! Inter~ational Bank for Reconstruction and Development / International Finance Corporation / International Development Association

1968 Annual Meetings of the Boards 0' Governors

Summary Proceedings " WASHiNGTON, D.C. / SEPTEMBER 30-0CTOBER 4, 1968

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This book is one of several volumes added as a supplement to a

small library on economic development presented by the Economic

Development Institute of the World Bank to various institutions in

the developing member countries of the Bank.

Introductory Note

The 1968 Annual Meeting of the Board of Governors of the International Bank for Reconstruction and Development, held

jointly with that of the International Monetary Fund, took place in Washington, D.C., September 30~October 4 (inclusive) under the Chairmanship of The Honorable U. B. Wanninayake, Minister of Finance and Governor for Ceylon. The Annual Meetings of the Bank's affiliates, the International Finance Corporation (IFC) and the International Development Association (IDA), were held in conjunction with the Annual Meeting of the Bank.

The Summary Proceedings record, in alphabetical order of member countries, the full or partial texts of statements by Governors insofar as these relate to the Bank, IFC and IDA. The texts of statements concerni ng activities of the International Monetary Fund are published separately by the Fund.

WASHINGTON, D.C.

December 31, 1968

M. M. Mendels Secretary

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

AND AFFILIATES

Contents

Page

Address by the President of the United States, Lyndon B. Johnson ............. 1 Opening Address by the Chairman, U. B. Wanninayake, Governor for Ceylon. . .. 4 Annual Address by Robert S. McNamara, President of the Bank and Its Affiliates. 9 Statements by Governors and Alternate Governors ............................ 14 Concluding Remarks by Mr. McNamara ..................................... " 97 Concluding Remarks by the Chairman, U. B. Wanninayake ... " ................ 97 Remarks by A. K. Vasena, Alternate Governor of the Bank and

Governor of the Fund for Argentina ........................................ 97 Documents of the Boards of Governors ....................................... 98

Schedule of Meetings ................................................... 98 Provisions Relating to the Conduct of the Meetings ....................... 99 Agendas ................................................................ 1 00

Joint Procedures Committee ................................................. 101 Reports of Joint Procedures Committee:

Report III ............................................................... 101 Stabilization of Prices of Primary Products: Letter from President of Bank to Chai rman ............................. 102 Letter from 15 Governors to Chai rman ................................. 104

Report III ............................................................... 104 Resolutions Adopted by the Board of Governors of the Bank Between 1967 and

1968 Annual Meetings ..................................................... 105 No. 241 ... Amendment of Section 14(c) of By-Laws of Bank ............... 105 No. 242 ... Membership of Lesotho ....................................... 105 No. 243 ... Membership of Mauritius ..................................... 107 No. 244 ... 1968 Election of Executive Directors .......................... 108

Resolutions Adopted by the Board of Governors of the Bank at the 1968 Annual Meeting ................................................................... 108

No. 245 ... Financial Statements, Auditors' Report and Administrative Budget. 108 No. 246 ... Allocation of Net Income ..................................... 108 No. 247 ... Stabi I ization of Prices of Pri mary Products .................... 109

I Report I relates to business of the Fund

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Contents continued

Page

Resolutions Adopted by the Board of Governors of IFC Between 1967 and 1968 Annual Meetings .......................................................... 109

No. 66 ... Membership of Yugoslavia ..................................... 109 No. 67 ... Membership of Indonesia ...................................... 110 No. 68 ... Membership of Singapore ..................................... 111 No. 69 ... Membership of Uruguay ....................................... 112 No. 70 ... Membership of China .......................................... 113 No. 71 ... Membersh ip of Mau riti us ...................................... 114

Resolution Adopted by the Board of Governors of IFC at the 1968 Annual Meeting .115 No. 72 ... Financial Statements, Auditors' Report and Administrative Budget .115

Resolutions Adopted by the Board of Governors of IDA Between 1967 and 1968 Annual Meetings ........................................................... 115

No. 63 ... Membership of Lesotho ........................................ 115 No. 64 ... Membership of Botswana .. , ................................... 116 No. 65 ... Membership of Mauritius ...................................... 117 No. 66 ... Additions to Resources; Second Replenishment ................ 117 No. 67 ... Supplementary Contributions to Resources; Second Replenishment .121

Resolution Adopted by the Board of Governors of IDA at the 1968 Annual Meeting ................................................................... 122

No. 68 ... Fi nancial Statements, Auditors' Report and Admi nistrative Budget. 122 Rules for the 1968 Regular Election of Executive Directors ..................... 122 Executive Directors Elected at 1968 Regular Election ......................... 124 Reports of the Executive Directors of the Bank ............................... 126

Allocation of Net Income ................................................ 126 iv Travel of Executive Directors and Alternates ............................. 127

Report of the Executive Directors of IDA ...................................... 128 Additions to IDA Resources; Second Replenishment ....................... 128

Accredited Members of Delegations at 1968 Annual Meetings ................. 134 Observers at 1968 Annual Meetings .......................................... 141 Executive Directors and Alternates ........................................... 142 Officers of the Boards of Governors and Joint Procedures Committee for 1968-69.143

Address by the President of the United States LYNDON B. JOHNSON

I am glad to meet with you again and to wish you well at this meeting

and in your working sessions through­out this year.

Yours is truly the world's business. You are the guardians of what we have done, and the guides to what we must do, in world economic co­operation. You are custodians of the world's economic welfare and ulti­mately of its security.

I imagine that there were occasions, during this past year, during which you might have wished those respon­sibilities off on someone else. Not many of you, I expect, have kept "bankers' hours" during 1968.

International finance is a mystery to most men and women. But even schoolboys and politicians know that this has been a year of crisis in world financial markets and that the well­being of millions of ordinary people was jeopardized.

And yet, thanks to the foundations that were laid at Bretton Woods years ago, those crises did not lead to panic and depression.

Somehow, we overcame each one. We learned from each one. So we are stronger today for the trouble that we met and the trouble that we mastered -together.

When Britain devalued its currency, we closed ranks to prevent a sense­less round of competitive actions by other countries. Compare that re­sponse with the 1930's or even with 1949.

When currencies came under spec­ulative attack, we increased our credit lines to each other. Cooperative gov­ernment action could offset the sense­less flows of panic money and could resist the plunder of speculation. Cur­rency exchanges remained stable, and trade went on unhurt and unhindered. Now it is our job to keep it that way.

When gold speculators threatened to create a monetary panic by bet­ting again-and again, unsuccessfully -that they could force an increase in

the official price of gold, we set up the two-tier system. Monetary gold reserves are now protected from speculative activity and the private markets.

When I met with you last in 1965, you had just decided to seek a plan that would meet the world's future re­serve needs. Today, it is a reality. We are close to seeing the special draw­ing rights facility come into being. This is a major step in international financial cooperation. I am very proud that the United States was among the first countries to complete its process of ratification.

I could go on and on with this re­markable listing to the enlargement of Fund quotas and the coordination of interest rates. The fact is that coop­eration with their neighbors is becom­ing a central part of the economic policy of many, many nations.

Last year, I asked our Congress for a tax increase. I also announced a new balance of payments program on January 1 of this year. I realized that these measures were strong medicine, particularly in an election year.

But the overriding need was to keep the United States economy, and the dollar, strong. This was vital not only, I think, to our economy, but to the world's. Other countries saw this clearly. Though some could be hurt by the measures that we were consider­ing, they strongly supported them­indeed, they pressed us to carry them through. And while they did not have any votes in our Congress, their voices were nonetheless heard.

We, in turn, have urged some Euro­pean nations to move more actively to expand their economies-in their own interests, and in the interest of a bet­ter balance of payments situation for all.

Why are we becoming more con­cerned about the economic policies of our neighbors? Why must we act together to set ground rules for mone­tary cooperation? Benjamin Franklin

explained it to his colleagues at the signing of our Declaration of Inde­pendence in 1776, in terms that they could all understand. "We must all hang together," he warned, "or assur­edly we shall all hang separately."

So in the world that started with Bretton Woods, the more we move out of phase with each other, the more we will each have to restrict ourselves. The more we move together, the more rapidly each of us will be able to ad­vance the prosperity of our own people.

Multilateral Approach to Development

The same principle holds in lend­i ng for international development. This is our common challenge, and it demands a common response. Devel­opment is not the responsibility of just a few countries, but of many. A multi­lateral approach can be a practical way to get at the job-for countries providing assistance as well as for those receiving it.

Our record to now in this field is encouraging, but we must improve on it. The World Bank is now able to bor­row capital all over the world, and that will serve to expand its activi­ti es. It wi II also contri bute to the achievement of better balance in world payments.

The Bank has also learned, as we all have, that heavy industry, dams, and other large projects cannot guar­antee development. We must help to improve the quality of human re­sources-in industry, in public admin­istration and in other fields. These ac­tivities may not seem commercially promising at once, but they do pay the largest dividends. People are the key to development.

We have also learned the critical value of the International Develop­ment Association. In the development business, we cannot always behave like hard-fisted moneylenders. Some projects have a quick payoff; others

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will take time. All are needed for bal­anced growth. The storehouse of de­velopment must include long-term, risk capital. It is essential that we do everything possible to provide enough of this capital, and it is essential that we provide it together.

The new replenishment of IDA re­sources is a first priority development need. It places a first call on the in­ternational community-and on our own Congress.

We must also expand the activities of the regional banks. We have a good base.

-The Inter-American Development Bank-the senior member of the group -is at the center of the Alliance for Progress.

-The Asian Development Bank is already a focal point for development plans and cooperation. Mr. Eugene Black has just made a study in that area of the world for me and will report to me later today.

-The African Development Bank, financed entirely by African nations, is finding new development opportuni­ties throughout Africa and has made its first loan.

These banks are a symbol of a new era of regional cooperation for eco­nomic development. I have seen for myself the achievements of the Cen­tral American Common Market when I went there a few weeks ago for a brief visit-the joint work on roads, in health and in trade.

So from the Mekong to the Indus, to the Volta, to the Amazon, nations are beginning to put aside the ancient quarrels so that they may develop to­gether the rivers and the other great natural resources they share.

Lessons of Development

What is the meaning of this experi­ence? It shows, I think, that the more we do together, really, the better we do it. But as we do more together, our common institutions must be prepared

to take on new responsibilities. They must adopt a broad development out­look. They must take the lead to in­sure that all the developing countries and the industrial countries meet their responsibilities.

What have we learned together about development?

First, development is a full-time job, calling for all-out mobilization in each country. Those who assist from outside can only be the junior partners in the venture.

Second, development is serious na­tion-building, a task for the doers and not just the talkers. There is no room for sterile dogma and there are simply not enough resources for empty for­eign adventures.

Third, developing countries cannot carry the burden of excessive military expenditures. Every nation has legiti­mate security needs. But there can be neither security nor development with a senseless spiral of military pur­chases.

Fourth, agriculture is a develop­ment growth industry. Most of the people are in the countryside. Hungry people cannot be productive people. But prosperous farmers can be the firm foundation for prosperous fac­tories.

Fifth, development requi res diversi­fied exports. Traditional products and traditional markets will not be enough to finance import needs. So the de­veloping countries have the responsi­bility to create new and competitive export industries. The industrial coun­tries have the responsibility to main­tain an open and growing economy.

Sixth, development requires broad opportunities for the private sector -domestic and foreign. The technol­ogy, management and capital that for­eign investment provides is a critical component if it is brought into the right sectors and if it is brought in on fai r terms.

Seventh, in some critically impor­tant nations policies of fami Iy plan-

ning have been adopted. New seeds and new priorities have lifted agricul­tural production and they have bought time for family planning policies to try to become effective. But the fate of development efforts hinges on how vigorously that time is used.

Eighth, we have proved that devel­opment works. We have seen ancient fields reborn; new roads built to bridge the traditional gap between city and countryside; new schools to bring modern knowledge to age-old cultures. We have seen nations on the move reaching sustained rates of eco­nomic growth exceeding 6 per cent a year. There is yet still a vast amount of work ahead. Many nations have only just begun. But we now know that foreign aid is not an endless task. We simply cannot turn our backs on the majority of our fellow human beings in the world.

We simply must not turn our backs on the majority of all mankind. This would be tragic. This would be a tragic end to more than two decades of commitment, of trial, of error, and I think of magnificent achievement.

Cooperation for World Economic Growth

And we must continue equally to work hard to strengthen the interna­tional monetary system.

Balance of payments problems affect our growth policies, affect our trade policies, and of course our aid policies.

Monetary crises can lead to panic and world depression with disastrous con­sequences for world security and wel­fare. So the machinery that we have built over the past 25 years prevented the recurrence of monetary panics. And it must continue to do so in the future.

It was 25 years ago that President Franklin D. Roosevelt said that Bret-

ton Woods expressed: " ... our hope for a secure and fruitful world, a world in which plain people in all countries can work at tasks which they do well, exchange in peace the products of their labor, and work out their several destinies in security and peace; a world in which governments, as their major contribution to the common welfare, are highly and effectively re­solved to work together in practical affai rs and to guide all thei r actions by the knowledge that any policy or act that has effects abroad must be considered in the light of those effects."

The world then was half destroyed from a terrible war. Total world in­come was probably little more than $750 billion in today's prices.

The institutions that we created at Bretton Woods and the cooperation that we built upon these institutions led to the highest sustained rate of economic growth in the history of the world. Total world income today is $2.5 trillion.

So by working closely together-in monetary policy, in economic policy, in development policy-we can realis­tically hope to increase world output by 5 per cent a year over the next decade. This is what we averaged over the past six years.

If we fai I to strengthen ou r i nterna­tional financial institutions-if we stand still or if we retreat in the co­ordination of our economic policies­if we falter in our effort to encourage economic development among the

poor nations-total world income will grow by far less. We could expect to falter back to a period of boom and bust-to stop-and-go economic growth. This would be a very sad replay of the record of the past century when world economic growth averaged just a bare 3 percent a year.

The difference at the end of a de­cade would be $500 billion of world production every year. So this is the measure of the stakes that are in­volved in constructive relations: con­structive relations among the indus­trial countries; between industrial and developing countries; among the de­veloping countries themselves; and between east and west.

Let us not fail to be wise.

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To ALL Governors, Alternates, Ad­visers, Observers and guests, a

cordial welcome to these Annual Meet­ings of the International Monetary Fund and the International Bank for Recon­struction and Development and of the Bank's affiliates, the International Fi­nance Corporation and the Interna­tional Development Association, and of the International Centre for Settlement of Investment Disputes.

I am greatly honored to have the privilege and pleasure of presiding over these meetings and of thanking the President of the United States for his gracious message of welcome. I know I am speaking on behalf of everyone attending these meetings when I say how appreciative we are of the friendly hospitality which the Gov­ernment and people of the United States are once again extending to us.

I wish to extend a special greeting to the Governors and Alternates for Botswana, Lesotho and Mauritius which have become members of the Fund and Bank during the past year and for Malta which has joined the Fund. Membership in the Fund and Bank now totals 111 and 110, respec­tively. I am pleased to note at the same time that Botswana, Indonesia, Lesotho and Mauritius have become members of IDA, increasing the mem­bership to 102, and that Yugoslavia, Uruguay, Singapore and Mauritius have joined IFC, Mauritius becoming the latest and 90th member. I also wel­come the observer from the People's Republic of Southern Yemen which has applied for membership in both the Fund and Bank. We are pleased that Swaziland, too, has made applica­tion to join the institutions.

I do not intend this morning to dwell upon the operations of our or­ganizations, which the various Annual Reports record in ample detail. I should like, however, to comment on a few events which appear to deserve emphasis.

At the outset, I should like to pay

Opening Address by The Chairman, U. B. Wanninayake

Governor for Ceylon

tribute to the Heads of these important international organizations.

I wish to say how pleased I myself, and I am sure all those who are in any way connected with international finance, feel at the reappointment of Mr. Schweitzer to a second term as Managing Director of the Fund. His calm and penetrating judgment has been an inspiration through the many crises and difficult decisions of the past five years and the Fund is to be congratulated on its good fortune in continuing to enjoy his leadership.

The selection of Mr. McNamara to lead the World Bank Group of institu­tions may signify a turning point in development more profound than is readily apparent. He has a reputation for administrative efficiency and drive, which he will now bring to bear on development finance. He is a true "generalist." Perhaps his unanimous selection by the Executive Directors reflects a realization that development is a universal process of many dimen­sions, of which the financial is only one. This is an important point, I be­lieve, and I shall refer to it again when I consider the affairs of the World Bank and its affiliates in more specific terms. Meanwhile, I wish merely to as­sure Mr. McNamara that we welcome his acceptance of this new responsi­bility and are glad to meet with him on the occasion of the first Annual Meeting he is attending.

To his great credit, it was Mr. Woods who said at the time of Mr. McNamara's selection that the presi­dency of the World Bank now re­quired a broader view than a banker might be expected to bring to it. Mr. Woods himself, of course, had already gone a long way to show how broad a view at least one banker could take. His principal new departures serve to illustrate the validity of this point. Under his direction, the Bank and IDA recognized the relationship between education and development, and greatly deepened and broadened their

concern with agriculture and industry. On behalf of the Bank and IDA, Mr. Woods accepted a more active leader­ship role in the coordination of de­velopment assistance and, realizing the needs of the developing world and of the "new" countries which joined the Bank during his terms of office, he advocated an expansion of IDA re­sources and worked unstintingly for the second replenishment. We wish for George Woods a long and full life.

Before turning to matters with which the Fund and Bank are spe­cifically concerned, I should mention the work of the two institutions on the stabilization of prices of primary products. Last year, when the Resolu­tions on that subject were put before the Annual Meetings in Rio de Janeiro, I and many other Governors stressed the importance and urgency of the problem. Developments since then have certainly not made the need for solutions any less pressing. I believe the analytical work of the Fund and Bank staffs during the past year pro­vides a valuable springboard for the task of formulating recommendations. I do not underestimate the complex­ities of that taSk, but I trust that early agreement will be reached on pos­sible constructive action by the Fund and Bank in this field.

Dramatic words would not be out of place in describing the past year for the Fund. From the point of view of both the financial support and the technical assistance provided to member countries, it has been a rec­ord year. At the same time, while there has been a series of crises of confidence in the international mone­tary system, the adoption by the Board of Governors of the Proposed Amend­ment of the Articles of Agreement in May this year represented the CUl­mination of a prolonged period of ex­ceptionally demanding study and con­sultation within the Fund. The double burden of a heavy load of, if I may

dare to so describe it, "routine" work and of a succession of special prob­lems, has imposed severe strains on the Executive Directors, management and staff of the Fund. I am sure all Governors would wish me to pay tribute on their behalf to the efficiency and fortitude with which that pressure has been borne.

A few moments ago I had the temerity to use the word "routine." The range and intensity of the activi­ties described in the Fund's Annual Report demonstrate how inadequate that word is. During the past fiscal year Article VIII or Article XIV con­SUltations were completed with 67 member countries, 32 stand-by ar­rangements were approved, three coun­tries accepted the obligations of Ar­ticle VIII, and six increases in quotas were approved. The number of finan­cial transactions was greater than in any previous year and by the end of June 1968, outstanding drawings had risen by $1.1 billion to $5.7 billion. Staff members visited 100 countries to conduct consultations and provide ad­vice on banking and fiscal problems, exchange policies and the operation of exchange systems, and the devel­opment of balance of payments and financial statistics. In addition to the increased level of technical assis­tance furnished directly by representa­tives from the Fund, 60 other ex­perts, the provision of whose services had been arranged by the Fund, were on assignments in 30 countries, mostly for periods of at least six months, at the close of the fiscal year. At the same time, the courses pro­vided by the IMF Institute have been expanded, and the list of international and regional organizations with which the Fund has maintained close rela­tions has continued to grow.

Turning to the "non routine" de­velopments, you have all been keenly aware that the international monetary system has been passing through a period of uncertainty. The alarums

and excursions of the past year have had repercussions on the economies of virtually every country represented here. There are many profound les­sons for the future in those events. One of the most significant has been the underlining of the need to improve the functioning of the process of payments adjustment. Inevitably, the aspects of that process which attract most attention are those relating to the interaction of developments among the major industrial countries. But 1967 demonstrated yet again that the impact of the tendency in those countries to delay appropriate action and to adopt too narrowly conceived policies is at least as great on the developing economies. The Fund Re­port has brought sharply into focus how the slowdown in the industrial countries led to a deceleration of ex­port earnings in less developed areas; this, together with a relative weaken­ing of aid flows, has meant that, despite a general improvement in agricultural output, development ef­forts were in many cases impeded. At the present time, we are particu­larly concerned about the possible im­pact on commodity prices of correc­tive measures being taken by the United States and the United King­dom. It can only be hoped that ex­pansion in the surplus countries will offset the dampening effect of these measures on world demand.

While efforts continue to be made to translate the sympathy widely ex­pressed for the payments problems of the poorer nations into meaningful in­ternational action to ease their bur­dens, the results of such efforts hitherto have fallen far short of needs. It is hard not to draw comparisons between those efforts and the re­sources that are mobilized to assist some of the richer countries in countering disequilibrating forces. In his opening address last year, my predecessor as Chairman of the Board of Governors of the World Bank

Group eloquently expounded the pit­falls of putting too much stress on aggregate growth rates as a measure of development success. But the widening gap between the national products of the rich and poor coun­tries is nonetheless a valid indicator of the need for more strenuous action on a broad front. It is to be hoped that the current of world opinion may soon begin to flow more strongly in favor of such actions, despite the re­cent slowdown in aid commitments and the persistence of constraints upon the access of primary products to major markets and the disappoint­ing results of the Second Session of UNCTAD. I hope that the attempts now being made will improve the framework for continuing the bal­anced expansion of trade and in­crease the willingness of all sectors of the world economy to cooperate more closely in the pursuit of mutually beneficial policies.

I have already referred to the work being done on commodity stabiliza­tion. It augurs well for the outcome of that work that the Proposed Amendment to the Articles of Agree­ment was approved overwhelmingly by the Board of Governors of the Fund in May and that already 17 coun­tries have taken the action necessary to enable them to accept the Amendment, while in others, procedures are well advanced. On the one hand, the mod­ifications to be made to the existing Articles demonstrate the Fund's ca­pacity to evolve in step with changing circumstances; on the other hand, the establishment of the speCial drawing rights scheme illustrates its ability to introduce a completely new element into the international monetary system. The facility will involve for the first time the deliberate creation of an interna­tional fiduciary asset in amounts which will ensure the orderly growth of the global supply of reserves. To reach agreement on such a major advance in the evolution of the international

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monetary system has involved recon­ciling a formidable range of diverse interests. And yet the end product not only protects those interests, it also provides a workable and flexible mechanism for resolving the daunt­ingly complex issues which will be involved in determining the appropri­ate rate of asset creation. The princi­ple of universal, nondiscriminatory par­ticipation by all Fund members is safeguarded, and the concept that surplus as well as deficit countries must contribute to the elimination of payments disequilibria is enshrined in many provisions. The strong empha­sis given to ensuring that there is "broad support" for any proposal to allocate or cancel special drawing rights may raise in some minds the question of whether reserves will in fact be created in sufficient amounts to meet the future global needs of the international monetary system. Simi­larly, the very high voting majorities required for many areas of action may cause misgivings about the decisive­ness with which the scheme can be operated. But effective functioning will not be possible unless there is a gen­eral consensus at each stage in the decision-making process. It will be up to all the member countries to en­sure that the consensus which emerges is a fair and equitable one. This requires a spirit of compromise on the part of both debtor and creditor countries, and a willingness to ap­preciate the points of view of other countries. I am sure that the task of achieving an equitable compromise will be rendered considerably easier, if there is general recognition of the fact that, in the changing world we live in, a country which is in a strong creditor position today may find itself in a few years in a debtor position, while the reverse may happen to a debtor country.

I am, however, very hopeful that the required degree of international co­operation will be forthcoming. The

fact that such a large majority of the votes cast by Governors was in favor of the Proposed Amendment certainly seems to signal that all countries ap­preciate the need for cooperation. I am sure that many countries had some reservation or other about the Pro­posed Amendment. Speaking for my own country, I can say that we were not quite in favor of some of the pro­posed amendments to the existing Ar­ticles, and would have preferred dif­ferent arrangements for the special drawing rights scheme to enable the developing countries to benefit more directly from the creation of interna­tional liquidity, but in the interests of cooperation, we chose to vote in favor of the Amendment as a whole.

Another event in which it was pos­sible to discern the advance of inter­national cooperation was the devalua­tion of sterling and 14 other member currencies in November. Although many of the tremors which have since been experienced in the payments system can perhaps be traced back to that first disturbance, the initial shock wave was significantly less widespread in its impact than had been the case in 1949. The orderly manner in which the operation was carried through without any changes in the exchange rates of the other major industrial countries was a grati­fying illustration of the extent to which financial cooperation has developed. Particularly impressive was the ability of the Fund to provide member countries with immediate advice on how they might react. That advice un­doubtedly made a major contribution to the fact that relatively few other countries found it necessary to alter their exchange rates; these relatively fewer offsetting devaluations meant that statistically speaking, and espe­cially when measured in terms of the country distribution of exports, the 1967 devaluations were more effective than those of 1949.

Whether the hopeful signs for the

future are in the ascendancy is per­haps debatable. By no means have all the sources of doubt and uncer­tainty been removed. The elimination of the U.S. and U.K. balance of pay­ments deficits, to which their Govern­ments are committed, is of crucial importance. The ominous tendency which has recently been emerging in some countries toward a build up in protectionist sentiment and toward preferential systems of a narrow type must also be reversed. The conclusion of the Kennedy Round negotiations re­affirmed the broad trend toward trade liberalization and should facilitate the adjustment process. However, the major concessions negotiated were principally of benefit to the developed countries. Especially as far as the de­veloping countries are concerned, non­tariff barriers remain formidable, and threats of new quota restrictions and retaliatory action cannot be entirely dismissed as only journalistic license.

Another problem which has been looming on the horizon is the ade­quacy of the Fund's resources. The present level of usable assets can scarcely be regarded as providing a comfortable margin over potential calls. If the outcome of the studies on commodity prices involves a pro­posal for the provision of additional financial assistance to member coun­tries, the position would become de­cidedly uncomfortable. The progres­sive reduction in the Fund's holdings of the currencies of the major sur­plus countries has only been par­tially offset by the broadening of the range of currencies used in drawings. However, the availability of the Fund's gold holdings and of borrowings under the GAB will continue to provide in­valuable supplements to the stock of usable member currencies, and I am confident that additional reinforcement of the Fund's liquidity will prove pos­sible in the period ahead.

When we turn our attention to the World Bank Group of organizations

and the problems of development which are its concern, we see a pan­orama filled with promise but clouded by uncertainty. Much of the promise is rooted in past accomplishment, and it rests on the hope that momentum already achieved will be sustained and increased. But will it be?

One effect of the population explo­sion has been a vast distortion of the familiar pattern of age distribution. The world is suddenly very young. Events in the last year in many coun­tries demonstrate that the moderating influence of age and experience is everywhere diluted by impatient ideal­ism. The resulting imbalance between generations is creating a new force that may soon be dominant.

This is no less true in our field of development than in the realm of moral values, ideology and politics. We can only hope, but cannot assume, that the new idealism will strengthen the world's commitment to develop­ment leading to a comprehensive and integrated international development policy. If it does, I have no doubt that we will see a new surge of growth in the developing countries which in time will give a more hopeful cast to world affairs. If it does not, the economic and political consequences for both the developed and developing world may be tragic.

Unfortunately, neither the magni­tude nor the significance of what has already been accomplished is widely known. If we seek a broadly based commitment, perhaps one of our first responsibilities is to try more vigor­ously to fill the void of information and understanding about the background, problems, achievements and require­ments of development.

We all know that the flow of aid must be increased in order to accel­erate the forward thrust of growth. At the same time, one must not overlook the fact that the total flow of de­velopment resources has risen by more than 80% in the last 12 years.

With temporary deviations, the in­crease has averaged more than $400 million a year.

We also know that the average terms of assistance for many countries must be improved in order to prevent future aid from devouring itself. Statistics on 54 countries, given in the Bank's An­nual Report, show that in 1966 at least six were paying more than 15% of their export earnings to service ex­ternal official debt, and that for all developing countries taken together the ratio was more than 9%. In fact, 13 countries in 1966 paid out in debt service more than half of the grants and loans they obtained from all sources. A few have actually been paying out more than they have been receiving. All this underscores the need for more development finance on concessionary terms, and makes especially distressing the delay­which we earnestly hope will be only temporary-in completing the second replenishment of IDA.

Nevertheless, the pressing need for more development finance on beUer terms should not blind us to the fact that nearly two-thirds of all develop­ment capital from abroad in the last 12 years has been advanced by the governments of industrialized coun­tries from public funds, and that as recently as 1966 the concessionary element in new external public debt incurred by developing countries amounted to nearly two-thirds of the total. Nor should the shortcomings of aid, as we know the problem tech­nically, prevent us from appreciating the fact that generosity on such a scale is an unprecedented phenom­enon.

In the industrialized countries, there is urgent need for better understand­ing of what has actually been accom­plished, the nature of the problems that confront the developing coun­tries, and what these countries have done to help themselves. Instead, we constantly hear of public disenchant-

ment with development assistance, on the widespread assumption that achievement has not justified the cost.

The facts are quite different. In the 12 years through 1967, the developing countries imported over $400 billion worth of goods and services, chiefly from the countries which have given development aid. Of that amount, nearly three-fourths has been earned by the developing countries through exports, chiefly to the same countries. The balance of some $100 billion has been financed by the industrialized countries through grants, loans, sup­pliers' credits and private invest­ments. Although the grant element in this financing has been considerable, it is also true that the bulk of it has been advanced on commercial terms.

A large part of these imports, to­gether with domestic resources of labor and materials, has been em­ployed to build or improve an infra­structure of facilities which people in other areas take for granted: irriga­tion, power, communications and urban water systems, roads and rail­ways, schools and colleges, basic in­dustries, and other public services of all kinds. Although with many excep­tions and qualifications, the most es­sential facilities have now been con­structed. Growth in the future can be faster if the momentum is maintained, since much of the indispensable foundation in most countries has been built. And if those who have given aid were well enough informed to take the pride they deserve in what their aid has achieved, I am sure that we would not have to be concerned about their continued interest.

We are now in a period when their unhesitating support, rooted in under­standing, could be crucial. Thanks to a whole train of developments, most of which are summarized in Part Two of the Bank's Annual Report, large parts of the developing world, espe­cially in the heavily populated lands of Asia, confront an unparalleled op-

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8

portunity. I refer to the "Agricultural Revolution in Asia." With adequate effort and assistance, well coordinated and administered, many countries have the clear possibility of overcom­ing the most intractable problem in the whole field of economic develop­ment: the lagging growth of agricul­tural production.

The opportunity is especially bright in my own country of Ceylon, where in the past the average annual in­crease in rice production was rela­tively modest in the context of popu­lation growth, with the result that we were forced to use a substantial pro­portion of our scarce foreign ex­change for rice imports. Now, how­ever, the progress made in the last two years or so in the use of the new strains of rice seed, proper applica­tion of fertilizers and other essential inputs, the opening of new areas through irrigation, an adequate pro­gram of training and technical assis­tance, effective incentives and ad­ministration at all levels, has placed self-sufficiency within reach in the 1970's. The degree of opportunity va­ries from country to country, but it is quite clear that all of Asia can, in the foreseeable future, become self-suffi­cient in food grains if these conditions are fulfilled. The question is whether the necessary conditions will be met.

The countries of Asia recognize the opportunity and are determined to seize it. Several are already carrying out highly effective pilot programs which demonstrate the possibilities for expanded production of both rice and wheat. The farmers in these areas have shown that they are quite pre-

pared to be progressive when they share in the benefits.

But pilot programs do not make an agricultural revolution. Only the po­tential is at hand. To realize it requires unflagging determination on the part of the countries concerned and, equally important, assistance on a broad front that is adequate, effective and sus­tained.

Many of the countries of Asia are also making efforts to curb the rate of population growth. This problem can be illustrated by reference to the situation in Ceylon. Our birth rate is 33 per 1,000, but our death rate­thanks to highly successful public health measures-has been reduced to only nine per 1,000. If the resulting rate of population growth were to continue unchecked, our total popu­lation would rise by more than a fifth in the next eight years and by the end of this century it would more than double. In our situation, such growth without a corresponding expansion in production could be disastrous. I am glad to state here that in Ceylon there is an increasing awareness among the people of the magnitude of this prob­lem and that the people by and large are showing signs of an increasing willingness to take the necessary steps to meet it.

I have referred to the situation in my own country only for illustrative purposes. In varying degrees and different ways, the same challenges and opportunities confront most of the countries of the developing world.

The problems of agricultural pro­duction and population growth, the

dilemma of limited resources con­fronted simultaneously by demands for administrative and technical skills on the one hand and universal edu­cation on the other, the need for bet­ter ways to mobilize and allocate resources at every level-all these and other thorny aspects of develop­ment require the coordinated applica­tion of the widest range of knowledge and experience. The World Bank Group of organizations are expanding their resources to assist in meeting these challenges and in realizing these opportunities.

But beyond this, we must formulate adequate and realistic goals for a "second development decade." I wel­come the forward-looking policies being evolved by the World Bank as well as the preparatory work for a "second development decade" being undertaken by the United Nations. I welcome also the initiative of the World Bank and other organizations to determine the basis for a global strategy of development for which we must win early acceptance.

Mr. Schweitzer and Mr. McNamara now have the task of building on the impressive records of the Fund and Bank during the last two decades. A considerable store of knowledge and experience has been accumulated and member countries have come to understand as never before the bene­fits of mutual support in all fields. But this is undoubtedly one of the most trying periods since the organizations were founded, and continued dynamic leadership is called for to exploit the great opportunities which lie ahead.

THIS IS MY first public speech as President of the World Bank, and

I speak to you with some diffidence as a newcomer with only half a year's experience in this post-but perhaps the half year in my whole life in which I have felt myself most challenged by the prospect before me.

I have always regarded the World Bank as something more than a Bank, as a Development Agency, and when I came here six months ago I was not entirely a stranger to the problems of World Development. As American Secretary of Defense I had observed, and spoken publicly about, the connection between world poverty and unstable relations among nations; as a citizen of the world I had begun to sense the truth in Pope Paul's dic­tum that "Development is Peace." Yet I was uneasily aware that as the peoples of the world looked at the sixties-the United Nations' Develop­ment Decade-they felt a deep sense of frustration and failure. The rich countries felt that they had given bil­lions of dollars without achieving much in the way of development; the poor countries felt that too little of the enormous increases in the wealth of the developed world had been di­verted to help them rise out of the pit of poverty in which they have been engulfed for centuries past.

How far is this mood of frustration and failure justified by the events of the past decade? I have sought to find out the truth about this, but, though there have been many voices only too anxious to answer my ques­tion, each with a panoply of statistics to prove its point, there is no agreed situation report, nor any clear joint strategy for the future.

There have been successes: many billions in aid have been forthcoming from the developed world, and as a result of that aid and of their own in­creased capacity to manage their affairs, the economic growth of the poorer countries has been stimulated.

Annual Address by

ROBERT S. McNAMARA President of the Bank and Its Affiliates

Let us make no mistake; Aid does work, it is not money wasted, it is a sound investment. Even the ultimate goal of the Development Decade, an annual rise in national incomes in the poorer countries of 5 per cent by 1970 is likely to be achieved: the average annual growth thus far has beeen 4.8 per cent.

And yet . . . you know and I know that these cheerful statistics are cos­metics which conceal a far less cheer­ful picture in many countries. The oil rich nations of the Middle East have prospered economically; so have some small states in East Asia. But for the nations of Africa and South Asia-nations with a population of over one billion-the average in­crease in national income is, at most, 3V2 per cent, and much of the growth is concentrated in the indus­trial areas while the peasant remains stuck in his immemorial poverty, liv­ing on the bare margin of subsistence.

Casting its shadow over all this scene is the mushrooming cloud of the population explosion. If we take this into account, and look at the progress for human beings rather than nations, the growth figures appear even less acceptable.

The annual growth of per capita in­come in Latin America is less than 2 per cent, in East Asia only about 2 per cent, in Africa only 1 per cent, and in South Asia only about V2 per cent. At these rates, a doubling of per capita income in East Asia would take nearly 35 years, in Latin America more than 40 years, in Africa almost 70 years and in South Asia nearly a century and a half. Even in the most progressive of these areas, the amount of improve­ment would be imperceptible to the average citizen from year to year.

Such a situation cries out for a greater and more urgent effort by the richer countries to assist economic growth in these poorer countries. It is clear they are financially capable of such action. During the Development

Decade so far, they have added to their annual real incomes a sum of about $400 billion, an addition itself far greater than the total annual in­comes of the underdeveloped coun­tries of Asia, Africa and Latin America.

But I found, and I need hardly tell you this, that while the requirement for assistance was never higher, the will to provide it was never lower in many, though not all, of the countries which provide the bulk of economic aid.

And the disenchantment of the rich with the future of development aid was fed by performance deficiencies of many of the poorer nations. Blatant mismanagement of economies; diver­sion of scarce resources to wars of nationalism; perpetuation of discrimi­natory systems of social organization and income distribution have been all too common in these countries.

This then was the picture of the de­velopment world which I found in my first weeks at the World Bank. A con­fused but sharply disappointing pic­ture, in which it was difficult to see what had gone wrong in the past (though something clearly had), or what was the right path ahead for us.

In these circumstances, I turned to a suggestion which had been put for­ward by my predecessor, Mr. George Woods-one of his many bits of wise advice from which we all, and I espe­cially, have benefited. This was that we should establish a commission of men well versed in world affairs, and accustomed to influencing them, who would survey the past aid effort; seek out the lessons it can teach for the future; and then examine that future to see what needs to be done by rich and poor, developed and under­developed alike to promote the eco­nomic well-being of the great majority of mankind. As you know, Mr. Lester Pearson, formerly Prime Minister of Canada, has agreed to lead such a survey, which will now proceed inde­pendently of the Bank.

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10

The Pearson Commission will be turning our eyes to the long future, marking out guidelines not just for a decade but for a whole generation of development that will carry us to the end of this century. But here are we now, living in 1968, with much that we can and must do today and to­morrow. It is already clear beyond contradiction that during the first four-fifths of the Development Decade the income gap between the de­veloped and the less developed coun­tries has increased, is increasing and ought to be diminished. But it is equally clear that the political will to foster development has weakened, is weakening further, and needs des­perately to be strengthened.

What can the Bank do in this situa­tion? I have been determined on one thing: that the Bank can and will act; it will not share in the general paral­ysis which is afflicting aid efforts in so many parts of the world. I do not believe that the Bank can go it alone and do the job of development that needs to be done around the world by itself; but I do believe that it can pro­vide leadership in that effort, and can show that it is not resources which are lacking-for the richer countries amongst them have resources in plenty-but what is lacking, is the will to employ those resources on the de­velopment of the poorer nations.

We in the Bank, therefore, set out to survey the next five years, to formu­late a "development plan" for each developing nation, and to see what the Bank Group could invest if there were no shortage of funds, and the only limit on our activities was the capacity of our member countries to use our assistance effectively and to repay our loans on the terms on which they were lent.

As a result of this survey, we have concluded that a very substantial in­crease in Bank Group activities is de­sirable and possible.

It is toward this objective that I

shall attempt to guide the Bank's ac­tivities in the next few years. In dOing so I shall need the advice and support of you gentlemen, our Governors, ex­pressed through the Board of Execu­tive Directors. Therefore I think it prudent and fitting that I should now present to you an outline of my thinking.

Let me begin by giving you some orders of magnitude: I believe that globally the Bank Group should dur­ing the next five years lend twice as much as during the past five years. This means that between now and 1973 the Bank Group would lend in total nearly as much as it has lent since it began operations 22 years ago.

This is a change of such a degree that I feel it necessary to emphasize that it is not a change of kind. We believe that we can carry out these operations within the high standards of careful evaluation and sound fi­nancing that my predecessors have made synonymous with the name of the World Bank.

Our loans will be for projects as soundly based and appraised as ever in our history. However, more and more, in looking for projects to sup­port we shall look for those which contribute most fundamentally to the development of the total national economy, seeking to break strangle­holds on development; to find those growth opportunities that stimulate further growth. And our help will be directed to those poor nations which need it most.

This, I believe, to be sound develop­ment financing, but it is not riskproof; nor do I believe that the utter avoid­ance of risks is the path of prudence or wisdom. For instance, I recently visited Indonesia where, for good rea­sons, the Bank has never made a loan of any sort in the past. What I found was the sixth largest nation in the world, rich in natural resources, striv­ing in the wake of the most terrible

disasters, both economic and politi­cal, to set itself straight on the path to development. Without external help Indonesia faces certain disasters; by giving help (as we have begun to do through the International Development Association and through the establish­ment of a permanent mission) we are running some risks. I do not believe you would wish it otherwise.

The parable of the talents is a par­able about power-about financial power-and it illuminates the great truth that all power is given us to be used, not to be wrapped in a napkin against risk.

But if we are to lend at double the level of the past, can we raise the money? I will not speak now about the soft loan money which is raised by Government contributions-you all know how essential these funds are­but about the money we raise by bond issues in the capital markets of the world. I am confident that the money is there, because I have confidence in the immense capacity of the econ­omies of the developed world; no country need fear bankrupting itself because it plays its full part in development.

There are, of course, certain con­straints resulting from balance of payments difficulties, but I am fully aware that the balance of payments difficulty is a problem of balance among the rich economies and not of balance between those countries as a group and the rest of the world -very little of the money lent in aid stays in the developing countries, al­most all of it returns quickly in pay­ment for the goods purchased in the richer countries. It is our job in the World Bank to look at the world money markets as a whole, and see where there are surpluses, where there are reserves that can be tapped. Following this line we have gone to the Middle East, and successfully raised funds there, as well as in the more conventional markets of the

world-in particular Germany and America.

As a result, in the past 90 days the World Bank has raised more funds by borrowing than in the whole of any single calendar year in its history.

I would stress that in doubling the Bank Group's lending activities we shall not depart from our high stan­dards of investment policy. But I would not want you to think that our policy is simply "more of the same."

Our five year prospect calls for considerable changes in the alloca­tion of our resources, both to geo­graphic areas and to economic sec­tors, to suit the considerably changed circumstances of today and tomorrow.

First as to area: in the past the Bank Group has tended to concen­trate its effort on the South Asian subcontinent. Much has been achieved-the harnessing of the waters of the Indus River system for power and irrigation for instance­and much remains to be achieved. I believe World Bank lending to Asia should rise substantially over the next five years. But it is not to Asia alone that our new effort will be directed. It is to Latin America and Africa as well, where in the past our activities have been less concentrated, and to some countries in great need of our help, such as Indonesia and the United Arab Republic, where our past activities have been negligible.

In Latin America, I foresee our in­vestment rate more than doubling in the next five years. But it is in Africa, just coming to the threshold of major investment for development, where the greatest expansion of our activi­ties should take place. There, over the next five years, with effective col­laboration from the African countries, we should increase our rate of in­vestment threefold.

Further changes will flow from our shift to a greater emphasis on Africa and Latin America. The states of these two continents are smaller than

the giants of Asia. There will be many more but smaller projects, demand­ing much more staff work per million dollars lent than in the past.

The work of the Bank will also be increased because in many of the countries in which we will now be in­vesting, there is no well established Development Plan or Planning Organ­ization. We shall try, in conjunction with other sources of funds, to help these countries to develop plans and to adopt wise and appropriate poli­cies for development-in some cases by establishing resident missions as we have done in Indonesia-but al­ways remembering that it is their country, their economy, their culture and their aspirations which we seek to assist.

In particular, we will exert special efforts to right one upside-down as­pect of Bank Group operations: the fact that many of our poorest mem­bers, despite their greater need, have had the least technical and financial assistance from the Bank Group. About ten of these have had no loans or credits at all. This is largely be­cause of their inability to prepare proj­ects for consideration. In these cases we will provide special assistance to improve economic performance and to identify and prepare projects ac­ceptable for Bank Group financing.

With the doubling of Bank Group lending and with the increase in the complexity of our operations, there will clearly be need for an increase in the total professional staff of the Bank, as well as for some streamlining of our procedures. We are now en­gaged in a worldwide recruiting drive to find people with the high standards of expertise and dedication that have always been the attributes of its staff. I am anxious that this should really be an International Bank, in fact as well as in name, and I intend to en­sure that we move steadily in the di­rection of the widest possible distribu­tion in the nationalities of our staff.

Not only should our lending double in volume and shift geographically, but we can foresee, as well, dramatic changes among sectors of investment. Great increases will occur in the sec­tors of Education and Agriculture.

Education is a relatively new field for the Bank on which my predecessor George Woods, with his wise sense of priorities, began to place increased emphasis. In recent years the Bank has been seeking, hesitantly but with a growing sense of urgency, to find its optimum role in this field.

We are aware of the immense num­bers of illiterates in the developing world: about 30 per cent in Latin America, 60 per cent in Asia, 80 per cent in tropical Africa. We know too that educ,ation is relevant to all as­pects of development: it makes a more effective worker, a more crea­tive manager, a better farmer, a more efficient administrator, a human being closer to self-fu Ifi IIment.

The need is clear, but it has been less clear how the Bank's resources can be brought to bear on this labyrinthine problem. Now, after some years of collaboration with Unesco, we believe we see a way ahead for increasing Bank investment in educa­tion-investment which we hope will call forth further investment by the governments of the developing coun­tries themselves.

Our aims here will be to provide assistance where it will contribute most to economic development. This will mean emphasis on educational planning-the starting point for the whole process of educational im­provement. It will mean assistance, particularly in teacher training, at al/ levels, from primary to university. It will mean expansion of our support for a variety of other educational ac­tivities, including the training of man­agers, entrepreneurs and of course of agriculturalists.

It is important to emphasize that education, normally one of the largest

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12

employers in any country, is one of the few industries which has not undergone a technological revolution. We must help to move it out of the handicraft stage. With the terrible and growing shortage of qualified teach­ers all over the developing world we must find ways to make good teachers more productive. This will involve in­vestment in text books, in audio-visual materials, and above all in the use of modern communications techniques (radio, film and television) for teach­ing purposes.

To carry out this program we would hope over the next five years to in­crease our lending for Educational Development at least threefold.

But the sector of greatest expan­sion in our five-year program is Agri­culture, which has for so long been the stepchild of development. Here again there has never been any doubt about its importance. About two­thirds of the people of the developing world live on the soil, yet these coun­tries have to import annually $4 billion of food from the industrialized na­tions. Even then their diet is so inade­quate, in many cases, that they cannot do an effective day's work and, more ominous still, there is growing scien­tific evidence that the dietary defi­ciencies of the parent are passed on as mental deficiencies to the children.

The need has stared us in the face for decades past. But how to help?

In the past, investment in agricul­tural improvement produced but a modest yield; the traditional seeds and plants did better with irrigation and fertilizer but the increase in yield was not dramatic. Now, as you know, research in the past 20 years has re­sulted in a breakthrough in the pro­duction of new strains of wheat and rice and other plants which can im­prove yields by three to five times. What is more,these new strains are particularly sensitive to the input of water and fertilizer; badly managed they will produce little more than the

traditional plants, but with correct management they will give the peas­ant an unprecedented crop.

Here is an opportunity where irriga­tion, fertilizer and peasant education can produce miracles in the sight of the beholder. The farmer himself in one short season can see the bene­ficial results of that scientific agricul­ture which has seemed so often in the past to be a will-o'-the-wisp tempting him to innovation without benefit.

Our task now is to enable the peasant to make the most of this op­portunity and we, with the continu­ing assistance of FAD, intend to do so at once and in good measure. Irriga­tion schemes, fertilizer plants, agri­cultural research and extension, the production of pesticides, agricultural machinery, storage facilities-with all of these we will press ahead in the immediate future. Indeed in the com­ing year we plan to process more than twice the value of Agricultural loans as in the last, and our Agricul­tural dollar loan volume over the next five years should quadruple.

There is an element of risk in all this, of course. The seeds were issued before all the tests had been com­pleted; the resistance of the crops to local diseases or pests cannot yet be assured; the splendid harvests in India and Pakistan this year cannot all be attributed to the new seeds. But I have no doubt, though setbacks may lie ahead, that we are now on the brink of an Agricultural revolution as significant as any development since the Industrial revolution. It is one that gives us a breathing spell in the race between man and his resources.

This leads me to yet another area where the Bank needs to take new initiatives-the control of population growth. This is a thorny subject which it would be very much more convenient to leave alone. But I can­not, because the World Bank is con­cerned above all with economic de-

velopment, and the rapid growth of population is one of the greatest bar­riers to the economic growth and so­cial well-being of our member states.

This is the aspect of the population problem with which I shall deal, be­cause it is this aspect which most closely concerns the World Bank and its members. It makes it impossible for any of us to brush the subject aside, however strong our inclinations to do so may be.

I do not need before this audience to deal with the terrifying statistics of population growth as a whole which show that, although world population totaled only one-quarter billion in the first century AD and required 1650 years to add another quarter billion, it added one billion in the next 200 years; a second billion in the follow­ing century and a third billion in the next 30 years. It is now expected to add three more billion by the end of the century. By then, at present rates, it will be increasing one billion each eight years. Nor do I need to deal with the personal tragedies and dangers to health of unwanted births, though these were suddenly illumi­nated for me by an item in a news­paper last month which recorded that in the two largest cities of one Eu­ropean country live births were out­numbered by illegal abortions which imperiled the life of each unhappy mother.

As a development planner, I wish to deal only with the hard facts of popu­lation impact on economic growth. Recent studies show the crippling effect of a high rate of population in­crease on economic growth in any de­veloping country. For example, take two typical developing countries with similar standards of living, each with a birth rate of 40 per thousand (this is the actual rate in India and Mexico) and estimate what would happen if the birth rate in one of those countries, in a period of 25 years, were to be halved to 20 per

thousand, a rate still well above that in most developed countries. The country which lowered its population growth would raise its standard of living 40 per cent above the other country in a single generation.

In terms of the gap between rich countries and poor, these studies show that more than anything else it is the population explosion which, by holding back the advancement of the poor, is blowing apart the rich and the poor and widening the already dangerous gap between them.

Furthermore these economic stud­ies show that this drag of excessive population growth is quite indepen­dent of the density of population. This is something that needs empha­sizing in view of the fact that many policy makers in the developing coun­tries attach only minor importance to reducing population growth. It is a false claim that some countries need more population to fill their land or accelerate their economic growth. There are no vacant lands equipped with roads, schools, houses, and the tools of agricultural or industrial em­ployment. Therefore, the people who are to fill those lands, before they can live at even the current low stan­dard of living, must first eat up a por­tion of the present scarce supply of capital-it is this burden which de­feats a nation's efforts to raise its standard of living by increasing its population.

No one can doubt then that very serious problems of population growth face most of the developing nations

today; what are the chances of their being mastered by natural causes? The answer lies in understanding the nature of the population explosion. It is not caused by an increase in the birth rate, but by a dramatic drop in the death rate due mainly to medical advances. It is this death control which has created the present emer­gency, and I do not believe that any­one would wish to reintroduce pesti­lence-or any other of the four horse­men of the apocalypse-as a "nat­ural" solution to the population problem.

We are therefore faced with the question of what action we at the Bank, as a Development Agency, should take to lift this burden from the backs of many of our members. I propose the following three courses:

First: to let the developing nations know the extent to which rapid popu­lation growth slows down their po­tential development, and that, in con­sequence, the optimum employment of the world's scarce development funds requires attention to this prob­lem.

Second: to seek opportunities to fi­nance facilities required by our mem­ber countries to carry out family plan­ning programs.

Third: to join with others in pro­grams of research to determine the most effective methods of family plan­ning and of national administration of population control programs.

With these three proposals for im­mediate action, I hope we may con­tribute to the success of the UN sys-

tem which is already working in this field, and to the well-being of the de­veloping nations.

Gentlemen, I have spoken long enough. Let me conclude by saying that in the next few days, while we examine the innumerable and daunt­ing problems which face you who ex­ercise control over so much of the world's financial and economic power, I hope that none of us will yield to despair as we see how much there is to do, how little time in which to do it.

There is no cause for despair. There is every reason for hope. In the past few generations the world has created a productive machine which could abolish poverty from the face of the earth. As we lift up our eyes from contemplating our troubles, who can fail to see the immense prospects that lie ahead for all mankind, if we have but the wit and the will to use our capacity fully.

I am not despondent about the dif­ficulties that lie ahead because I have faith in our ability to overcome them. That is why I have proposed a program of greatly increased activity by the World Bank Group, so that by taking a lead in development assis­tance we may encourage all those, rich and poor alike, who have begun to lose heart and slacken their pace.

If we in the Bank are able to double our effort, this could be the signal for others to rally again to the struggle, determined to use our overwhelming strength for the betterment of all man­kind, and the fulfillment of the human spirit.

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14

Statements by Governors and Alternate Governors 1

Afghanistan: M. E. Ziyaie Governor of the Bank

I am very grateful for having the privilege of participating for the first time in these Annual Meetings. It is a particular pleasure for me to meet the distinguished Governors repre­senting so many countr'ies. While the interests of our countries are varied, we have been drawn together in a common endeavor for the fulfillment of the hopes and aspirations of our people. I also want to take this op­portunity to express my appreciation for the warm hospitality of the Gov­ernment of the United States.

I should like to join other dis­tinguished Governors in welcoming the countries that have joined our or­ganizations during the past year ....

... We regret not having Mr. George D. Woods with us, but we are pleased that another leader with international reputation and proven capability has been chosen as President of the World Bank and its affiliated organ­izations. We welcome Mr. McNamara to these important offices and we are confident that the World Bank Group will carry forward and build upon the outstanding record achieved under the leadership of Mr. Woods. The dynamism of Mr. McNamara is already reflected in recent policy de­cisions of the World Bank Group and we can anticipate with confidence new achievements that will accelerate the economic and social development of member countries everywhere.

This year the Bank and the Fund have completed 22 years of service. Looking over the entire balance sheet

I Comprising statements relating to the work of the I BRD, I FC and IDA. Omitted passages are in· dlcated by dots ( •.. j. Statements relating to the International Monetary Fund are reproduced in the IMF Summary Proceedings.

2 The establ ishment of a speCial drawing rights facil· ity on the I nternational Monetary Fund.

of efforts and accomplishments, it seems to me that the past year, while beset with difficult problems for both organizations, nevertheless demon­strated again that with international cooperation unique achievements can be obtained. The concerted efforts and commitments of countries under the General Arrangements to Borrow and the Fund's resources on the eve of the devaluation of the pound sterling, the approval by the majority of member countries of the special drawing rights system,' the special contributions of certain countries to strengthen IDA resources, the adoption of the two-tier system for gold are but a few of the developments of the past year that demonstrate the importance of inter­national cooperation in meeting the problems that interest us all ....

. .. The Annual Reports of the Or­ganizations before us reveal that these operations have grown in cover­age as well as in volume and depth. The summary of the past year con­tained in the Fund and the Bank An­nual Reports presents an excellent de­scription of difficulties and of prog­ress. While not wishing to repeat the discussions we should take notice of the grave confrontations witnessed during the year that threatened the basis of our international monetary structure.

The devaluation of one of the major reserve currencies and the conse­quent devaluation of 14 other curren­cies presented the Fund with a task unprecedented since 1949. Despite ap­prehension among monetary authori­ties, the Fund's use of resources and counsel proved to be a source of strength and a force for o~derly ad­justment. Agreements not to supply gold from monetary reserves to the gold markets, as a temporary measure, to allow a free market price to fluctuate in accordance with forces of supply and demand and to adhere to the joint

communique of March 1968, are im­portant contributions to the effective functioning of the international mone­tary system. We support the continua­tion of efforts for the maintenance of the established official price of gold. It is very important that the Fund exer­cise all its authority in this significant area to avoid recurrence of the condi­tions of the 1930s. We agree with the Managing Director's statement that work on the establishment of the special drawing rights facility should proceed on schedule to supplement the reserve assets that are required now, more than ever before in the history of interna­tional monetary developments.

The inadequacy of international liquidity is felt not only with regard to the gold situation, but more seri­ously by the developing nations. The recent restrictions on movement of capital and the diminishing size and more stringent conditions of bilateral loans to the developing countries are making the development efforts of many countries most difficult. Any in­ternational scheme that creates new reserves should by necessity favor de­veloping nations. The task is to build up an international system of pay­ments that will better accomplish the objectives of full employment and ris­ing levels of income for all members of the international community and will give special support to the de­veloping countries.

Discussions of the international payments situation cannot be sepa­rated from observation of the condi­tions of imbalance in external ac­counts of primary producing coun­tries. Few countries in the early stages of industrialization, including Afghanistan, can have much hope, de­spite their best efforts, of building up and maintaining an essential level of foreign exchange reserves except at the cost of postponing needed invest­ment, which slows the economic

growth rate. The export earnings of developing countries are heavily de­pendent on prices and trading op­portunities prevailing in world com­modity markets. Adverse long-term price trends and recent further falling of prices for some primary products have created considerable balance of payments pressures. In Afghanistan severe winters have prevented in­creases in agricultural production, limiting exports and necessitating added imports. But the price decline in international markets has also been a factor beyond the control of the country. The average price of karakul lambskins which amounted to $8.91 per skin in 1963 was only $7.82 in 1967. More recently, the average price for the three auctions held in 1968 has been around $6 per skin. If such trends continue for all of 1968 the country will lose one-third of the for­eign exchange earnings from this im­portant export commodity.

The recent studies, as suggested by Executive Directors of the Fund and Bank, on the problem of stabiliza­tion of prices of primary products de­serve particular attention. We are pleased to see for the first time this important matter on the agenda of the Annual Meetings. We are appreciative of the Fund's reasonably liberal pol­icy with regard to requests for ac­commodation from countries that have had adverse conditions in terms of trade. This year Afghanistan joined the list of a few countries drawing on the Fund!s compensatory financing fa­cility. While such facilities are ex­tremely helpful to remedy short-term problems, the need is pressing for adoption of price stabilization tech­niques and of international agree­ments designed to increase export market opportunities for the primary producing countries as a long-term solution. The recent studies in this di­rection demand more attention and we suggest that the Fund-Bank studies, along with the discussions of the past UNCTAD conferences, provide the bases for resolutions in this regard which can be adopted during this meeting ....

... The Bank's Annual Report indi­cates that the problems faced in ful-

filling the demand for development funds continue to be substantial. The rise in market rates of interest, which again forced the Bank to increase its lending rates this year, will tend to harden loan terms generally. The An­nual Report's discussion of the grow­ing burden of debt service is illumi­nating. More than ever before the de­veloping nations are allocating more of their internal and external re­sources to meet higher service charges on loans at the expense of needed domestic investments. More and more public revenues and scarce foreign exchange are needed to ser­vice external loans. Under such difficult conditions and combined with the cur­rent trend of generally harder terms on new loans, the pace of economic development in major areas of the world may slow down from their pres­ent inadequate rate.

Serious re-examination and recon­sideration of the debt service prob­lem seem warranted. The recent Bank decision to extend short-term loans for servicing debt repayments can be helpful, but more often than not only if the time period for financing such debt servicing can be extended. We support further studies and adoption of policies in this regard by the World Bank Group ....

. . . The demand for softer-term loans has increased considerably. If aid-granting countries were to com­mit only a small part of their loan funds to IDA in the form of contribu­tions, the economic effect of ex­panded IDA activities would be sub­stantial. The recent Board discussions of a wider and more equitable distri­bution of new IDA resources deserve support. Also it is encouraging to learn that IDA will make special efforts to assist certain member coun­tries to prepare acceptable projects for IDA financing. Lack of technicians to prepare statistical, analytical, and engineering information should not be allowed to impede the financing of economically justifiable projects.

The eligibility criteria of per capita income for IDA credits may again cre­ate difficulties. The calculation of per capita income and the comparison of purchasing power parities in different

countries is by itself a controversial issue. Future IDA lending to coun­tries with a per capita income of $300 would extend the range of coun­tries which are eligible for conces­sionary assistance from this source. However, this proposal needs further study on the method of per capita in­come calculation as well as estab­lishing the time period for which such figures may be acceptable. We also hope that the extension of range of eligible countries would not be at the cost of studies to identify acceptable projects in the poorest countries.

We are happy to see significant changes in the operations of IFC. A more active role on the part of IFC to promote industrial projects and the incurring of costs for such promotions of up to $250,000 are welcome signs. However, costs of promotional activi­ties beyond this limit should not ex­clude productive enterprises which may be expected to be suitable for financing by IFC. Recent discussions with regard to IFC policies toward de­velopment finance companies are of particular interest to us. We urge an early consideration of this matter. In the light of recent decisions for Bank/ IDA to lend to government-owned in­stitutions, we are inviting the Bank Group to reconsider participation in the Industrial Development Bank of Afghanistan, which has been dis­cussed with the Bank since 1963.

It is gratifying to note that despite many difficulties the Bank has con­tinued to move ahead during the past year. Among the encouraging signs are the efforts of the Bank to achieve a greater geographic distribution among its professional staff and to have more Bank regional and coun­try representatives and to expand the scope and size as well as the possi­bility of greater technical assistance grants from IDA. We note with satis­faction the work of the Centre for the Settlement of Investment Disputes. In this same vein the vital training con­tribution being made by the Economic Development and the IMF Institutes should not be overlooked. We would like to see the training facilities ex­panded so that more qualified candi-

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dates can benefit from the services of the Institutes.

While there are reasons to be ap­preciative of the achievements of our organizations, there still remain the solutions of many problems basic to the maximum effectiveness of these institutions in their relations with the developing countries. We should like to urge that loan application pro­cesses be simplified and expedited and that IDA assistance and credit com­mitments remain firm so as to enable the developing nations to plan suffi­ciently in advance and continue to benefit from the full implementation of projects.

In conclusion may I express my ap­preciation for your patience and inter­est. We sincerely hope that a year from now we will gather to witness even greater improvements in the work of our organizations and that we may report more significant progress toward efforts to fulfill more of the needs and aspirations of the people we are trying to serve.

Algeria: Cherif Belkacem Governor of the Bank

It has become a truism to say that underdevelopment is the major eco­nomic and social problem of the world today. However, when we consider the provisions adopted to help the under­developed countries, we cannot fail to perceive that the priority assigned to development has hitherto often been verbal and that it has not been given its rightful place when measures to improve international economic mechanisms have been studied and worked out.

It should be well noted that .this is the case in the financial sphere and the working out of the system of spe­cial drawing rights provides further il­lustration of the fact.

Algeria, too, would like to show, by a concrete proposal which I shall presently expound, that it is possible to perfect this system so that it can help in solving problems of the de-

veloping countries, without the neces­sity, for this purpose, of modifying either the method of creation or of cancellation, that of allocation, or that of using these new reserve instru­ments.

My statement will be in three parts. I shall first describe the character­

istics of the external accounts of de­veloping countries and the relations existing between balance of payments and economic development.

I shall then demonstrate that the system of special drawing rights has not so far taken into account the situ­ation of the underdeveloped countries.

Finally, I shall present, with state­ment of reasons, the proposal to which I have just alluded, which ought to enable us to attain the objectives that the President of the World Bank Group described yesterday.

The equipment of the poor nations is conditioned by problems of financ­ing, if we want them to be able to expand considerably, diversify their production, and raise their people's standard of living. The acquisition of this productive equipment necessarily entails making medium- and long­term programs, which cannot be sub­ordinated to the occasionally erratic risks and fluctuations of the balance of payments. A country's investments cannot be properly planned if there are insufficient guarantees for their financing.

For underdeveloped countries, in­dustrialization is fi rst a balance of payments problem, because they do not produce the equipment that they need. In this respect their situation is far more difficult than that of indus­trial countries, where investment acts as a motive force to the economy, not only because of the future production for which it paves the way, but equally as much on account of the immedi­ate multiplier effects that it engenders, which increase the national product.

