Thank you for this opportunity to share some highlights of yesterday’s Development Committee Meeting. A more comprehensive account is available in our published Communiqué.

As you know, President Zoellick has started in recent speeches to lay out some of his own thinking about key strategic challenges confronting the member countries, and the choices that the World Bank Group needs to make on its own role in addressing those challenges. So this helped provide the context for our own discussions, and I want to emphasize to you that the Committee members responded very supportively to the President’s initiative.

We recognized the potential of “inclusive and sustainable globalization”—a concept that President Zoellick has introduced—to guide the Bank mission. We welcomed the President’s commitment to develop and refine the Bank Group strategic framework in a consultative manner under the guidance of the Board. We emphasized the importance of strengthening synergy among the Bank Group institutions.

We also discussed the six specific areas that the President has proposed as elements in the Bank Group’s strategic future direction. We agreed that strengthened support for the inclusion and empowerment of the poorest in development, especially in sub-Saharan Africa, and for active Bank engagement in fragile and conflict-affected states, must be key elements in the strategic framework.

We agreed, too, that the Bank Group must ensure its continued relevance to its middle-income country members. In this context, we welcomed the recent simplification and reduction in IBRD pricing, and urged the Bank to make further progress in reducing the non-financial cost of doing business.

We agreed on the importance of the Bank responding to key global challenges – what are often referred to as global public goods. But we also stressed the need for such engagement to be selective, and undertaken in close cooperation with other international institutions.

A number of our members from the Arab world gave encouragement to President Zoellick on his proposal to strengthen the Bank’s focus on that set of countries.

We encouraged the Bank to further intensify its important work as a knowledge-broker on development policy. We also emphasized the importance of successful implementation of the Bank’s governance and anti-corruption strategy. We also noted the importance of gender equality and women’s rights.

Turning to the Bank Group’s lower-income members, especially the IDA borrowers, we noted that many countries have enhanced their capacity to absorb larger amounts of aid productively.

In this context, we called on donors to meet their respective commitments to scale up aid for development, improve aid predictability and address financing gaps for meeting the MDGs.

We discussed the fact that, in a world with an increasing number of donors, and an increasingly complicated set of relationships between so-called vertical donors, horizontal donors, and the countries themselves, the World Bank Group’s concessional window, IDA, plays a unique role of helping countries develop their own country-led and country-owned programs to serve as a platform for integrating all of these different efforts.

And so, taking account of the need to strengthen the unique role performed by IDA, we underlined the need for a strong IDA replenishment. And in this connection we welcomed the recent very substantial contribution to IDA out of the earnings of IBRD and IFC.

Now, let me turn to the related challenges of supporting adoption of clean energy and helping countries address the challenge of climate change. We asked the Bank Group to increase its support for access to modern, cost-effective, clean energy, especially among the poorest and in sub-Saharan Africa. We also called for expanded work on energy efficiency and renewable energy, and facilitation of the development and dissemination of related knowledge and technology.

Bearing in mind the scale of the challenge of addressing the causes and impacts of climate change, we called on the Bank to develop a strategic framework for Bank Group engagement, including support for developing countries’ efforts to adapt to climate change and to achieve low-carbon growth while reducing poverty. We urged the Bank Group to help catalyze substantial additional resources from both public and private sources, including concessional finance as appropriate.

We also discussed the issue of debt. We noted progress in implementing the HIPC Initiative and the Multilateral Debt Relief Initiative. We stressed the need for all creditors to participate in these efforts on an equitable basis. In spite of improvements in debt indicators, the risk of debt distress in many HIPCs remains a challenge. And so, we emphasized the importance of sound lending and borrowing decisions guided by the Bank-Fund Joint Debt Sustainability Framework (DSF), and of strengthening public debt management.

We also talked about trade. We reiterated our strong support for intensified efforts to agree on an ambitious pro-development Doha Round. And we stressed the need for both developing countries and donors to pay attention to issues of trade and competitiveness in formulating their strategies, including the need for a stepping up of socalled aid-for-trade.

Let me turn, finally, to three matters relating to the governance and operation of the World Bank Group. First, we welcomed the Options Paper on Voice and Participation, while recognizing that further consultations among shareholders will be necessary to reach a political consensus on a comprehensive package. Secondly, we expressed our encouragement that the World Bank Board, together with management, is reviewing and reforming key aspects of the Bank’s governance. And finally, we took note of the Joint Management Action Plan, which has been prepared recently by the World Bank and Fund managements together, with the objective of strengthening the collaboration between the two institutions.

Statement by the Governor for the Islamic Republic of Afghanistan

Anwar Ul-Haq Ahady

It is a pleasure to address this forum again. As you know, since 2002, President Karzai’s administration has been trying to establish a democratic polity, a pluralist society, and a market-based economy. With great help from the international community, we have made impressive progress in all three areas; however, in the interest of time, I will briefly report on our achievements in economic matters in this past year and will express my government’s views on some issues that require decisions from the Bretton Woods financial institutions and that effect Afghanistan as well.

I am pleased to report that economic growth remained strong at about 13 percent, and inflation was contained at a relatively low level of 5.4 percent. As we have made significant progress in rebuilding our infrastructure, and as we are rather confident that international assistance will continue at the current level for the next few years, I expect that we will continue to benefit from high growth for the next few years. Similarly, last year we increased government’s domestic revenues by over 30 percent and expect an additional increase of about 30 percent this year. In close cooperation with the IMF, the World Bank, the Asian Development Bank, and bilateral donors, we are restructuring our economy. In June 2006, we launched our IMF program—the Poverty Reduction and Growth Facility—and I am pleased to report that thus far we have met the benchmarks specified by the program.

Under the auspices of the Paris Club, we have had very successful negotiations with our major bilateral creditors. I would like to thank our Paris Club creditors—namely the Russian Federation, the United States, and Germany—for agreeing to write off about $10.4 billion of our debt, and for promising this past June to forgive 100 percent of our remaining debt upon our completion of the Heavily Indebted Poor Countries (HIPC) program. We expect to successfully complete our HIPC program in 2009. We have also made significant progress in preparing our Poverty Reduction Strategy Paper (PRSP). We expect to complete and submit our PRSP by March 2008.

However, our polity, society, and economy suffer from corruption and narcotics. We have asked the World Bank to prepare a comprehensive analysis of the causes of corruption and to prepare recommendations for fighting corruption in Afghanistan. We have already implemented recommendations from the World Bank for fighting corruption in the management of public finances, and we are now confident in the transparency of our public financial management—a position with which I believe the international financial institutions (IFIs) agree.

Our people suffer the most from corruption in delivery of public services. We are waiting for the World Bank’s recommendations in this regard, and I can assure you that my government will fully implement those recommendations.

Similarly, we consider fighting narcotics as a joint task for my government and the international community. In collaboration with some of our donors, soon we will be developing a counter narcotics strategy encompassing not only eradication and interdiction efforts, but also a focus on better development of alternative livelihoods for rural residents.

However, despite these challenges and recent deteriorations in security, we are confident that with continued international support, we can build and strengthen the institutions and policies that will facilitate the functioning of a market-based economy.

Let me turn to some issues that require World Bank and IMF decisions and which affect us too.

First, we agree with the conclusions drawn in the Development Committee paper on “Scaling Up Aid,” that predictability of aid is crucial to its effectiveness, and we share the concern that the average level of aid predictability remains very low. Afghanistan is a good case for the argument that more predictable aid is better aid—particularly when aid volumes are such a large percentage of the overall budget, sensible budgetary planning can only occur when donors and the Government are well coordinated, and aid flows are communicated in advance.

Second, on the issue of IDA’s evolving role, Afghanistan is in a particularly good position to witness the benefits of IDA’s support through its “platform role.” We hope that the IDA-15 negotiations will result in much higher financing so that IDA achieves the “critical mass” necessary to achieve its many goals and continue to help guide other donors.

Third, we support the aid-for-trade initiative, particularly the proposal to undertake regional initiatives. With some of the lowest tariffs in the region, and membership in regional economic and trade groups, and given its location, Afghanistan is eager to become the bridge between Central Asia, South Asia, and the Middle East, and help the expansion of trade in the region.

And, finally, we are supportive of the recommendations of the HIPC Implementation Report. We hope that the Bank and Fund will continue to encourage other multilateral institutions to participate in the HIPC initiative. And we hope that non-Paris Club creditors will also increase their participation in the HIPC initiative. Along these lines, we agree that a public “scorecard” identifying the debt relief granted by each bilateral creditor would be a productive endeavor.

In conclusion, Afghanistan has made significant progress in the past year, but we need your support to continue our reconstruction efforts and to address the challenges of security, corruption, and the “growing pains” of moving towards a market economy. Despite these challenges, and with the support of the international community, we are confident that we will be able to build a democratic polity, a pluralist society, and a market-based economy in Afghanistan.

Statement by the Governor of the Fund for Antigua and Barbuda, on Behalf of the Joint Caribbean Group

Errol Cort

Mr. Chairman, I have the distinct honor of addressing this Joint meeting on behalf of the member states of the Caribbean Community (CARICOM), namely Antigua and Barbuda, The Bahamas, Barbados, Belize, Dominica, Grenada, Guyana, Haiti, Jamaica, St. Lucia, St. Kitts and Nevis, St. Vincent and the Grenadines, Suriname, and Trinidad and Tobago. Our delegations wish to express our profound appreciation to the management and staff of the Fund and the Bank together with our host, the Government and People of the United States of America, for the excellent arrangements afforded us.

The Caribbean Community wishes to warmly congratulate Mr. Zoellick on his recent appointment as President of the World Bank and expresses full confidence in his leadership of the Bank at this critical juncture in the Bank’s history. We are supportive of current efforts to develop a long-term strategy for the Bank Group and encourage the President to finalize and quickly implement this strategy.

Similarly, we welcome the preparation of The World Bank Group Strategy for the Caribbean, especially on private sector development. We wish to see a clear results-based framework for timely implementation and mutual accountability. The region also places on record its gratitude for the role and support of the Bank for the Conference on the Caribbean held in Washington DC in June this year.

The Community also wishes to express its appreciation to Mr. de Rato for his leadership, especially on some key reforms in the Fund and his demonstrated interest in facilitating a more mature dialogue with the Caribbean. We wish him well in his future endeavors and look forward to a good working relationship with his successor, Mr. Strauss-Kahn.

Mr. Chairman, these Meetings come against the backdrop of continued robust growth in the global economy but with some turbulence in the financial markets. Many countries, including the Caribbean, are vulnerable to this turbulence in the financial markets given the downside risks for global economic growth.

The role of the international financial institutions in assisting the Caribbean to reposition itself to thrive in the global economy is critical. We welcome the Caribbean-wide research and outreach activities being undertaken by the Fund and the Bank, especially in support of the full establishment of the Caribbean Single Market and Economy (CSME).

As the region implements reforms and builds its resilience, the support of the Caribbean Regional Technical Assistance Center (CARTAC) remains invaluable. Accordingly, we urge donors to provide funding for Phase III of CARTAC.

We are concerned that notwithstanding higher growth and fewer conflicts in low-income countries, far too many are still not on track to achieve the Millennium Development Goals. We encourage the development community to use the opportunity of the IDA-15 replenishment to demonstrate its resolve to keep its commitment to double aid to Africa by 2010. We also urge donors to make their contributions to the HIPC Trust Fund to permit certain creditors to meet relief commitments under the Multilateral Debt Relief Initiative.

We applaud President Zoellick on his recent announcement that the Bank Group will contribute $3.5 billion to IDA over the next 3 years (more than double its previous pledge of $1.5 billion). However, we call on the Bank and the Fund to demonstrate a greater awareness of and sensitivity to the significant debt challenges facing many Caribbean countries, primarily precipitated by the vulnerabilities associated with small island economies. In this regard, we encourage the Bank to be more creative in developing instruments to specifically assist middle-income countries that do not qualify for IDA funding, but continue to experience significant development challenges as a result of their high debt overhang. We also commend the management and staff of the IFC for the Corporation’s phenomenal financial results in fiscal year 2007 and good prospects in fiscal year 2008/2009 that have made this decision possible.

Mr. Chairman, on this occasion, the Caribbean Community wishes to focus on two issues of monumental importance to our region but with wider significance for all developing countries. These issues are climate change and crime and violence.

Statement by the Governor of the Bank and the Fund for Bangladesh

A.B. Mirza Md. Azizul Islam

It is an honor for me to address the 2007 Annual Meetings of the IMF and the World Bank. Let me join my fellow Governors in extending warmest felicitations to Mr. Zoellick on his assumption of the leadership of the Bank. Let me also congratulate Mr. Strauss-Kahn on his selection as the Managing Director of the IMF. On behalf of my government and my own behalf, I wish them success in their challenging new assignments.

Since the Millennium Declaration, some countries have made dramatic progress to reduce poverty. However, with considerable variation among countries, the end of poverty is not imminent. According to one World Bank estimate, the number of people in extreme poverty will decline by a quarter, and not by half, by 2015. Limited progress will be made by many countries including middle-income ones toward non-income MDGs.

While private capital flows have, of late become the most dominant source of external finance for some prosperous developing countries, IDA recipient low-income countries remain and will continue to remain for quite some time to come, heavily dependent on ODA. But the progress in raising quantity and quality of aid by development partners even for countries with the requisite capacity to absorb increased aid has been slow and uneven. Net official development assistance from DAC countries declined by about 5 percent in real terms in 2006. The average level of predictability of aid remains low. Moreover, the evolving aid architecture characterized by proliferation of aid channels, fragmentation of aid flows and increasing earmarking of aid are posing new challenges to aid effectiveness.

I need not belabor the point that MDGs will remain mostly unrealized in many countries unless ODA reaches the target of 0.7 percent of gross national income of donor countries by 2015 and is disbursed on a predictable basis. The increased volume should be reinforced by greater effectiveness of aid through strengthened country ownership of development strategies, use of country system and effective implementation of harmonization agenda. Market access of developing countries to the developed world must also be ensured through successful completion of the Doha Round. Aid cannot be a substitute for fair trade.

The increased pace of globalization has given rise to many concerns for developing countries. The most important one relates to the implications of climate change. Adaptation to climate change should be guided by the UNFCCC principle of “common but differentiated responsibilities and respective capacities” and should be consistent with developing countries’ basic objectives of accelerating and sustaining economic growth and reducing poverty. Additional concessional financing would be essential to help low-income countries adapt to climate change through their own development strategies without sacrificing these objectives. We are encouraged to see the efforts for development of a Long-Term Strategy by the World Bank Group to address these emerging challenges.

An important element of the Monetary Consensus is to enhance the voice and participation of developing countries in the decision making process of the World Bank Group. The work done so far on this issue is far from adequate. We urge fellow Governors to strengthen the international dialogue to resolve this issue in order to ensure the credibility and legitimacy of the Bretton Woods institutions.

Let me now turn briefly to the developments in my country. The present Government assumed office at the beginning of this year when the whole country was in a chaotic situation arising from confrontational politics, prolonged general strikes and frequent street battles among political adversaries. The Government has successfully restored law and order and is determined to hold a free and fair election by the end of 2008 to establish a democratic government free from political corruption. The reconstituted Election Commission has initiated significant reforms in the election process in line with international best practice. The Government has established a truly independent Anti Corruption Commission, separated the judiciary from the executive, and is in the process of implementation of wide ranging reforms in governance institutions and practices. The Anti Corruption Commission has already achieved notable progress to bring to justice corrupt people through due process of law.

On the economic front, notwithstanding several external and internal shocks, overall economic situation will continue to remain stable. We are on track to achieve most of the MDGs including reduction of income poverty. The present government has stepped up implementation of much needed structural reforms in almost all sectors to firmly establish an enabling environment for private sector led economic growth.

In conclusion, allow me to remind ourselves that it is the mutual responsibility of all of us to fulfill the hope we gave to the world’s poor and the under privileged through the Millennium Declaration. We must sincerely put our acts together to transform that hope into reality.

Statement by the Governor of the Bank for the Republic of Belarus

Andrei V. Kobyakov

Dear Mr. Chairman, Mr. President, fellow Governors, I would like to welcome you all at this largest international economic forum and express my sincere gratitude to the Washington authorities for their hospitality and to the management and staffs of the International Monetary Fund and the World Bank for the excellent organization of this event.

On the whole, the year that has elapsed since the last Meetings was a year of difficult trials and a rigorous test of endurance and stability for the current system of international relations. Rather ambiguous ongoing globalization and integration processes have further increased the unevenness of countries’ economic development. These trends have also had a significant impact on the development of our country.

How can we assess the past year for Belarus? Despite a number of objective difficulties that faced the country in late 2006/early 2007, including a drastic price growth for energy resources imported from the Russian Federation, the Belarus Government managed to maintain economic stability.

Today, Belarus is enjoying a sustainable and dynamic development. Our country continues to strengthen its economic, social, and political positions in the global community—remaining a nation with steadily growing GDP and industrial and agricultural output.

One cannot help acknowledging that, in addition to internal factors, economic growth in Belarus was facilitated by external circumstances, such as affordable energy prices and favorable foreign trade conditions. However, it is internal factors that primarily explain a steady growth and sustainable socioeconomic conditions in the Belarus Republic.

Over the past decade, our GDP has more than doubled, industrial output has increased 2.7 times, retail trade more than 4.5 times, and real household cash income more than 3.5 times.

High economic growth continues this year: GDP growth in January–September 2007, compared with the respective period in 2006, was 8.4 percent. The highest value-added growth rates have been observed in construction (120.2 percent), trade (111.5 percent), and catering (106.8 percent).

Industry remains the most significant source of economic growth in Belarus, accounting on the average, for about 38 percent of GDP growth over the past 5 years. The service sector places second: its contribution to GDP growth over the past 5 years was about 26 percent, on the average.

Positive outcomes in the real sector promoted a rapid growth of real household cash income and wages: they have increased by 16.2 percent and 10.2 percent, respectively, over the first 8 months of 2007. A higher real purchasing power of Belarus households has stimulated household consumption, which is a major factor of domestic demand growth.

The past few years have been characterized by a noticeable increase in investment in the national economy. Total investment in fixed assets has more than tripled over the last decade. Investment growth has far exceeded GDP growth over the last four years: about 123 percent per year vs. 109.4 percent per year, on the average. As a result, the share of fixed asset accumulation in GDP increased from 22.1 percent in 2002 to 28.7 percent in 2006. Such investment activity reflects economy orientation to accelerated refurbishment, and forms the basis for further improvement of economy efficiency and competitiveness.

Creating favorable macroeconomic conditions for production and investment activity—primarily due to inflation rate reduction and a competent fiscal policy—is an important factor of sustainable economic growth and macroeconomic sustainability in the Belarus Republic.

Implementation of certain monetary and pricing policy measures has helped stabilize inflation processes. As a result, the inflation rate has been going down steadily since 2000, and we have now reached a low level under the two-digit range. The year 2006 was characterized by the lowest consumer price growth rate over the last 15 years: 7 percent or 0.5 percent per month, on the average. In September 2007, CPI amounted to 107.6 percent, which is within the 2007 forecast range.

The country’s foreign currency market also remains stable. The official Belarus ruble to US dollar exchange rate was 2,149:1 as of October 1, 2007, going down by 0.4 percent relative to the year beginning. In 2001–2006, the Belarus ruble to US dollar exchange rate varied from devaluation by 33.9 percent in 2001 to appreciation by 0.5 percent in 2006. Such dynamics supported price competitiveness of Belarus products in the international market and promoted export growth.

The national fiscal policy in 2007 has been oriented to the creation of macroeconomic conditions that encourage economic growth, simplification of the tax system, rationalization of the tax burden, and provision of finance in support of priority public expenditure. In the context of tax burden reduction, the public expenditure policy focuses on expenditure efficiency improvement, concentration of budget resources on the implementation of the top priority governmental programs and activities scheduled for 2007, as well as expenditure optimization and streamlining.

Such macroeconomic policy makes it possible to maintain internal sustainability of the Belarus economy both today and in future.

Pursuant to the IMF/Bank recommendations, Belarus has implemented a number of activities and reforms to improve its business environment, promote privatization, and attract more foreign investment. I would like to note the well-known report, Doing Business 2008, which places Belarus among 10 countries with the largest improvements in business registration procedures.

Therefore, the positive year-over-year results of Belarus socioeconomic development confirm that the Government has been going the right way. We managed not only to restore the pre-crisis GDP level by 2001 ahead of all other CIS countries but also to make a rapid progress afterwards.

Due to our powerful and efficient authorities that work for the benefit of our people and prevent anarchy or ethnic and political conflicts, the Republic retains its focus on a strong social policy, first and foremost, with a view to welfare gains, which is fully consistent with the Bank/IMF mandate.

Naturally, Belarus, like any other transition economy, faces a number of socioeconomic development issues.

One cannot help acknowledging that the more than double growth of natural gas prices had a negative impact on the Belarus economy. Such growth resulted in higher import costs and a negative balance of trade. It also reduced the cost effectiveness of sold goods, works, and services, compared with the same period of 2006.

However, I would like to emphasize that the general foreign trade situation is gradually stabilizing. The gap between the growth rates of exports and imports of goods is decreasing: it went down from 29.7 percentage points in January 2007 through 14.6 percentage points in January–March to 7.4 percentage points in January–July.

Despite the fact that our energy-related difficulties caused a certain growth rate reduction compared with 2006, the country continues to strengthen its economic, social, and political position in the global community, remaining a dynamic economy with steadily growing GDP and industrial and agricultural output, and a relatively high level of domestic investment in the national export capacity.

Both the International Monetary Fund and the World Bank often express serious concerns about payment discipline and the growth of arrears in Belarus, as well as the generation of losses by a number of our enterprises.

We acknowledge the existence of such difficulties and reiterate that financial rehabilitation of the real sector is a top priority for our Government. To that end, we have developed and are implementing sector-specific and regional programs, and creating conditions to address financial rehabilitation challenges on a systemic basis.

The number of loss-generating entities reduced considerably over the first 6 months of 2007. There is an ongoing process of property reform. Most entities have been reorganized into open joint stock companies within the framework of public property privatization.

The goal of the Belarus Socioeconomic Development Program for 2006–2010 is to provide for further improvement of people’s living standard and quality of life based on an efficient use of human resources potential, as well as refurbishment and structural development of the economy and strengthening of economic competitiveness.

The aforementioned facts confirm that Belarus has chosen the right development path, which provides for our sustainable position in the economic and social sphere. It is true that the country has certain socioeconomic problems and difficulties. However, the Government is making every effort to accelerate the country’s integration in the global community and strengthen its global economic relations with due regard for the fact that Belarus is an economy in transition.

