Chapter

Opening Address by the Chairman of the Boards of Governors, the Governor for Trinidad and Tobago1

Author(s):
International Monetary Fund. Secretary's Department
Published Date:
October 1973
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Author(s)
George M. Chambers

I thank the President of the Republic of Kenya for his thoughtful and gracious remarks which we shall bear in mind during our deliberations this week. We have been greatly honored by his presence at these our Annual Meetings of the World Bank Group and the International Monetary Fund, the first to be held in Africa, “the continent of the future.” Kenya, our host, celebrates her tenth anniversary of independence this year. In saluting her ten years of nationhood, we pay tribute to the long history to which she is heir: we remember that from this area come some of the oldest traces of man ever discovered, while her cultural and historical traditions are deep and important. This dignified Conference Centre symbolizes the progress which our host country has made during these years of independence, a growth that has been impressive not only in this beautiful capital city, but also in the rural areas where most of Kenya’s people live.

I know that I am speaking for all Governors in thanking the President of Kenya, and the Government and people of Kenya—and of Nairobi in particular—for their generous hospitality. Our special thanks go also to those who have worked so hard to complete this Conference Centre in time to provide such an elegant setting for our deliberations.

Our pleasure at meeting for the first time in Africa must be tempered by the sorrow and sympathy we all feel for those peoples who have been experiencing such great privation and suffering as a result of the devastating drought which has hit so much of Africa. I know you will join with me in hoping that the efforts being made with the support of many agencies and governments to help the stricken countries will bear fruit.

I extend a warm welcome to all Governors, Alternate Governors, Advisers, Official Observers, and Special Guests. I wish especially to welcome as participants in these deliberations the Governors and delegates from the Bahamas and Romania which have become members of the Bank and Fund during the year.

You have before you the Annual Reports of the Bank and IDA, of IFC, and of the Fund. In a few moments I shall call on Mr. McNamara and Mr. Witteveen to deliver their annual addresses. But before I do, I should like to comment on the Bank Group’s five-year programs, and then on the Fund and the monetary problems facing the world and the prospects for their solution.

First, however, a few personal remarks. Recently, Mr. McNamara started his second five-year term as President of the Bank. Like many other member countries, we in Trinidad and Tobago were delighted to welcome Mr. McNamara when he visited us earlier this year. His determination to see development “on the ground” is greatly appreciated by all of us. He has visited 66 countries and traveled over 430,000 miles in his first five years of office.

I know that I speak for all Governors when I say that it is fortunate for all of us that Mr. McNamara has agreed to apply his untiring dedication and his outstanding qualities of leadership to the Bank for another five years. I congratulate him on the success of his first term and look forward to further periods of service from him to the Bank which is now the foremost and most influential body in the crusade for meaningful economic development which will touch all the peoples, including in particular the rural population and the unemployed in the developing world.

It is an honor and a pleasure at this time to welcome the new Managing Director and Chairman of the Executive Board of the Fund, Mr. Witteveen. As a former Minister of Finance, he is as much at home with us as we are with him. The Fund is fortunate to obtain a person with such a distinguished political, academic, and business career to direct its affairs. It will be his mission to see it through the reform that will emerge from the deliberations of the Committee of Twenty, in which he is a participant. His task is one of momentous importance. Let me remind him that his work vitally affects not only the business of governments, bankers, merchants, and industrialists but also the coffee, cocoa, sugar, rice, cotton, and tea farmers, the peasant in the far-flung rural areas of the developing world, and the urban resident in the populated metropolis of the industrialized countries. The Fund must change to meet the legitimate demands of all its clients. Change, however, can be considered satisfactory only if it facilitates the emergence into the daylight of hope and development of the intolerably large numbers who now live in the darkness of despair and economic backwardness. I warmly congratulate Mr. Witteveen on his appointment, and I convey to him our best wishes for total success in the demanding task before him.

