Chapter

Opening Address by the Chairman of the Boards of Governors, the Governor for Ivory Coast1

Author(s):
International Monetary Fund. Secretary's Department
Published Date:
November 1974
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Author(s)
Henri Konan Bédié

We are all greatly honored by the presence of the President of the United States at the opening of our Annual Meetings. May I be permitted to thank him, in the name of all participants, for his words of welcome and for the interest that he brings to our work. We wish to express our best wishes to the American people and to President Ford and his family.

It is a great honor for me to preside over these twenty-ninth Annual Meetings of the International Monetary Fund and the World Bank Group. This honor, which I owe to the African group and to you all for having chosen me unanimously last year in Nairobi, falls in fact upon my country, the Republic of Ivory Coast.

In the confidence which you have placed in me, I see a glowing tribute to the policies of economic and social development of President Houphouet-Boigny, and to his work in support of international cooperation and harmony among countries, through tolerance, dialogue, and brotherhood.

I am happy to extend a warm welcome to my fellow Governors and to the Alternate Governors, advisors, observers and special guests. I take special pleasure in welcoming the observers from Papua New Guinea, which has applied for membership in these organizations.

This is the nineteenth time that the Boards of Governors have been convened in Washington, which by now seems a second home to many of us. We warmly thank our host country and this historic city for receiving us with their traditional cordiality and for providing us with so beautiful a setting for our meetings.

Last July marked the thirtieth anniversary of the drafting of the Articles of Agreement of the Fund and Bank at Bretton Woods, New Hampshire. Institutions can survive only for so long as they demonstrate a high degree of usefulness to those they were created to serve, in this case their member countries.

Over so long a period as 30 years, the survival of the Bretton Woods organizations has depended on their ability to adapt themselves to a changing world. We are naturally proud of our record of adaptability and responsiveness to members’ needs. But the time has come when we must not merely cope with circumstances, we must play a stronger hand in controlling them. During the current troubled period many countries have felt that they were at the mercy of blind forces. They would like to look to our institutions to shield them from the economic adversities that now beset them. Our institutions in turn feel that they owe their members a better chance for a better destiny. In their separate spheres, the Fund and the Bank Group have sought to strengthen themselves to this end in ways that I shall touch upon in this statement. Moreover, in their concern for the developing countries, the Fund and Bank are taking joint actions at these meetings to carry on the work of the transfer of real resources to developing countries that was initiated and pursued, but not completed, by a Technical Group of the Deputies of the Committee of Twenty.

I am happy to inform you that I have received from the Managing Director of the Fund and the President of the Bank draft resolutions that would establish a Joint Ministerial Committee of the Boards of Governors of the Bank and the Fund on the Transfer of Real Resources to Developing Countries, to be known as the Development Committee. In the Fund, the resolution is in fact a composite resolution on the work of the ad hoc Committee on Reform of the International Monetary System and Related Issues and on a program of immediate action. It comprises four significant resolutions, of which the third is matched by a counterpart Bank resolution. These parallel resolutions would create the Development Committee to carry forward the study of the broad question of the transfer of real resources to developing countries and to recommend measures to be adopted to implement its conclusions. The Committee would consist of Governors of the Bank and Fund, ministers, and others of comparable rank, appointed for successive periods by the members of the Bank and the members of the Fund. In carrying out its program of work, the Committee would bear in mind the need for coordination with other international bodies.

As the representative of a developing country I feel this Committee would provide the machinery for progress. I therefore commend to you for favorable consideration these resolutions of the Fund and the Bank, which will be considered by the Joint Procedures Committee following this session.

In like manner, I commend to you the three other resolutions of the Board of Governors of the International Monetary Fund.

Before calling on the Managing Director of the Fund and the President of the Bank for their annual addresses, I wish to avail myself further of the Chairman’s prerogative to address you, first, on the special concerns of the International Monetary Fund, and then on the problems posed by the current economic situation for the work of the World Bank and its affiliates, the International Development Association and the International Finance Corporation. In considering their separate problems, however, let us not forget that the objectives and interests of the Fund and the Bank Group are closely and fundamentally related.

