Opening Address by the Chairman of the Boards of Governors, the Governor for Tunisia1

International Monetary Fund. Secretary's Department
Published Date:
October 1970
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Hédi Nouira

Our organizations and each of us individually are deeply honored by the presence of Your Majesties.

For me, it is a great privilege and a great honor to preside over the Twenty-Fifth Annual Meetings of the Fund and the Bank.

After assiduous attendance at these meetings over a dozen years, I now find myself promoted to head of the class. And to have the opportunity of hearing all the speakers from this platform is a very pleasant duty.

I am pleased, first, to welcome the Governors of our organizations, their Alternates and Advisors, and the official Observers and Special Guests. I also welcome the Governors for Cambodia, Equatorial Guinea, and the Yemen Arab Republic, which are represented at an Annual Meeting for the first time as member countries. As Governor for Tunisia, the first country to sign the Convention establishing the International Centre for the Settlement of Investment Disputes, I would also like to welcome the members of the Administrative Council of the Centre, which will be holding its fourth Annual Meeting later this week.

I thank the Prime Minister of the Kingdom of Denmark for his kind remarks. As Chairman of the Board of Governors, it is my special pleasure to offer my warmest thanks to the Government of Denmark for the hospitality they are offering us in this pleasant city and for their generous and untiring efforts to assure the success of this meeting, not least in providing this magnificent setting. In saying this, I am sure that I am speaking for everyone present.

In a few moments I will be calling on Mr. Schweitzer and Mr. McNamara to deliver their annual addresses to the Boards of Governors.

I should like to take advantage of an important prerogative of my office—the right to call on speakers—to make a few general remarks on our institutions and their activities.

A quarter of a century has passed since a small group of pioneers laid the foundations of our institutions at Bretton Woods. This, like all pioneer undertakings, could not avoid being, to some extent, a wager on the future.

We can say today that the wager has been won. Our two institutions have grown so that they now embrace a large proportion of the countries of the world and, as the years have passed, have steadily increased the assistance they offer and widened their field of activity.

The increasing number of member countries, the expansion of their financial and monetary assistance, and the recent creation of special drawing rights testify to, among other things, the vigor and dynamic growth of our organizations.

Their most important achievement seems to be the strengthening of international cooperation in the monetary and financial sphere, together with a feeling of greater solidarity among the different member countries, regardless of their degree of development.

That is an achievement of first importance which should be preserved and consolidated.

The year just expired was rich in events both for the Fund and for the Bank, and above all rich in new and path-breaking activities.

For the Fund it was, above all, the year when special drawing rights were activated. For the Bank it was a year of decisive expansion of its field of action and of a wider conception of its role as providing impetus and assistance for the development of the Third World.

As for the international monetary situation, which is more the concern of the Fund, the last year was one of comparative calm, in contrast to the crises to which we had become accustomed since 1964.

We may attribute the relative calm largely to the realignment of two of the major exchange rates. Following the action taken by the United Kingdom in November 1967, we saw in 1969 changes in the par values of the deutsche mark and the French franc and a very distinct improvement in the balance of payments of France and the United Kingdom.

Credit for the prevailing calm may also be attributed to the collective efforts made to find new ways of supplementing liquidity. At the last Annual Meeting, the epoch-making decision was made to allocate special drawing rights. The first allocation is now history. Of course there is still much to be learned about the operation of the new instrument. But it is encouraging that the transition from theory to practice has been accomplished so smoothly, and all the more so since special drawing rights have so quickly gained acceptability in international settlements.

Nevertheless, we should not delude ourselves into thinking that the present tranquillity is necessarily permanent, or that we may relax our efforts. It was for this reason that we invited the Executive Board of the Fund to continue its study of the mechanism of exchange rate adjustment.

The excellent report in front of you is the result of thorough study. I think we should congratulate both the Executive Board and the staff for the painstaking efforts which have produced a document drawing together the diversity of views on a subject never before tackled by the world financial community as a whole.

Our Directors believe that the system of exchange rates should continue to be based on stable but adjustable parities. For that reason, they reject substantially wider margins, freely fluctuating rates, and changes based on rigid formulas. However, they do not rule out some widening of margins, smaller and more frequent changes in par values, or temporary floating rates to facilitate more frequent changes in par value than some members have been accustomed to make in the past, and they propose further examination of these matters.

