SoutheastAsia, in particular, have made great strides in economicreforms and deservestrong support from the internationalcommunity. Recent policy coordinationamong iidustrial countrieshas helpedrestore confidencein the foreign exchangemarkets. Many challengesremain, nonetheless,to be addressedin the immediatefuture. Of particularconcern to policymakers in emerging markets is the size and pace of short-termcapital flows.Many of them have, therefore,justifiably resorted to temporaryrestric- tive measuresin order to alleviatethe situation.The sensitivityof borderless markets to systemicthreats has made it urgent for authoritiesworldwide to strengthentheir communicationchannels and policy coordination.Exchange rate misalignmentand banking crises are indeed areas which require closer and more coordinatedpolicy actions. In addition,more coordinationis needed to alleviatefrictions in the global tradingenvironment. Turmingto the Thai economy,export growth of 24 percent and a strong economicgrowth of over 8.5 percentis expectedfor this year, in line with the upward trend in other emerging economies.Notwithstanding this buoyancy, inflationary pressure is expected to remain manageable. Meanwhile, the slightly widening current account deficit reflects Thailand's high rate of investment.Intensified savings mobilizationefforts will help trim the deficit in the mediumterm. International reserves, now approximatingUS$35 billion or equivalentto 6.6 monthsof imports,stand as concreteevidence of thecoun- try's econonmcstrength. The rapid growthof the Thai economyhas made it essentialfor the financial sectorto accommodatethe increasinglysophisticated needs of enterprises and industries.Therefore, we have pursued financialbroadening and deepen- ing strategies with an aim to encouragingmobilization of long-termfunds, removingthe limitations,and upgradingThai financialmarkets to an international level. First, the Governmentcontinues to encouragemore participationof institutional investorsin the Thai financialmarkets. We plan to grant more mutual

196 fund and private fund managementlicenses to qualifiedfinancial institutions. The GovernmentPension Fund (GPF) is being set up and expectedto actively take part in the capital market. In addition, more private firms and public enterprisesare encouraged to set up their own provident funds. Of particular interest to foreign investors is the Thai Trust Fund, which would enable foreigners to circumventthe existingshareholding limitation of 25 percent. Second,Thailand is committed to the policy of financialliberalization. A number of forcign banks operating in international banking in Thailand (BIBF), are beingupgraded to a full branchstatus. The second round granting of more BIBF licenses is in the pipeline. In addition, we are allowing more commercialbanks to be set up in Thailand.These libermlizationmeasures are steps toward establishingThailand as a regional financialcenter. Finally,and most importantly,the Governmenthas consistentlyadhered to fiscaland monetaryprudeince. The Governnent budgethas been in surplusfor eight consecutiveyears. For this year, although the Governmenthas proposed a balanced budget policy, we are forecastinganother year of budgetary surplus. Thailand's exchange system has long served the country well both in terms of ensuring steady growth of exports and maintaining market confidence. The present system of basket peg, together with fiscal and monetary discipline, will continue to be the anchorof Thailand's economicgrowth and stability. Let us now share some thoughtson issues relatedto the policiesand operations of the Bretton Woods institutions. For decades, the Bank has been playing a constructiverole in helping the developingcountries achieve a better standardof livings for their people. We would like to record our appreciationfor the Bank's great efforts in combating poverty,protecting the environment,as well as emphasizingthe area of human resource development. While the Bank has accomplished poverty alleviation at a satisfactory level, there are still a large number of countriesand several groups of people enduringpoverty. We, therefore,urge the Bank to adhereto its spirit of abating poverty and be more aggressivein overcomingthis problem. On the Bank's lending system,we welcomethe Bank's decision to expand the Single CurrencyLoan Programn,which allows borTowersgreater flexibility in the managementof theirliabilities, particularly reducing the foreignexchange risk. However,we feel the program'sloan size is too restrictive.To this effect, we would like the Bank to furtherliberalize the access to this program. Let me,at this point,conclude with a few remarkson Fund matters.Thailand always welcomesefforts to increaseFund resourcesboth to financeFund-supported programs on a wider scale and to arrange for contingencyplans in response to emergencies.The Fund's liquidity positionis projectedto decline somewhat over the next two years. Therefore,we strongly urge the Fund to expedite the Eleventh General Review of Quotas. This review should ade- quatelyprovide for selectiveincreases that bring actualquotas more in line with

197 calculated quotas for the largest numberof countries possible.As for expansion of the GeneralAgreement to Borrow (GAB), LheGroup of Ten Halifax summit communiqud,which endorsed the idea to doublethe amount currently available under the GAB, is timely,but it should not be a substitutefor a quota increase. A revision of the current GAB should be explored in order to attract greaterpar- ticipationiin the new arrangement. To improve the Fund's early-waming mechanism,it is imperative that surveillance be strengthened and applied on a symmetrical basis. Borrowing and non-borrowing countries as well as countries with potential impacts on the global exchange market and international capital flows alike should receive effective and Commensurabletreatment. For the least developed countries, where structural adjustmentsmay be too difficultwithout special support from the Fund, we believe that the continuation of the Enhanced Structural Adjust- ment Facility (ESAF) would help soften the pressure. We thus hope that the framework for financing the ESAF can be speedily finalized to the benefit of low income countries. On the proposal to expand the institution's roie and jurisdiction in the capital account against the backdrop of higher globalization and liberalization of financial markets, we share the view that capital account convertibility deserves careful deliberation on the part of the authorities. No member, however, should be pressured to move prematurely towards relaxation of capital controls. I also would like to call on all member-sto work cooperatively on the prolonged issue of SDR allocation. An early conclusionwould help meet reserve needs of developing countries. In conclusion, we wish the Bank and the Fund every success in managing the forthcoming difficult challenges and in further improving their development activities for the benefits of all members.

TONGA: KINIKINILAUTUTOATASI FAKAFANUA Governor of the Bank

I am honored to represent the Governmentof the Kingdomof Tonga at the Joint AnnualMeetings of the Bank and the Fund. I join my fellow Governorsin expressing our appreciationto the Chairman,His Excellency Mr. Paul Dossou; the President of the World Bank, Mr. James D. Wolfensohn;the Managing Director of the Fund; Mr. Michel Camdessus and to the managementand the staff of both institutionsfor the excellent arrangementsof this meeting. I also join other Governorsin expressing deep regret at the passing away of the former WorldBank President,Mr. Lewis Preston. I also take this opportunityto extend a warm welcome to the new President,Mr. James D. Wolfensohn. I welcome the Bretton Woods institutions (BWIs) reports which forecast continued favorable global economic oudook. It is interesting to note that the

198 economic growthoutlook for developingcountries will continueto bc strong though it will vary across the regions. I note with conccrn the move to decrease the total official development assistanceand the growing sentimentsapainst officialdevelopment assistance among donor govemments.While I recognize that all countries face budget constraints,1 urge donor govemmentsto adopt a morc global view and to support actions to increaseofficial flows. In this regard,I welcomethe initiativeof the DevelopmentCommittee to focuson its major role in directing more official developmentassistance to developingcountries. This is critical in a time when developingmember countries are undergoingstructural adjustment. Turning specifically to World Bank matters, I support the continued emphasisof the Bank in its prime objectiveto reducepoverty. This is reflected in its ongoing assistancetoward the social sector, particularlywith the Bank's lending in support of education, health and other social services. With the IDA's principal goals of poverty reduction, growth and environmental sustainability,I share the concern regarding the IDA-10 funding situation over the shortfallsby the donor countriesin meetingtheir commitments. I recognizethe heavy commitmentindividual donor countrieshave, however. I fully support the concernthe Bank has regarding this shortfall. I support the efforts of the Bank toward private sector development through direct investmentto the private sector and financingof infrastructure and urban development.In this regard. I thank the Bank for the continuing support providedto the South Pacific Island nations through the South Pacific Project Facility (SPPF).Having said that, I would like to cautionthat the Bank must take into perspectivethe local conditionsof developingcountries in their activities. The Bank's effort to reduce the debt burden for severely indebted poor countries is welcomed,in particular its provision of MA credits, technical assistance for debt management,and policy reform. I welcomethe formal relationshipto be establishedbetween the BWIs and the WorldTrade Organization(WTO). This relationshipcould help in clarifying the impactsof WTO initiativeson developingcountries. On staffing matters, I wish to state my support for a more flexible approach,taking into accountthe analysisof demand and supply of skills mix, staffinglevels, and regional balance. I recognize that environmentally sustainable economic development is also important, however, it should not be over-emphasizedat the expense of other developmentpriorities of developingmemnber countries. Let me now tur to specificFund matters. I support the need by the Fund for more resources to ensure that it meets its commitments in developing countries, particularlyin the area of structural adjustment. I welcome the initiative by the Fund to formally establish the Extended Structural Adjustment Facility (ESAF). This facility has supported many structural adjustmentprograms in developingcountries during its pilot phase.

199 I appreciate the continuing technicalassistance of the Fund to the Pacific. Islands Lhroughithic Pacific FinancialTechnical Assistanice Center (PFTAC). The operationsof the Center have certainly supplemcntedthe needs of the Pacific Island nationsin financialmanagement. Turningto Tonga.membership in the Bank and the Fund has enhaincedour developmentalefforts. Tonga has cnjoyeda relativelystable economicgrowth ovcr recent years. This has been achieved mlainlythroughi deregulating the economyand developmentof the agriculturesector particularlythe exportsof' squash and vanilla. In order to sustain this cconomicgrowth momentumil,the Government continucs to carry out necessary adjustment programs both at macro and micro levels. Thcse include public sector maniagementrefoorm, export diversification, infrastructure development, and proper regulatory framework for private sector development.Efforts will also be directed at developingpotential areas such as fisheriesand tourism. In conclusion,let me thank the World Bank Group and the Fund for the assistancethat has been extended to the membercountries. This interestmust be continued.

TURKEY: AYFER YILMAZ Govenior of the Bank I will focus my remarks on the World Economic Outlook, on countries' implementationof the Fund's policy advice, and on the review of the Devel- opment Committeemeeting. The present outlook for the world economyis good. The industrialcountries are performingwell. Many of the developingcountries have overcome the problemsof the 1980sand have begunto experiencegrowth of output and investment.The transition economieswhose reforms have been vigorousand successfulhave also begun to grow,although others whose reformprocess has been less consistentare stagnating. The turnaroundachieved by the debt-riddendeveloping countries since the 1980sinvolved accelerated structural reforms and stabilization.The improvement in their situationhas been accompaniedby increasedintegration of their economiesinto the world financialsystem, with effects that are mostlybene- ficial. The financial markets are now watching the soundness of countries' policiesmuch more closely,and can react more swiftly to any inconsistencies, and policy makers now have less room to make mistakes.The growing integrationof the global market also increasesthe speed with which shocksto one part of the system can spread to other countrieswhich are not involvedin the conditionswhich causedthe crisis. During last spring's meetings in Washington,we therefore stressed the need to give more continuity to the surveillanceprocess and more frankness to the Fund's policy advice, and how importantit is for countries to provide timely and comprehensiveeconomic data to the Fund and even to the public.

200 We welcome the recent uppreciationof the US dollar anddepreciations of thc Japanese yeinand the deutsche mark, which should improvc prospects for lhecontinuation ol' noninflationiarygrowtih. Indecd, exchange rale policies now merit particulairattention from the Fund.The globalization of lthe finun- cial marketstins chaniged the parameters of theinternaLtioiail monetary system, ritid theFund and its membersneed to adopt themselvesto this newenviron- menit,It is now time to translatethesc ugreedgeneral principles into opera- tionalguidelines to helpimprove the Fund'ssurveillance. I join my colleagues in welcoming theconiclusions of the Halifax summitand the first monthily review of policyactions taken in responseto the Madrid Declaration. The iniegration of the emerging markets inito the global capital markets has beenaccompanied by an accelcrationof capital inflows into thosc countries,bringing both benefits and problems.Mexico's experience showshow quickly suchinflows can reverse to becomeoutflows, causing serious cco- nomicdisruplion. Strengthenedsurveillance will help avoid such emergenciesbut should be accompanied by a mechanism for rapid and temporary balance of payment support, with appropriate conditionality,in case they occur. Fund interventions may also be needed to avert spillover efifectsand soften the effects of mnarketfailures, for example overreactionscaused by defective information. The radicaladaptation required to meet these new challengesis shown by the number of topics on the Interim Committee's agenda: the Eleventh General Review of Quotas,the EmergencyFinancing Mechanism,Currency Stabiliza- tion Funds, the SDR equity issues, and the review of the SDR's role. Indeed, the Fund's financingis more importantthan ever. New initiatives such as the "Emergency Financing Mechanism"giving faster access to Fund resources with strong conditionalityand front-loaded disbursements in crisis situations, and the Currency Stabilization Fund approachto exchangerate problems, will require us to look at the wholerange of available financing options, including an increase of quotas. While we strongly believe the Fund must remain a quota-basedinstitution, we also support exploringthe possibilityof expandingthe General Arrangementsto Bor- row (GAB),but insist that any enlargementof the GAB shouldnot be regarded as a substitute for an increase uinderthle Eleventh Quota Review. In addition, the poorest countries continue to need financial support on concessionalterms to avoid debt servicingproblems. The ESAF facility provides an appropriate blend of structural conditionalityand concessionality.I therefore agree that we should explore ways of continuing this support after the resources under the current ESAF extensionhave been fully committed. Wealso need to seek ways of ensuringthe best use of the presentresources of the World Bank and other inultilateral development banks. We have expressed concem during Development Committee meetings about the expected declinein officialdevelopment assistance, and urged strong support of the ntmrnationalDevelopment Associationand the Special Program of

201 Assistancefor Africa.We welcome the Copenhagensocial summit's focus on the role of public expendituresin achievingthe goal of povertyreduction. We also support the new format for future DevelopmentCommittee meetings which will focus more on issues of Bank poli ., and other matters of broad significancefor development.The presentAnnual Meeting promiseto open new avenuesfor a much broader collaborativeeffort within the intema- tinnal communityto ensure the smooth and rapid functioningof the international financialmarkets and make thermmore resistantand resilientin the face of the challengesof the new century. Turning now to the Turkisheconomy, it is a pleasureto report that on the whole, the results of our 1995 programhave lived up to expectations.While inflationhas not declinedas rapidly as we would have liked, it has nonethele;s begun a downwardtrend. Favorableexpectations about inflationand the success of our program are already reflected in the Treasury's ability to borrow significant amounts at declining real and nominal interest rates and longer maturities. Exports have grown strongly and were about 30 percenthigher in the first six monthsof 1995 comparedwith the same period in 1994.While outputwas recovering faster than expected, however, imports also increased, and were 42.7 percenthigher in the first six monthsof 1995than during the same period in 1994.These trends duringthe first half of 1995resulted in a trade deficitof US$4.9 billion, about US$1.7 billion higher than program projections.The balance of paymentsprojection has thereforebeen revised to predict a small deficiton the order of US$300 millioninstead of the previouslyexpected surplus of US$1.2 billion.This picture appears to us consistentwith ongoing economic recovery and rebuildingof inventories. Foreign dIXcrt investmentremains important for Turkey.The Tu;kish government encourages foreign direct investment and has made great strides toward improvingthe investmentclimate during the last decade. The conclusion of the CustomsUnion and the establishmentof confidencein the environment is expectedto increaseforeign investmentflows. Giventhe particularlydifficult economic situation prevailing when the stabilization program was adopted in April 1994, Turkey has made good progress. The most important lesson of the stabilizationprogram is that its success is our own success: we have earned it. The adjustmentprogram received the full support of the IMF in the form of a stand-by arrangernent Wi-renthe ExecutiveBoard of the IMF approved the program targets for 1995, tnis arrangementwas extendedby six months until February 1996 with an accompanyingincrease in access of SDR101.2 million. The implementationof financialpolicies has so far been consistent with program targets. All performancecriteria for end-Marchand end-June have been met with considerablemargins. On September 18, 1995 the third reviewof the stand-byarrangement was approvedby the ExecutiveBoard and the fifth tranche, amountingto SDR75 million,was released.

202 In addition,the steps taken to comply with Turkey's commitmentto completion of the CustomsUnion and to conformto the provisionsof the Uruguay Round Final Act arc certainto increase trade, improveTurkey's access to various markets, and thus help build confidence. Despitethe gains I havejust noted,however, the stabilizationprogram has not yet translatedinto restored market confidence,mainly due to setbacks in carryingout neededstructural reformns. Privatization will be the key to reshap- ing the economy.Progress in this area will rebuild policy credibilityby promoting real changesin the structure of the economy. Let me finish by reiteratingTurkey's commitmentto becomingan active partner in the global economicand political system.While meetingthe conditions which have been set in the internationalarena will undoubtedlybe difficult, we do not consider these difficultiesinsurmountable.

UKRAINE: IHOR MITIUKOV Governor of the Bank

Let me first welcomeour newest member Brunei,with an emotionwe felt when we became membersthree years ago. Ukrainefinds itself at a decisive stage in the developmentof its economic reforms and the transformationof its society.We have concludedthat we must reinforce the first signs of stabilitywithin our economy,which have given us control: over the growth of inflation, positive real interest rates; relative stability of the exchangerate; and a low level of our budget deficit After reviewingour economicpolicies and scenariosfor economicdevelopment during 1995, which has been put together with the assistance of the IMF, the governmentsprogram has been able to keep to the program,which is supported by an IMF stand-by agreement, along with other financial assistance from separate donor countries, their organizations and international financialinstitutions. Liberalizationof economic relations has created a market orientation in Ukraine, and we have alreadyrealized certain revival in economicactivity, an increase in exports, stabilizationin the standard of living with an increase in the savings rate which can be directed towards increasinginvestment. At the same time, however,certain delays to realize institutionalchanges, foremost with privatization,has made our situation rather difficult.That is why as I speak here before you today,the Parliament of Ukraineis discussingthe new govemments program for making cardinal changes in speeding up the progress on private ownershipand its effectiveimplementation. With this, we understand, that it is vital that tight fiscal and monetary policies,along with the raising of competitivenessof domestic producers through the raising of effectivenessof his activity,is the only way in which Ukrainewill get out of its current crisis,experience growth in output and raise the welfareof society.

203 We are convinced that we will be able to fulfill the goals which we have given ourselves in our program for 1995. By lowering the budget deficit to 3.3 percent of GDP this year, we plan to see inflation in 1996 fall even further, where the average monthly inflation during 1996 should be limited to 2.6 percent, and 7.5 percent during 1995. Our macroeconomics stabilization plus long-standing liberal foreign investment laws lay a foundation for a good investment climate. Finally a few words about the critical issues facing the Bretton Woods institutions. I welcome the news of an encouraging global economic situation. For us and other transition countries, this gives good prospects for expanding exports, provided of course that the industrial country markets become more open to our products. We welcome the idea of establishing for some countries a Cur- rency Stabilization Fund. We feel that Ukraine could benefit greatly, and the reform process in Ulkraine would be supported, by a currency stabilization fund of $1.5 billion in the near future. We also emphasize, that the pillar of a useful Currency Stabilization Fund, remains a solid fiscal and monetary policy. While the Currency Stabilization Fund, and other newly instituted mechanisms such as Post-Conflict financing, emergency-financing, improve the utilization of existing Fund resources, it will also be necessary to move forward with expansion of resources. We strongly support the quota expansion and consider the doubling of this as an appropriate benchmark. As others, we look forward to the March 1996 seminar of the SDR, and hope for an early resolution of the remaining questions conceming an extended and self-sustained ESAF. We will continue and widen our cooperation with interational financial institutions. The successful realization in 1995 of the Rehabilitation Loan from the World Bank, with the completing of the first two investment projects, cooperation with over 15 investment projects requires a strong foundation for our cooperation. We expect to realize and agree to, in the very near future, a general strategy for cooperation with the World Bank in the nearest years. In Ukraine, we are currently working on a better administrative system to increase our effectiveness with our World Bank partners. We are currently with the World Bank on the idea of creating a national program for reformningthe whole energy sector of Ukraine, which would unite the Government, the World Bank, and bilateral donor countries in raising the effectiveness and securing the national security of energy for our economy. This relationship with the international community will be a comerstone of our successful economic development, and I look forward to it and I thank the intemational community for all the assistance already provided for Ukraine.

204 UNITED KINGDOM: EDWARD A.J.GEORGE Alternate Governorof the Fund

I am delightedto deliver the U.K. statement in the place of the Chancellor of the Exchequer. Central Bank Governors are always consciousof the risks and uncertainties surroundingprospects for both the world economy and their own parish. Although there are short-term uncertainties facing us all, the medium-term prospects for the world economy look, at present, relatively benign. The Fund's prediction is for continuing growth in the G-7 countries at around its long-termtrend. Inflationremains subdued.And the Fund expects G-7 inflationto remain around current levels.We must not lose sight of the long-termbenefits of price stability. In the three mneetingsthat I have attended as Governor,I have been struckby the contrast betweenthe shared commitmentto sound monetaryand fiscalpolicies around the world now, and the somewhateclectic approach to macroeconomicpolicy which often prevailed when I attended earlier in my career. In the U.K., while there are-as elsewhere-uncertainties in the short term, the economyis fundamentallysound. We share the view of the Fund that the prospectfor the UK over the next 2 years is for sustainedgrowth with low inflation.Unemployment has fallen by nearly 700,000since its peak, and our unemploymentrate is below the European Union (EU) average.At the same time, inflation has fallen to its lowest rate in a generation; and although the increase in import prices over the past year maylead to some rise in the short term, the outlookfurther ahead remainsencouraging. To achieve our inflation target of 2.5 percent or less we must nevertheless,of course, persist in sound monetaryand fiscalpolicies. Outside the G-7, the emerging markets of East Asia continue to grow strongly.And the same is true of some Eastern European countries. Russia, too, faces brighter prospects. But parts of Latin America remain in the dol- drums. Mexico in particular is going througlha painful period of adjustment. We welcome the evidence that Mexico is now getting back on track. But the earlier large decline in Mexico's GDP providesus with a salutaryreminder of the costs of financialand economic cnses.

AvoidingFinancial Crisis Several lessons are now evident from this particular episode. I want to highlight five: * First and foremost,that prevention is better than cure; * Second,that if crises do occur, the internationalcommunity needs prear- rangedprocedures to enable it to decide how to respond;

205 * Butthat third,in a worldwhere private capital flows have become so large, we must not exaggeratewhat official financing can achieve-a crisiswill forcethe adoption of soundpolicies so it is betterto adoptthem in advance; * Fourth,it is worthexploring whether there are moreorderly ways of man- agingsituations in whichthe servicingof sovereigndebt is interrupted; * And fifth, gettingthe benefitof liberalizedcapital flows means we need effectivecoordination of financialmarket supervisionboth within and especiallybetween countries. Prevention is Better than Cure

Inte1,rated and liquid global capital markets mean that now, more than ever,prevention of crisisis betterthan cure. Soundeconomic policies, backed up by effectivesurveillance by internationalfinancing institutions and mar- k-ets,are the key. The U.K. has stronglysupported efforts to improvethe Fund's own sur- veillanceprocedures. That meansa sharperfocus on thosecountries of global significance,encompassing both industrial countriesand emerging economies. It means frankerand more candidassessments by Fund staff, management,and theBoard. And it meansdevoting more attention to financialmarket developments,capital flows, and the maturitystructure of debt. Equallyimportant, markets themselves must be ableto reachinformed and timelyjudgments about economic prospects. G-7 leadersat Halifaxcalled on the IMF to establishbenchmarks for the publicationof key economicand financialdata. I welcomethe actiontaken by the InterimCommittee toward implementingthat call. In particular,setting a mnoierigorous standardfor thosecountries that aspireto use intemnationalcapital markets represents a sig- nificantstep forward.It is crucialthat the Fund identifiesfor the higher tier only those countriescontinuously meeting the higher standard. Responding to Crises But try as we might we are unlikelyto succeedin preventingevery crisis. Wemust thendecide whether official international support is appropriate,and, if it is, have the capacityto act quickly. As a steptoward that objective,we are establishingan EmergencyFinanc- ing Mechanism,clarifying the proceduresto be followedwhen the Fund is to lend rapidly,especially in large amounts,in exceptionalcircumstances. We are also makingimportant progress toward ensuring that the Fundwill continue to have sufficientresources to help countries implement sound adjustmentpolicies. There now seemsto be a near consensuson the case for a quota increase,although much work remainsto be done on detenminingits appropriatesize, distribution,and timing. And, in line with the requestfiom the HalifaxSummit, we are lookingat waysof expandingthe GeneralArrangements to Borrow(GAB).

206 Importance of Sending the Right Signals to the Markets In putting these arrangementsin place, we must never give the world's capitalmarkets the impressionthat the internationalfinancial authorities will ride to the rescue of every sovereigndebtor in difficultiesover debt serviceor foreignexchange. Creditors should not assumethey will be bailedout. That is one very importantreason why the use of the GAB has alwaysbeen so tightly circumscribed.Moreover, we must now acknowledgethat in today's capital markets, private sector flows have become much larger than the amounts availablein the form of officialfinance. The U.K. authoritiesattach great importanceto the statementby G-7 leaders at Halifaxthat "therecan be no presumptionthat multilateralfinancing will be providedin every instanceof localor regionalfinancial crisis." Becauseif marketsthink otherwise,it could lead to a seriousdistortion in the way tbey allocateglobal savings.Flows to a numberof sovereigndebtors would be too large, pricedtoo cheaply,and continuefor too long.Countries could be lulled into delayingthe stabilizationand adjustmentpolicies needed to secure their medium-termeconomic health and stability.We would, in short, be creating significantmoral hazardfor both lendersand borrowers. As far as the IMF is concerned,we must neverlose sight of the fact that its primary purposeis to support countries that pursue sound policies.The Fund has not been tasked with the job of "bailing-out"creditors. Nor is it, and nor can it become,a lender of last resort to the internationalfinancial community. Orderly Sovereign Debt WorkoutProcedures Limitationof moral hazard is also one reason for the work being conducted, under the aegis of both the IMF and the G-10, on so-called"orderly workout"procedures. We are exploringwhether there is a workable"middle way:' between large-scaleofficial financingand disorderlydefault, when a sovereignborrower becomes unable to meetits debt serviceobligations in full. In our view,it is importantto be open with the marketsabout this work.If the exercise were to be conductedsolely by officialsbehind closed doors, it could not only giverise to unfounded-but neverthelessdestabilizing-rumors in the markets,but couldalso lead to proposalsthat fail to takeaccount of market expertise. The Importance of Financial Sector Reform and Strong Supervision The finalissue thrown into starkrelief by the Mexicancrisis is the degree of stress that tough adjustmentpolicies can suddenlyimpose on a county's financialinfrastructure. A recent Fund Board discussionrightly emphasized that liberalizationof capital accounttransactions-an objectivethat the U.K. authoritiesstrongly support-has to be accompaniedby broad financialsector reform.

207 The combinationof capital account liberalizationand deregulationmeans that most financialorganizations now handle instrumentsthat straddlediffer- ent markets and differentcountries. These developmentsmake it imperative that financial supervisors work closely together across both national and industry frontiers. It is against this backgroundof increasing globalizationin financial services that the G-7 leaders called for the Bank for InternationalSettlements (BIS) and InternationalOrganization Securities Commissions (IOSCO) to report on how closer cooperationbetween regulators and supervisorscould enhance the monitoringand containmentof risk. Conctlusion We face a challengingfuture as the world becomes more integrated.I am confidentthat our internationalfinancial institutions can respond,and as necessary change,in the face of changingdernands. In that connection,let me concludeby joining with others in congratulat- ing Jim Wolfensohn.Jim has a very substantialtask in frontof him as he seeks to improve the Bank Group's effectiveness. Some issuesare alreadyclear. For example: * the need for much greater coordination and cooperation between the International Bank for Reconstructionand Development (IBRD), the InternationalFinance Corporation (IFC), and the MultilateralInvestment GuaranteeAgency (MIGA) as they work to support developmentin the private sectors of emerging,transition, and developingcountries; * the need to press aheadto bring the Bank closerto its clients,for instance by transferningresponsibilities to people in the field; * and the need, along with the IMF and regional developmentbanks, to find a comprehensiveand lasting solution to the special problemsfaced by the severelyindebted low-income countries that are followingreform programs. We very muchlook forwardto workingwith Jim as he unveilshis ideas on the way ahead.

UNITED STATES: ROBERT E. RUBIN Governor of zhe Bank and the Fund

It has been 50 years since the Bretton Woodsinstitutions came into being. Then, as now, their miissionwas to advance a vision of economiccooperation-cooperation aimed at safeguarding financial stability and furthering economichealth in all comers of the globe.