Thus, there is added to the first handicap experienced by developing countries, i.e., the irregularity of their exports, a second handicap derived from the fact that their investments, instead of having an impact of eco­nomic expansion from the time they are laid out, are automatically offset

by wide gaps in the balance of pay­ments. For an equal volume of invest­ment, an underdeveloped country will need to draw far more heavily on its foreign exchange resources than an industrialized country will.

The management of the external ac­count, therefore, has in the develop­ing countries specific characteristics of a structural nature that influence both sides of the balance of payments and that ought to be taken into con­sideration in international financial mechanisms, especially within the Fund, since balance of payments problems come within its sphere of competence.

A system of compensatory financing has, it is true, been worked out by the IMF. However, while recognizing that this is a worthy contribution to­ward regularizing the external re­source1s of primary producing coun­tries, we cannot fail to recognize that it affects only one aspect-however important-of the particular features of a developing country's external account.

The other aspect, though, is cer­tainly not a secondary one since it is the main reason why the external ac­counts of developing countries have certain special characteristics in com­mon, and why balance of payments and development are indissolubly linked.

It is in this respect that, where these countries are concerned, the Fund's work in matters of international settlements has a direct bearing on economic development. ...

... On both the foreign and the do­mestic plane, the system of special drawing rights is unfair to the less developed countries and fails to take into account the respective situations and different problems of the Fund's members.

With no illusions as to the practi­cal influence of a proposal made by the Minister of Finance of an under­developed country, I would now like to indicate how there would be a pos­sibility, while fully retaining the mech­anisms and system of distribution of the special drawing rights, of miti­gating their unsatisfactory features in­sofar as concerns countries that need

to overcome their economic back­wardness.

All that would be required is for the participating countries to place the national currency counterpart of the new instruments at the disposal of the Bank and IDA. A reserve would have to be set up, with the condition that only a small percentage of national currency funds could be used for settlements in favor of third countries and, moreover, with the prior agree­ment of the countries supplying their currency.

The participating countries would thus keep the benefits, insofar as their international liquidity is concerned, of the allocations of special drawing rights distributed by the system I have criticized, but the national cur­rency counterparts, instead of accru­ing to those countries' national trea­suries, would afford the Bank and IDA cheap resources enabling these insti­tutions to play a more powerful and energetic role in the economic devel­opment of the world, at interest rates not so burdensome as to compromise the poor countries' future prospects of emerging from their poverty.

Such a solution would be favorable to all.

The industrialized countries would receive their special drawing rights in accordance with the provisions of the proposed Amendment of the Arti­cles of Agreement, i.e., in accordance with their quotas; these reserve in­struments would be at their disposal in conformity with the rules drawn up concerning them. Furthermore, the na­tional currency counterpart of these drawing rights, which would be cred­ited to the Bank and IDA, would en­courage exports of goods and ser­vices from each industrialized country to the less developed countries. The result would be that the industrialized countries would benefit both from the additional international liquidity that the special drawing rights are de­signed to create, and from additional economic activity engendered by the use of counterpart funds for financing the less developed countries. Further­more, urgent appeals made to them for the replenishment of the resources of the international lending institutions

could easily be satisfied, without spe­cial concern for the balance of pay­ments.

As for the underdeveloped coun­tries, they would benefit directly from the new reserve instruments that would be assigned to them in propor­tion to their quotas and, indirectly, through low-cost loans from the Bank and IDA, in the total amount of the counterpart of the allocations of spe­cial drawing rights to all participants, which would appreciably increase their capacity for development.

In general, such a formula retains all the mechanisms worked out to im­prove international liquidity; it simply adds to them the methods designed to ensure that the distribution of new reserve instruments does not have the second, and more direct, conse­quence of swelling each country's na­tional treasury and replaces it by uti­lization of the counterpart funds for development purposes, under the con­trol of the Bank and IDA, which in the final analysis benefits the entire community of nations. Furthermore, since these counterpart funds would be earmarked for loans their replen­ishment would be assured, so that there would thus be available a re­volving fund for financing develop­ment. We have only to look at the balance sheet of the Bank and IDA to realize the radical change that would take place, through the proposed mechanism, in these organizations' scope for action, if there should be distributions of special drawing rights in the equivalent of $2 billion per year for five years; in only two years the Bank's and IDA's current external re­sources would double. It may be seen that the objectives Mr. McNamara iden­tified yesterday are within our reach.

We would thus take a tremendous­possibly a decisive-step on the road to more satisfactory expansion in the resource3 of the international devel­opment institutions and the determi­nation of their interest rates at a level that can be tolerated by the less de­veloped countries. Likewise, it would be easier to find the solution to the Bank's and IDA's financing local ex­penditures for prOjects, since these institutions would hold for this pur-

pose the counterpart of the special drawing rights allocated to each un­derdeveloped country; this counter­part, also, would be earmarked for de­velopment and not for covering public operating expenditures.

Finally, it should be noted that, in the very unlikely event of a cancella­tion of special drawing rights, the constant flow of repayments on the loans granted with the aid of the na­tional currencies entrusted to the Bank and IDA would normally enable the same to be replenished to the ex­tent of the cancellations and of the time limits set for their realization.

In closing, I would like to stress once more that the proposal submit­ted by Algeria calls for no change in the mechanisms for the creation and functioning of the drawing rights, as they result from the Amendments to the Fund's Articles of Agreement, and in the effects that these new instru­ments are destined to have on inter­national liquidity, in terms of which they were conceived.

But this proposal completes and crowns the special drawing rights project by giving it a second dimen­sion: that of the economic develop­ment of the world.

Argentina: Adalbert Krieger Vasena

Alternate Governor of the Bank and Governor of the Fund

have been given the great honor and the responsibility of addressing this august assembly on behalf of Argentina, Bolivia, Brazil, Chile, Co­lombia, Costa Rica, the Dominican Republic, Ecuador, EI Salvador, Guatemala, Haiti, Honduras, Mexico, Nicaragua, Panama, Paraguay, Peru, the Philippines, Uruguay and Vene­zuela. It is my task to outline the viewpoints of these countries regard­ing the activities of the International Bank for Reconstruction and Devel­opment and its affiliates during the past year, and our thinking on the subject of international cooperation.

Let me begin by expressing the

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satisfaction of the Latin American Group and the Philippines at the ap­pointment of Mr. Robert McNamara as President of the World Bank. His dynamism and deep understanding of the problems affecting the developing countries hold out the hope that new and successful solutions will be de­vised.

The World Bank Group has been discharging very efficiently the mis­sion entrusted to it at Bretton Woods of contributing to the common en­deavor of raising the living standards of our peoples by channeling finan­cial, human and technological re­sources that are plentiful in some areas toward others where they are scarce or virtually nonexistent. Valu­able technical assistance has been furnished in this way through the transfer of experience and knowhow, while at the same time public and private capital has been mobilized, ini­tially for use in the reconstruction of industrialized countries ravaged by the war and later to finance produc­tive investments in economically less developed countries.

The first phase, accomplished with singular success, as evidenced by the economic revival of the principal countries damaged by the war, con­stitutes one of the most extraordinary episodes in the history of humanity, paving the way, as it did, for a rapid recovery based on a fusion between domestic effort and cooperation be­tween nations that had already at­tained an advanced level of cultural and industrial development.

The problems of today are different, since the mobilization of resources in the less developed countries calls for an altogether different strategy if the process is to be both vigorous and ef­fective in regions where, in many cases, vast potential wealth lies un­tapped or is ill used because of defi­ciencies in human, technical and cap­ital resources or in the organization of trade.

An analysis of the evolution of the developing countries and the events in the world of finance and trade re­veals that progress has been neither as great nor as rapid as had been hoped.

The gap between effort and achievement in international monetary cooperation, on the one hand, and in economic and trade cooperation, on the other, is clearly very marked. In­ternational financial cooperation has been strengthened by the support given to the key currencies to pre­serve the smooth operation of the in­ternational monetary system, by the effectiveness of the stand-by arrange­ments, by the evolution of the special drawing rights facility, and by the ef­forts of the gold pool countries to keep the system stable.

On the other hand, there are signs of a decline in the rate of growth of world trade, chiefly in the flow of products from the developing coun­tries to the more advanced countries, accompanied by fluctuating or stag­nant prices for primary products. In this connection, we feel it is appropri­ate to draw attention to the remarks made by Mr. Schweitzer to the effect that the developed countries will have to rethink their trade policies, since they hamper access to their markets by many primary products.

The fact that we are talking about these aspects of international coop­eration indicates that the time has now come to analyze the mechanisms used in the past, evaluate the results achieved and identify the alternative courses of action for the future, in order to attain the rapid economic growth demanded by our peoples. It is for this reason that we applaud and support the idea put forward in Stock­holm by the former President, Mr. George Woods, which Mr. McNamara has now carried one stage farther by hi3 appointment of the former Prime Minister of Canada, Mr. Lester Pear­son. Latin America has high hopes of his work and offers here and now to furnish any cooperation that may be required to further the activities of this "Grand Assize." In this respect, it is relevant to add that our coun­tries anticipate that the Commission's work will be aimed at producing con­crete proposals, which is the only way to achieve practical results.

The decisions adopted within GATT during the so-called Kennedy Round benefited the industrial nations first

and foremost. The Latin American countries and the Philippines are anx­ious that a new effort be undertaken within the framework of GATT and other agencies to consider the prob­lems affecting access by their prod­ucts to the markets of the more de­veloped countries, bearing in mind the fact that the lengthy discussion of this subject at the UNCTAD meeting in New Delhi failed to elicit an adequate response.

In the sphere of trade cooperation it is necessary to abolish the restric­tions and preferences in the indus­trial countries that affect primary products (or to extend those pref­erences to other countries), as well as the systems of subsidies, in opera­tion chiefly in Europe, which gen­erate serious distortions not only in trade relations but also in the field of international finance. In regard to the possibility of new restrictions being introduced, we are worried by the pro­tectionist tendencies that are now gathering strength both in Europe and in the United States of America, since, if they were to materialize, they would spell disaster for the developing countries.

The enormous sums spent by in­dustrial nations on subsidies to pro­mote uneconomic activities ultimately produce negative effects, since they are inevitably reflected in a decline in the welfare of their peoples. A farm policy based on the production of ex­pensive foodstuffs brings additional inflationary pressures to bear on the industrial structure of the developed countries, while at the same time creating unfavorable conditions for the less advanced nations, due to the reduction in world-wide demand for primary products and to the increased cost of the industrial products which they have to buy abroad. The import capacity of the developing countries tends in consequence to diminish, thus reducing their scope for growth.

In the light of this evidence, we are confident that, just as the world re­sponded satisfactorily in the field of international monetary policy, the same good will and inventiveness will be forthcoming to evolve formulas to curb the spread of trade restrictions

and bring about more equitable trad­ing relations among the countries of the world.

No one can fail to appreciate the impact of these aspects on food pro­duction and the search for solutions to the world population problem, the importance of which has been under­scored by Mr. McNamara and which is a matter of concern throughout most of Latin America. Indeed, birth rates generally show an inverse rela­tionship to indicators of economic growth and educational and health levels.

Men everywhere are viewing this problem attentively and anxiously and, in discussing it intensively, are show­ing an increasing awareness of the unity of mankind. It must neverthe­less be pointed out that the specific proposals formulated involve ventur­ing onto highly controversial ground, and a still more exhaustive analysis will therefore be required. This will have to take account, quite apart from economic factors, of the various sci­entific, ethical and cultural issues in­volved, within a general context that makes allowance for the fact that the emphasis must be on an increase in the production of goods and on their equitable distribution. The problem unquestionably poses immense diffi­culties and the solution sought must not detract from freedom of con­science or from respect for the dig­nity of man.

As I stated earlier, the World Bank has made great strides toward mod­ernization in an effort to meet present­day circumstances. New policies have opened the way for financing such important sectors as agriculture, min­ing, stock raising and education. The need for finance in these sectors lies chiefly in the provision of funds for local currency expenditures. This ought not to cause us undue concern, since the aim should be to finance high-priority projects of established profitability. We are therefore grati­fied that the Executive Directors have approved a more liberal policy in this respect, which we hope will be ap­plied with sufficient flexibility to achieve the objectives outlined ear­lier.

We also think it would be appropri­ate for the Bank to give active study to the establishment of new systems of financing for the developing coun­tries. One of these might be supple­mentary financing to compensate for smaller foreign exchange receipts from exports. We would likewise ascribe particular importance to the granting of program loans-in special circumstances and for limited periods -to countries whose own endeavors justify this support.

But if general development plans and circumstance3 make it advisable, it would also be useful to concentrate the operations in specific sectors, in order to make the investments more effective.

To accelerate the preparation of projects and expedite disbursement of the loans, it would be appropriate to set up regional offices in Latin Amer­ica, as has been done in other areas.

The World Bank has wisely encour­aged the establishment of a new sys­tem of cooperation on the part of the industrial exporting countries, in the form of joint credits, which supple­ment the principal contributed by the Bank itself. This system enables the developin;) countries to obtain the benefit of international competition while, at the same time, it combines the credit mechanisms that the dif­ferent industrial countries have set up to promote their exports through di­rect credits, either to their exporters or to the buyers of the developing countries.

It may be opportune to mention here the very important place that our countries are giving to the develop­ment of tourism. This is a new field requiring international financing, such as the World Bank has already been providing. We are pleased, therefore, that this institution, like the Interna­tional Finance Corporation, has de­cided to expand its operations in this type of investment.

Extremely important, and deserving of the most cordial support, is the an­nouncement made by Mr. McNamara at the Opening Ceremonies, regarding the World Bank's intention to double, in the next five years, the total amount of the operations carried out in the

last five years, that is to say, almost the same amount in loans as it has granted since the beginning of its ac­tivities. In this connection we con­gratulate our President on the success achieved in the last few months, in collecting more funds on private capi­tal markets than in any such period in the past, including, also, nontradi­tional sources such as the Middle East. We must also acknowledge the assistance given by advanced coun­tries, among others, the Federal Re­public of Germany and the United States of America, conscious of the tremendous responsibility they bear, and without whom this considerable increase would have been impos­sible.

However, we cannot omit to men­tion the high cost of the capital, which is reflected in greater interest rates. This makes it necessary for the World Bank to charge the highest rate in its history at a time when the developing countries are overburdened with the annual servicing of their external debt, while there is no equivalent in­crease in their foreign exchange re­ceipts from exports of goods and services.

The economic development process requires from our countries the exis­tence of a constant demand for the equipment produced by their indi­vidual industries, if these industries are to be able to work at the levels of economy and efficiency demanded by the advances of modern technology. That is why, as an initial measure, a certain margin of preference is re­quired for local suppliers, to enable them to attain such levels of effi­ciency. But, at the same time, when comparisons are made with foreign equipment, the price to be taken into consideration should be their selling price on the markets of origin and not the price quoted for export. This is the only way in which the healthy competition required for international trading can be maintained. A new ap­proach on the part of the World Bank, and understanding of the problem by industrial countries, are also to be rec­ommended in this new era of devel­opment.

The progress of development makes

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it daily more necessary to work with economic units of greater size, such as to be able to reap the benefits de­rived from them. For this purpose, specialized financing mechanisms should be established, such as the Central American Bank for Economic Integration. It would be extremely useful if the World Bank were to give them its financial and technical as­sistance.

I have previously mentioned the high cost of the Bank's funds and the difficulties that countries are experi­encing on account of the high rates of external debt; these factors make it essential to obtain immediately funds for granting loans on more fa­vorable conditions. In the scheme of division of labor observed in the World Bank family, the International Development Association has been made responsible for this task. It is to be regretted, therefore, that replenish­ment of that Association's funds, vital for the rapid intensification of its op­erations, has not yet been realized. Our countries consider that this sit­uation should be corrected with the greatest urgency. They also think the Executive Directors' policy deci­sion, to assign to Latin America an adequate participation in this im­portant form of international coopera­tion, was a wise one.

The creation of the International Finance Corporation was one of the most imaginative and important steps in international financing. The work carried out by this institution in devel­oping and strengthening the private sector of our countries is well worthy of note, considering that in this sector lies, to a great extent, the enterprise that molds the economic development of our countries.

The Directors and technical staff of the Finance Corporation have the con­stant challenge of seeking new sys­tems and mechanisms for financing this most important sector. In this re­spect emphasis must be given to the new policy, which we hope will be in­tensified in the future, of promoting investments in the various countries, by means of a continuous dialogue with that sector and on-the-spot analy-

sis of different investment possi­bilities.

Another important aspect of the Corporation's business is that con­cerning the formation and reactivation of the national capital markets, a cor­nerstone in developing sound financ­ing for the private sector.

In the past year we have been able to note the intensification of the en­deavors made by the World Bank and its affiliates to reduce the gap exist­ing between the more advanced na­tions and the developing countries. We are comforted and stimulated by having heard at this Meeting such wholehearted pledges regarding the increase of those endeavors.

For this purpose, the more ad­vanced countries will need to make larger financial contributions and pro­vide easier access to their capital markets for the issues that are made. They are able to do so, since in this Development Decade they have in­creased their real annual income by a much greater amount than the total annual incomes of the developing countries of Asia, Africa, and Latin America.

This larger financial contribution from the more advanced countries will, without any doubt, receive the response of the greater internal ef­fort that the developing countries will make to improve the administration of their individual economies, to mod­ernize their productive structures, and to bring into effect greater social jus­tice founded on the availability of more real wealth and not on the illu­sion of inflation. In this connection it should be emphasized that in the Latin American countries and the Philippines considerable progress has been made in perfecting the tax sys­tems, tax collection, and the mobiliza­tion of genuine resources for infra­structure investment, with very satis­factory results which represent the best inducement to persevere in this course.

I cannot close these remarks with­out emphasizing the vitally important place of education in the field of de­velopment, in which it is essential that action be taken with the greatest ur­gency. The roots of economic and so-

cial backwardness are to be found in the low cultural levels of many re­gions. Without education, it is impos­sible to promote industry, synonym of progress and modernization. Industry, like agriculture, cannot but merit spe­cial attention on the part of the in­ternational lending institutions, as an irreplaceable means of creating new sources of labor and merchandise production. Education, I want to stress, is one of the most positive ways of providing solutions to our acute economic and social problems.

Finally, it is necessary always to re­member that in the world-wide coop­erative endeavor to which we have committed ourselves, the problem of development is not a purely material one, and that everything we must do to raise the economic and social levels of our nations has the essential aim of respecting the dignity that God has conferred on man.

Australia: William McMahon Governor of the Bank and Fund

It is traditional for a Governor to preface his remarks with references to the leadership of the Managing Direc­tor of the Fund and the President of the Bank, and to comment on the work performed during the year by those two institutions.

On this occasion, we can be warmer in our praise than usual. In the twelve months since we last met, these two institutions have had an ex­ceptionally fine record of constructive achievement.

In the Bank and its related institu­tions, a major task has been the sec­ond IDA replenishment. After ex­tensive negotiations, proposals in­volving a 60 per cent increase over the first replenishment have been sub­mitted to Governments for approval. The Bank and IDA have arranged a record number of loans and credits to a record number of countries. Mr. Robert McNamara, backed by an able staff, will guide these institutions

through what looks like being another year of progress ....

... The responsibilities of both the Fund and the Bank cover wide, varied and changeable fields. I want to men­tion one or two aspects which par­ticularly concern a country like Aus­tralia.

Australia has some points of simi­larity to its own native animal, the platypus, which has a duck's bill, a dog's claws, lives in the water, breathes air, eats worms, lays eggs and suckles its young. Like it, we do not belong exclusively to anyone species of economy. We are primary produc­ing; we are also industrial. We are developing, and also developed. We are in many respects a well-endowed country but still hungry for additional resources, not least of capital. We are a heavy capital importer on commer­cial terms, but we are also a substan­tial aid donor on a 100 per cent grant basis.

Necessarily therefore we have a point of view-a way of analyzing problems-which sometimes puts us in one camp and sometimes in an­other, in both Fund and Bank affairs. Let me tell you our point of view on five different issues.

World Trends

We all seem to agree that the United Kingdom and the United States, the two great reserve currency countries, must achieve a stronger balance of payments position. It is in their interest and it is in the interests of the international monetary system that they should do so. If they achieve this goal, and there is no action taken to offset the restrictive effects of what they do, the consequences for the rest of the world, for world trade and levels of economic activity, could be severe. In a perfect and logically man­aged world, the downward pressures resulting from United Kingdom and United States action would be coun­tered by expansive action on the part of the surplus countries with a high level of reserves and unused ca­pacity. This is a simple and valid philosophy. It must not be ignored. The consequences of indifference can

affect all of us severely and per­vasively. In the long run, no one stands to benefit from a breakdown or serious weakening in the international monetary system; in the long run, no one stands to benefit from a down­ward spiral in world production and trade. This can easily occur if the measures the United States or the United Kingdom take to eliminate their external deficits are not accompanied by compensatory measures on the part of the surplus countries to re­duce their external surpluses ....

Sterling

... The countries that provide re­serve currencies and manage them, that is, the United Kingdom and the United States, are discharging a world responsibility; one which carries risks and entails burdens going beyond the ordinary tasks of managing their own national affairs. They therefore have something of a claim on the support and cooperation of the rest of the world.

Australia has a special interest in­and relationship with-sterling, if only because we have, through the years, been one of the largest, if not the largest, holder of sterling in the ster­ling area.

Notwithstanding the November 1967 devaluation, pressure on sterling con­tinued and a number of countries shifted part of their reserve assets out of sterling in the first half of 1968.

With a view to restoring stability to sterling as a reserve asset, the Basle group of countries offered the United Kingdom a $2 billion medium-term credit as a safety net against further diversification. The United Kingdom, in turn, offered sterling area coun­tries a dollar value guarantee on the bulk of their sterling balances.

Australia did not seek arrange­ments of the kind which have been offered to us. We have agreed to par­ticipate, partly because we wish to co­operate with the Basle group of coun­tries and with the sterling area group of countries in an operation of this nature, and partly again because we believe sterling still has an important

role to play in the international mon­etary system.

Given time and confidence, and the stout efforts the United Kingdom is making, sterling will surely recover its strength on the foreign exchanges. At this time and in this context, the Basle arrangement is a sensible one and in the free world's interest. We have given it our support.

Capital Flows

Our close relations with sterling, and with the dollar, for that matter, have been influenced to a great extent by capital flows. It is unfortunate for capital importing countries that the two main capital exporting countries of the world are in deficit at the same time.

I want to say something about this subject because a great many coun­tries, indeed the bulk of Fund mem­bers, are importers of capital in one form or another. It seems to be fash­ionable these days to suggest that, if an advanced industrial country gets into balance of payments difficulties, it should in the first instance impose controls on capital outflow.

I strongly urge that we should re­ject this philosophy. If a country im­poses internal fiscal and monetary re­straints, this should have a helpful effect, not only on its current account balance of payments position, but also on its capital account. As a conse­quence, capital flows should be more favorable, or less unfavorable. This tendency will be reinforced as confi­dence in the currency increases. To impose physical controls on capital outflow in addition is to discriminate against capital in favor of current ac­count transactions. It is doubtful if this is appropriate. And I doubt if it can be justified as an initial move.

There are gains to be derived from capital flows between countries just as there are gains to be found in trade between countries. There is an agreed set of principles and institutional ar­rangements aimed at keeping a free flow of trade and payments on cur­rent account. The GATT and the Fund are there for that purpose. In contrast, the area of capital flows seems to be

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a no man's land. I do not know why! This argument does show up a defi­ciency in the framework we have set up for international cooperation.

Furthermore, there is a pretty clear division in the world between the major industrial countries who tend to be capital exporters and primary pro­ducing countries of the world, devel­oped and developing, who tend to be capital importers. To the extent that special measures are taken in the field of capital flows, there is a real possibility that an undue share of the burden of the adjustment process may be thrust onto the primary producing countries. Here is a field of inquiry which the Fund, or the Bank, or both might well consider.

In the meantime, I suggest that some caution be exercised in resort­ing to restraints on capital outflows. Li.ke import restrictions, once adopt­ed, they may be difficult to remove.

Again, there are advanced coun­tries who are in surplus or have a high level of reserves but who never­theless retain close supervision of outward capital flows. For sound eco­nomic and financial reasons they should be liberalizing their controls in a manner compatible with their eco­nomic maturity and balance of pay­ments position.

I am not making a general indict­ment. Some of the surplus countries, Germany for example, are playing the game. To the extent that countries like Germany can continue to take over the capital exporting role of the United States and the United King­dom, international disequilibrium will be reduced, even if not altogether eliminated.

Commodity Prices

I want to make one other comment relevant to a country which earns 80 per cent of its export proceeds each year by the sale of primary products and raw materials. I refer briefly to the joint report before the Governors on stabilization of prices of primary products.

Few countries have had greater ex­perience than Australia of the harm done by fluctuating export prices. We

strongly support the Dakar resolutions as to the importance of these prob­lems.

They are so important that we do not think the Fund and Bank should be rushed into making hasty decisions. There is a marked tendency these days, when we consider some prob­lem in the "too hard" category, to pass it over to the Fund and the Bank. Countries and institutions have been battling for many years with the prob­lems of organizing markets, of diversi­fying production, of buffer stocks, of compensatory finance and so on. We cannot expect the Fund and Bank, impressive as they are, to come up with the answers, even within a lim­ited area, at the drop of a hat.

Finally, we should be cautious about tapping the Fund and Bank (whose resources are by no means unlimited) for additional finance sim­ply because they have some in re­serve. The funds they have must be put to the best possible use, and they should be put to uses which are with­in their proper field of responsibili­ties.

So I do not think we should ask the Fund and Bank to rush this study. We are interested not in the answer which can best be given within a short space of time, but in the best answer.

We must all be impressed with the work the Fund and Bank have done so far and we look forward to the fur­ther work which is to be undertaken by the staff and by the Executive Di­rectors on this topic.

Conclusion

I have mentioned a number of is­sues which are of particular interest to Austral ia.

There are different ways of inter­preting some of these issues and dif­ferent suggestions for solving them­this is evident enough from the state­ments made by Governors from this rostrum.

But whatever problems may lie ahead in 1968-69, we have the satis­faction of knowing that one thing 1967-68 demonstrates is that the Gov­ernors of the Fund and Bank and the

countries they represent can work to­gether in the interests of the interna­tional community. Let us look at ex­amples of cooperation in 1967-68. There was the sterling devaluation­when devaluations were successfully limited to those countries who could really justify it. There was the gold crisis-when the members of the gold pool agreed to work together through the two-tier system to stabilize the situation. Now we have the Basle agreement-which has shown that Eu­rope, America, Japan, the United Kingdom and the sterling area coun­tries can successfully pool their re­sources to defend their financial in­terests.

I have no doubt that, so long as we continue in the same spirit of under­standing and cooperation, we shall surmount whatever challenges may lie ahead.

Austria: Stephan Koren

Governor of the Bank

First and foremost I would like to thank the President of the United States for the inspiring speech he ad­dressed to us, and to the U.S. Govern­ment for its unequaled hospitality. We share the President's and the Secre­tary of the Treasury's views on needs and possibilities and their confidence in the future.

Looking through the reports and evaluating the figures, I think the Bank and its affiliates have done ex­cellent work in the year under review.

In spite of the scarcity and high cost of long-term capital in the big fi­nancial centers of the world, the Bank has been able to maintain lending op­erations at what we consider a very high level. In order to keep the burden of servicing its loans light it has re­duced the margin between the cost of raising capital and the lending rates considerably. This did not, and I hope will not, lead to any significant loss of income. The net income of the Bank in 1967 was practically the same as the year before. Satisfactory in-

come rates are the best way for the Bank to maintain the excellent credit standing it has in world capital mar­kets. The results obtained in 1967 have reinforced the position of the Bank as one of the main supporters and promoters of economic develop­ment in the less developed parts of the world. The prospects for these countries to progress on the road to prosperity have been further en­hanced. For this I would like to thank the Bank and express my congratula­tions to President McNamara and his predecessor, President Woods.

The capacity of a country of the size and economic potential of Aus­tria to generate funds of the type the Bank needs for its lending operations is small and the domestic require­ments for capital are great.

These requirements are growing because of the pressing need for structural adjustments in order to cope with technological progress and changing external markets. In addi­tion to that we have to close the con­siderable gap between incomes in Austria and other industrialized countries.

To meet external competition, Aus­trian industry with its small produc­tion units has to be modernized. Larger and more efficient units have to be created and production concen­trated on the types of goods where comparative cost advantages are highest and permit industry to keep pace with technological progress.

In order to increase the supply of capital we are offering savers a va­riety of tax advantages and other in­centives. In spite of this, the supply of capital from internal sources re­mains small as related to present and future requirements.

In view of the present insufficiency of the supply of capital from domes­tic sources we have borrowed heavily abroad. As you have read in the Bank Report the total of foreign loans and credits was over $300 million in 1967. We will have to supplement domestic with foreign capital for some time to come if we want to meet increasing requirements.

At first sight this does not hold out much promise to the developing coun-

tries. In the long run, however, they will benefit. They will do so in three ways: by the greater absorptive ca­pacity for their export products once the modernization and concentration process in Austria has been com­pleted. Furthermore by the greater aid-giving potential a country with an efficient, fully integrated, and com­petitive industry has, and finally, by leaving more of the resources of for­eign capital markets for the use of the developing countries.

However, concern with our own problems has not made us oblivious to the needs of the rest of the world. One of the recipients of Austrian capi­tal will be the International Develop­ment Association. Austria was, I am happy to say, one of the first coun­tries to notify its acceptance of the proposed increase in capital. Another recipient was the Asian Development Bank. In 1967 the first installment of the Austrian capital subscription was paid to that organization. Very re­cently we have given the Inter-Ameri­can Development Bank access to our capital market. A first issue of bonds is in preparation and another is p'anned for next year.

The last-mentioned operations seem to me to show a practical way for in­creasing the volume of financial aid to less developed countries. To ex­plain further, government budgets are strained in most industrialized coun­tries. Financial stability requires strict control over expenditure. The possi­bilities for obtaining larger funds out of government budgets for aid pur­poses are limited. There are, how­ever, private sources of capital which could be used to a larger extent for aid to developing countries. Given reasonable security and satisfactory yields, the contribution of these sources could be greater.

Another way for the industrialized countries to help the developing coun­tries is to give the products of these countries greater access to their own markets than they have had so far. This will, of course, require a certain shift in the employment of the re­sources of the industrialized countries from labor-intensive to capital- and research-intensive goods.

To conclude, I think we should at­tribute less importance to the volume of money spent and more to the use made of our resources. We are con­fident that the results obtained by pro­ceeding in this way will justify our expectations.

Belgium: Baron 5noy et d'Oppuers

Governor of the Bank

One of the most attractive functions of my position as Minister of Finance, to which I was recently appointed, is indeed that of Governor of the Inter­national Bank for Reconstruction and Development.

I wish first to use this opportunity to greet our colleagues and assure them that the policy of the Government, to which I have the honor of belonging, remains like that of its predecessors: firmly attached to the objectives and principles of the Bretton Woods insti­tutions. They have our hearty support.

These institutions illustrate in a con­crete and increasingly effective way a positive achievement of our contem­porary world: a growing awareness of the need for widespread interna­tional collaboration.

I also greet the respected heads of our institutions, Mr. Schweitzer and Mr. McNamara, and, through them, the impressive body of international pub­lic servants formed in the course of nearly a quarter of a century under the leadership of a succession of men of exceptional ability.

I listened with the greatest atten­tion to the admirable introductory speech of Mr. McNamara and to the comprehensive and daring program outlined by him with such authority. I wish to say how deeply convinced I am by his arguments and by the order of priorities he suggested. It will be a privilege to assist him as a Governor of the Bank for the accomplishment of these tasks.

I have read with interest the excel­lent Reports of our institutions and es­pecially, as Governor of this institu­tion, the Report of the Bank. Our time

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is limited, and one might satisfy one's self with approving it in substance. I should like, however, to make a few remarks.

The progress achieved by the Bank Group in the development of agricul­ture and education deserves to be praised and, as stressed by our Presi­dent, substantially pursued. The inter­est that the Bank Group is beginning to take in the infrastructure and the industries of tourism, where appropri­ate, deserves also, in my view, our en­couragement.

I also noted with pleasure the in­creased collaboration between the Bank, the European Development Fund, and the European Investment Bank. I hope that there will be many occasions for such collaboration, and that the institutions of an integrated Europe will take the greater place they deserve to occupy in the inter­national effort.

I feel that the importance of the Bank's technical assistance should be mentioned and no less the value of its technical studies, which is perhaps not sufficiently emphasized. I am thinking particularly of its reports on the economic situation of individual countries and on their development plans. While these reports are, of course, primarily useful to the coun­tries they concern, they offer remark­able assistance in the coordination of the international aid that the develop­ment of our world requires. These studies are effective tools, not only for the public institutions engaged in development assistance, but also for the private financial sector. As others have stressed, we should not lose sight of the fact that the modern task of development cannot rely ex­clusively on public financing, whether national or international, but is bound to mobilize private resources. In my own experience with OEEC and Mar­shall Plan aid, I have learned how far the efforts of governments have multi­plied their results by mobilizing con­current initiatives from free enterprise.

By enlightening both the developing countries and the industrialized coun­tries whose assistance is required, our institutions are making an essen­tial contribution to the considerable

task that we have undertaken. Consid­erable task, indeed. The achieve­ments over almost a quarter of a cen­tury have been an effective answer to those who, in the early days, viewed the Bretton Woods institutions with skepticism, but we still have a long way to go.

The paragraph in Part II of the An­nual Report, entitled "Growth in De­veloping Countries" begins with the following sentence:

"Special factors such as weather con­ditions, military and political upheav­als, and severe balance of payments constraints can significantly affect an­nual growth rates of developing coun­tries; their growth record must there­fore be seen in longer-term perspec­tive."

It is true; perspective over a num­ber of years is needed to evaluate correctly the past. But a long-term view is also necessary to judge fu­ture action and prospects. The world we live in is far from being an ideal world, and political and military cir­cumstances with their financial and economic repercussions, as well as the social upheavals in the world today, place grave obstacles in the way of solving the problems of a con­tinuous progress in economic devel­opment, both from the point of view of its financing and of the pursuance of the policies necessary to its suc­cess. While this is at present a source of disappointment, regret, or perhaps impatience, there is no reason for dis­couragement. To this the past bears witness. As the report states, in many cases the meritorious efforts of the developing countries have produced results. It is important for this effort to be pursued along with that of the industrialized countries.

The task of promoting human wel­fare is a vast and complex undertak­ing, and a long-term one. What prog­ress has been achieved is due to the modern awareness of the nature of the problems we are confronting and the need for increasing international soli­darity. Our policy must not be permit­ted to swerve from that goal. Multi­lateral institutions, such as the World

Bank and the Monetary Fund, are most effective instruments for keeping us alert to our basic purpose, despite immediate troubles and worries. We must encourage their efforts. They are a positive achievement in our con­temporary world.

The proposed increased contribu­tion of Belgium to the second replen­ishment for the International Develop­ment Association has been submitted to Parliament, and I am confident that, in the very near future, we shall be able to ratify the agreement reached by the Governments a few months ago.

I certainly hope that we shall be able to carryon with our intention to give continuous support, in the course of years to come, to the Association, and the brief comment I am going to make on the amendment presented by the Governor of Mali to the proposed decision relating to the distribution of the net income of the Fund does not detract from this policy.

I can only be in sympathy with the intent and purpose of such proposal. However, I have doubts on the pro­posed method of supplying IDA with more funds. We should not, I believe, create confusion between the func­tions of the Fund and those of the Bank Group. Their collaboration is de­sirable but as a matter of principle and sound management, their tasks and the use of their resources should remain directed toward their respec­tive purposes. In my country, such confusion would raise so serious a problem of budgetary procedure as to make the suggestion of the Governor of Mali hardly practicable.

On all the activities of our institu­tions much more could be said. But our time is limited. Before leaving the rostrum, however, I wish to express my satisfaction at the progress made by the International Finance Corpora­tion.

As I said at the beginning of my re­marks, the collaboration of the pri­vate sector is essential to the suc­cess of economic development. The role played by the International Fi­nance Corporation in promoting pri­vate investment in developing coun­tries is highly valuable. I wish to ex-

I ,

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press my appreciation to those who are devoting their time and talents to the increasingly successful achieve­ments of the institution.

Burundi: Joseph Hicuburundi

Governor of the Fund

Weighty matters have just been dis­cussed, decisions have been made that will have important effects on the economic and financial future of the entire world.

Burundi, a small country in the cen­ter of Africa, will derive some bene­fit from them-at least, I hope so. I must confess, however, that our day­to-day concerns, which we share with many other developing countries, seem to us very modest in compari­son with all of the subjects discussed.

We can better describe our prob­lems by quoting a few figures. For a population of over 3 million, our for­eign exchange expenditure amounts to US$25 million a year, our budgetary problem-let us say the word--:-our deficit-which we are trying to over­come is US$2 million. To achieve a balanced budget, and especially to re­lease our country from its isolation and its subsistence economy, will re­quire monetary, physical and human resources that the State of Burundi and its people do not possess.

It is true that my country has bene­fited for the past four years from tech­nical and physical assistance from the Monetary Fund, and the stand-by credits granted to us have enabled us to stabilize our currency to an ex­emplary degree. This aid is given on reasonable terms, which are, in fact, very educational to my country. Each negotiation enables the authorities of Burundi to get a better grasp of mone­tary and financial problems and to make an educated choice of the most effective means of maintaining the value of our currency and improving the state of our public finances.

I must indeed emphasize the impor­tance to a country like Burundi of the efforts exerted by the Fund and the

Bank to recommend various methods in order to stabilize commodity prices.

But this Monetary Fund assistance, supplemented by various multilateral and bilateral aids, is proving clearly inadequate to lift our country out of its present situation. We therefore wished to follow the advice given by Mr. David Rockefeller in a much no­ticed conference last year in Rio. To that end, we turned to the private sec­tor-the foreign commercial banks.

In order to attract this private capi­tal, we had first done our utmost to show our good faith and our confi­dence in the future:

We adhered to the Convention on Settlement of Investment Disputes be­tween States and Nationals of other States.

We promulgated an investment code very favorable to foreign in­vestors.

We adopted measures authorizing foreign companies to transfer all of their profits after paying taxes-very moderate taxes, by the way.

We communicated with many pri­vate banks of great international im­portance; all but one gave negative replies. There again, the only place we encountered encouragement was in the public agencies.

The indecision of some and the in­difference of others show that much remains to be done if the developing countries are not to turn away from the spirit of free enterprise. .

On the other hand, we have more reason for hope in our relations with the international agencies. Indeed, the fears that my country has often voiced about the poor adaptation of the terms of assistance of the World Bank and its affiliates have just been removed. Burundi was particularly interested in the changes that seem to be taking place in the philosophy of the World Bank and the International Finance Corporation.

In fact, alongside the large projects which merit numerous and complex studies, there are investment needs for which the individual loans are so small that they cannot interest agen­cies not established in the country it-

self. The success of these small proj­ects, which is bound up with on-the­spot supervision of their execution, can radically change the economic situation of regions and give a stimu­lus to an entire sector of the popula­tion. The World Bank appears to have given thought to this problem, so we hope that IFC will be able, through capital participation in our develop­ment bank, to assist our enterprising people to become small industrialists or educated farmers. Burundi used to yearn for more intensive cooperation among the international agencies to set up multifaceted projects. Missions composed of representatives of the World Bank, FAa, Unesco, ILO have started over-all studies to rehabilitate our underpopulated regions. This ac­tion, if continued and broadened, may, in a few years, enable all of our peo­ples to play an increasing part in the monetary economy and thus achieve more rapid development of our coun­tries.

In closing, I should like to congratu­late Mr. Schweitzer upon his reap­pointment for another five years, and to thank Mr. McNamara for having taken stock, immediately upon assum­ing office, of the resources and uses of the Bank and its affiliates. I am sure that this will bring about deci­sions that will provide more and bet­ter aid to the little countries too often neglected in the past. These little countries are inspired with a strong desire to enter upon the path of eco­nomic development and must benefit from a greater share of international public and private cooperation.

Canada:E.J.Benson Governor of the Bank and Fund

This is an age of abundance, Mr. Chairman. The world's production of goods and services has at least dou­bled in the past two decades. But un­rest and dissatisfaction remain. New aspirations have come to the forefront while old tasks are far from complete.

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The awareness of poverty has become more, not less, acute.

This is true of Canada as well as of other countries. We are making a de­termined effort to deal with regional disparities of income within the coun­try and to improve the opportunities of all of our citizens. We are trying to formulate and pursue a set of eco­nomic policies which will free re­sources for high priority domestic pur­poses and for a steadily increasing flow of external aid. We are closely examining our taxation system and the priorities of government expenditure.

Knowing how great an effort we who are richly endowed must make, we are deeply impressed with the magnitude of the task facing the de­veloping countries where poverty is so much more acute and widespread and resources so much scarcer. The development of these countries re­quires exceptional effort, sacrifice and saving' by all strata of their societies. They have not always shown the re­quired degree of commitment to this discipline. It also requires assistance in various forms from more fortunate countries. This assistance has not been forthcoming on the scale re­quired. Thus we welcome most warmly the establishment of a Com­mission on International Development which will examine "what needs to be done by rich and poor, developed and underdeveloped alike, to promote the well-being of the great majority of mankind." Canadians are proud that the leadership of this enquiry has been entrusted to Lester B. Pearson.

As I turn to the Annual Report of the World Bank and the events of the past year, I become aware of the de­lays and frustrations on the develop­ment aid front. These are well known and only too real and disheartening. Although aid disbursements increased in 1967, we now fear that total aid levels will slip even further behind the objective of 1 per cent of national income.

The international community recog­nized in 1960 that the resources of the Bank would have to be supple­mented by credits which did not weigh so heavily on the balance of payments of countries unable to take

all their capital requirements on terms provided by the Bank. We must be under no illusions; a significant part of the needed expansion of Bank Group activities must take the form of IDA lending, if the Bank Group is to play its full role in all parts of the world and if the burden of supplying concessional aid is to be widely spread among the aid-giving coun­tries. The prompt completion of the recent IDA replenishment agreement is essential if these objectives are to be secured.

But the events of the past year have also given us real grounds for hope as well as for concern. Let me now touch on these because they should encourage us to rally the means at our disposal and to press on in spite of recent setbacks.

The revolution in agriculture has been a marked feature of the past year. Mr. McNamara has emphasized its importance. In my view, its great­est significance is its dramatic dem­onstration that even the most intract­able of development problems can yield to the concerted application of science and technology. It is impor­tant that greater efforts be made to focus the resources of science and technology on specific problems of underdevelopment. Canada plans to establish an International Develop­ment Centre for this purpose. Quali­tative improvements in the aid effort must go hand in hand with increases in the quantity of aid.

The people and leaders of many de­veloping countries, including some very large ones, are showing an in­creasing awareness of the negative ef­fects which high and rising rates of population growth are having and will continue to have on the fulfillment of human needs and aspirations. Much remains to be done. The United Na­tions' system is playing an increasing role in assisting countries with this problem. As an important part of this system, the World Bank, as noted by Mr. McNamara, should be able to make a significant contribution.

We are most encouraged that in the past three months the World Bank has been able to borrow more than in any previous year in its history. We

commend the President on his suc­cess and also the countries where these bonds have been sold. We hope this trend will continue so that the Bank can greatly increase its lend­ing activities.

I will dwell upon this for a moment since I am impressed with the signifi­cance of recent developments in the international capital markets. It used to be that virtually the only sources of international long-term capital were the United States and the United Kingdom which possessed highly de­veloped institutional structures in this field. Since they have experienced balance of payments deficits, difficul­ties have arisen for borrowers whether these were international institutions, such as the World Bank, national or local governments or private institu­tions. Since no adequate alternatives were open, the international alloca­tion of resources suffered and the bal­ance of payments adjustment process became more difficult. Now we are seeing an impressive diversification of the sources of long-term capital. As Canada knows at first hand, Euro­pean surplus countries are emerging as capital exporters on a substantial scale. This has come about as a re­sult of enlightened financial policies and of improvements in the institu­tional structure of financial markets, both within individual countries and on a wider geographical basis. It is surely to be hoped that this diversifi­cation in the international capital markets will gain further momentum and not prove to be only a passing phenomenon. I am sure that it will be understood that I am talking about the flow of capital through interna­tional markets on normal market terms. We would hope that the flows of aid from donor countries could be planned on a continuing basis rather than as a residual item fluctuating in response to balance of payments con­siderations. I agree with Mr. Schweit­zer that, "it is depressing that balance of payments considerations have been an element in retarding the growth of concessionary capital flows from some of the industrial countries."

The Bank has been well served by its distinguished Presidents and has

increasingly established itself as the leader in the international develop­ment effort. Never was its leadership more needed than it is today. We wel­come Mr. McNamara's determination that the Bank should exercise this leadership with vigor and resolution. We endorse his initial assessments and the plans for the World Bank Group which he has outlined to us.

At last year's Annual Meeting, we supported the resolution which called upon the staffs of the Bank and the Fund to study the stabilization of pri­mary commodity prices at remunera­tive levels. This year we can thank them for the first part of their study which has been made available to us, and support the resolution calling for the completion of the study by the time of our next Annual Meeting. Part I provides a useful analysis of the problem, particularly as it distin­guishes between its longer-term and shorter-term aspects. The prices of many primary commodities do move up and down in the short run, some­times violently, and those fluctuations have a disruptive effect on the econ­omies of the producing countries. They give rise to a need for short­term external financing, which the Fund helps to fill by its compensatory financing facility as well as by its nor­mal lending arrangements.

The basic economic problems of the developing countries, however, are structural in character. We ask ourselves whether it would not be of particular benefit to the process of development if the often unfavorable trend of commodity prices and in­comes could be improved. We need to consider how the competitive po­sition and market access of primary commodities can be improved, and how the economies of primary produc­ing countries can be diversified .... ... I find it most fortunate that the

Fund and the Bank meet together on these annual occasions. Their fields of concern are deeply interwoven as we have seen in such diverse mat­ters as the international flow of capi­tal and the problems of primary com­modities. Their cooperation should become ever closer and more produc­tive, led by the collaboration between

the distinguished heads of the two in­stitutions. Both institutions have done much to advance the progress of in­ternational cooperation in the eco­nomic and financial fields, which has served us all so well.

Central African Republic: Antoine Guimali

Governor of the Fund

Speaking before this august Meet­ing on behalf of my country, I realize how difficult is my task. It is indeed a difficult task to try to convince those who are indifferent of the need to take prompt action to come to the aid of a country at grips with the worst difficulties.

Mr. Chairman, the facts of the prob­lems which we face are known to you and their continuing presence is made clear in these words of the President of the Central African Republic: "Some of you are going to reach the moon, whereas our country does not yet have permanent access to the sea." How great is our anxiety, Mr. Chairman, when we note that the Cen­tral African Republic, whose task is the most arduous because of its geo­graphic position, has not, to date, benefited from the aid of the Bank and the International Development Association for carrying out its proj­ects still pending in the files of those agencies!

"God helps those who help them­selves" they will say to us. Therefore my Government has with determina­tion turned its attention to economic problems under the aegis of Opera­tion Bokassa. With determination we have declared war on uncultivated and underdeveloped land. We are proud to announce the positive results of this effort. To cite but one example, in 1966 and 1967, cotton production in­creased by 72 per cent with 42,000 tons, as against 24,000 tons in 1965. My Government attributes particular importance to the increase in cotton production because of the need for maintaining the export level and for

supplying our cotton mill from the Cen­tral African cotton industry.

But what benefit can the Central African farmer derive from this effort when, in 1967, 100 kg. of cotton barely enabled him to have a blanket and 3 meters of cloth, whereas in 1957, he could buy, with the same 100 kg., 4 blankets and 8 meters of cloth? That, Mr. Chairman, as our Delegation told you last year, in Rio, is the re­ward for the laudable effort made by our planters who have worked un­stintingly to increase the tonnage of their production, modernize their method of operation, improve the quality of their products, adapt them to the tastes of distant consumers by arduous reconversion of plantations and diversify their crops in order to try to improve their living conditions. Under these circumstances, you will perhaps understand our annoyance when we join the President of the Central African Republic in saying that this state of affairs is a "real dis­grace." In this connection, our disap­pointments are very deep after the failure of the New Delhi conference, and we do not understand the delay of the Fund and Bank staff in putting off for another year the submission of conclusions on the ways by which these two institutions could in prac­tice cooperate to find a viable solu­tion of the problem posed.

Thus, briefly, I have recalled the persistent facts of our problems. This reminder reflects essentially our bit­terness. However, we have confidence in the future and we cannot conceal the hopes raised by President McNa­mara's speech. Globally, the Bank Group should lend twice as much in the next five years as it has in the last five, which means that during the five years ahead the Bank Group should lend as much as it has since the be­ginning of its operations 22 years ago, did you say, Mr. President? May God heed you, Mr. President, especially since you added that the Bank's aid will be directed toward the most needy of the poor nations, one of which is the Central African Republic!

Allow us, President McNamara, to hail your arrival at the World Bank as the beginning of a new era in which

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innovations on behalf of the economic development of the have-not areas of our planet may prevail over adher­ence to rigid and paralyzing princi­ples. We also hail your coming to the Bank as an era of justice in the geo­graphic distribution of the loans of the Bank Group.

In conclusion, I wish to thank the American Government and people for their kind and friendly hospitality. We again bid President McNamara welcome and wish him every success.

Our thanks also to the Managing Director of the Fund, whom we con­gratulate on his reappointment. We express our gratitude to all of the au­thorities of the Fund and the Bank and to all of our friends in financial, economic and other circles who have given of their valuable time to or­ganize this meeting.

Ceylon: William Tennekoon

Alternate Governor of the Fund

should like, first of all, to join the other speakers before me in express­ing our thanks to the Executive Boards and the staffs of the Fund and the Bank for the excellent way in which they responded to the two Res­olutions passed at Rio. I wish to con­gratulate the Fund and the Bank on the efficient manner in which arrange­ments have been made for the con­duct of our mee'tings. I wish also to thank the Fund and Bank and the United States Government for making our stay in Washington very pleas­ant. ... ... As a developing country it is

Ceylon's hope that the future evolu­tion of the international monetary sys­tem should make provision for a link between liquidity creation and the transfer of resources from developed countries to international lending agencies for financing economic de­velopment. I hope that this will be the next step in international monetary reform following the creation of special drawing rights.

It is unfortunate that because of the priority which had necessarily to be given to the special drawing rights

facility time was not available for the Executive Directors of the Fund and the Bank to consider specific meas­ures for the alleviation of one of the most pressing problems of developing countries, namely, the problem of commodity stabilization. We can take some comfort from the fact that the staffs of the Fund and Bank have jointly produced an excellent study of this problem. Particular countries may feel disappointed with some aspect or other of the study but I have no doubt that it is the view of the large ma­jority of countries represented at this Conference that the proposals of the staff are worthy of serious considera­tion for initial action by the Fund and the Bank in the field of commodity problems.

One of the important points which has been brought out in the study is that the problems faced by develop­ing countries in commodity trade are many-sided. The staff also has cor­rectly drawn the corollary that there is no single solution to this problem, and that action needs to be taken on several fronts at the same time, par­ticularly in the field of product di­versification, the development of new uses and improvements in research and productivity.

I should like to draw your attention to one of the problems which Ceylon has experienced in recent years and which several other countries may ex­perience in the future. The prices and values of Ceylon's exports have been subject to sharp fluctuations at vari­ous times. One inevitable conse­quence of this instability is the un­certainty attaching to the future course of prices and earnings. More often than not, whether a given change in the price of a commodity is temporary or long-lasting, only the lapse of time can tell. It is quite pos­sible therefore that a decline in ex­port earnings which was initially thought to be of a temporary nature may later turn out to be of a more enduring kind. A country in that situ­ation would be faced with a formidable problem of restructuring its economy, possibly requiring a large outlay of foreign exchange. It must also be re­membered that programs for shifting

resources from the production of one export commodity to another can take several years before they begin to show returns. During that period the country concerned may suffer a fur­ther loss of exchange as a result of having to abandon production of exist­ing export crops.

To accomplish the diversification of our economies and reduce our de­pendency on a few vulnerable com­modities, the developing countries re­quire increased external capital on a long-term basis. For this reason Cey­lon has supported in intergovernmen­tal discussions the proposal of the Bank staff on Supplementary Financial Measures. We would hope that the Bank would also recognize the need for greater variety in their lending ac­tivities to make possible the needed transformation of the economies of the developing countries, as, for ex­ample, more program financing.

We must avoid inappropriate financ­ing for development such as sup­pliers' credit, but to do so we must have available alternatives such as World Bank and IDA loans and credits.

It should be mentioned that Cey­lon's recovery program started with the assistance of the Fund, the World Bank and donor countries, and the exchange reforms Ceylon has intro­duced, combined with rational in­vestment poliCies, as well as appropri­ate budgetary policies, are now begin­ning to show good results. A high growth rate is in prospect spear­headed by dramatic improvements in domestic agriculture. All this was achieved despite poor export earnings due to price declines and a tight for­eign exchange situation.

In concluding, I wish to express our appreciation to the various countries that have given us long-term assis­tance in the Ceylon Aid Group.

China: Kuo-Hwa Yu

Governor of the Bank and Fund

wish to associate myself with other Governors in expressing our thanks to you and to the manage-

ment and the staff of the Bank and Fund for the efficient handling of the 1968 Annual Meetings. On behalf of my Delegation, I wish to thank the host country, the United States of America, for its most generous hos­pitality and excellent facilities placed at our disposal. It is also my pleas­ure to extend our warm welcome to all the new member countries which have joined the Fund and the Bank Group since the last Annual Meetings in Rio.

Now I would like to comment briefly on the business of the Bank Group. Like many other Governors who have spoken before me, I, too, deeply re­gret the loss of the valuable services of Mr. George D. Woods due to mandatory retirement age. Fortunately for the Bank, however, he has been replaced by a man of such interna­tional stature and vast experience as Mr. Robert S. McNamara. Under his able leadership, I am confident that our Bank Group will be able to per­form even greater service to the eco­nomic development of our member countries.

Soon after the assumption of office last April, and with an earnest de­sire to help developing countries, Mr. McNamara took it as the most urgent duty to raise more money to replenish the Bank's cash resources in order to expand the Bank's lending operations. He has been most successful in this undertaking by the sale of bonds, not only within the United States, but even more so in Europe and in the hitherto untapped oil-rich countries of the Mid­dle East. It is really a great achieve­ment that in the last 90 days the Bank has raised more money than in any previous full year of its history.

With the increase of cash re­sources, the Bank is now formulating a Five-Year Plan with the ultimate ob­jective of doubling the lending opera­tions of the Bank and IDA for the next five fiscal years (1968-73) as com­pared with the preceding five years. As the developing countries step up the program of economic develop­ment, they will undoubtedly need more resources. I therefore heartily welcome and warmly support this new policy.

With regard to foreign trade, I was deeply impressed by President John­son's statement last Monday that the developing countries should endeavor vigorously to diversify their export products and to expand export mar­kets. He said further that the indus­trialized countries should have the re­sponsibility to maintain an open and growing economy. My Government has made great strides in expanding its international trade since the be­ginning of the 1960's, and the planned target of ou r exports for 1968 is US$800 million. But we are now much more concerned over the increasing obstacles to trade expansion, which some of the industrialized countries are taking in the form of higher tariffs and more restrictive quotas. High tariff rates have hindered the developing countries from exporting primary commodities as well as the processed goods. Quantitative restriction on im­ports is another main trade barrier which impedes the international trade and economic development of devel­oping countries. Therefore, to main­tain an open and growing economy by industrialized countries would be a prerequisite condition to assist de­veloping countries.

I note that the Bank's new policy seems to indicate shifting henceforth the resources of the Bank more to educational and agricultural projects, and concentrating less on roads, rail­ways, power, etc.-what is commonly known as "economic infrastructure." I agree heartily that education and agriculture are very important ad­juncts to economic development. Ac­cording to our own experience, un­less agriculture is well developed, in­dustrialization cannot be carried on smoothly, because development in agriculture will support industrial­ization, both in supplying raw ma­terials for industrial use and creating purchasing power for industrial prod­ucts. Investment in education is also another important element for further development of the economy. Skilled workers can come only through voca­tional education and technical train­ing. In view of this fact, my Govern­ment has recently decided to extend the period of free education from six

to nine years starting in the autumn of this year. Even with this new de­velopment in my country, I feel that economic infrastructure is still very much needed and is equally as impor­tant as agriculture and education. As the economy grows, the problem of economic infrastructure becomes more serious, unless our attention is constantly directed in this area, and it will hamper further development of the economy. In my own country, the most serious problem for industrial development is mainly that of eco­nomic infrastructure, particularly power, harbors, and transportation in general. Therefore, I would urge the Bank that attention to economic in­frastructure should never be lessened and should be treated as equally im­portant with education and agricul­ture.

I would like to refer briefly to the International Development Associa­tion. As the gap between the rich and the poor widens, and the creditworthi­ness or external debt burden has reached its saturation point in many of the developing countries, it is the IDA-type of money that they need the most-much more than conventional Bank loans. Although China is no longer eligible for IDA credits, we nevertheless wish to make a strong appeal to the donor countries for a speedy completion of the legislative procedures so that IDA operations can be carried on without interruption. As a temporary palliative, I therefore give my support to the proposed trans,fer of $75 million from the net earnings of the Bank in fiscal year 1967-68 to IDA by way of a grant. Meanwhile, in order to lighten the burden of other developing countries which have to lean heavily on conventional bank loans, I sincerely hope that as con­ditions of the money market of the main capital export countries become normal, the current standard lending rate should be reduced from 6V2 per cent to a reasonably lower level. Early attention to this issue by the Bank will, I think, be a common hope of all de­velopi ng countries. . . . ... Turning to the stabilization of

prices of primary commodities, I must first of all thank the staffs of both the

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Fund and Bank for their compre­hensive study of the subject. We real­ize that this question is of the utmost importance to developing countries, including my own. This problem has been a matter of concern since shortly after World War II. Much time has been devoted by many agencies to finding a possible solution. Whereas the problem is somewhat mitigated through diversification in some coun­tries, it remains a serious one for many developing countries. I am therefore happy to voice my agree­ment to the request that both the Bank and the Fund should continue their study of this problem and look for possible ways within the powers of their Articles of Agreement in which they can render assistance. However, in view of the fact that this economic illness has been a chronic one, a reasonable length of time should be provided to the staffs and Executive Boards in order to produce a thorough and useful study. The fa­cility for compensatory financing of export shortfalls provided by the Fund is a clear indication of our efforts in this direction.

Congo (Brazzaville): Edouard Ebouka-Babackas

Governor of the Fund

have the awesome responsibility of expressing to this distinguished as­sembly not only my country's con­cerns but also those of the member countries of the Central African Cus­toms and Economic Union, an agency of economic and financial cooperation with which the Fund and Bank are well acquainted.' First, I should I ike to welcome to our meetings the Gov­ernors of the States that have just joined the Bretton Woods institutions and to assure them of our active sup­port in seeking appropriate solutions to hasten the countries' progress to­ward development. I should also like to perform the agreeable task of

, Cameroon, Central African Republic, Chad, Congo (Brazzaville), and Gabon.

thanking the authorities of this coun­try for the hospitality extended to us.

I should also like to join the others who have already had the opportunity of expressing their hearty congratula­tions to Mr. Schweitzer on his reap­pointment as Managing Director of the International Monetary Fund.

Allow me, finally, on behalf of all of the States that I represent here, to extend very special congratulations to the President of the Bank Group In­stitutions, Mr. McNamara, who has consented to place his wealth of ex­perience and his outstanding qualifi­cations at the service of development. We venture to hope that the years to come will, under his enlightened guid­ance, bring about important changes in the financing of development by the international institutions, as he himself announced in his brilliant ad­dress of September 30. This address is very timely now, when we can dis­cern a certain dwindling of financial assistance from the rich countries to the poor countries for the latters' major needs.

The facts of the problems with which we have been faced since gain­ing independence were described at length last year in Rio. The growth of our economies and the consequent rise in the living standards of our peo­ples are in fact directly tied to the solution of these problems. In this re­gard, it was on a moderately optimis­tic note that we parted after our last Annual Meeting. In fact, after the Al­giers Charter was adopted, the so­called Group of 77 was entitled to place some hope on the outcome of the second session of the United Na­tions Conference on Trade and Devel­opment which was held in New Delhi early this year. Moreover, in unani­mously adopting the draft resolution on Stabilization of Commodity Prices, the Board of Governors of the Fund recognized the importance of this problem and undertook, in collabora­tion with the Bank, to seek solutions for it. Knowing the prodigious imagi­nation that our institutions are capable of applying to the solution of other problems much more complex and of entirely different scope, the matter ap­peared to us to be in good hands.

I propose therefore to draw up the balance sheet for this year of con­frontations and studies. Like all bal­ance sheets, it has a liabilities side and an assets side: I shall list our disappointments under liabilities and our hopes under assets.

The Fund's Report confirms that most of the primary producing coun­tries have suffered from the weakness of the demand from the industrialized countries; at the same time, a down­ward trend in economic assistance to developing countries was observed and the deterioration of the terms of trade became more severe. Under the impact of these factors, the develop­ing countries have shown a slow­down-indeed, a real decline-in growth. That is the situation.

As for the remedies, we must ac­knowledge that the New Delhi Con­ference, which some have called a "fair of illusions" did not come up to our expectations. In fact the confron­tations of viewpoint crystallized about the fundamental problems that are ours: the stabilization of commodity prices, especially of those commodi­ties that provide our countries with most of their export earnings; the granting of tariff preferences by de­veloped countries to commodity im­ports from the underdeveloped world; and the strengthening and reorganiza­tion of international assistance to de­velopment. That is why, concerning that Conference, there has generally been talk of stalemate, bitter disillu­sion and even frustration over the meager results achieved. Among these, I shall mention in particular the undertaking subscribed in principle by the industrialized countries which agreed to raise the amount of their aid to 1 per cent, and no more, of their gross national product, and the relatively favorable prospects for the cacao and sugar stabilization agree­ments; for other products, the out­come is unfortunately less certain and more distant.

With regard to the activities of the Fund and Bank for the benefit of our countries during the last fiscal year, we have learned with great interest of the studies undertaken pursuant to the Rio resolution on commodities.

The positive fact that has emerged from these preliminary studies is, on the one hand, the recognition of inter­national action in this area and, on the other, the contribution that could be made by the Bank and the Fund toward the creation and operation of buffer stocks of certain raw materials. We now hope that the diagnostic stage will be quickly put behind us with the translation into reality of the various stabilization techniques that have been submitted for our consid­eration. Indeed, the economic situa­tion of the underdeveloped countries in general and that of the countries of the Central African Customs and Economic Union in particular require that all efforts be mobilized in the shortest possible time to revalue within the framework of commodity arrangements for this purpose, the prices of the commodities that have the influence with which you are fa­miliar on the harmonious development of these countries. In order to strengthen the financial resources made available to the Bank, it would be highly desirable for those member countries that may participate in the Fund's profits to give proof of their wish to participate in development fi­nance by allocating their share to IDA.

It remains understood that this noble gesture of the recipient coun­tries, which we earnestly call for, in no way rules out obligations con­tracted or to be contracted by them in replenishing IDA's resources.

During the past fiscal year, the Board of Executive Directors of the Bank and IDA considered certain projects involving the member States of the Central African Customs and Economic Union. True, these proj­ects are limited in scope, but their implementation will be very much ap­preciated by the beneficiary States, in whose name I express my thanks to you.

