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INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

Public Disclosure Authorized INTERNATIONAL DEVELOPMENT ASSOCIATION ______

Public Disclosure Authorized SUMMARY PROCEEDINGS

1967 ANNUAL MEETINGS OF THE BOARDS OF GOVERNORS

Public Disclosure Authorized

Washington, D.C. Public Disclosure Authorized September 25 - September 29, 1967

Introductory Note

THE 1967 ANNUAL MEETING of the Board of Governors of the International Bank for Reconstruction and Development, held I jointly with that of the International Monetary Fund, took place in I Rio de Janeiro, Brazil, on September 25-29, 1967 (inclusive) under the Chairmanship of The Honorable Kare Willoch, Minister of Com- merce and Shipping and Governor for Norway. The Closing Joint Session with the International Monetary Fund on September 29 was held under the Chairmanship of the Honorable Erik Brofoss, Gov- ernor of the Fund for Norway. The Annual Meetings of the Bank's Affiliates, the International Finance Corporation (IFC) and the Inter- national Development Association (IDA), were held in conjunction with the Annual Meeting of the Bank. ~ There are recorded in these Summary Proceedings, in alpha- betical order of member countries, the full or partial texts of state- ments by Governors insofar as these relate to the Bank, IFC and IDA. French and Spanish editions of these Summary Proceedings are available upon request to the Secretary's Department. The texts of statements concerning activities of the International Monetary Fund are published separately by the Fund.

M. M. MENDELS Secretary INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT AND AFFILIATES

WASHINGTON, D.C. December 30,1967

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Contents

Page Address by the President of Brazil, Arthur da Costa e Silva ...... Opening Address by the Chairman, Kare Willoch, Governor of the Bank, IFC and IDA for Norway...... 2 Annual Address by George D. Woods, President of the Bank and its Affiliates. . . 6 Statements by Governors and Alternate Governors...... 10 Concluding Remarks by Mr. Woods ...... 68 Concluding Remarks by the Chairman, Erik Brofoss, Governor of the Fund for Norway ...... 69 Documents of the Boards of Governors...... 71 Schedule of Meetings ...... 71 Provisions Relating to the Conduct of the Meetings ...... 72 Agendas ...... 73 Joint Procedures Committee ...... 74 Reports of Joint Procedures Committee: Report I ...... 74 Report II ...... 75 Report IVl ...... 77 Resolutions Adopted by the Board of Governors of the Bank Between 1966 and 1967 Annual Meetings ...... " 77 No. 234 ... Amendments to Agreement with the United Nations Educational, Scientific and Cultural Organization (Unesco) ...... 77 No. 235 ... Membership of The Gambia ...... " 78 Resolutions Adopted by the Board of Governors of the Bank at the 1967 Annual Meeting ...... " 79 No. 236 ... Financial Statements, Auditors' Report and Administrative Budget ... " ...... 79 No. 237 ... Allocation of Net Income ...... " 79 No. 238 ... Membership of Botswana...... 80 No. 239 ... Stabilization of Prices of Primary Products ...... 81 No. 240 ... Appreciation ...... 81

'Report III relates to business of the Fund. (continued) iii Contents (continued)

Page Resolutions Adopted by the Board of Governors of IFC Between 1966 and 1967 Annual Meetings...... 82 No. 62 ... Membership of Viet-Nam ...... 82 No. 63 ... Membership of Mauritania...... 83 Resolutions Adopted by the Board of Governors of IFC at the 1967 Annual Meeting...... 84 No. 64 ... Financial Statements, Auditors' Report and Administrative Budget ...... , ...... , . .. 84 No. 65 ... Appreciation ...... 84 Resolutions Adopted by the Board of Governors of IDA Between 1966 and 1967 Annual Meetings ...... 84 No. 59 ... Amendments to Agreement with the United Nations Educational, Scientific and Cultural Organization (Unesco) ...... 84 No. 60 ... Membership of The Gambia ...... 84 Resolutions Adopted by the Board of Governors of IDA at the 1967 Annual Meeting...... 85 No. 61 ... Financial Statements, Auditors' Report and Administrative Budget ...... " ...... " ...... 85 No. 62 ... Appreciation ...... 85 Report of the Executive Directors of the Bank and IDA...... 86 Amendments to Agreement with Unesco ...... 86 Reports of the Executive Directors of the Bank...... 87 Allocation of Net Income ...... 87 Amendments to Loan and Bond Regulations ...... 88 Report of Board of Directors of IFC ...... 88 Rules of Procedure for Meetings of the Board of Directors ...... 88 Report of the Executive Directors of IDA...... 89 Amendments to Credit Regulations ...... 89 Accredited Members of Delegations at 1967 Annual Meetings...... 90 Executive Directors and Alternates ...... 97 Observers at 1967 Annual Meetings...... 98 Officers of the Boards of Governors and Joint Procedures Committee for 1967-68 ...... 99 Principal Officers of the Bank and IDA ...... 100 Officers of IFC ...... 101 iv Address by the President of the Republic of Brazil ARTHUR DA COSTA E SILVA

AM HERE to welcome on behalf of the through the sincerity and perseverance of markets for manufactured products from I Brazilian people and Government, the its application. less developed countries. distinguished participants of the Annual This, Gentlemen, is a moment of matu­ It is a fact that the effort towards the Meetings of the Boards of Governors of rity for the international community. Our promotion of development is the individual the International Bank for Reconstruction common destiny is inexorably linked to the responsibility of each nation. However, and Development and its Affiliates and the destiny of each one of us. It is well known this internal effort can and must be sup­ Board of Governors of the International that it is the richer nations which trade plemented by a broader availability of re­ Monetary Fund. most among themselves. Nonetheless, sources derived from the more developed Our country considers it a privilege, as their unimpeded trade depends on the countries, to be used in accordance with the seat of your Meetings, to contribute availability of means of payments. Though consistent government programs. It is ex­ to the continuity of the healthy tradition the international monetary system has actly in this area that the experience of established in the last 20 years, that the functioned with great efficiency in the post­ these last few years has not been very men responsible for the economic and war period, there exists today the firm be­ satisfactory. financial problems of so many countries, lief that the moment has come when the The well-known difficulties we face, in which are directly interested in the func­ level of international reserves can no diversifying our exports, require urgently tioning of these institutions, should meet longer be the unforeseen result of the to be removed, so that, besides being raw periodically to examine the progress of vagaries of gold production, or ad hoc material exporters, we will become sup­ the world economy during the second half measures, but must be the object of de­ pliers of manufactures to the world market. of the 20th century. liberate decision, as will be registered at As all of you are aware, the restrictions that the developing countries experience These Meetings - an extension of the this Meeting, 23 years after the first one in building their industrial sector hinder Bretton Woods spirit-reflect the progress was held in Bretton Woods. the speeding up of their economic growth. achieved in the field of communications It is necessary to entrust an interna­ We trust that, in addition to the measures and at the same time evidence the general tional organization with the task of adjust­ to be adopted in this meeting concern­ desire to advance in the still more impor­ ing the level of the means through which ing the problem of international liquidity, tant sphere of the interests of each of the international exchange is to be settled. It others may be studied which will help to nations here represented. These Meetings is even more important to note that this is stimulate the flow of investment capital amplify the possibilities of mutual under­ a decision to be taken, not under the im­ and to open markets for the products standing as opportunities are opened for pact of an emergency, but as the result which the economies of developing coun­ personal discussions among the high of a serene and objective evaluation of tries are in a condition to offer to the in­ authorities on economic matters, whose the conditions which govern our common dustrial nations. In addition to its own points of view may thus mutually influence advance towards the future. efforts, Brazil looks forward to the expan­ each other in the search for solutions of This approach deserves to be stressed, problems which have their own character­ sion of the availability of these external especially when we have in mind the dif­ resources in order to help increase the istics in each sovereign nation, but are, in ficulties the world economy went through pace of its progress and to enable Latin the final analysis, problems concerning the in the period between the two World Wars. international community as a whole. America to achieve its aim of economic On the other hand, it should be stressed integration. In fact, we shall only make progress in that in the international organization The objective of harmonious and self­ the solution of such problems if we achieve charged with such an important task, there sustaining development for all nations can a well-balanced appraisal of the over-all are to be represented, in accordance with only be feasible if we have in mind the interests of our countries. By this means accepted principles designed to reflect the problems I have just mentioned. we will be able to measure, with greater economic weight of each country, all mem­ The world must renew and raise the vol­ certainty, the differences to be overcome bers of the International Monetary Fund, ume of resources made available through among better developed areas and those in order to ensure that the decisions to be international financial institutions. How­ which demand and deserve an adequate taken shall be adopted in an adequate ever, equally important is the problem of treatment in thei r struggle for prog ress. context, because they are capable of how such resources shall be used. We Fortunately, the more favored nations are affecting profoundly the community of have noticed a favorable evolution to­ already aware of the fact that their own nations. wards greater flexibility and more courage tranquility, in the context of international As a result of the tasks to be under­ to innovate. This is a healthy tendency politics, depends directly on the develop­ taken by the Governors of the IMF during which must continue. ment of poorer nations or those more this Meeting, there is to be established the I hope that your labor will bear fruit and pressed by social inequalities. basis for a solution which will allow con­ help to satisfy the hopes of countries like In many instances, it is less important tinuous growth in international trade. The ours, which want to advance on the road to measure in absolute terms the progress attention given to financial matters should to progress, so that our community of already attained, than to be sure that the not mean that less emphasis will be placed democratic nations shall be stronger and treatment adopted in each case will make on questions pertaining to the liberaliza­ happier. it possible to reach positive results tion of this trade, including the opening of Brazil receives you with open arms. ------_... _----_._------Opening Address by the Chairman KARE WILLOCH Governor of the Bank, IFC and IDA for Norwayl

THANK the President of the Republic of ment of our twin objectives: the mainte­ swell the growth rate of Gross National I Brazil for his most gracious remarks. It nance of international financial stability in Product for some time to come. seems fitting that our first Annual Meeting an atmosphere conducive to high levels of This point may have a bearing on the in the Southern Hemisphere should be employment and growth, and a marked degree of public impatience with regard here in Brazil, which is the largest country rise in the living standards of developing to the results of development assistance in this part of the world and one of the countries. No doubt the attention of the which can be witnessed in many industrial founding members of the Bank and the world is focused on our Meetings this year, countries. Perhaps our own preoccupa­ Fund. I am certain that I speak for all in and there certainly is a feeling of hope that tion with aggregate rates of growth has thanking the President of Brazil, and the the clouds of uncertainty which have for encouraged the public to look upon them Government and the people of Brazil, and some years surrounded these questions as a kind of official index of develop­ of this city of extraordinary beauty for their are at last dissipating. ment success. We should take pains to generous hospitality. In particular, our A recitation of what the Bank Group and make it accepted that they alone cannot thanks are due to those who have made the Fund have been able to achieve de­ serve such a purpose in a satisfactory way available to us this striking Museum of spite the handicaps of this continuing un­ at this stage in the development effort. Modern Art, and who have in the past year certainty affords a glimpse of the potential In many developing countries, rapid eco­ and a half, with great energy and imagina­ of these institutions. I should like to high­ nomic growth can be generated only after tion, adapted it so well to the needs of light a few points which seem to be par­ far-reaching structural changes have been our Meetings. ticularly relevant to our discussions. brought about. This is inevitably a long Speaking for myself, as well as for my When the Annual Reports of the World process, and in many parts of the world colleague as Chairman, Governor Bro­ Bank Group are examined in the context we have some distance to go before the foss, I extend a most cordial welcome to of the entire development effort, one gains investments necessary to these changes all Governors, Alternates, Advisers and three quite distinct impressions. First, one can be expected to payoff. guests. I wish especially to welcome the is struck by the magnitude of the world's Although purposeful measures to cre­ Governors for Indonesia and The Gambia, accomplishments in the last 15 years or ate a more favorable basis for economic whose representatives have signed docu­ so, and by the promise this holds for the growth in underdeveloped parts of the ments of membership since our last meet­ future. Second, the record of the last few world date further back, one may say that ing, and to the Observers from Botswana, years reflects a remarkable intensification the international development effort as we which has applied for membership. and broadening of the effort to come to think of it today really began to gather You have before you the Annual Reports grips with development in all its dimen­ momentum only about 15 years ago. To of the World Bank Group and the Fund. sions. Third, yet at the same time, one is illustrate, of the $8.6 billion the Bank and In a few moments I shall calion Mr. Woods impressed by the critical-even dangerous IDA had disbursed for development pur­ and Mr. Schweitzer, whose Annual Ad­ -nature of the debt service problem we poses through last June 30, less than four dresses are eagerly awaited. Before dOing confront at this moment, and by the in­ and a half per cent had been paid out by so, however, I should like to make a few adequacy of development resources. I mid-1952. Of the remainder, more than introductory observations on the problems should like to speak on these three points. three-quarters have been disbursed in the we confront in finance and development. Once again in its Annual Report, the last decade, and, of this, more than 60 per For several years, our major preoccupa­ Bank has made an important contribution cent in the last five years. I have not tions have been essentially the same. On to the assessment of development prog­ analyzed disbursements from all sources the side of finance, our attention has pri­ ress and prospects. It summarizes the in the same way, but if high proportions marily been focused on the intricate prob­ varied growth experience of the develop­ of the total have been spent in such rela­ lems of world liquidity and the functioning ing countries against the background of tively short spans of time we can hardly of the international monetary system. In world economic conditions, the inade­ expect to see the bulk of these invest­ the realm of development, the core of quacy of development resources, the ris­ ments fully reflected so soon in the growth our concern has been the inadequacy of ing debt service burden, and obstacles to of GNP. financial resources. These are still the a satisfactory increase in export earnings. A few examples should make this point overriding issues before us. Theirsuccess­ This is an extremely useful analysis, but clear. Education probably takes the long­ ful resolution is essential to the achieve- I believe it deserves a footnote to make est time to payoff economically, but is a clear that today's aggregate rates of fundamental development necessity. The growth in agricultural, industrial and gross developing countries have made massive 'Delivered at the Opening Joint Session. September 25, 1967. Mr. Kare Willoch, Governor of the Bank, IFC and national production are not an adequate investments for this purpose. It must be IDA for Norway, and Mr. Erik Bro/oss, Governor of the relevant to any realistic assessment of de­ Fund for Norway, acted as Chairmen 01 the Annual Meet­ measure of the development effort already ings. Mr. Willoch presided at the Opening Joint Session made. While they do reflect results so far velopment achievement that the number on September 25, at the Second Joint Session on September 26, and at the Bank, IFC and IDA Session on obtained from earlier investments, the full of children in school more than doubled September 27, 1967. Mr. Brofoss, Chairman of the Board of Governors of the Fund, presided at the Fund Session benefit of a significant proportion of total between 1952 and 1963 in Latin America on September 28 and at the CloSing Joint Session on September 29, 1967. postwar development expenditure will not and South Asia, as reported by Unesco,

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while it tripled in Africa. Surely this in­ the fact that this growth starts from a very trial enterprise-an enterprise with experi­ crease can be expected to add much more small base, it may be at least one happy enced and efficient management. to future economic growth than has so far augury for the future. Education is another difficult field into been reflected in the GNP of developing Agriculture is still the great laggard. which the Bank Group has been led by countries. Some of the crucial facts reported by the Mr. Woods. Here also, steady and encour­ A lag between investment and realized Bank are those concerning the failure of aging progress is being made, although, benefits is inevitable in all development, agricultural output, and especially of food as already described, investment in edu­ though the time span involved varies wide­ production in the developing countries, to cation probably takes the longest time to ly. Water will begin to flow to the fields keep abreast of the increase in popula­ payoff. Bank and IDA lending for educa­ from a Bank-financed irrigation project, tion. Total farm production in these coun­ tion is increasing at a rapid rate, but still for example, only from three to five years tries actually declined last year, and in totals only $142 million. It may probably after the loan is approved. Some increase per capita terms it fell almost five per cent never be significant in terms of money in in production may result during the follow­ over the two years 1965 and 1966. In food relation to total lending, but looms sub­ ing year, and afterwards output should rise production, the decline per capita has stantial in terms of over-all assistance to gradually. Experience has shown, how­ been even more severe. education by external agencies. However, ever, that an irrigation project's full con­ These facts add a grim and powerful there is reason to believe that the Bank's tribution to growth cannot be expected endorsement to the initiative, taken by interest and activity in this field may have until 10 or more years after the water be­ Mr. Woods nearly five years ago, to en­ considerable impact in helping countries comes available. On this basis, less than gage the World Bank Group more fully in obtain greater long-range development 12 per cent of the approximately $660 mil­ the basic, highly complex and difficult task benefit from their education budgets. lion the Bank and IDA have committed for of agricultural development. They argue Within the broad framework of technical irrigation projects has had sufficient time strongly in favor of the emphasis which assistance, the Bank has acquired much to generate its full benefit; projects repre­ the Bank and IFC have been giving to the new experience with the manifold prob­ senting nearly 90 per cent of the Bank achievement of a massive, early increase lems of aid coordination, both through the Group's investment for this purpose will in fertilizer production and use. While formal coordinating groups that it has or­ reach their potential of productivity only there was a disappointing drop in the ganized for 11 recipient countries and gradually between now and 1982. amount of funds the Bank Group actually through flexible, ad hoc arrangements to In the case of so-called infrastructure committed for agricultural development deal with special problems as they arise. projects for electric power, transportation, during the fiscal year ending June 30, One important contribution the Bank telecommunications and urban water sup­ 1967, one IDA credit and four Bank loans has made in recent years has been through ply, these investments also are often made have been approved since then, bringing its studies of problems that are crucial to to anticipate and lead demand rather than the total of funds committed for agricul­ the growth of developing countries. Major respond to it. Thus, in these sectors as tural lending during the first nine months efforts in this direction have been the well, there is often a lag between project of calendar year 1967 to $194 million, a staff studies carried out at the request of completion and full capacity utilization. much higher rate than for any previous UNCTAD. Those concerning suppliers' Such projects have accounted for two­ period. We are assured that the number credits and shortfalls in export earnings thirds of the $11.6 billion the Bank and and diversity of suitable projects are in­ of developing countries are of particular IDA have committed for development, and creasing. At the end of the fiscal year, 28 interest. Many of us also share the interest a significant part of that amount has not projects had either reached the stage of of our hosts in the study, now under way yet been disbursed. loan negotiation or were being appraised in conjunction with FAO and the Interna­ Investments for industry entail the short­ and an additional 35 projects were under tional Coffee Organization, concerning the est lag between construction and the preparation. This compares with 19 proj­ world coffee problem and its impact on realization of benefits, since they are nor­ ects for which funds have been committed many developing countries. And we all mally made in more direct response to over the last two fiscal years. join in commending the Bank and OECD demand. Yet the infrastructure and skills There have been equally important de­ on the new and expanded system of debt resulting from the more slowly maturing velopments during the past year in the reporting which they have worked out, investments are both a prerequisite and Bank Group's assistance to industry. A and which came into effect on the first of a powerful stimulus to most industrial first line of credit for IFC has been made this year. growth. They also contribute greatly to the available by the Bank, under the new This leads me to a main point, the seri­ higher and more immediate returns on in­ authority recently approved by the mem­ ous nature of the debt service problem dustrial investments. It is interesting to bers of the Bank and IFC. The Corpora­ and the inadequacy of resources. In some note that industrial production in the de­ tion's total commitments reached more countries the debt service emergency veloping countries has been growing at an than $220 million, well over twice the might perhaps to some extent have been average annual rate of more than seven amount of its capital. The Bank made its avoided by more skillful management. per cent during the last six years. Despite first loan to a government-owned indus- Much of the difficulty, however, results

3 from causes beyond the control of the de­ as one measure of the Fund's accom­ number of areas the Fund has developed veloping countries concerned, but well plishments, certain aspects of its recent specific technical services to assist mem­ within the control of those in a position operations: bers. Experts provided by the Fund, both to encourage and help economic develop­ Drawings from the Fund in the past fis­ from within the staff and recruited from ment, if they could only concert their poli­ cal year again exceeded $1 billion, caus­ outside, are actively engaged in counsel­ cies with that end in view. ing outstanding drawings to rise to over ing the newer central banks and in ad­ The seriousness of this predicament has $5 billion. In this process the currencies vising on budgetary and tax operations. been summarized with stark clarity in the of four member countries, namely those of Moreover, the Fund has continued to be Bank's Annual Report, and has also been Brazil-our host-and Malaysia, Venezuela active in trying to alleviate the excessive treated in the Fund's Report. The facts and my own country, Norway, were used burden of indebtedness facing some of its make it obvious that the inescapable arith­ for the first time. Since our last Annual less developed members and has actively metic of debt service burdens will delay Meetings Bolivia, Denmark, Guyana-and collaborated with the Bank to help credi­ the development process in country after I am pleased to note, also Norway, as­ tor countries consider the debt problem of country unless the world community rep­ sumed the obligations of Sections 2, 3 and particular countries. These technical as­ resented in this room finds it possible to 4 of Article VIII. sistance activities, including the training agree on an acceptable solution. Coopera­ The fiscal year saw Fund quotas rise by provided by the IMF Institute, reflect the tion between the Bank and Fund in coping $1.5 billion as a result of the general quota Fund's efforts to help countries to increase with debt problems has been gratifying, increases which were authorized in 1965. the vital supply of skilled and experienced but further steps are needed to assure a Support of its resources continued under civil servants, especially in newer mem­ satisfactory development. the General Arrangements to Borrow, bers which have joined the Fund since This situation underlines the necessity which were renewed during the year. The independence. of giving the highest priority to the task of Fund did not have recourse to these Ar­ In view of the comprehensive account providing sufficient funds for the branch rangements during the year, but it is inter­ to be found in the Annual Report, I have of the World Bank Group which has been esting to note that the Fund borrowed merely touched upon some of the more created with the specific purpose to grant directly from Italy. This is the first such notable financial operations and decisions loans on lenient terms, viz., IDA. It is of bilateral arrangement in Fund history. It of the Fund. I have also noted with deep paramount importance to enable this in­ seems to me that Italy has thereby set an interest the review of economic policies stitution to fulfill its function. It is a most example which, if adopted by other credi­ and trends in member countries which is efficient instrument for long-term cheap tor countries, may prove to be of great given in the Report. This part of the Report and untied lending. importance for the adjustment process. depicts an economic slowdown in major Mr. Woods will undoubtedly have some­ Another initiative - demonstrating once industrial countries, with only few excep­ thing further to report on his efforts to more the flexibility which has character­ tions from mid-1966 to mid-1967. I shall obtain agreement on a new and larger re­ ized the policies of the Fund-was the not belabor the important economic and plenishment of IDA's resources. We should liberalization of the compensatory financ­ political questions which this part of the feel it as a great encouragement if Gov­ ing facility. Subsequent to this extension Report might evoke. I would like, however, ernors of the principal industrialized of policy have come the five compensatory to express the view that while in previous countries could give us hope for further, drawings described in the Report, plus two years most countries agreed in disapprov­ broader and more closely harmonized later drawings, a total of four more than ing of economic pOlicies which involved policies for liberal aid in all its forms. had occurred in the three years previously. what might be called "export of inflation," A new feature in the field of the World This indicates that increased use of the the development in the last year seems to Bank Group activities, which I will take facility may be anticipated particularly illustrate and underline the equal impor­ this opportunity to welcome, is the crea­ during the present economic pause in the tance of avoiding economic policies which tion of the International Centre for Settle­ industrial world, with its expected depres­ lead to "export of recession." ment of Investment Disputes, which has sant effects on the export receipts of the The question of pressures that may now come into operation. The first annual developing countries. generate recession brings me to another meeting of the Administrative Council of Equally deserving of attention have been general issue, to which I would now like the Centre will be held here today. The the strong and successful efforts of the to turn, and to which we all must give our creation of this facility for international Fund to provide assistance in technical careful attention during these next few conciliation and arbitration in investment fields relating to monetary and exchange days. I refer to the problems of liquidity, disputes marks an important step in the policies, central banking, fiscal manage­ and the functioning of the international cooperation between member countries ment and financial statistics. Much of this monetary system which are so important for the promotion of economic develop­ technical cooperation takes place within to the world's financial community and, ment by private international investments. the framework of its regular annual con­ indeed, to the world as a whole. Turning now more specifically to the sultations procedure or through similar The Fund has given much time and at­ activities of the Fund, I would like to note, staff discussions with members, but in a tention to these questions over the years.

4 and Governors will recall that at our last As a result of these various efforts, the In summing up, I believe that we have Annual Meeting in Washington it was Fund Governors have on their agenda the only started to see the full possibilities of agreed that informal joint meetings be­ "Establishment of a Facility Based on Spe­ the world-wide effort which began with tween Executive Directors and the Depu­ cial Drawing Rights in the Fund and Modi­ the establishment of the Bank and the ties of the Group of Ten might be helpful. fications in the Rules and Practices of the Fund at Bretton Woods. We have at our In the four such meetings that have taken Fund." Later this week, they will be asked hands instruments that give us great op­ place, and in the other contacts relating to to approve a Resolution which requests portunities to pave the way for still further them, there has been a most valuable ex­ the Executive Directors to proceed with and uninterrupted economic growth, and change of views contributing to the clari­ their work on these matters and submit thereby lay the foundations for increased fication of many problems. A useful contact to them appropriate amendments to the well-being and social justice allover the has also been established between the Articles of Agreement and the By-Laws. world. And we are all particularly aware Fund and UNCTAD. Our predecessors, the Founding Fathers, that the struggle to realize national poten­ The result of these various activities at Bretton Woods were wise in establish­ tialities, and to facilitate economic self­ seems to be that we are now closer to the ing an institution so organized that it could end of the uncertainties of the past years. repeatedly respond to challenges then un­ determination touches every aspect of the I am eagerly awaiting Mr. Schweitzer's foreseen, and we must aim to be as effec­ hopes and expectations of the peoples comments on these events, and I wish to tive as they were. Reform, to be reform, of the developing countries. Despite the pay tribute to him, to the Executive Di rec­ should be directed toward the Fund's con­ difficulties, I am confident that we shall tors, to the Fund's staff and to the Depu­ tinuation as the vigorous and universally proceed toward these goals, which affect ties of the Group of Ten for the excellent recognized center for international mone­ the dignity and self-respect of a major work done during this period. tary collaboration. proportion of mankind.

5 Annual Address by GEORGE D. WOODS President of the Bank and its Affiliates

SHOULD LIKE first to join the Chairman nant continuing problem. In the case of In any event, Bank assistance for IDA I in thanking His Excellency, the President the Bank, the consequence of a high rate can only be marginal; the chief supporters of Brazil, for his words of welcome. His of disbursement plainly must be large bor­ will always be the more prosperous mem­ country comprises nearly half the area and rowings. Since our last meeting we have ber countries. Agreement among govern­ population of South America. It is two and arranged to borrow $700 million, of which ments concerning the amount, the shares, a half times as large as Western Europe, $380 million was new money and $320 and the conditions of the next replenish­ including the British Isles and Scandina­ million was for refunding. ment of IDA's finances has not yet been via, and has a fourth of the population­ Over the past year, IDA has been able reached. This past summer, however, dis­ there are about 87 million Brazilians. It is to make commitments and carryon its cussions of these questions have become rich in minerals and agricultural resources. operations, due in large part to extraordi­ both more concrete and more intense, and It has a third of all known iron reserves nary support given to the Association from I am encouraged to feel that they will now and the world's fourth largest potential several sources. The Swedish Govern­ move forward to definite conclusions. In for hydroelectric power. In production, it ment, for the sixth consecutive year, made fact, I feel that here-in the atmosphere of ranks first in coffee, third in manganese, a welcome special contribution to IDA. this Meeting-solutions may begin to take fourth in sugar, and eighth in iron ore. The Swiss Government has started legis­ form. I am sure all concerned recognize Despite a long history of recurring eco­ lative machinery for authorizing a loan to that it is essential that the IDA replenish­ nomic difficulties, Brazil has managed in IDA on the same highly concessionary ment be agreed upon as rapidly as pos­ the last 20 years to triple its Gross Na­ terms IDA accords to its borrowers-a sible and that results be achieved which tional Product and to more than double the loan which will break new ground in IDA will permit IDA to respond, much more real per capita production and income of finance, being the initial borrowing by the adequately than in the past, to the priority its people. This is a vast and fascinating Association. And the Bank, with the ap­ needs of the less developed countries. country which well mirrors the aspirations proval of the Governors at last year's Mr. Chairman, when we turn from our and the problems of the developing na­ Annual Meeting, made a transfer to IDA own operating preoccupations to look tions. We are happy to be here. from its net earnings of the fiscal year around us, we see a troubled world. Pain­ Mr. Chairman, you and the other Gover­ 1965/66. ful dislocations and adjustments are tak­ nors have the detailed record of the World This year, the Governors are asked to ing place in nations of Africa, Asia and the Bank Group's activities of the past fiscal approve Bank support for IDA again, but Middle East. year in the Annual Reports of the Group­ only in a token amount. The Governors will During the past year, conflicts, domestic the World Bank itself, the International recall that Bank transfers to IDA have been and external, have pre-empted the ener­ Finance Corporation (IFC) and the Inter­ considered each year in the light of the gies, the concern and the resources of national Development Association (IDA). Bank's own financial position. The guiding nations, both industrial and developing. I will not take your time by repeating what policy, approved at Tokyo in 1964, has The tragedy of armed conflict and prepa­ you already have before you on the printed been that transfers are made only in rations for it is more than the diversion page. Suffice it to say that the operations amounts "not needed for allocation to re­ of manpower and scarce funds from pro­ of the Bank Group continue to grow. Once serves or otherwise required to be retained ductive uses. The tragedy is also in the again commitments were more than a bil­ in the Bank's business and (which), ac­ turning away from development it pro­ lion dollars and in more numerous and var­ cordingly, could prudently be distributed duces around the world. Conflicts, within ied transactions than before. The growth as dividends." and among the developing countries espe­ of the operations of IFC, our private enter­ The transfer to IDA recommended this cially, feed the prophets of doom who prise arm, now newly backed by a line of year is in a token amount for a simple claim that economic development does not credit from the Bank itself, was especially reason: the volume of Bank disbursements, work. They slow whatever momentum may marked. Disbursements of the Group ex­ against commitments previously made, is have been achieved. They harm not only ceeded a billion dollars. Technical serv­ rising; and the needs of the Bank for the countries directly involved; they harm ices to members increased. Our activities finance to carryon its operations, as I the cause of development everywhere. in the coordination of aid continued, and have said, will be correspondingly heav­ Deep-rooted social unrest short of out­ we feel that we are slowly making head­ ier. At the same time, the Bank has not right conflict exists in many societies, and way in this complex and vital task. After been given the access to capital markets solutions are neither simple nor swift. several years of preparation, we brought that its operations warrant. We have been Towering high over all the economic prob­ into being the International Centre for Set­ disappointed, but I hope only temporarily, lems is the fact of rapid population growth tlement of Investment Disputes to encour­ in our plans for offering long-term issues -now proceeding fast enough to double age the flow of private investment into the in several European member countries. It the population of the less developed coun­ less developed countries. is highly desirable that we borrow sub­ tries in a single generation. Here in Brazil, For the second consecutive year, I must stantial amounts in those markets in the it is expected almost to double in twenty report to you that finding finance for the current fiscal year, and there is good evi­ years. It is encouraging to see some coun­ operations of the Bank and IDA is a domi- dence that we will be able to do so. tries beginning to make advances in the

6 field of population control, but present of multilateral agencies, there are reasons capita income bracket of only $300 to $600 measures constitute only a beginning. for discouragement. a year. There are at least 25 countries1 , Experts say that at best, the rise of On the other hand, this situation is not many of them from this income group, in population curves will not begin any pro­ exceptional. There have been many years which Gross National Product grew dur­ nounced deceleration for another 15 or 20 in which exactly these same observations i ng 1966 at a rate between five and ten per years. In that time, the less developed could have been made at the Annual Meet­ cent, and there are nine countries2 in which countries must greatly increase both the ing of this Board of Governors. Progress recent average growth rates, if continued, output and the nutritional value of food: is always slow, always difficult. The way will double Gross National Product within they must produce more, both to feed ahead always seems blocked by frustra­ the 1960s. more people and to feed people more. tions, postponements, errors of commis­ The economies of many developing The food requirements - to double the sion and, even more, of omission. But we countries have been maturing. Progress present output by 1980 and to triple it by must plough ahead. Responsible and dedi­ in the industrial sector, as we all know, the end of the century according to the cated ministers in developing countries has been particularly rapid, and exports Food and Agriculture Organization of the should not lose heart. Harassed parlia­ of manufactures, while still originating United Nations-seem staggering. ments and men of broad vision in indus­ chiefly in a limited number of countries, However, none of the formidable prob­ trialized countries should take a second have increased by 70 per cent in the 1960s. lems facing the developing countries can breath as we approach the close of the Institutions have also matured-evidenced be attacked singly or by technical means Development Decade of the Sixties and by an encouraging flow of technical assist­ alone. The world is not going to be saved face the Seventies. Each must at intervals ance among the less developed countries simply by chemical fertilizers and "the appraise the problems of the other. In the themselves. An impressive infrastructure pill." The changes needed by the less de­ interest of the long-range well-being of of physical facilities, especially in the veloped countries touch virtually all of both, there must be a constructive recon­ form of power installations and transpor­ society. They will come about as part of ciliation between the natural impatience tation services, representing billions of a larger transformation of social and eco­ of the poorer, newer nations on the one dollars, has been put in place. And-for nomic organization-as part of the larger hand, and the pressing problems facing the first time in history-the improvement process we call economic development. the legislators and Cabinet ministers of of the fortunes of mankind has been ac­ In that process, education must playa the rich countries on the other. cepted as an international objective and pervasive part, teaching new skills and The Chinese have a proverb that a jour­ responsibility. cultivating new attitudes toward social and ney of a thousand miles must begin with Those of us who are deeply involved economic change. In too many of the less a single step. In the case of economic with the problems of the developing coun­ developed countries, however, educational development, we have taken not only the tries necessarily think and talk a great deal systems are not yet adequate for this single step but many, many steps beyond about the difficulties we face. I would like essential purpose. They have yet to strike that. Over the years, all those steps add to hear more talk about some of the suc­ a proper balance between various levels up to a journey for which there is no exact cess stories in development. It is time that and kinds of education, and in too many precedent in the history of man and from we began to say to the taxpaying public cases, the curricula being followed were which, I believe, there is no turning back. and the legislatures of the industrial coun­ not designed for, and have not been Remember that for most of history the tries that the development effort they are adapted to, the country in which they are lot of human beings has fluctuated only and will be asked to support can be suc­ being taught. The schools and universities between varying degrees of poverty. For cessful and has been successful in some are not yet doing enough to develop farm­ most of mankind, life has been nasty, important sections of the world. Among ers, engineers, administrators, teachers brutish and short. the countries which would currently be and the legion of other skilled workers Something new is happening in today's on my personal list for special mention geared to the development needs of the world. Over the past 15 years, economic for economic achievement would be Iran, economy. growth in less developed countries em­ Israel, Korea, Malaysia, Mexico, Pakistan, Development takes capital. Four-fifths bracing not less than half of mankind has the Republic of China, Thailand, Tunisia, of the investment being made today is be­ been proceeding as fast as in the indus­ Venezuela and Yugoslavia. ing made out of the resources of the de­ trialized countries. Over this span of 15 The reasons why some countries have veloping countries themselves, but the years, the Gross National Product in the been more successful than others are dif­ all-important leaven for the loaf must developing countries has more than dou­ ferent from case to case, but they are not come from outside. With the rate of private bled, and per capita income-despite the international investment currently down, rapid growth of population-has increased llncluding Bolivia, Chile, Colombia, Costa Rica, Greece, Guatemala, Honduras, Jamaica, Kenya, Korea, Malaysia, with parliamentary bodies in some of the by 40 per cent. Mexico, Nicaragua, Nigeria, Panama, Peru, Philippines, largest aid-providing nations reluctant to Among the countries of the world, the the Republic of China, EI Salvador, Spain, Tanzania, Thailand, Trinidad & Tobago, Turkey and Venezuela. augment bilateral programs, and with de­ fastest rate of growth, in fact, is now being 'Greece, Israel, Jordan, Korea, Nicaragua, Panama, the lays in enlarging the financing capability experienced by those nations in the per Republic of China, Spain and Thailand. 7 mysterious or unidentifiable. The Bank is caused, in part, by mistaken policies­ tiona I Product of the industrial countries, continually informed about both progress among them, overvalued exchange rates the flow of public and private finance to the and setbacks in the development perform­ and too much priority to import substitu­ developing countries is one hundredth; ance of its member countries. It is our tion, no matter how uneconomic. In part, but as a proportion of what the developing business to know why things work well it is due to neglect of quality and continu­ countries have available to invest in de­ when they do and why things go badly in ity of supply. But some part of the difficulty velopment, it is one-fifth. Here again, a other cases. Our conclusions about the has been the lack of cooperation given by change that would be marginal to the in­ facts of economic growth and our judg­ the industrialized countries through the dustrial countries would be greatly mag­ ments about the effects of various factors, removal of impediments to the exports of nified in the finances of the poor. including government policies, in promot­ the developing countries. Apart from the question of volume, ing or impeding that growth are regularly Suppose that the exports of the less de­ which currently presents very real politi­ communicated to member governments, veloped countries, instead of declining as cal and budgetary problems in certain in­ through our Executive Directors, in our a proportion of world trade, had been able dustrialized countries, much can be done economic reports. I commend these re­ last year to maintain the same modest to enhance the value of such development ports to any Governor who may from time position that they had occupied five years finance as is available. to time need evidence to sUbstantiate the earlier. On that supposition, the less de­ claim that economic development, where veloped countries would have had a 1 First, greater continuity of financing from one year to the next would lead to it is pursued with vigor and intelligence, per cent larger share of world exports­ a steadier and more effective effort in the is worthy on merit of the support of the and that 1 per cent would have earned developing countries themselves. The steps industrialized nations. them well over $1 billion more of foreign that several countries are taking to formu­ That is not to say that progress has exchange than their exports actually did been fast enough, or that throughout the earn in 1966. late their annual development assistance less developed world, the formidable bar­ If a 1 per cent adjustment in shares budgets within the framework of multi­ riers to self-supporting economic growth of world export trade would bring about year targets is greatly to be welcomed. are about to fall. But forward movement is a billion-dollar improvement in the for­ Second, the long-debated question of under way, and on an enormously wide tunes of the poor countries, then surely the terms of aid has become acute. If the front-forward movement that has tangi­ the matter is worth consideration and ac­ volume of development finance does not bly affected the lives of present genera­ tion. Price stabilization for selected pri­ grow, and if there is no improvement in tions in the developing countries, and mary products is a closely related subject the terms, development aid will simply promises still more for the generations to simi larly entitled to consideration, even eat itself up. Service on past official debt, come. though it admittedly presents difficult including both interest and amortization, Mr. Chairman, I am increasingly im­ problems. If the less developed countries already offsets two-fifths of the official pressed-and at times depressed-by the are encouraged - and permitted - to im­ flows of capital to the developing coun­ scope of the changes which traditional prove their export earnings, many prob­ tries. For some aid-giving countries, the societies must make in order to modernize lems will become more manageable: net transfer of official capital, on the basis themselves. These changes have to reach external debt crises will be fewer, the of present policies, soon will be zero. to the very core of the lives of peoples in need for aid will diminish, the attraction Since 1962, as our Annual Report relates, the less developed countries. By contrast, for private capital will grow. payments on debt service have more than in the industrialized countries, only mar­ On the volume of development finance, doubled in East Asia, have increased by ginal changes in their relations with the Mr. Chairman, my views are well enough 90 per cent in South Asia, and have risen underdeveloped countries would be of the known not to need-and perhaps not to by almost 75 per cent in Africa. Latin greatest significance. bear-repetition today. Official transfers American debt continues to be heavy. Take trade: as we know, exports-espe­ from the industrial countries to the less Almost half of all current debt service is cially of primary products-are the chief developed nations have only slightly in­ on suppliers' credits, often due to be re­ source of foreign exchange for the less creased over the last five years, while the paid before the equipment they finance developed countries. They provide about output and the income of the industrial has begun to make a perceptible contri­ four times as much as official develop­ countries have been bounding vigorously bution to the productivity of the borrowing ment finance and international private in­ to new highs. country. On average, the terms of develop­ vestment. Export earnings, historically, The available amount of international ment finance are little, if any, better than and for most developing countries today, development finance is falling farther and they were five years ago. The absolute are the main fuel of development. farther behind the economic capacity of essential, if development assistance is not The total exports of the less developed high-income nations to provide it, and to become an exercise in self-defeat, is for countries, however, have not been grow­ farther and farther behind the capacity of a decisive move toward much longer grace ing suffiCiently fast. For some countries, developing countries to use it produc­ periods and repayment terms as well as the lag in export growth has been tively. As a proportion of the Gross Na- toward lower initial interest rates.

8 Third, with my experience of the past achieved in the world, unless the ever What began tentatively as the develop­ five years-this is the fifth year that I have more violent and disastrous incidence ment effort after World War II is now estab­ the privilege of addressing this Governors' of war can be averted, unless some con­ lished as a planet-wide undertaking of meeting-I continue to believe that assist­ trol can be imposed on the headlong some concern to every government on ance provided through multilateral chan­ waste of man's limited inheritance of earth. When the story of our times is writ­ nels has advantages of objectivity, econ­ coal, oil, and moral energy that is now ten, historians may mark as their out­ omy and suitability of which donor coun­ going on, the history of humanity must standing contribution the idea that human tries should take greater advantage. In presently culminate in some sort of dis­ progress can be deliberately planned, en­ this connection, even though the funds aster, repeating and exaggerating the gineered and brought about-and further, flowing multilaterally are not yet adequate, disaster of the Great War, producing that progress need not be confined to the I am encouraged by the amount of devel­ chaotic social conditions, and going on minority of the world's population which opment assistance now being designed thereafter in a degenerative process to­ lives in wealthy countries. I hope too that within multilateral frameworks - through wards extinction." our times will be noted for the moral im­ such devices as consortia and consulta­ This prophet was the British author, Mr. perative that has caused the nations to tive groups. H. G. Wells, writing after the First World organize and work together in the cause Finally, let me observe that the effective­ War. Mr. Wells was right: mankind did re­ of development. Although sometimes ob­ ness of development finance would be peat and exaggerate the disaster of the scured, that motive is always at the foun­ particularly enhanced if aid-providing First World War in World War II. Whether dation of all our efforts. Indeed one of countries were to evolve common strate­ the rest of his prophecy will be fulfilled today's most hopeful signs is the clarion gies of assistance. Economic development remains to be seen; but, certainly, creative restatement of that imperative by those would benefit greatly if the donor coun­ acts are even more needed in our day than world leaders who concern themselves tries had consistent and mutually reinforc­ they were in his. ing views about the objectives they wish with morality and destiny-by Pope Paul In the field of economic development to achieve in their relationships with the in his encyclical of last spring, "On the and development assistance, policies and developing world, about the importance Development of Peoples," and by the performance that were tolerable 20 or of these objectives to their own national World Council of Churches, earlier this even 10 years ago are not good enough interests and about the level of resources, year, in the Report of the World Confer­ for today-they are not likely to survive the mechanisms and the techniques which ence on Church and Society. tomorrow-and this is true with respect should be employed to achieve these Mr. Chairman, it is the proud task of the to both developing and industrialized objectives. countries. Bank Group and its member governments Mr. Chairman, you probably remember to engage in a mission of noble purpose. the story of Cassandra, the Trojan prin­ The past is not a sufficient guide, for There exist on this planet the knowledge cess of 3,000 years ago who correctly the situation of humanity today is unprec­ and resources to create a future in which foretold the perils that confronted her peo­ edented. Never in the past was so much mankind can be decently fed, clothed, and ple, and who, for her pains, was thrown of mankind caught up in a single issue. housed, and beyond that, in which men­ from the battlements of Troy. Let me quote Never has technical change been so basic individual men and women-can devote today from a prophet who suffered a less and so effective. Never has social change their talents to improving the quality of disastrous fate. He said: been so rapid. Never has the increase of "The urgent need for a great crea­ population been so swift. Always before, life for all. tive effort has become apparent in the the world's opportunities and problems in­ Now let us gather the resolve to work affairs of mankind. It is manifest that creased by addition; now they are growing with all our force and ingenuity to make unless some unity of purpose can be by multiplication. that futu re real.

9 Statements by Governors and Alternate Governors1

has the honor to receive a preparatory aptly summarize the basic purposes of meeting bringing together representatives these institutions in this way. They are in­ Algeria: The Hon. SEGHIR MOSTEFAI of the Third World, now represents the spired by the need to achieve a healthy Governor of the Fund final authority before which all those who rate of growth of world production and should, can, and are prepared to make In joining with the Governors who have trade and to maintain that growth with a their contribution to the progress of the already spoken at this Meeting to express minimum of checks and reversals. It is for developing countries will have the oppor­ my pleasure at the opportunity we have them to help to ensure that world financial tunity there to accept finally the necessary been given to meet in this country, I do and economic conditions are favorable to sacrifices required by world solidarity and not feel that I am merely fulfilling the obli­ such growth. equilibrium. gations of courtesy and gratitude toward Let us first look at the picture which our hosts, the Government and the people emerges from our review of the year just

of Brazil. ------past. In important respects it was not a The fact is that, speaking today as a satisfactory one. There was what is now member of this Meeting, true, but even Australia: The RI. Hon. called, not inappropriately, a "decelera­ more as a representative of a developing WILLIAM McMAHON tion" in world production and trade. To country, I feel that Brazil, because of its Governor of the Bank and Fund some extent this was avoidable. Initially importance and its tremendous possibili­ there was a failure to employ sound eco­ Mr. Chairman, few Delegates have trav­ ties, forms an impressive backdrop that nomic and fiscal policies in some coun­ gives special interest to the opinions and eled as far as we Delegates from Australia. From the moment we arrived in Central tries. Action subsequently taken to offset preoccupations we are so eager to express. excess demand and correct external dis­ America-that is, in Mexico-through the While reconfirming here our support of equilibrium was belated. It was exces­ United States, later on to Puerto Rico and the memorandum on the activities of the sively concentrated in .the monetary sector Trinidad, and now into Brazil we have Bank and Fund prepared by the African when fiscal restraints could have been been treated with the greatest courtesy Group, to which we belong, I am able to more appropriately used. A slowdown in and consideration, and I am sure that if add a few brief comments which reflect the rate of growth of trade and develop­ all the Delegates have been treated in the my country's sentiments on the key prob­ ment occurred. lem of the present Meeting .... same way it must add to their capacity to One important consequence was a hard­ . . . At a time when needs are becoming make a contribution in these discussions . ening of world interest rates. Capital and more pressing each day, the efforts under­ In particular, I would like to convey to aid flows were restrained with adverse taken by the different institutions con­ the Government of Brazil, the host coun­ effects on growth in the developing coun­ cerned with development and international try, our respects and also our thanks for tries. World commodity prices and the ex­ the kindness they have showered upon us. economic relations have not been able to port incomes of many primary producing overcome either the uncertainties of aid They could not have done more to make countries fell and the terms of trade moved to the Third World countries or the resist­ our stay here both happy and informative. against the primary producing countries. ance to a constructive examination of Most of us, representing countries large World reserves showed a slower rate of their problems: bilateral aid is decreas­ or small, must have asked the question­ increase and official gold holdings actu­ ing; the resources of the Bank Group are what catalytic agents have drawn us to­ ally declined. dwindling or are increasingly difficult to gether from all parts of the free world. Clearly this series of events and these obtain; the Kennedy Round has not given I believe there are two reasons why we trends have implications for policies in the least consideration to our preoccupa­ are here-and they are both rational and the years ahead if needless slowing down tions; the Outline2 evades them. practical. First, we are reviewing the work in the growth of production and trade is In the face of these vicissitudes, the of the Fund and the International Bank, to be avoided. There is for example a World Conference on Trade and Develop­ and their related institutions, during the need for countries with high external re­ ment at New Delhi, for which my country year past. Second, we are considering serves and weakness of effective demand what action may be necessary in the pe­ internally to encourage domestic expan­ riod ahead to ensure that the Fund and IComprising statements relating to the work of the IBRD, sion and in that way stimulate growth do­ IFC and IDA. Omitted passages are indicated by dots Bank will be better able to fulfill the func­ mestically, and in the rest of the world as ( ... ). Statements relating to the work of the Interna­ tional Monetary Fund are reproduced in the IMF Sum­ tions for which they were created. well. There is need for recognition of the mary Proceedings. I shall not discuss the functions of the desirability of a more appropriate mix 'Outline Plan for a special drawing rights facility pre­ sented at the Fund's Annual Meeting. Fund and Bank in detail. I do believe I can of monetary and fiscal policies-relying

10 rather more perhaps on fiscal policy than I take pleasure-on behalf of Mr. Schmitz and about the efforts and performance of on monetary policy, high interest rates and as well as for myself-in paying tribute to the developing countries on the other side. direct restraint on capital transfers. the World Bank, well known as an out­ But we should realize that financial aid to Nor have developments in the world standing international institution, which in a certain extent involves some sacrifices. capital markets been encouraging. Inter­ spite of unfavorable over-all trends in de­ It means setting aside funds which could est rates for long-term capital borrowings velopment finance is making every effort be profitably used by the donor countries, are discouragingly high. Even at those to live up to its excellent reputation as a no matter how advanced, for their own rates the most creditworthy borrowers catalyst accelerating the process of eco­ economic and social growth. We would be have difficulty in gaining access to capital nomic development in this heterogeneous mistaken, however, to attribute the slow­ markets. Financial flows to developing world. We especially appreciate the fact ing down of foreign assistance to a delib­ countries have been falling and the inter­ that this international institution of sover­ erate policy. There are several limiting national bodies which need funds to chan­ eign states performs its task guided only factors adversely affecting the flow of nel to those countries have difficulty in by economic considerations. financial resources which, in my opinion, raising them. I believe capital should in The present trend of both economic de­ can hardly be tackled successfully within principle be permitted to move as freely velopment and development finance can the next few years. as possible. Such transfers can contribute only be considered as disquieting indeed. In evaluating the assistance efforts of much to our objective of a strong and Many factors causing this grave concern any country we should also bear in mind steady increase in world production and are interlocking and one cannot refer to that there is not only a disparity among trade .... them without repeating well-known facts borrower countries as to the different ... Last year, some of us voiced misgiv­ which have been stated several times in stages of development but also a striking ings regarding the outlook at that time for recent years. heterogeneity among the industrial coun­ the international trade and payments sys­ Among the various problems, however, tries as to their relative abilities to provide tem. What was said then was borne out are some which have a particular bearing assistance. to some extent by the check to the ad­ upon the situation with respect to raising A landlocked country like Austria with, vance of the world economy which took capital in the markets and it is of highest for historical reasons, less established ties place in the second half of 1966 and the importance that they be given full atten­ to the developing countries and a less first half of this year. For the year ahead, tion in this institution. competitive industry has first of all to in­ we can take comfort from the strong up­ To assist the less developed countries crease its industrial capacity and effi­ turn now occurring in the United States in their efforts to accelerate progress to­ ciency by an appropriate investment economy and from the hopes that have ward self-sustained economic develop­ policy. Strong pressure from competition been expressed regarding developments ment the more advanced countries are and increasing pressure from wages, even in other major industrial countries. Let us expected not only to provide real re­ anticipating higher productivity, compel trust that these forecasts will be fulfilled, sources, but also to bridge the foreign important and incisive structural adjust­ for these things are important to all of us, exchange gap by advancing financial re­ ments such as economic integration itself, primary producers and industrial coun­ sources. In this connection I do not want formation of larger industrial enterprises, tries alike. to touch upon the monetary issues related and improvement of capital equipment per In conclusion, may I congratulate both to this problem. I would rather focus on labor unit, etc. In the long run, the devel­ the Fund and the World Bank for the help the most pressing problem which con­ oping countries would benefit from such they have given countries like my own and cerns the Bank as well as the donor coun­ measures, as they would provide the basis the underdeveloped countries. Without tries, namely, the discrepancy between for an increase of imports from these their efforts, I am certain that world trade requirements and availability of long-term countries as well as for a stimulation of and development would not increase in funds necessary for economic growth. We the flow of assistance in the future. the way we have known it to increase over are well aware that the burden of accumu­ As long as a labor surplus kept wages the course of the last few years. lated foreign debt service will severely low in Europe, even the small domestic reduce the net flow of assistance still markets allowed for profits providing ade­ necessary for some time ahead. Difficul­ quate self-financing while additionally re­ ties in servicing foreign debt have already quired long-term capital could easily be caused serious problems for both lender raised in overseas markets. In recent Austria: The Han. HUGO ROTTKY and borrower countries. In this regard the years, however, investment financing had Alternate Governor of the Bank Bank deserves our fullest appreciation for increasingly to resort to domestic capital At the outset of my statement I want to making every effort to overcome these markets and the Euro-dollar market. Most convey to you the best regards of the Aus­ problems. of the small domestic markets, however, trian Governor, Minister Dr. Schmitz, who The slowing down of foreign assistance have yet to adjust to the changed situation. was prevented from attending this meet­ vis-a-vis the increasing absorptive capac­ It should be mentioned in this connec­ ing by budget negotiations. I would also ity of the developing countries is causing tion that serious efforts have been made like to express my personal appreciation disappointment. There is also some doubt in Europe to improve the functioning of to the Government of Brazil for its very about the willingness of the contributing capital markets and that two studies have warm welcome and hospitality. countries to expand aid, on the one side, been completed by the OEeD and the

