- International Monetary Fund. Secretary's Department
- Published Date:
- November 1997
Statement by the Governor of the Fund for Austria—Klaus Liebscher
Fellow Governors, Mr. Chairman, Mr. Camdessus, Mr. Wolfensohn, ladies and gentlemen, it is a great honor to accept on behalf of Austria the Chairmanship of the Joint Annual Meetings of the Boards of Governors of the International Monetary Fund and the World Bank Group for the coming year. This demanding task has been fulfilled in an able and efficient manner by our current chairman, Mr. Mohammed K. Khirbash, the Governor for the United Arab Emirates. I would like to express our gratitude and our appreciation for his excellent management of our meetings.
For Austria, 1998 will indeed be notable: the 1998 Annual Meeting in Washington, D.C., will coincide with Austria’s presidency of the European Union when we will also face the challenges of completing the Economic and Monetary Union and of enlarging the European Union.
The world economy has seen a year of low inflation, progress in budget consolidation and fairly high growth. Economic growth is especially well established in some industrial economies, while the transition countries seem—at last—on the way to an economic upturn. The developing countries are also showing encouraging progress. Some economies, particularly in Asia, are suffering short-term reverses but their medium-term outlook still seems bright.
Both from their sustained efforts over the past half-century and their quick response whenever crises arise, we know what the International Monetary Fund and the World Bank can achieve. The achievements of the past year and the success of the Hong Kong meetings have again demonstrated the problem-solving capacity of the Bretton Woods institutions. The two institutions, now truly global, are a perfect team to keep the world economy on a path of sound macroeconomic policies leading to a robust international monetary system and sustainable development. The initiatives on our agenda for the coming year show that the Fund and the Bank are serious about ensuring that their past successes are carried forward into the future.
Mr. Camdessus, Mr. Wolfensohn, and the staffs of the International Monetary Fund and the World Bank Group deserve our appreciation of their past efforts as well as our continued willingness to stand by them and support their future work. The challenges of an unfolding global economy, and particularly those enunciated here—attaining high-quality growth and ensuring inclusion—will be an important part of the agenda of the two institutions, not just for the coming year but also for the coming decade.
In closing, I would like to thank the government of the People’s Republic of China and the authorities of Hong Kong who have made this year’s Annual Meeting an event to be remembered for warm hospitality and perfect organization. I look forward to seeing you next year in Washington.
Statement by the President of the World Bank Group—James D. Wolfensohn
Thank you very much, Mr. Chairman. May I start by thanking you for your exemplary leadership during these meetings. As head of the World Bank, I very much appreciate it. But I would also like to express my personal thanks and my great gratitude to you.
I also want to express my thanks to the government of China and the authorities here in Hong Kong. I think that all of us would agree that these have been a quite remarkable series of meetings. We have all been deeply impressed by the environment here and by the warmth and the generosity of the reception that we have received. I certainly go away with a sense of great energy and excitement.
For us at the Bank it has been an excellent meeting. We were able to put to you the message of the Bank. It is a message that relates to poverty. It is a message that relates to inclusion. And most important, I think, it is a message that says, “Let us not wait. Let us focus on the issues now, because every day we wait makes the task more difficult.” I hope that we have been able to demonstrate that the Bank has a real sense of urgency on the question of poverty and that the issue of poverty is not something that is confined to poor countries. It is something that is meaningful to all of us. As leaders of all sections of the world, we have to move now. I believe that with its reorganization, the Bank is gearing itself to improve on what we have done in the past and to give all our work precisely this focus.
We are looking not just at projects, but at national and regional strategies. We are trying to focus on the fundamental issues of education and health, and social development, built on top of the important investments that are necessary in infrastructure. We are trying to engage in this fight on the basis of a medium-term commitment, not as something that can be done in one year or two, but on the basis of a strategy that we really stick with. That strategy is economic, social, and environmental. All I can say is that the reactions to that statement have been really terrific. I have discovered that many, many people feel the same way, and that our community is united in this sense of moving forward. I am thrilled about that.