We note with satisfaction the prom­ise to replenish IDA's resources through the contributions expected from the highly industrialized coun­tries, and in this connection we hail the untiring action undertaken for this purpose by President Woods and con-

tinued by his esteemed successor, Mr. McNamara.

We are justified in thinking that the distribution of IDA's new resources will be more favorable to us than in the past. For our much publicized needs are immense. I shall therefore refrain from going into detail about them and shall only mention those that should be given priority. We do not expect spectacular results. We feel, as far as we are concerned, that rural development is the foundation for over-all development. That is why the Governors of the member States of the Central African Customs and Eco­nomic Union have at these Meetings constantly stressed the need for aid to our national development banks, which are the best intermediaries for carrying out small projects that, effi­ciently performed in a large number of places by many people, will make possible the modernization of our agriculture and handicrafts. More­over, we are also aware that the ex­istence of means of communication worthy of the name goes hand in hand with economic growth, that quite fre­quently they even dictate it, and that certain areas would be in a position to produce more if they did not have crucial problems in moving their prod­ucts. In the task of subregional inte­gration on which we are embarked, it is clear that coordination and mod­ernization of the means of communi­cation is still our principal concern. This amply justifies our aspirations in the field of highway and railroad in­frastructure.

Likewise, we shall not neglect any effort to activate the development of our mining and power resources, for the exploitation of these assets con­stitutes an essential element in the di­versification of our economies that renders them less vulnerable and thus helps to improve our living conditions. The papers have been drawn up, some have been acted upon, others are submitted for your consideration.

But, while I have informed you of our disappointments, I have also spoken of our reasons for hope, which are not lacking, and it is on this note that I shall conclude, for highly au-

thoritative documents and speakers inspire me to do so.

More than 20 years ago, at Lake Success, representatives of the indus­trialized countries placed on record the fact that the development of the underdeveloped countries required a financial and technical effort that they could not provide by means of credits; they concluded that it was de­sirable to create a new system of mu­tual aid for the benefit of a large part of the human race. That was the start of the crusade on behalf of the coun­tries of the Third World.

More recently, President Woods stated that "we must fight for eco­nomic development as if we were wag­ing a war against intolerable living conditions, with determination to sur­mount all obstacles."

We believe with President McNa­mara that with the immense prospects before us for all mankind, we have no reason to despair. We have joined the battle against misery and we shall fight until it is ended. That is why, in spite of the obstacles, I have confidence.

Democratic Republic of Congo: Victor Nendaka

Governor of the Bank

On the occasion of this Annual Meeting of Governors of the World Bank, I am happy on behalf of the Democratic Republic of Congo to join all the other countries in congratulat­ing Mr. McNamara on his appointment as President of the World Bank. This appointment has special significance for Congo, as the basic options con­vincingly developed by Mr. McNamara in his speech coincide precisely with the major concerns of the developing countries.

The Democratic Republic of Congo wishes to assure Mr. McNamara that he will find in our country understand­ing and the spirit of cooperation needed to carry out his plans.

In a few short years the Democratic Republic of Congo, under President

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Mobutu's leadership, has succeeded in strengthening its unity, consolidat­ing its sovereignty, making firm its so­cioeconomic foundations and estab­lishing peace throughout its territory.

Last year was a significant turning point in the life of the country. The economic and monetary reform has created the conditions of order and stability so essential to progress.

The results of this reform, whether in the balance of payments and ex­change reserves, internal prices or foreign trade, have very broadly con­firmed the forecasts and they provide a sound basis for future expansion. We have followed a realistic policy, attempting to clarify the goals to be attained, to mobilize forces, to choose the best courses of action-with due regard for pressures of all kinds-to improve the methods of government and administration.

Congo can now open its door to the world in all fields, and is resolved to do so.

This resolution is already discerni­ble in the liberalization of trade and will soon be reflected in the free transfer of earnings.

It is evidence of an active desire to welcome private investment by of­fering a generally attractive climate, favorable conditions of access and positive incentives intended to recon­cile the financial earning power of those investments with their integra­tion into the national economy.

It is apparent now in the seeking of foreign assistance and manage­ment contracts that will ensure the provision of services, techniques and expertise useful to the public sector.

This open-door policy leads, quite naturally, to regional agreements and to the gradual removal of the bar­riers existing between countries of Central Africa, where Congo occupies the major geographic position.

The formation of the Union of Cen­tral African States early this year is one step in that direction. It is our intention to pursue the integration that has been started, in order to broaden the market and unify development ac­tivities in the heart of Africa.

A second guideline of government

policy is of course the promotion of economic development.

In the first place, we are very much aware of the need to reform the pub­lic finances in order to safeguard the value of the national currency and to maintain its purchasing power and to put the country's economic expansion on a sound basis.

Quite recently, we took steps to guarantee a balanced budget for 1968, which had been jeopardized by swell­ing expenditures. We placed restric­tions on new commitments; we drew up a cash budget which fixes the level of over-all expenditure at the level of actual receipts and those foreseeable until the end of the year; we intro­duced control methods and proce­dures to ensure strict budgetary dis­cipline.

While no deficit-and therefore no monetary financing-is expected, de­spite increasing the investment budget by ordinary receipts, the prob­lem arises of preparing a State budget for next year that will enable us to meet our essential needs with­out causing inflation and will at the same time be a tool of development. To that end, we are launching a large­scale campaign aimed at reorganizing expenditures in terms of their eco­nomic and social impact and increas­ing the role of investments and on the other hand rationalizing expendi­tures so as to make them as efficient and productive as possible.

A second great concern of my Gov­ernment is to increase the volume of investment, both public and private.

A plan for economic recovery has already established the priorities in public investments which, by the way, coincide with the programs that the World Bank considers most urgent and most timely.

These priorities concern the recov­ery and expansion of agricultural pro­duction and the overhauling, con­struction, and management of the in­frastructure of river and road trans­portation.

In addition to budget financing of these investments, the Government hopes to find in the Bank and the specialized agencies of the United Na-

tions the technical assistance and the supplementary external financing nec­essary for the study and implementa­tion of these projects.

Moreover, in view of its present eco­nomic structure, Congo attaches the greatest importance to the efforts made by the World Bank and the Inter­national Monetary Fund toward reduc­ing fluctuations in commodity prices and diminishing their impact; directly or indirectly, these fluctuations affect the financial resources of the country, its balance of payments, its export earnings, its import capacity, its abil­ity to finance its development-prac­tically all aspects of its economic activity.

However, beyond and in addition to these stabil ization measures that should be taken at the international level, Congo should promote private or mixed endeavors in industrializa­tion, in diversification of resources through the creation of new activities, and in local processing of primary products, both in order to mitigate the effects of price changes and to gratify its industrial aspirations.

Recently, also, private companies have been established in Congo at the initiative of American, European, and Japanese groups, in the sectors of mining, agriculture and tourism.

Finally, the Government wishes to set up in the near future, with the col­laboration and participation of the pri­vate sector and the International Fi­nance Corporation, a development bank whose mission will be to pro­vide financing for the productive sec­tors of the economy.

Against this background, and in the face of immense and urgent develop­ment needs, the contribution of the World Bank appears to be impera­tive and decisive. Moreover, in addi­tion to its direct intervention, it has a part to playas a catalyst of interna­tional cooperation.

Without ruling out-quite the con­trary-the assistance of friendly coun­tries and without underrating its value, Congo nevertheless hopes for an extension of multilateral aid, the relative importance of which is unfor­tunately diminishing. Above all other

types of aid, it guarantees effective application of resources from the na­tional point of view and equality of collaborating partners.

Congo also hopes that the financial assistance of the World Bank Group in all forms can be increased on be­half of the African continent and es­pecially the group of States of which it is a member.

The time is ripe, we believe, for put­ting into concrete form the aid that Congo is entitled to expect as a mem­ber of the World Bank, aid the objec­tives of which have been recognized by the various Bank missions.

To our way of thinking, this aid should be both technical and finan­cial; it should be applied to programs and projects whose economic useful­ness is justified at both local and na­tional level and from the point of view of the complementary interests of the neighboring African countries.

Technical cooperation is needed in order to study projects and deter­mine the methods by which they can be implemented, to improve the man­agement of key sectors of the econ­omy and train national managerial staff. Financial cooperation is needed in order to remedy the shortage of domestic capital and to provide ade­quate additional support for efforts at self-development.

We believe that the effective sup­port of the World Bank Group should go first to the countries which have chosen the difficult but promising path of economic independence and which, building their future by their own effort, therefore remain more vul­nerable, whatever the austerity of their policies.

Congo has had the courage to carry out a fundamental monetary and economic reform; it has undertaken to rehabilitate its public finances and has subjected itself to a demanding internal discipline.

This vast effort toward internal re­organization and equilibrium should now be continued by a movement of expansion and growth with which I firmly hope the Bank may associate itself and render its active and effi­cient cooperation.

Ethiopia: Yilma Deressa

Governor of the Bank

Mr. Chairman, pe'rmit me to join my fellow Governors in congratulating you upon your assumption of the rewarding but also exacting task of chairing our meetings this year.

It gives me great pleasure to welcome our new President of the Bank and its affiliates. Mr. Robert S. McNamara brings to the Bank Group a varied and vast wealth of experience. In the brief period that he has occupied the presi­dency of the Bank, he has shown a profound concern and a commitment to the economic and social develop­ment of member countries. The World Bank is to be even more active in lead­ing the way in the field of economic development; it is to be both a direct participant and a catalyst in the devel­opment process.

Allow me to make a few remarks on the operation of the Bank during the last fiscal year. Once again, we are presented with an Annual Report that is clear, precise, and illuminat­ing. The Bank staff is worthy of our appreciation and commendation on the Report.

We observe with some concern that finance provided during the year by the Bank/IDA contracted by $30 mil­lion and $247 million, respectively. This is a decline of some 22 per cent over that of the previous year. We also observe that IDA's funds avail­able for new credits have dwindled to a mere $41 million. It is, however, en­couraging to note that the rich coun­tries of the world have demonstrated their goodwill this year both in pur­chasing Bank bonds and in their offers to replenish IDA's funds.

We see a healthy sign in this new trend. It is also gratifying to note the continued and growing attention which education and agriculture in the developing countries are receiving from the Bank and IDA. Indeed, the share of agriculture in loan and credit money was about 18 per cent of the total finance provided by our two in­stitutions. Although the total number of agricultural projects financed has grown by only one over that of the

previous year, the volume of funds de­voted to it has almost doubled.

Perhaps more significant in this connection are the Bank's efforts in assisting member countries to identify and prepare projects-especially in the agricultural sector and in the field of education. The Bank's direct and indirect participation in the develop­ment of a project at its inception would no doubt accelerate the stream of projects which would be acceptable for Bank Group financing.

The funds that would be available from IDA for new credits are only $41 million; without the $400 million prom­ised in the second IDA replenishment, it means that IDA's activity will be seriously jeopardized if the promised fund will not be made available by the November deadline. We cannot but hope that the goodwill shown by the donor countries in this week's speeches will be given practical effect in the very nea'r future. In this con­nection it is in order to single out and express our gratitude to the five coun­tries, namely, the Netherlands, Can­ada, Denmark, Finland, and Sweden for having volunteered to make avail­able $17.5 million over and above the sum recommended by IDA's Execu­tive Directors as being their share. We cannot but also appreciate the promise that was held out in the speech of the Secretary of the Trea­sury of the United States in his ad~ dress of Tuesday last. We areconfi~ dent that the legislature of his great country will not fail to do for IDA what the Secretary hoped it would do. Our thanks also go to the Governor for the Federal Republic of Germany for advocating here vigorously that IDA's funds should be replenished without delay. We know, too, that his country will not fail to be as generous in its contribution to IDA's funds as it in­deed has done in purchasing the Bank's bonds.

At this point it is pertinent to point out the rising cost of loans and the mounting debt burden which develop­ing countries are faced with. We ap­preciate the Bank's predicament when it seeks to borrow from the capital markets of its developed members. We realize that the Bank was com-

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34

pelled by the situation in these finan­cial markets to raise its own lend­ing rate.

There was a time when there were eager donors of development assis­tance-a good bulk of it in the form of grants. But when it appeared to some that this was doing little good, loans increasingly supplanted grants. But even then the loans were fairly soft, thanks to many favorable factors such as low interest rates. In fact, the charges on the loans were meant to encourage effective use. Unfortu­nately, however, those were the years when developing countries lacked al­most all the ingredients that were preconditions for rapid economic and social development.

But now the story has changed. The will to develop on the part of devel­oping countries is stronger. These countries are relatively better able to prepare. sound and feasible projects and they can utilize assistance much more effectively. The paradox is that, as the capacity of the developing countries increases, development as­sistance correspondingly decreases and the cost for the little money avail­able rises.

There is yet another paradox. De­spite the shortage of funds for de­velopment purposes, it is still avail­able for other activities. Is it fair to suggest, therefore, that the general shortage of funds is more apparent than real?

The question is, when funds are so readily available for other purposes, why aren't they forthcoming when the war in the Development Decade is against disease, illiteracy, and pov­erty?

I do not think some of the answers suggested, such as financial difficul­ties of some of the developed mem­bers of the Bank, can fully explain the reluctance to assist adequately on the part of some donor countries. The main reason is, perhaps, that sug­gested by Mr. McNamara in his open­ing address on Monday; namely, that there has grown over the years a pro­found disenchantment regarding the social and economic development of the economically poor nations of the world.

It is true that the cumulative total of the aid poured out for development in the last two decades was monu­mental. But the development has been grinding at a slow pace and did not appear to produce commensurate re­sults. Development has always been a slow process requiring fundamental changes such as attitudes and institu­tions. Perhaps, for those who live in economically advanced societies today, these problems are not so easily evident. Hence, the impatience and disillusionment.

It is my considered judgment that all the aid that was received in the past two decades has not gone down the drain. It has gone into building the foundations for sound develop­ment. Many nations are at the point of making a breakthrough. Mr. George Woods was acutely aware of this when he talked about the success stories of development at our Annual Meetings in Rio last year, because he felt that much time and many words have been devoted to the failures and very little to the successes of the de­velopment effort.

The concentration on the failures of the economic and social development effort of developing countries is being made by those who mean well, and, therefore, want developing countries to redouble their efforts. We should take the idea seriously, and profit from these constructive criticisms. At the same time, what is desirable is to find out the objective truth-to present to all interested a just balance sheet of the development effort in the last sev­eral years. This disinterested and dis­passionate assessment will be what we hope to get from the Pearson Commission.

May I conclude these remarks by referring to a passage in our Presi­dent's speech on Monday last. In his inspiring opening address the new President of our Bank indicated that the Bank Group will double its efforts and lending in the next five years to help the developing countries. It is heartening to hear such an encourag­ing statement. I have no doubt that the Bank, under his able and ener­getic leadership, could raise and make available the funds. But for the

developing countries to be able to double or treble their external loans, they have to grapple with the mount­ing debt servicing problems-which are due partly to the volume and partly to the increasing cost of the loans. In order for these countries to avail themselves fully of the oppor­tunity that may be given them by the Bank, something must be done to im­prove their capacity to service their debts, or at any rate to ease the bur­den. In order to alleviate this burden the Bank could introduce a grace pe­riod for its own loans, say to five years, and a repayment period of 25 years thereafter. If at all possible this should be retroactive with a view to rescheduling past loans.

I realize the technical difficulties that may arise in attempting to modify the loan conditions of the Bank. Nev­ertheless, I venture to point out that it has been done hitherto. The inter­est on Bank loans was 3% per cent two decades ago, and it is today 6V2 per cent, and this is quite a change in the condition of loans. Whatever tech­nical difficulties may arise from the idea I ventured to put forward, I know that it will not be beyond the ingenuity of our Bank President and his staff to solve.

France: Fran~ois-Xavier Ortoli

Governor of the Bank

This is the first time that I have had the privilege of representing my coun­try at this annual assembly of the Fund and the Bank. I am gratified to find here in Washington my colleagues, the Finance Ministers, the Governors of the Central Banks, and the leaders of the Bretton Woods Institutions, Mr. Schweitzer and Mr. McNamara.

At the Annual Meetings of the Gov­ernors of the Fund and the Bank it is traditional to recall the lessons learned individually and collectively in the course of the year; the year just ended has been marked by im­portant events both in the monetary and the development fields.

If we wished to describe briefly the phenomena thus observed, we might say that, in the monetary field, we are witnessing a movement of accelera­tion and amplification; in the field of development, a process of slowing down and shrinking. This somewhat contrasted picture calls for clarifica­tion, in order to provide an objective appraisal of the evolution that has taken place during the year.

I. International Monetary Develop­ments

The many events that have oc­curred since the Rio Conference have compelled our Governments to give more thorough consideration to the very foundations of the international monetary system. Were it not pre­sumptuous to attempt to simplify so complex a development, we might say that the common experiences under­gone have of course tightened inter­national monetary cooperation, but have above all made still more ob­vious the scope of and the need for the progress still to be accom­plished ....

Results achieved

. . . In July, the Congress of the United States approved the courage­ous measures proposed by the Ad­ministration to bring the rate of activity of the economy back within limits compatible with a better balance of external payments. The same preoccu­pation inspired our British colleague in the choice of a policy that has already resulted in a perceptible improvement in the current payments of the United Kingdom. As a comple­ment, the EEC countries collectively decided, at the end of 1967, to pur­sue an expansionary policy, and measures have been taken in this re­spect by the governments concerned.

France also made its contribution to this collective effort. First, during the first half of the year, by an expan­sionary policy arising out of a "plan de relance" adopted in February; later, following the crisis in the French economy in May and June, by a set of temporary measures aimed at re­storing more normal conditions; and last, early in September, by an over-

all program of disciplined expansion that will, we anticipate, enable us to restore without delay a durable equilibrium.

Without going into detail, I wish to recall here that France tries to solve its problems in accordance with the principles that it has always upheld, rejecting the devices of protectionism and isolation.

After the limited and temporary re­strictions required by an exceptional situation, the French market is again to be fully open to foreign competi­tion; exchange control has already been lifted, only three months after it was set up. We did not contemplate the dubious medicine of deflation, be­lieving that a modern economy, placed in our present situation, finds in expansion the stimulus that enables it to overcome difficulties that would be insurmountable under conditions of stagnation. Lastly, during the period of disturbance that we experienced, as well as in the phase of resump­tion of growth in which we are now engaged, it seemed reasonable to provide for a certain use of our ex­change reserves in combination with temporary and limited recourse to the assistance that we have received within the framework of international monetary cooperation.

Our economic policy has begun to yield results: production is coming up strongly, price increases remain mod­erate and, in many sectors, are much lower than the forecasts made fol­lowing the events of May 1968. The purpose of the measures just adopted by the French Government is to stimu­late productive investments by incen­tives, and to lighten the burdens borne by enterprises. These measures are to contribute, in a favorable inter­national economic context, toward the maintenance of a continued eco­nomic growth that is already spon­taneously appearing, and through an improving productivity, which con­tinues to be sought and encouraged, to enable the French economy to re­main competitive . ...

II. The Problems of Development

. . . The problems of development contrast with the international mone-

tary situation as I have just described it. Here we find no spectacular trans­formations, but a further widening, this year again, of the gap between the living standards of the industrialized countries and those of the poor coun­tries. And, despite the undeniable fact of a serious shortage in the resources of the underdeveloped countries, reform projects are mark­ing time. They have been slowed down pending the completion of supplementary studies. Such studies are possibly inspired by the highest motives; they ought not, however, put off the time when constructive new answers are to be given to the prob­lems facing those countries. Here we see no concrete progress in interna­tional financial cooperation: the level of aid remains stationary and the ob­jectives of assistance defined in rela­tion to the national income of the con­tributing countries, as accepted by the international community, still remain a dead letter, with a few rare exceptions.

In this situation-further aggravated by the continued world tension and armed conflict-it is easily realized that the hopes fostered by the under­developed world on the eve of the New Delhi conference have been disapPOinted.

We have not met, though, only to deplore events but also to learn from them. It is mainly up to us to act as needed to expand the financial re­sources available to the international institutions for which we are responsi­ble and to guide their activities to­ward solutions that are at one and the same time constructive, bold, and in keeping with their mission.

In this respect, I should like to comment on the following two points: first, with regard to the traditional ac­tivities of the International Bank and the Development Association; and secondly, concerning the exemplary role that the Bretton Woods institu­tions ought to play in the stabilization of prices for primary products in con­formity with the mandate unanimously voted at Rio.

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36

The traditional activities of the Bank and IDA

(a) Replenishment of IDA's resources

With respect to the traditional ac­tivities of the Bank group, I must first of all mention my concern regarding the future of our International De­velopment Association. There is no possible doubt as to the importance of the survival and strengthening of an institution whose means must meet certain needs of the developing coun­tries. Now, despite the efforts of the Bank's management for the last two years, the Association has not yet succeeded in replenishing its depleted resources. The loan program of the past fiscal year has already been heavily affected by this, as witness the fact that the Association's new commitments have amounted ,to less than a third of those of the preceding year. The immediate future is still more discouraging: IDA has practi­cally nothing but extremely limited residual resources, which will no longer allow it to carry out new pro­grams of international scope. With­out resources, the Association has virtually disappeared from the world scene.

Yet, after two years of difficult ne­gotiations, at the beginning of 1968 the contributing countries succeeded in reaching agreement on a replenish­ment project providing for a sUbstan­tial increase in the resources made available to IDA for the next three years. Despite this agreement, the vote that we, as Governors, were to cast last March to give the arrange­ment the indispensable legal form has been delayed for six months. The entire procedure was thereby de­ferred and has been deferred again in regrettable circumstances. I must emphasize here the gravity of such procrastination; I can state, however, that the French Government, for its part, has been firmly standing by its obligations by voting at the proper time for the replenishment of IDA's resources. Indeed, it seems to us fundamental that development aid be given priority and not to allow it to be admitted that balance of payments difficulties of the developed countries

can justify either its amount Dr its conditions being called into question.

(b) Improvements to be made in the methods and working of the Bank and IDA

While hoping that replenishment of these resources will soon take place, I am inclined to think that our con­cern should not end there. As a mat­ter of fact, it is advisable, too, that the Bank and IDA continue improving their methods and revising certain of their practices. In this respect I would like to mention the concern I feel regarding the geographic dis­tribution of their operations. The share of Africa-still extremely in­sufficient over-all despite some re­cent progress, especially by the IDA­has shown particular weakness in respect of the Bank's loans during the fiscal year just ended. Unless a more equitable distribution is rapidly put into effect, there is the risk of a ser­ious disequilibrium appearing, which would deal a serious blow to the institution itself.

On the other hand, in selecting projects, the institutions of the Bank group must endeavor to improve co­ordination of their activities in a more general and coherent conception of the campaign against underdevelop­ment. A combination of general and technical education activity with pro­ductive and infrastructure investment, especially in agriculture, ought to be an increasingly important feature in the part played by our international organ izations.

The French representatives have likewise proposed that an appreciable part of the IMPs net income from its operations should be made available to the International Development As­sociation instead of being placed to reserve or distributed to Fund members.

Stabilization of prices of primary products

However, and this is the last pOint that I want to make, the expansion of the resources and improvement of the methods of the Bank and IDA in their traditional spheres are only part

of the necessary further undertakings. Over and above this, the Bretton Woods institutions, in order com­pletely to fulfill their mission, should finally tackle a problem expressly mentioned in the final Act of the 1944 Conference by clearly indicating their willingness to make an effective con­tribution to the endeavor under way for the stabilization of prices for the main primary products.

The importance of the problem is well known: unless there is some con­crete action in the matter, the export receipts of developing countries will remain insecure and the terms of trade will continue to deteriorate, thus more than offsetting any results obtained from financial aid. A net­work of individual commodity ar­rangements, with provision in each case for appropriate mechanisms for stabilization and for price-fixing at reasonable and remunerative levels, would thus make a vital contribution toward solving one of the funda­mental problems of the modern world, that of the structure of the developing countries' international trade.

Now, experience shows that such arrangements have run up against two types of difficulty, especialiy in the financial sphere:

(a) on the one hand, buffer stocks-which in some cases are re­quired for implementing such agree­ments-cali for the granting of funds, at the beginning of their operations; such grants can only be provided for by appropriate prefinancing schemes;

(b) on the other hand, the producing countries, which are led to submit to restraints that in some cases involve limitations on their production, can participate in such mechanisms only if they are enabled to diversify their aotivities.

The Fund, the Bank, and IDA, each insofar as it is concerned, and within the framework of its own present ar­ticles, could contribute to such opera­tions. There is no doubt that-should these institutions clearly manifest their willingness to place part of their resources at the disposal of the commodity arrangements now being negotiated, or to be negotiated in the future-negotiations of such arrange-

ments would be much more likely to be successful.

Bearing this in mind, we adopted last year at Rio a resolution inviting the Managing Director of the Fund and the President of the Bank to have a joint study made of the problem and of such courses of action as might be appropriate. The resolution further called for the Executive Directors to transmit to us the studies carried out by the Fund and the Bank so that we could examine them and take such decisions as were thought necessary, if possible on the occasion of the 1968 Annual Meeting.

What has become of this resolution?

The Bank and Fund staff, for their part, have carried out a number of studies which I should like to com­mend most particularly for their qual­ity and thoroughness, although they are but a first step and should be followed up by proposals for specific action which these institutions could implement in the required sphere.

But I fear that the procedure pro­posed to us today is not up to the standard either of the studies already made or of the avenues we opened last year in adopting a resolution which found a large following among the developing countries.

As a matter of fact, the resolution proposed to us this year refers only to part of the work carried out by the Fund and Bank. It fails to men­tion the studies submitted to the Boards in Part II of the report which, I think, contained the more concrete suggestions and the greater innova­tions. Furthermore, the aim of this resolution is to delay by another year the submission to Governments of conclusions as to the methods where­by these two institutions might, in practice, cooperate in seeking a viable solution to the problem.

Considering that studies already carried out and already informally passed on to member countries have reached an advanced stage; that the undertaking was made at Rio to sub­mit the results, if possible, in Sep­tember 1968; that the problem is a matter of urgency; and that the swift setting up of the special drawing

rights facility in the Fund constitutes a precedent in itself; I submit that nothing warrants a further delay of one year before conclusions are proposed.

If we did not today take note of the studies already undertaken, and if we did not prescribe a nearer deadline for the present procedure, there would be a grave risk of international opinion-particularly in the develop­ing countries-doubting our real will­ingness to reach a conclusion.

Having this in mind, and deeply convinced that we will be understood by our colleagues, we deem it neces­sary that a resolution be adopted calling for concrete solutions to be submitted, at latest, by December 31, 1968.

The trials the world is undergoing, which France has shared, confirm my country's deep conviction that the fight against underdevelopment as well as the smooth working of the in­ternational monetary system require a coordinated effort on a world-wide scale.

But this cooperation can be achieved and be fruitful only if each country, with due regard to its sov­ereignty and with a high sense of its responsibilities, is prepared to impose upon itself sacrifices and discipline without which the operations under­taken would be without effect.

The Gambia: S. M. Dibba

Governor of the Bank and Fund

am grateful for the opportunity to make a statement at this session. I should like to thank most warmly the Government of the United States for the tremendous hospitality extended to delegates during these meetings. I wish also to thank the staffs of the Fund and Bank for the excellent ar­rangements made for our meetings.

We salute the continuation of the affairs of the Fund in the capable hands of Mr. Schweitzer. My Govern­ment has already welcomed the scheme for special drawing rights and will take urgent steps in the immediate

future to signify and deposit its formal acceptance of the scheme.

I offer my warm congratulations to Mr. McNamara, our new President of the Bank, for his brilliant and inspiring address to us on Monday. We are heartened by the initiative he has taken at the Bank and are confident that under his able leadership the Bank will play an increasingly im­portant role in the economic advance­ment of developing countries.

We have been glad to receive Part I of the Fund and Bank study on the stabilization of commodity prices and are grateful to the staffs of these or­ganizations for preparing this report. We note that further work has already been done on Part II.

In my country the te,rms of trade have deteriorated progressively dur­ing the past 15 years. To us, the prob­lem of stabilizing prices of primary products at a remunerative level is vitally important. I realize that the problem is an intricate one, but wish to express the strong hope that early and satisfactory agreement will be reached on the matter by the Fund and the Bank. I wish to add that if there is anything the developing countries can do themselves, in ad­vance of the completion of the joint study, we should all be glad to have your guidance. We are anxious to co­operate in this great task.

We cannot provide sufficient sav­ings for the achievement of a reason­able rate of economic growth. We fully realize that the basic responsi­bility for our development rests with us, but the achievement of this goal depends to a large extent on external financial and technical assistance. We trust that help in this direction will be forthcoming from the World Bank and IDA in some measure.

Our present four-year Development Program is being financed in large measure from external sources. There are, however, some projects in the Program whose source of finance is at present uncertain. We have ap­proached the World Bank for financial assistance to develop our principal port, and it is my sincere hope that a loan will be successfully negotiated in due course.

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My Gevernment strengly supperts the ebjectives ef the Internatienal De­velepment Asseciatien and regrets that actien to' augment its funds has net yet been cempleted. It is my earnest hepe that all the ceuntries cencerned will very seen take the necessary steps in this regard and trust that when this is dene the spe­cial preblems ef small ceuntries like The Gambia in respect ef mere de­velepment finance will be berne in mind.

We are heartened by the sympathy shewn fer develeping ceuntries by the Geverners fer the United States and the United Kingdem and by the realism and censtructive werds ef the Geverner fer Germany.

Mr. Chairman, I thank yeu in cen­clusien fer yeur ewn speech and for the eppertunity to' address this dis­tinguished gathering.

Germany: Karl Schiller

Governor of the Bank

This werld menetary theatre in which we assemble year after year presents twO' dangers. The first is that each time we ceme tegether to' per­form the same play and that we fail to' realize the change and challenge ef the scene. The last year shewed up a let ef new menetary problems to' be selved. But I believe we teek a geed step ferward in bringing eur play up to' date, that is, we made sub­stantial pregress in the referm ef the werld menetary system.

The secend danger in this werld menetary theatre derives frem the fact that we here are all beth actors and spectaters in the same play. Thus, this werld menetary cenference can be seen as a special editien ef the med­ern "living theatre": everybedy in the audience can jein in. Hewever, in the werld menetary system such an in­dividual actien ceuld be very danger­eus fer all participants. Fer instance, nebedy sheuld be allewed to' stand up merely to' catch a better view ef the scene than his neighber. If we

did net ebserve that rule, seen every­bedy weuld be standing, and this weuld be very uncemfertable and very expensive fer the werld mene­tary system as a whele. In the lan­guage ef the fameus "theery ef games," this weuld be a censtant sum game with negative eutpay.

I sheuld like to' thank all the par­ticipants in the menetary game fer the ceeperative way in which the preblems were tackled and selved last year-abeve all the Werld Bank and the Fund. I hepe that Mr. Schweitzer's new term will take a less dramatic ceurse than the last ene. I sheuld alsO' like to' say hew pleased I am that the Werld Bank has been successful in getting such a dynamic man as Mr. McNamara as President. TO' George Weeds I weuld like to' express eur cerdial thanks fer all the werk he did fer us.

Ceming new to' eur agenda I wish to' begin with ene particular item. That is the cheice ef the place fer the An­nual Meeting in 1970. As yeu knew, my Gevernment weuld be delighted if Berlin ceuld beceme hest to' this Meeting. As fermer Senater fer Ece­nemic Affairs ef that city I can as­sure yeu that Berlin is a medern and lively place with a warm and hespi­table atmesphere and a rich cultural life. The city effers excellent cenfer­ence facilities and very geed hetels. Our prepesal to' held the meeting in Berlin was presented to' the Werld Bank and the Fund enly a shert while age. I weuld be very grateful if yeu weuld ceme to' a decisien in faver ef Berlin in due time. But I weuld add that there is nO' immediate hurry.

Ladies and Gentlemen, with respect to' seme press utterances this mern­ing, I sheuld like to' be allewed to' add a werd cencerning access to' Berlin. In 1961, the late President ef the United States, Jehn F. Kennedy, de­clared fermally the fameus three essen­tials fer Berlin. One ef these three essentials was free access to' the city. We in Germany have nO' deubt that this declaratien will be valid alsO' in the future .... ... In the meantime, in this peried

ef transitien, we depend even mere en the ratienal wisdem ef natienal peli-

cies in the ecenemic, menetary, and fiscal fields.

In this centext I sheuld like to' refer to' the measures taken by the United State Gevernment to' restere internal and external equilibrium. I appreciate the pelitical efferts to' reduce the def­icit in the U.S. federal budget. I hepe the results ef these efferts will be­ceme apparent in the near future. I appreciate that the U.S. Administra­tien in general has very firmly re­jected measures which might faver a revival ef pretectienist trends in the werld. Within the Eurepean Ecenemic Cemmunity I have advecated the sup­pert ef the United States in its sta­bilizatien pregram. On this initiative the Eurepean partners ef the United States have stated their readiness in principle to' accelerate en their side the tariff cuts ef the Kennedy Reund. I knew hew difficult it is fer the U.S. Gevernment to' fulfill in time the ex­pectatiens attached to' that prepesal. Nevertheless, we sheuld de every­thing to' prevent this preject frem fail­ing, fer it is an excellent example ef a pregressive selutien ef balance ef payments problems and ef interna­tienal selidarity.

An impertant step, I feel, has alsO' been made in the questien ef sterling liabilities. After the arrangements made during the last few weeks in Basle, we can new be cenfident that pessible changes in everseas sterling balances will nO' lenger cause dis­turbances. Mereever, the Basle agree­ment means an impertant medificatien ef the rele ef sterling as a reserve currency. This medificatien is in itself a new preef ef the flexibility O'f eur menetary system ....

... During these last weeks German ecenemic and menetary pelicy has again meved intO' the limelight and has beceme the subject ef seme speculatiens. Let me, therefore, say a few clarifying werds en the Federal Republic's pesitien:

1. SO' me peep Ie leek enly at the surplus in eur trade balance. This ise­lated view is wreng, fer eur surplus en trade acceunt has been very largely cempensated by capital meve­ments and ether net eutflews. Cense­quently eur fereign exchange reserves

have shown little increase. In other words we have provided other coun­tries with the capital and the liquidity required to finance their import needs.

2. Therefore, the German balance of payments as a whole is not in disequilibrium. During the first half of 1968, our basic balance was, in fact, in slight deficit; the third quarter seems to show the same picture.

3. Last year, the major part of Ger­man capital exports was of a short­term nature. This year the long-term capital exports of Germany are pre­dominant. They will reach an amount of DM 8 or 9 billion. As a result of this fundamental shift our balance of payments is now on a more solid basis.

4. We regard this long-term capital export as an important success of our policy. It was also the consequence of reducing German interest rates to a level which is low compared with other countries. Access to the German capital market for foreign borrowers is absolutely free. There is no restric­tion. The Federal Government has in fact encouraged the German com­mercial banks to float foreign loans in the Federal Republic. I think this is "good creditor policy."

5. To be a good creditor-that is also the rule for our policy at home. Our goal was full utilization of do­mestic capacities and the promotion of imports. Both fiscal and credit policy were directed to this aim. We have achieved this target. Since the recession of 1966-67 the German economy is on the track again with a full head of steam. Therefore, our propensity to import has increased. Economic grow1h this year will be more than 5Y2 per cent in real terms. At the same time we reached in these two years a very high degree of price stability.

6. In respect of this price stability we differ substantially from the de­velopment in some other countries. Our attitude on this subject is quite clear: no nation should be urged to accept unemployment as a means of restoring balance of payments equi­librium. But neither should any na­tion be forced to sacrifice its own price stability merely because other nations

are in an inflationary process. Anyway, we are not willing to do so. We have restored stability and growth in our country. Charity begins at home. Now we try to export stability and growth. That seems to me a better solution than being forced to import inflation.

High economic activity in the in­dustrialized countries is essential for the developing countries. In this con­text we are fully aware of the problem of the terms of trade for the develop­ing countries. Thus, we entirely under­stand the continued efforts to find a scheme for the stabilization of prices af primary products.

However, these questions are diffi­cult and complex. They require a dis­cussion in all respects. I know that for many developing countries the primary exparts constitute an essen­tial source of income. In the past, my country has cooperated in all ne­gotiations on commodity problems with much goodwill and readiness to compromise. We shall continue to do that in the future. Lasting solutions have to keep in line with market forces. The fixing of prices without regard to these forces would only favor the substitution of natural prod­ucts in the industrialized countries and the build-up of nonmarketable surpluses in the producer countries. International buffer stocks can be justified economically only if they serve to neutralize short-term fluctua­tions. Anything that goes beyond this would tend to perpetuate traditional structures of production and lead to misallocation of resources and that means retarding rather than promot­ing progress. How international mar­ket schemes and price regulations can disturb the international economy is demonstrated very clearly by some mistakes made in the agricultural schemes of the European Economic Community. The results are: growing overproduction, distortions in the price mechanism, Obstacles for struc­tural changes in home production, and damage to the agricultural ex­ports of third countries. We should have this example in mind when new international schemes for primary products are being discussed.

The best aid consists in expanding

the demand of the industrialized countries by a permanent policy of stable growth and by liberalization of imports.

But aid by trade is not enough. The capital needs of the developing countries must be met; that is the practical work done by the World Bank. In this field we need action and not only words. For example, at the beginning of the current year the in­dustrialized countries have managed to reach agreement on the replenish­ment of IDA funds. This would permit the increase of annual lending by 60 per cent. I am deeply disturbed that this agreement has not yet entered into force, and I ask all parties con­cerned to complete the IDA replenish­ment without any delay. Here is a practical test for solidarity. I am say­ing that to everybody to whom it may concern.

From President McNamara's illumi­nating address I have noted that the World Bank has been very successful in obtaining new funds. I may add: we in Germany have helped. I am satis­fied that the World Bank could raise funds totaling DM 920 million in Ger­many this year. Another DM 400 mil­lion is under discussion. That would mean a contribution of DM 1.3 bil­lion from the Federal Republic within a year. My country thus is making a very real effort to finance multilateral development aid.

The Federal Republic will go on playing its part in the international concert. In this way we will give con­tinued impulse to world trade and to substantial increases in the supply of world capital.

Growth and stability are our goals. Germany is pursuing this aim by a clear and courageous policy combin­ing the market economy system with a rational fiscal and monetary guid­ance.

This new economic policy might be uncomfortable for some vested inter­ests-at home and abroad. But we have to fight-and this is a permanent fight -against obsolete attitudes and pro­tectionism, indolence, and nationalism.

And we are quite sure a tacit alli­ance among the peoples is emerging:

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- an alliance of economic freedom and social welfare;

- an alliance of stability and growth;

- and an alliance of progress and prosperity for all people in "One World."

Ghana: A. A. Afrifa

Governor of the Bank

It is my great pleasure and honor to participate in this year's Annual Meetings. In particular, it is my pleas­ant duty to welcome on behalf of myself and my Government, Mr. Robert McNamara, the new President of the Bank. Mr. McNamara, as we all know, has had a distinguished career both as a businessman and as a public servant. True to 't)imself, Mr. McNamara has moved in at what is perhaps the most crucial moment in the history of the Bank. From what we know of Mr. McNamara, he has an unusual combination of pragmatism and sound technical knowledge, openmindedness and firmness of pur­pose. We are glad to find such a man to continue the task which Mr. George Woods has so ably perfo'rmed.

I join my colleagues in expressing my satisfaction at the reappointment of Mr. Schweitzer to a second term as Managing Director of the Fund. I congratulate Mr. Schweitzer person­ally and wish him further success in his work.

For Ghana the past year has been a period of relative stability in which some modest growth was recorded. As a result of the stabilization pro­gram, initiated in the first half of 1966 and continued through to June of this year, it has been possible to arrest inflation and to reduce the balance of payments deficit.

The economy also benefited from the improvement in the price of cocoa and from a relatively good harvest of domestic food crops. The effect of these factors has been the moderate easing of the external payments situation.

We ourselves recognize that much

still remains to be done. The stability in prices has been aChieved by effect­ing drastic cuts in our investment programs. As a result of the cutback in investment, the level of unemploy­ment is high. The price of cocoa, although reasonably firm now, con­tinues to be the most important factor of instability in the Ghanaian pay­ments situation. Debt servicing con­tinues to impinge upon resources available for investment to ensure future growth.

Our stabilization program has been a success so far, thanks to the co­operation between the Fund and Bank on one part and ourselves on the other. Stabilization as a policy has meaning to us only insofar as it per­mits us to re-check our bearings on the road toward economic develop­ment. Consequently, while we are committed to maintaining the gains realized during the stabilization pe­riod, my Government has, this year, introduced a Two-Year Development Plan which is designed to raise the level of investment in the country and to prepare the way for further sus­tained economic development.

The problems which have engaged the attention of the Fund and the Bank in recent years should be of concern to both developed and developing countries. I am referring particularly to fluctuations in the prices of primary products and the flow of aid to de­veloping countries. As regards the former, we note that the Fund and Bank staff are currently engaged in completing studies and in working out an acceptable scheme on Stabiliza­tion of Prices o,f Primary Products. Such a scheme in our opinion is long overdue. It has been our experience that violent fluctuations in prices of our exports have not only led to ad hoc measures which have threatened the promotion of orderly long-term trends in both supply and demand, but have also prejudiced the efficient long-term planning and allocation of resources. We do not think that this is a problem for us, the developiing countries alone. On the contrary, we feel that the developed countries also have a direct stake in the scheme since it will, among other things, as-

sure stable market conditions for both the exporting and importing coun­tries, and further the expansion of world trade.

It is the considered view of my delegation that the Fund and the Bank should be actively associated with the working out of the scheme. Without prejudging the final outcome of the proposal, however, I would like to say that my delegation is attracted to the idea of a buffer stock scheme for cer­tain commodities where the economic feasibility has been proved. We would also like to see the Fund and Bank make direct contributions of working capital to member countries to carry stocks. In this regard, I wish to record my delegation's reservations against the view that a member would have to show a balance of payments need before the Fund could make available the resources needed to finance the holding of stocks. The details of the scheme are still being formulated, but I must say that the broad principles are acceptable to us. We therefore find it difficult to understand the non­committal attitude of some developed countries to the proposals in spite of their numerous professions of sym­pathy and goodwill toward developing countries. I would urge these coun­tries to reconsider their attitudes and and lend support to these schemes which in our opinion are aimed at nothing more than an equitable allo­cation of resources among the rich and the poor countries.

This brings me to the question of the flow of capital to developing countries. As a result of recent de­velopments in the world trade and payments situation, the flow of both private and official capital from the developed to the developing countries is not likely to show much increase in the near future. Indeed, there are indication,s that it may well decrease. Moreover, unless definite steps are taken to reverse the trend, the terms on which capital is made available to developing countries will continue to impose hardship on their balance of payments and eventually lead to very little net inflow, possibly outflow of capital.

It is against this background that

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we welcome the steps which are now being taken to increase IDA's re­sources. We support the continued strengthening of this organization in the hope that this will enable it to expand its operations. In addition to this, the new measures being taken to expand the Bank's resources and the new attempts by the Bank to move into new areas of lending in developing countries, particularly in Africa, as outlined by Mr. McNamara in his inspiring opening statement, are of great interest to us. These mea­sures, if pursued, will go a long way toward solving the problems of the shortage of capital, and help promote the objectives of the Bank among the developing countries.

One area of concern to us in Ghana is, and has always been, the attitude of the IFC whose policies continue to ignore the facts of life in develop­ing countries. The reluctance of the IFC to lend to state enterprises or state-owned development finance in­stitutions is a case in point. Several developing countries have had to have state enterprises for various reasons. This need not necessarily be inter­preted in terms of ideologies or po­litical policies. In several cases the establishment of these enterprises as state organizations has been based largely on pragmatic grounds. It is true that the IFC's Articles do not permit lending to such institutions, but this would mean that several de­veloping countries will benefit very little from their membership in this organization. Alternatively, since most of the bankable projects in the private sector in developing countries are owned by non-nationals, any assis­tance on this basis is only of limited benefit to the receiving country. My delegation, therefore, feels that this policy should be reviewed as soon as possible to permit IFC lending to state enterprises, mixed enterprises, and to development finance institutions in which government by virtue of the local environment must have shares.

Before concluding, I wish to thank both the Fund and the Bank for the assistance which my Government has received from them in the past year. The staffs of both institutions have

cooperated very well with our officials. I would like, on behalf of myself and of my Government, to express my appreciation for this cooperation.

Greece: John Rodinos-Orlandos

Governor of the Bank

It is a great pleasure and an honor to participate in the Annual Meeting of the International Bank for Recon­struction and Development and its affiliates, and I wish to take this op­portunity to thank our American hosts most warmly for the generous hospi­tality they are extending to us in their beautiful capital.

Having followed with great attention the opening address of the Bank's President, outlining his basic ideas and his proposed course of action, I am most impressed with his grasp of the main problems and with his cour­age in facing them. The discussion that has followed shows how wide­spread is the feeling of urgency and the faith in Mr. McNamara's inspired and bold leadership.

However, the World Bank can only be successful in carrying out this imaginative and far-reaching program, if all of us understand that we are equally responsible for its realization, rich and poor countries alike. Mr. McNamara has spoken about the vast potential of the economies of the in­dustrial nations which he intends to mobilize and put at the disposal of the areas in need. But it is also up to the other part of the world, the less developed countries, and those in an intermediary stage of develop­ment, to create the necessary condi­tions and environment to receive this assistance and utilize it effectively.

And here lies a big question re­garding our readiness to look at our problems as part of those of the rest of the world, our readiness to put aside certain old habits and preju­dices or small objectives and particu­lar interests, that perhaps made sense one or two decades ago but have now become obsolete. Referring to this

problem, the President of the Bank has mentioned the mismanagement of economies, the unproductive diver­sion of resources and the old social systems.

But there is also the question of our attitude toward international eco­nomic cooperation, including invest­ment from abroad and foreign tech­nical assistance. We must realize that foreign investment is an absolute must if the less developed nations are to lift themselves to higher levels of income and employment.

The experience of nations like ours can be very useful in a more general way and I would like to make the fol­lowing suggestion: Perhaps the coun­tries in the intermediate levels of eco­nomic development could make an effective contribution as links in the vast process that is ahead of us of transfer of capital and skills from the developed to the less developed nations.

These countries are still too near the past to forget the material and human problems involved and can, therefore, be more understanding and patient. At the same time they are obviously beyond the suspicion that their pres­ence and activities can lead to politi­cal influence or economic exploita­tion. It may be Llseful that the Com­mission on International Development headed by Mr. Lester Pearson also include in its studies the possibilities of utilizing in this context countries in the intermediate stage of economic development.

In these critical times, it is most in­spiring to listen to the new leadership of the World Bank. Its contribution in the years ahead will no doubt be de­cisive, but its success will depend largely on the cooperation it will get from all its member countries, small or large, rich or poor.

As outlined, the new policy of the World Bank Group points to an era in which economic development of the less developed countries could be the prevailing element in world economic affairs. Such a challenge, if accepted by the advanced nations, would give a tremendous impetus to their own economic growth. A close study of the figures of world trade clearly

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shows such an interdependence. Bold initiatives taken by the World Bank Group would tend to make these in­stitutions function as catalysts for higher rates of growth and welfare in all countries. My Government en­dorses with enthusiasm this new course and will contribute to its success.

Guyana: P. A. Reid

Governor of the Bank

I am not sure that I can find my way in the maze of complex and ab­struse economic jargon which econo­mists use to chart what is happening in the world, but one salient fact stands out. Our world----yours ,and mine--is faced wHh practical prob­lems that must be tackled, not by moral support alone, but by deeds. This is the challenge which confronts us today in the International Bank for Reconstruction and Development and the International Monetary Fund. It is comforting that we have men with the drive, courage, and capacity of Mr. McNamara and Mr. Schweitzer to meet that challenge.

Being a very simple man, I incline to view the prospect before us in simpler terms, in terms of human needs and aspirations, for it is the human element that is ultimately important.

The problem which I propose to discuss is primarily a problem of de­veloping countries, but, in the modern context of trade and commerce, of rapid transportation and easy com­munication between nations, it be­comes a problem of the whole world.

The problem that faces developing countries is that of expanding their capacity to produce so that their citi­zens may enjoy a better level of living. In most cases they are not deficient in potential human and natural re­sources, but need capital, technology, and drive to develop these resources.

The peoples of these countries as­pire to do this. They are conscious that startling technological develop-

ments are taking place which are radically extending the productivity horizons of the world. New methods of agriculture multiply the capacity of the land to produce. Every day, new uses are found for materials which were previously counted as waste. These new techniques, if applied to the resources of the developing coun­tries, could work a startling trans­formation in their levels of living.

But these countries find that what they can do is limited. The stark fact of their low income and rudimentary development makes their savings in­sufficient for the capital needs of even a moderate rate of growth.

Their resources of technology and motivation are even more limited, by reason of the absence of a sufficiently high level of education, research, and business experience. It therefore means that, to promote its develop­ment, a developing country must im­port from abroad a large part of its capital, technology, and business drive. These are hard to come by. Private foreign investment capital has tended to flow more toward indus­trialized economies with established home markets. Loan and grant capital from governments or international or­ganizations in most cases lack the in­dividual motivation which insures proper business drive. Much of the capital is needed for infrastructural development, and the terms need to be liberal to provide for a long period of fruition.

Ultimately, the loans must be repaid from increased production. Repay­ment poses balance of payments problems for an economy which is dependent on one or two export crops, subject to unstable world prices, and which is in some cases choked off, by various measures, from overseas developed markets. All these factors underline the prob­lem of a developing country in achieving an adequate rate of eco­nomic growth.

This is the standard pattern of the economy of a developing country. This underlines the haunting contrast in the world today. On the one hand, there is a vast improvement in tech­nOlogy, in the possibility of providing

the good things of life, in the aware­ness of the world that these prospects exist; on the other hand, the frustrat­ing failure to put these improvements and these prospects to full use, be­cause of the way access to capital and knowledge is organized.

I, therefore, welcome the appoint­ment of the Commission headed by Mr. Pearson, that distinguished states­man, to study past aid efforts with a view to greater effectiveness in the future. The conditions for a peaceful and prosperous world community rely on the recognition that the world is a single community, in which all can enjoy to the fullest the wonderful fruits of modern living only if the tension arising from disparities in the develop­ment is resolved.

I cannot tell the Commission how to do its business but I hope and expect it will wish to see the opera­tion of aid in practice. I should be happy to welcome the Commission to Guyana to see for itself how aid contributes to the well-being of the country; what a powerful combination for development has been built up be­tween the aid given by the donors and the self-help labor freely donated by local communities. In this area of organized community effort develop­ment aid can contribute much and is my country's grand experiment in ac­celerating development.

The work of the committee which has been studying the question of stabilization of prices of primary products is also of prime importance. We should all support the initiative taken by certain Governors, prin­cipally from the African territories, to urge that the second part of the report be speedily submitted, with concrete proposals for improvement.

I was heartened, too, to hear the President's avowed intention of in­creasing the scope of lending over the next five years. There is so much need for this. Private investment, which could augment the funds avail­able for development finance in the developing territories, tends to show a preference for stable, well-devel­oped industries in industrial countries where markets are less uncertain. De­veloping countries are in a state of

transition and this makes industrialists more cautious. The establishment of the International Centre for Settlement of Investment Disputes, to the extent that it makes the climate of invest­ment more stable, will make a vital contribution to the efficacy of de­velopment finance.

Against this encouraging picture of increased activity at the Bank, we must set the discouraging prospect in relation to the replenishment of IDA resources. The delay in this has been a source of keen disappoint­ment to all developing territories. I hope that this matter will soon be resolved. Meanwhile, Guyana heartily endorses the Amendment to the Fund resolution on distribution of income which has been put forward by several African nations, to the effect that coun­tries should give consideration to allo­cating this income to IDA .... ... Before I resume my seat it is

fitting that I join in the general tribute to Mr. Woods, who has served the Bank so assiduously. Addressing last year's meeting he quoted a Chinese proverb, that a journey of a thousand miles must begin with one step. The step has been taken. The journey has begun. But, unless momentum is maintained, the road stretches in­terminably before us.

I should like to see some land­marks behind us. If we can pass the landmark of the IDA replenishment, the landmark of price stabilization of primary products, the landmark of spe­cial drawing rights, we shall have the feeling that we are making progress, and have visible proof that the journey is worthwhile.

India: Morarji R. Desai

Governor of the Bank and Fund

Mr. Chairman, may I first of all con­gratulate you, Sir, on the very thought­ful address with which you have sum­moned us to our task at this meeting of the Fund and the Bank. My delega­tion is particularly happy that the honor of guiding our deliberations

this year should go to a distinguished representative of a neighboring coun­try with which our ties have been the friendliest for many centuries.

We are happy also that the steward­ship of the Fund will remain in the trusted hands of Mr. Schweitzer for another term of five years. For the Bank family of institutions, we have now a highly respected new Presi­dent whose energy and idealism are matched only by the enormity of the task he has chosen to make his own. I hope it is some comfort for Mr. McNamara to know that we, in the de­veloping world, welcome him warmly as a comrade-in-arms in our orderly and peaceful assault on the poverty and want of our people.

It is an index of our times that there should be so much talk of despair and disappointment at the end of a period which has witnessed a more dramatic improvement in the human condition everywhere than in any other comparable period in history. It is equally a commentary on the current climate of expectations that we should be wondering about the performance and future of foreign aid when a generation which turned the concept of international economic co­operation into reality for the first time in human history is yielding place to another which rebels against the very inheritance of affluence. Can we then explain our present predicament by the failure to master the arithmetic of accumulation or the calculus of re­distributed welfare? Or is it the fail­ure to comprehend and discipline and organize the surging emotions and aspirations of an awakened people that really makes for the complexity of our task? I for one believe that as we assess and reassess the tasks before our institutions, we shall have to bear in mind constantly our ulti­mate point of concern and impact­the hearts and minds of millions of men and women. That is why I was particu­larly happy to note in Mr. McNamara's statement a desire to take the work of the Bank to as many countries as pos­sible and to areas of activity such as education and family planning, whose significance transcends the realm of per capita incomes.

We welcome Mr. McNamara's plans to greatly accelerate and diversify the work of the Bank; and we know that the desire for diversity will not put size at a discount as has often been the case so far. We know also that in exploiting the capital markets of the world, Mr. McNamara does not pro­pose to forsake his claims on the treasuries and finance ministries of the affluent one-third of our member­ship. For us in India it is a matter of deep disappointment that the sec­ond replenishment of IDA should not materialize, even 15 months after the termination of the period for which the first replenishment was intended. We are, therefore, particularly pleased that President Johnson reit­erated in his address to us yesterday that he places the highest priority on the second replenishment's becoming effective at the earliest possible date. Meanwhile, appropriate steps will have to be taken to minimize the damage that has already occurred­not only to the developing countries to whom IDA assistance has been promised, but also to confidence in the ability of international institutions to render their tasks in a continuing and steady manner.

We are happy that the Bank man­agement and the Executive Directors are making a thorough review of poli­cies and have affirmed unequivocally their intention to use the limited re­sources available in the Bank and the IDA at present to carryon as far as possible with the lending programs which would have been undertaken if IDA replenishment were available in time. The Executive Directors have al­ready laid down useful guidelines on a number of important issues, such as financing of local costs. I could per­haps refer here to one or two general issues which are yet to be fully de­bated and settled.

In my judgment, the Bank and the IDA should have no presumption in favor of an approach which may com­pel developing countries to go in for major projects entailing sizable im­ports of machinery and equipment in order to be eligible for their financing. On the contrary, developing countries should be encouraged to pursue pro-

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grams which are less spectacular but which may well make a far greater contribution to the prosperity and well-being of their people. Time and again, it has been pointed out in the Bank, and' also in respected academic circles, that there is absolutely no rea­son why project assistance should be preferred to non project assistance. And yet, the impression persists that somehow nonproject assistance is merely balance of payments support which is not the responsibility of the Bank or the IDA, which should con­fine their attention only to financing of projects. Indeed, the distinction is sometime sought to be created that, whereas it may be all right for IDA to give non project assistance, it would somehow not be proper for the World Bank to do the same. I wish to urge most strongly that this kind of artificial distinction between what the Bank should do and what the IDA should do, and between one kind of assis­tance and another kind of assistance, is not only wrong in theory but also harmful in practice. When the mUlti­lateral institutions give priority to project as against non project assis­tance, one implication of it is that the exports of the developed countries re­ceive a stimulus whereas the develop­ing countries by and large are unable to share in the process. If assistance is available for buying only capital goods and not for buying copper or rubber or sulphur or rock phosphate, the export interests of the developing countries inevitably suffer. There are also some countries, including mine, which have developed considerable capability for the production of capital goods though they do have to import components and spares. If external assistance is available for financing complete equipment but not for fi­nancing raw materials, spares, or components, a country may well find that it has foreign exchange to import a complete plant but not the much smaller amount needed to produce the plant with imported spares and components. Such a policy would clearly retard our efforts toward self­reliance; and I think that the time has come when this issue of project versus non project assistance should

be thoroughly thrashed out and re­solved-if necessary, with expert ad­vice and opinion.

At the UNCTAD Conference and in many other forums, it has been rec­ognized that if the developing coun­tries which have been left behind in the race are to be enabled to develop their technical competence and eco­nomic capability, they should receive a preferential treatment in the matter of trade. This is a prinCiple which needs to be translated more effec­tively in the procurement policies of the Bank and IDA. Similarly, at a time when the total funds available to the Bank and IDA are extremely limited, we should welcome the fact that some countries at any rate are in a position to dispense with imported equipment to a substantial extent and would be prepared to keep these items outside the scope of Bank or IDA finance. I am well aware that the procurement for any Bank or IDA fi­nanced project should be such as not to upset the viability or the economic efficiency of the project concerned. There is, however, also the larger consideration that it is not the viability of a particular project only, but the whole process of acquiring technical competence and experence that ulti­mately makes for the viability of the country as a whole and for greater self-reliance. It is also our experience that excessive and continuing re­liance on foreign consultants, who are often ignorant of the domestic potential that has been built up, re­sults in encouraging imports from the developed countries rather than strengthening the capabilities of the developing countries themselves. In short, there is a real danger that, unless we look critically at our pres­ent procurement policies, the opera­tions of the Bank and the IDA are likely to jeopardize at least in some cases the process of self-sustained growth.

When the quantum of aid is as in­adequate as it is today, it is all the more incumbent on us to increase its effectiveness by a more pragmatic attitude to questions such as procure­ment policy or program versus project assistance. This is hardly the time to

retreat behind rigid principles or dis­tinctions which cannot, in the nature of things, be universally valid. It is only with considerable flexibility and imagination that the Bank and the IDA will be able to play at least a limited role in the coming crucial months.

We in India are making every effort to develop exports of our newer manufactures such as iron and steel and a large variety of capital goods and engineering products to both de­veloped and developing countries. But our efforts in this direction are often inhibited by our inability to grant tied credits comparable to those offered by more advanced countries. Once again, if we are to be assisted in our efforts to be self-reliant, this particular dis­ability must be removed by appro­priate international action. And I hope that the Bank and the Fund will study actively and constructively the ques­tion of creating some rediscount fa­cility for the export credits granted by developing countries as recom­mended by the second UNCTAD .... ... Our experience with the sec­

ond replenishment of IDA also raises the question whether the present pro­cedures for putting IDA in funds are such as to give us any sense of as­surance of continuity in its operations. When the SDR scheme was being dis­cussed, many people felt that there was a logical connection between the creation of international liquidity and the provision of development finance. In order to facilitate an agreement on the crea1ion of international liquid­ity which was urgently needed, we did not press our plea in this regard. But I cannot help feeling that our experi­ence with the second replenishment of IDA makes it necessary to consider seriously whether the industrially ad­vanced countries should not use a part of the liquidity created on their behalf for adding to the funds of the institu­tions responsible for development. A great deal of expert opinion favors such an idea; and I, for one, appre­hend that unless we try to give it some concrete shape at least before the third replenishment of IDA, our pres­ent predicament may prove anything but temporary.

On international commodity prob­lems we have yet to find even a satisfactory framework for an answer. If we are to tackle seriously the problems of fluctuations in commodity prices and of secular declines in the prices of primary products, we may have to think in due course of solu­tions beyond the present framework of our two institutions. But it is not necessary to wait till we have evolved totally satisfactory as well as accept­able solutions to this urgent but com­plex problem. I hope the studies now under way are directed toward solu­tions which could be implemented without any undue delay and which can pave the way for further prog­ress in this vital field.

In conclusion, I would like to make it clear that if I have spoken at length on some matters of concern to us, it is not because we do not appreciate the considerable contribu­tion that is being made even today by the more advanced countries to the development of countries like mine. Contrary to the general impres­sion and the evidence of statistics, which in the nature of things are im­perfect, the record of achievements in many developing countries over the past 10 or 15 years is truly creditable; and foreign aid has played a valuable part in the progress we have made in agriculture and industry, technical edu­cation and health, and in building the infrastructure of power, transport, and communications. I, for one, do not feel that we have any right to demand as­sistance from others or to complain if this assistance is not forthcoming in the amount or in the manner which our needs might justify. But whether inter­national aid continues to be available or not, the aspirations of the people in the poorer two-thirds of the world will not remain unsatisfied for long. If I may quote the words of the Sec­retary-General of the United Nations at the UNCTAD Conference in New Delhi early this year: "The real ques­tion is not whether development will occur but how it will occur and within what international framework. Do we envisage a framework of international cooperation or a framework in which the developing countries are forced

back largely upon their own re­sources and are compelled to take the political and economic steps re­quired for an autarkic pattern of de­velopment? . . . That is the question to which the whole world expects an answer."

We have every hope that the Com­mission under the Chairmanship of Mr. Pearson, one of the most esteemed leaders of our time, will help in getting this question an­swered in the right manner. I am not very fond of expressions such as the Grand Assize. What we need, above everything else, is a revival of faith and fellow-feeling, a will to wield the means which are available in abun­dant measure, and a determination to solve our formidable problems with­out rancor and recriminations over the recent past and without being dis­heartened by the failures and disap­pointments which may still be in store during the most demanding decade that lies ahead for all of us, whether from the East or the West, North or South, rich or poor.

Indonesia: Ali Wardhana

Governor of the Bank

The excellent Annual Reports of both the Bank and the Fund, further commented upon by you, Mr. Chair­man, in your illuminating opening ad­dress, and by the President of the Bank and the Managing DireC'tor of the Fund in their informative statements, are like mirrors in which the events of last year are clearly and vividly reflected. The year under review was a dramatic year, highlighted by the devaluation of the pound on November 18, 1967, by the introduction of a two­price system for gold a few months later, by rising rates of interest do­mestically and in the international capital markets, and, finally, by a downward development of economic activities in the highly developed countries. Fortunately, some recovery could be noted in the latter part of 1967, when developed countries

started to resume their previous rate of growth.

We in the developing countries knew how much our economy would suffer and did suffer from the events in the developed countries. The back­lash was felt in a decrease of de­mand from industrialized countries, which, according to the Fund's Re­port, are taking about 70 per cent of our exports. Eventually, again ac­cording to the Fund, the total output of primary producing countries ex­panded approximately 4 to 4 V2 per cent, which, with the population in­crease, left only a meager margin for the per capita growth.

While witnessing the many events taking place in the centers of mone­tary and economic activity, many of us were desirous of a somewhat more active participation in the efforts made on the solution of the prob­lems. We are, after all, not spectators only, but participants as well, and in our way our stake in the well-being of the world is as great as that of the others. Some of the measures taken by the industrialized countries had an adverse effect on us, al­though, of course, the improvement sought by them ran parallel with the interests of the developing countries. A more active involvement in the relevant discussions would have given us comfort and perhaps a greater preparedness. This is, of course, not a claim but a wish! ...

