Chapter

Opening Address by the Chairman of the Boards of Governors, the Governor for Thailand1

Author(s):
International Monetary Fund. Secretary's Department
Published Date:
November 1961
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Author(s)
Sunthorn Hongladarom

We are gathered here in this glorious place of great and time-honored historical background to participate in the Annual Meetings of the International Bank for Reconstruction and Development, the International Monetary Fund, the International Finance Corporation (IFC), and the first Annual Meeting of our new sister institution, the International Development Association (IDA). As Chairman, I would like first of all to welcome our distinguished Governors, Delegates, and guests, and to extend our warmest greetings to our new members—Laos, Nepal, New Zealand, Nigeria, and Portugal. I am very happy, and when I say this, I think I am voicing the sentiments of all of us here, that Mr. Black has fully recovered from his illness and is back with us again looking as vigorous and sagacious as ever.

It is also my privilege and my most pleasant duty to express on behalf of all the visiting Governors and Delegates our deep thanks and appreciation for the great trouble and efforts which have been put into the arrangements to welcome and accommodate us in this beautiful city of Vienna—world-famous for its cultural and intellectual achievement. As we are all aware, we have some very important matters to discuss, the outcome of which will have far-reaching effects on the future economic and financial stability of many nations, large and small. Events which have greatly affected the history of European nations in the past have taken place here. It is most fitting, therefore, and perhaps even prophetic, that the 1961 joint Annual Meetings of our four sister institutions are being held in this historic city.

As their Annual Reports clearly show, the Bank, the Fund, IFC, and IDA—the last within the short space of its life—have achieved another year of highly successful operation. In truth, such height of achievement could only be reached, year after year, by hard-working men and women and their inspiring and enlightened leaders, collectively dedicated to the exacting task and heavy responsibility of carrying out the principles and objectives of international economic cooperation—in the spirit of Bretton Woods—for the promotion of world prosperity and welfare.

It is unnecessary for me to repeat here the high purposes of the four institutions. But let me recall that, with the adoption of the Bretton Woods Agreements, we entered in fact upon a long and arduous campaign, in which we have since been engaged on many fronts. We have made a good start and have taken steady steps forward, which justifies some optimism over the possibilities for further advances in the future. But even after 15 years of our collective efforts, it would be unrealistic to say more than that. Certainly, large-scale efforts are still required, if we are to avoid setbacks and reversals from the progress already achieved, and if we are to approach more closely the realization of a widely shared world prosperity. Our fellow world citizens who ask themselves, “Where is my next meal coming from?” still vastly outnumber by several hundred times those who are able to ask themselves this question, “What new motorcar shall I buy next year?”

There are some developments, of course, in which we may all take some measure of satisfaction. The continued expansion of world trade, in which most of our countries have participated to some extent, has brought widespread benefits. In particular, the rapid recovery and economic growth of Western Europe have created an expanded market for the rest of the world; it has facilitated a larger European outflow of foreign investment and assistance; and it has enabled European currencies to play a larger part in the foreign exchange transactions of the Fund.

This strengthening of European economies has also, in recent years, greatly benefited the operations of the World Bank, which has continued to draw an important portion of its financial resources from Europe. The Bank itself, I am glad to see, is carrying on its lending activities with undiminished vigor and greater vision and has now reached a loan commitment total approaching the $6 billion mark. We see the fruits of its work in many vital projects around the globe, giving brighter hope and promising a better future for millions of people throughout the world.

The Bank is performing an invaluable service, in mobilizing large investment funds, and in putting them to work where they are badly needed. In addition, Bank missions have continued to travel widely, giving counsel and assistance on almost every conceivable kind of development question. My own country’s economy has in recent years been the subject of a close and comprehensive study by a team of experts chosen by the Bank. The results have been not only the establishment of new institutions for economic development administration in Thailand, but also a much closer understanding in our country of the problems we face and of the solutions which are available to solve those problems. Needless to say, the combination of the Bank’s lending and judicious advisory assistance will continue to be of tremendous value to the Bank’s less developed member countries, where there exists an urgent and growing need for expert financial, economic, and technical advice of the kind the Bank can offer, particularly with respect to guidance in the preparation and implementation of development programs.

With increased production in Western Europe and elsewhere, there has been an abatement of inflationary pressures, but in many countries this has also required the use of vigorous fiscal and monetary measures. Such policies have proved their usefulness, again and again, in overcoming balance of payments difficulties, and in establishing the sound economic foundations that are essential for healthy expansion and development.