The last year demonstrated significant positive shifts in the development of our relations with the IMF and the World Bank, which has a favorable impact on the investment attractiveness, reliability and predictability of the socioeconomic environment in the Belarus Republic.

Over the last few years, Belarus and the World Bank Group signed a number of important documents that establish a framework for our cooperation: Memorandums of Understanding (1994 and 1997), the Country Assistance Strategies (1999 and 2002), and specific Loan Agreements.

Belarus attaches great importance to cooperation with the World Bank and highly appreciates the assistance provided by the Bank over the past few years in addressing urgent issues of socioeconomic development, energy efficiency, environmental protection, and mitigation of Chernobyl accident consequences.

There has been noticeable progress in our relations with the Bank of late. In particular, the Bank’s experts, together with the staff of Belarus ministries and agencies, have drafted the Bank’s Country Assistance Strategy for Belarus for fiscal years 2008–2011.

In view of the need to achieve a balance of payment equilibrium, Belarus is very much interested in the Bank’s proposals to intensify efforts in new areas, such as strengthening the country’s competitiveness in international markets, using the Kyoto Protocol opportunities, improving the national finance management, etc.

It is also noteworthy that the Bank’s senior management is interested in studying opportunities for preparing an operation in the short term that would address a set of issues to improve energy efficiency and enhance energy independence of the Belarus economy.

CAS for Belarus includes, among other priorities, support of small and medium-sized businesses. Taking into account the Government’s priorities relating to SMB development and the Bank’s vast experience in that sphere, I would like to confirm our interest in such cooperation.

In that context, special reference shall be made to the successful work by the International Finance Corporation, which has is helping Belarus improve its investment climate and finance investment projects. Belarus is strongly interested in expanding cooperation with IFC. At the same time, we find it advisable to develop a more reliable scheme to finance IFC activities from the IFC/World Bank budget, whereby donor funds could be used as an additional, rather than the principal, financial source.

It should be emphasized that the experience of our cooperation with IFC generated over the last few years demonstrates positive shifts in our dialog with this reputable international organization and significant positive trends in our collaboration.

In addition, I would like to express our gratitude to the IMF and Bank staffs for their efforts to reform these IFIs, and we wish them success in achieving sustainable results. In that context, I would like to reiterate our country’s position: we need to improve the transparency and efficiency of developing and transition economy participation in IFI reform processes, as well as in decision-making on their key activities.

The quality of materials, especially projections prepared by IMF staff, is another topical issue. In that regard, I would like to recommend to the IMF senior management to improve the Fund’s forecast methodology applied to transition economies with a high share of the public sector in the national economy.

Technical assistance provided by the World Bank and the International Monetary Fund enables Belarus to address a number of essential issues. The IMF’s work in that area made it possible to obtain specific results and improve the collection, compilation, and dissemination of statistical data and develop activities to combat terrorism financing and money laundering. Moreover, the Belarus Government uses the IMF’s recommendations when developing its economic policies. Over the past few years, these recommendations have helped tighten monetary policy, unify the national currency exchange rate, reduce restrictions in foreign trade, make progress in privatization, and prepare new cooperation programs.

In May 2007, Belarus received a mission under Article IV of the IMF’s Articles of Agreement. I would like to express our satisfaction with the fact that, compared with the earlier Aide Mémoires, the Aide Mémoire of the last mission gives a rather objective picture of the positive changes in the country’s socioeconomic development, contains more balanced conclusions of the IMF staff, and welcomes a number of the Government’s structural reforms.

The Fund devotes much attention to the sustainability of macroeconomic conditions in Belarus, taking into account growing expenditure on imported energy resources. The sustainability is related, first and foremost, to exchange rate flexibility, the balance of payment deficit, external debt growth, and financial system stability in the context of increased external borrowings.

I would like to note once again that Belarus has a significant economic potential. The sustainability and stability of the Belarus economy is reflected, in particular, in the conclusion by Moody’s Investors Service that “even worst-case stress scenarios do not result in a very heavy debt service burden in the medium term.”

We hope that further dialog designed to overcome remaining differences in determining the country’s development rates and areas would bring our relations with the Fund to a qualitatively new level and help improve the country’s investment attractiveness to foreign investors.

We still have to resolve an important issue of timing of next round of macroeconomic consultations with the IMF Executive Board. Holding the consultations in the second half of 2008 does not seem efficient: the Belarus budget and development forecast for 2009 would have been drafted by that time, and the Fund’s recommendations based on 2007 outcomes will become irrelevant. Therefore, we find it necessary to consider retaining the consultation schedule used in the preceding years, i.e., the beginning or first half of the calendar year.

I would like to thank the Fund’s senior management for the continued technical assistance and to emphasize the high value of the IMF’s technical missions to the Belarus Republic. The Government takes into account the recommendations of the Fund’s technical missions when implementing structural reforms and determining socioeconomic development prospects.

In the near term, we will continue our cooperation with the Fund across a wide range of technical assistance issues. We wish the IMF could better acknowledge the positive results achieved by Belarus in the process of economic policy implementation so that we could use their opinion as a basis for creating a favorable database required to attract foreign investors. We also hope that the International Monetary Fund would take into account the peculiarities of socioeconomic development in Belarus and our desire to continue close cooperation. We want to believe that as positive economic trends become stronger and our interaction with the Fund intensifies, we will create conditions for the implementation of an official program of cooperation between Belarus and the IMF.

In conclusion, I would like to reiterate that the Belarus Republic has its own economic strategy developed by the top national authorities and well tested by many years of experience. We have achieved significant positive results. Naturally, some things are not going smoothly, but it is always more difficult to ascend than to slide down. However, cooperation with the leading IFIs encourages Belarus to look for means that would help it overcome difficulties.

I would like to finish my address by reiterating my appreciation of the Washington authorities and the management and staffs of the International Monetary Fund and the World Bank, as well as the security service, for the excellent organization of these Annual Meetings.

Statement by the Governor of the Fund for Belgium

Guy Quaden

First of all, I wish to thank Rodrigo de Rato for his inspired leadership. I would also like to welcome Robert Zoellick as President of the World Bank and Dominique Strauss-Kahn as Managing Director of the Fund.

The IMF faces a number of important challenges. I will talk about three of those challenges:

The first challenge is no doubt the most delicate one. The Fund has to find a way to connect with the new realities of a changed global environment. All members have a right to a fair and adequate representation in the IMF. I recognize that the current distribution of quotas and voting rights does not reflect the shifts in the global economy that have taken place over the last decades; therefore the calls for change are justified. Discussions over the past 13 months have shown that it is not easy to find a comprehensive solution. The often-complicated technical details of the issue should not obscure the ultimate objective: a shift of actual quota shares to dynamic economies, while preserving and preferably enhancing the voting power of low-income countries. For those who might have doubts: I am fully committed to this objective. Although a compromise has not yet been reached, I feel a lot of progress has been made and a solution is within reach.

Developing a new income and expenditure model is the second major challenge the IMF is facing. The Fund cannot continue to rely solely on the revenue generated by its lending activities. The report of the Committee of eminent persons represents an excellent basis for developing a new income model, broadening the Fund’s income base in correspondence with the multiple tasks of the Fund.

We should however not limit this exercise to the income side, but also look at the Fund’s expenditures, based on an analysis of what we view as the Fund’s strategic priorities. The Fund must establish a costing framework, enabling it to calculate precisely the cost of the different elements of its mission. This will allow us, shareholders, to clearly indicate in what areas expenditures should be reduced.

The third challenge I want to mention here, is the need for the Fund to enhance the effectiveness of its surveillance. A candid but evenhanded exercise of surveillance is crucial for the relevance and legitimacy of the Fund. With its recent decisions, the Executive Board has created the framework for a more focused and effective bilateral surveillance. The Fund should also design a similar framework to govern its multilateral surveillance.

Like the IMF, the World Bank Group is facing important challenges, particularly in defining the strategic directions for the coming years. In my view fair governance and anti-corruption principles must maintain a central place in the work of the World Bank Group. I share President Zoellick’s vision on the Bank’s objectives to work towards an inclusive and sustainable globalization.

Tackling poverty remains the major strategic objective. Sub-Saharan Africa remains the region with the biggest needs and the most challenging environment to reduce poverty. In this context I would like to emphasize the important role of IDA as the premier development agency. Belgium supports a substantial IDA-15 replenishment, which is crucial for our effort to reach the MDGs, re-emphasizing IDA’s prominent role within the complex aid architecture.

The World Bank Group will also need to redefine its role in middle-income countries, taking into account their specific needs. The World Bank Group’s institutions need to formulate and implement joint strategies to assist this group of countries in realizing inclusive and sustainable growth with a particular emphasis on the poorest segments of society.

The Bank’s active role regarding further integrating the regional and global public goods should be reinforced with the objective of demonstrating to individual countries that investments in these areas are in their own interest.

The triple objective of the Bank’s energy policy remains more then ever important: providing low-income countries with sufficient energy for growth, the transition to a low carbon environment and adapting to climate change.

The Bank’s current business model is well adapted to face all those challenges. I can assure you, Mr. President, of my full cooperation in your important mission. Thank you for your attention.

Joint Statement by the Governor of the Bank and the Governor of the Fund for Cambodia

Aun Porn Moniroth and Chea Chanto

We are very pleased to be here to represent the Royal Government of Cambodia at this 2007 Annual Meeting of the IMF and World Bank. First of all, we would like to take this opportunity to congratulate H E Robert B. Zoellick on his appointment as the President of the Bank and to welcome him to his first Annual Meeting in his new position. We would also like to record the appreciation and thanks of the Royal Government of Cambodia for his groundbreaking visit as President of the Bank to Cambodia on August 4-5, 2007. His visit marks a welcome departure from the recent past and demonstrates and reinforces his commitment to uplift the poor of the world, especially in the developing member countries like Cambodia, through an inclusive, non-confrontational, and collaborative relations,

We would also acknowledge once again our sincere thanks to H.E. Rodrigo de Rato y Figaredo, the Managing Director of IMF for his recent visit to Cambodia in this year and specially thank him for his role in supporting the inclusion of Cambodia in the group of countries qualified for the MDRI program which has provided an excellent opportunity for the Governments of these developing countries to reach their respective MDGs. The Royal Government has already begun the implementation of the a rural irrigation project in the Eastern region of the country and is preparing three more projects for rural water supply, rural roads and agricultural extension services under the Royal Government’s Financing Schemes. We acknowledge and value the key development partnership role that IMF has played in contributing to the development of Cambodia.

Economies in East Asia and the Pacific continued to grow at a steady pace—an aggregate of 9.2 percent– while exports from the region have almost doubled over the last three years. This growth has lifted 50 million people out of poverty each year for the past five years and in much of the region, substantial gains in poverty reduction are expected to forge ahead. This progress notwithstanding, poverty reduction remains a challenge for the developing countries. Therefore, global financial institutions like World Bank will need to continue to play their leadership and partnership role in the foreseeable future if we are to achieve the global vision of a world free of poor. The Royal Government of Cambodia seeks the continued and strong support of the Bank and IMF in its effort to reduce poverty in Cambodia within the framework of the Rectangular Strategy of growth, employment, equity, and efficiency.

The RGC has affirmed the central role of good governance by making it the Cornerstone of its Rectangular Strategy for ensuring the economic development with sustainability, equity, and social justice. Therefore, we principally welcome the role of the Bank to be involved in these related areas of reform as well as some other areas where the Bank believes that it has strong comparative advantage.

The Bank, however, besides this role, should not forget its main and original role as the development Bank in order to realize the ambitious objective of poverty reduction. We must recognize, as many studies have shown, that while good governance and anti-corruption are critical issues, economic growth is a prerequisite for achieving any sustainable level of poverty reduction. We must therefore ensure that policies and strategies have a clear and central focus on economic growth while giving due emphasis on other crosscutting issues which are also critical for uplifting the poor out of poverty. These must be complementary to each other but I regret to note that recent trends show an imbalanced approach with much greater emphasis on crosscutting issues at the expense of economic growth.

Cambodia has achieved remarkable progress in economic growth and meeting the MDGs despite great political challenges faced in the recent past. But I urge the Bank to be mindful of the recent history of my nation. The institutional capacity, infrastructure, and very fabric of the Cambodian society were all but destroyed by the disastrous periods in the past when Cambodia lost most of its state institutions and human capital at a scale unknown in the modern world.

Without taking this factor into consideration such an historical background, as well as the current political context, where Cambodia is making every effort to deepen and strengthen democracy and human rights, Cambodia is being penalized by the current formula of the PBA system.

Therefore, with the smaller amount of IDA allocation, Cambodia has to make its own further effort to overcome two challenges: implementing the various reform programs; and promoting growth and reducing poverty.

To ensure the effectiveness and efficiency as well as to maintain the Bank integrity, and given the limited capacity of financing, to be involved in the reform programs as well as in the development process, the Bank activity, especially the Bank’s leading role should be selective on the areas where it has strong comparative advantage and meet the country’s needs and priorities.

On the other hand, at the operation side, RGC would like to reiterate that we have always committed to be responsible and accountable to the Bank funds. Therefore, RGC would like to welcome all measure to prevent any possible leakage. However, we would like to strongly urge the Bank to be more efficient in addressing these issues as it may cause more burdens to the recipient countries. Excessive or inefficient measures tend to be needlessly time consuming as well as to place heavy demand on limited resources.

After sharing some ideas within the context of our relationship with the Bank, I would like to briefly outline some major achievements in Cambodia in the recent past in terms of socioeconomic development.

Overall, between 1994 and 2006, Cambodia has achieved average economic growth rate of over 8 percent per annum. Particularly, since 1999 after the entire country achieved full peace, the average economic growth gained was over 9 percent annually. At the same time, inflation has been kept below 5 percent between 1994 and 2006. Country’s international reserve has increased almost by 15 fold from 100 million USD in 1994 to over 1.5 billion USD in September 2007. Export has risen by eight-fold from 463 million USD in 1994 to more than 3.6 billion USD in 2006. The international reserves are at a comfortable level and can cover 3 months of imports.

The RGS remains committed to the maintenance of price stability as the principle objective of its monetary policy. Given the high degree of dollarization and the still underdeveloped structure of the domestic financial sector, the current monetary policy framework, which relies on a well-defined monetary program and eventual intervention in the foreign exchange market, has been deemed broadly appropriate in achieving the determined policy objective. Despite the important role of exchange rate stability in maintaining price stability, the monetary authority is determined not to implement an exchange rate targeting framework, but only to limit volatility in the dollar exchange rate and by doing so not resist adjustments that reflect shifts in underlying fundamentals, thereby achieving a realistic exchange rate for the Riel.

The banking sector is gaining strength on the back of the banking sector reforms outlined in the government’s Financial Sector Development Strategy 2001–2010, which has recently been updated and extended through 2015. On the basis of capital adequacy, asset quality, earnings performance and liquidity, the overall financial condition and performance of the banking industry during the year has been satisfactory. The basic BIS principles for banking supervision have been achieved. This achievement has not occurred all of a sudden, but is the outcome of a deliberate and carefully designed program of structural reforms undertaken over the last several years, some of them still ongoing. In this context, the prudential standards set for the banking system will continue to rise as we seek perfect alignment with international standards.

Another issue that we wish to highlight during these important gatherings is that even as we have strived to forge an efficient and modern financial system, increasing the access of the poor to the financial system has been our constant special priority. And indeed, the success of microfinance so far has been the pride of the authorities. We will further encourage market linked banking, which involves commercial banks entering into arrangements with microfinance institutions to extend some form of banking services to outlying areas. We feel that linked banking provides an opportunity to improve the intermediation role that banks play in an economy.

While we are happy with the remarkable progress in the last decade both in the economic and political arenas, the Royal Government is mindful of the challenges and obstacles, both large and small, that lie ahead in the path of sustainable development of Cambodia. The Royal Government will actively face the challenges to ensure the continuity and sustainability of the economic and social conditions that have been created in the last decade and are necessary for sustained development and for rapid poverty reduction.

In terms of good governance and anti-corruption, the key priority has been to encourage and speed up the fight against corruption though judicial and legal reform, accelerating the implementation of the public financial management reform, moving speedily ahead in public administration reform, and further strengthening the de-concentration and decentralization measures. Enforcement of a code of ethics is being pursued. The draft Anti Corruption law is undergoing extensive and in depth review before it is referred to the National Assembly and the Senate. An Inter-Ministerial Task Force has been established to investigate and strengthen the enforcement of laws and regulations to ensure allegations of fraud or corrupt practices are addressed promptly.

Significant progress was made in many key sectors such as the management of government revenues and expenditures, the management of natural resources, land management, education, and health.

Nevertheless, heavy work remains at the top of the government’s agenda to achieve the country Millennium Development Goals. As has always been the case in the past, Cambodia hopes the continuous support of the international community, notably the IMF and World Bank, will help in meeting these challenging objectives.

In conclusion, we would like to express our deep appreciation to the Board, management and staff of the Bank and the Fund for their hard work and, despite recent hiccups in our relations with the Bank, their readiness in responding to the needs and challenges of the region and individual member countries, and especially for the support and assistance in the rehabilitation and development in Cambodia. We look forward to continued strong partnership with the Bank.

Statement by the Governor of the Bank and the Fund for Canada

James Michael Flaherty

I would like to extend my appreciation to Managing Director de Rato at this, his last Annual Meeting and welcome the appointment of Mr. Dominique Strauss-Kahn as the new Managing Director. Mr. Strauss-Kahn brings to the IMF a wealth of experience and a strong vision for the Fund. I would also like to take this opportunity to welcome Robert Zoellick as the new President of the World Bank. I am confident that the experience and knowledge that Mr. Zoellick brings to the job will ensure that the Bank can effectively deliver on its development mandate.

Statement by the Alternate Governor of the Bank for the People’s Republic of China

Li Yong

The first half of 2007 witnessed a continued buoyant growth of global economy. The growth in the emerging markets and the developing countries was particularly robust, making them the main engine for the global economy. However, the growth in some major developed countries has slowed down since the second quarter, reflecting in a significant downside risk in the global economy. At the same time, there is a widening gap between the North and the South, unbalanced global economic development, resurge in trade protectionism, high oil price, unstable exchange rates of the world major currencies and increasing pressure of expected high inflation. All this has added to the uncertainty in both regional and global economic growth. In addition, the unjust international economic order and the shortage of the external financial assistance still impede severely the development of the developing countries whose overall unfavorable position is yet to be fundamentally improved and whose challenges in poverty-reduction and development remain daunting.

Colleagues, the World Bank and the International Monetary Fund continue to play a constructive role in enhancing international coordination and cooperation, promoting global economic growth and reducing poverty. We appreciate their role and hope that they will continue to play an important role in global economic governance. For this purpose, we propose the following:

The Bretton Woods institutions (BWIs) should continue to improve their own governance and ensure the rights of the developing countries to effectively participate in the decision-making of the institutions.

We believe that the increasing share of the developing countries in world GDP and their significant contribution to world growth should be duly reflected in the voice and representation in the decision-making of the BWIs. The developing countries can no longer be excluded from major decisions or remain severely underrepresented in international institutions such as the BWIs. Further, we support working towards a transparent process in the selection of the heads of the BWIs, as unanimously resolved by the G-20 meeting in Melbourne in November 2006. We also hope that the recent consensus on IMFC chairmanship will be honored.

Therefore, the BWIs should actively reform their own governance, reflect the improvement of the economic positions of the developing countries, and demonstrate in a balanced manner the interests of the different members so as to design policies in the interest of the developing countries and long-term global development.

Statement by the Governor of the Bank for Costa Rica

Guillermo Zúñiga

Costa Rica is a country with a long-standing civilian tradition. It set a stellar example for the world on December 1, 1948 when it abolished its army. In the aftermath of a civil war, José Figueres Ferrer emerged as the victor and decided to abolish the army. As a result, the country stopped spending money on weapons and war and redirected its scant resources toward the promotion of economic and social development.

I am appearing before you today to promote the Costa Rica Consensus, an initiative unveiled by the President of Costa Rica and recipient of the Nobel Peace Prize, Dr. Oscar Arias Sánchez, at the United Nations General Assembly on September 20, 2006. Once again, Costa Rica would like to bring this initiative to the attention of the international community and to lobby for its decisive support.

A few days ago, on October 10, the President of the World Bank, Mr. Zoellick, in delivering his address to the National Press Club here in Washington, D.C. on Inclusive and Sustainable Globalization, identified a number of needs that are clearly apparent around the world. He mentioned combating malaria, which strikes some 500 million people; the pressing need for developing countries to produce their own electricity or to seek alternative sources of energy; the need for access to water by 1.5 billion persons; the social improvements needed by more than 2 billion persons; as well as the issues surrounding gender. He also addressed infrastructure and access to education. I should point out that the United Nations Millennium Development Goals are ambitious and call for the contribution of aid resources by industrialized countries, some of which have already attained the level of 0.7 percent of GDP. Indeed, all these development efforts that we are discussing call for money. The problem is that humankind continues to squander money on weapons and war, instead of using those resources to better our lives. Our spending decisions continue to be misguided.

Available figures on military spending worldwide, while not totally reliable, are truly alarming. It is estimated that approximately 3.4 percent of global GDP goes toward military spending, with significant variations from one region to another, however. Furthermore, well-founded suspicion exists regarding the possibility that assistance received by countries for other purposes may very well end up being diverted directly toward bankrolling wars or that funds are being siphoned off from government budgets for purposes of killing each other. A recent study by Collier puts this figure at approximately 11 percent of aid received. What is most disconcerting is that the weapons buildup by neighbors prompts countries to seek ways to defend themselves, while these actions in no way imply an improvement in general security conditions worldwide.

Hence, the initiative known to us as the Costa Rica Consensus seeks to incorporate moral criteria for public expenditure into official development assistance programs and loans from donor countries and international financial institutions. As President Arias stated, “with this initiative, we hope to establish mechanisms for debt forgiveness and financial support for developing countries that are investing more in public health, education, and housing programs, and reducing their spending on arms and armies. It is time for the international community to recognize not only those countries that use resources prudently but also those that use them morally.”

To this end, the Costa Rica Consensus calls on the donor countries to incorporate into their official development assistance programs a selective system of incentives to reward developing countries that, in a verifiable and sustainable manner, make genuine efforts to increase social investment, thereby meeting the most pressing social needs and reducing military expenditure. Costa Rica is appealing for the incorporation of the moral criteria of the Costa Rica Consensus into official development assistance programs and for the facilitation of the reduction of external debt, non-reimbursable assistance, and loans with subsidized interest rates with a view to rewarding and encouraging the peace dividends generated by those developing countries that engage in this type of moral spending.