11 EEC. The OECD study has been prepared Secondly, we would congratulate the in cooperation with the IMF. It is to be ex­ World Bank for the efforts made and the pected that the results of these studies will Burma: The Han. U KYAW NYEIN results obtained in 1966. Our thanks go have favorable effects on the functioning Governor of the Bank and Fund chiefly to the Bank's President, Mr. George of the capital markets and will stimulate , .. We endorse the work the World Bank Woods who, by his many negotiations, his saving in all forms, especially contractual has been doing in its eminently useful role intimate knowledge of international finan­ saving so badly needed for accumulation of providing developing countries with cial markets, and his extensive personal of long-term capital. With only a few ex­ long-term finance. We recognize that in relations, has succeeded in obtaining the ceptions the mechanism of the capital maximum resources for the operations of recent years the situation has changed, markets has to be adjusted to changed the World Bank and its Affiliates. making it too burdensome on some devel­ conditions to bring about a more efficient We trust that Mr. Woods will remain at oping countries to sustain the weight of and less expensive mobilization, collec­ the head of the World Bank and thus con­ conventional development finance; and tinue to place at the service of that insti­ tion and distribution of capital. that in these circumstances IDA's role has tution the capital of confidence that he On the way to a closer economic inte­ taken on increased importance. I have inspires in public and private banks, gration of Europe one has to consider the heard it observed on this rostrum that to The maintenance of monetary stability, deep-rooted historical, cultural and insti­ help developing countries, it is the demand the development of the economy, the rais­ tutional diversities of the individual coun­ of the developed countries for primary ing of the standard of living - these are tries. This integration, however, seems to products for which an increase should be problems common to all countries; how­ me a sine qua non to achieve a better sought, I am afraid this is only one side of ever, the means for solving them are often balanced economic development to the the picture; the demand of primary pro­ very different and some countries have but advantage of the industrial countries and ducers for capital and consumer goods minimum means to meet immense needs. of the whole world. Only such progress needs also to be fulfilled; thus, the process Burundi is a typical example. As a devel­ can alleviate the pressure on these econ­ should operate complementarily in both oping country that has only recently won directions. For that, development finance omies and their capital markets and bring political independence, with a currency will continue to be needed by developing about a better absorptive capacity for ex­ unattached to any area, the sole guarantee countries, and this on softer terms. Until ports from less developed countries as of which is the labor of its population- such time as an international central mon­ well as larger means for development 98 per cent rural - its SUbsistence needs etary institution endowed with sufficient finance so badly needed in the third world. are covered almost entirely by exports of international confidence to enable it to In my country every effort is made to coffee and cotton, two products whose create its own assets for both short and adjust the economy to the changing con­ prices have constantly deteriorated. long terms is evolved, I am afraid Mr. ditions of the world, to adapt the structure Despite courageous and determined ef­ Woods will have to continue his rounds of industry, to facilitate the mobility of forts, our Government cannot set aside out from door to door in search of long-term labor and to use fiscal and monetary poli­ of its domestic resources the necessary finance. funds to maintain, improve, and develop cies to maintain an appropriate growth of It now remains for me to render our sin­ the national wealth. For us international the economy. It is inevitable that such an cerest thanks to the President, the Govern­ institutions like the World Bank have rep­ adjustment process puts a heavy strain on ment and the people of Brazil for their resented, and continue to represent, a the economy especially of a small country deep and warmhearted hospitality shown hope that our potential resources may be like Austria. Nevertheless our efforts in the to us during our stay in this charming city. rapidly harnessed to enable us to come fields of foreign aid have been consider­ My thanks also go to the Chair for its through our present difficulties. Since in­ able. Austria has done its best by cooper­ suavity and impartiality in the conduct of dependence, that is to say, in five years, ating with the IMF, the World Bank and these deliberations. of all the projects submitted only one has its Affiliates, the Asian Development Bank, come to maturity and is only now begin­ and the OECD and in joining some ning to be implemented. This delay in consortia. carrying out our programs is more dis­ In view of the difficulties in providing the quieting every year, because the future funds necessary for development assist­ Burundi: The Hon. ERIC MANIRAKIZA Governor of the Bank of our people is at stake. ance it seems indispensable for the Bank We should like, therefore, to express and IDA, as well as their member coun­ First of all, we should like to thank Brazil three hopes. tries, to bear in mind the importance of for its welcome. The beauty of Rio is The first is that the leaders of the World an adequate distribution of the scarce famous throughout the world and this de­ Bank will persuade the rich countries to funds available among recipient countries served renown is matched by so much make new and generous unconditional and of a meticulous selection of develop­ graciousness and kindness on the part of contributions to the International Develop­ ment projects. all the people that to be here surprises ment Association, to supplement the pro­ Progress is always slow indeed and we and delights the visitor afresh every single ceeds of international loans in helping the have to be patient, but we also are quite day. We would like the Government and developing countries out of their present confident that this institution will cope people of Brazil to know that we shall have difficulties. This will be an excellent invest­ with these problems. lasting memories of our stay here. ment for all. Besides, small countries like

12 Burundi should not be too largely over­ ... Let me now turn to matters related some balance of payments safeguards. We looked when the Association's new re­ to the World Bank Group. The most im­ do not advocate such safeguards, but we sources are distributed. portant item is the replenishment of the are prepared to accept them if this means The second hope concerns the difficult resources of the International Develop­ that IDA could be replenished at a higher but urgent problem of the stabilization of ment Association. Both the level and con­ level. The safeguards should not affect a prices for raw materials. Each year, in ditions of the replenishment must be country's obligation to give more aid but spite of renewed efforts, the purchasing settled. only enable it to postpone the effective power of our population is lower because The Canadian Government has not taken date. Their establishment should be related export of increased amounts of cotton and a final decision on the level of replenish­ to balance of payments difficulties only, coffee is hardly sufficient to cover a con­ ment. I have no doubt that when it is asked not to other objectives. They should be stant volume of imports. The deterioration to do so, it will be influenced primarily by temporary and they should be of such a of the terms of trade is for us no mere the needs of the developing countries and character as not to undermine or weaken theory but a menace that grows more seri­ their capacity to use aid effectively. As I in any way the basic principles which have ous and burdensome yearly. It is abso­ indicated at last year's Meeting, we be­ governed the operations of the World Bank lutely necessary that international arrange­ lieve that IDA should be replenished at a Group and which have proven to be so ments put an end to this imbalance which figure substantially higher than the present successful in the past. brings all our peoples' efforts to naught one. Some time ago the President of the IDA replenishment also raises the and which amounts to a virtual plundering World Bank suggested a figure of $1 bil­ choice between multilateral and bilateral of all the primary producing countries .... lion per year for three years; an alternative aid. The relative advantages and disad­ ... These, Mr. Chairman and Governors, which has been discussed is an escalated vantages of these two forms of aid have are the few considerations that we wished increase ending in the third year at $1 been discussed at great length and I do to submit to you during the closing session billion and averaging $800 million over not wish to renew the debate here. Al­ of this august assembly. I am confident three years. though it is evident that in the immediate that they reflect the thinking of many coun­ An increase in IDA's commitment au­ future at least most aid will continue to tries represented here. I hope they will be thority to $1 billion per year would involve flow through bilateral channels, there is followed by results, for they seem to me an additional transfer of resources from nevertheless an evident need for more to be the basis on which a harmonious developed countries of $750 million per multilateral aid and an important part for it development of the world economy can be year or about $1.25 per head; an increase to play. As Ministers of Finance and Gov­ established. to $800 million would involve one of $550 ernors, concerned as we are with the effec­ million or about $0.90 per head. It would tive use of public funds, we can take some be difficult to argue that either one of these satisfaction from the soundness of invest­ increases is excessive when contrasted ment in IDA and by IDA. The management with eXisting per capita incomes in de­ and Board of Directors have rightly in­ Canada: The Hon. MITCHELL SHARP veloped countries of $2,000 and in devel­ sisted that projects should be selected Governor of the Bank and Fund oping countries of $160; or with the ex­ on their economic merits alone, that inter­ I would like first to thank our Brazilian pected annual increase in these incomes national competitive bidding should apply hosts for inviting us to hold this very im­ of $70 or $3.00, respectively. and that attention should be paid to the portant Annual Meeting in this beautiful In the richer countries, which are able to development pOlicies of the borrowers. In city. I would like also to congratulate them afford to share their good fortune, budg­ addition, there is good reason to believe on the excellent facilities which they have etary problems and balance of payments that the activities of the World Bank Group provided for us and for the kindness of difficulties do exist, will probably continue create a climate within developing coun­ their hospitality. Canadian businesses to exist and must be overcome. It is always tries which enhances the effectiveness of have long had close links with this coun­ tempting to go slow on aid as one of the bilateral programs. try and as a private businessman I have easiest and quickest ways to help restore In conclusion, Canada attaches the high­ had the pleasure of being closely associ­ equilibrium. And yet, as I said at last year's est importance to the early replenishment ated with some aspects of the develop­ Meeting, it should not be beyond our of IDA at a substantially higher level. This ment of Brazil. Canada's economic and capacity to manage our affairs in such a support is consistent with my Govern­ political ties with Latin America are de­ way as to effect these transfers of aid ment's decision, made some time ago, to veloping rapidly. Individual Canadians are without undue strain on our economies. undertake steady increases in the Cana­ coming more and more to appreciate the There will be agreement, I am confident, dian aid program. This decision has only importance of this area for the future of that the war against starvation, sickness, recently been reaffirmed despite the efforts our own country. Our contacts are becom­ ignorance and poverty in less fortunate which we shall be making by budgetary ing more frequent. Earlier this year, the parts of the world should be continuous policies and otherwise to limit the upward Central Bank Governors of the American and escalating. This will not be possible if pressures on costs and prices to which I Continent did us the honor of accepting the level of aid is to be treated as a resid­ have already referred. We rank aid among the invitation of the Bank of Canada to ual item in national planning. our highest priorities and we are deter­ hold their fourth reunion in Canada. Let In the present Circumstances, it may be mined to follow pOlicies that will release me now tu rn to the agenda .... necessary to build into IDA replenishment the required resources.

13 external tariff and for economic coopera­ that of convincing you of the need for ur­ tion for the purpose of achieving harmony gent action to solve these problems. Central African Republic: in the systems of taxation and investment, The orders of magnitude to which I The Hon. ALEXANDRE BANZA as also in the matter of the projects under­ have already referred-the area of Western Governor of the Fund taken in the interests of the industrial de­ Europe on the one hand and 12 million in­ It is with legitimate pride that I speak velopment of the five States. habitants on the other-reflect the extent today, in my capacity as present Chair­ "Each time we join forces in action we of the needs to be met in the matter of in­ man of the Committee of Management of shall achieve success," declared the Pres­ frastructure, transport, economic achieve­ the Customs and Economic Union of Cen­ ident of the Republic of Chad on the oc­ ment and social development, in compari­ tral Africa (UDEAC) and on behalf of the casion of the signature of the treaty, and, son with the weakness of our economies; five countries of which that Union consists, in fact, ever since it was set up, our Union these economies are weak because they to this distinguished gathering. I am also, has given proof of astonishing vitality, thus remain, in large measure, dominated by however, fully conscious of the formidable giving a valuable example of understand­ the primary agricultural sector. We never­ responsibility that is mine in setting forth ing between nations which, in a spirit of theless entered the fight for development our problems which are giving ever great­ mutual respect for national sovereignty, with the assistance, both bilateral and er cause for concern from year to year. are combining their efforts in an attempt multilateral, of our traditional friends; this I am indeed proud to give expression to obtain, in an extended geographical assistance, which sometimes lacked co­ here to the hopes and aspirations of the grouping, the means of achieving coordi­ hesion in the matter of its distribution, very 12 million people who live, or rather exist, nated development and a more rapid rise soon proved to be insufficient. This is why in a territory the geographical extent of in the standard of living of their popula­ we placed great hopes on the international which approaches that of Western Europe, tions. The initiative thus shown deserves financial institutions of which we became and who are distributed over five sover­ to be encouraged by an appropriate meas­ members five years ago. If we make an eign States, namely the Federal Republic ure of aid, for it represents an important evaluation of the activities undertaken in of Cameroon, the Central African Republic, and specific contribution to the attainment our countries since that time by the World the Republic of the Congo, the Republic of African unity, as was emphasized by Bank Group, we shall find that, since a of Gabon and the Republic of Chad. the President of the Federal Republic of first operation decided upon three years Following the achievement of our in­ Cameroon, on the occasion of the opening ago-and now carried out-in favor of the dependence, which occurred so recently, of the Port-Gentil oil refinery, which is Gabon highway system, the remaining there was a great temptation for each of shared by all our five States, when he said UDEAC countries received no fresh assist­ us to live apart, within our own frontiers, ... "Here we have an example of sound ance during the financial year 1965-66. The and some countries have, quite legiti­ and helpful cooperation ... African unity two loans granted by the Bank and the mately, chosen this path, both in Africa will be attained through sub-regional credit extended by the International De­ and elsewhere. We ourselves decided organization ...". velopment Association (IDA), during the otherwise, for we considered that the best To summarize what I have already said, past financial year, and representing a means of consolidating our political inde­ let me quote the senior member of our total value of $48 million, have therefore pendence, developing our economies in Heads of State, the President of the Re­ been particularly appreciated by the re­ harmony with each other and meeting the public of Gabon, when he said: "We are cipient countries. They have made it pos­ difficulties of the modern world was to five, but in fact we are only one, the sible for an enterprise established in the continue, on the economic plane, the UDEAC." Let me also sincerely thank the Republic of the Congo to start exploiting fraternal and fruitful relationships that had authorities of the Fund and the Bank for the large-scale Holle potash deposits, the been established among us in the course having been good enough to invite our anticipated output from which amounts to of more than half a century. This is how organization, represented here by its Sec­ 500,000 tons a year, and have also enabled the UDEAC came into existence, having retary General, to attend the proceedings the Cameroon to undertake the task of put­ been set up by a treaty signed in Brazza­ of this Annual Meeting, in the capacity of ting back into cultivation certain palm-oi/, ville between the five States I have just an observer. rubber, tea and pepper plantations, and to mentioned. Benefiting by the fact that ac­ Quite independently of the conclusions, extend the area of these latter. The bene­ tive and close monetary cooperation al­ with which we fully associate ourselves, fits that will be derived from these opera­ ready existed within one and the same that were set forth in the Resolution tions-whether in the economic sphere, area of issue, our organization is the cul­ adopted at Dakar by 15 Ministers of as the result of an increase in the output mination of painstaking study and patient Finance, and in the memorandum of the of these countries, and in their export and carefully-considered effort pursued African Group, it remains for me to deal earnings, or in the social field, since they jointly since 1961, for the purpose of form­ with UDEAC's relations with the Bank and will help to raise the standard of living of ing a strong and well-designed community, its Affiliates, on the one hand, and with the populations concerned - are to be affording access to a real Common Market; the Fund on the other. The concluding placed to the credit of the Bank and IDA. our institution is also distinguished by the part of my speech will be devoted to an The entire UDEAC is glad of this and, solidarity of its member States. As its name examination of our immediate problems, on its behalf, I wish to thank you. indicates, the UDEAC forms the institu­ which I make no claim of revealing to you I should, however, be failing in the task tional framework of a Customs organiza­ for the first time; my aim is more modest, that has been entrusted to me, to appear tion providing, inter alia, for a common and is an essentially practical one, being as the spokesman for the countries of

14 which our Union is composed, if, after ... "God helps those who help them­ their efforts. With or without the assist­ having expressed to you their thanks for selves" is an old saying that holds good ance of the public authorities, they have past operations, I did not at the same time in all latitudes, and we have made it our achieved a notable increase in the tonnage give utterance to our misgivings regarding motto whenever possible. Thus, the mem­ produced, modernized their operating the future. These misgivings are closely ber countries of the Common Organization methods, improved the quality of their connected with the existence of the feeling of African and Malagasy States (OCAM), products, adapted these latter to the tastes of solidarity of which I have already who are producers and consumers of of distant consumers by undertaking pain­ spoken, and come to the fore when we sugar, have reached agreement on the ful reconversion of their plantations, and see that two countries of the Union having, terms and conditions governing the mar­ diversified their crops in an attempt to by virtue of their geographical location, keting of that product, since it had become improve their conditions of life. the hardest task before them, namely the apparent to us that, on the world plane, In the technical jargon of economics, Central African Republic and the Republic nothing was to be expected for a long time this situation is modestly called "a dete­ of Chad, have not yet benefited by the to come. rioration in the terms of exchange." So far assistance of the Bank, or of the Interna­ In the case of the other leading prod­ as we are concerned, we prefer to use tional Development Association, in carry­ ucts, such as coffee, cocoa, cotton, ba­ the more realistic expression of one of ing out projects submitted to those institu­ nanas and oil-seeds, almost all of which our Chiefs of State, the President of the tions. We also experience concern at the are intended for export to the industrial­ Central African Republic, who has called prospect of a fresh rise, as contemplated ized countries, it is unfortunately impos­ the present state of affairs "a veritable by the Bank, in the rates of interest. Finally, sible to lay the foundations for a similar scandal." it is with amazement that we have learned agreement. In point of fact, although our In this sphere, we regret to have to draw that the funds of the International Develop­ products are essential to our respective up this year, once more, a certificate of ment Association are almost exhausted, economies, their quantity is not sufficient, nullity. The meetings organized by the and that the agonizing problem of their on the world market, to enable our pOints chief bodies concerned in this matter, replenishment remains, for the present, of view to be heard, either by the large FAO, UNCTAD, and GATT, in which the entirely unsolved. We thank Mr. Woods for producer countries or by the leading con­ IMF has generally participated, have not, the tireless efforts he is continuing to make sumer countries. So far as the products during the past financial year, contributed in this direction with the industrialized I have mentioned are concerned, we are the slightest hope of a solution. countries; these efforts constitute a valu­ literally paralyzed. If I may be allowed a Faced with such a painful set of circum­ able source of comfort to us, and we await, metaphor, we find ourselves, willy-nilly, stances, the most disastrous course would with confidence, the outcome of the nego­ in a galley that is at the mercy of the waves be for us to give way to discouragement, tiations that have been undertaken. -as rowers of course-without knowing and for the developed countries to con­ As regards the future, we can do no how long our painful voyage will last. Thus fine themselves to giving routine, token other than feel pleased at the new direc­ our producers and communities are se­ aid, thus sparing themselves a bad tion that has been given, in the interests verely exposed to the fluctuations of world conscience. of the development of human resources trade, especially when these changes-as So far as we are concerned, we have and the promotion of agriculture, to the has been the case during the past few multiplied our contacts, with a view to re­ operations of the World Bank Group. We years-have been, more often than not, in have indeed always considered that the a downward direction. At the same time­ inforcing the cohesion of the developing countries in the fight to ensure their sur­ lack of education constituted a formi­ and this is a secret to no one-the prices dable handicap to development. Further­ of manufactured products are constantly vival, and in order to achieve the "bal­ more, we have no intention of sacrificing increasing. anced prosperity" that the President of the agriculture to industrialization. Even A few figures will suffice to fix our ideas Republic of the Congo wished to see. We though this latter process is a necessary in this matter. In 1957, the Chad or Cen­ are also expecting a great deal from the one, we do not regard it as a means of tral African producer received 2,600 francs forthcoming World Conference at New taking our revenge on the past, and this for 100 kg. of cotton, sufficient for the pur­ Delhi, for which we shall be making care­ is why we are, save in exceptional, prop­ chase of four blankets and eight meters of ful preparations next month in Algiers, as erly justified circumstances, taking only cotton fabric; in 1967, the 100 kg. of cotton part of the "G roup of 77," in order to con­ modest steps along this road, starting by still command the same price, but this no solidate and, if possible, expand the re­ valorizing agricultural, animal- breeding longer suffices for the purchase of more sults recently achieved in Geneva, on the and fishery products, and by modernizing than one blanket and three meters of occasion of the last meeting of the Con­ handicrafts. Our development banks have fabric. The same argument applies to ference on Trade. an important part to play in this sphere, cocoa, coffee and other products, the Among the solutions that we have and I should therefore like to recall, in this prices for which have remained practically adopted, those relating to the prefinanc­ connection, the wish expressed last year, unchanged for ten years. I shall pass over ing of buffer stocks of raw materials pre­ by the Head of the Central African Dele­ in silence the consequences of the falls in suppose that a substantial contribution gation, that the small-scale projects price that have occurred in the interim. will be forthcoming from international financed through our national development Such has been the reward for the praise­ financing institutions and from the indus­ institutions should be brought within the worthy work done by our planters, who, trialized countries of the world, who are at sphere of action of the Bank.... during the same period, have not spared present in control of the situation ....

15 · .. I must apologize for having stated sources, we in Ceylon have suffered se­ of the problems of development. As far as my case at such length. By comparison verely from the adverse developments in the work of the Bank Group is concerned, with the heights of eloquence that have the world economic scene. Two years ago, the outstanding question is that of IDA been reached in this assembly, and with we initiated a program of economic recov­ replenishment. Ceylon has not so far been the noble titles that have been attached to ery and adopted several measures on the a beneficiary of IDA funds, but like other certain subjects of reflection, my remarks domestic front-some of them politically developing countries in our position we may have produced a shock, because they difficult. Yet, our hopes have been frus­ expect to have recourse to this source of were too robust, too incisive and doubt­ trated by a sharp downturn in commodity finance in the future. The problem of IDA less also too "terre a terre"; it was, how­ prices. Last year, our export earnings de­ replenishment is closely linked to the ever, my duty to express my views in clined by as much as 15 per cent, while growing debt service problem of develop­ this form, for they correspond to our im­ our terms of trade worsened by 13 per ing countries. IDA has been an outstand­ mediate anxieties and to our deep-felt cent. This was the biggest drop in export ing example of the combination of easy aspi rations. earnings we have experienced in the debt service conditions with sound invest­ I cannot conclude my statement without whole postwar period with the excep­ ment decisions .... associating myself with the welcome that tion of 1952 following the collapse of the has been extended to the new members Korean boom. Depressed prices for tea of the Fund and Bank, and, on behalf of and, more recently, for rubber played a the five countries of the UDEAC, to ex­ major part in this short-fall. It is true that press our warm thanks to our Brazilian we have made some notable gains in the China: The Hon. CHING·YU CHEN Governor of the Bank hosts for their cordiality in receiving us. domestic sector, particularly in the field of agriculture, but these did not, and could I wish to join other Governors in ex­ not, suffice to offset the impact of adverse pressing our thanks to you and to the external forces. management and staff of the Bank and Our problems were undoubtedly - in Fund for the efficient handling of these Ceylon: The Hon. U. B. WANNINAYAKE large part at least - a reflection of the Meetings. On behalf of my Delegation, I Governor of the Bank and Fund slowing down in the tempo of overall ac­ also wish to thank the host country, the May I add my voice to the others raised tivity in the industrial world. In particular, Republic of Brazil, for its most generous here in expressing to the Government of the restrictive measures adopted by the hospitality and the excellent facilities Brazil my warm appreciation of their gen­ industrialized countries in the monetary placed at our disposal during the 1967 erous hospitality. I am truly glad to have field have affected adversely the level of Annual Meetings. Brazil is indeed a great had this opportunity of visiting this excit­ commodity stocks in consumer countries. country and Rio is one of the most beau­ ing and beautiful city. I hope that the recovery of activity in in­ tiful cities in the world. My Delegation May I also convey my thanks and dustrial countries now predicted will re­ wishes to extend our compliments to Mr. congratulations to Mr. Woods and Mr. verse these trends and lead to an upturn Woods, Mr. Schweitzer and their col­ Schweitzer and to the staff of the Fund in commodity prices. But I am frankly leagues for the remarkable achievements and of the Bank and its Affiliates, for yet doubtful as to whether this alone will suf­ of both the Bank and the Fund in the fiscal another year of valuable service. The fice. It is my view that direct measures to year 1966/1967, and our best wishes for Annual Reports of these institutions are deal with this problem are also needed as continued success in the years to come. excellent and helpful documents which a supplement to any general recovery in It is gratifying to note from the Bank's contribute so much to an understanding the industrialized countries. I feel that Annual Report that, during the past fiscal of the problems before us. For us, in Cey­ such measures are needed, for example, year, the Bank and IDA provided over lon, our ties with the Bank and the Fund for tea as well as for rubber. The crisis in $1,200 million for economic development have grown even stronger in the past the field of development assistance lends projects in 40 countries, which is the high­ twelve months. We have used the Fund's a new importance and urgency to the est on record and, for the first time, the facilities for compensatory financing and problem of primary commodities. In this total loans made by the Bank since its have benefited from its guidance in the connection, I must welcome the Resolu­ inception in 1946 have exceeded the $10 field of monetary and fiscal policy. We tion before us calling for a special study billion mark. It is particularly noteworthy have had the benefit of the Aid Group of of the commodity problem by the Bank that the financing of educational and agri­ donor countries convened by the Bank and the Fund. A solution to this problem cultural projects has increased, both in and we have profited from the advice of is intimately related to the effectiveness of amount and in the number of the member the Bank staff on a wide range of develop­ the work of these institutions and it is fit­ countries. My Delegation firmly believes ment problems. We have negotiated a ting that they should contribute, together that both education and agriculture should loan from the Bank for our Development with other bodies, toward the search for be given more weight in our development Finance Corporation and we have also be­ such a solution. finance because these are the foundations come a signatory to the Convention for the I come now to some of the more general for building efficient manpower as well as Settlement of Investment Disputes. matters before us. I hope that the world for raising the standard of living for the I must say, however, that despite the at large will take heed of the note of poor. On the other hand, it is regrettable assistance we have received from various urgency underlying Mr. Woods' analysis that, according to the estimate made by

16 the Bank's staff, the average growth rate exports by one per cent, this would yield the Brazilian Government for its warm and of developing countries in the 1960s has over $1 billion in foreign exchange earn­ friendly welcome. been only slightly higher than in the pre­ ings, and he urged all developing member Brazil, with its great territory and valu­ vious decade, and because of higher birth countries to redouble their efforts in the able resources, is not entirely unlike the rates, their average per capita growth in promotion of export trade. In this connec­ Congo, and I hope that this Meeting, which the 1960s, which is known as "the De­ tion, I am happy to report to my fellow has its seat in the magnificent city of Rio, velopment Decade" has been only 2.3 per Governors that in my country, the volume will have the same successful results as cent. This fact alone proves beyond doubt of trade in 1966 increased by 12 per cent the Summit Conference of the OAU, which that population control has to be rigor­ over 1965, showing a total of approxi­ has just finished its work in Kinshasa. ously pursued by the governments of the mately $570 million for exports and $603 The Bank's Report, which Mr. Woods developing countries; otherwise their per million for imports. The increase in our has presented to us, is as always clear capita income and standard of living will exports is due primarily to diversification and precise. It gives a realistic analysis of forever remain very low. of our products and also shifting from the position of the developing countries. Since 1963, the Chinese Delegation has agricultural products to industrial com­ I shall not reiterate the need to give been consistently advocating softer Bank modities. For the year 1966, industrial these countries the aid they should re­ loan terms and the gradual hardening of products accounted for 49 per cent of our ceive, since this is something of which all IDA credit terms. We have also advocated total exports, while agricultural and proc­ the countries here represented are aware; more extensive application of blending of essed agricultural products were reduced but it is clear to me, from reading the list Bank loans and IDA credits. It is gratifying to 20 per cent and 26 per cent respectively. of loans and credits granted by the Bank, to note that during the past year the Bank Mr. Woods has done a great honor to my IDA and IFC, that there is a need to seek has made a few loans on much more lib­ country by including the Republic of China from these institutions more suitable con­ eral terms, extending the grace period to in the list of member countries which have ditions for loans and credits, beUer 10 years and the amortization to as long made "economic achievement with fastest adapted to the economic circumstances as 35 years. This liberalization policy, in rate of growth". However, my Government of these countries. my opinion, is a move in the right direc­ is not fully satisfied with whatever success Since 1947 the Bank has made loans to tion. But for the interest charge, it is almost we may have achieved and we are cer­ as soft as IDA credits, and therefore such tainly not complacent. We shall continue the African countries totalling US$1,403,- terms of easy payments should enable the to exert our efforts to further increase our 600,000 and IDA has made credits amount­ developing member countries to reduce industrial production and broaden our ex­ ing to US$235,800,000. their debt servicing burden. port markets. In doing so, we still need I think it may be concluded from this Now turning to the sister institution, the continued external assistance and capital that the Bank has up to now pursued a International DevelopmentAssociation, my inflow, particularly for infrastructure proj­ development policy more favorable to the Delegation is disappointed that, in spite of ects which have comparatively slower re­ African countries than that of IDA. It is Mr. Woods' eloquent plea at the last An­ turn but which are very necessary for nevertheless necessary that the latter nual Meeting for the replenishment of IDA healthy economic growth. hereafter obtain from these countries resources by $1 billion each year, it has Lastly, my Delegation notes with great whose prosperity is beyond question a not yet received the whOlehearted support interest the statement in the Annual Report greater amount of help, without restric­ of the rich member countries. As the ex­ that the Bank continued, during the past tions, in order to strengthen its means to ternal debt service capability has reached year, to provide technical assistance to act and to support it, and also that urgent its saturation point in many of the poor its developing member countries. As I re­ study be made of the institution of mecha­ member countries, the need for develop­ ported at the last Annual Meetings in nisms designed to achieve an effective sta­ ment finance on concessional terms is all Washington, the Republic of China has bilization of the prices of primary products. the more urgent and it should be resolved been extending technical assistance, since We have in fact all witnessed the rela­ in the very near future. The urgency of the 1954, to an increasing number of countries tive weakness of net private capital flows problem is borne out by the fact that only in a variety of enterprises, including some to the developing countries, as well as the three weeks ago, on September 7th, the 30 countries in Africa, the Middle East, unfavorable trend of development of those members of the United Nations Trade and Southeast Asia and Latin America. My inflows. Development Board unanimously adopted Government is willing and forever ready What other solution have we, then, ex­ a resolution to express their concern over to coordinate this program with the Bank's cept to see public capital temporarily take the urgent need for replenishing IDA re­ efforts in the same di recti on .... the place of the shrinking private capital, sources without further delay. My Delega­ which produces pressure on budgets al­ tion fervently hopes the donor countries ready precariously in balance and at the will soon come forward with very generous mercy of a drop in the world prices for contributions, such as so well exemplified raw materials, themselves influenced by by Sweden, for the benefit of developing Democratic Republic of the Congo: the disequilibrium in the balance of pay­ The Hon. LITHO countries. J. J. ments of the industrial countries or by the Governor of the Bank In his address (in the opening Joint Ses­ measures to which these countries resort sion), Mr. Woods said that if only the First of all, let me join the speakers who in order to protect the stability of their producing countries could increase their have preceded me and with them thank currencies.

17 It is therefore desirable, first, that the am very concerned about the prospects as Denmark is concerned, procurement Bank Group closely study their activities for the future lending activity of IDA. The under our bilateral loan agreements has in specifically economic fields - taking fact that IDA today for all practical pur­ to take place in Denmark, while the recipi­ care to avoid loss of effectiveness by poses is in a position in which it is not ent countries are free to choose the proj­ undue dispersion and proliferation and, able to make any new commitments does ects which they wish to finance under therefore, their eventual diminution-and, underline the urgency of finding a solution these agreements. In my opinion the ex­ second, that the Group's expansion policy to the replenishment of IDA's funds for the tensive use of tying in connection with go hand in hand with the activation of the years following 1967. During its seven bilateral development loans makes it even new international liquidity. years of operations IDA has placed itself more important that IDA can maintain its as the most important multilateral source truly multilateral character. of development finance on lenient terms. In conclusion, may I say that I sincerely To be realistic I think we have to expect hope it will prove possible before the next that the need for financing on IDA terms Annual Meeting to reach agreement on a Denmark: The Hon. IVAR NORGAARD will not be reduced for a long time to new replenishment for IDA, which will Governor of the Bank come. For the near future it seems more make it possible for this institution to con­ First of all I want to associate myself likely that the need for resources on IDA tinue the growth in its lending operations with my fellow Governors in expressing terms will be increasing. In order to make in the same way as we have seen during my profound thankfulness to the Brazilian it possible for the management of IDA to the past seven years. Government and people for the arrange­ administer the available funds in the most ment of this Meeting. efficient way, I feel that it would be desir­ I find it encouraging that the extremely able to have a commitment plan from Part I countries covering at least a three­ tight position in the international capital Ethiopia: The Hon. VILMA DERESSA markets, which prevailed for a large part year period. Governor of the Bank of the past year, has not necessitated any In recognition of the shortage of avail­ Permit me, first of all, to request the limitation upon the lending operations of able funds for IDA, Denmark welcomed Governor of the Bank for Brazil to convey the World Bank. I have noted with particu­ the proposals put forward by the President of the Bank in July 1966. In my statement to his Government and his people my Dele­ lar satisfaction that the trend towards in­ gation's profound appreciation of the ex­ creased emphasis on lending for agricul­ at the Annual Meeting in 1966 I pointed out that the Danish Government has a cellent arrangements Brazil has made for tural projects and for educational pur­ our Meetings and the delightful hospital­ very high regard for IDA, and although we poses has been continued in 1966-67. ity and welcome extended to each of us -like many other Part I countries-are Provided that investment in these fields is upon our arrival in this beautiful city. faced both with balance of payments and followed up by the necessary initiative at May I join my colleagues, Mr. Chairman, budgetary problems we find it very impor­ the local level, I feel that the financing of in congratulating you upon your assump­ such projects will prove very productive tant that an early solution be found to tion of the difficult but rewarding task of from a long-term point of view. IDA's replenishment problem for 1968 and chairing our meetings this year. In spite of the high costs of borrowing the following years. I would, also, like to welcome our prevailing in 1966 the Bank has been able For our part we will be perfectly willing new members, Singapore and Guyana, as to increase its net earnings. Although the to accept a replenishment which is sub­ well as welcome back our old member, Bank may also in the future find it difficult stantially larger than the one we have had Indonesia. at times to raise the necessary funds for over the period from 1965 to 1967. As we Members of the Bank staff are to be lending at rates which are compatible with see it, a new replenishment of IDA should commended for their enlightening report. the Bank's present lending rates, we hope be based on contributions from the indi­ Mr. Woods, the President of our Bank and vidual Part I countries in the same pro­ that it will prove possible to maintain the its Affiliates, is to be particularly thanked portions-although not necessarily exactly for his usual clear, precise, farsighted and practice which was introduced in 1964 of identical-as those used during the pres­ broad-visioned annual address. I believe allocating a substantial part of the World ent replenishment period. I am expressing the feelings of quite a few Bank's net income as a grant to IDA. In One prominent feature of IDA has been of us here, when I say, that his contribu­ my opinion, it is a matter of regret that for its truly multilateral character. The fact tions to the evolution and development of 1966-67 a transfer of only a token amount that the proceeds of the IDA credits are the Bank and its Affiliates were not only of $10 million has been proposed. I sin­ freely available to the borrowing countries significant but have also been positive cerely hope, that in the years to come, we means that the borrowers have a wide and timely. would again be able to allocate amounts choice for the use of these funds. I am When we turn our attention to the Bank's from the Bank to IDA which could serve convinced that this system does lead to a finances and activities, during the year the interests of the developing countries more efficient use of the resources of IDA under review, we note that its efforts have in a more constructive manner. than any other system of procurement. been satisfactory: Bank/IDA commitments Although I feel that we can look back Most of the industrialized countries base showed an increase of about 9 per cent upon the recent development in the Bank their bilateral assistance to the developing and disbursements about 21 per cent over and IDA's loan policy with satisfaction I countries upon tied loans or grants. As far those of the previous year; it is also en-

18 couraging to note that 10 agricultural proj­ of goods and services. Debt service obli­ Not being at the giving end, perhaps, it ects have been approved for the year gations grew at a more rapid rate to a is not in my line to determine the magni­ 1966/67 and another 28 are in the final cumulative total, for the developing coun­ tude of the contributions. However, I would stages of processing, with a further 40 in tries as a whole, of $41 billion by June like to observe that if donor countries are various stages of preparation. Although 1966. The predicament of the developing willing to contribute in the end it better much needs to be done in this crucial sec­ countries is complicated further by the not be "too little and too late." tor of the predominantly agricultural econ­ fact that, on the one hand, sluggish ex­ In conclusion, I would like to observe omies of developing countries and the ports and increasing costs of develop­ that it is ironical that development finance small amount of $87 million would be no­ ment finance have increased the debt should diminish at a time when the project where near the actual annual needs of the burden on them, and, on the other, the flow preparation capabilities of aid recipient agricultural sector of developing coun­ of capital on appropriate terms has been countries have improved considerably, tries, the effort the Bank and IDA are mak­ nowhere near the minimum requirements and the absorptive capacity of developing ing in this direction gives one the hope of these countries. It is quite evident that countries increased greatly. that with increasing and widening experi­ this situation cannot be allowed to con­ It should not be surprising, therefore, ence, they will assist borrowing countries tinue for long without it disrupting world that the increase in the volume of sup­ to tackle this intractable problem. Invest­ economic relations. pliers' credits-a situation that has begun ment in agriculture does not constitute en­ Understanding of the problem is no sub­ to create concern in the World Bank­ tirely the financing of agricultural projects stitute for its solution. What is lacking is should continue to grow even further, in -thai is, "project" in the strict and narrow not the identification of the problem, but the near future, due to the unabated hun­ sense of that term. Indeed, as the Bank/ taking the appropriate steps to solve it. ger for development finance of develop­ IDA Report notes, although in passing, but It is in this light that the second replen­ ing countries and the intensified obsession quite correctly, agricultural projects can­ ishment of IDA's funds must be viewed. of developed countries to increase their not stand in themselves, but require the Although the prospects of lOA's replenish­ exports. building of the infrastructure base on ment have not been very encouraging in which they can stand. In other words, the the last two years, the report that some investment in infrastructural projects can progress has been recently made is wel­ be rightly regarded as indirect invest­ come news. Nevertheless, my Delegation ments in agriculture. All this would ap­ feels that no overriding reason exists to France: The Hon. MICHEL DEBRE pear to be too obvious to need stating but justify a change in the procurement pol­ Governor of the Bank it has been discovered not to be so. icy for the use of IDA credits, in order to When we consider education, the atten­ It is a great pleasure for us to be enjoy­ secure IDA's second replenishment. As tion that has been given to projects in ing the hospitality of the Republic of Brazil the Bank/IDA Report states: education by the Bank and IDA in recent in this famed city. May we tender our "Borrowers from the Bank and IDA are years has also been timely. Here again thanks and our compliments to the leaders free, and indeed are required to spend the one must point out that what remains to of this great nation .... proceeds of loans or credits in whichever be done, particularly in technical, voca­ ... However, the fundamental difficulties tional and teacher training and the finan­ member country (or Switzerland) they can that affect the economy of the pre3ent-day cial requirements for the projects are obtain the best value. The difference to the world call for other remedies. quite immense. borrowing country in purchasing power What are these difficulties? Bearing this in mind and in spite of between tied and untied assistance can be There are two with which we are quite other considerations, my Delegation would considerable." familiar. First, the slowing down of the have liked for our Executive Directors to To change this state of affairs in order economic expansion throughout the world, recommend the transfer, in the form of a to proffer or obtain IDA's second replen­ and second, the widening growth-rate gap grant to IDA, of an amount of the order of ishment will undermine the basic char­ between the industrial countries and the magnitude of that of the previous year; the acter of the Bank and its Affiliates. The young developing countries. net income of the Bank has increased by President of our Bank in one of his One frequently hears it said that both $26 million over that of the previous year speeches during the course of the current these difficulties could be remedied by when we allocated the $75 million to IDA. year, has clearly and convincingly stated creating new monetary liquidity ex nihilo Moreover, it appears now, that the much the advantages obtained by borrowers and claiming for this liquidity the status discussed second replenishment of IDA from the Bank Group and the disadvan­ of a new currency independent of and re­ shall not be forthcoming in the immediate tages they sustain when they obtain tied placing gold. But can this be taken seri­ future and IDA is without funds. We be­ loans. Both the debt burden and the loan ously? A currency is not created out of lieve, therefore, that a mere $10 million wastage are greater in a tied loan than nothing, any more than political institu­ would not go very far in meeting IDA's Bank Group loans. Therefore, although I tions are created out of nothing. Much most pressing needs for funds. do not go as far as advocating the aboli­ more is needed at the start than abstract As the Bank/ IDA Report clearly shows, tion of bilateral aid, I believe its character­ statements or noble pronouncements. A the amortization and interest payments of istics should not be allowed to tarnish currency is both an expression of an econ­ the developing world are growing at a those of IDA or those of any other existing omy and an assertion of confidence in a faster rate than the growth of their exports multilateral institutions. higher authority capable of imposing a

19 discipline which, in a free world, is a dis­ and financial discipline than that required fishly to pursue the welfare of the wealthy cipline equal for all. The time has not come of the non-reserve currency countries. countries. We cannot at the same time for an international currency because the We note that this is not the case. In preach about massive aid to the poor time has not come for such a freely ac­ other words, the gold exchange standard countries and lead the rich countries to cepted, impartial and universally re­ has had its day, and the more quickly we believe in the possibility of a rapid reduc­ spected authority. Any currency other than return to the gold standard supplemented tion in their work effort. gold is an expression of sovereignty, and by a good organization of international It is true that to bring about a beUer if certain currencies, through the power credit, the more quickly we shall provide distribution of income is one of the most of the economy they represent and the the world economy with the conditions for difficult tasks before us. We shall not make authority of the government that creates recovery. any serious start on this task except by them, enjoy great prestige and a great The special problem of the developing giving priority to an international organi­ power of attraction and accordingly play countries does not affect these conclusions. zation of the market for certain raw mate­ a useful role in trade, the national policy It is true that no credit mechanism can rials and certain products, notably tropical that is-and is alone-at the basis of their fully satisfy the aspirations of the young products. By stabilizing prices and by management decrees that they cannot be countries and, in general, of the countries organizing stocks of such items we can equivalent to gOld. Any claim to the con­ whose rapid development is an essential bring about an improvement in income trary may for a time deceive some people, social priority. having its origin in the prices paid by con­ Yet how can it be thought that the arti­ but the truth will very quickly become evi­ sumers in the wealthy countries. As a ficial creation of paper money can provide dent. The longer the deception has lasted, counterpart, the producing countries are a solution? Nothing is solved by distribut­ the more tragic will be the consequences required to accept certain disciplines, ing small quantities of money, and to dis­ of this error. chief among which is that of production. tribute large quantities of money would Let us look at things realistically and This is the subsidiary difficulty of the very speedily generate unprecedented dis­ wisely. What is at the root of the slowdown problem. in world economic growth? turbances of which the developing coun­ tries would be the first victims. However, to repeat my conclusion, there Political strife and military conflict have is no other way. This is the meaning of their share of responsibility. There can be To some extent, the problem of coop­ eration between industrial and developing the draft resolution submitted by the 15 no growth without confidence, and there Ministers of Finance who met in Dakar last can be no confidence in a world divided countries falls within the framework partly of conventional long-term infrastructure week. It is for the members of the Fund by sectarianism and strife. But there are and Bank to study the problem and the also the measures that many industrial loans. On this point, I wish to convey to the possible solutions to it, including the pos­ countries should have taken to avoid over­ sible setting up of a special agency. I am heating their economy. In the face of noth­ International Bank and to the International Development Association the support of convinced that a well-conducted experi­ ing short of an explosion of demand, the French Government. Their past action ment will permit subsequent developments especially for public investment, many in­ merits praise, even if their action must the value of which will surprise the most dustrial countries should cut expenditures take new directions in the future. It will skeptical. France, I need hardly say, is and curb inflationary trends when they then be possible to place additional re­ ready to take its rightful share in this have been compelled to yield. These coun­ sources at their disposal, not excluding effort. ... tries are not suffering from a shortage of the contribution that might be made by international liquidity but from an imbal­ the IMF, out of the income from interest ance between their production capacity that it is at present hoarding. and their economic and social develop­ But the effort to be made is greater than ment aspirations. Although monetary the means, even the augmented means, of The Gambia: The Hon. S. S. SISAY factors have been involved and have ag­ the eXisting international organizations, Governor of the Fund! gravated these difficulties, it is really infla­ just as it surpasses the special efforts that ... The Fund represents also for us the tion that has result.ed during recent years have been made by certain countries, par­ door through which we may enter both the from the excess liquidity arising in its turn ticularly my own. Bank and IDA. I hope that our applications from the persistent balance of payments What I am going to say here is what I for membership of these institutions will deficit of the United States. have had occasion to say before other be accepted in the next few days. We Thus, the gold exchange standard, an international assemblies, especially the make no bones about our desire for the empirical structure that served well in the Organization for Economic Cooperation means to speed development. We have past so long as holdings of reserve cur­ and Development, and I have expressed already received valuable help from abroad rencies did not exceed the normal volume myself in the same terms to the French but an important gap remains. We are of working capital, has become an instru­ Parliament. Aid will be given to developing seeking to strengthen our economic base, ment of instability. It could be otherwise countries only through a clearly accepted to diversify our activities and to achieve only if the countries whose currencies sacrifice of part of their national income better agricultural output. Finally, we hope are responsible for the smooth functioning by the developed countries. of the gold exchange standard were to It is not possible simultaneously to IDelivered at the Annual Discussion of the Board of subject themselves to a stricter economic preach about aid to poor countries and sel- Governors of the Fund. 20 to develop those assets, notably connected I make no apology for referring to our submitted impressive reports. I should like with our great river, which hold out prom­ aims and our circumstances. This is, after to thank them for this and to express our ise in the longer term. all, a special occasion for us and one congratulations to President Woods and We venture therefore to hope for sup­ where it may be helpful to some of our Managing Director Schweitzer.... port from the Bank and from IDA in two friends that we comment on our own affairs ... The World Bank Group has continued important directions. The first is in the rather than presume to comment as new­ and, in fact, has increased its important launching of constructive projects within comers on your larger preoccupations. work. Nevertheless, there are indications The Gambia itself. Some of these proj­ For the rest, we salute the efforts which that it is becoming more difficult for the ects, notably in connection with the harbor the Fund is making to improve interna­ institutions of the World Bank Group to at Bathurst, are already under active prep­ tional liquidity and thereby to bring about carry out their tasks. For the World Bank aration. The second direction is in explor­ an expansion of world trade free from the itself finds it less easy to satisfy its very ing and ultimately in bringing to fruition upsets that have characterized it in the large capital requirements on reasonable larger schemes which can only be carried past decade. We align ourselves fully with terms and conditions. Despite a great sup­ out on an international scale and by inter­ our African colleagues in expressing the ply of savings the volume of available national effort. hope that it will be possible to increase capital is insufficient to meetfullythe heavy I must emphasize the word "interna­ the volume of development aid and to demand. Thus, the World Bank has re­ tional" here because we are always mind­ make it available on terms which take cently had to raise funds at rates of inter­ ful that some of the long-term plans for de­ great account of the immense difficulties est higher than ever before in its history. velopment do not affect us alone but also which face all of us not only in Africa but But it is an encouraging sign of the con­ our friends and neighbors in the Republic also in many other developing countries. tinuing confidence placed by capital inves­ of Senegal. Finally, while recognizing the vast prob­ tors in the Bank's sound business policy Collaboration on an international scale lems involved, we support all efforts to that its most recent issues have been so has one special aspect. The Gambia may achieve greater stability in the prices of successful. yet be an important testing ground for the primary products. It is for this reason that The position of IDA is more critical. Bal­ growth of what we in Africa call the hori­ my country wishes to be associated with ance of payments difficulties in some coun­ zontallinks, that is, the ties between differ­ the Resolution on the subject which is be­ tries and budgetary problems in others ent countries within the continent. It is a fore the Meeting; and I congratulate the have rendered negotiations on capital fact of history that most of us have risen countries which submitted it on their time­ replenishment more difficult. Perhaps con­ to nationhood deeply influenced in eco­ ly initiative. sideration should be given to avoid too nomic structure and habits by what may We are confident of your interest and ambitious capital targets. The possibilities be called the vertical links, that is, with proud to participate in your affairs. of the Federal Republic of Germany are other and larger economic systems over­ at the moment particularly strained as a seas. This is not a matter for regret since result of budgetary problems. But my the vertical links have great and continu­ Government is prepared to help so that ing value. But undoubtedly they tend to Germany: The Hon. KARL SCHILLER IDA will be able to continue its work. I wel­ make difficult the extension of practical Governor of the Bank come the recommendation by the Bank's collaboration between African countries Executive Directors that at least a mod­ I am very happy and honored to address which historically belong to different sys­ est amount of the Bank's earnings be this distinguished assembly. I should like tems. In this respect The Gambia occupies transferred to IDA. to say how very much impressed I am by a position of strategic importance and one Conditions in the developing countries the hospitality of this great country of which, I hope, will command the sympathy Brazil. I am overwhelmed by the vast eco­ as a whole have not yet improved deci­ and interest of you all. nomic possibilities and by the social needs sively even though the Annual Report The currency of The Gambia is free and of this continent. I am deeply impressed shows practical progress. In many of these convertible. It is our intention to main­ by the efforts made for growth and stabil­ countries economic growth is still insuffi­ tain these characteristics. The currency is ity. My greatest wish for this country is cient, especially on a per capita basis. allied to the pound sterling and we have that it may be able to make further progress Also armed conflicts and similar condi­ found the connection a satisfactory and on the road toward a higher standard of tions of unrest are not favoring develop­ valuable one, which we shall continue. living. You may be sure you are not alone ment. The inflow of private capital is Our trade system is straightforward and in your struggle for economic and social hampered. And private capital is also in­ on classical lines. We seek to sell our pro­ development. The fate of the developing dispensable to the development of national duce in the best markets-though these countries is also our own fate. The devel­ economies. It flows only if there is an at­ admittedly produce poor returns at the oping countries and the old industrialized mosphere of confidence. Furthermore, the present time-and we aim to buy in the countries are living in one world. We all general public in the industrialized coun­ cheapest markets. In short, we conduct a -for instance, Brazil and Germany-are tries is influenced by unfortunate events. liberal trade policy, and behind it we have in this sense united in an Alliance for Without broad support by public opinion, a currency amply backed by external as­ Progress. however, it will become increasingly diffi­ sets and at a par value which reflects its The Bank and the Fund have again this cult for governments to provide major true purchasing power. year been doing excellent work and have funds for development aid. I should like