I think we have had some marvelous moments here. In Premier Li Peng’s opening speech, he said, “Seeing it once is better than hearing about it a hundred times.” That is a Chinese proverb with which I think we can all agree. Seeing this region and seeing Hong Kong, the “one country, two systems,” is certainly something that we can now believe, and I think it served as a very reassuring message to all of us that Hong Kong will continue as it has before.
At the Development Committee, under the admirable chairmanship of Driss Jettou, I think we had very good results. First, we focused on the HIPC Initiative, and I think that all of you here and the members of the Development Committee were approving of the work that we and the Fund have done during this past year. I am very grateful that the Indonesian government came in with a contribution of $10 million to the Trust Fund—the first such contribution from a developing country. Belgium, Portugal, and Sweden have also made pledges, and it would be my hope that other countries will follow suit. I would urge you all to take this up. The issue is not just one of joining the club. For ourselves and the Fund it is essential. We must try to get rid of the debt overhang, and for that we need bilateral donors to assist us with the Trust Fund. I really hope that many of you will give this favorable consideration in the period ahead.
On the Multilateral Investment Guarantee Agency (MIGA), as I think you all know, we have had a pretty tough year in trying to reach a conclusion. The very success of MIGA has meant that we need more capital; that capital requirement was set at $1 billion, and we have had a lot of argument this year as to how to do it. Fortunately, at the Development Committee we were able to agree that it will be in two parts: $150 million coming from a grant from the Bank, and then, most significantly, that we should move forward in the coming months to approve a $150 million contribution from shareholders, in addition to $700 million in uncalled capital. I hope we can move forward on this, and I would urge Governors to give it support so that we can bring it to closure at our spring meetings.
The other very important development was on the private sector. I think everybody in this room agrees that the private sector is now central to the economic base of development, and central to the base of technology, skill, and know-how, and we gave a lot of attention to this. The most important thing for us is that we are bringing together the Bank, the International Finance Corporation, and MIGA with a single “window,” so that you can come to the institution and make a request for help or advice or support, and you do not have to find your way around all the buildings. You can find somebody with whom you can deal. We are trying to make the place customer friendly. I think this is a development that we are all pleased about and we are going to try and make it work during this coming year.
I was thrilled with the debate on corruption. I think it is astonishing that in one year we should have come from being scared to mention the word to having it as the central item on the Development Committee agenda. I do not think anyone underestimates the difficulty of eradicating corruption completely. But what is significant is that we are focusing on the corrupters and the corruptees; trying to make corruption illegal, in fact, criminal. In this past year, we have seen that with the activities of the Group of Seven, the Organization for Economic Cooperation and Development, and the International Chamber of Commerce. There is absolutely no doubt that governments that have problems with corruption feel very much strengthened by the fact that there is pressure on this subject. This is not the Bank coming in as a policeman; this is the Bank trying to respond to the needs of countries that want to do something about corruption. I think that the support that Governors gave to our efforts and the efforts of the Fund can only strengthen the hand of the people in countries that are concerned about this scourge and want to take action. I must say that I appreciated the support that Governors have given.
I had a series of meetings with regional Governors, which were very productive. With the Latin American and Caribbean Governors I talked about the current economic situation in Latin America, but we have also put on the Bank’s agenda the problem of the El Niño issue. This is an environmental problem that could be enormous, and we are talking to the governments in Peru, Ecuador, and Bolivia. It is a real issue that we face not only in the region, but throughout the world. If we want yet another demonstration that we live in one world, El Niño surely provides one, and we are trying to prepare in advance.
We had good meetings with the African Governors. With the African Governors our focus was on the issue of capacity building. This is an initiative taken by the African Governors to build capacity in their governments and in their private sector, and it is an African-led issue. I think it is extraordinarily promising, and I have told the Governors that we are ready to support them in any way possible to bring about the results they want. The responsibility is the responsibility of the African Governors. I have put it squarely on their plate. They are very happy to grasp it, and my guess is that we will have a significant advance on this and that the subject will, I hope, be taken up by the African heads of government early next year.