208 These imperativesare as pressingtoday, if not more so, as theywere a half centuryago, and the need for cooperationis in many ways even greater.We live in an ever-moreglobal economy, one in whichall nations' well-beingand progressare increasinglyintertwined, in whichthe smallestand the largestare integralparts of that globaleconomy and profoundlyaffected by decisionsand events outside their borders. We-the nations of the world-are all in this together. Whole regions have greatly improved economic conditions by embracingopen marketsand trade. From Wall Street and the world's other financialcapitals to the cities of Asia, Eastern Europe, Latin America, and Africa,the unprecedentedgrowth and internationalizationof financial markets are fueling regionaladvances. Once weak economieshave come to the fore, and have becomemajor tradingpartners for the long prosperousecono- mies. Moreover,the growingimportance of these newlysuccessful economies calls for them to be given a greater voice in the stewardshipof the financial system. The growth enjoyedby some emergingeconomies should energize us all to fulfill the imperativethat others not be left behind. In a truly global economy, it is all the more important for us to work togetherand furtherthe prosperityof all. Las ir, we agreedbroadly on the need to adapt the internationaleconomic a; - nancial architectureto meet new realities.We must work to continuemaking that vision a reality,and to continuereinvigorating these institutionsto meet changingneeds. Economic Outlook A healthyU.S. economyis very importantto global growth prospects.If you 'ook to underlyingfundamentals, the UnitedStates economyis in better shape todaythan it has been for three decades,which would not havebeen the case without the powerful deficit reduction program put in place in 1993. More immediately,after a sluggish winter, we foresee steady,low-inflation growththrough next year. The govemmentsector budget deficitto GDP ratio this year is less than half what it was three years ago. The UnitedStates now has the lowestdeficit to GDP ratio in the G-7 countries.For the first time in nearly half a century, U.S. budgetdeficits have fallen for three consecutiveyears. And the improvement is largelystructural. Moreover,there is a broad political consensusin Americato balance the budgetover the mediumterm, thoughthere is and will continueto be vigorous and contentiousdebate on priorities. Opportunities and Risks The emergenceof a truly global economyhas openedup enornous new prospectsfor all our countries.Nonetheless, as we saw this year, with these prospects come new risks and new problems.Mexico provided one of the clearest examples to date of the extent to which our nations' interestshave

209 becomeinterlinked. Financial instability in one part of the world increasingly threatensothers' prosperity. Recognizing this change, the InternationalMonetary Fund, the World Bank, and the Inter-AmericanDevelopment Bank, in conjunctionwith the Ur;itedStates, all rose to the challenge.Mexico is now back on track, though there is much that remainsto be done. But the episode highlightsthe need for new measuresto safeguardfinancial stability in the face of global change. Safeguarding Financial Stabilty At Halifax. the G-7 leaders agreed to advance a number of initiativesto accomplishthat objective. The first must be an increasedemphasis on financialtransparency and surveillance.More importantthan any internationallending package is the need for full disclosureof financialinformation, so that public and private analysts can detect potentialdangers and prevent crises before they occur.Disclosure, which is at the core of the Americanregulatory system for the securitiesmarkets, is a powerful,powerful preventative. The InternationalMonetary Fund is now workingon a comprehensivelist of financialdata and nationalaccount- ing standardsto whichour nationsshould adhere.The standardmust be rigorous, and there must be clear identificationof which nations are adheringand which are not. Also, strengthenedsurveillance by the IM itself must supplement market discipline. Second, even with the best of preventive measures, liquidity crises of broad concem mayoccur. The internationalfinancial institutions worked well this year to contain Mexico's problems.But the increasedsize and speed of financial flows mean that resources required to address future crises may be much greater than anythingnow available. Neither the United States nor any other country can be relied upon to function as a lender of last resort. Moreover, a host of countries can now afford to share responsibility for the health of the international economic and financial system, and therefore should play a greater role. That is why the G-7 and G-10 have agreed to seek the establishment of new arrangements to lend to the IMF in the event of an unusual and large call for funds for conditional lending, and to seek other doncrs to this facility. Let me emphasizethe word conditional.Our goal is to have the capacity to respondto problemsfaced by countriesthat agree to take strong actions to get at the root of their difficultie. Resources must not be used to put off required adjustment. Third, the expansionof and changesin thefinancial markets, while greatly increasing capital for investment,have widened the numbers and types of creditorswho hold a creditorinterest whencrises to arise. We shouldexplore new ways for a country to work its way out of debt, which take into account these changesin the private capitalmarkets. This is a difficultproblem. Some have expressed concerns over moral hazard, though I think this should be

210 solvable through stringent conditionality,and there are many other complex issues. Nonetheless, I do not think we should accept the assertion that the approaches of the past are the best we can do. I think it is very constructive that the G-0 has set up a group to study the issue. Fourth, the greatly increased size and speed of the markets, the great increase in the origination and use of complex new instruments, as well a number of episodesthat we have seen in the public and private sector, point up the need for greater attentionto risk managementand to up-to-dateregula- tions. And these issues are now receiving attention. Nonetheless, I believe there is a need for more than ritual calls for cooperation,though I think cooperation is critical to avoid activitythat simplyseeks the locale with the weak- est regulatoryrequirements. We must provide at least the following: * adequatesystems of risk managementin the private sectorand in the public regulatory domain, while at the same time recognizing-contrary to the claims of some-that no risk management system, no matter how many armies of PhDs and traders have been involvedin the engineering, can provide certainty; * effectiveinternal controls,and regulatorymonitoring of those controls; D enhanced capital and prudentialstandards; - improveddisclosure by market participants;and e stronger safeguardsin paymentsand settlementsystems and exchanges. Our aim mustbe to preservethe benefitsthat innovationsoffer, while min- imizing dangers. Sustainable Development and Reform Whole new regions have achieved high rates of growth and greatly improved standards of living. This is a watershed in human affairs.Nonethe- less, too manycountries are not experiencingthe benefitsthat the global economy offers. The multilateraldevelopment banks continueto have an essential role to play in promotingreform and growth.Nonetheless, as capital marketsbecome more important, many of the developmentbanks' old roles are fading. The banks must focus on helpingcountries meet human, environmentaland other public needs that advance market-baseddevelopment, through programs that private-marketparticipants cannot undertake. In these regards, let me make several points. First, the banks must acceleratetheir own internal re-engineering.The fiscal and budgetary restraint that many of our governmentsface, and simple good managementand effectiveuse of resources,require the banks to have an ongoing focus on furthering efficiencyand eliminatingunnecessary bureau-

211 cracy. The turn to democracy in so many countries must be paralleled by greater transparency within the internacionalfinancial institutions.And participation by affected communitiesand nongovernmentalorganizations should be increased as the best way to design development programs that truly serve the people they are intended to serve. Second, because private finance has advanced, the bankcsshould concen- trate on programs where they are doing what the private sector cannot do. For example, resources should be shifted toward more innovative use of risk guarantees, conditional lending, and joint private sector-developmentbank operations, which can catalyze private sector activity. Similarly, an increasing proportion of bank resources should be devoted to investments in human capital. A private investment bank can finance a new generating plant, or industry, or perhaps even a tollroad. But for the most part, only the public sector will invest in women's health or primary education. These are the kinds of social investments that provide an enormous return for a society, and which show a strong correlation with economic expansion. Channeling development bank resources to these areas will provide high returns in more societies. Finally, development can impose important costs that are not captured by traditional economic indices. Such costs-social dislocation, uprooted communities and villages, and environmental degradation-are every bit as real as the measurable jump in economic output that can result from a financial investment. Such costs must be taken into account, if development is to maximize human well-being, and be sustainable in the long run. The multilateral development banks have made enormous strides toward placing sustainabledevelopment at the heart of all their lending decisions.Only a few months ago, my wife, Judy, and I had the opportunityto visit an Intema- tional DevelopmentAssociation (IDA)-supported watershed project at Udaipur, India. I saw first-handhow a carefullydesigned effort can enhance people's lives, by drawing on local plantingskills, by teachinglow-cost methodsto prevent run- off and erosion, and by involving women and children. These are the kinds of efforts that make use of and preserve what is best in a community.They are the kinds of projects that make a real difference,for the better, in people's lives. World Bank President Lew Preston was a pioneer in turmingthe World Bank in these directions, and he deserves our gratitude. I also applaud the strong start President Wolfensohn has made toward furtheiing this mission, and I am confident that great progress will be made under his leadership. Continued progress will require continued support from the banks' member countries. This Administration is fully devoted to meeting all of its commitments to the international financial institutions. While I cannot promise results, I can pledge our utmost effort. Moreover, I firmly believe that those who are resisting the need for the United States to meet its full commitments are gravely underestimating the importance to the United States of the work that these institutions do, in an increasingly interconnected world.

212 Conclusion I would like to concludewhere I started.The emergenceof a global economy, and the unprecedentedgrowth and integrationof financialmarkets, have brought enormousnew opportunitiesto all our countriesand peoples,but also new risks. Moreover,the needto help the strugglingeconomies and the billion people worldwidewho live in poverty is unabated.The reality of the global economyis that all our countries'well-being, and all our peoples' aspirations, are increasinglyintertwined. No nation can stand on the sidelines.The need for participation,for cooperation,and for leadershipin strengtheningthe global economyis even greaterthan it was 50 yearsago, when theBretton Woods institutionswere founded.

VIET NAM: CAO SY KIEM Governiorof the Fund

From the outset, allow me on behalf of the Vietnamesedelegation to express our greetingsand best wishes to Mr. Chairman,the WorldBank Pres- ident, the IMF ManagingDirector, Governors and the other delegatespresent here today.I would like to express our high appreciationto the Joint-Secretar- iat for the careful preparationsto facilitateall the delegationsto these Annual Meetings. I would also like to take this opportunity to pay my profound respect to the lateWorld Bank President,Lewis Prestonwho, during his office termn,made significantcontributions to the activities of this institution.My heartfelt congratulationsgo to Mr. James Wolfensohnin his new capacity of Presidentof the World Bank. Reviewingthe developments over the yearsince our FiftiethAnnual Meet- ings in Madrid, Spain, I would like to share the observationof the previous speakersthat the world economyhas reboundedstrongly. The growth outlook continues to be strong in most developingcountres, while industrial countries' growthis weakerthan earlierforecast owing to a slow recoveryin Japan. Robust growth in industrial and developing countries and higher import demand in countriesin transitionhave led to a strong expansionin the volume of world trade, well above the average growth rate of the last two decades. Trade amnongdeveloping countries has risen markedly,supported by trade liberalizationand increased intraregionaleconomic and financial ties. Private capital flowsrebounded quickly after the Mexicocrisis. However,the Mexi- can experienceshows that financial stabilityand resource managementon a national and global basis are of paramount importance.Moreover, financial reformsin manycountries require their own effortsas well as the supportand coordinationof the internationalfinancial community. Among the industrial countries,inflation has easedfurther; in manycountries, it has achievedlevels closer to price stability than seen in three decades. However, inflation has

213 remainedat high levels in many of the transitioncountries, although socioeconomic stabilization eflorts have progressed in a number of these countries. These circumstancesneed continuedsupport on the part of the WorldBank the IMF, and the donor governmentsfor the major socioeconomic programs of developingand transition countries.In this connection,I would like to express high appreciationof the Bank's recent initiative,joining many governmentsin implementing the poverty-alleviationstrategy through the establishmentof the ConsultationGroup to Assist the Poorest. Over the last few years, officialdevelopment assistance has made remarkable contributions to the economic development of developing countries. However, public concern exists over the prospect of a fall in total official developmentassistance and the growing sentiments against official development assistance among donor governmentsand their parliaments.the poorest countriesare likely to be hit the hardest.I would like to call upon donor governments to adopt a more global view and take actions to increase official flows, since many developingand transitioncountries need both financialand advisory assistance to maintain the momentumof economic reforms. In this context, the Bank's replenishmentof IDA-11 and the Fund's EleventhGeneral Review of Quotas review are extremely necessary. Since our normalization of relations with intemational financial institutions in October 1993,both the Fund and the Bank have extendedconsiderable support to Vietnam.The Fund has assistedVietnam to successfullyimplement the one-year economic adjustment program under the stand-by arrngement and the systemic tansformation facility and the first year of a three-year medium-tenn economic program under the Enhanced StructuralAdjustment Facility (ESAF).The Fund and the VietnameseGovernment have planned to hold negotiationson the content of the second year of this program this coming November.In addition to a the StructuralAdjustment Credit (SAC), the Bank has signed five credit agreementswith Vietnamfor projectsin education, transport,agriculture, irrigation, and power sectors.The disbursementof these credits progressed rather slowly in the initial stages owing to Vietnam'sinex- periencein implementingprojects of this kind, but the situationhas improved remarkablyover time. The Bank has planned to ap-provein fiscal year 1995- 96 five projects for Vietnam in banking, rural finance, power, public health, populationand transport.All told, the Bank and the Fund have provided Viet- nam with many technicalassistance in the form of grants. I would like to take this opportunityon behalf of the VietnameseGovernment to express our sincere gratitude to the managementof the Bank and the Fund for their valuable assistance to Vietnam over the past few years. We undertake to utilize resources from these two institutionsin the most effective manner. Over the past year, Vietnam has obtained remarkable economicachievements by persevering in their efforts to develop a market-orientedeconomy. In 1994, GDP increased by 9 percent, export value by 32 percent, agricultural productionby 4 percentand prospects for 1995 prospect look good. However,

214 the inflationrate was 14.4percent in 1994,slightly above the target.The Viet- namneseGovemmcnt hasi taken strong measurcsto maintain inflationin 1995 to the range of last yeor. Over the past few years, our renovationshave been profound and comnpre- hensive, thereby gaining such important successes as robust economic growth, political stability, social development, improvemeintof livelihood, and increased prestige in the intcrnational arena. These successes have created new momentumfor our country to enter into the process ol industrializa.- tion and modernization.However, much remainsto be done because Vietnam is among the poorestand most backwardcountries in the world, and lilf is still hard for part of the population,especially in mountainousand remote areas. The year 1995marks an importantmilestone of diplomacy,with Vietnam's admission to the Association of Southeast Asian Nations (ASEAN), which was followedby the establishmentof full diplomaticrelations withithe United States and the conclusion of an agreement with the Europcan Union (EC). These three events have allowed Vietnam to further integrate itself into the region and other parts of the world. These accomplishmentsare new indications that Vietnam'sforeign policy has been activelybacked by the people the world over. Last September,Vietnam celebrated the Fiftieth IndependenceDay. Over the last fivedecades, the Vietnamesepeople have traveledalong a path full of successesand challenges. The prospectlooks very bright for our country.The Governmentand people of Vietnamare actively working out a five-yearecononiic development plan to close the twentiethcentury and start the Twenty-firstcentury with the watchwords"building a powerful nation with a rich population and an equal and civilized society." It is our firm belief that with our own efforts and the enormousassistance of the internationalcommunity and friends in all continents we will be able to achieve the objectiveof doubling per capita GDP by the year 2000.

215 CONCLUDINGREMARKS BY JAMES D. WOLFENSOHN PRESIDENTOF THE WORLD BANK GROUP

First of all, let mc thank all of you for your many kind wishes on my appointment as President of the Bank Group, I have been tremendously encouragedby the words that have been spoken-and by the commitmentto the work that mustnow be done.This mayhave beenour 50th annual meeting, but I leave here not so much with a sense of the pastsas of the future. A sense of a new beginning-and new partnership. I saw this even as these meetingsgot underway,when I participatedin the Conferenceon EnvironmentallySustainable Development-the third in the annualseries sponsoredby the Bank.There, amongthousands of others from all over the world, I witnessedwhat is meant by the term "the new environ- mentalisra:"the broadagreement that promotingdevelopment and protecting the environmentare two sides of the same coin.The broad understandingthat we all have responsibility-and tLat we mustall worktogether-in safeguarding our children's future. These meetingshave focused,rightly. on the work of the Bretton Woods institutions,but theyhave also seen an openingup to all our partnersin development. Our friends in the private sector have played an active and leading role in a new series of seminarson differentcountries-as a spur to increased investmentin those countries. The increasedparticipation of our friendsin the NGO communityhas also helped to enrich these meetings.A few days ago, as I joined in a press conference with severalof their leaders-which incidentally,I believe is the first of its kind-I could see clearly that we share the same ultimategoals. We can do much more to achievethem by enhancingour dialogueand our collaboration. And I plan for the Bank to movevigorously in that direction. There was a new consensus,too, at the DevelopmentCommittee. Not only on what the prioritiesare, but on the more effective role the Committeecan play in ensuringthat action is taken on them. I particularlyappreciated the Committee'surgent call to all donors to maintaintheir commitmentsto IDA. There was also agreementthat the Bank and the Fund shouildcontinue to advance their work on the issue of the multilateraldebt problemfacing some of the world's poorest,mostly highly indebtedcountries-and to present our proposalsto the Committeeat its next meeting. The new formatof the DevelopmentCommittee meetings has been judged a success. And let me add how delighted I was at another departure at this year's meeting:the presencethere of the UN Secretary-General,Mr. Boutros Boutros-Ghaii,and of Renato Ruggiero,the head of the WTO.This is further evidenceof new partnershipin the developimentcommunity-and of the inter- linkagesin our worldbetween development,trade, and peace. In my annualaddress, I spokeof theneed for a "newcompact:" that in return for adequateresources being made availablefor the world's poor-recipient

216 countries, the Bank, and all of us engaged in development, must make a greater effort to ensure that those resources are used even more effectively. Business- as-usual will not do. I have been gratified that my call for a new compact seems to have resonated in these meetings-with donors and recipients alike. I also spoke of the need---in a number of respects-for a "new Bank" to meet the changing needs of our client countries. We must be more focused on results-development impact. We must be more accountable for our work, and more open to effective partnerships. We must be committed to excellence in everything we do. And I am determined that we will be. As I said, the potential for this institution to leverage its unique capacity is enormous. But to take full advantage of it, we must change. Let me say how gratified I was to hear so many of you speak in support of my early thinking on this issue. I also deeply appreciate the strong support for IDA articulated by virtually every Governor in the plenary session-as well as by Michel Camdessus, whose remarks on this issue were so inspiring. I should add that NGOs have also been highly supportive of IDA. They understand-as we all do-exactly what is at stake here. Because of overall declining aid flows, IDA has become of greater importance than ever before to the poorest countries. The threatened budget cuts by the U.S. Congress would have the effect of driving them further into debt, deprivation, and poverty. In my view, this represents the most serious crisis for development assistance in our lifetime. If we fail to protect IDA, the ideas and ideals in which we have believed for a generation will be dealt a devastating blow: the importance of upholding international commitments; the undoubted advantages of multilateism over bilateralism; and the mutual benefits of the rich helping the poor-all these principles will be severely damaged. No-one spoke more forcefully or eloquently on this issue than President Clinton. "IDA is essential," he said. It serves our fundamental values, as well as our economic interests." Above all, he emphasized, "it is the ri,ghtthing to do." I sense that we leave these meetings with renewed spirit and strength-not only to garner the necessary support for IDA, but to build on the partnerships that have been forged and reinforced here. As our Chairman told us in his opening remarks, what is important now is that we "translate our words into concrete measures that have measurable and sustainable results." Speaking personally, I very much appreciate the support and friendship everyone has given me at these, my first meetings. We are all here for the same reason, because we care about the same goals: helping the poorest people in this world to improve the quality of their lives. And building a better world for our children. In concliision, let me repeat my deep gratitude to my friend Michel Cam- dessus, who has done so much to advise and help me in these early months of my presidency at the Bank.

217 On that note, allow me also to express the Bank Group's appreciationto MinisterDossou for his excellenthandling of these meetings.And to congratulate MinisterAninat, the Governorof Chile, on his selectionas next year's Chairman. I wish you all a very safe joumey home,and I look forwardto welcoming you all again to Washingtonnext year.

218 CONCLUDING REMARKS BY THE CHAIRMAN THE HONORABLE PAUL DOSSOU

It has been a great honor to have served as the Chairmanof the Boards of Governorsof the Bank and the Fund for the past year.I would take this opportunity to thank everyonefor the support and kindness extendedto me during my tenure. I would also like to thankthe Presidentof the UnitedStates for his words of strong support for our institutionsand our work. As these 1995Annual Meetings draw to a close, let me return to a themeof my openingremarks, to which many of you have referred-the need for a global partnershipto achieve our common goal of sustainableeconomic growth and the reductionof poverty.Our economicdestinies are intertwined.We must work together to seize the opportunitiespresented by current conditions. As a priority,many Governorsstressed the importanceof ensuringan adequate flow of resources to the poorest countriesso that they can continue the progress they have made.The vital role of concessionalmultilateral development assistance, as provided through IDA, was emphasized. I join with all who urged donors to fulfill their obligationsto IDA-10 and to commit themselves to a timely and substantialreplenishment of IDA- 1. As PresidentClin- ton so eloquentlyreminded us, "We mustprovide supportfor the poor and less fortunate,because it is the right thing to do." In tum, recipient governments must take measuresto ensure that the resourcesare used with maximumeffi- ciency.In this regard, I welcomeMr. Wolfensohn'scall for a "new compact" among us. Many of you also emphasized the need to address the debt burden of heavily indebtedpoor countries, which places a constrainton the acceleration of economicgrowth. This issue is centralto the discussionof reducingpoverty in these countriesand requiresa concertedand comprehensiveapproach. You have encouragedthe Bank and the Fund to move forward with their explor- atory work on this problem. The Governorsrecognized the importanceof investingin human capital. Improved access to education and health facilitieswill improve the quality of life in the developingcountries. You welcomedthe reorientationof the Bank Group toward addressing global social and environmental problems and encouragedit to becomemore client-orientedby, in particular,strengthening its presence in the field and promotingthe participationof beneficiariesin the design, preparation,and implementationof projects. Turning to the Fund, I note that many Governorscommented on the significant new opportunitiesthat are openingto most countriesas a consequence of recent developmentsin the internationaleconomic environment, in particular the globalizationof markets for goods, services,capital, and labor.Coun- tries should be vigilant and stand ready to move quickly to address domestic imbalances, correct financial sector weaknesses, and pursue prudent debt- managementstrategies. Only through the consistentimplementation of sound

219 policieswill our countriesbe equippedto take full advantageof the opportunities for strong growth,while avoiding downside risks. Againstthat background,many of you have encouragedthe Fund to step up all aspectsof its surveillanceover the internationalmonetary system and members'economic policies. You have welcomedthe recentdecision by the Fund to developstandards to guide membersin the preparationand publication of economicand financialdata. ManyGovernors also drew importantlessons from the Mexicancrisis for the tMF's policiesand its financialassistance to membercountries. You com- mendedthe Fund for playingits crucialpart in the extraordinarydemonstra- tion of internationalsolidarity that has helpedMexico to weatherthat fierce storm.For the future,you welcomedthe recentdecision of the Fundto establish an emergencyfinancing mechanism to respondrapidly and appropriately in the eventof seriousfinancial crises. The Governorsexpressed their whole- heartedendorsement of the importantrole that the enhancedstructural adjustment facility (ESAF) has played in helping to put many low-income developingcountries on the path of durablegrowth. I welcomethe universal supportfor continuationof the ESAFand the establishmentof a self-sustaining ESAF. In lookingahead, the Governorsagreed that it is crucialthat the Fund be equippedwith sufficientresources to fulfill its responsibilities.There is a broad consensusin favorof a significantand early increasein quotas,and the Governorsasked the Fund to pursue the enlargementand extensionof the General Arrangementsto Borrow (GAB), with a view to doubling the resourcescurrently available. You also stressedthe needto continueto review the issue of a new SDRallocation. Ladiesand Gentlemen, there is muchfood for thoughtin the workwe have donein thepast few days.As we adjourn,let us pledgeto worktogether in the comingmonths to achieveour commongoal of a betterstandard of living for everyone. Beforeadjourning, I wouldlike to expressmy appreciationto Mr.Wolfen- sohn, Mr. Camdessusand their staffsfor their dedicationand competencein makingour gatheringa successonce again. It is with humilityand respect that I welcomethe election of the Governorfor Chileas the Chairrnanof theBoard of Governorsfor the comingyear. At thisjuncture, I wouldlike to pledgemy full supportand that of my colleaguesfor thesuccess of hiswork. I wouldconclude by onceagain thanking eveiyone and wishingall a safejourney back home. On that note, I nowdeclare the 1995Annual Meetings of the Governorsof the WorldBank Groupand the InternationalMonetary Fund adjourned.

220 CHILE: EDUARDOANINAT Governorof the Bank

I shouldlike to express my appreciationof thischoice you have made.On behalfof Chileand the Region,I am honoredto acceptelection to theChair of the nextJoint Annual Meetings of the Boardsof Governorsof theWorld Bank Group and the InternationalMonetary. It will be an inspirationto followin the footstepsof MinisterPaul Dossou,Govemor for the Republicof Benin,whose able managementof these Meetingsdeserves our fullestcommendation. This year's Meetingshave set ambitiousgoals that mustguide the work of the WorldBank Group and the InternationalMonetary Fund duringthe forthcoming months. They have also demonstratedthat these institutionsmust continueto live up to the challengespresent in an increasinglycomplex inter- nationalclimate. The views that have emergedin the Committeesand in these discussions indicatethat, generallyspeaking, the internationaleconomy at the momentis in favorablecondition. In termsof the outlookfor both global growthand sta- bilizationefforts, the world environmentis showingsigns of progressthat are worthyof note. Nevertheless,this is no time for complacency.On the contrary,our countries need to take advantageof the new underpinningsof global growth and expandingtrade to consolidatethe economicreforrn, structural adjustment, and social developmentprograms in whichthey are now engaged. In this context,a decisivefactor will be the part that govemmentbudgets and fiscal policy play in consolidatingmacroeconomic equilibria. However, the developingcountries are very consciousthat the impact of fiscal policy extends beyond macroeconomicgoals. There are marked imbalancesin the distributionof the dividendsof progressand in the degreesto whichthe van- ous social groupsare reaping the benefitsof growth. Our countriesneed to persevereresolutely with public policies to combat poverty,indigence, and marginalization. At the internationallevel, we need to ensure that the poorest countries receive adequate financial support and that limiitedaid resources are used effectively. It is our firmconviction that both the WorldBank Group and the Interna- tional MonetaryFund will continueto put increasingforcefulness, adaptabil- ity,and ingenuityinto the quest for responsesto the challengesfacing us today. We anticipateworking in conjunctionwith Mr. Carndessus,Mr. Wolfensohn, and the ExecutiveDirectors and staffsof these institutionsto ensure the success of the Fifty-FirstJoint AnnualMeetings of their Boards of Governorsin Wdshingtonin 1996.

221 DOCUMENTSOF THE BOARDS OF GOVERNORS

SCHEDULE OF MEETINGS1

Tuesday October 10 10:00 a.m. OpeningCeremonies Address from the Chair AnnualAddress by President, WorldBank Group2 AnnualAddress by ManagingDirector. InternationalMonetary Fund

3:00 p.m. AnnualDiscussion

Wednesday October II 9:30 a.m. AnnualDiscussion

3:00 p.m. AnnualDiscussion

6:15 p.m. Joint ProceduresCommittee

6:30 p.m. MIGAProcedures Committee

Thursday October 12 9:30 a.m. AnnualDiscussion Followingthe conclusion ProceduresCommittees Reports of the AnnualDiscussion Commentsby Heads of Organizations Adjournment

' All sessionswerejoint sessionswitli the Boardof Governorsof the International MonetaryFund 2 ThieWorld Bank Groupconsists of thefollowing: InternationalBankfor Reconstructionand Development(JBRD) InternationalFinance Corporation (IFC) International Development Association (IDA) InternationalCentre for Settlementof InvestmentDisputes (ICSIF) MultilateralInvestment Guarantee Agency (MIGA)

222 PROVISIONS RELATING TO THE CONDUCT OF THE MEETINGS1

ADMISSION 1. Sessionsof the Boards of Goverrns of the World Bank Group and the In- ternational Monetary Fund will be joint and shall be open to accredited press, guests and staff. 2. Meetingsof the Joint ProceduresComrnittee shall be open only to Gover- nors who are membersof the Committeeand their advisers, ExecutiveDi- rectors, and such staff as majt be necessary.

PROCEDURESAND RECORDS 3. The Chairman of the Boards of Governors will establish the order of speaking at each session. Govemorssignifying a desire to speak will generally be recognizedin the order in which they ask to speak. 4. Withthe consent of the Chairman, a Governor may extend his statement in the record followingadvance submissionof the text to the Secretaries. 5. The Secretarieswill have verbatim transcriptsprepared of the proceedings of the Boards of Governorsand the Joint ProceduresCommittee. The tran- scripts of the proceedingsof the Joint ProceduresCommittee will be con- fidential and available only to the Chainnan, the President of the World Bank Group, the Managing Director of the Intemational MonetaryFund, and the Secretaries. 6. Reportsof the Joint ProceduresCommittee shall be signed by the Commit- tee Chairnan and the Reporting Members.

PUBLIC INFORMATION 7. The Chairman of the Boards of Governors, the President of the World Bank Group, and the Managing Director of the International Monetary Fund wiII communicateto the press such informationconcerning the proceedings of the Annual Meetingsas they may deem suitable.

'Apprmvedon February8, 1995pursuant to the By-Laws,IBRD Section 5(d), IFC Section 4(d) and IDA Section 1 (a).

23 BANK AGENDA2

1. 1994195Annual Report 2. FinancialStatements and AnnualAudit 3. Allocationof Net Income 4. AdministrativeBudget 5. Joint DevelopmentConunittee 6. Membershipof BruneiDarussalam 7. Officersand ProceduresCommittee for 1995/96

IFC AGENDA1

1. 1994195Annual Report 2. FinancialStatements and AnnualAudit 3. AdministrativeBudget

IDA AGENDA1

1. 1994/95Annual Report 2. FinancialStatements and AnnualAudit 3. AdministrativeBudget

MIGA AGENDA2

1. 1994/95Annual Report 2. Selectionof Officersand ProceduresCommittee for 1995/96

1 Approved on August 29, 1995 pursuant to the By-Laws. IBRP) Section 5(a). IFC Section4(a) and IDA SectionI (a). 2 Approvedon August 29, 1995pursuant to Section4(a) of the MIGA By-Laws.

224 JOINT PROCEDURESCOMMITTEE

Chtairmarn...... , ...... Benin ViceCh7airmen ...... Paraguay Romania ReportingMember .. Korea

Members

Barbados Korea Benin Lithuania Chile Mauritius China Parguay Ecuador Romania Finland Saudi Arabia France Tanzania Germany Ukraine Israel UnitedKingdom Italy UnitedStates Japan Zimbabwe Kiribati

225 REPORT OF THE JOINT PROCEDURES COMMITTEE

REPORT III

September 25, 1995

At the meeting of the Joint Procedures Committee held on October 11, 1995, the items of business on the agendas of the Boards of Governors of the Bank, IFC, and IDA were considered.

The Committee submits the following report and recommendation:

Membership of tee Brunei Darcssalam

The Committee considered,by correspondence,one item on the agenda of the Board of Governors of the Bank concerning membershipof Brunei Darussalarn and submnitsthe following report and recommendation:

Membership of Brunei Darussalam

The Committee considered the Report of the Executive Directors of the Bank dated September 15, 1995, concerning Brunci Darussalam's membership in the Bank.

The Comnmitteerecommends that the Board of Govemors of the Bank adopt the draft resolution....2

Approved:

1sf Paul Dossou /sf Kyung Shik Lee Benin-Chairman Korea-Reporting Member

(This report was approved and its recommendations were adopted by the Boards of Governors on October 12, 1995)

1 Report I related to the business of the Fund. 2 See page 236.

226 REPORT III

October 11, 1995

At the meeting of the Joint Procedures Committee held on October 11, 1995, items of business on the agendas of the Boards of Govemors of the Bank, IFC, and IDA were considered.

The Committee submits the following report and recommendationson Bank and IDA business:

1. 1995 Annual Report

The Committeenoted that the 1995 AnnualReport and the activitiesof the Bank and IDA have been discussed at these Annual Meetings.

2. Financial Statements, Annual Audits, and Administrative Budgets

The Committeeconsidered the FinancialStatements, Accountants' Reports, and AdministrativeBudgets containedin the 1995Bank and IDA AnnualRe- port, together with the Report datedAugust 18, 1995

The Committeerecommends that the Boards of Governorsof the Bank and IDA adopt the draft resolutions ....

3. Allocation of Net Income of the Bank

The Committee considered the Report of the Executive Directors dated August 2, 1995, on the Allocation of FY95 Net Income and transfer of surplus .... 2

The Committeerecommends that the Board of Governorsof the Bank adopt the draft resolution....3

The Committeesubmits the followingreport and recommendationson IFC business:

1 Seepages 239 and 253. 2 Seepage 256- 3 Seepage 239.

227 1. 1995 Annual Report

The Committeenoted that the 1995Annual Report and the activitiesof IFC have been discussedat these AnnualMeetings.

2. Financial Statements, Annual Audit, and Adminis:rative Budget

The Committeeconsidered the FinancialStatements and the Accountants' Report contained in the 1995 Annual Report, and the AdministrativeBudget attached to the Report dated August 21, 1995.

The Committeerecommends that the Boardof Governorsof IFC adopt the draft resolution....

Approved:

/s/Paul Dossou /s/Kyung Shik Lee Benin-Clainnan Korea-Reporting Member

(This report was approved and its recommnendationswere adopted by the Boards of Governors on October 12, 1995)

i Seepage250.