21 to mention that in my country, neverthe­ Unlike several other countries, our con­ world, milestones on the road to a com­ less, development assistance is regarded flicting aims are not tensions between the mon progress for all people. as having particular priority within me­ development of domestic demand and the dium-term financial planning. While me­ balance of payments equilibrium. On dium-term financial planning provides for the contrary, only by strengthening our an average increase of total public ex­ domestic demand can the foreign trade Ghana: BRIGADIER A. A. AFRIFA penditure by 6 per cent, the average in­ balance be brought back to a better Governor of the Bank crease of development assistance during equilibrium. Sometimes in our country the years 1967 to 1971 is planned to be there seemed to be another set of con­ Mr. Chairman, we have been most im­ flicting aims, i.e., between a policy of ex­ about 11 per cent. pressed by the hospitality of the Brazilian pansion and the necessities of the medium­ To summarize, I should like to say that Government and I would like to offer our term financial planning. We are trying now the work done by the World Bank under sincere thanks and best wishes to the to overcome this conflict by a "twin pro­ its active management and with its quali­ President and his people. gram," by consolidating our budget on the When I addressed the Annual Meeting fied staff sets a remarkable example for one side and by mobilizing an investment last year, the present Ghana Government all our own efforts. budget on the other side. Thus the so­ had been in office for only a few months I would now like to make some com­ called "German double talk policy" in and I could speak only of the first steps ments in respect to the economic position fact makes good sense. taken toward economic recovery and our of my own country: Along the same line we have contributed program for the future. This year, happily, Last year our country ran into a sig­ to the international leveling of interest I can speak of a modest but concrete nificant recession. This has been reflected rates. In this way our surplus in the bal­ progress. in our foreign trade balance development. ance of trade has been compensated by The real rate of economic growth in During the first eight months of 1967 Ger­ short-term money exports and by long­ calendar year 1966 was of the order of 1.6 man imports were 6 per cent lower than term capital exports out of Germany. To­ per cent and this was a modest improve­ in the year before; exports, however, con­ day, the Bundesbank's currency reserves ment on the 0.7 per cent growth rate tinued to rise vigorously, by 9 per cent, of a little over $7 billion are no higher than recorded for the previous year. For the during the same period. first time in many years balance was they were at the end of 1966 and at the This development in our balance of trade achieved in the financial accounts of the end of 1965. is an "import deficit" rather than an "ex­ public sector. For the current financial In order to create the instruments of a port surplus." It has given rise to concern year also, the Government has been able modern policy of balanced growth, the in some of our partner countries. But you to introduce a budget which shows a small German Parliament has passed an "Act to may be assured that we do not want to surplus on current account. pursue any beggar-my-neighbor policy by Promote Economic Stability and Growth," In spite of these improvements, our bal­ exporting recession. We are aware of our which is-in my eyes-a modern version of ance of payments has continued to be responsibility for international trade. Also the old "Employment Act" of the U.S.A. under presRure, and to reinforce the sta­ for that reason we have-since the begin­ Our new law provides the legal basis for bilization measures which were introduced ning of the year-taken decisive measures a global monetary and financial guidance last year, the Government announced in to revive economic activity. The Federal to our market economy, to vary income early July this year, a number of far-reach­ Government has carried out a first public tax rates by 10 per cent upwards or down­ ing financial and economic measures, the investment program involving about DM wards, to facilitate investment by tax most important of which was the devalua­ 2.5 billion, and now, in September we have bonuses and so on. And now we possess tion of the currency by 30 per cent. This started a second public investment pro­ the legal background for a "concerted last measure was, among other things, gram comprising DM 5.3 billion. We also action" between trade unions, employers' designed to give the cedi a more realistic stimulated private investment by special federations, and the Government to work exchange rate. depreciation allowances. The Bundesbank out "orientation data" for an adequate It is our view that these measures will has lowered its discount rate by stages economic behavior of the important groups lead to an expansion of domestic produc­ from 5 to 3 per cent and has reduced the of society. tion and exports and will enable us to minimum reserve requirements seven further liberalize our imports, current pay­ As a member of the European Economic times altogether. The measures since the ments and transfers. Community and as one of the important beginning of the year have meanwhile It seems appropriate on this occasion world trading nations, the Federal Re­ brought the recession to a standstill. The to recall the wide extent of overseas assist­ public of Germany is aware of its over­ level of production. however, is still low ance which we have received during the and upward forces are still weak. But I all responsibility for world trade and for past year. The Fund itself made its facili­ am firmly convinced that the rapid and the world monetary system. As in the past ties available to us in the form of a com­ straightforward decisions on the second we are also in the future ready to mediate pensatory financing drawing of $17 million investment program will strengthen the differences of opinion in the international and of a further stand-by arrangement forces of the market and initiate a revival field. For us the activity of the World Bank amounting to $25 million. Negotiations be­ on a broad front of economic activity with­ and the new developments within the Fund tween Ghana and its principal creditor out any danger to our stability. are milestones on the road to a better countries have also taken place during the

22 year and these culminated in an agree­ A recent World Bank staff review, which ment last December to stretch out the re-examined on a country-by-country basis servicing of our very substantial debts on Greece: The Hon. previous calculations of the Bank, that the suppliers' credits. This was followed in J.P.PARASKEVOPOULOS developing countries could use effectively Governor of the Bank April by a meeting organized at the re­ $3 to $4 billion more per year in external quest of the Ghana Government by the wish to associate myself with other capital during the next five years, has now Fund in collaboration with the Bank at Governors in expressing my thanks to you, confirmed these conclusions. which Ghana's balance of payments gap Mr. Chairman, and the management and The countries that are members of the and external aid requirements for 1967 staff of the World Bank Group for the effi­ Development A.ssistance Committee of the OECD produce together more than 80 per were discussed. This Aid Meeting resulted cient handling of this conference. On be­ cent of the world output for less than 20 in encouraging offers of balance of pay­ half of my Delegation I wish also to thank our host country, Brazil, for its generous per cent of its population and they can cer­ ments support from a number of donor hospitality. tainly afford to give greater assistance to countries for which we are very thankful. Reading the Annual Reports of the three the less developed countries. The provision of this and other forms of institutions and listening to Mr. Woods' Several smaller countries are stepping relief enabled us during the past year to address, one is impressed by the growing up their aid programs, while the main in­ meet nearly all kinds of current foreign ex­ activities of our institutions and, at the dustrial countries with one or two excep­ change commitments as they arose and same time, by the increasing difficulties in tions are dragging their feet, so to speak, also to continue paying off accumulated obtaining ample funds at a reasonable in the field of development assistance. arrears on short-term debts .... rate of interest for the needs of member We had been told that, as multilateral ... Mr. Chairman, Ghana fully supports countries. institutions with a broad mandate from the President of the World Bank in his We are aware of the fact that the rapidly member governments, the World Bank efforts to get the developed nations to re­ growing needs for investment capital in G roup has certain advantages in the ad­ plenish their funds to IDA. IDA has played most of the less developed countries can­ ministration of development finance. Last a major role in the strengthening of the not be met by the financial contribution of Monday Mr. Woods reiterated his belief economies of the developing countries, the World Bank Group only; their over-all that "assistance provided through multi­ and we hope that the developed nations development effort has to be supplemented lateral channels has advantages of objec­ will replenish its funds substantially to en­ by the affluent countrieb, as the world's tivity, economy and suitability." We fully able it to continue and expand its present richer nations' contribution to the world's agree with this affi rmation. program of assistance. poorer nations. Continuing and intensified efforts should I have just returned from a meeting of As the World Bank Group is encounter­ be made by both developing and devel­ a smaller gathering at which considera­ ing money-raising problems and the cost oped countries working together to in­ tion is being given to putting the provision of its borrowing becomes higher it is ru­ crease the size and the effectiveness of of technical assistance and pre-investment mored that the interest rate the Bank aid. The practice, for example, of many studies on a more formal basis. As I indi­ charges on development credits may be aid-giving countries of tying aid to their cated in my address before the Annual raised from 6 to 61/2 per cent. Such a move own exports has cut into its real volume, Meeting last year, I believe that this kind would intensify the strain on developing and it is well known that most aid-receiv­ of service which the Bank has in the past countries, already hard-pressed to meet ing countries cannot always buy the goods made available informally is of such im­ fast-rising debt burdens, and one wonders they need at the most competitive price. portance and benefit that it ought to be­ if it is advisable for the Bank to make large The overall terms of aid on develop­ come a formal part of the Bank's functions. borrowings at the prevailing high rates. ment loans generally remain too hard and I have here in mind the creation of another On the other hand, the International De­ the trend toward the softening of terms affiliate by the Bank which would support velopment Association is now left without has recently suffered certain setbacks. and guide the developing countries in funds; let us hope that Mr. Woods' opti­ Further endeavors are required to soften their research for well-based projects. mism with regard to the replenishment of the terms of aid generally, and also to Both the Fund and the Bank have con­ its resources is justified. harmonize the terms of assistance given tinued to provide technical assistance to These difficulties come at a time when by various developed countries to indi­ Ghana in various ways and I would like to bilateral financing is stagnant and the in­ vidual developing countries. take this opportunity, and again more debtedness of developing countries - in I should not like to conclude this short formally, to acknowledge these invaluable particular their mounting debt service obli­ statement without paying tribute to the services given so freely and so com­ gations-is a matter of serious concern. International Finance Corporation and its petently to my Government and the people The flow of financial resources from in­ very able Executive Vice President, Mr. of Ghana. dustrial countries in support of the devel­ Martin Rosen. The increased activities of In conclusion, may I extend my delega­ oping countries' efforts has failed in recent I FC for 1966-67 reflect the greater diversi­ tion's congratulations to the Managing years to keep pace with the growth of their fication of its operations and its increasing Director of the IMF and the President national income, even though most of the partnership with private investors. A sub­ of the IBRD for completing yet another less developed countries could immedi­ stantial amount of capital has been pro­ year of successful operations by these ately put into effective use a greater vol­ vided by them for projects which IFC institutions. ume of external assistance. financed. 23 Although equity financing is an area of tions, not in order to join in the Aeschylean "Under-development is a crucial real­ vital concern to the Corporation-its ob­ choir chanting the plaints of the countries ity," he said on September 22, 1967. "We jective being, of course, the development of Latin America, of the Third World, of earnestly hope that in the development of capital markets - we expect that the all the developing countries and evoking battle during the new decade, the cries of Corporation's commitments will continue all the heart-rending images of hunger and the poor peoples of the world will be to be made on a mixed loan and equity death-these images of the "Mocambos heeded by the wealthy peoples" ... "for basis. As we noted in the IFC Annual Re­ crabs" described by Don Helder Camara, the decade from 1957 to 1967 has been for port, the year's operations brought the Archbishop of Recife-or to swell the vol­ us a decade of frustration and disappoint­ cumulative total of IFC's gross commit­ ume of the cries directed by the poor ment of hopes founded on and sustained ments to $22.4 million. The capital cost of countries to the wealthy ones-these cries by some form of financing by the interna­ projects undertaken in 1966-67 totaled tional financing agencies, the World Bank that rise from every conference hall, even approximately $313 million. Net of par­ and its Affiliates or others. Haiti has not to the most recent meetings at Punta del ticipation by other investors, IFC's capital received finanCing for its wharf; it has not Este and Vina del Mar, in our own America risk amounted to about $44 million which received finanCing for the establishment of -permit the voice of our little free and means that for every dollar committed by electricity plants based on a dam that has IFC more than six dollars were provided sovereign black republic-faced with the existed for more than 10 years; it has not by other investors. same situation that it has been confronting received finanCing for its roads ... it has This is most satisfactory and it is to be for years past-to make itself heard in this built its modern airport by itself." hoped that during the next year IFC's ac­ assembly, as a member of the institutions These paradoxes, these bizarre situa­ tivities will continue to expand and diversify now met together for the purpose of re­ tions, which demonstrate or denounce the for the benefit of its members. porting to all of us on the results of their mental state of men, being reflected in the activities and the measures they have institutions that they create, found and di­ taken throughout the world, merely to pro­ rect, are directly reflected in the daily lives claim the need for change both in the of our peoples. structure and in the attitude of these in­ We sincerely regret our inability to ex­ Haiti: The Hon. CLOVIS DESINOR stitutions, and of all the international in­ press a few words of high appreCiation Governor of the Bank stitutions, in order to permit the bringing toward the World Bank, which appears to Permit me, on behalf of the Haitian Dele­ about of a transformation in the life of the have eliminated Haiti from its list of clients, gation, to join with all the previous speak­ developing countries and their peoples, under the pretext, according to one of its ers at this Meeting by expressing to His who represent a little over half the human Officers, that by reason of the economic Excellency the President of the Republic race. Like President de Gaulle, President "deflation" that prevails in Haiti the Bank of Brazil, and to its noble people, our sin­ Duvalier has never ceased to declare that cannot grant it credit or loans for the cere and hearty thanks for the warm and this has been and continues to be essen­ financing of its infrastructure projects enthusiastic welcome extended to us. I tial. Haiti wishes to say so here, even if it (such as national roads). should like to convey to them fraternal is not telling you anything new .... It is our wish, our equally sincere desire, greetings and to assure them of the firm ... The fact is, that Haiti, exemplifying that the World Bank and its Affiliates, as friendship of the Government and people the Third-World countries, needs external well as all the other international and inter­ of Haiti. resources for the financing of the neces­ American financing institutions, review I should also like to thank more espe­ sary investment expenditures for the ac­ their policy of loans for infrastructure cially Brazil and Honduras who are part of celeration of its economic and social financing of the developing countries. At the Latin American bloc to whom we are development. President Duvalier put it this a time when such an attitude is being fully linked. And the reason I say this is way on May 22, 1963: "However jealous adopted toward Haiti, we are paying, down that they have expressed our difficulties the nations of this hemisphere may be of to the last penny, and in dollars, to all our and our aspirations. their independence and their sovereignty, creditors and the World Bank itself, what I should also like to thank the Chairman they have all discovered and realized that is due to them according to our public debt and Delegates in advance for their kind the pursuit of growth within a framework maturities schedule. Haiti does not worry attention to the statement that I have to of order and peace is impossible without about its non-payment of civil service make today. the cooperation and assistance of the na­ salaries, and of pensions to the aged and In the present stage of world history, tions that are better-off and better organ­ the sick, but it does pay international in­ when so many vital problems have to be ized and that possess effective means of stitutions and its private creditors. faced, involving the demise or survival of action to contribute to that growth .... " Our country has been visited by more concepts, interests and hegemonies, as "The wealthy nations," he wrote in 1966, than twenty technical missions and com­ well as the bringing into existence of new "must understand that they cannot and missions from the finanCing agencies. All scales of values for the building of a better must not, if they are to avoid crises and of them have reached the conclusion that world and the satisfaction, at least to the folly, remain deaf to these cries of the poor there is an immediate need for an injec­ extent of the vital minimum, of the im­ nations and continue to adhere to out­ tion of capital for the execution of the mense and manifold needs of its peoples, dated positions incompatible either with country's infrastructure projects. All the may the small black republic in the Carib­ historic and geographic realities or with missions and commissions have reached bean add its voice to that of the other na- the universal expectations of humanity." this conclusion; nevertheless, Haiti and its

24 people, Haiti and its Government have Bank's position. The member countries lems indicated would give our countries a run up against the indifference, the pas­ in whose names I speak congratulate the greater capacity to avoid greater imbal­ sivity and the ultra-conservatism of the President, Mr. George Woods, the Execu­ ances in their balance of payments and, in lending institutions, an attitude to which tive Directors and all their staff and ex­ the case of Latin America, would permit the World Bank has not been immune. press their particular appreciation of the an increase in their imports more in keep­ Haiti has undergone and continues to fact that these levels have been achieved ing with their development needs. undergo a series of trials from which it without raiSing the interest rate so far as It is for this reason that we welcome emerges better tempered for all the bat­ the member countries are concerned. with great interest the reference made by tles necessary to secure the generalized If we analyze briefly the position of the President Woods in his brilliant opening well-being of its generous people. It cher­ developing countries, we find that these address to the fact that, if instead of de­ ishes no illusions.... figures, taken together, indicate a rise in clining as a proportion of world trade, the their gross domestic product in the order exports of the less developed countries of 4.8 per cent in the period 1960-1965. last year had been able to maintain the This shows that the productivity of these same modest position that they had oc­ countries has continued to grow, but not Honduras: The Hon. at a satisfactory rate, since on a per capita cupied during the previous five years, in MANUEL ACOSTA BONILLA basis, in the aforesaid period, their rate of that case, the share of the less developed Governor of the Bank development was less, due to the rate of countries in world exports would have I consider it a great honor to my country growth of their population, which was 2.4 been one per cent larger, which "would and a singular honor to me personally that per cent. Within this general picture, the have earned them well over a billion dol­ I have been appointed to speak in the area included within the Latin American lars more of foreign exchange than their name of Argentina, Bolivia, Brazil, Chile, countries showed a decrease in the growth exports actually did earn in 1966. If a one Colombia, Costa Rica, the Dominican Re­ of per capita income from 1.9 per cent in per cent adjustment in shares of world ex­ public, Ecuador, EI Salvador, Guatemala, 1955-1960 to 1.7 per cent in 1960-1965, port trade would bring about a billion­ Haiti, Honduras, Mexico, Nicaragua, Pan­ which reflects in part the deterioration of dollar improvement in the fortunes of the ama, Paraguay, Peru, the Philippines, the terms of trade between the industrial­ poor, then surely the matter is worth con­ Uruguay, and Venezuela. ized countries and those of Latin America. sideration and action." We believe that A brief analysis of the figures indicates The reduction in the rate of increase in while the one per cent referred to would that the past year has been one of the most the productivity of the industrialized coun­ have little significance for the industrial active for the Bank, since by June 30 it tries, which can be observed from the mid­ countries, it would be of vital importance reached the highest level of operations dle of 1966, has had an unfavorable impact to the developing nations. since its creation. Bank loans to member on the exports of the developing countries. Concerned by the gravity of these prob­ countries rose to US$877 million, the With concern we note that unless there is lems, the Latin American countries have credits granted by IDA to US$354 million a rise in the rate of productivity in the already taken the first steps toward re­ and the investments made by IFC to industrial countries, the export revenues gional integration, certain that this will US$49 million, thus placing at the disposal of our countries during the rest of the hasten the growth of their economic prog­ of the member countries a total sum of present decade would increase at a rate ress. The Presidents of the Latin American US$1 ,280 million for the purpose of financ­ less than that achieved in the 1955-1960 countries recently agreed, at Punta del ing their plans for economic development. period and consequently, this would im­ Este, to fix goals for the formation of a The countries in whose names I speak pede even further the growth of our regional common market which would em­ have received 17 loans from the Bank countries. brace an area with 200 million inhabitants. (15 for Latin America and 2 for the Philip­ This dependence of the growth of the In this huge task, the aid of the industrial pines) amounting to a total of US$285 mil­ developing countries on the rate of in­ countries and of the international institu­ lion. I should observe, however, that of the crease of their exports accentuates the tions, especially those concerned with credits granted by IDA, Latin America re­ urgent need to introduce changes in the financial matters, would be of the greatest ceived only US$2 million, or less than one trade policies of the industrial countries importance. per cent of the total, a figure markedly out in order to facilitate the movement in Having made these general comments, I of proportion for an area that includes world markets of the primary and manu­ shall pass on to some problems which in one-fifth of the members of the Bank. factured products exported by the devel­ the opinion of the countries of Latin Amer­ The Bank's rate of disbursements has oping countries. For this reason, the ica and of the Philippines merit urgent increased notably, reaching US$790 mil­ situation of their basic products in the consideration. lion. Sales of its own bonds and of those international market causes deep concern It is of the greatest importance that the from its portfolio produced US$623 million. to the countries of Latin America; espe­ industrialized countries should facilitate The net profits of the Bank amounted to cially as concerns the problems linked the placing of World Bank bond issues in US$170 million and its reserves rose to to overproduction, the absence of regula­ their money markets; if this is not done US$1,023 million, both these figures rep­ tion of the market and the discrimination or is done in an inadequate manner, the resenting the highest amounts reached practiced by some industrial countries in Bank's task will be either impossible or since the creation of the Bank. They are regard to imports coming from the devel­ very difficult. We give equal importance to the best evidence of the soundness of the oping countries. The solution of the prob- the facilitation of the placing of Bank

25 bond issues in the markets of the develop­ IDA, now already exhausted, a step which chases made abroad could be diverted to ing countries. the industrialized countries have not yet make purchases within the country, to the Our countries have viewed with pleasure decided to take in the immediate future, extent that domestic industries were able the support that the Bank is giving to the in spite of the repeated and dramatic ap­ to compete with the aid of the special obtaining of new resources through the peals publicly made by the President of treatment established in their favor as so-called parallel financing, which is in the World Bank. Nevertheless, we hope regards customs duties. addition to Bank loans. that in its new phase of operations IDA Besides the reasons already set forth An essential factor for the development will be able to achieve a wider and more in support of this general theory, it should of countries with a low standard of living equitable distribution of its credits among be pointed out that once a project is ap­ is their inflow and outflow of foreign ex­ the member countries, as we have re­ proved and the respective loan made by change, because they must import the peatedly emphasized. the Bank, domestic industries continue to capital goods which they cannot produce. We also hope that the negotiations being evolve and in many cases reach a standard Serious basic obstacles exist, furthermore, carried on concerning the replenishment of excellence which results in the creation to the transformation of domestic re­ of IDA's funds will make it possible for of discriminatory situations, in which they sources into exchange in the present con­ this institution to continue its policy of cannot compete. These situations, besides dition of the world market. It is for this granting untied credits. We have already having a negative effect on domestic de­ reason that they must seek aid from the pointed out that tied credits increase the velopment, create an atmosphere unfavor­ flow of public and private capital from the cost of the goods required to carry out the able both to the national authorities and to more advanced countries. We can cite projects financed by the international the Bank. the case of Mexico, which has joined with organizations. On the other hand, once a project and the World Bank in obtaining additional re­ We believe that the fact that the World the corresponding loan are approved, the sources through the procedure of so-called Bank has financed the acquisition of goods internal financing complementary to the parallel loans - loans parallel to those and services with the currency of the bor­ project is jOintly accepted. Consequently, granted by the Bank itself. Thus, a loan of rowing countries constitutes an important as a general thing, in not being able to US$110 million granted by the Bank for the step in the financial techniques in aid of obtain the flexibility intended for Bank development of electrical power in Mexico development, a step which fosters inter­ loans, a borrower cannot resort to the cor­ has been complemented by parallel loans national cooperation undertaken to pro­ responding internal support without pro­ granted by Canada, France, Italy and mote the growth of our countries. As a Japan in a total amount equivalent to consequence, we believe it indispensable ducing difficulties in financing. This would US$35 million and similar negotiations are that this policy should be continued and also imply the deferring, sometimes in a continuing with Belgium and Switzerland. strengthened. manner decisively detrimental to eco­ In a friendly spirit we call upon the coun­ There are several important grounds nomic development, of the execution of tries that are exporters of capital goods to upon which we base our support for the the project or the expansion of national participate more vigorously in this effort, expansion of this policy. The use of credit industries which are in a position to com­ which means that thei r exports for projects to finance local costs will stimulate effi­ pete with foreign industry. approved by the World Bank should be ciency in domestic industries, so that they In the Annual Meetings of previous years accompanied by complementary financing will be able to obtain international bids the Latin American countries have put that would permit an increase in the flow solely on the basis of the advantage to forth the idea, which we wish to re-em­ of foreign capital destined for the devel­ themselves. Likewise, the stabilization pro­ phasize on this occasion, that the Bank opment of our countries. grams adopted by many of our countries should take part in and cooperate with the In this respect, it is interesting to ob­ will be strengthened by World Bank financ­ stabilization policies of its member coun­ serve that the World Bank believes that ing of local costs, avoiding the inflationary tries. I speak of the advisability of coordi­ the less developed countries could pro­ pressures resulting from the need to pro­ nating the carrying out of stabilization ductively absorb, in the next five years, no vide local resources in order to use foreign programs with the development programs less than three to four thousand millions credits. In the case of agricultural and aided by long-term loans. Although the in­ of additional dollars. Thus, we have on the educational projects - in which the par­ itiative and responsibility belongs to the one hand countries that need to import ticipation of the Bank has been welcomed national authorities, we believe that the capital for the acquisition of the goods and with general approval-a reduction in the IMF and the World Bank are in a position services required for economic develop­ financing of local costs would as a prac­ to provide more adequate international co­ ment, and on the other, countries that are tical matter make their execution very operation through effective coordination the owners of capital, desirous of export­ difficult. Finally, we believe that treating as between themselves. ing such goods and services. Conse­ local costs the purchases made by a mem­ The Governors of the Latin American quently, formulae should be established ber country within the integrated economic countries and the Philippines wish to ex­ which would make possible and viable the area of which it is a part would give larger press, through me, to Mr. George D. attainment of both these objectives through scope to this policy. Woods, their warm thanks for the timely the means of parallel loans. It is also important, within this same suggestions that he has formulated for The countries of Latin America and the concept of the financing of local costs, closer economic cooperation between the Philippines believe that there is an urgent that in the case of loans already approved, industrialized countries and the develop­ need for action to replenish the funds of part of the resources granted for pur- ing countries. 26 ·...... ------

Finally, the Governors of the Latin Amer­ cern for one's fellow men extended so Among the richer countries also, one ican countries and the Philippines are nobly beyond national or racial or religious senses some impatience with the fact that proud that Brazil has been chosen as the frontiers. What is more, what has hap­ foreign aid continues to be needed on as seat for this twenty-second Meeting of pened in the social, economic and political large a scale as before, that the poorer Governors of the World Bank and IMF, fields during the past 20 years in both the countries are not able to payoff thei r debts whose achievements, we are sure, will industrialized and the developing coun­ with interest in a reasonably short time, mark a new epoch in the strengthening of tries has surpassed the expectations of that the record of political stability has not financial cooperation among the mem­ even the most optimistic among us. In been as enduring as one might have hoped ber States. the international league tables which have for, and that many of the problems, such become fashionable in some quarters, we as control of population or increases in exports or avoidance of inflation, are prov­ see from time to time different countries ing more intractable than what all of us going up or down in respect of the record had hoped for. Undoubtedly, there is sub­ of economic progress or political stability India: The Hon. MORARJI R. DESAI stance in all these complaints. But if we or social consciousness and individual Governor of the Bank and Fund allow the present mood of mutual disen­ freedom. But the more remarkable fact is Mr. Chairman, may I first of all congratu­ chantment to settle, there is every danger that behind these vagaries of fortune, there late you, Sir, on the very discerning ad­ of our dissipating the considerable gains lies everywhere an unprecedented strug­ dress with which you summoned us to our of the past two decades. By all means, let gle and striving for the betterment of the task yesterday at this annual gathering. us discuss our problems as freely and human condition. We have not all followed To our hosts, the Government of Brazil, frankly as possible and learn from the the same path; nor have many of us fol­ all of us owe a heavy debt of gratitude for experience of each of us. But let us not the excellent arrangements made for us lowed the same path consistently. But lose our sense of proportion out of impa­ whatever the course of action that we may and for the gracious words of welcome tience. I was, therefore, particularly happy with which our present session was in­ have adopted from time to time in the light to note, Mr. Chairman, that you tried to put augurated by the President of this great of our circumstances and in keeping with this question in a proper perspective.... country. This is my first visit to Brazil and the traditions of our people, there are not ... It is a matter of great regret for us indeed to Latin America. India and Latin many countries in the world, and hardly that at this meeting we are not able to America are separated by thousands of any in the membership of our two institu­ record any definitive progress towards the miles. But we are drawn together by our tions, where the past 20 years have not replenishment of IDA funds for which Mr. common endeavors for the fulfillment of witnessed a remarkable progress in social, Woods and his associates have worked so the hopes and aspirations of our people. I economic or political fields. hard and with such deep conviction and have no doubt that the present meeting I consider it particularly appropriate to dedication for the past so many months. will mark yet another stage in the coming recall this at the present stage when so I am happy to note that Mr. Woods is now together of Asia, Africa and Latin America, many people hitherto committed to the encouraged to feel that the discussion a coming together which is directed solely cause of world economic development are concerning the amount, the shares and against the poverty, hunger and want beginning to be daunted and even disen­ the conditions of the next replenishment among our people. I would also like to take chanted by the magnitude of the task that of IDA's finances will now move forward this opportunity to welcome in our midst lies ahead. Throughout the developing to definite conclusions and that solutions the new members of the Fund/Bank com­ world there is at present a sense of dis­ may begin to take form at this very meet­ munity. We are particularly happy that rep­ appointment about the progress made, ing. I earnestly hope that this question resentatives of Indonesia are fortunately whether in achieving satisfactory rates of will be resolved soon and that at this meet­ with us again after a brief interruption. growth or in mobilizing adequate amounts ing definite decisions will be taken by This year the Bank and the Fund have of foreign aid on reasonable terms or in major Part I countries together so that Mr. completed 21 years of existence. Beset securing greater access to the markets of Woods is enabled to chalk out a specific as we are with problems of one kind or the affluent societies or ensuring greater timetable for new IDA credits without another from year to year, we are natu­ stability in regard to the major primary ex­ which development programs in many rally inclined to focus at these gatherings ports. It is not uncommon to hear now­ countries would be severely interrupted. on the difficulties and disappointments of adays that the promise of the Development Our interest in IDA replenishment is the day. But a year in which our two cher­ Decade has not been fulfilled, that the clear. While we are naturally anxious to ished institutions have come of age is per­ resolutions of the first UNCTAD confer­ meet our own needs, we recognize that haps also an appropriate time to look back ence have remained mainly on paper, that IDA operations should become more at the entire balance sheet of our efforts the Kennedy Round has not sufficiently broad-based and should take into account and endeavors. As Mr. Woods reminded taken into account the interests of the less the urgent needs of all its members among us, it is during these two postwar decades developed countries - and now to this the developing countries. The best way of that the improvement of the well-being of series of disappointments is added the fact achieving this would be to replenish IDA human beings everywhere has been ac­ that it has not been possible so far for the funds on a substantially increased scale cepted for the first time in history as an richer countries to come to an agreement and indeed in a manner whereby the avail­ international objective and responsibility. regarding the replenishment of IDA funds ability of funds for IDA increases progres­ At no other time in the past has the con- on a substantially larger scale than before. sively from year to year. We are equally 27 interested in IDA's operations being as un­ Before commencing the few observa­ In this connection I would like to com­ fettered as possible while being not un­ tions which I have to offer, I would like to mend the IMF and its staff members for mindful of the concerns of countries in congratulate you, Mr. Woods, and Mr. their tireless, patient, very able and dedi­ temporary balance of payments difficulties. Schweitzer for the excellent, illuminating cated work in assisting us. I believe that I earnestly hope that the question of IDA statements, made on the first day of our the Fund's attitude greatly contributed to replenishment would be well behind us by Meeting, parts of which I will reflect upon the confidence shown by many nations in the time we all meet in New Delhi for the in the course of my intervention. both bilateral and multilateral talks and second UNCTAD Conference. Our relations with the international finan­ meetings such as held in Tokyo, Paris and Finally, a word about the International cial and economic community will be the Netherlands. Finance Corporation. The IFC has served based on the new situation in Indonesia If to govern is to foresee, my Govern­ well its basic purpose of being a catalyst and her new economic policy. My country ment, while still engaged in overcoming for private investment. The line of credit has re-established its state ideology and one of the worst postwar inflations, is of $100 million provided to IFC by the its 1945 Constitution, the spirit of both of already thinking of and making other prep­ Bank should provide the basis for further which was violated by a previous regime. arations for a start, at some future date, useful expansion of IFC's operations. I am We are now using the relevant provisions of economic development proper. We in­ happy to say that the IFC is playing a valu­ of our Constitution as guidelines for our tend to draft a plan of which the tentative able role in enabling us to secure financial new economic policy which is geared to­ operational date would be the year 1969. and technical collaboration for the devel­ ward achieving economic growth and so­ Anticipating the future, more massive and opment of our industries, particularly the cial justice. Taking into consideration our systematiC action in the field of develop­ fertilizer industry. ideal to promote growth simultaneously ment proper, my country adopted, at the Sir, I do not wish to take any more of with a fair distribution of the acquired beginning of this year, a foreign invest­ your time by referring to many other wealth among our people, we have re­ ment law, among others, for replacing a aspects of international economic cooper­ stored the functioning of the market former ill-advised policy that economic ation which are uppermost in our minds system which we now consider a more development should be financed mainly today as I have no doubt that some of adequate medium for the smooth opera­ by attracting supplier's credits. Years ago my colleagues will undoubtedly do so. I tion of our economy than controls and the IBRD gave a warning against such one­ would, therefore, conclude by expressing regulations. Whereas no modern state can sided method of financing. I believe that once again our deep sense of gratitude to forego guidance, planning and supervi­ the Bank has been proven right. First of the Government and the people of Brazil Sion, our position is that such should be of all we realize that economic development for receiving us so warmly in these beauti­ a general, supplementary and corrective has to rely on our own resources. We fur­ ful surroundings. nature. ther realize that additional means ought Since October 3, 1966, we have started to be balanced and varied, coming from implementing our economic policy. Our different sources, international, national first objective is to put order in a dis­ and private, so that the burden of repay­ ordered house. That effort implies the ment and reimbursement could be more Indonesia: The Hon. FRANS SEDA achievement of monetary stability simulta­ adequately spread and adjusted to needs. Governor of the Bank neously with the rehabilitation of our exist­ We are now exploring the possibility of It is with singular pleasure that I avail ing industries, both as a prerequisite for attracting foreign investment, a source of myself of the opportunity to address this and a first start toward economic de­ financing hardly touched upon by us. We distinguished meeting, for this is the first velopment. are gratified that foreign entrepreneurs are Annual Meeting since Indonesia again be­ Our exchange system was reformed, showing interest in the possibility of oper­ came a full member of the International giving room to the interplay of supply and ating in Indonesia to their and our benefit. Bank for Reconstruction and Development demand, instead of, as in the past, resort­ Their confidence in our economic future and of the International Monetary Fund. ing to allocations and licenses. We also enhances our own conviction. We are also hopeful of becoming shortly unfroze our price system by reintroducing I do not need to explain to this gather­ reassociated with the Bank's affiliated in­ the market system and abandoning sub­ ing of the world's highest qualified per­ stitutions, the International Finance Cor­ sidies which, together with price ceilings, sons that private capital alone cannot poration and the International Development distorted the real picture of our economy. adequately meet the financial require­ Association. The warm words of welcome While we are reaping some harvest from ments of developing countries. Loan capi­ extended by you, Mr. Chairman, and by our efforts to the extent that we managed tal will still be needed both bilaterally and others, are greatly appreciated by us. to reduce the rate of inflation consider­ multilaterally. In this connection, I express On this first occasion since our re-entry, ably, we have not completely achieved our the hope that the highly developed coun­ permit me to thank you and, through you, objectives. Money supply and prices still tries would meet the call of the United the Boards and the managements of both tend to rise, albeit at a slower rate. We are Nations to apportion the expected one the Bank and the Fund for their under­ determined to pursue our course; we are per cent of their GNP for development standing and cooperation during our ne­ gratified that, so far, we have been given purposes. gotiations regarding the renewal of our both understanding and support from For various reasons my country has membership. friendly countries. made little use of international financial 28 resources. For instance, we have never mentum of its own, such is far less the efforts as well as those internationally or received any loans from the IBRD or from case with certain steps and measures bilaterally undertaken. I am of the opinion any of its affiliates. This is not a complaint undertaken by some of them. Economic that efforts to provide assistance to de­ but a statement of fact. However, in due development and the state of our economy veloping countries, however welcome and course, our economic development would in general are mainly, but not entirely, our needed, should be matched by as vigorous need the assistance of such bodies as the own responsibility and in this respect or even more vigorous efforts to enable IBRD and IDA. In this respect I sincerely we would wish that developed countries their exports to grow, because exports are hope that the International Development could and would be more conscious of their main source of development capital. Association would receive eventually the the repercussions of events generated by Permit me now, Mr. Chairman, to end support it so highly deserves. Somewhat or through them on the weaker econo­ my intervention by expressing our satis­ alarming information is circulating regard­ mies of others. We are grateful for the faction and gratitude that our reparticipa­ ing the future position of IDA which we understanding shown vis-a.-vis the need tion in the work of the Bank and the Fund hope could be dispelled forthwith by those of additional capital and know-how of de­ happens to take place in this beautiful city who are able to do so on the basis of their veloping countries. However, international of Rio de Janeiro. Brazil and Indonesia are economic position. IDA is necessary for economic cooperation is not confined to on opposite sides of the world but we have developing nations. If I am not mistaken, providing capital and knoW-how. at least three things in common: the great there is a growing awareness of the heavy I have already cited the effect of the wealth of our natural resources, the less burden shouldered by many developing decline of the business cycle on our econ­ developed state of our economy, the de­ countries in connection with loans. It is omy. The control of this business cycle is sire and determination to grow and to let for this reason that some highly developed a matter that concerns the relevant coun­ our peoples benefit from the wealth of our countries have softened their terms of bi­ tries, but it is also a matter of international lands. May I most warmly thank the Gov­ lateral credits; in some cases, even grants concern. I would also like to mention steps ernment of Brazil, through you, Mr. Chair­ were given. For the same reason, countries recently taken by the Common Market, man, for the opportunity given to us to be in Asia are pleading for so-called "Special namely, among others, the imposition of here and for the very cordial hospitality Funds" to be entrusted to and adminis­ an import duty of 9 per cent on palm oil, extended to and enjoyed by us. tered by the Asian Development Bank one of our important export products. If which, as we know, has itself the possi­ no alleviation could be provided, for in­ bility, to a certain degree, of extending stance, by way of a quota based on our soft loans. traditional export to our client countries Iraq: The Hon. IDA has been a useful complementary in the Common Market, we are afraid of ABDUL RAHMAN AL HABEEB institution to the normal operations of the losing many millions of dollars of exports Governor of the Bank IBRD and it would be deplorable if it had which we can hardly afford to forego under to curtail its activities due to the lack of our circumstances. The Annual Meetings of the Fund and funds. Moreover, balance of payments I do not want to be misinterpreted. The the Bank are always an important event problems encountered by some highly de­ Common Market is a great endeavor, because they give us an opportunity to veloped countries are expected to be which is one of the shining examples of review the working of the world monetary alleviated by the newly conceived device successful regional cooperation, but we system and the efforts made to raise the of special drawing rights. They should cannot remain indifferent to some of its living standards of the majority of world therefore not weigh too heavily in con­ negative aspects for such developing population. This year's meetings are spe­ siderations for continuing support to IDA countries as mine, and I believe for a few cially important because they are being in its original, untied form. My Govern­ others also. It is not my intention to take held under circumstances which require ment strongly supports the procedure pro­ stock of all steps undertaken by some serious thought and urgent action .... posed by the Governor from the Nether­ highly developed countries with harmful ... In addition to the question of inter­ lands with respect to the best manner for effects for weaker economies. The release national liquidity we should give urgent solving the problem of contributions to IDA. of stockpiles, the decline of exports due thought to measures which may promote Now allow me to dwell for a few more both to the business cycle and to certain the flow of capital from the developed to moments on the problem of the need of arrangements at a time that my country the developing countries. It is a sober fact development capital. is desperately trying to expand its earn­ that in 1966-almost the mid-year of the As both the excellent Annual Reports ings, the short-run fluctuation of the Development Decade-the net flow of long­ of the Bank and the Fund show, economic prices of commodities which has been term financial resources to the less de­ growth in some large industrialized coun­ discussed so many times in the United veloped countries registered a deCline. tries slackened in the past year and with Nations and UNCTAD but, so far, without The terms at which capital can be obtained it their need for raw materials of which tangible results, the matter of the worsen­ have also tended to be harder. Hence the my country is one of the suppliers; hence, ing terms of trade of developing countries growing problem of debt servicing would we are deeply interested in a reversal of and so forth, are affecting the develop­ continue to be serious for developing that hopefully temporary trend. If, in a way, ment of the economy of my country and countries in the years to come. The diffi­ the development of the business cycle in of others in similar conditions. All of them culties of poorer countries are likely to be the major developed countries has a mo- tend to nullify or reduce the domestic accentuated because of the continuance 29 of restrictions imposed on the imports of show a spirit of tailoring their approaches, Nor is the qualitative composition of products of these countries by industrial­ procedures, and policies to the social and that flow any more comforting: less grants ized countries. The long-term trend of economic needs and aspirations of the and more loans, and on stiffer conditions. prices of primary products is also showing people of the world. The Report of the Bank to this meeting a gradual decline, and exports of these says: "The share of grants in official bi­ countries are highly unstable. In this situa­ lateral aid has declined from 76 per cent tion it is becoming extremely difficult for in 1961 to 65 per cent in 1965 and to 63 the developing countries to continue to per cent in 1966." make a successful effort to develop their Israel: The Hen. DAVID HOROWITZ Nearly four-fifths of the investment in economies. We fully endorse the view ex­ Governor of the Bank underdeveloped nations is financed from pressed in last year's Annual Report of I would like first of all to associate my­ local resources that are squeezed out of the Executive Directors of the Fund that self with the expressions of gratitude to populations living on or below subsistence "participation, to an appropriate extent, the Brazilian Government and its people levels, and even this apparently positive in the supply of financial resources to the for the very kind and warm hospitality development is not an unmixed blessing. less developed countries should have a which they were so kind to extend to us It implies a reduction in consumption of high priority in all countries with a rela­ and also to extend my greetings to the local products, as capital goods are as a tively high per capita income and should, new members of our associations of the rule imported. Paradoxical as it may seem, as far as possible, be shielded from any Bank and of the International Monetary in the underdeveloped world it is not less action needed from time to time to deal Fund. important to finance the primary con­ with balance of payments problems." May It is with great diffidence that one tries sumption than it is to finance development I add that the supply of these resources to draw a balance sheet of performance there. The driving force for any stepping­ should also be shielded from political in­ in development by economic aid as viewed up of production is first and foremost a fluences and political differences, if any, against the magnitude of the task. larger market. In the first stage of develop­ between the developed and developing ment, higher consumption stimulates de­ It is a sad and sorry tale of decline of countries. mand and allows for the establishment of aid, with the trends in the '50s of a more In this connection the World Bank can many enterprises whose possibility is abundant flow of capital to the under­ give useful guidance. Its lending policies predicated on economies of scale. The ex­ developed nations reversed in the '60s. should not be allowed to be affected by perience of countries which are presented The sum of capital transferred from the political considerations. The Bank which as "success stories" in development developed to the underdeveloped two­ is no doubt aware of the problems facing shows that the development was based, thirds of humanity is being eroded by the low-income countries, should adopt a above all else, on effective demand, which more imaginative approach in assisting deterioration in terms of trade, and-if served as a basis for the economies of the process of economic development. calculated, as it should be, per head of scale in numerous industries. Not only should the quantum of capital population-by the population explosion. Not by narrow infiltration, but by a flow be increased but the terms at which Relatively, the decline is even more pro­ break-through, have some countries it is made available should be made easy. nounced, for the net flow of capital is achieved spectacular development and Judged by the criterion of ability to pay, hardly more than one-half of one per cent progress. the interest rates charged by the World of the Gross National Product of $1,500 What happened in my own country, Bank on loans made to the developing billion from a rapidly growing volume of which is particularly unendowed with nat­ countries are rather high. These rates production in the developed nations. ural resources, was a break-through by should not necessarily be related to those Moreover, the more than tenfold gap in way of increase of population and import which the Bank has to pay on its own bor­ investment per head of population between of capital: these created effective de­ rowings. It is not difficult for human imagi­ the two parts of the world-the privileged mand and a domestic market conducive nation to find ways and means to bridge and the underprivileged-foreshadows an to growth. Thanks to this, the Gross Na­ the difference between the two rates. Also, even more gloomy and deplorable future. it is important that requests for loans or tional Product could go up by an average At the present rate of the flow of capital, for studying projects should be dealt with of 10 per cent per annum for 16 years, and promptly. Iraq's experience suggests that as a dwindling share of the swiftly rising the national product could be quadrupled, the World Bank's procedures connected Gross National Product in the developed the population more than trebled, exports with such requests are very time-consum­ nations, any approach to a more accept­ multiply 20 times and the standard of life ing. It is axiomatic in banking that loans able economic relationship between the per head of population rise by 250 per delayed can be tantamount to loans de­ two divisions of mankind would take cen­ cent within 18 years. nied. The Bank should, therefore, review turies. Mr. Schweitzer defined this situa­ Similar if less spectacular statistics can its lending policies and procedures. tion in his speech as follows: "It is a matter be quoted for other countries which are I am offering these suggestions in the for deep concern that the flow of long­ considered as "success stories" in de­ hope that they will help in promoting the term financial resources to the less devel­ velopment. objectives of the Bretton Woods Agree­ oped countries in recent years has lagged Of course, capital alone is not sufficient, ments. We wish the Fund and the Bank behind the growth of output in the indus­ but it is indispensable. Without a flow of well and hope that they would continue to trial world." capital, other means will be of no avail. 30 As the situation now is, the Report of debts. This is no more than make-believe. But the flow of capital today is taking the IMF mentions that the growth in the The loans are contracted on conventional a direction opposite to global needs, and flow of capital to developing nations in the terms and the fiction of respectability is the most specious plea advanced to jus­ years 1960-65 was smaller than in the five duly acknowledged. Instead of conces­ tify this contrary trend is that money mar­ previous years and that "the growth of sionary terms at the outset, the less de­ kets are tight. Money markets will always per capita output was distinctly lower than sirable device is used of changing the be tight as long as there is no stagnation in the second half of the 1950s." conditions post factum. in economic activity and demand, and the Thus, the two gaps, the one in standards Our contention is that economic growth market can be tightened by raising inter­ and consumption between the developed is primarily the function of investment. nal demand and investment effectively in and underdeveloped worlds, and the sec­ However, a new kind of escapism is now highly developed countries. Over $30 bil­ ond-even more perilous and ominous-in the fashion. The thesis is that growth is lion of bonds are floated every year on investment, linked with the steady mount­ overwhelmingly the function of skill, the financial markets of the developed ing of debt payments, for which the zero knowledge and technological level, and countries, and only a negligible proportion hour of equilibrium between capital flow that there is no point in pouring capital of that flotation enters the developing and redemption should strike at some into countries which do not possess these ones. This is a problem of priorities: the time in the '70s, may bring us to the brink prerequisites. The facts are that techni­ tightness of the market is, to a very great of despair and to an imminence of failure cal assistance is more readly available extent, the function of policy, and it can if the scope and conditions of aid alike than capital. UN technical assistance, the be escalated. should be perpetuated in their present DECO and bilateral technical aid are at The Economic and Social Council of dimensions. disposal, and even more of these can be the United Nations comments thus on the The terms and conditions of loans are purchased in the free market. There is a problem: certainly not less important than the scope tremendous margin of possibilities. My "The developing countries have rela­ of assistance. The Report of the Bank own country can claim to have done not tively little access to the world's capital says: "Between 1962 and 1966, payments a little in this field. Our technical assist­ markets. This is in part a problem of regu­ of amortization and interest on external ance to developing nations, if calculated lations and procedures but at root it re­ public debt grew at an average annual per head of population, is twice that which flects the inadequacy of their credit stand­ rate of 10 per cent, considerably faster is extended by the DECO, the club of the ing when judged by market criteria. In than the increase in exports of goods and wealthiest nations in the world, and addi­ recent years, moreover, conditions have services by developing countries as a tional facilities in this sphere are forth­ been particularly tight in most markets, group." The cumulative onus of debts is coming from a variety of sources. and interest rates appreciably higher than a sort of time-bomb which may explode at The second road of escapism is the those at which the developing countries any moment in the '70s, when debt repay­ emphatic contention that the developing have in fact borrowed from governments ments will amount to as much as the finan­ nations do not make any effort on their and from international institutions. If, in cial assistance itself. Priority for IDA is own behalf. No one will argue that the order to avoid the budgetary constraint conspicuous by its absence; what there is endeavors of the developing nations are and to take advantage of favorable bal­ of it has been whittled down this year always adequate. But the very fact that ance of payments positions in particular more than ever by reduction of the Bank's four-fifths of investment there come from countries, more use is to be made of the allocation to IDA. internal sources contradicts this other capital market, it will thus have to be done To make matters worse, even the food form of shirking the real issue. through a mechanism which has both an situation is becoming sinister: the FAD It is also a fact that, wherever capital appropriate credit ranking and the ability estimates that per capita food production was available, the results were gratifying. to re-Iend at less than market rates." has fallen by from 4 to 5 per cent in the To quote a report on research carried out Here is a clear allusion to the plan which developing regions of Africa, Latin Amer­ for the office of Program Co-ordination of I had the honor to submit to the World ica and Asia. "These estimates indicated AID: Bank of some kind of a device which by that per capita food production in the de­ "The possibilities of securing rapid and subsidization of the interest rate and the veloping regions had dropped back to the sustained development by effective use of guarantee on bonds would supply and 1957-58 level, the same as the inadequate foreign assistance have been strikingly provide the necessary means and funds level before World War II." Again, the demonstrated in the past decade by such for the expansion of IDA credits. Bank Report says: "On a per capita basis, countries as Greece, Israel, Taiwan and Here is the crux: access of developing growth in Gross Domestic Product has the Philippines. In each case, a substantial countries to the free capital market. been slower, while agricultural output in increase in investment financed largely The fears and apprehensions aired in many countries has actually declined." by foreign loans and grants has led to this respect are illusory and unrealistic. My own dark predictions at our previous rapid growth of GNP followed by a steady The same Cassandra warnings were Meetings are, I grieve to say, more than decline in the dependence on external uttered when the proposal to allocate a vindicated. This applies especially to the financing. Not only was growth acceler­ part of the profits of the World Bank to evaluation of conventional but unrealistic, ated by foreign assistance, but the ability IDA was first deliberated. Experience has instead of concessionary, terms of lend­ of each economy to sustain further de­ shown that this had not the slightest effect ing. The developed world is deluding itself velopment from its own resources was on the creditworthiness of the Bank. Bonds by the new expedient of rescheduling of very substantially increased." are bought on the strength of the united 31 resources of more than a hundred nations, state of affairs in the world inspired by the financial resources supplied by them and not on a purely bookkeeping basis. modern political and economic concepts through the replenishment procedure is a The Representative of the Bank declared regarding the advancement of peoples. significant indication of a need to update at the meeting of the United Nations Con­ Such advancement, which today consti­ the rules of all the Bretton Woods institu­ ference on Trade and Development: "If tutes not only a moral obligation as tions, not only IDA, in view of the evolu­ Bank lending depended only on its ability affirmed in the encyclical, "Populorum tion in the positions of their members. to borrow, the Bank would have no diffi­ Progressio," to which President Woods We feel that it would be unwise to go on culty in raising money, because the Bank's referred in his opening address, but also evading this problem simply because it creditworthiness is considered everywhere a political necessity, should be sought presents understandable difficulties. as first class." It is difficult to comprehend through the judicious management of pro­ Since development problems are, as what the apprehensions can be. Do they ductive resources. Nothing is more vexing you are aware, interrelated, we may per­ stem from the fear of world inflation be­ than to observe the uneconomic way in haps be allowed in this connection to cause another $1 billion is added to the which resources are being depleted with­ recall the two bond issues made on the financing of underdeveloped nations from out regard to essential needs, such as Italian capital market by the Inter-Ameri­ a bloc representing $1500 billion of GNP? food, housing, health and education. can Development Bank for an amount that The current share of the underdeveloped The organized cooperation that finds clearly shows the importance we attach nations in the world capital market is neg­ expression in the World Bank and its to that Bank's activity in furthering de­ ligible. It must be made bigger. The idea Affiliates is not based on false optimism velopment. Our support is merely a reflec­ that this will affect the creditworthiness of but on the constant and steadfast pursuit tion of the warm relations which, by virtue the World Bank is based on an erroneous of realistic aims. I should like, on behalf of a long uninterrupted and flourishing conception. The World Bank is not a com­ of Governor Carli and myself, to express tradition, link us to Latin American coun­ mercial institution, but rather similar to a our warm appreciation of the work carried tries. We are particularly pleased to re­ central bank, which can never fail finan­ out by these institutions over the past year, affirm the strength of these ties, hoping cially. No central bank apprehends failure, including the valuable work performed by that in the future, as in the past, they may and the same applies to the World Bank. the members of the staff. lead to a fruitful partnership in the inter­ And, as far as monetary policy is con­ President Woods is well aware that we ests of economic development and also cerned, the view can hardly be that an in Italy follow the problems facing the of the preservation of the cultural and extra $1 billion a year, injected into the World Bank and its Affiliates with a readi­ social values which we have in common. underdeveloped world, would generate ness to give careful and sympathetic con­ As this Conference takes place in the inflationary pressures. sideration to anything that may facilitate heart of South America-and we are grate­ The path to peace and to good neigh­ their solution. The problems of under­ ful to our great host - our attention is borliness is through a universally affluent developed economies are followed in Italy drawn to the development problems of society in a single and undivided world. with an interest that reflects its own direct this vast part of the American continent, Keynes has already shown that what is experience with some of these prob­ full of potentiality and hopes, and a worthy decisive in influencing the shape of things lems and its awareness of the difficulties depository of high standards of civiliza­ to come is the mind of Man, his ideas, and involved. tion. It is, therefore, legitimate to express that what must be overcome is the stub­ The purchase of IBRD bonds, which the hope that the European countries, has been one of the means by which Italy especially the members of the European bornness of routine and obsolete thinking. has given support to development assist­ Economic Community, will intensify their There is a gateway out of the impasse, ance organizations, has substantially in­ present efforts at financial cooperation but it can be unlocked only if there is the creased and has more than doubled over with Latin American countries, possibly political will for a new departure. the past two years. The fact that in 1966, leading to a new institutional frame­ according to statistics compiled by the work to ensure a continuity of greater DAC, Italy was the largest subscriber of contributions. such bonds is clear proof of the favor with My country has always tried to help Italy: The Hon. EMILIO COLOMBO which Italy views the granting of increased solve the problems of international liquid­ Governor of the Fund assistance to developing countries through ity and development assistance that I have the intermediary of multilateral agencies. just outlined through material contribu­ . . . Both in the world economy as a It is consistent with this trend that we are tions and actions in keeping with its re­ whole and in the so-called dual economies in principle opposed to "tied loans" and sponsibilities. It may be pOinted out, for it is still proving a hard task not only to would regret to see a recourse to such example, that at the present time, thanks narrow down existing disparities in income loans in connection with the second re­ to its strong reserve position and the levels but even to prevent those dispari­ plenishment of IDA. We wish to assure absence of conflict between internal and ties from widening further. Nevertheless, you that we shall consider this matter in external objectives-a state of affairs to it should be recognized that it is essential the same spirit of cooperation that we which the Fund has duly called attention to stimulate the development of backward showed at the time of the first replenish­ in its excellent Annual Report-Italy is areas without at the same time restraining ment. making a significant contribution to the the autonomous expansionary force of the The disparity between the initial sub­ expansion of income and trade in the developed areas, if we are to achieve a scription to IDA of certain countries and world. This has been achieved through