Five years ago when Mr. McNamara made his first annual address as President of the Bank Group, he announced his plans to double and to refashion the Bank’s lending program in the five fiscal years through 1973. These were bold and audacious plans—a challenge to the world at large to look again at the quantity and quality of our assistance. As you know, the Bank Group has made good on these promises.

During the five years to 1973, Bank and IDA commitments amounted to US$12.8 billion, well over twice the total of the previous five years, even in real terms. Lending to Latin America has more than doubled and loans to Africa have more than tripled. Lending to improve the quality of life has expanded as promised. Targets for lending to education were comfortably exceeded. Agricultural lending increased fourfold as planned. And lending to the poorest of the Bank’s member countries—those with per capita gross national product below about US$120 a year in 1970—increased two and a half times.

We congratulate the Bank Group on meeting its targets. We look forward to a continued expansion in its programs in the future.

And, of course, the Bank is already well advanced on its expanded program for the financial years 1974 to 1978. I am happy to see that the targets for these years include, in addition to an average increase of 11 per cent a year in financial commitments to developing member countries, an increased emphasis on improving the conditions of life for the poorest 40 per cent of the population in the developing world. The poor, as well as the more fortunate sectors, must benefit from growth and be able to participate in it. To this end we applaud the role the Bank is playing, as one noted economist has put it, in exercising a steady pressure toward a more creative development strategy, and in analyzing and fighting weaknesses of policy and of intent among the governments and peoples of the wealthy nations.

In most developing countries, the great mass of the population is dependent on agriculture. It is these people for whom, in the Bank’s view, a sharp advance in output, income, and levels of living must be the heart of meaningful economic progress. This view, which I entirely endorse, is now increasingly shared throughout the developing world, where there is ever more acute concern with the intertwined problems of rural poverty, rural underemployment, inadequacy of production means, and low productivity. There is a growing awareness that if economic growth does not affect these conditions, it is severely limited and illusory. There is an increasing conviction that a direct attack on them is essential and that this attack must involve a comprehensive approach, frequently covering several sectors, rather than a narrowly production-oriented one. It is heartening to see therefore that the Bank, together with some of the developing countries, notably here in Africa, has begun to attack the problems of the rural majority in new and imaginative ways.

These efforts recognize that rural development involves more than agricultural production alone. It embraces the supply of agricultural inputs and agricultural knowledge, the credit which small farmers need to acquire these inputs, education and training opportunities, health and transportation services, improved water supply, storage, marketing and other facilities in various combinations, as particular circumstances require. Institutional innovations will be needed and, if an adequate impact is to be made, provisions must be generous; the task is immense but the rewards are greater. A start has been made and the Bank and the countries of Africa and other regions of the world will learn a great deal from these projects and so be able to design more programs which will bring increasing benefits of development to the rural poor.

Unemployment is one of the most urgent problems facing many developing countries. Bank projects can help stimulate increased employment. My own country welcomed recently a pioneering study team from the Bank which sought to develop elements of an employment policy both to help us and which might be applicable to other countries facing similar problems. We know only too well what human misery can come from substantial unemployment and the poverty it produces.

Reducing uncontrolled population growth is inextricably linked with success in economic development. For this reason, four years ago the Bank entered the population planning field—a controversial and difficult sector. Beginning modestly in 1970 in Jamaica, and then a year later in my own country and Tunisia, it has now committed US$66 million for 7 projects. Within another five years it expects to have financed as many as 30 projects in almost as many countries, often with additional funds supplied by other organizations.

Urban problems are also receiving increasing attention from the Bank. It is lending for housing sites and service projects in response to the problems of crowding and poor housing. It is stimulating the ordered growth of public transport systems to help the poor, to limit the growth in private car use and so to limit the need for costly urban highways. Bank projects provide water and sewerage services and health infrastructure facilities. But the problems of the cities cannot always be attacked solely by such direct action. The Bank stands ready to review the overall programs and policies of cities and to advise and to help in implementing urbanization programs.