228 REPORT V'

October1 A 1995

The JoinitProcedures Comnmintcte Ille on October 11, 1995 and submitsthe tollowing reportand recomnmendations:

1. Dei'elopmtlenltCommittee

The Commicttenotcd that the Reportof the Chairnnanolftlhc Joint Ministe- tial Committeeof the Boards of Governorsof the Bank and tlhe Fund on the Transferof Real Resourcesto DevelopingCountries (Developmcnt Commit- tee) has been presentedto the Boardsof Governorsof the Bank and Fund pursuant to paragraph 5 of ResolutionsNos. 29-9 and 294 of the Fund and Bank, respectively.

The Committeerecommends that the Boardsof Govemorsof the Bank and the Fund note the report and thank the DevelopmcntCommittee for its work.

2. Officers and Joint Procedures Committeefor 1995196

The Committeerecommends that the Governor for Chile be Chairmanand that the Governorsfor Papua New Guinea and SouthAfrica be Vice Chairmen of the Boards of Governorsof the Fund and of the World Bank Group, to hold office until the close of the next AnnualMeetings.

It is furtherrecommended that a Joint ProceduresCommittee be established to be available,after the terminationof these meetings and until the close of the next Annual Meetings,for consultationat the discretionof the Chairman, normallyby correspondenceand, if the occasionrequires, by convening;and that this Committeeshall consist of the Governorsfor the followingmembers: Belarus,Belgium, Chile, Denmark,El Salvador,Equatorial Guinea, Ethiopia, France, Germany,India, Jamaica, Japan, Mauritania, Moldova, Papua New Guinea, Portugal, Saudi Arabia, South Africa, UnitedArab Emirates,United Kingdom,United States, Venezuelaand Viet Nam.

RReport IV related to the business of the Fund.

229 It is recommendedthat the Chi.irmanof the Joint Procedures Committee shall be the Governorfor Chile, and the ViceChairnen shall be the Governors for Papua Ncw Guinea and South Africa. and that the Governor for Portugal shall serve as ReportingMember.

Approved:

Isf Paul Dossou Is/ Kyung Shik Lee Benin-Chzairnan Korea-Reporting Member

(Thiis report was appro.'ed and its recommentdationswere adopted by the Boards of Governors on October 12, 1995)

230 MIGA PROCEDURES COMMITTEE

Chairman...... Benin WiceChlainnen ...... Paraguay Romania Reporting Member...... Korea

Members

Barbados Korea Benin Lithuania Chile Mauritius China Paraguay Ecuador Romania Finland Saudi Arabia France Tanzania Germany Ukraine Israel United Kingdom Italy United States Japan Zimbabwe

231 REPORT OF THE MIGAPROCEDURES COMMITTEE REPORT I

October I1, 1995

At the meeting of the MIGA ProceduresCommittee held on October 11, 1995, the items of business on the agenda of the Council of Governors of MIGAwere considered.

The Comnittee submits the following report and recommendationson MIGAbusiness:

1. 1995Annual Report

The Committee noted that the 1995 Annual Report and the activities of MIGAhave been discussedat this AnnualMeeting.

2. Officers and Procedures Committeefor 1995/96

The Committeerecommends that the Govemor for Chile be Chairmanand the Governorsfor Papua New Guinea and South Africa be Vice Chairmenof the Council of Governorsof MIGA to hold office until the close of the next AnnualMeeting.

It is furtherrecommended that a ProceduresCommittee be establishedto be available,after the termination of this AnnualMeeting and until the close of the next Annual Meeting, for consultationat the discretion of the Chairrnan, normallyby correspondenceand, if the occasion requires,by convening;and that this committeeshall consistof the Govemorsfor the followingmembers: Belarus,Belgium, Chile, Denmark,El Salvador,Equatorial Guinea, Ethiopia, France, Germany,India, Jamaica, Japan, Mauritania, Moldova, Papua New Guinea. Portugal, Saudi Arabia, South Africa, UnitedArab Emirates,United Kingdom,United States, Venezuelaand VietNam.

232 It is recommendedthat the Chairmanof the ProceduresCommittee shall be the Govemor for Chile and the ViceChairmen shall be the Governorsfor Pap- ua New Guinea and South Africa, and that the Governor for Portugal shall serve as Reporting Member.

Approved:

Is/ Paul Dossou Isf KyungShik Lee Benin-Chairman Korea-Report Member

(This report was approved and its recommendations were adopted by the Council of Governors on October 12, 1995)

233 RESOLUTIONS ADOPTED BY THE BOARD OF GOVEP.NORSOF THE BANK BETWEEN THE 1994AND 1995 ANNUALMEETINGS

ResolutionNo. 495

TransferfroomSurplu(s to Fund Special EmergencyAssistance Grantsfor Rwanda

RESOLVED:

1. THATthe Reportof the ExecutiveDirectors dated September 12, 1994on "Transferfrom Surplus to Fund Special EmergencyAssistance Grants for Rwanda"is herebynoted with approval;and

2. THATthe Banktransfer from surplus US$20.0 million to fundthe advance for specialemergency assistance for Rwanda.

(Adopted on November 28, 1994)

ResolutionNo. 496

Direct Remunerationof Executive Directors and their Alternates

RESOLVED:

THAT,effective July 1, 1995, the annual rates of remunerationof the ExecutiveDirectors of theBank and theirAlternates pursuant Section 13(e) of the By-Lawsshall be as follows: (i) As salary,$131,660 per yearfor ExecutiveDirectors and $112,360 per year for theirAlternates; (ii) As supplementalallowance (for expenses,including housing and entertainmentexpenses, except those specified in Section 13(f)of the By-Laws),$9,000 per year for ExecutiveDirectors and $7,200 per year for their Alternates.

(Adopted on August 14, 1995)

234 Resolution No. 497

WorkJers'Conmpenisation Benefits for Executive Directors and their Alternates

RESOLVED:

THAT the Workers' Compensation benefits available to the staff of the Bank for injury, sickness or death arising out of service with the Bank shall be available to the Executive Directors and their Alternates on the same basis as they are available to the staff.

(Adopted on August 14, 1995)

235 RESOLUTIONS ADOPTED BY THE BOARD OF GOVERNORS OF THE BANK AT THE 1995 ANNUAL MEETINGS

Resolution No. 498

Menmbershipof Brunei Darussalain

WHEREAS the Government of Brunei Darussalam has applied for admission to membershipin the InternationalBank for Reconstructionand Developmentin accordance with Section 1(b) of Article II of the Articles of Agreementof the Bank; WHEREAS,pursuant to Section 19 of the By-Laws of the Bank, the Executive Directors, after consultation with representatives of the Governmentof BruneiDarussalam, have maderecommendations to the Board of Governorsregarding this application;

NOW,THEREFORE, the Boardof Govemorshereby

RESOLVES: THAT the terms and conditionsupon which Brunei Darussalamshall be admitted to membershipin the Bank shall be as follows:

1. Definitions:As used in this resolution: (a) "Bank" means International Bank for Reconstruction and Development. (b) "Articlesof Agreement"means the Articlesof Agreementof the Bank. (c) "Subscription"means the capital stock of the Bank subscribedto by a member. (d) "Member' means member of the Bank. (e) "1979 Additional Capital Increase Resolution" means Board of Governors' ResolutionNo. 347 entitled "1979 Additional Increase in Authorized Capital Stock and Subscriptions Thereto" adopted on January 4, 1980, as amended by Resolution No. 419, adopted on August 17, 1987. (f) "1988 General Capital Increase Resolution" means Board of Governors' Resolution No. 425 entitled "1988 General Capital Increase"adopted on April 27, 1988. 2. Membership in the Fund: Before accepting membership in the Bank, Brunei Darussalamshall accept membershipin and become a member of the IntemationalMonetary Fund.

236 3. Subscription:By accepting membershipin the Bank, Brunei Darussalam shall subscribe to 2,123 shares of the capital stock of the Bank at par on the terms and conditionsset forth or referred to in paragraph4 hereof.

4. Paytnenis on Subscription: (a) Upon accepting membership in the Bank, Brunei Darussalam shall pay to the Bank under Article II, Section 7(i) of the Articles of Agreement on account of the subscription price of each of 1,082 shares subscribedpursuant to paragraph 3 of this resolution: (i) Gold or United States dollars equal to 0.875% of the said subscriptionprice; and (ii) An amount in its own currency which, at the appropriate prevailing exchangerate, shall be equal to 7.875%thereof. (b) Upon accepting membership in the Bank, Brunei Darussalam shall pay to the Bank under Article II, Section 7(i) of the Articles of Agreement on account of the subscription price of each of 1,041 shares subscribedpursuant to paragraph 3 of this resolution: (i) Gold or United States dollars equal to 0.3% of the said subscriptionprice, and (ii) An amount in its own currency which, at the appropriate prevailing exchange rate, shall be equal to 2.7% thereof. (c) The Bank shall call the amountsof subscriptionunder paragraph 3 of this resolution payableunder the said Article U, Section 7(i) which are not requiredto be paid under paragraph4(a) and (b) above only when required to meet obligations of the Bank for funds borrowed or on loans guaranteed by it and not for use by the Bank in its lending activitiesor for adrninistrativeexpenses. (d) The provisions of paragraph 5 of the 1988 General Capital Increase Resolution shall apply to the shares subscribedpursuant to paragraph 4(b), above.

5. Acceptance of Subscription: Before the Bank shall accept Brunei Darussalam's subscription to the shares set out in paragraph 3 of this resolution, the followingaction shall have been taken: (a) Brunei Darussalamshall have taken all action necessary to authorize such subscriptionand shall fumish to the Bank all such information thereon as the Bank may request; and (b) With respect to and on account of the subscriptionprice of the said shares, Brunei Darussalamshall pay to the Bank the amounts set forth in paragraph 4(a) and (b) above. 6. Representation and Information: Before accepting membership in the Bank, Brunei Darussalam shall represent to the Bank that it has taken all action necessaryto sign and deposit the instrumentof acceptanceand sign the Articles as contemplated by paragraph 7(d) and (e) of this resolution and

237 Brunei Darussalamshall furnish to the Bank such informationin respect of such action as the Bank may request.

7. Effective Date of Membership:Brunei Darussalam shall become a member of the Bank with a subscriptionas set forth in paragraph3 of this resolutionas of the date when BruneiDarussalam shall have: (a) becomea memberof the InternationalMonetary Fund; (b) made the paymentscalled for by paragraph4 of this resolution; (c) furnishedthe representation,and such informationas may have been requested,pursuant to paragraph6 of this resolution; (d) depositedwith the Govemmentof the United States of America an instrumentstating that it has accepted in accordancewith its law the Articlesand all the terrns and conditionsprescribed in this resolution, and that it has taken all steps necessaryto enable it to carry out all its obligationsunder the Articlesand this resolution;and (e) signedthe originalArticles held in the archivesof the Governmentof the United States of America.

8. Limitation on Period for Fulfillment of Requirements of Membership: Brunei Darussalammay fulfill the requirementsfor membershipin the Bank pursuant to this resolution until December 29, 1995, or such later date as the ExecutiveDirectors may determine.

9. Additional Subscription on Terms and Conditions of the 1979 Additional CapitalIncrease Resolution: Brunei Darussalammay subscribe250 sharesof the capital stock of the Bank on the terms and conditions specified in paragraphs 2 and 3 of the 1979 Additional Capital Increase Resolution, provided,however, that notwithstandingthe provisionsof paragraph2(b) of the said Resolution,Brunei Darussalammay subscribe such shares up to June 30, 1996or such later date as the ExecutiveDirectors may determine.

(Adopted on October 10, 1995)

238 ResolutionNo. 499 Financial Statements, Accountants'Report and Administrative Budget RESOLVED:

THAT the Board of Governors of the Bank consider the Financial Statements,Accquntants' Report and AdministrativeBudget, included in the 1994/95Annual Report,as fulfillingthe requirementsof ArticleV, Section 13, of the Articlesof Agreementand of Section 18 of the By-Lawsof the Bank. (Adopted on October 12, 1995)

ResolutionNo. 500 Allocation of FY95 Net Income RESOLVED:

1. THAT the Report of the Executive Directors dated August 2, 1995 on "Allocationof FY95 Net Income"is herebynoted with approval;

2. THATthe addition to the General Reserveof the Bank of $280 million of net incomefor the fiscalyear ended June 30, 1995, which is intendedto reach a target reserves-to-loansratio at 1425%, and incrementalreserves of 1% of outstanding fixed-rate single currency loans, at the end of the fiscal year ending June 30, 1996, taking into account the estimated costs of a waiver for all paymentperiods commencingin the fiscalyear endingJune 30, 1996 of 25 basis points on the interest rate charged to borrowers that have serviced all their loans from the Bank in a timely manner,is hereby noted with approval;

3. THATthe Bank transfer to the Trust Fund for Gaza, by way of grant, out of the Bank's FY95 net income, $90 million;

4. THAT the Bank transfer to the Debt Reduction Facility for IDA-only Countries,by way of grant, out of the Bank's FY95 net income, $100 million;

5. THAT,immediately upon approval by the Board of Govemors, the Bank transfer to the InternationalDevelopment Association, by way of grant, out of the net incomeof the Bank for the fiscal year ended June 30, 1995,an amount equivalentto $250 million in SDRs, in the componentcurrencies of the SDR, as of June 30, 1995; and

6. THAT any excess of net income over $720 million shall be retained as surplus. (Adopted on October 12, 1995)

239 RESOLUTIONSADOPTED BY THE BOARD OF GOVERNORS OF IFC BETWEEN THE 1994 AND 1995 ANNUALMEETINGS

ResolutionNo. 212

Increaseof Subscriptionby Chileto the Capitalof the Corporation

WHEREASChile has indicatedits desireto subscribefor 2,673additional authorizedand unissuedshares of the Corporation;and

WHEREASthe Boardof Directorsof the Corporationhave concluded that it is desirablethat Chile shouldbe permittedto increaseits shareholdingand have maderecommendations to theBoard of Governorsregarding this matter,

NOW, THEREFORE,THE BOARD OF GOVERNORSRESOLVES THAT:

A. Chile is hereby authorizedto subscribeup to 2,673 shares of the Corporationon the termsand conditions provided for in thisResolution.

B. The subscriptionprice per share shall be $1,000in terms of United Statesdollars, and suchsubscription price shallbe paidin UnitedStates dollars or other freely convertiblecurrency or currencies;provided that, if paymentis rnadein such a currencyor currenciesother than UnitedStates dollars, the Corporationshall exercise its best effortsto causesuch cun.aicy or currenciesto be promptlyconverted into United Statesdollars and the sameshall constitute payment of, or towards,the subscriptionprice only to the extent that the Corporationshall have receivedeffective payment of UnitedStates dollars.

C. Chile, may at any time on or before June 30, 1995 (or such later date as the Directorsmay determiine),subscribe up to the numberof shares of capitalstock of the Corporationreferred to aboveby depositingan Instrumentof Subscriptionwith the Corporation,in a formacceptable to the Corporation,and by payingin cash in full for such shares.

D. Any shares of capital stock remaining unsubscribedafter the date prescribedunder paragraph C hereof, shall remain authorizedand unissued,issuable by the Corporationin accordancewith its Articles of AgreemenL

(Adoptedon November28, 1994)

240 ResolutionNo. 213

Increase of Subscription by C/ina to the Capital of the Corporation

WHEREASChina has indicatedits desireto subscribefor 1,500additional authorizedand unissuedshares of the Corporation;and

WHEREASthe Board of Directorsof the Corporationhave concluded that it is desirablethat China shouldbe permittedto increaseits shareholdingand have maderecomrnendations to the Boardof Governorsregarding this matter,

NOW, THEREFORE,THE BOARD OF GOVERNORSRESOLVES THAT:

A. China is hereby authorizedto subscribe up to 1,500 shares of the Corporation on the terms and conditions provided for in this Resolution.

B. The subscriptionprice per share shall be $1,000 in terms of United Statesdollars, and such subscription price shall be paidin UnitedStates dollars or other freely convertiblecurrency or currencies;provided that, if paymentis made in such a currency or currenciesother than UnitedStates dollars,the Corporationshall exercise its best effortsto causesuch currency or currenciesto be promptlyconverned into United Statesdollars and the same shallconstitute payment of, or towards,the subscriptionprice only to the extent that the Corporationshall have receivedeffective payment of UnitedStates dollars.

C. China, may at any time on or before June 30, 1995(or such later date as the Directorsmay determine), subscribe up to the numberof shares of capitalstock of the Corporationreferred to aboveby depositingan Instrumentof Subscriptionwith the Corporation,in a form acceptable to the Corporation,and by payingin cash in full for such shares.

(Adopted on November 28, 1994)

241 ResolutionNo. 214

Increase of Subscription by Pakistanto the Capital of the Corporation

WHEREAS Pakistan has indicated its desire to subscribe for 2,256 additionalauthorized and unissuedshares of the Corporation;and

WHEREASthe Board of Directorsof the Corporationhave concluded that it is desirablethat Pakistan should be permittedto increase its shareholding and have made recommendationsto the Board of Governorsregarding this matter;

NOW, THEREFORE,THE BOARD OF GOVERNORS RESOLVES THAT:

A. Pakistan is hereby authorizedto subscribe up to 2,256 shares of the Corporation on the terms and conditions provided for in this Resolution.

B. The subscriptionprice per share shall be $1,000 in terms of United Statesdollars, and such subscriptionprice shall be paidin UnitedStates dollars or other freely convertible currency or currencies;provided that, if paymentis made in such a currency or currenciesother than United Statesdollars, the Corporationshall exerciseits best efforts to causesuch currencyor currenciesto be promptlyconverted into United States dollarsand the same shall constitutepayment of, or towards,the subscriptionprice only to the extent that the Corporationshall have receivedeffective payment of UnitedStates dollars.

C. Pakistan,may at any time on or beforeJuly 31, 1995(or such later date as the Directorsmay determine),subscribe up to the numberof shares of capital stock of the Corporationreferred to above by depositingan Instrumentof Subscriptionwith the Corporation,in a form acceptable to the Corporation,and by paying in cash and in full for such shares.

D. Any shares of capital stock remaining unsubscribed after the date prescribed under paragraph C hereof, shall remain authorized and unissued,issuable by the Corporationin accordancewith its Articles of Agreement.

(Adopted on March 3, 1995)

242 ResolutionNo. 21S

Mentmbershipof St. Kiatsan/d Ne vis

WHEREAS lhc Government of St. Kitts and Nevis lias applied for admission to membership in the International Finance Corporation in accordance with Section I (b) of Article 11of the Articlesof Agreementof the Corporation;and

WHEREAS,pursuant to Section 17 of the By-Laws ol' thc Corporation, the Board of Directors, aftcr consultation with representatives of the Govcrnment of St. Kitts and Nevis has mladerecommendations to the Board of Governors regardingthis application;

NOW,THEREFORE, the Board of Governors,hereby

RESOLVES:

THAT the terms and conditions upon which St. Kitts and Nevis shall be admitted to membershipin the Corporationshall be as follows:

1. Definiitions:As used in this resolution: (a) "Corporation"means InternationalFinance Corporation. (b) "Articles" means the Articles of Agreementof the Corporation. (c) "Dollars" or "$" means dollars in currency of the United States of America. (d) "Subscription"means the capital stock of the Corporationsubscribed by a member. (e) "Member" means member of the Corporation. (f) "1991 GeneralCapital IncreaseResolution" means ResolutionNo. 179 adoptedby the Boardof Governorsof the Corporationon May 4, 1992.

2. Subscription:By accepting membershipin the Corporation,St. Kitts and Nevis shall subscribeto 774 shares of the capital stock of the Corporationat the par value of $1,000 per share.

3. Paymentof Subscription: (a) Before accepting membershipin the Corporation,St. Kitts and Nevis shall pay $638,000to the Corporationrepresenting payment in full for 638 shares of the capital stock subscribed. (b) The balance of 136 shares shal be paid for by St. Kitts and Nevis, on the same terms and conditionsas set forth in the 1991.General Capital Increase Resolution,as amendedfrom time to time.

243 4. Infortmtation:Before accepting membershipin the Corporation,St. Kitts and Nevis shall furnish to the Corporationsuch informationrelating to its applicationfor membershipas the Corporationmay request.

5. Effective Date of Menbers/zip: St. Kitts and Nevis shall become a member us the Corporation with a subscription as set forth in paragraph 2 of this resolution,as of the date when St. Kitts and Nevis shall have complied with the followingrequirements: (a) made the paymentcalled for by paragraph 3 of this resolution; (b) fumished such information as may have been requested by the Corporationpursuant to paragraph 4 of this resolution; (c) deposited with the International Bank for Reconstruction and Development an instrument stating that it has accepted without reservationin accordance with its law the Articles and all the terms and conditions prescribedin this resolution, and that it has taken all steps necessaryto enable it to carry out all its obligations under the Articles and this resolution;and (d) signed the original Articles held by the International Bank for Reconstructionand Development.

6. Limitation on Periodfor Fulfillment of Requirements of Membership: St. Kitts .'nd Nevis may fulfill the requirements for membership in the Corporation pursuant to this resolution until December 31, 1995, or such later date as the Board of Directors may determine.

(Adopted on April 14, 1995)

Resolution No. 216

Membership of Erirrea

WHEREAS the Government of Eritrea has applied for admission to membership in the International Finance Corporation in accordance with Section 1(b) of Article II of the Articlesof Agreementof the Corporation;and

WHEREAS,pursuant to Section 17 of the By-Laws of the Corporation, the Board of Directors, after consultation with representatives of the Governmentof Eritrea has made recommendationsto the Board of Governors regarding this application;

NOW,THEREFORE, the Board of Governors,hereby

244 RESOLVES: THAT the terms and conditions upon which Eritrea shall be admitted to membership in the Corporationshall be as follows:

1. Definitions: As used in this resolution: (a) "Corporation" means InternationalFinance Corporation. (b) "Articles' means the Articlesof Agreementof the Corporation. (c) "Dollars" or "$" means dollars in currency of the United States of America. (d) 'Subscription" means the capital stock of the Corporationsubscribed by a member. (e) "Member' means member of the Corporation. (tf) "1991 GeneralCapital IncreaseResolution" means ResolutionNo. 179 adoptedby the Boardof Governorsof the Corporationon May 4, 1992.

2. Subscription:By accepting membership in the Corporation, Eritrea shall subscribe to 935 shares of the capital stock of the Corporation at the par value of $1,000 per share.

3. Payrnent of Subscription: (a) Before accepting membership in the Corporation, Eritrea shall pay $823,000 to the Corporation representing payment in full for 823 shares of the capital stock subscribed. (b) The balance of 112 shares shall be paid for by Eritrea, on the same terms and conditions as set forth in the 1991 General Capital Increase Resolution, as amended from time to time.

4. Information: Before accepting membership in the Corportion, Eritrea shall furnish to the Corporation such information relating to its application for membership as the Corporation may request.

5. Effective Date o] Membership: Eritrea shall become a member of the Corporation as of the date when Eritrea shall have complied with the following requirements: (a) made the payment called for by paragraph 3(a) of this resolution; (b) furnished such information as may have been requested by the Corporation pursuant to paragraph 4 of this resolution; (c) deposited with the International Bank for Reconstruction and Development an instrument stating that it has accepted without reservation 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 ur ,r the Articles and this resolution; and

245 (d) signed the original Articles held by the International Bank for Reconstructionand Development.

6. Limitation or2 Period for Fulfllmett of Requiremnentsof Membership: Eritrea may fulfill the requirements for membership in the Corporation pursuantto this resolution until December31, 1995,or such later dare as the Board of Directorsmay determine.

(Adopted ott July 3, 1995)

Resolution No. 217 Memnbershipof Bahrain WHEREAS the Government of Bahrain has applied for admission to membership in the International Finance Corporation in accordance with Section I (b) of Article II of the Articlesof Agreementof the Corporation;and

WHEREAS,pursuant to Section 17 of the By-Lawsof the Corporation, the Board of Directors, after consultation with representatives of the Government of Bahrain has made recommendations to the Board of Governorsregarding this application;

NOW,THEREFORE, the Board of Governors,hereby

RESOLVES:

THATthe terms and conditionsupon which Bahrainshall be admitted to membershipin the Corporationshall be as follows:

1. Definitions:As used in this resolution: (a) "Corporation"means IntemationalFinance Corporation. (b) "Articles" means the Articlesof Agreementof the Corporation. (c) "Dollars" or "$' means dollars in currency of the United States of America. (d) "Subscription"means the capitalstock of the Corporationsubscribed by a member. (e) "Member" means member of the Corporation. (f) "1991General Capital Increase Resolution" means Resolution No. 179 adoptedby the Boardof Governorsof the Corporationon May 4, 1992.

2. Subscription:By acceptingmembership in the Corporation,Bahrain shall subscribe to 1,746 shares of the capital stock of the Corporation at the par value of $1,000 per share.

246 3. Paymennof Subscriptiont: (a) Before accepting membershipin the Corporation,Bahrain shall pay $1,593,000to the Corporationrepresenting payment in full for 1,593 shares of the capital stock subscribed. (b) The balance of 153 shares shall be paid for by Bahrain, on the same terms and conditionsas set forth in the 1991General Capital Increase Resolution,as amended from time to time.

4. Infornation: Before accepting membershipin the Corporation,Bahrain shall ftunish to the Corporationsuch infornation relating to its applicationfor membershipas the Corporationmay request.

5. Effective Date of Membership: Bahrain shall become a member of the Corporation as of the date when Bahrain shall have complied with the followingrequirements: (a) made the payment called for by paragraph 3(a) of this resolution; (b) furnished such information as may have been requested by the Corporationpursuant to paragraph4 of this resolution; (c) deposited with the International Bank for Reconstruction and Development an instrument stating that it has accepted without reservationin accordance with its law the Articles and all the terms and conditionsprescribed in this resolution, and that it has taken all steps necessary to enable it to carry out all its obligationsunder the Articlesand this resolution; and (d) signed the original Articles held by the International Bank for Reconstructionand Development.

6. Limitation on Period for Fulfillnent of Requirements of Membership: Bahrain may fulfill the requirments for membership in the Corporation pursuant to this resolution until December 31, 1995,or such later date as the Board of Directorsmay determine.

(Adopted on August 30, 1995)

ResolutionNo. 218

Membership of the Azerbaijan Republic

WHEREASthe Government of the AzerbaijanRepublic has applied for admission to membership in the International Finance Corporation in accordancewith Section 1(b)of Article II of the Articlesof Agreementof the Corporation;and

247 WHEREAS,pursuant to Section 17 of the By-Lawsof the Corporation, the Board of Directors, after consultation with representativesof the Governmentof the AzetbaijanRepublic has made recommendationsto the Board of Governors regarding this application;

NOW,THEREFORE, the Boardof Governors,hereby RESOLVES. THATthe termsand conditionsupon whichthe Azerbaijan Republic shall be admittedto membershipin the Corporationshall be as follows:

1. Definitions:As used in this resolution: (a) "Corporation"means International Finance Corporation. (b) "Articles"means the Articlesof Agreementof theCorporation. (c) "Dollars"or -$" means dollars in currency of the United States of America. (d) "Subscription'means the capitalstock of the Corpormtionsubscribed by a member. (e) "Member"means memberof the Corporation. (f) "1991General Capital Increase Resolution" means Resoludon No. 179 adoptedby the Boardof Govemorsof the Corporationon May4, 1992.

2. Subscription: By accepting membership in the Corporation, the AzerbaijanRepublic shall subscribe to 2,595shares of the capitalstock of the Corporationat the par valueof $1,000per share.

3. Payment of Subscription: (a) Before accepting membershipin the Corporation,the Azerbaijan Republic shall pay $2,367,000 to the Corporation representing paymentin full for 2,367 sharesof the capitalstock subscribed. (b) The balance of 228 shares shall be paid for by the Azerbaijan Republic,on the same termsand conditionsas set fordt in the 1991 GeneralCapital Increase Resolution, as amendedfrom time to time.

4. Information: Before accepting membership in the Corporation, the Azerbaijan Republic shall furnish to the Corporation such information relatingto its applicationfor membershipas the Corporationmay request.

5. Effective Date of Membership: The Azerbaijan Republic shall become a memberof the Corporationas of the datewhen the AzerbaijanRepublic shall have compliedwith the followingrequirements: (a) madethe paymentcalled for by paragraph3(a) of this resolution; (b) furnished such informationas may have been requested by the Corporationpursuant to paragraph4 of this resolution;

248 (c) deposited with the International Bank for Reconstruction and Development an instrument stating that it has accepted without reservationin accordancewith its law the Articles and all the terms and conditionsprescribed in this resolution,and that it has taken all steps necessaryto enable it to carry out all its obligationsunder the Articlesand this resolution;and td) signed the original Articles held by the International Bank for Reconstructionand Development.

6. Limitation on Periodfor Fulfillment of Requirenents of Membership:The Azerbaijan Republic may fulfill the requirementsfor membershipin the Corporationpursuant to this resolutionuntil December31, 1995,or such later date as the Board of Directorsmay determine.

(Adopted on September 8, 1995)

249 RESOLUTION ADOPTED BY THE BOARD OF GOVERNORS OF IFC AT THE 1995 ANNUALMEETINGS

Resolution No. 219

Financial Statemnents,Accountants'Report and Administrative Budget

RESOLVED:

THATthe Boardof Governorsof the Corporationconsider the Financial Statementsand the Accountants'Report, includedin the 1994/1995Annual Report, and the Administrative Budget attached to the Report dated August21, 1995,as fulfillingthe requirementsof ArticleIV, Section 11 of the Articlesof Agreementand of Section 16 of the By-Lawsof the Corporation.

(Adopted on October 12, 1995)

250 RESOLUTIONSADOPTED BY THE BOARD OF GOVERNORSOF IDA BETWEEN THE 1994 AND 1995 ANNUALMEETINGS

ResolutionNo. 181 Membership of the Aze rbaijan Republic

WHEREASthe Governmentof the AzerbaijanRepublic has appliedfor admissionto membershipin the InternationalDevelopment Association in accordancewith Section 1(b)of Article II of the Articlesof Agreementof the Association; WHEREAS,pursuant to Section9 of the By-Lawsof the Association,the ETecutiveDirectors, after consultationwith representativesof the Government of the AzerbaijanRepublic, have made recommendationsto the Board of Govemorsregarding this application; NOW,THEREFORE, the Boardof Governorshereby RESOLVES: THATthe termsand conditionsupon which theAzerbaijan Republic shall be admittedto membershipin the Associationshall be as follows: I. Definition:As used in this resolution: (a) "Association"means Intemational Development Association. (b) "Articles"means the Articlesof Agreementof the Association. (c) "Dollars" or "$" means dollarsin currency of the United States of America.