32 ------......

balance of payments and reserve policies and may turn into a deficit, albeit a small order to achieve orderly economic growth which entail the assumption of calculated one, for 1967 as a whole. at a rate compatible with the country's risks. On the current account side, a trade current potential, may work effectively to Thus, I think it may be useful for me to deficit is the result of an increase in the that end. dwell briefly on the most recent economic rate of growth of imports, especially raw developments in my country. In general, materials and semi-manufactures, and at an optimistic view may be taken of the the same time of a reduction in the growth current economic situation in Italy, al­ of exports, due not only to the recovery Jamaica: The Hon. EDWARD SEAGA though, as is always the case in a phase of domestic demand but also to the less Governor of the Bank and Fund of upsurge, constant care must be exer­ favorable economic conditions prevailing cised by the authorities in order to con­ in some of the countries with which Italy Most developing countries will support trol its course. has particularly strong commercial ties. the observation of the President of the Industrial production, continuing a trend The latter factor may also be held re­ World Bank, made in his annual address that has been going on for some time, is sponsible for the slowing-down in certain delivered at the opening session, to the at present expanding at an annual rate of receipts from services (tourism and emi­ effect that there is an increasing momen­ 10 per cent, which is certainly one of the grants' remittances). tum of development taking place among highest in the Western world; what is par­ Coupled with the deterioration in the developing countries. It is an observation ticularly encouraging is that the most current balance, a comparable deficit has to which a great deal of weight and im­ dynamic sector is the capital goods indus­ taken place on capital account. The im­ portance should be given. try. The growth rate I have just given is, balance here is partly due to the liberaliza­ The business of development for four­ of course, an average; in some sectors tion policy that enables holders of liquid fifths of the world's population, who live in advances are more rapid than in others. funds to invest them in the most profitable the less developed countries, is wrapped But even building activity, which had way, either in Italy or abroad; in this con­ in a mystique which almost defies defini­ slowed down for various reasons, has re­ nection it is interesting to note that the tion. In contrast with sophisticated econo­ cently accelerated. deficit recorded in respect to capital mies, which have geared their structures Economic recovery, which has been movements is the net result of larger flows to a uniform standard and perfected the continuing now for more than two years in both directions. This deficit represents, machinery for recording indices of meas­ after a standstill in 1964, is taking place in fact, a shift of foreign exchange assets urement, the concept of development in against the background of a satisfactory -i.e., of credits to foreign countries-from developing societies begins with a lack of degree of monetary stability. Wholesale the public sector, that is to say, the mone­ agreement on what it constitutes for what prices have for some time remained sub­ tary authorities, to the private sector, and people. To help reduce differences for stantially unchanged, while the cost of from short term to long term. Among other purposes of measurement, the concept of living has shown increases, which-how­ things, this has made it easier to cope development is sometimes even misinter­ ever moderate in comparison with those with the problem of administering the offi­ preted in order to fit it into existing sta­ taking place in other countries-raises cial reserves. tistical moulds: the rate of growth of a some apprehensions. The Italian banking system is also play­ developed economy expressed in terms of These developments in the price field, ing an active-and increasingly important percentage increase of GNP, for instance, on the whole gratifying, have been accom­ -role in financial transactions in foreign is full of much more meaning in advanced panied by a reasonable stability of both markets. economies than in its application to a short- and long-term interest rates, which If the present favorable economic situa­ developing economy where it speaks only have settled down at levels that are con­ tion is to continue, it is necessary, inter of vertical growth, minimizing the distri­ sidered likely, in view of the particular alia, to prevent tensions from emerging as bution of the fruits of growth, and even circumstances prevailing in Italy, to en­ a result of factors already present or aris­ ignoring the score-sheet of social pres­ courage a balanced growth of productive ing in the Italian economy. On the do­ sures. How does one, for instance, reflect activity. mestic front there is already a potential in the GNP the number of school places For the current year it may reasonably element of tension in the growing require­ needed for education, the jobs required for be expected that the rate of increase in ments announced by the public sector; full employment, or water for irrigation? national income will be not less than 5.5 an additional stimulant could be supplied But from all this has been distilled the per cent in real terms and 8 per cent in by the foreign sector when economic somewhat undefinable mystique of the money terms. Similar gains are expected activity will revive in certain countries. concept of development-to a degree un­ to be shown next year. Hence, the need exists for liquidity to be derstood, to a degree intuitively known­ Naturally, the high level of productive carefully controlled to ensure an adequate and it is from this combined experience activity has had repercussions on the bal­ flow of funds to the various sectors of the of sense and sensation that we have be­ ance of payments, repercussions that are economy and at the same time guarantee gun to realize within this decade that becoming all the more noticeable as Italy's conditions of financial equilibrium. this complex scheme has started to gain dependence on trade with foreign coun­ Application of the methods of economic momentum. tries increases. Consequently, the large planning recently introduced in Italy, But nothing spurs momentum like mo­ balance of payments surplus of the last which lay down the guidelines to be fol­ mentum. The Annual Report of the Bank few years has been gradually diminishing lowed by each sector of the economy in for this year notes that 80 per cent of the

33 capital resources used for their develop­ housing, hotel development, agricultural and trade are twin problems, which com­ ment is supplied by the developing coun­ credit and basic industries, requires rea­ prise two faces of the same coin. tries themselves; to this, in the words of sonable returns and a safe investment Jamaica supports the Resolution for the President of the Bank, the developed climate. Several countries, like Jamaica, special consideration of this problem. But countries add the 20 per cent "leaven for have all the necessary prerequisites to at­ realizing that success or failure may well the loaf." tract investments of this type from huge depend on the machinery for study, we With the build-up of new skills in these external mutual funds and life insurance suggest that concurrent with the investi­ traditional societies, the establishment of deposits, except for the fact that because gations of a study group, a number of institutions to mobilize and plan the use of the period of life of the investment interested member nations should meet to of resources, and the growth of awareness (10-20 years) the lack of safeguards outline their interests and tackle at that of the standards of living which are the against devaluation of currency creates a level problems raised by the study group. new goals, the race is now on, and it will real fear in the mind of the investor. This would provide machinery to resolve require a new dimension of resources to Obviously, no single country or small problems as they appear and thereby maintain the lead of development over group of countries can carry the weight shorten the time for conclusions to be discontent. of full conversion against devaluation, reached .... With the end of the Development Dec­ which sometimes results from external ac­ ... It must definitely be noted that with­ ade in sight, this is an opportune time to tions beyond our control, and so it be­ in the past couple of years the major consider what "new dimension of re­ comes a proper matter for international problems which have been placed on the sources" can be provided to save the arrangement. agenda of international discussions for spark of momentum from being put out. At present, the Bank is considering a study and decision have been the trade It has been noted that the aggregate of report from the staff on multilateral invest­ and financial difficulties of the industrial­ aid provided by donor countries has failed ment insurance against various types of ized countries. The agreements flowing to increase over the past five years and investor risks. It is understood that de­ from the Kennedy Round have little effect at this particular time the resources of that valuation risks are not among these pro­ on the real problems of the developing most accommodating aid institution, IDA, posals and we make an urgent plea to the world; nor is it likely that the proposals have been expended. Indeed, very few Bank to look into this. It should be under­ for increasing liquidity will have any real donor countries have actually contributed stood that what is expected is a scheme direct impact on the major problems of the targeted one per cent GNP in eco­ which would involve supporting contri­ most primary producing countries. nomic assistance. butions from developing and developed The point must be made, therefore, that An integral part of the reluctance of countries to provide a cushion fund. the time has come to bring the full focus donors to expand economic assistance Jamaica in putting forward these pro­ of world attention on matters of major programs is the need to justify such assist­ posals for a system of guarantees would importance to the developing world. ance to their taxpayers and electorates be willing to cooperate with any select No problems better commend them­ who must consider such assistance as committee created for special study. selves for this intensive treatment than the against competing domestic needs. It should be noted that this problem re­ proposals for price stabilization and ex­ The answer to all this may be consid­ sults from the psychological fears of in­ amination of the means of increasing aid. ered in two aspects: vestors and is present regardless of the The plight of IDA as a major source for Firstly, the pOint at which aid stops and inherent strength of a currency. In effect, increased aid must be considered to­ investment begins is a shadowy area a guarantee against devaluation for coun­ gether with an examination of the criteria which defies definition. In a world in which tries in the same position as Jamaica for IDA assistance. In the absence of real closer ties of trade and investment are would not be a major risk, but it would understanding of the concept of develop­ daily crystallizing, there is an interdigita­ have tremendous possibilities for expand­ ment in less developed societies, the use ing investments which could replace some tion of mutual interests which cannot be of per capita income figures as a criterion separated. Indeed, to reverse the point of the budgetary items set aside in public for assistance has proven unjustifiable. made by the Governor for the United King­ resources to finance other areas for which Countries like Jamaica, which practice dom yesterday, not only do we need to aid is traditionally sought. orthodox financing and are denied the strengthen developed countries so that Special machinery is also needed to they might assist us, but they need to increase the activity of the private sector use of IDA funds, must break the ground strengthen us so that we might buy their in trade. A special Resolution has been rules of good financing when short-term goods. introduced on the Agenda of this Confer­ or medium-term money at commercial Secondly, beyond the efforts to maxi­ ence to discuss the deterioration of terms rates has to be used to finance infrastruc­ mize public assistance, the private sector of trade as it affects developing countries tural projects, which can only be sensibly is capable of providing increased invest­ and to maintain price stabilization for pri­ financed by IDA-type soft credits. Yet ment. Here, two new mechanisms are mary products. That this matter, which has these financial indiscretions are precisely needed to more fully mobilize private been discussed internationally for several the practices to which Finance Ministers capital. years, is to be specifically presented at of several countries have to resort again Longer-term private money at commer­ this level is very welcome news. The pOint and again in the absence of IDA-type cial rates, which could provide a substan­ has been made repeatedly that better funds. In the final analysis, this builds up tial base for mortgages and investment in terms of trade mean less aid, and that aid pressures on public debt charges, which 34 detract from a country's ability to finance moting economic development in the de­ public projects. veloping countries. We wish to suggest that in the replen­ Japan: The Hon. MIKIO MIZUTA Looking at the progress of aid to the ishment of IDA funds, new criteria be Governor of the Bank and Fund developing countries from the developed considered for making IDA credits avail­ I should like to begin by expressing my countries, one is struck by the fact that the able for projects which require by their total volume of aid has recently been de­ warm appreciation of the hospitality ac­ very nature soft untied aid regardless. of corded to us and the excellent arrange­ creasing rather than increasing. F~r e~­ the specific country in the developing ample, the total for the DAC countries In ments made for this Annual Meeting by the world which is involved, and that a por­ 1966 amounted to the equivalent of $9.9 Government and people of Brazil and the tion of IDA funds be set aside to implement billion about 4 per cent less than the City and citizens of Rio de Janeiro. I such proposals, leaving the remaining of $10.3 billion given in the should also Ii ke to pay high tribute to the equiv~lent previous year. funds for application to the projects ~f excellent Annual Reports made by the In the meantime, Japan's aid to devel­ countries which qualify by virtue of their Fund and the World Bank Group, and to levels of development and income. oping nations has increased considerably. the most lucid and penetrating presenta­ In summary, let us: It is my great pleasure to be able to note tions made at the beginning of this meet­ 1. Take note that development activity here that in 1966 it increased by more than ing by Messrs. Schweitzer and Woods .. : . is beginning to settle into a pattern with 10 per cent over the previous year. This ... Turning to the domestic economic some results and firm expectations for means the amount of our aid has dou­ situation, the Japanese economy entered the future; bled since 1963. We have made strenuous a course of recovery in the autumn of 1965 2. Accept the need for increased in­ efforts in this field, and we expect to con­ and has since been in a new phase of vestment and aid to accelerate the mo­ tinue our efforts to the extent circum­ rapid economic expansion .. Plant and mentum of economic growth towards self­ stances permit. equipment investment continued o~ a sufficiency; As for replenishment of IDA resources, steady upward course and consum~tlon 3. Explore the realm of the private sec­ which is one of the most important and remained high. Indications were eVident tor for the "new dimension of aid and urgent problems in the field of.aid to. the of a strong trend of expansion in every investment" needed to supplement the developing countries, many dlscussl~ns field of economic activity. Although prices limitation placed on budgeted aid from have taken place since Mr. Woods first have been relatively stable for these sev­ the public purse; made a proposal in this respect. It was eral months, the increase of exports lagged 4. Study the possibilities for organizing made known that a number of contributing behind the continued increase of imports. international support schemes for: countries were faced with various budg­ As to the long-term capital account, the (a) guarantees against deflation of cur­ etary and balance of payments difficulties. inflow of foreign capital was relatively rency values, and Japan also is now faced with suc~ prob­ small while aid to developing countries (b) stabilization of world prices for s~e­ lems. However, I believe all countries are and export credits showed a marked cific primary commodities, both of which well aware of the urgency of the IDA re­ increase, resulting in a very large net out­ can open doors of private investment and plenishment as the availa~le fu~ds are flow of capital. The balance on nonmone­ trade to overcome the stagnation of aid; running short. I expect deliberations .on tary transactions thus turned to a defi~it 5. Make available a portion of IDA funds this problem will produce a progr.am w~lch since the beginning of this year. The in­ to all developing countries for schemes is sound and feasible from the viewpoints crease of imports reflected the strong de­ which essentially require soft money so as of both the industrialized and the develop­ mand of domestic economy, and the slump to avoid a build-up of debt repayment ing countries. I also think it necessary to of exports was also caused chiefly by the pressures which imperil development; give due consideration to let IDA funds strong domestic demand and partly by the 6. Focus international attention now on be utilized by as broad a scope of develop­ economic situations prevailing in the selected major problems of the developing ing countries as possible. United States and Europe. Under these world, this being the effective machinery We all realize the importance of the circumstances, we took a combination of to produce real results, which are urgently United Nations Conference on Trade and fiscal and monetary measures, at the be­ needed. Development which will be held in Feb­ ginning of this month, including deferment Mr. Chairman, I feel it is my duty not ruary 1968. The proposal for a scheme of of a substantial amount of government ex­ to close my comments without paying a supplementary financing, which is ex­ penditures and an increase in the official very special and warm tribute to our host pected to be on the agenda of the Con­ discount rate, in order to insure that our country, Brazil, for providing what must ference, will, I think, require very careful economic growth would be sustainable. be one of the most beautiful settings in study from all angles since it i~volv~s the world for this particular conference I think it is important for us to maintain many problems, including its relationship and for measuring up to what we in the a sustainable growth of our economy on to the Fund scheme for compensatory developing world would expect of them in a long-term basis also. I believe that flex­ financing. doing a man-sized job in providing all the ible and effective management of a fiscal I would now like to refer to the Asian facilities and comforts necessary for this and monetary policy mix is necessary to Development Bank, which is a crystalliz~­ conference. It always pleases us when the attain this objective. tion of the spirit of self-reliance and soli­ developing world can measure up to its Next, I wish to speak on another darity among Asian countries. It is re~lIy own responsibility. important problem facing us, that of pro- gratifying to note that, since commencing

35 operations in December last year, this re­ fully to their people and convince them of of the President of the Bank, Mr. George gional bank of Asia has worked hard to the need and urgency to increase their Woods, in his inspiring statement on Mon­ finish all the necessary preparations and assistance to the developing countries. At day when he said that he would like to is about ready to begin its lending opera­ the same time, as has often been pOinted hear more about the success stories of tions in the near future. It is also note­ out by Mr. Woods, those governments development. The evidence here before worthy that a Special Fund in the Asian should be in a position, if their aid efforts our eyes in Rio is inspiration to all of the Development Bank is now proposed to be are to be further intensified, to be able to poor countries in the world. established to strengthen the Bank's func­ give full and satisfactory explanation to Like other Governors before me, I must tions, with a view to promoting Asian eco­ their people on the use of their aid, its congratulate the Bank and the Fund on nomic development in various fields, and, effect or contribution to the progress of achieving once again such a high standard in particular, to improving the agricultural the developing economy. of excellence in their Annual Reports. sector of the region. The Government of From this point of view, I would like to These two reports are now regarded as Japan intends to make a contribution suggest that a study be made in the Bank amongst the most authoritative commen­ amounting to $100 million to the Special to clarify what sort of conditions on the taries each year on the state of the world Fund of the Asian Development Bank to part of the developing countries enabled economy. The depth of their analysis and be used mainly for agricultural develop­ them in the past to obtain positive assist­ the lucidity of their exposition attain a ment, providing countries other than Japan ance from abroad and to utilize it effi­ standard of which the two institutions can and the United States make contributions ciently, and what sort of conditions are be justly proud. I wish, however, that it on a matching basis with Japan; and for required in the future to enable them to were possible for us to be as proud of all the fiscal year 1968, my Government is draw more positive assistance and to events disclosed in these reports.... ready to contribute $20 million for agricul­ utilize it in a more efficient manner. I am ... A downturn in the economies of tural development. At this juncture I sin­ of the view that, in order to maximize aid nearly all of the major industrial countries cerely hope that other industrial countries efforts of the developed countries in the has not only interrupted their own pros­ will join in contributing to this Special long run, careful consideration should be perity but seriously affected the economic Fund to help strengthen further Asian unity paid to the respective budgetary and bal­ progress of the developing world. I shall, and the close ties now existing between ance of payments problems of those coun­ however, later in this statement return to Asia and industrial countries in the rest tries, and more reasonable and equitable the ridiculous contradiction of industrial of the world. ways of sharing the aid efforts should be countries giving aid when their trade pol­ The improvement of the standards of found. I hope that some international study icies defeat the objects for which the aid living in developing countries is not only will be made on this question, to clarify is given. At this point, I merely want to ... the problem of the developing countries and elaborate the issues. repeat what I said in my statement in themselves but also is a most essential I would like to conclude my statement Washington last year, that countries main­ and urgent task for the economy of the by expressing my confidence that the taining persistent balance of payments entire world, and in order to accomplish International Monetary Fund, the Inter­ surpluses have a responsibility to the eco­ this purpose both the efforts of self-help national Bank for Reconstruction and De­ nomic community just as great as those by the developing countries and aid efforts velopment and its Affiliates will exert countries in persistent deficit, and as I by the developed countries should be continued efforts for the improvement of said then: "this responsibility should be made vigorously and in harmony with each the international financial system and for discharged to the rest of the world either other. In this connection, it is often pointed the promotion of economic assistance to by those countries following an expan­ out that one of the obstacles preventing the developing countries and will thus sionary policy in their economies or by the increase in the global flow of economic make full contribution to the stability and their giving much greater financial support aid to developing countries lies in the fact growth of the world economy. to the international agencies and/or direct that the capital-absorbing capacity of development aid to the poorer countries." those countries is not necessarily suf­ My own country enjoyed a very prosper­ ficient to make effective use of the assist­ ous year in 1966. Gross National Product ance extended by the developed countries. Kenya: The Hon. J. S. GICHURU increased by over 10 per cent, capital for­ It is also emphasized that the efforts of Governor of the Bank and Fund mation by 40 per cent, agricultural output self-help should be directed toward the by 15 per cent, exports by 11 per cent and improvement on the economic front in the must first compliment and express imports by 14 per cent. In addition, we form, for example, of mobilization of do­ my thanks to the Government of Brazil for achieved a small balance of payments sur­ mestic resources and augmentation of the excellent arrangements that have been plus. Since the country achieved inde­ import capacity through fostering export­ made for the 1967 Joint Annual Meetings pendence at the end of 1963, Gross Do­ related and import-substitute industries of the Bank and Fund in this wonderful city mestic Product in the monetary economy as well as toward the improvement on the of Rio de Janeiro. The striking evidence has moved ahead at an average rate of social front in the form of improved educa­ of spectacular economic development in 7112 per cent. I am confident that if a tion and advancement of social reforms in a country not so long ago regarded as buoyant world economy can be main­ the developing countries. On the side of backward and undeveloped, provides per­ tained, we shall be able to advance the developed countries, their governments haps the best backdrop to these Annual economy in real terms at an average rate should continue their efforts to explain Meetings. It also underlines the remark of more than 6 per cent in spite of the in-

36 evitable bad harvests that are bound to enough-valuable though it is-to make I realize that there is probably not one occur. Once we have been able to provide provision for the international institutions industrial country that does not have its the Kenya economy with a more substan­ to provide compensatory financing, norfor own social problems to which it would like tial infrastructure, we shall be able to con­ using them to provide financial aid to to devote more of its national resources. sider accelerating this rate further. Our poorer countries hit by natural disasters I know that charity begins at home-at sucess is, however, heavily dependent on or by equally costly movements in the home with a home electorate-but how the maintenance of an expanding level of terms of trade. It is not enough to talk in many people in the industrial countries world trade and all our efforts and also the terms of providing loans for viable would be affected significantly if the bene­ efforts of countries providing us with valu­ schemes at the going rate of interest, par­ fits of a part of one year's growth were ticularly when, as far as the Bank is con­ able development assistance will be nulli­ devoted to the principle of social justice cerned, it is having to pay a market rate of in the world as a whole. fied if, to use your own expression, Mr. interest higher than ever before. It is clear from the analysis presented Chairman, countries start to "export re­ All Governors at this meeting who are to us by both the Bank and the Fund, cession." On a more optimistic note we also Ministers in their Governments at that, given the activation of the new have in the last year signed an East African home would not be able to maintain their scheme of international liquidity and Treaty for mutual economic cooperation political position if they did not pay regard rather greater expansionist policies on with our neighbors Tanzania and Uganda. to the particular problems of the poorer the part of those countries in a fortunate In the current year, we have seen a seri­ members of their national community. In position of persistent balance of pay­ ous downturn in the prices of a number of the same way that long accepted national ments surpluses, the prospect for the our more important export commodities, principles are about to be applied to world world economy and world trade should reflecting a lower level of demand. Earlier monetary problems so now must national be brighter. It is, however, important to in the year we forecast the growth of our policies with regard to social justice and realize that by itself such prosperity will economy in 1967 at a little more than 6 per the redistribution of income from the rich still, in large measure, be enjoyed by the cent; we have recently had to reduce that to the poor be taken out into the interna­ richer industrial countries, and although forecast to 4 or 5 per cent, in large meas­ tional sphere. Social and economic think­ the developing countries themselves look ure due to the downturn of the world eco­ ing on a national level has moved far in for a higher level of trade from prosperity nomy in the first half of the year. the last 100 years, and policies which in the industrial countries, unless there is ... Broad agreement on the new ar­ would at the beginning of this period have a reversal of the trends we have seen in rangements for international liquidity leads been regarded as unthinkably radical are recent years, we can expect that the prin­ me to suggest that if so much thought and now generally accepted as normal in most cipal benefits will still accrue dispropor­ imagination can be brought into the mone­ of the industrial countries of the world. tionately to the rich. The developing world tary sphere, it is now time for as much Why is it then, when such policies are con­ has suppressed its doubts about the new thought, work and imagination to be de­ sidered normal on a national level, that the liquidity arrangements because it feels voted to the equally important twin prob­ suggestion that they should be applied on that the important thing is first to have a lems of trade and aid. Mr. George Woods an international level cannot also be gen­ prosperous world economy. We do, how­ in his statement on Monday emphasized erally accepted? ever, also feel that the time has come for the important relationship between trade The provision of aid from the economic much greater imagination, and indeed and aid, and rightly stressed that what resources of the rich would in this way be sacrifice, to be applied to the problems of was needed was not only more aid but aid regarded less an instrument of political the developing countries. In essence, this on more favorable terms, in particular low­ purpose and more a just redistribution of means a much more substantial replen­ interest, long-term loans. IDA was de­ income from the rich to the poor. In this ishment of IDA. I would naturally hope signed to provide just such aid. Ambitious way aid should not always be regarded as that the Bank's imaginative proposal for in concept and flexible in implementation, a residual in the national budget; it should the setting aside of $1,000 million a year IDA at the outset seemed to those of us in large measure be a prior charge in the would be accepted and I regret that there desperately short of development finance budget in the same way that an individual's has been no mention of this proposal by to be the type of assistance necessary to personal income tax is normally a prior meet the fundamental development needs charge on his personal budget. Clearly, the Managing Director. It is unfortunate of the poorer countries. Many countries aid contributions mean a lower level of that a proposal, which would tie a substan­ have been generous in contributing to IDA personal consumption in the donor coun­ tial part of IDA money to the procurement over and above their existing aid commit­ tries unless there are unemployed re­ of a particular country's imports has been ments, and I am aware that the developing sources available for use. This must made. Such a suggestion goes to the very countries' plea for more and more money always be so; but when the industrial root of the conception of IDA. It is not now on increasingly favorable terms must seem countries as a group are moving ahead the time to fall back on the resolution and to the industrial countries like the per­ at a growth rate of three or four per cent imagination by which IDA was formed. The sistent and irritating importuning of the per annum, is it so very much to ask that principle of free and open procurement is professional beggar. But I believe the one or two per cent of their total national vital to the efficient utilization of IDA re­ world is becoming too small for the richer product should be put aside to raise the sources, and the benefits of the scheme countries to be able to live side by side on living standards of the poor to a world would be dissipated if the money is not this planet with the poorer ones. It is not level? spent in the cheapest market. 37 Although I have suggested that con­ always particularly helpful for economic hosts for their great hospitality and for tributions for development aid in general missions from the Bank to arrive ask­ making such excellent arrangements for and for the replenishment of IDA in par­ ing to be given lists of projects, for if this Conference in this beautiful city, and ticular should be an essential part of the such projects had already been brought to the staff of the Fund and the Bank national budget of the richer industrial to a final stage of preparation, they would Group for their usual superb compe­ countries and not necessarily depend on invariably have been suggested to one or tence in ensuring the success of our a country's particular balance of pay­ more of the available financing agencies. deli berations. ments position, I must, in part at least, In large measure, therefore, we need as­ I do not believe that there have been accept that so long as persistent balance sistance to help identify and analyze via­ many times before when as much mutual of payments deficit exists in the industrial ble projects and I feel that the Bank and understanding and cooperation among world, some countries will find it difficult its Affiliates may need to do more in this countries, not only in political affairs but to play the expanding part they might sphere if its financing activities are to ex­ also in economic matters, have been re­ otherwise seek. There is, therefore, a pand at the rate of recent years. quired as in the world today. In meeting greater onus on those countries in a for­ I have spoken at length because these this need, the Fund and the Bank Group tunate surplus position to contribute a are issues of greatest importance to the are indeed playing an increasingly useful relatively greater proportion of their na­ developing world. The industrial countries role. In this connection, I wish to express tional income to the replenishment of IDA. have already shown great understanding my Government's sincere appreciation It is interesting to speculate on the possi­ of our problems and if they would bear for the assistance given to us by these bilities of a world tax on balance of pay­ with us for just a few more years, I am two institutions since Korea joined them ments surpluses. It is, however, possibly sure that we can look forward to the day in August 1955 .... not practical politics to pursue this idea when development will have reached the ... The Bank has helped materially at the present time. stage in which an increasing number of through technical advice in executing our The developing world must hope that countries now classed as underdeveloped First Five-Year Economic Development Mr. George Woods is able to bring his will be able to stand on their own feet and Plan and drafting the Second Plan, while discussions with the industrial countries exist as viable economic communities IFC has been largely instrumental in set­ on the replenishment of IDA to a success­ with rates of growth sustainable and com­ ting up the Korean Development Finance ful conclusion, so that once again it can parable with those in the more advanced Company which recently started opera­ play its necessary role in meeting the countries of the world. The problem can, tions, and IDA has established a credit crucial needs of those countries whose however, not be put off for very much line of $14 million for railway development. average per capita income tends to stag­ longer. The imaginative initiative in the Fellow Governors, may I now take a nate at the bottom of the world order. I financial field with regard to liquidity must few minutes of your precious time to nar­ am, however, pleased that the Bank is now be directed toward new policies for rate to you some of our major economic able to continue and indeed accelerate aid and trade. It is to these problems in achievements during the last few years the level of its activities. One of the most the next twelve months that both the Bank about which we in Korea feel very proud remarkable statistics I have heard in the and Fund must give particular attention. indeed. Last year, we successfully com­ last week is that mentioned by Mr. George pleted the First Five-Year Development Woods when he said that 60 per cent of Plan, and in the current year we launched the Bank's funds have been disbursed in the Second Plan. During the First Plan the last five years. I am also most im­ period, the Korean economy recorded an Korea: The Hon. BONG KYUN SUH pressed by the Annual Report of the unprecedentedly high annual average Governor of the Bank and Fund junior partner in the Bank triumvirate, the GNP growth rate of 8.3 per cent, and in International Finance Corporation. Per­ It is a great honor and a distinct privi­ 1966-the last year of the Plan-at 13.4 haps the most interesting statistic in that lege for me to participate in this 22nd per cent, the growth rate was indeed report is that when IFC undertakes com­ Annual Meeting and to commend, on be­ epoch-making. mitments with other private investors, half of the Government of the Republic of The rapid progress of our economy in those other investors contribute 12 dollars Korea, the Fund and the Bank Group for recent years has been perhaps most dra­ for every dollar disbursed by IFC. their worthy achievements in promoting matically demonstrated in a substantial It is clear that IFC has an important further international economic coopera­ increase in the degree of industrialization, role to play in economic development, tion during the past years. Before talking, with the share of the secondary industries acting as a catalyst for reluctant private however, on subjects of common interest, in the fast-growing GNP rising from 18 investment. I hope the Corporation will I would first like to join with my fellow per cent in 1961 to 25 per cent in 1966. not be afraid to expand its staff in order Governors in welcoming The Gambia to In the external sector, too, we have to undertake the important task of the our fraternity of membership in the Fund achieved remarkable results. Our mer­ identification and the assessment of via­ and the Bank Group and to the Governor chandise exports which amounted to only bility of projects. The expertise required for Indonesia in honor of Indonesia's re­ $41 million as recently as in 1961, rose to to identify private investment projects is sumption of membership in this fraternity. $250 million in 1966, the increase in 1966 perhaps one of a particular shortage. In Also, I am very happy to join with the alone being 43 per cent. Encouraged by this connection I should perhaps men­ honorable delegates who have paid such this result, and also as an important ele­ tion, as a general point, that it is not well-deserved tributes to our Brazilian ment in our economic stabilization pro-

38 gram, my Government has been pursuing of aid from the developed countries to the a bold policy of increasingly opening our developing countries has been decreasing doors for imports from all friendly coun­ relative to the growth rate of their national Liberia: The Hon. J. MILTON WEEKS tries. Especially rapid strides have been incomes. Hence, it would not be inapprop­ Governor of the Bank and Fund taken in this connection during the cur­ riate for me to recall here a UN Resolution Mr. Chairman, as we approach the end rent year as evidenced by the recent trade passed in 1960 that requested the de­ of our deliberations permit me on behalf liberalization measures through the adop­ veloped countries to allocate at least one of my Delegation to join all those who be­ tion on July 25 of a new negative list per cent of their annual national income strode this rostrum before me to express system under which only a relatively lim­ for giving aid to the developing countries. our sincere appreciation to the President, ited number of import and export items Of particular interest in this context to Government and people of Brazil for the still remain prohibited or restricted. all of us in the developing countries are Furthermore, Korea has actively sought to privilege of holding our Annual Meetings the activities of the international financial implement an increasingly rigorous finan­ in this great and historic city. institutions which, I sincerely believe, can cial stabilization program in close collabo­ We are now approaching the end of our provide us perhaps the most suitable ration with the Fund, which, along with deliberations. The words addressed to us forms of both short-term and long-term the rapid increase in our export earnings by His Excellency the President of Brazil development assistance.... and steadily enlarging net inflow of foreign at the beginning of our Meeting have re­ ... Also, in view of the shortage of re­ capital, has imparted to our exchange rate mained a constant source of inspiration sources that is now increasingly being a remarkable degree of stability since and wisdom. I join those who have pre­ experienced by the Bank Group, espe­ 1965. ceded me on this rostrum to thank the cially IDA, an appropriate formula should We in Korea, however, fully recognize President not only for his timely encour­ be speedily evolved to increase their re­ that all our economic progress hitherto agement to us but also for the splendid and plans for development hereafter will sources. I have followed with keen interest arrangements made by the Brazilian Gov­ be largely nullified unless we are able to the recent discussions among the Part I ernment to facilitate our meetings and en­ control our population growth rate. This countries about the replenishment of IDA's sure our comfort. growth rate is still high, but thanks to a meager resources and hope that this For me, coming from Liberia which vigorous family planning program that we would soon be followed by concrete pro­ looks directly across the ocean to Brazil, launched some years ago to coincide with posals that are acceptable to both the I have been tremendously impressed with the inauguration of our First Five-Year industrialized and the developing coun­ the level of development in this country. Plan, the growth rate has already regis­ tries. In this regard, may I suggest that This city and its people have received tered a noticeable decline from 2.9 per the Governors should consider the advisa­ us with open arms and a warm heart. No cent in 1961 to 2.5 per cent in 1966. But bility of calling for a general increase in effort has been spared to make our stay we realize fully that this is only the begin­ the subscriptions to IDA by all its here enjoyable and memorable. We shall ning and are convinced of the need for a members. leave Rio full of praise of the warm hospi­ further sharp decrease in this rate. Conse­ Finally, I take this opportunity to extend tality of its people and eager to return to quently, our new Second Five-Year Plan, my Government's sincere gratitude to our continue to discover more of its charm which commenced this year, calls for a fellow Governors for approving the in­ and beauty. sustained further drive in this respect with crease in Korea's Fund quota, and to It is also a pleasure for me to extend a view to bringing down the population convey our thanks to the member coun­ a warm word of welcome to The Gambia growth rate to even below 2 per cent by tries that are now participating in the which is meeting with us for the first time, the end of the Plan. We are confident that Bank Consultative Group for Korea. and we look forward to an early admis­ we shall attain this goal with the adoption In concluding my remarks, may I add sion date when Lesotho and Botswana of all the necessary measures on our part that in meeting the challenge of attaining will have completed their membership in and with appropriate technical and other a self-sustaining and satisfactory rate of the Fund and Bank Group. We are also assistance from the concerned interna­ glad that Indonesia has resumed its seat economic growth in all the countries, mil­ tional organizations in this field. among us. lions of the people must, during the years Although Korea has made such good The more universal our institutions be­ ahead, undergo such changes in our ways progress in both the internal and external come the more strengthened they will be of thinking and modes of living as men in sectors in the past few years, we are still in achieving their objectives. in great need of further sizable external former times have never known. In this It is also my privilege to extend con­ development assistance. In this connec­ task, we as Governors of these Bretton gratulations to the President of the Bank tion, please permit me to draw your atten­ Woods Institutions have a continuing obli­ Group and the Managing Director of the tion to the pressing problem that is gation to help focus the world's attention Fund and their respective staffs for the currently facing the world, namely, the on the need for the pursuit of sound na­ comprehensive reports which they have widening gap in economic prosperity be­ tional and international monetary and ex­ submitted for the consideration of the tween the developed and the developing ternal payments policies, and I am Boards of Governors. We are certainly en­ countries, even during this so-called "De­ confident that we shall discharge this couraged by the deep awarendSS on the velopment Decade." It is regrettable, obligation honorably at this historic part of the Fund and Bank Group of the therefore, that in recent years, the scale meeting. basic problems of the world economy. 39 Speaking as the representative of a acceleration and deceleration in the mo­ cessful operations over the past twenty­ developing country, I am particularly grat­ mentum of economic activity in the indus­ two years, I find myself faced with a meas­ ified by the increasing emphasis in the trialized countries have had serious effects ure of uneasiness in respect of this faculty Reports of our institutions on the inter­ on the flow of public and private capital of the Bank-that is to say, its mandate relationship, indeed the very close inter­ from the developed to the developing to stay out of politics. relationship, between the developed and countries in addition to the hardening of If the command to the Bank to stay out the less developed countries. It cannot be the terms of development loans in recent of politics is interpreted as meaning that emphasized too strongly that the only years. Actually, the flow of private capital it should not interfere in the internal affairs hope for success of the universal develop­ to developing countries declined consid­ of its members, or that its financing de­ ment effort will be through the exercise of cisions should not be based solely, or even erably from 1965 to 1966. a full and satisfactory partnership in fact principally, upon political considerations, Probably the most significant effects of as well as in name based on mutual appre­ then my uneasiness is allayed. economic fluctuations in the industrialized ciation of the problems of all parties. The Bank is, and must of necessity re­ countries on the developing countries have In both the Fund and the Bank Reports, main, an international financial institution one notes the cyclical trend in economic been the drastic fall in primary commod­ of the highest standing and repute. In­ activity in the industrialized countries in ity prices. The Bank Report observes that: deed, it is the obligation of the Bank's the period 1965 to 1967, and the policies "The deceleration of growth of the world management and of its member countries which have been adopted by most of these economy since the middle of 1966 has to ensure that this characteristic of the countries to offset inflationary and defla­ adversely affected demand for most pri­ Bank remains untarnished, since this is a tionary forces, and correct the resulting mary commodities." In Liberia we have pracondition of this ability to acquire the imbalance in their external payments. The been seriously hurt as a result of the fall massive financial resources required for unmistakable lesson gathered from these in prices of our two major export com­ development. Economic considerations experiences is that there has been a modities-iron ore and rubber-resulting must, therefore, be the keystone of the greater reliance by the industrialized in a disturbing aggravation of our budget­ evaluation of projects eligible for Bank countries on monetary policy rather than ary and balance of payments problems .... financing. fiscal policy to solve their internal eco­ ... The President of the Bank, Mr. On the other hand, the Bank's clients nomic problems. A direct consequence of George Woods, said in an article in the are its member governments which are this policy bias has been a regime of high January 1966 issue of Foreign Affairs: " ... also its shareholders. While we agree that, interest rates which prevailed, more or one is bound to wonder when the fine in making decisions on development pri­ less, throughout 1966 and into 1967. sentiments so eloquently and often ex­ orities, economic considerations must be The Bank Report records that: "By mid- pressed by leaders in all industrial nations heavily weighted, I should observe that it 1966 interest rates in major financial mar­ will give way to positive action to help is not unusual for Governments to take kets had reached their highest levels since raise the living standards of developing political considerations as well into ac­ the 1920s despite continued high levels countries at a much faster rate. For how count in making such decisions. In the of savings in the industrial countries.... long can the industrial nations justify the few years of my experience with the prac­ As economic activity slackened in the relatively low place that development tical operations of the Bank, I have been second half of 1966, monetary policy be­ finance has hitherto been accorded in impressed with the emphasis on economic came less restrictive. Interest rates de­ their list of priorities?" Elsewhere in the justification for projects eligible for Bank clined by the end of the year in most capi­ same article he stated that "unless the financing; this is indeed a healthy empha­ tal markets, but by mid-1967 they had Development Decade ... receives greater sis. But, I have also been disturbed at risen again to well above the level prevail­ sustenance, it may, in fact, recede into times by the apparent lack of apprecia­ ing since the 1920s. The higher interest history as a decade of disappointment." tion of the political element in economic rates considerably increased the cost of In a world where economic nationalism decision making. capital for international development in­ is re-emerging strongly and, in conse­ Another aspect of the problem is that stitutions and for the few developing coun­ quence, is persuading some political lead­ too often development projects are unduly tries which borrowed in external capital ers to look increasingly inward, it appears delayed because of the overemphasis on markets." I might add that this phenome­ that these truths are being pushed economic justification based upon precise non increased the cost of capital also to aside .... statistical data which in developing coun­ the developing countries, which did not ... Now a word about the very pertinent tries are often inadequate and sometimes borrow directly in external capital mar­ remarks contained in the preface of the even nonexistent. Such delays very often kets. It can readily be seen that the high Annual Report of the Bank. Of the three have repercussions on political stability. cost of borrowing imposes a tremendous faculties mentioned in the preface with In my experience, I am convinced that strain on developing countries, such as which the Bank was endowed by its found­ there is a kind of local educated instinct mine, which are already saddled with ers, it is stated that one was the command which even in the absence of statistics heavy debt service burdens. In our case, to the Bank to base its operations on eco­ suggests certain lines of action which the debt service presently represents more nomic factors and to stay out of politics. professional expert from outside can never than 20 per cent of total revenues. While I agree that these endowments are understand. I could cite numerous ex­ The Fund and Bank Reports reveal, "priceless gifts" of the Bank's Charter and amples where our instinct has proved moreover, that the oscillations between have indeed provided the basis for its suc- correct as against the evaluation of the 40 outside professional expert. The pace of suffice. If the developed world is to dem­ ices of these two dedicated men and their technological and political change has, in onstrate to the millions of impoverished staffs, whose efficiency and diligence has both worlds-the developed and the de­ people all the world over, the correctness impressed most of us. veloping-brought with it problems that of its basic approach to the solution of the I would also wish to welcome the rep­ cannot be solved by conventional or out­ problems of underdevelopment, then the resentatives of Indonesia, who have re­ moded tools. developed world will have to ensure that joined the Bank and the representative of Returning to the problem of interna­ the flow of finance to the developing world The Gambia, who have recently joined us. tional liquidity, it is only human to take regains its momentum. In this context, we I also welcome the indications of Bot­ the attitude that charity begins at home. join in the appeal to the industrialized swana and Lesotho to join this world body. However, if such an attitude prevails in countries for their favorable consideration Many speakers have touched on all the the developed world, the problems of the important monetary and economic prob­ of the proposal of the President of the developing world will not only become lems confronting this meeting. Without World Bank Group for appropriate replen­ more intransigent but may well compound wasting much of your time, I would like ishment of IDA resources. We are pleased the problems of the developed world. In to dwell on a few of these, if only to under­ to note that there is general consensus on the absence of adequate foreign financial line and endorse those views which affect assistance and in the face of deteriorating the need for such replenishment, and we my country more .... terms of trade and heavy debt service bur­ hope that the level proposed by Mr. Woods ... Now I would like to refer briefly to dens, we cannot solve our problems alone. will be realized. the question of the replenishment of IDA. We consider that the developed world We heartily welcome the initiative taken As one of the developing countries that must also have a vested interest in the by the Bank in promoting the establish­ can least afford loans on conventional health of the developing world. ment of the International Centre for Set­ terms, Malawi is deeply concerned at the The situation that confronts my coun­ tlement of Investment Disputes as we are possibility that the replenishment of IDA try is probably similar to that of most other persuaded that this machinery will facili­ will be either inadequate or tied to pro­ developing countries. In the absence of tate the flow of private capital to develop­ curement or delayed. It is regrettable that more acceptable forms of development ing countries. Although Liberia has signed the normal functioning of the Associa­ financing, we were obliged to accept large the Convention, it has not yet been ratified tion may be interrupted by these delays. debt obligations on very onerous terms. by Legislature but we expect that ratifica­ Malawi welcomes the views of those de­ We have, however, learned a painful les­ tion will take place in the near future. veloped countries which have indicated son. As the upward investment spurt pe­ In closing, Mr. Chairman, I want to say readiness to support such replenishment. tered out and world market prices for our that we have been satisfied with the man­ In conclusion, I would like to say one main export commodities turned sharply ner in which our meetings have been or two words regarding the operations of downward, we were faced with great dif­ conducted and on behalf of myself and my the Bank and the Fund. My country has ficulties and were forced to seek some Delegation, I wish to congratulate you on benefited greatly from the advice given alleviation of our debt obligations. At the your able leadership. by missions sent to it under the auspices same time we drastically trimmed our de­ of these two organizations from time to Velopment efforts and imposed harsh tax time. These visits have proved useful. - -~"------~---- measures on our people. We undertook, However, I would like to suggest that, in furthermore, to foreswear less desirable future, an attempt should be made by both Malawi: The Hon. J. Z. U. TEMBO forms of financing. We do not complain the Bank and the Fund to coordinate gen­ Governor of the Bank and Fund at having done these things even though eral economic missions by sending jOint it has entailed greater hardship than would I wish to join my friends in expressing teams and jOint questionnaires. It would be tolerated, or even dreamed of, in indus­ our gratitude to the President, the Gov­ also be of great help if questionnaires trialized countries, e.g., a lower level of ernment and the people of the Republic could be sent well in advance and could follow a standard form, the answers to domestic activity and higher consumer of Brazil for the warm welcome which which could be updated from year to year. prices combined with a virtual freeze on they have accorded us. For the first time, In this way, there could be a very consider­ wages and salaries in the public sector. we are meeting in the Southern Hemis­ able saving in time of our own officials. If one is realistic, one should ask oneself phere, and in a country which, like my own, falls under the category of under­ for how long can one convince one's peo­ developed. For this reason, this particular ple of the merits of financial orthodoxy session assumes greater significance. It when one's only prospect, in the absence helps us to focus our attention, even more of increased primary commodity prices or Malaysia: The Hon. TAN SlEW SIN vividly, on the many serious economic Governor of the Bank and Fund increased foreign assistance, is a further problems now facing the world at large. drastic tightening of the belt. I have also noted with great satisfac­ In the first place, I would like, on behalf The developed countries advocate the tion the Annual Reports presented by Mr. of our Delegation, to express our appre­ pursuit of financial orthodoxy for develop­ Woods, President of the World Bank, and ciation to the Government of Brazil for ing countries. We have a measure of faith Mr. Schweitzer, the Managing Director of the cordial welcome and generous hos­ in the virtues of financial orthodoxy, but the Fund. I welcome these Reports. We pitality extended to us. We meet today in faith alone without good works will not are indeed fortunate in having the serv- this beautiful city of not only a very large

41 country, but a country with a wonderful It may be asked if it is relevant for this trade, we would not need any aid from future, and we hope that that future will gathering to refer to the questions of anybody, because the difference between be as good as what its people wish it to be. freight rates and GATT rules, but I sub­ what we actually received and what we I would also like, if I may, to congratu­ mit that both these questions are only should have received, was 63,4 times the late Mr. George Woods, the President of other facets of the general problem of amount of official net loans and grants or the Bank, for his inspiring and illuminating assisting the economic growth of the de­ more than 3V2 times the inflow of both address. The statement which we were veloping countries, the primary purpose private and official long-term capital dur­ privileged to hear from him on the open­ for which the World Bank itself has been ing this period. In fact, not only would we ing day of this session is typical of his established, and these matters are, there­ not require any aid from anybody, we farsighted and imaginative but practical fore, entirely relevant to our present dis­ would be in a position to give aid to outlook. Although he will be leaving us cussion. They are relevant, because if fair others, and this brings me to the main in the not too distant future we hope that terms of trade could be extended to the theme of my statement. the policies which he has initiated and developing countries, we could probably Before I deal with it, I would, however, maintained will be continued by his suc­ wind up the World Bank in the foresee­ like to go back a little into the history of cessor, whoever he may be .... able future. the World Bank, or to give it its full name, ... At past meetings, I have constantly I shall now take the case of my own the International Bank for Reconstruction referred to a basic problem of the develop­ country, viz., Malaysia, as an example to and Development. It will be remembered ing world, viz., the need to secure fair illustrate my point. Between 1960 and that this institution was founded after the terms of trade, our chief disability being 1966, the unit value of Malaysia's natural end of the Second World War for the pri­ that we are paid less and less for what we rubber exports, our most important export mary purpose of helping in the recon­ largely export, i.e., primary commodities, commodity, fell by about 38 per cent from struction of the shattered economies of a while having to pay more and more for an average of US 35 cents a pound to an Europe ravaged by war. When this task what we largely import, i.e., manufactured average of US 21 cents a pound. Since was completed, the Bank turned its atten­ goods. Secondly, freight rates of the ship­ then, the price has fallen further and only tion to the developing countries. Its task ping companies, and the overwhelming a little while ago, touched a level of US in this field grew with the years as the bulk of such ships is owned and controlled 15 cents per pound, its lowest price in 18 number of such countries which became by the industrial countries, are heavily years. Although the volume of rubber ex­ independent also grew steadily as a result loaded against both the exports and im­ ports expected for 1967 is estimated to of the retreat of Western colonialism from ports of the developing world, though some be about 26 per cent higher than that ex­ Asia and Africa. It is, therefore, clear that are discriminated against more heavily ported in 1960, estimated export earnings the primary objective of the World Bank than others. Thi rdly, the manufactured for this year will probably amount to only should be to do its work in such a way goods of the developing world are all too about two-thirds of the sum received in that it is eventually no longer required. often denied reasonable terms of access 1960. I need hardly add that the prices of In other words, its success will be judged into the industrial countries. It is becom­ manufactured goods which have to be im­ by its ability to render itself no longer ing increasingly clear that the principles ported by us have steadily risen, or that necessary. In order to achieve this, how­ of GATT are being implemented in such the terms of trade have equally, steadily ever, it should lay greater emphasis than a way that GATT has become a club run and correspondingly deteriorated. Since it has hitherto done on the basic problems by the rich for the benefit of the rich. 1960, the foreign exchange loss incurred of the developing world. At the moment, Although GATT rules permit the estab­ by Malaysia as a result of falling com­ it is fair to say that the bulk of its energies lishment of free trade areas and customs modity prices has been of the order of is concentrated on the giving of financial unions, such as the European Economic US$1,807 million which represents more aid for economic projects, though recently Community, such arrangements are, by than 57 per cent of our estimated gross such aid has been extended to include their very nature, more suited to condi­ national product for 1967, or nearly 1 V2 educational projects which were not re­ tions in developed countries. On the other times the country's gross estimated export garded as economic projects in the strict hand, any proposal to introduce new pref­ receipts for 1967, or 63/4 times the amount technical sense until a few years ago. erential duties in favor of the less devel­ of official net loans and grants received The Bank should, therefore, bear in oped nations, such as those adopted by during the period 1961-1966, or more than mind that mere project financing is only the Australian Government with effect 3V2 times the inflow of both private and a palliative and at the moment it is treat­ from April 12, 1966, requires a specific official long-term capital during this same ing only the symptoms rather than the waiver of the provisions of GATT forbid­ period. causes of the disease. The basic causes ding the creation of new preferences. To illustrate my point further, I might are, as I have stated already, three in num­ While it is not suggested that there was add that a drop of one Malaysian cent in ber, viz., (a) uneconomic prices for pri­ any undue delay in the granting of the the price of natural rubber over a period mary commodities, (b) excessive freight waiver by the Contracting Parties on that of one year results in an annual loss of rates for the goods of the developing occasion, we in the developing world nearly US$7 million in export earnings. world, both exports and imports, and (c) urge that the GATT rules should be modi­ One can come to the valid conclusion difficult terms of entry into the industrial fied in such a way as to facilitate such from the figures which I have given that countries for the manufactured products arrangements. if Malaysia had been given fair terms of of the developing world. I am, of course,