The Costa Rica Consensus seeks to supplement existing development assistance programs; it does not seek to reduce current aid for low-income or middle-income countries, which would therefore eliminate competition for the scant development resources. We are, however, calling on the donor countries and the multilateral financial organizations to ensure that a portion of the additional aid resources be used to reward developing countries engaged in moral spending. All developing countries have the potential to achieve this objective—it is merely a question of political will.

The Millennium Development Goals are in the offing and we can shift resources that are currently being spent on weapons toward the pursuit of peace and the welfare of the people. We are faced with an important task that we must assume.

Statement by the Governor of the Bank for the Republic of Croatia

Ivan Suker

It is my pleasure and privilege to address the 2007 Annual Meetings of the Boards of Governors of the World Bank and the International Monetary Fund here in Washington. I would like to express my warm appreciation to Mr. de Rato for his dedicated work in the Fund and to wish him all the best in future work. Also, I would like to greet the new president of the World Bank, Mr. Robert B. Zoellick and to wish him much success and wisdom in steering the institution in years to come.

In my statement, allow me first to outline the major economic developments related to the Republic of Croatia. Croatian economy is performing well. In the first half of 2007, we were experiencing the highest growth rates in the last couple of years and all the other macroeconomic indicators speak in favor of good performance of the economy. The economy is expected to grow by 6.0 percent this year. Inflation continues to remain low and stable at 2.5 percent in 2007. What remains as a challenge are external imbalances, namely the current account deficit, which is likely to reach around 8.1 percent of GDP and the external debt, which is expected to account for roughly 86.1 percent of GDP at end-2007, mainly as a result of the enterprise sector’s stronger direct borrowing from abroad.

In this context, I would like to emphasize the fact that the Government recognized the risk of external imbalances and has put a great deal of efforts in addressing them. In 2004 we started with a strong fiscal consolidation, which was characterised by, among other measures, improvements in budget planning and process, and introduction of a single Treasury account, which gave impetus for better control of public expenditures and liquidity of the system and better collection of revenues. Fiscal consolidation is best seen in the budget results. In only three years, we halved our consolidated general government deficit. This year we continued with the reduction of the fiscal deficit. When it became clear that our first target for fiscal deficit of 2.8 percent of GDP will be met, in the revised budget from July we set ourselves the more ambitious target of 2.6 percent of GDP for 2007. The medium-term perspective sees budgetary central government balanced by 2010. This policy of fiscal adjustment and the reduction of fiscal deficit led to the decrease of general government debt, which fell from 43.7 percent of GDP in 2005 to 40.7 percent of GDP in 2006. Moreover, it gave an important contribution to addressing the external balances and so the government reduced its share in total external debt from 33.0 percent at the end of 2003 to 22.0 percent in June 2007.

In the context of the curbing credit growth, and alongside the existing measures—marginal reserve requirement, special reserve requirement and prudential measures—the Croatian National Bank implemented a new credit control measure in 2007, which puts a strong disincentive to commercial banks’ credit growth in excess of 12 percent per annum. This additional measure represents the further effort of the central bank to slow down the pace of credit growth, as well as a contribution to overall incentives focused on reducing external imbalances.

Turning to my second point—Croatia’s relations with the Fund and the Bank—I want to stress first that Croatia continues to have open and fruitful discussions with the Fund/Bank staff. In this context, besides cooperation with the Fund through the Article IV Consultation, Croatia will again participate in a Financial Sector Assessment Program initially conducted and concluded in 2002. The FSAP update is planed for the end of October 2007 and is set to cover three main fields: Basel Core Principles, insurance, and securities. The plan is also to make a technical overview on non-banking supervision, cross-country cooperation in supervision, credit growth and related measures and Basel II.

Fulfilment of the EU accession criteria and successful EU integration have been calling for intensive structural and institutional reforms especially over the last couple of years, and the Bank’s Programmatic Adjustment Loans (PALs) have been supporting Croatia in that effort. The main aim of the PALs is to support Croatia in improving its investment climate and reducing the size as well as improving the efficiency of its public sector. In addition, Croatia has still been benefiting from the Bank’s investment lending focused primarily towards the improvement of social welfare, enhancement of economic competitiveness, protection of the environment, improvement of trade and transport infrastructure, and advancement of Croatia’s knowledgebased economy. Besides program arrangements, Croatia has been participating in a number of the Fund/Bank initiatives aimed at strengthening the architecture of the international financial system. Therefore, I wish to thank both the Fund and the Bank for providing us with expert technical assistance, which is very much appreciated.

Let me also touch on a couple of policy issues relevant for the Fund/Bank business. First, regarding the quota reform, I have to say that we support the general idea of making the quota formula simple and transparent, but at the same time the new formula should aim at striking the right balance between the size of countries and their openness. Also, we do see merit in using a compression factor for GDP in the formula, as this helps alleviate the problem of getting overly large disproportions in quota shares between advanced and other economies. In addition, care ought to be taken about voice and participation of low-income countries. The first step in achieving this goal should be at least doubling of basic votes at the time of second ad hoc quota increase, while further steps down the road should include introducing a mechanism to safeguard the share of basic votes in total voting power, and increasing the number of Alternate Executive Directors of especially large constituencies.

Second, I recognize the need for the Fund to develop a new income model that will be more robust and sustainable in the long run, and to achieve better alignment of the Fund’s income with its diverse activities. I welcome the key recommendations made by the Committee of Eminent Persons; however, to achieve success, the expenditure side measures should also be taken into account in the context of a comprehensive framework.

Finally, I would also take the opportunity to comment on the globalization issues which bring free trade and prosperity to the countries around the world. We are aware, however, that the universal sense of global economy working for all is not entirely there yet. Moreover, we are witnessing these days rising protectionism in some of the countries previously known to promote globalization. In addition to that we observe the continued existence of global imbalances, which remain a key risk factor for the world economy. These lead us to a simple conclusion—promoting international economic cooperation remains a challenging task.

Mr. Chairman, dear guests, allow me in concluding to thank our hosts for their warm hospitality and outstanding organization of these meetings. I wish the Fund and the Bank well in their future undertakings and I would like to thank them for the help provided to my country.

Statement by the Governor of the Bank for Cyprus

Michael Sarris

This statement comments on global economic and financial issues, from the perspective of Cyprus as a small open economy in the European Union, which will adopt the euro on January 1, 2008.

Statement by the Governor of the Fund for Denmark, on behalf of the Nordic-Baltic Constituency

Nils Bernstein

I am honored to address the 2007 Joint Annual Meetings on behalf of the Nordic-Baltic constituency consisting of Estonia, Finland, Iceland, Latvia, Lithuania, Norway, Sweden, and Denmark. Let me begin by welcoming Montenegro as a new member of the Fund.

Statement by the Governor of the Bank for Fiji

Mahendra Pal Chaudhry

Mr. Chairman, it is indeed an honor for me to address this distinguished forum on behalf of the delegation of the Republic of the Fiji Islands. I take this opportunity to offer my congratulations to you on your appointment as Chairman of this meeting.

May I also congratulate President Robert Zoellick on his appointment as head of the Bank, and welcome his statement on his appointment that globalization must be founded upon inclusive growth, opportunity, and respect for personal dignity.

I would also like to warmly welcome the new Managing Director Mr. Dominique Strauss-Kahn, who will take over the helm of the Fund next month. I remain confident that he will continue his known commitment to all nations, both great and small.

Sir, it would be remiss of me not to acknowledge the significant contribution of the outgoing Managing Director of the Fund, Mr. Rodrigo de Rato. I pay tribute to his exemplary leadership and dynamism in steering the Fund during a period of significant global challenges.

Sir, let me now turn to the agenda of the World Bank Group and the IMF. While many middle-income countries (MICs) have made progress, for the majority, significant challenges still remain. The need for accelerated action on these challenges is, therefore, obvious. The Bank and Fund’s extensive experience, knowledge pool, and financial resources can help these countries address difficult issues and take full advantage of the opportunities arising from globalization. Accordingly, we are pleased with the inclusion of middle-income countries agenda, as part of the World Bank’s strategic direction.

On this note, we welcome the Bank’s commitment to develop a competitive menu of “development solutions” that is responsive to the diverse needs of middle-income countries. In devising these development solutions, we call on the Bank to include in its strategic focus the plight of small island states, like Fiji, that are unable to access the Bank’s concessional and grant financing, but continue to face many of the challenges confronting low-income countries.

We, therefore, encourage the Bank to include instruments for capacity building, particularly for small and lower income MICs, as part of its package of solutions. In the meantime, we welcome the Bank’s recent approval to simplify and reduce the pricing of IBRD loans. Addressing the non-financial costs associated with borrowing from IBRD remains a fundamental part of IBRD’s loan pricing and competitiveness.

We would also like to commend the work of the Fund in the successful completion of its first multilateral consultation aimed at reducing imbalances in the global economy, while maintaining robust world growth.

Mr. Chairman, let me now brief you on the developments in Fiji. On the political front, the Interim Government is in effective control of the country. Peace and stability has been maintained. Law and order is intact. The Interim Government is pursuing roadmaps to democracy and economic recovery. There is determination to rebuild and move the country forward. We are deeply committed to combating corruption and promoting good governance.

I would like to assure the Bank and Fund that necessary steps are being taken to enable general elections to be held. We appeal, therefore, to the international community and our development partners to understand our situation. We are grateful to all those who have engaged with us and are assisting us with our plans for economic recovery and return to constitutional rule.

We have suffered costly setbacks in two of our major export sectors in the recent years. The termination of preferential quota access to the US market has resulted in a substantial scaling down of our garment industry, at a cost of several thousand jobs.

Likewise, the difficulties experienced with our agricultural land tenure system over the last decade have seen a significant reduction in our sugar exports. However, this sector is now poised for recovery and growth under a reform and restructure program being pursued jointly by Government with stakeholders in the industry. Receipts from sugar exports will, nonetheless, be at reduced levels as a consequence of price reductions initiated by the sugar sector reforms in the European Union.

Over the last four years Fiji’s external position worsened critically as a result of declining export earnings and rising cost of imports—largely due to the escalation in oil prices and burgeoning budget deficits.

Despite these setbacks and challenges, we are determined to maintain financial stability through prudent economic management. Monetary policy has been tightened and the Ministry of Finance has consolidated its fiscal policy. The Interim Government announced a revised 2007 budget containing the overall fiscal deficit to 2 percent of GDP and it intends to take further measures to reduce the level of future fiscal deficits.

I am pleased to advise that our policies have proved successful thus far. More importantly, the Ministry of Finance has been able to keep the fiscal deficit in check, in spite of shortfalls in revenue collections.

However, we are not out of the woods yet. Whilst our foreign reserves position has stabilized as a result of the policy measures in place, the challenge going forward is to sustain a healthy balance of payments position.

Mr. Chairman, the valuable contribution and support of our development partners and multilateral institutions is critical to our development and in overcoming the challenges that we face. In this regard, we look forward to assistance and support of the Fund and the Bank through policy advice, financial resources, and technical assistance. In this respect, I wish to thank the IMF for the two staff visits this year in the lead up to the upcoming Article IV Mission towards the end of November.

May I also state here, that Fiji was amongst the first of the small island nations in the Pacific region to undertake the Financial Sector Assessment Program (FSAP). However, there is need for prompt follow up of Technical Assistance to implement the recommendations and we look forward to this being facilitated by the Fund and the Bank. Fiji would welcome IMF assistance in improving statistics and policy guidance, which is essential for meaningful assessment of the exchange rate during surveillance and to avoid dogmatic solutions.

Mr. Chairman, we support the process of reform to update the representation of members and modernize the governance of the Fund. Furthermore, we agree with the proposed increase in basic votes in order to ensure that low-income countries have a greater opportunity to participate in the Fund’s governance. We wish to express our support for increasing the resources in the Executive Directors’ office and the proposal to have two Alternative Executive Directors for the larger constituencies.

We welcome discussion on the Reserve Augmentation Line, which will be particularly useful to emerging market economies. Fiji is in an interesting position of being subject to all the vulnerabilities of a small island state, yet not classified as a low-income country. We have been waiting for a framework to be developed for emerging market economies with strong macroeconomic fundamentals and effective development programs—these countries however, may need contingent financing at reasonable cost to help prevent crises or reduce the costs of crises. We recognize that there are design challenges in developing such an instrument but we call on the IMF to accelerate its work in this area as the need for such an instrument is sorely felt in an environment of heightened and growing capital and financial flows.

Developing and low-income countries, therefore, need all the assistance they can get from development partners and the multilateral community to integrate into the world economy. In this context, we fully support the Bank’s Aid for Trade agenda, to develop assistance programs in support of developing countries’ trade reforms. We acknowledge the continued involvement of the Bank and Fund in assisting countries to mainstream trade into country strategies and we encourage further support in areas of capacity building, technical assistance, advisory and analytical work as well as investment in infrastructure. We call on development partners to scale-up their assistance in these key areas.

Mr. Chairman, climate change is a global challenge that has tangible impact on economic growth. Overexploitation of resources and unsustainable management practices has increased the vulnerability of water resources, agriculture, health, and major infrastructure to climate change. In fact, many vulnerable states have begun to experience the adverse effects of this phenomenon on their daily lives. Fiji is no exception. We therefore, welcome and support the Bank’s commitment to scale-up resources devoted to combating climate change. We also appreciate the Bank’s close cooperation with the Global Environment Fund (GEF) and other partners to advance the implementation of the Clean Energy for Development Investment Framework.

Fiji has been fortunate to benefit from a regional GEF funded project aimed at financing renewable energy (electricity) supply to rural communities. Through the Fiji Electricity Authority, we have also embarked on a comprehensive investment program aimed at full renewable energy supply by 2011. Given the Bank’s technical expertise and experience, Fiji has sought its assistance in the implementation of this investment program.

Mr. Chairman, we commend the Fund and the Bank for their support towards the Pacific Financial Technical Assistance Centre in Fiji. The centre has the potential to play a useful role in assisting the Pacific Island nations in their capacity building programs. We therefore, request that the centre be adequately resourced and welcome the Bank’s proposed contribution to its operations.

Finally, I would also like to express our appreciation to the management and staff of the Fund and Bank, as well as, the host government for the excellent arrangements made for these meetings. Fiji is grateful for the assistance provided by the Bank and Fund and we look forward to deepening our country’s engagement with both institutions.

Statement by the Alternate Governor of the Fund for France

Christian Noyer

The year 2007 is a pivotal year for the Bretton Woods institutions. It is a pivotal year, of course, because of the election of Robert Zoellick as head of the World Bank, the departure of Rodrigo de Rato—to whom I would like to pay tribute here and thank for the reforms launched during his mandate—and the arrival of Dominique Strauss-Kahn. However, it is also a pivotal year owing to the fresh impetus that must be given to enable the International Monetary Fund and the World Bank to remain, jointly, the guarantors of growth, international financial stability, and poverty reduction.

The Fund and the Bank are in fact faced with three demands: for leadership, legitimacy, and efficiency.

The demand for leadership requires the IMF and the World Bank to mobilize their shareholders in favor of reform.

At the IMF, considerable progress has been made since 2005, such as the radical reform of surveillance. I hope that the future Managing Director benefits to the full from the choices already made, that he continues the efforts made in each area in which reforms have been initiated, and that he implements the priorities adopted. I am convinced that he will be able to modernize and adapt the institution to allow it to respond to the criticisms leveled at it.

At the World Bank, the election of President Zoellick has made it possible to overcome a very difficult period for the institution. That is now behind us. The Bank is now in full working order, ready to complete the negotiations on the IDA-15 replenishment and to conduct the strategic review that has been launched in the Development Committee. Encouraging signals have already been given in an especially important area of work. I am referring to the transfer of earnings from the World Bank and the IFC to IDA. However, there is still a long way to go, and the personal commitment of the President will certainly be a determining factor in the success of the reforms that the institution needs.

The demand for legitimacy implies continuing to adapt the governance of the Bretton Woods institutions to world economic reality.

Enhancing the legitimacy and governance of the IMF requires quota reform. An important first step was taken in Singapore last year. It defined the framework for the current negotiations. The IMFC and Board discussions have highlighted the basis for compromise.

There is consensus on the principle of a single, simple, and transparent formula. The objective is to increase the share of dynamic economies, many of which are emerging countries, without marginalizing the developing countries. The clock is ticking toward September 2008.

Europe and France, for their part, have entered into these negotiations in an open manner. We have, of course, consistently recalled that this reform should not disregard the principles that underlie the IMF’s mission and the role of its quotas; but we have also shown flexibility by agreeing, in a spirit of compromise, to drop some of our demands, in the context of an overall compromise. All of the elements are interrelated. Among the options suggested by IMF staff, the filter approach is the best suited to achieved the objectives of this reform.

I would like to add that, in any event, the reform will succeed only if the poorest countries also gain from it. That is why France supports the option to triple the basic votes. This is a matter of justice, and thus of legitimacy.

The Bank’s shareholders cannot disregard the reforms that they are undertaking at the IMF. What is appropriate for the IMF is not necessarily appropriate for the Bank, because the two institutions have their own cultures and carry out distinct missions. However, there is no need to wait for the reform of the IMF to be completed before undertaking a reform of the Bank.

Finally, the demand for efficiency requires that the instruments of the IMF and the World Bank be strengthened.

Surveillance is a core mission of the IMF. Indeed, the Fund should be a contributor to crisis resolution only after it has first exercised its preventive role by identifying economic and financial vulnerabilities nationally, regionally, and internationally.

The positive international economic and financial context should not lead us to conclude that balance of payments crises have been permanently consigned to the past. For this reason, France is promoting the development of an insurance instrument, and wishes therefore that discussions regarding its implementation move forward quickly.

The efficiency of the IMF also presupposes a reform of its financing. The current model has reached its limits. The IMF’s income should be diversified so as to make it less dependent on economic cycles. The Crockett Report has laid the foundation for a thorough reform, and France supports the underlying principles. Rapid progress must now be made on these issues.

Efforts to streamline the IMF’s budget, which necessarily entail more efficient expenditure, are also required. However, the institution’s operational capacity must be maintained. All member countries, including the poorest, must continue to benefit from the advice and support—including financial support—of the IMF.

At the World Bank, the strategic review launched in the Development Committee should redefine the institution’s priorities and enhance the effectiveness of its actions and instruments.

Negotiations regarding the IDA replenishment have already allowed this work to begin and the initial results are encouraging, with greater priority placed on support for fragile states, support for regional integration, and greater responsibilities relating to the fight against climate change.

Moreover, the Bank’s competitive environment has changed greatly in recent years, and we must draw the consequences from this: the Bank must be more selective in its operations and coordinate more closely with the other donors and lenders; it must listen more closely to its clients, be more flexible in defining its country strategies, and more responsive in preparing its projects.

Finally, as at the IMF, the strategic review of the Bank should also examine its financing model. Recent efforts regarding loan fees are one part of the answer. However, more must be done. This will involve innovation and internal reform efforts and strengthening certain synergies among the different institutions in the group.

Now more than ever, therefore, the IMF and the World Bank have an urgent responsibility to reform. To move forward together, thanks to the impetus that their new leaders will bring, is now an opportunity that the Fund and the Bank must seize, for the aim of the two reform efforts is to strengthen both institutions and to sustain the political process that is necessary for reaching compromise and formulating new ideas.

Statement by the Governor of the Fund for Germany

Axel A. Weber

At the outset, I would like to join previous speakers in welcoming Robert Zoellick as the new President of the World Bank. I also would like to thank Rodrigo de Rato for his excellent work as the IMF’s Managing Director. We look forward to working with his successor, Dominique Strauss-Kahn.

The global economy continues to grow strongly, despite the problems in the US housing and mortgage markets and the related recent financial market turbulence. However, the downside risks have increased.

For Germany, while the international financial market turbulence has increased uncertainty and has required some corrections to our economic forecasts, our expectations for economic growth next year remain positive. Not only the continued robust global growth but also strong industrial activity in Germany and the improving German labor market—which should also stimulate private consumption—contribute to this positive assessment.

Regarding global financial stability, it will now be important to jointly search, in particular, for ways to make the securitisation process more transparent. We welcome the contribution by the IMF and the World Bank to the development of local bond markets in emerging market economies and developing countries.

Moreover, economic policy should continue to support the orderly unwinding of global imbalances without losing sight of the challenges of demographic change and global warming.

Trade liberalisation on a non-discriminatory basis is one of the most important elements in ensuring sustainable growth. I therefore urge all member countries to continue and redouble their efforts to achieve a successful and development-friendly conclusion of Doha Round negotiations.

Ongoing IMF reform should contribute to strengthening the IMF’s position as a global forum for international monetary cooperation:

• Adapting quotas and voting rights to reflect the new economic realities will be an essential element in strengthening the IMF’s legitimacy. It should create appropriate incentives for countries to pursue sound policies, promote openness and global integration while taking into account the Fund’s role and its contribution to global financial stability as well as to growth and development. I hope that consensus on a new quota formula can be found soon. The key to this central element of the reform lies in finding a sustainable solution which is consistent with the IMF’s core principles of uniformity of treatment and fair burden sharing among members. Safeguarding the voice of low-income countries will also be essential. Germany remains committed to reaching an agreement on the reform within the timeframe provided by the Singapore resolution. All parties need to show flexibility and act in a spirit of compromise.

• Surveillance is the Fund’s most important task. To make it stronger, surveillance should be focused, in future, more on aspects of global financial stability, exchange rate analysis, and the impact of national and unified supranational economic and monetary policies on other countries and regions. It is of critical importance for the Fund to apply the New Decision on Bilateral Surveillance Over Members’ Policies consistently and to ensure that for members of the European Monetary Union “the principles for the guidance of members’ exchange rate policies and the associated indicators … are only applied at the level of the currency union” as a whole.

As regards the financing of the Fund, I explicitly welcome the Crockett report as an excellent basis for developing a new reliable income mechanism. However, considering the Fund’s financing gap, it will be crucial to look at both income and expenditure in tandem. Not least in view of the changing focus of the Fund’s mission, more ambitious real expenditure restraint seems warranted.

We are looking forward to discussing and refining the strategic themes of the World Bank Group presented to the public by Robert Zoellick last week.

• In low-income countries, assistance to reduce poverty and foster development has to be focussed better. In particular, resources should be more selectively channelled towards reform-oriented and turnaround situations. In fragile states, peace-building and state-building are at the frontier of the development agenda.

• In middle-income countries, the World Bank’s strong engagement continues to be important for achieving the Millennium Development Goals and for the cooperative accomplishment of global future tasks.

• We support the World Bank’s new focus on global and regional public goods and on social and environmental sustainability. The essential challenge and opportunity for the World Bank Group is to integrate its global public goods priority into all aspects of its work, in particular into its country program.