The International Monetary Fund has given very substantial assistance in these efforts. From the beginning, and often under discouraging and delicate conditions, the Fund has effectively promoted the policies needed to achieve a freer, multilateral system of payments. As conditions for proper use of its resources have improved, we have seen the Fund playing an increasingly important financial role. Already drawings on the Fund during this year alone have reached more than $2.3 billion, or have more than doubled their previous peak year of 1957. The total of foreign exchange assistance given by the Fund since it began operation in 1947 is now over $7 billion, including approximately $1.1 billion in undrawn portions of stand-by arrangements.

But figures alone do not tell the whole story. I am sure we are all agreed that the Fund has been genuinely helpful to a large number of its members, whose payments difficulties have sprung from a great variety of causes. It has not hesitated to come to the aid of countries, no matter how serious their problems, as long as they were prepared to make strong efforts on their own behalf. The Fund has succeeded in using its resources to advance its purposes of foreign exchange freedom and stability. It has preserved the revolving character of its assets. In transactions ranging from relatively small amounts to the massive $2 billion support for the pound sterling last month, the Fund has combined a conscientious concern for its primary purposes with a sympathetic and efficient response to our problems. Meanwhile, the Fund has continued the process of consultation on foreign exchange matters and related questions, a process which has gained in significance and value under conditions of a more general currency convertibility.

While the work of the Bank and Fund has gone forward, other efforts to aid economic development have been maintained or even increased. Some individual countries are making stronger efforts to provide external assistance, and work continues to go forward on the construction of new international machinery, including the welcome establishment of the Inter-American Development Bank and the continuing evolution of the Development Assistance Group.

I have referred to some of the more encouraging aspects in the present situation, not to indicate a complacent point of view, but to point out some of the lines along which further efforts will be helpful. As I have also inferred, there is still a great deal to be done before the campaign begun at Bretton Woods will have been won. There are some problems which may be outside the jurisdictional reach of our Bretton Woods organizations, but which nevertheless should continue to challenge us in our official capacities at home. For example, the less developed countries, largely dependent on one or two primary commodities for their foreign exchange earnings, still lack protection against fluctuations in world prices and demand for their major exports. In this connection, the industrially advanced nations could very well pay increasing attention to facilitating the access to their markets not only of these traditional exports but also the products of the nascent industries in developing countries. While the programs maintained by certain countries for the disposal of their surplus agricultural production may provide some support for temporary needs of some countries, it should not be forgotten that they nevertheless adversely affect the foreign trade of those other countries which also export these products. There should also be further opportunities for useful reduction of such obstacles to trade as tariffs and quantitative restrictions on imports. But the main consideration is that our campaign of economic cooperation in its broader aspect—with all it has involved in development finance, in stabilization efforts and freer trade—has not yet succeeded in making enough impact on the real income of enough people, whose numbers continue to grow unabated.

Recognizing this, I think we need constantly to review our strategy and planning, and the adequacy of the resources we are bringing together. I believe all of us have learned from our successes and failures the need to adapt our thinking to experience and to new circumstances and, without losing sight of our basic principles, to adjust our policies accordingly.

Most of us are probably closer together in our attitudes on governmental programing for development than formerly was the case. The inevitability of governmental leadership in this field is now generally acknowledged—nowhere more clearly, perhaps, than in President Kennedy’s recent proposal for an “Alliance for Progress” in the Western Hemisphere. On the other hand, I believe government officials are more widely aware than ever of the dangers of excessive expenditure and use of credit for this or any other purposes. It is accepted, too, that private enterprise has an important role in the expansion of our economies, and that it must be accorded proper conditions for its activity.

With the general acceptance of planning for progressive development over a period of years, the concept of long-term foreign aid follows very logically. It is understandable that there should be reluctance in some quarters on this count. But I see it as a clear indication of our continued dedication to the ideal of an orderly and effective development effort which in the final analysis is beneficial both to the donors and the recipients. Whether we like it or not, our fortunes are now much more closely knit together.

I would caution that such international programs of assistance should never neglect the problems of smaller countries in favor of achieving more rapid and spectacular results in a few of the larger ones. Nor should we permit the problems of any one region of the world to preoccupy our attention to the disadvantage of other areas and regions. The broad aims and purposes of the Bretton Woods organizations, and their widely scattered membership—even their informal titles of “World Bank” and “World Fund”—should help us to maintain the global character of our campaign. I think balanced growth is good for a country as well as for the world as a whole.