42 aware that at least two of these subjects not likely to be reversed as long as the are being studied by bodies sponsored by developed countries do not liberalize their the United Nations, but one cannot help Nepal: The Rt. Hon. KIRTI NIDHI BISTA existing policies and practices regarding feeling that the Bank and Fund would be Governor of the Bank imports. In view of the technological revo­ the most appropriate institutions not only First of all I would like to associate my­ lution taking place in the developed coun­ for the study of these subjects but for the self with the previous speakers in express­ tries, synthetic raw materials are gradually implementation of schemes which such ing our sincere thanks to our hosts, the replacing many of the farm and forest studies could well produce. Government and the people of Brazil for products. Such countries have also been Though the United Nations was asked the warm welcome extended to us. We are expanding their own raw material base so to take over these tricky subjects, it is also indebted to H. E. the President of as to be less dependent on imports. Unless clear that this body does not possess Brazil for the inaugural speech which has the developed countries show greater the financial resources to implement any set the tone for our discussions. May I sympathy and extend more cooperation to scheme, however soundly conceived, also take this opportunity to welcome, on the less developed world, not only in re­ which could tackle the root of the prob­ behalf of my Delegation, the Governors for spect of aid but also with regard to trade lem. On the other hand, the Bank and Indonesia and The Gambia and also the and capital flow, the prospects of this re­ Fund are the only two institutions in the representatives of Botswana. gion's coming up to economic maturity world which have the resources to imple­ We have read with considerable inter­ look bleak. I would, therefore, like to sup­ ment sound and viable schemes, however est the Annual Reports of the Fund and port the views expressed by the Managing vast such schemes might be, so long as the Bank. These Reports, as usual, give Director of the Fund in his statement the will to help is there. These two insti­ us a very useful review of developments that the industrial countries should im­ tutions can also act expeditiously because in the world economy and in international prove the access to their markets of goods five or six of the largest industrial coun­ financial affairs and provide us with de­ produced in the developing countries and tries between them represent more than tailed records of the Fund's and the World that they accord high priority to the flow 50 per cent of the total voting power. The Bank Group's activities of the past fiscal of development assistance. apparent unwillingness of the Bank and year. It is disheartening to note that per I need not pOint out the significance of Fund to tackle the basic problems of the capita income in a large number of de­ the flow of funds from the developed to developing countries will inevitably give veloping countries rose only slightly or the underdeveloped areas, but what I rise to a growing belief in the developing declined in the first half of the present would like to stress is the need to main­ world that the Bank is not really interested decade and the situation further worsened tain a minimum rate of flow of such funds in the basic reconstruction and develop­ during 1966 and 1967 because of the re­ to these areas if the underdeveloped coun­ ment of Asia and Africa as it originally cent weakening in the export receipts of tries are to achieve the targets set by the was with the reconstruction and develop­ the less developed countries. From the Development Decade. While we in Asia ment of war-torn Europe. This would be a record of economic progress the less de­ have noted with pride the emergence of very great pity indeed, as I have no doubt veloped countries have achieved in the the Asian Development Bank during the that the good intentions of the Bank are past six years, it is almost definite that the last year, the international flow of funds in beyond question. Treating the symptoms target of economic growth set for the general, seems to be stagnating, espe­ of a disease rather than its basic causes Development Decade is not going to be cially at a period when the need for such might, however, largely nullify the entire fulfilled. It has often been stressed that de­ funds has been growing. What I would work of the Bank in the long term, pro­ veloping countries should make all efforts like to state is the need for planning the digious and dedicated though its efforts to mobilize domestic resources before rate of flow of funds to the less developed have been in its present field of endeavor. they look for external assistance. This is areas in view of their requirements and We in Malaysia, therefore, warmly wel­ no doubt true, but whatever steps we may the exploring of the means by which it come the resolutions to be put forward by take, internal resources are likely to be can be achieved. I hope in planning and a number of countries urging the Bank and very modest in relation to the investment coordinating the flow of funds to the less Fund to concern themselves directly and requirements necessary to achieve even a developed areas the World Bank can defi­ closely with the question of fair prices for reasonable rate of growth. nitely play an important role. Furthermore, it is a matter of serious primary commodities. We would like to We note with satisfaction that the opera­ concern to the Fund and also to other in­ congratulate them on their initiative and tions of the World Bank Group continued ternational bodies interested in the growth to grow during the year under review. Dis­ we hope that the Bank and Fund will re­ of trade volume between the developed bursements of the Group exceeded a bil­ spond suitably and spiritedly to the chal­ and the less developed countries to note lion dollars and the Group has entered lenge which has been presented to them. that the total exports of countries de­ into more numerous and varied transac­ That response could well signify the be­ pendent mainly on agricultural products tions than ever before. However, there are ginning of a new era in the history of these increased only moderately from 1965 to still a number of developing countries, illustrious institutions and open up a new 1966, while the prices of commodities that including my own, which have not had vista of hope for the developing world. In they generally import continued to rise financial assistance from the Bank Group. the process the shadows of today would and, therefore, there was scarcely any in­ Let me now turn briefly to the develop­ be lifted and make way for the promise crease in the import purchasing power of ment problem of my own country. In spite and fulfillment of tomorrow. this large group of countries. This trend is of our pressing needs to expedite the pace

43 of development, we, like others, are fac­ our efforts and cooperation toward step­ Moreover, under a multilateral scheme ing formidable barriers of shortage of ping up world economic development. The which is the very nature of IDA, there can capital and know-how. Our own efforts to record of past performance, as Mr. Woods be no question that procurement should mobilize resources within our borders pointed out, shows gratifying progress in be untied and subject to free international have been rewarding yet we are nowhere a number of countries, but the fact re­ competition. near meeting our needs. We look upon the mains that there are still large areas in the There is an additional pOint which I World Bank and its Affiliates for guidance world where the economic growth rate is would like to stress. Development assist­ and assistance. However, we are dis­ disappointing and exceeds only by a slight ance is a long-term process that will lose tressed that there appears to be continued margin the rate of population increase. much of its usefulness if it lacks continu­ indifference on the part of these agencies This has various causes but there is no ity. Uncertainty defeats efficient planning to assist us. We are aware of the difficul­ doubt that shortage of external finance on and interruptions are damaging to the ties the Bank is facing in raising adequate appropriate terms is a most important one realization of balanced growth. For that which calls for our special attention. reason multi-annual commitments are funds and of the shortage of IDA re­ Although the Bank Group's contribu­ highly desirable. In the case of IDA we sources. Yet we hope that our needs are tion to last year's development financing feel that a replenishment for three years is worthy of greater attention by the staff in amounted to more than $1 billion, it is the minimum and we would favor tranches the future .... generally agreed that this is not a satis­ that are gradually increased each year . . . . To conclude, the healthy trend factory target for the years to come. Each It causes my Government great concern started by the Bank and the Fund of giv­ of our institutions should continue to grow that IDA's replenishment has run into con­ ing special consideration to the needs of in terms of the volume of its specific siderable delay and that the Executive the developing countries is in keeping operations. However, while the greatest Board has already been forced to slow with their needs. There is no doubt that need is for an expansion of IDA assist­ down the rate of new commitments of IDA these two institutions are being looked at ance, the Association has run out of funds. funds at a time when the number of proj­ by all member countries, especially the I am convinced that the main topic of con­ ects in member countries qualifying for developing ones, as their friend and guide cern with which most, if not all of us, have IDA financing is increasing rapidly and the in the fields of monetary, fiscal and de­ come to this Rio conference, is the prob­ foreign debt service burden of several velopmental problems. lem of IDA's early replenishment. members is setting definite limits to addi­ My Government finds it a cause for great tional Bank lending on conventional terms. regret that Mr. Woods' last year's pro­ It is a warning signal to be observed that ------~---.-- posal for IDA's replenishment has not met the need for a rescheduling of foreign debt with more ready response and that in the obligations, which in the past used to be Netherlands: The Han. H. J. WITTEVEEN discussions about this subject with indi­ confined to accumulations of short- and Governor of the Bank vidual Part I countries, difficulties have medium-term commercial debts, is now First of all I want to join other Gover­ arisen which seem to be rooted in certain creeping up so as to embrace, though still nors in thanking our Brazilian hosts for misconceptions of what we consider to be in exceptional cases, the amortization of having invited us to this beautiful city so the right approach to official development long-term development loans. It is rather bursting with life and energy, and for the assistance in general and to such assist­ unlikely that the Bank will be immune gracious hospitality which abounds wher­ ance through IDA in particular. In our from such occurrences, and to the extent ever we go. It is an inspiring and at the opinion the share of participants in de­ that the Bank does get involved, this is same time challenging thought that our velopment assistance and their contribu­ bound to have an unfavorable effect on institutions are meeting here in one of the tions to IDA should be based on their its cash flow. Money-raising problems largest developing countries where major relative economic capability as reflected have already guided the Executive Direc­ achievements go hand in hand with hopes in their national income figures. Once tors in recommending a drastic curtail­ and expectations, within the scope of the agreement has been reached on the total ment of the transfer to IDA of a portion of objectives of both the Bank and Fund, amount, each participant should be ex­ the Bank's net income over the last fiscal which are still awaiting fulfillment. I wish pected to put up his reasonable share and year from $75 million to $10 million. I am the Brazilian Government and the Brazil­ adjust his budget accordingly, and not the fully satisfied that prudence dictated this ian people the greatest success in their other way around. As a matter of prin­ recommendation from the Bank's pOint of energetic striving for progress. ciple the size of each contribution and the view, but at the same time it aggravates It gives my Delegation particular satis­ timing of its disbursement should not be IDA's financial problem and calls for early faction that Indonesia has reassumed conditioned by balance of payments con­ and vigorous action to overcome the ex­ Fund and Bank membership. siderations. Foreign financial assistance isting impasse. I also take pleasure in joining other requires transfers-ultimately transfers of I wonder whether after the long prelimi­ speakers in thanking the Executive Direc­ real resources-and it is an essential fea­ nary discussions that have taken place tors for their very interesting Annual Re­ ture of any foreign aid policy, realistically we have not reached a stage when the ports on last year's activities of the World conceived, to accept the burden thereof on Gordian knot has to be cut. I would like Bank Group and President Woods for his the balance of goods and services, directly to suggest that as soon as possible after impressive address in which he made such or indirectly. That is to say: foreign aid this meeting a special conference be con­ a forceful appeal for an intensification of should not be treated as a residual item. vened of high level representatives of the 44 Part I countries, preferably their responsi­ of Agreement. Cooperation with other Barely three months ago, our seven ble Cabinet Ministers-preceded if neces­ long-term creditors may be useful in this Governments, by a joint decision, com­ sary by one or two meetings of their depu­ respect in order to work out equitable pletely liberalized the external financial ties-for the purpose of reaching a final arrangements, but the Bank should be relations of our States, eliminating all ex­ agreement on the amount and apportion­ cautious not to jeopardize its own high change controls, and leaving subject to ment of the required replenishment of IDA standing in the world's capital markets. authorization only a few investment opera­ funds. This method proved highly suc­ Finally, I would like to state that my tions in order to integrate them better into cessful in the case of the liquidity pro­ Government continues to be interested in our development programs. On this occa­ blem. The step I propose would, in our the preparation and eventual establish­ sion, the moderate exchange taxes pre­ opinion, be the most constructive and most ment of a scheme for multilateral invest­ viously established by three of our States promising response to Mr. Woods' plea ment guarantees, closely associated with were eliminated in conformity with the for a rapid agreement, and at the same the Bank. The announced intention of the International Monetary Fund's wish. time meet the intention of the resolution Executive Di rectors to proceed at an early Our currency, based on the combined adopted by ECOSOC on August 4, with its date with thei r studies of this subject has external reserves of our seven States, appeal to all Governments "to treat the my strong encouragement. managed by a jointly administered Central replenishment of IDA resources to the re­ Bank, and supported by a monetary co­ quired level, as a matter of the utmost -----"------operation agreement concluded with urgency." France, is now completely convertible. I can give the assurance that the Nether­ Niger: The Hon. COURMO BARCOURGNE No exchange restrictions deter the ac­ lands Government is fully prepared, sub­ Governor of the Fund tivities of foreign investors from any coun­ ject of course to parliamentary approval, try. Encouraged also by liberal and non­ to assume a reasonable share in a sub­ Mr. Chairman, in compliance with your stantially higher total amount than has pre­ request that we limit our discussion, I ad­ discriminatory investment codes, investors viously been allocated to IDA. dress myself to you and to our Boards, can find in our country the most favorable I now would like to comment briefly on which you chair with such skill and cour­ conditions for their activities. some problems related more particularly tesy, not only on behalf of the Republic of In an Africa in agitation, in a radically to the Bank. The Bank has to take care of Niger, but also on behalf of the Republics changing world, it gives me pleasure to its own financing and is supported therein of Ivory Coast, Dahomey, Upper Volta, state here that, in spite of everything, our by the high credit standing it has acquired Mauritania, Senegal and Togo, which with States have always fulfilled their obli­ in the capital markets and the confidence my country form the most complete mone­ gations. They have thus provided the in its management. It continues, however, tary union; and it is as Chairman of the stability necessary for the expansion of and today perhaps more than ever, to de­ Board of Directors of our Central Bank investment. pend on the greatest possible coopera­ that I have the honor to speak here. We expect from our membership in the tion and understanding of its member Allow me, first of all, to greet Brazil Fund and Bank and from strict observance Governments. The Bank's borrowing in warmly and to thank it for its magnificent of their principles, not intellectual satis­ the creditor countries is subject to official welcome. We are particularly happy to be factions, but tangible assistance for the approval which is not always easily ob­ received in this great country where so development of our economies. tained in view of competing demands for many West Africans among us here find Year after year, we have heard elo­ capital in markets that generally have be­ once more, on the other side of the ocean quent assertions at these meetings of the come tight. Here the Bank deserves a and after centuries, the men, the tongues, need for nations, all nations to try to bal­ treatment commensurate with its impor­ the gods, and the rhythms of their ance their external payments so as not to tance, and a reasonable assessment of countries. prejudice the operation of the international what each market is capable of contribut­ Among the new members of our Meet­ monetary system. We shall approve the ing. I trust that in the course of the coming ing, there is one, The Gambia, that we creation of new facilities to benefit coun­ year it will be possible for the Bank to are particularly happy to find here at our tries whose behavior has or will have ren­ come also to the Netherlands capital dered their international financial rela­ side. market. Debtor countries, on the other tions difficult. Our countries of the West You have allowed us to anticipate the hand, should be aware of the fact that the African Monetary Union, in assuring the forthcoming membership of two other Afri­ Bank, not having unlimited resources at equilibrium of their external payments, its disposal, may have to become more can countries, and we express our pleas­ will not be in a position to profit from these selective in various respects, and since it ure in advance at this. new arrangements. Once more, we shall has to pay higher rates for the money it The West African Monetary Union has have to content ourselves with being satis­ borrows, may have to adjust its own lend­ always shown great eagerness to partici­ fied with the satisfaction of others. ing conditions accordingly. With respect pate fully in the activity of international Just before we came to this Meeting, to debtor countries facing serious pay­ institutions. Thus, our signatures were we balanced our accounts. We found that ments difficulties, it may be expected that among the first to be affixed to the Con­ our seven States have, in the five years the Bank shall assist, in case of need, in vention for the Settlement of Investment of their participation in the international finding for its part appropriate solutions Disputes, and of the 36 States to ratify it, financial institutions, paid to them in con­ along the lines provided for in the Articles seven are members of our Union. vertible currencies an amount almost equal

45 to that actually disbursed on our behalf aging Director of the Fund, authorizes us the long struggle for independence, has by these institutions. It is true that the to look forward to it with the following rejected as unworkable. The collapse of obligations recently contracted on behalf statement, made a short time ago, which the first Military Government in July 1966, of our countries by the Bank and its affili­ he allows me to quote: was a direct reaction to the extreme cen­ ates will soon reverse this situation. We "An outstanding lesson of both the Ken­ tralization imposed on the country by a have been able to note, however, how nedy Round and the liquidity negotiations group of men who had no public support. right you were, Mr. Chairman, in empha­ is that the most difficult problems of trade Since then, the country has returned to a sizing the slowness of the process, and we and finance can be resolved provided that federal system based on equality of oppor­ would add, procedures, of development. the will exists." tunity for all the ethnic groups who desire, Your remarkable opening address would and are able economically, to have a state have the most salutary effect if it finally of their own within a Nigerian Federation. led to recognition by this Meeting of the The armed conflict actually started when need to give priority to ways in which ade­ certain members of a tribal group, out of Nigeria: The Hon. A. A. ATTA quate aid could be provided for the de­ about 240, refused to accept the federal Governor of the Bank velopment of our countries. system of Government. This tribal group There is no other way of doing this than I would like to join my fellow Governors has, within a period of five months, from to allow the developing countries to draw in the glowing tributes paid to the Presi­ January 1966, shifted from a position of the optimum profit from their present ac­ dent and the people of Brazil for their hos­ extreme centralization to extreme decen­ tivities, according to their present possi­ pitality, to you, Mr. Chairman, for your tralization which would mean the break­ bilities. Such aid can be rendered to them address and wise counsel and the able ing up of Nigeria into four countries, each at the least cost by appropriate commod­ manner in which you have handled this quite autonomous in every respect and ity agreements covering the principal agri­ large assembly, and lastly, to the President having no authority whatsoever at the cen­ cultural or mining products which now of the Bank and the Managing Director of tre. The Federal Military Government re­ provide the essential part of the foreign the Fund for their untiring efforts to achieve gards the rebels' proposal as unworkable exchange earnings of the countries all of the aims and objectives of the Bank and in the modern world and as a negation of us here wish to aid. the Fund, as illustrated both in their ad­ the spectacular progress made hitherto, Our colleague, the Governor for Malay­ dresses and Annual Reports. and the growing bond of oneness which sia, has shown us so well the need for a Coming back to this country, Nigeria's has been evolved since 1914. In short, the commodity agreement for his country's historical connection with Brazil is well war has come about because most Nige­ principal export that it seems useless for known, and dates back to nearly a century rians believe that the rebels' case would me to repeat it here with reference to our ago when a group of Brazilians of Nigerian offer neither political stability nor mean­ countries. origin returned to take part in the early ingful economic future for our people. Such agreements would impart to the development of our commerce and indus­ Despite the upheaval and the uncertain­ flow of financial resources available to try. Today, the legacy of these pioneers ties created by the crisis, it is gratifying our countries the regularity necessary for is seen everywhere in the capital city of to state that there has been continuing their efficient use, as Mr. Woods requested Lagos, which has its "Brazilians Quarters", economic progress in Nigeria. The rate of at the start of our meeting. with characteristic Brazilian architecture, economic growth in 1966 was even a little Therefore a study should be made of monuments and way of life. faster than the year before, and the public the stabilization of commodity prices at I will now comment briefly on the Nige­ sector continues to achieve a healthy cur­ remunerative levels by establishing ap­ rian political situation. Strife and political rent revenue surplus for the financing of propriate arrangements calling for bal­ disorder have put Nigeria in the news since development. A trade surplus of the mag­ anced obligations on the part of both the January 1966. Many delegates, I have no nitude of £27 million was recorded in 1966. producer and the consumer countries, doubt, would be wondering why such a The production of primary export com­ and the necessary resources should be potentially rich country, with a great future modities and minerals was higher than the allocated to it. and opportunity to raise the living standard year before. The crisis had, however, af­ This is the purpose of the resolution of its people should find itself in strife and fected the inflow of foreign capital, but in which the Governors for the 15 African, civil war. The fact of the matter is that the main the setbacks currently experi­ French and Malagasy countries, assem­ most Nigerians passionately desire peace, enced in our economy are not of struc­ bled last week in Dakar under the chair­ which they regard as a precondition for tural nature, and will be removed as soon manship of the Minister of Finance of the economic development and progress. But as normalcy is restored by the Federal Republic of Senegal, agreed to submit for war has to be fought in order to estab­ Military Government. This will not be far approval at our present Meeting. lish peace. The war was brought about by from now. We wish to be sure that in the new a few ambitious men belonging to one of I now turn to the operation of the World study requested of them the Executive the major ethnic groups who, in the early Bank G roup for the financial year 1966/67. Boards and staff of the Bank and Fund hours of January 1966, murdered a num­ It is gratifying to note that the encouraging show the same diligence and efficiency ber of political and military leaders other progress which the World Bank Group that they demonstrated in the search for than those of their group, and imposed, made in previous years under its able a solution to the problem of international shortly thereafter, a system of government President, Mr. George Woods, continued liquidity. Mr. Schweitzer, the eminent Man- which every Nigerian leader, throughout during the year 1966/67. Total loan com-

46 mitments, as well as disbursements in the has established a high reputation in the a view to accommodating the needs of the year, increased. But the problem of ade­ world capital market. developing countries. quate flow of development funds to de­ I now turn to the allocation of IDA re­ We note with satisfaction the Bank's in­ veloping countries still remains unsolved sources. During the current fiscal year IDA creased assistance to industry during the and the gap between the "haves" and the made nearly $36 million in development year. We also welcome the first line of "have nots" continues to widen. In this credits to 13 countries-8 in Africa, 3 in credit the Bank has made available to connection, we commend the efforts made Asia and one each in Europe and the West­ IFC. We equally welcome the encouraging by the President to persuade the more ern Hemisphere. Of the total credits, Asia development by which the Bank made its prosperous countries to contribute gen­ benefited to the tune of $246 million; Africa first loan to a government-owned indus­ erously to the replenishment of IDA $199 million; Europe $15 million; and trial enterprise, and we hope that the Bank resources. As one of the developing coun­ Western Hemisphere $2 million. While we will not relax its efforts to increase the tries, we strongly urge the more fortunate do not question the basis of allocation, we flow of its loan funds to publicly owned and more prosperous countries to recog­ hope that the requirements governing the enterprises. We regret, however, that nize that the urgent need of the develop­ distribution of IDA resources will soon be IFC, by its regulations, is precluded from ing countries for soft loans-the type which re-examined and reappraised to enable giving assistance to government-owned IDA offers - has never been greater and more countries, especially in Africa, to development finance companies when it more urgent than now. They should con­ qualify for IDA assistance. is no secret that, in most of the developing tinue to assist IDA so that it can respond The burden of the debt servicing in the countries, development finance companies adequately, as in the past, to the priority developing countries has, in recent years, are publicly-owned and play an important needs of the less developed countries. become a serious problem. The net effect role in financing medium-size enterprises As the Annual Report reveals, there has of the rising debt servicing burden is that, or that, in some cases, such industries are been a consistent increase in the net earn­ today, most developing countries devote eventually handed over to the private sec­ ings of the Bank. We have been told that, substantial parts of their budgets to inter­ tor and to the natives of the country con­ in furtherance of the decision of the Board est payments and loan amortization. To cerned. We urge the World Bank to of Governors in Tokyo in 1964, $50 million alleviate this burden, it is absolutely es­ broaden, in the light of present day devel­ of the net incomes in 1963/64 was trans­ sential that aid-giving countries and or­ opments, the rules and regulations of ferred to IDA, and $75 million, each, in ganizations, including the World Bank, IFC to enable it to playa more effective 1964/65 and 1965/66. It is paradoxical, must take a decisive step toward much role in the economic development of devel­ therefore, that, while there has been an longer repayment moratoria and more lib­ oping countries, especially in fields where appreciable increase in the net earnings eral repayment terms than hitherto. Unless private enterprise has turned its back. of the Bank, particularly in 1966/67, the this is done, economic assistance will be­ One of the factors which have inhibited Board of Governors are being asked to come a fruitless exercise which will fail to the flow of private foreign capital into the approve only a token sum of $10 million achieve tne noble objectives of acceler­ less developed countries has been the to IDA resources. The acceptance of such ated growth. sense of insecurity of investment. It was in a recommendation will impair the ability As I mentioned earlier, service on past order to reduce this risk that Resolution of IDA to increase its level of development official debts, including both interest and No. 174 for the establishment of machinery financing, particularly at a time when the amortization, has adversely affected the for the settlement of investment disputes commendable efforts made by the Presi­ finances of developing countries and has was adopted at the 1962 Annual Meet­ dent to replenish IDA resources by Part I substantially reduced, and in some cases ing. The International Centre for Settle­ countries have not yet come to fruition. In exhausted, the domestic resources avail­ ment of Investment Disputes is now fully our view, the present recommendation is able for development. This, coupled with established and operative. We welcome a contradiction of the efforts which the the almost universal inclination of donor this development and hope that the exist­ President has made and is still making to countries to finance only foreign exchange ence of this machinery will lead to in­ obtain a highest level of replenishment of components of projects, or projects with creased flow of private capital into less IDA resources for the benefit of the poor higher foreign exchange content, has developed countries .... countries. We submit that, on the basis of greatly inhibited the determined develop­ ... Mr. Chairman, I am grateful for the past practice, the annual transfer of funds ment efforts for many developing countries, time allowed me to comment on those vital to IDA should be proportional to the net particularly in Africa. In this connection, issues which affect our common good, and earnings of the Bank, and, at least, should we commend the initiative of the World it is my hope that the world community will normally not fall below the level in a pre­ Bank to finance, subject to certain criteria, approach the problems of economic de­ ceding year. In saying this, we do not over­ part of local costs. We, however, regret velopment and trade with enlightenment. look the reasons given by the President in that not much has been done in this direc­ his speech for the need to strengthen the tion. In order, therefore, to have impact financial position of the Bank. We, how­ on the economies of the developing coun­ ever, are unable to accept the premise tries, and since the World Bank Group that the transfer to IDA resources of at are the most efficient instruments "for Pakistan: The Hon. N. M. UQUAILI least $75 million, out of the net income of long-term cheap ... and untied lending", Governor of the Bank $170 million, will seriously impair the bor­ we urge the Bank to make its requirements By now, so much has been said on the rowing capacity of the Bank now that it for local cost financing more flexible, with various issues confronting the world econ-

47 omy that there is perhaps little new that strain for the developing countries. Any I would suggest that the legacy of the one can add to it, but the problems of the curtailment in the flow of external assist­ unfavorable aid terms, which has assumed developing countries are such that they ance, or downgrading of the aid priorities the form of serious foreign exchange crisis would bear repetition. by the developed countries, will not only in a number of countries, should not be To begin with, may I express the appre­ slow down the current momentum, but dealt with on a selective and individual ciation of my Delegation to the manage­ may also nullify some of their develop­ basis. This problem is of a general nature, ments of the World Bank Group of ment effort made over the last twenty and the solution should be of equally gen­ institutions and the International Monetary years. We realize that some of the highly eral applicability. The World Bank Report Fund on their well-presented Annual Re­ developed countries may have balance of makes a mention of the rescue operations ports. These Reports are known for their payments or budgetary difficulties of their it had to undertake for some countries. comprehensiveness, clarity, and objec­ These are laudable efforts but if only those own. These difficulties are, however, tivity, and bring into sharp focus the basic on the brink are rescued, it may merely largely transitory and should not be al­ problems confronting the developing encourage others to rush to the brink. lowed to distract from the ideal of ensur­ countries, which we have been discussing Countries which so far have managed ing a reasonable standard of life to the in this forum year after year for almost their debt and development problems bet­ two decades now. These Reports bring great mass of humanity inhabiting the ter should not be penalized for doing so. out clearly: that for the sixth successive developing world. I would suggest that the donor countries year, there has been little improvement A matter of equally serious concern to should seriously consider rescheduling in the over-all level of development assist­ the developing countries is the hardening their old loans, as, unless there is both an ance provided by the high income coun­ terms of external assistance in a period improvement in the future loan terms as tries; that the terms on which such of declining levels of such assistance. The well as in their terms of trade, the ines­ assistance has been given have become debt burden of the developing countries capable arithmetic of loans on hard harder and harder; and that the rising has increased over the last decade from terms is sooner or later gOing to catch up debt burden is proving extremely difficult $10 billion in 1956 to over $41 billion by with these countries also. Such resched­ for a number of developing countries to 1966. The annual service charges on this uling arrangements alone, provided they shoulder. debt have risen during the same period are not accompanied by a reduction in The worldwide deteriorating climate of from $800 million to nearly $4,000 million. the quantum of aid or the hardening of foreign assistance is a matter of utmost The rate of increase in debt service loan terms, would substantially increase concern for the developing world. While charges, amounting to about 10 per cent the flow of net real resources to the de­ the developing countries stand at a crucial per annum, is far above the rate of growth veloping countries, and facilitate the or­ stage of their economic development, in the export earnings of the developing derly liquidation of their old debts. I must countries. Currently, of the total gross when they need a much higher flow of make it clear that, in making the plea I external resources than ever for a decisive capital outflow of about $10 billion to the have made for rescheduling of external developing countries, as much as 40 per push toward the much cherished goal of debts, I do not have the particular interests cent goes back to the developed world self-sustaining growth, they are faced of my own country in mind. Pakistan's in the form of debt repayments. Taken with reduced availability of aid funds the economy during our Second Plan and in together with the rise in prices of capital world over. The high income countries the first two years of our Third Five Year equipment and other aid imports, the net seem to be getting impatient with, or tired Plan, despite natural calamities and fac­ inflow of foreign assistance in real terms of, the aid requirements of the developing tors beyond our control, has, as Mr. Woods is even lower than that indicated by these world. The need for economic assistance was kind enough to mention, done reason­ figures. ably well. I am making this plea as one is no longer looked upon with the sym­ This is a dangerous trend, and we of the many representatives of the devel­ pathy and understanding that character­ should take serious note of it, if the decade ized the start of the Development Decade. of the 1970s is not to become a period of oping countries, to all of whom I am sure This situation, which was so ably analyzed large-scale defaults. It is imperative that the burden of growing debt repayments is by the President of the World Bank in his foreign aid and loans should be made a matter of deep concern. address, is a sad development for the available on much softer terms than those In this context it is unfortunate that the world at large, and for the developing prevailing at present. The international question of the replenishment of IDA re­ countries in particular. We ourselves are community owes this obligation to itself sources has been pending for so long, keen to reduce our dependence on foreign and to the developing world. We were despite the valiant efforts of the President economic assistance as quickly as possi­ glad to note last year that the Develop­ of the World Bank. IDA was the one insti­ ble. The World Bank Report acknowledges ment Assistance Committee of the OECD tution which, by providing untied loans on that the developing countries as a group had called upon its members to improve concessional terms, was easing the over­ provide about four fifths of the finance the terms of their assistance and sug­ all impact of the debt burden of developing for their own development. Knowing as gested a minimum period of 25 years for countries. But the funds of IDA are now you all do the per capita income of these repayment and a maximum 3 per cent in­ exhausted, and their replenishment is still countries and their marginal propensity terest rate. Except for one or two coun­ nowhere in sight. My Government spon­ to save, the mobilization of resources on tries, these recommendations have yet to sored a resolution at the recent meeting such a scale already involves a heavy be implemented. of the ECOSOC in Geneva for the early

48 replenishment of IDA resources. This before us point out that trends exactly the resolution was passed unanimously. I contrary continue to prevail. In terms of would urge upon the Part I IDA countries volume, exports of primary products from Paraguay: The Hon. represented in this forum that before they developing countries have increased by CESAR ROMEO ACOSTA return to their respective capitals they 5.5 per cent per annum during 1960-65, as Governor of the Bank should agree on a definite time schedule against an expansion of 9.5 per cent in We are assembled once more in the leading to an early replenishment of IDA the export volume of manufactured goods. Meeting of Governors to consider the ac­ funds at a substantially enhanced level. At the same time, in relation to the prices tivities carried out by the World Bank I am somewhat disappointed to see that of manufactured goods, the average price Group during the fiscal year ended June the Executive Directors of the World Bank level of primary commodities has declined, 30, 1967, and to assess the general eco­ have recommended transfer of only $10 implying a further deterioration in the nomic situation of the countries of which million to IDA during 1966/67 out of the terms of trade of primary producers. Not it is composed, involving the use of the Bank's net income of $170 million. In 19631 much progress has been made so far on financial and technical support they re­ 64, $50 million of the Bank's net income international commodity agreements to ceive with a view to achieving more dy­ was transferred to IDA. For each of the stabilize the prices of primary exports. As namic economic growth rates, especially fiscal years 1964/65 and 1965/66 the allo­ such, the second UNCTAD Conference, in the developing countries. Along these cation to IDA was increased to $75 million due to meet early next year, can only start lines, we are pleased to note that in many per year. In view of the unfortunate delay on a note of pessimism, unless the de­ respects the Bank Group has had one of in the replenishment of IDA resources, veloped world changes its basic attitudes the most active years since it started there was a case for increasing the amount toward trade with the developing coun­ operations, and that it has thus enhanced of allocation to IDA from the Bank's in­ tries .... the important contribution it has been come, rather than to reduce it to a token ... Progressive ideas are all the more making to countries resolutely engaged in figure of $10 million. It seems that the valuable in a period of retrograde devel­ improving the economic and social con­ Bank is anxious to retain most of its in­ opments. Instead of being depressed or ditions of their people. The total amount come because of the increasing difficulty of the 67 new loans granted by the Bank of Bank borrowing in industrially advanced overwhelmed by the current international and IDA was about 10 per cent higher countries and the rising rates of interest. developments, we should try, to the best than the amount committed in the preced­ We share the World Bank's anxiety on this of our capacity, to influence the course of ing fiscal year, increasing from US$1, 123 score and would urge the developed coun­ these trends for the benefit of economic million to US$1,230 million. IDA's contri­ tries to adopt fiscal and monetary meas­ development in the less developed parts bution, which represented 29 per cent of ures to enable the Bank to borrow from of the world. This is the kind of leadership this total, reflects a substantial increase their money markets on reasonable terms. that we seek from the World Bank Group over the amount provided in the preced­ We hope that from next year the World and IMF. I am confident that the Bank ing period, and represents an important Bank would resume its contribution to IDA and the Fund will continue to provide this stimulus to the developing countries' own on a generous scale. leadership in the future as they have done efforts. We rejoice at this despite the fact While the aid climate has been deteri­ in the past. that a very small proportion of this in­ orating, there has been no noticeable im­ As a major beneficiary of this leader­ crease went to the countries of Latin ship, I would like to express the sincere provement in the prospects of normal America, which, we are able to say, re­ appreciation of my Government for the trade of the developing countries. The ceived little aid during the period. developed countries continue to maintain role that the World Bank has played in the The Bank, for its part, despite the in­ many tariff and non-tariff barriers in re­ general economic development of my creasing difficulties which have arisen in spect of goods originating from develop­ country and more recently in the success­ the international situation, granted loans ing countries, though they have agreed to ful lining up of credit for what is going to for a larger total amount. We can also re­ reduce tariffs on goods traded among be the world's largest dam of its kind, fer to the active negotiations it carried themselves. The outcome of the Kennedy namely Tarbela Dam, a project of vital im­ out to coordinate external financial assist­ Round has come as a great disappoint­ portance to the agricultural economy of ance to developing countries, as well as ment. It is indeed disheartening that the Pakistan. I would also like to avail myself to promote increased cooperation be­ less developed countries are not likely to of this opportunity to thank all those coun­ tween the Bank Group and other inter­ derive any material benefit from the big­ tries who, through the institution of the national or regional institutions. This task gest round of tariff cuts since the Second consortium organized by the World Bank, is singularly important for the countries World War. We had hoped that UNCTAD have made this possible. that receive aid from different interna­ would herald an era of progressive eco­ Before I conclude I would also like to tional institutions, as has occurred with nomic collaboration between the devel­ express the sincere thanks of my Delega­ the Latin American group, which counts oped world and the developing countries tion to our gracious hosts, the Govern­ the Inter-American Bank among the prin­ and that there would be material increase ment and the people of this great country cipal promoters of regional development. in the benefits which the developing coun­ for the warm reception they have ac­ Note should also be taken of the priori­ tries would derive from growing interna­ corded us and the generous hospitality ties the Bank and IDA have given to infra­ tional trade. In fact, the Annual Reports they have lavished on all of us. structure projects, which have absorbed

49 the greater part of their new loans. Indus­ lative rate of 36 per cent per year. The ing stations, drinking troughs, cattle pens, try, transportation, and electricity as a increase recorded during the 12 months ramps, cattle dips, etc. Credit received group received 77 per cent; the agricul­ ended in July was 38 per cent. Private from IDA in the amount of US$3.6 million, tural sector, 7 per cent; and purposes such investment has increased considerably in plus a local contribution of 25 per cent, as education, telecommunications, water recent years as a result of the favorable have been disbursed entirely to breeders and project preparation, 8 per cent. The climate that has prevailed in the country in the period 1965-1967, the beneficiaries rest was granted to the International Fi­ for long-term investment. In this connec­ having been 222 borrowers with 2,817,065 nance Corporation for performing its mis­ tion mention may be made, among other hectares of fields and 727,213 head of sion. These priorities undoubtedly make things, of the stimulus provided by long­ cattle. Last year IDA granted Paraguay a it possible to approach with better per­ term financial aid granted for industrial second loan for the same purpose, in the spective the structural problems facing equipment and development of other basic amount of US$7.5 million, which is also the majority of the Bank member coun­ sectors, including livestock, forestry, and being invested at an accelerated rate, the tries. Some of the lesser developed coun­ agriculture. This assistance has been sup­ amount utilized by the end of August 1967 tries continued to make economic prog­ plemented appropriately through short­ having been more than US$2 million. ress, but it seems that many of them con­ and medium-term operations. At the same tinued to experience little growth, mainly time, the flow of foreign private capital We must also point out that Paraguay because of the rapid population increase has increased gradually, especially in the is currently drawing on another credit and the instability of production and trade sector of industry. from IDA in the amount of US$6 million, levels. In the four-year period 1963-1966, in­ which is intended for the construction of To all this we must add the satisfaction vestments of the Central Government rep­ bridges and roads covering a 303-kilo­ we feel at knowing that the World Bank resented about 20 per cent of each year's meter stretch. Last year a new contract was will grant credits to sectors hitherto not budget expenditures, of which one-fourth signed with the IBRD for a supplementary served, such as agriculture, education, in­ was made with external resources, and loan of US$2.2 million to enlarge the road­ dustry, and tourism. In addition, the fact the remainder with public saving. These bed. In addition, another loan received that part of the credits will be used to investments went mainly into infrastruc­ from the World Bank in the amount of finance local currency expenditures will ture projects such as roads, electric en­ US$2.75 million is being used for enlarg­ make a positive contribution to the indus­ ergy, ports and airports, expansion of the ing the port facilities of Asunci6n. Another tries concerned and to monetary stability. merchant marine, telecommunications and credit from the same institution for US$2.2 In order that all this can actually be colonization, as well as to social needs: million will be used for road construction done, we join with all the developing coun­ housing, health, and education. However, covering a distance of 43 kilometers. In in this period an increasing proportion of tries in asking the capital-rich countries sum, Paraguay is currently using US$17.1 to continue granting financial aid to the public saving also went to promote pro­ million provided by IDA and US$7 million World Bank Group and especially to IDA, duction directly on the basis of specific provided by the World Bank. whose soft loans are so beneficial to us. economic activation programs. These pro­ The total volume of loans obtained by As to Paraguay, the annual rate of eco­ grams were implemented through the Na­ nomic growth was about 5 per cent in the tional Development Bank, an institution the public sector, including State enter­ period 1960-1965, as a result of increased that receives a large part of its resources prises, amounted to US$123 million at the investment in productive sectors and in­ from fiscal sources in the form of capi­ end of 1966. Of this total, US$73.5 million frastructure projects and the improvement talization. This Bank, which receives as has been used thus far, the outstanding of exports. Investments were concentrated supplementary resources credits provided balance being US$57.6 million. The larger in the transportation, agricultural and elec­ by IDB, AID, and the German Government, part of the loans received was provided tric power sectors. The rate of investment grants medium- and long-term credit for by IDA, the World Bank, lOB, AID, and since 1960 has been 16 per cent of Gross industry, farming, and other areas of na­ the Eximbank. Domestic Product. This investment indi­ tional interest. The Government is now engaged in in­ cates a capital-output ratio of three to one, Within this promotional activity carried troducing improvements into the system which we consider satisfactory, consider­ out by the Government through its insti­ of collecting public revenues and rational­ ing the nature of the investments, which tutions, we must emphasize the wide rep­ izing budget expenditures. In this way it in general have been intended to meet the ercussion throughout the country from the expects to achieve new levels of saving national economy's development needs. implementation of the special livestock in order to give continuity to the various development program being carried out The investments were financed by means public investment programs without un­ through IDA's assistance. This program, of an increase in private saving that led balancing the budget. to increased economic activity and higher which is administered by the Banco Cen­ Paraguay enjoys a reasonable mone­ export earnings, and also by means of a tral del Paraguay through a tripartite com­ tary stability, which we consider adequate larger flow of external capital to the pub­ mission, aims to improve the system of lic sector, supplementing its own internal livestock management in order to raise the in view of the nature of domestic produc­ savings. quality of livestock. For this, long-term tion and foreign trade. The policy of mone­ Savings of the private sector held in financing with reasonable grace periods tary stabilization also provides support for the form of bank deposits increased in is being granted. These loans are used to the effort being made by the Government the five years ended July 1967 at a cumu- cover investments in wire fencing, water- to give momentum to economic progress.

50 The balance of payments has been costly to obtain finance for development favorable for several consecutive years, from those markets. including 1966. This has led to continual Philippines: The Hon. Official assistance to developing coun­ increases in reserves, which reached their EDUARDO Z. ROMUALDEZ tries has been marked by a shift from highest level at the end of last August Governor of the Bank grants to loans. Loans have taken on a relative to any previous period. Paraguay It is an honor and a pleasure for me to substantial hardening of terms. Thus be­ has no arrears in the fulfillment of its ex­ address the 22nd Annual Meeting of the tween 1962 and 1966 payments of amor­ ternal financial obligations. Board of Governors of the Bank and its tization and interest on external public Domestic prices have recorded few Affiliates, IFC and IDA, and, on behalf of debt of developing countries have grown changes in recent years. The cost of liv­ the Government of the Republic of the at an average annual rate of 10 per cent ing increased only 2.9 per cent in 1966, Philippines, to congratulate the World while the annual rate of growth of exports and during the eight months of the current Bank Group on the conclusion of another of those countries was only 6.5 per cent year the increase recorded was 0.8 per year of operations. It is also a pleasure to between 1960 and 1965. cent. enjoy the warm hospitality of the Brazilian The developing countries have been We must point out that the success people, and we therefore take this oppor­ drawing fairly heavily on equipment sup­ achieved by Paraguay in regard to eco­ tunity to express our sincere appreciation pliers' credits which are relatively shorter nomic and social development is due, to the Government of Brazil. in maturities and reflect high implicit or among other factors, to the political and In considering the Report of the Inter­ explicit costs. Debt service burdens of a social stability the country has enjoyed for national Bank for Reconstruction and number of developing countries have thus more than a decade. This has permitted Development for this fiscal year (in the risen to dangerously high proportions of the Government to design and carry out context also of the reports for the past exports, some going up beyond 20 per development plans with long-term pro­ three or four years) we are impressed both cent. jections, without any interruption in the by the increasing gravity of the external It is well for us to remember that in implementation of the various programs financial positions of the developing coun­ many of the developing countries, the drawn up to overcome the deterrents to tries of the world and by the apparent opportunities for developing light and economic development. An outstanding meagerness of the attention and efforts relatively simple projects have been ex­ and historic aspect of this political proc­ we have devoted so far to meeting this hausted. Further developments require ess is the existence of a new National problem boldly and adequately. heavier and more capital-intensive proj­ Constitution since last August 25. The new In the past it was fashionable to explain ects that will require massive external Magna Carta consecrates the objectives away the paucity of the flow of capital finance. It is alarming to view this impera­ of economic development in an impera­ into the developing countries in terms of tive in the light of the statement in the tive to which the Government must give their lack of "absorptive capacity." Today World Bank Report that while a continuing shape, and there are embodied in the economists, particularly of the World Bank growth in the gross capital flow is required Constitution prinCiples that the Govern­ itself, admit that the developing countries simply to maintain the net inflow of foreign ment has been following in its work of are in a position to utilize effectively an capital (net of amortization) into these progress, such as repatriation of citizens, increase of "several billion dollars" of ex­ countries, the trend has been for such fair distribution of land within the frame­ ternal finance over the present gross rate flow to decline. This means that the net work of respect for private property, free­ of flow of roughly $6.5 billion. Further­ flow is threatening to reverse itself and dom of the press exercised by all political more, the concept of absorptive capacity that we shall shortly have a net outflow of sectors through their own journalistic or­ is itself a variable dependent on the mag­ resources from the developing countries gans, and, above all things, the right to nitude, forms and effective di rection of representing debt service and repatriation. live free and with dignity within the na­ external assistance. With over two-thirds of the Development tional territory. The problem we face now is clearly one Decade past, we believe it is too late to In this way, Paraguay is succeeding in of supply of resources from the countries hope that the achievements in improved advancing in many fields, both on the in­ that are in a position to provide those livelihood for the developing countries in stitutional plane and on the plane of eco­ capital resources. "External finance," says this decade will come anywhere near the nomic and social achievements. For these the Report of the World Bank, "on appro­ promise. It is not too late, however, to achievements, we have counted upon the priate terms continues in short supply." meet the problems and bottlenecks front­ financial support of the institutions of the For the sixth successive year there has ally and layout the institutional bases for World Bank and IDA, to which we express been little improvement in the over-all level their solution. This must be the overriding our sincere gratitude. of development assistance provided by task of the countries here represented at Finally, we express our thanks to the the high-income countries. And while the this year's meeting. Government of Brazil for having given us emergence of the European capital mar­ We would like to quote here the concern such a magnificent welcome to this won­ ket has become an essential complement expressed by the Economic Survey Sec­ derful city of Rio de Janeiro, offering us to the traditional markets in New York, tion of the United Nations Secretariat, at every turn the kindness and courtesy London and Zurich, competing demands which stated in a study published by characteristic of the noble Brazilian from among the high-income countries Princeton University this year: " ... by the people. themselves have made it more difficult and middle of the nineteen sixties, it appears

51 that further progress in extending devel­ credit insurance scheme to provide guar­ and regret that we learn of the rapid de­ opment finance from the rich to the poor antees for loans to developing countries pletion of these funds. We would urge that countries is encountering serious difficul­ in order to enable suitable projects of such in addition to the token transfer from the ties. Indeed, the flow of resources in this countries to tap trust and other institu­ Bank to IDA of net earnings, which I hope direction has remained on a plateau since tional funds which are subject to fairly this meeting will approve, the indus­ the beginning of the decade. Unless a constrictive laws in their countries of dom­ trialized countries should give the Bank fresh impetus is given to efforts to raise icile, once again, within defined limits. greater access to their capital markets. such finance, there is grave danger that We would like to close by underlining In addition, more of the advanced coun­ the impasse may turn into a crisis." (New the urgency of focusing attention on these tries could and, indeed, should follOW the Proposals for the International Finance problems and of devising means of break­ very worthy example set by the Swedish of Development, Princeton, New Jersey, ing the present obstacles to a freer flow Government in making special annual con­ 1967, p. 19.) of finance from the developed to the de­ tributions to IDA, and, more recently, the We are proposing that a Working Party veloping countries. If the problem of inter­ Swiss example in preparing the ground­ be constituted at this Meeting to examine national liquidity which has occupied the work for lending to IDA on highly con­ in detail this whole question of raising the center of our attention for the past several cessional terms. supply of development finance for the de­ meetings was considered a serious one, We think that the time has come for advanced countries to consider it their veloping countries, identifying the obsta­ we believe the problem of opening up new normal obligation to budget annually for cles and bottlenecks that impede its free resources and establishing more adequate contributions to IDA, thereby creating and flow, determining how the terms of such channels for development finance is of effecting a system of international trans­ finance might be made more favorable, more critical importance particularly at fer payments similar to those operating evaluating the adequacy and shortcom­ this time. ings of existing bilateral, regional as well already within the national boundaries of as multilateral arrangements, and formu­ most advanced countries. Thus, on an in­ lating a concrete program for meeting the ternational scale, fiscal measures would problems under the leadership of the be used to eventually correct the struc­ World Bank Group of institutions. Sierra Leone: Lt. Col. B. I. KAI-SAMBA tural imbalances of the world community The agenda and terms of reference of Governor of the Bank of nations. In the long run, it is in the inter­ such a working party should cover pri­ est of the advanced countries to raise the marily the pattern of policies that might I wish to join previous speakers in living standards of the overwhelming ma­ be established in the major capital export­ thanking the Government and people of jority of the peoples of the world, at the ing countries of the world for the purpose Brazil on behalf of my Government and same time creating for themselves wid­ of inducing a measured flow of suitable the people of Sierra Leone for the warm er markets for their manufactures and financing to the developing countries. The hospitality extended to us. services .... magnitude of the flow is to be a measured I would like also to register my appre­ . . . While we recognize that the major one to take into consideration the various ciation for the commendable way in which initiatives for our economic consolidation, competing demands in the country itself our affairs have been managed by the staff recovery and expansion must be taken by for financial resources, for private as well of both the World Bank Group and the ourselves, we, like many other developing as government uses and taking into ac­ Fund. countries, are concerned about tenden­ count the balance of payments situation Since our independence in 1961, we cies in world trade and capital move­ of the country itself. But overriding priority have received missions and their reports, ments, particularly during the last three should be given to the specific magnitude and had discussions with World Bank years, which even with the most optimistic of finance deemed appropriate over any officials. These have served as important interpretations, signify that, on balance, period of time, and an effective comple­ guidelines in the formulation of our finan­ the share of the developing nations in ment of policies should be adopted to cial, economic and fiscal pOlicies. world trade has been declining and capi­ render the financing accessible to devel­ Being amongst the latecomers to this tal movements have been falling. This re­ oping countries. These policies may in­ international lending institution, we are duced flow of funds into the developing clude outright budgetary allotments from not too discouraged by the fact that we nations coincided with a contraction of tax revenues, suitable funds earmarked have qualified so far for only one Bank­ grace periods and maturities as well as out of normal banking channels, exemp­ financed project. Most of our energies higher interest rates. tions from portfolio ceilings or interest have been directed toward planning and The escalation in debt servicing obliga­ equalization taxes in the capital markets, the formulation of basic policy decisions. tions of low income nations would have and, subject to compliance with the nor­ As a result a few of our projects are at an to be sharply and urgently constrained. mal registration requirements, ready ac­ advanced stage of preparation, and it is We recognize our potential contribution cess to the markets for private placement our hope that they will shortly qualify for to this end, but venture to suggest that or public issues. IDA funds. Our interest, therefore, in the some kind of a breakthrough in the initia­ One of the instruments which might be replenishment of IDA funds is more than tives of lending nations and multilateral explored is a multilateral, international merely academic. It is with great concern institutions is presently needed ....