Turning now to the matters within the purview of the Fund, I wish to comment briefly on the background for the changes in the objectives for monetary reform during the past year. When we gathered in Nairobi for our last Annual Meeting, there was a sense of urgency to settle the issues of reform. Just before that Annual Meeting, the members of the Committee of Twenty set themselves a deadline of July 31, 1974 for completing this task. A year of intensive work had been devoted to the question of reform by the Committee and its Deputies. The Chairman of the Committee, our colleague the Honorable Ali Wardhana, Finance Minister of Indonesia, in submitting to us last September his report and a First Outline covering the main aspects of reform, indicated that positive results had been achieved, but much remained to be done. Agreement had been reached on some important points, but a number of major issues (including adjustment and convertibility) remained unsettled. At the Nairobi meeting, the Board of Governors commended the Committee for its efforts and urged it to complete its task as soon as possible. That is where we stood on monetary reform one year ago. The need for a new system was deeply felt, but many left Nairobi wondering how soon it could be achieved.

The answer was not long delayed. In the months following Nairobi, it became clear that the possibility of designing and implementing a full-scale monetary reform was being swept away by a groundswell of events: the reduction of crude oil supplies and the sharp increases in the price of this commodity, the rising prices of other commodities, the early prospect of enormous balance of payments disequilibria, the widespread floating of exchange rates, and rapid inflation coupled with symptoms of economic stagnation—all of these together not only dictated a change in the course of monetary reform but also brought to the forefront the necessity of directing attention and action to immediate urgent needs and problems of many countries, particularly the developing countries.

In January 1974, at its Rome meeting, the Committee of Twenty, after having focused its attention on monetary reform for 16 months, had on its agenda, for the first time, the subject “recent economic developments.” It was recognized that an integral reform had to await improved conditions. The Committee of Twenty thereupon decided to complete its work on the main features of reform in the months ahead and to give priority to steps that could usefully be taken for early implementation. The detailed elaboration and operational features of the reformed system would come later.

The Rome meeting of the Committee of Twenty, besides accepting the need for altering the timetable of reform, led to increased recognition of the need for international cooperation and for consideration of the problems of all countries. This recognition was reflected in the Rome communiqué, in which the Committee recorded its agreement that “in managing their international payments, countries must not adopt policies which would merely aggravate the problems of other countries.” It was also reflected in the Managing Director’s timely presentation of his plan for recycling the surpluses of oil producing countries.

The results of the work of the Committee of Twenty are to be found mainly in the Outline of Reform issued after its final meeting on June 13, 1974. This Outline comprises largely a set of longer-term principles and a series of recommended immediate steps to be taken by the Fund’s Executive Directors, including the drafting of resolutions and amendments of the Articles of Agreement to be presented to the Board of Governors. From the Committee’s work we have learned many valuable lessons on the difficult problems involved in monetary reform and are thus better prepared for our part in the future monetary system. The longer-term principles contained in Part I of the Outline are largely an elaboration of the First Outline presented to us in Nairobi; even though full agreement has not been reached on them by the Committee, it can be said that some have already stood a certain test of time, at least conceptually. I need not enumerate here these features of the future reformed system since the published Outline is available to us all. I shall mention only the retention of “stable but adjustable par values” and the change in the structure of the Fund recommended by the Committee of Twenty, which will entrust the management and adaptation of the future monetary system to a permanent and representative Council of the Board of Governors, to be created by amendment of the Articles of Agreement. Reform is still very much on the books, and we as Governors of the Fund should expect to deal with it in stages, in this and future Annual Meetings.

Among the immediate steps recommended by the Committee of Twenty is the creation of an Interim Committee of the Board of Governors, as a precursor of the permanent Council which I have just mentioned. This Committee is to have an advisory role in areas in which the Council is to have decision-making powers, namely, in supervising the management and adaptation of the monetary system, overseeing the adjustment process, and dealing with sudden disturbances which might threaten the system.

One such step, already taken by the Executive Directors, has resulted in an SDR made more usable in transactions against currencies by the interim basket evaluation and a new interest rate. The Executive Directors have also established, on an experimental basis, guidelines for the management of floating rates.