What of the future? In spite of all efforts much has yet to be done, and the difficulties of development may well become more acute. Controversies over energy, natural resources, trade—and, unless we take firm action, monetary arrangements—may tend to polarize the developed and developing worlds. Severe food shortages are likely in many developing countries. Despite the earlier progress, in many countries increases in agricultural production are disturbingly slower than population growth. Debt service obligations, which in some cases may grow faster than export earnings, could present increasingly difficult problems. Without a continuing increase in the Bank’s lending program, and particularly without an increase in Bank and IDA lending to the poorest member countries, those whose need is greatest must soon pay more in debt service payments than they receive in new loan disbursements. The developing countries must run faster even to stay in the same place.

But the entire picture is not one of gloom. We can congratulate the Bank on its outstanding success in borrowing money in the world capital markets. To raise nearly US$4 billion in five years and to diversify the sources of its funds, as the Bank has done, speaks volumes for its management and the confidence it inspires in the world at large. But its success must not blind us to the need for a considerable expansion in IDA resources and the growth of IDA credits.

At the 1972 Annual Meetings of the Boards of Governors the President of IDA announced that, since the resources available to IDA would be fully committed by June 30, 1974, he intended to initiate consultations with members, with a view to reaching agreement among them on a fourth replenishment. Discussions began in December 1972 and continued during the ensuing months. I am certain that I speak for all of us if I commend the efforts that are being made to reach agreement on the replenishment at a high level in the very near future; however, it is unfortunate that these talks have yet to be concluded. As I have said, the needs of the poorest and least developed countries, which are the principal recipients of IDA credits, are very great. The role of IDA is highly significant for their development prospects. As one who comes from a developing country which has not been a beneficiary of IDA resources, I should like to stress that a speedy conclusion of the fourth replenishment at a high level is of the highest priority to the poorest of the world’s peoples so that IDA can continue without interruption its essential work to assist these countries.

However, even the contribution of IDA, vital as it is to the development of so many countries, is by itself small. The problems I have stressed require for their solution a growing volume of the developed world’s resources. We are talking here about political will—the will to take basic actions to right the balance between rich and poor.

Before I turn from the Bank Group, a few words on the IFC, which has significantly increased its contribution to stimulating and assisting domestic and foreign private investment in the developing countries. In the fiscal year just ended, IFC on its own account invested the record total of US$146 million in 18 developing countries. But IFC cannot invest alone—it always acts together with other investors, domestic and foreign. To see its performance in the right perspective, we must realize that in the 17 years of its existence the projects in which it has been involved totaled nearly US$4.25 billion, of which IFC provided only one fifth. In recent years IFC has increased the geographical spread of its investments, placed more emphasis on project promotion, and gained a flexibility which allows it to respond quickly to changing needs. The result is that 70 per cent of its total investment has taken place in the past five years. IFC can and does play a significant part in encouraging private enterprise as a contribution to development. It can do this because, as an international institution belonging to both developing and developed countries, it is uniquely able to promote mutual confidence between private investors and host governments.

As I complete my comments on the Bank Group and pass on to the International Monetary Fund, I should like to refer first of all to the Fund’s great interest in the welfare of the developing countries. Here there is much common ground among our four institutions. The establishment of the Fund’s Committee of Twenty which, as we all know, is at work on the reform of the international monetary system, gave express recognition to the proposition that all member countries, developed and developing alike, should participate in the reform. The transfer of real resources from the richer to the poorer countries as an act of political will occupies a legitimate place in the consideration of the reform. The Fund has pursued its examination of one means of effecting a greater and more assured transfer of real resources to the developing countries—the link between the allocation of special drawing rights and development finance—through its staff, its Executive Board, the Technical Group on the SDR Link of the Deputies of its Committee of Twenty, and finally through the Committee itself. It has provided facilities for meetings of the Group of 24 where a position could be taken on the link and other matters of concern to the developing countries. The examination of various questions related to the link has not yet been concluded, but it is my hope that the efforts in that direction will be successful and produce a net addition to the volume of finance available to the poorer countries. The Fund has under consideration other proposals for enlarging its facilities for assisting developing countries, including improvements in its compensatory financing and buffer stock facilities, and new arrangements providing for assistance at longer terms and in larger amounts than are available under existing Fund policies.