2. Initial Subscription: (a) The terms and conditions of the membership of the Azerbaijan Republicin the Associationother than those specificallyprovided for in this resolutionshall be those set forth in the Articleswith respectto the membershipof original memberslisted in Part I1 of ScheduleA thereof (including, but not by way of limitation, the terms and conditions relating to subscriptions, payments on subscription, usabilityof currenciesand votingrights). (b) Upon accepting membership in the Association, the Azerbaijan Republicshall subscribefunds in the amount of $720,000expressed in terms of UnitedStates dollarsof the weightand finenessin effect on January 1, 1960, that is to say, pursuant to the decision of the Executive Directors of the Associationof June 30, 1986 on the valuationof initial subscriptions,$868,572, and shall pay the latter

251 amount to the Association as follows: (a) ten percent either in gold or in freely convertible currency, and (b) ninety percent in the currency of the Azerbaijan Republic. As of the date the Azerbaijan Republic will become a member of the Association, 644 votes shall be allocated to the Azerbaijan Republic in respect to such subscription, consisting of 144 subscription votes and 500 membership votes.

3. Effective Date of Memnbership:The Azerbaijan Republic shall become a member of the Association with a subscription as set forth in paragraph 2(b) of this resolution as of the date when the Azerbaijan Republic shall have complied with the following requirements: (a) made the payments called for by paragraph 2 of this resolution; (b) deposited with the International Bank for Reconstruction and Development an instrument stating that it has accepted in accordance with its laws the Articles and all the terms and conditions prescribed in this resolution, and that it has taken all steps necessary to enable it to cary out all its obligations under the Articles and this resolution; and (c) signed the original Articles held in the archives of the Intemnational Bank for Reconstruction and Development.

4. Limitation on Periodfor Fulfillmnentof Requirements of Membership: The Azerbaijan Republic may fulfill the requirements for membership in the Association pursuant to this resolution until December 31, 1995, or such later date as the Executive Directors of the Association may determine.

5. Additional Subscription: Upon or after acceptance of membership, the Azerbaijan Republic shall also be authorized at its option to make an additional subscription in the amount of $153,628 which shall carry 27,344 votes, calculated on the basis of 5,144 subscription votes and 22,200 membership votes, and which shall be subject to the following terns and conditions: (i) Payment of such additional subscription shall be made in the currency of the Azerbaijan Republic within 30 days after the Azerbaijan Republic notifies the Association of its intention to make such additional subscription. (ii) the rights and obligations of the Association and the Azerbaijan Republic with regard to such additional subscription shall be the same (except as otherwise provided in this resolution) as those which govern the 90% portion of the initial subscriptions of original members payable under Articles II, Section 2(d) of the Articles by members listed in Part II of Schedule A of the Articles, provided. however, that the provisions of Articles IV, Section 2 of the Articles shall not be applicable to such subscription.

(Adopted on March 23, 1995)

252 RESOLUTION ADOPTED BY THE BOARD OF GOVERNORS OF IDA AT THE 1995 ANNUAL MEETINGS

Resolution No. 182

Financial Stazernents,Accountants'Report and Admin istrative Budget

RESOLVED:

THAT the Board of Governorsof the Associationconsider the Financial Statements,Accountants' Report and AdministrativeBudget, included in the 1994/95Annual Report, as fulfillingthe requirementsof Article VI, Section 11, of the Articles of Agreement and of Section 8 of the By-Laws of the Association.

(Adopted on October 12, 1995)

253 RESOLUTIONADOPTED BY THE BOARDOF GOVERNORSOF MIGA BETWEENTHE 1994 AND 1995 ANNUALMEETINGS

ResolutionNo. 51

Membership of Eritrea

WHEREAS the Governmentof Efitrea has applied for admission to membership in the Multilateral Investment Guarantee Agency (the "Agency");and

WHEREAS,pursuant to Section 17(c) of the Agency's By-Laws, the Board of Directorshas made recommendationsto the Councilof Governors regardingthis application;

NOW,THEREFORE, the Councilof Governorshereby

RESOLVESthat:

1. Upon depositof its instrumentof ratification,acceptance or approvalof theConvention. Eritrea shall be obligatedto: (i) subscribeat par to 50 sharesof the capitalstock of the Agency;and (ii) pay in full to theAgency the paid-inportions of the subscriptionprice of such sharesin accordancewith Articles7 and 8 of the Convention.

2. With effect from the date of the fulfillment of the conditions set forth in paragraph 1 above, Eritrea shall be admitted to membershipand shall be classifiedas a CategoryTwo (developing country) member for the purposesof the Convention.

(Adoptedon July 3, 1995)

254 REPORTSOF THE EXECUTIVEDIRECTORS OF THE BANK

September12, 1994

Transferfrom Surplus to Fund Special EmergencyAssistance Grants for Rwanda

1. To assist in meeting the immediate needs of Rwanda's people and in furthering Rwanda's rehabilitation,recovery, and longer-termdevelopment, particularly by facilitating the return of refugees to their places of origin through the establishmentof sustainableconditions, and thereby to promote the purposesof the Bank, the ExecutiveDirectors have approvedan advance of grants totaling US$20.0 million for special emergency assistance to Rwanda. The grants have been allocated as follows: US$10.5 million to the United Nations Children's Fund (UNICEF)to restore basic health servicesto the Rwandan returnees and to improve water supply and sanitationsystems; US$1.5 million to the WorldHealth Organizationfor the diagnosis,treatment and control of specific diseases in zones not covered by UNICEF; US$4.0 million to the United Nations High Commissioner for Refugees to meet emergency shelter and infrastructureneeds of returnees;and US$4.0 million to the Food and Agriculture organization for the provision of agricultural planting materialsand tools. The ExecutiveDirectors consider it desirablethat the advance be funded from surplus. They recommend, therefore,that the Board of Governorsauthorize the transfer from surplusof US$20.0million to fund the special emergency assistance for Rwanda. In the event that any portion of this amount is refunded to the Bank, it will be returned to surplus.

2. Accordingly, the Executive Directors recommend that the Board of Governorsadopt the draft resolution....I

(This report was apprmvedand its recommendationwas adopted by the Board of Governorson November28, 1994)

] See page 234.

255 August 2, 1995

Allocationof FY95 Net Income 1. The Bank's net income for the fiscal year ended June 30, 1995 (FY95) amountsto $1,354 million. The General Reserve has been increased by a net translationadjustment due to exchange rate changes of $1,914 million. As of June 30, 1995,the Special Reservecreated under Article IV, Section 6 of the Bank's Articles of Agreementtotaled $293 million and, without regard to the Bank's net income for FY95, the General Reserve amounted to $16,937 million.Total reserves includingaccumulated net income thereforeamounted to $18,584 million, of which the $293 million in the Special Reserve is kept in liquid form, the remainderbeing used in the businessof the Bank. 2. The Executive Directors have considered what action to take, or to recommend that the Board of Governors take, with respect to FY95 net income.The ExecutiveDirectors have concludedthat the interestsof the Bank and its memberswould best be served by the followingdispositions of the net incomeof the Bank: (a) the addition of $280 million of net income to the General Reserve, which is intended to reach a target reserves-to-loansratio of 14.25%, and incremental reserves of 1% of outstanding fixed-rate single currency loans, at the end of the fiscal year ending June 30, 1996, taking into account the estimated cost of a waiver for all payment periods commnencingin FY96 of 25 basis points on the interest rate charged to borrowersthat have serviced all their loans from the Bank in a timely manner; (b) the transfer to the Trust Fund for Gaza, by way of grant, out of the Bank's FY95 net income, of $90 million; (c) the transfer to the Debt ReductionFacility for IDA-onlyCountries, by way of grant, out of the Bank's FY95 net income, of $100 million; (d) the transfer,immediately upon approval by the Board of Governors,to the InternationalDevelopment Association, by way of grant,out of the Bank's FY95 net income, of an amount equivalentto $250 million in SDRs, in the component currencies of the SDR, as of June 30,1995; and (e) the retention as surplus of any excess of net incomeover $720 million. 3. Accordingly, the Executive Directors reconunend that the Board of Governors note with approval the present Report and adopt the draft resolution....1 (This report was approved and its recomnmendationwas adopted by the Board of Governors on October 12, 1995)

'See page 239.

256 REPORTOF THE BOARD OF DIRECTORS OF IFC

October 11. 1994

Increaseof Subscriptiotisby ChfIeand China to the Capital of the Corporation

1. The Board of Directors of International Finance Corporation (the Corporation)has consideredthe Memorandato the Board of Directorsfrom the Presidentdated September28, 1994, on the subject of the increase of subscriptionsto the capital of the Corporationby Chile and China. These Memorandaare attached.(Attachment I and II respectively)

2. The Board of Directors,having duly consideredthe matter and having takeninto accountthe Memorandadated September28, 1994, has found the proposalset out in paragraph7 of the Memorandato be desirable.Accordingly, the Board of Directorssubmits to the Boardof Governors,for a vote without meeting,the proposalswhich are set out in the draft resolutions....1

3. The Boardof Directorsrecommends that the Boardof Governorsof the Corporationadopt such draft resolutions....1

(This report Wasapproved and its recommendationswere adopted by the Boardof Governorson November28, 1994)

Seepages240andV41.

257 Attachment I

September28, 1994

IncreaseOf SubscriptionBy Chile To IFC's Capital

1. This Memorandum recommends that the Board of Directors submit a proposal to the Board of Governors to authoiize Chile to subscribe for additional shares of the capital stock of International Finance Corporation (IFC). Shares subscribed pursuant to this allocation would be issued from IFC's authorizedunallocated shares.

2. On May 4, 1992,the Board of Governorsadopted IFC ResolutionNo. 179 (1991 General Capital Increase), in which the authorizedcapital of IFC was increased to $2,300,000,000by the creation of 1,000,010 additional shares, which were allocatedfor subscriptionby then membercountries of IFC. IFC's authorized capital stock was again increased to the current level of $2,450,000,000 by Resolution No. 196 (the 1991 Special Capital Increase Resolution) adopted by the Board of Governors on December 10, 1992. The Special Capital Increase was to provide the full share entitlements of the former Soviet Republics and to replenish the pool of authorized and unallocated shares to accommodate new memberships and requests for additional shares by existing members as provided in the President's memorandumto the Board of Directors(IFC/R9 1-79/I).

3. Chile currentlyholds 5,893 fully paid shares and remains entitled to 3,144 shares payable in accordance with the terms of IFC Resolution No. 179 adopted by the Board of Governorson May 4, 1992, entitled "1991 General Capital Increase".Chile has requestedan additionalallocation of 2,673 shares. With an additionalallocation of 2,673 shares, Chile's share of total SECvotes, on an allocated basis, would rise from 0.38% to 0.49%. The effect of this additional allocationwould be to bring Chile's shareholdingin IFC in closer alignment to its respectiveshareholding in IBRD, which is 0.45%.

258 result of the 1991General Capital Increase,the 1992Special Capital Increase, subsequent allocations, and those which would come into effect upon approvalof the attachedresolution and the parallel resolutionbeing circulated in respectof China's request.When subscribed, the proposedallocation would provide IFC with $2,673,000of additionalshare capital.

5. Shares subscribedby Chile under this proposedallocation would be issued from IFC's pool of 58,241 authorized and unallocated shares. Assuming approvalof the resolutionsconcerning both Chile and China, IFC would have a balance of 54,068 authorizedunallocated shares.

6. I am satisfied that the following recommendationcomplies with the Articlesof Agreementof IFC. Recommendation 7. 1 recommendto the Boardof Directors: (a) That Chile be authorizedto subscribe an additional 2,673 shares of IFC capital stock on the terms and conditions specified in draft resolution.... I (b) That the Directorsapprove, for circulationto the Board of Govemors, this Memorandumand the followingattached draft documents: (i) Report of the Boardof Directorsto the Board of Governors; (ii) Draft resolution' attached thereto for adoption by the Gover- nors; and (c) That the Secretary take such action as he shall deem necessary or appropriateto carry out the purposes of the foregoing.

Attachment II

September28, 1994

IncreaseOf SubscriptionBy ChinaTo IFC's Capital

1. This Memorandumrecommends that the Board of Directors submit a proposal to the Board of Governors to authorize China to subscribe for additional shares of the capital stock of InternationalFinance Corporation (IFC). Shares subscribed pursuant to this allocation would be issued from IFC's authorizedunallocated shares.

] See page 240.

259 2. On May 4, 1992, the Board of Governorsadopted IFC ResolutionNo. 179 (1991 General Capital Increase), in which the authorized capital of IFC was increased to $2,300,000,000 by the creation of 1,000,000 additional shares, which were allocated for subscription by then member countries of IFC. IFC's authorized capital stock was again increased to the current level of $2,450,000,000by Resolution No. 196 (the 1991 Special Capital Increase Resolution)adopted by the Board of Governors on December 10, 1992.The Special Capital Increase was to provide the full share entitlements of the former Soviet Republics and to replenish the pool of authorized and unallocated shares to accommodate new memberships and requests for additional shares by existing members as provided in the President's memorandumto the Board of Directors(IFC/R91-79/1).

3. China currently holds 20,196 fully paid shares and remains entitled to 2,804 shares payable in accordance with the terms of IFC ResolutionNo. 179 adopted by the Board of Governors on May 4, 1992, entitled "1991 General Capital Increase". China has requested an additional allocation of 1,500 shares. With an additional allocation of 1,500 shares, China's share of total IFC votes, on an allocated basis, would rise from 0.96% to 1.01%.The effect of this additional allocation would be to bring China's shareholding in IFC closer to its respective shareholdingin IBRD, which is 2.94%.

4. After the approval of the Special Capital Increase, several requests for additional shares have been granted by special Resolutions of the Board of Governors. These allocations brought to 2,391,759 the total number of allocated IFC shares. China's request, if approved, would lead to a further increase of 0.06% in the number of allocated shares. Assuming approval of China and Chile's requests for additional shares, the total number of allocated shares would increase in total by 0.17% to 2,395,932 shares. Consequently, the effect on the voting powers of other members would be rninimal. Attachment III shows country shareholdingallocations and voting rights as a result of the 1991 GeneralCapital Increase,the 1992 SpecialCapital Increase, subsequent allocations, and those which would come into effect upon approval of the attached resolution and the parallel resolution being circulated in respect of Chile's request. When subscribed,the proposed allocationwould provide IFC with $1,500,000of additional share capital.

5. Shares subscribed by China under this proposed allocation would be issued from IFC's pool of 58,241 authorized and unallocated shares. Assuming approval of the resolutions concerningboth Chile and China, IFC would have a balance of 54,068 authorizedunallocated shares.

6. I am satisfied that the following recommendation complies with the Articles of Agreement of IFC.

260 Reconimendation: 7. 1 recommend to the Board of Directors: (a) That China be authodized to subscribe an additional 1,500 shares of IFC capital stock on the terms and conditions specified in the draft resolution....I (b) That the Directors approve, for circulation to the Board of Governors, this Memorandum and the following attached draft documents: (i) Report of the Board of Directors to the Board of Governors (ii) Draft resolution1 attached thereto for adoption by the Gover- nors; and (c) That the Secretary take such action as he shall deem necessary or appropriate to carry out the purposes of the foregoing.

1 Seepage 24).

261 INTERNATIONAL FINANCE CORPORATION-SHARE ALLOCATIONS, DISTRIBUTHON OF VOTES, AND RANKINGS IVITHTHEADDITIONALALLOCATION OF 2,673 SHARES TO CHILE AND 1,500 SHARES TO CHINA

BEFORE THE PROJECTED POSITION PAID SHARES 1991 GENERAL 1991-1994ALLOCATIONS IF THE PROPOSAL ASOF CAPITAL INCREASE ISADOPTED 4 9/1194

MEMBER Suibscribed Votes 1991 Newv OtIher5 Totals as of Voles3 Rank Shiare Vote? Rank Shtares Votes2 COUNTRY Shraresas as of Capifal Member- Sutbse- 71/194 Alloca- of 5/03/92 5/03/922 Increase ships qierit (A-+(B)+ rion (A) (B) (C) (D) (C)+qD)

Afghanistan 244 0.03% 188 (133) 299 01n2% 131 299 0.02% 131 111 0nD2% Albania 736 0.08% 566 1.302 0.06% 100 1,302 0.06% 100 962 0.07% Algeria 3,177 0.27% 2,444 5,621 0.24% 50 5,621 0.24% 50 3,177 0.20% Angola 837 0.09% 644 1,481 0.07% 93 1,481 0.07% 93 1,095 0.08% Antigua & Barbuda 13 0.02% 10 23 0.01% 166 23 0.01% 166 13 0.02%

Argentina 21,551 1.73% 16,578 38,129 1.58% 15 38,129 1.57% 15 28,182 1.63% Armenial 0 0.0O% 0 1,769 1,769 0.08% 85 1,769 0.08% 85 0 0.00% Australia 26,751 2.14% 20,578 47,329 1.95% 12 47,329 1.95% 12 26,751 1.54% Austria 11,158 0.90% 8,583 19,741 0.82% 24 19,741 0.82% 24 14,590 0.85% Azerbaijanl 0 0.00% 0 2,595 2,595 0.12% 70 2,595 0.12% 70 0 0.00%

Bahamas,The 251 0.03% 193 (109) 335 0.02% 129 335 0.02% 129 219 0.03% Bangladesh 5,108 0.42% 3,929 9,037 0.38% 40 9,037 0.38% 41 6,679 0.40% Barbados 204 0.04% 157 361 0.03% 128 361 0.03% 128 266 0.03% Belams 0 0.00% 0 5,162 5,162 0.22% 52 5,162 0.22% 52 4,254 0.26% Belgium 27,446 2.20% 23,164 50.610 2.09% 11 50,610 2.09% 11 36,711 2.11% Belize 57 0.02% 44 101 0.01% 150 101 0.01% 150 84 0.02% Benin 67 0.03% 52 i 19 0.02% 147 119 0.02% 147 67 0.02% Bolivia 1,075 0.11% 827 1,902 0.09% 82 1,902 0.09% 82 1,406 0.09% Bosnia-Herzegovinal 0 0.00% 609 620 1,229 0.06% 102 1,229 0.06% 102 0 0.00% Botswana 64 0.02% 49 113 0.01% 149 113 0.01$ 149 113 0.02%

Brazil 22,314 1.79% 17,165 39,479 1.63% 14 39,479 1.63% 14 29,180 1.68% Bulgaria 1,789 0.16% 3,078 4,867 0.21% 54 4,867 0.21% 54 1,789 0.12% Burkina Faso 538 0.05% 414 (106) 846 0.05% 109 846 0.04% 109 432 0.04% Burundi 100 0.03% 168 268 0.02% 135 268 0.02% 135 100 0.02% Cameroon 1,075 0.09% 827 (190) 1,712 0.08% 87 1,712 0.08% 87 885 0.06%

Canada 45,976 3.66% 35,366 81.342 3.35% 6 81,342 3.35% 6 60,122 3.45% Cape Verde 11 0.02% 8 19 0.01% 167 19 0.01% 167 15 0.02% Central African Rep. 67 0.03% 52 119 0.02% 147 119 0.02% 147 67 0.02%

Chile 5,108 OA2% 3,929 9,037 0.38% 40 11,710 049% 38 5,893 0.35%

China 9,115 0.74% 7,012 6,873 23,000 0.96% 22 24,500 1.02% 22 20,196 1.17%

Colombia 7,125 0.58% 5.481 12,606 0.53% 35 !2,606 0.53% 35 7,125 0.42% Comoros 0 0.00% 8 II 19 0.01% 167 19 0.01% 167 14 0.02% Congo, Republic of 147 0.03% 113 (16) 244 0.02% 138 244 0.02% 138 131 0.02% Costa Rica 538 0.06% 414 952 0.05% 108 952 0.05% 108 702 0.05% Cote d'Ivoire 2,003 0.18% 1,541 3,544 0.16% 65 3,544 0.16% 65 2,516 0.16%

' Membershipin progress. 2 Votesbased onipaid shares. 3 Votesbased oit allacatedshares. 4 Assumrningcouiniries siubscribe to andpayfor tleirfidl allocation. s Allocated membershipsubscription, or special allocationaf slares to existing mcmbers,or tunpaidsubscribed shares ( ) released to pool of unallocatedshares. 6 Paid shares belotnging to Bosniia-Herzegovinaanid Federal Republic of Yugostavia. INTERNATIONAL FINANCE CORPORATION-SHARE ALLOCATIONS, DISTRIBUTION OF VOTES,AND RANKINGS WVITHTHE ADDITIONAL ALLOCATION OF 2, 673 SHARES TO CHILE AND 1,500 SHARES TO CHINA

BEFORE THE PROJECTED POSITION PAID SHARES 1991 GENERAL 1991-1994ALLOCATIONS IF THE PROPOSAL AS OF CAPITAL INCREASE IS A DOPTED4 911194

MEMBER Subscribed Votes 1991 Newv Othe Totals as of VoteH Rank '.tare Votes3 Ranik Slhares lVotes2 COUNTRY Shares as as of Capital Member- Sabse- 7/1194 Alloca- of 5/03/92 51031922 Increase ships quent (A)+(B)+ ifon (A) (B) (C) (D) (C)+(D)

Croatia 1,856 0.14% 1,428 (402) 2,882 0.13% 67 2,882 0.13% 67 2,025 0.13% Na Cyprus 1,209 0.12% 930 2,139 0.10% 75 2,139 0.10% 75 1,767 0.12% Czech Republic 5,038 0.42% 3,875 8,913 0.38% 43 8,913 0.38% 43 7.363 0.44% Denmark 10,487 0.85% 8,067 18,554 0.77% 25 18,554 0.77% 25 13,713 0.80% Djibouti 21 0.02% 35 56 0.01% 157 56 0.01% 157 21 0.02%

Dominica 24 0.02% 18 42 0.01% 159 42 0.01% 159 35 0.02% Dominican Republic 671 0.07% 516 1,187 0.06% 103 1,187 0.06% 103 1,015 0.07% Ecuador 1,479 0.14% 1,138 2,617 0.12% 69 2,617 0.12% 69 1,706 0.11% Egypt, Arab Rep. of 6,986 0.57% 5.374 12,360 0.52% 37 12.360 0.52% 37 10,210 0.60% El Salvador 24 0.02% 18 (13) 29 0.01% 164 29 0.01% 164 11 0.01%

Equatorial Guinea 43 0.02% 33 76 0.01% 154 76 0.01% 154 43 0.02% Eslonia 0 0.00% 0 1,434 1,434 0.07% 96 1,434 0.07% 96 502 0.04% Ethiopia 72 0.03% 55 127 0.02% 146 127 0.02% 146 105 0.02% Fiji 162 0.03% 125 287 0.02% 133 287 0.02% 133 237 0.03% Finland 8,872 0.72% 6,825 15,697 0.66% 32 15,697 0.65% 32 12,967 0.76% France 68,400 5.44% 52,615 121,015 4.98% 4 121,015 4.97% 4 89,446 5.13% Gabon 931 0.09% 724 1,655 0.08% 90 1,655 O.O% 90 931 0.07% Gambia, The 77 0.02% 59 (42) 94 0.01% 152 94 0.01% 152 59 0.02% Georgial 0 0.00% 0 2,461 2,461 0.11% 71 2,461 0.11% 71 0 0.00% Gernany 72,861 5.80% 56,047 128,908 5.31% 3 128,908 5.30% 3 95,281 5A7%

Ghana 2,242 0.20% 2,205 624 5 071 0.22%' 53 5,071 0.22% 53 3,748 0.23% Greece 3,899 0.33% 2.999 6,898 0.29% 48 6,898 0.29% 48 3,899 0.24% Grenada 46 0.02% 35 81 0.01% 153 81 0.01% 153 53 0.02% Guatemala 671 0.07% 516 1,187 0.06% 103 1,187 0.06% 103 671 0.05% Guinea 294 0.04% 226 520 0.03% 120 520 0.03% 120 339 0.03%

Guinea-Bissau 40 0.02% 31 (22) 49 0.01% 158 49 0.01% 158 18 0.02% Guyana 808 0.08% 622 1,430 0.07% 97 1 430 0.07% 97 808 0.06% Haiti 671 0.04% 516 (365) 822 0.04% 110 822 0.04% 110 306 0.03% Honduras 404 0.03% 311 (220) 495 0.03% 121 495 0.03% 121 370 0.04% Hungary 6,179 0,51% 4,753 10.932 0.46% 39 10,932 046% 40 8,081 048%

Iceland 24 0.02% 18 42 0.01% 159 42 0.01% 159 42 0.02% India 45,976 3.66% 35,366 81,342 3.35% 6 81,342 3.35% 6 60,122 3.45% Indonesia 16,131 1.30% 12,408 28,539 1.18% 18 28,539 1.18% 1S 21,094 1.22% Iran, Islamic Rep. of 816 0.08% 628 1,444 0.07% 95 1,444 0.07% 95 816 0.06% Iraq 147 0.03% 113 260 0.02% 136 260 0.02% 136 147 0.02%

I Membershipin progress. 2 Votesbased on paidshores. 3 Votesbased on allocatedsihares. 4 Assuwningcountries suibscribeto and payfor theirfaill allocatiotn. S' A llocatedmembership subscription,or special allocafion of shiaresin existing members, or unpaidsubscribed shares f ) released to pool of unallocated shares. 6 Paidslares belongingto Rosnia-Herzegovina and FederalRepublic of Yugoslavia. INTERNATIONAL FliVANCE CORPORATION-SHARE ALLOCATIONS, DISTRIBUTION OF VOTES, AND RANKINGS WITH THEADDITIONALALLOCATION OF 2,673 SHARES TO CHILE AND 1,500 SHARES TO CHINA

BEFORE THE PROJECTED POSITION PAID SHARES 1991 GENERAL 1991-1994 ALLOCATIONS IF THE PROPOSAL AS OF CAPITAL INCREASE ISADOPTED 9/1194

MEMBER Stubscribed Votes 1991 Neiv Orher5 Totalsas of Votes- Rank SMare lVoter Rank Slhres Vores' COUNTRY Shares as as of Capital Member- Subse- 7/1194 Alloca- of 5/03192 5,03/922 Intcrease ships qutem (A)+(B)+ :ion (A) (B) (C) (D) (CJ+(D)

Ireland 729 0.08% 561 1,290 0.06% 101 1,290 0.06% 101 954 0.07% bi Israel 1,207 0.12% 928 2,135 0.10% 77 2,135 0.10% 77 1,579 O.1O% Italy 45,976 3.66% 35,366 81,342 3.35% 6 81,342 3.35% 6 60,122 3.45% Jamaica 2,420 0.21% 1,862 4,282 0.19% 57 4,282 0.19% 57 3,660 0.22% Japan 79,794 6.35% 61,380 1 41,174 5.81% 2 141,174 5.80% 2 120,714 6.92%

Jordan 941 0.09% 724 1,665 0.08% 88 1.665 0.08% 88 941 0.07% Kazakhstan 0 0.00% 0 4,637 4,637 0.20% 55 4.637 0.20% 55 2,031 0.13% Kenya 2,284 0.20% 1,757 4,041 0.18% 59 4,041 0.18% 59 2,986 0.19% Kiribatl 7 0.02% 5 12 0.01% 170 12 0.01% 170 7 0.01% Korea, Republic or 9,013 0.73% 6,933 15,946 0.67% 31 15,946 0.66% 31 11,786 0.69%

Kuwait 4,533 0.38% 7,652 5,414 117599 0.73% 26 17,599 0.73% 26 9,947 0-58% Kyrgyz Republic 0 0.00% 0 1,720 1,720 0.08% 86 1,720 0.08% 86 1,267 0.09% Lao PDR 157 0.03% 121 278 0.02% 134 278 0.02% 134 229 0.03% Latvia 0 0.00% 0 2,150 2,150 0.'0% 74 2,150 0.10% 74 753 0.06% Lebanon 50 0.02% 85 135 0.02% 145 135 0.02% 145 50 0.02% Lesotho 40 0.02% 31 71 0.01% 156 71 0.01% 156 60 0.02% Liberia 182 0.03% 140 (99) 223 0.02% 139 223 0.02% 139 83 0.02% Libya 55 0.02% 93 148 0.02% 144 148 0.02% 144 55 0.02% Lithuania 0 0.00% 0 2,341 2,1341 0.11% 72 2,341 0.11% 72 1,724 0.11% Luxembourg 1,209 0.12% 930 2,139 0.10% 75 2,139 0.10% 75 1.581 0.10%

Macedonia,FYR of 345 0.04% 266 (75) 536 0.03% 119 536 0.03% 119 270 0.03% Madagascar 244 0.04% 188 432 0.03% 126 432 0.03% 126 . 370 0.04% Malawi 1,030 0.10% 792 1,822 0.09% 83 1,822 0.08% 83 1346 0.09% Malaysia 8,604 0.76% 6,6i8 15,222 0.64% 33 15,222 0.63% 33 11,250 0.66% Maldives 9 0.02% 7 16 0.01% 169 16 0.01% 169 13 0.02%

Mali 255 0.04% 196 451 0.03% 124 451 0.03% 124 294 0.03% MarshallIslands 0 0.00% 0 727 727 0.04% 115 727 0.04% 115 381 0.04% Mauritania 121 0.03% 93 214 0.02% 142 214 0.02% 142 214 0.03% Mauritius 941 0.09% 724 1,665 0.08% 88 1,665 0.08% 88 1.376 0.09% Mexico 13,175 1.06% 10,135 4,279 27,589 1.14% 19 27,589 1.14% 19 17.229 1.00%

Micronesia 0 (.0O% 0 744 744 0.04% 114 744 0.04% 114 744 0.06% Moldoval 0 0.00% 0 2,125 2,125 0.10% 78 2,125 0.10% 78 0 0.00% Mongolia 144 0.03% 246 390 0.03% 127 390 0.03% 127 144 0.02% Morocco 5,108 0.42% 3,929 9,037 0.38% 40 9,037 0.38% 41 7,466 0.44% Mozambique 182 0.03% 140 322 0.02% 130 322 0.02% 130 322 0.03%

I Membership in progress. 2 Votesbased on paid shares. 3' Votesbased on allocated shlares. 4 Assumintgcountries surbscribeto and payfor theirfull allocation. s Allocatedtmembership subscription, or specialallocation of shores to etisting members,or unpaidssubscribedshares( ) releasedto pool of unallocated shares. 6 Paidsihares belonging to Rosnia.Herzegovimmaamid Federal Republic of Yugoslavia. INTERNATIONAL FINANCE CORPORATION-SHAREALLOCATIOiVS, DISTRIBUTION OF VOTES, AND RANKINGS WITH THEADDITIONALALLOCATION OF 2,673 SHARES TO CHILE AND 1,500 SHARES TO CHiNA

BEFORETHE PROJECTEDPOSITION PAIDSHARES 1991 GENERAL 1991-1994ALLOCATIONS IF THE PROPOSAL AS OF CAPITALINCREASE ISADOPTED4 9/lh

MEMBER Suibscribed Votes 1991 Nev Other5 Totalsas of Voles! Rank Slare VotesJ Rank Slhares 1otres2 COUNTRY Sliares as as of Capiral hMember- Subse- 7/1194 Alloca- of 5/03192 51031922 Increase ships queni: (A)+4B)+ tion (A) (8) (C) (D) (C$+(D)