In the search for larger international financial resources, a great deal of thought has been given to possible methods of strengthening the world payments situation, in such a way as to provide greater protection against sudden large swings in the foreign exchange earnings of individual countries. Such occurrences can have widespread disruptive effect on international trade, unless countries subject to sudden strains on their reserves can be assured of adequate temporary assistance. If it becomes obvious that such support can be immediately available, much of the speculative pressure that sometimes upsets foreign exchange markets can be avoided. In any event, the availability of additional resources for this purpose would give all of us a greater protection against declines in our foreign earnings.

The Executive Directors of the Fund have been discussing a plan for this purpose since early in the year, and it is my understanding that Mr. Per Jacobsson, the Fund’s Managing Director, will go into some detail on this important subject later this morning. It is a topic which has attracted keen interest everywhere, and which will doubtless be discussed at some length in the sessions of the Governors of the Fund.

A few words now should be said about our new sister institution, the International Development Association, which already within the first year of its birth has carried out a series of operations totaling more than $100 million. It should be unnecessary for me to say how much we, who are responsible for economic development in the Bank’s less developed countries, welcome the emergence of IDA. Almost all of us are in the position of being asked to find more money for development than can be extracted from our national resources, and also more than we can afford to borrow on conventional terms. For us the emergence of IDA, even on the small experimental scale on which it exists at present, holds out great promise of providing part of the extra finance we need on very liberal terms. However, I understand that while IDA may be softhearted in its lending terms, it will by no means be softheaded in its operating policies.

I think the Executive Directors were extremely wise to draw up the Charter of the Association as a very flexible instrument. The Association should be allowed to develop naturally in accordance with the needs which are found to exist, and I am sure that we can expect the Executive Directors and management to show an enlightened and imaginative approach in the formulation of IDA’s operating policies. Certainly, its first development credits have been interesting examples of how to meet development needs in a new way.

We are all aware, of course, that IDA’s initial resources are small in relation to the known needs of the less developed countries. I hope and believe that IDA’s operations will soon demonstrate the need for much larger funds to be put at its disposal, and I look forward to hearing more on this subject.

Finally, I turn to the International Finance Corporation, for which this has also been an important year. It is a sad duty to say farewell to Mr. Robert L. Garner on his retirement as President of IFC. No one with any knowledge of the World Bank can fail to be aware of the tremendous contribution which Mr. Garner made to that institution. Many of the Bank’s operating practices and its thorough and common-sense dealings are due to his original work. In the last five years, he has had to deal with the first and most difficult years in the life of IFC and he has discharged his task with his usual skill, foresight, and enthusiasm.

Unfortunately, the original Charter of IFC forbade it to make equity investments, a limitation which proved extremely restrictive in practice. Because of this limitation, IFC was obliged to resort to complicated types of security in its investments, a policy which would have been serious enough in developed countries, but was much more so in the countries where IFC was doing its business and where there was little knowledge, if any, of the types of security which IFC was obliged to negotiate. As you all know, as the result of steps taken last year, the past few weeks have finally seen the removal of this limitation. IFC is now at last free to make equity investments in the enterprises it wishes to assist. This should give IFC an additional impetus and widen the scope of its activities, a result which will be most welcome to all of us, the more so, since the Corporation will continue its established policy of not exercising control over, or participating in, the management of any enterprise in which it invests.

We are grateful to Mr. Black for accepting the presidency of IFC for the next two years in spite of the great burdens he already has, and we welcome the appointment of one of his most promising young executives, Mr. Martin M. Rosen, to be the new Executive Vice-President of IFC. We wish both of them great success.

I have spoken of strategy and material resources as important elements of our international economic and financial cooperation. But certain resources of the human spirit are also necessary. We have been especially fortunate in having men of such high ability as Mr. Eugene Black, Mr. Robert Garner, and Mr. Per Jacobsson who, I am most happy to say, has agreed to remain as Managing Director of the Fund for an additional two years. With a friendly interest in each other’s problems, a willingness not only to share our views but also to learn and be persuaded, I believe we shall gain from this meeting a renewed sense of common purpose and of greater confidence and hope for the future.

September 18, 1961.

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