. . . In 1960 the United Nations made a moving appeal to developed countries to devote 1 per cent of their national income to the economic de­velopment of the retarded regions of the world. Raul Prebisch of UNCTAD estimated that the larger developed countries, so far, contributed only 0.6 per cent of their national income.' However, it would be incorrect and un­fair to consider the shortage of capital the sole factor in the sluggish growth of the developing countries. With a more efficient administration, greater discipline, sharper awareness regard­ing the dangers of inflation, more ade­quate priorities and project prepara-

, Statement by Dr. Raul Prebisch at the Ministerial Meeting of the Group of 77, Algiers, October 13,

1967. (Doc. MM 77/1/8, p. 4.)

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46

tion, a more effective coordination and better use of aid, we could and should have performed better, even on the basis of the available means. But it remains a fact that the supply of capi­tal is an important factor in the pur­suit of economic growth. It is testi­mony of the Bank's imaginative policy that, in spite of difficult con­ditions in the capital markets, it suc­ceeded in raising sUbstantial loans. The Bank is faced with the enormous growth needs of developing coun­tries. In the part of the study on the instability of export markets, certain recommendations regarding buffer stocks, diversification programs and the improvement of the competitive position of primary products, were made which, if implemented, would re­quire more capital. It must be con­sidered unfortunate that, on the other hand. member governments have not been able, so far, to replenish the Bank's IDA funds. The same applies to the so-called Special Funds of the Asian Development Bank. It is of the utmost importance that both IDA and the Special Funds of the ADB should be given the necessary means for their concessional loan operations. In this connection, although we will go along with the majority, we wonder if an alternative use of the Fund's net income, other than the proposed distribution among eligible members, would not have been more in line with the needs of our time.

Under the circumstances referred to, my country is extremely grateful for the Bank's decision to extend an IDA loan of US$5 million, the first given by the World Bank group to us. We are also thankful for the Bank's willingness to send a resident repre­sentative to Indonesia who, together with a broadly qualified team of ex­perts, is going to help us with much needed knoW-how and experience.

With the improvement of the bal­ance of payments position of many countries and the reversal of the downward trend of the business cycle since the latter part of 1967, public capital might become more available than last year. But still, so much more

, World Economic Survey, 1962. 1-The Developing Countries in World Trade, p. 111.

is needed and in fact available. I am alluding to another source of capital, namely, private capital. The share of private capital in the flow of total cap­ital flowing into developing countries is relatively small. At the beginning of the United Nations Decade, the United Nations estimated that only one-fifth of such capital emanated from private sources.' The present sit­uation is not much different. This in spite of the fact that many develop­ing countries have overcome their hesitancy to let private foreign capi­tal play a role in economic devel­opment. The reasons are obvious: the home market in developed coun­tries still requires capital in view of the growth of their economies and if some investors feel that the do­mestic market has become somewhat restrictive or uncomfortable or less profitable, markets in other developed countries are considered the best al­ternative field for investment activities.

On the other hand, private capital could play such an important role in the development of developing coun­tries. Mindful of this, the governments of some developed countries have provided investment guarantees to private investors wanting to operate in developing countries. Besides that, the Bank, through IFe and through the facility extended to participant members to serve as arbiter in cases of disputes regarding foreign invest­ments, is making its contribution also. But more efforts seemingly are neces­sary. Would not, for example, greater confidence be inspired if the Bank could extend the kind of investment guaranty now given by some govern­ments? For that purpose an invest­ment insurance facility on a world­wide scale would have to be created by the Bank. This is only an idea; the main thing is that the Bank could do some thinking on the matter of the mobilization of private capital for de­velopment purposes.

I have come to the end of my re­marks. I would like to congratulate the Bank and the Fund on their forti­tude in the midst of last year's vicis­situdes. My country is indebted to the Fund for its invaluable assistance, both technical and financial, given

with regard to our efforts to rid our economy of the burden of inflation inherited from the past. The Bank has now joined the Fund in this en­deavor and in particular in our en­deavor to further develop our econ­omy. We are hopeful that their joint efforts, together with our own, will eventually produce the stability and growth which have been set as my country's top priority. The Bank's attitude toward my country is a reflec­tion of the new policy charted by the Bank's new President. His policy statement made yesterday is a coura­geous and compassionate response to the challenge of stagnation and poverty in the larger part of the world.

Finally, it is our pleasure to thank most warmly our host, the Govern­ment of the United States, for the ex­cellent arrangements and splendid hospitality extended to and enjoyed by all of us.

Israel: David Horowitz

Governor of the Bank

This second half of the twentieth century may well prove to be the most momentous epoch in recorded his­tory. It is the first time in the annals of Man that modern technology and modern economics provide us with means and instruments for the aboli­tion of poverty and, consequently, for the elimination of ignorance and the alleviation of disease. This is not a Utopian dream. It is a practical ob­jective within our grasp, a vision which could become a reality.

The Gross National Product of the developed and underdeveloped parts of the world, taken together, has reached the stupendous sum of $3,000 billion a year and is rising at the im­pressive annual rate of about $150 billion.

A transformation is taking place in the productivity of modern economy: automation, computers and atomic energy are cases in point. In agricul­ture, the extensive use of fertilizers, the dramatic expansion of irrigated

areas, the Indus and Nile projects, and, last but not least, the introduc­tion of new crop varieties, sometimes doubling and trebling the yield of the soil-these amount to a veritable rev­olution and open up new vistas for the extinction of hunger and malnutrition.

The great discoveries of gas and oil added vastly to the power re­sources of the universe. The indus­trial exports of the underdeveloped to the developed nations more than doubled within a decade, and the pos­sibilities of further industrialization if, thanks to preferential tariffs, the mar­kets of the developed world become accessible to the underdeveloped na­tions, are practically boundless. The teeming millions of Asia, Latin Amer­ica and Africa, now underemployed, could be drawn into the orbit of mod­ern technological production and mul­tiply the wealth of the world.

New forces are being liberated all over the globe, and changing the image of economy and society.

Technically, the problems are being solved, as it were, on a laboratory scale. I should like to take the liberty of quoting the experience of my own country. Productivity in Israel's farm­ing, run predominantly by people who had never before pursued agricul­tural vocations, is today 10 times higher per person than in the under­developed nations and substantially higher than in most developed coun­tries. The yield per unit of production in dairy farming and cotton growing is the highest in the world. On one million acres, with only 12 per cent of the population engaged in farming, foodstuffs are produced for 85 per cent of the consumption of nearly three million, and, on top of that, farm produce to a value of $150 million is shipped or flows from the same tiny area to overseas markets. The worth of the total output by a relatively small number of farmers is over half a bil­lion dollars.

Everywhere on earth new prospects come to light, and it seems that the sky is the limit.

The actualities of present condi­tions are, however, in stark contrast to this anticipation.

According to the important state-

ment made by the President of the World Bank,

"The average annual per capita in­come in some 40 of the world's poorest countries is roughly $120. That is less than 35¢ a day. The annual per capita income in the United States is nearly $3,000. That is about $8.00 a day. That is more than a 2000 per cent differ­ence."

These are averages, between the ricksha-pulling coolie and a million­aire.

Unemployment and underemploy­ment are among the gravest problems confronting the underdeveloped world, and here the trend is one of steady aggravation. But the dynamics of the trend are a matter of even greater concern. Their cumulative ef­fect is adverse and far-reaching, fo­cusing on three points: demography, income and investment.

If present indications persist, dem­ographic projection envisages the doubling of the population of the world at the end of this century and a fundamental shift in its composition. Today, about two-thirds of it live in underdeveloped countries, but then it will be made up as to four-fifths in underdeveloped countries and as to one-fifth, only, in the developed and industrialized parts. A swing of such magnitude will have widespread re­percussions. The tendency for the Gross National Product to rise rapidly in the developed world will be un­checked, and it is estimated that it will come to $6,000 billion in the year 2000, against $1,600 billion now, while the economic growth of the un­derdeveloped nations will lag far be­hind. A handful of people on the one side will be faced by a mass of eco­nomically underdeveloped people on the other, with all the inherent eco­nomic, political and cultural dangers that the confrontation signifies. If, to­day, every citizen of an industrialized country is faced by two citizens in un­derdeveloped countries, at the end of this century he will have to take heed of his confrontation with four under­privileged inhabitants of those coun­tries. Thus, a relatively dwindling num-

ber of people controlling extensive productive capacity and high technol­ogy per person will be arrayed against a growing total of people fighting for their very existence under the mount­ing pressure of greater numbers upon restricted resources.

Of course, in such a development, the absolute level of consumption and demand counts not less than the rela­tive magnitudes.

Secondly, the gap in the growth of the real gross product between devel­oped and underdeveloped countries will widen.

In the years 1950-1966, the expan­sion of the Gross National Product in the underdeveloped world came to 4.5 per cent per annum but the popula­tion explosion reduced the per capita annual increment to no more than 2 per cent, while in the developed coun­tries of the West the over-all rise in the Product was 5 per cent per annum and per capita 3.6 per cent. The re­sultant extension of the gap WOUld, therefore, be speeded up enormously.

This climbing ratio in respect of the per capita Gross National Product must be viewed in its absolute terms if it is to be translated into human and not merely statistical notions.

A rise of 2 per cent per annum in the average income of about $100 per capita represents slightly more than one-half American cent per day per person and is the equivalent of, at most, one or two decent extra meals a year. This would affect only micro­scopically the appalling poverty that prevails among the underdeveloped nations. The basic fact abides that poverty there is not a pathological deviation from the normal and norma­tive but the ordinary circumstances and condition under which the over­whelming majority of the peoples of those nations are compelled to exist.

The main obstacle on the path to self-sustaining growth is capital. Most of the countries catalogued by the former President of the World Bank, Mr. Woods, as success stories in eco­nomic growth, are plain evidence that investment, although not the only con­dition, is one of the main precondi­tions of development. There is, how­ever, a large disparity in investment

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per head between the developed and the underdeveloped countries-of about 1 to 12.

The strangest of all justifications tor the laggard flow of capital to under­developed nations and of the unbal­anced investment ratio of 1 :12 per head is that the capital markets are tight. The money market will always be tight, as long as the curve of eco­nomic activity keeps rising; its tight­ness can only be relaxed under con­ditions of recession, which certainly is the least desirable and could hardly be considered as conducive to ex­pansion of economic assistance.

To make matters worse, if the flow of capital is not enlarged, a zero hour will strike some time in the 1970's, when repayment of debts plus inter­est due will become equal to the vol­ume of assistance to developing na­tions.

No wonder that, things being so, economic growth is arrested and a spirit of despair and despondency is abroad in the realm of economic assistance. Moreover, psychological conditions are worsening to an even grimmer extent. Unwarranted pessi­mism is being diffused as to the capa­bility of the underdeveloped countries to achieve swift economic progress. In spite of the fact that four-fifths of investment funds originate from capi­tal formation in those countries them­selves and not from capital trans­fers, the pedestrian approach to the export of capital to them is largely adopted.

The truth is that, within a decade, the share of the Gross National Prod­uct set aside as aid to underdevel­oped nations from the developed world fell from nearly one per cent to some half a per cent. Never before was there such a distance between opportunity and performance. It is, however, a man-made distance, and it becomes intolerable when viewed against the background of conviction that poverty is superfluous today, that the resources to wipe it out are poten­tially available.

The feeling of frustration is accen­tuated by the moral and intellectual motivations for transferring resources

from the developed to the underde­veloped world with the object of re­distributing them on a global scale and reorganizing the world's econ­omy, by the demonstrative effect of high standards of life in the West, and by a comparison with the scope of the Marshall Plan in relation to its pur­poses.

The technical processes for bring­ing about a change in this situation are not too complex, and the World Bank is the chosen agent for this mis­sion: to alter the shape of things to come and bridge the gulf between present fulfillment and future poten­tial.

It is obvious that grants alone will not do the job. Government grants, whose dimension should and can be enlarged in any case, as the Gross National Product of the developed na­tions grows by some $80 billion a year, should serve in the main for in­terest equalization to minimize the discrepancy between the commercial conditions under which capital can be obtained for the underdeveloped countries on the free markets of the world and the IDA conditions under which the poorest nations could use the capital placed at their disposal. It would be done by interest equaliza­tion and by a guarantee as supple­mentary collateral for countries of insufficient creditworthiness. These funds, established by cumUlative grants, would assure both the access of underdeveloped nations to the cap­ital markets on which some $30 bil­lion of fixed interest securities are floated every year, and the replenish­ment of IDA funds. Some suggestions in that direction were made in what has been termed the Horowitz Pro­posal. It is the same principle as that applied in a combustion engine where an ignition spark releases a vast mass of energy. In economics, it is the ap­plication of the multiplier.

It can hardly be maintained that the credit of the World Bank depends on a strict adherence to obsolete dogma. The record of the Bank is ex­cellent, and it procures capital on the strength of its own resources and the

backing of Governments and not by clinging to worn-out principles.

We all remember that it was fore­told, with a kind of Cassandra cer­tainty, that the credit of the Bank on the capital markets would be irrepar­ably demaged by the assignment of part of its profits to IDA. Such allo­cations have, however, been made several times, with no visible effect on the credit standing of the Bank.

But many countries are already sat­urated with commercial credit, and IDA-term credits are of crucial im­portance. The creation of new liquid­ity, the special drawing rights, should be linked with a diversion to devel­opment of part of the resources thus brought into being, dogmatic objec­tions notwithstanding.

If the governments of the world are not yet ready for a new departure, the World Bank should go it alone, by using the annual allocation from its profits to IDA for interest equalization and its strong capital structure as a guarantee to raise funds for IDA. It is, however, difficult to believe that some kind of guarantee, which would not require an immediate spending of funds, could not be obtained from the industrialized nations.

The President of the World Bank, Mr. McNamara, is to be congratu­lated on restoring the annual alloca­tion of $75 million to IDA, and on the expansionist and optimistic spirit re­flected in his new, recently adopted IDA lending program and in his speech in this meeting.

Thus, the combination of grants ju­diciously used, access to the capital market, and use of part of the special drawing rights for development through IDA, all with a view to promoting self­sustained growth in the underdevel­oped nations, would go a long way to filling the vacuum between the oppor­tunity for a new deal, between a mighty forward leap in the economy of the world, and current backwardness of performance, and would be in welcome harmony with the vision of New Eco­nomics and the guiding philosophy of humanism.

Italy: Emilio Colombo

Governor of the Fund

· .. One of the most significant ex­amples of monetary cooperation during the year has been the agreement for the creation of special drawing rights.

· .. The new facility, being the out­come of a very difficult compromise aimed at reaching a general con­sensus, is not perfect. The main defi­ciency, according to some, is the lack of a link between reserve creation and the provision of resources for de­velopment needs, a link which, on the contrary, exists in the present system. An improvement which could be care­fully studied and eventually made, without modifying the text of the Amendment, could consist of a pledge by the main industrial countries to use the part of their reserves corre­sponding to a portion of their special drawing rights allocations for the re­plenishment of IDA or for subscription to World Bank bonds ....

· .. The analysis of the present prob­lems, to which the Fund, the World Bank, and its associated Institutions are called upon to find a solution, would be incomplete if I did not men­tion the problem of the stabilization of prices of primary products-a sub­ject which is also on our agenda. The Italian Government, which has a di­rect experience with these problems due to the existence of underdevel­oped areas in Italy itself, has followed with great sympathy the problems of the developing countries. We are aware that even if a great deal has al­ready been done, even more remains to be done. The stabilization of prices of primary products has always met with the support of our country in the various forums where it has been de­bated. We hope that the Executive Di­rectors may be able not only to com­plete their mandate in the shortest possible time, but also to indicate the concrete feasible actions which the two Institutions may undertake for the solution of this problem. I should also add-and in this we see a serious and evident limitation-that especially for the Fund the action to be taken

should not go against the nature of the Institution itself and should be confined to an appropriate and safe use of its resources ....

. . . The existence of such limits makes us wonder if we should not ex­plore new ways of solving a problem which is of prime interest to both pro­ducing and consuming countries. These Institutions might consider in the future the possibility of creating, even in cooperation with other organ­izations having a similar interest, a specialized agency which would have the scope of coordinating, directing and fostering the necessary steps to be taken for the stabilization of prices of primary products .... ... I now wish to join wholeheart­

edly in praising President George Woods for the wisdom and energy applied to his difficult assignment. The new tasks that he has devised for the Bank from the beginning of his term and his unyielding insistence that the developing countries' problems be studied and solutions be found, will find impetus in the well-known and effi­cient leadership of President Robert McNamara. We wish him the best suc­cess in his endeavors.

Undoubtedly, international coopera­tion as expressed through the Bank and its affiliates has indeed scored sUbstantial success. However, it could be strengthened by a global review of the type of economic assistance pro­vided so far, as well as by the care­ful formulation of directives to be fol­lowed in the future, although we are of course aware of the difficulties ex­isting in this era of rapid technologi­cal change.

It is well to remember that the strategy of economic development re­lates not only to the availability of resources-and consequently to the duties of the more developed coun­tries. Of equal importance is the valid­ity of the goals underlying the eco­nomic programs of the developing countries. Particular attention must be given to the goals of efficient alloca­tion of resources, of making educa­tion and professional training truly ac­cessible and of eliminating privileges which are not consistent with today's social climate. In our opinion, equal

careful consideration should be given to the projection of future needs of material and human resources and their creation to achieve satisfactory development.

The acceleration of economic de­velopment is, indeed, the true social revolution of our times. It demands political awareness and commitment to diminish the differences presently existing among living standards of men. This is the historical challenge and opportunity of our times.

Jamaica: Edward Seaga

Governor of the Bank and Fund

May I first join with previous speakers in extending welcome to Mr. Robert McNamara as President of the World Bank. We could not fail to be im­pressed by the vigor and resolution Mr. McNamara indicated in his opening address to the Conference. We are particularly fortunate to have Mr. McNamara's leadership of the World Bank at this time, and we are heartened by the bold way in which he seeks to meet the challenges of development.

We meet this year at an important junction of past and future. We meet with the knowledge that two decades and more of aid programs have been completed; yet in the race between development and discontent, not a single country in the developing world has yet finished the course and reached the winner's circle to receive that distinctive award which marks the achievement of a country gradu­ating from the ranks to a rate of self­sustaining growth. If the aim of aid programs is to eliminate aid programs by graduating aid countries to self­supporting roles, then the first gradu­ate is yet to appear.

As the Governor for a country that is midway in the field of countries moving toward graduation, I believe we are well located in the stream of things to make some positive pro­posals which relate to this apparent lack of finality in achievement, not-

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withstanding the well-established suc­cesses already attained by many countries along the way.

I would like to set these proposals in the context of the establishment of a major evaluation exercise to be un­dertaken by the Grand Assize under the able leadership of Mr. Lester Pearson, and more so in the context of the welcome proposals for expan­sion in Bank lending to a doubling in the next five years, and the. direction of priorities to education and agricul­ture in which projects would be in­tensified.

In proposing these priorities, of course, the Bank is supporting the long-expressed view of developing countries that if development is to be really effective it must begin at the be­ginning and tackle those problems which have the widest base in the society.

Edueation and agriculture for coun­tries which are characteristically un­learned and rural are well chosen as the two priorities which will reach the base of society and its base problems. This identification of the real roots of development moves a step closer to a fundamental recognition that the eco­nomic problems of developing coun­tries are often more social in context than economic; often more a ques­tion, not of the machine, but the man behind the machine.

Both agriculture and education share the common problem of being largely a matter of training in and the mobilizing of human skills; skills of new techniques of husbandry to gain the most from the land and skills of learning to cope with the techniques of development.

But training and the yield from training are long-term matters; indeed very long-term, more so because of the sheer scope of the positive stance of the Bank to treble and quadruple involvement in education and agricul­ture.

As a consequence a real question poses itself in respect of these views for expansion. By the very long-term nature of the problem and the solu­tion, we must accept the fact that we are talking about long-term money, if we ourselves are to create bankable

and feasible projects which will of themselves generate the means for re­payment during the life of the project. Equally as important is the type of credit provided. Educational problems and the mobilization of agricultural growth on any major scale are essen­tially matters that span three decades of determined work and sustained planning and programming. If this is so, then the Bank must now ask it­self how can viability be maintained and projects generating their own re­payment be established at the current Bank rates of interest? There is un­doubtedly a limit to what can be done with 6% per cent, 15-year money avail­able to countries who are not IDA­eligible without a consequential run­down on the economy in drawing on other resources to meet repayments.

In the context of the Bank's more limited field of operation, which in the past was based principally in eco­nomic and economic infrastructure projects, the rate of interest and term of loans offered are understandable and indeed represent a helpful con­cession on commercial market terms. But the fundamental change of under­standing that is taking place in the concept of the real development roots, which has led the Bank firstly into the field of education and now into pro­jecting a major expansion in agricul­ture, both having yields only in the long term, must result correspond­ingly in a fundamental change in character of the loan terms in these two fields.

Therefore, we positively propose the opening of a "3 per cent win­dow" in the Bank with long-term cred­its from 30 to 50 years to meet the realities of the newer areas of em­phasis in Bank operations.

But because the Bank borrows on the open market at higher rates than 3 per cent and depends on these bor­rowings for its major resources, we must ask ourselves how we can achieve here the opposite of banking logic by borrowing high and lending low.

The answer does appear to be available to us despite the illogic of the situation, and I have two positive proposals to make in this regard.

Last year, and indeed the year be­fore, the Bank on its investments turned a net profit of $170 million. Be­fore us is a proposal to earmark $75 million of this amount for transfer to IDA in the replenishment of its re­sources.

Taking a cue from this proposal, I put forward the positive view that in addition to the $75 million of Bank profits earmarked for IDA replenish­ments, a further $75 million should be used with a matching amount of Bank borrowings at the usual borrow­ing rates to constitute a $150 million "3 per cent window."

Quite obviously, this amount will not be sufficient to meet the requirements of the expansion targets in education and agriculture in respect of those countries which are not eligible for IDA loans. On this thought, therefore, I make a second proposal by way of alternative to or in combination with the first.

The proposal has been made at this Joint Annual Meeting year after year by the Governor for Israel that loans at commercial rates should be interest-subsidized to reach the bor­rower at more concessional rates, which is precisely what we are now seeking in order to fund our "3 per cent window." This proposal we have always supported and suggest that in the context of a new need it should be given real consideration.

The statistics are interesting. As­suming the availability for use of only $75 million of Bank profits, this could service a reduction of interest rates of normal Bank funds from roughly 6 per cent to 3 per cent up to an amount of $2112 billion. The magnitude of this figure is realized when set alongside the fact that in this year the total loan commitments of the Bank was $800 million, that is, only one-third of the projected $2112 billion set out above.

Indeed, calculations will show that it is coincidental that whether the tar­get is to double over-all Bank lending over five years, or to triple educational and quadruple agricultural lendings in the same period, using as a base the current figures of this year for agri­cultural, educational and total lend­ing, the answer is the same in each

case: double the total current Bank program of $800 million per annum will exactly provide for the projected Bank targets of expansion in agricul­ture and education.

Using the interest-subsidy proposal this amount could be provided an­nually over five years, bearing in mind the compounding application of the subsidy each year, by a total deploy­ment of about $240 million, that is, averaging $48 million per annum from Bank profits.

Setting aside figures, the important point that must be accepted is that 61/2 per cent, 15-year funds cannot on a large scale finance agricultural and educational projects without impair­ing our economies and there is there­fore a real need for a "3 per cent win­dow" to meet the change in character of the Bank's challenging program.

I turn to a separate yet further im­portant point to which I referred at the outset.

It must be frustrating to donor coun­tries to watch the race for develop­ment as a seemingly unending spec­tacle. As I remarked earlier, there have been no final graduates in the exercise of aid programs, no country being now beyond the need of such help despite over two decades of work.

Yet some countries have made sig­nificant achievements in growth in this period, significant enough indeed that they have placed themselves beyond the scope of IDA, which restricts its assistance only to the poorest coun­tries. These "middle level countries," as I shall call them, form a significant bloc. They number 28 ' members of the Bank, that is, about one-fourth of the membership.

It is from this group that the quick­est successes of aid graduates will come. By and large, they have passed the halfway mark, yet they face a par­ticular problem in that their needs al­ways tend to be compared with the neediest, they are judged by the low­est common denominators in their wants, and, as can be expected in this exercise, often find their claims prejudiced.

But who has ever heard of a runner not needing real assistance in the sec-

ond half of a race? It is the last lap that seems longest and is hardest. Yet it is commonplace in the "middle level" group of countries for them to experience a reduction of interest in their problems from quarters from which assistance may be expected. This is truer of bilateral than of mul­tilateral programs, but I make the point in this forum because in the ex­pansion program of the Bank a major objective should be to seize the op­portunity to push some of the "middle level" group beyond the take-off stage. The real hope for this lies in the enlightened approach of the Bank; otherwise there may never be a real success story of self-support to tell in the coming generations of aide ....

Japan: Makoto Usami

Alternate Governor of the Bank and Fund

... It is also a great pleasure to express our warm welcome to Mr. McNamara, the new President of the World Bank and its affiliates. I look forward with confidence to seeing these institutions achieve higher standards of excellence in their activi­ties under the leadership of the new President. May I also take this op­portunity to pay my very sincere trib­ute to the former President, Mr. Woods, who worked so devotedly and effectively for the Bank Group. I should like also to pay high tribute to the comprehensive Annual Reports made by the Fund and the World Bank Group.

I do not know of a period of twelve months as important as the recent one in the history of international finance. Events following the devaluation of pound sterling last November put in­ternational financial cooperation to its severest test.

It also confirmed for us the impor­tance of discipline in implementing economic strategy, as well as of the necessity for international coopera­tion in the field of financial problems.

In such an international environ­ment, Japan had to deal with balance

of payments difficulties. Fortunately, however, the mixture of restrictive fiscal and monetary policies worked satisfactorily, while the climate of our overseas markets also turned favor­able. Recently our external account has been showing a remarkable im­provement, permitting the Bank of Japan to reduce its discount rate early last August.

We recognize clearly that the es­sential task for us is to try to build an economy capable of sustainable growth with stability. We are mindful, of course, that we should be as cau­tious as ever, abiding by the principle of discipline, in order to be able to cope with any developments in the future.

I think the international monetary developments during the past year gave us most valuable lessons for the understanding of the importance of in­ternational financial cooperation. And it is my sincere hope that, based upon the valuable experience gained in this period, international financial co­operation will be further strengthened and consolidated to evolve into a closer and more effective system in the future.

The fundamental cause of the dis­turbances in the international mone­tary system in the past year lies in the simultaneous weakening of the balance of payments in the two reserve currency countries. In order to restore confidence and to main­tain stability in the international mone­tary system, I believe it is essential that a substantial readjustment of the payments positions of the United States and the United Kingdom be achieved. However, it is becoming a matter of concern that the adjustment process, particularly in the United States, may have a dampening effect on the growth of the economy of the other developed countries as well as of the developing nations.

1 Countries with $250 per capita GNP and over, ex­cluding Part I members of I DA: countries receiving IDA credits in the past are indicated with an asterisk (*)

Argentina, Chile, * Colombia, * Costa Rica, Do­minican Republic, EI Salvador: Greece, Guate­mala, Iran, Iraq, Ireland, Israel, Jamaica, Lebanon, Libya, Malaysia, Mexico, Nicaragua: Panama, Peru, Portugal, Singapore, Spain, Trinidad and Tobago, Turkey: Uruguay, Venezuela, Yugoslavia.

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In order to forestall such undesir­able developments and to maintain sustainable growth of the world econ­omy, due consideration should be paid by the United States authorities to preventing their adjustment mea­sures from going too far. At the same time industrial countries in a com­fortable balance of payments and re­serve position would be expected to strengthen expansionary policies by positive utilization of their growth po­tential. In this regard, I look forward to further improvements in the work­ing of the adjustment process among the countries of the world ....

... Turning to the problem of sta­bilization of prices of primary prod­ucts, we have now before us Part I of a study prepared jointly by the staffs of the Fund and the Bank. I am very grateful to the staffs of both organiza­tions for their work. It is obvious that we cannot neglect a question of such importance. I hope that the Executive Directors and the staffs of both in­stitutions will continue their studies within the framework of the purposes of each institution and seek possible ways in which we might assist in find­ing feasible solutions to the problem. Therefore, I support the resolutions ....

. . . As to the Bank, since 1964 we have every year given our support to the proposal to make a transfer to IDA out of current net income of the Bank. The proposed resolution in this regard is also acceptable to us.

Next, I should like to touch upon matters relating to the economic de­velopment of the developing coun­tries. Needless to say this is one of the most important problems of the world economy today. It should be clearly recognized, however, that it is a kind of problem which can be dealt with only through the concerted efforts of both developing and devel­oped countries.

As I said before, today a slowdown in the world economy is becoming a matter of concern and, should the as­sistance from the developed indus­trial countries be somehow held down on account of their own economic dif­ficulties, it will give a negative mo­mentum to the already weakening trends of the world economy and

might well aggravate the whole pic­ture. On the part of the developed countries, therefore, it is their respon­sibility to contribute to the sustainable growth of the world economy by en­suring the flow of necessary re­sources to the developing countries.

There may well be balance of pay­ments, fiscal or other domestic dif­ficulties confronting the industrial countries, but it is evident that more has to be done to ensure the flow of economic assistance from those coun­tries in as much and in such way as their respective economic situations would permit.

Japan's contribution to economic assistance to the developing nations has been increasing steadily in re­cent years. In 1967, in spite of vari­ous internal difficulties, the flow of funds from Japan to those countries showed again a substantial increase, reaching a level more than 20 per cent higher than that of 1966, or about 2.5 times that of 1963.

In addition to the substantial in­crease in volume of aid as I just men­tioned, we have taken measures to improve the terms of our economic cooperation. I can assure you that it will continue to be the policy of our Government to make utmost efforts to the extent possible in contributing to secure the flow of resources needed by the developing countries.

It has been pointed out that in order to maximize the effect of external as­sistance to the developing countries, it is of vital importance that positive efforts be directed within those coun­tries toward the attainment of ap­propriate economic as well as social objectives such as, among others, bet­ter utilization of their own domestic resources, improvement of education and a more effective population pol­icy.

From this standpoint, I welcome the recent move of the Bank Group to adopt positive measures to study and to select suitable projects in the aid­receiving countries. I highly commend the standing technical mission to In­donesia for the promotion of eco­nomic stabilization.

I am pleased to learn that the Pear­son Commission now being estab-

lished will make a review of the im­pact of past external assistance on the development of nations and, with such practical lessons before them, will then consider appropriate meth­ods and orders of magnitude of eco­nomic assistance which appear to be needed over the next decade. This is, I believe, a very timely study and I look forward to this Commission pro­ducing the most illuminating reports on the problem.

In the wide-ranging activities of the Bank Group in the field of economic development, the role of IDA is of par­ticular importance and the replenish­ment of IDA funds is an urgent prob­lem before us. I would stress the need for early implementation of the recent resolution for the second IDA replen­ishment.

As regards IDA, I welcome the re­cent adoption of lending policies, which, among others, aim at a broader geographical distribution of its cred­its. IDA is entrusted with the impor­tant task of assisting economic de­velopment in the less developed area of the world from a global standpoint. I hope IDA loans would be allocated on a broader and more reasonable basis and more countries would bene­fit by effective utilization of IDA funds .

Finally, I should like to say some words about the Asian Development Bank which was established in the spirit of the self-dependence and joint responsibility of the Asian peo­ple. Since its inauguration in 1966 the Asian Development Bank laid empha­sis in its activities on basic and tech­nical research as well as on technical assistance for economic development. I believe it was a reasonable ap­proach to make in the light of the va­riety of economic difficulties fac­ing the Asian nations. It is indeed my personal pleasure to see that the Asian Development Bank has already accomplished much good work in these fields and is making steady progress in its contribution toward the development of Asia. The Asian De­velopment Bank will, with the benefit of its past experience, soon enter the phase of full-fledged activity of de­velopment finance.

Considering the needs for eco-

.1

nomic development of the Asian coun­tries particularly for strengthening their basic economic structure, I think much is to be expected of the role of a Special Fund to provide loans on a concessional basis.

In view of the particular importance and the urgency of agricultural devel­opment in Asia we have already pro­vided in this fiscal year the amount of yen 7.2 billion-equivalent to US$20 million-to be contributed shortly to the Special Fund of the Asian Devel­opment Bank. I hope that other de­veloped nations will respond to the expectations of Asian countries by contributing also to this Special Fund.

To conclude my speech, I would repeat that we in Japan look forward to better fulfillment of the respective functions of the Fund and the Bank Group and to their support for the sus­tained growth of the world economy.

Kenya: J. N. Michuki

Alternate Governor of the Bank

Mr. Chairman, firstly, I would like to join our Governors in welcoming Mr. McNamara as the President of the World Bank Group, and to con­gratulate Mr. Schweitzer for his reap­pointment as Managing Director of the IMF. I would also like to pay tribute to Mr. George Woods for his very dedi­cated service to the Bank and mem­ber countries, and to wish him, on behalf of my country, a happy future.

A good deal has happened since last year's Annual Meeting of the World Bank Group, and although the picture is not an entirely favorable one, there has been an encouraging amount of progress on a number of matters of great importance to devel­oping countries. On several issues which have been raised at Annual Meetings, stretching back over a num­ber of years, by many developing countries, including ourselves, the thinking of the World Bank appears, to judge from its Annual Report and from the papers we receive periodically

from our Executive Director, to have undergone a certain amount of evolu­tion; and this we welcome.

We welcome, for example, the greater emphasis which is now being put by the Bank and IDA on assis­tance with project identification and analysis-a need which was stressed by Kenya at last year's Meeting. We also welcome the special section which has now been established in the Bank to deal with the problem of promoting tourism in developing countries. The need for help in this sector was something we stressed in 1966 and this latest move, combined with the assistance we have been re­ceiving from the IFC in building up tourist facilities, is very encouraging to us.

We also welcome the increasing emphasis being put by the World Bank Group on agriculture and on education since these are two criti­cal areas for economic development, but areas which have often been ne­glected in the past because they do not, on the whole, consist of large easily identifiable projects in need of substantial imports of capital equip­ment and machinery from the indus­trialized countries, but rather of a whole series of diffused problems dif­ficult to identify, difficult to come to grips with, and difficult to control and supervise.

This greater emphasis on agricul­ture and education immediately raises the problem of the financing of local costs. The developing countries have as a group been stressing for a considerable time the need for donor agencies and donor countries to finance a proportion of the local costs of a project, and not to confine themselves to the direct foreign ex­change costs alone, which are nearly always substantially less than the ul­timate foreign exchange costs in­curred as a result of executing the project. We were, therefore, very glad to see the interesting paper on this subject prepared by the Bank staff and circulated by the President on July 30, 1968. If the recommendations contained in that paper are accepted, we understand that the Bank Group will be somewhat more prepared than

it has been in the past, not only to finance the local expenditure equiv­alent of indirect foreign exchange costs than can be clearly identified, but also to provide foreign exchange over and above the direct require­ments in cases where these are either small or uncertain. We understand also that if it becomes clear that in a country with a sound develop­ment program which is being sensibly carried out, the program is jeopar­dized by an over-all shortage of for­eign exchange, the Bank will be pre­pared to finance the local costs of projects agreed to be of high priority. This shift of emphasis will, I am sure, be of great help to the developing countries, and I would hope that it will be followed in due course by in­dividual donor countries in regard to the conditions on whi'ch they make bilateral aid available, since it is still too often the case that offers of aid from some countries cannot be ac­cepted because they make no provi­sion for the ultimate foreign exchange costs the project may burden us with. It is, therefore, appropriate to men­tion here, firstly, that conditions at­tached to development aid by some donor countries make it almost, if not completely impossible for the aid to be utilized, and, secondly, that devel­opment aid offered by such countries should be viewed, not against its mag­nitude, but against such conditions. It is difficult to escape the conclusion that the donor countries involved are normally fully aware, long before they make the offer, that their aid would not be drawn upon. I hope, however, that we in the developing countries will not be accused of looking a gift horse in the mouth as a result of these remarks.

Another change in emphasis which we were glad to see was the decision of the Bank that a more flexible ap­proach is to be adopted toward Bank and IFC lending to development fi­nance companies in which the Gov­ernment has a large direct stake. The recognition that it is the management of individual industrial enterprises and development finance companies, and not the question of the exact extent to which they are owned by the Gov-

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ernment that is important, is helpful and more than a little overdue.

The decision to replenish the re­sources of IDA can only be wel'comed, despite the fact that the resources made available ($400 million a year for three years) will be substantially smaller than the President of the Bank originally requested. However, a much more pressing problem than the over-all size of the replenishment is the question of when it will become available. It was originally intended that the formalities should be com­pleted by the end of June, but be­cause of the extreme slowness with which the process of ratification has been taking place in certain Part I countries, this date had to be put back to the end of last September. As I understand it, the question of when the money will become available is still an entirely open one. This is ex­tremelY unsatisfactory, given the fact that the resources of IDA were vir­tually exhausted by the end of June. The slowness with which the new resources are becoming available is a source of great disappointment to us, and I am sure to all the o.ther de­veloping countries. However, I would not like to leave the subject of IDA replenishment without expressing my appreCiation to those countries-and, in particular, Sweden-which have pledged themselves to make available resources over and above their re­quired contribution to replenishment. This is an example of the kind of spirit we need if progress in the de­veloping countries is to be maintained at a tolerable rate.

On the subject of the favorable de­velopments, I should also like to refer to the encouraging address made on Monday by the President of the Wo.rld Bank Group. Mr. McNamara's deter­mination to step up dramatically the attack o.n world poverty and his in­tention that the World Bank Group sheuld devete twice as much meney to. develepment over the next five years as over the past five years, is extremely heartening to us, and will I am sure be welcomed unreservedly in the developing countries. We are hopeful that the developed countries will for their part take all possible

steps to facilitate the necessary ac­cess to their capital market.

Having outlined some of the rea­sons for satisfaction with events of the last year, I now come to two is­sues which give less cause for satis­faction. The first is the double in­crease which has taken place since last year's Annual Meeting in the lend­ing rate of the World Bank. A year ago it was 6 per cent; now it is 6V2 per cent. We recognize that, given the agreed limits of the spread between its borrowing and lending rates, the Bank had no option but to raise its lending rate in the face of the higher rates of interest prevailing through­out the capital markets of the world. Nevertheless, it is a disappointing trend. We do, however, take some comfort from the fact that the Execu­tive Directors have recommended that for the financial year 1967/68 there should be a transfer from the Bank to IDA of $75 million, which is a dis­tinct improvement on the nominal sum of $10 million transferred in fiscal year 1967. If the higher bank lending rate continues to be reflected in future years in substantial transfers to IDA, it might turn out to be a cloud with a silver lining.

A second cause of disappointment lies in the very limited progress which appears to have been made in tackling the problem of the instability and disapPo.inting trend of primary pro.duct prices. I should like to em­phasize that the developing co.untries, and Kenya in particular, accept the responsibility to. do what they can themselves to o.vercome this problem. In the case o.f Kenya, fo.r example, we are very co.nscious o.f the need to. diversify our economy to some ex­tent, and seme progress in this direc­tien is being recorded. It may also be worth drawing attention to the plan adopted at the Conference of Governors of the African Development Bank which teek place in Nairebi at the end of August, to. cencentrate on streamlining agricultural production, thus making it mo.re efficient; to search for ways o.f substituting home preductien for imperts; to increase efforts to find new ways of earning foreign exchange; and to emphasize

the importance of fostering economic cooperation on a regional and sub­regional level.

Despite our best efforts, however, the problem ef primary preduct prices is ene which can only be tackled if the industrial countries and the inter­national institutio.ns devote vigorous actien to this end. It is not altogether clear whether this is going to happen, but we have faith in the ability of beth the Bank and the Fund to wo.rk out proposals which would substantially assist in the solution o.f the problems which prompted last year's Reselution.

Looking to the future, we hope that some positive recommendations will emerge fro.m the work o.f the "Grand Assize" proposed by the former Presi­dent o.f the Bank, which will have the distinctio.n of being presided over by Mr. Lester Pearsen. We cannet afford to relax from the mest strenuous ef­forts to promote the develo.pment of the developing countries. One must face the fact tha't over the next year or two there is a distinct possibility of a slo.wer growth in world produc­tion and trade, leading prebably to a slo.W rise in the demand for some pri­mary pro.ducts, and quite Po.ssibly an actual fall in the demand fer ethers. These problems are likely to be com­pounded by the inexo.rable growth of substitutes for primary products, and by the very great difficulties we still experience in exporting manufactured geods. Even if there is a speedy rati­fication of the IDA replenishment, it is not clear whether this may not be offset by a reduction in the amount of bilateral aid which individual donor ceuntries make available. Taking ac­count also of the increasing burden which debt repayment is placing on many develeping ceuntries, and the way in which this factor reduces the true value of aid to. a figure far belo.w the gro.ss amount apparently made available, there is clearly a consider­able danger that a sho.rtage o.f fereign exchange will hamper the develeping ceuntries in their struggle to. advance. Despite all eur effo.rts (and we in Kenya can Po.int to. a gro.wth of the GOP in real terms o.f almo.st 5V2 per cent a year during the feur years since we became independent) we are

going to need an increasing inflow of both capital and technical assistance from abroad if we are to be able to raise the living standards of our peo­ple at a rate that can be tolerated.

Korea: Jong Ryul Whang

Governor of the Bank and Fund

am indeed very happy to address this Twenty-third Annual Meeting of the Fund and the Bank Group, and to commend on behalf of the Korean Government the very meritorious achievements of these two institutions in further promoting international eco­nomic progress during the past year.

At the outset, I would like to join with my fellow Governors in welcom­ing Botswana, Lesotho, and Mauritius to the membership of the Fund and the World Bank Group, and Malta to the membership of the Fund.

I would like to express my warm congratulations to Mr. Robert S. McNamara, the new President of the World Bank, with whose strong lead­ership and valuable experience the Bank will, I am sure, continue to have a bright future. At the same time, I would also like to extend our most profound gratitude to Mr. George D. Woods, who retired from the Presi­dency of the Bank Group last April, for his signal contribution in bring­ing about the enlargement of the Bank Group's resources, especially IDA's resources, and for channeling increas­ingly a larger portion of these re­sources to meet the needs of the de­veloping countries ....

... The Bank Group also made re­markable progress during the past year, widening its loan and investment ac­tivities through further diversification of its operations. In this context, my Government strongly commends the new initiative taken by the Group this year to modify its lending policies in favor of less developed nations, to al­locate its available loan funds among the developing countries on a more equitable basis than hitherto, to ex­tend Bank and IDA financial assistance to government-owned development

banks, and to make IFe resources available for the promotion of new industrial ventures.

At this point, I would like to express our special gratitude to the Bank for approving a $5 million loan to the Ko­rea Development Finance Corporation which has already commenced opera­tions with the direct and active partici­pation of IFC. IDA, too, approved a new technical assistance credit for a Ko­rean highway project. Further, the Bank is now considering undertaking feasi­bility studies for investing in new rail­way, vocational training, and ali-weath­er agricultural projects in our country.

All these decisions of the Bank Group reflect the fact that our econ­omy has matured enough to make Korea a very creditworthy country.

With your kind permission, I would now like to cite a few facts highlight­ing the continuing remarkable growth of the Korean economy in the past year under the auspices of our Sec­ond Five-Year Development Program. Testifying to this, for the sixth con­secutive year, Korea's gross national product registered a very creditable growth rate in 1967, which at 8.9 per cent compared very favorably with the population growth rate of 2.4 per cent.

A remarkable feature of this expan­sion was that it occurred despite a considerable setback in agricultural output because of drought conditions. The growth reflected primarily mas­sive further expansion in manufactur­ing output, exports and imports-the expansion in exports, at 35 per cent, was particularly marked. Our trade and the restrictive systems were also greatly liberalized. Also note­worthy is the fact that this rapid growth was achieved in the context of increasing stability, with the whole­sale prices during the year rising by less than 7 per cent or appreciably less than the average annual rate of increase over the several preceding years.

In a very large measure, this was the result of our further conscientious efforts at tightening the fiscal and monetary discipline, in connection with which I am very happy to say we have had very close collaboration with the International Monetary Fund.

The current year, we confidently expect, will be another boom year. We are very hopeful that despite the unfortunate recurrence of drought and flood conditions, the output growth during the year will not turn out to be far off from our original an­ticipation of 12.4 per cent.

This growth, too, will be achieved, we are pretty certain, in a climate of increasing stability, reflecting our res­olute determination to pursue a course of sound fiscal and monetary management as evidenced, inter alia, by the inauguration this year of new tax and customs reforms.

While, in the coming years, we are sincerely hopeful of improving further on our already creditable performance, we are deeply mindful of the immense problems still facing us. We are firmly resolved, therefore, to work hard, work diligently, and work according to well coordinated plans to realize our objec­tive of rapid growth with stability.

But we realize that our efforts in this connection must necessarily be supplemented by a continuing flow of adequate technical and financial aid from friendly countries and interna­tional institutions like the Fund and the Bank Group. It is in this context that I would like to offer a few com­ments that, while not in any sense original, are nonetheless important and bear repeating ....

The Bank Group, too, must evolve and vigorously implement suitable policies for extending effective and timely assistance to the developing nations in view of the pivotal role of this Group in the world capital mar­ket today. I cannot but re-emphasize here what has been said over and over again here in this Conference and in several previous Annual Meet­ings, that the Bank Group, and espe­cially IDA, must expeditiously replen­ish its resources through all appropri­ate means.

In this connection, we greatly ap­preciate the pledges given by several Part I countries to help replenish IDA's resources, and hope that the other Part I members, too, will do so soon. Further, we earnestly urge that the enlarged resources of the Bank Group be made equitably availa:ble to

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all the capital-short countries on rea­sonable terms for a wide variety of socioeconomic infrastructure develop­ment projects. Positive new steps along the lines initiated by the Bank Group, which I referred to earlier, are essential not only for reversing the dangerous trend of the widening gap between the living standards of the "have" and the "have-not" nations, but for ensuring that the "have-not" nations do not remain in that posi­tion for decades to come, as that would be disastrous for the peace and welfare of the whole world. I would also like to strongly endorse here the UNCTAD proposals for establishing special supplementary financing facil­ities in the Bank Group for the use of the less developed nations. May I also add here that, besides direct financial assistance from the Bank Group, it is essential that steps be taken to estab­lish soon an International Investment Insurance Corporation under the aus­pices of the Bank Group to help en­courage increasing private invest­ments in underdeveloped countries.

At this juncture, I would be greatly remiss if I did not immediately and gratefully acknowledge the labors of the Bank-sponsored Consortiums and Consultative Groups in arranging mul­tilateral financial aid to an increasing number of countries, including my own. I do earnestly hope that the ac­tivities of these Consortiums and Con­SUltative Groups will be greatly ex­panded to help meet the urgent capi­tal needs of these countries.

In conclusion, I would like to pay very well deserved thanks to our American hosts for their great hos­pitality and for making such excellent arrangements for this Conference, and to extend to the staffs of the Fund and the Bank our sincere appreciation of their usual superb efficiency for en­suring the success of our delibera­tions.

Lebanon: Joseph Oughourlian

Governor of the Fund

It is not unlikely that I am one of the senior Governors among you, though not necessarily the oldest!

It was in fact in September 1949 that I made my first appearance as Alternate Governor of the Fund in the Annual Meetings of the Fund and the Bank which then as now were held in Washington. I came again to these meetings in subsequent years, some­times as Governor of the Fund and sometimes as Governor of the Bank. After a gap of some years, I once more took my place among you in 1966 as Governor of the Fund.

I know therefore from experience that speeches gain from being short. I shall therefore be brief, hoping thus to obtain your cordial patience.

The problems that we consider in our Meetings, and upon which, prac­tically, the fate of our national econ­omies and the economy of the world depend, may be identified under a few headings. Turn and turn about, they have had the spotlight in our Meetings in accordance with the events which, from one period to another, have domi­nated the economy of the world ....

... The second question I am going to raise, as briefly as possible, for your consideration concerns the eco­nomic development of the so-called "developing" countries.

International organizations, univer­sities, and, more especially, the In­ternational Bank, have already ac­quired very broad experience in this field. The "science" of development is nevertheless in its infancy and one of the obstacles that it must overcome, it seems to me, is the preconceived idea that the only model for devel­opment is that of an industrialized country.

Development is not a phenomenon marginal to the over-all economy of a country. It is an integral part of it; it concerns all sectors in the life of a country: for example, education and vocational training, such as scientific research or the construction of com­munications media. The financing of development does pose a particularly difficult problem for the developing countries, because shortage of capi­tal is one of the characteristics of these countries. As their fiscal re­sources and domestic capital are clearly insufficient to ensure a socially acceptable minimum growth rate, a

large supplement from external sources is indispensable: notably, private enterprise capital and loans from regional or international organ­izations, mainly from the International Bank and its affiliates.

The portion of its over-all expendi­ture that a country may dedicate to the factors of development that fall within its purview depends naturally upon the other items and priorities. For, when all is said and done, the same law governs a strong economy and a weak economy; neither can ex­ceed a certain limit of taxation, nor spend more than they earn, without causing imbalances that compromise the domestic and external value of their money, the continuity of their progress and their social order.

Now, many developing countries are obliged to increase their military expenditures more and more. In rais­ing this point, I have no thought of going beyond our own economic and financial sphere; even less do I think that the priority given to national de­fense can be questioned. But it is clear that military expenditures can be undertaken only to the detriment of equally indispensable investments and certain types of consumption. This is where the drama comes in, be­cause these sacrifices are becoming more and more unbearable and may be at the root of social explosions. How can we then pass silently over such an important factor, without mu­tilating our development research? Should we not, on the contrary, pay particular attention to this fact, which is one more difficulty to add to the natural ones that must be faced by the developing countries?

The financing of development by foreign lenders, and, to remain within our own circle, by the International Bank, is an operation that involves specific techniques, methods and problems. But from the point of view of the country which receives the for­eign aid, development is a matter fail­ing within its economic and financial policy, with its impacts on prices, ex­change rates, balance of payments, and currency. This aspect of develop­ment primarily concerns the Fund.

Thus, the decision of Mr. McNamara,

• the President of the International Bank, to establish an International Commis­sion to study the past and future of world development is very timely. And we must share "the very lively satis­faction" expressed by Mr. McNamara over the acceptance by Mr. Lester Pearson, the former Prime Minister of Canada, of the chairmanship of that commission.

"Since I first came to the Bank," said Mr. McNamara, "I have been deeply concerned with two linked problems: What is the strategy for aid and development for the next ten, twenty and thirty years; and secondly, what is the Bank's part in this strategy. We have begun to see the way ahead for the Bank in the im­mediate future-a sharp increase in loans for development-but the broad strategy for the future is not clear. It is to this that Mr. Pearson's Com­mission will turn its attention."

In his letter of August 16, 1968, to Mr. Lester Pearson, Mr. McNamara had already stipulated what he ex­pected of the Commission.

"The Commission," he wrote, "should review the impact of external assistance on the development of the poorer nations over the past two de­cades, noting where it has been most successful and where least. It should continue by trying to identify the causes of relative success and failure.

"With these practical lessons of the past clearly before them, the Commis­sion should consider the methods of giving assistance and the orders of magnitude for that assistance which appear necessary over the next de­cade and the next generation, in order to ensure a reasonable hope of sustained, and eventually self-sustain­ing, growth in a number of the less developed countries. The Commission should also examine the courses of action which these less developed countries need to take to facilitate their economic growth."

Thus, the problem of development has been fully stated: from the view­point of the banker providing the as­sistance and from the viewpoint of the action of the country benefiting from the aid.

So, if I may, I should like to make

the suggestion that the Commis­sion's inquiry should not be limited to the "poorest," the "least devel­oped" countries and that express pro­vision should be made for the Com­mission to collaborate closely with the Moneta,ry Fund as it is for its col­laboration with the United Nations Economic and Social Council and the OECD Development Assistance Com­mittee.

While we are convinced that devel­opment is an essential condition for peace in the world, each of us must work at the national and international levels to give it every chance of suc­cess.

Liberia: J. Milton Weeks

Governor of the Bank and Fund

We have met once again in the joint Annual Meetings of the two largest international financial institu­tions in the world-the Fund and the World Bank Group. In these Annual Meetings we have the phenomenon of over 100 countries-large and small­meeting for only one week amidst all the fanfare of social events to delib­erate upon and presumably find solu­tions for the herculean, and, one might add, almost awesome, financial and economic problems of the world, as these problems affect all countries both collectively and individually. One would, of course, be lacking in depth of insight and in perception if one went away with the notion that every­thing that happened is what takes place in this hall.

Among the many substantive ac­tivities that take place outside this hall and which are reflected in our deliberations is the year-round toil of our Executive Directors, management and the staffs of the Fund and the Bank Group which makes possible such an efficient organization for our Annual Meetings that our deliberations proceed with almost clockwork preci­sion. I take this opportunity to extend to them our hearty congratulations for their devotion to duty.

Apart from these behind-the-scene activities, what are the concrete ob­jectives of our Annual Meetings? I find a threefold answer. The first is the drawing up of a balance sheet, or, if you like, a stock-taking of past per­formances. This objective is normally enshrined in the Annual Reports sub­mitted by the Executive Directors to the Board of Governors. The second consists in an evaluation of past per­formances with a view to drawing ap­propriate lessons for the future. The third consists of a courageous, and oftentimes, ambitious effort to map out new directions for the future and/or enlarging on existing courses of action.

For the most part, the second and third objectives are expressed in the opening statements of the top execu­tives of the Fund and the Bank Group, and in the statements of the Gover­nors. In listening to, or reading, the speeches of the Governors one gets the first impression that there is a strong consensus that we all desire to move in the same direction. How­ever, in practice when we are faced with the realities, then a somewhat different picture emerges which, while understandable, considering the dif­ferent interests involved, is neverthe­less disturbing at times. "Desire" like the concept of "demand" in eco­nomics must be "effective" to be meaningful.

We are all too familiar with the well-known dichotomy of the "devel­oped countries" on the one hand, and the "developing countries" on the other. Even in these groupings there are also differing shades of interest. For analytical purposes, one might distinguish a third element, the man­agement of our institutions, whose re­sponsibility it is to reflect the inter­ests, desires and aspirations of the two broad economic groups-the de­veloped countries which are, for the most part, the donors of aid; and the developing countries, which are al­most entirely the recipients of aid.

While it must be recognized that there is a growing awareness of an identity of interests, desires and as­pirations between the developed and the developing countries, one cannot escape the painful conclusion that the

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problem of reconciliation is not an easy one, and the management of our institutions must be congratulated for the courageous efforts which they have made in this direction since Bret­ton Woods.

This difficulty of reconciliation is amply illustrated in the latest Annual Reports of the Fund and the Bank which carry the familiar theme of the past few years concerning the adverse effects of the slowdown of demand and output in the major industrial countries on the prices of primary commodities in 1966 and in the fi rst half of 1967, and consequently upon the external positions of many primary producing countries.

Summing up this precarious situa­tion in his dynamic and inspiring in­augural address, Mr. McNamara ob­serves that, "It is already clear be­yond contradiction that during the first four-fifths of the Development Decade the income gap between the developed and the less developed countries has increased, is increasing and ought to be diminished. But it is equally clear that the political will to foster development has weakened, is weakening further, and needs des­perately to be strengthened."

Two obvious and well-recognized conclusions follow from these authori­tative observations: firstly, the crying need for appropriate measures by the world community of nations to mini­mize the cyclical fluctuations in pri­mary commodity prices; and, sec­ondly, the paramount requirement for economic diversification to remove the heavy dependence of developing countries on a narrow range of pri­mary commodities. These two conclu­sions have broad implications for col­lective action on a massive scale.

Returning to the theme of recon­ciliation between what appear to be conflicting interests between devel­oped and developing countries: what has been the latest response to this supreme challenge to international development-the challenge of the alleviation of poverty and despair among the millions of underprivileged peoples of the world? The sec­ond session of UNCTAD held in New Delhi early this year provides an an-

swer. According to the World Bank Report: "The discussions during the conference centered around four major questions" and "At the conclu­sion of the conference these ques­tions remain largely unanswered."

The answers to these questions do not, of course, depend upon one group of countries, but upon collective action between all countries, provid­ing the "political will" and the incen­tive to self-help are present. When speaking about the problems of de­velopment, it is convenient to talk in terms of "countries," but in the final analysis, as President Johnson so forcefully asserted in his keynote ad­dress at the beginning of these Meet­ings: "People are the key to develop­ment."

With the rapid advance in science and technology, the pace of develop­ment in the developed world is pro­ceeding at an astounding rate, includ­ing the rapid strides in the fields of transportation and communications. A small modicum of this development is spilling over into the developing world, thanks partly to public and pri­vate assistance and investments from the developed world. These develop­ments are contributing to the rising tide of expectations the world over, and we have the somewhat confusing picture of the apparent timeless trans­formation of poverty and despair into impatience and desperation. But de­spite the tide of expectations which continues to rise, the process of eco­nomic and social change seems to move with glacial speed. The implica­tions of this phenomenon for peace and stability are fairly obvious.

Returning to our two groups of in­stitutions, it is heartening to note the new thrust and the new dimensions which they have assumed. . . . ... In turning my attention to the

Bank, I must, first of all, pay tribute to Mr. George Woods who, during his five years of office as President 0'f the Bank Group, made a great con­tribution to the forward march of the Bank and its affiliates.

And, in congratulating Mr. McNamara on his election as President of the Bank Group, I must give expression to my satisfaction with the policies and

objectives outlined in his inaugural address. These policies and objectives demonstrate a profound appreciation and understanding of the fundamental problems of the developing world. We can only hope that he will succeed in obtaining the cooperation of the rich countries for the implementation of his policies and the attainment of his ob­jectives.

Already there are evidences of a wind of change in respect of certain lending policies of the Bank. I refer, firstly, to the recommended modifica­tion of the rather rigid distinction between the foreign exchange and local cost components of development projects, and the suggested inadvis­ability and, in some instances, futility of such a rigid distinction in the Bank/ IDA financing operations. The genesis of this distinction is a fact well known to economic historians, while the ra­tionale of its continuing application is highly questionable.

A second and refreshing area of recommended modifications is in the policies and criteria governing the dis­tribution of IDA credits. While it ap­pears that no firm determination has been arrived at as to the relative weights to be given to the various stated criteria governing the distribu­tion of IDA credits, I find the follow­ing guideline set forth in a BankllDA memorandum dated July 16, 1968, to be encouraging: " ... in seeking to achieve a reconciliation between 'fair distribution' and the application of discriminating criteria, IDA will have to rely not upon some preconceived formula but rather upon a continuing process of practical compromise." It is also reassuring to note the new emphasis on Africa that will be given in Bank/IDA lending operations.

I should note that high hopes had been raised in respect of the expecta­tion of an early substantial second replenishment of IDA resources. The apparent failure of this expectation is a source of great disappointment to my country which leaves us with some apprehensions as to the long-term fu­ture of IDA. It can only be hoped that the major donor countries will find it possible soon to revive our ex­pectation in this respect. Meanwhile

we must express our deep apprecia­tion of the leading role played by Norway and Sweden in making supple­mentary contributions to IDA not sub­ject to the conditions of effectiveness of the second replenishment.

While applauding the new thrust which Mr. McNamara has brought into the operations of the Bank and IDA, I must again, as I did in my statement last year, express grave concern over the criteria employed by the Bank in the determination of proj­ect priorities. While accepting the general principle of the desirability of maximizing the utility of scarce re­sources, it should be remembered that governments are not mere eco­nomic mechanisms, but first of all po­litical entities. It follows, therefore, that certain courses of action in the economic decision-making process are necessary in the interest of political stability which is a precondition of economic development. As President Johnson stated it in his opening ad­dress: "In the development business, we cannot always behave like hard­fisted money-lenders. Some projects have a quick pay-off; others will take time. All are needed for balanced growth. The storehouse of develop­ment must include long-term risk capital."

I must congratulate the staffs of the Fund and Bank for the extensive work they have done so far on the prob­lem and possible solutions of the in­stability of primary commodity prices in response to the resolution on this subject adopted by the Board of Gov­ernors in Rio de Janeiro in Septem­ber 1967. It is noted that while the analytical section (Part I) of the Study has been completed and transmitted to the Board of Governors for their information, the section embodying possible courses of action by the Fund and the Bank (Part II) is still under examination by the staffs of the two institutions. My Delegation is prepared to vote in favor of the draft resolution on this subject sub­mitted by the Executive Directors in the hope that the entire Study will be completed as soon as possible.

In his statement on Tuesday, Sec­retary Fowler indicated that this is his

last meeting with us as United States Governor. I wish to express to Secre­tary Fowler the appreciation of my Delegation for the valuable contribu­tion he has made to the success of our institution during his incumbency as United States Governor of the Fund and the Bank, and for the coopera­tion he has given to our country. We wish him continuing success in his fu­ture undertakings.

In conclusion, I wish on behalf of my Delegation to express our deep appreciation to the Government and people of the United States for the warm welcome extended us during this session of our joint Annual Meet­ings. It is a great pleasure also for me to welcome into our midst the new member countries of Botswana, Les­otho, Malta and Mauritius. And to you, Mr. Chairman, I express congratula­tions for the able manner in which you have conducted our institution during your tenure of office.

Libya: Khalil Bennani

Governor of the Fund

I am indeed honored to address this Annual Meeting of the Board of Governors of the Fund and the Bank, which is convened to review activi­ties and achievements of these institu­tions during the preceding year, and to consider ways and means of solv­ing the problems that are affecting the world economy, international monetary system, world reserves, in­ternational liquidity, and economic ad­vancement of developing countries and acceleration of this process ....

. . . The 1968 Annual Reports of the Fund and the Bank throw into bold relief the importance of the sta­bilization of prices of primary products at a remunerative level for the eco­nomic advancement of the developing countries. The decline and instability of prices of primary commodities in 1966 and 1967 have adversely affected foreign exchange earnings of quite a large number of developing countries, particularly those depending on the

export of a small number of primary commodities or a single commodity. Strains developing in the external po­sition of some primary producing countries not only necessitated cur­tailment of their imports but had a dampening effect on their over-all eco­nomic activity. The necessity for ex­pediting the joint study that is being undertaken by the Fund and the World Bank of the problem of the stabiliza­tion of prices of primary products can­not be overemphasized. I am sure that support from member countries of the Fund would be forthcoming for any feasible proposal for the handling, by the Fund, of the financing of the buff­er stocks or any other arrangement that would impart stability to the prices of major primary commodities.

The Bank's Annual Report makes mention of the fact that the flow of financial assistance from the de­veloped to the developing countries increased in 1967, partly due to dis­bursement under aid commitments made in the earlier years. However, the leveling off of fresh commitments of assistance by major developed countries and the reduction in the fi­nancing provided by the World Bank Group, mainly due to the approaching exhaustion of resources of IDA, are causing concern among developing countries. This, coupled with shrink­age of foreign exchange earnings from export of primary commodities, has created a difficulty for certain developing countries, not only in maintaining the tempo of their develop­ment, but in some cases even the servicing of their external debts. Some of them are finding themselves in the unenviable position of being unable to complete their partly executed de­velopment projects, due to the inade­quacy or slowing down of foreign as­sistance. This has upset calculations about expected growth in their GNP, out of which they had planned debt servicing. The hardening of rates of interest in international monetary mar­kets has added problems for coun­tries needing foreign loans for financ­ing their economic development. De­veloping countries in general and those in Africa, in particular, require sizable development assistance so

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that the gap between the developed and the developing countries, in the matter of the standard of living, could be narrowed down within the foresee­able future. The setting up of the Com­mission on International Development, recently announced by the World Bank, is indeed a step in the right direction. Developing countries would welcome an interim report from the Commission suggesting ways and means for the stepping up of the quantum of foreign assistance during the remaining years of the current development decade. I am sure that the special needs of the developing countries in Africa, which have had a late start, will be kept in view.