These arrangements supplement efforts being made in other forums aimed at facilitating the growth of export earnings of the developing countries. In this connection, I note with satisfaction that agreement was reached in Tokyo to launch comprehensive trade negotiations in which the developed countries will not require reciprocity from the developing countries. I am sure that Governors share with me the earnest hope that these negotiations will be completed expeditiously and to the full satisfaction of all concerned.

In its current work and in formulating its plans for the future, the Fund has taken full note of the adverse effects which the current uncertain exchange situation has on the developing countries.

This is closely related to our main preoccupation at this meeting as far as the Fund is concerned, that is, the reform of the international monetary system. Our Committee of Twenty and its Deputies have been working diligently on this matter for the past year. The urgency with which the reform of the monetary system must be completed requires the utmost diligence. Nevertheless, we must in all frankness concede that the subject of reform is likely to be with us for a while, for even the most determined efforts cannot quickly solve problems that have been brewing for more than a decade. Our troubles did not begin on August 15, 1971 when the inconvertibility of the U. S. dollar into gold or other reserve assets was announced. That declaration merely marked both the culmination of long-standing problems in the functioning of the international monetary system and the turning point that produced our Resolution on Reform of the International Monetary System of October 1, 1971.

I recall that when I made my first statement as Governor of the Fund for Trinidad and Tobago to this audience two years ago, I referred to the weightlessness that the financial world was then experiencing. Indeed it has been fashionable to use terminology borrowed from man’s dizzying space exploits to describe monetary developments since August 15, 1971. Many besides myself have referred to the sensation of weightlessness which resulted from the abrupt displacement of dollar convertibility as the center of gravity of the monetary system. The sensation is now associated with the general condition of floating and is compounded also of such elements as speculative capital movements, the decline of the dollar, maldistribution of the world’s liquidity, inflation, the huge dollar overhang, inconvertibility, and the absence of an adjustment process based on internationally agreed rules.

Although the violent thrusts that have jolted the monetary system have been parried by reasoned counterthrusts such as the Smithsonian currency realignment and the decision on central rates and wider margins, these served their purpose only for a time and were then outdistanced by further events. The floating of sterling in June 1972, in which a number of currencies followed suit, heightened our feeling of uncertainty. The situation worsened about the turn of the year, when the dollar was brought under the pressure of speculative attacks. A second currency realignment and the floating of the yen in February 1973 appeared to be only the forerunners of renewed flights from the dollar, which led to the closing for more than two weeks in March of a number of European exchange markets. The reopening of the markets was accompanied by the European narrow margins arrangement, in which six EEC members and later Sweden and Denmark agreed to keep their currencies within specified margins of each other. Germany entered the arrangement with a revalued currency. The dollar continued to decline following speculative movements, and a rash of exchange rate changes, including floats, ensued. Swap arrangements were increased with a view to intervention in support of the dollar. In the past two months, partly because of intervention by major central banks, the behavior of exchange markets has, by and large, been more orderly.

These recent events have by no means lessened the need for progressing toward agreement on reform. The point we have reached today has resulted from step-by-step development from the Resolution of the Board of Governors adopted on October 1, 1971, to which I have referred. That Resolution instructed the Executive Board to make reports on the measures desirable or necessary for the reform of the international monetary system. This report proved to be an important step in progress toward reform.