52 This takes me to the kinds of aid avail­ ent and is not yet of age. What we expect able, especially through and from the from the Corporation is to mobilize, to Somalia: The Han. World Bank institutions. In particular, I organize, to advise and even to create HAGI FARAH ALI OMAR would like to touch on only two of the such businesses on private lines where Governor of the Bank Bank affiliates, IDA and IFC. the potential exists. We cannot avoid sus­ It gives me great pleasure to express, The larger part of the Bank's most pecting that not only matters of organiza­ on behalf of the Somali Delegation, our needy members are those that require aid tion but also size has much to do with sincere thanks, for the warm hospitality of the type provided by IDA. My country, IFC's reluctance to participate in the very and courtesy shown to us since our arrival Somalia, is one of such members. These small and often limited private initiative by the people and Government of Brazil. countries are literally lined up for an ap­ which exists in the various parts of the I would further like to state how grateful propriate share of IDA funds which are, Continent. we are to have had the President of the as we all know, very limited. Worse still Even if private enterprises are lacking in Republic of Brazil addressing us here and is the regrettable fact that all IDA funds many of the member countries in Africa, I am certain that his wise words will con­ are either used or committed and no new Governments have taken action to fill the tribute greatly to our deliberations .... replenishment has taken place so far this gap with public organizations. It is high ... This last year has been an eventful year. This is rather frightening despite the time for IFC to shed some of its ideologi­ one and political tensions in many areas note of hope we have heard in Mr. Woods' cal bias against public ownership if this is of the world have become more significant address. A lot of projects are piled up the only way to help a member country. hurdles to development efforts and, in the waiting and subject to IDA replenishment Evidently it would be very difficult to keep case of the Middle East crisis, have had and it would really be unfortunate if IDA track of and coordinate aid to numerous severe bearing on the economies and cannot continue playing its useful role in small businesses, and I am certain that trade of, not only the participants. but also international aid. the best way to overcome such a problem many other parts of the world. It is even more surprising to note that would be for IFC to channel its assist­ There were, however, some favorable the Board of Directors have not allocated ance through wholly or partly government­ events in the field of international coop­ any amount of substance to IDA from the owned credit institutions and investment eration of which I need mention here the Bank's net income which hit the record banks that have acceptable degrees of agreement reached in the long-drawn high of US$170 million. Out of this, unlike independence from political decision and GATT negotiations, better known as the the two previous years, only a nominal which may have the required standards of "Kennedy Round," and the London under­ US$10 million has gone to IDA and the management and organization. standing reached by the Group of Ten on rest was allocated to the reserves. I am sure that the Bank's resourceful the subject of world reserves and liquid­ Every prudent businessman recognizes leadership is leaving no stone unturned to ity. We are glad of this agreement on the need to build up sufficient reserves for find ways and means of giving fair treat­ reserve creation which, if not an ideal the Bank against contingencies when its ment to the Corporation's neediest mem­ solution to the problem, brings us a step disbursement is rising fast as at pres­ bers, even if final recourse is changing ent. Nevertheless, the Board of Directors nearer to such goals .... the rules of the Corporation. should have supplemented the words and ... The Chairman and Mr. Woods have Finally, Mr. Chairman, allow me to efforts of their illustrious President by both touched on the problems of eco­ congratulate you on your effective man­ serious action and should have allocated nomic development, and I think we all agement of these Meetings and may I at least US$75 million to IDA as in the agree that it is a long process which congratulate also Mr. Schweitzer and Mr. involves more effort and time than is gen­ previous year. An action of this kind Woods, and their staffs at all levels, not erally appreciated. A country that gener­ would not only have set an example to only for yet another year of success for ates most of its development needs is other contributors but would also keep the Fund and the Bank, but also for the accepted to have attained self-sustaining the Association in business until such time excellence of the arrangements for the growth. Underdevelopment, therefore, is as a decision is made as to its future. Meetings and the documentation, inter­ always associated with foreign aid. Avail­ It would amount to a blow to progress pretation and translation services that en­ ability of foreign aid has always its snags if IDA is allowed to lapse when it has to watch for, most important of which is become a successful example of conces­ able us to conduct our deliberations under the degree of indebtedness of the recipi­ sionary multilateral aid administered on the best possible conditions. ent country. If this indebtedness reaches strict business lines. a certain level it becomes dangerous and A look at the International Finance Cor­ has negative effects on the economy of poration is worthwhile here. The Corpora­ tion's activities have fallen far behind its that country. It therefore requires pru­ South Africa: other sisters by maintaining a very narrow dence on all sides to approach the prob­ The Han. NICOLAAS DIEDERICHS approach to its mandate: the more so with lem of assistance with the tacit under­ Governor of the Bank and Fund standing that aid flows by manageable regard to its approach to African condi­ proportions both in its volume and its tions. One explanation often put forward I gladly join with other Governors in terms. In short, the best aid is that given is the lack of organized private capital in thanking the Government and people of with generous hearts and used with pru­ the African Continent. Obviously African Brazil for their generous hospitality in this dent judgment. private enterprise has not been independ- beautiful city ....

53 · .. Turning now to the World Bank, I nomic and financial situation through projects merit the urgent and special at­ wish to touch briefly upon the position of which the world is passing. tention of the Bank. the so-called intermediate group of coun­ I therefore wish to tender to the Exec­ This special attention must not, how­ tries, sometimes referred to as the "more utive Directors and President of the Bank ever, lead us to forget that the member developed primary producing countries". my congratulations on the effort they have countries of the Bank present an extremely It would appear to be the Bank's present accomplished, and to encourage them to varied range of economic development, policy to restrict loans to this group. Par­ continue to pursue the path on which they and I am sure that the Bank will know how ticularly at a time when some of the major have embarked. to continue to furnish to each of them the capital exporting countries have imposed I consider the policy followed during the specific form of cooperation that it needs. restraints on the free movement of capital, past financial year of maintaining interest In this way, those countries now in an I believe that this policy is wrong and that rates unchanged, in spite of the increase intermediate stage of development will be it will, in the longer run, not serve the best that has taken place in the price of money able to join the highly developed group interests of the Bank or of the less devel­ on the world capital markets, to be satis­ sooner, and thereby to add their effort to oped countries themselves. It seems to be factory, and recommend that that policy that of the countries that are already par­ most desirable that the Bank should have continue without modification. Any trans­ ticipating actively in providing technical a well-diversified and representative group fer of resources to purposes other than and financial assistance to the more needy of borrowers. The Bank furthermore can those of the World Bank itself-even if it countries. generally find a ready market for the were conceived as a distribution of divi­ Spain is conscious of the responsibility shorter-term portions of loans made to its dends in favor of organizations closely that it bears as a member of the Bank. relatively stronger member countries, and associated with the Bank-should remain For this reason, in spite of the fact that it thereby continue not only to increase its subordinate to that policy. is still in a period of evolution and con­ lending resources but also to maintain The developing countries are engaged tinues to need the Bank's assistance, it the necessary liaison with investors in in a struggle, at times dramatic, to acceler­ has in turn collaborated with the Bank to Bank bonds. As a result of such liaison ate their growth rates, in which a funda­ the full extent of its power by means of the these investors may also come forward in mental obstacle frequently encountered is subscription of bonds and by agreeing, increasing numbers as participants when the weakness of their primary sectors, in even though it has not yet freed its capital the Bank finds it necessary to approach spite of the paradox that many of them transfers, to the conversion to any other the market for new funds. A continuously possess abundant, still unexploited natural currency of the pesetas portion of its open door to this intermediate group of resources. The problems of these sectors quota. Similarly, Spain has communicated countries at the Bank's standard lending are most clearly manifested in the inade­ to the International Development Associa­ rate would not only be of assistance to quacy of their food supply. Without a prior tion its decision to release its pesetas these members; it would also enable them, solution of this basic and vital problem it quota for purchases in Spain, and I am in future years, to make a more substantial is vain to hope for any massive associa­ pleased to announce here that important contribution to the efforts of developing tion on the part of the populations of the operations have already been carried out countries to expand their trade, and would nonindustrialized countries with the al­ that have beyond doubt helped to relieve facilitate the extension of a greater volume ways arduous undertaking of economic the Association of disbursements in other of development assistance by the inter­ development. currencies. mediate countries to the developing The growing demand for foodstuffs is Before concluding, I should like to take nations. the consequence not only of the acceler­ In conclusion, I am pleased that two ated population growth in the majority of this opportunity to express my most sin­ newly independent neighboring African the developing countries, but also of a cere support for the economic and social States, Botswana and Lesotho, are likely defective distribution of the available development of the Latin American coun­ to join our institutions shortly. We shall products. There is a need for ever greater tries, with which Spain has such close ties. Finally, permit me to tender my thanks welcome our neighbors most sincerely to attention to the primary sector on the to the Brazilian Government and to this our ranks. part both of the governments and of the international organizations, faced as we beautiful city of Rio de Janeiro for the are by the specter of millions of human generous hospitality extended to us. beings suffering from hunger. Spain: The Hon. JUAN-JOSE ESPINOSA In the face of this frightful situation, the Governor of the Bank most authoritative voices in the world have raised moral and human arguments that Sudan: The World Bank has completed another cannot be ignored at this time of search The Hon. ABDALLA SIDDIG GHANDOUR year in its already long life of work, a year for specific solutions. Governor of the Bank during which, as its President has in­ The rational and efficient exploitation formed us in his documented speech, it of natural resources, and the just distribu­ I would like to join all those fellow has carried out a volume of operations tion of their fruits at world level, would be Governors who expressed their apprecia­ that is all the more impressive in view of the best and the most humanistic formula tion and sincere thanks to the Government the considerable difficulties with which it for the matching of supply to demand. and people of Brazil for the warm wel­ has had to contend as a result of the eco- Consequently, agricultural and livestock come and excellent arrangements they 54 have made to us here in this magnificent sary to maintain an accelerated rate of very considerable easing of its terms since city. economic and social progress. And yet in the capacity of the developing countries We have decided to make a joint state­ spite of all the efforts that have been made as a group to service additional external ment on the activities of the Fund and of and pleas and aspirations expressed by debts is rapidly diminishing; their resort the Bank Group, not only for reasons of and through international forums, the total to short-term suppliers' credit has been expediency but more so to underline the capital flow to the developing nations had inevitable though ill-advised. unity of purpose of these august institu­ remained stagnant over the first half of It is in this connection and against this tions. The promotion of economic growth the 1960s, declined in the preceding two background that we look with disappoint­ under conditions of stability remains as years, and in real terms the value of both ment at the failure so far to replenish IDA never before to be the challenging objec­ was less. resources. We wholeheartedly support the tive of both. This levelling off and decline in the net President in his endeavors and urge the At the outset of my joint remarks I amount of the flow of supplementary exter­ donor countries to make a massive re­ should like to express our great apprecia­ nal financial resources is coming at a time plenishment of IDA resources possible tion for the outstanding work done during when most of the developing countries: without conditions that may defeat the the preceding year by the Executive Di­ (a) Have increased and are continuously underlying principles and goals of multi­ rectors and staff of the Fund and the Bank increasing their capacity wisely, construc­ lateral concessional and unconditional as­ G roup. The 1967 Annual Reports are lucid tively and productively to absorb a far sistance. We are also of the opinion that and most informative and ably survey the greater inflow of foreign capital and assist­ the amount to be transferred from the problems of the world economic develop­ ance. Their potential in this respect can Bank's net profits this year is inadequate ment and the international payments easily double if sustained efforts and as­ and doubly impairs IDA's ability to main­ mechanism. The addresses of Mr. Schweit­ sistance are devoted to the preparation tain reasonable levels of development zer and Mr. Woods which introduced the of the numerous identifiable projects that financing. We therefore strongly urge that respective Annual Reports were as usual are beginning to emerge. the practice of transferring to IDA an ap­ full of penetrating comments and stimulat­ (b) Are experiencing a reduction in their preciable portion of the Bank's net profits ing ideas. foreign exchange earnings and reserves be maintained as a standing policy. The Bank and its Affiliates have again due to the difficulties of marketing their Before I move to another subject may I achieved impressive success, which is exports, the downward trend in the prices make brief observations on some of the witnessed by the widening fields of their of such exports and the upward trend in aspects of the present amount and condi­ activity and the greater flexibility in the the prices of their basic imports. tions of aid. My first point concerns the terms and conditions of the loans and (c) Are beginning to face the burden approach and method followed in fixing assistance which they extended to the of debt servicing. Though debt servicing the amount of loans. As you know the developing countries. The President of the now already absorbs over 60 per cent of general practice is to lend for a specific Bank Group, however, had in his able and the inflow of external assistance, what is project and to confine the loan to the inspiring address expressed in a way no really alarming is that this proportion will other qualified person can do the dimen­ amount which it is estimated will be sions and gravity of the problems that continue to rise. needed for financing the direct foreign still face the developing world. He has Perhaps these phenomena which I have exchange costs of the project. In my view made a plea to the statesmen of the world outlined, however serious they are, can this practice needs to be revised and a community to heed the writing on the wall be explained in terms of specific factors measure of flexibility be introduced to and to recognize, before it is too late, that and combinations of circumstances. What cater for: the unity of purpose and interests that is far more alarming, however, is the out­ (a) A portion of the import content of bind men and states together require un­ look for the future. A crisis in the interna­ the numerous domestic services which selfish foresight on the part of the richer tional aid to the developing countries are not easily recognized as a direct effect industrialized countries. We would like to seems to be gathering momentum. There of the investment project and are therefore lend our unqualified support to Mr. Woods' are signs that the original impulse which not taken or at best insufficiently taken plea. led to a progressively increasing outflow into account when calculating the foreign We note with dismay that toward the of aid in the 1950s is now running out of exchange component of the project, and end of the United Nations Development steam. For though the gross inflow of (b) A portion of the import content of Decade the question of aid to the develop­ foreign capital to developing countries is current consumption (the so-called secon­ ing countries still remains the most vital still at a high level, yet the amounts which dary imports) generated during the con­ aspect of and the most serious factor industrialized countries have been voting struction period of the project through hampering their development efforts. We in their annual budgets are falling away. wage earners and others who had been believe in the principle of self-help, that This may sooner become a trend if not given direct or indirect employment by each developing country should provide urgently and consciously checked. Again the execution of the project. from its own resources the major portion we join others who plead that all states­ We can readily see the difficulties of of the financing of its economic develop­ men will seriously ponder over this matter reliably calculating these indirect foreign ment, but it is still an accepted fact that and do their best to check this grim pros­ exchange costs of a project. It may never­ for some time to come, an appreciable pect. What is needed is not only a substan­ theless be possible to adopt the practice injection of capital from abroad is neces- tial increase in the amount of aid but a of increasing the direct import contents

55 of a project by a reasonable percentage ... Last but not least, I would like to Present developments of aid conditions to be agreed upon. extend our welcome to the new and pros­ and debt burdens would seem to call for a My second observation will very briefly pective members; their experience and complement to the UNCTAD target, focus­ deal with foreign exchange financing of views will no doubt enrich our discus­ ing on the qualitative aspects of develop­ local development costs. It is readily sions. ment assistance. Donor countries might agreed that a greater and more effective agree to achieve a certain "liberalization" and sustained effort by many of the under­ of their development assistance, the tar­ developed countries is needed for the get being that, say, at least 80 per cent of mobilization and more rational allocation their assistance efforts should consist of Sweden: The Hon. G. E. STRANG of internal resources. But because of the one or several of the following items: con­ Governor of the Bank very low per capita income and the violent tributions to multilateral agencies, bilat­ fluctuations in their export earnings, we should like to associate myself with eral grants and development loans ex­ should not expect too much in that direc­ those of my colleagues who have spoken tended on IDA terms or softer and, finally, tion. It is in this context and the great before me in thanking the Government of development loans at low interest rates pressure of the implementation of devel­ Brazil for the warm hospitality extended and fairly long repayment periods pro­ opment projects on internal currency re­ to us. We are fortunate, indeed, in having vided they were untied. Of course, this sources and its strains and stresses on been invited to meet in this beautiful city. liberalization percentage could be at­ the balance of payments that foreign ex­ Our meeting is held at a time when tained only progessively, and provision change lending for local development there is overwhelming evidence that the would have to be made for appropriate costs is required. The policy initiated by objectives of what was proudly announced balance of payments safeguards. If such the Bank a few years ago to make loans as the Development Decade will not be at­ a target were established-as a supple­ to cover both external costs and part of tained. In many developing nations we are ment to the volume target-and if donor the local currency costs of projects, is of witnessing difficulties even to achieve a countries made real efforts to reach it, a great significance in this respect. It is our rate of growth sufficient to maintain the significant contribution would have been sincere hope that its imaginative and con­ prevailing low standards of living. The made toward reversing the present, nega­ tive trend in development assistance. sistent application whenever circum­ gulf between the poor and the rich nations Now, I would like to turn to the very stances so dictate (and in many cases they of the world is still widening. acute problem of IDA resources. Despite do) will soon see the light of day. We also Time and time again it has been stated the fact that the proposal for a quadru­ hope that all other lending institutions and that this situation should be a challenge pling of IDA funds was made in the middle capital-exporting countries will adopt a to expand the contributions to the eco­ of last year, negotiations concerning the similar policy and apply it in practice. nomic development of the poor nations. size and conditions of the replenishment My third point concerns the financing However-far from increasing-the total operation have not yet been concluded of development studies, surveys and pre­ volume of aid, measured in gross terms, and, consequently, IDA has run out of re­ investment reports and other preparatory has stagnated in recent years. In net terms sources. Deep concern has been voiced works prior to investment. Technical as­ there may even have been a reduction of over this delay. My Government fully sistance by international institutions and total aid. Furthermore, the quality of aid shares this concern. donor countries cover the cost of some seems to be declining. The share of grants Multilateral development assistance has general surveys and investigations. How­ in official bilateral aid thus diminished certain advantages over bilateral aid. One ever, the foreign exchange costs of de­ from three quarters to less than two thirds is that it is not tied as to the source from tailed studies, design work, preparation of over the last five years. Tying of bilateral which the recipient country may purchase documents and supervision fees by con­ aid to procurement in the donor countries goods and services. Nevertheless, this sultants are except for the World Bank is now the rule, and attempts are made to type of assistance seems to have difficul­ often not accepted by lender countries. introduce such tying also in the field of ties in holding its own in the over-all aid There is no doubt about the crucial im­ multilateral aid. picture. Over the past six years there has portance of such work by consultants in The UNCTAD one per cent target is the been a relative decline in contributions to paving the way for subsequent smooth well-known, widely accepted goal and multilateral agencies from 12 per cent to economic expansion and for ensuring the measuring rod of our aid efforts. This tar­ 8 per cent of total resource flows for de­ maximum productivity of every unit of in­ get, however, treats resource flows in velopment. This trend should be reversed. vestment. At the same time, while the cost crude quantitative terms and does not take I wish to join in the appeal to the major of such works for individual projects may financial and other conditions sufficiently donor countries to make possible a re­ not be very large, yet the total in a devel­ into account. Flows with a negligible or plenishment of IDA's resources which opment plan is very substantial. It is, nonexistent element of assistance proper would enable the Association to expand therefore, necessary to provide for the are lumped together with transfers of an its activities without introducing restric­ foreign exchange cost of such services unquestionable aid character. This de­ tions or procurement rules which inhibit on all loans by lender countries, and also ficiency in the target has had the effect a rational use of the funds contributed. necessary for the Bank to be more flexible of drawing attention away from the terms Should a doubling of the present annual in reimbursing all the earlier expenditures and conditions of resource transfers to the rate of contributions be all that could be in this respect. ... less-developed countries. attained for the next fiscal year, this should 56 be recognized as a first step only. If it ity agreements which partly help to sta­ technical and financial assistance. In view were deemed necessary to introduce some bilize prices and improve the terms of of some peculiarity of our development kind of balance of payments safeguard, it trade of developing countries. Maximum problems, I must congratulate Mr. Woods should be sufficient to give a country in efforts should also be exerted to bring and his staff on their foresight and imagi­ balance of payments difficulties the bene­ about a gradual reduction in trade barriers nation in effecting the Bank Group opera­ fit of having its contributions, in so far as in developed countries so as to help the tions in our countries and in bringing our they exceed procurements under IDA developing ones to achieve a higher rate economic development to its present level. credits in that country, called only after of growth in their exports .... I would now like to say a few words the contributions of other Part I countries. about the new development policy in my This implies that countries with no marked country. From the time we embarked upon balance of payment difficulties should al­ National Development Planning, we in low the Association greater flexibility as Tanzania: The Hon. PAUL BOMANI Tanzania have been concerned with the to the encashment of their contributions. Governor of the Bank desire to accelerate our social and eco­ nomic development. In the course of doing My Government would be prepared to Let me, in the first place, join my col­ this, we have realized the absolute neces­ make such a concession. leagues in thanking H. E. the President of sity of first maximizing our own efforts. At this Annual Meeting, it has been rec­ Brazil for his kind address of welcome. His This has created in us a much greater ommended that we approve a transfer decision to offer his country and the beau­ sense of self-help, before intensifying the from the Bank to IDA in only a token tiful city of Rio de Janeiro as host to this search for foreign assistance in a world amount. I have some difficulties in seeing august assembly was a wise move. We, where available capital and manpower re­ that developments since our last Annual in the developing world, have plenty in sources cannot cope with the demand Meeting warrant such an abrupt break common with this great country, in that under our present circumstances. It is on we share the same experience in the prob­ with the practice of allocating a substan­ the realization of the gravity of this situa­ lems of marketing our agricultural com­ tial sum to IDA. The Bank's net income tion that my Government has decided to modities such as coffee, sisal and many last year was the highest ever, while the adopt a new strategy for development primary products. In Tanzania we also need of funds of its "soft-lending" daugh­ which, under the name of self-reliance, ter institution is the greatest ever. The have the problems of development of vast lands with sparse population. In our case, seeks to stress the efforts of the people change as to IDA's share of the Bank's of Tanzania as the "prime mover" in our income takes place at a most unhappy and of course in the case of Brazil, our population does not call for the use of the country's development. moment. It has been suggested, however, This should not be interpreted to mean that a further transfer to IDA be contem­ pill as seems to be the need in some other developing countries, as indicated by Mr. that we shall not need or solicit foreign plated in the course of the current fiscal Woods. Given the development instru­ assistance. On the contrary, as we go on year. Sweden would wholeheartedly sup­ ments, that is capital and skill, our vast implementing our policy of self-reliance, port a proposal for such a transfer. lands are capable of producing more food so shall we be increasing our real appetite Finally, I wish to pay tribute to the de­ to feed millions of the hungry world. for foreign assistance. We realize that voted and outstanding achievements of Mr. Chairman, I would like to share with Tanzania cannot exist alone. All we are the staff of the Bank Group. If the Bank you and my colleagues the sentiments ex­ saying is that in pursuing our development Group, despite Mr. Woods' and his staff's pressed about the extraordinary beauty of goals, we should not look to the outside efforts, should prove unable to meet the this city and the generous hospitality that world alone for salvation, but to ourselves demands for funds in service of the de­ we have enjoyed since our arrival. If you first and then to the outside world. Obvi­ velopment of the world economy, the re­ permit me, I would like to add that it is ously this is a great challenge which I sponsibility will be ours. particularly gratifying for an international believe must be faced by all of us, and we congregation, such as this, to meet in this are confident that the World Bank Group great country where its people of different of institutions and many other develop­ origin and background live harmoniously ment agencies shall support the efforts of and happily. Our presence here for this Syrian Arab Republic: The Hon. our people. important conference is not only an in­ MOUAFFAQ SHOURBAJI As Mr. Woods said in his annual address Governor of the Bank spiration to many of us, but it also offers a great opportunity for us to learn from on Monday, it is true that we are in a trou­ would like to begin by thanking the this country's experiences. bled world indeed. Events of political and managements of the Bank and Fund for I would like to take this opportunity to military nature in our countries under­ their valuable 1967 Annual Reports .... extend to Mr. Woods my Government's mine the productive use of our scarce re­ ... We believe that it is of utmost appreciation of the invaluable services sources. However, there is as yet no cause urgency that the countries present here, that he has rendered to the World Bank for despair. Indeed, many developing and those who are members in the United Group. It is during his term of office that countries registered in the past year sig­ Nations Conference on Trade and Devel­ most of our African countries became nificant achievements in the field of eco­ opment, should exert maximum effort in members of these institutions, to which we nomic growth and cooperation. During order to increase the number of com mod- have been turning for our much needed 1966, my own country increased its real 57 per capita income by almost 7 per cent assistance that we have received in this us to look broadly at what IFC can do and, with our neighbors in Kenya and field, particularly under the Bank's co­ in most of the African member countries, Uganda, we signed a treaty establishing operative programs with the specialized where special circumstances prevail to the East African Community, designed to agencies of the United Nations. I am, how­ challenge the legal character of the Cor­ strengthen our regional cooperation in all ever, rather disturbed by the new policy poration. In view of the existing conflict fields of economic activity. whereby grants for the financing of pre­ between IFC's Charter and the inevi­ Mr. Chairman, may I at this juncture investment studies are limited to $200,000. table nature of business enterprises in make a few brief remarks about our in­ In view of the fact that there has not been African countries generally, I would like dividual institutions of the World Bank any substantial improvement in the level to call for the imagination of the experts in Group. In this connection I will begin with of our technical skills or in our national the Corporation to explore possibilities of the International DevelopmentAssociation. incomes, and in the absence of any visible such recommendations to the Board of In recognition of the important role difficulties which the Bank has had with Governors which would allow for some played by IDA in the development of our the past practices, I must confess I am flexibility in IFC's investment policy. In countries, and in view of the fact that our unable to appreciate the basis of this par­ this connection, may I repeat what I said hopes for the future lie, to a considerable ticular ceiling. I would therefore like to last year, that in matters of this nature measure, in further effective contributions suggest that $200,000 be considered only we need to be guided by the basic cri­ which IDA can make toward meeting our as an indicative figure and introduce an terion of efficient management rather than aspirations, I would like to express my element of flexibility in handling matters by a legalistic approach to institutional satisfaction over the efforts that have been of technical assistance. ownership. I believe this is not an impos­ made and which are still being made on I would like, in passing, to mention the sible demand to make. If it is possible to the replenishment of IDA's resources. I importance of local cost finanCing in the amend the IMF Charter to accommodate have followed with interest the proposals light of our usual shortfalls in export the new world situation, I cannot see why put forward by the President of the Asso­ earnings and heavy pressures on our ciation and the discussions which have budgetary allocation. At this point, I must it should not be possible to deal with taken place after the United States' coun­ congratulate the distinguished Governor IFC's Charter in the same manner, so as ter proposals. I hope that, with the co­ for Malaysia on the way in which he pre­ to transform it into an institution capable operation of Part I countries, the level of sented the real problems confronting the of dealing with the present challenge. annual contributions shall be as close to developing world. When he clearly stated Finally, Mr. Chairman, my Delegation the original proposals as possible and on the destructive effects of the unfavorable would like to join you in welcoming the terms no less favorable. terms of trade on our economies, he was new members and to offer our warm and With a view to strengthening IDA's finan­ indeed speaking for many of us who have sincere congratulations to the Governors cial standing, I joined my colleagues in constantly been hard hit by unfair con­ for Indonesia and The Gambia. supporting the 1964 recommendation for traction of prices for our primary com­ a transfer to IDA of $50 million out of the modities. Prices for Malaysian rubber have Bank's net income for the fiscal year caused the same problems to Malaysia as ended June 1964. I also had the pleasure the problems we have in Tanzania with Trinidad and Tobago: The Hon. to support the recommendations in 1965 prices for our sisal. These have fluctuated from £120 per ton in 1964 to £63 per ton FRANCIS C. PREVATT and in 1966 for respective transfers of $75 Governor of the Bank and Fund million by way of grants to IDA. While I today, reducing our earnings from £20 appreciate the reasons which have called million to barely £10 million sterling last Mr. Chairman, may I with your permis­ for a drop in the level of this year's trans­ year. This difference constitutes a larger sion express on behalf of my Delegation fer, I consider it very unfortunate that a amount than the World Bank Group or and myself how happy we are to be here management decision should have been any other lending institution has ever lent in Brazil, one of the most dynamic and taken to recommend a transfer of only to Tanzania in one year. vigorous developing countries of the West­ $10 million for a year of good income to On account of administrative delays in ern Hemisphere and indeed of the world the Bank, and of serious financial difficulty processing loan and credit applications, and to be in Rio de Janeiro, a city which to the Association. Under these circum­ may I too mention that it becomes neces­ we have found to be most delightful and stances it is difficult for my Delegation to sary in many cases to press for retroactive progressive. We are also happy to be pres­ support this recommendation. finanCing. These are problems of which, ent at this historic meeting of the Inter­ I cannot overemphasize the signifi­ I know, the management of our institu­ national Monetary Fund and of the World cance of the various forms of technical tions are well aware, and I cannot insist Bank, the arrangements for which merit assistance which we require in the iden­ too much on them. the highest praise .... tification, preparation and execution of Finally, let me conclude by registering ... I now turn to the subject of develop­ projects, and in this connection I am re­ my satisfaction over the operations of IFC ment finance. ferring both to the Bank and IDA. Our in member countries, where conditions Now that a solution of the liquidity prob­ technical limitations in all aspects of our have allowed the Corporation to operate lem is in sight, I earnestly hope that the development are well known, and we are within the provisions of its Charter. I must balance of payments inhibitions which grateful for the magnitude and nature of say, however, that the time has come for have in the past prevented the developed 58 countries from extending economic aid on takes a fairly long time. At the moment, the appropriate scale and quality to the therefore, we are experiencing certain bal­ developing countries will be removed. We ance of payments pressures which are Turkey: The Hon. CIHAT BILGEHAN of the developing countries are sanguine likely to persist into the early 1970's when Governor of the Bank and Fund that the flow of aid from developed coun­ the diversification programs now being We have noted with great interest and tries over the next few years can reach, vigorously pursued will yield their full re­ satisfaction the efforts of the World Bank and indeed should surpass, the target of sults both in earning and in saving of and its Affiliates during the past year to one per cent of the national income. In fact, foreign exchange. assist developing countries in their eco­ we hope that in the proposed Second De­ The stresses now being experienced on nomic development. I would like in this velopment Decade of the United Nations, external account are also manifesting respect to extend my earnest congratula­ the one per cent aid target will be consid­ themselves in our Budget. Since the end tions to Mr. Woods and to his colleagues. ered anachronistically low. Further, we of the petroleum boom in the beginning of I feel confident that these efforts will fur­ would expect to see a rapid end to the the 1960s our budget surpluses have been ther increase during the coming years and tying of aid to goods produced by the shrinking in spite of increases in rates of that the World Bank community will con­ donor country and a greater provision to taxation and our efforts to improve tax tinue, through its dedicated leadership meet the local costs of projects. administration. This shrinkage has in part and staff, to play its instrumental role in All of these are pressing problems, the been caused by the development effort it­ assisting developing countries in the resolution of which would improve the self; for the capital investment has given achievement of their crucial aim of rapid international economic and political cli­ rise to greater operating costs for the ex­ economic growth. mate in the last third of the twentieth cen­ panded services. This is particularly so in In spite of these achievements the fact tury. Yet there is an even more immediate the case of education. remains that many problems continue to aspect of the aid problem. I refer here to Our policy in this regard is, as far as is beset us. The points raised by my coun­ the much discussed question of the in­ consistent with the development effort, to try's representatives and other speakers creased provision of resources for IDA. restrict the growth of recurrent expendi­ at last year's Meeting continue, unfortu­ This is an area in which further delay can ture. At the same time we are now taking nately, to remain valid. only aggravate the already desperate situ­ steps to increase public savings in gen­ The adverse movement of terms of trade ation on external account of many develop­ eral and the budget surplus in particular is continuing with regard to developing ing countries. Further, even in respect of by the institution of a medium-term fiscal countries. Foreign assistance is becoming ordinary loans granted by the World Bank, program. The first aspect of this program more scarce and its terms are hardening I wish to suggest that the rigid rules relat­ is the improvement of the financial con­ rather than improving. All these are dis­ ing to the degree of government participa­ dition of our public utilities to be effected turbing developments which contrast tion in projects need to be relaxed and partly by increasing rates and charges and sharply with the rate of increase of na­ that more positive efforts should be made partly by more effective management. The tional income in developed countries. to enlist local capacity in both the con­ second aspect is greater attention to the In this connection I feel compelled to sulting and contracting phases of the im­ possibilities of measures which, apart from voice our great concern at the fact that the plementation of assisted projects. Finally, raising revenue, will in many cases check terms extended by IDA are endangered on this subject of development finance, I the rate of increase of consumption ex­ by the non-replenishment of its resources. wish to give my wholehearted support to penditure, especially on imported goods. We must all remember that unless such the distinguished President of the Bank The third is the improvement of the ad­ funds on soft terms are made available to when he said in his opening address "that ministration of our income tax which permit financing on truly developmental economic development, when it is pursued would result in greater tax yields even at terms, this institution cannot be expected with vigor and intelligence, is worthy on present rates. As a result of this fiscal to continue the all-important role it is pres­ merit of the support of the industrialized program, we hope shortly to be in a posi­ ently playing in less developed countries. nations". tion where we can again finance a greater I wish to associate myself with the speak­ With your permission, Mr. Chairman, I proportion of our public sector capital ex­ ers who have preceded me in urging the shall end by speaking briefly on the cur­ penditure from public savings. major contributors to act rapidly in re­ plenishing IDA funds so as to permit the rent economic position in, and the outlook But given the present transition to a new achievement of its fundamental goal. for, my country-Trinidad and Tobago. economic structure, our best domestic Thus, developed countries must con­ In previous meetings of the Fund and efforts will be of no avail over the medium tinue to work hand in hand with inter­ the Bank, the need to diversify our petro­ term unless we receive considerable national financial institutions, if the vital leum economy has been stressed. I can amounts of external economic assistance problems of the less developed world are now report that diversification programs to further our process of diversification. to find a solution. A higher volume of aid, are now well under way in domestic agri­ I feel certain that we shall during the next commensurate with the increased possi­ culture and livestock production, in manu­ few critical years overcome our problems bilities of the developed countries, in con­ facturing and in tourism. However, no one of structural transition provided that we junction with softer terms with particular ought to expect such programs to yield continue to be fully supported by the In­ emphasis on untied loans, are prerequi­ substantial results immediately. By its very ternational Monetary Fund and the World sites to assist developing countries in nature such a process of diversification Bank. bringing about the capital accumulation 59 which is of such great importance in the year, as well as on some of the problems We have united with our neighbors in a first phase of development. that are still to be resolved. common market to expand our agriculture, The latest developments in this field are If I may be permitted, I would like to commerce and industry as a means of fur­ not hopeful. The volume of present aid speak first about the performance of the thering the development of our respective from all sources is such that a substantial Uganda economy. countries. We have agreed to continue to portion of it has to be allocated to meet The Uganda economy has been grow­ administer certain basic services in com­ the servicing of external debts. The trend ing at a reasonably fast rate during recent mon so as to reap economies of scale to is toward more tied aid thus making in­ years. Over the past five years, per capita our mutual benefit. vestments naturally more costly, and the income in the monetary sector has grown There will naturally be need for the three terms of trade are continuing to dete­ at an annual average rate of nearly 2V2 governments to coordinate their economic riorate. per cent. Fixed investment, on which will and monetary policies so as to ensure the It is for all these reasons that we look depend future output, particularly in the proper functioning of the Community. In upon the untied Bank financing with such industrial sector, rose from £18 million this respect we have continued and will great hope and, again for all these rea­ sterling to £32 million sterling per annum continue the practice of full coordination sons, that we feel such great concern that over the past three years. Domestic sav­ of our fiscal poliCies through close consul­ without IDA replenishment, Bank financ­ ings were running at a high level but were tations between the three finance minis­ ing will become so costly as to impair its offset by "private capital flight." It is esti­ ters. Similarly, the central banks are fully crucial role. In saying this I believe I am mated that between the years 1961 and consulting each other on all matters of actually only associating myself with the 1965, the economy probably lost almost mutual interest so as to ensure that our statements made on various occasions by £50 million sterling of foreign exchange governments harmonize their monetary Mr. Woods. by way of net long-term private capital policies. In fact, there have already been The solution to our problems lies in the transfers. held five useful meetings between our cen­ decisions of the member countries, to be With greater public demand for services tral banks. taken in conjunction with the World Bank and the need to develop the economy so We have agreed to set up a regional Group. We trust that such urgent deci­ as to improve the standards of living of development bank to be known as the East sions will be forthcoming soon. our people, there have inevitably been African Development Bank which will be I wish to conclude my remarks by ex­ generated heavy pressures on our budget­ an integral part of the Community with the pressing my sincere appreciation to the ary resources, despite their sufficiently purpose of correcting imbalances and Brazilian Government for the successful rapid annual increase. In the past two promoting a more balanced industrial de­ arrangement of this Meeting and the hos­ budgets, the Government has taken firm velopment between the three economies pitality they have shown to us. fiscal and monetary remedial measures to and to make it possible for the three econ­ restore a proper financial balance both omies to become more complementary in externally and internally. The Government the industrial field. The Bank is also in­ has also taken vigorous steps to diversify tended to supplement the activities of the agricultural sector, the main source of national development agencies. It is our Uganda: The Hon. L. KALULE-SETTALA Uganda's export earnings. At this junc­ hope and desire that this new institution, Governor of the Bank and Fund ture, I would like to express the apprecia­ in collaboration with the African Develop­ ment Bank and other international finan­ On behalf of the Uganda Delegation to tion of my Government for the external cial agencies, should prove an effective this year's Annual Meetings of the Bank assistance received from bilateral sources instrument for organizing and employing and the Fund, I would like to express our and from the International Development new resources for our development. ... appreciation to His Excellency the Presi­ Association which has supplemented our ... On the Bank, I should like to begin dent of Brazil for his excellent address to efforts in raising resources for develop­ by commending the President, the Board us when opening this year's proceedings. ment of key sectors, such as education, health, communications, livestock and and the staff for the particular attention I would also like to extend our grateful agriculture. they are giving to the problems of the de­ thanks to the Government of Brazil and In my address to fellow Governors last veloping member countries. In this re­ the citizens of Rio de Janeiro for the warm year, I referred to certain developments spect, I would like to make special mention and kind reception accorded to us since in the economic and monetary fields in­ of the services rendered by the Bank in our arrival. volving my country and its East African the field of technical assistance. As is Sir, I join fully Governors who have neighbors, Kenya and Tanzania. Since mentioned in the 1966/67 Report (Part II), spoken before me in expressing my ap­ then I am glad to state that the three East assistance has been through such organ­ preCiation for your clear and commend­ African Governments have reached agree­ izations as the two permanent mission able statement on the economic and mon­ ment on a new form of association and offices in Africa, the Agricultural Develop­ etary problems of the member countries have signed a treaty for an East African ment Service and expert missions visiting in the Bank Group and the Fund. Economic Community. The treaty, which member countries to assist them to formu­ I also wish to thank Mr. Woods and Mr. will come into force on the 1st December late investment programs and pOlicies that Schweitzer for their excellent statements this year, establishes an East African com­ are conducive to their economic growth. on the activities and achievements of the mon market and provides for its proper In this connection, we were pleased to Bank Group and the Fund during the past function and regulation. welcome to Uganda a Bank mission to-

60 ward the end of 1966. We found discus­ need for an amendment of the Articles of reports in front of us, leading in a most sions between the mission and the various IFC aimed at enabling the Corporation to masterly way to a grasp of the complex agencies of our Government and the pri­ lend funds or participate in equity capi­ and multiple problems of world economy. vate sector most fruitful. My Government tal of enterprises owned and managed Their compelling presentation of the has now received an advance copy of the by State corporations. I feel obliged to re­ problems of developing countries and the mission's report which contains some gen­ peat some of the arguments already made deep sympathetic understanding with eral observations and recommendations for the need to amend the Articles in this which these problems are expounded are on the Uganda economy and on our eco­ respect. both gratifying and inspiring. I find myself nomic and financial policies. This report In most African economies today, it is encouraged to include in this brief state­ will be a useful guide to my Government acknowledged that there is a scarcity of ment a warning as to the gravity of some in identifying those areas of economic and entrepreneurship and many Governments of the tendencies pervading the interna­ financial policy that need reviewing. in the African region have, by force of cir­ tional economic relations of today. Once again I feel obligated to refer to cumstances, to intervene in the setting up Most alarming amongst those tenden­ the fact that the over-all flow of financial of enterprises. Indeed, some of the most cies is the fact that the growth in exports resources from the more to the less de­ successfully organized enterprises that of the developing countries has been con­ veloped countries has not kept pace with are available for further financing in my siderably slower than the expansion of the growth in wealth in the richer coun­ own country, for example, were initiated trade among the industrial countries and tries. The situation has been aggravated and are managed by the Government of of over-all world trade. in the past year by the excessive de­ Uganda agency known as the Uganda De­ This development aggravates the al­ flationary policies followed in certain velopment Corporation. I therefore feel ready deteriorating balance of payments developed countries with the purpose of strongly that the criterion on which IFC situation between the developed and the correcting imbalance in their balance of should base its investment policy deci­ developing countries. Furthermore, this payments positions. These policies have sions in this respect, should be "economic deterioration comes at a time when, as is tended to weaken further the demand for viability and proper management" of an stated in the Bank's Report, "For the sixth primary products from the less developed enterprise and not "ownership" of such successive year there has been little im­ countries. They have also led to an over­ enterprise. I therefore suggest to fellow provement in the over-all level of develop­ all reduction in the long-term capital flow Governors that the management of IFC ment assistance provided by the high to the developing countries. To correct should work out a suitable amendment to income countries." It comes also at a time these adverse effects, there is clearly an enable it to participate, on a loan and when "competing demands for capital urgent need for those industrialized coun­ equity basis, in State-owned enterprises. have made it more difficult and more costly tries that are enjoying surpluses in their Finally, I also wish to join other fellow to obtain finance for development by bor­ basic balances to seek an appropriately Governors in welcoming Indonesia and rowing in the world's capital market." greater rate of economic expansion at The Gambia to membership in the Bank An additional serious development of home. Group and the Fund. an urgent nature is the increasing bur­ Because of the fact that all IDA re­ den of debt and debt service as related sources have been committed and there to current export proceeds of developing countries. is nothing to meet further commitments in To state it briefly and without drama­ 1968, it is disappointing that Part I coun­ United Arab Republic: The Hon. tization, the developing countries-toward tries of the Association have not moved HASSAN ABBAS ZAKI the end of the U.N. Development Decade with as much speed as the need for early Governor of the Bank -seem to be in the following predicament: decision would appear to dictate. It is It gives me great pleasure to begin Their terms of trade vis-a.-vis the indus­ obvious that, with the recommended trans­ this statement by welcoming Guyana, The trial countries are again deteriorating; fer of only US$10 million from the Bank's Gambia, Botswana and Lesotho into the their share of international trade is shrink­ profits to IDA, the activities of the Asso­ family of our institutions. The return of ing, debt service is absorbing a continu­ ciation, which constitute a vital credit line Indonesia to membership is also an occa­ ally bigger share of their export proceeds of badly needed soft loans to the develop­ sion for rejOicing. and the cost of acquiring development ing world, will come to a complete stand­ At this stage, too, I would like to express capital is increasing. still unless the Part I member countries our Delegation's joy at being in this great It has been said repeatedly that eco­ reach early agreement on this replenish­ and beautiful city, and to offer our thanks nomic development is an international re­ ment issue. to the host Government for all its most sponsibility. But while each day bears new I was encouraged by the remark made generous and effective efforts to make the evidence of the importance of this state­ by you, Mr. Chairman, that during 1966 occasion of our Meetings this year most ment, little has been done to carry through one of the important developments in the memorable. its profound implications. Bank Group lending activities was that the Coming now to the business before this On the other hand, one is bound to Bank made its first loan to a Government­ Annual Meeting, I must start by compli­ wonder as to what would have been the owned industrial enterprise. menting the President of the Bank Group situation in the absence of the Bank and On several previous occasions, some and the Managing Director of the IMF on the IMF and the steps taken by them to fellow Governors have spoken about the their thoughtful statements, in the three improve the environment for development.

61 Development cannot continue in a world as we all know belongs to another inter­ velopment of the resources of all their where trade is hampered and international national forum. members. We cannot claim that we have payments are not in equilibrium .... succeeded in either direction in 1966/67. . . . The efforts of the Bank and the Fund Indeed, in the early months of 1967 in guiding the work of coordination groups world industrial production actually fell both for development financing and re­ slightly-a situation we have not seen for United Kingdom: The Han. scheduling of debts are worthy of praise. close on a decade-and this has had an JAMES CALLAGHAN This role is developing into a major func­ Governor of the Fund adverse effect on the developing coun­ tion and a service of great importance to tries as well as on the developed countries. the less fortunate developing countries. I wish to express my gratitude to the As the OECD has pointed out, this slow­ The multilateralization of aid is, in our Government of Brazil for the hospitality ing down in world trade has occurred as estimation, the soundest approach in tack­ that they have extended to the Interna­ a result of deliberate reduction of demand ling development financing as an interna­ tional Monetary Fund and to the World in three major countries, namely, the tional responsibility. But this great respon­ Bank in inviting us to meet here in Rio United States of America, the Federal Ger­ sibility could not be made use of without de Janeiro-a city famed throughout the man Republic and the United Kingdom, the provision of adequate financing. A world for its outstanding natural beauty. while simultaneously a number of other scarcity of funds is shown by the exhaus­ In Britain we are very mindful of our his­ countries were following a similar course. tion of the funds available for IDA. torical association with Brazil, which has This deliberate action was taken in each We feel that it is about time that re­ extended over the centuries, and of the case in order to correct either an exces­ sources used in production of means of links of trade and commerce that have sive pressure of demand at home leading destruction in this divided world of ours given us a deep knowledge and under­ to an inflationary situation, or to deal with should be directed, at least in part-since standing of each other. troublesome balance of payments deficits we cannot ask for the impossible-toward It is also a pleasure to express the ap­ -or to do both. Where these deflationary the improvement of the standard of living preciation of the British Government to the measures have been taken, they have of the. people of the world who live below Managing Director and to the staff of the had a dramatic effect both at home and acceptable standards. International Monetary Fund and to the abroad. Internally, they have led to a loss Therefore, the UAR strongly supports President and staff of the World Bank for of production and to high unemployment. any positive action which would result in the work that they have done during the Abroad, they have resulted in the slowing the setting aside of a reasonable propor­ last 12 months and for the reports which down of world trade with harmful effect tion of the funds now being spent for mili­ they have laid before us. It is my privilege on other countries, especially on the de­ tary purpose by all nations, for the purpose to see a great deal of the work of Mr. veloping countries-and consequential of finanCing development. Schweitzer and of Mr. Woods, and the harm to the very countries that initiated The ways and means in which these world is fortunate to have two such out­ the deflationary measures. funds could be utilized could be examined. standing public servants. It is clear from our experience of the One way would be to make use of the long It is a pleasure to see the membership last 12 months that, despite the studies experience of the Bank Group, either di­ of the Fund and Bank growing year by and reports and recommendations on rectly or indi rectly, through the establish­ year, and I am very glad to join in wel­ these subjects, we have not yet worked ment of a new UN agency for that purpose. coming The Gambia and Indonesia. I look out how to achieve full employment and This proposal will benefit both the cause forward to Botswana and Lesotho becom­ a reasonable rate of growth with a pattern of prosperity and the cause of interna­ ing members in due course. of international payments satisfactory to tional peace. I shall, of course, have something to all of us. All these questions need much I have kept my brief statement within say about two important initiatives that more study, which must include the factor the strictly economic field in which we all will take up much of the time of this con­ of business confidence, before we can be agreed to set the limits of our business in ference. One is the proposal for special sure that an unbroken period of expand­ this gathering. I am sure that the distin­ drawing rights. This is something which, ing world trade lies ahead. guished Delegate of the United Kingdom, for my part, I warmly welcome. The other Meantime what more has to be done to in raising the question of the closing of is the case for an early and substantial ensure the renewed expansion of world the Suez Canal, did not mean to introduce replenishment of the funds of the Inter­ trade and output which is needed by all a political element into our deliberations. national Development Association. This is of us and in particular by the developing Therefore, rather than ignore the ob­ a need to which I give great emphasis. countries who have seen a disappointing servations of the honorable Delegate, I But before I come to these two matters, fall in commodity prices? I myself have would like to endorse what he said re­ I wish to refer to the disappointing rate of just come from a gathering of the Finance lating to the economic loss to the world increase in world trade during the last Ministers of 26 nations of the Common­ resulting from the closing of that vital 12 months. For this, the major industrial wealth, who represent between them 800 waterway; in fact, my country must be countries must accept primary responsi­ million people of whom the overwhelming relatively the biggest loser. But going fur­ bility. I remind the conference that the pri­ number are living in the less developed ther into the discussion of reasons why mary objective of both the International countries. the Suez Canal is closed to world traffic Monetary Fund and the World Bank is to My colleagues at that meeting ex­ would draw us into a discussion which ensure expansion of trade and the de- pressed great concern about the price

62 and volume of their exports. Rising indus­ those with international reserve curren­ funds are efficiently administered, but also trial production in the developed countries cies, but also to the developing world. The because it is the world's principal source is the best way of ensuring increased ex­ World Bank's lending rates have also been of soft, untied multilateral aid. Its monies port incomes for primary producers, but under pressure in recent months, and I have been made fully and freely available. schemes directed to the support of prices am concerned lest the burden of debt We believe that these conditions should at a level fair both to producers and con­ charges should become even more oner­ obtain in the future as in the past. If, how­ sumers are also valuable. I warmly sup­ ous for those who receive development ever, a country feels that the result of port, therefore, the Resolution now before finance. operating them-particularly with an in­ us that these problems be studied by the I therefore welcome the United States creased level of replenishment-would be Fund in collaboration with the other inter­ Government's proposal for a tax increase to impose too heavy a burden on its bal­ national bodies concerned. which will help them to achieve the right ance of payments, we would be prepared The communique of the Commonwealth blend of fiscal and monetary policies. I to consider this problem with other Gov­ Finance Ministers' meeting emphasized a very much hope that this courageous and ernments, to see if some system of ad­ further thought that was frequently ex­ necessary move will enable the world to ministrative deferment of the use of their pressed during our discussions, namely, avoid a repetition of a rise in interest rates contributions can be worked out, if, other­ that countries whose balance of payments of the kind which occurred last year, as, wise, serious balance of payments diffi­ and reserve positions are strong and who taking the world economic situation as a culties would arise. have a margin of spare capacity are under whole, such a rise is certainly not called We ask that the matter should be dis­ a heavy obligation to contribute to world for. cussed at an early date among the parties prosperity by pursuing suitable expansion­ Another temporary problem is the clo­ concerned so that a settlement can be ary policies at home. sure of the Suez Canal. This is doing harm reached. In our view this matter should be Speaking for Britain, I can say that, not only to the developed nations, who can settled before the end of the year .... within the strict limits imposed by the withstand it, but also to a number of de­ ... Discussion of the liquidity problem overriding necessity of maintaining a sat­ veloping nations. I do not wish to become naturally brings me to the position of isfactory balance of payments, we are enmeshed in the political aspects of the sterling in the world monetary system. It following a policy that will lead to a re­ problem, but from an economic standpoint is now more than ever clear that we are newal of growth in the United Kingdom and from the pOint of view of the prosper­ living and working within a system which during the remainder of 1967 and 1968. ity of the peoples represented here, I very is constantly evolving and which must We expect that rate of growth to be around much hope that an early solution will be be improved and adapted to the world's three per cent per annum, and that this will found. So long as the Canal is closed both needs. But this process of evolution is be consistent with a satisfactory balance trade and aid are hindered and the world's not simply a matter of what Finance Min­ of payments. We have no intention of de­ people are all the poorer. isters and Governors of Central Banks parting from this basic economic strategy, The important question of IDA replen­ separately or collectively, may decide, which will prove to be in the long-run inter­ ishment has not yet been settled. I regret however important we may think we are. ests of both Britain and the rest of the this. At our meeting last year many Gover­ It is a matter, too, of the needs and wishes world. nors referred to the call which Mr. Woods of the world financial community. This has I understand from my colleagues, Mr. made in July 1966 for a replenishment of been overlooked in a lot of the talk-some Henry Fowler, the Secretary of the United the resources of IDA. I said then that this of it rubbish-that has taken place about States Treasury, and Professor Karl Schil­ was something to which we in Britain gave the role of sterling in international finan­ ler, the Minister of Economics of the Fed­ high priority and that we favored a sub­ cial affairs. eral German Republic, that both of them stantial increase. We have indeed made On this I have two things to say. The also expect to see a higher rate of eco­ provision in our public expenditure for first is obvious. The international role of nomic growth in their countries, and if this such an increase. However, since then, sterling is a fact. It is not something which is so then the world can look forward to this problem has been much discussed, has been fabricated to support the pres­ renewed expansion and to a higher level and it is now urgent to reach a decision. tige of the United Kingdom or even our of world trade in due course. On behalf of the British Government, I economic interests. Nor does it continue I hesitate to be more precise than that have indicated my view to Mr. Woods both because of any stubborn policy on our part because I have long since discovered that on the level at which we would be pre­ to persist in such a role. It continues be­ while we can predict trends with some pared to contribute to a replenishment cause it meets a world need: because accuracy, we are nearly always wrong of IDA and on the conditions on which, bankers, traders, investors and govern­ about timing. Nevertheless my view is that in H. M. Government's view, the money ments throughout the world find it con­ the renewal of growth will be discernible should be subscribed. Our proposal pro­ venient to hold and use sterling. It is by the end of the year and quite obvious vides for a replenishment of the funds of noticeable that the fluctuations in the ster­ by next spring. IDA at a substantially higher level than ling balances, even in periods of consider­ Another constant concern for all of us in the past-a level which we believe to able pressure, have been relatively small is the persistent tendency of interest rates be realistic and attainable. As regards when compared with the total amounts to edge upwards. Difficult though it may conditions, Britain's views are well-known. which are held. Pressure on sterling usual­ be to avoid this at all times, it is harmful IDA is held in high regard by the develop­ ly arises when the balance of payments not only to industrial countries, especially ing countries, not merely because its of Britain or of the Sterling Area as a whole

63 looks like being in heavy and continuing payments and a high level of employment. We are now roughly in a position of equi­ deficit. But at present we are not in that To cope with their immediate difficulties librium in the balance of payments. position. Indeed at the recent Common­ we took severe measures last year. Natu­ If we look at the last twelve-month pe­ wealth Conference, the Finance Ministers rally they have been uncongenial to our riod for which figures are available, the expressed their conclusion that the Ster­ people, but they have been of great bene­ year to June 1967, our balance of pay­ ling Area showed the prospect of con­ fit to our competitive position. We have ments on current and long-term capital siderable improvement in the balance of enjoyed a period of overall relative price transactions, including the normal unre­ payments and of a surplus in 1968, al­ stability and of wage stability, with bene­ corded earnings, was roughly in balance though the amount will be affected by the ficial effects on our overseas prices. The and this represented an improvement of length of time the Suez Canal remains British Government has no doubt that a some £275 million compared with the closed. prices and incomes policy is a necessary preceding twelve months. Taking all un­ Sterling also comes under pressure as condition for success in our efforts to recorded movements into account, the a result of a weakening of confidence break free from "stop-go." In this aim we balance of monetary movements showed which can arise, for instance, because of have the support both of employers and a surplus during this period of some £140 war in the Middle East or disturbances in of organized labor, although there are diffi­ million, compared with a deficit of nearly Asia. These events have little or nothing culties about the methods that should be £300 million in the twelve months before. to do with Britain's economic position but employed. We have now moved out of the We in the United Kingdom look forward they can lead to temporary difficulties be­ period of total wage freeze into a period to better times as the various measures cause the relationship between Britain's where wage increases are to be related to we have taken bear fruit. Our objective short-term liabilities and short-term liquid increases in productivity. This will con­ remains unaltered. It is to make the best assets is less than satisfactory. It is that tinue to be the Government's policy for use of all our resources and to do it in relationship which needs improvement in the l1ext phase. It is estimated that the such a way through the Bank and the order to achieve a better balance. There underlying growth of Britain's productive Fund that we narrow the gap between rich is, of course, no difficulty about the size potential at present is about 3 per cent and poor. of Britain's long-term assets compared per annum with a tendency to accelerate. with her liabilities-our worldwide assets Accordingly, our medium-term economic are substantially in excess of our overseas strategy is to maintain a rate of growth liabilities. Therefore I have consistently of demand within that figure. taken the view that the smooth running I have spoken before to this assembly United States: The Hon. of the world's monetary system requires about the long-term structural changes HENRY H. FOWLER Governor of the Bank and Fund that a shortage of immediate liquidity that are taking place in Britain-the ra­ should be met by the combined operations tionalization of traditional industries, the I take special pleasure in participating of the Central Banks to offset such a short­ training for new skills, the emphasis on in this Annual Meeting in Rio de Janeiro. age. I readily acknowledge with gratitude productivity, the technological develop­ I am very grateful to the Government the assistance which has been given by ments in such fields as computers, nuclear and the people of Brazil for their gracious the Central Banks and by Governments in energy, electronics and natural gas ex­ hospitality on this occasion. The beauty this matter, which has enabled these so­ ploitation, not forgetting the growing so­ of this city, the breathtaking potential of called "confidence" movements to be phistication of British exports. These are this huge and vibrant country, form a back­ offset. long-term pOlicies but year by year I can drop to this conference that can inspire Against this background I repeat that see progress in increased efficiency, bet­ us all. we do not approach the question of the ter management, improved labor relations. The personal experience of viewing at role of sterling with a fixed determination At the same time we have taken more firsthand the problem3 and potentialities to keep things as they are. But it goes direct action to strengthen the external bal­ of economic growth in Brazil and in her without saying that we could not contem­ ance. One reason for our difficulties was neighboring nations will, I trust, stimulate plate any change, which did not take full the high level of Government expenditure us all to assist in further efforts to rein­ account of the interests of those who have overseas, principally for defense and aid, force international collaboration to sup­ claims on the United Kingdom. Subject which grew from £270 million in 1959 to port economic development. to that, however, we shall adopt a flexible over £500 million last year. We have taken I am very glad to see among us once position. We are ready to adapt the ster­ again Governors for Indonesia represent­ ling system to an evolution in the world's measures to reduce that burden, and these ing that large and important nation, and monetary arrangements, provided that the will have an increasing effect in the later change comes in a way which will nineteen-sixties and early nineteen-seven­ to note that both the Fund and Bank have strengthen the world monetary system as ties. We have also had to take certain been able, in the past year or so, to play a whole. measures to limit the outflow of private a helpful, constructive role in assisting As to the U. K. economy, the British capital from the United Kingdom to de­ Indonesia to deal with a most difficult and Government recognizes clearly that the veloped countries while leaving develop­ trying period of economic stabilization. I long-term task is to build an economy ing countries unaffected. It is a regrettable know that all of us wish the Indonesian which will be capable of sustained growth fact that this outflow was making unduly authorities well in the courageous efforts while still maintaining a strong balance of heavy demand on our liquid resources. they are making.