The universal desire to consider fully the interests of developing countries is manifested in two new facilities of the Fund, the oil facility devised by Mr. Witteveen, which, through his vigorous efforts and the cooperation of several member countries, is already in operation, and the extended facility established earlier this month, which is likely to be beneficial to developing countries in particular by providing assistance in certain cases of balance of payments difficulty, in larger amounts and at longer terms than was previously possible. Draft amendments to the Articles of Agreement, including one on the link, are being considered by the Executive Directors. I fully expect that proposals for amendments will be submitted next year for the approval of the Board of Governors.

In these remarks on the reform, I have intended to convey the idea that we have not deviated from our fundamental purpose, even if it has proven inevitable that the timetable envisaged two years ago be extended. Reform is our goal. A phase of it is now being implemented, and provisions have been made for its future. I take this opportunity to congratulate Chairman Wardhana and the Committee of Twenty, and Chairman Morse, his Vice-Chairmen, and the Deputies, on their very significant and far-reaching work, and to acclaim the contribution they have thus made to the Fund in its search for an improved monetary underpinning of the world economic order. I endorse the words of appreciation expressed in the draft composite resolution which we are to consider. I wish also to congratulate the Executive Board of the International Monetary Fund for the part it has played in the reform exercise, particularly its rapid and effective decisions on immediate steps, while proceeding with its heavy workload of regular business.

I realize that it is difficult to make a clear distinction between monetary reform and the regular business of the Fund. But taking “regular business” to mean all activities that would have been undertaken in the absence of the task of reform, I must mention at least one that may have an important bearing on the future activities of the Fund: the Sixth General Review of Quotas, which was initiated in April and is to be completed by action of the Board of Governors early in February, and which has important implications for the Fund’s scale of operations and therefore for its usefulness to members, individually and collectively. We shall await with interest the recommendations of the Executive Directors.

At this juncture I wish to speak with family pride of one who richly deserves our commendation and confidence—the Managing Director of the Fund, Mr. Witteveen, who was unanimously selected for that position by our Executive Board last year. The wisdom of that choice became fully apparent during his first year in office—a demanding and troubled period. At Nairobi, his opening remarks revealed his innovative spirit and sense of fair play by setting the course for a new form of consultation with member countries to safeguard the interests of all members. Also, the advent of the oil crisis late in 1973, as I mentioned previously, led to his timely proposal to the Committee of Twenty in January that the Fund should establish a facility for recycling the surpluses of oil producing countries to the oil importing countries. In the relatively short period since, that facility has become fully operative and some 30 countries have indicated that they wish to use it. We congratulate Mr. Witteveen on these achievements of his first year in office.

Let me now turn to the developing world and to the operations of the World Bank Group. I would like to focus on the implications for development of the global economic storm of the past year, to which I have already referred. I would like to review the challenges that these changes present, and our chances of success, however uncertain they appear today. At the same time may I remind you of our longer-term goals and of some of the means of their attainment. In this regard, I would like to underline the social objectives of the Bank’s work and possibilities of agricultural advancement in the developing countries.

The severe strains to which the world economy has been subject since our 1973 Annual Meetings have had drastic effects on the developing world. While the most dramatic events have been the quadrupling of oil prices and the tripling of grain prices, there have been other sources of strain as well. Foodstocks have been run down to dangerously low levels. Fertilizer has been in scarce supply and prices have soared. The extremely rapid rates of inflation in the industrialized countries have been reflected in the high prices of their manufactured exports. Thus, many of the developing countries have experienced crisis conditions or have seen their prospects seriously impaired.

Some developing countries—those that are net oil exporters—have emerged as substantial beneficiaries. Among this group of countries are some of the poorest of the developing world. They now have the realistic prospect of success in pursuing their development objectives. They have my sincere wishes for success.

Still other developing countries have benefited from the high prices of other exportable commodities. Those with exportable minerals, timber, cotton, sugar, or oilseeds, have been able to offset, partially or completely, their increased import bills. However, even those countries must make adjustment in investment patterns to assure that the production of exportable commodities can make its maximum contribution to long-term development. The Bank Group seeks to provide advice and assistance in the adaptation process.