There followed the Resolution of July 26, 1972, establishing a Committee of the Board of Governors on Reform of the International Monetary System and Related Issues, otherwise known as the Committee of Twenty, which figures so prominently in the work of our present Annual Meeting. That Resolution is notable, among other things, for the matter-of-fact statement in its preamble that the reform should meet the present and future needs of the world economy. That, in a nutshell, is the task on which the Committee embarked a year ago and which it has been pursuing steadily ever since.

From the start, the Committee of Twenty, under the chairmanship of Mr. Ali Wardhana of Indonesia, had set itself the goal of substantial progress on the main issues of reform by the Nairobi Annual Meetings. At its meeting in March the Committee instructed the Deputies to proceed urgently with the preparation of a draft outline of the reform. The Deputies, headed by Mr. Jeremy Morse, have worked intensively through the year, holding seven meetings during which they have refined a draft Outline and have set out the major issues at stake. At some of these meetings and in the interim between them, Technical Groups examined such subjects as the SDR link, objective indicators, and destabilizing capital movements. The Committee met again in July, at which time Mr. Wardhana, while observing that he hoped that an important part of the agreement on reform could be achieved during these present meetings, nevertheless noted that much would be left to be done during the period to come.

Subsequently, the Deputies met in Paris in September, further refining the Outline, which was in turn considered yesterday by the Committee at its fourth meeting. Governors will shortly be receiving a report by the Chairman of the Committee. I commend this report to your attention; I know that Governors will have views to state on it during the coming discussion. Speaking for myself, I have just come from participating in the meeting of the Commonwealth Finance Ministers held in Dar es Salaam, at which Finance Ministers representing 32 Fund members unanimously urged that, at this meeting, the Committee of Twenty should obtain the necessary directives and guidelines so that by this time next year the major problems of monetary reform could be resolved in a manner equitable to all countries. Reflecting the same sense of urgency, the Committee’s Chairman stated, after yesterday’s Committee meeting, that the Committee had considered its future program and had given instructions to the Deputies for further work, with a view to settling the issues of international monetary reform by July 31, 1974. For now, it is appropriate to note as your Chairman that the hardworking Deputies and their Chairman and the foresighted Committee and its Chairman deserve our warm congratulations, and I am sure you would wish me, on your behalf, to thank them all for advancing to its present stage the main subject matter of the Fund’s annual discussion.

I should not like to proceed with the conduct of the meeting without paying tribute to Mr. Schweitzer, who retired as Managing Director of the International Monetary Fund on August 31. Mr. Schweitzer was one of the first to perceive the need for thoroughgoing reform of the international monetary system, and indeed it was he who laid the foundations for the strengthened Fund that is to emerge from the reform now being negotiated. The first ten years of my own country’s membership in the Fund coincided almost exactly with Mr. Schweitzer’s two terms. We always considered him a loyal companion and dependable guide in our progress over that period, and his warm sympathy for and understanding of the problems of the developing countries endeared him to us in a very special way. I am sure all the Governors share my feelings of admiration and respect for Mr. Schweitzer, who, I believe, had a real genius for steering adroitly through the frequently troubled waters of international relationships. A man of great sagacity, wit, and charm, he has left his mark upon us.

I have sought, in these few minutes, to highlight a few of the problems of finance and development facing the world, problems which I know will be the theme of illuminating contributions from many of you in the week to come. I have welcomed the success of the Bank’s last five years in helping tackle the problems of development; I have touched on the changes which are occurring in that live and growing body and stressed the urgency for it to be provided with the resources to meet the needs of the developing countries.

And, lastly, I have tried to show how the Fund has responded to the world’s need for a stable monetary system.

I will conclude as I started, by commenting on the significance of our meeting in Kenya. In closing his statement to us this morning, His Excellency the President of our host country has said: “In your deliberations, I commend to you the Kenyan motto of ‘Harambee,’ which means ‘pulling together in full cooperation.’” What better slogan could there be for our organizations, and for the constructive discussions we shall have in the week ahead?

Delivered at the Opening Joint Session, September 24, 1973.

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