The second session of UNCTAD held in February and March last favored the granting of trade prefer­ence to the developing countries. Let us hope that some positive response would be forthcoming in this regard, which would help the developing countries in increasing their exports and accelerating their economic development.

I extend my delegation's congratu­lations to the Managing Director of the Fund and the President of the Bank and its affiliates for the con­tinuing excellent work done by these institutions and the efforts that are being made for fulfilling the aims and objectives for which these institutions were set up to serve mankind.

Malawi: J. Z. U. Tembo

Governor of the Bank and Fund

On Monday we had the privilege of listening to a succession of impressive speeches by the President of the United States, by you, yourself, Mr. Chairman, by Mr. Schweitzer, and by Mr. McNamara. These speeches to­gether described the monetary and developmental problems that face the world today. They provide a prologue which it is hard for those of us who follow to live up to.

At this Meeting it gives me great pleasure to join in welcoming my

friends the representatives of Bots­wana, Lesotho, Malta and Mauritius. All are developing countries, all, I am sure, will benefit as Malawi has done through membership in the institu­tions represented here.

I would like also to pay a special tribute to the speech which the Presi­dent of the Bank made on Monday. All too often we have heard recently of the difficulties that lie in the way of raising funds for development. We have become far too accustomed to hearing expressions of doubt as to whether the pace of development can even be maintained. Indeed in many parts of the developed world the question has been raised as to whether it is worth making the effort to maintain it. On Monday, however, in Mr. McNamara's speech we not only heard of concrete plans to in­crease the rate of Bank lending, but, even more important, we heard an expression of confidence that the problems can be overcome, that the obstacles that lie in our way can be removed and that the pace of de­velopment can be not only maintained but speeded up.

This we welcome. However, though we agree that it is urgent to increase the volume and scope of lending by the Bank, it is even more important to ensure that the International De­velopment Association has funds available to assist in the development of those countries with very low per capita incomes, such as my own country, Malawi. The original pro­posals to make available to the Asso­ciation the sum of $1,200 million over a three-year period represents con­siderable progress, even though it was acknowledged as being short of the ideal. But since then, as a result of the delay in the authorization by the United States of its contribution to the second replenishment, it seems likely that there will be no funds avail­able for IDA lending for many months.

This is a tragedy. It is the poorest countries which need help the most. However hard we may try, however correct our economic and fiscal poli­cies, without external capital on soft terms, we cannot maintain the de­velopment impetus. But if this impetus

is lost, it will be the harder to take up the race again in the future. For these reasons I would like to ask the developed countries to consider spe­cial methods of bridging the present hiatus. Could not the Part I countries resolve to consult together to make their contributions to the second replenishment immediately effective, without waiting for authorization by the United States of its contribution? I realize that there are difficulties and impediments, both legal and admin­istrative. But surely these can be overcome, given the will.

Secondly, could not the developed countries abandon the proposal to transfer net profits of the Fund to cer­tain of their members? This would not require the making of any actual pay­ments, merely the giving up of a benefit which could not have been planned on. But, if the net profits of the Fund could be made available immediately to IDA, it would enable the Association to continue in opera­tion for the next few months.

Sweden, in particular, has shown that it recognizes the importance of keeping IDA in funds, by making con­tributions over and above its quota. I recognize that some of the other de­veloped countries may have particular problems, balance of payments diffi­culties, etc., but the IDA contributions in themselves would not materially affect these.

The need to make money available on soft terms for the underdeveloped countries is made the more urgent by the delays that seem likely to take place before any satisfactory solution is made of the problem of stabilizing commodity prices. We welcome the progress that has been made so far in studying the problem; I would be more enthusiastic if I could see the prospects of any early solution.

Mr. Chairman, in the clear and en­couraging speech made on Tuesday by the Governor for Germany, the latter, after recounting the steps which his country had taken to increase the flow of capital to the underdeveloped world, made clear his own country's disappointment at the delay which has taken place in the second replenish­ment. The Governor for Germany

stated that at this time what was needed was more action, not words. With this sentiment, I respectfully as­sociate myself and my country.

Malaysia: Ismail Bin Mohamed Ali

Alternate Governor of the Fund

First of all, I would like to join the other Governors in welcoming Mr. McNamara as the new President of the World Bank Group. The problems of economic development throughout the world have not diminished with the years. Rather, they have grown in magnitude and in complexity. When we listened yesterday morning to Mr. McNamara's analysis of the problems of economic development, the ap­proach which he considers that the World Bank Group should take to­ward these problems and his ideas on how these problems should be solved, we had a feeling of excitement over the fresh and bold attitude with which he views his mission. This is particu­larly so to a young country like Ma­laysia which is only 11 years old. To us in Malaysia, engaged as we are in the process of development, Mr. McNamara's approach and ideas are most inspiring. He gives heart to our economic planners and to those called upon to implement our develop­ment plan. Malaysia wishes him well and every success in his new mission ....

... Earlier this year, amid the pres­sures on the world monetary system, the less developed world and the in­dustrial countries met in New Delhi for the Second United Nations Con­ference on Trade and Development. As we see it, the basic objective of this vast forum is to formulate and author­ize a program of concrete measures to step up the rate of growth of the less developed countries. It has pro­vided a forum for a more lucid and emphatic presentation of the prob­lems and needs of the less developed world. Results have been achieved in some fields though in others these have been limited or incomplete.

Nevertheless, I cannot help but share with my colleagues in the less de­veloped world the general feeling of disappointment and impatience at the decisions that emerged on the major issues.

In this connection, we welcome the Bank's appointment of a Commission headed by Mr. Lester Pearson to study the problems of development aid and to recommend new principles and guidelines for the future. If I may say so, it is essential that this Com­mission should be given maximum latitude and the widest possible scope if it is to achieve its purposes. It should not hesitate to propose un­orthodox solutions merely because they are unorthodox. It should not avoid novel proposals merely be­cause they are novel. We suggest that only on this basis would the Com­mission be given a fair chance to de­ploy its talents to the full.

Let me turn now to the study under­taken by the Fund and the World Bank on the problems of stabilization of prices of primary commodities as re­quested by the Boards of Governors last year under the Rio Resolutions. We have seen the preliminary drafts of this study. The staff of both the Fund and the Bank should be con­gratulated for their incisive analysis and understanding of the problems of primary commodities as presented in the first part of their study. While this part of the study is no doubt an im­portant contribution to our approach to the problems of primary commodi­ties, let me say that what we are after is not a continuation of the study of the commodities problems which has already gone on for so long but yet has achieved so little progress. When we approved the Rio Resolutions, we were looking forward to the emer­gence of a new initiative and con­certed action on these problems.

The broad proposals put forward by the Fund and the Bank staff are pos­sible solutions to the problems of primary commodities. They are mod­est proposals which could serve as starting pOints for closer examination and action in these fields. Though some of these would be new opera­tions insofar as the Fund and the

Bank are concerned, such as the fi­nancing of buffer stocks, it is interest­ing to note that they have been care­fully formulated within the framework of the Articles of Agreement of both these institutions.

A comprehensive consideration of the problems of primary producing countries will certainly need a bolder approach than these proposals, and possible solutions may have to go be­yond the confines set by the Articles of Agreement of the Fund and the Bank. Indeed, as we see it, the Rio Resolutions do not seem to limit the staff study of the Fund and the Bank to possible schemes and arrange­ments that might be undertaken within the framework of the Articles of Agreement of these institutions, al­though the proposals must in the main be on what the Fund and the Bank could do under their present charters. In our view, it would be useful for the staff of both these institutions to ex­tend the exercise beyond these con­fines so that we would also have the advantage of considering a wider range of the possible solutions that could be brought to bear on the com­modities problems.

I must say that we are quite dis­mayed to learn that in the preliminary discussions among the Executive Di­rectors on the modest proposals put up by the staff, some developed countries have found it already diffi­cult to consider these proposals as a basis for further work. We sincerely hope that a more constructive ap­proach will be taken in future discus­sions on the staff proposals in the Executive Boards so that the Rio Res­olutions will not become another futile exercise.

The events of the last twelve months have underlined the need for something more than conventional remedies. We need to change our attitudes; we need to adjust our thinking to rapidly changing times; we need imagination and vision. Basic problems need basic solutions, not palliatives. Thanks to the giant strides of science and technology in recent years, it is possible to usher in an age of plenty, at least for those who are prepared to work for it. But this

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era cannot be reached unless there is the will on the part of those who have the power and the means to de­vise solutions which deal with these problems at their roots. The nations represented at this Conference com­mand between them vast and almost unlimited resources. If the will is there, no obstacle should be insuper­able. As you know, Mr. Chairman, Malaysia is the world's biggest exporter of rubber, tin and palm oil. Last year, we exported over a million tons of rubber, our chief export prod­uct, 3 per cent higher than in 1966. But our export earnings from rubber fell by as much as 13V2 per cent. In the case of tin, we exported about 74,000 tons last year, and we are now faced with the need to control tin exports because of the fall in price. This is the measure of our problem, a problem faced by many other. developing countries. As far as we in the developing world are con­cerned, all we are asking for is that our toil and efforts of yesterday, today and tomorrow should not be in vain.

Mauritius: Veerasamy Ringadoo

Governor of the Bank and Fund

The accession of Mauritius to inde­pendence early this year has enabled the Government to apply for member­ship in the International Monetary Fund, and the World Bank and its affiliates, and I am proud and privi­leged to represent my country here today as perhaps the very newest member of the Fund, our member­ship having been formally approved only within the last week or so. I am most grateful to the Managing Di­rector of the International Monetary Fund and the President of the World Bank and their officers for their as­sistance in promoting our early mem­bership in the two institutions and the affiliates.

Being new in this international setup I do not want to enter into the details of the working of the Fund, the Bank and its affiliates nor deal

with the complicated issues involved but I will limit myself to expressing my appreciation at the re-election of Mr. Schweitzer and at the appoint­ment of Mr. McNamara as the head of the Bank. His thought-provoking and inspiring speech marks a new era in the life of the expanded role of the Bank and it gives a new dimen­sion to the concept of development. It also gives new hope for progress and welfare within our lifetime. I wish him Godspeed. I welcome the appointment of Mr. Lester Pearson to a position which will help to bring to reality the concept of the world being one. On the question of a scheme for the stabilization of prices of primary products, I have noted the intention of the Fund and the Bank to submit their conclusions in a year's time. This matter is vital for the developing countries and the urgency for finding a solution need not be debated. I therefore share the disappointment of the distinguished delegate for France, Mr. Ortoli, and urge an earlier solution to the problem.

Mauritius in addition to being the newest member is also, perhaps, in a geographical sense, the smallest, since our island and its dependencies cover less than 800 square miles but already carry a population of about 800,000 people. This, as you will be aware, constitutes one of the densest agri­cultural populations in the world and this fact gives rise to many problems and causes deep anxiety, especially when, as in our case, the population continues to grow rapidly and could at this present rate double itself well within 25 years.

Long before this condition of af­fairs has been reached, however, the population will have outgrown the carrying capacity, or means of sub­sistence at an acceptable rate, of the island itself; and this is naturally a cause of very great anxiety to us, for, although we cannot expect posterity to help us, we are very mindful of what it may say of us if we fail now to cope adequately with the problem. And in essence the problem is to re­duce the rate of population growth as far as this is possible while at the same time developing the other re-

sources of the island to the maximum in order to enable it to carry that in­creasing population without seriously diminishing the existing standards of living.

The standards of living, or the standard of life, as it might more ap­propriately be termed, in Mauritius is comparatively high. Although we have only recently attained indepen­dent status we have from early in the 19th century known and developed democratic institutions and we have managed very largely to staff our own public services. This is not to say that we are independent of the out­side world for technical and other as­sistance. Far from it. But a large fund of skilled labor and other workers is now available in the island and it is primarily these workers who have developed the economy to a high de­gree, although it is still essentially primary in form.

The burden which now bears so heavily, in both the political and the social sense, upon us is the fact that we have very nearly reached the limits of possible development as a primary economy and this so far without the advantages and opportunities of de­veloping secondary industries which, if they were to succeed, would depend largely on outside markets. We al­ready have more than 40,000 unem­ployed to care for: this is just under 20 per cent of the total economically active population; and as already indicated, the prospects are that this condition of mass unemployment must increase, at any rate for some time to come. And as the burden increases it necessarily reduces the capacity of the economy to save or otherwise pro­vide resources for development.

There is nevertheless a considerable development potential and the Gov­ernment is occupied in exploring every avenue for promoting this po­tential both in the public and in the private sector. We are particularly anxious to encourage investment from overseas in industry and welcome any enquiry as to possibilities and pros­pects in this regard. We are ready to do much to stimulate and encourage activity in the various opportunities for investment which are now known to

I

exist or could be found. The country already has a well-developed infra­structure which the Government is striving to maintain and to expand; but, for the reasons already indicated, this imposes so heavy a burden on the public revenue resources under present circumstances that there is little or nothing to spare for public sector development. As with so many other developing countries, we must look to outside supply sources for de­velopment capital, and it is essen­tially, if not primarily, to the Fund and the Bank and its affiliates that we are encouraged to look.

Because our links with Great Britain are both close and cordial we hope for a continued flow of capital aid from the United Kingdom, from which we have had much help already. Our problem is such now, however, that what we may hopefully expect from the United Kingdom will no longer suffice to cover our needs if the economy is to be developed to bear the increasing burdens of which we are already so vividly aware. For all these reasons, then, in addition to the satisfaction it gives us to be asso­ciated with other countries more or less developed in this great body of nations, we trust that we shall have a due share in whatever resources are available for development. It would seem selfish, however, if we were to leave it at that, for our mem­bership means much more to us. We hope that we, too, in our turn, will be able to assist other member coun­tries one way or another out of our rich experience of the past and also out of our resources which, if meager by some standards, nevertheless still enable us to look with hope to the future and especially the hope of our being able to make a worthwhile and significant contribution to the well­being of mankind.

I have used the short time avail­able to describe in brief the situa­tion and problems of my own country. Let me nevertheless assure the rep­resentatives of other countries that we are also interested in their problems and I trust that the years to come will give us all an opportunity of under­standing one another better so that

this will contribute to the general good. May I conclude by affirming on behalf of my Government and for my country our great pleasure and satis­faction, indeed our gratitude, that our membership has been approved.

Nepal: K. N. Bista

Governor of the Bank

I wish to associate myself with the previous speakers in expressing our gratitude to His Excellency the Presi­dent of the United States for gracing our meeting with his thoughtful and comprehensive address.

The very refreshing and inspiring address by Mr. McNamara has set the tone of our deliberations. The projec­tions and priorities outlined by Mr. McNamara have caught our imagina­tion. Nowhere since its inception has the program of international cooper­ation faced difficulties as it does today. Major donors of bilateral as­sistance either for fiscal or other rea­sons are gradually reducing the level of assistance to developing countries. Raising the resources for multilateral assistance is becoming very difficult due to the tight monetary situation. In spite of these I was very much en­couraged by the optimistic tone in which Mr. McNamara addressed us. In these difficult days we have to prove that the Bank can provide the kind of leadership that is needed to make in­ternational cooperation a reality. His­tory bears witness to the fact that world leadership involves commen­surate responsibility and world peace requires cooperation and brother­hood. I express satisfaction at the initiative taken by the Bank under Mr. McNamara's leadership. I am equally pleased to learn that the Bank is appointing a commission headed by a distinguished man like Mr. Pear­son to make a study of development assistance within a broad frame of reference. We stand ready to help the commission in any way we can and we pledge our faith and cooperation to this noble task.

The Annual Report presented to us

contains a summary of world eco­nomic problems and those of the de­veloping countries in particular. It is disheartening to note that during the period under review the over-all flow of development assistance continued to fall short of accepted targets in spite of heavy demands for resources in developing countries. The present trend is one which must be reversed if we are to carryon with our develop­ment plans and programs. We note with satisfaction that the Bank is pay­ing adequate attention to the prob­lems of agricultural development. We, in Nepal, have placed agriculture at the center of development priorities. In spite of this we recognize the need to do much more in this area in the future. We look forward to the con­tinued cooperation of international agencies in these programs. We are at the moment completing our third development plan and are also in the process of drafting the fourth develop­ment plan.

At the end I wish to conclude my statement by expressing my confi­dence that the Bank will endeavor to make continued efforts in assisting developing countries in the process of social and economic development. We hope that the Bank's program of assistance for the future will be guided as much by sound banking principles as it will be by the eco­nomic needs of developing countries. The need to make resources avail­able on a more equitable basis has been stressed by my delegation in the past. In my speech last year I mentioned some disappointment at the continued indifference of the Bank family toward my country. I take sat­isfaction at the initiative shown during the year in developing some schemes for IDA lending. I hope this will mean the beginning of a long and fruitful cooperation between the Bank family and my Government.

Netherlands: H. J. Witteveen

Governor of the Bank

An important event that has taken place since our last Annual Meeting

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is the change in the Presidency of the Bank and its affiliates. We owe Mr. Woods much gratitude for his ex­pert leadership of the Bank Group and for the many initiatives taken by him during his term of office. At the same time I take much pleasure in welcom­ing Mr. McNamara whose great man­agerial reputation and outstanding per­sonality justify the highest expecta­tions. His address delivered at the opening session has given us impres­sive proof of his ability to provide drive and inspiration to us all.

I note with great satisfaction that one of Mr. Woods' imaginative initia­tives is now being put into operation by our new President. I have in mind the institution of an independent Commission, with the task of identi­fying the merits and weaknesses of the economic development effort over the last decade and of making appro­priate recommendations for its im­provement. It was most gratifying to learn that such a prominent states­man as Mr. Lester Pearson has favor­ably responded to the request to act as Chairman of this Commission. We hope that the Commission's work will provide additional material for the shaping of a well-considered interna­tional development strategy and the establishment of an effective interna­tional program of action for the de­cade of the 1970's, in which both developing nations and the advanced nations may join.

There is a keen and active interest in these problems as manifested in the United Nations, and especially in the work of the U.N. Committee for Development Planning. It is of the utmost importance that the best tal­ents be mobilized by the Bank and other international agencies to meet this challenge and that they under­take their tasks in well-organized and harmonious cooperation. In this per­spective the Netherlands Government has noted with great satisfaction the request made by our President in his letter to Mr. Pearson to seek close collaboration with the planning bodies of the U.N.

In the meantime the lending and technical assistance activities of the

Bank Group should be expanded as quickly as possible to their full po­tential. As far as the Bank is con­cerned, I welcome the announcement by the President of the Bank in his address to greatly increase during the next five years the volume of project preparation and financing, while at the same time maintaining the Bank's high standards of evaluation and sound financing. Recent efforts to raise more capital in old and new markets have met with notable suc­cess and we feel that the Bank, in order to attract the money it could usefully employ, should not be reluc­tant to follow with its borrowing rate the trends prevailing in these mar­kets. It gave me satisfaction that a few months ago, after the Bank's ab­sence of several years from the Netherlands' capital market, a bond issue was floated in my country.

I think that the Annual Report quite rightly stresses the importance of the foreign debt problem of the develop­ing countries, and I would single out this subject for some closer scrutiny. Although the debt burden varies widely from country to country, there is nevertheless a continuous increase which in some cases has assumed alarming proportions. More and more we are confronted with situations where the foreign debt situation re­quires either a periodic rescheduling of debt service obligations or the granting of new credits mainly to en­able the servicing of existing debts. Such arrangements obviously do not offer a satisfactory solution to this problem as they do not remedy its cause but merely mitigate some of its conseq uences.

I feel that here we are up against a very fundamental problem which can only be solved by concerted and con­structive action on the part of both creditor and debtor countries.

As far as the future provision of development loans is concerned, it is of the greatest importance to en­sure that the loan conditions are adapted to the economic situation of the recipient country and to the proj­ect or program financed so that the

debts incurred can be reasonably borne by that country.

This applies to multilateral as well as to bilateral lending. Multilateral lending, especially by the World Bank Group, will be expanded, but it would be very unfortunate-in view of the need to avoid overindebtedness of the developing nations-if an increased volume of Bank lending at market rates would not be accompanied by a corresponding increase of IDA lend­ing. Implementation of the replenish­ment agreement of IDA, particularly in view of the expanded lending pro­gram, is therefore urgent.

At the same time, bilateral develop­ment lending should also take better account of the repayment capacity of the developing countries. The volume of bilateral lending is very consider­able and the terms at which it is pro­vided have a very great impact upon the indebtedness position of the de­veloping nations.

In this respect I would strongly ad­vocate an active role for the Bank, particularly in the context of consortia and consultative groups, to provide guidance to donor countries as to the appropriate terms for the aid these countries are extending, as this quali­tative aspect of development aid is just as important as the need for in­creasing its quantity.

If aid is thus appropriately geared to economic yield, also in terms of foreign exchange, the debt problem should become manageable, provided of course that recipient countries pur­sue sound economic policies. There is, however, one problem in this con­nection that requires further scrutiny, namely, the management by recipient countries of their short-term obliga­tions. There is in my opinion a strong case to look much more actively into the sometimes disquieting growth of the volume of short-term commercial credits and to follow more deliberate policies to control effectively the vol­ume of short-term indebtedness; there should also be a greater awareness both in credit-giving and in credit­receiving countries of the implications of their actions on the indebtedness situation.

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In this respect I would counsel against the opinion that some stretch­ing of commercial terms would con­stitute a solution to the problem.

I dwelt at some length upon this special issue because it warrants our concern. I will therefore be very brief on one more point I would like to make concerning a procedural matter. I am referring to the joint study that has been undertaken by the staffs of the Bank and Fund in response to the Rio resolutions on the stabilization of prices of primary products.

I hope that the Executive Directors will submit their report well in time for us to consider it for appropriate action at the next Annual Meeting. In view of the magnitude and com­plexity of this problem I feel, however, that we should leave the Executive Directors as much time as is com­patible with this target.

I cannot deal in this address with the manifold other highly important subjects to which Mr. McNamara has called our attention. They provide a broad field of action encompassing new and extended activities in three important sectors. Let me just express my great appreciation for the way in which he, as President of the major aid-providing multilateral organiza­tions, has indicated the way ahead. We in the Netherlands are inspired by his bold and imaginative words which, I am sure, will be translated into concrete action to master one of the major tasks-if not the major task -of our generation.

New Zealand: R. D. Muldoon

Governor of the Fund

During the coming year the policies of the United States, Canada, Japan and the United Kingdom are all directed toward restraint. The Annual Report points out that this will mean little, if any, rise in imports by these major countries in world trade. This may have adverse effects on the de­mand for, and prices of, primary com-

modities. This in turn could make it difficult for many of the smaller coun­tries which are exporters of these commodities to maintain a balance in their transactions with the rest of the world. New Zealand, along with other countries heavily dependent on primary commodity exports, looks ahead with some uneasiness to the consequences of these policies. Nevertheless, we recognize that it is inevitable that countries such as the United States should take steps to eliminate their substantial deficits and that if this process is delayed too long it could become more difficult to carry out without disrupting world trade.

Further international cooperation will be necessary to find a means of accomplishing the readjustment be­tween the major surplus and deficit nations with the minimum harmful effects on the trade of these nations with other countries. The Annual Re­port has noted this problem. It em­phasizes that the maintenance of sat­isfactory growth in world trade in such a situation will require expan­sionary policies on the part of the in­dustrial nations in surplus balance of payments positions having unutilized capacity for expansion and strong re­serve positions. These countries must be prepared to encourage the read­justment by action to generate and facilitate increased demand for im­ports to absorb the expanding exports aimed for by the deficit countries. Only if this is done will the readjust­ment take place in an expansionary environment favorable to primary commodity prices. If the readjustment should fall too heavily on the reduc­tion of imports rather than the expan­sion of exports in countries dominant in world trade, the consequences for smaller deficit countries could be disastrous. The surplus countries must be prepared to accept a check to the increase in their reserves and the pos­sibility of loss of reserves without tak­ing countermeasures.

New Zealand will be closely watch­ing trends during the coming year, particularly to assess the conse­quences for such commodities as wool. The New Zealand Government

is hoping also for a responsible ap­proach to the problems arising from excessive support for the production of dairy products in major industrial nations. These policies are likely to be self-destructive and we welcome the realization of this fact by some participants. The statement on this matter by the Governor for Germany will be warmly commended in New Zealand. The offering of surpluses at subsidized prices in the markets of traditional exporters strikes a blow at international economic cooperation.

Partly arising from the slowdown of demand and output in major industrial countries during 1966 and early 1967, and partly because of a structural change for what was New Zealand's main export commodity-wool-the rate of growth of New Zealand's ex­port income was severely checked in that period. Although there has been some recovery in the demand and prices for some exports, the deteriora­tion in our terms of trade with the rest of the world in a period of two years has been about 17 per cent. This de­terioration and the future outlook for world trade leads us to assume that any significant improvement during the coming year is unlikely. To accom­modate our economy to this situation a period of severe restraint has been necessary, covering fiscal and mone­tary remedial measures, to reduce do­mestic demand for imports and to create the environment in which the devaluation, which accompanied that of sterling, could achieve the objec­tive of halting the excessive deficit on current account. During the year ended October 1967 the deficit on current account had reached $NZ 136 million. In the year ended last month we had succeeded in changing this to a surplus of $NZ 50 million ....

. . . It is clear that the key to re­sumption of a reasonable rate of eco­nomic growth must lie in channeling more of our resources into exports and competitive import saving to ac­commodate ourselves to the adverse terms of trade. This reshaping of the economy will require greater empha­sis on the efficient use of our re­sources of labor and capital. To this end, and to ensure the cooperation

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of all sections of the community, a National Development Conference with committees and working parties covering all sectors of the economy is now engaged in the task of setting targets for an integrated program of development for the next ten years. At a recent meeting targets were set for growth in various sectors designed to achieve an average annual growth of 41f2 per cent.

New Zealand was fortunate to have a team of World Bank economists visit the country during the last year to undertake an independent survey of the New Zealand economy with par­ticular reference to development strat­egy. Their report has provided the the structure of the economy and the Government with an outside view of changes needed to achieve maximum development in the future. The mis­sion report will be an additional ref­erence for our National Development Conference. To achieve the annual growth rate set by the Targets Com­mittee, some significant structural changes in the economy will be re­quired. These will require access to sUbstantial amounts of capital funds.

I welcome the comments of the President of the World Bank regard­ing the likely expansion in Bank lend­ing during the next five years and hope that the Bank may be able to continue to assist New Zealand in achieving its development goals.

Because of our preoccupation with commodity prices we have been looking forward to the study initiated at last year's Annual Meeting on the problem of the stabilization of prices for primary products. The study so far completed and distributed as Part I is a useful one, but I had hoped that more progress would have been made. Little attention has been given to those products which are of par­ticular interest to New Zealand, that is, temperate agricultural products. While these international organiza­tions of ours, and other organiza­tions, pursue their leisurely way to­ward agreements on commodity prices and markets, individual primary producers and their families through­out the world have personal problems ranging from financial insecurity to

downright starvation. It is essential that the major industrial nations give more of this kind of aid, that is, aid to find a solution to the problem of the man who simply wants a reason­able return for the products of his toil. This is not charity. Ultimately, it is simply international common sense.

The staff study refers to the prob­lem of diversification of production in order to remove the problem of sur­plus capacity in primary products. It seems to imply, however, that this will need to be done by a long-term trans­formation of the structure of produc­tion and exports of the primary pro­ducing countries. In many cases, how­ever, the problem of surplus capacity has originated in the artificial stimulus to production of primary products or substitutes for them in industrial countries. I believe that these coun­tries are much better equipped and in a stronger position to undertake any diversification which may be necessary than the smaller primary producing countries. We have noted with interest the reference made to this point by the Managing Director of the International Monetary Fund in his opening address, and fully agree with the emphasis which he gave to this question. While the President of the World Bank was speaking of his plans for increased capital aid to develop­ing countries I was reminded that a massive flow of aid for development will be rendered useless if the mar­kets for the products of that develop­ment are destroyed by short-sighted, protectionist policies implemented for political reasons. This is particularly true of the agricultural development to which he gave so much emphasis.

My country supports the Resolution urging an early completion of the study which has been recommended by the Executive Board.

Niger: Courmo Barcourgne

Governor of the Fund

shall take only a few minutes of your time and, at that, not only on

my own account but also on behalf of the Governors of the six countries Dahomey, Ivory Coast, Mauritania, Senegal, Togo, and Upper Volta which, with Niger, make up the West African Monetary Union with the Ban­que Centrale des Etats de l'Afrique de I'Ouest as their common institute of issue.

In our own small way we have al­ready, for the last six years, achieved the type of monetary cooperation be­tween sovereign states that econo­mists recognize as the ideal: with pooling of our foreign reserves and a common administration of our mone­tary system. The system is all the better for it and, with the support of the cooperation that we estab­lished with France, on July 8, 1967, we were able to abolish all restrictions on our foreign payments to any coun­try whatever. Although, for reasons of solidarity and precaution, we tem­porarily reinstated certain exchange control measures in June 1968, those measures were repealed in all our States from last September 15.

This free convertibility of our cur­rency, favorable as it may be to our development and to the foreign enter­prises concerned in it, nevertheless imposes on us a strict discipline with regard to the creation of our currency, and this discipline is particularly pre­carious to maintain when interest rates in developed countries are at such high levels as those presently in effect, which are detrimental to the conditions attaching to financing on the scale of the problems of developing countries .... ... It is not the least of the para­

doxes of the Bretton Woods institu­tions that every year, for 21 years, they have invited their members to discuss monetary problems and prob­lems of financing and development, at the same time and in the same surroundings, but without ever suffi­ciently emphasizing the need for a joint study. It seems to us, however, that the effectiveness of one of the institutions is each day more depen­dent on its cooperation with the other.

We hailed the appointment of Mr. McNamara with high hopes, and so were most impatient to hear the first

address of the World Bank's new President. It is said that eloquence is a quality particularly appreciated by Africans, and we highly valued that of Mr. McNamara. We also admired his courage inasmuch as courage was needed to acknowledge that Africa should be given a more equit­able place in the operations of the Bank and its affiliates, since more than one-third of their members be­long to the African continent, and it is their needs that should be most urgently met, according to the Bank's· own publications.

While Mr. McNamara's remarks held our entire attention, we in our turn would like to stress certain points that we take most particularly to heart: they concern IDA and the sta­bilization of prices for primary products.

It would be not unprofitable to evaluate the problems of development once again in the light of the past and have their future solution ex­plored by a new Commission com­posed of eminent personalities. We congratulate the President of the Bank on this new idea and on the choice of the distinguished person appointed to direct his Commission. May we ask him, however, to take as the motto for their deliberations this phrase of the economist whose memory forever haunts the Bretton Woods institutions: "In the long run we are all dead."

People describe underdevelopment as a threat to peace, but that is be­cause it is, above all, a protest and revolt in the face of perpetual rejec­tion, in the long run, of the solutions that must be devised for its problems. We are perfectly well aware that our needs, even those for which there are the soundest reasons, cannot all be met immediately; but at least we ex­pect them to be taken into considera­tion and the means of satisfying them put into effect without delay.

In this respect we greatly regret that there have not been submitted to this Meeting all the studies and pro­posals already worked out by the Bank and Fund staffs concerning possible intervention by these two institutions in the stabilization of prices for pri­mary products.

It is not right to propose that we defer till our next Meeting the mere study of proposals already drawn up, which would have the effect of post­poning the first decisions until 1970 at the earliest. Therefore, our seven States of the Monetary Union have joined with another group of countries to put forward a draft resolution urg­ing that our Board be notified of the Bank and Fund proposals by Decem­ber 31, 1968, at latest.

The States on whose behalf I ad­dress you once again express their trust in the Bretton Woods institu­tions by setting their hopes on jOint action by these two organizations in searching with the greatest speed for solutions requiring a common effort and international solidarity, which alone is truly able to combat underdevelopment.

Nigeria: C. N. Isong

Governor of the Fund

would like to join the previous speakers in welcoming the new mem­bers to the Fund and Bank and to wish them well. We are also pleased that the tenure of office of the Manag­ing Director, Mr. Schweitzer, has been renewed, and that a renowned pub­lic figure like Mr. McNamara has been appointed the new President of the World Bank. A combination of Mr. Schweitzer and Mr. NcNamara should represent a new watershed in the operations of the Fund and the Bank and the relations of these institutions with all member States, especially the developing countries. There is already strong evidence that this hope is justified ....

. . . Developing member states have a vital interest in what happens to the international payments system. In a period of planned development, and dependent as they are on primary exports and development assistance for their economic progress, stable in­ternational economic conditions are required for the expansion of export receipts and the flow of develop-

mental assistance. A continuous and steady growth in the developed economies should result in a steady and expanding demand for primary products. If conditions of instability in the international financial order are permitted, the whole world suffers and not least the developing states.

The Annual Report of the Fund has shown that there has in recent years been a progressive rise in the level of exchange transactions between the Fund and its members. The drawings of the primary exporting members arising from decisions on the Com­pensatory Financing of Export Fluc­tuations have also been expanding progressively. In the aggregate, the rising level of drawings reflects firstly the absolute growth of world trade and the inadequacy or maldistribu­tion of international reserves. Sec­ondly, especially for the developing states, it demonstrates the diminishing value of the exports of the primary exporting states compared with their requirements for foreign exchange to finance developmental and other forms of imports. And yet there is no sign that the terms of trade of the primary exporters will ever improve. The inexorable advance in technology and scientific research constantly brings out new products in the form of synthetics which, in some cases, are progressively superior to and cheaper to manufacture than natural commodities. This is increasingly evi­dent in the case of rubber and fibers where synthetics are gradually re­placing natural products in the re­spective industries. It goes without saying that in the face of advanced technology and science developing countries are becoming less and less competitive.

For a number of years now Ni­geria and other less developed coun­tries have tried to draw attention to these developments and their adverse effects on the development efforts of the developing countries. It is evident that the developing countries cannot, and would not wish to, stop the ad­vances in science and technology. But until they also become active par­ticipants in these spheres, the ad­verse effects of such advances on the

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economic development efforts of the less developed countries must be countered through international com­pensatory actions in the stabilization of world prices of primary products. The developed countries would also have to come to terms with the fact that industrialization is the only means of achieving economic prog­ress in the less developed countries. In this respect they should be more ready to extend assistance to further the development of manufacturing in­dustries so that at least some of the local raw materials may be utilized domestically. They should also be more responsive to the resolutions of UNCTAD which have repeatedly called upon them to open their mar­kets for manufacturing exports of the developing countries, and to reduce tariffs against processed primary ex­ports. Schemes which do not add to the debt burden of these countries are called for. That is why it is especially important that the current studies on the stabilization of prices of primary products, which should find a realistic solution to offset permanently the diminution of export receipts of pri­mary exporting countries arising from declines in world prices of their ex­ports, should be completed with a minimum delay. Nigeria, from its ex­perience at the conferences on cocoa price stabilization, recognizes the dif­ficulties which attend efforts in the di­rection of international price stabiliza­tion. But if the growing gap in eco­nomic well-being between the rich and the poor is to be narrowed, a positive action is imperative. It is gratifying to note that the Managing Director is convinced that it is pos­sible for the Fund to make some con­tribution toward this end.

There is yet another possibility for active Fund involvement in the de­velopmental process in the less de­veloped member states. We and many other developing member states have in the past proposed that the Fund should allocate annually a portion of its annual net income to the Interna­tional Development Association in the same manner as the Bank does. In this way, IDA would be in a position to extend more nonconventional loans

to needy members. It is our opInion that this kind of assistance has plaus­ible balance of payments implications, and in a very direct way, represents a kind of supplementary finance to counter falls in export receipts. We have noted with concern that this year the Fund is proposing to share part of its annual net income among some of its members. While it may be legally impossible for it to trans­fer part of this net income to IDA, we believe that the prospective re­cipients of such income can, at this time, voluntarily surrender their share to that body. In future, however, legal means should be found whereby the Fund can transfer from time to time a SUbstantial part of its annual net income to IDA.

It is not my desire to go into the balance of payments difficulties of Nigeria specifically. Our problems in this sphere are partly a result of in­ternal difficulties and partly a result of the general conditions of the world economy. To the extent that the gen­eral international problems are tack­led and solved, to that extent will most of Nigeria's own specfic prob­lems receive solutions .... ... Turning to the problems of de­

velopment, which are the concern of the World Bank Group, we see that in the past year there was a contrac­tion in the amount of finance provided to developing countries by the World Bank and its affiliate, the International Development Association. Since de­velopment assistance arising from bi­lateral negotiations also declined, this meant an absolute decline in de­velopmental assistance at a time when the need for development fi­nance has been greater than ever. The flow of aid must be increased if the economic growth in developing countries is to be accelerated. It is for this reason that we welcome in particular the bold new policies aimed at tripling aid to Africa in the next five years, which the new Presi­dent of the World Bank has outlined for us.

One of the perennial problems of developing countries has been the growing burden of debt servlcmg. The terms of assistance to many de-

veloping countries have worsened in recent years. This continues to pose serious problems for these countries. The Bank's Annual Report reveals that in 1966 at least six countries utilized more than 15 per cent of their export earnings in servicing ex­ternal official debts and that for de­veloping countries, the ratio was more than 9 per cent. In fact, a good num­ber of the countries actually employed more than half of the total new re­ceipts of loans and grants in debt servicing. In a number of cases debt servicing actually exceeded receipts of new assistance. All this under­scores the urgent need of these coun­tries for more development finance on concessionary terms and the urgent need for the replenishment of IDA re­sources. We strongly urge the more prosperous countries to assist IDA so that it can respond more adequately than hitherto to the needs of develop­ing countries. In this connection, we are happy to note the recommenda­tion of the Executive Directors to transfer US$75 million from the net earnings of the Bank to the resources of IDA. We are also gratified to note the very commendable supplementary contributions from Norway and Sweden in the current campaign to augment the resources of IDA.

In Rio de Janeiro last year, Nigeria stated that in most developing coun­tries, development finance companies are publicly owned and controlled by governments and that they play an important role in financing medium­sized enterprises. We therefore urged the Bank to broaden its rules and regulations to make it possible for it to assist directly government-owned enterprises. We note with satisfaction that steps are being taken to enable Bank/IDA, subject to the usual cri­teria, to give financial assistance to government-owned and controlled de­velopment banks as well as industrial enterprises. We also welcome the de­cision to allow IFC to invest in indus­trial projects even though they do not qualify for IFC finance initially under IFC's established criteria.

As I mentioned earlier, growing burdens of debt servicing have ad­versely affected the finances of the

developing countries and have in­hibited the determined development efforts of many developing countries, particularly in Africa. In this connec­tion, I commend the relaxation of the rules and regulations of the Bank re­garding the financing of local cur­rency cost of development projects. This policy shift represents a signifi­cant departure from the investment policy which was tenaciously pursued hitherto. We share the view that the ability of the Bank to playa leading role in development is directly related to the degree of flexibility and the optimum level of investment in a country. The need for the Bank to operate effectively in these areas is a major reason for it to engage in this type of financing in deserved cases. It has always been the view of Nigeria that if a country is making a genuine effort to mobilize domestic savings and to use these savings for high priority investment projects, the Bank should not deny such a country assistance on the ground that it is unable to provide the required local cost component of a highly desirable and important project. We welcome the policy of expanding the lending operations of the Bank in the African region and the new emphasis on as­sistance in favor of educational and agricultural development.

In welcoming these significant policy changes, however, we are compelled to point out that since de­veloping countries are at different levels of development, care must be taken in executing the new policies. While in some countries priorities may be given to infrastructural projects such as roads, ports and power, in others emphasis may be on agricul­ture and education. In Nigeria, our priority needs are for assistance for capital investment in transport and in­dustrial sectors, agricultural modern­ization and expansion of education in the less advanced parts of the country.

My country welcomes the appoint­ment of the Pearson Committee. We believe that the reasons which prompted its creation are commend­able and worthwhile. We hope that the result of its study will lead to a nar-

rowing of the gap which now exists between the rich and the poor nations of the world. The new policies of the Bank Group point to a promising future for developing countries. It is our hope that what is starting so well will endure and even improve as we move into the future. Nigeria has a stake in the new policies and in the future.

I would like to conclude my state­ment by referring briefly to conditions in my country. As you are fully aware, Nigeria has been compelled for more than a year now to fight a civil war in order to maintain its sovereignty and national integrity. The war has led to serious dislocations in some sectors of the economy and a general retardation of its growth rate. The rate of inflow of new in­vestment has slowed down. The dis­ruption of the transport system has also complicated the problem of in­ternal communication and hence pro­duction. Mineral production, espe­cially petroleum, which imparted a high per cent contribution to the rate of growth of GOP before mid-1966 has fallen drastically.

Although it was inevitable that some degree of difficul1y should re­sult from the civil war, it can be said that Nigeria has managed its economy in the direction that strengthened its sovereignty. Whateve'r else the war has done, it has revealed to us more than ever before the basic strength of the economy. Because of this we have been able to keep our head above the sea of economic difficul­ties, despite internal and external de­velopments which have increased these problems. With the end of the civil war in sight, plans are being readied to embark on the task of post­war reconstruction. For us this will be, perhaps, the most challenging period in our history. We estimate the cost of rehabilitation and restoration of basic infrastructure in the country at about US$280 million in the public sector. About 50 to 60 per cent of this expenditure will take the form of offshore cost which Nigeria will have to earn in foreign exchange within the next two to three years.

This is a staggering sum but we are

determined to return the economy to a peacetime footing as early as pos­sible so that a normal rate of produc­tion and export may be resumed. Nigeria's exports exceeded US$670 million in 1967, and this was after a substantial decline in the export of crude petroleum. With the expected resumption of petroleum production, export of petroleum by 1971 is esti­mated to rise about four-fold over the 1968 level, and over seven-fold by 1975. Even if our other exports re­main at the 1967 level, Nigeria's esti­mated export should reach about US$1,510 million by 1975. This should have a healthy effect on the coun­try's balance of payments. We also believe that with the cessation of hos­tilities and the restoration of confi­dence in the country, increased foreign assistance toward our devel­opment will strengthen the domestic efforts. Nigeria is confident of achiev­ing improved economic performance in the postwar years.

Pakistan: N. M. UquaiJi

Governor of the Bank

At the outset I would like to con­gratulate Mr. McNamara on his ap­pointment as President of the World Bank and Mr. Schweitzer on his re­appointment as the Managing Direc­tor of the Fund. With men of their eminence and mature experience at the helm we can look forward with confidence to the continued growth of these institutions and the further strengthening of their role in the field of international finance and develop­ment. May I also take this opportunity to compliment Mr. Rosen, Executive Vice President of IFC, for the strides made by IFC with investments in 39 countries and record new commit­ments, participations and portfolio sales made at time of tight money conditions.

The year 1967-68 was a year of un­usual activity both for the Fund and the World Bank. It is creditable that the Executive Directors of the Fund

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were able, in less than a year, to complete their report to the Governors proposing amendments in the Fund's Articles of Agreement necessitated by the adoption of the resolution relating to the special drawing rights scheme last year. We are also appreciative of the studies conducted by the staffs of the Fund and the Bank on various problems affecting the less developed countries. The joint study on the stabilization of prices of primary prod­ucts and the World Bank studies on the export experience of developing countries and export credit are val­uable documents and should greatly help policy formulation in future years. The question of stabilization of commodity prices being one of great importance and urgency for the de­veloping countries I would urge-as in fact was suggested by Mr. Schweitzer yesterday-that the study be. completed well in advance of our Annual Meeting next year.

The hopes and aspirations of the developing world are enshrined in these two institutions. Every year we flock to their portals in this annual ritual to see and assess the extent to which our prayers of previous years have been answered. Every year, however, it is our experience that "the hungry sheep keep looking up." The year 1967-68 was no exception. Development finance provided by the World Bank and its affiliates declined from $1,130.3 million in 1966-67 to $953.5 million in 1967-68. The rate of growth of export earnings of the less developed countries as a group went down by almost half. Tariff and trade barriers for the developing countries continued to operate as harshly as ever. The terms of foreign assistance showed little sign of softening while the debt servicing liability became more burdensome.

The decline in the amount of fi­nance provided for economic devel­opment by the World Bank and its affil­iates was caused entirely by the ap­proaching exhaustion of resources of IDA. The need for a second general replenishment of IDA resources was long recognized, the target date for replenishment to become effective was fixed at June 30, 1968. It was

subsequently extended to September 30, 1968, but it has not been possible to adhere to even this deadline. The continued delay in the replenishment of IDA resources is a matter of great concern for all developing countries. Development assistance loses much of its usefulness if it lacks continuity. Not only does uncertainty about re­source availability preclude efficient planning, interruptions of this nature disrupt the entire development pro­gram. The new formula on which the replenishment proposal is based takes adequate care of the balance of payments problem of individual donor countries but if this be still a hurdle in the way in some cases, I see no reason why the process of re­plenishment should not commence and the proceeds begin to be used straightaway.

Conscious of the impact which con­tinued delay in the replenishment of IDA resources could have on the economic growth of less developed countries, Mr. McNamara has shown commendable initiative in expanding the Bank's operations and by bringing about improvement in the terms of credit by leng'thening the repayment period; and yesterday we heard him giving an outline of the very bold and imaginative manner in which he in­tends to expand the Bank's operations further in this direction. These are welcome measures but no substitute for the resumption by IDA of its oper­ations on an enlarged scale as origi­nally envisaged.

Both the Fund and the Bank reports have focused attention on the s'trains to which the world economy was sub­jected during 1967. Particularly dis­turbing was the reduction in the growth of world trade which reflected the slowing down of demand and out­put in the major industrial countries in the course of 1966 and its intensi­fication in the first half of 1967. De­spite the recovery of economic ac­tivity in the industrial countries in the second half of 1967, world trade in­creased by only 5 per cent in 1967 as a whole as against the impres­sive rate of expansion of over 8 per cent between 1960 and 1966. Taking the year from the third quarter of

1966 to the third quarter of 1967, the rate of expansion in world trade was still more disappointing and was only 2 per cent. The slowing down of world trade has had a markedly ad­verse effect on the exports of the de­veloping countries. Not only were their export earnings affected, but the slowdown in the expansion in world trade also impinged on the growth in aid commitments for them which re­mained stationary at the level of the preceding years.

While there was no improvement in the quantum of aid for less developed countries during 1967-68, their debt servIcing problem became more acute. Due to restricted availability of credit on soft terms, increasing use of suppliers' credit had to be resorted to by the less developed countries. As a result, the blend of soft and hard loans has been quite different from what could be considered desir­able, leading to a considerable hard­ening in the average terms of avail­able assistance. It is obvious that the harder the terms, the higher will be the future gross amount required merely to maintain a constant net amount of foreign assistance. Ac­cording to an estimate made by the Development Assistance Committee of the OECD, on the same average terms as in 1965, the gross official capital flow would have to be in­creased from $5,750 million in 1965 to $7,820 million in 1975 and further to $10,180 million in 1985, if the flow of official capital to the developing coun­tries net of amortization and interest is to be kept only unchanged. In fact, as the World Bank President remarked in the Annual Meeting for 1966-67, if the volume of development finance does not grow and if there is no improve­ment in the terms of aid, development aid would simply eat itself up and for some aid-giving countries net official trans·fers would soon turn out to be zero. Improved programming and bet­ter terms of aid are, therefore, an ur­gent and inevitable necessity for the protection of development effort in less developed countries. In fixing their level of aid, I hope the developed countries will keep in mind the con­cept of aid flows net of debt repayment.

The year 1967-68 has been a dis­appointment in other respects also. In this forum last year developing countries expressed their strong sense of disillusionment with the re­sults of the Kennedy Round of tariff negotiations. This year we had ear­nestly looked forward to UNCT AD II to ease the problems of less devel­oped countries. The central issues were those that have already been de­bated for years, namely, trade prefer­ences for developing countries, greater access for their products in the mar­kets of developed countries, commod­ity agreements, the volume of aid and the supplementary financing scheme. There was, however, a regrettable lack of understanding on all these issues and none of them received more than a vague recognition. I be­lieve the world as a whole is com­mitted, in common concern, to the task of the economic uplift of the developing countries. The crucial element in this process is the ade­quate availability of external finance. Developing countries can acquire these resources by enlarged trade and greater external assistance. But both these sources are shrinking.

We in Pakistan largely endorse the priorities for development set out by the President of the World Bank in his address last Monday. In Pakistan, at any rate, agriculture in all its aspects and family planning are already enjoy­ing the highest priority and we can claim to have achieved a substantial measure of success also in both these fields. For improvements in ed­ucation we have just set up a man­power commission to assess the needs of the country in the light of our development program. But it is the balance of payments constraint which comes seriously in the way of accelerated progress not only in these fields but of the growth process as a whole. However vigorous may be the domestic resource mobilization effort of developing countries, their devel­opment plans cannot be carried to fruition unless the foreign exchange needed to cover the import component of their development plans is forth­coming. It is the unanimous view of the developing countries that some

international financial arrangement is vitally necessary to overcome the impediment to the smooth progress of their development plans arising from adverse movements in their exports of a nature which could not be taken care of by short-term balance of payments support. It was in this context that the developing countries greatly welcomed the supplemen­tary financing scheme prepared by the staff of the World Bank. We hope that this scheme, though not fully satisfac­tory, will be given a trial.

The year 1967-68 was a trying year for the world monetary system also. Much will now depend on the restora­tion of a better balance in the world payments system through the elimina­tion or reduction of the payments deficits of the two reserve currency countries. While it is reassuring that the reserve currency countries are making determined and sustained ef­forts to cope with their payments problem, the process of adjustment is likely to prove painful. In this con­text I would like to draw attention to the fact that in bringing about the needed adjustment in their balance of payments, the developed countries appear to be relying heavily on in­struments of monetary policy, particu­larly the interest rate mechanism. While the consequences for world trade are the same whether the cur­tailment of domestic demand in these countries is brought about by fiscal policy or monetary policy, the less developed countries stand to lose more if the main emphasis is on monetary policy. Such a policy would, on the one hand, reduce the spontan­eous movement of private capital to the developing countries and on the other aggravate their debt serviCing problems by causing a rise in the general level of interest rates. It would be in the larger interest of the world economy if the demand contraction­ary policies of deficit countries rely more on fiscal than monetary mea­sures and are also accompanied by suitable expansionary policies on the part of surplus countries ....

. . . The developing countries are currently in a crucial stage of growth. Several Qf them have built up a large

potential for development by invest­ing in the necessary infrastructure and evolving the appropriate institu­tional framework. Organizations for the efficient implementation of de­velopment projects have come into being. Techniques of planning at the national and local level have become more sophisticated. Just when these favorable factors have prepared the developing countries for entrance into a more ambitious phase of de­velopment, the international climate is tending to become indifferent. If this trend continues, the challenge of development would rapidly outgrow our combined efforts to meet it. This not only would be a sad event for the future of the developing countries but it is also likely to affect the eco­nomic well-being of other countries and, if development is peace, as Mr. McNamara, quoting Pope Paul, said last Monday, it might even endanger world security.

Before I conclude I would like to place on record our appreciation of the able leadership of the former President of the World Bank, Mr. Woods, and his unfailing solicitude for the interests of the developing countries. We hope that the idea of the Grand Assize, which he had sug­gested for the assessment of the re­sults of development activity over the last two decades and for formulation of a long-term strategy of foreign as­sistance for developing countries and which has now been given concrete form by Mr. McNamara's appointment of Mr. Lester Pearson as the chair­man of this group, will cut short the apparently interminable debates on the basic issues dividing the devel­oped and developing world and will result in a concrete and universally acceptable solution of this ali-impor­tant world problem.

Paraguay: Cesar Romeo Acosta

Governor of the Bank

During the last few years Paraguay has embarked upon the task of giving a strong push to its economic and

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social development through the or­derly use of internal and external re­sources. The objectives accomplished thus far are reflected in the national accounts sta'tements and tables pub­lished by the Central Bank of Para­guay, which provide a complete pic­ture of the progress made in a rela­tively short time. Without rigidity or pressures in ,the implementation of the programs, a strong rate of prog­ress has been reached for mitigat­ing or remedying existing social ills through harmonious equilibrium trends in the economy and adequate use of financial and technical resources.

A monetary policy with a stable ex­change rate in accordance with the proposed targets of an economic policy that reflects the general feeling of the productive seotors has been a primary objective; in addition, it has been considered essential to achieve reasonably stable domestic prices. These conditions have promoted, first of all, confidence in the country, and secondly, a well-defined and rapid rate of business activity to sustain vol­untary savings and create a propi­tious climate for the investment of re­sources for productive purposes in goods and services.

However, there are questions out­side the sphere of government that are being faced by the Paraguayan economy, such as that of world prices for export commodities. It should be emphasized that very little progress can be made toward increasing in­come and improving economic condi­tions without a full solution of this problem. The studies that are being made in the World Bank for opening up the trade of the less developed countries to an expansion that does not fall short of the desired potential by guaranteeing stable prices for their products will contribute to the solu­tion of one of the essential problems of the growth process.

We have attached considerable im­portance to agricultural production, where notable advances have been recorded. Investment in new industry is also increasing. Production of wheat has become a reality. Infra­structu re projects are being carried out steadily. The total amount of in-

vestment for fixed capital formation, which is of incontestable importance for the continuity of Paraguay's eco­nomic development, has shown a high increase during 1967, reaching 10,180.4 million guaranies, equivalent to an absolute increase of 991.8 mil­lion guaranies, or 10.8 per cent, in rel­ative terms.

The extraordinary growth of invest­ments for capital formation is the result of the Government's efforts to provide adequate conditions for the growth of the economy. As a result of the strong expansion of the econ­omy in 1967, gross national product continues to expand at a relatively high rate. It is expected that it will increase in 1968 at the same rate as in 1967, Le., by 6 per cent at constant market prices.

In national income terms, it was possible to offset the virtual stagna­tion of expoMs in 1967 by a more rapidly expanding rate of production of goods for the domestic market.

Nevertheless, fruitful results cannot be produced by a one-sided effort; a joint effort is required. Therefore we rely on ,the words of Mr. Robert S. McNamara in his address as Presi­dent of the World Bank at the open­ing meeting on September 30, 1968, when he said " ... the Bank group should during the next five years lend twice as much as during the past five years," adding tha't "in Latin America, I foresee our investment rate more than doubling in the next five years."

These words open up unlimited and promising prospects for achieving the minimum desirable increases in the future evolution of our socioeco­nomic situation. In this awareness of the need to increase the rate of prog­ress, it has been necessary to inten­sify the Government's effort in many aspects of essential infrastructure projects and in the construction of a hydroelectric plant that will be opened in December 1968.

Within the limited framework of this statement, there is evidence of the great willingness of the Paraguayan Government to surmount the cyclical and external factors that have ad­versely affected the developing coun­tries, such as diminished foreign

exchange receipts, unstable and fre­quently low prices, and the obstruc­tion of trade through quotas, customs tariffs and other limitations established by the developed countries for imports from exporters of raw materials. To counteract the negative effects of these factors, measures have been adopted to expand and diversify pro­duction of other agricultural products such as wheat, sorghum, and legumes with very good production prospects.

In expressing our approval of the Annual Report of the World Bank and International Development Associa­tion and that of the International Fi­nance Corporation, I am happy to ful­fill the most pleasant duty of extend­ing to Mr. McNamara on behalf of my Government its warmest congratula­tions for his highly esteemed opening address, and to express my best wishes for his success in perform­ing his functions for the peace and se­curity of the free world.

Philippines: Eduardo Z. Romualdez

Governor of the Bank

These ga'therings that we hold every year would be futile exercises if, each succeeding year, they did not enable us to help the developing countries move somewhat more rapidly toward a fuller and more abun­dant existence.

This is our 23rd consecutive An­nual Meeting. While some progress has been achieved these 23 years we are still merely nibbling at the tre­mendous resources needed to do the task. Not only is the total flow of re­sources to the developing countries short of what they can now produc­tively use, but the share of the World Bank family in that flow is still barely a tenth. The major portion, over two­fifths, are bilateral forms of assistance motivated not primarily by the desire to help development but intermixed with commercial and trade objectives.

President McNamara has set bold targets for expanding the volume of Bank financing for development.

I t

I weuld like to' undertifl.e the impor­tance of providing the proper blend and balance ef assistance.

It is time that we censidered hew the family of international devel­epment finance institutiens could be fashiened intO' a mere petent instru­ment fer assisting develeping coun­tries to' derive the maximum benefits and balance frem external financing. The hepe ef setting the development of the peerer countries as the pri­mary geal ef assistance lies in an ex­pansion ef the rele ef these institu­tiens.

This year we meet to' discuss the problems ef world develepment fi­nance under a rather gleemy and emineus atmesphere. The level ef as­sistance frem the richer ceuntries reached a plateau in 1963. The meed in the United States (which has been acceunti ng fer five-eighths ef the tetal flews) seems to' be to' cut the levels back further. Last year the United States Cengress cut the AID apprepri­atien by abeut ene-feurth. And enly recently there have beenindicatiens that the United States subscriptien to' the funds ef IDA weuld net pass U.S. Cengress.

In the meantime many ef the devel­eping ceuntries are meeting severe bettlenecks in their centinued devel­epment because ef their balance ef payments difficulties.

It is well knewn at this peint that the average terms ef the fereign fi­nancing that develeping ceuntries get are mest significant fer their future debt burden and its impact en their balance ef payments.

Thus, censider the effect ef direct private investments en the balance ef payments. Ignering the impact ef cap­ital repatriatien and censidering merely the remittances from invest­ment inceme, a censtant annual gress flew ef direct investments will after a time be cempletely effset by a net eutflew ef inceme remittances. The time will depend en the rate ef re­turn earned by the foreign investment in the develeping ceuntry and the per­centage ef annual inceme that is re­invested.

Thus calculated-assuming the rate ef return to' be, say, 20 per cent per

annum and the reinvestment ratio to' be 50 per cent-then in about seven and a quarter years, the income re­mittances will cempletely offset a fixed annual gress inflew ef direct in­vestment. After that peried then, if the gress inflew remains at the same level, net inflew will be negative and the gap will be increasing every year.

In the Philippines, this has already been the situatien since at least 1961. Remittances en investment inceme far exceed the inflew ef direct invest­ments.

In the seven years frem 1961 to' 1967, the gress inflew ef direct pri­vate investments intO' my ceuntry te­taled US$76.5 millien. Over the same peried eutward remittances fer invest­ment inceme added up to' $332.2 mil­lien, er ever feur times the gross capi­tal inflew.

The situatien, ef ceurse, wersens the higher the rate ef return earned by fereign investments in the develep­ing ceuntries. In a study prepared by Mr. Andrew M. Kamarck ef the Werld Bank, the rates ef return en U.S. di­rect investments have averaged as high as 38.9 per cent per annum in Asia frem 1956 to' 1963.

The same situatien helds true ef fereign leans. A fixed annual gress in­flew ef fereign credits is effset by re­mittances ef amertizatien and inter­est. The time it takes fer this to' eccur depends largely en the average ma­turity ef the credits and partly en the interest rate.

Taking the cenventienal terms ef, say, an average ef abeut 7.5 years fer equipment credits and an interest ef 7 per cent per annum will mean that a censtant gress inflew ef credits an­nually will be cempletely effset by debt service in five years. After which, if gress inflews ef new credits merely remain at the same level, the net inflews ef capital will be negative.

The Philippines has alsO' been suf­fering frem precisely this situatien:

a. Private medium- to' leng-term trade credits have shown net eut­flews fer feur eut ef the six years frem 1962 to' 1967.

b. On Natienal Gevernment leng­term leans, we have had net repay­ments in 1966 and 1967.

Unless the financing "mix" ef a ceuntry like eurs includes a reasen­able prepertien ef cencessienary credits, we shall be hard-put to' raise increasing ameunts ef fresh cenven­tienal leans. And we get intO' the irenic pesitien ef getting intO' mere serieus balance ef payments difficul­ties the mere attractive we make eur ceuntry to' fereign direct investments.

The aggregate flew must increase if the develeping ceuntries are to' have a net inflew ef financial reseurces. The mement the rate ef flew slews dewn then debt service payments will cause a net eutflew ef reseurces frem the develeping ceuntries.

I sheuld like to' set ferth seme ef the salient faots ef my ewn ceuntry to' illustrate the preblems ef develep­ment finance which are beceming typical.

The Philippines has had a rather respectable recerd ef growth and ece­nomic stability. Over the past seven years eur real GNP has been grew­ing at the rate ef 5 per cent per year, altheugh per capita product has grewn at an average ef enly 1.5 per cent per year because ef eur popula­tien grewth. Our pepulatien grewth ef 3.2 per cent per year is ameng the highest in the werld, but Mr. McNamara's remarks netwithstanding, it is my censidered view that at least in my ceuntry the imperative is to' in­crease the preductive petential and to' channel funds intO' prejects designed to' meet head-en secial preblems, such as these in the fields ef educa­tien, health, and infrastructure.

Ameng the means enumerated by Mr. Fewler fer assuring an adequate velume ef develepment finance is the improvement in the mebilizatien of do­mestic reseurces in the develeping ceuntries themselves.

We have achieved a reasonably rapid growth in eur demestic preduct largely eut ef our ewn reseurces. Our gress demestic investment rate has grewn frem 15 per cent in 1962 to' 18 per cent in 1967. Gress domestic sav­ings have actually exceeded gress de­mestic investments in three ef the six years frem 1962 to' 1967. Over that peri ed, en balance, the centributien ef fereign capital has been negative.

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This year, our Congress has ap­proved a tax program that would raise fresh revenues for the Govern­ment's development budget. To date, our Congress has enacted tax mea­sures which will raise government revenues by about 25 per cent.

We have thus achieved growth under relatively stable domestic con­ditions with a growth in the consumer price levels of under 4 per cent per annum.

Our foreign trade record has been relatively good. Over the period, our merchandise exports have grown an average of 63/4 per cent per annum but our invisible receipts have in­creased at an annual rate of 27.7 per cent per annum, so that our foreign exchange receipts on current account have grown at the rate of 11 per cent per year.

We welcome the attention that the staffs of the World Bank and the Fund have jointly given to the problem of stabilizing the world prices of primary commodities. We share the senti­ments expressed by our neighbors concerning the loss of valuable for­eign exchange resources that we, in the developing world, suffer from the steady erosion of prices of certain primary commodities.

As a result of development itself, our import requirements have been growing more rapidly at ~he rate of 12.5 per cent per year. The situation has been aggravated by the fact that the foreign capital flows have now turned against us because of profit remittances and repayments for past conventional foreign financing.

The Philippines has not been con­sidered eligible for IDA financing. But it has become obvious from our ex­perience that a country in our posi­tion needs to blend foreign credits on concessionary terms with more con­ventional loans. Otherwise, it must constantly be increasing the inflow of fresh conventional credits simply to keep up with the past obligations for dividend remittances and debt ser­vice.

In a cursory glance at the balance of payments of a number of develop­ing countries, I have found quite a number in a similar situation. I have

noted with interest particularly that, in many countries, the outflow of in­vestment income remittances often exceeds the net inflow of private long­term investments. And that except for those countries enjoying fresh loans on concessionary terms, debt service burdens have begun to offset the in­flow of new loans.

It is time the family of international development finance institutions played a more active role in assist­ing developing countries to structure the right kind of "mix" in their inter­national financing. The policies so far have been strongly oriented toward in­dividual projects. It is conceded that in formulating financing decisions the country situation enters into the reck­oning. But the basis for evaluating the position of countries is largely the ac­tual flows of resources in the econ­omy. Little attention has been paid so far to the structure which influences future flows.

The reason perhaps is that the sta­tistical accounting of flows is much more advanced in the developing countries than the recording of na­tional balance sheets.