Let me conclude by saying that achieving the Millennium Development Goals (MDGs) will require a substantial scaling up of Official Development Aid (ODA). Germany will fulfil its international commitments and contribute its fair share. The International Development Association (IDA) has a key role to play in the increasing global aid architecture and should more actively address the challenge of climate change in its work.

Statement by the Governor of the Bank for Greece

George Alogoskoufis

Statement by the Governor of the Bank for Haiti

Daniel Dorsainvil

On behalf of the Haitian delegation, I would like to begin by conveying my heartfelt appreciation to the Joint Secretariat of the Bank and Fund for the excellent organization of the 2007 Annual Meetings of Governors.

I am also pleased to congratulate Mr. Rodrigo de Rato, who will leave his position at the end of this month, on the work that he has accomplished. I would also like to extend a cordial welcome to Mr. Dominique Strauss-Kahn, who will take up the reins at the IMF. We eagerly await the expeditious implementation, under his leadership, of reforms that impact the role of the IMF in low-income countries and enhance the representation of member countries through quota reform and staff diversity.

The Republic of Haiti warmly welcomes the decision of the World Bank Group, under the leadership of its President, Mr. Robert Zoellick, to allocate US$3.5 billion to the poorest countries. We also avail ourselves of this opportunity to laud the initiative of the World Bank to undertake a critical review of the conditionalities associated with the disbursement of external aid. It would also be helpful to review the basis for the allocation of resources to post-conflict countries. For such countries, access to Bank resources remains inadequate, given that the allocation of IDA funding based on past performance puts them at a disadvantage.

The Bank should also be commended for the leadership shown in instituting an insurance program to cover disaster-related risks in the Caribbean. However, the recent damage suffered by Jamaica as a result of Hurricane Dean demonstrated the existence of technicalities that impede disbursement of funding under this program.

In Haiti, institutions are becoming stronger, dialogue is deepening, and insecurity has been considerably reduced. In this context, we commend the work done by the Haitian National Police, with assistance from the United Nations Stabilization Mission in Haiti [Mission des Nations Unies pour la stabilization en Haiti—MINUSTAH] through the contingents from several of the countries represented there. We thank them for their steadfast support.

The Government of Haiti has made a commitment to address several challenges and is confident that, with the support of friendly countries and partner institutions, it will manage to achieve the objectives set. A number of important steps have already been taken. Maintaining political stability, a climate of security, and sound macroeconomic management have facilitated the resumption of growth of the Haitian economy, which stood at 1.8 percent in 2005 and 2.3 percent in 2006, with the rate for 2007, under the worst case scenario, being projected at 2.5 percent. It is important to compare three consecutive years of GDP growth with the 3.5 percent contraction posted in 2004. Inflation has fallen from approximately 8 percent in February 2007 to 7.9 percent in September 2007, as compared to 12.4 percent in 2006 after reaching 37.8 percent in September 2003. The gourde/dollar exchange rate has been stabilized.

At the moment, we not only have to build on the gains made in the area of economic and political stabilization, but also to accelerate the growth rate. Rapid and sustained growth of the Haitian economy is essential for poverty reduction in Haiti. Also, in order to ensure rapid growth, the Government is according special importance to improving the business climate, strengthening democratic institutions, combating corruption, enhancing access to basic social services, and repairing and building economic infrastructure.

Determined to bolster the progress made in the areas of stabilization and good economic governance, the Government will complete the second review of the first year of the Poverty Reduction and Growth Facility (PRGF) with the IMF. Next fall, Haiti will reach the decision point under the HIPC Initiative, a milestone that will make it eligible for the Multilateral Debt Relief Initiative (MDRI).

Efforts to boost domestic resources have already yielded decisive results and are continuing apace, with emphasis being placed on combating smuggling and tax fraud. However, we are also counting on the assistance of our external partners with implementation of our PRSP that we have just completed with input from all sectors of Haitian society.

We would like to express our profound gratitude for the support of the countries in this room that are friends of Haiti. The Haitian Government harbors the hope that it will be able to count on the assistance of all of you with the implementation of its poverty reduction and economic growth promotion program.

Statement by the Governor of the Bank and the Fund for India

P. Chidambaram

This plenary is very special in one respect: we have with us a new President of the World Bank Group and we will, in a few days, welcome the new Managing Director of the International Monetary Fund. Both Mr. Robert Zoellick and Mr. Dominique Strauss-Kahn are exceptionally qualified individuals, we are sure they will provide wise leadership to the two institutions, and we wish them success. If the two institutions had launched a worldwide talent search for persons to head the institutions, these two names would have figured in any short list; such a process would have also enhanced the credibility of the two bodies as truly global institutions. Fellow Governors, I think this is the day and the hour when we should declare our intention to uphold the principles of corporate governance and state in unambiguous terms that the next President and the next Managing Director will be selected through a transparent process from among the best talent available in any part of the world.

Statement by the Governor of the Bank for Indonesia

Sri Mulyani Indrawati

On behalf of the Indonesian delegation, I would like to express my sincere appreciation to the American people for their gracious hospitality and warm welcome to your nation’s capital. Allow me also to congratulate President Zoellick and Managing Director Strauss-Kahn on their recent appointments. We are confident that their good leadership will prove crucial in the coming years as the need for the Bank and the Fund to reform and position itself in meeting the demands and development challenges of eradicating poverty in an ever-increasing complex world.

In this context, we greatly welcome the Bank’s Long-Term Strategic Direction. We consider this will provide a better mechanism for aligning aid with national development strategies, for reducing transaction costs, as well as maximizing the Bank’s expertise in client countries. On the matter of project disbursement, we continue to experience difficulty with the Bank’s slow and antiquated process. We therefore encourage the Board of Executive Directors to seek ways for streamlining the Bank’s disbursement procedures so that it can remain competitive, including adopting national standards and best practices.

Looking ahead, we note that the Bank’s strategic direction appears to have expanded to include regions that continue to enjoy the benefits of record oil prices and higher economic growth. We are concerned that this expanded scope will affect deployment of the Bank’s limited resources for addressing the most relevant and highest priorities in accordance with its original mandate and focus; that is poverty reduction and development issues.

Also, given the universal consensus that climate change poses real risks and challenges with our existing approach toward sustainable development, we feel that the Bank should direct and intensify its efforts in addressing the challenges that this new reality creates for us all.

To this end, Indonesia will host the 13^th Conference of Parties (COP) meeting of the United Nations Convention on Climate Change in Bali, December 3 to 14, 2007. As part of the Bali’s UNFCCC conference, Indonesia will also host the ‘first-of-its kind’ High Level Event on Climate Change for Finance Ministers, December 10 to 11, 2007. Climate change is not only an environmental issue; it is becoming a development and investment issue, with these new responsibilities falling on the shoulders of finance ministers. The overall purpose of the meeting is to raise awareness among finance ministers on climate change, with particular attention to fiscal instruments related to climate change mitigation and adaptation.

We believe that finance ministers can and should be assuming a leading role on this issue. Finance ministers have all the policy instruments needed to make a difference on the global outcome of climate change. These instruments include fiscal policy, risk management, insurance, finance policies, and the power in directing the flow of funds and investments. Indonesia is now taking steps to reduce emissions from deforestation and promote cleaner future energy initiatives. Other countries are expected to take more promising actions. We must not wait, but take action now in addressing the problem together.

Statement by the Governor of the Bank for the Islamic Republic of Iran

Davoud Danesh-Jafari

I am very much delighted to have the opportunity to attend this august meeting and to be able to express my views.

The economic gap between rich and other countries is increasing. The current rigid structure and mechanism governing the world economy is designed in such a way that even the most optimistic intellectuals in the field of development do not see the decrease in this gap at sight. Although the rapid world economic growth in 2006 has provided a favorable ground for making progress in achieving the Millennium Development Goals (MDGs), but the expected programs pertaining to poverty alleviation throughout the world has not yet been met. World Bank as one of the most important international organizations should pursue its main goals as comprehensive development and poverty reduction mission in member countries. But, it seems that, unfortunately there has been some dualism between words and actions of the Bank.

On the issue of enhancing the voice and participation of developing and transition countries in decision making at the World Bank and IMF, while we welcome the overall increase of the shares and voting rights of these countries as a whole, we would like again to emphasize on the principle, that any increase in the shares and voting rights of a given group of countries should not be at the expense of some other developing countries. This should be formulated in a way that leads to the increase of the voting power of developing countries as a whole without reallocation among them. This should be the crucial objective to be considered in the changes. Furthermore, we believe that the overarching aim has to be bringing the total voting power shares of Part II countries to the level of 50 percent in order to observe the equity and equal voice between developed and developing countries.

In this direction we believe that restoring the basic votes to their original level or at least tripling them should be considered as a way, among other things, in closing the gap between voting power of Part I and Part II countries. The voice of developing countries can also be enhanced by providing level playing field for the selection of the World Bank president and IMF Managing Director in future. We believe that a transparent, open and merit based selection procedure without the consideration of the country of origin should be established as the principle framework for the section.

Middle-income countries are vital stakeholders and shareholders of the Bank. They are the main source of income and demand for World Bank loans and home for 70 percent of the poor living with less than 2 dollars a day. There are huge needs for development loans in these countries. Despite this fact, we observe negative net transfer to these countries from the Bank. Also, the loan portfolio of the Bank has been shrinking which is a matter of concern. We believe that the Bank should be more forthcoming and active in simplifying and modifying its procedures in doing its business in an efficient and effective manner.

And last but not least, as it is also stipulated in the Articles of Agreement of the World Bank, it should analyze and consider implementing projects in different countries only on the basis of the economic merits of the respective projects. The political considerations under no circumstances should undermine or bias the position of the World Bank management in making the right economic decisions in cooperation with member countries on any program or project.

The performance of the Iranian economy in recent years demonstrates its resilience and vibrancy despite the strong enmity of an unreasonable and willful power that, over the last three decades, has unilaterally used all means to force the Islamic Republic of Iran to submit to its will. Having failed in all threats and intimidation, this power has resorted to subverting the international economic and monetary system to damage the integrity of Iran’s financial system. It abuses its power in all international fora to weaken my country’s financial system. It uses misinformation, disinformation, and outright lies in its fear-creating efforts. While we are confident that it will fail in its attempt to intimidate the global financial system to isolate Iran, the actions of this power is a warning to all nations that rely on the global economic system for orderly trade and finance. This power has used unilateral economic sanctions against some 55 countries in the last five decades and can victimize any country. This is a very unsound policy. If allowed to carry out its very wrong intents by subverting the integrity of the international economic and monetary order and to deprive Iran of its rights of trade and finance, no country will be safe in relying and trusting the global financial system. International community should not remain silent in face of this phenomenon, which could be called “financial terrorism.”

Statement by the Governor of the Fund for Iraq

Barham Ahmed Salih

I would like to take the opportunity of addressing you on the occasion of the Annual Meeting. I want to thank the World Bank team in Washington, the country team in the region and especially the team in Baghdad with whom I am in regular contact.

It is undeniable that for Iraqis, and friends of Iraq, the continued violence and the pace of progress has been a source of deep frustration. But while acknowledging the setbacks and the challenges, we must also recognize the important progress that has been achieved. In recent times, the security environment has improved in tangible ways. Of course we still have a long way to go before attaining the stability and security we need, but the progress is undeniable. Levels of violence are way down compared to a year ago. A year ago, entire areas such the Anbar province were deemed lost to Al Qaeda—now these regions have become denied territory to Al Qaeda terrorists. These changes in the security dynamics affirm that success is possible in Iraq.

In terms of economic performance, we are still not living up to the potential a country with such an abundance of natural and human resources should be showing. Security challenges have been a primary impediment to improving our economic performance at a faster pace. But also bureaucratic inertia, the overbearing legacy of a socialist command economy and corruption—and indeed political instability have proven serious impediments to accomplishing the reforms needed to unleash Iraqi’s economic potential.

These are no easy challenges for a state emerging from decades of tyranny, wars and sanctions—but we are committed to an ambitious agenda of reform manifested in the International Compact with Iraq—this was an initiative launched by the government of Iraq with the UN, and with the help of the World Bank, aimed realizing our National Vision in establishing a stable unified, federal democratic state with a prosperous economy with a diverse production base capable of providing the requirements of sustainable development based on the market factors and opened to the world and integrated with it and with the regional economies.

The Compact aims to create a mutually reinforcing dynamic of national consensus and international support. Domestically the aim is to build a national Compact around the government’s political and economic program and to restore the Iraqi people’s trust in the state and its ability to protect them and meet their basic needs—it includes a far reaching agenda of economic reform at unlocking Iraq’s development and economic potential.

The Compact reaffirms the commitment of the Government of Iraq to good governance and fighting corruption. Achieving prosperity is a key part of the Vision. We know that sustainable growth in employment and living standards has to be driven by a strong, diversified private sector. The Government has a key regulatory and legal function—but the real source of sustainable prosperity has to be the private sector.

Since the launch of the compact earlier in the year, we can report progress on many of the bench marks defined in the socioeconomic arena.

In public resource management, the government can reports continued progress in improving budget execution performance. In particular, execution of its investment budget is 35 percent (around Iraqi Dinars (ID) 4.5 trillion) as at July 2007. For perspective, the investment budget execution result for the full year in 2006 was around 26 percent.

The Government’s joint Public Expenditure and Institutional Assessment being conducted in partnership with the World Bank continues to be on track for completion by the end of the year.

Good progress is being achieved in economic reform. A generally positive outcome has been achieved following meetings between the Government and the IMF on Article IV consultations and the fifth review under the Stand-By Arrangement (SBA). The Government is currently implementing measures to reenergize efforts to meet certain structural performance criterion under the SBA and is preparing for a third program in support of the final phase of debt forgiveness under the agreement with the Paris Club.

The SBA is important because of the close relationship between its implementation and the process of debt reduction. The Paris Club agreement postulated that 80 percent of the debt owed to Paris Club countries is to be cancelled. The agreement also states that other creditors (public and private) should treat Iraq in a comparable way. Without going into the details of the matter almost $70 billion dollars of debt (amounting to about $130 billion) has been written off. The implementation of the new SBA due to end by the end of 2008 will make it possible for Iraq to get the final 20 percent reduction of the Paris Club debt.

The Government’s efforts to control inflation are beginning to deliver tangible results. Annual Consumer Price Inflation (CPI) reached around 65 percent for 2006, up from 32 percent for the preceding year. The Government targeted the primary causes of inflation by addressing areas such as fuel supply bottlenecks as well as implementing new IMF supported monetary policy. Core inflation (excluding fuel and transportation) has consequently been reduced from 32 percent in 2006 to 14 percent, and it is hoped that the CPI will decline to 12 percent in 2008.

The Government has approved up to US$1 billion for micro-credit lending. This decision was made on the basis of the successful US$50 million micro-credit pilot program for Baghdad.

The Government has also provided funding for the development of economic free zones. Funds are earmarked for the rehabilitation of new and existing zones. Work with the Governorates continues with a focus on investment promotion, but also involves work on improving budget execution for regional economic development. Particular achievements in the investment area include the appointment of the Chairman of the National Investment Board.

Progress has been achieved in increasing electricity supply with record levels of generation being reached. For example, in a day in September around 120,000 mw was produced. Attacks by terrorists on the electric networks hamper the effective distribution of current and future generation capacity. To this end, the Ministry of Electricity, with the help of security ministries, will continue efforts to increase sustainable electricity generation capacity and improve distribution networks; the Ministry is also in process of enhancing its strategic plan for the sector.

From the declining rates of production experienced during 2006, oil production and export volumes have increased though not to levels initially forecast for 2007. Improved prospects for oil production and economic growth will be contingent on the completion of planned investments in the oil sector.

We are working to bring the negotiations on the hydrocarbon law to closure—if and when enacted, this law will cause the restructuring of the oil sector and will provide a conducive investment environment to unlock Iraq’s real potential as an oil producer. I am hoping that year 2008 will witness major improvement in our production and export levels.

We are also making progress with the restructuring of the banking sector and are looking to increase the possibilities of Foreign Direct Investment. As our capacity to implement projects increases, there will be a need for the participation of international financial institutions, including the World Bank and IMF. In many cases we are only just beginning to re-engage with the international community through trade and financial services. I do believe that as we restructure our economy we will need high quality advisory services.

With some of the World Bank–funded projects there have been some difficulties in implementation. These are being taken seriously and I am already in touch with the senior ministers involved to resolve these issues.

For the future, we need to examine how the engagement between the Government of Iraq and the international financial institutions will deliver results. One of the main advantages of the International Compact with Iraq is that it enables us to examine the main economic priorities of the Government and assess how we are performing.

When there are difficulties, we are trying to find Iraqi solutions. When we identify a need for expertise or finance we have a way of involving other partners. When we make progress, we need to look at the lessons learned and apply these to future priority areas.

The World Bank’s role in helping to launch and establish the International Compact with Iraq is very much appreciated by our Government. The roles that the IMF and World Bank have played in ensuring debt forgiveness, has taken a great burden away from the Iraqi people. We now have to invest in improving infrastructure and developing many different sectors to ensure that wealth created in Iraq is distributed more fairly. We have to help people who were unable to reach their full potential under Saddam to fulfill their dreams and build a stable and prosperous Iraq.

We need to recognize that ultimately it is up to us Iraqi politicians and people to resolve our problems. Outsiders cannot deliver for us. The Iraqi leadership must assume responsibility and deal with these challenges and turn the tide. This can be done by Iraqis and by Iraqis alone, but undoubtedly we will need sustained support from the international community.

For us failure is not an option, success will be difficult—it will take time—there will be no easy nor quick fixes—but it is possible—we must succeed.

Statement by the Alternate Governor of the Fund for Ireland

John Hurley

I am pleased to speak on behalf of Ireland. Firstly, I would like to welcome Mr. Zoellick as the new President and Mr. Strauss-Kahn as the incoming Managing Director of the IMF. I wish them both every success in their new roles. I would also like to thank their predecessors, Mr. Wolfowitz and Mr. de Rato, for their contributions and to wish them well in the future.

We welcome the continued focus on the future roles of the Bank and the IMF and the progress made to date. There are challenges ahead that need to be met in tandem with supporting the global economy.

The six strategic themes President Zoellick has highlighted are an important contribution to the work of the Board to ensure the finalization and implementation of the long-term strategy for the Bank.

The IMF faces many challenges to ensure it remains a relevant and useful institution and I will mention some of these.

Statement by the Governor of the Bank for Israel

Stanley Fischer

These meetings take place not only at a challenging time in the international economy, but also at a time of unexpected changes in the leadership of both the Bank and the Fund. I will use this opportunity to discuss the futures of each of these two great institutions. But let me start with recent developments in the Israeli economy.

Statement by the Governor of the Fund for Italy

Tommaso Padoa-Schioppa

Statement by the Temporary Alternate Governor of the Bank and the Fund for Japan

Otohiko Endo

It is my great privilege to have this opportunity today to address the World Bank-IMF Annual Meetings, representing the Government of Japan.

At the outset, I would like to express my sincere appreciation to the Managing Director, Mr. Rodrigo de Rato, who will be leaving the IMF at the end of this month, for his services in his office. I would also like to offer a warm welcome to Mr. Robert B. Zoellick, who is here for the first time after assuming the important responsibility of President of the World Bank, and to Mr. Dominique Strauss-Kahn, who has just been elected as the next Managing Director of the IMF.

Statement by the Governor of the Fund for the Republic of Korea

Okyu Kwon

It is my great honor and privilege to address you today on behalf of the Korean government. And I thank the US government for the excellent arrangements of this meeting. Let me join my fellow governors in welcoming Mr. Zoellick as the new head of the World Bank. His forward-looking vision and leadership will surely add new momentum to the Bank’s continued progress, as a leading development institution.

I also take this opportunity to pay my tribute to Mr. de Rato for his outstanding commitment and progress he made in advancing the IMF reform agenda for the past three years.

Statement by the Governor of the Bank for the Lao People’s Democratic Republic

Somdy Douangdy

It is an honor and a great pleasure for me to represent the Government of the Lao People’s Democratic Republic at the 2007 Annual Meetings of the Boards of Governors of the World Bank and International Monetary Fund. Let me join my fellow Governors in congratulating Mr. Chairman, the President of the World Bank, the Managing Director of the IMF, and the Government and people of the United States of America for the excellent arrangements made for this important meeting.

I would also like to take this opportunity to express my congratulations to President Zoellick for being elected as a new President of the World Bank Group. I believe that the Bank under Mr. President’s leadership will further enhance its role in supporting the poverty reduction of all regions in the world.

I would like to take this opportunity to inform the meeting on the Lao PDR’s economic performance for the fiscal year 2006–07; our macroeconomic situation was stable, inflation has been reduced to historical low about 4 percent, the exchange rate was stable, and there has also been an increase in private domestic and foreign investment from US$1,249 million in 2005 to an estimated US$2,600 million in 2006. The economic growth for 2006–07 is estimated to be about 7.6 percent; this growth will be partly contributed by the expansions of hydropower and mining sectors.

The Government has continued to conduct the prudent fiscal policies with the aim of increasing domestic revenue and strengthening expenditure controls in order to maintain the budget deficit at target level. As the result, in last two fiscal years, the domestic revenue has exceeded the target by 6 to 8 percent and the budget deficit has maintained below 3 percent. The monetary policy continues to be carried out in a caution manner. The external position has significantly improved. A surge in mining export, strong tourism receipts, and high flow in foreign direct investment has boosted the foreign earning.

In order to fulfill the socioeconomic development plans setting for the coming years, the Government of Lao PDR has initiated major reforms, including the continued focus of effort on stronger improvement of business environment, more enhancement of investment efficiency, higher progress in public financial management reform particularly centralization of revenue administration and treasury and redesign the inter-government fiscal relationship, accelerating the banking sector form. On the economic integration into the world, the government has continued to reduce the tariff under AFTA commitment and push up the preparation for WTO accession.

We highly value the support from the international community including the bi-lateral and multi-lateral organizations, the international financial institutions. The Fund and the Bank have continued to provide vigorous support and assistant to the Lao PDR in term of policy advice, infrastructure and economic projects and programs, and technical assistances. This support has played an important role in helping Lao PDR in recovering from the crisis and achieving the high economic growth and stable macroeconomic condition in recent year. The Poverty Reduction Support Operations (PRSO) which lead by the World Bank has remarkably support the structural reform to more market-oriented economy, particularly the improvement in the legal framework, which will form a fundament for sound and efficient development in the key sector.