Myanmar 666 0.07% 1,124 1,790 0.08% 84 1,790 0.08% 84 666 0.05% Namibia 404 0.05% 693 1,097 0.06% 106 1,097 0.06% 106 404 0.04% 00 Nepal 306 0.04% 516 822 0.04% 110 822 0.04% 110 512 0.04% Netherlands 31,726 2.54% 24,405 56,131 2.32% 10 56,131 2.31% 10 41,488 2.39% NewZealand 2.025 0.18% 1.558 3,583 0.16% 61 3,583 0.16% 61 2.025 0.13%

Nicaragua 404 0.05% 311 715 0.04% 116 715 0.04% 116 404 0.04% Niger 147 0.03% 113 260 0.02% 136 260 0.02% 136 147 0.02% Nigeria 12,233 0.99% 9,410 21,643 0.90% 23 21,643 0.90% 23 15.997 0.93% Norway 9,947 0.81% 7,652 17,599 0.73% 26 17.599 0.73% 26 13.009 0.76% Oman 671 0.07% 516 1,187 0.06% 103 1,187 0.06% 103 981 0.07%

Pakistan 9,679 0.79% 7,445 17,124 0.71% 28 17,124 0.71% 28 14,641 0.85% Panama 755 0.05% 581 (329) 1,007 0.05% 107 1,007 0.05% 107 643 0.05% Papua New Guinea 1,075 0.06% 827 (585) 1,317 0.06% 99 1,317 0.06% 99 490 0.04% Paraguay 270 0.04% 208 478 0.03% 122 478 0.03% 122 270 0.03% Peru 3,899 0.19% 2,999 6,898 0.29% 48 6,898 0.29% 48 5,698 0.34% Philippines 7,125 0.58% 5,481 12,606 0.53% 35 12,606 0.53% 35 7,125 0.42% Poland 4,090 0.34% 3,146 7,236 0.31% 45 7,236 0.31% 45 6.187 0.37% Portugal 4,705 0.39% 3,619 8,324 0.35% 44 8,324 0.35% 44 6,151 0.37% Ronmania 1,504 0.14% 1,157 2,661 0.12% 68 2.661 0.12% 68 2,198 0.14% RussianFederation 0 0.00% 0 81,342 81,342 3.35% 6 81,342 3.35% 6 59,911 3,44%

Rwanda 671 0.04% 516 (365) 822 0.04% 110 822 0.04% 110 306 0.03% Saint Lucia 42 0.02% 32 74 0.01% 155 74 0.01% 155 61 0.02% Sao Tnmce Principec 0 0.00% 338 439 777 0.04% 113 777 0.04% 113 0 0.00% SaudiArabia 14,447 1.17% 15,615 30,062 1.25% 17 30,062 1.24% 17 20.693 1.20% Senegal 1,551 0.11% 1,193 (445) 2,299 0.10% 73 2,299 0.10% 73 1,106 0.08%

Seychelles 15 0.02% 12 27 0.01% 165 27 0.01% 165 27 0.02% SierraLeone 182 0.03% 140 (99) 223 0.02% 139 223 0.02% 139 83 0.02% Singapore 177 0.03% 298 475 0.03% 123 475 0.03% 123 177 002% SlovakRepublic 2,519 0.22% 1,938 4,457 0.19% 56 4,457 0.19% 56 3,681 0.22% Slovenia 1,022 0.08% 785 (222) 1,585 0.08% 92 1,585 0.08% 92 1,114 0.08%

SolomonIslands 19 0.02% 18 37 0,01% 161 37 0.01% 161 24 0.02% Somalia 182 0.03% 140 (99) 223 0.02% 139 223 0.02% 139 83 0.02% SouthAfrica 9,014 0.73% 6,934 15,948 0.67% 30 15,948 0.66% 30 11,786 0.69% Spain 20,928 1.68% 16,098 37,026 1.53% 16 37,026 1.53% 16 30,586 1.76% Sri Lanka 4,033 0.34% 3,102 7,135 0.30% 46 7.135 0.30% 46 5,894 0.35%

" Membership ir progress. 2 Votesbased on paid slarev. 31Votes based on allocated shares. 4 Assumingcountries subscribe to and payfor theirfill allocation. S Allocatedmemrlbership subscrlption, or specialallocation of sharesto e.ristinrgmembers, or utnpaidsuibscrdbedsshares() released o pool of unallocatedshamres 6 Paidshiares beloniginig to Bosnia-Herzegovirraand FederalReprblic of Yugoslavia. INTERNATIONAL FINANCE CORPORATION-SHARE ALLOCATIONS, DISTRIBUTION OF VOTES, AND RANKINGS WITH THEADDITIONAL ALLOCATION OF2,673 SHARES TO CHILEAND 1,500SHARES TO CHINA

BEFORETHE PROJECTEDPOSITION PAIDSHARES 1991GENERAL 1991-1994ALLOCATIONS IF THE PROPOSAL AS OF CAPITALINCREASE ISADOPTED' 9/1194

MEMBER Subscribed Votes 1991 Neiw Other5 Totalsas of Votes3 Rank Share Votesl Rank Shares VoteS2 COUNTRY Sharesas as of CCapitalMember- Saibse- 7/1194 Alloca- of 5103192 5/031922 Increase sliips quient (A)+(B)+ tion (A) (B) (C) (D) (C)+WD)

Sudan 244 0.03% 188 (133) 299 0.02% 131 299 0.02% 131 III 0.02% Swaziland 404 0.05% 311 715 0.04% 116 715 0-04% 116 684 0.05% Sweden 15,191 1.22% 11,685 26,876 1.11% 21 26,876 1.11% 21 19.865 1.15% Switzerland 0 O.W0% 18,078 23,502 41,580 1.72% 13 41,580 1.72% 13 30.733 1.77% Syrian Arab Republic 72 0.03% 122 194 0.02% 143 194 0.02% 143 72 0.02%

Tajikistan 0 0.00% 0 1,647 1,647 0.08% 91 1,47 0.08% 91 0 00.00% Tanzania 1,589 0.09% 1,222 (692) 2,119 0.10% 80 2,119 0.10% 80 897 0.07% Thailand 6,184 0.51% 4,757 10,941 OA6% 38 10,941 0.46% 39 9,355 0.55% Togo 808 0.08% 622 1,430 0.07% 97 1.430 0.07% 97 808 0.06% Tonga 19 0.02% 1s 34 0.01% 163 34 0.01% 163 25 0.02%

TrinidadandTobago 2,324 0.20% 1,788 4,112 0.18% 58 4.112 0-18% 58 3,039 01 9'c Tunisia 2,014 0.18% 1,552 3,566 0.16% 64 3,566 0.16% 64 2,945 0.18% Turkey 8,221 0.67% 6,324 14.545 0.61% 34 14,545 0.61% 34 8,221 0.48% Turkmenistan 0 0.00% 0 1,476 1,476 0.07% 94 1,476 0.07% 94 0 0.00% Uganda 1,613 0.08% 1,241 (878) 1,976 0.09% 81 1.976 0.09% 81 735 0.06% Ukraine 0 0.00% 0 16,945 16.945 0.71% 29 16,945 0.71% 29 5,931 035% United Arab Emirates 2,569 0.22% 3,102 1,464 7,135 030% 46 7,135 0.30% 46 4.033 0.25% United Kingdom 68,400 5.44% 52,615 121.015 4.98% 4 121,015 4.97% 4 99.969 5.73% United States 321,823 25.53% 247,556 569,379 23A0% 1 569,379 23.36% 1 384.801 22.03% Uruguay 2.017 0.18% 1,552 3.569 0.16% 63 3,569 0.16% 63 2,639 0.17% Uzbekistan 0 0.00% 0 3,873 3,873 0.17% 60 3,873 0.17% 60 3.193 0-20% Vanuatu 55 0.02% 42 97 0.01% 151 97 0.01% 151 55 0.02% Venezuela 15,593 1.26% 11,995 27,588 1.14% 20 27,588 1.14% 20 15.593 0.91% Viet Nam 364 0-03% 280 (198$ 446 0.03% 125 446 0.03% 125 166 0.02% Western Samoa 20 0.02% 15 35 0.01% 162 35 0.01% 162 26 0.02% Yemen.Republicof 404 0.05% 311 715 0.04% 116 715 0.04% 116 404 0.04% Yugoslavia, Fed. Rep. of, 0 0.00% 1,772 1,803 3.575 0.16% 62 3,575 0.16% 62 0 0.00% Zaire 4,233 0.19% 3,256 (2,074) 5,415 0.23% 51 5.415 0.23% 51 2,159 0.14% Zambia 1.286 0.12% 2,171 3,457 0.15% 66 3,457 0.15% 66 1,286 0.09% Zimbabwe 1,198 0.11% 922 _ 2,120 0.10% 79 2,120 0.10% 79 1,566 0.10% TOTALS (A) 1,234.039 100.00% 987,136 147,049 23,217 2,391,41 100.00% 2,395,614 100.00% 1,707,625 100.00% Authorized Capital (B) 1,300,000 2.450,000 2,450,000 2,450,000 Balance (B)-(A) 65,961 58,559 54,386 742,375 of which Allocated unsubscribed 23,952 318 318 79,324 Subscribed unpaid shares 672 606,560 Paid shares 2,423 2,423 Unallocated shares 38,914 58,241 54,068 54,068

1 Mermbershipin progress. 2 Votesbased on paid sJhares. 3 Votesbased on allocatedshares. 4 Assuminagcountries subscribe to and payfor theirfidi allocation. s Allocated mernbersluipsubscript ori, or specialallocationz of sharesto existingmenmbers. or tnpaid suibscribedshares ) releasedto pool of unallocatedshares. 6 Paidshzares belonging to Bosnia-Herzegovinaand FederalRepublic of Yugostavia. January18, 1995

IncreaseOf SubscriptionBy PakistanTo IFC's Capital

1. The Board of Directors of International Finance Corporation (the Corporation)has consideredthe Memorandumto the Boardof Directorsfrom tne Presidentdated January 5, 1995,on the subject of a proposed increaseof subscriptionto the capitalof the Corporationby Pakistan.This Memorandum is attached.

2. The Board of Directors, having duly considered the matter and having taken into account the Memorandum, has found the proposal set out in paragraph 7 thereof to be desirable. Accordingly,the Board of Directors submits to the Board of Governors,for a vote without meeting, the proposal which is set out in the draft resolution....

3. The Board of Directorsrecommends that the Board of Oovemors of th.e Corporationadopt such draft resolution.... (This report was approved and its recommendationwas adopted by the Board of Governorson March3, 1995)

AttachmentI January 5, 1995

IncreaseOf SubscriptionBy PakistanTo IFC's Capital I This Memorandum recommends that the Board of Directors submit a proposal to the Board of Governors to authorize Pakistan to subscribe for additional shares of the capital stock of International Finance Corporation (IWC).Shares subscribed pursuant to this allocation would be issued from IC's authorized unallocated shares. 2. On May 4, 1992, the Board of Govemors adopted IFC Resolution No. 179 (1991 General Capit:-' Increase), in which the authorized capital of IFC was increased to $2,300,000,000 by the creation of 1,000,000 additional shares, which were allocated for subscription by then member countries of IFC. IFC's authorized capital stock was further increased to the current level of $2,450,000,000 by Resolution No. 196 (the 1992 Special Capital IncreaseResolution) adopted by the Board of Governors on December 10, 1992. The Special Capital Increase was to provide the full

/ See page 242.

272 share entitlementsof the former Soviet Republicsand to replenishthe pool of authorized and unallocated shares to accommodate new memberships and requests for additional shares by existing members as provided in the President's memorandumto the Board of Directors (IFC/R91-79/1). 3. Pakist.anhas subscribed to and paid for its full allocation of 17,124 shares. Pakistan has requested an additional allocation of 2,256 shares. With an additional allocationof 2,256 shares, Pakistan's share of total IFC votes,on an allocated basis, would rise from 0.71% to 0.80%, which would restore its 1985 share of IFC votes. 4. After the approval of the Special Capital Increase, several requests for additional shares have been granted by special Resolutionsof the Board of Governors. These allocations brought to 2,395,932 the total number of allocated IFC shares. Pakistan"s request, if approved, would lead to a further increase of 0.09% in the number of allocated shares. Consequently, the effect on the voting powers of other members would be minimal. Attachment I shows country shareholdingallocations and voting rights as a result of the 1991 General Capitai Increase, the 1992 Special Capital Increase, subsequent allocations,and those which would come into effect upon approval of the attached resolution. When subscribed, the proposed allocation would provide EFCwith $2,256,000 of additional share capital. 5. Shares subscribed by Pakistanunder this proposed allocationwould be issued from IFC's pool of 54,068 authorized and unallocated shares. Following approval of the resolution,IFC would have a balance of 51,812 authorized unallocatedshares.

6. I am satisfied that the following reconmmendationcomplies with the Articles cf Agreementof IFC. Recomrnendation: 7. I recommendto the Board of Directors: (a) That Pakistanbe authorizedto subscribean additional2,256 shares of IFC capital stock on the terms and conditionsspecified in the draft resolution 1 hereto. (b) That theDirectors approve, for circulationto the Boardof Governors, this Memorandumand the followingattached draft documents: (i) Reportof the Boardof Directorsto the Boardof Governors (ii) Draft resolution1 attached thereto for adoption by the Gover- nors; and (c) That the Secretary take such action as he shall deem necessaryor api ropriateto carry out the purposesof the foregoing.

"Seepage 242.

273 INTERNATIONAL FINANCE CORPORATION-SHARE ALLOCATIONS, DISTRIBUTION OF VOTES, AND RANKINGS WVITHTHE ADDITIONAL ALLOCATION OF 2,256 SHARES TO PAKISTAN

BEFORETHE PROJECTEDPOSITION PAIDSHIARES 1991 GENERAL 1991-)994ALLOCATIONS IF THE PROPOSAL ASOF CAPITALINCRE4SE ISADOPTED 12'J394

MEMBER Subscribed Votes 1991 Newv Other5 Totalsas of Vot.es. Rank Share Vores3 Rank Shores Votes2 COUNTRY Shtaresas as of 2 Capital Member- Sttbse- 7/1194 Alloca- of 5/03/92 5103/922 Increase ships queent (A)+(B)+ tion (A) (O) (C) (D) (C)+(D)

Afghanistan 244 0.03% 188 (133) 299 0.02% 131 299 0.02% 131 111 0.02% Albania 736 0.08% 566 1,302 0.06% 100 1.302 0.06% 100 962 C.07% Algeria 3,177 0.27% 2,444 5.621 0.24% 50 5,621 0.24% 50 3,177 0.19% Angola 837 0.09% 644 1,481 0.07% 93 1,481 0&07% 93 1,095 0.07% Antigua & Barbuda 13 0.02% 10 23 0.01% 166 23 0.01% 166 13 0.01%

Argentina 21,551 1.73% 16,578 38,129 1.57% 15 38,129 1.57% 15 28,182 157% Armenia 0 0.00% 0 1.769 1.769 0.08% 86 1,769 0.08% 86 0 0.00% Australia 26,751 2.14% 20,578 47,329 1.95% 12 47,329 1.95% 12 26.751 1A9% Austria 11,158 0.90% 8,583 19,741 0.82% 24 19,741 0.82% 24 14,590 0.82% Azerbaijan 0 0.00% 0 2,595 2,595 0.12% 70 2,595 0.12% 70 0 0.Q0%

Bahamas, The 251 0.03% 193 (109) 335 0.02% 129 335 0.02% 129 219 0.03% Bangladesh 5,108 0.42% 3,929 9,037 0.38% 41 9.037 0.38% 41 7.465 0.43% Barbados 204 0.04% 157 361 0.03% 128 361 0,03% 128 266 0.03% Belarus 0 0.00% 0 5,162 5.162 0.22% 52 5,162 0.22% 52 4,254 0.25% Belgium 27,446 2.20% 23,164 50,610 2.09% 11 50,610 2.08% 11 36.711 2.04% Belize 57 0.02% 44 101 0.01% 150 101 0.01% 150 84 0.02% Benin 67 0.03% 52 119 0.02% 147 119 0.02% 147 99 0-02% Bolivia 1,075 0.11% 827 1,902 0.09% 82 1,902 0.09% 82 1,406 0.09% Bosnia-Herzegovina 0 0.00% 609 620 1.229 0.06% 102 1,229 0.06% 102 0 0.00% Botswana 64 0.02% 49 113 0.01% 149 113 0.01% 149 113 0.02%

Brazil 22,314 1.79% 17,165 39,479 1.63% 14 39,479 1.63% 14 29,180 1.63% Bulgaria 1,789 0.16% 3,078 4,867 0.21% 54 4,867 0.21% 54 1,789 0.11% Burkina Faso 538 0.05% 414 952 0.05% 108 952 0.05% 108 432 0.04% Burundi 100 0.03% 168 268 0.02% 135 268 0.02% 135 100 0.02% Cameroon 1.075 0.09% 827 1,902 0.09% 82 1,902 0109% 82 885 0.06%

Canada 45,976 3.66% 35,366 81,342 3.35% 6 81,342 3.34% 6 60,122 3.34% Cape Verde 11 0.02% 8 19 0.01% 167 19 0.01% 167 15 0.01% Cenal African Rep. 67 0.03% 52 119 0.02% 147 119 0.02% 147 67 0.02% Chile 5,108 0.42% 3,929 2,673 11.710 0.49% 38 11,710 0.49% 38 6,678 038% China 9,115 0.74% 7,012 8,373 24.500 1.01% 22 24,300 1.01% 22 20,196 1.13%

Colombia 7,125 0.58% 5,481 12.606 0.53% 35 12,606 0.53% 35 10,413 0.59% Comoros 0 0.00% 8 I1 19 0.01% 167 19 0.01% 167 14 0.01% Congo, Republic of 147 0.03% 113 (16) 244 0.02% 138 244 0.02% 138 131 0.02% Costa Rica 538 0.06% 414 952 0.05% 108 952 0.05% 108 703 0.05% Cote d'lvoire 2,003 0.18% 1,541 3,544 0.16% 65 3,544 0.16% 65 2,516 0.15%

1 Members/iapin progress. 2 Votesbased on paid shares. 3 Votesbased on allocatedshrares. 4 Assumningcountries su bscribe to and payfor tileirfuillallocation. 5 Allocatedmembers/lip subscription, or speciatallocaxioni of sharesto e.isting members.or uripaidsubscribed shares ( ) releasedto pool of unallocatedshares. 6 Paidsiares belonigingto fosnia-Herzegovina ard FederalRepublic of Yugoslavia. INTERNATIONAL FINANCE CORPORATION-SHAREALLOCATIONS, DISTRIBUTION OF VOTES, AND RANKINGS WVITHTHE ADDITIONAL ALLOCATION OF 2,256 SHARES TO PAKISTAN

BEFORETHE PROJECTEDPOSITION PAIDSHARES 1991 GENERAL 1991-1994ALLOCATIONS IF THE PROPOSAL AS OF CAPITALINCREASE IS ADOPTED 12/194

3 MEMBER Subscribed Votes 1991 News OtherA Totals as of Votes! Rank Slhare Votes Rank Shores Votes2 COUNTRY Slharesas as of 2 Capital Menaber- Subse- 7/1194 Alloca- of 5103192 51031922 Increase ships qttetir (A)+(B)+ lion (A) (B) (C) (D) (C)+(D)

Croatia 1,856 0414% 1,428 (402) 2,882 0.13% 67 2,882 0.13% 67 2,310 0.14% Cyprus 1,209 0.12% 930 2,139 0.10% 75 2,139 0.10% 75 1,767 0.11% Czech Republic 5,038 0.42% 3,875 8,913 0.38% 43 8,913 0.38% 43 7,363 0.42% Denmark 10,487 0.85% 8,067 18,554 0.77% 25 18.554 0.77% 26 15,327 0.86% Djiboutli 21 0.02% 35 56 0.01% 158 56 0.01% 158 21 0.01%

Dominica 24 0.02% 1 42 0.01% 159 42 0.01% 159 35 0.02% Dominican Republic 671 0.07% 516 1,187 0.06% 103 1,187 0.06% 103 1,015 0.07% Ecuador 1.479 0.14% 1,138 2,617 0.12% 69 2,617 0.12% 69 1,706 0.11% Egypt, Arab Rep. oF 6,986 0,57% 5,374 12,360 0.52% 37 12,360 0.52% 37 10,210 0.58% El Salvador 24 0.02% 18 (13) 29 0.01% 164 29 0.01% 164 11 0.01*

Equatorial Guinea 43 0.02% 33 76 0.01% 154 76 0.01% 154 43 0.02% Estonia 0 0.00% 0 1,434 1,434 0.07% 96 1,434 0.07% 96 502 0.04% Ethiopia 72 0.03% 55 127 0.02% 146 127 0.02% 146 105 0.02% Fiji 162 0.03% 125 287 0.02% 133 287 0.02% 133 2.37 0,03% Finland 8,872 0.72% 6,825 15,697 0.65% 32 15,697 0.65% 32 12,967 0.73% France 68,400 5.44% 52,615 121,015 4.97% 4 121.015 4.97% 4 89,446 4.96% Gabon 931 0.09% 724 1,655 0.08% 90 1,655 0.08% 90 931 0.07% Gambia,The 77 0.02% 59 (43) 94 0.01% 152 94 0.01% 152 59 0.02% CGeorgia 0 0.00% 0 2,461 2.461 0.11% 71 2c461 0.11% 71 0 0.00% Germany 72,861 5.80% 56,047 128,908 5.30% 3 128,908 5.29% 3 95.281 5.28%

Ghana 2,242 0.20% 2,205 624 5,071 0.22% 53 5,071 0.22% 53 3,748 0.22% Greece 3,899 0.33% 2,999 6,898 0.29% 48 6,898 0.29% 48 4,499 0.26% Grenada 46 0.02% 35 81 0.01% 153 81 0.01% 153 53 0.02% Guatemala 671 0.07% 516 1.187 0.06% 103 1,187 0.06% 103 671 0.05% Guinea 294 0.04% 226 520 0.03% 120 520 0.03%7 120 339 0.03%

GCinea-Bissau 40 0.02% 31 71 0.01% 156 71 0.01% 156 18 0.01% Guyana 808 0.08% 622 1,430 0.07% 97 1.430 0.07% 97 1,056 0.07% Haiti 671 0.04% 516 (365) 822 0.04% 110 822 0.04% 110 306 0.03% Honduras 404 0.03% 311 (220) 495 0.03% 121 495 0.03% 121 370 0.03% Hungary 6,179 0.51% 4,753 10.932 0.46% 40 10,932 0.46% 40 9,032 0.51%

Iceland 24 0.02% 18 42 0.01% 159 42 0.01% 159 42 0.02% India 45,976 3.66% 35,366 81,342 3.35% 6 81.342 3.34% 6 60,122 3.34% Indonesia 16,131 1.30% 12,408 28,539 1.18% 18 28,539 1.18% 18 23,575 1.32% Iran, IslamicRep. of 816 0.08% 628 1,444 0.07% 95 1,444 0.07% 95 1,444 0.09% Iraq 147 0.03% 113 260 0.02% 136 260 0.02% 136 147 0.02%

1 Membersi/ipin progress. 2 Votesbased on paid shars, 3 Votesbased on allocatedshares. 4 Assumirircountries subscribe to andpayfor rheirfiull allocation. -5 Allocatedsae embers/hip subscription, or specialallacarioji of s/haresto e.ristingmembers, or unipaidsuibstribedshares( ) releasedio pool of unallocatedshares. 6 Paids/hares beloniging to Rosnia-Herzegovinaand FederalRepublie of Yugoslavia. INTERNATIONAL FINANCE CORPORATION-SHARE ALLOCATIONS, DISTRIBUTION OF VOTES,AND RANKINGS WVITHTHEADDITIONAL ALLOCATION OF 2,256 SHARES TO PAKISTAN

BEFORE THE PROJECTED POSITION PAID SHARES 1991 GENERAL 1991-1994ALLOCATIONS IF THE PROPOSAL AS OF CAPITAL INCREASE ISADOPTED 12/13J94

MEMBER Subscribed Vores 1991 Nesw Otder5 Totals as of Votes3 Rank Sliare Votes) Rank Shares Voaes2 COUNTRY Shjaresas as of Capital Member- Sitbse- 71/194 Alloca- of 5103192 5/031922 Increase ships quen: (A)+(B)+ dion (A) (B) (C) (D) (C)+(D)

Ireland 729 0.08% 561 1,290 0.06% 101 1,290 0.06% 101 1,066 0.07% Israel 1,207 0.12% 928 2,135 0.10% 77 2,135 0.10% 77 1.579 0.10% Italy 45,976 3.66% 35,366 81,342 3.35% 6 81,342 3.34% 6 60,122 3.34% Jamaica 2,420 0.211% 1,862 4,282 0.19% 57 4,282 0.19% 57 3.660 0.22% Japan 79,794 6.35% 61,380 141,174 5.80% 2 141,174 5.79% 2 120,714 6.69%

Jordan 941 0.09% 724 1,665 0.08% 88 1,665 0.08% 88 941 0.07% Kazakhstan 0 0.00% 0 4,637 4,637 0.20% 55 4,637 0.20% 55 2,031 0.13% Kenya 2,284 0.20% 1,757 4,041 0.18% 59 4,041 0.16% 59 3,337 0.20% Kiribati 7 0.02% 5 12 0.01% 170 12 0.01% 170 7 0.01% Korea,Republic of 9,013 0.73% 6.933 15,946 0.66% 31 15,946 0.66% 31 11,7E6 0.67%

Kuwait 4,533 0.38% 7,652 5,414 17,599 0.73% 26 17,599 0.73% 27 9.947 056% KyrgyzRepublic 0 0.00% 0 1,720 1,720 0.08% 87 1,720 0.08% 87 1,267 0.08% Lao PDR 157 0.03% 121 278 0.02% 134 278 0.02% 134 229 0.03% Latvia 0 0.00% 0 2,150 2,150 0.10% 74 2,150 0.10% 74 753 0.06% Lebanon 50 0.02% 85 135 0.02% 145 135 0.02% 145 50 0.02% Lesotho 40 0.02% 31 71 0.01% 156 71 0.01% 156 71 0.02% Liberia 182 0.03% 140 (99) 223 0.02% 139 223 0.02% 139 83 0.02% Libya 55 0.02% 93 148 0.02% 144 148 0.02% 144 55 0.02% Lithuania 0 0.00% 0 2,341 2,341 0.11% 72 2,341 0.11% 72 1,724 0.11% Luxembourg 1.209 0.12% 930 2,139 0.10% 75 2,139 0.10% 75 V,581 0.10%

Macedonia,FYR of 345 0.04% 266 (75) 536 0.03% 119 536 0.03% 119 270 0.03% Madagascar 244 0.04% 188 432 0.03% 126 432 0.03% 126 370 0.03% Malawi 1,030 0.10% 792 1,822 0.08% 84 1,822 0.08% 84 1.346 0.09% Malaysia 8,604 0.70% 6,618 15,222 0.63% 33 15,222 0.63% 33 1l,25O 0.64% Maldives 9 0.02% 7 16 0.01% 169 16 0.01% 169 13 0.01%

Mali 255 0.04% 196 451 0.03% 124 451 0.03% 124 333 0.03% MarshallIslands 0 0.00% 0 727 727 0.04% 115 727 0.04% 115 381 0.03* Mauritania 121 0.03% 93 214 0.02% 142 214 0.02% 142 214 0.03% N) Mauritius 941 0.09% 724 1,66i 0.08% 88 1,665 0.08% 88 1,376 0.09% Mexico 13.175 1.06% 10,135 4,279 27,589 1.14% 19 27,589 1.14% 19 17.229 0.97%

Micronesia 0 0.000% 0 744 744 0.04% 114 744 0.04% 114 744 0.05% Moldova 0 0.00% 0 2,125 2,125 0.10% 78 2,125 0.10% 78 0 0.00% Mongolia 144 0.03% 246 390 0.03% 127 390 0.03* 127 144 0.02% Morocco 5,108 0.42% 3,929 9,037 0.38% 41 9,037 0.38% 41 7,466 043% Mozambique 182 0.03% 140 322 0.02% 130 322 0.02% 130 322 0.03%

/ Meimibershipin prmgress. 2 Voresbased on paid shares. 3 Votesbased on allocatedshares. 4 Assiuninigcounlfries stibscribe to aid payfor theirfili allocation. 5 Allocatedrmembership srbscription, or specialallocation of sharesso existinigpuemzbers, or unipaid.subscribedshares ( ) releasedto pool of unallocatedshares, 6 Paidsthares belonging to Bosnia-Herzegovimaand FederalRepuiblic of Yugoslavia. INTERNATIONAL FINANCE CORPORATION-SHARE ALLOCATIONS, DISTRIBUTION OF VOTES, AND RANKINGS WITH THEADDITIONAL ALLOCATION OF 2,256 SHARES TO PAKISTAN

BEFORE THE PROJECTED POSITION PAID SHARES 1991 GENERAlL 1991-1994 ALLOCATIONS IFTHEPROPOSAL AS OF CAPITAL INCREASE IS ADOPTED 12/13/94

MEMBER Subscribed Voles 1991 Vesw Other5 Totals as of Vores3 Ranik SJare Vores3 Rank Slhares Voies2 COUNTRY Slares as as of Capital Member- Su5bse- 7/1194 AlIoca- of 5/03/92 5/03922 Increase ships quenir (A)+(B)+ lion (A) (B) (C) (D) (C)+(D)

Myanmar 666 0.07% 1,124 1,790 0.08% 85 1,790 0.08% 85 666 0.05% Namibia 404 0.05% 693 1,097 0.06% 106 1,097 0.06% 106 404 0.04% Nepal 306 0.04% 516 822 0.04% 110 822 0.04% 110 512 0.04% Netherlands 31,726 2.54% 24.405 56,131 2.31% 10 56,131 2.31% 10 41,488 2.31% New Zealand 2,025 0.18% 1,558 3,583 0.16% 61 3,583 0.16* 61 2,025 0.13%

Nicaragua 404 0.05% 311 715 0.04% 116 715 0.04% 116 404 0.04% Niger 147 0.03% 113 260 0.02% 136 260 0.02% 136 147 0.02% Nigeria 12,233 0.99% 9,410 21,643 0.90% 23 21,643 0.90% 23 15,997 0.90% Norway 9,947 0.81% 7,652 17,599 0.73% 26 17.599 0.73% 27 14,540 0.82% Oman 671 0.07% 516 1.187 0.03% 103 1,187 0.06% 103 981 0.07%

PakIstan 9,679 0.79% 7,445 17,124 0.71% 28 19,380 25 17,124 0.96%

Panama 755 0.05% 581 (329) 1,007 0.05% 107 1,007 0.05% 107 643 0.05% Papua New Guinea 1,075 0.06% 827 (585) 1,317 0.06% 99 1,317 0.06% 99 490 0.04% Paraguay 270 0.04% 208 478 0.03% 122 478 0.03% 122 395 0.04% Peru 3,899 0.19% 2.999 5,898 0.29% 48 6,898 0.29% 48 5,698 0.33% Philippines 7,125 0.58% 5,481 12,606 0,53% 35 12,606 0.53% 35 7,125 0.41% Poland 4.090 0.34% 3,146 7.236 0.31% 45 7,236 0.31% 45 6,187 0.36% Portugal 4,705 0.39% 3,619 8,324 0.35% 44 8,324 0.35% 44 6,151 0.35% Romania 1,504 0.14% 1,157 2,661 0.12% 69 2,661 0.12% 68 2,198 0.14% RussianFederation 0 0.00% 0 81,342 81,342 3.35% 6 81.342 3.34% 6 67,054 3.72%