Against the backdrop of recent regional financial problems, it is not surprising that we focused extensively at our meetings on strengthening our work in the financial sector. I think there was virtually unanimous agreement on the part of Governors that the Bank should improve and strengthen its capacity in terms of financial sector support. Everybody agrees that crisis gives a focus to a financial problem, but it is in the years that come after and the years that precede crises that you can make the most difference: improving supervision, improving regulation, and strengthening the financial system, the legal system, and the regulatory system. That involves a lot of hard work. We were encouraged to proceed with our plans to supplement our existing team and, most important, to work wholly and completely in conjunction with the excellent efforts that the Fund is taking in terms of its own supervisory role. We will be working closely with the Fund and trying to supplement their efforts in those areas where we think we can make a contribution.
As to the change program at the Bank, I am delighted to say that it was hardly on the agenda. Last year we were subjected to quite a lot of heat about our renewal and the so-called Compact. I think most of you as Governors are now giving us a chance to try to get it done. I do not think everyone is convinced that we are there yet, but there was very strong evidence of support for what we are doing. I am very grateful to Governors for that support, because we are doing something that is making a huge difference in our institution. I need your support. We are not there yet, but I do believe that there is a big change in our institution, and that the most important thing about it is that it is designed to serve your needs. This is not just a consultant-led internal reorganization. This is driven by the needs of the clients, and what we are trying to have is an organizational system that really responds. As I have said to many of you, we provide the cheapest money in the market. There is no cheaper source of funding. There should be a queue around our building. If there is not, it is because we are doing something wrong. So what we are trying to do is to make it so attractive that you will be beating down our doors, not only for money, but also for help, and we look forward to that in the months and years ahead.
We are, of course, delighted, Dr. Liebscher, at your nomination and acceptance of the Chairmanship this year. We look forward very much to working with you and your colleagues in preparation for next year’s Annual Meetings in Washington.
May I close simply by saying, as always, a word of thanks to my colleague, Michel Camdessus, for our partnership, and may I say to all of you how much we look forward to working with you this year and to seeing you in Washington next year.
Statement by the Chairman of the Executive Board and Managing Director of the International Monetary Fund—Michel Camdessus
Mr. Chairman, Governors, ladies and gentlemen: This has been quite a fruitful Annual Meeting—not least because of the excellent facilities our hosts have provided us and the way in which they have organized everything so splendidly. During the past few days, we have had extensive, thought-provoking discussions about the challenges of global markets. And we have made substantial headway in equipping the IMF to help its members meet these challenges. Recent developments in several Southeast Asian markets have, of course, been ever present in our minds. Yet this beautiful, dynamic city of Hong Kong has been a constant reminder of what can be achieved in a free and open economy. Against this backdrop, four major themes have emerged.
First, you have expressed your conviction that global opening and integration offer the only path to greater global prosperity. Many have cautioned against allowing market turbulence to divert us from the critical task of fostering closer financial integration. Indeed, many of you have pointed to the role that the free movement of capital can play in accelerating investment and growth. Notwithstanding the problems of recent months, this region testifies to the benefits that can spring from the productive use of capital inflows over the longer term. These recent events should not cloud that reality.
Second, in full recognition of these long-term benefits, you have reconfirmed that the time has come to give the Fund a mandate to promote the orderly liberalization of capital movements, and thereby add a new chapter to the Bretton Woods agreement. In so doing, you have echoed the bold vision contained in the Interim Committee’s Hong Kong statement— a vision of orderly, lasting liberalization backed by sound national policies and a solid multilateral system for surveillance and financial support. That bold vision—as the Interim Committee has said—will be implemented cautiously.
You have also given considerable attention to what this liberalization must entail. Many of you have emphasized the need for adequate flexibility to take account of countries’ differing stages of economic and financial development; I can assure you we have this requirement clearly in mind. Many have also pointed to the need to strengthen domestic banking systems and the important role that IMF technical assistance can play in this regard. Here, too, I can confirm that the Fund and the Bank will work closely with members to help strengthen financial systems and disseminate best practices on the basis of the new framework for financial sector soundness.