I am suggesting that the World Bank family of institutions consider more carefully the need to achieve a proper blending of the assistance typically offered by each of the three institutions and to depart from hard and fast rules disqualifying particular countries from IDA assistance.

Sierra Leone: M. S. Forna Governor of the Bank and Fund

On behalf of my delegation, I would like, first of all, to join other speakers in thanking the President, Govern­ment, and the people of the United States for the warm hospitality ex­tended to us.

During the last Annual Meetings, we had as our President of the World Bank Group a man whose tireless ef­forts and devotion to duty will long be remembered by the developing world. His constant pleas to the rich

nations for assistance to the poor na­tions have been heard in all corners of the world. This, coupled with his high sense of responsibility and will­ingness to be of service wherever he is needed has earned him the dis­tinction and reputation of a friend of the developing world. It is, therefore, with a sense of gratitude and appreci­ation, that I, on behalf of my Gov­ernment and the people of Sierra Leone, take this opportunity to give honor and tribute to our former Pres­ident, Mr. George Woods. To him, I say, well done.

We are fortunate to have as his suc­cessor, a man of great distinction, a man with the vision and drive to ex­plore new avenues of raising funds for the operations of the Bank and its affil­iates. We are heartened by the new targets he has set, and note with satisfaction the new emphasis on a more equitable geographical distribu­tion of the Bank's resources. The em­phasis on agriculture, education and population control as special areas of activity by the Bank are especially welcome. I and my Delegation have great faith in the determination of our new President and wish him a suc­cessful tenure of office.

During the period between the two World Wars, the world economy col­lapsed largely as a result of the se­rious problems encountered by one or two of the leading industrial coun­tries in the world. These problems were quickly transmitted to other in­dustrial countries and, in even more severe form, to the primary produc­ing countries. From the experiences of the last year or so, we can prob­ably safely conclude that cooperation on international economic affairs in recent years has reduced the threat to world trade and development aris­ing out of the difficulties of one or two major industrial nations. . . . There are however, certain aspects of this cooperation and these measures which have attracted the particular attention of the developing coun­tries, and these aspects themselves may merit some consideration.

The first point emerging from the experiences of the last year or two is that the flow of development ass is-

t

tance is seriously affected by difficul­ties in the economies of the devel­oped nations. The pressures on the balance of payments of certain major developed countries, and on the econ­omies of the reserve currencies in particular, have both reduced the amounts channeled to the developing countries and increased the cost of the assistance which was available. The difficulties faced by IDA in re­plenishing its resources are a particu­larly striking illustration of this point. In a very direct way, therefore, the stabilization of the world monetary system is eagerly awaited by the poor countries of the world, since instability in this system results in a disruption in the flow of loans and grants for development purposes.

Another feature of the recent efforts to save the existing monetary system is that although action was taken fairly quickly when the system was seriously endangered, these efforts were applied only when the rupture of the system appeared to be immi­nent. That is to say, the crises created by the gold rush of March and the threatened diversification of sterling area country reserves in the months leading up to July 1968 were tackled and staved off virtually at the last mo­ment, and only because ultimately the stronger currencies would themselves have foundered along with those under attack.

The measures and devices which emerged from the cooperation of the world's principal monetary authorities are also obviously temporary. Despite their success in solving the immedi­ate problems created by the external payments difficulties of the reserve currency countries, both the two-tier gold price and the various stand-by and currency swap arrangements have been characterized by many observers as patches for two separate but re­lated parts of the international mone­tary system which have threatened to break down and bring the whole structure with them. Whether such ar­rangements will do the job until a basic recasting of the system is accom­plished is, literally, a matter of specu­lation, but it is quite clear that a num­ber of years will elapse before such a

reorganization is complete. In the meantime, we shall have to manage with a system which shows a tendency to shudder noticeably with every shock, and which communicates these shudders in a magnified form to the developing countries.

None of these observations is new, but taken together, they make a point which has received insufficient stress in the discussions of these matters. The international monetary system, as it operates at present, reflects over­whelmingly the views and preoccupa­tions of the rich countries of the world. If strains develop in the sys­tem, steps are taken to deal with them only when they threaten directly the economies and currencies of the rich members. And the measures to re­move this threat take little account of the needs of the poorer members. To some extent, this is easily under­stood; the members on whose partici­pation, management, and contribu­tions the system vitally depends should expect to have a predominat­ing voice in the management of the system, and any running repairs to the system must be made with reference to their particular problems, since these problems invariably create the need for such repairs. At the same time, however, the question should be asked whether this need be so, and whether temporary solutions cannot also take account of the special needs of the poorer countries.

Such a question may be raised in the current debate on the methods by which countries running a substantial external deficit and those enjoying a large and persisting surplus can be brought into closer balance. Basic or fundamental solutions, such as a sys­tem of flexible exchange rates, a gen­eral realignment of pegged exchange rates, or a large increase in world monetary reserves either do not enjoy general acceptance, or require lengthy preparation and neg01iation. Hence, a number of interim solutions have been offered, such as more ex­pansionary policies in the surplus countries, more restrictive policies in deficit countries, or selective revalua­tion of the currencies of certain surplus countries. The difficulties with these

solutions are that they frequently are scarcely more acceptable to the par­ties concerned than the more basic solutions and, more importantly for the poorer nations, in themselves they contain nothing which ensures a re­sumption of the flow of aid to devel­oping countries.

The policies advocated for reducing the external imbalances among the major industrial countries contain real political and social drawbacks, and governments are in general under­standably unwilling to inflict sacrifices in their domestic economies too quickly or too drastically. This is par­ticularly true in the case of surplus countries, although the Annual Report of the Fund does draw attention to the progress made in this area of coop­eration. This is not to advocate that countries in deficit do not have an ob­ligation to correct this deficit by the application of sound economic poli­cies. However, as recent experiences have indicated, even strong medicine takes time to work, and in the mean­time, a continuous threat is posed to the stability of the monetary system as a whole.

Some measure of relief has been achieved by encouraging the outflow of capital from surplus countries, prin­cipally by giving foreign governments and companies access to the domes­tic capital market of the surplus coun­tries. This approach also has its limi­tations, however, since speculative short-term capital inflows may com­pletely offset the longer-term outflow through the capital market. In a word, this approach permits a transfer of the surplus but does not ensure it. In addition, the long-term capital may it­self have come from the deficit coun­tries, and the evident competitiveness of the surplus countries also makes it possible that in the final analysis the capital outflow may itself add further to the surplus countries' reserves.

Finally, such an approach is in no way geared to the needs of the devel­oping countries, except insofar as they, or the international development agencies, also have access to the cap­ital markets of the surplus countries. We have seen very welcome moves in this direction in recent months, and

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these initiatives have been warmly welcomed in the developing countries. Taken as a whole, however, the use of capital markets as a means of cor­recting payments imbalances and re­storing the flow of development as­sistance is haphazard and inadequate.

Nevertheless, the concept of deal­ing with chronic imbalances through capital movement may be worthy of additional consideration, if suitably expanded and institutionalized. To put the matter simply, what is needed at the present time is a means by which the surplus countries can somehow channel their excess reserves into long-term loans for developing coun­tries, and these loans used for the purchase of goods and services in the deficit countries. Essentially, such an arrangement would combine a re­distribution of reserves between sur­plus and deficit countries with a re­distribution of income between rich and poor countries.

The conversion of the surpluses into loans could be carried out by divert­ing all reserves in excess of a certain level into a development fund to be administered by the Bank and certain other development banks and agen­cies. Such an approach would ensure that objective economic criteria would continue to be used in the actual awarding and disbursement of devel­opment loans, and the trend toward direction of aid through multilateral channels would be continued.

There are, of course, certain ob­jections to such a scheme. In the first place, it would be a purely temporary device, and would do nothing to alter the basic reasons for the emergence of chronic payments surpluses and deficits. Indeed, its adoption may even perpetuate the overvaluation and un­dervaluation of currencies. However, as indicated earlier, it is not meant to provide a basic solution to the problem of international payments ad­justments, but rather to provide a means by which crises can be avoided while more fundamental solutions are being pursued, and to avoid the dry­ing up of development aid which nor­mally accompanies such crises. Fur­ther, its effect in perpetuating dis­alignments in exchange rates may, in

many cases, be no greater-and much less painful-than other currently used expedients, and may assist the inter­national balancing mechanism in cases where no fundamental disequilibrium in exchange rates exists.

The question also arises under what circumstances the scheme would come into operation. Clearly, the cur­rent payments situation would be one in which this scheme could be tried, and it ought to be clearly within the competence of the Fund to judge when the relative surplus-deficit po­sitions in the major countries would warrant the operation of such a scheme. One further question con­cerns the time required to organize and implement such an arrangement. No doubt some time would be needed to prepare suitable channels for the transfer of the surpluses into the de­velopment fund, and for the borrow­ing institutions to prepare themselves for what would be for many a new kind of activity. These technical diffi­culties, however, would surely yield to expert and energetic work in the vari­ous international organizations and central banks ....

... In conclusion, I would wish that the friendly and business atmosphere which has characterized all our meet­ings in the past will stay with us and that our present deliberations will yield fruits that we and posterity may come to enjoy.

Somalia: Abdullahi Jirreh DuaJeh

Governor of the Bank

Allow me first of all to give my cor­dial greetings to the participants in this international gathering and to thank the City of Washington, which traditionally acts as our host, for the friendly-thus, typically American­reception accorded to us.

I should like to express my Gov­ernment's as well as my own personal satisfaction at the appointment of Mr. McNamara as President of the World Bank and the confirmation in office as Managing Director of the Fund of

Mr. Schweitzer. At the same time, I would like to thank most warmly Mr. George Woods for the work under­taken by him during the five years in which he was President of the World Bank. My Government also welcomes the new countries-Botswana, Leso­tho, Malta, and Mauritius-to member­ship in these institutions.

Last but not least, I congratulate the staff of the Bretton Woods insti­tutions for their excellent perfor­mance, and in particular wish to stress the importance of the work under­taken toward the stabilization of prices of primary products. I look for­ward to concrete steps which may contribute to resolve the long-stand­ing, and for us very impor,tant, prob­lem of these prices.

May I now register my regret over the fact that there has been a decline, in the course of last year, in the as­sistance provided by these three fi­nancing institutions, and particularly by IDA: this last organization, in fact, owing to the gradual depletion of its resources, was forced to restrict its aid within considerably narrower lim­its than in previous years, as figures alone will suffice to show: total loans, amounting to $353 million in 1966-67, came down to as little as $107 mil­lion in 1967-68.

I noted with satisfaction the agree­ment reached in March this year by the industrialized countries, which have pledged to increase their contri­butions to IDA to a higher level than in 1964, when a new injection of capi­tal was decided for the first time. I hope that now many projects, which were held in abeyance due to financ­ing difficulties, may soon be imple­mented. I indeed welcome the crea­tion of the Commission headed by Mr. Lester Pearson to survey the prob­lems of development activities during the last decade and to chart out a plan for effective steps to tackle these problems in the future. It is the hope of my Delegation that this Commis­sion will give ample accommodation to views and experience of the de­veloping world.

In spite of the financial embarrass­ment just mentioned, which put a con­straint on IDA's activities during the

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last twelve-month period the Associa­tion was able to grant Somalia an ad­ditional credit of the order of $2.3 mil­lion in order to complete the con­struction of the 125-mile long Afgoi­Baidoa road. This road runs through the major agricultural centers of the country and will help reduce the cost of transporting our agricultural pro­duce to the various local markets. So­malia's interes-t in completing this project is enhanced by the recent identification of uranium deposits in the areas to be traversed by the new road.

Representatives of the World Bank have visited Mogadiscio not long ago and held meetings with members of the Somali Government with a view to discussing the procedures for financ­ing the Mogadiscio Por-t project. It is our hope that the financing and or­ganizational difficulties which so far barred the way to the finalization of this project may be overcome in the near future. This project is of vital im­portance for Somalia, fo-r in the ab­sence of efficient port facilities the products we export increase consid­erably in cost and are thus less com­petitive on the world markets.

If these two projects can be run concurrently, the pace of agricultural and industrial development in the im­portant area lying between Juba and the Shebeli Rivers will be quickened and the exodus of the rural population to the towns, which of late has been increasing to an alarming point, will be checked.

I should now mention that, within the framework of the Short-Term De­velopment Plan of Somalia, there has been established, in early 1968, the Somali Development Bank, which is to finance, by means of medium- and long-term loans, productive activities that, by their nature, require heavy in­vestments. May I express the hope that we may count on the assistance of friendly countries and of these in­stitutions to further this new initia­tive ....

... We listened with great interest to Governor Colombo of Italy's pro­posal aiming at providing a link be­tween the special drawing rights fa­cility and the financial needs of eco-

nomic development. We wish to join him in suggesting that this proposal be carefully studied and eventually im­plemented.

In going through the Fund Annual Report I have observed the huge profit that the Fund has made last year. These amounts have been provision­ally put into the General Reserve pending the Board of Governors' de­cision.

It is the view of my delegation that these profits should not be dis­tributed. Instead we suggest that the bulk of these profits be distributed through international investment in­stitutions in the form of development assistance. Failing this, we would ask that these funds be used to lower the Fund's charges on its transactions with developing countries ....

... We in Somalia believe that aid alone will not solve our problems. In fact we know that without self-help any efforts we make can be meaning­less. We therefore have drawn our­selves a timetable for the next three years in the form of a Short-Term Development Plan which has just been released.

The Development Plan makes use of our experiences of the last eight years of independence and avoids the short­comings of our First Five-Year Plan. It is based on projected internal re­sources and available external aid. It lays emphasis on the very sectors that President McNamara has singled out in his opening speech as the basis of sound economic development, i.e., agriculture, animal husbandry and di­versification of exports.

We have every reason therefore to look to the future with optimism, with­out at the same time being com­placent since the path to economic growth is indeed very difficult and re­quires both courage and caution.

South Africa: Nicolaas Diederichs

Governor of the Bank and Fund

I should like at the outset to extend a very warm welcome to Mr. Mc­Namara, whose opening address gives

promise of a distinguished term of of­fice as President of the Bank and its associated organizations. I am espe­cially gratified at his reference to the prospect of increasing aid for the de­veloping countries of Africa. We wish him well in the challenging task which he has set himself. I should also like to add my tribute to the many which have been paid to his predecessor, Mr. Woods, who has guided the World Bank Group through difficult years. Allow me further to congratulate Mr. Schweitzer on his well-deserved re­appOintment as Managing Director of the Fund.

It gives me great pleasure also to welcome the new members of our or­ganizations, and particularly our neighbors Botswana, Lesotho and Mauritius. I hope that they will soon be joined by our other newly-inde­pendent neighbor, Swaziland ....

Spain: Juan Jose Espinosa

Governor of the Bank

have read with the greatest inter­est the Report on the Bank's fiscal year 1967-68, and I wish to express my congratulations on the work that has been accomplished, as, in spite of the difficulties of the world situation, operations have been maintained at practically the same level as in the previous fiscal year. The rapidly grow­ing volume of the external indebted­ness of developing countries, the con­siderable tension existing in the in­ternational capital market, and the in­crease in the interest rate of the Bank have no doubt impeded the achieve­ment of more ambitious goals.

After hearing the brilliant speech of the new President, whom I congratu­late on his appointment, I also wish to join in the general approval of Mr. McNamara's declared intention of increasing the scope of activity of the World Bank Group and for making it more dynamic. We also agree with Mr. McNamara in his desire for greater activity by the World Bank Group in the sectors of agriculture,

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livestock, and fisheries. We also be­lieve that the field of education should have a high priority.

The World Bank Group should also pay preferential attention to the sec­tors which contribute most to the de­velopment of each specific country. The aid already initiated in favor of countries which are half-way along the road to development should be con­tinued, so as to prepare them as soon as possible to give aid in their turn to the remaining developing coun­tries. It would also be very appropri­ate in this new period of greater mo­bility and dynamism to go beyond the guidelines that might put difficulties in the way of effective aid for the de­velopment of member countries, as, for instance, the rules limiting fi­nancial assistance to cover only for­eign exchange needs should be re­vised.

Within this framework of increased efforts in favor of developing coun­tries, the present situation of IDA de­serves special attention. Its increas­ing activity is one of the most effec­tive means of adding to the efficiency of the Bank and decreasing the burden it might entail on those coun­tries which need the assistance of mixed credits because of the particu­lar stage of their development. We consider that there is an urgent need for the replenishment of IDA and an improved geographical distribution in the use of its resources, with special attention to the countries of Latin America and Africa.

It so happens that we are about to witness the entry into the international community of the new nation of Equa­torial Guinea. It will be for its Gov­ernment to decide whether to join the World Bank Group. May I here express the warm wishes of my Gov­ernment that Equatorial Guinea, which begins her international life so full of hope and in a spirit of fraternal friend­ship with Spain, may pursue her de­velopment with the greatest speed and effectiveness, and may find here the best possible response to her request, if, as I hope, the new Government de­cides to join.

We have before us the proposal to

transfer to IDA $75 million out of the Bank's net income. Perhaps we should approach this suggestion with due caution, from considerations of finan­cial and legal orthodoxy. However, for the reasons I have already men­tioned, we are decidedly in favor of the proposed transfer. Spain, al­though she is a Part II country, has already taken steps to mobilize her quota in favor of other countries, and she will study with the Association the proper formulae for proceeding further in this direction.

Also urgent is the study of the need to increase the exports of developing countries through adequate preferen­tial treatment and complementary fi­nancing. Attention should be given to the need to mitigate the insecurity and fluctuation in the prices of basic products, and to consider the problem of the heavy burden imposed on de­veloping countries by their external indebtedness, combined with the ris­ing expense of international credit.

The Bank is now entering a new phase, the importance of which has been justly pointed out and reiterated. The increasing gap between the poor and rich countries does indeed make it urgent and essential to correct this phenomenon which is so menacing for world economic stability and peace. This situation demands new and diversified efforts by the World Bank Group, and the creation of new forms of action and of flexible and dy­namic ideas, to allow the Bank, even if it means assuming new risks, to work effectively for the achievement of this important goal.

But I would not be sincere if I did not express to this distinguished as­sembly my surprise and concern at the reference made by our President, at the end of his interesting speech, to the complex and delicate subject of birth control and family planning, which, in my opinion, might possibly affect the fundamental freedoms of men, families and nations.

I am confident that this reference was merely an expression of personal opinion and that there was no inten­tion of proposing these now as de­cisions to be made here, because

these would require a previous and very careful study on the part of the Governors. It this were not the case, I would feel obliged to express my disapproval of such a proposal.

This is a highly controversial mat­ter, which, since it goes beyond eco­nomic considerations to higher levels affecting morals, might pose serious problems for the individual con­science.

Mr. McNamara has stated that the population increase is not due so much to a higher birth rate as to a decrease in mortality rates due to ad­vances in medical science. To reduce the population increase he thinks in terms of artificial birth control.

I believe that this approach is pre­mature. The reports of the World Bank and FAO emphasize, in an evidently optimistic tone, that remarkable tech­nological progress has been made in agriculture, and Mr. McNamara him­self has told us that we are on the verge of an agricultural revolution as significant as any event since the In­dustrial Revolution, and so it improves our chances in the struggle between Man and the resources at his disposal.

In order to re-establish the balance between our needs and resources, I believe that the world's effort should concentrate on increasing our re­sources, instead of the supposedly easier and quicker method of reduc­ing our requirements.

But in the event that the Bank should undertake to study this issue, I wish it to be noted that in my view the objective sought could not be justified by the financing or imposi­tion of any sort of methods. At the time of taking decisions the opinions of the highest spiritual and moral au­thorities should be very much borne in mind and the greatest care and prudence exercised in proceeding.

Finally, I would like to express my best wishes to our President for fur­ther success in this new phase and to congratulate him on the mobilization of resources he has obtained in vari­ous capital markets on an unprece­dented scale, and for his high purpose of increasing the Bank's assistance to the developing countries.

... f.

,

Sudan: Hussein EI Sherif EI Hindi

Governor of the Bank

I wish first of all to congratulate Mr. McNamara on his succession to the Presidency of the International Bank and its affiliates. The hopes and fates of the majority of humanity depend to a great extent on his success in the war on poverty and backwardness and in his persuading the industrial­ized countries to increase their sup­port for international development. We are sure that he will bring to these challenging tasks a breadth of vision, more effective techniques, and ex­peditious and efficient dispatch of problems and policies.

Sudan is pleased to learn about the intended plans for reviewing the problem of underdevelopment and the ways and means needed to meet it over the next five years. We welcome the setting up of the Pearson Com­mission, and the promise to map out operations for the next five years and to formulate a development plan for each developing nation.

We also welcome the new shift to greater emphasis on Africa and other areas where past efforts have been inadequate, hence the need for greater help; and we support fully the new policy of doubling investment in agriculture, education, and health.

It is only common sense that Bank loans should be for projects soundly based and appraised; but the approval should not be purely from a banker's outlook; there is great foresighted­ness in admitting that sound develop­ment financing is not and should not be risk-proof; it is finance for devel­opment and therefore carries along with it a certain degree of acceptable risk.

I fully appreciate that the crucial factors in economic development are numerous, but still it is a generally accepted fact that the single most strategic factor is capital. The devel­oping countries are providing from their own resources a little more than three quarters of the financing of their development. On the other hand, in the first six years of the Development

Decade the official net inflow of capi­tal from the industrialized countries was static and, in real terms, its value was less. Since then its magnitude has become less and its real value further reduced, and this at a time when the needs and absorptive ca­pacity of the developing countries had appreciably increased and the pros­perity and wealth of the industrialized countries had substantially grown. Fi­nancial assistance is not only de­creasing but also, in the words of the former President of the World Bank, Mr. George D. Woods, "The indus­trial countries are not doing enough to enable the less developed nations to earn their own way. The export earnings of the developing countries are not keeping pace with the gen­eral growth of world trade, and formidable barriers in the form of tariffs, quotas, and other kinds of hurdles stand in the way of their achieving a higher share of this trade." This question, as well as the other central themes of the second session of the United Nations Con­ference on Trade and Development, remains largely unanswered. It is true that some of the resolutions adopted at the end of that Confer­ence contain some fruitful ideas and good intentions, but it is doubtful whether in the present circumstances effective and speedy constructive ac­tion will be taken on these resolu­tions. I am not being unnecessarily peSSimistic, for it is no exaggeration to say that a crisis in capital aid to developing countries is already here and seems to be gathering momen­tum. The change of mood in some of the industrialized countries makes the prospects of increased aid very grim.

Capital inflow is now very slow, in­terest exorbitantly high, and periods of repayment rather short, and the rate of inflow is confined to sup­pliers' credits to further exports from developed to developing countries. Should international assistance to de­veloping countries be held down be­cause of one or other of these fac­tors, an already serious situation will be aggravated. The replenishment of IDA has dragged on and on. Although the sizable level of replenishment

that was tentatively agreed is below the expectations and needs of devel­oping countries, it is not yet effective in spite of the extension of the date by which it was to come into force. The case for helping the less devel­oped countries needs no reiteration. I, therefore, still hope that the indus­trialized countries will provide enough and do so in the right way and in time, for, as Mr. Woods once said, "The new name for peace is develop­ment." ...

Sweden: Gunnar Strang

Governor of the Bank

Speaking on behalf of the five Nor­dic countries, Denmark, Finland, Ice­land, Norway and Sweden, I want to join the previous speakers in their words of welcome and good wishes to the new President of the Bank Group. New vistas and new avenues of approach were indeed opened in his inspiring address which in such a commendable way combined realism, enthusiasm and forcefulness.

My main topic today will be the complex one of development finance. However, the dramatic events in the monetary field over the last year have certainly demonstrated that the smooth functioning of the international mone­tary system is a prerequisite for mobil­izing an adequate amount of funds for development finance. . ..

. . . In 1961, President Kennedy, speaking on development assistance, stated: "We have not only obligations to fulfill, we have great opportunities to realize." These words are equally true and valid today, seven years later. But the efforts of the richer nations to meet the challenge and to realize these opportunities have become less and less convincing. The share of Gross National Product that devel­oped countries devote to official as­sistance has continued to decline since 1961. In the gigantic Second Session of UNCTAD there was hardly any issue on which agreement on pos-

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itive action in favor of the developing countries could be reached.

It is a sad state of affairs that we are witnessing a slowing down of progress in the field of development assistance. This tendency must be reversed.

We join in deploring the present lack of a joint strategy, and promise our support for the preparations now under way for making the next de­velopment decade a more success­ful one.

One of the most important single lessons to be learned from the ex­periences of the last decade is that the problems of development cannot be successfully tackled on a purely financial basis. In most of the devel­oping countries a momentous task is to create new social and economic structu res-often in conflict with tra­ditions of a past era. The responsi­bility for creating social justice and reducing economic inequalities lies of course with the countries themselves. But the World Bank and other multi­lateral organizations must be pre­pared to use their resources to assist these countries in their difficult task. We welcome the fact that the Bank Group is now placing increased em­phasis on the vital sectors of educa­tion and of agriculture.

We should-in the words of Mr. McNamara-look at the progress for human beings rather than nations. Economic growth does not achieve its purpose if it is not accompanied by increasing per capita income. And it is not so much economic growth rates as birth rates that differ significantly between rich and poor countries. The development problem cannot be solved as long as the population ex­plosion is not brought under control. We are all aware of the circumspec­tion with which this question has to be approached. I therefore strongly wel­come and support not only that the population problem will now be given increased attention by the Bank Group but also that this will be done in the pragmatic way outlined by Mr. McNamara. Nordic countries, with some experience in granting assis­tance to family planning programs in developing countries, will certainly be

prepared to cooperate with the Bank to the extent that this may facilitate its work in this field.

Another fundamental problem is that of the debt-servicing burden.

To be fully efficient, measures to improve the terms and conditions of development assistance should be taken by concerted action. We be­lieve that here the Bank has an im­portant role to play in submitting con­structive solutions. Initiatives to this end should be based on past experi­ence and a full knowledge of the present situations. We therefore sug­gest that the Bank study systemati­cally the experiences of indebtedness problems made in the international aid coordinating groups-consortia and consultative groups-with a view to establishing guidelines for future policies.

The Nordic countries are consid­ering ways and means of softening the terms of their development as­sistance. In this connection I may mention that the Swedish Government is prepared to make its contribution to this end by reducing the burden of all Swedish development credits to be repaid over less than 25 years. Sweden intends to double the grace period of these credits from 5 to 10 years. The repayment period for all Swedish development credits will thereby be 25 years or more. It is hoped that this action will form part of a general advance toward softer terms and conditions.

The increasing tendency toward tying development loans to deliveries gives ground for concern. The nega­tive effects on the value of aid of this tendency may be offset by an increase in the share of multilateral aid in total development aid. But a condition is of course that tying practices should not be allowed to spread from bi­lateral to multilateral assistance.

This is the third consecutive An­nual Meeting in which the second IDA replenishment is the most important question. Last March the long nego­tiations resulted in a three-year re­plenishment on a level which was 60 per cent higher than that of the pre­vious period. Although this level was much lower than that of the original

proposal supported by the Nordic countries, it still means a significant step forward.

One would have expected that only formalities remained before the re­plenishment would become effective on June 30. However, the closing date has had to be postponed twice. This is highly regrettable. There is no sub­stitute for IDA today. If the second replenishment is further delayed this would mean a hard blow to IDA as the leading multilateral agency for soft development finance as well as to the cause of international devel­opment assistance in general. The countries which have the largest needs would suffer most. We appeal to all countries that have not yet ap­proved the second replenishment to do so urgently.

Syrian Arab Republic: Adnan Farra

Alternate Governor of the Fund

It gives me pleasure to start by thanking the management of the Bank and the Fund for their valuable 1968 Annual Reports and for their joint study of the problem of stabilization of prices of primary products. I would like also to thank in particular the Executive Directors of the Fund for their Report containing the Proposed Amendment to the Articles of Agree­ment.

I would like, however, to make the following comments related to the aforementioned reports and study ....

... It is well known that the efforts of the developing countries to in­crease their growth rates are ham­pered by two main problems pertain­ing to their foreign trade: namely, a short-term one and a long-term one. The short-term problem takes the form of short-term declines in their export earnings owing either to de­clines in their international prices or to reductions in the volume of ex­ports consequent upon unforeseen circumstances such as droughts, floods and the like. The long-term problem is the slow growth in their

•

exports and the deterioration in their terms of trade. This slow growth in exports is manifested in the fact that the share of the developing countries in total world exports declined from 27 per cent in 1953 to only 19.3 per cent in 1966. Moreover, the deteriora­tion in their terms of trade amounted to 13 per cent between 1954 and 1966 which entailed a considerable loss in the purchasing power of their exports in terms of their imports. Thus, the report of UNCTAD II states that "taking as a base for estimation the average export and import prices rul­ing in the years 1953-57, the average annual magnitude of this loss has been put at nearly US$2.2 billion, or an appreciable proportion-roughly one-fifth-of the annual net capital flow into developing countries from all sources."

May I add here that, taking the years 1952-54 as a base, only as a result of the adverse movements of its cotton prices, my country has suf­fered a loss of US$260 million during the period 1952-1967.

The reasons for the long-term slow growth in the exports of developing countries and the deterioration in their terms of trade are familiar and are competently analyzed in the joint study of the Fund and the Bank. Therefore, I see no need to rehearse them. What I would like to stress here, however, is that the aforementioned two problems affecting the trade of developing countries disrupt their de­velopment efforts, and that their loss in purchasing power is one of the most unjust realities of international trade relations.

We believe it is high time that the international community adopt con­cordant measures that would help in solving the aforementioned trade problems of developing countries. For a long time these countries have been advocating in the United Nations and related bodies the establishment of international buffer stocks within the framework of commodity agreements in order to stabilize commodity prices. The results were disappointing. More­over they have been urging, with dis­mal results, the developed countries to take measures that would ensure

freer access to their markets for the exports of developing countries. There is no doubt that such measures, to­gether with measures that should be taken by the developing countries themselves to diversify their exports and ensure trade expansion and eco­nomic cooperation among themselves, would help to improve the long-term prospects for their exports.

Resolution No. 22-9 1 adopted last year in the Rio Meeting invites the Fund and the Bank to study the prob­lem of stabilization of prices of pri­mary products. This resolution may be viewed as an attempt by the develop­ing countries and some developed ones to expedite the process toward achieving some kind of stability for the prices of primary products.

The first part of the study is be­fore us and is valuable. It contains a general and analytical survey of the problem. But what would be of more interest is the second part which is expected to contain the possible measures that might be taken by the Fund and the Bank in the field of com­modity stabilization. We expect, how­ever, that the measures to be recom­mended by the Bank staff will be more oriented toward improving the long­term export performance of develop­ing countries, while those to be rec­ommended by the Fund staff will be concerned with the problem of stab­ilization as such ....

. Despite the slight increase in 1967 in the flow of official capital from the developed market economy countries, as was indicated by the latest Annual Report of the World Bank, it is regrettable that the over­all flow of development assistance continued to fall short of accepted targets, despite the enhanced ability of the developing countries to absorb more efficiently a bigger amount of aid. Thus, while in 1961 the flow of development financing to developing countries amounted to 0.87 per cent of the gross national product of de­veloped countries, it came down to 0.62 per cent in 1966.

When we come to the terms of de­velopment assistance, it is agreed even by the developed countries that they still remain too hard. The stiff-

ness of these terms together with the sluggish growth of the exports of de­veloping countries played a role in aggravating the problem of their ex­ternal indebtedness and increased sharply their debt-servicing commit­ments. The ratio of the annual debt burden of these countries to their ex­ports has risen from 6 per cent in the mid-1950's to 12 per cent in the mid-1960's.

In addition to the foregoing, there is another disturbing feature of the state of external development financ­ing. This feature is not widely publi­cized, but is not less disturbing. It is simply that the provision of aid is not always made in accordance with eco­nomic criteria and that political con­siderations often play an important role when decisions for aid assistance are taken. In the Report TD/7/Supp.1 submitted by the UNCTAD Secre­tariat to the financial Committee of UNCTAD II, the following statement is made: "It is difficult to discern any clear pattern of distribution of capital flows among recipient countries in terms of economic criteria. Govern­ments often concentrate their aid upon countries with which they have affiliations of one kind or another. Pri­vate capital concentrates largely upon countries that are already or are po­tential exporters of petroleum, and, to a lesser extent, of other minerals. The net result of this concentration is a somewhat haphazard distribution of the total resources available, and tendency for the per capita flows to the low-income countries to be below the average."

We believe that this unsatisfactory state of affairs with regard to the vol­ume of aid, its terms and its distri­bution should be remedied. We there­fore reiterate our support of the rec­ommendations taken by UNCTAD II concerning the aid volume target and the improvement of the terms and conditions of aid. Moreover, we are pleased to note the recent establish­ment of the Pearson Commission, which is made in response to the sug­gestion of the distinguished previous

I Of the Board of Governors of the Fund. A similar Resolution (No. 239) was passed by the Board of Governors of the Bank.

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President of the World Bank, Mr. Woods. We understand that the pur­pose of this Commission is to pro­vide expert evaluation of the results of the last 20 years of development activity, draw the lessons of such evaluation and make recommenda­tions thereon. We hope that the work of the Commission will prove helpful in enhancing the flow of external cap­ital and rendering the distribution of such flow more compatible with sound economic criteria.

Tanzania: Paul Bomani

Governor of the Bank

I should like to take this opportunity to welcome the new President of the Bank whose address reflects the en­ergy and wisdom he brings to his new office. The promising initiatives he has taken in the past few months and the still more hopeful perspec­tives he has outlined for the next five years are indeed welcome. I also take this opportunity to congratulate the Managing Director of the Fund for his reappointment and to wish him well in his new term of office. Finally it is a pleasure to welcome Botswana, Mauritius, Lesotho, and Malta to the joint meetings for the first time as members.

Our task as members of the inter­national economic community re­mains, and is becoming increasingly formidable. The past year has been one of crises and of stresses. Increas­ing scarcity of international liquidity and balance of payments crises in several major industrial economies have combined to raise interest rate (forcing the World Bank to follow suit), and made the flow of untied capital transfers and progress toward trade liberalization more difficult. In this context, I share the concern ex­pressed by other Governors regarding the continued delay in the replenish­ment of IDA resources. If the result of adjustments by economies suffer­ing balance of payments problems is to reduce world growth rates, re-

source transfers, and international trade expansion the cost to the de­veloping world-in lower export vol­ume, deteriorating terms of trade, and worsening borrowing conditions-will be high. Such a pattern of adjust­ment would to a significant degree shift the real burden of adjustment to the developing countries who are least able to bear it.

It would not be proper to paint a picture of total gloom and despair. The measures which were taken ear­lier this year as well as the agree­ment on the establishment of the spe­cial drawing rights indicate that, given the will, the international community has the capacity to meet these chal­lenges .... ... It is also encouraging to ob­

serve that in spite of these unfavor­able developments certain developing countries, including my own, were able to record some solid achieve­ments. Nonetheless, the nature of the challenge confronting us remains stark, a conclusion only the more clearly underlined by the President of the Bank's delineation of the uneven­ness of growth among developing countries. It is disconcerting that at a time when many developing countries are making strenuous efforts and achieving significant successes in in­creasing their self-reliance, the in­dustrial world's cooperation in our joint battle for development is stag­nant or actually declining.

I welcome the President's determi­nation to double the volume of the Bank's lending over the next five years and to expand the field of its operations and, in particular, his rec­ognition of the needs of the less fa­vored areas of the world. On the other hand, the decline in untied and con­cessionary funds to which I have re­ferred, and of which IDA had become the most significant single source, is deeply disheartening. In this connec­tion, I would like to welcome the in­creased transfer of Bank profits to IDA and to express the hope that this trend will be sustained.

The unresolved problem of replen­ishment of IDA resources emphasizes the need to evolve a mechanism for providing this institution with a per-

manent source of funds. It is with re­gret therefore that the Fund should, at a time when IDA's position is so critical, have initiated the unprece­dented distribution of part of its profits. Even at this late hour, I should like to make an earnest appeal to the beneficiaries to surrender these funds to IDA. As a long-term measure, I would like to propose that considera­tion be given to modifying the Arti­cles of the Fund to permit an auto­matic transfer of all or part of its net income to the Association.

The danger that adjustments will result in reduced growth of world trade in 1969 is a real one. To pri­mary producing countries this pros­pect is ominous. To cite our own case, the loss from falling prices of sisal (once our largest export) has, over 1965-68, come to a 50 per cent fall in unit price and a total export loss of T Sh 780 million which is more than total public and private net capital in­flow over the period and about 15 per cent of annual gross domestic prod­uct. In this regard I do not need to overemphasize the importance to us of the questions of commodity price stabilization at remunerative levels and the need for the industrial econ­omies to remove restriotive discrim­ination against our exports. Thus, while I welcome the preliminary work on commodity stabilization done to date by the Bank and Fund, I cannot but record my deep regret at the fail­ure to produce concrete recommenda­tions even for interim action. The fail­ure of UNCTAD to reach agreement on the reduction of subsidies in re­spect of uneconomic agricultural pro­duction in the industrial countries is equally disappointing. If it is sensible to urge developing countries to di­versify out of high-cost coffee pro­duction, how much more sensible it is to urge developed industrial econo­mies to diversify out of high-cost cot­ton or beet sugar production. Their flexibility in resource allocation and their ability to bear the transitional costs are surely much greater than ours.

I welcome the initiative of the Bank in setting up the inquiry into the per­spective for development finance

under the distinguished leadership of Lester Pearson. However, it must be admitted that in the past many such studies-no matter how ably carried out and well intentioned-have tended to be substitutes for, rather than pre­ludes to, action. I trust that under the dynamic leadership of Mr. McNamara this pattern will not be repeated.

In Tanzania we have increasingly acted on our conviction that the main thrust to development must come from our own efforts. Confidence in our capacity has grown during the implementation of our first Five Year Plan-now in its final year. By the end of the five-year period, we shall have mobilized nearly double the volume of domestic resources originally con­sidered possible and these will have financed well over half of all devel­opment spending. Conversely, only little more than half of our external re­source projections will have been realized. Our next Five Year Plan will provide for continued increases in the absolute level and percentage share of domestic savings. However, if the domestic efforts are not to be frus­trated, a significant volume and a re­liable flow of foreign capital will be essential.

For many years the import content of our investment programs will re­main high while present price pro­jections for our major exports offer little hope of corresponding growth of foreign exchange earnings. Only through long-term investment de­signed to restructure our economy, both to reduce the relative depen­dence on imports and to develop new exports, can sustained economic growth be achieved. I might add that resource transfer for this purpose will -both in the short and the long run­make Tanzania a better trading part­ner and, therefore, enable it to play its full part as a member of the inter­national trading community.

During the past year, the inaugura­tion of the East African Community has strengthened the capacity for long-term development of Kenya, Tan­zania, and Uganda and provided the foundation for an expanding area of economic integration in Eastern Africa. One of the institutions of the

Community is the East Africa Devel­opment Bank, designed to assist in accelerating industrial development in the partner states. Specifically, the Bank is designed to promote a more balanced trade pattern within the Community. I believe that for small countries the development of viable industrial sectors is intricately linked with the attainment of regional eco­nomic integration. In this context I would call attention to the importance of bilateral and multilateral financial participation in, and support for, this important institution.

One aspect of our program of self­reliance is increased emphasis on rural development. If development is to have human meaning, it must reach the masses of the people who, in Tan­zania, are peasant farmers. Effective rural development, therefore, requires decentral ization in development plan­ning and implementation. It also calls for increased flexibility by external donors and lenders. Rural develop­ment is in large measure a matter of small projects, such as: training cen­ters, local clinics, cattle dips, feeder roads, district storage facilities, and small processing plants. This does not exclude the need for certain large­scale projects which have a direct im­pact on the ability of rural commu­nities to participate effectively in eco­nomic development. These include ir­rigation projects, main highway links, and cattle ranching in respect of some of which we are receiving wel­come assistance from the World Bank Group. However, the tendency in ex­ternal finance, with its elaborate feasi­bility studies, concentration on direct import content, complex adminis­trative procedures, and long time lags, is to give undue bias to large-scale proje'cts. In other words, existing methods of effecting capital transfers from both international financial insti­tutions as well as from major donor countries tend to discriminate against integrated rural development pro­grams comprising not only large-scale projects but, especially, small-scale projects. The result is an unhealthy channeling of resources into those large-scale projects which may in some cases, be criticized as "pres-

tigious" and "capital city" in em­phasis.

If international lenders are serious in urging developing economies to lay greater emphasis on local level development, lending procedures will need to be reconsidered. It must be understood that detailed feasibility studies of small projects can, at times, cost more than the projects them­selves and that local initiative and en­thusiasm can hardly be expected to survive a long investigation period. The funding of programs by IDA for specific smallholder lending schemes and the provision of initial staff for their implementation has been most valuable to Tanzania, and has pro­vided a base from which a broader rural development bank structure can be built up, I hope with continued World Bank Group interest.

Among bilateral programs, too, there are hopeful signs; for example, SIDA's 1 loan to Tanzania for rural water development. However, the in­creased flexibility represented by these examples needs to become a more general feature of international assistance if national emphasis on basic rural economic development is to be bolstered rather than impeded by the mechanisms of international re­source transfers.

The picture before us today is neither reassuring nor hopeless. The development of the international monetary system still poses major challenges for all of us as does the process of adjustment necessary for debtors and creditors alike. In respect of trade opportunities and resource transfers open to developing econo­mies, 1968 has-at best-continued the post-1960 pattern of basic stagna­tion with recurrent periods of deterio­ration. On the other hand, the deter­mination and capacity of most devel­oping countries to marshall their own resources-both human and material -for development has continued to grow. As a result, not only their ca­pacity to use, but also their real need for, international resource transfers and expanded opportunities for trade is now higher than ever before. That

I Swedish International Development Agency.

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is the challenge which both the Pres­ident and Managing Director have posed to us in their addresses. More rapid development is now within the grasp of many poor countries if, but only if, buoyancy in international trade, adequate international liquidity, and a rising level of resource trans­fers from industrial economies on at least somewhat less onerous average terms can be achieved. These condi­tions are far from impossible to ful­fill: if they are not met then, it is not the means but the will that will be lacking.

Trinidad and Tobago: F. C. Prevatt

Governor of the Bank and Fund

Mr. Chairman, permit me to ex­press my personal pleasure, and that of my Government, that Mr. Schweitzer has agreed to continue his services with us as Managing Di­rector of the International Monetary Fund and that Mr. McNamara has as­sumed the Presidency of the World Bank Group. The enormous respon­sibilities which attach to these high offices in the Fund and the Bank Group are in demonstrably capable hands.

I would also like, on behalf of my country, to pay tribute to the efforts of Mr. Woods, the former President of the World Bank, who did so much to sustain the interest of the developed countries in providing valuable assis­tance to us in the developing coun­tries in our difficult task of raising the standards of living of our people.

Since our meeting in Rio de Janeiro last year the world has experienced a series of recurring monetary crises. We in Trinidad and Tobago have been seriously affected by them. We have suffered substantial losses in the pur­chasing power of our already small reserves; we have had to pay more for the imports we need and we have received less for our exports; we have experienced increasing restrictions in capital inflows; and the reinvestment of profits earned in our country by

foreign companies has been adversely affected by the guidelines which have been introduced by major capital ex­porting countries. We hope that the high degree of international monetary cooperation evident during the past 12 months will continue, and that it will result in further improvements to the international payments system and in relief from the downward pres­sure on world trade and on the stan­dards of living of peoples in the de­veloping countries.

We in Trinidad and Tobago are fully aware that the task of developing our country rests largely on our own efforts, and that this requires the maximum feasible mobilization and the most efficient use of our do­mestic financial and human resources, in accordance with properly formu­lated development plans. We have al­ways acted in the light of this aware­ness; we will continue to do so. How­ever, because we are a small de­veloping country, we must depend heavily on trade and inflow of capi­tal. We must export. Fair and re­munerative prices for the goods we export are vital to us, so that we can pay for the imports which we can­not do without. We must, for some time to come, depend heavily upon in­flows of private international capital to cooperate with us in exploiting the assets we have, and so to produce income, employment, and rising standards of living for our growing population. And finally, we need offi­cial assistance at both the national and international level to fill the gap between our needs and the resources we can provide through our own efforts.

It is abundantly clear that the de­veloping countries will enjoy eco­nomic expansion only if the world pro­duction system is restructured to al­low for an expansion in exports by these countries to the developed countries. The conclusion of equitable international commodity agreements and a substantial export of capital to developing countries are also neces­sary. The conclusion of equitable in­ternational commodity ageements is a logical starting point and would provide immediate and important

benefits to the developing nations. However, the opportunity to expand production and income on an ade­quate scale must go far beyond what can be derived from the sale of raw materials; it will require access to world markets for more highly pro­cessed goods in steadily increasing volume as output can be expanded on competitive terms. This of course im­plies that the developing countries will themselves provide steadily ex­panding markets for all sorts of pro­duction as their incomes rise, so that the world as a whole stands to bene­fit from their economic growth. Fur­thermore, it is clear that these bene­ficial results will be heavily dependent on a substantial export of capital to the developing countries, especially in the initial stages. In the past these needs have not been given due atten­tion, especially during periods of monetary crisis, and, consequently, the adjustments have fallen on those countries least able to bear them.

In the past these needs have been subjected only to study and analy­sis; action on the necessary scale has not been forthcoming. I hope that the developed nations will take the action called for by these analyses and studies to give effect to their prom­ise of support, that this action will be taken now, and that the next de­cade will be appropriately described as the "Action Decade."

We in the developing countries rely heavily on the World Bank, the Inter­national Monetary Fund, and other in­ternational organizations to assist us financially and technically to stimu­late our growth sectors and to estab­lish and equip the financial and other institutions we require. The upward trend in interest rates is therefore of particular concern to us, especially when this upward trend is set against the downward movements in com­modity prices. We are also disap­pointed that the World Bank scheme for supplementary financing has not so far been implemented. There is no effective substitute for arrangements which will assure markets for the products of the developing countries at prices which are fair when mea­sured in terms of international pur-

chasing power, but the World Bank scheme for supplementary financing will be an important source of support for us in the developing countries in executing our development plans, and we hope that it will be finalized and implemented as early as possible.

We would like to express our satis­faction with some of the recent mea­sures and policies which have been adopted by the World Bank in order to improve the quality and quantity of the assistance which it provides. We are greatly encouraged by the positive approach outlined by Mr. McNamara in his statement to us.

We welcome the establishment of the international Commission under the chairmanship of that able and dis­tinguished statesman, Lester Pearson. We also welcome the decisions taken in the past year by the Bank to ex­tend its activities to include tourism and financial institutions appropriate to our needs and circumstances. We note with satisfaction the recent de­cision of the Board to deal construc­tively and pragmatically with the ques­tion of local costs and the indirect foreign exchange content of projects financed with World Bank assistance.

It is important that this dynamism should continue and be extended. In particular, the Bank should consider amending its policies so as to stimu­late the construction sector in de­veloping countries by appropriate de­vices as is now done in the man­ufacturing sector.

We welcome the firm assurances given by some of the developed coun­tries on the second replenishment of IDA and the promise of future support to this institution. We hope that this promise of replenishment will become a fact in the very near future. We also hope that this new lease of life given to IDA will permit it to re-examine its criteria and its policies, so that coun­tries such as Trinidad and Tobago which are small and have a narrow economic base, and which do not now benefit from IDA loans according to present criteria, will be able to benefit in the future. We also support the sug­gestion that the policy of project lend­ing be re-examined ....

... I have made several references

to the need for an international sys­tem to facilitate an expansion in ex­ports on which our economic growth depends. You will therefore appre­ciate our great interest in the studies on commodity price stabilization schemes being jointly carried out by the Fund and the Bank. We look for­ward to early and positive results en­suing from these studies in depth.

We have given a great deal of thought to proposals before us for distributing part of the annual net in­come of the Fund. We recognize the legitimacy of the proposal before us but we consider that the interest of the international community will be better served by applying these re­sources to other pressing areas such as an expansion in loanable funds for development purposes. We therefore support the amended proposal cir­culated on this subject.

I conclude by recording my appre­ciation for the close and cordial rela­tionship which we in Trinidad and Tobago have enjoyed with the staffs of the Fund and of the Bank. They have convinced us of their sympathy with our development problems and we are encouraged by their approach. We are confident that these cordial relations will continue.

Turkey: Cihat Bilgehan

Governor of the Bank

It is my great pleasure to have the honor of addressing this distinguished gathering of the Governors of the In­ternational Monetary Fund and the International Bank for Reconstruction and Development and its affiliates. Knowing that your valuable time is very limited, I shall dwell briefly on certain points concerning these institutions.

First of all, I would like to express my appreciation to you, Mr. Chairman, for the opening remarks which we en­joyed listening to with deepest inter­est; and our thanks to Mr. Schweitzer and Mr. McNamara for the precise and detailed Annual Reports they sub-

miUed to us, reflecting another year of great effort and success of both managements toward attaining solu­tions to many financial and economic problems.

While talking about the World Bank one cannot help saying a few words on economic development, which has been a slogan of recent decades, as well as a common goal for all na­tions. The fact can be witnessed with satisfaction that the developing na­tions are trying their best to create new domestic resources and to utilize them, together with already existing ones, in a most effective way for economic development. Such nations, along with mobilizing all their re­sources, continue to be compelled to rely upon external assistance to make up the financing requirements which cannot be met solely by their own means. Ever decreasing amounts of external aid being cffered on more and more unfavorable terms, however, prove to be inadequate for keeping the gap between industrialized and developing nations from getting even wider. This creates bottlenecks for the development efforts and for the expansion of international trade. It is our sincere hope and concern, there­fore, that means be sought to in­crease external assistance. An early completion of legal formalities for the replenishment of IDA resources will be a significant step in this direction.

Needless to say, the adoption of special drawing rights, which is the outcome of the very praiseworthy efforts of the Executive Directors and the management of the Fund, is a big stride toward alleviating the pressure on the international liquidity. We are now looking forward to an early im­plementation of this system. In addi­tion to the special drawing rights, it is our hope that the national policies will be so adjusted that they will not hamper further development of world trade. There is no doubt that such an expanded trade will be to the benefit of all nations.

In concluding my remarks, Mr. Chairman, I feel it is a most pleasant duty to express our deepest thanks to Mr. Woods for his past services and our best wishes for success to

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the new President of the Bank, Mr. McNamara, and to Mr. Schweitzer on his extended term.

Uganda: L. Kalule-Settala

Governor of the Bank and Fund

would like to begin with a word or two of thanks. First to the President of the United States of America for his address to this year's Annual Meetings in which he touched upon the major monetary and economic problems facing the world com­munity. I wish also to thank you, Mr. Chairman, for your address to us on Monday at the commencement of our proceedings for this year.

Like fellow Governors who have al­ready addressed these meetings, I would like to congratulate Mr. Pierre­Paul Schweitzer on his reappointment for a second term of office as Man­aging Director of the Fund. We are fortunate to be able to have a con­tinuation of the very able leadership of Mr. Schweitzer in the Fund.

I would also like to welcome the appointment of Mr. McNamara as President of the Bank Group. I also wish to pay tribute to Mr. George D. Woods for the very able manner in which he managed the affairs of the Bank Group during his term of office.

Uganda Economy

I would now like to say a few words about the performance of the Uganda economy during the past year.

During 1967, Uganda's export earn­ings increased by 17 per cent over 1966. This was wholly accounted for by a very sharp increase in exports to our East African Common Market partners. The increase in export earn­ings would have been even higher if our overseas exports had not fallen by 2 per cent as a result of adverse weather conditions which affected the cotton crop for the year. Another fac­tor which unfavorably affected over­seas export performance was the

continued lack of a satisfactory rate of growth in demand for our major exports-coffee, cotton, copper, and tea. This lack of growth in demand for our products stems mainly from the fact that some of the major in­dustrialized countries which provide markets for our exports continue to follow deflationary policies aimed at moving from deficit to balanced positions.

On the imports side, there was a decrease of 5 per cent in 1967 com­pared with the previous year. This was the result of the monetary and fiscal measures which we took in the 1967 Budget. Imports of consumer goods fell by 29 per cent while im­ports of producer capital goods rose by 23 per cent. This is an indication that our fiscal and monetary mea­sures hit the right targets in that con­sumer goods imports were effectively reduced, while at the same time the way was left open for a rapid increase in the importation of capital goods which are necessary for our economic development program.

We continued our efforts to diver­sify the agricultural base and reduce our dependence on cotton and coffee through the expansion of crops, such as sugar, tea, and tobacco, and ex­panding the livestock industry. Thus, by controlling our consumption, we are generating sufficient foreign ex­change savings with which to buy the needed capital goods for our invest­ment program.

Bank Operations

Regarding the activities of the Bank Group concerning my country during the past year, I would like to men­tion the successful launching of a Consultative Group for East Africa, embracing Kenya, Tanzania, Uganda, and the East African Community with 12 donor countries drawn from Europe and North America. The first meeting of the Group took place in Paris in April this year. My country is hopeful that, given the basic objectives for consultative groups, there will be a greater flow of technical, financial and other assistance which will enable Uganda to carry out its development efforts more effectively.

Stabilization of Primary Commodity Prices

In his address to this Meeting on Monday, Mr. Schweitzer referred to the Draft Resolution before us con­cerning Part I of the study on the Sta­bilization of the Prices of Primary Products. While noting the progress so far made and the intentions of the Executive Directors in the Fund and the Bank Group in this matter, I would like to stress the urgency for an early completion of Part II of the study so that early action can be taken to de­rive effective and satisfactory solu­tions to the primary commodities prices problem. I stress and urge early action in this matter because of my firm belief that the problem of un­stable prices of primary commodi­ties is the root cause of the inability of the developing countries to gen­erate sufficient resources for their economic development. A few facts in this connection amply illustrate my point. First, the share of developed countries in world trade has risen from th ree-fifths in 1950 to almost four-fifths in 1967; that of developing countries has fallen from one-third to one-fifth in the same years. Second, since 1955, the terms of trade of de­veloping countries have worsened by over 10 percentage points, while those of developed countries have improved by the same number of points. Third, while exports of manufactured goods have grown at reasonably fast rates, the rates in respect of primary com­modities have been most unsatisfac­tory. The real solution, therefore, must lie in the provision of stable and ex­panding markets for primary products. Financial aid should be supplementary to this real solution.

Adjustment Process

I would like to touch upon another aspect of developing countries' prob­lems. This is in regard to some of the fiscal, monetary, and other bal­ance of payments measures that have been taken by some of the major industrialized countries, espe­cially the United Kingdom and the United States. While we accept the fact that these measures are neces­sary to bring back some stability to

the international payments system, we feel strongly that the side effects of such measures on the developing countries should be fully taken into account. These measures are likely to lead to reduced export earnings by the developing countries; they are also likely to lead to restrictions in transfers of capital and the reduction in aid programs of certain donor countries; and they are also likely to lead to a reduction in the quality of aid currently being given through higher interest rates, shorter repay­ment periods, and a tendency to more tying of aid to exports of donor coun­tries. It is important in these circum­stances that efforts of major trading nations to correct balance of pay­ments disequilibria should not worsen the already unsatisfactory position of the developing world. It is my view that the problems of developing coun­tries resulting from side effects of the adjustment process in the developed countries' payments positions deserve particular attention in this and other international forums, as the develop­ing countries are the least equipped to bear any further shocks than those they are already bearing.

Finally, I would like to record my support for the recommendation of the Executive Directors of the Bank Group relating to the distribution of the net income for the fiscal year 1967/68. As regards the Fund's net income, I support the Executive Direc­tors' recommendation, subject to the amendment circulated by the African Group of countries.

United Arab Republic: Hassan Abbas Zaki Governor of the Bank

I would like to take this opportunity first to reiterate-on behalf of the United Arab Republic Delegation-our congratulations and good wishes to Mr. Schweitzer, whose term of office as Managing Director of the Fund has been recently renewed, and to Mr. McNamara, who has assumed the

high office of President of the World Bank and its affiliates.

In Mr. McNamara's opening speech he made it clear that he will be more than a match for the difficult task with which he has been entrusted. Devel­oping countries are aware of the diffi­culties which are facing the World Bank in its efforts to acquire re­sources, especially for soft loan pur­poses. However, the frustration of the hopes of developing nations should soon come to an end, and the gap be­tween rich and poor countries must be coped with squarely and with courage .... ... As to the other important

item on our agenda-the Stabilization of Prices of Primary Products-my Delegation wishes to pay tribute to the staffs of the Fund and Bank for the extensive study prepared jointly in this connection in pursuance of the Resolutions adopted by the Gov­ernors of the Fund and the Bank last year.

We hope that the forthcoming com­ments and recommendations-still to be submitted-would embrace prac­tical and prompt solutions to some of the recognized problems, to the mutual benefit of the developing and developed countries ....

... The benefit to be derived from all this can be well enhanced by the support which still must be given to the developing countries by the World Bank and IDA, especially with en­larged resources.

In this direction, the completion of the working out of a scheme for sup­plementary financing would be an important step. We hope that the intergovernmental group-as recom­mended by UNCTAD II-would be able to resolve some of the relevant outstanding issues and that the final­ization of the scheme would be achieved before long.

Since I represent a developing country, it was only natural that my statement should touch upon the vital question of an adequate flow of developing aid and the establish­ment of suitable terms and conditions.

Therefore, I welcome the appoint­ment of the Pearson Commission, which, I trust, will arrive at a set of

recommendations, the implementation of which will lead the way to de­velopments resulting in a narrowing of the gap between the prosperous and the needy countries.

Before I conclude, I wish to wel­come to the community of the Fund and the Bank the new member coun­tries, Malta, Botswana, Lesotho, and Mauritius.

It was also with deep satisfaction that we heard the intimation by Presi­dent McNamara that the Bank will shortly be resuming operations in In­donesia and the United Arab Republic.

This prompt attention from Mr. McNamara augurs the initiation of a welcome new phase of cooperation with the World Bank.

United Kingdom: Roy Jenkins Governor of the Fund

This is the first time I have had the privilege of addressing this gathering of the Governors of the Fund and Bank.

I would like first to express my ap­preciation to the U.S. Government for the characteristic warmth and friend­liness with which they have wel­comed us to Washington for another meeting of these two great world institutions.

I should also like to express my enthusiasm at the reappointment of Mr. Pierre-Paul Schweitzer as Man­aging Director of the Fund. The world owes a great deal to the wisdom and skill with which he has steered the Fund through recent difficult times.

The World Bank has in Mr. McNamara a President whose ability, vigor and integrity are famous throughout the world. I extend my congratulations and welcome to him in his new appointment. His remark­able speech earlier this week, which because of commitments at home I was not able to hear but which I have read with the greatest interest and admiration, shows what a tre­mendous' contribution he will make to the work of the Bank.

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The membership of both the Fund and the Bank is still expanding, and it is appropriate for me to welcome four new countries, all members of the Commonwealth, namely, Malta, Botswana, Lesotho, and Mauritius.

Bank/IDA Questions

The interest aroused throughout the world by Mr. McNamara's speech makes it appropriate that I should start with development and aid ques­tions. As the Minister responsible for the economic policy of a major deficit country I am particularly 'conscious of the responsibility of such countries to put their affairs in order, but not to do so in a way which will add to the already formidable difficulties of the developing countries. This was a concern which was forcefully-and rightly-expressed at the Common­wealth Finance Ministers Conference in London last week.

At the Bank and Fund Meetings of 1966 and 1967 my predecessor stressed the importance we attached to securing quickly a second replen­ishment of IDA funds at a substan­tially higher level than the first. The British Government, therefore, wel­comed the Agreement in March of this year, providing for a 60 per cent increase.

We passed the necessary legisla­tion by the end of July. The Parlia­mentary debates on it showed how highly members of all our parties valued the special contribution IDA has made, and can continue to make, to the development of the poorer countries of the world.

We have therefore learned with keen disappointment that enough con­tributors have not yet given their formal notification of acceptance to enable the Agreement to come into effect. We hope such notification will not be long delayed. IDA has used its funds wisely and well; and the con­sequences of a continuing failure to ratify this Agreement will be felt most keenly by those countries least able to bear them, although the results may be damaging for the whole world.

Bank and IDA Lending Policies

I welcome the President's plans to raise more money in the capital mar­kets of the world, particularly those not traditionally oriented toward over­sea lending. An increased World Bank borrowing program would in­deed be a means of putting to good use the surpluses of the creditor countries.

I also welcome the detailed con­sideration which the President and the Executive Board have recently given to Bank and IDA lending poli­cies. More flexibility is likely to en­able the Bank to make a still greater contribution to the welfare of the de­veloping world. In many, perhaps most, cases project aid will be more appropriate; but in other cases pro­gram aid may be more suitable. Nor should the Bank be unwilling to fi­nance local costs where these are associated with the financing of high priority projects and developments in, for example, agriculture and educa­tion. I look forward to the early com­pletion of the study of commodity price stabilization which the Bank and Fund have been making.

The British Government welcomes the setting up of the Commission­the Grand Assize-to reassess the de­velopment efforts of both donors and recipients. We see value in such an enquiry thoroughly and objectively carried out by independent persons whose judgment will command gen­eral respect among governments, leg­islators and peoples throughout the world. Mr. Lester Pearson is an ad­mirable choice as Chairman. We shall naturally give all the help we can ....

The U.K. Situation

... I come now to the U.K. situa­tion. There is no need for me to say how painful it was to us to have to devalue the pound last November. We resisted it long and fiercely, largely because of the important role which our currency plays in international fi­nance and the shock which we knew would be felt throughout the system if we altered our parity. But the time came when we had no alternative.

Since I became Chancellor of the

Exchequer, it has been my central purpose to make a success of de­valuation by following policies which will carry us out of deficit into large and secure surplus.

To ensure this success, we in Britain had to accept very sub­stantial sacrifices. We had first to moderate the growth of public ex­penditure. The decisions were diffi­cult. Some were not only necessary but desirable. We were able to cut ourselves free from one of the most crippling legacies of our past, the at­tempt to maintain the status of a great power on the basis of the economy of a medium power. Other cuts in the growth of public expenditure involved the deferment of many desirable ad­vances in social security. Second, I had to impose in the Budget greater tax increases than had ever before been imposed in peace or war. This was necessary in order to ensure the restraint on consumption which was essential if we were to free resources for exports. Third, it was essential to prevent a wage/price spiral develop­ing as a result of the rise in import prices. No one who is responsible for economic policy in any country in the world will underestimate the dif­ficulty, or the unpopularity, of a suc­cessful incomes policy. Yet it is vital that we should check the danger of increased costs eating away the com­petitive advantage of devaluation. To ensure this we have backed our in­comes policy by legal powers to an extent which is unparalleled in West­ern countries. In political terms the British Government has paid a price for following these policies. But we were determined not to tolerate the alternative, which was an ever-mount­ing deficit.

Against this background the mea­sures which we have adopted have in­evitably been hard ones. We in Britain have had to face the necessity of two years' hard slog-hard but, I believe, ultimately rewarding. The results have not been quick to appear, and it would have been foolish to expect immedi­ate results. We are only just begin­ning to see the benefits with our re­cent improved trade figures.

Provided there is no downturn in

world trade, I look forward now to a long series of improving British trade figurl~s-not necessarily an improve­ment every month but a sustained trend of improvement. Taking invisi­bles into account, we were very near to b:tlance in August, but inevitably the figures fluctuate from month to month, and we must not become too euphoric at one favorable set of fig­ures or too cast down by the reverse. I cannot predict the exact time at which we shall break even and cross the line from deficit into surplus. It should come in the first half of next year and so permit us to be earning a substantial surplus and repaying debt in the second half of the year ....