Rwanda 671 0.04% 516 (365) 822 0.04% 110 822 0.04% 110 306 0.03% Saint Lucia 42 0.02% 32 74 0.01% 155 74 0.01% 155 61 0.02% Sao Tome e Principe 0 0,00% 338 439 777 0.04% 113 777 0.04% 113 0 0.00% SaudiArabia 14.447 1.17% 15,615 30,062 1.24% 17 30,062 1.24% 17 20,693 1.16% Senegal 1,551 0.11% 1,193 (445) 2,299 0.10% 73 2,299 0.10% 73 1.106 0.07%

Seychelles 15 0.02% 12 27 0.01% 165 27 0.01% 165 27 0.02% Sierra Leone 182 0.03% 140 (99) 223 0.02% 139 223 0.02% 139 83 0.02% Singapore 177 0.03% 298 475 0.03% 123 475 0.03% 123 177 0.02% t'i Slovak Republic 2,519 0.22% 1,938 4,457 0.19% 56 4,457 0.19% 56 3,681 022% °° Slovenia 1.022 0.08% 785 (222) 1,585 0.08% 92 1,585 0.08% 92 1,271 0.08%

Solomon Islands 19 0.02% 18 37 0.01% 161 37 0.01% 161 24 0.02% Somalia 182 0.03% 140 (99) 223 0.02% 139 223 0.02% 139 83 0.02% SouthAfrica 9,014 0.73% 6,934 15.948 0.66% 30 15,948 0.66% 30 11,786 0.67% Spain 20,928 1.68% 16,098 37,026 1.53% 16 37,026 1.53% 16 30,586 1.70* Sn Lanka 4,033 0.34% 3,102 7,135 0.30% 46 7,135 0.30% 46 5,894 0.34%

1 MembershilpIn progress. 2 Votesbased on paid shares. 3' Votes based on allocated shares. 4 Assumippingcointiries subscribe to aiiil pay for theirfuill allocatioln. -5 Alocated rmembershipsubscription, or special allocation of siares to e.istinig memibers or tiuipaidsubscribed stares ( ) released ro pool of unallocated shares. 6 Pald shores belonging to Bosita--Herzegovinaaond Federal Republic of Yugoslavia. INTERNATIONAL FINANCE CORPORATION-SHARE ALLOCATIONS, DISTRIBUTION OF VOTES, AND RANKINGS WITH THEADDITIONAL ALLOCATION OF 2,256 SHARES TO PAKISTAN

BEFORE THE PROJECTED POSMTMON PAID SHARES 1991 GENERAL 1991-1994ALLOCATIONS IF THE PROPOSAL AS OF CAPITAL INCREASE ISADOPTED 12t13t94

MEMBER SUbscribed Votes 1991 Newv Other5 Totalsasof Votes- Rank Share Votes' Rank Shares Voles2 COUNTRY Shlaresas as of Capiial Mtenmber-Sutbse- 7/1194 Alloca- of 5103/92 5/031922 Increase ships qtenit (A)+(B)+ tion (A) (B) (C) (D) (C)+(D)

Sudan 244 0.03% 188 (133) 299 0.02% 131 299 0.02% 131 III 0.02% t-i Swaziland 404 0.05% 311 715 0.04% 116 715 0.04% 116 684 0.05% *sz Sweden 15,191 1.22% 11,685 26,876 1.11% 21 26,876 1.11% 21 19,865 1.11% Switzerland 0 0.00% 18,078 23,502 41,580 1.72% 13 41,580 1.71% 13 30,733 1.71% Syrian Arab Republic 72 0.03% 122 194 0.02% 143 194 0.02% 143 72 0.02%

Tajikistan 0 0.00% 0 1,647 1,647 0.08% 91 1,647 0.08% 91 1,212 0.08% Tanzania 1,589 0.09% 1,222 (692) 2,119 0.10% 80 2,119 0.10% 80 897 0.06% Thailand 6,184 0.51% 4,757 10,941 0.46% 39 10,941 0.46% 39 9,355 0-53% Togo 808 0.08% 622 1,430 0.07% 97 1,430 0.07% 97 808 0.06% Tonga 19 0.02% 15 34 0.01% 163 34 0.01% 163 28 0.02%

TrinidadandTobago 2,324 0.20% 1,788 4,112 0.18% 58 4,112 0.18% 58 3,039 0.1s% Tunisia 2,014 0.18% 1,552 3,566 0.16% 64 3,566 0.16% 64 2,945 0.18% Turkey 8,221 0.67% 6,324 !4,545 0.61% 34 14,545 0.61% 34 8,221 0.47% Turkmenistan 0 0.00% 0 1,476 1,476 0.07% 94 1,476 0.07% 94 0 0.00% Uganda 1.613 0.08% 1,241 (878) 1,976 0.09% 81 1,976 0.09% 81 735 0.05% Ukraine 0 0.00% 0 16,945 16,945 0.71% 29 16.945 0.70% 29 5,931 034% UnitedArab Emirates 2,569 0.22% 3,102 1.464 7.135 0.30% 46 7.135 0.30% 46 4,033 0.24% United Kingdom 68,400 5.44% 52,615 121.015 4.97% 4 121.015 4.97% 4 99,969 5.54% United States 321,823 25.53% 247,556 569.379 23.36% 1 569,379 23.34% 1 420,353 23.25% Uruguay 2.017 0.18% 1,552 3,569 0.16% 63 3.569 0.16% 63 2.950 0.18% Uzbekistan 0 0.00% 0 3,873 3.873 0.17% 60 3,873 0.17% 60 3.193 0.19% Vanuatu 55 0.02% 42 97 0.01% 151 97 0.01% 151 55 0.02% Venezuela 15,593 1.26% 11.995 27,588 1.14% 20 27,588 1.14% 20 15.593 0.88% Viet Nam 364 0.03% 280 (198) 446 0.03% 125 446 0.03% 125 166 0.02% WesternSamoa 20 0.02% 15 35 0.01% 162 35 0,01% 162 26 0.02* Yemen, Republic of 404 0.05% 311 715 0.04% 116 715 0.04% 116 528 0.04% Yugoslavia,F.R. of (Serbia/Montenegro) 0 0.00% 1,772 1.803 3,575 0.16% 62 3,575 0.16% 62 0 0.00% Zaire 4,233 0.19% 3,256 (2,074) 5,415 0.23% 51 5,415 0.23% 51 2,159 0.13% Zambia 1,286 0.12% 2,171 3,457 0.15% 66 3.457 0.35% 66 1,286 0.08% Zimbabwe 1,198 0.11% 922 2,120 0.10% 79 2,120 0.10% 79 1.566 0.10% TOTALS(A) 1,234,039 100.00% 987,136 148,696 26,061 2,395,932 100.00% 2,398,188 99.20% 1,768,478 100.00% AuthorizedCapital (B) 1,300.000 2,450,000 2,450,000 2.450,000 Balance(B)-(A) 65,961 54,068 51,812 681.522 of which Allocatedunsubscribed 23,952 75,892 Subscribedunpaid shares 672 551,395 Paid shares 2,423 2,423 Unallocatedshares 38,914 54,068 51,812 51,812

MMembers/lip In progress. 2 Votes based on paid shares. Votes based on allocatedshares. 4 Assunmirngcountries subscribe to and payfor rheirfidti allocation. S Allocated m2embershipsubscription, or special allocation of slares to existintgmembers ort npaid subscribedsshares( ) releasedtopoolofunallocatedshares. 6 Paid shares belonging to Bosnia-Herzegoviiaaand Federal Republic of Yugoslavia. ACCREDITEDMEMBERS OF DELEGATIONSAT 1995ANNUAL MEETINGS

Afgiwnistan= Adviser Govenjor E. MaravilhosoBucharus AhmnadRa-shidi PcdroBuptista Luis Coca da Fonseca AlterniateGovernor Miguel Bastos dc Almeidu GvHilarioDomingos MohummadEhsan Manucl Domingus Agostinho Fernandes Adviser Sabino Pereim Fwcroz MohamadHakim Nazare Ferreira AntonioaPranca Albania Carlos Gomet Governor Antonio da Silva Inacio Manuel Francisco Gomes Maiato Dylber Vrioni Adriano Rafael Pascoal Pedro Maianga3aPuna Alternate Governor Francisco Luis Rosario Edmond Leka

Adviser Antigs and Barbuda# = Baki Berberi Governor Palok Kolnikaj Molwyn Joseph

Algerin = Adviser Governor Patrick A. Lewis Ahmed Benbitour Alfernate Governor Argentina Ali Hamdi Governor Hadj Babaami * Roque Benjamin Fernandez

Adviser AlernmateGovernor Hadj Osmane Bencherif Ricardo Gutierrez Lahcene Bessikri Kacim Brachemi ++ Adviser MerouaneDjebbour Carlos Abihaggle MohamedEl Hanani Elias Horacio Alvarez Rivero Sid AmarLazli Tomas Anchorena Ms. Oum-EI-KheirOuaoua Miguel Alberto Ballestrini Pablo Barone Angola Nestor Mario Bosio Juan Ramon Branchi Governor Ricardo Branda Jose Pedro de Morais Jorge Joaquin Cendoya Jose Antonio Costa Altenate Govemor Joaquin A. Cottani Ms. Marinela Martins Amaral Ribas Miguel d'Alessandro

* TcmporAmy o No a rmmbcrof IFC * Not a memberof IDA = No amember ofMIGA * ExecutiveDrcetor ++ Altcnwte ExecutivcDircrtor

284 Tomas Ferrari David Cox Rodolfo Frigeri John KennethDavidson SantiagoJose Galindw. Phil CIarton Adrian Gomez GaryJohnston Santos Goni Marcnico Christopher Y. Legg ++ PabloE. Guidotti Ms. Barbara Livescy Ms. Ana Kessler Don Ru,sell Ms. Nocmi La Greca Ncvilic Worland Oscar Lamberto Oscar Alfredo Machado Daniel Martin Austria Ms. Amalia Martinez Danicl Mt ino A tenriaeGovernor Julio Nogucs + Hans-DietmarSchweisgut Ms. Susana Olgiati Harald Sitta * Enrique Olivera HoaMciOPernasetti Adviser Jorge Rcmes Lenicov Georg Lennkh Jesus Rodriguez Walter Mayr Pablo Rojo Walter Rill + Juan Carlos Romero Luis Rotacche Claudio Augusto Sebastiani Azerbaijan Ms. Cristina Uchara Nicolas Weisz-Wassing Govemnor A. Guillermo Zoccali Elman Siradjogly Rustamov Attemale Governor Armenia= Fuad Akhundov Governor Andranik Andreassian AdviserOktay Heybatov Altemate Governor BagratAsatryan The Bahamas # Adviser Governor Vladimir Manoyan William C. Allen

Al(emale Governor Australia = Mrs. Ruth Millar Governor Ralph Willis Adviser Ms. Sheila Carey Alternate Governor Paul Feeney BruceLawrence Davis *Edgar N. HallI Neil F. Hyden * Zhivarog Laing Graeme Thompson * Adviser Bahrain # Frank Campbell Governor David Clark Ibrahim Abdul Karim

*Termpoary o Not a mcn)beror IFc 1 Not a newbr of IDA = Not a tnctnher of MIGA + ExecutiveDiectow Alterntc ExecutiveDirector

285 Alternate Govemor Alremate Governor Rashid IsmailAl-Meer * Nikolai FilippovichRunas

Adviser Adviser AbdullaIsa Hasan Al-Binali GennadiAleinikov Luc Hubleue+ ValeriJoudra Bangladesh MikhailV. Nikitanko

Governor M. Saifur Rahman Belgium

Afrerna:eGovernor Governor MuhammadLutfullahil Majid PhilippeMaystudt Md.Tawfiq Chouwdhury * K.M.Ejazul Huq Alternate Governor HIumayunKabir * Alfons Verplaetse Mushfiqur Rahmran *+q Adviser Adviser Gino PierreAlzetta ToufiqAli Ms. HilianaCoessens A.M. ZahiruddinKhan Ms. Anne de Gang GaziulHasan Khan BernardDelbecque Abul Maal A. Muhith Kurt Delodder MizanurRahman Louisde Montpellier SalmanF. Rahman Ms. Marciade Wachter

Belize Barbados# Alternate Governor Governor Mrs. YvonneS. Hyde OwenS. Arthur Adviser Alternate Governor Jaime D. Alpuche GeorgeLincoln Reid ClaudeHaylock Joseph D. Waight Adviser CourLneyN. Blackman Benin CarlstonB. Boucher Govemor Ricardo Browne Paul Dosson WinstonA. Cox ++ ClevistonL Haynes CarlosA. Holder Alterate Governor Rupert DelisleWorrell Robert Tagnon WallisMamoudou Zoumarou *

Bdarus# Adviser Ms. RosemondeAdjibi Governor Jules Ahodekon Pavel Dzik RheticeFranchy Dagba

* Tcnporay o> Nota menberator N Nota memberoF IDA = NotamembcrofMlGA * ExecudvcDircctor 4i Altenate ExecudveDitor

286 YacoubaFassassi Adviser SouleymaneGado Jose Ricardo do Costa AguiarAlves FructueuxGnansounou Ms. Maria Cclina B. Arracs Francis Loko Fabiode Olivcira Barbosa Lucien Tenoukouin BenvindoBelluco Regis Baoncii Ms. Elik!naA. Cardoso Bhutan v= Carlos ltnrique Moojende Abrcu a Silva Governor ValderyFrota do Albuquerque Dorji Tshering Carlos EduardoDutra MarcioJoao de Andrade Fornes Alternate Governor Mrs. MariaAparecida Grendene Yeshey Zimba do Souza Marcio CardierMarques Ms. Maria Silvia BastosMarques Bolivia LourencoAlonso Martins Geraldo Jose da CamaraFerreira Melo Governor Luis Carios MoreimCabral Juan FernandoCandia Castillo Helio Mori Murilo Portugal Alternate Gouernor OrlandoLeite Ribeiro Juan C. Aguilar Sergic RuffoniGuedes Elcior Ferreira de Santana Filho Adviser Ney RobinsonSuassuna JaimneCoronado 'ac RoTc Zagury Manuel Decornis Brunei o4#= Botswana Alternate Governor AhmadWally Skinner Governor Chua Pheng Siong * FestusG. Mogae Adviser Alternate Governor Hj Jefri bin Hj Mohd. Salleh O.K. Matambo Ms. Honeytabinti Haji Mustapha

Adviser Michael OtsileMolefane Bulgara # Governor Brazil Dirnitar Kostov Governor Alternate Governor Pedro SampaioMalan Mileti Mladenov

Alternate Governor Adviser Gustavo J. LaboissiereLoyola Marin BogdanovBogdanov Marcos C. de Paiva *+ SnezhanaBotusharova Gustavo Henriquede Barroso Franco * LubomirChris.ov Alexandre Kafka *+ Peter Gueorguiev Djodjov Luiz Afonso Simoensda Silva * Ivan Gospodov

* Taupmury o Not a membcrof l} * Not a memberof IDA = Not a ember ofMGA 4 Execuivc Dir +F AlkcrnateExecutive DirCtor

287 Plamen SpassovIlchev Alternate Govenor Todor Marinov Staykov Amidou Marafa * Mrs. Olga Paviova DencovaTeneva Jerome Mendouga'

Burkina Faso Adviser Francois-XavierEloundou Governor Edouard Etori A Z1ang Bissiri Joscph Sirima Andre-BlaiseKesseng a MbaLssa Andrc Koung a Yombi A(ten afe Governor Martin Mbeng Patrice Nikiema Mrs. Martha Angeline Minja Roger Mbassa Ndine Adviser Jean Philippe Njeck Charles Baba Gomina Isaac Njiemoun Saidou MaharnadiOuedraogo bosephTcdou SouleymenaOuedraogo Canada Burundi = Govemor Goveror Paul Martin Sralvalor Toyi SAernate Governor Alientate Governor Ms. HuguetteLabelle Nestor Ntungwanayo Leonard Good *+ Douglas Peters * Adviser erard Niyibigira Adviser Gaspard Sindayigaya Mostafa Askari Ms. Nathalie Gauthier Ms. Jill E. Johnson Cambodiao= Paul Labbe Governor SoeBenoit Lin La Bonte Keat Chhon Peter Mousley Gary Pringle Alternate Goveror Roger Pruneau Sun Chan Thol David C. Sevigny Aun Porn Moniroth * Jerry Zypchen

Adviser Var Houth CapeVerde Mao Chan Samnom Govemor VongseyVissoth Antonio Gualberto do Rosario

Cameroon Adviser Alexandre Vieira Fontes Governor Manuel de Iesus VarelaNeves Justin Ndioro Henrique RodriguesCorreia Pires

* TeMporary o Nota mnembeofr tFC r Not a memberof IDA = Nota memnberof MIGA + ExecuiveDirector AltenateExecutive Diretor

288 CentralAfricanRep. Alternate Governor Governor Jin Lqun DogoNendje Bhc Zhang Shengman*+ Zhao Xiaoyu * AlternateGovernor Zhu Guangyao *++ EmmanuelDok-ouna Adviser Cui Ti:mkai Adviser Feng Jingbac NdingaGaba Peng Yiping Ms. IsabelleGouyonigbia-Zeze Sheng Baoliang Hcnry Koba WangXiaolong Ms. Lucienne Perriere Wu Jinkang GregoireZowayc Zhang Wencai Zhang Yuebin Ms. Zou Jiayi Chad o= Zou Zhongwei Governor Ms. Mariam MahamatNour Colombia_ Governor Alternate Govemor Hassan Adoum Bakhit GuillermoPerry Rubio Alternate Governor Adviser Jose AntonioOcampo Gaviria SouleymanAbdoulaye Clementedel ValleBorraez * BicharaCherif Daoussa Carlos Lieras de la Fue tc * Lemayc Favitsou-Boulandi Armando Montenegro*+ Ahmat Mahamat Saleh DiegoPizano * Hassan Ousmane LeonardoVillar Gomez *

Adviser Chile Julio CesarAngel Goveror M. CarmenzaArenas EduardoAninat Ms. Isabella Banrios Morales Alberto Carrasquilla

Alternate Governor Ms.Sergio Pacricia ClavijoCorrea Jose PabloArellano Ms. Monica EcheverriCardoso Cesar Gonzalez-Munoz Adviser Victor Manuel Hoyos Salanr Alejandro Foxley Manuel MartinezR. Felipe Perucci Alberto MontoyaPuyana Andres SanfueniesVergara Camilo Salazar L Andrcs R. Solimano Carlos WolffIsam

China Congo Governor Governor Liu Zhongli Nguila Moungounga-Nkombo

* Ternpo-y o Not a memberof IFC * Not a memberofIDA = Not a memberof MIGA + ExccutiteDoaoor AlternateExecutive Director

289 Alternate Governor Jonathan Caldcott Jean Christophe BoungouBa.ika MoustaphaDiabi YahotDjelhi Adviser Nocl Eliamon Amphas-MampouaMbow Clement Elln Fidele Emile Kaya Ms. Jocelyne Gaelic Gauzc Prosper Kissingou Charles Gomis Ange Gaston Mabiala-Ngoulou Pascal Kanga lpou Robert Masamba Debat Lambert Fch Kesse Gilbert M'Pclc-Mantsila KoumoucKoffi Moise Emmanuel Ngono KounmeKouassi Dzaba Nieme Michel Leblanc Lambert Nzaba N'Guessan Martin M'Boua Ms. JacquelineClaire Nzalankazi Diagna NWDiaye Esso Elie Nomel Jean-CharlesSery CostRica DaoudaTanoan Francois Yno Governor Ms. Honorine Yaoua-Kouman Fernando HerreroAcosta icannot Zoro Bi Bah

Alternate Governor Cmatia Mrs. Sonia Picado * Ms. Sylvia Saborio * Goveror Marco AntonioVargas Diaz * Bozo Prka

Adviser Aliernate Governor Oscar Acuna Josip Kulisic Luis Libennan Ginsburg Barislav Skegro * Luis LukowieckiG. Edwin Martinez Adviser Javier Sandoval Chaves Ms. Vladimira Ivandic Boris Segura Nenad Porges Otton Solis Fallas Dubravko Radosevic Petar Sarcevic Marko Skreb Coted tlvoire Governor Cyprus N'Goran Niamien Alterate Governor

Alternate Governor Leslie G. Manison * KonanVictor Kouame SymeonMatsis * Adviser Adrviser AndrewJ. Jacovides Robert Adingra Eugene AmouinKouakou Koikou Felix Assamoi CzechRepublic MichelAssamoua Noel Assohoun Governor Roger Boua Ivan Kocarnik

* Tmpory o Not a ncmberof I FC a Not amcmber of IDA = nouinmbarof MIGA + EzecutiveDircktor +4- AltemateExecutive Director

290 AlternareGovernor DominicanRepublic = Jan Vit Governor Adviser Hector Manucl ValdezAlbizu Ms. LumirmKaflkova Alternate Govpernor Ludek Niedernayer Ms. Alena Radkova Ramon Cacercs Troncoso Jiri Vctrovsky Adviser Miroslav ZarnecnikAdie MiroslacZaccniky Ms. Clarinsa de la Rocha de Torrs Michael Zaniovsky Ms. Gladys M. Santana S.

Denmark Ecuador Governior Ole LoensmannPoulsen Governor Ivan Andrade Apunte Alternate Govemor Ms. Jete Egelund Alternare Governor Luis 1. iacome * Adviser Kaare E. Janson Adviser Frode Neergaard Miguel Babra Lyonl Mogens Svahn Leopoldo Baez Carrera Knud-Erik Tygesen Felipe Cordovez Escobar Jorgen F. Varder ++ Modesto V. Correa San Andres Adam Wolf Ms. Maria del Cannen de Guzman de Morla oGlennGoldhagen Djibouti= Pedro L. Gomez-CenturionRizzotti Governor Leenidas Ortega Trujillo MohamnedAli Mohamed Luis Alberto Ortega Trujillo Edison Ortiz-Duran Alternate Govemor Arturo Quiroz Martin Ms. Hawa Ahmed Youssouf Cesar Robalino Gonzaga Fernando Salazar Anrare Adviser Simon Mibrathu Egypt Roble Olhaye Hassan Mohamed Sougal Govemor Kamal Ahmed El Ganzoury Dominica Alternate Governor Governor YoussefBoutros Ghali Edison C. Jmes Adviser Alternate Governor Ms. Nadia Abdel Azim Gilbert W%illiams Mohamed Ahmed Dawood Riad El Badawy Adviser Ahmed MahrmusEI-Darsh James Fleming Ahnied Maher El Sayed Atherton E. Martin Mrs. Arnina Ghanem J. Bernard Yankey Abdel Wahab Heikal

* Tempmary o Not a mcetbr of IFC # Not a memter of IDA = Not a meniberof MliGA + Executive Director w. Alhcnate Executive Direcor

291 AhmedAdei Hosny Adviser Alan Khalil AgatcDalton Omar Mohanna Act Kull Fuad Shaker Martin Poder AlanShalaby MadisUurike

El Salvador Ethiopia Goveroor Manuel Enrique Hinds oavernor SutianAhmcd AlternateGovernor Ms. MariaTeresa 0. de Rendon * Alternate Governor Ginna Bimt Adviser Claudio M. de Rosa Adviser RobertoJimenez Ortiz '- Amare Gebrewold Ms. Nelly Lacayo-Andcrson BerhaneGebre-Chnstos Ana Cristina Sol TadeleTcferra

Equatorial Guinea Fiji Governor Manuel-EnriqueKing Somo GovernorBerenadoVuniboba Alternate Governor FelipeHinestrosa Dkaka literate Governor TevilaK. Banuve Adviser PastorMicha Ondo Bile Adviser DamianOndo Mane SolomoneS. Kotobalavu

Eritma= Finland Governor Governor Haile WoSdense lirmViinanen

Alternate Governor Alternate Governor GebreselassieYosief MauriEggert

Adviser Kari Nais * Negash Afworki Kjell Peter Soderlund* Adviser Estonia# RaimoAnttola Mrs. Inga-MariaGroehn Governor VVeikkoKantola Mart Opmann Ms. Taina Sinikka Kiekko Rune Lindholm Alternate Governor Ms. Kaarina Rautala Enn Pant Jukka Robert Valtasaari

Temporary o Not amembar of IFC * Not a memberof IDA Nota mcmbcrof MIGA + ExecutiveDin ctor 4* AltenateEJLecutive Dircor

292 France Adviser Governor PaulMichacl Boundoukou-LathaAdande Jean .rthuis Ms. Marie-LouiseEnic Koombila Jean Eudes Regis Immongault AlwernateGovernior Ms. Martinc Mabiala Jean LemicrreAutheman Picrre Blaisc Mboula Marc-Antoine *+ Jean B3runoModoko FarancisMayer HyacintheMounguengui-Mouckaga Jean de Dicu Mounguenou Luc Oyoubi Adviser PascalYoubi-Lugha MichelAlbert Philippe Ayoun Jean Bensaid TheGambia Jean-FrancoisBoittin Francois Bujon de l'Estang Governzor Arnaud Chneiweiss++ Bala Garba-Jahumpa Bruno Deletre Bertrand de Mazieres AtrenuiceGovernor Pierrc Duquesne Alicu M. N'gum Michel Filhol Thierry Francq A Jacques Godfrain Adviser Francois Haas TombongSaidy Marc Lautre Danicl Maitre Antoine Merieux Georgia Philip Minns Mrs. DanielleNoirclerc-Schoenberg Governor ChristianNoyer David lakobidze ChristianOquet Mrs. Helene Paris AlremrateGovemor Jean-PierrePatat Vladimer Papaya * Guy Pontet Annand Pujal Adviser L. Rigouzzo Jean-MichelSeverino George Makharadze Ms. StephanieSeydoux IramkiManagadze Jean-MarcSimon MamukaTsereteli Marc-OlivierStrauss-Kahn Hcnri-LucThibault Germany Governor Gabon= Carl-DieterSpranger Governor Pierre-ClaverMaganga Moussavou AlrernateGovernor JuergenStark GerhardBoehmer * Alternate Governor Fritz Fischer *+ Richard Auguste Onouviet Eberhard Kurth *

* Temporary o Not a mczbcr o IFC t No, a mmiber of IDA = Not a memier of MIGA + Exacutivc Direlor AlternateExecutive Director

293 Adviser Spyros P. Papanicolnou Ms. Ute Armns PanugiotisA. Pliatsikas Hans-Pcter lsaur CharalambosStamatopoulos Ms. WValtraudB:"cink KonstantinosStamoulis Ms. Barbara Eckrich AnastusiosG. Tzavellas Ms. Sabine Hader Hans Cli. Hammann Grenada KarstenHinrichs Hubert Knirsch Governtor DiectrichKurth Linus SpenccrThomas Nikolaus Lambsdorff Gernit Hermann Mittler Alternate Govemnor Harald Rehm CaneLonHood Ms. Ina Ruthenberg VolkerSchlegel Adviser Manfred Schubert Denis Campbell Gerhard Sennlaub BcrndSiegfried AndreasTrautvetter Guatemala = Sepp-JuergenWoelker Governor Mrs.Ana F. Ordonezde Molina Ghana Adviser Governor Ms. Sylvia Beatriz Barrios Palacios Richard Kwatne Pcprah Julio Roberto Suarez Guerra

AlternateGovernor VictorSelormey Kwesi Botchwey * Governor Michel Kamano Adviser Emest Ako-Adjei Alternate Governor Fred Apaloo Madikaba Camara Ste:veDatdzic PercivalAlfred Kuranchie Adviser WilliamK. Whitworth Elhadji Mamadou Bobo Baide KazaliouBalde Greece Ms. Fatima Kassory Bangoura FrederickBangoura Governor IbrahimaCamara YannosPapantoniou Alkall M. Daffe AbdoulayeDiallo Alternate Governor Alpha Ousmane Diallo YannisStournams lbrahima KassoryFofana YoussoufSylla Adviser Sekou Traore Stefanos Avgouleas Eugene Calafatis Guinea-Bissau= Ms. Helen Kraia Pericles Loukopoulos Govemor CharalambosMachairidis Rui Dia de Sousa

* Temporsy C Nomamember oF IFC Not a member of lDA = Nc mcmbcroTMIGA + ExecutiveDirector +s AlternateExecufive Direcor

294 Alternate Governor Alerirate Governor IssufaSanha AlmosKovacs Fri gycs Harshcgyi * Adviser Alfredo Cabrji Adviser Aristides Games Mrs. Katalin Demecer Paulo Fernando Games Gabor Hidvegi Peter Mihalyi Mrs. Eva Tarjan Guyana Ms. Agnes Vargha Govenior Bharrat Jagdeo =

AlternateGovernjor Governor Clyde Raymond Roopchand * Fidrik Sophusson

Haiti= Alternate Governor Goventor Thorkell Helgason * Franck Lanoix Adviser AlternateGovernor Bolli Thor Bollason HilmarThor Hilmarsson Henry Cassion * Sigurgeir Jonsson Thorsteinn Olafsson Adviser Ms. MargaretteCharles Henry Robert Dubois India Narcisse Fievre Robert Jean Governor Frantz Verella ManmnohanSingh

Alternare Governor Hoonduras Montek Singh Ahluwalia Govemor Mrs. Rani Jadhav * Guillenno Bueso Bimal Jalan *+

Altemate Governor Adviser Juan r-crrera Lopez Udaibir Saran Das S.G. Hoda Adviser Niraj KurnarJain Jorge A. Alvarado L. N.PyKrishnan Roberto Flores Benrudez Narayan Valluan Carlos Montes Asun Vasudevan

Hungary Indonesia Govemor Governor Lajas Bokros Ma'ie Muhammad

* Tcmponay o Naota member of IFC N Not a mnemberof IDA Nzota member of MI4:A * Executive Diecmtor 4+ Alttarte ExecutiveDiractr

295 A tenauteGovernor AlternateGovernor Boediono David Brodet ArifinM. Siregar * Ali Wardhona* Adviser Eldud Fresher Adviser Ms. Ruchel Hirshicr Jannes Hutagalung Ohad Marani Subarjo Joyosumarto Mrs. Sylvia Pitermun Achmad Rochjadi Boaz Raday Sockarno Wirokarnono Gideon Schurr Ms. Esther Shumniner Eli Zitouk Iran, I.R. of= Govermor Italy Morteza Mohamnmad-Khon Governor Alternate Governor Antonio Fazio Morteza Gharchbaghian Alternate Goveror