During the course of this meeting, Governors will no doubt address themselves to these questions. I am sure that each of us will be eager to find ways of improving the efficiency of the exchange system by means of which a large part of the world conducts its trade and other transactions. We should not hesitate to support any modification of the system that would clearly be for the better.

The activity of the Bank Group expanded remarkably during the last financial year.

New commitments in member countries entered into by the Group totaled almost $2.3 billion, a 22 per cent increase over last year. Two years ago in Washington Mr. McNamara announced a target for the Bank Group of providing twice as much financial assistance in the five years 1969-73 as in the previous five years. The Bank Group is well on the way to this target.

I am glad to see that there has been a further shift in the geographical distribution of commitments. Lending to Africa is rising as a proportion of the total, and so is the share of IDA credits going to African countries. There is every indication that this trend will continue. I am also glad to note that on the tenth anniversary of the International Development Association, the Executive Directors recommended to the Board of Governors a third replenishment of IDA’s resources.

The increasing proportion of loans for education is an encouraging sign. Many governments, including my own, have a special interest in this aspect of the Bank’s work. It was in Tunisia that the Bank Group, through IDA, made its first commitment for education eight years ago.

This first education project has now been completed; a second, negotiated and signed in 1966, is nearly completed, and a third is in the planning stage. The Bank and IDA are still a long way short of their target of a threefold increase in lending for education in five years, but their imaginative approach to this problem is reassuring.

Most certainly, to campaign against illiteracy is a duty, to teach an obligation, and to educate is an inescapable commitment. But such investments must have, as their logical consequence, an economic structure capable of absorbing all persons with a secondary or college education if we are not to witness serious disequilibria due to the disparity between the demand for jobs and the supply of jobs. Such a disparity causes a drain of professional people from less developed to more developed countries. That the former should invest for the benefit of the latter is quite the reverse of what we want.

In developing countries the proportion of technicians of all kinds is very low. This neglect of applied technology persists from generation to generation, and results in a conspicuous shortage of vocational training which is prejudicial to economic development and leads to dissatisfaction that eventually jeopardizes their entire educational structure. If such a trend were to persist it would result in the production of more or less déclassé human beings who reject the society that rejects them.

In agriculture, the Bank and IDA have also achieved a marked progress. Thirty-two loans and credits totaling about $413 million were made during the year, exceeding the lending for agriculture in the previous year by about 12 per cent. By the end of the year the Group had financed over 150 agricultural projects. The five-year target was to quadruple the average of the 1964-68 level of commitments in this important sector. Already it has more than tripled. The Bank has neglected no aspect of agriculture; it has laid special emphasis on the provision of agricultural credit to finance on-farm improvements, mechanized equipment, and other inputs. The Bank is also actively interested in the promotion of research in agriculture.

The growth of operations in these relatively new sectors, and in others like tourism, has not meant a reduction in the Bank Group’s support for the more traditional infrastructure investments. On the contrary, lending for power, transportation, communications, and water supply has continued to increase. In 1970, operations in the power sector increased by 45 per cent compared with 1969.

There have also been developments in the industrial field. Industrial sector studies, which will become increasingly important, have been carried out in Brazil, Colombia, East Africa, Ghana, Morocco, and Turkey. As in previous years, most of the Group’s industrial financing has been through loans and credits to development finance companies. Four companies—in Brazil, the Democratic Republic of Congo, Pakistan, and Singapore—received their first financial support from the Group during the year.

IFC financing also reached a record level of $112 million during the 1970 fiscal year. The Bank, by lending an additional $100 million to IFC, brought to $200 million the total amount it has made available to help its affiliate continue to expand its activities in the private industrial sector.