Sterling and the Sterling Area

. . . The next major event of the past year has been the Basle agree­ment. In the last few weeks, arrange­ments have finally been completed on the one hand between ourselves and a group of countries operating through the Bank for International Settle­ments, and on the other between Britain and the other governments of the sterling area. These arrangements have given sterling a new stability.

I should like to pay tribute to the far-sightedness of the BIS and the twelve countries, who have provided the facility of $2 billion to offset the effects on our reserves of fluctuations in the sterling balances. Unlike pre­vious arrangements, this is not only large in scope but fairly long-term in character. Drawings made under the facility will be repaid during the sec­ond half of a ten-year period.

The offer of this new and large fa­cility enables us to come to terms with an historical change that has been taking place over a period of years but which was made more acute by devaluation. The sterling balances themselves were accumulated basi­cally as long ago as World War II, and have changed in composition, though not broadly in their total. There have been far-reaching changes in the pat­tern of trade and capital sources of the sterling countries during this period which has in turn stimulated a desire for diversification. In the United

Kingdom we were ready for an evolu­tion in the nature of the sterling area. Early in July, we were able to put new proposals to the other sterling area countries. These led to a series of agreements, which came into oper­ation toward the end of last month. They are on all essential points uni­form. Their essence is that we in the United Kingdom have given a guaran­tee to maintain the dollar value of the bulk of the sterling reserves of ster­ling area countries; and, in return for this, those countries have undertaken to maintain not less than an agreed proportion of their reserves in sterling.

The guarantee applies to the total of each country's official sterling re­serves in excess of 10 per cent of its total official reserves; that is to say, 10 per cent of each country's reserves will be held in the form of unguaran­teed sterl ing. The arrangements, in most cases, are for three years in the first instance, with the option of re­newal by agreement for another two years. In the remaining cases, they run for five years.

The guarantee is conditional on each country maintaining at all times a Minimum Sterling Proportion in its re­serves. These proportions are not the same for each country, but broadly reflect the level prevailing at the start of our discussions. Thus, the effect is to stabilize the over-all level of the sterling area's offi'cial sterling bal­ances, so long as total reserves re­main stable. And although sterling proportions will vary, the arrange­ments, combined with the guarantee arrangements, mean that every ster­ling area country has the assurance that 90 per cent of its reserves are protected against any hypothetical loss regardless of the ratio of sterling to non-sterling assets which it holds. It may take a little time for people to realize the radical transformation which has been achieved by the Basle arrangements, but once this has been recognized I believe that we need not again fear a flight from our currency and the contingent threat to the international monetary system.

Thus, we have entered upon a tri­partite undertaking. The Basle Group have made a major contribution in the

provIsion of the facility. We in the United Kingdom have contributed our guarantee, and we also have the ob­ligation of repayment. The sterling area countries themselves have gone far to assure the stability of the sys­tem by their undertakings in regard to the proportions of their reserves which they will hold in sterling. In re­turn, they are fully protected. The ad­vantage to the United Kingdom is that we shall be protected from the threat of large-scale demands on our re­serves through withdrawals from the sterling balances, during the time when we shall be emerging from defi­cit into surplus. And the world as a whole benefits from a strengthening of the international monetary system through a less extended and exposed position for sterling.

Thus, Mr. Chairman, as we look at the events of the past year, it is right to emphasize that we have made reasonable progress in securing a greater degree of international mone­tary stability. But, even though ster­ling and the dollar are now on a more favorable course we have been sharply reminded of the great risks to which the system is subject, and of the vital need to strengthen it. That we have so far avoided the bitter ex­periences of the prewar years is a tribute to the achievement of the last 20 years but is no ground for com­placency. The tremendous growth in international trade and the commit­ment to full employment by the major industrialized nations of the world means that the need for international monetary cooperation is now greater than ever. If both rich and poor na­tions are to achieve the rising stan­dards which are now possible, we mus't all realize that we must make a con­tinuing and sustained effort to build on what we have achieved during the past year. That is one of the reasons why the United Kingdom particularly welcomes the SDR scheme, and why we urge that it should be ratified as soon as possible. For SDR's are im­portant not only in their own right but as a symbol of our determina­tion to make our monetary destinies the subject of rational international decisions.

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United States: Henry H. Fowler

Governor of the Bank and Fund

We meet once again in the noble cause of international cooperation. Our works-the works of peace-em­body the hopes and dreams of all men.

It is my pleasure to welcome my fellow Governors and other guests to Washington once again after our memorable and enjoyable meeting last year in Rio de Janeiro.

I offer congratulations to our two world organizations and the countries they represent in the quality of lead­ership secured in the year past for the years ahead. In the election of President McNamara of the Bank and the re-election of Managing Director Scl:lweitzer of the Fund, we in the Free World are fortunate.

I am happy to welcome the entry into membership of Botswana, Leso­tho, Malta, and Mauritius during the past year ....

... We have reason to be heartened by the signs of progress now emerg­ing in the economy of the United Kingdom. We look forward to con­tinuation of this trend as the real­istic program employed by the British Government makes its full mark upon the international transactions of that country.

As far as the United States is con­cerned, I am pleased to report that our accounts are moving toward equilibrium. Since our meeting in Rio, the devaluation of the pound sterling, the subsequent run on the monetary gold stock, and a deterioration in the U.S. balance of payments caused the United States to reassess its contribu­tion to the balance of payments ad­justment process.

President Johnson, in a message to the Nation on January 1, launched an action program designed to strengthen both the current and the capital accounts of our balance of payments. With the first six months' statistics already in hand and with early indications on the third quarter, there is clear evidence that substan-

tial progress is being made toward the President's target.

The delay in the imposition of the tax bill until the end of June will certainly influence our timetable but not the result. With the passage of the fiscal restraint package in June of this year, the economy was put on a more sustainable path of expansion. The fiscal package will cut some $20 billion from the Federal budget deficit in fiscal 1969.

As this strong medicine works and our economy moves into better bal­ance we anticipate an improvement in our trade position. Our private capi­tal account has already shown a re­markable improvement.

Results so far this year from the over-all balance of payments program are gratifying. On a seasonally ad­justed liquidity basis, the first quarter deficit of $660 million was down sub­stantially from the fourth quarter 1967 deficit of $1,742 million. The second quarter showed a continuing favor­able trend with a deficit of $170 mil­lion. One of the most striking develop­ments has been the substantial sur­plus on official reserve transactions during the first half of this year. Re­sults, so far in the third quarter, are encouraging.

Whatever the outcome of our elec­tion, I am confident that the United States has arrived at a fixed and de­termined policy to bring our balance of payments into equilibrium as a national and international responsi­bility of the highest priority and to move in a determined way toward restoring price stability in an atmo­sphere of balanced growth. This is a major source of my confidence in the future of our international accounts.

The decisive vote to increase taxes and to decrease projected public ex­penditures-both unpopular measures in an election year-should go far to sustain confidence in the dollar, the economy on which it is based, and our system of government.

This vote was a momentous de­cision-to pay our nation's bills and order our economic and financial af­fairs in such a manner as to reduce sharply the twin deficits in our Fed-

eral budget and in our international balance of payments.

I believe that this action will make possible and probable a return to far better balance in our Federal budget, in our international payments, and in our economy during the fiscal year 1969, which began on July 1.

This action by the President and the Congress of the United States to im­pose fiscal restraint was designed in large part to protect and strengthen the financial system of the free world and discharge the responsibilities of the United States in making the ad­justment process work ....

. .. Over the longer run, our task will be to extend the record of vigorous economic growth that has been estab­lished during the 1960's. With the economy and the national finances now coming into better balance, our domestic expansion, with its unprece­dented duration of 91 months, has been placed on a much more secure basis-with promising effect on our balance of payments ....

Institutional Framework for Development

... I turn now to the field of develop­ment finance. President McNamara's opening remarks yesterday were bold, challenging, and constructive. He has placed before us his plan of action­grounded in practicality and con­structed with vision. We have heard from him how the Bank plans to move along its course at an accelerated pace while probing into new fields. I bel ieve this plan is right. I have con­fidence that as Governors of the World Bank we will respond to his leader­ship. The urgent need to do so is rooted not only in the hopes of hun­dreds of millions of people, denied and deprived, but in the well-being of the interdependent family of nations.

Over the years, the distinguished Presidents of the World Bank, its senior management and staff have molded the Bank into a solid lending institution of unquestioned excel­lence. They have given the Bank world-wide stature as a prime mover of development finance, as the best forum in which to examine develop-

ment problems, and as a source of creative initiatives.

We welcome President McNamara's prompt move to obtain the services of Lester B. Pearson of Canada to conduct a "grand assize" of the de­velopment process. Such a compre­hensive appraisal will be a vital element in devising a broadened in­ternational consensus on assistance to the developing countries-this con­sensus has suffered gravely in recent years from the combined shocks of budgetary and balance of payments difficulties in capital exporting coun­tries, compounded by international monetary disturbance and somber events in a number of aid recipient countries. The Commission will enjoy the fullest support and cooperation of the United States.

We have made major progress on many of the great problems of de­velopment. We have created an in­stitutional structure for countries to join in the common purpose of help­ing to improve the harsh conditions of life in which large segments of the world's population exist. A viable in­stitutional framework for development now in fact exists. We have created, extended and consolidated a frame­work embracing both multilateral and bilateral elements that permits ex­ternal assistance resources to flow and be properly coordinated.

This great institution, the World Bank, has grown from a single entity in the early postwar years to a healthy fam ily of special ized institutions. Regional banks have emerged in Latin America, Africa, and Asia as major financing instruments, closely attuned to the needs and opportunities in the specific regions they are designed to serve.

Moreover, as President Johnson, speaking of the Middle East, said on June 19, 1967, "in a climate of peace ... we here will do our full share in support of regional cooperation."

In creating this complex of institu­tions we have not built haphazardly. Our architecture has been coherent and innovative, complementary and responsive to needs.

We have also witnessed the re­sponse of the developing countries to

the need to organize themselves in order to attract and efficiently exploit the external assistance that was avail­able. The extent of these efforts to upgrade the capacity to apply aid effectively has varied from country to country, but several elements have increasingly emerged: the formulation of development objectives and multi­year plans; improvement in the tech­nical capacity to design well and ex­ecute efficiently projects that are sound and economically justified; in­stitution of self-help measures that give external donors assurance that domestic economic and human re­sources are being diligently applied; and creation and maintenance of a climate that attracts foreign private investment, without which an unsus­tainable burden would fall on official external financing. Although much has already been done by many develop­ing nations to bring about those con­ditions that will yield a maximum flow of resources for development, we must recognize that more remains to be done.

Financial Resources for Development

I turn now to a pressing develop­ment problem whose solution will re­quire all our ingenuity and best efforts. This is the financial resources prob­lem; it will dominate the development process in the decade ahead. By and large, we know what must be done, and we have the instrumentalities to do it. But the component that is still lacking is the crucial one-a sus­tained volume of financial resources at a level high enough to do the job.

Finding the answer to this problem is a formidable task and the new re­plenishment of IDA is a major element in this effort. Absolute top priority should be given to the successful com­pletion of the governmental approvals necessary to bring this replenishment into effect. I am hopeful that the United States Congress will act soon to authorize U.S. participation in this replenishment of IDA. An executive proposal to that effect has been pend­ing before the legislative body since last spring.

The establishment of IDA and an earlier replenishment of its funds re­ceived strong bipartisan support from the United States Congress and three Presidents-Eisenhower, Kennedy, and Johnson. The basic reason for this record of support has been the con­viction that a multilateral approach to development assistance is a desirable national policy and an essential fea­ture of international financial cooper­ation in the world in which we live.

I can tell my fellow Governors that U.S. participation in the new replen­ishment agreement has received the overwhelming approval of the House Banking and Currency Committee with bipartisan support and that it is favored by a preponderant bipartisan majority of the Senate Foreign Rela­tions Committee. I express again my continued hope that procedural dif­ficulties and views by a limited num­ber of opponents will not block early approval-particularly in view of the fact that approval by the United States is essential to the replenish­ment agreement becoming effective.

I would like now to mention a few of the ideas bearing on the solution of the problem of assuring an adequate volume of development finance on which I think a broad agreement exists.

1. Strengthening the Multilateral Approach-It is no longer open to question that a strong multilateral ap­proach holds the greatest promise for marshalling major amounts of funds for development on an equitably shared basis.

The multilateral financial institu­tions have a well-earned reputation for efficient operations, deriving in large part from the enlightened man­agement they enjoy and the compe­tent staffs they have assembled. They maintain a rigorous objectivity in the financial and technical assistance they render and they demand of their borrowers economic performance based on dispassionate comparison of efforts and potentialities. For all these reasons, the multilateral institutions inspire confidence on the part of gov­ernments and private investors alike that they have the capacity to ad-

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minister wisely the funds that are en­trusted to them.

Because of the confidence they now enjoy, the multilateral institutions are in a unique position to exercise con­structive leadership in the critical process of mobilizing development resources that will be adequate in re­lation to the demands of the develop­ing world.

The stronger their leadership be­comes, the stronger their potential for attracting financial resources in world markets. This means leadership in marshaling capital for development finance, guiding the determination of needs and priorities, in selecting the best approaches to the development task, in encouraging both developing nations and capital exporting nations to pursue sound and helpful policies. It also means leadership in developing approaches and techniques to insure that the balance of payments of donor countries is taken fully into account in arranging the flows of development funds.

This kind of objective leadership cannot and should not be undertaken by any single nation, either donor or recipient. Only by making full use of the leadership potential of the inter­national financial institutions can we mount the most effective attack on the problems of development finance.

2. Broadening the Sources of Multi­lateral Development Financing-A truly multilateral approach to development financing requires a broad multi­lateral ism in the source of borrowed funds as well as in the capital struc­tures of the institutions, Excessive dependence on a single capital mar­ket is not sustainable over the long term, nor is it desirable from the standpoint of the institutions them­selves, which need the flexibility that can only come from widely diversified sources of borrowed funds. Interna­tional institutions can and should play an important part both in devel­oping capital markets and in finding other ways of drawing resources from balance of payments surplus countries. Their objective must be the continued strengthening and expand-

ing of the resource base of develop­ment finance.

3. Improving the Mobilization of Domestic Resources by Developing Countries-A third factor on which the solution of the resources problem of the 'Seventies will depend is the efficiency with which governments of the developing countries mobilize their own resources. This involves a tax system and a tax administration that is oriented to balanced economic growth and a set of domestic policies that is conducive to private savings and investment and the avoidance of the disruptions and distortions that characterize unchecked inflation. I would list among the irreducible mini­mum of sound financial policies necessary for growth a public ex­penditure program that is formulated with clear priorities in mind, incen­tives to balanced growth, stable prices, appropriate wage policies, and maintenance of realistic exchange rates. These policies and economic conditions are part of the essence of the self-help concept.

Certainly of great importance in this connection is the establishment of an effective and efficient tax system. The developing nations themselves do­and must continue to-provide the bulk of the resources needed for their development. This is not only be­cause unlimited external resources are not available, but also because too much reliance on external re­sources would bring an intolerable debt burden. Revenues raised do­mestically, therefore, are inevitably a first resource for development and the pace of development will in con­sequence depend in large part on the revenues yielded by the tax system.

Substantial international efforts such as the Inter-American Conference of Tax Administrators have already been devoted to encouraging ways to make tax systems more efficient and thereby make revenues available as a source of development finance. But more can be done. For example, tax administra­tors and tax policy officials in a par­ticular geographic region can establish forums for regular exchange of ideas and experience. The IMF, the World

Bank, and the regional banks can add a new dimension to their activities by more active leadership in fiscal opera­tions. They can synthesize existing bodies of experience and analysis and disseminate the product widely in forms most useful and practical for developing countries.

Beyond these steps, the multilateral development finance institutions can in their own lending operations, give greater recognition to those countries making the greatest relative efforts to mobilize their domestic resources.

4. Compatibility of Multilateral De­velopment Finance with the Adjust­ment Process-I have always re­garded it as axiomatic that the de­velopment finance mechanism should function in a way that reinforces the workings of a sound international monetary system. This means that de­velopment finance must contribute to expanding levels of trade and pay­ments and the smoother flows of in­ternational capital. It must also be consistent with what we have come to describe as the balance of payments adjustment process. This matter is closely related to the central prob­lem I am addressing in these re­marks-that of assuring a flow of de­velopment finance that is both sus­tained and adequate. We can expect such a flow only if we can arrange that it functions to ameliorate rather than exacerbate the imbalance in world payments and that it exercise a stabilizing rather than a destabiliz­ing influence on world payments.

Development finance must therefore take into account balance of payments considerations as these considerations affect the ability of donor countries to provide resources. I have already touched on the role of the multilateral banks in mobilizing resources in the private and public capital markets. I should refer here to the recent IDA replenishment proposal as an excel­lent example of the way safeguards for deficit donor countries can be in­tegrated into an international under­standing without sacrificing any of the fundamental principles that have been the strength of such institutions.

5. Private Enterprise and Develop-

I

ment-I believe it has also become clear even to those who may have had lingering doubts that the ade­quacy of the flow of resources de­pends in large measure on the at­traction of private investment, do­mestic and foreign, into development channels.

Official financing, vital as it is and will be, cannot be the major element in the financing of development. Of key importance is the far greater vol­ume of private capital flowing inter­nally and from abroad. In my own view, and I know it is shared here, foster­ing conditions for the full application of the creative energies of private en­trepreneurship is essential for accel­erated development. And it is also essential that these conditions be at­tractive for foreign as well as do­mestic private investment, for with the former come additional benefits of new productive technology as well as management techniques.

One need look no further than the group of countries that can be con­sidered development "success sto­ries" to confirm that vigorous private enterprise development plays a key role in practically all such countries. Recent UN figures show a close cor­relation between net private capital inflows and high rates of growth. The lesson should be plain.

Let me add a further thought re­garding the character-rather than the volume-of private investment flows in the future. Just as the early post­war years were ones in which new mechanisms evolved to channel the flow of public development finance, so is the present period one in which new mechanisms are evolving in the field of private foreign investment. The multinational operating company, the multinational management service company, and other structures now emergent represent the emerging mul­tilateralism in the private investment sector. It is in the interest of all con­cerned that we facilitate movement in these new and significant directions.

Stabilizing Commodity Prices

Last year in Rio, the Governors of the Fund and Bank called on the

staffs of the Fund and Bank for studies on the problem of stabilization of prices of primary products. Although it has not been possible for the or­ganizations fully to complete their work on this important and demand­ing task, I compliment them on what they have been able to do in examin­ing this question. The analytic part of the study which has been transmitted officially to Governors contains a very full discussion of many important aspects of this wide-ranging topic.

There is urgent need for more at­tention to the root causes of market difficulties and to the possibilities of better coordination of trade, produc­tion and development policies. The case of coffee, where we now have five years of experience, has shown both that there is scope for assisting developing countries through price stabilization arrangements and that where success is obtainable in such a price arrangement it hinges ulti­mately on bringing supply and de­mand into balance, at an equitable level and encouraging diversification.

It is well that the Bank and Fund staffs have broken new ground in working together on this difficult prob­lem and it is urgently necessary that both become more involved in this area in the future.

There can be no lasting improve­ment in commodity market conditions without more attention to helping the developing countries make the neces­sary adjustments in pOlicies and plans. These are areas in which the Fund and Bank, respectively, are al­ready making important contributions. These institutions are well-situated to do more, with benefit to our collective interests, if they are permitted and invited to play a more active role in the international consideration of particular commodity problems and in the framing of specific proposals to ameliorate them.

We shall look forward to the fur­ther work to come with deep interest and sympathy. I am glad to support the Resolution which the President and Managing Director have put for­ward to the Governors on behalf of the Executive Directors.

Building Blocks for Progress

Fellow Governors, in this last meet­ing with you as the United States Governor may I be permitted a per­sonal word.

For nearly four years as Under Sec­retary of the United States Treasury and the last three and one-half years as Secretary, I have been privileged to work with many of you in a com­mon cause of international financial cooperation for peace, prosperity and development. I am grateful to you, my colleagues, for the many kindnesses and courtesies bestowed on me in countless meetings here, in your countries, and at our other interna­tional gatherings.

We have pursued together the de­velopment of ever firmer policies and programs of international coopera­tion which logically flow from the earlier foundations which our coun­tries built together in the years fol­lowing World War II.

The past seven and one-half years have been fruitful in putting interna­tional cooperation in the economic and financial area on an ever more inten­sive, intimate, and productive basis.

Let us look back on a few examples. -The General Arrangements to

Borrow and the 1965 expansion of the resources of the Fund which have given it a much more SUbstantial ca­pacity to perform the task originally allotted to it at Bretton Woods.

-The creation of huge currency swap networks, now totaling almost $10 billion, which have proven valu­able tools in minimizing the destabiliz­ing effects of short-term capital flows.

-The quick, quiet, informal, and effective means to assist nations that have found themselves in temporary monetary difficulties-Canada, Italy, the United Kingdom, and, most re­cently, France.

-The expansion of multilateral aid to the developing nations through the enlargement of the resources of the International Development Associa­tion, the Inter-American Development Bank, and the creation of regional banks in Asia and Africa.

-The reciprocal reduction of tariff barriers in the "Kennedy Round."

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-The development in the Fund and the OECD of machinery for the multi­lateral surveillance of the adjustment process and the creation of standards and guidance for the industrial coun­tries in the 1966 Report to the OECD on "The Adjustment Process."

-The development of a new fa­cility in the Fund for special draw­ing rights to provide an orderly ex­pansion of world monetary reserves.

-Cooperation on gold policies in the interest of greater stability for the international monetary system.

But looking ahead I am confident that the future holds opportunities for even greater and more significant progress in this area of our common aspirations. For the United States, participation in the creation of these building blocks of international fi­nancial cooperation flows logically from the basic policies laid down at the end of World War II and pursued by Pre'sidents Truman, Eisenhower, Kennedy, and Johnson, with the bi­partisan support of the U.S. Congress.

I venture not only the hope that solid confidence that this pursuit of inter­national economic and financial co­operation will be continued by their successors because it represents the deepest aspirations of the American people for living with their neighbors on this planet.

I have the same confidence in the future policies of the other member countries of the Bank and the Fund. They are born of the same aspirations.

As President Johnson said yester­day: "Let us not fail to be wise."

Yugoslavia: Kiro Gligorov Governor of the Fund

Let me, at the outset, join my col­leagues in expressing my welcome to Mr. McNamara as President of the Bank: I wish him every success in his far from easy duty. I also congratulate Mr. Schweitzer on his reappointment.

During the past fiscal year many unfavorable developments in the

world trade and payments position oc­curred, affecting especially those countries which make up the great majority of membership of the Fund and Bank. . . . I do not consider it necessary to repeat them here. How­ever, I do think it useful to mention the consequences of such develop­ments on the world monetary system, which in the past year has gone through a very difficult phase. This is precisely what demonstrates once more how many risks and how many elements of uncertainty are involved in the existing world monetary system. World liquidity alone is not such a cause for worry at present. It will-we hope-successfully be dealt with by the special drawing rights scheme. What is perhaps more difficult is how to cope with adverse effects which may at any time result from the func­tioning of the mechanism of the exist­ing monetary system.

It is, therefore, necessary to find ways to make the world monetary sys­tem no longer-or at least not to such an extent-dependent on the balance of payments position of one, or a few of the world reserve currency coun­tries. The present-day world is ex­pecting more stability in international payments; such stability is necessary if we are to achieve a steady economic growth in the world. I think, therefore, I need not especially stress that the re­sponsibility of reserve currency coun­tries is of international interest. In ad­dition, we have to reflect on ways by which the international community could offset the effect of devaluation of reserve currencies and of those other currencies by means of which the greatest part of international trade is conducted. The devaluation of such currencies and the measures which accompany them cause disturbances both in the world trade and in the bal­ance of payments of other countries. Disturbances in the world trade and in the flow of capital further aggravate the existing gap between the devel­oped and developing countries. I am sure you will agree with me that our basic task consists in narrowing as much as possible that gap. Because of this, it is necessary to thoroughly con-

sider whether the existing monetary system should be supplemented by some additional instruments in order to reinstate confidence in it.

The second problem in front of us is the stabilization of prices of primary I products, especially of agricultursll products. We have read with great ir,l­terest the exhaustive analytical se(.:­tion of the Study, Part I, prepared loy the Bank and Fund staffs. I must ex­press my regret that the second pan of the Bank-Fund Study is not avail­able for discussion at this year's An­nual Meetings. As this work goes for­ward, I wish to point out that the sec­ond part should also deal with rela­tions between any possible future mechanism for commodity price sta­bilization on one side, and the mech­anism of compensatory and supple­mentary financing on the other. I am of the opinion that all these instru­ments will have to be implemented as they supplement each other. I would suggest also that a range of possible institutional arrangements be con­sidered; one of these would be the possibility of the creation of a joint subsidiary of the Fund and the Bank. Such an agency should be entrusted with the task of applying any future mechanism both to the problem of stabilizing prices of primary products and of eliminating unfavorable con­sequences on export earnings due to unforeseen causes. Since lasting im­provement in prices and earnings of primary producers is not possible with­out a reallocation of resources in the developing countries through a sys­tematic international policy of diversi­fication of production, the functions of price stabilization at remunerative levels, of supply management and of diversification must be closely integrated.

The third problem connected with the problem of exports of primary products is the increasingly wide­spread obstacles to trade in the pres­ent world, having direct unfavorable consequences on balance of payments of countries exporting these products. I have in mind the agrarian protec­tionism which is a phenomenon also closely associated with the existence of inward-looking groupings.

At this juncture there is no need to enumerate all the consequences of the agrarian protectionism-they are too well known. I may only say that such a policy is having an increas­ingly adverse effect on international trade relations. Moreover, such a policy is also a direct negation of the principle of international division of labor. Foreign trade in my country is adversely affected to a consider­able degree by such policies. We are not alone; moreover, while we can, sometimes at a high cost, offset some of the adverse effects through expansion of industrial exports, thanks to the present stage of our in­dustrial development, many of the de­veloping countries are less fortunate and therefore less in a position to do so. I am afraid that many efforts for the stabilization of prices of primary products may prove futile in the pres­ence of agrarian protectionism of such intensity.

A high degree of protection em­bodied in the system of some of the integrated regions, with the use of levies and other protective measures of unpredictable magnitude, has re­sulted. not rarely, in a situation where our producers of certain important commodities, especially of agricul­tural products, have been unable, after deducting import levies, to cover their production costs. Under such conditions, it is rather difficult to grasp how the developing countries can implement the recommended lib­eralization policy of foreign trade and follow the advice, otherwise sound, that trade expansion should be the prime source of foreign exchange.

I would like now to turn specifically to the issues of international invest­ment financing.

In the first instance, it is most en­couraging to hear from the President of the Bank the determination that the Bank and its affil iates should for the next five-year period double its present volume of loans. This policy, I am sure, will have the support of our membership.

There is one potentially limiting fac­tor which I would like to mention: in­debtedness of developing countries. The problem is acute today for some

countries and it does not permit post­ponements in seeking adequate solu­tions. I think it would be necessary if the various proposals for the solu­tion of these problems, which were discussed before UNCTAD together with other problems, become the sub­ject of the future intensive considera­tion of the Bank with the aim of finding their practical implementation.

I am also glad to know that there are certain indications that there will be increased financing of education, and agricultural and industrial devel­opment. The two loans which my country recently received from the Bank for the modernization of indus­try reflect such a policy. The con­cept of financing tourism as a more direct form of Bank activity deserves our support for two reasons: tourism favorably affects the balance of pay­ments of developing countries and their employment levels, and also contributes to more intensive con­tacts, to the exchange of ideas and creates an atmosphere of human rela­tions which represents a specific con­tribution to the cause of peace and understanding among the nations.

Finally, I would wish to see the Bank's policy more and more oriented to financing of long-term development programs of developing countries in all cases where sufficient conditions exist for this purpose.

I had believed that the problem of the second replenishment of IDA re­sources would be finally settled be­fore this year's Annual Meetings. Solutions, optimally possible under given conditions, were found, but un­fortunately the procedure for putting them into effect has not been com­pleted. I do not have to emphasize the importance of this final phase. When I mentioned the problem of in­debtedness I had in mind also the activity of IDA which may play an important role in implementing solu­tions. For this reason also we should welcome any action leading to the increase of IDA funds. I mean by that, special contributions made by certain countries, as well as the trans­fer of parts of the net profits of the Bank to IDA's funds. When speaking of the profits of our organization, it

would perhaps be also feasible to channel a part of the profit of the Fund to long-term development ends.

The replenishment of IDA and other possible sources for IDA financing would not be sufficient, however, to meet the aggregate Bank Group re­quirements for funds. It is Bank bor­rowing which must be expanded; and recent successes in the mobilization of funds for the Bank are significant indications of the potential for the future. In order to support the lend­ing expansion program which the President has proposed, all sources of funds must be tapped. Specifically, I have in mind two sources. First, I believe that larger resources can be mobilized from central banks' re­serves, both in developed and develop­ing countries, than has been the case so far. Second, I suggest that the Bank examine the possibility of bor­rowing funds in those industrially more advanced developing countries which, due to their balance of pay­ments situation, may not be in a posi­tion to permit purchases out of pro­ceeds of Bank loans in third coun­tries, but which would be willing nevertheless to devote a part of their resources to development of coun­tries at lower levels of income. This suggestion would require further elab­oration in order to protect the in­terests both of Bank borrowers and of the countries willing to lend to the Bank.

To conclude, the enlargement of ac­tivities of the Fund and the Bank by introducing additional facilities in the pol icy and practice of these institu­tions-taking into account specific conditions under which the greatest number of countries are develop­ing-is being imposed by the neces­sities of the present world, which is today too sharply divided between the rich and the poor. This gap between the "haves" and "have-nots" is very often the source of widespread in­ternational misunderstanding which leads to the need for material sacri­fices largely exceeding those which would be necessary for narrowing the gap; this by itself implies many dangerous situations which all of us would like to see discontinued.

95

96

Zambia: E. H. K. Mudenda

Governor of the Bank and Fund

Mr. Chairman, I wish to congratu­late you on your election to such an important office. The International Monetary Fund and the World Bank Group play an important part in fur­thering the cause of economic wel­fare and cooperation in the world community. We are happy to be as­sociated with a group of financial in­stitutions which means so much to so many of our fellowmen.

I wish to congratulate the Bank and the Fund on yet another successful year. I welcome and congratulate our new President. His eloquent address to us yesterday indicated his deep concern and understanding of the problems developing countries are facing and has given us much en­couragement. I wish also to congratu­late Mr. Schweitzer on his reap­pointment as Managing Director.

I wish to thank the former Presi­dent of the Bank, Mr. George Woods, whose hard work and dedication have contributed to the sound progress of the World Bank and its affiliates. May I also extend our warm greetings to the new members, Botswana, Lesotho, Mauritius and Malta .... ... I now turn to the activities of

the World Bank Group. The resources of the Bank and IDA currently out­standing amount to more than 6 bil­lion dollars. That the developing coun­tries in some cases sustained a growth

rate not dissimilar to the rates achieved by the industrial countries is an indication of the prudent use of resources. The sacrifice that has been made to enable the flow of such re­sources seems, therefore, to have been worthwhile. I believe that even higher rates of growth can be achieved.

It is because we believe that the developing countries as a group can do better that we welcome the Presi­dent's appointment of a commission under the chairmanship of Mr. Lester Pearson-a man for whom we in Zam­bia have the highest regard-to as­sess the results of development ac­tivity in the past decade. We trust that this assessment will help formulate our development strategy to yield a higher rate of growth.

We want to see the scheme on Sup­plementary Financial Measures come to fruition. Our support for this scheme designed by the Bank is a further indication of our belief that the development process requires dis­cipline for, as we all know, the Bank's assistance under this facility is con­ditional upon the acceptance of mu­tually agreed upon development plans and of pOlicies.

We congratulate the Bank and the Fund on their excellent analytical study on commodities. However, an urgent need remains to evolve con­structive policies. We support, there­fore, the resolution before us on this matter.

We welcome the recent changes

which enable the World Bank Group to participate in statutory enterprises. For us in Zambia, with our faith in cooperative endeavors between the private and public sectors, this is a particularly important change. An­other change which we welcome is the provision of additional assistance in the financing of feasibility studies by the Bank Group. We welcome also the Bank's policy of financing a greater proportion of local costs.

We are aware of the need to have criteria for allocations of IDA assis­tance. I note with some relief that the criterion of national income per head has been somewhat relaxed. We would like more weight given, how­ever, to the vulnerability of an econ­omy to trade fluctuations. I would like to thank Part I countries for their con­tribution to the second replenishment and in particular Canada, Denmark, Finland, the Netherlands, and Sweden for making available further supple­mentary contributions.

Much of our concerted effort to achieve a satisfactory development rate will be frustrated if we do not establish a more durable mechanism for international monetary payments­a mechanism which will satisfy the requirements of confidence, adequacy and flexibility.

Mr. Chairman, I wish to reaffirm Zambia's confidence and faith in the Fund and the World Bank Group and to assure you that we shall continue to give full support to measures de­signed to increase the effectiveness of these important institutions.

Concluding Remarks by

Mr. McNamara

My colleagues and I are deeply grateful for the strong support you have given to our proposals for ex­panding the operations of the World Bank Group. We shall now direct our energies to translating the plans into action, and I shall hope to report to you one year from today that such action is well underway.

I have listened with great care to your suggestions for increasing the effectiveness of our institutions, par­ticularly your desire that we act to help stabilize the earnings from com­modityexports.

I pledge you that these matters you have suggested, these actions that you have proposed will receive my personal attention in the weeks that lie ahead.

And now, as you return to your own countries, I thank you again for your warm expressions of friendship, and I wish you Godspeed.

Concluding Remarks by the Chairman,

U. B. Wanninayake

These Meetings which are conclud­ing have given us a great deal to think about. No worthwhile endeavor is ever free of problems and difficul­ties. But we can take heart from the sense of hope and determination that

has been expressed here and from the continuing evidence of the flexible performance and demonstrated abili­ties of these financial institutions.

Both the Fund and the Bank have charted new paths for the years ahead. Governors have discussed the problem of stabilizing commodity prices and, generally, how to improve the relative position of the develop­ing countries.

Governors of the Fund have re­viewed the Fund's role in the world economy; they have supported a pol­icy for the use of the Fund's re­sources which will safeguard uniform and equitable treatment for all mem­bers; and, in particular, they have sup­ported Mr. Schweitzer's stress on the need to establ ish the facil ity for spe­cial drawing rights with minimum delay.

Governors of the Bank have spoken of the need for greater and more sustained lending to the developing countries, of the need for program as well as project lending, for an ex­panded program of technical assis­tance, and for exploitation of the po­tentialities of today's agricultural revo­lution. Mr. McNamara has forcefully expressed his determination to expand and broaden the Bank's effort.

To all those who have helped to make these Meetings a success, in­cluding those who have worked be­hind the scenes to ensure a smooth functioning organization, I give my sincere thanks. To the Governors and their delegations, I extend my special thanks for their cooperation in our proceedings.

And now I wish you all a safe jour­ney home and declare these Meetings adjourned.

Remarks by A. K. Vasena, Alternate

Governor of the Bank and Governor

of the Fund for Argentina

It will be the privilege of the Gover­nors of Argentina to act as Chairmen of the Boards of Governors during the period 1968-1969, and I take this opportunity to express the deep ap­preciation of the Government of my country for so signal an honor.

We are on the threshold of a new era of development and financial co­operation among countries. Some so­lutions have been found for the pres­ervation of the international monetary system, but great responsibilities lie ahead for all in raising the economic and social levels of the developing world. I know that the Management and the staff of both institutions will help us accomplish this challenging task.

Our Chairman this year and his predecessors have set a very high standard for us to meet, and I hope that we shall justify the confidence you have placed in us when we as­sume the traditions and responsibili­ties of this high office.

Mr. Chairman, ladies and gentle­men: on behalf of my colleague and myself, thank you very much.

97

Monday

September 30

Tuesday

Oqtober 1

Wednesday

October 2

Thursday

October 3

Friday

October 4

DOCUMENTS OF THE BOARDS OF GOVERNORS

SCHEDULE OF MEETINGS I

10:00 a.m.-JOINT BOARDS -Opening Ceremonies

-Address by the Chai rman

-Annual Address by Managing Director, IMF

-Annual Address by President, IBRD, IFC and IDA

9:30 a.m.-JOINT BOARDS -Annual Discussion

9:30 a.m.-IMF BOARD -Annual Discussion

-Election of Executive Directors

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

-Election of Executive Directors

3:00 p.m.-JOINT BOARDS -Annual Discussion

5:00 p.m. -Joint Procedures Committee

9:30 a.m.-JOINT BOARDS -Conclusion of Annual Discussion

-Joint Procedures Committee Reports

-Comments by Heads of Organizations

-Adjournment

98 I Approved on April 28, 1968, pursuant to the By-Laws, IBRD Section 6(d), IFC Section 4(d) and IDA Section 1(a).

NOTE: The International Centre for Settlement of Investment Disputes held the Annual Meeting of its Administrative Council on Monday, September 30.

PROVISIONS RELATING TO THE CONDUCT OF THE MEETINGS I

ADMISSION

1. Sessions of the Boards of Governors of the Fund, the Bank, IFC and IDA, 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 Chairman 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 Chairman, the Managing Director of the Fund, the President of the Bank and its Affiliates, and the Secretaries.

6. Reports of the Joint Procedures Committee shall be signed by the Committee Chairman and the Reporting Member.

PUBLIC INFORMATION

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

I Approved on August 24, 1968, pursuant to the By-Laws, IBRD Section 6(d), IFe Section 4(d) and IDA Section 1(a). 99

100

BANK AGENDA!

1. 1967/68 Annual Report

2. Financial Statements and Annual Audit

3. Administrative Budget

4. Allocation of Net Income

5. Election of Executive Directors

6. Stabilization of Prices of Primary Products

7. Amendment of Regulations Relating to Executive Directors and Alternates

8. Place and Date of 1970 Annual Meetings

9. Officers and Procedures Committee for 1968/69

IFe AGENDA!

1. 1967/68 Annual Report

2. Financial Statements and Annual Audit

3. Administrative Budget

IDA AGENDA!

1. 1967/68 Annual Report

2. Financial Statements and Annual Audit

3. Administrative Budget

!Approved on August 14, 1968, 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).

JOINT PROCEDURES COMMITTEE

Chairman ..................................................... CEYLON Vice Chairmen ............................................. DAHOMEY*

TURKEY Reporting Member ......................................... AUSTRALIA

AFGHANISTAN DEMOCRATIC REPUBLIC

OF CONGO* ECUADOR FINLAND

"Not a member of IFC ., Not a member of IDA

Other Members

FRANCE GERMANY INDIA JORDAN LAOS* NICARAGUA

REPORT 111

SPAIN SUDAN TANZANIA UNITED KINGDOM UNITED STATES VENEZUELA * *

October 3,1968

At the meeting of the Joint Procedures Committee held on October 3, 1968, the items of business on the agendas of the Boards of Governors of the Bank, IDA and IFC were considered.

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

1. 196711968 ANNUAL REPORT

The Committee noted that provision had been made for discussion of the 1968 Annual Report and of the activities of the Bank and IDA at these Annual Meetings.

2. FINANCIAL STATEMENTS, ANNUAL AUDITS AND ADMINISTRATIVE BUDGETS

The Committee considered the Financial Statements, Auditors' Reports and Administrative Budgets contained in the 1968 Bank and IDA Annual Reports, together with the Report dated August 14, 1968.

The Committee recommends that the Boards of Governors of the Bank and IDA adopt the draft reso­lutions ... 2

3. ALLOCATION OF NET INCOME OF THE BANK

The Committee considered the Report of the Executive Di rectors dated August 1, 1968, on the Allo­cation of Net Income. l

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

4. STABILIZATION OF PRICES OF PRIMARY PRODUCTS

The Committee considered the letter of the President of the Bank to the Chairman of the Board of Governors of the Bank regarding the Study on Stabilization of Prices of Primary Products,5 together with the proposal of certain Bank Governors 6 to amend the draft resolution referred to in that letter.

The Committee recommends that the Board of Governors of the Bank adopt the draft resolution ... 7 101

1 Report I related to the business of the Fund 2 See pages 108 and 122 l See page 126 4 See page 108

5 See page 102 6 See page 104 7 See page 109

102

5. AMENDMENT OF REGULATIONS RELATING TO EXECUTIVE DIRECTORS AND ALTERNATES

The Committee has reviewed and noted the Report of the Executive Directors dated August 22, 1968, regarding amendment of the Regulations Relating to Executive Directors and Alternates Adopted Pursuant to Section 14 of the By-Laws of the Bank. I

The Committee recommends that the Record of the Proceedings of this Annual Meeting state that the said amendments have been noted.

6. ELECTION OF EXECUTIVE DIRECTORS

The Committee noted that the 1968 Regular Election of the Executive Directors of the Bank had taken place and that the next Regular Election of the Executive Directors will take place at the Annual Meet­ing of the Board of Governors in 1970.

B. The Committee submits the following Report and Recommendations on IFC business:

1. 196711968 ANNUAL REPORT

The Committee noted that provision had been made for discussion of the 1968 Annual Report and of the activities of IFC at these Annual Meetings.

2. FINANCIAL STATEMENTS, ANNUAL AUDIT AND ADMINISTRATIVE BUDGET

The Committee considered the Financial Statements and the Auditors' Report contained in the 1967/ 1968 Annual Report, and the Admi nistrative Budget attached to the Report dated August 14, 1968.

:rhe Committee recommends that the Board of Governors of IFC adopt the draft resolution ... 2

Approved:

/S/ U. B. WANNINAYAKE CEYLON-Chairman

/s/ WILLIAM McMAHON AUSTRALIA-Reporting Member

This Report was approved and its recommendations were adopted by the Boards of Governors on October 4, 1968.

Dear Mr. Chairman:

STABILIZATION OF PRICES OF PRIMARY PRODUCTS

LETTER FROM PRESIDENT OF BANK TO CHAIRMAN

Washington, D.C. September 12,1968

At the Annual Meeting in Rio de Janeiro, in September 1967, the Board of Governors adopted the following resolution:

RESOLUTION NO. 239

Stabilization of Prices of Primary Products

WHEREAS Governors of the Bank and the Fund for Cameroon, Central African Republic, Congo (Brazza­ville), Ivory Coast, Dahomey, France, Gabon, Upper Volta, Madagascar, Mali, Mauritania, Niger, Senegal,

I See page 127 2 See page 115

Chad and Togo have transmitted to the President of the International Bank for Reconstruction and Devel­opment 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 Gover­nors for consideration and appropriate decision by the Board, if possible at its next Annual Meeting.

In response to this resolution, the staff of the Bank, in consultations with the staff of the Fund, has undertaken a study of the problem and the two staffs have jointly prepared, as a fi rst stage, a general and analytical section (Part I) of the study which, at the request of the Executive Directors, I am transmitting herewith to the Board of Governors for their information. I

Certain additional work has been initiated by the Bank staff, including an examination of possible courses of action by the Bank in this field (Part II), and the staff is pursuing its work on various aspects of the problem.

The Executive Di rectors have begun consideration of the study but are not in a position to submit comments at this time. They intend to return to their deliberations on these matters immediately after the 1968 meeting of the Governors and to report further to the Board of Governors on the study.

In the light of the foregOing, the Executive Directors have asked me to convey to you their recommen­dation that the Board of Governors adopt the following resolution:

RESOLVED:

THAT the Board of Governors

(a) Note the section of the study already prepared on the problem of the stabilization of prices of primary products;

(b) Invite the President of the Bank to have the staff complete its study as soon as possible, particu­larly by preparing a section which considers possible ways in which the Bank might assist in finding feasible solutions to the problem; and

(c) Request the Executive Directors to transmit to the Board of Governors the section of the study referred to in (b) above as early as possible but not later than the 1969 Annual Meeting, together with such comments or recommendations as they may have on the entire study and a report on any actions regarding it which they may have taken.

I Distributed separately

Sincerely,

Robert S. McNamara President

103

104

STABILIZATION OF PRICES OF PRIMARY PRODUCTS

LETTER FROM 15 GOVERNORS TO CHAIRMAN

Washington, D.C. October 1, 1968

Mr. Chairman:

In our capacity as Governors of the World Bank, we have the honor to inform you that we wish the draft resolution presented by the Executive Directors of the Bank concerning Item 6 of the Agenda of the 1968 Annual Meetings to be amended to read as follows:

Amended text:

"The Board of Governors:

(a) Note the section of the study transmitted to them on the problem of the stabilization of prices of primary products and the work already performed by the staffs with regard to the action which the Bank could undertake in this field;

(b) Invite the President of IBRD to have his staff complete this work as soon as possible, on the basis of the studies already carried out, and identify a set of specific financial support measures which the Bank could undertake with a view to stabilizing the prices of primary products;

(c) Request the Executive Directors to transmit to the Board of Governors by December 31, 1968, at the latest the section of the study referred to in (b) above, together with such comments or rec­ommendations as they may consider pertinent and a report proposing action to be taken on it."

We should appreciate your submitting this proposal for approval by the Meeting of Governors of the World Bank.

Please accept, Mr. Chairman, the assurance of our highest consideration.

Signed:

Laurent Ntamag, Cameroon Louis Alazoula, Central African Republic Georges Diguimbaye, Chad Bernard Banza Bouiti, Congo-Brazzaville Stanislas Kpognon, Dahomey Frangois-Xavier Ortoli, France Emile Kassa-Mapsi, Gabon

Konan Badia, Ivory Coast Ralison Rakotovao, Madagascar Louis-Pascal Negre, Mali Mokhtar Ould Haiba, Mauritania Alidou Barkire, Niger Abdou Diouf, Senegal Boukari Djobo, Togo Pierre Claver Damiba, Upper Volta

JOINT PROCEDURES COMMITTEE

REPORT III

October 3,1968

The Joint Procedures Committee met on October 3,1968, and submits the following Report:

1. PLACE AND DATE OF 1970 ANNUAL MEETINGS

The Committee noted that invitations had been received from the Governments of Denmark and the Federal Republic of Germany to hold the 1970 Annual Meetings in Copenhagen and West Berlin, respectively; the Committee felt that there should be further consideration of this matter, and recom­mends that the Executive Directors of the Bank and of the Fund be requested to consider these two invitations and report to their respective Boards of Governors as soon as possible, but not later than December 31 J 1968.

2. OFFICERS AND JOINT PROCEDURES COMMITTEE FOR 1968/1969

The Committee recommends that the Governors for Argentina be Chairmen, and that the Governors for Belgium and Nepal be Vice Chairmen, of the Boards of Governors of the Bank and its affiliates and of the Fund, to hold office until the close of the next Annual Meetings.

It is further recommended that, as in the past, 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 the occasion re­quires, by convening; and that this Committee shall consist of the Governors for the following mem­bers: Argentina, Belgium, Costa Rica, Dominican Republic, France, Gabon, Germany, India, Italy, Kuwait, Libya, Nepal, Philippines, Rwanda, Saudi Arabia, Sweden, Trinidad and Tobago, United King­dom, United States, and Zambia.

It is recommended that the Chairmen of the Joint Procedures Committee shall be the Governors for Argentina and the Vice Chairmen shall be the Governors for Belgium and Nepal, and that the Gover­nor for Zambia shall serve as Reporting Member.

Approved:

/s/ U. B. WANNINAYAKE CEYLON-Chairman

/sl WILLIAM McMAHON AUSTRALIA-Reporting Member

RESOLVED:

This Report was approved and its recommendations were adopted by the Boards of Governors on October 4, 1968.

RESOLUTIONS ADOPTED BY THE BOARD OF GOVERNORS OF THE BANK BETWEEN 1967 AND 1968 ANNUAL MEETINGS

RESOLUTION NO. 241

Amendment of Section 14(c) of the By-Laws of the Bank

Sub-section (c) of Section 14 of the By-Laws of the Bank is hereby amended by deleting the last sentence thereof and by substituting therefor the following:

"The initial contract of the President shall be for a term of five years. Any renewal of the con­tract may be for the same or for a shorter term."

RESOLUTION NO. 242

Membership of Lesotho

(Adopted November 13,1967)

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

WHEREAS, pursuant to Section 20 of the By-Laws of the Bank, the Executive Directors, after conSUl­tation with representatives of the Government of Lesotho, 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 Lesotho shall be admitted to membership in the Bank shall be as follows:

105

(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: Mauritius may accept membership in the Bank pursuant to this resolution until February 14, 1969, or such later date as the Executive Directors may determine.

(Adopted August 14,1968)

RESOLUTION NO. 244

1968 Election of Executive Directors

RESOLVED:

a) THAT the proposed RULES FOR THE 1968 REGULAR ELECTION OF EXECUTIVE DIRECTORS are hereby approved; and

b) THAT a Regular Election of Executive Directors shall take place at the Annual Meeting of the Board of Governors in 1970.

RESOLVED:

(Adopted September 9,1968)

RESOLUTIONS ADOPTED BY THE BOARD OF GOVERNORS OF THE BANK AT THE 1968 ANNUAL MEETING

RESOLUTION NO. 245

Financial Statements, Auditors' Report and Administrative Budget

THAT the Board of Governors of the Bank consider the Financial Statements, Auditors' Report and Administrative Budget, included in the 1967-68 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 October 4,1968)

RESOLUTION NO. 246

Allocation of Net Income

RESOLVED:

108 1. THAT the Report of the Executive Directors dated August 1, 1968, on "Allocation of Net Income" is hereby approved;

2. THAT the Bank transfer to the International Development Association by way of grant $75,000,000 out of the net income of the Bank for the fiscal year ended June 30, 1968, such transfer to be made at the time and in the manner to be decided by the Executive Directors;

3. THAT the allocation of the remainder of the net income of the Bank for the fiscal year ended June 30, 1968 ($94,123,501), to the Supplemental Reserve Against Losses on Loans and Guarantees and From Currency Devaluations is hereby noted with approval.

(Adopted October 4, 1968)

RESOLUTION NO. 247

Stabilization of Prices of Primary Products

RESOLVED:

THAT the Board of Governors

(a) Note the section of the study already prepared on the problem of the stabilization of prices of primary products;

(b) Invite the President to have the staff complete as soon as possible the work already initiated, par­ticularly by completing a section which considers specific financial measures and other ways in which the Bank might assist in finding feasible solutions to the problem; and

(c) Request the Executive Directors to transmit to the Board of Governors the section of the study referred to in (b) above not later than June 30, 1969, together with such comments or recommen­dations as they may have on the entire study and a report on any actions regarding it which they may have taken.

(Adopted October 4,1968)

RESOLUTIONS ADOPTED BY THE BOARD OF GOVERNORS OF IFe BETWEEN 1967 AND 1968 ANNUAL MEETINGS

RESOLUTION NO. 66

Membership of Yugoslavia

WHEREAS the Government of Yugoslavia 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 Yugoslavia, 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 Yugoslavia shall be admitted to membership in the Cor­poration 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.

109

110

2. Subscription: By accepting membership in the Corporation, Yugoslavia shall subscribe to 591 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, Yugoslavia shall pay $591,000 to the Corporation in full payment of the capital stock subscribed.

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

5. Acceptance of Membership: Yugoslavia shall become a member of the Corporation, with a subscrip­tion as set forth in paragraph 2 of this resolution, as of the date when Yugoslavia 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: Yugoslavia may accept membership in the Cor­poration pursuant to this resolution until June 30, 1968, or such later date as the Board of Directors may determine.

(Adopted December 29,1967)

RESOLUTION NO. 67

Membership of Indonesia

WHEREAS the Government of Indonesia 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 Indonesia, 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 Indonesia shall be admitted to membership in the Cor­poration 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.

•

~~. Subscription: By accepting membership in the Corporation, Indonesia shall subscribe to 1,218 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, Indonesia shall pay $1,218,000 to the Corporation in full payment of the capital stock subscribed.

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

5. Acceptance of Membership: Indonesia shall become a member of the Corporation, with a subscrip­tion as set forth in paragraph 2 of this resolution, as of the date when Indonesia 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: Indonesia may accept membership in the Cor­poration pursuant to this resolution until Monday, August 5, 1968, or such later date as the Board of Directors may determine.

(Adopted February 5,1968)

RESOLUTION NO. 68

Membership of Singapore

WHEREAS the Government of Singapore 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 Singapore, 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 Singapore shall be admitted to membership in the Cor­poration 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.

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2. Subscription: By accepting membership in the Corporation, Singapore shall subscribe to 177 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, Singapore shall pay $177,000 to the Corporation in full payment of the capital stock subscribed.

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

5. Acceptance of Membership: Singapore shall become a member of the Corporation, with a subscrip­tion as set forth in paragraph 2 of this resolution, as of the date when Singapore 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: Singapore may accept membership in the Cor­poration pursuant to this resolution until September 9, 1968, or such later date as the Board of Direc­tors may determine.

(Adopted March 8,1968)

RESOLUTION NO. 69

Membership of Uruguay

WHEREAS the Government of Uruguay 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 Uruguay, 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 Uruguay shall be admitted to membership in the Corpora­tion 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.

«-J

2. Subscription: By accepting membership in the Corporation, Uruguay shall subscribe to 155 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, Uruguay shall pay $155,000 to the Corporation in full payment of the capital stock subscribed.

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

5. Acceptance of Membership: Uruguay shall become a member of the Corporation, with a subscription as set forth in paragraph 2 of this resolution, as of the date when Uruguay 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: Uruguay may accept membership in the Corpo­ration pursuant to this resolution until October 15, 1968, or by such later date as the Board of Direc­tors may determine.

(Adopted April 15, 1968)

RESOLUTION NO. 70

Membership of the Republic of China

WHEREAS the Government of the Republic of China 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 the Republic of China, 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 the Republic of China shall be admitted to membership in the Corporation 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.

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2. Subscription: By accepting membership in the Corporation, the Republic of China shall subscribe to 4,154 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, the Republic of China shall pay $4,154,000 to the Corporation in full payment of the capital stock subscribed.

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

5. Acceptance of Membership: The Republic of China shall become a member of the Corporation, with a subscription as set forth in paragraph 2 of this resolution, as of the date when the Republic of China 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: The Republic of China may accept membership in the Corporation pursuant to this resolution until January 24, 1969, or by such later date as the Board of Directors may determine.

(Adopted July 24,1968)

RESOLUTION NO. 71

Membership of Mauritius

WHEREAS the Government of Mauritius 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 Mauritius, 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 Mauritius shall be admitted to membership in the Corpo­ration 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, Mauritius shall subscribe to 95 shares of the capital stock of the Corporation at the par value of $1,000 per share.

3. Payment of Subscription: Before accepting membership in the Corporation, Mauritius shall pay $95,000 to the Corporation in full payment of the capital stock subscribed.

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

5. Acceptance of Membership: Mauritius shall become a member of the Corporation, with a subscrip­tion as set forth in paragraph 2 of this resolution, as of the date when Mauritius 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: Mauritius may accept membership in the Cor­poration pursuant to this resolution until February 14, 1969, or such later date as the Board of Direc­tors may determine.

RESOLVED:

(Adopted August 14,1968)

RESOLUTION ADOPTED BY THE BOARD OF GOVERNORS OF IFe AT THE 1968 ANNUAL MEETING

RESOLUTION NO. 72

Financial Statements, Auditors' Report and Administrative Budget

THAT the Board of Governors of the Corporation consider the Financial Statements and the Auditors' Report, included in the 1967-68 Annual Report, and the Administrative Budget attached to the Report dated August 14, 1968, 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 on October 4,1968)

RESOLUTIONS ADOPTED BY THE BOARD OF GOVERNORS OF IDA BETWEEN 1967 AND 1968 ANNUAL MEETINGS

RESOLUTION NO. 63

Membership of Lesotho

WHEREAS the Government of Lesotho 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

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WHEREAS, pursuant to Section 9 of the By-Laws of the Association, the Executive Directors, after consultation with representatives of the Government of Lesotho, 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 Lesotho shall be admitted to membership in the Associa­tion shall be as follows:

(a) The terms and conditions of the membership of Lesotho 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" 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, Lesotho shall subscribe funds in the amount of $160,000 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, Lesotho 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) Lesotho may accept membership in the Association pursuant to this resolution until July 29,1968, or such later date as the Executive Directors may determine.

(Adopted January 29,1968)

RESOLUTION NO. 64

Membership of Botswana

WHEREAS the Government of Botswana 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

WHEREAS, pursuant to Section 9 of the By-Laws of the Association, the Executive Directors, after consultation 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 Asso­ciation shall be as follows:

(a) The terms and conditions of the membership of Botswana 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" 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, Botswana shall subscribe funds in the amount of $160,000 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, Botswana 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) Botswana may accept membership in the Association pursuant to this resolution until October 1, 1968, or such later date as the Executive Directors may determine.

(Adopted April 1, 1968)

RESOLUTION NO. 65

Membership of Mauritius

WHEREAS the Government of Mauritius 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

WHEREAS, pursuant to Section 9 of the By-Laws of the Association, the Executive Directors, after consultation with representatives of the Government of Mauritius, 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 Mauritius shall be admitted to membership in the Asso­ciation shall be as follows:

(a) The terms and conditions of the membership of Mauritius 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" 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, Mauritius shall subscribe funds in the amount of $860,000 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, Mauritius 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" of Schedule A of the Articles.

(d) Mauritius may accept membership in the Association pursuant to this resolution until February 14, 1969, or by such later date as the Executive Directors may determine.

(Adopted August 14,1968)

RESOLUTION NO. 66

Additions to Resources; Second Replenishment

WHEREAS, Pursuant to Resolution No. 56 of the Board of Governors adopted on September 30, 1965, the Executive Directors of the International Development Association have considered its prospective finan­cial requirements and have reported to the Board of Governors their conclusion that additional resources should be made available to the Association for new commitments for the period up to June 30, 1970; and

WHEREAS, the governments of the countries listed in paragraph (b) below have expressed their in­tention, subject to any necessary legislative authorization, to contribute additional resources to the Asso-

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ciation equivalent to U.S. $1,170,480,000 in the amounts set forth below which, together with the equivalent of (i) approximately U.S. $12 million which the Swiss Confederation has agreed to lend to the Association on terms whereby the proceeds thereof would be made available in three equal instalments on July 1, 1968, July 1, 1969, and July 1, 1970, and be repayable over a 50-year period without interest, and (ii) U.S. $17,520,000 which the governments of certain countries listed in paragraph (b) below have expressed their intention, subject to any necessary legislative authorization, to contribute by way of Supplementary Contributions, would mean a total of the equivalent of U.S. $1,200 million in additional resources available to the Association to accomplish the foregoing objective.

NOW, THEREFORE, the Board of Governors

RESOLVES THAT:

(a) The Report of the Executive Directors, dated March 8, 1968,1 is accepted by the Board of Gover­nors and its conclusions adopted.

(b) The Association is authorized to accept additional contributions, as follows:

Country (U.S.$)*

Australia 24,000,000 Austria 8,160,000 Belgium 20,400,000 Canada 67,200,000 Denmark 12,120,000 Finland 3,720,000 France 97,200,000 Germany 117,000,000 Italy 48,360,000 Japan 66,480,000 Kuwait 5,400,000 Luxembourg 600,000 Netherlands 26,520,000 Norway 10,680,000 South Africa 3,000,000 Sweden 24,120,000 United Kingdom 155,520,000 United States 480,000,000

(c) Such contributions shall not be regarded as additional subscriptions and, in accordance with the provisions of Article VI, Section 3(a) of the Articles of Agreement of the Association, shall not carry voting rights.

(d) Payment of such contributions shall be made in freely convertible currencies in three equal in­stalments on or before November 8, 1968, November 8, 1969, and November 8, 1970, provided, however, that if the replenishment authorized by this Resolution shall not have become effective in accordance with paragraph (h) below by October 8, 1968, payment of the instalment due on November 8, 1968, shall be postponed and shall be made within 30 days after the date when the replenishment shall have become effective.

(e) If any contributing member shall deposit the notification referred to in paragraph (h) below after the date when the first instalment shall be payable, including any postponement thereof (as pro­vided in paragraph (d) above), payment of such instalment by such contributing member shall be made within 30 days after the date of such deposit.

I See page 128

* In terms of United States dollars of the weight and fineness in effect on January 1, 1960.

(f) The Association shall use the contributions in the manner set forth in the Procedural Memoran­dum regarding Use of Contributions under the Second Replenishment attached as the Appendix to this Resolution (herein called the Procedural Memorandum) or with such modifications as shall be approved by the Executive Directors; provided, however, that no modification shall permit any contribution to be used more rapidly than as set forth in the said Procedural Memorandum unless the member whose contribution is involved consents thereto.

(g) The rights and obligations of the Association and the contributing members in regard to such contributions shall be the same (except as otherwise provided in this Resolution, including the Appendix hereto) as those which govern the ninety percent portion of the initial subscriptions of original members payable under Article II, Section 2(d) of the Articles of Agreement by members listed in Part I of Schedule A of the Articles.

(h) None of such contributions shall become payable unless the following condition has been satis-fied:

At least 12 contributing members whose contributions aggregrate not less than $950 million shall each have given the Association, on or before June 30, 1968, or such later date as the Executive Di rectors may determine, formal notification that it will make the contribution author­ized hereunder for such member in accordance with the terms of this Resolution, provided that, for the purpose of determining whether the condition set forth in this paragraph with re­spect to the amount of contributions has been satisfied, account shall be taken of the amount of any Supplementary Contribution made pursuant to the Resolution of the Board of Governors entitled "Supplementary Contributions to Resources; Second Replenishment."

The replenishment authorized by this Resolution shall become effective on the date when the foregoing condition shall have been satisfied.

(i) No member shall be obligated to make the contribution authorized hereunder for such member unless it gives the formal notification described in paragraph (h) above. The giving of such formal notification by any contributing member shall be deemed to constitute an agreement between the Association and such member that the contribution of such member shall be used in the manner set forth in the Procedural Memorandum, with such modifications as may be made pursuant to paragraph (f) above.

(j) In the event any contributing member ceases to be a member or the Association permanently suspends its operations, the additional resources contributed or to be contributed pursuant to this Resolution shall be treated for the purposes of Article VII, Sections 4 and 5 of the Articles of Agreement in the same manner as though they were subscriptions, and disposition thereof shall be made in the manner provided in those sections for the disposition of subscriptions as therein defined; provided, however, that the obligation of a contributing member to make the contribu­tions authorized for such member under this Resolution shall not be affected by the cessation of membership of such member.

I. Introduction

APPENDIX TO RESOLUTION NO. 66

Procedural Memorandum Regarding Use of Contributions under Second Replenishment

(Adopted September 20, 1968)

Pursuant to paragraph (f) of the Resolution adopted by the Board of Governors of the Association (herein called the Second Replenishment Resolution) providing for the second replenishment of the re­sources of the Association, this memorandum sets forth the procedure which the Association will follow

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in using the contributions of the contributing members to the second replenishment (including Supple­mentary Contributions as referred to in the second Whereas clause in the Second Replenishment Resolu­tion) to meet its disbursement requirements on Second Replenishment Credits and to maintain an appro­priate working balance.

The term "Second Replenishment Credits" shall mean all credits entered into after the date when the replenishment authorized by the Second Replenishment Resolution shall have become effective (the Effective Date) and any credits entered into prior to the Effective Date and deemed by the Association to be made from resources provided to the Association under the Swiss Confederation loan referred to in the Preamble to the Second Replenishment Resolution and from resources provided by any transfer by the Bank to the Association authorized after June 30, 1968.