We would like to take this opportunity to urge the World Bank Group to put more afford in supporting the socioeconomic development and poverty reduction of the poor countries of our region as the Bank does with other regions of the world. Official Development Assistance is an important factor in supporting the poor countries of this region to achieve their poverty reduction agenda and Millennium Development Goals.

In conclusion, in the name of the Government of Lao PDR, I would like to express my sincere appreciation to the managements and staffs of the Bank and the Fund, and fellow member countries for the support given to the Lao PDR. I wish the meetings a great success.

Statement by the Governor of the Bank for the Republic of Lithuania, on Behalf of the Republic of Estonia, the Republic of Latvia, and the Republic of Lithuania

Rimantas Sadzius

I am honored to speak on behalf of the three Baltic countries—Estonia, Latvia, and Lithuania. Let me take this opportunity to welcome the new World Bank President Mr. Robert Zoellick and wish him every success in his new capacity as a leader of this prominent international development institution. I also want to give many thanks to the IMF Managing Director, Mr. Rodrigo de Rato, and wish him great success in his new endeavors.

For Estonia, Latvia, and Lithuania, since regaining independence in 1991, integration into the international system has been our overriding objective. We have implemented major economic and social restructuring in the process of integration to the European Union. The membership in the European Union has brought new responsibilities and commitments, including those in the area of development cooperation in our region and beyond. Having received assistance ourselves, today we appreciate and understand that it is equally important to give as to receive.

The Baltic countries are already contributing to the development bilaterally and through the EU mechanisms and are committed to further increase their official development assistance in line with the commitments made by the new EU Member States. Estonia, Latvia, and Lithuania have already graduated from the IBRD’s borrower status and are on the way to join International Development Association donor countries and to contribute to the ongoing IDA-15 replenishment. We are taking our international obligations and responsibilities seriously and we do believe that multilateral organizations, such as International Development Association, are well placed to provide development assistance to the poorest countries.

This year’s Annual Meeting is of particular importance as it focuses on the issues that need urgent actions and consolidated response by the international community, if we are to achieve the Millennium Development Goals. Challenges of sustainable development still remain: global imbalances and inequalities in opportunities within and among countries and regions. The new daunting challenges are climate change and global warming. Therefore, both countries themselves and the international community should address these challenges. A successful and effective response to climate change requires considerable and urgent increase of our efforts. In light of that, the World Bank needs to adopt its strategies and actions, including the self-reform of the institution with the aim to make it more relevant and enhance its development impact.

Let me continue with the issues related to the World Bank’s long-term strategy. We concur with the six strategic themes identified by the President for the Bank’s future work in support of inclusive and sustainable development. Along with the new strategic directions, a corresponding review of the World Bank’s internal organizational structure could be considered to make it more efficient and effective.

I would like to emphasize the importance of the World Bank’s strategy in the middle-income countries. Although many middle-income countries have achieved economic development, many challenges still remain that distance these countries from the attainment of the Millennium Development Goals. The Baltic countries do believe that the World Bank can play an important role in the development of the middle-income countries by being more proactive and engaging more closely with these countries since its involvement in these countries is central to the Bank’s development mandate. The disbursement levels to the middle-income countries and prepayments of the Bank loans show that the Bank lending in these countries is loosing its competitiveness. Given that, the Bank should try to reduce the non-financial costs of doing business through increasing use of country systems and enhancing the Bank’s knowledge services business model.

In our view, the Bank’s value added for the middle-income countries rests within the Bank’s flexibility, responsiveness, and ability to provide cutting edge knowledge. Knowledge services appear as a unique product, which constitutes the Bank’s comparative advantage. The Bank should give more attention to transferring reform experiences from more advanced middle-income countries to those lagging behind. With regard to this, we encourage the Bank to apply the best practice activities from the Bank’s cooperation with Estonia, Latvia, and Lithuania in other countries and I confirm that we are ready to share our experts and knowledge with the Bank and its clients.

Not long ago, Estonia, Latvia, and Lithuania were recipients of the World Bank’s financial assistance and were considered middle-income countries. Now, as EU members, we strive to reach the development level of the old EU members and to be among the most developed countries in the world. Our progress over a rather short period of time has been remarkable. The World Bank and other international financial institutions have made an important contribution to this transformation process by helping with the financial resources as well as with high quality technical assistance, advisory and analytical services. Over the past five years, the GDP growth in the Baltic countries has averaged 8 to 9 percent, and our macroeconomic policies are geared towards accession to the euro zone: to reduce inflation and maintain sustainable growth by minimizing the risks of economic overheating. Improvement of the business environment continues to be our priority to ensure the flow of foreign investments that supports growth and helps to reduce economic imbalances.

We would like to thank the World Bank’s management, its staff, and the Board of Directors for their valuable cooperation and partnership, and look forward to continuing our fruitful collaboration in a different status—as we assume greater responsibility as donors—aiming to contribute to the achievement of global goals of reducing poverty and promoting economic development.

Statement by the Governor of the Fund and the Bank for Malaysia

Tan Sri Nor Mohamed Yakcop

Statement by the Governor of the Fund for Malta

Michael Bonello

It is a pleasure and honor to address the Annual Meetings of the International Monetary Fund (IMF) and the World Bank.

We take this opportunity to welcome the Republic of Montenegro as a member of the IMF and the World Bank Group, as well as Djibouti and Liberia as new members of the Multilateral Investment Guarantee Agency. We also note with satisfaction that, since the 2006 meetings, the Republic of Serbia has joined the International Centre for Settlement of Investment Disputes.

A remark of appreciation goes to Mr. Rodrigo de Rato y Figaredo for the direction he has given to the ongoing discussions on the medium-term strategy of the IMF and look forward to work with his newly appointed successor Mr. Dominique Strauss-Kahn. We are confident that Mr. Strauss-Kahn’s academic and professional background will help to ensure that the pace of reform will maintain momentum as the discussions shift from the technical to the negotiation phase. We also welcome the nomination of Mr. Tommaso Padoa-Schioppa as chairman of the International Monetary and Financial Committee.

In this regard we would also like to show our appreciation of the positive work undertaken by the former World Bank President Mr. Paul Wolfowitz during his tenure at the Bank and stand ready to cooperate fully with his successor Mr. Robert B. Zoellick in taking this institution forward.

These meetings take place against the background of relatively favorable growth prospects. It is encouraging that while second round effects from the recent financial market turmoil represent a further downside risk, and some downward revisions to growth, global expansion is expected to remain in the range of 5 percent. Furthermore, growth appears to be coming from diverse regions. The vigorous pace of activity in emerging economies, in particular, has assumed an important role in alleviating the potential negative multiplier effects of softer conditions in the United States. In the euro area, growth is also expected to remain robust.

Although inflation is generally under control in industrialized countries, the narrowing of output gaps in many emerging economies, posits an upside risk to the inflation outlook. Another factor is the demand for energy products that is pushing the price of oil to higher levels. In an environment like this, some countries might be pressed to take preventive measures in the form of higher interest rates. Concurrent, with the potentially disorderly unwinding of global imbalances and the continuing protectionist sentiment, this presents a downside risk to the growth outlook.

Moreover, financial vulnerabilities persist, particularly in emerging countries, where financial institutions and corporations have been accumulating debt that is partly denominated in foreign currency. More generally, although the recent instability, which originated in the US sub-prime mortgage market is not expected to have a significant impact on global economic activity, and many central banks have responded appropriately through liquidity injections, the situation in financial markets is still unfolding and this continues to present a source of uncertainty.

Against this background, the prompt implementation of reforms aimed at addressing structural rigidities and macroeconomic imbalances assumes further importance, as it signals policymakers’ commitment to sound economic management and thereby helps restore business confidence. Cognizant of this fact, EU Member States remain committed to a faster pace of implementation of structural reforms, although in this case, this Endeavour is made even more urgent in view of the policy constraints associated with Economic and Monetary Union.

The Maltese authorities concur with this view. While 2007 is expected to mark the second year in which the fiscal deficit ratio will have been below the 3 percent limit defined in the EU Treaty, and the annual inflation rate has been below 2 percent since 2006, it is acknowledged that a successful existence as a euro area Member State from 1 January 2008 requires further progress on the path of reform. Of utmost importance in this regard, will be a more expenditure-led fiscal adjustment which takes due account of the future costs of ageing, wage growth that takes into account productivity growth and cost developments in other countries, and enhanced competition in product and resource markets.

Since the IMF was established, the world has undergone an economic development that has seen the balance of economic power shift to a different set of countries. Many emerging economies have seen an increase in their share in trade and financial flows, while others have correspondingly seen a drop in their role in the global economy. This shift, however, has not been reflected in the distribution of quotas and voting power in the IMF. In this regard, we support the work that is being undertaken to bring the quota share of emerging market economies and the voting power of low-income countries closer to their relative weight and role in the world economy. In particular, we fully support the idea of at least a doubling of basic votes and are prepared to consider also a tripling. We also look forward to a mechanism that safeguards the share of basic votes in total votes.

While the emergence of new economic powers in the world stage has implications for the governance of the Fund, it also has implications for the surveillance framework of the IMF, not least because the diversity of the economic players which today exert the greatest influence on financial markets has not only facilitated risk transfer opportunities, but it may also have created new channels of contagion and created incentives to trade in more complex financial products. Furthermore, the benefits of greater market integration that go to emerging economies can only spillover to less developed countries if these can draw on a stable international financial system. We thus welcome the 2007 Decision on Bilateral Surveillance. We consider that with this revision, the IMF is in a better position to deliver focused and even-handed messages to its members, while providing a better framework than the 1977 Decision in avoiding the misuse of exchange rate policies to disguise underlying macroeconomic imbalances and to postpone reforms. This should reduce the potential negative effects that such practices often entail, while also facilitating a more orderly unwinding of global imbalances.

We also welcome the decision of the Executive Board to set a statement of surveillance priorities and responsibilities. By clarifying the channels through which the different parties involved in surveillance are held accountable, this should strengthen the effectiveness of surveillance. In this sense, it would complement the new surveillance decision. While we encourage the IMF to continue to work on an appropriate text that could make up this remit, we emphasize that this statement of priorities and responsibilities should steer clear from introducing new administrative burdens. Moreover, to ensure that this statement achieves the purposes it is meant to achieve, surveillance practices and results should be regularly monitored against previously agreed priorities.

The continuation of benign economic conditions and progress with macroeconomic stabilization in many borrowing members have in the meantime reinforced the pattern of early repayments, thus depriving the IMF from what is effectively its most important source of income. The report from the Committee of Eminent Persons includes a number of suggestions that could be activated to address this situation, although these measures differ in terms of their technical and political feasibility. We encourage the IMF to use this Report as a basis for a comprehensive package that builds on different approaches. Although we recognized that expenditure-led solutions were not included in the terms of reference of the Committee, we consider that a durable income model must include both income and expenditure measures.

Given the implementation lag associated with such measures, we encourage the IMF to start considering these issues without delay.

On the expenditure side, one aspect that might warrant closer examination are the potential savings that could be achieved through better collaboration between the IMF and the World Bank, as this has the potential to reduce significantly the duplication of resources. In particular, the appropriate role of the two institutions in low-income countries needs to be addressed.

A more effective deployment of resources to combat poverty would not only benefit directly the citizens of low-income countries but is also of interest to countries, which like Malta have to deal with an overflow of immigrants who leave their country of origin in search of a better life overseas. Improved economic conditions in these countries, especially in Africa, would reduce incentives for illegal migration to recipient countries, and thus avoid further pressures on the infrastructure and financial resources of the latter.

Although there remains scope for Fund involvement in low-income countries under existing facilities, the involvement of the Fund in these countries should not overstep its mandate. Focus should remain on macroeconomic stabilization and financial sector work, including participation in the Financial Sector Assessment Program and the implementation of the recommendations of the Financial Action Task Force (FATF) against money laundering and the financing of terrorism. Generating a stable and transparent macroeconomic environment conducive to private sector initiative, in our view, is the best way in which the IMF can be of added value.

In this regard, Malta continues to support initiatives administered by the IMF and the World Bank, which seek to avoid the re-emergence of unsustainable external debt problems, and has taken note of the recommendations made in the Report on Applying the Debt Sustainability Framework for Low-Income Countries post debt relief.

Although Malta plays a very minor role compared to other creditors, it has always stood ready to make contributions to the clearance of arrears or to the pledging of financial resources under initiatives benefiting low-income countries. This commitment is also reflected in recent decision to pledge our contribution in the Special Contingent Account-1 to help secure a financing package for Liberia. Moreover, the Maltese authorities remain committed to adhere to the expected benchmarks in terms of Overseas Development Assistance.

I conclude by stating that we keep the work of the Fund and the Bank in high regard and thank the Boards of the two institutions, management, and staff for their continued efforts in engendering an environment conducive to international financial stability and poverty reduction. We wish them continued success in these endeavors.

Statement by the Governor of the Fund for the Islamic Republic of Mauritania, on Behalf of the African Caucus

Ousmane Kane

Over the recent years, macroeconomic performance has been strong in African countries. Economic growth rates have reached levels unseen before, supported by prudent policies and sustained macroeconomic stability. At the same time, it has become common perception that many African countries will not achieve any of the Millennium Development Goals, while others will at best meet only a few of them.

In order to improve the prospects for attaining the MDGs, these countries certainly need to register higher growth rates. Yet, the repeated efforts that our countries make to accelerate growth are often undermined by the poor quality of infrastructure, which is perpetuated by the difficulty of mobilizing the necessary financing. To fill the gap, the Bretton Woods institutions must be more supportive of efforts to implement innovative financing mechanisms and to improve access to concessional resources and international capital markets. In parallel, we see ample scope for more flexibility in their policies pertaining to low-income countries’ access to non-concessional financing, provided that the returns and viability of related infrastructure investments are appropriate.

Improving the prospects for meeting the MDGs will also require that additional resources be made available to these countries. In this connection, it is regrettable that, despite the strong commitments made by the donor community, notably at the Gleneagles Summit held in July 2005, the scaling-up of aid has yet to materialize. On the contrary, aid flows, in particular official development assistance, appear to follow a declining trend.

We call on development partners—particularly the Bretton Woods institutions—to assist our countries more actively in their efforts to mobilize the financial resources needed for attaining the MDGs. We expect these institutions, and particularly the World Bank, to play a leading role in supporting these efforts, which requires, among other actions, the replenishment of IDA resources, the expansion of the IDA’s Regional Pilot Program, active involvement in the coordination of donor aid, and the streamlining of modalities for existing funds such as the Africa Catalytic Fund and the Africa Infrastructure Fund.

Ultimately, we see a major role for the Bretton Woods institutions in support of the efforts that we are making to graduate our countries from aid dependence and increase their access to market-based financing.

Let me now turn to the issues of quota, voice, and representation: African members remain very concerned that the decision- and policymaking processes as well as the legitimacy and effectiveness of the Bretton Woods institutions have been weakened by the continued erosion of the voice and representation of African countries, as well as by the lack of diversity in their staffing.

To ensure ownership of these institutions by all members, and thus enhance their credibility and effectiveness—beginning with the Fund, which has undertaken a package of reforms approved by its Board of Governors in Singapore—it is essential to reverse the current trend by substantially increasing basic votes, which best protect the voting power of small member countries. Furthermore, the relative importance of the basic votes ought to be protected from shrinking at all times, by ensuring that any further re-alignment of quotas is synchronized with a commensurate increase in basic votes. This is precisely the spirit and the letter of the Singapore Resolution.

On the quota formula, the ongoing work at the Fund should not aim at maximizing the benefits of some individual countries, and we stress the need for a give-and-take spirit in reaching a consensus. A new quota formula should not aim at maintaining the status quo either, nor should it be skewed towards raising the quota shares of developed countries from their current level. Such moves would compound the current imbalance in voice created by the very formula we intend to change.

Good representation of the membership also implies that the Offices of Executive Directors representing a large number of countries can effectively fulfill their mandate. We call upon the Executive Board of the Fund to implement a more meaningful increase in the staffing of those offices as agreed by the Board of Governors. It is also important to expedite the amendment of the Fund’s Articles of Agreement to enable those Executive Directors to appoint more than one Alternate Executive Director.

As for the World Bank, this institution should, in due course, engage in similar reforms. In addition, we advocate better representation of the African borrower countries in the IDA negotiations.

Last, but not least, let me add a few words on the issue of diversity within the staffs of the Bank and the Fund. Promoting staff diversity is an integral part of the mandates of the management of the Bank and the Fund. It is regrettable that meaningful progress is yet to be seen on this front. In particular, Africans are being left out when it comes to recruitment and even career promotion. We urge the two institutions to draw up effective action plans to increase the number of African staff at all levels, including the highest managerial positions, and to carefully monitor promotions and career streams, with a view to ensuring fairness and evenhandedness.

Statement by the Governor of the Bank for Myanmar

Hla Tun

It is indeed a great pleasure as well as a privilege for me to address these 2007 Annual Meetings, on behalf of the Myanmar Delegation. At the outset, I would like to congratulate you, Mr. Chairman, on your election to chair these prestigious meetings.

I would now like to take this opportunity, along with my colleagues, to welcome Mr. Zoellick on taking over the responsibilities as the president of the World Bank. I wish him all the best in stewarding the World Bank effectively. With his vast experience I am confident that he will be able to work for the benefit of the developing countries and look forward to working closely with him.

I would like to express our regret at Mr. Rodrigo de Rato leaving the Fund after these Meetings. At the same time, I would also like to congratulate and welcome Mr. Dominique Strauss-Kahn for being elected as Managing Director of the International Monetary Fund.

We meet here today at a time when global growth has been good. Especially, our region’s developing countries are expected to maintain their growth momentum in the coming year and to be able to overcome any turmoil or disturbances that may occur. Geopolitical tensions and inflationary pressures still remain while some economies, especially the ones in our region, are repeatedly facing natural disasters. However, I am confident that the Asian economies with concentrated efforts will be able to weather these risks and challenges and continue to contribute to global growth.

I would like to take this opportunity to inform the Meeting, briefly, of Myanmar’s economic performance. Since 1992–93 successive shortterm plans have been formulated and implemented with emphasis placed on agriculture as a base and development of the other sectors as well. 2006–2007 is the first year of the fourth five-year short-term plan, and Myanmar has been able to maintain its growth momentum. Economic growth of our country is attributable to accelerated growth in all sectors of the economy.

Inflation has remained moderate. However, it is on the rising trend due to the raise of the salaries of civil servants last year and increase in energy prices this year. FDI has been increasing yearly and we have a favorable balance of payments position in recent years.

Measures have been taken to strengthen the Central Bank’s supervisory and regulatory power. Necessary instructions and guidelines have been issued in order to maintain the stability of the banking sector. At present our banking sector is strong and stable.

With regard to the fiscal front, on the revenue side, the government has continued its efforts at increasing revenue income by broadening the tax base, improving tax administration and reducing tax evasions. On the other hand, on the expenditure side, efforts have been made to prioritize spending and cut unproductive expenditures. Despite the steps taken, Myanmar’s budget is still in deficit due to continuation of developing the infrastructure as well as developing the social sectors by mainly depending on its own resources.

Myanmar is making its utmost efforts to achieve the MDGs through its own national plans. The MDG indicators are good. Therefore, I am pleased to inform the meetings that Myanmar has been able to make much progress in attaining some of the MDG targets. However, there is no denying that there still remain some challenges that need to be overcome for Myanmar to be able to meet all the MDG targets by 2015.

At this point, as have been done in previous years, I would like to point out that Myanmar has been able to attain the above-mentioned achievements by mainly relying on its own resources as multinational institutions have suspended their financial assistance to Myanmar for nearly two decades.

Needless to say much more would have been achieved if we have had some financial assistance from the multilateral financial institutions. Although continued efforts for maintaining our growth momentum, and achieving the MDGs in time would be taken, we do wish that normal relations with the Fund and the Bank could be resumed in the near future so that our national objectives could be achieved faster and be more robust.

In this globalized world a country should not be left alone to stand on its feet only. Much better and healthier growth, for the benefit of the region and subsequently the world, could be achieved if our efforts have been combined together with that of the international community.

We would like to give credit to where it is due. Therefore, we would like to express our gratitude to the international institutions and donors concerned for their assistance through the UN, for the prevention of avian flu in Myanmar. We would also like to thank the Bank and the Fund for their efforts to give technical assistance (TA) to Myanmar, for the enhancement of its AML/CFT framework. We look forward to receiving TA for the AML/CFT from the institutions by 2007.

There has been absence of financial assistance from international financial institutions to Myanmar for nearly two decades. We are of the view that we have been cut off from having normal relations with them based on non-economic factors. We do not think that a member of these prestigious constitutions should be treated on a different level from that of other members. We do look forward to resuming normal relations in the near future. In the time being, we will continue to take steps to further maintain our growth momentum, and achieve the MDG targets in time, by giving priority to the development of the social sectors and also to human resource development, which is essential to attain our main objectives.

Last month the 2007 IMF Article IV Consultation mission came to Myanmar on its regular yearly mission. We have always emphasized for continuity in the composition of the yearly Article IV mission members and we are very much happy to note that our request have been noted and taken seriously. We think that both sides would benefit from this practice and therefore request the Fund to continue this practice in the coming years.

I will now conclude by thanking the managements and staffs of the Bank and the Fund for the excellent arrangements made for the success of this Meeting.

Statement by the Governor of the Bank for Nepal

Ram Sharan Mahat

I congratulate President Mr. Zoellick and offer best wishes for your success. Your observation at the National Press Club in Washington, DC on October 10, 2007 that poverty breeds instability is quite appropriate. I would like to express my heart-felt thanks to the Managing Director Mr. de Rato for leading the Fund with great competence. I appreciate your program of reform to ensure that the IMF remained attuned to the needs of its members in a globalized economy. I also congratulate and welcome Mr. Dominique Strauss-Kahn, who is taking over as the Managing Director on November 1, 2007. I take this opportunity to offer Mr. Strauss-Kahn best wishes for his success.

My sincere appreciation goes to the government and the people of the United States for the warm hospitality extended to us.

Despite the recent volatilities, uncertainties and defaults that marked the functioning of the financial markets, it is heartening to note that the immediate impact of the market turbulence would be modest and the world economic growth would remain solid, buoyed by strong growth in emerging market and developing countries. However, we need to be constantly vigilant about the occasional dangers and risks inherent in the financial markets and make utmost efforts toward strengthening the international financial infrastructure and addressing the weaknesses in the global financial and economic system.