Adviser Mario Draghi Ahmad Abediyech Jalal Kalantari Adviser Mohammad KhazaeeTorshizi RobertoAlbisetti Seyyed Ziaedin Modarresi Ghavami Raoul Ascari MohammadTaghi Sadeghi Fabrizio Befani Boris Biancheri Claudio Bisogniero Irmland Rosario Bonavoglia Gian PaoloCavarai Governor Giorgio Gomel Ruairi Quinn Maurizio Gresti Enzo R. Grilli + AlternateGovernor Vittorio Greilli Pol O'Duibhir * Mrs. Franct:eq Mtnrno Noel O'Gormnan* MiIaumoMasi Tommaso Padoa-Schioppa Adviser Eazo Quattroc:ocche Adrian J. Keams Fabrizio Saccoramnni Joe* Carlo Santini Cathal O'Loghlin VittorioTedcschi Ciaan OMama Mario Vattani Nioclas O'Murchu Sergio Vento Ms. Hannah O'Riordan Ms. Kate Slauery Jamaica Michael J. Somers Govemor israel Mrs. Shirley Tyndall Governor Alternate Governor Jacob A. Frenkel Wesley Hughes

* Tcmpcraly o N a nemberof lFC # Not a memberor IDA = NotamemberofMIcA + Executive Director 4+ Alicnte Ezccutiv. Dircclor

296 Adviser Shigcoki Togo Richard Bernal Hiroshi Toyoda Colin Bullock TadasshiUenura DerickLatibeuudierc YnsufuiuiUenishi Winsome Leslie Tsukasa Wado Nathan Richards Locksley S. Smith Jordan

Japan Gotvernor Rirna Khaluf Hunaidi Governor Masayoshi Takemura AlternateGovernior Nabil Suleiman Ammari Alsernate Goventor Y;LSuoMatsushitl Adviser Hideichiro Hamanaka F Mustafa Ahmad Zahran Tadashi Iwashiha Takatoshi Kato * Haruhiko Kuroda * Kazakstan Hachiro Masaki *+ Zembei Mizoguchi * Governor Akira Nagashima * Mrs. Janat Zh. Ertlesova Kosuke Nakahira * ArLsuoNishibama *+ AisukeSaakibara *+ AlternateGovernor Altai A. Ticuberdin Adviser Hioshi Ancha die HiroshihArichikoFuTimour Issataev Toshibiko Fukuyama Beisenbai L.Izteleuov Yasuhiro Harada Touleoutai S. Souleimcnov Makoto Hosomi Ryuhei Hosoya Hitohiro Ishida Ms. Naoko Ishii Kenya Masato Kanda Governor Shinji Kume W. Musalia Mudavadi TonuMimura Daikichi Monma Shuzo Nakamura Ahern ow Goveror Yoichi Nemnoto Benjamin Kipkoech Kipkulei Yoshio Okubo Toshio Oya Adviser Masayuki Sato Azhari Ahmed Osamu Shimizu B.E. Kipkorir Hitoshi Shimura Sammy Kirui Masahiro Sugita Hezborn A. Lidambiza Kazumoto Suzuki Peter Kimilu Matheka Masahiko Takeda Kariuki Wilson Mwangi Rintaro Tamaki +u Martin Ogang Hiromichi Tanigawa Chiboli Induli Shakaba

* Tcmpory o Not a meaber of IFC V Nota memberof IDA = NotamenberofMIGA + ExecutiwvDirnctr o+ Alternate ExecutiveDirccwr

297 Kiribaitia KyrgyzRepubile Governor Governor 13upaR Willioms Kcnielbek Niinacv

AllerniareGove~'rnror AIteniateGoienior TimiiKaiekicki Askar 1.Surygulov Adviser Korea TaitinlAbdraiknov ErmilS. Abdunuinuipov Goverueor SouerkoulAbdybLily-Tcgin iuc-liyoi.gliong Ms. ElenniBit-Avrnhiiii JaC-hyoIgh0ng AlniusT. Chukin Ms. Asyl Iiutnalieva AlIeirnureGovernor ShainshibeklMoldokztnov KyungShik Lee UlmnKytiibekovich Sarbanov Myoung-HoShin * AsanUsupov Won-YoungYon '

Adviser Lao P.D.R. Sung-JoonCho Governor Byoung-JoChun NaysomphonePhomvihanc Jeong&YeonKeum Dong-YoupKim AlrernateGovernor Eung Jin Kim Mrs. KhcmviengPholsena t Chong Min Lee Hoo-MyoungLee Adviser Jong-ScongLee Heim Phommachanh Moon-HoLee Sila Vicngkto SungII Lee Jae Soo Yoo Latvia = iGovernor :{uwait NMrs.Aima Poca Govemor Alternate Governor Sheikh SalemAbdul-Aziz Al-Sabah Aanis Zvanitajs

Alternate Govemor Adviser Bader MeshariAI-Humaidhi NormundsPopens

Adviser YoussefAI-Awadi AbdullaAhmed Al Fuwaires Governor AbdulKarim Al-Mutawa FuadA.B. Siniora SheikhSalem Abdullah A1-Ahmed Al-Sabah Alternate Governor HeshamIbrahim Al-Waqayan Nouhad Baroudi * Ahmad MoharamedAbduirehman Basil R. Fuleihan* Bastaki Boutros Labaki * Abdul RahmanHashem Nadim Amer Munla *

Temporary c Not a memberor i FC U Not a meber elrDA = NoeamemberorMIGA + ExecutiveDireior +t AlterniateExecutive Dium:ar

298 AtAiser AhrmedN. Gubran Francois S. Bassil BatshirMahinoud Naihaesi Ms. ClautideHatyck MahmIuLdM. Shenghir NiiaiumiiKlholury Ms. NadaMuil'ariJ BnssmnRumilladan

;lesotho RcljuldijusiSorkinaks GCnenzior AIrenuireGovernor M.P.Senaoana Joius Ninura AlrertwteGovernor Adviser EsselenMotiztsi Mutckinne Aeter Pater Enp&rroru Avi.ser Felikas Kolosauskus Ms, Eunice M. Bulone Darius Pranckevicius ANM.Mojara Mrs. Ruta Skyrienc M. Mashologu RcatilcThabo Mochcbeleclc Caswell Makoue Moliapi Luxembour Pule Nthcjanc Gavernor BenjuminTsic Pckcche Garnor Poko Pellane Marc flchbach AlternateGovernor Llberia= Yvcs Mcrsch GoverniorAdNe Francis M. Carbah Adviser JleromeHamilius Alternate Governor Georges A. Hcinen Ms. Nyama B. Wanitay

Adviser Madagascar Konah K. Blacketu Governor R. Fole Sherman RogerVony Alexander Wallace Alternate Governor Libya Daniel Ramarokoto Governor Pierrol J. Rajaonarivelo * Mohamed A. Bait Elnal Adviser AlternateGovernor Mrs. Mariette Andrianibelo Bashir Ali Khallat Biclair H.G. Andrianantoandro Tantely Andrianarivo Adviser Mrs. Clatilde Rabenja Salem Kha. Azabi Raiana-Ramiandrisoa Nuri Abdussalam Baryun Mrs. Arlette Rakotondrazafy Mohamed Finaish Henri Ranaivosolofo

Tempomuy o Nota mnmbcrof IFC * Nora memneror IDA Not a mcmberorMlGA + Executive Director ++ AlternateExecutive Director

299 Malawi Adviser Abdoulayc Bio Tchane Grn'PenwOr Michel Kumianvi Kloussch Alcke K. Banda Marccl Kadjo Namala Kone A IrernateGovernor Alex C. Gomani Malta o# Adviser P.W. Mamba Goventor S.W.K. Mkandawirc John Dalli Chadwick LawrenceMphande Alternate Governor Alfred Rizzo MWalaysia Governor Adviser Sen Anwar bin Ibrahim Albert Borg Olivier de Puget Anthony Vella Alternate Governor Clifford Francis Herbert Marshall Islands = Adviser Abdul Majid Mohamed Governor Mohd.Azmin Hj. Ali Ruben R. Zackhras Zul I Aznam bin Haron HadenanAbdul Jalil Altemate Govemor Rajmah Hussain H.M. Gunasekera Murad Khalid Mohamed bin Ahmad Ali Abul Hassan Sulaiman Muhd. Shahrul Ikram Yaakob Mauritania Goventor alt iVe = M.L Ch'bih Ould Cheikh Melainine Governor FaveunoaJameel Alternate Govemor FathullaJamel Mohamed Lenine Ould Deidah Alternate Governor Adam Maniku Adviser Kane Aly Amadou Diaw Mali Cheikh Selman Mahmoud Fall N'Guissaly Giovemor MIobamedOuld Abba AboubacarAlhousseyni Toure Ahmed Mahmoud Ould Boilil Ismail Ould lyahi Alternate Governor Sidi el Moctar OuId Nagi Issaga Dembele MoohamedOuld Oumarou Charles Konan Banny * Bekaye Ould Sidi Mohamed

Tcmporury o Na rmmbero IFC * Not a mmber or IDA = NaamemberofMIGA * Executivc Dizrctor -i Allernatc Enutive DirmtOr

300 Mauritius Adviser Enrico Calderon Governor Jesse B. Marehalau Pararnhamsa Nababsing James Stovall Alternate Govemnor Dharani Dev Manraj Moldova

Adviser Governor Peter Craig Andrei Sangheli Israhyananda Dhalladoo AlternateGovernor A.P.Ncewoor Radhakrishna Laxman Prabhu Valeriu Sergiu Kitsan N. Soomauroo Adviser Anatol Arapu Mexico= Ms. Ala Beleavschi Valeriu Bobutac Govternor Ceslav Ciobanu Guillenno OrGizMartinez VeastiCiurnac Nicolae Sterbet Alternate Governor Ion Sturza Ariel Buia NPicolae Tau Jesus Reyes Heroics * Carlos Vazquez Ochoa * Mongolia = Adviser Governor Jose Beluran emchigav Molomjamts Gregono Canales Roberto Casilas Atemate Governor Jose Garcia Torres Alurnate Governor Mario Alberto Garcia Barajas Axurtaxyn Bazarkhuu* Salvador Gonzalez Perez Adviser F. Javier Gurza aluConh Timoteo E. Harris ;halbuu Choinkhor Daniel Martinez Valle Siilegmaa Monabat Julio Cesar Mendez Rubio TChalZknaguNasankuu Alfredo Navarrete TsereidsSynd Odongua Ricardo Ochoa Rodriguez Enebish SandagIoij Federico Patino Marquez Moises A. Pineda Padron rkrorocco Francisco Suarez Davila Jorge Terr3zas Ornelas + Governor MoharnedKabbaj Micronesia Alternate Govemor Governor Abdeltif Loudyi * Asterio R. Takesy Adviser Rachid Aguassim Altemare Governor Mohamed Aissaoui Lorin Robert Omar Alaoui

* Temponry o NocamaitrncrlrXc * Not3nncmbeoflDA = Not a nma of M1GA * Exctive Dir 44 Alternate Exutive Dircor

301 MohamedBenaissa Alternate Govemor Driss Benhima GodfreyGaoscb Othman Benjelloun Fouad Benzaklour Adviser Hassan Bernoussi Samuel H. Goagoseb MustaphaCherknoui TuliamcniKalomoh MohammedDairi TeferraWolde-Semait Farid Dellero Abdelhak El Abdi Abdellah El-Ouadrhidi Nepal MustaphaFaris Governor Saad Keutani Lahbib El-Dfissi Lalami Ram S. Mahat Ali Lanmani Alternate Govemor MonkidMestassi Rat GoBhatearnor AbdelhafidQuandoussi Basudiv Prasad Dhungana AbderrahmaneSaaidi BenyoussefSaboni Adviser AliTricha Mukti Nath Bhaeta Basant Prasad Bidari Mozambique Keshab B. Khatry MukundaPrasad Sharna Governor AdrianoAfonso Maleiane Netherlands

AlternareGovernor Govemor Samuel Canor Navele GernitZalm Alternate Govemor Adviser Johannes Pieter Pronk HipolitoPatricro Henk Gajentaan * Ms. EugenicPires Ms. Eveline Herfikens*+ Koos N.M. Richelle * Myaunmar= Adviser Governor Ms. Annette Deckers Win Tin Ms. FredeniqueM. de Man HaroldHenniquez Alternate Governor Ms. Monique H. Koning U Thein Aung Lwin Johan Peter Le Poole Wouter Raab Adviser RobertJ.M. Reynaenr U Khin MaungAye Alberto G. Romero U Khin MaungAye Raymond Salet Ms. Khin Ohn Tant ++ Johan H. du MarchieSarvaas Bemard ter Haar Mark Van Den Boogaard Namibia it Ms. Alida H. van Ee Mrs. Claire van Nispentot Sevenaer Gover7wor MarinusVan Vier Ms. Snara Kuugongelwa Rob Vermaas

* Tenpomry a Nt a memberof IFC * Nt a memberof IDA = Nota memberof MIGA * Excutive Direcor ++ AltemateExecutive Diretor

302 New Zealand = Nigeria Governor Governor Murray J. Horn Anthony A. Ani Atternate Govemor Alerat Goero AI:ernate Governor Alhaji Abubakar Alhaji * Graeme Paul Wheeler Zubair Mahmud Kaaure * Alan B. Fhncis * Muhammed Lawal Sule * Gordon Shroff * Adviser Adviser Ali Abubakar Phillip Anderson C.D. Adeola Ms. Adele Bryant F.RalfAderele Peter W.E. Nicholl + Fabian U. Alaneme Andrew G. Rae Mrs. Justina 0. Ashinze LJohn Wood Alhaji S.Y. Kasimu Auwalu Abubakar Koko Herbert 0. Nkwocha Nicaragua Okwu Joseph Nnanna Jacob Nkanta Utfot Governor EmnilioPereira Alegria Norway

Alternate Governor Governor Rene Vallecillo Kari Nordheim-Larsen Sergio Mario Blandon * .AlternateGiovernor Adviser Bjom G. Rogstad Louis Fernando Jarquin Kjell Halvorsen * Roberto Mayorga Eduardo Montealegre Rivas Adviser Leonel Teller Sanchez Hans Brattskar Jorge Wong Valle Ms. Marianne Damhaug Cesar Zamora Eilif Gundersen Roberto Zamora Llanes Maj-L;s Johansson Sigurd Klakeg Asbjom Lovbraek Niger = Tor Berntin Naess Governor Almoustapha Soumaila Oman Governor Alternate Governor Hamoud bin Hilal Al Habsi Boubacar Moumouni Saidou Altemare Govemor Adviser Suad Mohammed Al-Fadhil Hal idou Badje Marnadou Diop Adviser Hamid Hamed Ycshwant C. Desai Moussa Sangare Abdul Razak Ali Issa

* Tcnpomry o Not a member of IFC a Not a mcmber of IDA = NotamntenberofMIGA + Executive Diretor ++ AkeimatcEx:cutivc Dircwor

303 Pakistan Adviser Governor Carlos Montanaro Ovidio Otazu Gimcnez V.A. Jafarey Luis F, Villalba Alternate Govenior Aftab Ahmad Khan Peru

Adviser Governor MohammadAnwar Asi Jorge Camet Dickmann Mansoor Elahi Alternate Governor Ahmad Jamal Shahid Hassan Khan Frtz Dubois Freund * Abdul Karim Lodhi + Adviser Qasim e.Niaz Roberto Abusada GuillermoCastaneda Mungi Manuel Deza Panama Ricardo V. Luna Mario MansillaAnieta Governor Ernesio Mitsumasu Guillermo0. Chapman. Jr. Martin A. Naranjo Landerer Juan Jose Neyra Alternate Governor Raul Otcro Bossano Rene Luciani * Jorge R. Peschiera Cassinelli Jaime Pinto Tabini Adviser Ivan Rivera Rogelia Novey Renzo RossiniMinan Gustavo Villa Eduard1oValdivia Manuel VasquezPerawes Jaime Yoshiyama PapuaNew Guinea Governor Philippines Gerea Aopi Governor Alternate Governor Roberto F. de Ocampo Mrs. Fiu Williame-Igara Alterate Governor

Adviser Romeo L. Bernardo * Eno Daera Cielito Habito * Celcius Kose Christopher S. Mero AdvMser Kepas Isirnel Watangia Mrs. Juanita D. Amatong Tirso D. Antiporda, Jr. Alfredo C. Antonio Paraguay Antonio I. Basilio Jorge Briones Governor Rafael B. Buenaventura Orlando Bareiro Aguilera Ms. Corazon de la Paz RamnonR. Del Rosario, Jr. Alternate Govemor Renato Diaz Hermes Gomez Ginard Nestor A. Espenilla. Jr.

* Temporary a NotamcmberafrIFC * Not amcmbe af IDA = NotamrmnberoflMICA * Executivc Dircctor -4 Altenace Executivc Director

304 OctavioVictor R. Espiritu Qalar o=# Peter B. Favila Atmt oero Victor Cosiengfiao AlternateGovernor Vicente R. JiaymeShihFadBnFitAThi Jesli A. Lapus Ernest C. Leung Adviser Luis C. Liwanag, 11 AbdullatifA. Alncer Ms. ValerianaS. Parungo Abdulbasit Al-Shaibei Federico C Pascual Khalid Bin Ahmed Al-Souwaidi Jeremias N. Paul, Jr. Sheikh Abduirahmanbin Saud Al-Thani Raul C. Rabe Sheikh Ali Bin AbdullaAl Thani Miguel L. Romero John P. Finigan Mrs. Mercedes B. Suleik Maqbool H. Khalfan Renato C. Valencia TrimothyPatrick Nunan Deogracias N. Vistan Taha S. Omar Qasim Mohamed Qasim

Poland Romania # Governzor Alternare Governor Mrs. Hanna Gronkiewicz-Waltz Vladimir Soare Alternate Governor Nicolac Consantinescu iotold Kozinski Adviser Adviser Mrs. Teodora Mioara lonescu JadvserwBiernacki Ms. Gheorghita Oprea Jaroslaw Biernacki Ms. Monika Borowska-Masalska Jerzy Hylewski Russa Ryszard Kokoszczynski Governor Ms. Beam Lenard Krzysztof Majczuk Anatoi Chubais Alternate Governor uYevgeniYasin Portugal Mrs. Tatiana Paramonova* Governor Adviser Eduardo de Almeida Catroga Alexander Bekker Maxim Boiko Alternate Governor Andrei Bugrov + Walter Marques Vladimir Chekunov Mario PatinhaAntao Andrei Flev Vitor Bento * Viktor V. Gerashchenko Miguel Jose Ribeiro Cadilhe * Leonid M. Grigoriev Ms. Maria Helena Coardeiro*++ Ms. Nadezhda Ivanova Antonio S. Vieira Monteiro * Stanislav Katash Ms. Filomena R. da Rocha P.de Andrei Kaznmin Oliveira * Andrei Kozlov Jose Inacio Toscano * Mikhail Lopatin Sergei Manezhcv Aduiser Eugene Miagkov .F Jose Humberto da Cruz Bafofs Vladimir Nikishin

' Temporary o Not a memberoflFC r a memberof IDA - Not a memberofMIGA * Executive Diecaor 4 Altanaten Execunive Dir

305 Andrei Nikolayev John P. Irish Ruslan Orekhov Lee L. Moore Andrei Paramonov Ms. EuphemiaRoberts YuriPimoshenko HerbertWycliffe-Morton AlexanderPotemkin Oleg Prcksin VyacheslavProkhorov St. Lucia Mrs. TatianaRodionova Governor SergeiRotov John C.M. Complon AlexanderRusakov MikhailSarafhnov Alternate Governor Ms. Irna Savateeva Cleus Springer AndreiSerov AlexanderShokhin Adviser KonstantinShor AlekseiSmirnov Joseph Edmunds Pavel Smimov ChesterHinkson VadimSolovyov George Mallet Nikolai Soubbotin A,,drei Trapeznikov St. Vincentand the Grenadinesc SergeiVasiliev Andrei Vavilov Governor Oleg Vyugin Randolph Cato MikhailZadornov AlternateGovernor Isaac Solomon Rwanda= Governor Adviser Marc Rugenera KingsleyLayne Ms. Cecily Non-is Alternate Governor WendellSamuel Jean Birara Adviser SaoTome o= Simon Gatabazi Governor Jean Marie VianneyKarekezi JoaquimRafael Branco Anastase Munyandamutsa Joseph W. Mutaboba AltemnateGovernor MathiasNkuliyingoma Mrs Maria das Neves Batsta de Sousa PierreRuzirabwoba Rwanyindo Justin Uyisenga SaudiArabia St Kitts and Neviso= Governor Governor Sheik;hHamad Al-Sayari Denzil Douglas Alterate Governor

Alternate Governor AbdulazizAl-Orayer t VanceAmory * Advi¶er Adviser KhaledM. Al-Aboodi Mrs. Alice B. Alexis AbduldayemAl-Ahmnadie

* Temponry o Nota nenber faIFC * Nota member or IDA = Nota menberof MIGA + ExecutiveDireetor ++ AltemaIcExetive Directo

306 Maher KasseimAl-Awjan Mamadou Mansour Sack Saich Eid Al-Huscini Maguetie Wade Taymour Abdullah Ali Reda Ibrahim M. Al-Issa Abdulaziz Saleh Al-Jarbou Seychelles# MedlejAl-Medlej MohammedAl-Nafic Govenior Sulaiman Al-Olayan MrsmDaniclle de SL Jorre Said Al-Qahbtani Talal 1.Al-Qudaibi Alternaie Goven2or Fahd Abdullah Al-Rajhi Emmanuel Faurc Salah Rashed Abduirahman Al-Rashed Ziad Al-Saad Saud Al-Sa]eh Sierra Leone = MohammadAl-Shchri Ali Samir Al-Shihabi Covernor AbdulazizAl-Turki John A. Karimu Sulai man Al-Turki Abdulaziz Al-Wahayeb Alternate Governor Khalid Al-Yahya Samura Kamara Saud Al-Yemeni Henry T. Azzarn Adviser Abduirouf Suliman Banaja Peter M. Chapman Wahib Binzagr Kaefen S.T. Kallay EI-Refai Kamal Eisa Grahame J.anatlay Elie El-Hadj Christian J. Smith Abdullah El-Kuwaiz Said Hashim Richard R. Herbert Singapore#m Oussama A. Himani AbdulrahmanA. lawa Governor Jamal Kibbi Richard Hu Tsu Tau Khalil Abdulfattah Kurdi Melhem F. Melhem Abdulaziz A. O'Hali Alternate Governor Aziz M. Sherif Ong Beng Teck Andre van Hove Adviser Senegal Ampalavanar Selvarajah

Governor SlovakRepublic Papa Ousmane Sakho

Alternate Governor Governor Mrs. Awa Thiongane Sergei Kozik MarnadouWoury Diallo * Alternate G;overnor Adviser V'adimnirMasar Samcidine Dieng Mrs. Seynabou Diop Ly Adviser Aliou Faye Rudolf Aurner Papa Salla Mboup Ms. Elena Kohutikova

* Tetnporasy o NotI mncmberof IFC I Not a mcrnbcr of IDA = Not a membcrof MIGA *ExecutiveDirector #- AltcrntcExecudve Dietor

30C7 Mrs. Eva Kohutova A/female Governor Branislav Lichardus Alfredo Pastor Jaroslav Na'hlik Vladimir Rigasz Adviser Juraj Sipko Ms. Sero Alcalde German Bcjarano Juan M. Burdiel Slovenla Joaquin de la Herran Mendivil Julio DuranHernandez AlternareGoveror VicenteJ. Fernandez Bozo Jasovic Jose Gasset Loring Miran Vicic * Felix Gonzalez Ortiz Luis Ma. Linde de Castro Adviser Pedro Mejia Mojmir Mrak Miguel Muniz de las Cuevas Ms. Irena Nakrep Ms. Rosa Puech Boris Skapin Ms. Isabel Riano Ms. Teresa Saez Julio Vinuela Solomon Islands =

Goveri.or SriLank2 Christopher Columbus Abe Govemor A.S.Miyawardena Alternate G¢overnor Snyder Rini Alternate Governor

Jayantha Dhanapala * SouthAfrica La] Jayawardena Siripala Jayaweera * Govemor Christo Ferro Uebenberg Adviser Prasad Kariyawasarn Altemate Govemor Faize Mohideen Ms. Maria Ramos * S.L. Seneviratne Adviser Chris J. de Swardt Sudan Zingie Dingani Goveror Higgo du Toit Elias Links Abd Alla Hassan Ahmed Jabu Moleketi C. Rustomjee Altemare Govenor B. Setai Mohamed Khair El Zubair Franklin Sonn Edwin Frank Tavemer Adviser Sabir Mohamed El Hassan Spain Omer Ibrahim El Tahir Mirghani Mohamed Salih Govenmor Elftih Ali Siddig Pedro Solbes Hassan AhmedTaha

* Teporay o Not a mcmba of IFC * Not a memberof IDA = Not a merba or MIGA - ExecutiveDimwcr - Ahcantr Exctfive Dirctur

308 Suriname <>#= Switzerland Governor Governior Humphtcy S. Hildcnberg Otto Stich

Alternate Governior Alternate Governor Stanley B. Ramsaran Franz Blankart Jean-Francois Giovannini * Nicolas Imboden * Swaziland Adviser Governor ClaudeBarns Themba N. Masuku Jorg Giovanni Frieden Jean-Daniel Gerber + Alternate Governor Anton Greber Mrs. Musa Fakudze Bemard Jaggy Carlo Jagmetti Adviser Adviser ~~~~~~~~MatthiasOscar KnappMcyer Absalcm Themba Dlamini Walter Naef Ms. Mary M. Kanya Ms. Barbara Schlaffer Bruchez Dumisani E. Masilela Mrs. Rita Trier-Somazzi Da Masuku Pietro Veglio Stephen L. Simelane Mrs. Marie Elisabeth Veya David Vogelsanger

Sweden

Governor Syria Goran Persson Governor Mohammed Khaled Al-Mahayni Alternate Governor Mats Karlsson Alremate Govemor Ms. Malin Karre Adnan Al-Satti

Adviser Ms. Maita Andersson Tajikist = Anders Bengtcen Ms. Harriet Bengtsson Governor Bengt Ake Berg Murotali M. Alimardanov Lars Ekengren Thomas J.H. Franzen Alternare Governor Ms. Christine M. Holm Sbarif Maksumnovich Rakhimov Torgny Holmgren Jorgen Holmquist Ms. Ruth Jacoby + Tanzania Bo Jeristrom Erik Johnsson Altemate Governor Jan Larsson Peter J. NgurnbuIlu Anders Sahlen Fulgence M. Kazaura* Wilhelm von Warmstedt Isaac A. Sepetu *

* Tmnpoamzy o Not nmcmbrofrll f NoAamamberolIDA = Not a mcmberof MGA + ExcoativeDizetor +F Aleruc Exeutive Dimtcr

309 Adviser Altern&teGovemror E. Bukuku Kwassi Klutse Hamed R. Hikmany DonaldJimogi Kamori Adviser Ms. Diana Kantabula NakpancAli-Napo Singo R. Madata Adjc Amegapo Ali Mchumo Adjc Amegavi OmarS. Mussa AssibaAmouzou-Guwnou John M. Mwendwa ~~~BoukpcssiPayadowa John M. Mwendwa Ms. Essvi YonaDjokpe MusJaohSalim Nyanguany MahentaBirima Fall John Rubambc J. Akin Gcorge Hatibu K. Scnkoro BadawassoJoseph Gnaro RizwanHaider Thailand = LorempoTchabre Landjcrgue Kossivi Osseyi Governor Badanam Patoki SurakiartSathirathai

Alternate Governor Tonga= M.R. ChatumongolSonakul Governor AkrasidAmatayakul * KinikinilauTutoatasi Fakafanua SomchaiRichupan * WiratWattanasiritham * Altemate Governor Adviser 'Aisake V. Eke AnurakChureemas Aran Thammano Adviser Aswin Kongsiri Lemeli Malu Chawan Svasti-Xuto TanielaPenisimani To'a Vea ChoopongPongsudhiralks Ms. Chularat Suteethom EkachaiChainuvati Tinidad andTobago KawinThangsupanich NophadolBhandhugravi Governor NutthakornUtensute Carlyle Grcaves Mrs. Pannee Sathavarodom Pin Chakkaphak Altemate Governor Pongpanu Svetarundra Rakjit Mormnongkol Randolph Kong Som Chatusripitak Somchai Sujapongse Adviser Suphat Suphachalasai CorinneMcKnight Suwan Pasugswad+ Tada Phuthidata Mrs. VanidaBuranasiri raisin Sun Vithespongse Goenor Governor MohamedGhannouchi Toga Govemnor Alternate Governor YandjaYentchabre AbdelbamidTriki *

* Tcmpormy o Not a memberof IFC 9 Nota ncmberob IDA = Not arember of MlGA + ExecntiveDimelor ++ AlternateExecuiive Director

310 Adviser Adviser Laroussi Bayoudh LouisAustins Kasekende Slaheddineben Mahmoud Damoni Kitabire Kamel Bcn Rcjcb MatthewHcnry Martin Ferid ben Tanfous Ms. RosemaryMugasha AbdeslemBenyouncs Keith Muhakanizi MoncefEl Kaoucch Ms. AnnentcMulondo Mill'Carol Azouz Ennifar Ukruine# Turkey Govemor Governor Ihor Mitiukov Ayfer Yilmaz AlternateGovernor Alternate Governor Yuriy I. Yckhanurov4 M. Bulent Ozgun Adviser Adviser Anders Aslund Ms. B. Sen Akman ViacheslavBotvinov Mrs. Birsen Aktugan Agha Ghazanfar Bilsel Alisbah Andriy Goncharuk SelahattinAlier Sergiy Kulyk++ Namik Dagalp VolodymyrKuznetsov Ertan Dikmnen Ihor Melnikov AydinKaraoz Olexandr Ncsterenko Ms. Cigdem Koken Oleg Rybachouk Faik Ozirak Yyriy Shcherbak Mrs.Gulbin Sahinbeyoglu Igor Shumila Ufuk Soylemez Eduard Skryl H. Can Yesilada Mrs. TamaraSolianyk VictorSuslov YaunyYakusha ¶flrklnenistan

Alternate Governor Governor YollyA. Gurbanmuradov NassarAl-Nowais

Adviser Alernate Govemor Chary Annaberdiev Ms. NarimanA. KamberAl Awadi* Serdar R. Bairiev Adviser Fadhel SacedAl Daniaki Uganda Ali MohammedAli Governor Anis Al-Jallaf Obeid Saif Al Nasseri lehoash Mayanja-Nkangi SultanRashed Ebrahim Saif Al-Sakeb Iobamimadbin HusseinAl-Shaali AlternateGovernor WahidAttalla EmmanuelT. Mutebile Humaid DarwishAl-Ketbi

* Temporay o Nota rembcrcf IlPt N Nota memberof IDA Nota tnemberof MIGA + ExecaniveDirector i- Alteufle Excivc Director

311 Ahined M.S. Folathi David Lipton * Khalila Mohd. Hassan Ms. Kurin Lissakers *4 D.F. McKenzie Michael Marek *e Abdulla Mohamcd Salch Ms. Jati Picrcy *+ AbdulshakoorTahlak JeffrrcyR. Shafer * Lawrence H. Summers *

United Kingdom Adviser Governior Carroll Bouchard KennethClarke TerrenceRichard S.J. CarnellClhecki AlterntareGovernor Jame.sH. Fall, Ill AmIterncorP. Budd WilliaoniR. Ford AJla R Budd * Henry H. Fowler John Drans * Timothy Geithner DHuwEvans e+ John D. Hawke, Jr.