64 It is also a pleasure to welcome to mem­ that are desirable and feasible from a We are mindful, of course, that external bership in our organizations The Gambia, long-term point of view. Despite this, long­ assistance such as IDA provides can only which last week completed the formalities term interest rates have remained high. supplement sound na.tional development to assume membership, and Botswana, There will be a need to harmonize na­ efforts. whose membership resolutions are before tional economic and financial policies in Only in association with self-help efforts this Meeting of Governors. the interest not only of balanced expan­ -coordinated and soundly-conceived do­ The Fund and Bank have had another sion at home, but also of a balanced ex­ mestic policies and actions - can the highly successful year, the highlights of pansion of trade internationally. We are application of external assistance bring which have been recorded in their excel­ all aware that both deficit and surplus developing countries to sustained growth. lent Annual Reports. Mr. Woods and Mr. countries share the responsibility for con­ Further, domestic self-help policies Schweitzer have summarized the activity tinuous efforts to improve the process of which need not be catalogued here are of of the past year in the Bank family and in adjustment. Deficits and surpluses are vital importance to create a climate in the the Fund and I will not retrace the ground after all two sides of the same coin. There developing countries conducive to maxi­ they have covered so well. ... should be no presumption that either the mizing the flow of external resources­ ... A perfectly even rate of growth is deficit or surplus country is the one that public and private. Where these measures not to be expected either in national econ­ is delinquent. Cooperative action by both are lacking, the task of commanding the omies or in world trade. The recent situa­ parties is essential. ... support of the electorates of high-income tion has been marred by sluggish ad­ ... I turn now to matters relating to countries for continued assistance with vances in output-and in some instances, long-term economic development. The im­ public funds will be made far more diffi­ contractions-in a number of key indus­ provements we are now setting in motion cult. Where these are lacking, private re­ trial nations. If this state of affairs were in the international monetary mechanism sources will not flow in desired directions to continue, or, worse still, to intensify, are, I believe, essential to the long-term and amounts. strains on the international payments well-being of the developing countries. Two developments of the past year are mechanism would surely become severe. Economic interdependence of the devel­ especially noteworthy for us here in rela­ In particular, the world's primary produc­ oped and the developing countries is a tion to the object of encouraging greater ing nations would bear a heavy burden fact of the present and of the future that foreign and local private capital participa­ of adjustment. must be a guiding principle in the direc­ tion in the growth process. In many of the industrial nations, a tion we give to international economic The initial use of the authority granted slower advance in output was consciously policies. under earlier Charter amendments was sought by national policy in order to re­ It is a paradox that the problem of de­ made by the Executive Directors approv­ duce inflationary pressures. With the ad­ velopment, while infinitely complex in its ing a $100 million line of credit from the justment completed, the basis for a more economic, social, cultural and even moral World Bank to the International Finance enduring expansion has been laid. Essen­ ramifications, is also blindingly simple in Corporation. As a result, we may expect tial as these adjustments in separate coun­ its barest elements. These can be reduced even more substantial increases in IFC tries have been, pOlicies of contraction to three in number: (a) domestic self-help financing of the private sector-and the in surplus countries must not be allowed policies by the developing country suffi­ much larger volumes of foreign and local to continue so long as to prejudice the cient to (b) attract external resources, private capital that are associated with it. prospects for an expanding volume of public and private, drawn from countries Second, the inauguration of a new and world trade, severely aggravating imbal­ able to provide them resulting in a (c) useful facility within the IBRD institu­ ances in international payments. A con­ diligent application of the combined do­ tional structure-the International Centre stantly expanding volume of trade, well mestic and external resources along lines for the Settlement of Investment Disputes distributed regionally, is essential if ac­ conducive to long-term development rath­ - through arbitration and conciliation ceptable levels of well-being are to be er than exhausting immediate consump­ services will contribute materially to an sustained in developed countries and pro­ tion. The major factor in the history of improvement of the climate in which inter­ moted in the developing countries of the successful development lending by the national private investment takes place. world. World Bank may well be its devotion to In so doing, it will extend the area that A common theme in the recent experi­ these principles. The Bank outstandingly can benefit from private investment. It ence of many industrial nations has been reflects them today. merits the support of the entire member­ the monetary strains that are the conse­ The subject of IDA replenishment, while ship of the Bank. quence of too rapid internal expansion, not formally on our agenda, is neverthe­ I cannot overemphasize the importance and too sparing reliance on fiscal re­ less the most important business pending of policies conducive to a strong and dy­ straint. In general, this year has seen before the Governors of the Bank family namic private sector, offering opportuni­ some easing of the most severe financial of institutions. It should be evident from ties to both foreign and local capital, and strains. But, in turn, the welcome mod­ my remarks today that President Johnson serving as the pace-setter of the economy. erate reduction in upward pressure on fully supports the efforts of the World Bank In streSSing the role of private finance, money markets internationally has only management to achieve a replenishment I am, of course, ever mindful of the need been achieved, in the main, along with a for IDA on a substantially enlarged scale. for effectively mobilized and effectively slowing in the growth of output in some I am hopeful that in their statements here, applied public finance. We heard in the major industrial nations below the rates other Governors will share this attitude. opening addresses yesterday and will in

65 the next days learn more of the urgent straint on the ways the United States can giVing increased attention on their part. need for the developed countries to find provide assistance, persistent balance of Nothing less than the highest priority at­ the ways and means of promoting in­ payments surpluses constitute an impera­ tention to these problems will provide the creases in the volume of real resources tive to countries enjoying such a position basis for averting the potential disaster available for development. We have too to expand their assistance in the form of that looms in the food-population race. long remained on the so-called aid "pla­ finance. A sensible policy for such coun­ In closing my remarks I would like to teau." It is time to strike out for higher tries, and a policy which can make a quote to you the words of the Brazilian ground. The World Bank family, and with contribution to the over-all adjustment representative, Mr. Souza Costa, who, in it the regional banks, offer a promising process in the international payments sys­ offering a resolution of thanks at the final channel for dOing just this. tem, is one of increasing the volume, eas­ session of the Bretton Woods Conference, I would be taking an unrealistic view of ing the terms, widening the geographic said: the world if I were not to recognize, how­ scope and eliminating procurement limita­ "As the knowledge of these results be­ ever, that, leaving aside the budgetary tions on the flow of development funds. comes more widespread, a corresponding problem we all face, there are at least two These thoughts are relevant to the un­ increase will take place in the number of other constraints that tend to hold back resolved question of IDA replenishment. those who, realizing the greatness of the the steadily increasing availability of re­ As of last March I was authorized by objectives sought, will wish to be counted sources to these multilateral lending in­ President Johnson to support the IDA re­ among the supporters of this undertaking." stitutions. plenishment at a substantially increased How correct this prophesy has been a. Capital markets everywhere are un­ level, provided that account should be with respect to the Fund and Bank. Let us der pressure from mushrooming domestic taken of the balance of payments prob­ hope that our successors will say the same requirements. The price of capital in many lems of deficit donor countries in deciding of the work that we have launched at this markets is touching historic highs. how IDA's new resources would be made Annual Meeting. The World Bank should not be forced available. Such a feature will in fact speed to place excessive reliance on any single agreement leading to transfer of resources market for its rising capital needs. A sus­ to LDC's through IDA. If the multilateral tainable mechanism for providing develop­ agencies themselves are to achieve our ment finance to the Bank through private hopes for them, they must have increasing Yugoslavia: The Hon. JANKO SMOlE Governor of the Bank markets requires an equitable sharing of funds committed by the donors for a long­ the total efforts-and the concept of equity term period. Balance of payments safe­ The general economic situation prevail­ embraces reasonable terms as well as guards will help assure that long-term ing in the world today, expertly presented adequate amounts. Certainly, surplus contributions are made, since only with in the Annual Reports of the Fund and the countries should contribute positively to their protection will Finance Ministers be Bank, indicates some economic trends in the adjustment process through granting in a position to assure their legislatures the developing countries that are of great preferred and substantially increased ac­ that the uncertainties of the future have concern to us. cess to their capital markets by the Bank been taken into account. The rate of economic growth continues and other multilateral leading agencies. In thus referring briefly to IDA replen­ to be below the five per cent foreseen for b. Balance of payments factors are the ishment discussions I would like to make the Development Decade, the growth of other special constraint. Rather than per­ one further point very clear. foreign trade has slowed down, prices of mit our serious and continuing balance Nothing in the United States plan would primary products have declined, and the of payments difficulties-made still more require IDA to make any changes in its terms of trade of developing countries pre­ complex by the foreign exchange cost of present policies with respect to the allo­ sent the most unfavorable aspect since our effort in Viet-Nam-we in the United cation of its resources to countries and 1960. The flow of long-term capital con­ States have found ways to maintain a high projects, or with respect to international tinues to be below the one per cent of level of aid through the transfer of real competition in procurement, and no such GNP of developed countries. In addition, resources to the developing world. We changes are contemplated in this proposal. interest rates and other conditions of loans would prefer, in an ideal world, to make The magnitude of the tasks ahead re­ and credits have deteriorated. our assistance available in the form of quires that we strive to improve the quality These developments should be consid­ financial resources. However, when bal­ of the development efforts of both the ad­ ered when we discuss the Outline before ance of payments realities confront us, vanced and the developing countries. In us for the creation of special drawing our choice is clear: we strive not to re­ so dOing, we must recognize that certain rights. This proposal tends to solve one duce the level of our assistance-but in­ economic sectors demand greater con­ very important problem of the existing stead to make our assistance available centration of these improved efforts. The monetary system, that is, its quantitative through transfer of real resources. This twin problems of food and population aspect. I think, however, that we would approach requires that the real resources should now occupy the forefront of our not fulfill our task if we stop at this first represent an addition to, not a substitute attention. The United States is emphasiz­ step without deploying all our efforts for for, goods and services moving in normal ing assistance in agricultural improvement further improvements in the existing mone­ commercial channels. -including land reform as well as direct tary system. We see many serious short­ If serious and continuing balance of production improvements-in its own pro­ comings in the proposal: it was created payments difficulties constitute a con- grams. The international institutions are for and under conditions which have been

66 evolving in the developed part of the whole. It should contribute to the elimina­ proposed to be transferred from IBRD to world. tion of a fundamental disequilibrium in IDA this year is, in my opinion, a very For developing countries, the problem developing countries. It seems to me that modest one and, I think, regrettable. In of international liquidity plays a special the absence of this element in the existing this connection, I should Ii ke to urge that role. The development of their economies monetary system is clearly evident. member countries do their utmost to speed imposes on them the necessity for a grow­ The present international monetary sys­ up their decisions for the replenishment ing volume of imports, which cannot be tem represents a complexity of various of IDA resources by direct contributions reduced below a certain level without cur­ instruments of which one-and an impor­ and by releasing the capital of IDA paid tailing their development plans. On the tant one-is the Fund's resources. It would in national currencies, as my Government other hand, the decreasing volume of for­ be advisable for the Fund to study the pos­ has already done. eign aid and large export fluctuations are sibilities of applying more liberal criteria Also, it seems to me that it is necessary imposing upon these countries difficult for the utilization of its resources by de­ to introduce more flexibility in the Bank's tasks of adjustment in their economies veloping countries. Furthermore, a link policy of granting loans with a view to to maintain a balance in their external between the utilization of special drawing putting more stress on the financing of accounts. Under the eXisting monetary rights and basic financing should be estab­ development plans. It is of great impor­ system the developing countries are con­ lished. I suggest that this subject be tance to developing countries that the fronted by a dilemma: to increase their thoroughly explored .... Bank should finance a part of local cur­ monetary reserves or to finance their de­ ... Now, I would like to turn to certain rency expenditures. It is of concern to us velopment plans. This problem still awaits problems related to the work of the Bank. that there have been recent indications a solution. Although good results from the work of that such a practice may not be fOllowed. With your permission, Mr. Chairman, I the Bank may be seen in practically every World economic and financial problems should like to quote the case of my coun­ member country of the Bank, a satisfac­ in general, and specifically, the problems try as an illustration of the problems which tory level of loans granted has not yet been of developing countries, will shortly be the other developing countries may also face. reached. In fact there is not an adequate object of discussions at the second meet­ In order to speed up its industrialization increase in Bank lending at a time when ing of UNCTAD. This requires prepara­ we had resorted in the past to a system the needs are rapidly increasing. tory work on the part of the Fund, and the of trade and customs restrictions in order One of the very acute problems today, Bank as well, and their full cooperation in to protect the development of our industry. much discussed by various international this important international gathering. The This protective mechanism played a very forums, is the debt repayment problem contributions of the two institutions in the important role in the initial period of our which threatens to nullify the net transfer past to UNCTAD activities have been of development. However, when new industry of capital to the areas where the problem great value. The active participation of the was built up, it became clear that trade exists. The present slow-down of growth Bank in preparing the scheme for supple­ restrictions could be an obstacle to further is to a large extent the consequence of mentary financing contributed greatly to progress in efficiency and productivity. the debt-servicing problem. Debt service the clarification of the complex problems For this reason, as well as because of and capital income transfers are already in this field and I hope that the support technological advances, we see the open­ absorbing more than half of the inflow of of the Bank will continue until practical ing of our doors to world markets as a capital and grants to developing countries. measures are introduced. Here also, the way to continuing economic progress. Concrete and urgent action is awaited, full cooperation of the Fund would be de­ This transition from a closed economy to especially from our international institu­ sirable in seeking practical solutions. an open economy requires, however, con­ tions, for solutions of the debt consolida­ I should like to use this opportunity to siderable adjustment, which inevitably en­ tion problem and establishing means for express the great appreciation of my Gov­ tails balance of payments difficulties. This easing the debt-servicing burden. I think ernment to the Fund for its assistance in adjustment process cannot be carried out that the Bank and Fund are equally inter­ the implementation of our economic re­ within a period of a few years only, is form. My Government's appreciation goes ested in the solution of these problems, not restricted to particular projects and equally to the Bank for its assistance in each of them from their own sphere of cannot be carried out without adequate financing the modernization of our industry. competence. This requires close coopera­ external financial assistance. Neither the May I also mention that in the imple­ tion between the two institutions. The assistance provided by Bank loans under mentation of the policy for the modern­ same applies, in my opinion, to the set­ the present procedure nor by Fund financ­ ization of our economy and its closer ting up of a suitable mechanism for the ing of balance of payments short-term integration in the world market, we re­ deficits is adequate. Nor has the problem stabilization of prices of primary products, cently enacted regulations enabling for­ been solved by the present special draw­ which is an essential element for further eign private capital to invest in joint ing rights facility. The problem, however, progress in accelerating the economic de­ ventures with Yugoslav enterprises. In this remains a crucial one for the integration velopment of developing countries. connection, my Government has decided of developing countries in world economy. My Government attaches special impor­ to apply for membership in IFC. If I may generalize, the international tance to the replenishment of IDA re­ In conclusion, it is with great pleasure monetary system cannot be regarded in sources, in order to meet the needs of this that I express my thanks to the Govern­ isolation but must be viewed within the important institution and to enable it to ment of Brazil for its hospitality to us in context of economic development as a continue its work unhindered. The amount this magnificent city.

67 Concluding Remarks by GEORGE D. WOODS

I know that I speak for all in the World ized nations would mean an immensely amount of $600 million for the first year, Bank Group when I add my voice to the larger proportional increase in the exter­ $800 million for the second year, and $1 many you have already heard and express nal resources available to the developing billion for the third year-a total of $2.4 our thanks to the Government and the countries. Any sacrifice involved is simply billion. Certain conditions designed to pro­ people of Brazil for the warmth and gra­ that of sharing with the poorer countries tect the position of countries in balance ciousness of their hospitality, and for the a really very small part of the improve­ of payment difficulties were stipulated. efficient manner in which various facilities ment in living standards that the steady Regardless of the merits or demerits of and services have been mobilized to assist growth in the industrial countries will make these stipulations, I feel impelled to state us in our work. I add a special word of possible. that, contrary to a widely held impression, appreciation for the enchanting, delightful It was but a few years ago that the prin­ they would in no way inhibit our inter­ social activities which were arranged. cipallimitation on the World Bank Group's national competitive bidding procedures. As we approach the close of this Annual activities was a shortage of well-prepared Several other contributing countries have Meeting I would like to express my appre­ and economically sound projects in coun­ accepted the amounts proposed by the ciation to the Governors who have offered tries where the general economic position United States. But the amount of the re­ so many constructive comments on the warranted financial assistance. We had plenishment and the kind of balance of work of the World Bank Group of organi­ faith that through patient effort and with payments protective devices which should zations. May I also at this time say that technical assistance from the Bank and be incorporated in the replenishment I welcome the resolution you have just other sources, the ability of many of our agreement are still under negotiation with approved relating to a staff study of the less developed countries to prepare and and among IDA's major contributors. Prog­ problem of the stabilization of prices for carry out useful projects could be im­ ress toward resolution of these issues con­ primary products.! proved. But this was faith. The process tinues to be slow. At the conclusion of last year's Annual had never been tried on a large scale be­ The Governor for The Netherlands has Meeting I expressed the view that the Bank fore. We could not be sure it would work. suggested to this meeting of Governors Group faced a period in which austerity Today things have changed greatly. We that the time has come to convene a spe­ would have to be the rule in managing our have been able to identify more projects cial high-level meeting or series of meet­ resources. We are still in such a period which are, or soon will be ready for financ­ ings as soon as possible for the purpose and the pledge which I then made, that ing than we now have the resources to of reaching a firm agreement regarding we would "be even more prudent in our finance. These are located in many more the replenishment of IDA resources. This operations, even more selective in choos­ countries than ever before. This is an en­ is a constructive suggestion which should ing our projects, and even more insistent couraging fundamental change. It reflects, receive full consideration by all con­ on wise use of development finance, for not a decrease in our resource availability, cerned. I expect to act on it; and I trust purposes which, without question, have but a substantial increase in the ability that by this or some similar procedure we the highest developmental priority," stands of our member countries to prepare and shall be able, within the next month or today. carry out productive investment. two, to resolve the outstanding issues re­ However, the statements of Governors In the World Bank Group of organiza­ garding amounts and conditions and to from many industrial countries indicate tions, governments have created and have reach conclusions that will enable IDA to that their economies are entering a new available a powerful and efficient machine operate, without any change in its basic period of economic expansion. There is with proven ability to contribute signifi­ principles, at a very much higher level than no doubt in my mind that the increased cantly to the objectives they have repeat­ in the past. resources which become available to the edly set for themselves in the development I said in my opening address that the richer countries as a result of their own field. The present problem is to give that journey of a thousand miles is well begun. economic growth provide the best hope machine sufficient fuel of the right kind to Our steps must not falter now. The weeks of finding the capital required to maintain enable it to take advantage of the greater ahead will determine whether the discus­ the momentum of the development effort. opportunities for financing development sions at this meeting will lead to the neces­ I would like to emphasize again that the which are now open to it. I refer here, of sary decisions that will enable that journey allocation to development finance of only course, primarily to the urgent matter of to continue. Only then could we look back a small proportion of the increase in the IDA replenishment. on this week's work as indeed, in the elo­ Gross National Product of the industrial- As most of the Governors are aware, quent words of His Excellency, the Presi­ the Government of the United States, re­ dent of Brazil, "a moment of maturity for sponding to my proposal of July 1966, has the international community." indicated its willingness, subject to legis­ I wish you all a safe journey and lative approval, to support an IDA replen­ good health until we meet again next 'See page 81 ishment for a three-year period in the September.

68 Concluding Remarks by the Chairman ERIK BROFOSS Governor of the Fund for Norway'

The time has come to close the Twenty­ The formulas on which the Outline is and energies from the overriding issue of Second Annual Meetings of the Boards of based might differ greatly from the bold the adequacy of world reserves. Governors of the Bank and of the Fund. and sweeping ideas that served as the The task now before us calls for such I am sure that we had all of us been point of departure when the exercise first flexibility in the legal provisions so as to looking forward with great expectations to started. The more gratifying it is to record allow the Fund a margin of discretion in convening in the fascinating setting of this the approval which Governors have given the implementation of the scheme. scenic, alluring and pulsating metropolis. to a new facility sue generis. I have no doubt that the Executive Board We shall be leaving with vivid and lasting Reconfirming as we have the fundamen­ will be able to observe the time limit of the memories of engaging and enchanting tal principles of universality and of non­ resolution for the submission of the pro­ days. The soccer game added excitement discrimination, we have dispelled the posals for the necessary amendments to to the joy of our stay. apprehension that once was widely shared the Articles of Agreement. I trust that with The Governors have already adopted that compartmentalization would turn the utmost dispatch Governors will take action Fund into a divided house. In any future the Resolution expressing our appreciation on the Board's recommendations and gov­ evolution it will be imperative that the unity to the Government and people of Brazil ernments likewise will seek to obtain rati­ of the Fund and its character of a world­ and the City of Rio de Janeiro. My co­ fication by parliaments. Time might be wide organization be faithfully upheld. The Chairman and I shall express our personal running short in preparing the ground for democratic right of all members-large or feelings of gratitude for the warm welcome activation. small-to voice an opinion on cardinal is­ and delightful hospitality which has been We would also recognize an equally extended to us with such charming cour­ sues and to be able to do so at all stages of preparation and at all levels is the very urgent need for a reassessment of gen­ tesy. The two Chairmen want to pay trib­ eral economic policies. An ominous circle ute to the Brazilian authorities for having prerogative of membership in the Fund. of man-made stagnation has in recent discharged the duties of the host country By placing this novel instrument of the months had serious repercussions, in par­ in such a commendable and graceful way. SDR's in the experienced and skillful ticular on developing countries, but also We wish the Government of Brazil every hands of the Executive Board, the Manag­ on the smaller industrialized nations. success in realizing its aspirations to build ing Director and the staff of the Fund we a prosperous future for its great people. shall have the benefit of proven adminis­ This unsatisfactory state of affairs ac­ We recogniZe and treasure the indis­ trative and technical competence. Over centuates one crucial aspect of the ad­ pensable services and the untiring labors the two decades of pragmatic adaptation justment process and gives emphasis to of the staff of the Bank and of the Fund, of our Institution to the needs of a chang­ the special responsibilities that rest upon we compliment them on their model per­ ing world they have demonstrated their the major industrial countries for the or­ formance, we beg forgiveness for the ex­ resourcefulness and their dedication to derly functioning of an economic system acting strains we impose upon them and truly international service. based on an international division of labor we wish them well deserved days of rest­ However, upon member countries will which carries with it a strong element of ful relaxation. rest the ultimate responsibility for deci­ mutual interdependence. In discharging I shall not attempt, in my capacity as sions on policies and will fall the praise of national responsibilities for designing do­ success or the onus of failure. The legal your Chairman today, to make a formal mestic economic policies, the impact of structure of the agreement and the man­ summing up of the achievements of this action and no less of inaction upon other agerial talents of the operators will be of conference. But with your permission, fel­ countries has to be heeded. low Governors, I might offer a few per­ little avail unless the enterprise is ani­ mated by a dynamic and genuine spirit of We have welcomed the statements of sonal reflections. the Governors of the lending industrial­ We have successfully brought to frui­ partnership in a joint venture. Indeed, only through our firm determination to exploit ized countries where they visualized an tion the protracted deliberations on the early resumption of a more satisfactory much heralded reform of the international to the full the potentialities of this new fa­ rate of growth than was experienced in monetary system. I am confident that by cility as a means of solving the problem of 1966 and early 1967. • adopting the outline for the establishment any future shortage of international liquid­ I sincerely hope that this prospect will of a new facility in the Fund, we have made ity, will the Twenty-Second Annual Meet­ a significant contribution to the organic ings stand out as a landmark in the annals materialize. It would be most fitting and development of this Institution. of our organization. appropriate at this signal juncture in the As of this moment all we can claim is life of our Institution to reaffirm by deeds that we have completed an initial stage of our faith in the fundamental principles as a continual search for improvements in laid down in Article I of the constitution the international payments system. Other of the Fund where its purposes and the lSee footnote, page 2 projects should not distract our attention objectives of policies are established.

69 Economic policy must continuously be than aid must be the sound basis of opening freer access to markets and by conducive to economic progress in a development. alleviating the strains imposed by a grow­ world which is one and indivisible. In his report on the activities of the ing burden of foreign debt. A positive re­ A steadily expanding production in the Bank and its Affiliates, Mr. Woods gave sponse will make possible a major break­ industrialized countries will strengthen us an assurance that projects already au­ through in the battle against destitution their capability to offer assistance to de­ thorized will serve to solidify the economic and despondency. veloping countries which on their part will foundations of many developing coun­ I now wish all of you a safe passage more easily find outlets for their exports tries. The industrialized countries have, I back to your respective home countries. and at more remunerative prices. This is am sure, taken note of his plea for addi­ The Twenty-Second Annual Meetings of the best way of rendering help since in tional support, not only in the form of more the Boards of Governors of the Bank and the long-term perspective trade more funds for IDA and the Bank, but also by Affiliates and of the Fund stand adjourned.

70 DOCUMENTS OF THE BOARDS OF GOVERNORS

SCHEDULE OF MEETINGS I

Monday September 25 10:00 a.m.-JOINT BOARDS -Opening Ceremonies -Address from the Chair -Annual Address of President, IBRD, IFC and IDA -Annual Address of Managing Director, IMF -Joint Procedures Committee2

Tuesday September 26 9:30 a.m.-JOINT BOARDS -Joint Procedures Committee Report I -Annual Discussion

Wednesday September 27 9:30 a.m.-IBRD, IFC and -Annual Discussion IDA BOARDS

Thursday September 28 9:30 a.m.-IMF BOARD -Annual Discussion -Joint Procedures Committee

Friday September 29 9:30 a.m.-JOINT BOARDS -Conclusion of Annual Discussions -Joint Procedures Committee Reports II, III and IV -Comments by Heads of Organizations -Adjou rn ment

lApproved by the Chairman, Kare Willoch and the President, George D. Woods, on August 8, 1967, pursuant to the By-Laws, IBRD Section 6(d), IFC Section 4(d) and IDA Section 1(a). 2The first meeting of the Joint Procedures Committee was added to the Schedule of Meetings on September 25, 1967. NOTE: The International Centre for Settlement of Investment Disputes held the Annual Meeting of its Administrative Council on Monday, September 25.

71 PROVISIONS RELATING TO THE CONDUCT OF THE MEETINGS 1

ADMISSION

1. Sessions of the Boards of Governors of the Bank, IFC, IDA and the Fund, including joint sessions, shall be open to accredited observers, the press, guests and staff. 2. Meetings of the Joint Procedures Committee shall be open only to Governors who are members of the Committee and their advisers and to such staff as may be necessary.

PROCEDURE AND RECORDS 3. The Chairmen of the Boards of Governors will establish the order of speaking at each session. Governors signifying a desire to speak will generally be recognized in the order in which they asked to speak. 4. With the consent of the Chairman, a Governor may extend his statement in the record following advance submission of the text to the Secretaries. 5. The Secretaries will have verbatim transcripts prepared of the proceedings of the Boards of Governors and the Joint Procedures Committee. The transcripts of proceedings of the Joint Procedures Committee will be confidential and available only to the Chairmen, the President of the Bank and its Affiliates, the Managing Director of the Fund and the Secretaries. 6. Reports of the Joint Procedures Committee shall be signed by the Committee Chairmen and the Reporting Members.

PUBLIC INFORMATION 7. The Chairmen of the Boards of Governors, the President of the Bank and its Affiliates and the Managing Director of the Fund will communicate to the press such information concerning the proceedings of the Annual Meetings as they may deem suitable.

lApproved by the Chairman, Kare Willoch and the President, George D. Woods, on August 8, 1967, pursuant to the By-Laws, IBRD Section 6(d), IFC Section 4(d) and IDA Section 1(a).

72 BANK AGENDA 1

1. 1966-67 Annual Report

2. Financial Statements and Annual Audit

3. Administrative Budget

4. Allocation of Net Income

5. Report on Loan Regulations and Bond Regulation Amendments

6. Place and Date of 1969 Annual Meetings

7. Officers and Procedures Committee for 1967-68

8. Membership of Botswana

9. Stabilization of Prices of Primary Products2

IFe AGENDAI

1. 1966-67 Annual Report

2. Financial Statements and Annual Audit

3. Administrative Budget

4. Rules of Procedure

IDA AGENDAI

1. 1966-67 Annual Report

2. Financial Statements and Annual Audit

3. Administrative Budget

4. Amendments to Credit Regulations No. 1

lApproved by the Executive Directors of the Bank, IFC and IDA, pursuant to the By-Laws, IBRD Section 6(a), IFC Section 4(a) and IDA Section 1 (a), on August 9,1967.

2 Item 9 was added to the Agenda on September 26, 1967 in accordance with Joint Procedures Committee Report I. 73 JOINT PROCEDURES COMMITTEE

Chairmen ...... NORWAY Vice Chairmen ...... , ...... , ...... MALAYSIA SIERRA LEONE Reporting Members ...... HONDURAS

Other Members ALGERIA* CHILE KENYA AUSTRIA CHINA* LEBANON BRAZIL FRANCE LUXEMBOURG CAMEROON* GERMANY UNITED KINGDOM CANADA INDIA UNITED STATES

* Not a member of IFC

REPORT I

September 25,1967

At its meeting held on September 25, 1967, the Committee considered a request submitted by Governors of the Bank and the Fund for Cameroon, Central African Republic, Congo (Brazzaville), Ivory Coast, Da­ homey, France, Gabon, Upper Volta, Madagascar, Mali, Mauritania, Niger, Senegal, Chad and Togo to add to the Agendas for this Annual Meeting of the Boards of Governors of the Bank and of the Fund an item on Stabilization of Prices of Primary Products ( ... attached). The Committee recommends that an item on Stabilization of Prices of Primary Products be added to the Agendas of the Boards of Governors of the Bank and the Fund for this Annual Meeting.

Approved: /s/ KARE WILLOCH /s/ M. ACOSTA B. /s/ ERIK BROFOSS /s/ ROBERTO RAMIREZ NORWAY-Chairmen HONDURAS-Reporting Members

This Report was approved and its recommendation was adopted by the Boards of Governors on September 26, 1967.

ATTACHMENT DAKAR, September 22, 1967

DRAFT RESOLUTION

For inclusion in the Agenda of the Annual Meeting of Governors of the IMF and the IBRD in Rio de Janeiro, Brazil

CONSIDERING the decisive importance of the stabilization of prices for primary products at a remu­ nerative level for the economic advancement of the developing countries and the improvement of the standard of living of their populations, the Governors meeting in Dakar request that in Rio study be made 74 of the conditions in which IMF, IBRD and IDA could participate in the elaboration of suitable mechanisms involving balanced commitments on the part both of the producing and of the consuming countries, and devote the necessary resources thereto. Signed: Nko'o Etoungou, Cameroon Alexandre Banza and Bernard Ayandho, Central African Republic Edouard Ebouka-Babackas, Congo (Brazzaville) Konan Bedie, Ivory Coast Bertin Borna and Stanislas Kpognon, Dahomey Michel Debre, France Pierre Mebaley and Pierre Fanguinoveny, Gabon Tiemoko Garango and Pierre Claver Damiba, Upper Volta Victor Miadana and Rakotovao Ralison, Madagascar Louis Negre, Mali M. S. M'Khaitirat and B. M. Wane, Mauritania Courmo Barcourgne and Alidou Barkire, Niger Jean Collin and Habib Thiam, Senegal Abakar Sanga Traore and Georges Diguimbaye, Chad Boukari Djobo and Paulin Eklou, Togo

REPORT II

September 28,1967

At the meeting of the Joint Procedures Committee held on September 28,1967, the items of business on the agendas of the Boards of Governors of the Bank, IFC and IDA were considered.

A. The Committee submits the following report and recommendations on Bank and IDA business:

1. 1967 ANNUAL REPORT The Committee noted that provision had been made for discussion of the 1967 Annual Report of the Bank and IDA.

2. FINANCIAL STATEMENTS, ANNUAL AUDITS AND ADMINISTRATIVE BUDGETS The Committee considered the Financial Statements, Auditors' Reports and Administrative Budgets contained in the 1967 Bank and IDA Annual Report, together with the report dated August 18,1967. The Committee recommends that the Boards of Governors of the Bank and IDA adopt the draft resolutions ... 1

3. ALLOCATION OF NET INCOME OF THE BANK The Committee considered the Report of the Executive Directors of the Bank, dated August 15, 1967, on the Allocation of Net Income.2

The Committee recommends that the Board of Governors of the Bank adopt the draft resolution ...3

4. LOAN REGULATIONS NOS. 3 AND 4 AND BOND REGULATION NO.1 The Committee considered the Report of the Executive Directors of the Bank dated August 15, 1967, on amendments to Loan Regulations Nos. 3 and 4 and Bond Regulation No. 1.4

lSee pages 79 and 85 3See page 79 2See page 87 4See page 88 75 The Committee recommends that the record of the proceedings of this Annual Meeting state that the said Loan Regulations Nos. 3 and 4, dated February 15, 1961, as amended February 9, 1967, and Bond Regulation No.1 dated February 1, 1967, have been reviewed and noted by the Board of Governors of the Bank.

5. CREDIT REGULATIONS NO. 1 The Committee considered the Report of the Executive Directors of IDA, dated August 15, 1967, on amendments to Development Credit Regulations No. 1.1 The Committee recommends that the record of the proceedings of this Annual Meeting state that the said Development Credit Regulations No. 1 dated June 1, 1961, as amended February 9, 1967, have been reviewed and noted by the Board of Governors of IDA.

6. APPLICATION FOR MEMBERSHIP IN THE BANK The Committee considered the Report of the Executive Directors dated September 15, 1967, and the application of Botswana for membership in the Bank.

The Committee recommends that the Board of Governors of the Bank adopt the draft resolution ...2

7. STABILIZATION OF PRICES OF PRIMARY PRODUCTS The Committee considered the request of Governors for Cameroon, Central African Republic, Congo, Ivory Coast, Dahomey, France, Gabon, Upper Volta, Madagascar, Mali, Mauritania, Niger, Senegal, Chad and Togo relating to Stabilization of Prices of Primary Products3 and prepared the text of a draft resolution on that subject.

The Committee recommends that the Board of Governors adopt the attached resolution ...4

B. The Committee submits the following report and recommendations on IFC business:

1. 1967 ANNUAL REPORT The Committee noted that provision had been made for discussion of the 1967 Annual Report of IFC at this Meeting.

2. FINANCIAL STATEMENTS, ANNUAL AUDIT AND ADMINISTRATIVE BUDGET The Committee considered the Financial Statements and the Auditors' Report contained in the 1967 Annual Report and the Administrative Budget attached to the Report dated August 18, 1967.

The Committee recommends that the Board of Governors of IFC adopt the draft resolution ...5

3. RULES OF PROCEDURE FOR MEETINGS OF THE BOARD OF DIRECTORS The Committee considered the Report of the Board of Directors, dated August 22,1967, on an amend­ ment of Section 1 (d) of the Rules of Procedure for Meetings of the Board of Directors.6 The Committee recommends that the record of the proceedings of this Annual Meeting state that the said amendment has been reviewed and noted by the Board of Governors of IFC.

Approved: /s/ KARE WILLOCH /s/ M. ACOSTA B. NORWAY-Chairman HONDURAS-Reporting Member

This Report was approved and its recommendations were adopted by the Boards of Governors on September 29, 1967 lSee page 89 3See page 74 5See page 84 2See page 80 4See page 81 6See page 88 76 ...... ------

REPORT IV I

September 28,1967

The Joint Procedures Committee met on September 28, 1967, and submits the following report:

1. 1969 ANNUAL MEETINGS The Committee recommends that the 1969 Annual Meetings of the Boards of Governors be convened in Washington, D.C.

2. OFFICERS AND JOINT PROCEDURES COMMITTEE The Committee recommends that the Governor for Ceylon be elected Chairman, and that the Governors for Dahomey and Turkey be elected Vice Chairmen, of the Boards of Governors of the Fund and of the Bank and its Affiliates to hold office until the close of the next Annual Meetings. It is further recommended that a Joint Procedures Committee be established to be available after the termination of these Meetings, and until the close of the next Annual Meetings, for consultation at the discretion of the Chairman normally by correspondence and, if occasion requires, by convening; and that this Committee shall consist of the Governors for the following members: Afghanistan, Australia, Ceylon, Democratic Republic of the Congo, Dahomey, Ecuador, Finland, France, Germany, India, Jor­ dan, Laos, Nicaragua, Spain, Sudan, Tanzania, Turkey, United Kingdom, United States and Venezuela. It is recommended that the Chairman of the Joint Procedures Committee shall be the Governor for Ceylon and the Vice Chairmen shall be the Governors for Dahomey and Turkey and that the Governor for Australia shall serve as Reporting Member.

Approved:

lsi KARE WILLOCH lsi M. ACOSTA B. Is/ ERIK BROFOSS Is/ ROBERTO RAMIREZ NORWAY-Chairmen HONDURAS-Reporting Members

This Report was approved and its recommendations were adopted by the Boards of Governors on September 29, 1967

RESOLUTIONS ADOPTED BY THE BOARD OF GOVERNORS OF THE BANK BETWEEN 1966 AND 1967 ANNUAL MEETINGS

RESOLUTION NO. 234

Amendments to the Memorandum of Understanding with Respect to Working Arrangements Between the United Nations Educational, Scientific and Cultural Organization (Unesco) and the International Bank for Reconstruction and Development and the International Development Association

RESOLVED: THAT the amendments to the Memorandum of Understanding with Respect to Working Arrangements Between the United Nations Educational, Scientific and Cultural Organization (Unesco) and the Bank

1 Report 11/ relates to business of the Fund. 77 and the International Development Association attached as Annex Al to the Report of the Executive Directors to the Boards of Governors dated April 11, 1967 are hereby approved. (Adopted May 15,1967)

RESOLUTION NO. 235 Membership of The Gambia

WHEREAS the Government of The Gambia has applied for admission to membership in the International Bank for Reconstruction and Development in accordance with Section 1 (b) of Article" of the Articles of Agreement of the Bank; and WHEREAS, pursuant to Section 20 of the By-Laws of the Bank, the Executive Directors, after consulta­ tion with representatives of the Government of The Gambia, have made recommendations to the Board of Governors regarding this application; NOW, THEREFORE, the Board of Governors hereby

RESOLVES: THAT the terms and conditions upon which The Gambia shall be admitted to membership in the Bank shall be as follows: 1. Definitions: As used in this resolution: (a) "Bank" means International Bank for Reconstruction and Development. (b) "Articles" means the Articles of Agreement of the Bank. (c) "Dollars" or "$" means United States dollars of the weight and fineness in effect on July 1, 1944. (d) "Subscription" means the capital stock of the Bank subscribed to by a member. (e) "Member" means member of the Bank. 2. Subscription: By accepting membership in the Bank, The Gambia shall subscribe to 53 shares of the capital stock of the Bank at the par value of $100,000 per share. 3. Membership in the Fund: Before accepting membership in the Bank, The Gambia shall accept member­ ship in and become a member of the International Monetary Fund. 4. Payments on Subscription: (a) Before accepting membership in the Bank, The Gambia shall pay to the Bank on account of the subscription price of one-half of such shares: (i) Gold or United States dollars equal to 2% thereof; and (ii) An amount in its own currency which, at the appropriate prevailing exchange rate, shall be equal to 18% thereof. (b) With respect to the subscription price of the other one-half of such shares, the 2% portion payable in gold or United States dollars and the 18% portion payable in the currency of the member shall be left uncalled, as set forth in Resolution No. 129, on the same basis as the 2% and 18% portions of subscriptions made pursuant to Resolution No. 128 of the Board of Governors. 5. Representation and Information: Before accepting membership in the Bank, The Gambia shall repre­ sent to the Bank that it has taken all action necessary to sign and deposit the instrument of acceptance and sign the Articles as contemplated by paragraph 6(d) and (e) of this resolution and The Gambia shall furnish to the Bank such information in respect of such action as the Bank may request.

ISee page 87 78 6. Acceptance of Membership: The Gambia shall become a member of the Bank with a subscription as set forth in paragraph 2 of this resolution, as of the date when The Gambia shall have complied with the following requirements: (a) Become a member of the International Monetary Fund; (b) Made the payments called for by paragraph 4 of this resolution; (c) Furnished the representation, and such information as may have been requested, pursuant to paragraph 5 of this resolution; (d) Deposited with the Government of the United States of America an instrument stating that it has accepted in accordance with its law the Articles and all the terms and conditions prescribed in this resolution, and that it has taken all steps necessary to enable it to carry out all its obligations under the Articles and this resolution; (e) Signed the original copy of the Articles held in the Archives of the Government of the United States of America. 7. Limitation on Period for Acceptance of Membership: The Gambia may accept membership in the Bank pursuant to this resolution until January 31, 1968, or such later date as the Executive Directors may determine. (Adopted July 17,1967)

RESOLUTIONS ADOPTED BY THE BOARD OF GOVERNORS OF THE BANK AT THE 1967 ANNUAL MEETING

RESOLUTION NO. 236

Financial Statements, Auditors' Report and Administrative Budget RESOLVED: THAT the Board of Governors of the Bank consider the Financial Statements, Auditors' Report and Administrative Budget, included in the 1966-67 Annual Report, as fulfilling the requirements of Article V, Section 13, of the Articles of Agreement and of Section 19 of the By-Laws of the Bank. (Adopted September 29,1967)

RESOLUTION NO. 237

Allocation of Net Income RESOLVED: 1. THAT the Report of the Executive Directors dated August 15, 1967,1 on "Allocation of Net Income" is hereby approved; 2. THAT the allocation of $159,596,227 of the net income of the Bank for the fiscal year ended June 30, 1967, to the Supplemental Reserve against Losses on Loans and Guarantees is hereby noted with approval; and 3. THAT the Bank transfer to the International Development Association by way of grant $10,000,000 out of the net income of the Bank for the fiscal year ended June 30, 1967, such transfer to be made at the time and in the manner to be decided by the Executive Directors. (Adopted September 29,1967) 1See page 87

79 RESOLUTION NO. 238

Membership of Botswana

WHEREAS the Government of Botswana has applied for admission to membership in the International Bank for Reconstruction and Development in accordance with Section 1 (b) of Article II of the Articles of Agreement of the Bank; and

WHEREAS, pursuant to Section 20 of the By-Laws of the Bank, the Executive Directors, after consulta­ tion with representatives of the Government of Botswana, have made recommendations to the Board of Governors regarding this application;

NOW, THEREFORE, the Board of Governors hereby

RESOLVES: THAT the terms and conditions upon which Botswana shall be admitted to membership in the Bank shall be as follows: 1. Definitions: As used in this resolution: (a) "Bank" means International Bank for Reconstruction and Development. (b) "Articles" means the Articles of Agreement of the Bank. (c) "Dollars" or "$" means United States dollars of the weight and fineness in effect on July 1, 1944. (d) "Subscription" means the capital stock of the Bank subscribed to by a member. (e) "Member" means member of the Bank. 2. Subscription: By accepting membership in the Bank, Botswana shall subscribe to 32 shares of the capital stock of the Bank at the par value of $100,000 per share. 3. Membership in the Fund: Before accepting membership in the Bank, Botswana shall accept member­ ship in and become a member of the International Monetary Fund. 4. Payments on Subscription: (a) Before accepting membership in the Bank, Botswana shall pay to the Bank on account of the subscription price of one-half of such shares: (i) Gold or United States dollars equal to 2% thereof; and (ii) An amount in its own currency which, at the appropriate prevailing exchange rate, shall be equal to 18% thereof. (b) With respect to the subscription price of the other one-half of such shares, the 2% portion payable in gold or United States dollars and the 18% portion payable in the currency of the member shall be left uncalled, as set forth in Resolution No. 129, on the same basis as the 2% and 18% portions of subscriptions made pursuant to Resolution No. 128 of the Board of Governors. 5. Representation and Information: Before accepting membership in the Bank, Botswana shall represent to the Bank that it has taken all action necessary to sign and deposit the instrument of acceptance and sign the Articles as contemplated by paragraph 6(d) and (e) of this resolution and Botswana shall furnish to the Bank such information in respect of such action as the Bank may request. 6. Acceptance of Membership: Botswana shall become a member of the Bank with a subscription as set forth in paragraph 2 of this resolution, as of the date when Botswana shall have complied with the following reqUirements: (a) Become a member of the International Monetary Fund; (b) Made the payments called for by paragraph 4 of this resolution; (c) Furnished the representation, and such information as may have been requested, pursuant to paragraph 5 of this resolution; 80 (d) Deposited with the Government of the United States of America an instrument stating that it has accepted in accordance with its law the Articles and all the terms and conditions prescribed in this resolution, and that it has taken all steps necessary to enable it to carry out all its obligations under the Articles and this resolution; and (e) Signed the original copy of the Articles held in the Archives of the Government of the United States of America. 7. Limitation on Period for Acceptance of Membership: Botswana may accept membership in the Bank pursuant to this resolution until March 29, 1968, or by such later date as the Executive Directors may determine. (Adopted September 29,1967)

RESOLUTION NO. 239

Stabilization of Prices of Primary Products

WHEREAS Governors of the Bank and the Fund for Cameroon, Central African Republic, Congo (Brazza­ ville), Ivory Coast, Dahomey, France, Gabon, Upper Volta, Madagascar, Mali, Mauritania, Niger, Senegal, Chad and Togo have transmitted to the President of the International Bank for Reconstruction and Develop­ ment the following request: CONSIDERING the decisive importance of the stabilization of prices of primary products at a remunerative level for the economic advancement of the developing countries and the improvement of the standard of living of their populations, the Governors meeting in Dakar request that in Rio study be made of the conditions in which IMF, IBRD and IDA could participate in the elaboration of suitable mechanisms involving balanced commitments on the part both of the producing and of the consuming countries, and devote the necessary resources thereto. AND WHEREAS the Board of Governors recognizes the importance of this subject in relation to the purposes of the Bank, NOW THEREFORE the Board of Governors resolves that the President is hereby invited to have the staff, in consultation with the Fund staff, prepare a study of the problem, its possible solutions, and their economic feasibility, in the light of the foregoing, to be submitted to the Executive Directors who are requested to transmit it with such comments or recommendations as they may have to the Board of Gover­ nors for consideration and appropriate decision by the Board, if possible at its next Annual Meeting. (Adopted September 29,1967)

RESOLUTION NO. 240

Appreciation

RESOLVED: THAT the Governors of the International Bank for Reconstruction and Development and its Affiliates and the International Monetary Fund express their deep appreciation to the Government and people of Brazil and of the city of Rio de Janeiro for their warm and gracious hospitality; and THAT they express their particular appreciation to the Governor and Alternate Governors for Brazil and their associates for their outstanding contributions to the success of these 1967 Annual Meetings. (Adopted September 29,1967) 81 RESOLUTIONS ADOPTED BY THE BOARD OF GOVERNORS OF IFe BETWEEN 1966 AND 1967 ANNUAL MEETINGS

RESOLUTION NO. 62

Membership of Viet-Nam

WHEREAS the Government of Viet-Nam has applied for admission to membership in the International Finance Corporation in accordance with Section 1 (b) of Article II of the Articles of Agreement of 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 Government of Viet-Nam, has made recommendations to the Board of Governors regarding the application of said Government;

NOW, THEREFORE, the Board of Governors hereby

RESOLVES: THAT the terms and conditions upon which Viet-Nam shall be admitted to membership in the Corpora­ tion shall be as follows:

1. Definitions: As used in this resolution: (a) "Corporation" means International Finance Corporation. (b) "Articles" means the Articles of Agreement of the Corporation. (c) "Dollars" or "$" means United States dollars. (d) "Subscription" means the Capital Stock of the Corporation subscribed by a member. (e) "Member" means member of the Corporation.