When I spoke of a year of extraordinary growth, I was thinking not so much of the volume of development finance as of the change in outlook and new moral commitment which has characterized the recent operations of the World Bank Group. For more than ten years, lending agencies largely ignored fundamental development problems, perhaps because they appeared so formidable. Some of these problems arise from the structural and institutional problems of education and agriculture. Others stem from the growth of population and the migration to the cities. There is also the problem of how to achieve a better distribution of income and employment opportunity during the process of growth without stunting growth itself. And on all sides there are challenging and perplexing issues of environmental degradation resulting from the lack of knowledge, foresight, and concern. These problems have two main attributes: they affect every aspect of development and they defy meaningful analysis by purely economic criteria.

Several of these basic questions have now been drawn into the orbit of the World Bank’s interest and concern. Experts have begun a determined search for solutions. The quality of life, as well as the quality of production, has been adopted as a valid criterion of development success which will increasingly be taken into account in the Bank’s operations.

Another element is the complex and controversial problem of population growth. The staff is now organized to provide concrete assistance on this front; a Population Projects Department has been created, and I am pleased to note that the Bank has made its first loan for a family planning project in Jamaica. I understand that other projects are being studied.

These signs show that we have come to see the development process as a whole. The problems of school and the farm are bound up with those of factory and city. The rural problem is not separated from the urban problem by a watertight compartment. On the contrary, they are part of one and the same problem. Similarly, social and economic questions do not exist in isolation one from another. Each presents a different facet of the same reality. I believe these primary truths are now at the root of all our activities.

However great the efforts of the Bank in these directions, they will certainly not of themselves suffice to resolve the problem of development of the Third World.

As the Pearson Report stressed, a joint endeavor must be undertaken to bring humanity out of the dark labyrinth of poverty and ignorance.

Such an endeavor is first and foremost the responsibility of the countries directly concerned, those of the Third World. It is also the responsibility of the advanced countries which continue to flaunt their wealth in the face of the majority of mankind who are hardly able to satisfy their basic needs. In the village to which our planet has shrunk, this is a matter which concerns us all.

Unfortunately, on both sides, there are those who will not and those who cannot. The helplessness of the latter group encourages the reluctance of the former.

In the last 12 months, there have been a number of appraisals of the growth process, of which the most important is probably that of Mr. Lester Pearson. Other important reports include that of the United Nations Committee for Development Planning, chaired by another Nobel Prize winner, Professor Tinbergen, the study by Sir Robert Jackson, the Rockefeller report on the Western Hemisphere, and the report of the United States Task Force on International Development, headed by Mr. Rudolph Peterson.

The list of studies is long and may even grow longer. I think we now have a very clear idea of what needs to be done. It remains to transform into facts the ideas of the thinkers and the wishes of the benevolent. The world needs action, not only words; energy, not only intelligence.

As the representative of a developing country, I should like to address some remarks to my colleagues in the Third World in the hope that my frankness will not give undue offense. Our lag behind the developed countries is very great, to be sure. But the advantage of a lag is that you can catch up. At least it allows you to survey the road ahead.

Our countries must first of all rely on themselves. Excessive resort to foreign aid entails the risks that the necessary internal efforts may be thwarted and that the future of the rising generation may be heavily mortgaged. It is first and foremost by our own efforts that we must secure the essential means to our own development. Every country must have a clear idea of the objectives it wants to attain and especially of the means that it can use and that are most readily available to realize economic and social progress. These means are not limited to financial capital. They must be the result of an effort of creative imagination and innovation, and must call upon the individual and collective talents which no country lacks.

We reproach our partners for the inadequate aid they provide, the lack of real determination to stabilize primary products, and for their protectionist trade policies. Without doubt, these complaints have some foundation. But they should not divert us from our own responsibilities or make us forget what we can do ourselves in these areas.

An efficiently managed economy is in itself sufficient to attract foreign capital. The stabilization of the prices of raw materials calls first of all for a minimum of understanding and cooperation among the producing countries. Foreign aid should not be simply a substitute for national effort. Improved regional cooperation, transcending quarrels between neighbors, would improve the utilization of energies.

Furthermore, the urgent need for development has often induced the authorities of countries of the Third World to treat the symptoms of the problems confronting them instead of attacking their fundamental causes. Many of these countries have embarked on industrialization programs for which they have to import equipment, technicians, and sometimes raw materials, without attending to the psychological, social, and administrative reforms which are the basis of successful industrialization. The most obvious result is admittedly a considerable increase in production, but in most cases the increase is only token and does not produce the changes in structure and customs that constitute the very essence of the development process.