David L Stanton *44 Lionel C. Johnson John Verikcr * William J. McDonough Nigel Wicksr * G. William Miller Nigel Wicks * Barry S. Newman Adviser Charles Schotta Edwin M. Truman Alan Ci.Cathcart Ms. Theresa Wagoner Ms. Johanne W. Dagustun Ms. Rachel Glennerster Neil Gregoy Uruguay Ms. Julicttc HealeyUrgaU Andrew Hudson Governor N.B. Hudson Luis Mosca Mervyn King James H. Lau, Jr. Ms. Julia F.Y. Leung Alternate Governor Nicholas Macpherson Cesar Rodriguez Batlie * Michael McCulloch Carlos Steneri *+4 Brian Quinn David Richmond Adviser James A. Roaf Javier Bonilla David Roe Walter Calcagno Andrew Len Tao Sheng Alvaro Diez de Medina Donald Y.K.Tsang Ms. Anna Wechsberg Ms. Lessie Wei Uxzbeistan

Governor United States Bakltiar Sultanovich Khamidov Governor Robert E. Rubin Allernate Governor Alisher Erkinovich Shaykhov Alternate Governor Mrs. Joan E Spero Adviser John M. Abbott * Nariman Mannapbekov Alan S. Blinder * Bakhram Salakhitdinov

' Tempcnry o Nota menbr of lFC P Not a menber olrDA = Mota mernberorMIGA * ExecudveDirector e- AlternateExecutive Director

312 Vninualu Adviser Governor PeterTapsell Willie Jimmy Yemenm AltertiateGoverinor Ms. Jcphlyn Nasc Governor Abdul Kader Bajntnal Adviser Allernle Cuvernor AugtustineGasirac Anwar Rizq Al-Harazi *

Venezudlat Adviser' Ali Lutf Al-Thour Goverior Galat Mohamcd Moula Luis Raul Matos Azocur Jamul A. Numan Ahmed A. Ghtleb Saecd AlternateGovenuor Carlos Bernardez Lossada Z7,re

Adviser Govenor Edmond Bcncdetti Pay-Pay W.S. Pirrc Carlos Chalbaud Werncr Corrales Alrcnare Goverrior Pedro Luis Echeveia Kakese Mulume Nda Mumi Ms. Maritza IzaguircA Nelson Quinrero-Muru Advser Alejandro Reyes Bolalucte Mbwcbcmbo Rafael Mauricio Roitman BJastidas Assango Bondombc Djamboleka Loma Okitongono llunga M'Bundu Wa Bilboa Vietnam Lakup-Ticr Munkeni Lukusa dia Bordo Gouernor Mukendi Tambo a Kabila Nguyen Quang Thep Ngimbi Kalumvueziko Alternate Governor Nguyen Ngoc Minh * Zambia Governor Adviser James Mwalimu Mtonga Dinh Sy Thien Ha Huan Dan Alternate Governor Nguyen Van Doan Eiesani Dickson Njobvu Tring Ngoc Ho Adviser Donald Chanda Western Samoa Richard K.E. Chembe Governor Patrick S. Chiumya Epa Tuioti Benny Chundu Kaitano P. Chungu Dunstan V4 Kamana Alternate Governor Edwin M. Koloko Ms. Pisaina Leilua-Lei-Sam Gershom Moses Mumba

* Tempomy o NotanmenberorIFC P Not a embeafr IfDA = Nota memberor MICA + ExecutiveDirector +4 AlternateExecutive Dinecior

313 Wally DerrickMusonda Louis Mwale D.C. Pile

Zimbubwe Alternate Govenior Charics TawonereraKuwaza SomkhosiMahamba Temba Malaba ' Adviser J. Gulu Stuart Kufeni ObertMatshalaga Rosemary Mazula Amos B.M. Midzi J. Mubika Fudzai Pamacheche

* Tamemr ofy o Nota memberof IDA = Not a mcmberof MIGA + ExecutiveDirctor ++ AkrateroExecutivc Dirccor

314 ACCREDITED MEMBERS OF DELEGATIONS (MIGA) AT THE 1995 ANNUAL MEETINGS

Albania Bangladesh Governor Governor Mrs. Rexhina Bajraktari M. SaifurRahman

Barbados Angola Governwr Governor Owen S. Arthur Jose Pedro de Morais Alternate Governor Alie mate Governor George Lincoln Reid Ms. Ana Dias Afonso Lourenco * Belarus Argentina Governor Governor Nikolai Filippovich Rumas Domingo Felipe Cavallo Alternate Governor EugeniGeorgievich Bogomazov * Alternate Governor Roque BenjaminFernandez Belgium Governor Azerbaijan Philippe Maystadt Governor Alternate Governor Elman Siradjogly Rustamov Gregoire3rouhns

Alternate Governor Benin Fuad Akhundov Governor Paul Dossou The Bahaams Alternate Governor Governor Robert Tagnon William C. Allen Bolivia Altemate Governor Mrs. Ruth Millar Governor Juan Fernando Candia Castillo

Bahrain B6tswana Governor Governor IbralhimAbdul Karim Fests G. Mogae

Alternate Governor Alternate Governor Khalid Ateeq * Modise Davies Modise

* Temporay + Director -,- Alematc Oliciar

315 Brazil Alternate Governor Govenwar Jose PabloArellano Pedro SampaioMalan China Alteniate Governor Guslavo J. LaboissicreLoyola Govenror Luiz Afonso Simoensda Silva * Liu Zhongli

Alternate Governor Bulgaria Zhang Shengman*+ Governor Zhu Guangyao* DimitarKostov

Alternate Governor Congo Mileti Mladenov Governor Nguila Moungounga-Nkoombo

BurkinaFaso Alternate Governor Jean ChristopheBoungou Bazika Governor Bissiri Joseph Sirima CostaRica Alternate Governor Govemor Patrice Nikiema FernandoHerrero Acosta

AlternateGovernor Cameroon RodrigoBolanos Zamora

Governor JusuinNdioro Coted'lvoire

Governor Canada N'Goran Niamien

Governor Alternate Governor Paul Martin Konan VictorKouarne Alternate Governor Ms. Huguete Labelle Croatia Governor Cape Verde Zlatko Matesa Governor Alternate Governor AntonioGualberto do Rosario Josip Kulisic

Chile Cyprus Governor Altemare Governor EduardoAninat SymeonMatsis *

a Temporry i Director 4 AltmrateDirector

316 CzechRepublic Albemate Got-emor Governor Enn Pant Ivan Kocanik

Alternate Governor Ethiopia Jan Vit Governor Sufian Ahmed

Denmark Fiji Alternate Governor Ole Locnsmann Poulsen Governor BerenadoVunibobo

Dominica Altemate Governor Tevita K. Banuve Govternor Julius C. Timothy Finland Ecuador Governor liro Winanen Governor Ivan Andrade Apunte Alternate Govemor Kari Nars

Egypt Governor France Atef MoharnedEbeid Governor Jean Arthuis Alternate Govemor Mahmoud Mohamed Mahmoud Alternate Governor Jean Lemierre

El Salvador The Gambia Alternate Governor Jose Roberto Orellana Milla G aovernora Bala Garba-Jahumpa

Equatorial Guinea Alternate Governor Sako M. IMboge Govemor Manuel-EnriqueKing Somo Georgia Alternate Governor Govemor Felipe HinestrosaIkaka David Iakobidzc

Estonia Gernany Governor Governor Mart Opmann Carl-Dieter Spranger

Tempomy * Dircor ++ Altimte Dirctr

317 AlternateGoverntor Indonesia Juergen Stark Governor Fritz Fischer *+ a'cMuara Eberhard Kurth a Marie Muhamnad Altenwre Governor Ghana J. Soedradjad Djiwandono Governor Richard Kwame Pprah Ireland Governor Ruairi Quinn Greece Alternate Governor Governor Pol O'Duibhir * Yannos Papantoniou Noel O'Gorman *

Grenada Israel Govemor Governor KeithMitchell Jacob A. Frenkel AlternareGovernor Guyana David Brodet Shay Talmon * Governor Bharrat Jagdeo Italy

Governor Hondurs AntonioFazio Governor Alternate Govemor Ms. Gabriela Nunez Mario Draghi

AlternateGovernor Ms- Marcia Elisa Bonilla Mejia Jamaica Governor Hungary Omar Davies Governor Alternate Governor Lajos Bokros Wesley Hughes

India Japan Governor Mannohan Singh MasayoshiTakemura Alternate Governor Alternate Governor YasuoMatsushita Montek Singh Ahluwalia Masahiro Fujita *

Tcmporuy t Diretor ++ AlermateDirector

318 HideichiroHamanaka KyrgyzRepublic Norio Hattori * Tadashi Iwashita * Governor TaklatoshiKato * KemelbekNanacv HaruhikoKuroda * Kosuke Nakahira* Altemrae Governor Atsuo Nishihara *+ Askar 1.Sarygulow Eisuke Sakakibaram Lesotho Jordan Governor Governor M.P. Senaoana Rima Khalaf Hunaidi Alternate Governor AlternateGovernor Esselen Matiatsi Matekane MohamedSmadi

Libya Kakstn Governor Alternate Governor MohamedA. Bait Elmal Mrs Janat Zh. Ertlesova Alternate Governor Govemor BashirAli Khallat MaratT. Ospanov

Lithuania Kenya Governor G.overnor iodjsSrna RamesonD. Ongalo ReijoldijusSarkinas

AlternateGovemor Luxembourg BenjaminKipkoech Kipkulei Luvemor G;overorr Marc Fischbach Korea Governor Alternate Governor Jae-hyongHong Yves Mersch

Alternate Governor Madagascar Kyung Shik Lee Myoung-HoShin * Governor Won-YoungYoun Roger Vony Alternate Governor Kuwait Daniel Ramarokoto Governor Sheikh Salem Abdul-AzizAl-Sabah Malawi

Alternate Governor Governor Ali AbdulrehmanRashaid Al Bader Aleke K. Banda

* Tcnpruy i Dimaer 4+ Altentt Dimctmr

319 Alternate Governor Momcco Alex C Gomani Govemor MohamedKabbaj Malaysia Govemor Dato' Scri Anwar bin Ibraim Mozambiquc AlternateGovernor Govemor CliffordFrancis Herbert TomazAugusto Salomao

Atternate Governor Mali AdrianoAfonso Malciane Governor SoumailaCisse Namibia Alternae Governor AboubacarAlhousseyniToure Governor HannoBurkhard Rumpf

Malta Alternate Governor Governor Paul Walter Hartmann John Dalli Alternate Governor Nepal Alfred Rizzo Governor RainS. Mahat hunritni Governor Alternate Governor Sidi MohamedOuld Biya RumBinGd Bhauarai AlternareGovernor Sidi MoharnedOuld Bakha Netlhelands Governor Mauritius GerritZalm Govenor RundeersingBheenick Alternate Governor lohannes Pieter Pronk Henk Gajentaan* Mkronesia Alternate Governor NivIrag Asterio R. Takesy Governor Moldova ErnilioPereir Alegria Governor Alternate Governor Andrei Cheptine Jose EvenorTaboadaAana

* Tepowy + Drs ++ Ahcrac Dirrw

320 Nigeria Alternate Govemor Govemnor Rizalino S. Navarro Ayo Ogunladc Romeo L. Bemardo * A ltermie Govemor Isaiah Folorunso Olaniyan * Poland Christopher U. Omamogho ' Alternate Govemor Andrzej Chmiel Norway Altemate Governor Portugal Ms. Kari Nordheim-Larsen Governor Eduardo de Almcida Catroga Alternate Governor Governor Walter Marques Hamoud bin Hilal Al Habsi

Altemate Govemor Romania Mubarek Suleiman Al-Manthari Alternate Govemor Vladimir Soare Paidstan Governor Rtsia Qazi M. AIimullah Governor Anatoli Chubais PapuaNew Guinea Alternate Governor Alternate Govemor Yevgeni Yasin Gerea Aopi

Paraguay - ~~~~~~~~~~~~~St.E Lucviaui Governor Governor Orlando Bareiro Aguilera John G.M. Compton

Altemate Governor Alternate Goveror Hermes Gomez Ginard Ms. Zenith James

St Vincentand the Grenadines Governor Alternate Govemor Jorge Camet Dickmann Maurice Edwadls

Philippines SaudiArabia Governor Governor Roberto F. de Ocamnpo Sheikh Hamad Al-Sayari

* Temporary + Diretor Altemate Director

321 AlternateGovernor AlienmateGovernor AbdulazizAl-Orayer Siripala Jayaweera Ibrahim M. AI MoReh*++

Sudan Senegal Governor Governor AbdAlla Hassan Ahmed Papa Ousmane Sakho Alternate Governor Atlrnate Governor Mrs.Awa Thiangane MohamedKhair El Zubair

Sweden Seychelles Governor Govemor Abdul-GafoorYakub Goran Pcrsson Alternate Governor Alternate Governor Patrick Stravens Mats Karlsson Ms. Malin Kare *

SlovakRepublic Switzerland Governor Sergej Kozlik Govemor Nicolas Imboden Alternate Governor Vladimir Masar AluernareGovernor Luciano Lavizzari *

Slovenia Airemaie Governor Tanzania Bozo Jasovic Alternate Governor PeterJ. Ngumbullu

South Africa Togo Governor ChnstoFerro Liebenberg Govemor Yandja Yentchabre

Spain Alternate Governor Kwassi Klutse Alternate Govemor Apolonia Ruiz Ligero Ms. Pilar Moran Reycro * Trinidadand Tobago Governor SriLanka Jerry Hospedales Govemor Alternate Governor A.S. Jayawardena Ms. Alison Lewis

* Tempormy * Diretor 4* AlternateDirecor

322 Ibnlsia United States

Governor Governor MohamedGhannouchi Robert E Rubin

AlternateGovernor l rkey IMrs.Joan E. Spero Governor John MI.Abbott * Alan S. Blinder * Ms. AyferYilmaz Ms. Ayfcr Yilmaz ~~~~DavidLipton * Ms. KarinLissakers *1 Alternate Governor MichaelMarek *t. M. BulentOzgun Ms. Jan Piercy*+ Jeffrey R. Shafer * LawrenceH. Summers* Ibrkmenistan Governor Uruguay HudaiberdiArtiklovich Orazov Governor Luis Mosca Uganda Governor Utzbekistan Jehoash Mayanja-Nkangi Governor Alternate Governor BakhtiarSultanovich Khamidov EmmanuelIT Mutebile AlternateGovernor Ukraine AlisherErkinovich Shaykhov

Governor Vu ThorMitiukov Vanuatu Governor

UnitedArab Emirates Willie Jimmy Alternate Governor Alternate Governor Ms. NarimanA. KamberAl Awadi Ms. JephlynNase

UnitedKingdom Venezuela Govemor Governor KennethClarke WernerConmules

Altemate Governor HIuwEvans *+ Vietnam David Peretz * David L. Stanton *-I-+ Governor John Vereker* Cao Sy Klem

* Tempora + Diretor AlthnuaeDireor

323 Western Samoa Altereate Governor Governor KakeseMulume Nda Mumi Sifuiva Sione Zambia Alternate Governor Governor GainaTino Ronald DamsonSilamc Penza

Zaire Zimbabe Governor Alrenmte Governor Pay-PayW.S. Pierre Charles TawonereraKuwaza

Tcmporary 4 DiRwCr i AlMtnweDimor

324 OBSERVERS AT THE 1995 ANNUALMEETINGS

AbuDhubl Fund for Arab ArabMonetary Fund EconomicDevelopment Jassim Al-Mannai Ahmed HusscinBaqcr Faris Bin Garadi

AfricanCentre for MonetaryStudies Asian DevelopmentBank Jcan-MaricGankou MitsuoSato Tsana FernandMarcel D.C. Amerasinghc TadahiroAsami AfricanDevelopment Bank Arun B. Adarkur Onar Kabbaj Ms. Rhonda Bresnick Hedi ben AmeurMeliane Shoji Nishimolo Ferhat Lounes Farrokh E Kapadia Mrs. Peace Ayisi-Okyere Jun Mizuguchi Mrs. Inga Bjork-Klevby Mrs. Eva L. Relova Ms. Alice M. Dear Claudio di Vegli Bankfor International Settlemenbs Caleb M. Fundanga AndrewD. Crocket Ms. Laure Olga Gondjout Gunter D. Baer MuhimaMasumbuko RenatoFilosa Koji Narita Wiliam R. White Samuel F. Owori Peter Dittus Daniel Gabriel Tembe John R. Lowen Olabisi Oluyemi Ogunjobi James Ranaivoson Dankor Central African States Delphin G. Rwegasira Jean-Felix Mamalepot M. EI-Obeid Jean-Baptisie Assiga-Ahanda John A. Hammond Gilbe:t Ntang El Hadji Mbengue Rigobert Roger Andely Ms. SelamawitYemaneherhan N'Diaye Serge-BlaiseZoniaba G. M. Woldu Joseph Nyonuchi Ma;son AfricanExport-Import Bank Bosniaand Herzegovia ChristopherC. Edordu B evn T omic Timothy M. Whalley NevenToice John WashingtonT. Otieno Kasim Omicevic Benedict OkechukwuOramah SvenmGacic

Andean Development Corporation Sead Creso Enrique Garcia Rodriguez Enes Gotovusa Juan Femando Posada Zlatko Hurtic Hugo SarmientoK. Ms. Alama Musanovic Ms. Alexa Leon-Prado Ms. Carmen Elena Carbonell Caribbean DevelopmentBank Neville Nicholls Arab Bank for Economic Marius SL Rose Developmentin Africa Ahmed HardiEl Wardi Center for Lalin American MohamedAtta El Mannan El Ageid Monetary Studies Luis Alberto Giorgio ArabFmnid for Economicand Social Development Central African States Development Bank AbdulatifYousef Al-Hamad Jean-MarieMbioka Hossam Omar Adoum Malloum Ismail TawfiqEl-Zabri Jean-MarieOmog-Samnick

325 CentralAmxrIcan Bonk for Ms. NoreenDoyle EconomicIntegration LIlirichH. Kienrayr JosecManuel PacasC. Ms. BarbaraAnn Clay Felix Garrid Salie Parada Philippe Richard Carlos Arturo Sanchez Rendon Ms. GeraldineJacob Angel Andres Matuty Ms. HcrtnioneSmith Ms. Maria del Pilar EscoburPocus EuropeanCommission CentralAnmrican Monetary Council Yves-Thibaulde Silguy Manuel FonicehaFerrari Laurencede Richeniont Enrico Cioill CentralBank of West African Stuins AntoineBloch EmmanuelNana GuenterGrosche Amadou Bachir Herve Carre YacoubaNabassoua Joly Dixon Mikc Ncilson Common Fund for Commodities My Huynh-Cong Delegationof the European Commission PeclerBckx CommonMarket for Eastern and Ms. Anne Vorce SouthernArrica Bingu Mutharika EurnpeanFree Trade Associatin Prega Ramsamy Kjartan Johannsson

CommonwealthSecretariat European Investment Bank HumphreyMaud Sir Brian Unwin RummanFaruqi WolfgangIRothl

EastAfrican Development Dank Mrs. Ariane Obolensky FSastbAfricanRDTibeitarelopme Claesde Neergaard Fabian R Tibeita Thomas Oursin ScramKariisa-Kasa FriedolinWeber-Krebs Jean-Louis Biancarelli Eastern Caribbean Central Bank Rex Speller Arthur P. Campbell Terence Brown E.Eustace Liburd Rene Karsenti S.C. McHaleAndrew Ulrich Damm ChristopherBeame EconomicCommunity orWest African States European Investment Fund Samuel K. Apea Georges LeopoldAntoine Ugeux BoubacarBa Helmut Kuhrt Frank Ofei BarthelemyDrabo EEuropean Monetary Institute Alexandre Lamfalussy EconomicCooperation Organization Gert Jan Hogewcg ShamshadAhmad Huseyin Avni Botsali Food and AgricultureOrganization of the UnitedNations European Bank for David Forbes Watt Reconstructionand Development Jacques de Larosiere Inter-American DevelopmentBank Ronald M. Freeman Enrique V. Iglesias Bart Le Blanc Ms. Nancy M. Birdsall NicholasH. Stern Charies 0. Sethness Mark NicholasCurls Carlos Santistevan

326 lnter.AmericanInvestment Corporation Orgunlisdonror Reconomic John C. Ralhrilng Coopertilonand Development (OKCD) Jean-ChludePayc Inter-ArabInvestment SalvatorcZcechini Guantnee Corporation Kuiniharu Slilgehbrn Mamounlbrahirn Hassan RichairdCarcy AbdelMagssod I.ssa Robt-i Ford IniterntiklonailFund for Ms. Brigid Janssen AgriculturalDevelopment OE.CD.DevelopmentA.sistbmee Committee FttwziHp ,adAl-Sultan JnamsH. Michel Jim Moody Basudcv DOthal Orgunl7.ntionofAfrican Unity Mrs. VernP. Weill-Hulle Ibrahinia Sy Ms. LenoraAnn Gruckin FredcrickYuo Alipui InternationalLabour Office NgardournlnoMbondjim Sohndol MichelHansenne OrganizationofAmerican States Ms.Katherinc Ann HageII OsbertWordsworth Liburd Ali Taqi Anihony G. Freeman PalestineLlberation Organization (P..L.O.) Ms. Tercsa Prada de Mcsa Mohd. Zuhdi Nashashibi Stanley G. Taylor Fouad H. Sh. Beseiso Islamic DevelopmentBank MohammradSamir AbdailahShtayyeh Saieh Abdurrakman Nur Hersi Hasan Abdcl Rahman

Omar Abdullah Seijiny Saudi Fundfor Development Abdul Aziz Jal[oh AbduirahmanAloraini Mohained Ennifar El Mansour Feten Southem African DevelopmentCommunity LatinAmerican Economic System Lengolo B. Monyake Mrs. Manuela de Rangel United Nations Latin American Reserve Fund Boutros Boutros-Ghali Miguel VelascoBosshard Jean-Claude Milleron NordicDevelopment Fund UN Children's Fund Jens Lund Soerensen Ado VaVier Engilbert Gudmundsson Ms. Fay Chung Ms. Stella Eckert Frank DalI NordicInvestment Bank UN Conferenceon l-ade and Development Jon Sigurdsson Roger Lawrence Bengt Dennis Ms. Birgitta K. Kantola UN DevelopmentProgramme Bert H. Lindstrom Ms. Ellen Johnson Sirleal Erkki Karmila Ms. Sarah Bums Oddvar Sten Ronsen Ms. Finda E.M. Karoma Eivind Dingstad TegegneworkGettu Thorsteinn Thorsteinsson hlEs.Heidi Sydanen UN EconomicCommission for LatinAmerika and the Caribbean OPECFund for InternationalDevelopment Isaac Cohen Y. Seyyid Abdulai Ms. Ines Bustillo Said Aissi Mrs. Jumana A.W. Dejany UN EconomicConunisslon .r Africa Ms. Nelly Ruiz Kingsley Y. Arnoako

327 United Nations Educatlonal, Scientiflc, World Health Organization andCultural Organization Yuji Kawaguchi Paulralzon UN Industrial DevelopmentOrganization World TrudeOrganization EnriqucAguilar RcnaJo RugSiero Michael Duvidsen JesusSende EvanRogerson West Africun DevelopmentBank David Woods Boni Yayi Gary P. Sampson YaoAgbo N'Dc Hounouvi Clemens F. J. Boonckamp SoungaloAndre Fayama Jcff Gertier

328 EXECUTIVE DIRECTORS, ALTERNATES AND ADVISORS BANK September 21, 1995

Alternate Advisars to ExecutiveDirectars ExecutiveDirectors Executive Directars

Ibrahim M. Al-Mofieh Richard R. Herbert (SaudiArbia) (UnitedKingdom)

Khalid M. Al-Sand MohamnedWafik Hosny Abdul Karim Sadik (Kuwait) (Egypt) (Jordan) Ezzedin M. Shamsedin (Lebanon)

Marc-Antoine Autheman Arnaud Chneiweiss PhilippeAyoun (France) (Fmrnce) (France)

Ali Bourhane Luc A. Aden Mahamat Ali Adoum (Comoros) (Djibouti) (Chad) Yssouf Baunba (Coted'lvoire) B1assayToure (Mali) wa BilengaTshishimbi (Zaire)

Andrei Bugrov Eugene Miagkov Lconid M. Grigoriev (Russia) (Russia) (Russia)

Marcos C. de Paiva Arnando Montenegro Juanita D. Amatong (Brazil) (Colombia) (Philippines) Sergio Ruffoni Guedes (Brazil)

Huw Evans David L Stanton (UnitedKingdom) (UnitedKingdom)

Fritz Fischer Erika Wagenhbfer (GerTnany) (Germany)

Jean-Daniel Gerber Jan Sulmicki Jorg Giovanni Frieden (Svitzerland) (Poland) (Switzerland) Pietro Veglio (Switzerland)

Leonard Good Winston A. Cox Lesley Boucher (Canada) (Barbados) (Canada) Gregory Ebel (Canada) Nioclas O'Murchu (Irand)

ErezoR. Grilli Helena Conleiro Raoul Ascari (Italy) (Portugal) (Italy)

329 Alternate Advisors to ExecutiveDirretors ExecutiveDirectors ExecutiveDirecrtrs

EvelineHerfikens SergiyKulyk LubomirChrislov (Netherlands) (Ukraine) (Bulgaria) MoniqucH. Koning (Netherlands)

Ruth Jacoby JorgcnF. Vardcr Runc Lindholmn (Sweden) (Denmark) (Ftitland) AsbjoemLovbrack (Nwrway)

Bimal Jalan MushfiqurRahman S.C. Hoda (India) (Bangladesh) (India)

Abdul Karim Lodhi KacimBrachemi Emcst Ako-Adjei (Pakistan) (Algeria) (Ghana) MohammadKIhazace Torshizi (Iran I.R.of)

LeonardK. Mscka Joaquim RibeiroP. de Carvalho Agil M. Elmanan (Malawi) (Mozambique) (Sudan) WilliamsAyodele Fadare (Nigeria) HarryM. Mapondo (Malawi)

Peter W.E. Nicholl ChristopherY. Lcgg Hak-KukJob (NewZaland) (Australia) (Korea)

Atsuo Nishihara Rintaro Tanaki Masato Kanda (Japan) (Japan) (Japan)

Julio Nogues CarlosSteneri AlejandroFoxicy (Argentina) (Uruguay) (Chile) SantiagoJose Galindez (Atgentina)

Jan Piercy MichaelhMrek MatthcwP. Hennesey (UnitedSlates) (UnitedStates) (UnitedStates)

WalterRill Luc Hubloue NamikDagalp (Austria) (Belgium) (Turkey) KatalinDemeter (Hungary)

SuwanPasugswad Khin Ohn Thant Ha Huan Dan Tlbailand) (Myanmar) (Vietnam)

Jorge TerrazasOmelas RobertoJimencz Ortiz EdmondBenedetti (Mexico) (El Salvador) (Venezuela) Rosa Puech (Spain)

ZhangShengman Zhu Guangyao (China) (China)

330 DIRECTORS AND ALTERNATES MIGA September 21, 1995

Directors Alternate Directors

Ibrahim M. Al-Moflch (Saudi Arabia) Khalid M. Al-Saad MohamcdWafik Hosny (Kuwait) (Egypt) Mtarc-AntoineAutheman Arnaud Chneiweiss (France) (France) Ali Bourhane Luc A. Aden (Comwos) (Djibouti) Andrei Bugrov Eugene Miagkov (Russia) (Russia) Marcos C. de Paiva JuanitaD. Amnatong (Brazil) (Philippines) Huw Evans David L. Stanton (United Kingdom) (United Kingdom) Fritz Fischer ErikaWagenhbfer (Germnany) (Germany) Jean-DanielGerber (Switzerland) LeonardGood WinstonA. Cox (Canada) (Barbados) Enzo R. Grilli Helena Cordeiro (IOY) (Portugal) Eveline Herfkens Sergiy Kulyk (Netherlands) (Ukraine) Luc Hubloue KatalinDemeter (Belgium) (Hungary) I.E. Ismael Hak-KukJoh (Indonesia) (Korea) Ruth Jacoby Jorgen F. Varder (Sweden) (Denmark) Bimal Jalan MushfiqurRahman (India) (Bangladesh) Abdul KarimLodhi Ali Tricha (Pakistan) (Morocco) Pedro Mejia EdmnondBenedetti (Spain) (Venezuela) Leonard K. Mseka Joaquim Ribeiro P. de Carvalho (Malawi) (Mozambique) Atsuo Nishihara Masahiro Fujita (Japan) (Japan) 331 Directors AlternateDirectors

JulioNogues CarlobStencri (Argentina) (Uruguay) Jan Piccy MichaclMarek (UnitedStates) (UnitedStates) ZhangShengman Zhu Guangyao (China) (China)

332 OFFICERSOF THE BOARDOF GOVERNORS IBRD, IFC AND IDA AND JOINTPROCEDURES COMMITTEE FOR 1995-1996

OMCERS

Cliainn ...... Chile WceChainnen ...... PapuaNew Guinea SouthAfrica

Reporting Member ...... Portugal

Members ...... Belarus Belgium Chile Denmark El Salvador EquatorialGuinea Ethiopia France Germany India Jamaica Japan Mauritania Moldova Papua New Guinea Portugal Saudi Arabia South Africa United Arab Emirates United Kingdom United States Venezuela Viet Nam

333 OFFICERS OF THE MIGA COUNCIL,OF GOVERNORS AND PROCEDURES COMMITTEE FOR 1995-1996

OFFICERS

C/iainnan...... Chile Wce Clairen. .Papua New Guinea South Africa

Reporting Meber .Portugal

Members.Belarus Belgium Chile Denmark El Salvador Equatorial Guinea Ethiopia France Germnay India Jamaica Japan Mauritania Moldova Papua New Guinea Portugal Saudi Arabia South Africa United Arab Emirates United Kingom United States Venezuela VietNam

334 THE WORLD BANK GROUP

Headquarters 1818 H Street, N.W. Washington,D.-C. .20433, U.S.A..'j Telephone: (202) 477-1234 Telex Nos.: F1'CC 82987 RCA 248423 WUI 64145 TRT 197688. Facsimile:(202) 477-6391 Intemnet:http:I/W'WW.w' orldbank.org.

European Office. *. 66 avenued IdIna. 75116Paris, France. *Telephone:(1) 40M9-30-00 Telex: 640651 Facsimile: (1) 40-69-30-66;

Cable Address, .

World Bank: NTBAFRAD . * : IFC; CORINTfiIN

IDA: INDEVAS . -MIGA:MICAVE-ST