II. Initial Drawing Rules

Whenever the Association decides to make a periodical drawing on contributions (the Drawing), it shall draw:

(a) upon the contribution of each contributing member which shall have notified the Association by the date when the Executive Directors of the Association shall have adopted their report submit­ting the Second Replenishment Resolution to the Board of Governors that it desires its contribu­tion to be used only on a pro rata basis, for its pro rata share of the Drawing;

(b) upon the contribution of the United States, for the lesser of (i) its pro rata share of the Drawing and (ii) such amount as shall represent identifiable procurement in the United States under Sec­ond Replenishment Credits (as reasonably determined by the Association, taking account from time to time of such procurement on a cumulative basis within a year prior to the date of the Drawing), any excess of (i) over (ii) accruing before June 30, 1971, or thereafter if and to the extent that amounts are available under paragraph (c) below to cover the balance of the Drawing, becoming a "Deferred Amount";

(c) upon the contributions of other members, pro rata among such members, up to the balance re­maining of the Drawing;

(d) thereafter, if needed, upon the contribution of the United States excluding Deferred Amounts, up to the balance remaining of the Drawing;' provided, however, that no drawings under this para­graph (d) shall be made prior to July 1,1971; and

(e) finally, upon the Deferred Amounts of the contribution of the United States for any balance re­maining of the Drawing;' provided, however, that no drawings may be made on any Deferred Amount prior to the expiration of three years after such amount was deferred.

Notwithstanding the foregoing, any portion of a contribution of a contributing member paid in cur­rency (either of the contributing member or of another member) for which notes or similar obligations shall not have been substituted in accordance with Article II, Section 2(e) of the Articles of Agreement of the Association will be used by the Association more rapidly than provided above if such contributing member so requests.

III. Drawing Rules after Termination of Special Arrangements for the United States

If the United States notifies the Association that it waives the special arrangements set forth in II above, the Association, whenever it decides to make a Drawing, will thereafter draw pro rata on the un­drawn portions of the contributions of contributing members.

IV. Carry-Over

Immediately prior to the Effective Date the Association will have, inter alia, resources available to it derived from the 10% portions of subscriptions, from profits and from transfers to the Association author­ized by the Bank prior to July 1, 1968, but not yet utilized. (The amount of such resources is herein called

, This drawing would be in addition to drawing on the United States subscription under (b).

the Carry-Over.) If it proves necessary at any time to meet disbursements on Second Replenishment Credits, the Association may, in anticipation of the receipt of contributions under the Second Replenish­ment, use these resources for that purpose. To the extent that the Carry-Over is so used, the Association shall, whenever such contributions become available for the purpose (a) draw on such contributions so that the position of each contributing member shall, to the extent practicable, be adjusted to that which it would have been if the contributions had been initially available when needed to meet the disburse­ments and (b) restore the accounts from which amounts were used to meet such disbursements.

V. Determination by the Association

Apportionments, adjustments and other calculations provided herein may be based when necessary upon approximate amounts and estimates of the Association.

RESOLUTION NO. 67

Supplementary Contributions to Resources; Second Replenishment

WHEREAS, the resolution entitled "Additions to Resources; Second Replenishment" of the Board of Gov­ernors (herein called the Second Replenishment Resolution) authorizes additions to the resources of the Association;

WHEREAS, it is desirable that supplementary contributions to the resources of the Association be made available;

WHEREAS, the governments of the countries listed in paragraph (a) below have expressed their intention, subject to any necessary legislative authorization, to make supplementary contributions to the Association equivalent to U.S. $17,520,000 in the amounts set forth below;

NOW, THEREFORE, the Board of Governors

RESOLVES THAT:

(a) The Association is authorized to accept supplementary contributions (herein called Supplemen­tary Contributions) as follows:

Country (U.S.$)*

Canada 7,800,000 Denmark 1,080,000 Finland 360,000 Netherlands 2,760,000 Sweden 5,520,000

(b) Except as provided in paragraph (c) below, the Supplementary Contribution of each contributing member shall be made on the same terms and conditions as those provided in the Second Re­plenishment Resolution for the additional contribution authorized thereby for such member;

(c) Each contributing member whose Supplementary Contribution is authorized pursuant to para­graph (a) above shall give the Association, by the date provided in paragraph (h) of the Second Replenishment Resolution, formal notification that it will make the Supplementary Contribution authorized hereunder for such member in accordance with the terms of this Resolution; pro­vided, however, that no such Supplementary Contribution shall become payable until the condi­tion specified in paragraph (h) of the Second Replenishment Resolution shall have been satisfied.

(Adopted September 20,1968)

• In terms of United States dollars of the weight and fineness in effect on January 1, 1960.

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RESOLUTION ADOPTED BY THE BOARD OF GOVERNORS OF IDA AT THE 1968 ANNUAL MEETING

RESOLVED:

RESOLUTION NO. 68

Financial Statements, Auditors' Report and Administrative Budget

THAT the Board of Governors of the Association consider the Financial Statements, Auditors' Report and Administrative Budget, included in the 1967-68 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 October 4,1968)

RULES FOR THE 1968 REGULAR ELECTION OF EXECUTIVE DIRECTORS I

1. Definitions: In these Rules, unless the context shall otherwise require,

(a) "Articles" means the Articles of Agreement of the Bank.

(b) "Board" means the Board of Governors of the Bank.

(c) "Chairman" means the Chairman of the Board or a Vice Chairman acting as Chairman.

(d) "Governor" includes the Alternate Governor or any temporary Alternate Governor, when acting for the Governor.

(e) "Secretary" means the Secretary or any acting Secretary of the Bank.

(f) "Election" means the 1968 Regular Election of Executive Directors.

2. Date of Election: The election shall be held during the 1968 Annual Meeting of the Board at a time to be fixed by the Board.

3. Basic Rules-Schedule B: Subject to the adjustments set forth herein, the provisions of Schedule B of the Articles shall apply to the conduct of the election, except that "four-and-a-half per cent" shall be substituted for "fourteen per cent" in Paragraphs 2 and 5 and "ten per cent" shall be substituted for "fifteen per cent" in Paragraphs 3, 4 and 5 thereof.

4. Executive Directors to be Elected: Fifteen Executive Directors shall be elected.

5. Nominations:

(a) Any person nominated by one or more Governors entitled to vote in the election shall be eligible for election as Executive Director.

(b) Each nomination shall be made on a Nomination Form furnished by the Secretary, signed by the Governor or Governors making the nomination, and deposited with the Secretary.

(c) A Governor may nominate only one person.

(d) Nominations may be made until 12 o'clock noon on the day preceding the election. The Secretary shall post and distribute a list of the persons nominated.

6. Supervision of the Election: The Chairman shall appoint such tellers and other assistants and take such other action as he deems necessary for the conduct of the election.

I Adopted by Resolution No. 244; see page 108

7. Ballots: One ballot form shall be furnished before a ballot is taken to each Governor entitled to vote. On any particular ballot only ballot forms distributed for that ballot shall be counted.

8. Balloting: Each ballot shall be taken as follows:

(a) There shall be a call of members whose Governors are entitled to vote and each ballot, signed by the Governor, shall be deposited in the ballot box.

(b) When a ballot shall have been completed, the Chairman shall cause the ballots to be counted and shall announce the names of the persons elected before the end of the session at which the elec­tion is held. If a succeeding ballot is necessary, the Chairman shall announce the names of the nominees to be voted on and the members whose Governors are eligible to vote.

(c) If the tellers shall be of the opinion that any particular ballot is not properly executed, they shall, if possible, afford the Governor concerned an opportunity to correct it before tallying the results; and such ballot, if so corrected, shall be deemed to be valid.

9. When on any ballot the number of nominees shall not exceed the number of Executive Directors to be elected, each nominee shall be deemed to be elected by the number of votes received by him on such ballot; provided, however, that if, on such ballot, the votes of any Governor shall be deemed under Paragraph 4 of Schedule B to have raised the votes cast for any nominee above ten per cent of the eligible votes, no nominee shall be deemed to have been elected who shall not have received on such ballot a minimum of four-and-a-half per cent of the eligible votes, and a succeeding ballot shall be taken for which any nominee not elected shall be eligible.

10. If, as a result of the first ballot, the number of Executive Directors to be elected in accordance with Paragraph 4 above shall not have been elected, a second and, if necessary, further ballots shall be taken. The Governors entitled to vote on such succeeding ballots shall be only:

(a) those Governors who voted on the preceding ballot for any nominee not elected; and

(b) those Governors whose votes for a nominee elected on the preceding ballot are deemed under Paragraph 4 of Schedule B to have raised the votes cast for such nominee above 10 per cent of the eligible votes.

11. The votes of a Governor shall not be deemed under Paragraph 4 of Schedule B to have raised the total votes for a nominee above ten per cent of the eligible votes if without the votes of such Governor such total would be more than four-and-a-half per cent but not more than ten per cent of the eligible votes.

12. If on any ballot two or more Governors having an equal number of votes shall have voted for the same nominee and the votes of one or more, but not all, of such Governors could be deemed under Para­graph 4 of Schedule B to have raised the total votes received by such nominee above ten per cent of the eligible votes, the Chairman shall determine by lot the Governor or Governors, as the case may be, who shall be entitled to vote on the next ballot.

13. Abstention from Voting: If a Governor shall abstain from voting on any ballot he shall not be entitled to vote on any subsequent ballot and his votes shall not be counted within the meaning of Section 4(g) of Article V towards the election of any Executive Director. If at the time of any ballot a member shall not have a duly appointed Governor, such member shall be deemed to have abstained from voting on that ballot.

14. Elimination of Nominees: If on any ballot two or more nominees shall receive the lowest number of votes, no nominee shall be dropped from the next succeeding ballot, but if the same situation is re- 123 peated on such succeeding ballot, the Chairman shall eliminate by lot one of such nominees from the next succeeding ballot.

15. Announcement of Result: After the last ballot the Chairman shall cause to be distributed a statement setting forth the results of the election.

124

16. Effective Date of Election: The effective date of the election shall be November 1, 1968. Incumbent elected Executive Directors shall serve through the day preceding such date.

17. General: Any question arising in connection with the conduct of the election shall be resolved by the tellers, subject to appeal, at the request of any Governor, to the Chairman and from him to the Board. Whenever possible, any such questions shall be put without identifying the members or Governors concerned.

EXECUTIVE DIRECTORS ELECTED AT 1968 REGULAR ELECTION

1. Hideo SUZUki (Japan), elected by the votes of:

2. Giorgio Rota (Italy), elected by the votes of:

Burma Ceylon Japan Nepal Singapore Thailand

Greece Italy Portugal Spain

3. Patrick M. Reid (Canada), elected by the votes of:

Canada Guyana Ireland Jamaica

4. John O. Stone (Australia), elected by the votes of:

Australia New Zealand South Africa

5. S. Osman Ali (Pakistan), elected by the votes of:

Iran Iraq Jordan Kuwait Lebanon Pakistan Saudi Arabia Syrian Arab Republic United Arab Republic

6. Reignson C. Chen (China), elected by the votes of:

China Korea Viet-Nam

650 1,077 7,976

350 570

1,263

917 6,910 1,050 2,917

8,170 410

1,103 570

5,580 1,917 2,383

1,536 890 413 917 340

2,250 1,210

650 1,671

7,750 783 677

11,886

11,794

10,253

9,880

9,877

9,210

7. Christopher Kahangi (Tanzania), elected by the votes of:

Botswana 282 Burundi 400 Ethiopia 350 Gambia, The 303 Guinea 450 Kenya 583 Lesotho 282 Liberia 463 Malawi 400 Mali 423 Nigeria 917 Sierra Leone 400 Sudan 850 Tanzania 583 Trinidad and Tobago 717 Uganda 583 Zambia 783 8,769

S. Andre van Campenhout (Belgium), elected by the votes of:

Austria 2,117 Belgium 4,750 Luxembourg 450 Turkey 1,400 8,717

9. Pieter Lieftinck (Netherlands), elected by the votes of:

Cyprus 400 Israel 1,209 Netherlands 5,750 Yugoslavia 1,317 8,676

10. Erik Karlsson (Sweden), elected by the votes of:

Denmark 1,983 Finland 1,583 Iceland 400 Norway 1,850 Sweden 2,650 8,466

11. Abderrahman Tazi (Morocco), elected by the votes of:

Afghanistan 550 Algeria 1,050 Ghana 717 Indonesia 2,450 Laos 350 Libya 450 Malaysia 1,583 Morocco 1,210 8,360

12. Luis Machado (Cuba), elected by the votes of:

Costa Rica 357 EI Salvador 357 Guatemala 357 Haiti 400 125 Honduras 330 Mexico 2,330 Nicaragua 330 Panama 340 Peru 885 Venezuela 2,117 7,803

126

13. Virgilio Barco (Colombia), elected by the votes of:

Brazil Colombia Dominican Republic Ecuador Philippines

14. Mohamed Nassim Kochman (Mauritania), elected by the votes of:

Cameroon Central African Republic Chad Congo (Brazzaville) Congo, Democratic Rep. of Dahomey Gabon Ivory Coast Malagasy Republic Mauritania Mauritius Niger Rwanda Senegal Somalia Togo Upper Volta

15. Angel R. Caram (Argentina), elected by the votes of:

Argentina Bolivia Chile Paraguay Uruguay

3,983 1,183

383 421

1,423

450 350 350 350 850 350 350 450 450 350 421 350 400 583 400 400 350

3,983 460

1,183 310 530

7,393

7,204

6,466

The Governor for Tunisia having abstained from voting, his votes did not count toward the election of any Executive Director.

REPORTS OF THE EXECUTIVE DIRECTORS OF THE BANK

August 1, 1968

Allocation of Net Income

1. The Bank's net income for the fiscal year ended June 30,1968, was $169,123,501, before providing for a loss of $23,186,698 arising from currency devaluations during the year. In addition the Bank had com­mission income for that fiscal year amounting to $595,027, which was appropriated to the Special Reserve created under Article IV, Section 6 of the Bank's Articles of Agreement. As of June 30, 1968, the Special Reserve totalled $291,017,345 and, without regard to the 1968 fiscal year's income, the Supplemental Reserve Against Losses on Loans and Guarantees and From Currency Devaluations amounted to $868,984,038. Total reserves therefore amounted to $1,160,001,383, of which the $291,017,345 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, 1968.

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 From Currency Devaluations and

what portion thereof, if any, they should recommend that the Board of Governers transfer to the International Development Association. The Executive Directors have allocated $94,123,501 of such net income to the Supplemental Reserve Against Losses on Loans and Guarantees and From Currency Devaluations.

4. The Executive Directors have conclued that it is not necessary to retain $75,000,000 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 Development Association by way of grant.

5. Accordingly the Executive Directors recommend that the Board of Governors approve the present Report and adopt the draft resolution attached .... I

(This Report was approved and its recommendation was adopted by the Board of Governors on October 4, 1968)

Regulations Relating to Executive Directors and Alternates Adopted Pursuant to Section 14 of the By-Laws of the Bank

Travel of Executive Directors and Alternates

August 22,1968

1. Paragraph 3(c) of "Regulations Relating to Executive Directors and Alternates Adopted Pursuant to Section 14 of the By-Laws of the Bank" as adopted by the Executive Directors on DecembAr 6, 1951, was as follows:

"(c) A full-time Executive Director or his full-time Alternate may receive a reasonable allowance for expenses incurred by him in traveling Officially, after consultation with the President, to the country or countries he represents; provided that such Executive Director or Alternate shall not ordinarily be entitled to such allowance more frequently than once in each period of 12 months beginning with the date of his taking office."

2. On June 10, 1968, the Executive Directors amended said Paragraph 3(c) to read as follows: "(c) An Executive Director or an Alternate may receive a reasonable allowance for expenses incurred by him on approved official travel to the country or countries he represents. Such travel of Executive Directors and Alternates shall be approved by the Board. Notice of intention to travel officially between the Bank and their countries shall be given to the Board through the Secretary. In the absence of objection, such travel shall be deemed approved and the Secretary shall so inform the Administration and Treasurer's Departments. Such notice shall be submitted to the Board for consideration prior to undertaking such travel; provided, however, that when circumstances do not permit submission of prior notice, notice shall be given to the Secretary who shall submit it to the Board. The signature of the individual concerned shall be sufficient authorization pending considera­tion of such notice by the Board."

3. In accordance with Section 16 of the By-Laws of the Bank, the said amendment is hereby presented to the Board of Governors for review. 2

I See page 108

2 See page 102

(This Report was reviewed and noted without objection by the Board of Governors on October 4, 1968)

127

128

REPORT OF THE EXECUTIVE DIRECTORS OF IDA

March 8,1968

Additions to IDA Resources; Second Replenishment

1. At their 1965 Annual Meeting, the Board of Governors of the International Development Association adopted the following resolution (Resolution No. 56):

"THAT the Executive Directors are requested to consider the prospective financial require­ments of the International Development Association, and to formulate for submission to the Board of Governors, at the earliest possible date, preferably before December 31, 1965, specific proposals for replenishing the resources of the Association."

2. In July 1966 the President of the Association put forward to the Part I member Governments a proposal for their participation in the Second Replenishment of the Association's resources, and since that time extended discussions have been conducted among the potential contributing Governments concerning the aggregate amount of additional resources to be made available to the Association, including the share of the total to be contributed by each of the participating member countries; the period during which those resources should be available for commitment by the Association; the manner in which the new funds should be provided; and the conditions to be attached to the use of the new funds. The results of these discussions, including the documents attached ... ,I were presented to the Executive Directors by the President of the Association on February 26 and March 6, 1968, and have been reviewed and approved by the Executive Directors.

3. The basis on which it is proposed that the additional resources be provided, and the terms and conditions proposed for their acceptance by the Association, are embodied in (i) the draft Resolution (the Second Replenishment Resolution) attached ... 2 including the draft Procedural Memorandum regarding Use of Contributions under Second Replenishment (the Procedural Memorandum) attached as the Appendix to the Second Replenishment Resolution,3 and (ii) the draft Resolution (the Supple­mentary Contributions Resolution) attached .... 4

4. Status of Resources

The following table shows the status of the resources available to the Association for lending purposes as of February 29, 1968:

I See pages 116 and 121 2 See page 116 3 See page 119 4 See page 121

Resources:

Subscriptions 5

First Replenishment Special Supplementary Contribution

from Sweden IBRD Contributions Net Income

Expressed in equivalent of

millions of United States

dollars

$791 745

28 210

19

$1,793

5 This amount includes the (i) subscriptions of Part I members ($751 million); (ii) 10% portion of the subscriptions of Part II members payable in gold or freely convertible currency ($25 million); (iii) that part of the 90% portion of the subscriptions of Part II members released on a convertible basis and releases on a non-convertible basis which have actually been used ($15 million).

~. Up to February 29, 1968, the Association had committed (net of cancellations) $1,741 million, leaving a balance available for commitment of about $52 million in freely usable currencies. The First Re­plenishment of the resources of the Association became effective in June 1964 and the Association proceeded to extend credits of about $309 million in the fiscal year 1964/65, $284 million in 1965/66, and $354 million in 1966/67. By December 31, 1966, when the uncommitted resources of the Asso­ciation had been reduced to $115 million, it became apparent that the Association could no longer sustain the full pace of its activities, and no credits have been extended since that time to the two countries which had theretofore been the principal recipients of Association credits, namely India and Pakistan. The remaining resources of the Association have been either committed or earmarked on credits to other developing countries among the Association's membership, and it is expected that they will all be formally committed within the next few months.

6. Additional Contributions

The member countries listed below have stated that, subject to any necessary legislative action, they intend to make available to the Association new resources aggregating the equivalent of $1,170,480,000 payable in three annual instalments commencing on November 8, 1968 (unless that date is postponed as provided in paragraph (d) of the Resolution) and otherwise on the conditions stated below. The amount each member country has stated it would contribute is as follows:

Country (U.S.$)*

Australia 24,000,000 Austria 8,160,000 Belgium 20,400,000 Canada 67,200,000 Denmark 12,120,000 Finland 3,720,000 France 97,200,000 Germany 117,000,000 Italy 48,360,000 Japan 66,480,000 Kuwait 5,400,000 Luxembourg 600,000 Netherlands 26,520,000 Norway 10,680,000 South Africa 3,000,000 Sweden 24,120,000 United Kingdom 155,520,000 United States 480,000,000

7. Swiss Loan

In addition to these contributions from member countries, the Swiss Confederation has agreed to lend to the Association (the Swiss Loan) the equivalent of approximately $12 million on terms whereby the proceeds of the Swiss Loan would be made available in three equal instalments on July 1, 1968, July 1, 1969, and July 1, 1970, and be repayable over a 50-year period without interest. The 129 Swiss Loan is subject to ratification by the Swiss Federal Council which is expected to become final in April 1968 .

• In terms of United States dollars of the weight and fineness in effect on January 1, 1960.

130

8. Supplementary Contributions

(a) Several member countries have stated that, subject to any necessary legislative action, they intend to make Supplementary Contributions available to the Association in the aggregate amount of the equivalent of $17,520,000. The amount each such member country has stated it would thus contribute is as follows:

Country (U.S.$)*

Canada 7,800,000 Denmark 1,080,000 Finland 360,000 Netherlands 2,760,000 Sweden 5,520,000

(b) The Supplementary Contribution of each contributing member would be made on essentially the same terms and conditions as provided in the Second Replenishment Resolution (including Procedural Memorandum) for the additional contribution authorized thereby for such member. No Supplementary Contribution would become payable until the condition specified in paragraph (h) of the Second Replenishment Resolution shall have been satisfied, i.e., when 12 contributing members whose contributions aggregate not less than $950 million give the formal notification provided in that paragraph; the amount of any Supplementary Contribution would count towards the $950 million. (See the Supplementary Contributions Resolution attached .... 1)

(c) The contributing members desire it to be recorded that their willingness to volunteer these Supplementary Contributions has no implications whatsoever with respect to their shares in any future replenishment of the Association's resources.

9. Aggregate Amount of New Resources

Thus, the aggregate amount of new resources to be made available to the Association would total $1,200 million.

10. Future Bank Transfers

It is not possible to say at this time whether the Bank will be in a position to provide additional resources to the Association for purposes of the Second Replenishment in the form of further transfers out of Bank profits.

11. Period of Availability and Spreading of Commitments

The proposed Second Replenishment Resolution states that the additional resources should be made available to the Association for new commitments for the period up to June 30, 1970, it being understood that any amounts not so committed by that date would be held for commitment as soon thereafter as appropriate. In other words, the Second Replenishment is basicaf/y intended to cover, together with other resources available to the Association, the commitment requirements of the Association for the fiscal years 1967/68, 1968/69, and 1969/70. In the normal course of business, the Association would aim to commit the resources available to it over these three years at a reasonably even pace. It is necessary, however, to envisage the possibility that the Second Replenishment will not have become effective by June 30, 1968, in which case the actual signing of many credit commit­ments which are currently being processed in anticipation of the Second Replenishment will have to be postponed until after the fiscal year 1967/68 has closed.

12. Timing of Payments

It should be noted that payment of the first instalment on the member country contributions to the Second Replenishment is not due before November 8, 1968. Since it is hoped that the effective

* In terms of United States dollars of the weight and fineness in effect on January 1, 1960.

1 See page 121

date of the Second Replenishment would fall sooner, and since the Association would thereupon expect to commence signing credit agreements against the commitment authority provided by the Second Replenishment, the question arises of how the Association should finance disbursements on these credits prior to the date of the first instalment. Although the Association holds substantial resources deriving from its earlier operations, most of these (in particular those derived from the 90% portion of original subscriptions and from contributions to the First Replenishment) are subject to drawing only on a pro rata basis.

1::,. Accordingly, it is planned that the Association should temporarily cover its cash requirements for disbursements on Second Replenishment credits during the period between the effective date of the Second Replenishment and the date when the first instalment is paid by (a) accelerated drawings on the undrawn balance of the Bank transfers previously authorized (it is estimated that this would provide about $30 million) and (b) by using about $20 million from the working balance of the Association (normally maintained by the Association at a level of about $30 million from the 10% portion of subscriptions and from profits). Therefore, it is provided that the Association may, in antici­pation of the receipt of member country contributions under the Second Replenishment, use the resources available to it as described above. It is also provided that the Association shall, whenever the contributions under the Second Replenishment become available for the purpose (a) draw on such contributions so that the position of each contributing member shall, to the extent practicable, be adjusted to that which it would have been if the contributions had been available when needed to meet the disbursements and (b) restore the accounts from which amounts were used to meet such disbursements. (See Section IV of the Procedural Memorandum.)

14. Arrangements for Use of Contributions

The United States has represented that in the light of its serious balance of payments problem it wishes to make its contribution under arrangements affording it certain balance of payments safe­guards. The United States and other contributing members have agreed to arrangements regarding the use of their contributions as set forth in the Procedural Memorandum. A summary of these arrangements follows.

Hi. Whenever the Association decides to make a drawing on contributions (the Drawing), and so long as the United States has not waived the special arrangements applicable to the use of its contribution, the Association shall draw

(a) upon the contributions of each contributing member which shall have notified the Association by the date of this Report that it desires its contributions to be used only on a pro rata basis, for its pro rata share of the Drawing; I

(b) upon the contribution of the United States, for the lesser of (i) its pro rata share of the Drawing and (ii) such amount as shall represent identifiable procurement in the United States under Second Replenishment Credits, any excess of (i) over (ii) accruing before June 30, 1971, or thereafter if and to the extent that amounts are available under paragraph (c) below to cover the balance of the Drawing, becoming a so-called "Deferred Amount";

(c) upon the contributions of other members, pro rata among such members, up to the balance remaining of the Drawing; and

(d) thereafter, if needed, upon the contribution of the United States but subject to the restrictions as to the time and amount of drawing as set forth in paragraphs lI(d) and (e) of the Procedural Memorandum.

16. The Executive Directors wish to call to the attention of contributing members that it would be helpful 131 to the Association if these members were to pay their contributions in currency (either in their own currency or that of another member) without substituting notes therefor. This would help the Associa-

lAustralia, Austria, France and Kuwait (subject in the case of Kuwait to possible reconsideration) have notified the Association thRt they desire their contributions to be used only on a pro rata basis.

132

tion in the administration of its finances and would enable it to derive some income from the invest­ment of such funds prior to their being used for disbursement on Second Replenishment Credits. Several members have expressed their intention to make payment of their contributions in such manner. It is also provided that any portion of a contribution of a contributing member paid in currency for which notes or similar obligations shall not have been substituted will be used by the Association forthwith if such contributing member so requests.

17. It should be noted that the arrangements set forth in the Procedural Memorandum contain certain re­strictions regarding the timing of the use of the United States contribution. It appears, in the light of present estimates of the Association's cash flow requirements, that the proposed arrangements with the United States and other contributing members as set forth in the Procedural Memorandum will en­able the Association to proceed in orderly fashion with the commitment by June 30, 1970, of the re­sources deriving from the Second Replenishment, while affording to the Association reasonable assur­ance that sufficient funds will be available at all times to meet its resulting disbursement requirements.

18. Possibility of Making Special Arrangements with Members other than the United States

If any other contributing member should in the future request deferment of drawings upon its contribution to the Second Replenishment on grounds of serious balance of payments difficulties, it is understood that the Association would sympathetically explore ways of achieving a mutually satis­factory variation in the pattern of drawings now being agreed. To that end the Association would also, if necessary, undertake negotiations with those contributing members who might be prepared to accept a corresponding acceleration of drawings on their contributions. The Second Replenishment Resolution allows for this possibility by providing (paragraph (f» that the Procedural Memorandum may be modified by approval of the Executive Directors, provided that no modification shall permit any contribution to be used more rapidly than as set forth in the Procedural Memorandum unless the member whose contribution is involved consents thereto.

19. Waiver of Special Arrangements with the United States

The United States has represented that it will waive the arrangements described above when it emerges from its serious balance of payments difficulties. The Procedural Memorandum (Section III) provides for the possibility of such a waiver by the United States and also provides, in effect, that if such a waiver is given the Association will draw on the total undrawn portion of the United States contribution including any deferred amounts, on a pro rata basis with any other member country contributions then remaining unwithdrawn.

20. Effective Date of Second Replenishment

It is proposed that the obligation to contribute new resources should not become binding on any member unless and until at least 12 of the contributing countries whose contributions (including the Supplementary Contributions) aggregate at least $950 million give the Association formal notification that they will contribute the amount specified for each of them. The Second Replenishment Resolution also provides that the giving of such notification shall be deemed to constitute an agreement between the Association and such member that the contribution of such member shall be used in the manner set forth in the Procedural Memorandum.

21. Part /I Members

The Executive Directors have concluded that, as in the case of the First Replenishment, the Part II members of the Association should not be asked to participate in this Second Replenishment. The Executive Directors have also concluded that the new resources should be contributed, as in the case of the First Replenishment, in the form of additional contributions rather than subscriptions. Under Article VI, Section 3(a) of the Articles of Agreement, such additional contributions would not carry voting rights. In consequence, the existing voting rights of members will remain unaffected by the replenish ment.

22. General Consideration

The Executive Directors consider that arrangements under the Second Replenishment should be regarded as without prejudice to any arrangements in connection with subsequent replenishments.

23. Proposed Study

The Executive Directors will undertake a study, to be completed before the resources provided under the Second Replenishment are fully committed, of the means which have been employed and which might be employed for the provision of additional resources to the Association. This study will include a review of the desirability of providing additional resources through loans on appropriately concessional terms and conditions from member countries in addition to or in lieu of subscriptions and/or contributions. The study will also include a review of the desirability and practicability of adjusting (with or without amendment of the Articles of Agreement) the voting power as among Part I member countries to reflect their total financial contributions to the Association, without affecting the voting rights of Part II member countries.

24. Recommendation

The Executive Directors recommend that the Board of Governors adopt the draft Resolutions attached .... 1

1 See pages 116 and 121

133

134

ACCREDITED MEMBERS OF DELEGATIONS AT 1968 ANNUAL MEETINGS

00 AFGHANISTAN

Governor ........................ M. Enwer Ziyaie Alternate Governor .............. Abdul Aziz Atayee Advisers:

Ghulam Hussain Jewayni Zia H. Noorzoy

° ALGERIA

Governor . . . . . . . . . . . . . . . . . . . . . . .. Cherif Belkacem Alternate Governor ........ Kemal Abdallah-Khodja Advisers:

Mohamed Benali Georges Simon Hachemi Saibi

o ° ARGENTINA

Governor ..................... Pedro Eduardo Real Alternate Governor . . . . . . . . . . . .. Ernesto Malaccorto Alternate Governor .. .... , Adalbert Krieger Vasena* Advisers:

Roberto Ancarola Carlos Brignone Angel R. Caram Jose M. Cascales Fntncisco N. Castro Alberto J. Cordeu Alfredo Duran

Guillermo W. Klein, Jr. Jose Alfredo Martinez

de Hoz h. Rafael A. Perrotta Francisco P. Soldati Pablo O. Sorensen Ricardo J. Vignau

o ° AUSTRALIA

Governor . ... , ., .............. . William McMahon Sir Roland Wilson Alternate Governor ............. .

Advisers: L. B. Brand B. E. Fleming G. A. Hutton H. M. Knight G. A. Low

J. O. Stonet Sir Keith Waller R. J. Whitelaw J. B. Wright

00 AUSTRIA

Governor ......................... Stephan Koren Alternate Governor ............. Walter Neudoerfer Advisers:

Othmar Haushofer~ Viktor Wolf Max Thurn

00 BELGIUM

Governor ............... , Baron Snoy et d'Oppuers Alternate Governor ................ Hubert Ansiaux Advisers:

Herman Biron Cecil de Strycker Jacques Roelandts

Andre van Campenhoutt Roger Vanden Branden

00 BOLIVIA

Governor .................. Jorge Jordan Ferrufino Alternate Governor . . . . . . . .. Enrique Vargas Guzman Advisers:

Jack Hull Julio Sanjines-Goytia

* Temporary t Executive Director ~ Alternate Director o IFC Member ° IDA Member

° BOTSWANA

Governor ......................... M. K. Segokgo Alternate Governor . .................. S. W. Assael

DO BRAZIL

Alternate Governor . . . . . . . . . . . . . . .. Ernane Galveas Alternate Governor . ..... ' Octavio Gouvea Bulhoes* Alternate Governor .............. Alexandre Kafka* Advisers:

Camilo Calazans de Magalhaes

Pedro Cipollari Rubens Costa Milton de Oliveira

Ferreira Lucas Nogueira Garcez Eduardo da Silveira

Gomes, Jr. Joao Gustavo Haenel

Alfonso Celso Pastore Paulo Hortencio

Pereira Lira Moacyr Teixeira Carlos Alberto Vieira Jose Antonio

Berardinelli Vieira Sergio de Champerbaud

Wequelin Vieira

DO BURMA

Governor ......................... , U Kyaw Nyein Alternate Governor ................. U Chit Moung

° BURUNDI

Governor ................. Bonaventure Kidwingira Alternate Governor ...... , Bernard de Martrin-Donos Advisers:

Bonus Kamwenubusa Terence Nsanze

° CAMEROON

Governor ........................ Laurent Ntamag Alternate Governor ... . . . . . . . . . . . . . . .. E. M. Koulla Adviser:

Alfred Ekoko Mpondo

o ° CANADA

Governor . . . . . . . . . . . . . . . . . . . . . . .. Edgar J. Benson Alternate Governor .................. , A. B. Hockin Alternate Governor . ................. M. F. Strong* Advisers:

J. H. Chan-Lee V. L. Chapin M. Gillan S. J. Handfield-Jones H. J. Hodder W. C. Hood L. Denis Hudont H. V. Kroeker

R. W. Lawson C. T. MacDonald E. A. Oestreicher P. M. Reid~ A. E. Ritchie N. A. Rost van Tonningen P.M.Towe S. Wheelock

° CENTRAL AFRICAN REPUBLIC

Governor ........................ Louis Alazoula Alternate Governor ....... Andre Zanife-Touambona

DO CEYLON

Governor ..................... , U. B. Wanninayake Alternate Governor ....... H. Jinadasa Samarakkody Alternate Governor . ... ' ........... Gamani Corea* Alternate Governor ........... Oliver Weerasinghe* Adviser:

P. L. N. Liyanage

ACCREDITED MEMBERS OF DELEGATIONS AT 1968 ANNUAL MEETINGS (Continued)

o CHAD

Governor .................... Georges Diguimbaye Alternate Governor ................. Jean Nendigui

DO CHILE

Governor ......................... Carlos Massad Alternate Governor . ................. Luis Velasco* Advisers:

Luis Escobart Domingo Santa Maria Jose Pardo

o CHINA

Governor ........................... Kuo-Hwa Yu Alternate Governor ............... Ching-Yu Chen* Advisers:

Felix S. Y. Chang Pao-Chuan Chao Reignson C. Chent C. L. Chow W. Y.Hui H.C.Pan

Beue Tann Martin Wong Nelson G. Y. Yu John C. C. Yuan

DO COLOMBIA

Governor ............. Abd6n Espinosa Valderrama Alternate Governor . . . . . . . . . . . . . .. Edgar Gutierrez* Advisers:

Arturo Bonnet Rodrigo Botero Miguel Fadul Camilo Herrera Jorge Mejia Salazar

Jorge Navas Eduardo Nieto Jorge Ruiz Vicente Uribe

o CONGO (BRAZZAVILLE)

Governor ................... Banza Bernard Bouiti Alternate Governor ............... Jean Moumbouli

o CONGO, DEMOCRATIC REPUBLIC OF

Governor . . . . . . . . . . . . . . . . . . . . . . . .. Victor Nendaka Alternate Governor ................. Cyrille Adoula Advisers:

Lambert Baruti Charles Bofossa Eddy Bokwetenge Jacques Bongoma Paul de Bruyne

Jean Jacques Deveaud Michel Elongo Rudolf Kroc Nicolas Misa Charles Sumbu

o 0 COSTA RICA

Alternate Governor . . . . . . . . . . . . . .. Jaime Solera B. * Alternate Governor . . . . . . . . . . .. Santiago Morera B. *

DO CYPRUS

Governor . ....................... A. C. Patsalides

o DAHOMEY

Governor ...................... Stanislas Kpognon Alternate Governor ............. " Bruno Amoussou Advisers:

Virgile Tevoedjre Maxime Zollner

* Temporary t Executive Director :j: Alternate Director IJ IFe Member

o IDA Member

DO DENMARK

Governor . .................... P. Nyboe Andersen Alternate Governor ..... . . . . . . . . . . . . . .. Otto Muller Alternate Governor ............. Karl Otto Bredahl* Advisers:

Flemming Agerup Torben Friis Otto Schelin

Steen Sec her Max S~rensen

o 0 DOMINICAN REPUBLIC

Governor. . . . . . . . . . . . . . . . .. Di6genes H. Fernandez Alternate Governor ............ Juan O. Velazquez·

DO ECUADOR

Governor ...................... Roberto Caballero Alternate Governor .......... Carlos Mantilla-Ortega Advisers:

Leonidas Aviles R. Rodrigo Valdez Nahim Isaias

DO EL SALVADOR

Alternate Governor ............. Armando Interiano Adviser:

Enrique Borgo Bustamante

DO ETHIOPIA

Governor ......................... Yilma Deressa Alternate Governor ............. Moulatou Kassaye Advisers:

Asfaw Damte Tedla Teshome

DO FINLAND

Governor ......................... Jussi Linnamo Advisers:

Jorma Aranko Jaakko Lassila Eero Asp Olavi Munkki

DO FRANCE

Governor ................... Fran!(ois Xavier Ortoli Alternate Governor . . . . . . . . . . . . . .. Bernard Clap pier Advisers:

Georges Beisson Louis L. Bruneau Jean Carriere:j: Daniel Deguen Jacques de Larosiere Bruno de Maulde Jean du Pre de

Saint-Maur

Georges Durin Ivan Martin-Witkowski Claude

Pierre-Brossolette Georges Plescofft Marcel Theron Jean Vallet Jacques Wahl

o GABON

Governor ..................... Emile Kassa Mapsi Alternate Governor ........... Pierre Fanguinoveny Advisers:

Leonard Badinga Paul Moukambi Dominique Casalta

o THE GAMBIA

Governor ............................ S. M. Dibba Alternate Governor .............. H. R. Monday, Jr. Adviser:

A. J. Senghore

135

136

ACCREDITED MEMBERS OF DELEGATIONS AT 1968 ANNUAL MEETINGS (Continued)

D ° GERMANY

Governor ........................... Karl Schiller Alternate Governor . .............. Wilhelm Hankel* Alternate Governor. . . . . . . . . . . . . . . .. Hans Rannow* Advisers:

Fritz Fischer Dieter Frommel Miss Lore Fuenfgelt Horst Goltz Hilmar H. Hartig Heinrich Irmler Joerg Jaeckel:j: Harald Joerges Guenther Kaeckenhoff Helmut Koinzer

Helmut Middelmann Eckard Pieske Wolfgang Rieke Fritz Schiettinger Guenther Schleiminger Ernst vom Hofet Karl von Loesch Johann von Mallinckrodt G. A. von Trotha

DO GHANA

Governor .................. " Brigadier A. A. Afrifa Alternate Governor ................. E. N. Omaboe Advisers:

E. N. Afful K. Gyasi-Twum A. E. K. Ashiabor B. K. Mensah

DO GREECE

Governor ................. John Alternate Governor ............. . Advisers:

Rodinos-Orlandos Achilles Cominos

Philocles D. Assimakis C. P. Caranicas Evangelos A. Eliades

Constantine Papacharalam pous

Nikitas M. Parissis

o ° GUATEMALA

Governor ................ Mario Fuentes Pieruccini Alternate Governor ......... " Jose Luis Bouscayrol Advisers:

Oscar de Leon Aragon Gustavo Herrera Orellana Mario R. Gomez

GUINEA

Governor .......................... Balla Camara Alternate Governor . . . . . . . . . . . . .. Theodore Soumah Adviser:

Mohamed Lamine Toure

DO GUYANA

Governor . ........... , .............. " P. A. Reid Alternate Governor . .............. " H. O. E. Barker

DO HAITI

Alternate Governor . . . . . . . . . . . . . . . . . .. Rene Adrien

DO HONDURAS

Governor ................... Manuel Acosta Bonilla Alternate Governor . .... , Ricardo Zuniga-Augustinus Advisers:

Antonio Fiallos Diaz Vicente Williams Francisco Prats Porfirio Zavala

* Temporary t Executive Director :j: Alternate Director o IFe Member

° IDA Member

DO ICELAND

Governor .......................... Gylfi Gfslason Alternate Governor .............. , Magnus J6nsson Advisers:

Vilhjalmur Th6r:j: Petur Thorsteinsson

DO INDIA

Governor . ....................... Morarji R. Desai Alternate Governor . . . . . . . . . . . . . . . . . . . .. I. G. Patel Alternate Governor .............. S. Jagannathan*t Advisers:

A. K. Banerji J. M. Chona S. Guhan:j: M. G. Kaul

Kuldip Sahdev C. S. Swaminathan V. Y. Tonpe

D ° INDONESIA

Governor . ......... ' .............. . Ali Wardhana Kusumahardja Alternate Governor .......... Djuana

Advisers: Sulwan Astradiningrat Abdul Hamid

Sujitno Siswowidagdo Sudjatmoko

Byanti Kharmawan

DO IRAN

Governor .................... Jamshid Amouzegar Alternate Governor ... . . . . . . . . . . . .. M. Parsadoost* Advisers:

Ahmad Abrishani Feridoon Nasseri Nader Akrami

DO IRAQ

Governor ............. Amin Abdul Karim Kalamchi Alternate Governor . ................ Sa'adi Ibrahim

DO IRELAND

Alternate Governor . ................ T. K. Whitaker

DO ISRAEL

Governor ......................... David Horowitz Alternate Governor .................. Jacob Arnon Advisers:

Shimon Alexandroni Moshe Meirav Avner Cassuto Eli Nevo

DO ITALY

Governor . . , ........................ . Guido Carli Advisers:

Mario Ercolani Felice Frasca Felice Gianani:j: Florio Gradi Gino Marci Rinaldo Ossola

Francesco Palamenghi-Crispi

Riccardo Patti Emilio Ranalli Alfredo Vernucci

ACCREDITED MEMBERS OF DELEGATIONS AT 1968 ANNUAL MEETINGS (Continued)

o ° IVORY COAST

Governor ................. Jean-Baptiste Amethier Alternate Governor . .............. , Charles Gomis* Advisers:

Timothee Ahoua A. Assamoua Jean R. Batigne Jean Charpentier Tiemoko Coulibaly Abou Doumbia

John C. Elliott N.Gom Andre Hovine Camille Konan Gerhard Rohnfelder

o JAMAICA

(30vernor ......................... Edward Seaga 'Alternate Governor .................. , G. A. Brown Advisers:

H. G. Barber Miss Sybil Campbell D. R. Clarke R. I. Mason

Miss Heather Royes V. C. Smith B. A. Watkis

DO JAPAN

~lternate Governor .. , . . . . . . . . . . . . .. Makoto Usami }4lternate Governor ............ Yusuke Kashiwagi * Yt.lternate Governor ............. Haruo Mayekawa*

~lternate Governor ............... Shichiro Murai * Iternate Governor .............. Haruo Nakajima*

4dvisers: I Yukihiko Awane Hiroshi Ohki

Genzo Fujimoto Aritoshi Soejima Masaru Fukuda Hideo Suzukit Seitaro Hattori Yukio Takamatsu Tatsuaki Hirai Keijiro Tanaka Tatsuzo Inoue Tetsuo Tanaka Tomohiko Kobayashi Kiichi Watanabe Michiya Matsukawa Itsuro Yamamoto Ichiro Miyoda Tetsuo Yamanaka Yuichiro Nagatomi Fujio Yoshida Shijuro Ogata

DO JORDAN

·30vernor . . . . . . . . . . . . . . . . . . . . . . . . .. Hatim S. Zu'bi 4lternate Governor ............... Adel Shamayleh

DO KENYA

4lternate Governor .................. J. N. Michuki 4lternate Governor ................... N. Nganga* 4dviser:

J. R. Karanja

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

DO KOREA

Governor ....................... Jong Ryul Whang Alternate Governor ................. .. Jin Soo Suh Advisers:

Byung Kyu Chun Choon Taik Chung In Yong Chung Jae Hyung Hong Seung Hi Hong Wan Mo Hong Byung Tai Hwang Jae Sun Kim

Soon Sun Kwon Hae Myung Lee Jai Woong Lee Song Ho Lee Hong Woo Nam Soo Kon Pae Chung Pum Song:j: Kwong Jung Song

DO KUWAIT

Governor . .......... Abdul Rahman Salim AI-Ateeqi Alternate Governor ........... Abdlatif Y. AI-Hamad Advisers:

Khaled Abu-Soud Haider Shihabi

° LAOS

Governor ................. Sisouk Na Champassak Alternate Governor ......... Oudong Souvannavong Adviser:

Sitha Sisombat DO LEBANON

Governor . . . . . . . . . . . . . . . . . . . . . . . . . . .. Pierre Edde Alternate Governor . . . . . . . . . . . . . . . . . .. Khalil Salem

° LESOTHO

Governor ............................ P. N. Peete Alternate Governor .................... A. Collings

DO LIBERIA

Governor ........................ J. Milton Weeks Alternate Governor ................... Cyril Bright Advisers:

George A. Blowers S. Edward Peal

DO LIBYA

Governor . ................... Giuma Saleh EI-Turki Alternate Governor ........... . . . . .. K. M. Sherlala

o ° LUXEMBOURG

Governor .......................... Pierre Werner Alternate Governor ............. Albert Dondelinger

o ° MALAGASY REPUBLIC

Governor ...................... Ralison Rakotovao Alternate Governor .... Raymond Randriamandranto Advisers:

Christophe Andrianarivo Jean Kientz Max Rakoto- Eugene Lechat

Andriantsilavo o ° MALAWI

Governor . ................... ' .... J. Z. U. Tembo Alternate Governor .................. , K. J. Barnes Advisers:

F. P. Kalilombe Nyemba Mbekeani F. Mambiya

137

138

ACCREDITED MEMBERS OF DELEGATIONS AT 1968 ANNUAL MEETINGS (Continued)

0" MALAYSIA

Alternate Governor ............• Chong Han Nyan * Advisers:

Lee Hock Lock Tan Sri Ong Yoke Lin Abdul Manaf Mohamed

° MALI

Governor . .......... " ... , ... , .... Tieoule Konate Alternate Governor ................ Sekou Sangare Advisers:

Moussa Leo Keita Paul Marquis

o ° MAURITANIA

Governor . ................... , Mokhtar Ould Haiba Alternate Governor . ............. Mamadou Cissoko

o ° MAURITIUS

Governor ................... Veerasamy Ringadoo Alternate Governor .......... Goorpersad Bunwaree Advisers:

P. Guy Balancy J. Hinchey

David C. Keys M. D. Kingston

00 MEXICO

Governor . ............ " ..... , Antonio Ortiz Mena Advisers:

Juan Gallardo-Moreno Jesus Robles Martinez Alfredo Navarrete Jose Saenz A.

o ° MOROCCO

Governor ......................... Mamoun Tahiri Alternate Governor ........... Mohamed Benkirane Advisers:

Abdeslam Jaidi Ahmed Osman

Abdeslam Tadlaoui Abderrahman Tazit

DO NEPAL

Governor ........................ Kirti Nidhi Bista Alternate Governor .......... Bhekh Bahadur Thapa Adviser:

G. P. Lohani o 0 NETHERLANDS

Governor ......................... H. J. Witteveen Alternate Governor. . .. Count J. H. O. van den Bosch Advisers:

J. G. Blikslager S. Boomstra J. Everts J. Grooters R. L. Haan

G. A. Kessler Miss G. A. Koen H. M. H. A. van der Valk D. M. N. van Wensveen

o NEW ZEALAND

Governor . . . . . . . . . . . . . . . . . . . . . . . . . . . .. N. R. Davis Alternate Governor. . . . . . . . . . . . . . . . . . .. N. V. Lough Advisers:

E. G. Buckton A. W. Young:!: C. H. Terry

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

o ° NICARAGUA

Alternate Governor. . . . . . . . . . .. Arnoldo Ramirez Eva Advisers:

Alfredo Enriquez Gustavo Escoto Goenaga Ernesto Fernandez Holmann Roberto Incer

Enrique Meneses Pena Eduardo Montealegre Jorge A. Montealegre Arnaldo Pasquier Alvaro Porta Alberto Knoeppffler

o NIGER

Governor . . . . . . . . . . . . . . . . . . . . . . . . .. Alidou Barkire Alternate Governor. . . . . . . . . . . . . . .. Abdoulaye Diallo Advisers:

Robert Julienne Pierre Sanner

0" NIGERIA

Governor . ............................ " A. A. Atta Alternate Governor.... . . . . . . . . . . . . .. J. A. Adeyeye Adviser:

J. O. Wifliams

DO NORWAY

Governor ........................... Kare Willoch Alternate Governor................ Christian Brinch Advisers:

Erling B~rresen Karl Skjerdalt Gabriel Kielland Olaf Solli V. H. Schirmer

DO PAKISTAN

Governor . ......................... " N. M. Uquaili Alternate Governor . .......... " Ghulam Ishaq Khan Advisers:

Ziauddin Ahmad Ashraf-uz Zaman A. R. Bashir

00 PANAMA

Governor ......................... Carlos Velarde Alternate Governor . .............. " Alberto Navarro

0" PARAGUAY

Governor . .................. " Cesar Romeo Acosta Alternate Governor. . . . . . . . . . . . . . .. Augusto Colman Advisers:

Ruben Alvarenga Marcos Martinez Mendieta Julio Cesar Gutierrez

DO PERU

Governor ........................... Celso Pastor Alternate Governor. . . . . . . . . . . . . . .. Tulio De Andrea Advisers:

Ismael Benavides Guillermo Castaneda Guillermo Ganoza Carlos Gibson Pedro Pablo Kuczynski Alfredo Mastrokalo

Ricardo Palmo-Valderrama Carlos Rodriguez Pastor Daniel M. Schydlowsky Alfredo Valencia:!: Carlos A. Vidal

ACCREDITED MEMBERS OF DELEGATIONS AT 1968 ANNUAL MEETINGS (Continued)

o 0 PHILIPPINES

Governor . ................. , Eduardo Z. Romualdez Alternate Governor . . . . . . . . . .. Roberto S. Benedicto Advisers:

Mrs. Magnolia W. Antonino Romeo Arguelles Constancio Castaneda Wenceslao R. Lagumbay Benito Legarda, Jr. Gregorio S. Licaros, Sr. Artemio AI. Loyola

Gil J. Puyat Juan Quintos, Jr. Pablo R. Roman Simplicio Roque Lorenzo Sarmiento Jose R. Tengco, Jr. Gilberto Teodoro Lorenzo Teves Dennis Noel

Ambrosio Padilla

o PORTUGAL

AI'ternate Governor ............ L. M. Teixeira Pinto Alternate Governor .......... Ricardo Faria Blanc* Arlvisers:

Albino Cabral Pessoa Rodrigo Marques Guimaraes

o RWANDA

Gbvernor ....................... " Fidele Nzanana Alternate Governor .......... Fidele Nkundabagenzi

o 0 SAUDI ARABIA

Giwernor . . . . . . . . . . . . . . . . . . . . . .. Ahmed Zaki Saad

DO SENEGAL

G~JVernor . . . . . . . . . . . . . . . . . . . . . . . . . . .. Abdou Diouf AMernate Governor. . . . . . . . . . . . . . . . . . .. Hamet Diop

o 0 SIERRA LEONE

G~)vernor ........... . . . . . . . . . . . . . . . .. M. S. Forna Alrernate Governor ., . . . . . . . . . . . . . . . . .. E. L. Coker Ac/visers:

:::>. Akinrele F. Jones-Asgill 3. Conrad

o SINGAPORE

Governor .. . . . . . . . . . . . . . . . . . . . . .. Goh Keng Swee Alternate Governor ................ Franz Ballmann

DO SOMALIA

Governor ................. Abdullahi Jirreh Dualeh A/~ernate Governor ............. Said Mohamed Ali Adviser:

Leone Fici

o 0 SOUTH AFRICA

Governor .......................... N. Diederichs Alt~rnate Governor ................ T. W. de Jongh AcNisers:

\Y. J. J. Conradie G. P. C. de Kock ~\. M. de Villiers ~ ohn Kincaid

W. J. Lubbe H. L. T. Taswell A. J. J. van Vuuren

* 'Temporary t Executive Director :j: Alternate Director o IFCMember o lOA Member

DO SPAIN

Governor .................... Juan Jose Espinosa Alternate Governor ......... Mariano Navarro Rubio Alternate Governor . ...... Joaquin Gutierrez Cano*t Advisers:

Rafael Aguilar Angel P. Madronero Raimundo Bassols Manuel Ortinez Fernando Benito

DO SUDAN

Governor . . . . . . . . . . . . . . .. Hussein EI Sherif EI Hindi Alternate Governor . ......... Ismail EI Misbah Mekki Advisers:

Sogyroun EI Zein Musa Abdel Karim Hussein Idris Kamil Mansour Hassab EI Rasoul Ahmed Orabi

DO SWEDEN

Governor . ........................... G. E. Strang Alternate Governor . . . . . . . . . . . . . . .. Krister Wickman Advisers:

Kjell-Olof Feldt Erik L. Karlsson

Hans O. Lundstrom John Wingstrand

o 0 SYRIAN ARAB REPUBLIC

Alternate Governor ........... Ahmad Nizar AI-Jabi Adviser:

Muhammad AI-Atrash

o o TANZANIA

Governor . ........................... " P. Bomani Alternate Governor .................. J. D. Namfua Advisers:

B. Andersen R. H. Green I. M. Kaduma M. A. Kamba

H. Noorani C. Nyirabu D. A. N. Yona

DO THAILAND

Governor ..................... Serm Vinicchayakul Alternate Governor ...... Bisudhi Nimmanahaeminda Advisers:

Manas Leeviraphan Nathapan Bhukkanasut Pandit Bunyapana

Thavee Kiarti Krishnamra Vijit Supinit

DO TOGO

Governor . ................. , ....... Boukari Djobo Alternate Governor . ................... " Jean Tevi

TRINIDAD AND TOBAGO

Governor . . . . . . . . . . . . . . . . . . . . . . . . . . .. F. C. Prevatt Alternate Governor . .......... Frank B. Rampersad* Adviser:

Victor Bruce

DO TUNISIA

Governor ..................... Abderrazak Rassaa Alternate Governor .... . . . . . . . . . . . . . .. Hedi Ennifer Advisers:

Hamed Ammar Rachid Ben Yedder

Hedi Ghachem Taoufik Smida:j:

139

140

ACCREDITED MEMBERS OF DELEGATIONS AT 1968 ANNUAL MEETINGS (Continued)

DO TURKEY

Governor ......................... Cihat Bilgehan Alternate Governor . . . . . . . . . . . . . . . .. Kemal CantGrk Alternate Governor. . . . . . . . . . . . . . . . . . .. Zeki Toker* Adviser:

Cetin Hacaloglu

DO UGANDA

Governor ........................ L. Kalule-Settala Alternate Governor .......... A. J. P. M. Ssentongo Advisers:

J. R. O. Elangot C. M. Kabenge

S. Nyanzi W.Okwenje

o 0 UNITED ARAB REPUBLIC

Governor ..................... ' Hassan Abbas Zaki Alternate Governor ............ , Hamed A. EI-Sayeh Advisers:

Fikry EI Kalliny Aly Nazif Ashraf Ghorbal

Abd EI Rahman Hammoud Mohammed A. Roushdy

o 0 UNITED KINGDOM

Governor ...................... Sir Leslie O'Brien Alternate Governor .............. Sir Douglas Allen Alternate Governor ................ E. W. Maude*t Advisers:

F. J. Atkinson R. A. Barnes G. L. Bell A. J. Clift I. A. Craik Sir Patrick Dean D. E. J. Dowler S. Goldman E. P. Haslam J. H. Harris

D. F. Hubback G. Huntrods J. A. Kirbyshire M. P. J. Lynch:j: C. Raphael W. S. Ryrie P. W. Unwin D. Williams G. M. Wilson

o 0 UNITED STATES

Governor ..... . . . . . . . . . . . . . . . . . .. Henry H. Fowler Alternate Governor . ............. Eugene V. Rostow Alternate Governor . ............... Joseph W. Barr* Alternate Governor . ............... William B. Dale* Alternate Governor . . . . . . . . . .. Frederick L. Deming* Alternate Governor . ...... , Livingston T. Merchant*t Alternate Governor " . . . . . . . . . . . . . .. John R. Petty* Advisers:

Robert B. Anderson Thomas L. Ashley Jonathan B. Bingham Hale Boggs Richard Bolling W. E. Brock Harry F. Byrd, Jr.

William H. Chartener Edward Clark Charles Coombs J. Dewey Daane Edward Fried William Gaud Henry B. Gonzalez

* Temporary t Executive Director :j: Alternate Director o IFC Member

o IDA Member

Advisers (Continued)

Seymour Halpern Richard T. Hanna Alfred Hayes Bourke B. Hickenlooper John Hooker Jacob K. Javits Albert W. Johnson Tom Lilley William McC. Martin, Jr. Lawrence McQuade Chester L. Mize William S. Moorhead

Arthur M. Okun Thomas M. Rees Henry S. Reuss Emmett Rice:j: Walter Sauer Warren Smith John W. Snyder Anthony Solomon John J. Sparkman J. William Stanton William B. Widnall Bernard Zagorin

o UPPER VOLTA

Governor ................... Pierre Claver Damiba Alternate Governor .................. Pierre Tahita Adviser:

Delchan Ouedraogo

o URUGUAY

Governor ........................ Cesar CharI one Alternate Governor . . . . . . . . . . . .. Carlos Manini Rios AdVisers:

Alfredo Casrtelli Carlos Sanguinetti Jose Maria Michetti

o VENEZUELA

Governor ........... General Rafael Alfonzo Ravard Alternate Governor ....... Alfredo Machado G6mez· Advisers:

Cesar Manduca Domingo Valladares

DO VIET-NAM

Governor ...................... Nguyen Van Dong Alternate Governor ............. , Nguyen Huu Hanh Advisers:

Lam Binh Thanh Tran Cu Uong Nguyen Anh Tuan

o 0 YUGOSLAVIA

Governor ........................... Janko Smole Alternate Governor ................ lIija Marjanovic Advisers:

Milenko Bojanic Sime Karaman Mirko Mermolja Dragutin Sebrek

Ivan Simoncic Milivoje Spasic Zoran Zagar:j:

DO ZAMBIA

Governor . . . . . . . . . . . . . . . . . . . . . .. E. H. K. Mudenda Alternate Governor . ............. P. N. Kirthisingha* Advisers:

L. W. Bwalya N. A. Mujumdar J. L. Muchinga

OBSERVERS AT 1968 ANNUAL MEETINGS

Malta G. Felice P. Hogg R. Soler E. Anastasi

People's Republic of Southern Yemen A. M. S. Hamshari

Swaziland C. V. Kuhlase

African Development Bank Mamoun Beheiry Sheikh M. A. Alamoody Juma Mohamed Sei Marcel Tokpanou L. Qureshi G. Mancini

Asian Development Bank Takeshi Watanabe Toyoo Gyohten Sam Chung Hsieh Edgar Plan

Bank for International Settlements Gabriel Ferras Milton Gilbert Hans H. Mandel Miss Kathleen O'Connor

Center for Latin American Monetary Studies Javier Marquez Fernando Rivera

Central American Bank for Economic Integration Enrique Ortez Colindres Jorge Sol Castellanos :arlos Manuel Escalante

Cenlral American Monetary Union ,Jorge Gonzalez del Valle

Central Bank of Equatorial African States and Cameroon

Georges Gautier

Central Bank of West African States Hobert Julienne Pierre Sanner

Commission of the European Communities Ugo Mosca Frederick Boyer de la Giroday Foland de Kergorlay Robert Triffin

Common Organization of African and Malagasy States A. Foalem

Commonwealth Secretariat T. E. Gooneratne

Contracting Parties to the General Agreement on Tariffs and Trade

James H. Lewis

European Free Trade Association George R. Young Frank Mi,tchell

European Investment Bank Yves Le Portz Guy Trancart

Food and Agriculture Organization of the United Nations

I. H. Ergas Donald W. Woodward

Inter-American Development Bank Felipe Herrera T. Graydon Upton Jose Epstein Javier Urrutia Rodrigo Llorente Luis Sanchez-Masi Jose Juan de Olloqui Carlos E. Peralta-Mendez

International Atomic Energy Agency Robert Najar

International Labor Organization Ralph Wright

League of Arab States Rashad Mourad

Organization for Economic Cooperation and Development

Jean Cottier Luciano Giretti J. C. R. Dow Ernest Parsons Harry Travers

Development Assistance Committee Edwin M. Martin

European Monetary Agreement Alexandre Hay

Organization of African Unity Gratien Pognon

Organization of American States Walter J. Sedwitz Germanico Salgado Rene Monserrat Mario Ramirez Calistro

Inter-American Committee on the Alliance for Progress Carlos Sanz de Santamaria Walter J. Sedwitz

Permanent Secretariat of the General Treaty for Central American Economic Integration

Carlos Manuel Castillo Abraham Bennaton Gert Rosenthal

141

~ ...... ---------------------

142

OBSERVERS AT 1968 ANNUAL MEETINGS (Continued)

United Nations Philippe de Seynes Martin Hill Jacob L. Mosak A. J. Aizenstat Pierre Benoit Joseph Mensah David H. Pollock

United Nations Conference on Trade and Development Sidney Dell Mrs. Maria t'Hooft-Welvaars

United Nations Educational, Scientific and Cultural Organization

United Nations Development Program Paul G. Hoffman

Alfonso de Silva

Rajendra Coomaraswamy Claude de Kemoularia

Executive Directors

Osman Ali

Reignson C. Chen

S. Othello Coleman

Luis Escobar

Joaquin Gutierrez Cano

L. Denis Hudon

S. Jagannathan

Mohamed Nassim Kochman

Pieter Lieftinck

Luis Machado

E. W. Maude

Jorge Mejia-Palacio

Livingston T. Merchant

Georges Plescoff

Karl Skjerdal

J. O. Stone

Hideo Suzuki

Abderrahman Tazi

Andre van Campenhout

Ernst vom Hofe

World Health Organization Milton P. Siegel

EXECUTIVE DIRECTORS AND ALTERNATES October 4, 1968

Alternate Executive Directors

Abdol Ali Jahanshahi

Chung Pum Song

Christopher Kahangi

Daniel Fernandez

Felice Gianani

Patrick M. Reid

S. Guhan

Michel Bako

Zoran Zagar

Alfredo Valencia

M. P. J. Lynch

Jose Camacho

Emmett J. Rice

Jean Carriere

Vilhjalmur Th6r

A. W. Young

Maung Gyi

Taoufik Smida

Othmar Haushofer

Joerg Jaeckel

OFFICERS OF

THE BOARDS OF GOVERNORS AND JOINT PROCEDURES COMMITTEE

FOR 1968-69

OFFICERS

Chairmen ................................. Argentina Vice Chairmen ............................ Belgium

Nepal

JOINT PROCEDURES COMMITTEE

Chairmen ................................. Argentina Vice Chairmen ............................ Belgium

Nepal Reporting Member . ......................... Zambia Members .................................. Costa Rica

Dominican Republic France Gabon Germany India Italy Kuwait Libya Philippines Rwanda Saudi Arabia Sweden Trinidad and Tobago United Kingdom United States

143

•

World Bank/lFC/lDA Headquarters 1818 H Street, N.W. Washington, D.C. 20433, U.S.A. Telephone: EXecutive 3-6360

New York Office 20 Exchange Place New York, N.Y. 10005, U.S.A. Telephone: WHitehall 3-5400

European Office 4 Ave. d'iena Paris 16e, France Telephone: 553-2510

London Office New Zealand House Haymarket London S.W. 1, England Telephone: 930-3886

Cable Addresses World Bank: INTBAFRAD IFe: CORINTFIN IDA: INDEVAS