We noted with appreciation the theme of the World Development Report 2008—Agriculture for Development. The report covers the major features underlying the economic structure and performance as well as the development prospects and priorities in the developing economies. Agriculture and the agriculture-linked industry account for a significant share of GDP in majority of these economies. It is disheartening to note that such an important sector of the economy in these countries is still suffering from a very low level of productivity. In my country Nepal, the dominant role of this sector is reflected in its contribution to GDP, employment, livelihoods and interlinkages with the other sectors. However, its productivity is very low and the country has turned to a net food-importing country from its past position of a food-exporting country. We strongly support the Report’s conclusion that the agriculture has a special role in reducing poverty and that GDP growth originating from agriculture would have a far greater income impact than the growth generated outside the agriculture.

We have also taken note of the World Bank Group’s Report entitled Doing Business 2008. The Report mentions that, in South Asia, the cost of employing and laying off workers, registering property, getting credit, trading across borders, and closing a business is high. These problems need to be addressed for making the individual country systems less burdensome, less time-consuming and less costly. We would, therefore, like to urge the Bank, especially the IFC, to substantially enhance its efforts to help countries like Nepal in creating a favorable investment climate and reducing the cost of doing business.

Achieving Millennium Development Goals remains a continued challenge for many of us. Nepal is making sincere efforts toward meeting these goals, especially halving the number of people below the poverty line by 2015. However, goals on primary education and HIV/AIDS would be hard to achieve primarily because of the resource constraint. I would, therefore, like to urge the development partners to enhance their support level as per the agreed commitments.

Focus on clean energy by the Bank is a welcome step. Nepal has huge potential of hydropower, which is a prime source of clean, renewable energy. This resource could be harnessed for the benefit not only of Nepal but also of the neighboring countries. I encourage and welcome both, the official development assistance and the private investments, and domestic and foreign, for tapping this potential.

As mentioned in the communiqués of both the DC and the IMFC in their 2006 Annual Meetings, Nepal would like to see a successful conclusion of the Doha Round after its unfortunate suspension last year. We continue to encourage the Bank to engage in Aid for Trade with the focus on trade-related infrastructure development so as to help developing countries in a meaningful way in the expanding global trade.

I support the Bank’s initiative in the field of Global Public Goods through policy support, advocacy, financing, and technical assistance. Countries are facing a severe risk of climate change, flooding, pandemics, conflicts, civil strife, etc. These risks need urgent and collective global action with particular focus on risk mitigating strategies at the regional and national level.

I also support the country-based scaling up of efforts by the Bank and acknowledge the progress made so far. Certainly, scaling up should be based on the country performance. However, special consideration needs to be given to the specific country contexts where, despite persistent efforts, the performance level has not been met for reasons of natural calamities, conflicts, and so on.

We have observed that much of the rise in aid has been for debt relief. We are supportive of debt relief measures as a financing instrument, but we firmly believe that this should be treated as a supplement rather than a substitute to the ODA.

Now, allow me to briefly mention Nepal’s current situation. The country is in the midst of political transition after more-than-a-decadelong insurgency. Our imminent task is to hold free and fair elections for the Constituent Assembly that would pave the way for building a truly democratic and inclusive Nepal. Though the election slated for November 22 this year has been postponed because of some new political developments, we are holding consultations with the concerned parties for a new date. The march toward sustained peace, democracy and development is not without hiccups and challenges, but we are clear about the direction to take and the goal to achieve. Our commitment to the evolving peace process remains unequivocal and unfaltering, and we are particularly grateful to the international community for their support at our difficult times.

Nepal’s development efforts in recent years have been severely constrained due to violent insurgency. This is reflected particularly in the slower rate of economic growth, which averaged 2.8 percent a year during the last three years. Nepal’s merchandise exports/GDP ratio also fell from 10 percent in FY 2004/05 to 8.4 percent in FY 2006/07. Nepal’s macroeconomic management has remained under control. The government revenue increased by 20.8 percent in FY 2006/07, which pushed the revenue/GDP ratio to 12.1 percent from 11.2 percent in the preceding year. The government has also been able to maintain the fiscal deficit/GDP ratio below 4 percent. The monetary expansion has been contained at the targeted levels and the treasury operations resulted in the surplus situation. The rate of inflation has come down to 6 percent.

The fourth PRGF Review Report on Nepal mentions that economic outcomes have been in line with the program, macroeconomic policies have remained sound, the PRGF-supported program is broadly on track, and Nepal’s economic prospects have improved despite some risks. According to the Report, the authorities’ efforts and achievements as reflected in the continued macroeconomic stability and further progress in structural reforms under trying circumstances merit international support. I assure that the government would not at any cost let the reform measures be weakened. I request the international community to adequately support Nepal in these endeavors in this period of difficult transition.

Nepal needs immediate resources for reconstruction, rehabilitation and reform. People displaced due to the conflict need immediate support to return home and lead a normal life. Problems of hunger, deprivation, disease and unemployment, which provided fertile ground for violent insurgency, need to be addressed with utmost urgency. International community has been supportive, but additional and timely support is crucial.

Before I close, I would like to reaffirm our commitment to consolidating gains achieved to date in stabilizing political and economic situation in the country. Our journey to peace, democracy and development will continue until we reach the goal of building a just, prosperous and democratic Nepal.

Finally, I would like to thank the Bank and the Fund for their continued support for Nepal’s overall development in the past and hope for the enhanced support in the future.

I wish the Annual Meetings a grand success!

Statement by the Governor of the World Bank for The Netherlands

Wouter Bos

I would like to discuss three issues. First, I will shortly reflect on the quota discussion. After that, I will address the turmoil that financial markets have recently experienced. Finally, I will outline my views on the World Bank strategy.

The debate on the distribution of quota and voting shares goes to the heart of the Fund. A proper governance structure is eminent to any organization, and especially to a multilateral. This is why I am very pleased by the progress made this weekend.

As we have discussed this issue at length, I will not further delve into it or the Dutch position now and will turn to the other issues.

The past several months have been an eventful period for financial markets. The international financial markets were severely tested by spillover effects from the US subprime housing market. I do not want to delve into the origins as by now these are reasonably clear. What I feel is most striking is that no one had foreseen the contagion effects of the slump in the US housing market. The baseline scenarios of all major forecast institutions assumed that the problems would be confined to the US. Have we underestimated the likelihood of contagion? Or has an unlikely risk manifested itself? These are the questions that we should be asking ourselves.

An important feature of the recent turbulence has been the lack of information. First of all, this raises the issue of transparency of complex products. Furthermore, questions arise on how these products are valued, monitored and treated within the framework of prudential regulation and supervision. Recent events also underscore the importance of better insight into the incentive structures faced by credit rating agencies, including possible conflicts of interest. In addition, excessive reliance on credit ratings by investors without carrying own risk assessments has to be dealt with.

Fortunately, the financial system has proven its resilience and central banks have prevented a vicious circle from developing. The latest projections of the Fund show that the turmoil will have a moderate impact on the real economy.

Then, the World Bank Strategy.

I very much welcome President Zoellick’s vision as laid out in his 100-day speech. We support his idea of the World Bank as a “catalyst for market dynamism that seizes the opportunities of globalization, inclusively and sustainably.”

We also broadly agree with the six themes he has identified.

Nevertheless, there is a risk that the goal of inclusive and sustainable globalization could overburden the Bank’s agenda, where it tries to do “everything everywhere.” The following criteria are crucial in determining what the Bank should do and where.

First and foremost, strategic priorities should be in line with the Bank’s mandate, which is to reduce poverty and promote sustainable economic growth.

Second, we should keep in mind that the Bank is a financial and not a political institution, it should have a solid capital base, necessary to carry out its mandate.

And finally, the Bank should focus on areas where it has valueadded and comparative advantage vis-à-vis the market and other partners.

Within this context, let me elaborate on the specific role of the Bank in middle and low-income countries.

In my eyes, it is essential that the Bank remain relevant to all its clients—middle-income as well as low-income countries. In order to remain relevant to MICs the Bank must respond to their wishes, for example by developing new and innovative products. The Bank should also adapt its engagement to the specific characteristics of each country. Some countries require financing; in others, advice is the more appropriate instrument.

In low-income countries, the Bank should primarily focus on building a basis for sustainable development. It can thereby provide the “glue” in the international aid architecture. In the specific case of fragile states, the Bank should focus on strengthening institutional capacity. This should take place in close coordination with the UN and bilateral donors and in line with the ongoing policy dialogue with these countries. Only then will the Bank be able to effectively help countries coming out of conflict or seeking to avoid a possible breakdown of their economies.

Statement by the Governor of the Bank and the Fund for New Zealand

Michael Cullen

Statement by the Governor of the Bank for Pakistan

Salman Shah

It is a great honor, Mr. Chairman, to address this Annual Meeting of the Boards of Governors of the Bank and the Fund. First, let me congratulate you, Mr. Chairmen, on your election as Chair of the 2007 Annual Meetings of the Board of Governors.

Statement by the Governor of the Bank for Papua New Guinea

Wilson Kamit

I would like to thank the President of the World Bank Group, the Managing Director of the IMF, and the United States Government for hosting the 2007 Annual Board of Governors Meeting and for the warm welcome and hospitality given to us. We look forward to a fruitful round of meetings, sharing and discussing experiences and issues relevant to all of us.

I also convey my country’s congratulations to Mr. Robert B. Zoellick on his appointment as the new President of the World Bank Group and to the in-coming IMF Managing Director, Mr. Dominique Strauss-Kahn. We thank the out-going IMF Managing Director, Mr. Rodrigo de Rato, in this, his last Annual Meetings, for his support, guidance, and stewardship during his tenure. The new leaders bring to our institutions a wealth of experience and I am confident they will continue to carry on the good working relationship with all member countries.

Papua New Guinea’s macroeconomic performance has improved in recent years. This year (2007) will mark the fifth year in a row of economic growth, with growth now expected at 5.4 percent. While economic growth is at its highest rate in over a decade, we now face the challenge of sustaining and further improving our performance, as well as translating these gains into tangible benefits for our people. A strong and sustainable economic growth is also required to make a noticeable improvement in income per capita growth, given our population growth rate of 2.7 percent per annum.

Political stability has also improved over recent years, and this year, we held our first general elections using the Limited Preferential Voting system. The same Government, which held power for a full term (20022007), was returned to office in August 2007. With enhanced political stability, we now aim to sustain and grow the economy through removing impediments to growth and investment, and improving our physical infrastructure. The Government has continued with its medium term strategies—the Medium-Term Fiscal Strategy, the Medium-Term Development Strategy, and the Medium-Term Debt Strategy—which provides a coherent medium term policy framework, maps out our future plans and builds on the gains achieved to date.

Papua New Guinea has benefited from the favorable global economic conditions and high international commodity prices. The country has pursued prudent economic, financial and fiscal management which have together, resulted in improved consumer and investor confidence in the economy. Recently, the international credit rating agency, Standard and Poor’s upgraded its long-term foreign currency rating on Papua New Guinea to B+ and long-term local currency rating to BB-. Our long-term growth prospects are also favorable.

Inflation has remained low, with the outcome in 2006 of 2.6 percent on a year-on-year average. Interest rates also remained low by historical standards while the exchange rate has remained relatively stable, with a slight appreciation against the United States dollar, although it has depreciated against the Australian dollar over 2006 and 2007. Foreign exchange reserves continued to increase to historical levels. We will continue to maintain the floating exchange rate regime, with intervention only to smoothen out short-term exchange rate volatility. The Bank of Papua New Guinea has been liberalizing exchange control regulations since September 2004, mainly to encourage an easy flow of funds and improve investment in the country.

Papua New Guinea as a small, open and developing economy still faces several risks to our economic outlook. These risks include any downturn in the global economy; fall in major export commodity prices; depreciation of our currency, especially against the Australian dollar; or natural disasters such as pests, frosts, floods, landslides, cyclones and volcanic eruptions.

In the fiscal area, expenditure controls and higher-than-expected revenues have resulted in continued budget surpluses since 2004. Public sector debt has declined from a high of 72 percent of GDP in 2002 to 39 percent of GDP in 2006 and should continue to decline. The Government plans to use the windfall revenues this year to repay outstanding debts and other liabilities, fund district improvement programs, as well as invest in priority infrastructure projects and maintenance aimed at boosting the productive capacity of the economy.

Despite these achievements, our challenges remain daunting. The increasing HIV/AIDS pandemic represents a threat to our population, while public health and education facilities need improving, and our transport infrastructure needs rehabilitating. We continue to face the challenge of raising the efficiency of public utilities to provide vital services to businesses and the population at large. We acknowledge that there is still more to be done in the years ahead to bring these utilities up to acceptable standards and performance, which are needed to provide affordable, reliable, and efficient service to support private sector development in Papua New Guinea.

The Government of Papua New Guinea is making efforts to improve the delivery of public services, and is continuing with its reform agenda it started in 2003 under its broader public sector reform. The Public Expenditure Review and Rationalization process and implementation of its recommendations has had solid donor support including from the World Bank. The financial sector liberalization and reforms have contributed to reducing business impediments, enhance competition, and supported private sector growth. Reform work is also continuing in the trade and the public utilities.

We acknowledge our limitations and are therefore grateful to the continued assistance of our development partners. As we work towards building on our gains and growing the economy further, we seek the support, understanding, and counsel of the World Bank Group and the IMF. By working together as partners, we can ensure that our efforts complement each other and are directed in the most effective way for the benefit of all of us. I therefore look forward to the discussions at this meeting and the insights of the participants.

To conclude, I would like to acknowledge and express my country’s sincere gratitude to the management and staff of the World Bank and the Fund for their continuous support in Papua New Guinea’s development efforts.

Statement by the Governor of the Bank for the Philippines

Margarito B. Teves

First, please allow me to welcome the new President of the World Bank, Mr. Robert Zoellick and assure him of our confidence in his leadership and support for his stewardship of the Bank.

Fellow Governors, at a time when its constituents are seeking to reexamine the Bank’s role and relevance, the Philippines welcomes the Bank’s strategic framework to seize opportunities from globalization and achieve inclusive and sustainable globalization. We highlight the thrust to develop an appropriate business model for middle-income countries (MICs) that would be more responsive to its diverse development challenges. In particular, we support the approach that envisions providing financial support and customized services to MICs designed to cater to specific country needs and conditions. Learning form the past, there is no “one size fits all” formula in the Bank’s engagement with its developing member countries.

Likewise, we very much welcome the Bank’s recognition that there is a need for the World Bank Group to play a more active role in fostering regional and global public goods. The Bank must again refocus its resources and efforts on its core development roles. Accordingly, the Bank should continuously adapt and innovate in order for it to more effectively respond to new global as well as country specific challenges. The inventory of knowledge it has accumulated from its development work, if shared and harnessed effectively, can be a tremendous tool in enabling its developing members to successfully overcome its challenges.

Mr. Chairman, the Bank has made the global challenge of reducing poverty, its challenge as well. We look forward for the Bank to face this challenge by increasing its relevance to the middle-income countries. We note the continued strong growth of the global economy, driven to a large extent by the dynamism of emerging economies. Still 70 percent of the poor still live in India, China, and middle-income countries (MICs). The Bank, with its limited resources, would have to adopt new paradigms on how it can, effectively and efficiently serve as a catalyst in generating and mobilizing resources to address the development demands arising from the high poverty incidence in many middle income countries.

The move of the Bank to cut its lending cost to pre-1999 levels and adopt a simplified process is a positive signal on the Bank’s engagement in the middle-income countries. These are significant steps in the right direction. However, we still need to see how the Bank’s articulated strategy, including streamlined procedures, is going to be implemented with indicative timeline, for more effective and timely response to the countries’ demands.

We also await the specific innovative financial products and services of the Bank that will help enhance the capacity of middle-income countries mobilize financial resources.

During the Annual Meeting in Singapore last year, we talked about promoting greater use of country systems given its importance in reducing the non-financial costs of doing business with the Bank and in strengthening the countries’ institutional capacities. We acknowledge the efforts of the Bank in meeting this expectation with increased lending activities on national program support operations.

We welcome the Bank’s active collaboration and harmonization with member countries and other development partners for aid effectiveness. However, we strongly advocate a more proactive harmonization process converging towards adoption of country systems so that recipient countries are not unduly burdened with varying conditions and practices imposed by development partners in availing of funding assistance.

We take this opportunity to echo our full support for stronger partnership and collaboration among the agencies of the World Bank Group. The strong economic growth of middle-income countries during the past decade has brought with it greater demands to upgrade competitiveness and productivity. Growing requirements for infrastructure development and social service delivery call for better complementation among development agencies of the Bank in providing technical expertise, advisory services and financing. For the Philippines, more effective partnership between the IBRD and IFC in their engagement with the country would optimize the benefits of their assistance. We appreciate IFC’s engagement in the promotion of private sector participation in the country. However, we strongly believe that given increased allocation of resources to the country, IFC can do more beyond its advisory services, in the underserved areas and sectors, such as local power, water, health, and education. A higher resource allocation to the country, complemented by a better balance between big volume and smaller but high impact transactions will be more effective in enabling the Philippines face its challenge in providing more and better infrastructure and social services. We believe the IFC remains well equipped to meet the increasing requirements of the private sector and local government in contributing to infrastructure development and provision of social services.

A key factor in sustaining economic growth is a well-developed financial system. The World Bank Group is well positioned to share its expertise in developing the financial sector of the country, particularly in deepening the domestic capital market and the insurance industry. We would welcome the World Bank to be forthcoming in this effort.

In closing Mr. Chairman and Governors, allow me to update you on the recent performance of the Philippine economy, which has been encouraging.

Our macroeconomic environment has been improving. This is providing a strong platform for the economy to move to a higher growth path in the near term. In the first half of the year, GDP accelerated by an average of 7.4 percent, the highest in 20 years and outperforming the high-end of our projections. Inflation has been benign at 2.6 percent and interest rates remain at relatively low levels. The national currency continues to strengthen as a result of sustained capital inflows and foreign remittances. We are on track with our fiscal consolidation program and the fiscal deficit is projected to go down to 0.9 percent of GDP this year from 1.1 percent of GDP in 2006. While most macroeconomic indicators register healthy levels, our main challenge is to improve tax effort to which Government is committed to vigorously pursue through tax administration reforms.

As the Philippines implements key reforms to enhance productivity and competitiveness, boost the investment climate, sustain macroeconomic stability, and ensure increasing growth over the medium term, we look forward to the World Bank Group’s active engagement in pursuing its mission of poverty reduction and sustained growth for the developing countries.

Statement by the Alternate Governor of the Fund for the Republic of Poland

Arkadiusz Huzarek

For a relatively long period, the global economy has been experiencing a sustained, strong growth, accompanied by moderate inflation and robust growth of international trade. It is also worth emphasizing that the geographic base of the world growth has broadened and its volatility has visibly declined.

Growth pattern rebalancing is among the prominent features of the performance of the global economy over the 2000s. The driving forces of global growth have been shifting towards emerging market and developing countries, with many of these economies participating in the process. They now account for a substantial share of the world growth. Several most dynamic emerging economies are increasingly playing a systemic role in the global economy. The rebalancing process also shows the capability of Central European economies to use the opportunities and to cope with the challenges of economic integration and globalization.

Since the April WEO, the balance of risks to the global economy has clearly shifted to the downside. Recent turbulence in the financial markets, which originated from the US sub-prime mortgage market, is a major downside risk to the global growth. The tightening of financial conditions, prompted by re-pricing of risk, can be seen as restoration of more sustainable price levels and more discipline to the credit markets. However, the risk of a protracted financial markets adjustment may lead to a visible slowing down of the global growth. This perspective might be reinforced by a set of other risks, such as volatile oil markets, disorderly unwinding of global imbalances, protectionist sentiments or geopolitical conflicts.

Against this background, Central European countries are a strong component in the growth pattern of emerging economies. The robust growth is the outcome of substantial structural and macro-policy improvements as well as of strengthening integration with the European Union. The main risk for Central Europe would be a slowdown in the Euro area whereas in case of the risk from the financial markets, a big and sudden shift in sentiment producing a flight to safety would disturb the growth of emerging European economies. In this context, a responsible fiscal policy, sizeable foreign exchange reserves in relation to gross external financing requirements and an appropriate exchange rate regime are helpful in cushioning the real economy from financial volatility. Improving prudential and banking supervision and the visible progress in the soundness of the banking sector are significant as well.

Recent developments in the global economy call for a clear and determined IMF action. It has to be emphasized that the Fund has been and is responding to those challenges, including by an adoption and implementation of the Medium- Term Strategy. However, further action by the IMF is necessary.

The Fund’s surveillance has to cope with strong challenges. A thorough analysis of the role of the financial sector and its closer integration with the macroeconomic assessments is a step in the right direction. More emphasis could be put by the Fund on the issues of complex financial instruments and institutions that deal with them. It is also highly relevant to strengthen surveillance of systemically important economies and exchange rates which helps better integrate bilateral with multilateral surveillance. In this respect, Poland welcomes the adoption of the 2007 Decision on Bilateral Surveillance over Members’ Policies. It is instrumental in upgrading the principles of the Fund’s bilateral surveillance. The 2007 Decision should help to reduce misalignments in exchange rates more effectively and thus positively contribute to international stability.

We also acknowledge the conclusion of the first round of multilateral consultations on global imbalances. This new procedure well complements other instruments of the IMF multilateral surveillance. The main players involved in the global imbalances have agreed on policy responses necessary for the orderly unwinding of imbalances. A significant issue that lies ahead for the Fund is the monitoring and assessment of the implementation of country plans.

Quota and voice is a prominent issue among the IMF governance reforms. These reforms should strengthen the credibility of the Fund as a global financial institution. It is very significant to timely agree on the reform of quota and voice, aiming at ensuring fair and adequate representation for all IMF members. Simultaneously, the reform should set adequate incentives to pursue policies consistent with the IMF principles. Poland is in favor of a transparent, principle-based quota formula, with a clear and strong rationale in economic terms. We consider compression as a useful instrument of rebalancing the quota distribution between advanced and emerging economies as well as we see an adequate increase in basic votes as a way of enhancing representation of low-income countries.

Efforts aimed at developing a new income model for the IMF are needed to provide medium term sustainability of the Fund’s financing. Whereas we consider the proposals of the Crockett report as correctly diversifying IMF sources of income, we also believe that they should be integrated with the analysis of Fund’s expenditures.

Profound changes in the global economy and in the architecture of aid flows call for refocusing and enhancing the IMF–World Bank collaboration. Whereas we support procedural recommendations of the Joint Management Action Plan, we also see as reasonable going beyond these recommendations and focusing on a clearer division of labor between the two institutions. In that regard, it is important that the Fund is involved in tasks that fall within its core competences.

Statement by the Governor of the Bank for Portugal

Fernando Teixeira dos Santos

It is a great pleasure for me to be here and I would like to start by thanking the Bank and Fund staff for their efforts in organizing this year’s Annual Meetings.