The prices of primary commodities are indeed such that the terms of trade for many developing countries have been more favorable recently than for many years. However, because of inflation in the industrialized countries and the increase in prices of their manufactured exports, and because of the slowdown in world economic activity, we must expect terms of trade to move against primary producers, other than oil exporting countries. It is therefore urgent that we intensify efforts in international forums to develop commodity agreements to maintain and stabilize the real producer prices of primary commodities. You may recall that at the 1967 Annual Meetings in Rio de Janeiro, the ministers of finance of the Franc zone introduced resolutions requesting the Bank and Fund to study means of stabilizing prices of primary commodities. As a result of the studies consequently undertaken, a number of decisions were taken about ways in which the Bank Group could assist producers of primary products and could support commodity agreements, and the Fund in 1969 established a facility for financing buffer stocks. In my opinion it is important that these efforts should be pursued so that the international community can enter resolutely into an effective guarantee of the income of the rural world where poverty has been rife since time untold.

The time has come for the political leaders of the world to realize that a global agreement between the primary producing countries and the industrial countries is not only necessary but is required by international justice. An appropriate equilibrium must be established between the prices of the primary commodities produced by many poverty-stricken countries, and the prices which the same economically weak countries must pay to import the manufactured goods they need for their development.

This claim of the primary products exporting countries has too long been denied by the egoism of national interests. In this attitude I see one of the causes of the economic upheavals that beset us.

I have previously expressed from this platform the idea that an international institution either already existing or to be established for the purpose would be the ideal framework for this necessary dialogue between primary producing countries and the countries that are more advanced by reason of their technology and industrial production.

Although the terms of trade of some developing countries have improved recently, many others have not benefited from increased commodity prices. These countries, including some of the poorest, are faced with severe pressures from rising import costs. Most of the seriously affected countries have per capita incomes of less than $200, and over 800 million people live there. Among these countries are many of those with the highest rates of population growth. Only with additional large sums of external capital on highly concessional terms have they any prospect of averting an actual decline in their per capita incomes.

My fellow Governors, I am sure you will agree that priority must be given to marshaling emergency forces to sustain development. Both the industrialized countries and the major oil exporting countries have a duty and a responsibility to respond to the existing crisis. In particular, their support for the UN Emergency Operation, for the Fund oil facility, and other measures which seek to provide funds quickly to the seriously affected developing countries, is vitally important.

The Governors will also appreciate that steps must be taken to meet the longer-term financial requirements of the developing world. The prospects of developing countries are in general all the more bleak since concessionary assistance from traditional donors has continued to decline in real terms. The World Bank estimates that if international prices continue to rise at about 7.5 per cent per year for the rest of the decade, official development assistance would need to increase from the 1973 level of $9.8 billion to over $24 billion in current dollars by 1980 to maintain a minimum level of development, let alone an acceptable level. The current basis for commitments is far below that which would permit disbursements at these higher levels in the years ahead.

The proposed increase in Bank and IDA combined lending operations over the next five years is about $18 billion, from roughly $12.5 billion in the five years ended 1973 to $30 billion in the five years ending 1978. However, much of the increase will be illusory because of inflation: in my view an even greater increase is needed.

Inflation also seriously affects the replenishment of IDA resources. In Nairobi last September, agreement was reached on a Fourth Replenishment of IDA which would provide the equivalent of $4.5 billion for the fiscal years 1975–77. Contributing countries thought that they were providing IDA with a 55 per cent increase in its resources in real terms over the level of the Third Replenishment. However, because of continued and accelerated world-wide inflation, it is now estimated that at constant prices the Fourth Replenishment will actually be less than the third.

The Fourth Replenishment was scheduled to go into effect on July 1 of this year. Due to legislative delays this did not happen. A number of contributing countries have, however, provided the Association, on an interim basis, with sufficient additional resources for operations to continue without interruption for much of fiscal year 1975. However, it remains of the greatest importance that governments press for the earliest possible legislative approval of the full replenishment.

In addition to IDA, to meet this increased need, it is to be hoped that the industrialized nations and the petroleum exporting countries will study the implications of a continuing shortfall of development assistance on concessionary terms. The OPEC countries, some of which will build up extraordinarily high reserves in the coming years, already are taking certain initiatives toward the developing nations: I sincerely hope that they will join wholeheartedly in the world-wide war on poverty.

Further, governments should continue to purchase Bank bonds and enable private investors in their capital markets to do so. A continuing increase in the sale of Bank bonds is needed to support the expanded Bank lending program, which is so vital for those countries for which Bank lending terms are appropriate.