2. Subscription: By accepting membership in the Corporation, Viet-Nam shall subscribe to 166 shares of the capital stock of the Corporation at the par value of $1,000 per share.

3. Payment on Subscription: Before accepting membership in the Corporation, Viet-Nam shall pay $166,000 to the Corporation in full payment of the capital stock subscribed.

4. Information: Before accepting membership in the Corporation, Viet-Nam shall furnish to the Corpora­ tion such information relating to its application for membership as the Corporation may request.

5. Acceptance of Membership: Viet-Nam shall become a member of the Corporation, with a subscription as set forth in paragraph 2 of this resolution, as of the date when Viet-Nam shall have complied with the following requirements: (a) made the payment called for by paragraph 3 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 under the Articles and this resolution; and (d) signed the original copy of the Articles held by the International Bank for Reconstruction and Development.

6. Limitation on Period for Acceptance of Membership: Viet-Nam may accept membership in the Corpora­ tion pursuant to this resolution until October 31, 1967, or such later date as the Board of Directors may determine. (Adopted March 27,1967) 82 RESOLUTION NO. 63

Membership of Mauritania

WHEREAS the Government of Mauritania has applied for admission to membership in the International Finance Corporation in accordance with Section 1 (b) of Article II of the Articles of Agreement of 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 Government of Mauritania, has made recommendations to the Board of Governors regarding the application of said Government;

NOW, THEREFORE, the Board of Governors hereby

RESOLVES: THAT the terms and conditions upon which Mauritania shall be admitted to membership in the Corpora­ tion shall be as follows:

1. Definitions: As used in this resolution: (a) "Corporation" means International Finance Corporation. (b) "Articles" means the Articles of Agreement of the Corporation. (c) "Dollars" or "$" means United States dollars. (d) "Subscription" means the Capital Stock of the Corporation subscribed by a member. (e) "Member" means member of the Corporation.

2. Subscription: By accepting membership in the Corporation, Mauritania shall subscribe to 55 shares of the capital stock of the Corporation at the par value of $1,000 per share.

3. Payment on Subscription: Before accepting membership in the Corporation, Mauritania shall pay $55,000 to the Corporation in full payment of the capital stock SUbscribed.

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

5. Acceptance of Membership: Mauritania shall become a member of the Corporation, with a subscription as set forth in paragraph 2 of this resolution, as of the date when Mauritania shall have complied with the following requirements: (a) made the payment called for by paragraph 3 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 under the Articles and this resolution; and (d) signed the original copy of the Articles held by the International Bank for Reconstruction and Development.

6. Limitation on Period for Acceptance of Membership: Mauritania may accept membership in the Cor­ poration pursuant to this resolution until December 29, 1967, or such later date as the Board of Directors may determine. (Adopted June 19, 1967) 83 RESOLUTIONS ADOPTED BY THE BOARD OF GOVERNORS OF IFe AT THE 1967 ANNUAL MEETING

RESOLUTION NO. 64

Financial Statements, Auditors' Report and Administrative Budget

RESOLVED: THAT the Board of Governors of the Corporation consider the Financial Statements and the Auditors' Report, included in the 1966-67 Annual Report, and the Administrative Budget attached to the Report dated August 18, 1967, as fulfilling the requirements of Article IV, Section 11, of the Articles of Agreement and of Section 16 of the By-Laws of the Corporation. (Adopted September 29,1967)

RESOLUTION NO. 65

Appreciation

RESOLVED: THAT the Governors of the International Bank for Reconstruction and Development and its Affiliates and the International Monetary Fund express their deep appreciation to the Government and people of Brazil and of the city of Rio de Janeiro for their warm and gracious hospitality; and THAT they express their particular appreciation to the Governor and Alternate Governors for Brazil and their associates for their outstanding contributions to the success of these 1967 Annual Meetings. (Adopted September 29,1967)

RESOLUTIONS ADOPTED BY THE BOARD OF GOVERNORS OF IDA BETWEEN 1966 AND 1967 ANNUAL MEETINGS

RESOLUTION NO. 59

Amendments to the Memorandum of Understanding with Respect to Working Arrangements Between the United Nations Educational, Scientific and Cultural Organization (Unesco) and the International Bank for Reconstruction and Development and the International Development Association

RESOLVED: THAT the amendments to the Memorandum of Understanding with Respect to Working Arrangements Between the United Nations Educational, Scientific and Cultural Organization (Unesco) and the Interna­ tional Bank for Reconstruction and Development and the Association attached as Annex N to the Report of the Executive Directors to the Boards of Governors dated April 11, 1967, are hereby approved. (Adopted May 15,1967)

RESOLUTION NO. 60

Membership of The Gambia

WHEREAS the Government of The Gambia has applied for admission to membership in the International Development Association (hereinafter called "Association") in accordance with Section 1 (b) of Article II of the Articles of Agreement of the Association (hereinafter called "Articles"); and lSee page 87

84 WHEREAS, pursuant to Section 9 of the By-Laws of the Association, the Executive Directors, after consultation with representatives of the Government of The Gambia, have made recommendations to the Board of Governors regarding this application; NOW, THEREFORE, the Board of Governors hereby

RESOLVES THAT the terms and conditions upon which The Gambia shall be admitted to membership in the Association shall be as follows: (a) The terms and conditions of the membership of The Gambia in the Association other than those specifically provided for in this resolution shall be those set forth in the Articles with respect to the membership of original members listed in Part II of Schedule A thereof (including, but not by way of limitation, the terms and conditions relating to subscriptions, payments on subscriptions, usability of currencies, and voting rights). (b) Upon accepting membership in the Association, The Gambia shall subscribe funds in the amount of $267,000 expressed in terms of United States dollars of the weight and fineness in effect on January 1, 1960. (c) Before accepting membership in the Association, The Gambia shall make all payments on its initial subscription which would have been payable on or before the date of acceptance had it become a member of the Association as an original member listed in Part II of Schedule A of the Articles. (d) The Gambia may accept membership in the Association pursuant to this resolution until January 31, 1968, or by such later date as the Executive Directors may determine. (Adopted July 17,1967)

RESOLUTIONS ADOPTED BY THE BOARD OF GOVERNORS OF IDA AT THE 1967 ANNUAL MEETING

RESOLUTION NO. 61

Financial Statements, Auditors' Report and Administrative Budget

RESOLVED: THAT the Board of Governors of the Association consider the Financial Statements, Auditors' Report and Administrative Budget, included in the 1966-67 Annual Report, as fulfilling the requirements of Article VI, Section 11, of the Articles of Agreement and of Section 8 of the By-Laws of the Association. (Adopted September 29,1967)

RESOLUTION NO. 62

Appreciation

RESOLVED: THAT the Governors of the International Bank for Reconstruction and Development and its Affiliates and the International Monetary Fund express their deep appreciation to the Government and people of Brazil and of the city of Rio de Janeiro for their warm and gracious hospitality; and THAT they express their particular appreciation to the Governor and Alternate Governors for Brazil and their associates for their outstanding contributions to the success of these 1967 Annual Meetings. (Adopted September 29,1967)

85 REPORT OF THE EXECUTIVE DIRECTORS OF THE BANK AND IDA

April 11, 1967

Proposed Amendments to the Memorandum of Understanding with Respect to Working Arrangements Between the United Nations Educational, Scientific and Cultural Organization and the International Bank for Reconstruction and Development and the International Development Association

1. On April 30, 1964, the Boards of Governors of the Bank and IDA approved a Memorandum of Under­ standing between the Bank/IDA and the United Nations Educational, Scientific and Cultural Organiza­ tion (Unesco), setting forth basic principles to govern a proposed cooperative program in the field of education. On the same date, the Boards of Governors approved a Memorandum of Understanding with the Food and Agriculture Organization of the United Nations (FAO), setting forth basic principles to govern a proposed cooperative program in the field of agriculture.

2. The arrangements incorporated in both Memoranda of Understanding contemplated that certain specified costs incurred for agreed work under the program would be shared equally by the Bank/IDA and Unesco, and by the Bank/IDA and FAO, respectively, up to a ceiling figure to be agreed from time to time. It was also contemplated that, at least for an initial period, the Bank would bear any excess costs above the ceiling figures.

3. In August 1965, the Boards of Governors of the Bank and IDA, upon the joint recommendation of the Executive Directors, approved amendments to the Memorandum of Understanding between FAO and the Bank/IDA, which (a) eliminated the provision for a ceiling on cost sharing, so that the Bank and FAO would thereafter share all the agreed costs of the cooperative program, and (b) increased the Bank's share of those costs from 50% to 75% and correspondingly reduced FAO's share from 50% to 25%. These amendments, which were also approved by the Council of FAO, became effective on January 1, 1966, the start of FAO's next budgetary period.

4. A similar change in the cost-sharing formula governing the cooperative arrangements with Unesco was concurrently negotiated with Unesco, to become effective at the beginning of the next Unesco budgetary period. However, because that period would not start until January 1, 1967, the Director­ General of Unesco asked that formal amendment of the Memorandum of Understanding be deferred.

5. It is now proposed that the Memorandum of Understanding with Unesco be amended to reflect the change in the cost-sharing formula described above, and to bring that Memorandum into line with the Memorandum of Understanding with FAO. If approved, the proposed changes, under which Unesco and the Bank would share all direct costs of the cooperative program in a 25:75 proportion, will be deemed to have taken effect on January 1, 1967, the start of Unesco's current budgetary period.

6. At the request of Unesco one further minor change is proposed to the Memorandum of Understanding in order to take account of recent changes in Unesco's terminology. In lieu of references to Unesco's "Educational Financing Unit" the amended Memorandum of Understanding will use the term "Educa­ tional Financing Division".

7. The text of these amendments to the Memorandum of Understanding with Unesco have been negotiated with Unesco and are attached as Annex A to this report. As was the case with the Memorandum itself, the amendments require the approval of the Boards of Governors of the Bank and IDA, pursuant to Article V, Section 2(b)(v) of the Articles of Agreement of the Bank and to Article VI, Section 2(c)(v) of the Articles of Agreement of IDA, under both of which formal arrangements for cooperation with other international organizations must be approved by the Board of Governors. These amendments are similarly subject to approval by the appropriate intergovernmental body of Unesco.

86 Recommendations 8. The Executive Directors recommend that the proposed amendments to the Memorandum of Understand­ ing with Unesco be approved by the Boards of Governors and that:

(a) the Board of Governors of the Bank adopt by vote without meeting the draft resolution attached ... 1 and

(b) the Board of Governors of IDA adopt by vote without meeting the draft resolution attached ...2

ANNEXA

Proposed Amendments to the Memorandum of Understanding Governing the Cooperative Program With the United Nations Educational, Scientific and Cultural Organization

1. Subparagraph (a) of paragraph 4 of the Memorandum of Understanding between Unesco and the Bank/IDA would be amended to read as follows: "(a) Subject to the qualifications set forth below, the costs of Unesco in connection with agreed work under the program, including salary, allowances and other benefits and travel costs of the Educa­ tional Financing Division, of outside consultants, and of other Unesco staff members assigned to such work will, until December 31,1966, be shared equally by Unesco and the Bank up to a ceiling figure to be fixed from time to time by agreement between the two organizations." 2. A new subparagraph (i) would be added to paragraph 4 to read as follows: "(i) Beginning with the calendar year 1967, the costs of Unesco for agreed work under the program as defined in subparagraph (a) will be shared in the proportion of 25% by Unesco and 75% by the Bank, subject to the qualifications set forth in subparagraphs (b), (c), (d) and (e). The cost­ sharing ceiling figure for each Unesco biennium will be fixed from time to time by agreement between the two organizations." 3. Wherever the words "Educational Financing Unit" appear in the Memorandum of Understanding there shall be substituted the words "Educational Financing Division."

REPORTS OF THE EXECUTIVE DIRECTORS OF THE BANK

August 15,1967

Allocation of Net Income

1. The Bank's net income for the fiscal year ended June 30, 1967, was $169,596,227. In addition the Bank had commission income for that fiscal year amounting to $684,528, which was appropriated to the Special Reserve created under Article IV, Section 6 of the Bank's Articles of Agreement. As of June 30, 1967, the Special Reserve totalled $290,422,318 and, without regard to the 1967 fiscal year's income, the Supplemental Reserve against Losses on Loans and Guarantees amounted to $732,574,509. Total

ISee page 77 2See page 84

87 reserves therefore amounted to $1,022,996,827, of which the $290,422,318 in the Special Reserve is kept in liquid form, the remainder being used in the business of the Bank. 2. The Executive Directors have considered what action to take, or to recommend that the Board of Governors take, with respect to the net income for the fiscal year ended June 30, 1967. 3. The Executive Directors have considered what portion of that net income should be allocated to the Supplemental Reserve against Losses on Loans and Guarantees and what portion thereof, if any, they should recommend that the Board of Governors transfer to the International Development Association. The Executive Directors have allocated $159,596,227 of such net income to the Supplemental Reserve against Losses on Loans and Guarantees. 4. The Executive Directors have concluded that it is not necessary to retain $10,000,000 of net income in the Bank's business. They have fUrther concluded that the interests of the Bank and its members would best be served by the transfer of that amount to the International DevelopmentAssociation bywayofgrant. 5. Accordingly the Executive Directors recommend that the Board of Governors approve the present Report and adopt the draft resolution attached ... 1

(This Report was approved and its recommendations adopted by the Board of Governors on September 29, 1967)

August 15, 1967

Loan Regulations Nos. 3 and 4, and Bond Regulation No. 1

1. The Board of Governors, at the 1961 Annual Meeting, reviewed and noted revised Loan Regulations Nos. 3 and 4 of the Bank, dated February 15, 1961 and, at the 1962 Annual Meeting, reviewed and noted revised Bond Regulation No.1 of the Bank, dated January 15, 1962. 2. On February 9, 1967, the Executive Directors approved several amendments to Loan Regulations Nos. 3 and 4, and Bond Regulation No.1. The amendments to the Loan Regulations are principally designed to bring these regulations into line with the Bank's practice as it has developed since the last revisions. The amendments to the Bond Regulation are minor and of a technical nature. 3. In accordance with Section 16 of the By-Laws of the Bank, Loan Regulations Nos. 3 and 4 of the Bank dated February 15, 1961, as amended February 9, 1967, and Bond Regulation No.1 dated February 1, 1967, incorporating the amendments approved on February 9, 1967, are herewith presented to the Board of Governors for review.2

(This Report was reviewed and noted without objection by the Board of Governors on September 29,1967)

REPORT OF THE BOARD OF DIRECTORS OF IFC

August 22,1967

Rules of Procedure for Meetings of the Board of Directors

1. To take account of the appointment of the Vice President of the Corporation, the Board of Directors, on July 3, 1967, amended Section 1 (d) of the "Rules of Procedure for Meetings of the Board of Directors" to read as follows: lSee page 79 2See page 75 88 "(d) 'Chairman' means the President of the Bank and of the Corporation acting as Chairman of the Board or, in his absence, the Executive Vice President of the Corporation or, in the absence of both, the Vice President of the Corporation." 2. In accordance with Section 14 of the By-Laws of the Corporation, said amendment is hereby presented to the Board of Governors for review. 1

(This Report was reviewed and noted without objection by the Board of Governors on September 29, 1967)

REPORT OF THE EXECUTIVE DIRECTORS OF IDA

August 15, 1967

Amendments to Credit Regulations No. 1

1. At the 1961 Annual Meeting, the Board of Governors reviewed and noted Development Credit Regulations No. 1 of the Association, dated June 1, 1961. 2. On February 9, 1967, the Executive Directors approved several amendments to Development Credit Regulations No.1. These amendments are principally designed to bring the regulations into line with the Association's practices as these have developed since 1961. 3. In accordance with Section 6 of the By-Laws of the Association, Development Credit Regulations No.1 of the Association dated June 1, 1961, as amended February 9, 1967, are herewith presented to the Board of Governors for review. 1

(This Report was reviewed and noted without objection by the Board of Governors on September 29, 1967)

lSee page 76

89 ACCREDITED MEMBERS OF DELEGATIONS AT 1967 ANNUAL MEETINGS

D° AFGHANISTAN DOBRAZIL Governor ...... Abdul Karim Hakimi Governor ...... Antonio Delfim Netto Alternate Governor ...... Abdul Aziz Atayee Alternate Governor ...... Ruy Aguiar da Silva Leme °ALGERIA Alternate Governor ...... Helio Marcos Penna Beltrao* Alternate Governor ...... Ary Burger* Governor ...... Hachemi Saibi Alternate Governor...... Nestor Jost" Alternate Governor ...... Kemal Abdallah Khodja Alternate Governor ...... Germano de Britto Lyra" Adviser: Alternate Governor Edmundo de Macedo Soares e Silva* Hafid Keramane Alternate Governor ...... Jayme Magrassi de Sa* D° ARGENTINA Alternate Governor ...... Helio Marques Vianna* Alternate Governor . . Gastao Eduardo de Bueno Vidigal* Governor ...... Pedro Eduardo Real Advisers: Alternate Governor ...... Carlos S. Brignone Antonio Carlos do Jose Garrido Torres Advisers: Amaral Osorio Desiree Guarany e Silva Adolfo E. Buscaglia Julio Gonzalez del Solar Joao Walter de Andrade Eduardo da Silveira Angel R. Caram Carlos Conrado Helbling Jose de Assis Aragao Gomes Junior Enrique Carrier Jose Alfredo Martinez Gilberto Ronaldo Alexandre Kafka Jose Marfa Cascales de Hoz Campello de Azevedo Marcelo Leite Barbosa Carlos Coli Benegas Narcisco Ocampo Teofilo de Azeredo Santos George Alvares Maciel Raul Dejean del Castillo Luis Marfa Otero Monsegur Aldo Baptista Franco Joaquim Ferreira Mangia Hernan Massini Escurra Rafael Perrotta da Silva Santos Francisco Melo Franco Teodoro A. Fernandez Manuel San Miguel Luiz Biolchini Alufzio Mendes Enrique E. Folcini Alejandro Shaw Herculano Marcos Borges Joao Baptista Miranda Alejandro Frers Roberto Verrier da Fonseca Euler Bentes Monteiro Horacio Garda Belsunce Ricardo J. Vignau Joao Pedro Gouvea de Andre Franco Montoro Carvalho Vieira D° AUSTRALIA Luis de Moraes Barros Horacio Sabino Coimbra Denio Nogueira Governor " ...... William McMahon Antonio de Abreu Paulo Hortensio Pereira Alternate Governor ...... Si r Roland Wi Ison Coutinho Lira Advisers: Marcos Vinfcius de Ernesto Pereira Lopes T. J. Bartleyt J. M. McMillan Moraes Casimiro Antonio Ribeiro B. E. Fleming J. G. Phillips Joao Osorio de Oliveira Genival de Almeida B. F. Hurley J. O. Stonet Germano Santos H. M. Knight R. J. Whitelaw Joao di Pietro Celso Luiz Silva Milton de Oliveira DOAUSTRIA Victor Silva Ferreira Mario Trindade Alternate Governor ...... Hugo Rottky Sergio Fonseca Rubens Vaz da Costa Alternate Governor ...... Walter Neudoerfer" Adolpho de Oliveira Joao Paulo Reis Veloso Adviser: Franco Jose Maria Villar de Othmar Haushofert Ernane Galveas Queiroz

DOBELGIUM DOBURMA Alternate Governor ...... Hubert Ansiaux Alternate Governor ...... Andre van Campenhout"t Governor ...... U Kyaw Nyein Advisers: Alternate Governor ...... U Chit Moung Herman Biron Adviser ...... U Maung Gyit Cecil de Strycker °BURUNDI Jacques Mertens de Wilmars Governor ...... Eric Manirakiza o ° BOLIVIA Alternate Governor ...... Franc;:ois Kesteman':' Governor ...... Jorge Jordan F. Adviser: Alternate Governor ...... Enrique Vargas Guzman Bernard de Martrin-Donos Advisers: Gaston Guillen O. °CAMEROON Alberto Saavedra Nogales Governor ...... Laurent Ntamag Felipe Tredinnick Alternate Governor ...... Alfred Ekoko Mpondo

* Temporary t Executive Director tAlternate Director o IFC Member ° IDA Member

90 ACCREDITED MEMBERS OF DELEGATIONS AT 1967 ANNUAL MEETINGS (Continued)

DOCANADA °CONGO (BRAZZAVILLE) Governor ...... Mitchell Sharp Governor ...... Bernard Banza Bouiti Alternate Governor ...... A. B. Hockin Alternate Governor ...... Jean Mombouli Alternate Governor ...... J. J. J. Chretien* Advisers: °CONGO, DEMOCRATIC REPUBLIC OF A. J. Barry A. C. Lamb Governor ...... " .. " ..... J. J. Litho R. W. Lawson Gaston Clermont Alternate Governor ...... J. Bongoma* Miss J. Dugal V. C. Moore Advisers: Herb E. Grey J. Rae Jacques de Groote Louis Lamonzie S. J. Handfield-Jones P. M. Reid:j: Fulgence Konzi Edouard Mambu W. C. Hood N. A. Rost van Tonningen Y. Koyambi Domenico Paolillo L. Denis Hudont M. F. Strong W. J. Kennett M. Vennat DOCOSTA RICA S. Wheelock Governor ...... Jenaro Valverde ° CENTRAL AFRICAN REPUBLIC Alternate Governor ...... Guillermo Gonzalez Truque*

Governor ...... Bernard-Christian Ayandho DOCVPRUS Alternate Governor ...... Andre Zanife-Touambona Governor ...... Renos Solomides DOCEVLON °DAHOMEV Governor ...... U. B. Wanninayake Alternate Governor ...... H. Jinadasa Samarakkody Governor ...... Stanislas Kpognon Alternate Governor ...... Gamani Corea" Alternate Governor ...... Gilles Florent Yehouessi Adviser: Adviser: G. A. Fernando Christian Johnson

°CHAD DODENMARK Governor ...... Georges Diguimbaye Governor ...... Ivar Norgaard Alternate Governor ...... Jean Nendigui Alternate Governor ...... Otto Muller Advisers: Torben Friis Poul Kryger Ole N. Koch Governor ...... Carlos Massad Alternate Governor ...... Enrique Vial* DO DOMINICAN REPUBLIC Advisers: Luis Escobart Jorge Valdovinos Alternate Governor ...... Luis M. Guerrero Hector Correa Letelier Fernando Zegers DOECUADOR °CHINA Governor ...... Federico Intriago Arrata Governor ...... Ching-Vu Chen Alternate Governor ...... Guillermo Perez Chiriboga Alternate Governor ...... Kuo-Hwa Yu Advisers: DOEL SALVADOR T. K. Chang C. L. Chow Governor ...... Edgardo Suarez C. Jong-Shing Chang Horine Hsieh Alternate Governor ...... Armando I nteriano Felix S. Y. Chang W. Y. Hui Advisers: Stephen S. F. Chen Beue Tann Alberto Berra di Berra Manuel Antonio Robles Reignson C. Chent Nelson G. Y. Yu Francisco Lino Osegueda

DOCOLOMBIA DOETHIOPIA Governor ...... Abdon Espinosa Valderrama Governor ...... Vilma Deressa Alternate Governor ...... Rodrigo Botero* Alternate Governor ...... Asfaw Damte* Advisers: Adviser: Anfbal Fernandez de Soto Tedla Teshome Jorge Mejia Salazar O°FINLAND * Temporary t Executive Director :j:Alternate Director Governor ...... Mauno Koivisto D IFC Member Advisers: ° IDA Member Jorma Aranko Heikki Leppo

91 ACCREDITED MEMBERS OF DELEGATIONS AT 1967 ANNUAL MEETINGS (Continued)

DOFRANCE DOGUYANA Governor ...... Michel Debre Alternate Governor ...... H. O. E. Barker Alternate Governor ...... Bernard Clappier Advisers: DOHAITI Louis Bruneau Jacques de Larosiere Jean Chanel Jean Malaplate:j: Governor ...... Clovis Desinor Daniel Deguen Paul Mentre Alternate Governor ...... Noe C. Fourcand Jean Dromer Claude Pietra Pierre Esteva Georges Plescofft DOHONDURAS Jean-Yves Haberer Marcel Theron Governor ...... Manuel Acosta Bonilla Michel Hauswirth Alternate Governor ...... Virgilio Urmeneta* Advisers: °GABON Cesar Augusto Batres Galeano Governor ...... Pierre Fanguinoveny Roberto A. Kattan Rolando Salgado Gabriel A. Majia Porfirio Zavala Alternate Governor ...... Dominique Casalta Salom6n E. Munoz R. DOGERMANY DOICELAND Governor ...... Karl Schiller Governor ...... Gylfi Gislason Alternate Governor ...... Wilhelm Hanemann* Alternate Governor ...... Magnus J6nsson Alternate Governor ...... Hans Rannow* Advisers: Advisers: Vilhjalmur Th6r:j: Petur Thorsteinsson Bernhard Benning Rudolf Morawitz Otto Donnert Wolfgang Rieke Miss Lore Fuenfgelt Fritz Stedtfeld Guenther Harkort Horst Ungerer Governor ...... Morarji R. Desai Hilmar H. Hartig Ernst vom Hofe Alternate Governor ...... S. Jagannathan Walter Heinrich Victor von der Lippe Alternate Governor ...... 1. G. Patel'" Joerg Jaeckel:j: G. A. von Trotha Alternate Governor ...... K. S. Sundara Rajan*t Helmut Koinzer Carl Wagenh6fer Advisers: Werner Lamby A. K. Banerji C. S. Swaminathan Kantilal Desai V. Y. Tonpe DOGHANA S. Guhan:j: Governor ...... Brigadier A. A. Afrifa INDONESIA Alternate Governor ...... K. Gyasi-Twum Advisers: Governor ...... Frans Seda P. K. Anane-Binfoh B. K. Mensah Alternate Governor ...... Djuana Kusumahardja Peter Kamerling Advisers: Muhamad Barmawie Alwie DOGREECE Byanti Kharmawan Soegantyo Koesoemodigdo Governor ...... John P. Paraskevopoulos Alternate Governor ...... Costas A. Thanos DOIRAN Advisers: Costa P. Caranicas Evangelos Eliades Governor ...... Jamshid Amouzegar Alternate Governor ...... Jahangir Amuzegar DOGUATEMALA Adviser: E.F.Chadan Governor ...... Alberto Fuentes Mohr Alternate Governor ...... Roberto Barillas Izaguirre DOIRAQ Advisers: Mario Asturias Gilberto Secaira Governor ...... Abdul Rahman AI Habeeb Alternate Governor ...... Sa'adi Ibrahim GUINEA DOIRELAND Governor ...... Ousmane Baldet Alternate Governor ...... Mohamed Lamine Toure Governor ...... Charles J. Haughey Alternate Governor ...... T. K. Whitaker

* Temporary t Executive Director :j:Alternate Director D IFC Member ° IDA Member

92 ACCREDITED MEMBERS OF DELEGATIONS AT 1967 ANNUAL MEETINGS (Continued)

DOISRAEL DOKENYA Governor ...... David Horowitz Governor ...... J. S. Gichuru Alternate Governor ...... Jacob Arnon Alternate Governor ...... J. N. Michuki Advisers: Advisers: Shmuel Divon Moshe Bernhard Gitter A. T. Brough J. K. !lako Gabriel Doron Arnon Shmorak DOKOREA ° ITALY o Governor ...... Bong Kyun Suh Governor ...... Guido Carli Alternate Governor ...... Se Ryun Kim Alternate Governor ...... Paolo Baffi Alternate Governor ...... Yoon Sae Yang* Advisers: Advisers: Lamberto Cantuti Castelvetri Byong Kyu Chun Jai Woong Lee Lionello Fronzoni Emilio Ranalli In Yong Chung Myong Won Paik Felice Gianani:\: Edgardo Valle Seung Hi Hong Chung Pum Song:\: Giovanni Lovato Alfredo Vernucci Hyungkun Kim Jin Soo Suh Rinaldo Ossola o ° KUWAIT D° IVORY COAST Alternate Governor ...... Abdlatif Y. AI-Hamad Governor ...... Gbeho Sibi Alternate Governor ...... Rene Amichia* °LAOS Advisers: Charles Gomis Gerhard Rohnfelder Governor ...... Sisouk Na Champassak Koffi N'Guessan Alternate Governor ...... Oudong Souvannavong Adviser: DJAMAICA Sitha Sisombat Governor ...... Edward Seaga DOLIBERIA Alternate Governor ...... G. A. Brown Advisers: Governor ...... J. Milton Weeks H. G. Barber D. R. Clarke Alternate Governor ...... Cyril Bright Miss Sybil E. Campbell R. I. Mason Advisers: George A. Blowers S. Edward Peal DOJAPAN o ° LIBYA Governor ...... Mikio Mizuta Alternate Governor ...... Makota Usami Governor ...... Shamsiddin Mohsen Alternate Governor ...... Yusuke Kashiwagi* Alternate Governor ...... Ali A. Attiga Alternate Governor ...... Haruo Mayekawa* Alternate Governor ...... Shichiro Murai" D° LUXEMBOURG Alternate Governor ...... Haruo Nakajima* Governor ...... Pierre Werner Advisers: Alternate Governor ...... Albert Dondelinger Masaru Fukuda Nobuyasu Nishimiya Taro Hori Shijuro Ogata o ° MALAGASY REPUBLIC Daizo Hoshino Toshio Oshima Koichi Inamura Eiji Ozaki Governor ...... Rakotovao Ralison Sadaolnose Masaki Shiratori Alternate Governor ...... Louis Rakotomalala Tatsuzo Inoue Hideo Suzukit Adviser: Shunzo Kawai Keijiro Tanaka Jean Kientz Tarao Maeda Tetsuo Tanaka Naoyoshi Matsuo Yoshiaki Toda o ° MALAWI Yasuo Matsushita Tetsuo Yamanaka Governor ...... J. Z. U. Tembo lehiro Miyoda Alternate Governor ...... Florian P. Kalilombe* Adviser: DOJORDAN G. A. Jaffu Governor ...... Hatim S. Zu'bi Alternate Governor ...... Nijmeddin Dajani

* Temporary t Executive Director t.Alternate Director o IFe Member ° IDA Member

93 ACCREDITED MEMBERS OF DELEGATIONS AT 1967 ANNUAL MEETINGS (Continued)

DOMALAYSIA °NIGER Governor ...... Tan Siew Sin Governor ...... Alidou Barkire Alternate Governor ...... Chong Hon Nyan* Alternate Governor ...... Karimou Goukoye Advisers: Advisers: Lee Hock Lock Tan Cheng Swee Robert Julienne Pierre Sanner Lin See Van DONIGERIA ° MALI Governor ...... A. A. Atta Governor ...... Louis-Pascal Negre Alternate Governor ...... J. A. Adeyeye Alternate Governor ...... Tieoule Konate Advisers: J. A. O. Akadiri Y. A. O. Jinadu °MAURITANIA Governor ...... Birane Mamadou Wane OONORWAY Alternate Governor ...... Moktar Ould Haiba Governor ...... Kare Willoch Alternate Governor ...... Christian Brinch DOMEXICO Advisers: Erling Borresen Karl Skjerdalt Governor ...... Antonio Ortiz Mena Alternate Governor ...... Jose Hernandez Delgado DOPAKISTAN Advisers: Carlos Giron Jesus Robles Martinez Governor ...... N. M. Uquaili Alfredo Navarrete Jose Saenz Asunsolo Alternate Governor ...... Ghulam Ishaq Khan Advisers: DOMOROCCO Ziauddin Ahmad Tayeb Uddin Mahtab Governor ...... Mamoun Tahiri DOPANAMA Alternate Governor ...... Mohamed Benkirane Advisers: Alternate Governor ...... Carlos A. Velarde Ahmed Benabud Abderrahman Tazit Alternate Governor ...... Winston Spadafora Franco* Ahmed Osman Advisers: Jaime Ford Jose Maria Gonzales DONEPAL DOPARAGUAY Governor ...... Kirti Nidhi Bista Governor ...... Cesar Romeo Acosta Alternate Governor ...... Bhekh Bahadur Thapa Alternate Governor ...... Oscar Stark Rivarola

DO NETHERLANDS DOPERU Governor ...... H. J. Witteveen Governor ...... Celso Pastor Alternate Governor ...... Count J. H. O. van den Bosch Adviser: Advisers: German de la Melena G. S. Boomstra P. Lieftinckt V. M. de Miranda Baron A. W. R. Mackay DO PHILIPPINES J. Everts H. M. H. A. van der Val k Miss G. A. Koen D. M. N. van Wensveen Governor ...... Eduardo Z. Romualdez Alternate Governor ...... Roberto S. Benedicto DO NEW ZEALAND Advisers: MiguelP.Avancena Manuel P. Manahan Governor ...... N. R. Davis Francisco Dalupan Eliseo P. Ocampo Alternate Governor ...... N. V. Lough Panfilo Domingo Ismael Reinoso Adviser: Benito Legarda, Jr. Angelesio C. Tugado E. G. Buckton Gregorio S. Licaros Leon O. Ty Octavio L. Maloles Carlos S. Victorino D °NICARAGUA DOPORTUGAL Governor ...... , ...... Guillermo Sevilla Sacasa Alternate Governor ...... Arnoldo Ramirez Eva Governor ...... Ulisses Cortes Alternate Governor ...... L. M. Teixeira Pinto Alternate Governor ...... Ricardo de Faria Blanc* * Temporary t Executive Director tAlternate Director Advisers: D IFe Member Fausto Amaral Figueiredo Joao Amado de Freitas ° IDA Member Albino Cabral Pessoa P. Pitta e Cunha

94 ACCREDITED MEMBERS OF DELEGATIONS AT 1967 ANNUAL MEETINGS (Continued)

° RWANDA DO SYRIAN ARAB REPUBLIC Alternate Governor ...... Leon Mbarushimana Governor ...... Mouaffaq Shourbaji Adviser: Alternate Governor ...... Abdul Hadi Nehlawi Raymond Miege Adviser: Hassan Sakka DO SAUDI ARABIA DOTANZANIA Governor ...... Ahmed Zaki Saad Governor ...... P. Bomani DOSENEGAL Alternate Governor ...... 1. M. Kaduma* Advisers: Governor ...... Habib Thiam G. Akermalm E. A. Mulokozi Alternate Governor ...... Ibrahima Tal R.H.Green Adviser: Henri Pierre Arphang Senghor DOTHAILAND DOSIERRA LEONE Governor ...... Serm Vinicchayakul Governor ...... Lt. Colonel B. I. Kai-Samba Alternate Governor ...... Mrs. Suparb Yossundara* Alternate Governor ...... Sheikh Batu Daramy Advisers: Manas Leeviraphan Vichitr Sachchavedha Yune Huntrakoon SINGAPORE Pandit Bunyapana Prasit Ujchin Governor ...... Goh Keng Swee Alternate Governor ...... Chua Kim Yeow* DOTOGO DOSOMALIA Governor ...... Boukari Djobo Alternate Governor ...... Jean Tevi Governor ...... Hagi Farah Ali Omar Alternate Governor ...... Said Mohamed Ali TRINIDAD AND TOBAGO DO SOUTH AFRICA Governor ...... F. C. Prevatt Governor ...... N. Diederichs Alternate Governor ...... William G. Demas Alternate Governor ...... T. W. de Jongh Advisers: Advisers: D. H. N. Alleyne Victor Bruce A. M. de Villiers G. J. Viviers R. A. du Plooy DOTUNISIA DOSPAIN Governor ...... Ahmed Ben Salah Alternate Governor ...... Hedi Ennifer* Governor ...... Juan-Jose Espinosa Adviser: Alternate Governor ...... Mariano Navarro Rubio Taoufik Smida:j: Advisers: Manuel Aguilar Angel P. Madrofiero DOTURKEY I Rafael Aguilar Enrique Manzanares Agustin Alcocer ManuelOrtinez Governor ...... Cihat Bilgehan ~ Joaquin Gutierrez Canot Gabriel F. de Valderrama Alternate Governor ...... Fahir Tigrel Jose-Maria Latorre Alternate Governor ...... Zeki Toker* Adviser: DOSUDAN Husnu Kizilyalli

Governor ...... Abdalla Siddig Ghandour DOUGANDA Alternate Governor . .. Mohammed Abdalla Ghallander* Governor ...... L. Kalule-Settala DOSWEDEN Alternate Governor ...... A. J. P. M. Ssentongo i I Adviser: Governor ...... G. E. Strang T. B. Byatike Alternate Governor ...... Krister Wickman Advisers: DO UNITED ARAB REPUBLIC Hans o. Lundstrom Lennart Westerberg Governor ...... Hassan Abbas Zaki Alternate Governor ...... Hamed A. EI-Sayeh * Temporary t Executive Director :j:Alternate Director Advisers: I D IFC Member Kamal M. Aboul-Kheir Fikry EI Kelliny ° IDA Member Ahmed Farid Aboushady

95 ACCREDITED MEMBERS OF DELEGATIONS AT 1967 ANNUAL MEETINGS (Continued)

D° UNITED KINGDOM URUGUAY Governor ...... Sir Leslie O'Brien Governor ...... Amilcar Vasconcellos Alternate Governor ...... Sir Denis Rickett Alternate Governor ...... Juan Ferrando" Alternate Governor ...... E. W. Maude"t Advisers: Advisers: Felipe Amorin Sanchez Jaeteno Pellegrini P. R. Baldwin M. V. Posner Alfredo Castelli Luis M. Pigurina L. F. Crick R. E. Radford:j: Jorge Delisante Mrs. Maria E. Rocha Sir Alan Dudley C. Raphael Hector Dfaz de Barthabura D.F.Hubback W. S. Ryrie Orlando Dovat Artigas Rodriguez J. E. W. Kirby L. P. Thompson-McCausland Jose P. Echevarria Devicensi J. A. Kirbyshire D. W.G. Wass Carlos Fernandez Goyechea Eduardo Sanguinett Yamandu Fisher Miss Norma Stefini DOUNITED STATES Carlos Fleitas Governor ...... Henry H. Fowler DVENEZUELA Alternate Governor ...... Eugene V. Rostow Alternate Governor ...... William B. Dale" Governor ...... General Rafael Alfonzo Ravard Alternate Governor ...... Frederick L. Deming" Advisers: Alternate Governor ...... Livingston T. Merchant*t Leopoldo Diaz Bruzual Ernesto Peltzer Advisers: Roberto Guarnieri Samuel Rieber Gardner Ackley Harold F. Linder Robert B. Anderson William McChesney DOVIET-NAM Thomas L. Ashley Martin, Jr. Francis M. Bator Chester L. Mize Governor ...... Nguyen Huu Hanh Michael Bradfield William S. Moorhead Alternate Governor ...... Nguyen Bich Hue" William E. Broch, 3d Eugene E. Oakes Advisers: Charles A. Coombs Donald K. Palmer Buu Hoan Ha Xu an Trung J. Dewey Daane John R. Petty Douglas Dillon Gustav Ranis °YUGOSLAVIA Thomas O. Enders Thomas M. Rees Governor ...... Janko Smole Mark C. Feer Henry S. Reuss Alternate Governor ...... Vladimir Ceric E. Jay Finkel Emmett J. Rice:j: Advisers: John F. Ghiardi Fred B. Smith Milenko Bojanic Milivoj Spasic Seymour Halpern John W. Snyder Uros Markic Zoran Zagar:j: Charles R. Harley Anthony M. Solomon Mirko Mermolja Alfred Hayes Robert Solomon Ralph Hirschtritt Joseph L. Spilman DOZAMBIA Douglass Hunt Frederick L. Springborn Jacob K. Javits John Tuthill Governor ...... U. G. Mwila John F. Kane George H. Willis Alternate Governor ...... E. B. T. Mbozi* James F. King Advisers: P. K. Chiwenda P. M. Ngonnda °UPPER VOLTA P. Kirthisingha J. B. Zulu K. B. C. Mumbalanga Governor ...... Pierre Claver Damiba Alternate Governor ...... Pierre Tahita

"Temporary t Executive Director :j:Alternate Director o IFC Member ° IDA Member

96 EXECUTIVE DIRECTORS AND ALTERNATES September 30, 1967

Executive Directors Alternate Executive Directors

Muhammad Ayub Abdol Ali Jahanshahi Reignson C. Chen Chung Pum Song S. Othello Coleman Iddi Simba Otto Donner Joerg Jaeckel Luis Escobar Daniel Fernandez .Joaquin Gutierrez Cano Felice Gianani L. Denis Hudon Patrick M. Reid Mohamed Nassim Kochman Michel Bako Pieter Lieftinck Zoran Zagar Luis Machado Alfredo Valencia E. W. Maude Robert E. Radford Jorge Mejia-Palacio Jose Camacho Livingston T. Merchant Emmett J. Rice Georges Plescoff Jean Malaplate K. S. Sundara Rajan S. Guhan Karl Skjerdal Vilhjalmur Thor J. O. Stone T. J. Bartley Hideo Suzuki Maung Gyi Abderrahman Tazi Taoufik Smida Andre van Campenhout Othmar Haushofer

97 OBSERVERS AT 1967 ANNUAL MEETINGS

Botswana Inter-American Development Bank Q. K. J. Masire Felipe Herrera A. J. Beeby T. Graydon Upton The Gambia Jose D. Epstein H. R. Monday Rodrigo Llorente Javier Urrutia African Development Bank Francisco Albornoz C. Ali Kara-Mustapha Antonio Carlos de Castro Philip Clarence Parker, Jr. Victor da Silva Carlos Sanguinetti Asian Development Bank Takeshi Watanabe International Atomic Energy Agency Toyoo Gyohten Robert Najar Howard Farrelly Bank for International Settlements International Labor Organization Gabriel Ferras P. Monteiro de Souza Milton Gilbert Antonio Ferreira da Silva Hans H. Mandel League of Arab States Center for Latin American Monetary Studies Adel Youssef Javier Marquez Fernando Rivera Organization for Economic Cooperation Central African Customs and Economic Union and Development Charles Onana Awana Thorkil Kristensen Jean Cottier Central American Bank for Economic Integration Luciano Giretti Jorge Sol Castellanos Ernest Parsons Central American Monetary Union European Monetary Agreement Mario R. G6mez V. Alexander Hay Central Bank of Equatorial African States and Cameroon Georges Gautier Organization of American States Walter J. Sedwitz Central Bank of West African States Germanico Salgado Robert JUlienne Edward P. Davis Pierre Sanner Inter-American Committee on the Alliance Commission of the European Communities for Progress Ugo Mosca Robert Triffin Carlos Sanz de Santamaria Roland de Kergorlay Walter J. Sedwitz Germanico Salgado Common Organization of African and Malagasy States Paul Harrison Ambroise Foalem Manuel Trucco Commonwealth Secretariat United Nations T. E. Gooneratne Paul G. Hoffman Contracting Parties to the General Agreement Carlos Quintana on Tariffs and Trade Sidney Dell Eduardo Albertal Eric Wyndham White Raul Trejos Mrs. M. Wilson Daniel Bitran European Investment Bank Clinton A. Rehling Ulrich Meyer-Cording Yves Le Portz United Nations Educational, Scientific and Cultural Organization Giandomenico Sertoli Guy Trancart J.Howe Food and Agriculture Organization of the United Nations World Health Organization Pompeu Accioly Borges Raul Vera

98 ACCREDITED MEMBERS OF DELEGATIONS AT 1966 ANNUAL MEETINGS (Continued)

DOCHILE DODENMARK

Governor ...... Carlos Massad Governor ...... Ivar N0rgaard Alternate Governor . Jorge Marshall Alternate Governor ...... " Otto Miiller Advisers: Advisers: Luis Escobar Enrique Vial Flemming Agerup Steen Secher Svend Andersen Max Soerensen Otto Schelin °CHINA

Governor .... Ching-Yu Chen D °DOMINICAN REPUBLIC Alternate Governor .. Kuo-Hwa Yu Governor ...... Di6genes H. Fernandez Advisers: Alternate Governor ...... Hector Garcia Godoy* Felix S. Y. Chang Yung-Chuan Chu Pao·Chuan Chao W. Y. Hui R. C. Chent Martin Wong DOECUADOR C. l. Chow Nelson G. Y. Yu Governor ...... Pedro Jose Arteta Martinez Alternate Governor ...... Gustavo Larrea DOCOLOMBIA Adviser: Jacinto Benalcazar Governor .. Abdon Espinosa Valderrama Alternate Governor ...... Jorge Mejia Salazar DOEL SALVADOR Adviser: Hernando Gomez Otalora Governor ...... Francisco Aquino h. Alternate Governor .... Abelardo Torres Advisers: ° CONGO, REPUBLIC OF (BRAZZAVILLE) Mauricio Ernesto Martinez Tomas Alfonso Medina Governor .... Bernard Banza Bouiti Alternate Governor ...... Jean Moumbouli DOETHIOPIA Governor ...... Yilma Deressa °CONGO, DEMOCRATIC REPUBLIC OF Alternate Governor ...... Bulcha Demeksa Adviser: Governor ...... J. J. Litho Asfaw Damte Alternate Governor ...... Jean-Martin Mondjobe Alternate Governor ... Paul Mushiete DOFINLAND Advisers: Jacques de Groote Domenico Paolillo Governor ..... Mauno Koivisto Louis Lamonzie Lievin Zangadi Alternate Governor ...... Esko Rekola Edouard Mambu Advisers: Olavi Munkki Pentti Uusivirta

D aCOSTA RICA DOFRANCE

Alternate Governor · Guillermo Gonzalez* Governor ...... Michel Debre Alternate Governor · ..... Rodolfo Lara* Alternate Governor ...... Bernard Clappier Adviser: Advisers: Bolivar Salas Castillo Gilbert Bouchet Rene Larret Louis Bruneau Jean Malaplate:f: DOCYPRUS Jean Carriere Claude Pierre-Brossolette Daniel Deguen Robert Raymond Governor · Renos S. Solomides Jean du Pre de Saint Maur Gerard Teyssier Alternate Governor ...... A. I. loannides* Pierre Esteva Jean Vallet Jean-Yves Haberer

°DAHOMEY °GABON Governor ...... Christian Vieyra Governor ...... Andre-Gustave Anguile Alternate Governor ... Stanislas Kpognon* Alternate Governor ...... Michel Abessolo Adviser: Adviser: Jean Charpentier Boutamba

* Temporary t Executive Director :f: Alternate Director o IFe Member ° IDA Member

99 ACCREDITED MEMBERS OF DELEGATIONS AT 1966 ANNUAL MEETINGS (Continued)

o °GERMANY, FEDERAL REPUBLIC OF o ° ICELAND Alternate Governor ...... Wolfram Langer* Governor ...... Gylfi Gislason Alternate Governor ...... Hans Rannow* Alternate Governor ...... Magnus J6nsson Alternate Governor ...... Fritz Schiettinger* Advisers: Advisers: Johannes Eliasson Vilhjalmur Thort Walter Baeumer Harald Joerges S. Frimannsson Petur Thorsteinsson Bernhard Braubach Guenter Keiser Otto Donnert Helmut Koinzer DOINDIA Klaus Flachmann Gerhard Laske Miss Lore Fuenfgelt Gustav Adolf Sonnen hoi Governor ...... Sachindra Chaudhuri Rolf Gocht Miss Helga Steeg:j: Alternate Governor ...... C. S. Krishna Moorthi* Walter O. Habermeier Erich Stoffers Alternate Governor ...... I. G. Patel* Hilmar H. Hartig Horst Ungerer Advisers: Heinrich Irmler Ernst vom Hofe J. J. Anjaria M. G. Kaul Ernst Jirka Friedrich Wilhelm von P. K. Banerjee R. G. Nayak Schelling A. K. Banerji A. U. Ratwani S. Guhan:j: K. S. Sundara Rajant DOGHANA D'°IRAN Governor ...... Colonel A. A. Afrifa Alternate Governor ...... K. Gyasi-Twum* Governor ...... Jamshid Amouzegar Advisers: Alternate Governor ...... Jahangir Amuzegar P. K. Anane-Binfoh B. K. Mensah Advisers: Nader Akrami Amir Goudarznia DOGREECE Parviz Behroozi M. Sadegh Parand Alternate Governor ...... Nicholas N. Porphyrogenis DOIRAQ Advisers: Costa P. Caranicas A. D. Sismanidis Governor ...... Saleh Kubba F. H. Mahon Alternate Governor ...... Saadi Ibrahim

o °GUATEMALA DOIRELAND Governor ...... John Lynch Governor ...... Alberto Fuentes Mohr Alternate Governor ...... T. K. Whitaker Advisers: Mario G6mez Valencia Gert Rosenthal D'OISRAEL Armando Gonzalez-Campo Manuel Rubio Sanchez Manuel Mendez Escobar Governor ...... David Horowitz Alternate Governor ...... Jacob Arnon GUYANA Advisers: Avner Cassuto Nachum Shamir Governor ...... P. S. d'Aguiar M. Lador S. Sitton Alternate Governor ...... W. P. D'Andrade Eli Nevo Adviser: C. E. Douglas o ° ITALY GUINEA Governor ...... Guido Carli Alternate Governor ...... Paolo Baffii Governor ...... Moussa Diakite Advisers: Alternate Governor ...... Mohamed Lamine Toure Carlo Ciampi Rinaldo Ossola Adviser: Lionello Fronzoni Emilio Ranalli Paul Stephen Felice Gianani:j: Edgardo Valle Florio Gradi Alfredo Vernucci DOHAJTI Silvano Montanaro Governor ...... Leon Mirambeau Alternate Governor ...... Edouard Francisque* D° IVORY COAST Governor ...... Konan Bedi6 ° HONDURAS o Alternate Governor ...... Mohamed Diawara Governor ...... Manuel Acosta Bonilla Advisers: Alternate Governor ...... Alberto Galeano M. * Daba Agoussi Charles Gomis Advisers: Jean Batigne Pierre Laigroz Ricardo Alvarez R. Ramon Euceda Cardona John C. Elliott

... Temporary t Executive Director :j: Alternate Director o IFC Member ° IDA Member

100 OFFICERS OF IFC September 30,1967

George D. Woods* ...... President Martin M. Rosen ...... Executive Vice President James S. Raj ...... Vice President

Robert W. Cavanaugh* ...... Treasurer William Diamond ...... Director, Development Finance Companies Department J. David Dodd ...... Director, Engineering Department Harold N. G raves, Jr. * ...... Director of Information Howard C. Johnson* ...... Director, New York Office M. M. Mendels* ...... Secretary John D. Miller* ...... Special Representative in Europe Naokado Nishihara ...... Special Representative in the Far East Neil J. Paterson ...... Director of Investments, Latin America, Europe and Australasia R. B. J. Richards ...... General Counsel Hugh B. Ripman* ...... Director of Administration Virgil C. Sullivan ...... Special Adviser Ladislaus von Hoffmann ...... Director of Investments, Africa, Asia and Middle East J. H. Williams* ...... Director, Department of Program Evaluation and Control

*Also officer of the World Bank. 101

Wt;'--I~ f3a,'{,.,/rfOfOA Headquarters London Office 1818 H Street, N.W. New Zealand HQuse Washington, D.C. 20433, U.S.A. Haymarket ;, .. ,", ' Telephone: EXecutive'3-6360 [9;,dori S.W, '1, England Teiephone: 930·3886 ... - " New York Office 20 Exchange Place . Cable Addresses' , New York, N.V.l000S, U.S.A., Wofjd B~nk: INl'BAFRAD Telephorie:~Hi,tef1Eill3-5400' , iF.'C::Co'RINTFlN."., . ," , ," , '. jOA':'IN"DEVAS, ' • ':~.~ -.. ; l -, '" ..- . European Office -~ ..' •• , t • 4 Ave, d'h§na , -:"" paris 16e, France , ~,J . i(..'ot. •• .... ', .. ~~.~'. / .~' T~lephone: 553-25-,10,: ~~ . " ,', '-' -::., .4--"~- I ~ ~:}: ~~~ ~.'" I' "'''':'.',:;\ :~t:' , .~: .', ~

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