World economic activity remains robust, despite some cooling down of the pace of economic growth due to the financial market turmoil. Therefore, these recent developments lead to downward revisions in expected economic growth for global economy.

Portuguese economy will likely be influenced by these events. Nevertheless, the gradual recovery of the Portuguese economy will continue in the next years, and the gap vis-à-vis European average is expected to be reduced in coming years.

The acceleration of economic growth for the next year will be the result of an investment recovery, both on entrepreneurial investment and public investment and of the continued good performance of exports.

In a context of increasing globalization, competitive pressure is growing, and consequently important efforts have been put in place in Portugal to increase competitiveness and productivity growth.

Structural reforms have been implemented in areas such as social security, public administration, in raising the workers skill level, in promoting innovation and technological development and in developing a more favorable environment for investment.

A rigorous implementation of the budgetary consolidation strategy has also been a priority. In 2007 the deficit is going to be 3 percent of GDP, ending the excessive deficit situation one year earlier than initially expected. In sum, the Portuguese macroeconomic fundamentals are strong, which should have positive spillovers on the fight against social exclusion, poverty, and inequality.

Portugal remains fully committed to the global fight against poverty.

The partnership between developed and developing countries established during the Monterrey, Johannesburg and Doha summits and reaffirmed in New York in 2005 remains the only way to make further progress towards the achievement of the Millennium Development Goals. These are not only objectives but also a means to measure progress in this quest. The first of these goals, poverty reduction, has been the World Bank’s overarching objective for many years and it is a priority of the Portuguese cooperation.

Portugal welcomes the new President of the World Bank, Mr. Robert Zoellick and wishes him success in this challenging but very important mission. We very much support the concept of an inclusive and sustainable globalization, presented by President Zoellick, as the vision underlying the Bank’s work. We believe multilateralism remains the best means to achieve this daunting task. We urge the Bank to continue working closely with its multilateral partners—the UN, the IMF, the WTO and regional development banks. In this context, we welcome the six strategic themes proposed by President Zoellick as a framework for the future work of this important Institution.

This is a particularly challenging year for Portugal—as we currently hold the Presidency of the European Union—and I would say it is also a challenging year for the World Bank Group as it prepares, together with the international donor community, to mobilize crucial resources for development through IDA-15 replenishment. IDA remains the most important multilateral development institution, especially in Africa. Portugal will make its best to help create an atmosphere conducive to a successful IDA replenishment.

We welcome the Bank’s work in addressing the special needs of fragile states. These countries are the least likely to attain the MDGs and should not be left behind. To engage more effectively in these difficult environments, the international community needs to develop an integrated approach that takes into account security, political and developmental concerns. Portugal thinks the World Bank is well positioned to play a key role in these countries and to make a difference due to its adaptability character and by making quick disbursements.

The Bank should continue working closely with other development partners and relevant institutions, both public and private, in order to help build capable, accountable, and responsive states, reflecting each other’s mandate and comparative advantages.

In its 60 years of existence, the World Bank has been a driving force for development in middle-income countries by providing financing, technical assistance and knowledge services. The Bank needs to remain engaged and competitive in middle-income countries in order to fulfill its mandate, but it must also continue to use its development knowledge and expertise for the benefit of other developing countries, such as IDA countries.

Global and regional public goods should clearly be on top of the World Bank’s agenda. Climate change and global warming concerns are a paradigmatic example. In this area, where there are clear market failures, a global institution like the World Bank has a key role to play in fostering country and regional strategies for the promotion of environmentally sustainable low-carbon economic development, while maintaining countries’ growth rate and their path towards poverty eradication.

We recognize that developed countries need to provide stronger support to the least developed countries through increased market access. Portugal urges the international community to make a renewed effort to achieve a successful closing of the Doha Development Round. We also strongly support World Bank and IMF efforts to step up the Aid for Trade agenda and commend their advocacy role in seeking a positive outcome of the negotiations.

Portugal believes that the private sector development plays a crucial role in the fight against poverty. We, therefore, encourage the World Bank Group to continue, through IFC, to promote private sector ventures in developing countries and frontier markets. The ambitious IFC strategy that includes a sensible increase in its activity goes, in our opinion, in the right direction. In this context, let me share with you that the Portuguese Government, in collaboration with private partners, has recently established a new financial instrument—International Financing Corporation for Development (SOFID)—with the aim of supporting private sector development through partnerships in least developed countries.

The establishment of this Institution was formally announced at the International Conference on Promoting of Investment Partnerships for Sustainable Development in Africa, an Initiative organized jointly by the Portuguese Government, the European Investment Bank, and the International Finance Corporation, which took place in Lisbon, on October 11.

I would like to finish by thanking the Bank and Fund Staff and management for their excellent work and the Boards of Directors for their strategic view and guidance. I would like to thank Managing Director Rodrigo Rato for his excellent work in the time spent leading the IMF and wish him well in his future endeavors.

Statement by the Governor of the Bank and the Fund for the Russian Federation

Aleksei L. Kudrin

Statement by the Governor of the Bank and the Fund for Saudi Arabia

Ibrahim A. Al-Assaf

I am honored to deliver the joint Arab speech this year on behalf of my colleagues, the Governors of the Arab Group in the International Monetary Fund and World Bank. I would first like to welcome Mr. Robert Zoellick, the President of the World Bank, and Mr. Dominique Strauss-Kahn, the IMF Managing Director. I would like to express our deep gratitude to Mr. Rodrigo de Rato for his wise leadership of the Fund during the most recent period. We wish him success in his future endeavors. The coming period will see new leadership in both institutions. We are prepared to put forth the support and effort needed to assist the executive boards of both institutions in achieving their goals.

During the past year, the global economy has seen a recovery, testifying to its resilience. However, new challenges are now being posed by the recent turbulence in the financial markets, the credit pressures affecting the American real-estate market, and the potential effect of such pressures on developing countries. These challenges require greater efforts by the major countries to correct imbalances and maintain stability.

Nonetheless, most of the developing countries have seen record capital flows. This is reassuring, as these flows present opportunities to support long-term growth. However, they also pose major, short-term economic challenges. The concerned countries must adopt realistic policies for dealing with these flows, particularly sound fiscal policies, and must strengthen prudential standards.

In this context, the countries of the Arab region have seen high growth during the past year, with average growth expected to exceed 6 percent in 2006 and to continue at this rate in 2007. Factors contributing to this growth include sound fiscal policies, structural reforms, and the Arab governments’ desire to bolster economic integration among the Arab countries. The Greater Arab Free Trade Area began operating in 2005. Discussions are currently being held to establish an Arab customs union and to liberalize the services trade among the Arab countries. The countries of the Cooperation Council for the Arab States of the Gulf have completed the requirements for establishing a common market this year. In another development, the Arab oil exporting countries—cognizant of the importance of oil price stability and meeting the global economy’s energy needs—have increased their output and cooperation with consumers. However, oil demand has not risen sufficiently to justify the recent price increase. Responsibility for the increase also lies with political tensions, speculation, and the shortage of refinery capacity.

The International Monetary Fund plays a primary role in maintaining the stability of global financial and money markets. This role is particularly important in view of the risks posed by the current credit crisis to the global economy. In this regard, we commend the international monetary policy measures taken. They have had an appreciable effect in lessening the gravity of the crisis.

Concerning emerging economies, we encourage the Fund to study a new mechanism for providing quick financing to such economies, if needed. Regarding the sovereign funds, we urge the Fund and other agencies to seek to deal with this subject prudently. We also underscore the need for the Fund to maintain its activity as stipulated in its Articles of Agreement. To enhance the Fund’s role, it is important to increase the developing countries’ voting power and role in decision-making.

Concerning development and poverty-reduction efforts in the developing countries, global economic developments and reform policies in the developing countries have helped bring about tangible development and poverty-reduction accomplishments. However, major challenges still face the international community, particularly the slow rate at which the Millennium Development Goals are being achieved in a number of Arab and African countries, and the concentration of financial flows in a limited number of countries. Official assistance has stagnated, and there is uncertainty about the main donor countries’ commitments to the debt-relief programs and financing for the 15th replenishment of the International Development Association’s resources.

These challenges place substantial burdens on the international community, especially the World Bank Group. To meet these challenges, we look to the discussions being held to reformulate the World Bank’s strategy. We hope this strategy will focus on the development of the real economy sectors to meet the needs of medium-income member countries in particular, as they are home to more than 70 percent of the poor. It is especially necessary to maintain the World Bank Group’s constants, which focus primarily on providing the necessary financing and knowledge transfers. These challenges and aspirations require strengthening the long-term financial capacity of World Bank institutions. In this regard, we would like to express our gratitude to Mr. Zoellick’s for recognizing the importance of the Arab region and making it a priority region for the expansion of World Bank activity.

It is important to achieve positive results in the negotiations on the 15th replenishment of IDA resources, including compensation of the Association for the burdens it has assumed under the Multilateral Debt Relief Initiative. The Arab countries attach importance to international economic and development conditions. Therefore, the donor countries and regional development institutions in our region have undertaken to provide major assistance to the developing countries and to increase Arab private investment in a number of such countries. In this regard, we call for strengthening cooperation among regional development institutions, the Fund, and the World Bank through joint activities and programs, especially programs designed to support economic reform efforts and achieve sustainable development goals in our region.

Regarding the multilateral trade negotiations, it is important to achieve positive results in the Doha round, which has reached a critical stage. We are disappointed by the stalled negotiations and look forward to positive results once the negotiations resume. We call on the concerned parties to make greater efforts to complete this task. In particular, we call on the advanced countries to show greater flexibility regarding the elimination of subsidies for producers and exporters and the provision of greater assistance for developing the production capacities and infrastructure of the developing countries to help them benefit from trade opportunities.

We also advocate greater concern for countries that are facing difficulties, suffering from the effects of conflicts, and experiencing a shortage of the resources needed to promote economic and social development. Such countries are home to a third of the world’s poor, and their negative conditions have regional and global effects. We commend the World Bank Group for its concern and its policy in this connection. We call for promoting this policy and for greater flexibility on the part of the World Bank and the Fund in providing the necessary resources, including debt relief, to these countries.

Here, we refer especially to the worsening of the Palestinian people’s suffering under the occupation and besiegement. We also point to the urgent, pressing need for: international assistance for Lebanon, whose economy and infrastructure have been subjected to extensive destruction by the war launched against it; support for the reconstruction of Iraq; and efforts to enable Sudan and Somalia to rebuild their economies.

In conclusion, we note the paucity of IMF and World Bank officials from the Arab countries compared to other geographic regions. We thus repeat our urgent call for the Fund and World Bank to employ more citizens from the Arab countries.

Statement by the Alternate Governor of the Bank for Spain

David Vegara Figueras

Let me start by greeting a warm farewell and wishing the best to the current IMF Managing Director, Mr. de Rato, to whom we should credit his leadership in setting the ground for IMF reform. We look forward to continuing working in this fundamental process with the next Managing Director, Mr. Strauss-Kahn, as well as with Mr. Zoellick, who attends his first Annual Meetings.

Statement by the Governor of the Bank and the Fund for Sri Lanka

Sarath Leelananda Bandara Amunugama

We are meeting at a time when the global economy is performing strongly. But the high risks and vulnerabilities, which we noted at our meeting in Singapore a year ago, have become more apparent today. The turbulence in the sub-prime loan mortgage market in the United States has caused some degree of turmoil in financial markets in many other parts of the world. Fortunately, the adverse impact of this volatility on financial markets has been contained. It also did not exert an adverse impact on emerging economies. However, these market events have delivered a very strong message to policy makers, both in developed and developing economies, that they cannot afford to be complacent.

The events also demonstrate that financial globalization, which has brought about many benefits through an efficient allocation of international savings, can also be a source of vulnerability for small nations like Sri Lanka. In view of such circumstances, it is in our interest to call for increased surveillance of the financial sectors of countries, particularly the large advanced economies, by both domestic regulators and the international lending organizations.

We firmly believe that time has now come for both IMF and World Bank to critically review their long-followed strategies relating to emerging economies. The past development strategies adopted by these institutions by supporting public initiatives have overburdened many governments with fiscal constraints and ever-rising debt ratios. Instead, as an alternative, we should look for new development strategies that harness the possibilities of private initiatives for sustainable development. This could be achieved through public private partnerships, also known as the PPP model, for development. Donors, specially the World Bank and its subsidiary IFC, could facilitate this process by linking their country programs to such home driven strategies.

Let me now turn to my own country of Sri Lanka. Although we are an island, we are certainly not insulated from the developments around us. The unprecedented high price of oil in international markets has taken a heavy toll. Volatility in major markets and any slow down in world output would certainly bring about a deleterious impact on our economy. Rising food prices is also a significant challenge. The recent price hike of wheat grain in the international market has added to our problems, even though we are self-sufficient in rice. Despite the challenges we face, our economy grew strongly, by 7.4 percent, last year. The growth in 2007 is expected to be around 6.5 percent, but in the medium term, the economy envisages to grow around 7-8 percent per annum. We have been successful in bringing down unemployment to around 6.5 percent, which is a historically low level. The Sri Lankan Government is committed to fiscal prudence and sound macro economic policies. We appreciate the need for continued investment to sustain our economic growth and eradicate poverty.

Given the limitations of domestic resources for continued high growth, we are encouraging international investors to come to Sri Lanka. I am happy to report that in 2006 Sri Lanka received the highest ever foreign direct investment inflows. This trend is expected to continue in a similar fashion in this year as well as in the near future.

We are focusing on measures to reduce poverty and bring about broadbased, regionally equitable economic growth. This is an important aspect of a just and lasting settlement to the ethnic conflict in the country. The multi-ethnic Eastern Province of Sri Lanka, which has recently been cleared of all terrorist activity, will be developed on a priority basis.

Sri Lanka was recently able to make successful debut bond issue, which was over subscribed by more than three times, and is a mark of confidence in the resilience of our economy. This has paved the way for the Sri Lankan private sector to tap this global market for infrastructure development. In the sea around Sri Lanka, a vast off-shore oil field has now been discovered. There has been considerable international interest in the venture and bidding will begin early next year.

Let me now conclude by stressing the need for economic policy makers everywhere to be vigilant and willing to take concerted action to ensure that the dynamism experienced by the world economy continues and that its growth momentum is maintained.

Statement by the Governor of the Bank for Sweden, on Behalf of the Bank Nordic Countries

Anders Borg

I am honored to address the 2007 Annual Meeting on behalf of the five Nordic countries. Let me first welcome the new World Bank President, Mr. Zoellick. The Governors of the Nordic countries strongly believe that the World Bank plays a crucial role in the fight against poverty and in the achievement of the Millennium Development Goals. The time has come to agree on a common vision globally, and then implement it, locally. We strongly support the vision for an inclusive and sustainable globalization that has been brought forward by Mr. Zoellick, and we look forward to actively participate in further discussing and refining it.

Today, I will focus on:

• (1) global economic development

• (2) the needs of Africa, especially sub-Saharan Africa, and

• (3) addressing challenges of climate change.

I will also stress the need for:

• (4) women’s economic empowerment for growth and development, and

• (5) effective use of available resources.

Statement by the Governor of the Fund for Switzerland

Jean-Pierre Roth

Chairman, President Zoellick, Managing Director de Rato, Honorable Governors and distinguished Delegates, it is an honor to address you here today.

This year’s Annual meetings take place against the background of the recent financial market disruptions. Unlike several financial crises of the past, the current problems have mostly affected advanced economies. An encouraging feature is that emerging market economies have escaped essentially unscathed. The consequences of these financial market difficulties for global economic growth are not fully clear yet. So far, the most likely scenario is a modest but contained slowdown. One important outcome is that market participants have started to reappraise financial risks. Even though this reassessment is in some cases painful and its consequences are not yet totally known, it is a necessary and welcome development.

So far, the international financial system has proved sufficiently resilient. However, the current events have highlighted weaknesses in the way risks are appraised not only by banks, but also by rating agencies and supervisory authorities. There is clearly scope for improvements.

• Banks and financial firms need to take a broader view of risks: reputation and liquidity risks, for instance, have been underestimated. The same applies to contingent liabilities associated with new off-balance sheet financial instruments.

• Rating agencies should revisit the methods they employ to analyze credit derivatives and structured products.

• Supervisory authorities should put greater emphasis on more regular stress testing; and these tests should rely on more elaborate and diversified scenarios.

Furthermore, recent events have shown that it cannot be safely assumed that markets always remain liquid. Thus, ways have to be found to put a correct price on complex products when markets have become illiquid. While these events call for responses from both market participants and authorities, short-term activism should be avoided.

The Fund clearly has a role to play in enhancing global financial stability. We welcome the efforts to improve its financial sector surveillance activities, making them more focused, more regular, and better integrated with macroeconomic surveillance. Furthermore, Switzerland supports a possible second round of multilateral consultations on financial stability issues. It is important, though, that the Fund avoids duplicating the work of other institutions and fora. The Fund should rely upon their technical competences, but not infringe on them. A starting point for a sensible division of work could take into account the unique position the Fund is in: it is the only financial institution with a global membership.

The Annual Meetings provide a welcome opportunity to take stock of the work done by the Fund and the World Bank. At the Fund, an important project has been the revision of voice and representation. What we need is, of course, a quota formula that is at the same time simple, transparent, and in keeping with the Fund’s mandate. There has been some progress. But no one could have realistically expected a smooth process in developing a new formula. In moving forward, I want to emphasize once again that, for Switzerland, the new formula and the quota adjustment must meet three principles:

• First, GDP should be measured at market exchange rates. GDP measured in PPP terms would be a highly misleading indicator. The basic fact is that both the financial contributions to the Fund and lending by the Fund are priced at market exchange rates and not in purchasing power parity terms.

• Second, openness should continue to play a major role in the formula. In addition, this variable should be modernized to include financial openness. After all, the Fund’s mission and its objectives make it first and foremost a monetary institution. One of its key mandates is to help safeguard international financial stability. Including financial openness in the formula would therefore give an appropriate weight to those countries with most at stake in this respect.

• Third, we continue to believe that the prime driver behind any general rise in quotas should be a need for increased liquidity at the Fund. Without any clear need at the current juncture, we could, at most, agree to an overall increase of ten percent.

Beyond these core principles, we are ready to work constructively towards a revised allocation of quota and voting shares to reflect the changes in the international economic environment. To this effect, Switzerland supports at least a doubling of basic votes as well as the mechanism to keep this higher share of basic votes constant in the future. The representation issue is clearly at the heart of efforts to ensure the continued relevance of the Fund today and in the future. Switzerland is ready to compromise so that an acceptable solution can be found, but we are not willing to discard the basic principles underlying the Fund’s mission. I sincerely hope and indeed have great confidence that we can reach a broad consensus on this issue.

A second topic has been high on the agenda of the Fund: its new income model. New sources of income are certainly necessary, but expenditure reductions are at least as important to achieve financial soundness over the medium term. I welcome the reductions in administrative real expenditure already planned in the medium-term budget, but more ambition is warranted. We would like to see further proposals on how to control expenditures and additional efforts towards achieving greater cost efficiency. Such efforts should be accompanied by a serious discussion about the optimal size of the Fund. We would like to see an institution with a stronger focus on its core mandate: to secure macroeconomic and financial stability.

This being said, I broadly agree with the two main pillars of the new income model: first, to broaden the investment mandate of the Fund; second, to increase the amount of resources that can be invested. One way to achieve this would be a limited sale of gold. I have to admit that I feel uncomfortable with gold sales as a panacea to deal with financial difficulties. However, I could agree to a one-off and limited gold sale, with the proceeds contributing to an investment endowment. It is important, though, that any such gold sales should be handled in a way that avoids disruptions to the gold market. A second way to raise funds is to mobilize quota resources specifically for investment purposes. We consider this a promising approach, but believe that there should be an upper limit on the share of quota that can be used for this purpose. There are also equity issues to be addressed if, what is likely, not all countries would contribute.

A third important topic concerns what role the Fund should play in low-income countries. Switzerland believes that the Fund must focus its support for these members on macroeconomic stability and debt sustainability. Here it should resume its traditional role: giving advice and providing temporary balance of payments support. However, the Fund should not fill gaps in the provision of public services—such as coordinating aid flows—or in the delivery of development aid. Long-term lending should be phased out. There are other institutions more suitable to these jobs. A clear division of labor with the World Bank is essential, and we welcome the efforts currently undertaken to achieve this. Greater specialization would help increase the effectiveness of the services provided by both the Fund and the World Bank to their lowincome members.

The World Bank, in a context where rapid globalization continues to create new opportunities as well as global challenges, has embarked on a reflection about its role and its mandate. We welcome President Zoellick’s commitment to develop a strategy for the World Bank Group in a consultative manner with the guidance of the Board and we broadly share the general thematic orientation proposed. A sustained engagement in low-income countries, fragile states, and middle-income countries, as well as renewed efforts towards global and regional challenges and the promotion of the knowledge and learning agenda, all constitute critical areas for action.

This orientation should be further elaborated on the basis of the value added and the comparative advantage of the World Bank Group across the suggested themes. To support the prioritization process four criteria appear particularly important to us: (i) value-added and comparative advantage of the World Bank Group, (ii) subsidiarity, (iii) consistency with the Bank’s core mandate of poverty reduction and economic growth, as well as (iv) coherence with the countrybased model.

Inclusiveness and sustainability must be acknowledged as building blocks for the long-term strategy of the Group. Moreover, good governance remains central. The recent approval of the Implementation Plan for strengthening the Bank’s engagement on Governance and Anticorruption (GAC) provides a sound platform for implementing the GAC strategy, and we expect the Bank to act resolutely on this important agenda. We encourage the Board and management to consider all opportunities and modalities for mainstreaming the issues of inclusiveness, sustainability, and good governance in the Group’s long-term strategy.

On the themes suggested by President Zoellick, we would like to comment as follows:

First, we support the World Bank Group’s commitment to play a more active role in addressing challenges and opportunities related to regional and global public goods. In our view, efforts to address global public goods should include all member countries. High-income countries are affected by global challenges as well, for example in the field of climate change and communicable diseases. They can significantly benefit from the experience of the Bank. As a competent policy and technical advisor, the Bank has a major role in providing assistance to all countries affected by global challenges.

We agree that climate change represents the biggest challenge on the global public goods agenda. Mitigation and adaptation to climate change will be essential to overcome poverty in many countries. The Bank has made good progress in mapping these challenges, and we welcome the activities undertaken so far under the Clean Energy Investment Framework. Further progress on the agenda will however imply to go beyond energy to address related concerns and bottlenecks in transportation, agriculture, and forestry. We hence support the need for a multi-sectoral approach and we encourage the Board and management to deepen their discussion and to review options in that matter. To secure funding, new financing windows should be envisaged with caution and only with the assurance that market distortions are avoided.