I have been speaking of overall economic and financial matters. But important and dramatic as these may be, for the people of much of the developing world the crisis comes much closer to home. The gloomy events of the past year—the tragic droughts, the rising food and energy costs, the balance of payments crises, the shortage of fertilizer—have created both confusion and pressure. For the herdsman without pasture for his animals, the farmer without water for his land, the townsman without money to buy food—for millions upon millions in the developing world they bring the basic agonizing fact of hunger and destitution.

The critical world-wide shortage of food has been felt most dramatically and tragically in Sahelian Africa and Ethiopia, but many other countries have felt its effects. Even before the shortages of the past two years, the Food and Agriculture Organization estimated that more than 400 million people in the developing world did not have enough to eat. Many more suffered severe nutritional shortages, leading to widespread endemic diseases and reducing drastically their expectation of life. In many places in the world this situation worsened dramatically with the droughts of 1972 and 1973. In much of the Sahel, drought has now lasted for six years.

The Bank, of course, was not set up to provide food aid or emergency relief as such. We are thus even more appreciative of the speed with which the Bank Group moved, in cooperation with the Governments in the drought regions, to develop projects designed to bring early assistance for their most urgent requirements.

Last year in Nairobi, Mr. McNamara eloquently set out the World Bank’s goals for the years ahead, and in particular its strategy for tackling poverty, hunger, and malnutrition by means of rural development. To a limited but significant degree this program is in the process of being implemented.

Lending for agriculture and rural development in fiscal year 1974 was over $950 million, 22 per cent of total Bank-IDA lending. Within this total, Bank and IDA strategies in the agricultural sector continue to evolve, aiming at spreading the benefits of development more widely, with an important emphasis on improving the productivity and quality of life of the small producer. Increasingly the Bank is seeking to stimulate projects which involve large numbers of people, rather than those which benefit a few.

I am sure that you will all agree that, for most of our countries, without rural development there can be no sound or substantial basis for a nation to develop. If the rural areas remain in poverty, development is illusory.

I am pleased to be able to say that a number of rural development projects have been initiated, and among them one, aimed at increasing the production of food and cash crops and increasing income in the poorer, northern part of my country, is currently under preparation for Bank Group lending. This project to me exemplifies the policies desirable in rural development.

Diversification and experimentation are important features of Bank-IDA lending for agriculture and rural development. There has been a shift away from capital-intensive projects toward those with components such as extension and support services for the small farmer, research, new seeds, fertilizers, and insecticides, tube wells, and credit and marketing programs. Emphasis has been placed on improving rural roads, on functional literacy programs, and on medical and veterinary services.

Integrated rural projects are particularly important in Africa. Rural area and settlement development can help stem the tide of migration from country to city, and improve levels of nutrition and health. Education and training are needed, together with the development of the alternative agricultural techniques they make possible. New sources of credit will allow farmers to buy fertilizers and insecticides.

A continuing concern with the problems of land tenure and the size of land holdings is reflected in a recent Bank policy paper on land reform. The Bank’s preparedness to stimulate and to support land reform efforts with finance for infrastructure and services, including the creation of many new credit facilities, will be an important ingredient in the development of rural areas in many countries.

May I pause here to express the great appreciation of the Governments of a number of Western African countries for Mr. McNamara’s initiative and for the cooperative efforts of governments and international organizations toward the control of river blindness. Not only will the misery of many people be avoided, but also urgently needed land, now uninhabitable because of the disease, can again be made productive. This vital project has our wholehearted support.

Efforts to develop projects with a broad-based social impact are important in sectors other than the rural one. The Bank-IDA program proposed for the next five years showed a tenfold increase in lending for urbanization projects, a more than fourfold increase in lending for population and nutrition projects, and an appreciable increase in lending for basic education for the least privileged groups. I welcome this social emphasis in the Bank-IDA lending program.