Development is not simply a linear function of production; it involves changes in economic structures and, most of all, a profound change in the attitudes and mentality of the people which enables them to increase production permanently.

In the countries of the Third World, man is not only the end purpose, but also, first of all, the most important tool of development. He is the number one factor in progress and, as such, must be given priority in investment—that is to say that it is of the greatest importance to turn out not only reliable technical staff and skilled workers, but also enlightened and, if possible, organized citizens.

Economic development should not be regarded as some kind of by-product of international philanthropy. It is something earned primarily by serious and disciplined effort on the part of the countries concerned.

The encouraging results gained in recent years by the developing countries show that they have chosen the right path. But these results are still inadequate in relation to the complexity of the problems and the wide gap that has to be bridged.

Factories, blast furnaces, and refineries are only the outward signs of development. But sound, dynamic management, products of good quality at reasonable cost, a system of government that does not crush man’s creative spirit, adequate technical and vocational training, and intellectual and social structures responsive to the demands of progress—these are the truly strategic objectives toward which our countries have still a long way to go.

To act directly on the causes of development or of underdevelopment, that is, on man and his economic and social environment, is something that has not received all the attention it deserves. Such action would not only assure a sustained growth of production but would also be likely, by introducing more and more technical refinements, to increase the value of the products.

Nowadays production, especially of industrial goods, requires ever-increasing know-how quite unrelated to the value of the raw materials. The cost of a computer is in no way comparable to the cost of the materials of which it is constructed. In a world dominated by science and technology, the role of raw materials tends to become secondary. It is chiefly ideas that are produced and marketed, and the economy based on materials is giving way to an economy based on know-how.

This means that countries which restrict themselves to being suppliers of raw materials are dooming themselves to the task of Sisyphus.

It also means that the function of training scientific and technical staff is highly important.

But the fact that the development of the Third World is primarily the responsibility of the developing countries in no way relieves the advanced countries of responsibility.

The problem of aid has been dealt with in detail by the Pearson Report, which has removed a few misunderstandings and thrown light on some highly controversial issues. There is, it seems, still much to be done to improve the volume and terms of aid if it is to become an effective tool of development.

A more unobtrusive, but by no means ineffective form of aid, would be to pay greater attention to the views of the Third World countries on certain economic, commercial, and financial decisions affecting their future.

Let us beware of applying to the economic relations between rich and poor countries the jibe of Paul Valéry when he defined politics as “the art of preventing people from meddling with what concerns them.”

It is a euphemism to recall that the economic situation of the developed countries has direct and profound repercussions on the economy of the Third World. The dominant nature of the economies of the advanced countries, and the growth of economic relations between nations, make it increasingly difficult to draw the line between national and international policies.

Thus the failure of the attempts of certain leading countries to overcome inflationary pressures continues to affect the capacity of the developing countries to import and imposes a heavy burden on their balance of payments. The resulting high interest rates are also sources of increasing difficulty for the countries of the Third World. At the rate things are going, one wonders whether the yield on borrowed capital in these countries will be enough to pay the interest. It is essential that a set of measures be adopted at the international level to provide a solution to this problem.

We should profit by the calm and stability now prevailing in the international payments system to study this question. If we let this opportunity go by, we would fail in our duty to maintain under control our international monetary and financial situation. We cannot be sure that this state of affairs will last. Signs of strain remain in the international adjustment mechanism; events have shown that the operation of the system is hampered by substantial payments imbalances in the major countries. As long as inflation still prevails in several countries of the world, and while its rate of increase varies from one country to another, serious balance of payments problems can be expected. But it would be a great pity if countries were to seek solutions through higher protection.

The progress made in recent years in the broad field of development encourages us to conclude that Mr. Pearson was right when he said, “We live at a time when the ability to transform the world is only limited by faintness of heart or narrowness of vision.” We must not allow ourselves to be found wanting on either count.

Though arduous, the task of development is nonetheless inspiring: it is necessarily the point on the planetary level toward which intelligent minds and valiant hearts converge.

Delivered at the Opening Joint Session, September 21, 1970.

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