Switzerland is currently reviewing its climate change strategy and it is setting new pillars of action to reduce GHG emissions. Switzerland will continue to participate actively in the multilateral discussion related to the United Nations Framework Convention on Climate Change (UNFCCC). The current negotiations should allow to find a global consensus on a Post-Kyoto climate regime and to reduce drastically GHG emissions. We will support more actively low and middle-income countries so that they can integrate the global climate change normative framework.

Second, the Bank’s engagement in low-income countries has significantly contributed to the results achieved in poverty reduction over the last decade. The country-based approach and Poverty Reduction Strategies have been instrumental in facilitating this progress. In the current context of increasing aid fragmentation, we encourage the Bank and development partners to seek further ways to strengthen the effectiveness of the country-based model, and to explore additional opportunities to promote higher growth through private sector development in low-income countries. Agriculture, business environment, trade, local financial markets, and infrastructure for regional integration are areas where the World Bank Group should scale up its work. Results and performance should remain at the center of the resource allocation system in low-income countries and the governance weight should remain strong.

Third, although the World Bank Group has since long been recognized as a leading contributor to the world’s knowledge and learning, this domain has not yet translated into a true business line of a “knowledge institution.” The Bank has the potential to learn from experiences worldwide and to share competences and lessons among all shareholders and stakeholders. We encourage the Bank, in the context of the long-term strategy, to reflect on the opportunities and constraints to better tap the wealth of knowledge and learning which exist in the institution and in partner countries, and to avail this to all members, borrowing and non-borrowing countries. We are convinced that the Bank may establish a dynamic and successful new business line in focused areas without crowding out service providers of the private sector.

We encourage President Zoellick to sustain efforts in finalizing the strategy rapidly; we would welcome a full-fledged discussion of the strategy by the 2008 Spring Meeting of the Development Committee.

Regarding the scaling up of aid and the role of IDA, we acknowledge and welcome progress achieved in poverty reduction, macroeconomic performance, and institution development in low-income countries, and we commend IDA for its contribution to this encouraging trend. With a strong presence at the country level worldwide, IDA is in a position to play a pivotal role in promoting coordination among partners, addressing regional and global issues, and leveraging private and public, financial and human resources. In particular, we expect IDA to support partner countries to increase domestic resources mobilization. To produce effective and sustainable development results, the quality of lending and advice is key. IDA should continue to improve the quality of these products to ensure maximum benefits to clients and to avoid reaccumulation of debt, in addition to the proposed agenda for the Bank to support scaling-up efforts.

Statement by the Governor of the Bank for Thailand

Chalongphob Sussangkarn

Let me start by expressing my appreciation to the World Bank, the IMF, and the United States for their warm hospitality in hosting the 2007 World Bank/IMF Annual Meeting in Washington D.C. I would also like to join my fellow Governors in extending a warm welcome to Mr. Robert Zoellick on his appointment as the new President of the World Bank Group. I am confident that his vast knowledge and experience will enable the Bank to meet increasingly complex development challenges in the coming years. Also, I would like to express my appreciation to Managing Director de Rato for his contributions during his tenure. At the same time, I would like to welcome Mr. Dominique Strauss-Kahn as the new Managing Director of the Fund and look forward to working closely with him in the future.

This year’s meetings take place against a global economic background characterized by growing uncertainties as a result of a surge in oil prices, the turmoil in the subprime market, continued global imbalances and growing capital market and exchange rate volatilities due to excessive liquidity in the global financial markets. These volatilities impose tremendous policy challenges to countries that need to shield their economies from the risks associated with the volatilities. The challenges are particularly severe for middle-income countries in general. Most advanced economies are better able to cope with the volatilities. They have deep financial markets, a diverse array of financial instruments for hedging risks, sophisticated market participants, and large financial resources to ease potential problems that may arise. Middle-income countries on the other hand lack these characteristics. They have relatively thin markets so that moderate capital inflows and outflows can lead to large changes in asset prices. They do not have sufficient risk hedging instruments; market participants are not sophisticated in dealing with risks; and they have limited financial resources to deal with market disruptions.

As in many other middle-income countries, the current global financial volatilities have certainly put tremendous strains on Thailand’s ability to achieve a stable macroeconomic policy environment consistent with the maintenance of competitiveness and sustainable growth. We have had to impose capital control measures as additional tools to help moderate the impacts of large capital inflows into our capital markets on the exchange rate. While these controls may be regarded as second-best or even third-best policies in theory, analyses in text books do not deal with the kind of financial volatilities that we are experiencing today, and in practice, with such volatilities capital control measures are likely to become part of the tool-kits for policy makers in middle-income countries out of necessity.

As far as Thailand’s economic performance is concerned, I am happy to report that in spite of the volatile external environment and the uncertain domestic political situation Thailand should be able to achieve a reasonable growth rate of about 4.5 percent this year with a low rate of inflation of around 2 percent. The government has also given the goahead for three major mass transit projects amounting to more than US$3 billion. Construction for these projects will begin in 2008. Other large-scale investment projects in the petrochemical sector are also in the pipeline. In addition, in spite of the political uncertainties, foreign direct investment has picked up. Applications to the Board of Investment during the first eight months of this year increased by more than 50 percent compared to last year, and over the last couple of months there have been announcements of major investment expansions by many multinational companies, particularly in the appliance and automotive sectors. These various investment projects, both by the public and private sectors, will stimulate domestic demand starting next year. This will help to cushion the impact of a potential slow down in exports as a result of potentially unfavorable external environment. Elections are due on December 23 of this year. With political clarity after the elections and the investment stimulus from the groundwork laid by this government, it is expected that Thailand’s economic growth in 2008 should easily exceed that in 2007.

Let me now turn to matters relating to the World Bank Group. On behalf of the Thai government, I would like to thank the World Bank for its continued fruitful engagement with Thailand even though Thailand has not borrowed from the World Bank for a number of years. Our relationship with the Bank is now evolving from a borrower-lender relationship, to more of a development partnership. As a development partner, the Bank has supported Thailand in a number of areas; namely human and social capital, competitiveness, poverty and income inequality, natural resources and environment, as well as on governance issues. Currently a Country Development Partnership between the World Bank and Thailand is under preparation, and we look forward to a broadening and deepening of engagement with the World Bank over the next 5 years.

With regard to this year’s agenda, we are fully in agreement with the Bank’s emphasis on closing the development gaps among members and that specific attention should be given to the poorest countries while flexible policy should be utilized in engaging with fragile and postconflict states. We are also in full support of the Bank’s goal of greater engagement with middle income countries. As a middle-income country, Thailand can still benefit a great deal from the expertise of the Bank, whether in project related issues or broader policy issues. With greater flexibility in the Bank’s lending policy, particularly in terms of local currency lending, Thailand hopes to expand our engagement with the Bank in the future.

On Fund matters, I believe that much work remains to be achieved for the Fund to remain relevant, credible, and effective in the changing global environment. While some of the progress has been laid out in a “Report of the Managing Director to the International Financial and Monetary Committee on the IMF’s Policy Agenda,” we would like to take this opportunity to highlight a couple of issues.

First and foremost, the issue of quota and voice reform needs to be addressed to tackle the long overdue problem of the Fund’s governance. In this connection, we view that the new quota formula should be simpler and transparent, yet comprise variables that reflect not only members’ ability to contribute to the Fund, but also their relative economic positions in the world economy. In addition, a sizeable quota increase for the most underrepresented members would be needed to achieve a meaningful change and credible reform, realigning the quota shares of developing countries with their relative importance to the global economy.

Second, on the issue of surveillance, it is important that the Fund continue to strengthen its surveillance framework while ensuring evenhandedness among members. The recently adopted 2007 Decision on Bilateral Surveillance remains to be tested whether it could provide greater clarity on the Fund’s surveillance exercise to members. We would like to emphasize that the Fund would need to pay due regard to the different exchange rate regimes as well as specific conditions and challenges of individual members in conducting surveillance over members’ exchange rate policies. Too much attention of exchange rate policies as a key macroeconomic adjustment variable would be unproductive. At the same time, the Fund would also need to focus much more on how to reduce the global financial market volatilities that are major sources of risks to member countries, particularly the middle-income countries. Focusing solely on members’ policies without trying to reduce the external sources of risks faced by members would also be unproductive in my opinion.

Last but not least, I would like to express my appreciation to the Board of Governors, management, and staff of the Bank and the Fund for their continued support and fruitful cooperation. Also, I wish them every success in their tasks of promoting global financial stability and eradicating poverty.

Statement by the Governor of the Bank for Tonga

Siosiua T.T. ‘Utoikamanu

It is an honor for me to address the Board of Governors of the International Monetary Fund and the World Bank Group on behalf of the Government of the Kingdom of Tonga at the 2007 Annual Meetings.

I would like to congratulate and welcome Mr. Robert B. Zoellick on his appointment as President of the World Bank Group. I also take this opportunity to thank his predecessor Mr. Paul Wolfowitz for guiding the World Bank Group during his tenure in office.

Since the Singapore Annual Meetings, the global economy continues to show strong growth, projected at 5.2 percent in 2007 and 4.8 percent in 2008. Despite this, the recent financial market turbulence has heightened global uncertainty about future economic outlook. The role of the Fund in safeguarding global stability and growth is even more critical.

Amidst an uncertain global economy, rapid globalization has heightened economic interdependence. This has subsequently escalated the level of concern over a list of global challenges, which can no longer be treated separately from national development efforts. Amongst the most pronounced concerns is climate change.

There is overwhelming evidence of the speed of climate change, the source of the problem and its consequences for developing countries and in particular small island developing states. Tonga joins other members in echoing its concern over the impact of climate change and calls for a more committed and concerted effort to establish collective actions to combat the impact of climate change.

Tonga’s national sustainable development strategies aligns with the Bank’s work in global public goods, and in particular the five priorities that the Bank will continue to maintain, with climate change as the biggest challenge. Recognizing this, Tonga has made progress in translating its commitment to addressing the impact of climate change, by enhance its policy focus on energy efficiency, as it remains the most effect way to reduce green house gas emissions.

Statement by the Governor of the Fund for Turkey

Mehmet Şimşek

Let me at the outset extend our thanks to Mr. de Rato for his achievements as the Managing Director of the Fund and congratulate Mr. Strauss-Kahn on his appointment as the new Managing Director. We also warmly welcome Mr. Robert Zoellick as the new President of the World Bank Group. We believe that his very high qualifications and strategic vision will bring a strong transformational leadership to the institution in its fight against poverty.

We welcome the progress made in the quota and voice reform issues in the Fund. We view quota reform process as a historic opportunity to enhance the ownership and credibility of the Fund. In this regard, a desirable outcome should be the one which increases both the calculated and actual quota shares of developing and dynamic emerging market economies in the Fund.

We continue to favor a simple, linear, and transparent formula with a PPP blended GDP. As also adopted in the IMFC communiqué, GDP should have the highest weight in the new formula. We also support an increase in the weight of “variability” to better reflect the demand-side functions of the quotas. I should add that the needs of seriously underrepresented countries must be addressed by adoption of specific mechanisms at the distribution stage of the quota increase.

Needless to say, Turkey will remain supportive of the process and will continue to cooperate with all member countries to reach a viable and satisfactory result in quota reform.

We welcome the work on developing a new income model for the Fund. The cooperative nature of the Fund should be the guiding principle for the new model. New model should avoid cross-subsidization and involve the whole membership in the financing of the Fund. New model should also prevent shifting of the cost of the expanding activities of the Fund to emerging market economies that would be borrowing from the Fund. We also call for a substantial revision of the existing burden sharing mechanism with this understanding.

On the Bank side, we share the President’s strategic vision. We commend him, among others, for his clear understanding of importance of strengthening the Bank’s engagement with the IBRD client countries in eradication of poverty. We welcome the renewed emphasis put on MICs in World Bank strategic directions. To attain our dream of a world free of poverty and Millennium Development Goals, continued and enhanced engagement of World Bank with MICs is crucial. We have convincing reasons for that: 70 percent of the world’s poor lives in the IBRD client countries, and even in those with relatively higher income levels, there remain large pockets of poverty where the social and economic challenges are no less difficult than the challenges we see in the poorest countries. Moreover, experience and knowledge gained in MICs will help World Bank to serve better in low income countries.

We highly appreciate the Bank management’s efforts to respond to the needs of MIC clients. We are pleased to see that some important progress is being made. The recent reduction in the loan charges and the simplification of the pricing structure was an important step in the right direction. We believe that it will contribute significantly to the Bank’s efforts to strengthen its engagement with IBRD partner countries. However, the task is not completed yet. The Bank should redouble its efforts to reduce the non-financial cost of engaging with the Bank.

Finally let me briefly touch upon the most recent developments in the Turkish economy. Turkey’s economic performance remains strong. The economy grew by 6 percent last year. Annual average growth rate was 7.4 percent during the last five years, making Turkey one of the fastest growing economies in the world. 2007 growth is projected at 5 percent.

Fiscal discipline continues to be the cornerstone of our economic policy. The primary surplus for 2007 is expected to be 4.3 percent of GNP. We aim at reaching a primary surplus target of 5.5 percent of GNP for 2008. As a result of fiscal policy implementation, net public debt fell to 45 percent of GNP in 2006 and expected to below 40 percent of GNP this year. Inflation is on a downward path to converge towards our 4 percent medium term target. The current account deficit is stabilizing and FDI inflows remain robust.

Strengthened economic fundamentals helped Turkey to weather well the most recent turmoil in global financial markets. Prudent policy implementation and commitment to a structural reform agenda should further enhance the growth potential of the economy and provide the necessary buffer against any adverse shocks.

Statement by the Governor of the Bank and the Fund for the United States

Henry M. Paulson, Jr.

Welcome to Washington. I am pleased with the new leadership we have at the World Bank and the IMF. I have great confidence in Bob Zoellick and he has clearly hit the ground running. I am really looking forward to working with Dominique Strauss-Kahn—a proven leader. And a big thank you to Rodrigo de Rato for his leadership over the last few years. I wish him the best in his future endeavors.

Statement by the Governor of the Fund for Vanuatu, on Behalf of the Federated States of Micronesia, Kiribati, Marshall Islands, Samoa, Solomon Islands and Vanuatu

Odo Tevi

It is with great pleasure that I address these 2007 Annual Meetings of the International Monetary Fund and the World Bank Group, on behalf of the Pacific Constituency comprised of Kiribati, Republic of the Marshall Islands, the Federated States of Micronesia, the Republic of Palau, Samoa, the Solomon Islands and Vanuatu. Let me at the outset convey my utmost appreciation to you, Mr. Chairman, for the excellent arrangements for this year’s meetings. We also welcome the appointment of Mr. Zoellick as the President of the World Bank, and also congratulate the outgoing Managing Director of the Fund, Mr. Rodrigo de Rato for the outstanding leadership over the last two years in office. At the same time, we look forward to working with the new Managing Director, Mr. Dominique Strauss-Kahn.

Over the last decade, most of our member countries have been undertaking substantial reform, to strengthen their economies in order to minimise the impact of external shocks, while also preparing for greater adaptation to globalization. Admittedly, the pace of reforms has been slow for some of our member countries, reflecting the varying strengths and capacities of our local institutions, and the need to ensure strong ownership and support by our people.

Our growth prospects, however, are encouraging, and it is worth noting some of the following features:

• a boost in remittance receipts from the newly introduced Recognized Seasonal Employer scheme by New Zealand that took effect at the beginning of 2007. The scheme will progressively allow some 5000 workers from Vanuatu, Tonga, Samoa, Tuvalu, and Kiribati to enter and work in New Zealand;

• development funding is also due to rise through a renewed Compact of Free Association between the Micronesian countries of FSM, RMI, and, potentially, Palau with the United States. There is a potential impact anticipated from the new institutional arrangements put in place to improve the effectiveness of these transfers;

• Samoa, Tonga, and Vanuatu are in the process of establishing, or in some cases have commenced, more reliable airline services, in partnership with an international airline—this is certainly seen as an impetus for tourism growth; and

• tourist numbers to the Pacific have the potential to continue to grow due to favorable growth in Australia and New Zealand and an economic rebound in Japan.

Statement by the Governor of the Fund for Vietnam

Nguyen Van Giau

It is a great honor for me to join this 61st Annual Meetings of the International Monetary Fund and the World Bank. Let me take this opportunity to thank our hosts for their hospitality and excellent arrangements for this event.

I wish to extend our warm congratulations to Mr. Dominique Strauss-Kahn on his appointment as the next Managing Director of the Fund and to Mr. Robert Zoellick on his first Annual Meetings in the capacity of the Bank’s President. I would also like to express our appreciation to Mr. Rodrigo de Rato for his significant contribution to the work of the two institutions.

We are meeting at a time when the world economy is moderating after several consecutive years of broad-based growth. Activities in the United States have been slowed down as a result of the downturn in housing sector. Nevertheless, the euro zone and Japan are performing well and serving as locomotives of growth. Developing Asian economies are on positive track, led by sustained high growth in China and India. However, there are still significant vulnerabilities worldwide, including political instability, persistent high oil prices, mounting global imbalances and financial market volatility. The recent subprime mortgage turmoil signals how problems in a specific financial segment could have repercussions throughout the whole macroeconomic system, representing an immediate challenge for policy makers in ensuring that stability goes in tandem with growth.

In this connection, Vietnam welcomes efforts made by the Fund and the Bank in safeguarding global financial stability, promoting sustainable growth, and reducing poverty. We attach special importance to the reforms under the Medium-Term Strategy being put forward by the Fund for it to remain relevant and responsive to the needs of member countries, especially the developing ones. The Board’s recent adoption of revised 1977 Decision on Surveillance was an essential step in enhancing the effectiveness of the Fund’s surveillance. We noted, however, that members’ macro conditions are diverse and rapidly changing. Therefore, Fund surveillance activities under the revised framework should take into account of country-specific socioeconomic conditions while refraining from putting further obligations on member countries. Such direction would go in line with the principles of flexibility and candidness in this core function of the Fund.

Another key element of the Fund’s Medium-Term Strategy is quota and voice reform. Following the ad hoc quota increase, we acknowledge the ongoing work of the Fund to come up with different formulas for quotas recalculation and appreciate the time and focus exerted given the complexities of this issue. While a lot of factors are to be considered, we believe that the new quota distribution should be better aligned to recognize the increasing role of developing countries in the global economy. It is for the benefit of the Fund’s mandate that voice and representation of developing countries are strengthened.

On another aspect of Bank and Fund operations concerning Millennium Development Goals (MDGs), we are fully aware that the achievement of MDGs is a great challenge to countries even those with rapid growth track record. In this regard, we commend the Bank’s continued focus on poverty reduction in Asia, where still half of the world’s poor are living. We share our common viewpoint with the approach of integrating MDGs in development programs and projects of the Bank. In addition, enhancing aid effectiveness is equally essential to the attainment of MDGs, which requires closer coordination between international donors and aid recipients. We fully support the Bank’s initiative of formulating new financing modalities based on national development strategies, which help promote ownership and capacity of recipient countries.

The intensified level of globalization and interdependence among nations remind us that we are living under a common roof. While confronting the same challenges such as the devastating impacts of climate change, or the spread of communicable diseases, we also have the same needs, such as knowledge sharing and mutual trading. Thus, we hold that the Bank’s role in providing global and regional public goods remains relevant. We see a consistency between the Bank’s framework on global and regional public goods and our national priorities.

In the context of a more complex and fragmented aid architecture, the Bank’s work on strengthening country-based development model is of vital importance to ensure concerted actions of development between international and national partners. This would not only boost the effectiveness of aid, but also help us have a common vision and to work together on the way to achieve it. We think that extensive dialogue with and capacity building for aid recipients are necessary elements for a solid and viable country-based development model.

As a final note to the Bank’s operations, we highly appreciate commitments by international donors to IDA-15 replenishment. Such resource has been a very valuable assistance to developing countries including Vietnam.

Next, let me take this opportunity to provide a briefing on the latest developments in my country since our last gathering. The past months have been a turning point in Vietnam’s international integration process, with the country’s landmark accession to WTO in November 2006. WTO membership brings about enormous opportunities for the economy, but new challenges are emerging as well. The improved access to international market is expected to have positive impact on production and export. Foreign capital continues to flow in dramatically, providing an important source of financing for investment, yet also causing difficulties for the conduct of monetary policy and overall macroeconomic management. At the same time, heightened pressures from foreign competition will necessitate bolder reforms from both the state and private sectors.

Against that background, the economy continues to perform strongly, although a high inflation rate, a rising trade deficit, an agricultural epidemic, and natural calamities remain major challenges for the country in remaining months of the year. As of the end of September, GDP growth went up to 8.16 percent and is expected to reach the set target of 8.2–8.5 percent for the whole year. In the same period, export turnover reached US$31.2 billion, making a year-on-year increase of 19.3 percent. Foreign capital inflows struck a new record on all three channels of foreign direct investment (registered capital), official development assistance (commitment figure), and foreign indirect investment, at US$9.6 billion, 4.5 billion, and 6.2 billion respectively. The stock market experienced a boom in late 2006 and early 2007.

The Government has been pushing up reforms in various aspects of economy, banking, and finance, fiscal and administration. In the financial sector, progress is being made with regard to enhancing considerably the legal framework for the sector through the drafting of new laws on the State Bank of Vietnam, Credit Institutions, Bank Supervision, and Credit Insurance. Equitization of the state-owned commercial banks (SOCBs) is on track, with the first SOCB’s IPO expected to take place soon. Bank supervision and governance are being improved steadily.

Looking back at the development path of the country, with ceaseless efforts to achieve broad-based reform and international integration, we have made significant achievements in various socioeconomic fields so far. Compared with 1986, when the reform process was initiated, GDP has increased over four times in 20 years and recorded the second-highest growth rate in Asia during the last decade. Poverty has been reduced at a fast pace, falling around 3 percentage points per year since 1990. We have already achieved five out of the ten main MDG targets for 2015 and is on track to achieve another four ahead of time.

The new Socio-Economic Development Plan (SEDP) 2006–2010 reaffirmed the country’s vision of becoming a middle-income country by the year 2010, while ensuring equal and sustainable development. In recognition of the huge challenges on the way ahead, we are committed to furthering reforms and international integration to realize this vision. At this important juncture, we look forward to receiving continued assistance from the international community, especially the Bank and the Fund as the leading development partners of Vietnam.

In concluding, I would like to convey our sincere thanks to the management and staff of the Fund and the Bank for the efficient support extended to Vietnam thus far. I wish the Meetings a splendid success.