There is another subject of broad social impact about which I would like to say something. I refer to what many call “the population problem.” People in different parts of the world see this problem differently, and often come to different conclusions about what, if anything, needs to be done. It is not uncommon for attitudes on population policy to get mixed up with wider political attitudes involving relations between rich and poor countries, or between different racial and religious groups. In many developing countries, there is today relatively little interest in, and considerable suspicion of, government policies to limit population growth. This is true even though some of the world’s highest birth rates, and the highest infant and maternal mortality rates, are found among these countries. If the adverse impact on family health of high fertility were better known, perhaps suspicion would be less and interest in family planning be greater, for purely private reasons. It is worth noting that there does seem to be a significant relaxation of opposition to the inclusion of family planning services in national health programs in a number of countries that formerly did not worry about the effect of rapid population growth on their ability to eliminate poverty. I therefore venture to predict that the Bank, in company with other external donors, will find a gradually expanding willingness to consider population assistance, particularly if it can be linked to family health in addition to national economic and social objectives.

Fellow Governors, the important innovations in Bank operational activities, which I have described, should be seen as a widening and deepening of the developmental effort, not as a substitution for lending in other sectors. The Bank Group, and other development institutions and governments, should continue this emphasis on projects which directly benefit large numbers of the world’s poorest people. But it is in the borrowing countries particularly that the commitment to lifting the human condition of those in poverty must have its beginning and its most energetic support.

I have been speaking about the Bank and IDA. But also of great importance to the development effort is the International Finance Corporation. In the fiscal year just ended the commitments made by IFC again reached a record figure. Altogether, since it was established in 1956, IFC has invested more than $1 billion in 225 enterprises in 54 developing countries. During the year, IFC intensified its efforts in promoting projects in poorer member countries. In other countries, it placed intensified emphasis on stimulating local capital markets, to improve utilization of domestic capital for productive investment.

In its task of mobilizing capital the Corporation has naturally been subject to the constraints that have increasingly been a feature of the international monetary market. Those constraints have particularly affected the availability of long-term funds for the developing countries. This is a situation in which an international institution like IFC, belonging to both developed and developing countries, and with flexible policies, can play a uniquely useful role in devising financial patterns which are in the best interests of lenders, borrowers, investors, and the host countries.

I should like to give strong support to an aspect of the World Bank’s work that is not specifically linked to the financing of development projects. I refer to the Economic Development Institute, the training arm of the Bank Group. Training in project development and appraisal is a most valuable form of technical assistance. Recently, the EDI has been launching a series of overseas courses: my own country is host to its first regional training program. Our collaboration with the EDI and other international organizations to augment the training of African officials will, we hope, be a forerunner to expanded regional programs in other areas of the developing world.

Before concluding my remarks, I cannot resist the temptation to take advantage of the opportunity presented by my being on this platform to emphasize the contribution made by the African continent to the progress of international cooperation.

This contribution was particularly evident in 1973 in the African Declaration on Cooperation, Development and Economic Independence, which it has been agreed to call the Abidjan Declaration, and—more recently—in the active role played by the countries of Africa in the United Nations General Assembly Special Session on Raw Materials and Development.

Despite severe economic and social limitations, the African continent is struggling resolutely on all fronts to achieve total political independence and remove the last vestiges of colonialism, and also to increase its economic independence by pursuing the Africanization of its economy and by becoming a full partner in the international economic and financial system.

I believe that our institutions and the community of rich nations will continue to support the efforts of the African states to establish a more equitable world economic order.

At no time since the creation of our institutions have the problems facing us been as acute as those we now confront.

Many and deep-rooted are the sources of concern for the future of international economic and financial relations and the development of the poorest regions. But we do not, given the responsibilities with which we are charged, have the right to yield to pessimism or to despair.

I am convinced that continuing deterioration of the situation is not inevitable and that there are solid possibilities for returning to a state of equilibrium within a reasonable space of time. I would even say that our present difficulties bear the fertile seeds of their own solution, and that obstacles to the development of the third world may be removed: it is when everything is changing, when everything is in question, that the possibilities for action are the greatest. But we realize that, for this to come to pass, a common political will must inspire the leadership of all the member states.

The international community, by greater use of reason, intelligence, continuing dialogue, and diplomacy, and also by showing more concern for the principles of justice and mutual respect among nations, has the means to meet the challenge. To do so, it must have the active participation of each of us in strengthening the solidarity between peoples, so as to achieve at last the aspirations of thousands of millions of human beings: prosperity, peace, and happiness.

Delivered at the Opening Joint Session, September 30, 1974.

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