And all of you have recognized the vital importance of sound economic policies and the continuing need for strong Fund surveillance. Again, we will continue to do all that we can to ensure that our policy advice is timely and on the mark. And we will stand ready to give financial support to countries’ adjustment efforts, when warranted.
I know that a number of you still have concerns about contagion and speculative pressures and are asking yourselves what more could be done to limit their effects. Having had these meetings here in Asia, we now understand those concerns better. Several of you have also come with ideas about how the interactions between governments, markets, and the international institutions could be made to work more smoothly. We will be reflecting on these ideas over the coming months. But, as you may recall, the Governor from the Philippines has offered a good starting point for our reflection. He said, “Volatile capital flows will continue to be a challenge. But the answers are not in a return to controls, but in managing these flows better. The answers are not in restricting capital markets, but in making them work better. And the key to this is a higher level of disclosure and transparency so that players act based on timely and accurate information.”
Governor Brown of the United Kingdom made the same point in a slightly different way. He said, “The turbulence in the Southeast Asian economy has brought to our attention a truth that applies to us all—that, in addition to pursuing prudent policies, there is nothing more important for maintaining stability than effective decision making based on openness, transparency, and accountability.” Many others of you have also stressed this point.
This brings me to the third conclusion that emerged from your discussions: the vital importance you attach to good governance in all its dimensions. Not so long ago, this subject was virtually taboo in the multilateral institutions; today, it is on everyone’s lips and, I hope, at the top of everyone’s agenda. There can be no doubt but that good governance, including the rule of law, is absolutely essential—both in order to realize the benefits of this new global economy and to manage its risks. As I have heard so many of you say, good governance is not only a moral necessity, it is an economic one, as well. For this reason, you can count on the IMF to play its part in promoting good governance in all member countries in accordance with the mandate you have recently given us.
Fourth and finally, you have emphasized that when problems do emerge, as surely they will continue to do, the Fund must be ready to respond with its financial support. We were able to do this in Thailand. Your agreement to increase IMF quotas by 45 percent will substantially enhance our ability to continue meeting our systemic responsibilities. The decision on a one-time equity allocation of SDRs, through an amendment of the Articles, is also an important breakthrough, allowing all members to participate in the SDR system on an equal footing. Meanwhile, during these past few days, the number of countries adhering to the New Arrangements to Borrow (NAB) has increased to 15, with credit arrangements of over SDR 15 billion. I do hope that participants that have not yet taken the steps needed to adhere to the NAB decision will do so, so that these supplementary credit lines can enter into force as soon as possible.
Governors, all of you have expressed strong support for the poorest countries struggling to be included in the global economy. Yet, there is a major piece of our financial architecture that is still incomplete—the financing needed to ensure a continuous role for the Enhanced Structural Adjustment Facility (ESAF), and the Fund’s contribution, via ESAF, to the joint Initiative for Heavily Indebted Poor Countries. We must rectify this. I am deeply gratified by the contributions that have been made to the interim ESAF, a number of which come from low-income countries and very small economies that want to express their solidarity with the poorest. But I am also troubled that we are still far from our goal, with important deadlines facing us in the next few months. I urge all those who have not yet done so to give their full, unconditional support to ESAF. I also urge everyone to join a consensus that will permit us to bring this effort to a successful conclusion. The Fund must have the means to support the adjustment efforts of those most in need.
Here let me add one additional point. I would not like to leave the impression that progress in Africa has been overshadowed by turmoil in Asia. I would not want the African governors to leave Hong Kong feeling that their concerns had been left on the back burners in our kitchens. So let me refer back to what I said about Africa in my opening address: growth on the order of 4½ to 5 percent is progress, but we must do more and better.
In closing, let me once again thank the government of China and the Hong Kong Monetary Authority for the professional way in which these meetings have been organized and conducted. Let me also thank our able Chairman, Governor Khirbash from the United Arab Emirates, and congratulate the Governor from Austria, who will succeed him. Finally, I wish all of you well until we convene again next year in Washington.
Concluding Remarks by the Chairman of the Boards of Governors and Governor of the Bank and the Fund for the United Arab Emirates—Mohammed K. Khirbash
As Chairman of the Boards of Governors, it is now my duty to bring these deliberations to a close. It has been a great privilege to have served as the Chairman of the Boards of Governors of the Bank and the Fund. I would like to take this opportunity to thank everyone for the support and kindness extended to me during my tenure. On behalf of all of us, I would also like to thank Premier Li Peng for his words of encouragement and the government of China and the people of Hong Kong for their warm and generous hospitality.
As these 1997 Annual Meetings draw to a close, I would like to review briefly some of the major themes that have emerged from our discussions and their implications for our two partner institutions. We have all recognized, I think, that the increasing globalization of the world economy has brought great benefits in terms of economic growth and poverty reduction. But we have also recognized what Mr. Wolfensohn said at the beginning of our discussions, that too many people in too many countries have yet to enjoy the fruits of success. It is also clear that the increasing interdependence of national economies and financial markets requires what Mr. Camdessus has described as an even more far-reaching sense of national responsibility and international solidarity. In this context the need for strong partnerships both between our two Bretton Woods institutions and more broadly with national governments, other multilateral and bilateral institutions, nongovernmental organizations, and the private sector has never been greater.
In my opening remarks I highlighted three areas where a strengthened common effort between the Bank and the Fund is of great importance— financial sector cooperation, governance, and the Initiative for Heavily Indebted Poor Countries. During our deliberations, Governors have noted with satisfaction the strengthened ability of the IMF to help countries meet the challenges of a global financial market and the increased collaboration between the Fund and the Bank in strengthening the financial sectors of member countries. You have agreed that the Bretton Woods institutions should pay more attention to issues of governance and corruption and you have welcomed the strategies and guidelines recently issued by both institutions. Finally Governors have commended the Bank and the Fund for the progress made on the HIPC Initiative and have emphasized the importance of an equitable sharing of the financial costs of the initiative among all creditors.
Turning specifically to the Bank, Governors have indicated their strong support for the objectives of the Strategic Compact. You have applauded Mr. Wolfensohn for this initiative and have noted that the first progress report confirms that real change is taking place. You now look forward to seeing the tangible results of the Compact in terms of improved results on the ground. Governors have welcomed the Bank Group’s increased focus on private sector development and the development of an expanded range of guarantee and other lending and nonlending services in support of private sector development. You have also welcomed the action program for infrastructure development presented to the Development Committee and the increased focus of the Bank on capacity building, particularly in Africa. Governors have indicated their satisfaction with the consensus that has been reached on addressing the Multilateral Investment Guarantee Agency’s resource constraints and have urged all relevant parties to come to closure on the details of the capital increase before the next Development Committee meeting in April 1998.
In respect of the Fund, Governors have adopted a resolution on an amendment of the Articles. The amendment will provide a special onetime allocation of SDRs. All members will then have an equitable share of SDRs, including those countries that have never received allocations of SDRs since they joined the Fund. You have welcomed the agreement that has been reached by the Fund’s Executive Board on the Eleventh General Review of Quotas and look forward to speedy completion. Governors have also agreed that the Fund should play a central role in promoting the orderly liberalization of capital movements and you have indicated that the Fund should give high priority to the work on an amendment of the Articles. In this context you have emphasized the importance of adequately designed approval policies and transitional arrangements.
Before adjourning, I would like to express my appreciation to Mr. Wolfensohn and Mr. Camdessus, to the staff of the Joint Secretariat, and to their counterparts in the Hong Kong Monetary Authority for their hard work and dedication, which have helped make our gathering here in Hong Kong such a success. I would also like to extend my best wishes to the Governor for Austria, who succeeds me as Chairman of the Boards of Governors.
I would conclude by once again thanking everyone and wishing all a safe journey home. The 1997 Annual Meetings of the World Bank Group and the International Monetary Fund are hereby adjourned.