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Recent Activity—nternational Bank for Reconstruction and Development, International Development Association, and International Finance Corporation

Author(s):
International Monetary Fund. External Relations Dept.
Published Date:
March 1970
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Population Planning

The Bank is taking an active interest in studies and programs related to population to assist the less developed member countries. Rampant population growth was cited as the “greatest single obstacle” to the economic and social advancement of the majority of the peoples in the less developed world by the President of the Bank, Robert S. McNamara, in his speech to the Board of Governors last September. He also stated that more and more governments were expressing a willingness to deal with the problem.

The former Chairman of the Family Planning and Population Board of Singapore, Dr. Kandiah Kanagaratnam, was appointed Director of the Bank’s Population Projects Department around the beginning of the quarter under review. The newly established Department will seek to identify and appraise projects in the field of population which will be suitable for financing by the World Bank Group. Earlier, a Population Studies Division in the Economics Department was set up.

The Bank’s country economic reports now contain a section dealing with population and staff members specializing in population studies have participated in a number of economic missions. Specialist staff members have also been in close and frequent contact with outside experts in the field.

The important subject of controlling excessive population growth was taken up for discussion by an aidcoordinating group organized by the Bank. In November, the consortium of governments and institutions interested in development assistance to India met in Stockholm, Sweden, to review the problems and progress of India’s Family Planning Program and to discuss the possibility of further external assistance to the Program.

A United Nations Advisory Mission, at the request of the Government of India, had conducted an evaluation of the Program. The Report of the Mission had been distributed to members in advance of the meeting. Members agreed with the Report’s conclusion that India had established a large family planning program which was making good progress. Members also welcomed the Government of India’s determination to continue to give it the highest priority. They agreed that the Program could absorb substantial amounts of additional resources. It was recognized by most members, however, that if external assistance was to make a significant contribution it would have to be available, in large part, to finance local currency expenditures. Some members indicated that they were willing to move in this direction.

The Bank’s policy is not to impose programs in this sensitive area. The Bank endeavors to encourage awareness among member countries of the consequences of unchecked population increases and to develop programs to assist those countries which ask for help.

Tourism

Establishment of the Bank’s new Tourism Projects Department underlines the Bank’s growing interest in another area now recognized as being of particular importance to developing countries—tourism. Dr. Alfred Koch, a former Secretary-General of the German Institute for Tourism Economics at Munich University was appointed Director. The Department has been assigned the specific task of identifying, preparing, and implementing projects in the field of tourism.

WORLD BANK LOANS DURING THE SECOND QUARTER OF FISCAL 1970

AMOUNT
COUNTRYPURPOSE($ millions)
ArgentinaElectric Power60.00
ColombiaAgriculture—Livestock18.30
CyprusElectric Power5.00
Dominican RepublicElectric Power25.00
KenyaRoads23.50
KenyaAgriculture—Forestry2.60
MoroccoRoads7.30
MoroccoAgriculture46.00
NigeriaRoads10.60
SingaporeTelecommunications11.00
TunisiaDevelopment Finance Company10.00
ZambiaEducation5.30
IFC100.00
Loans made during the second quarter of fiscal 1970324.60
Loans made during the first quarter of fiscal 1970189.75
Total loans made during the first half of fiscal 1970 ended December 31, 1969514.35

IDA CREDITS DURING THE SECOND QUARTER OF FISCAL 1970

COUNTRYPURPOSEAMOUNT

($ millions)
CeylonAgriculture—Drainage2.50
EthiopiaAgriculture3.50
IndonesiaElectric Power15.00
MoroccoRoads7.30
NepalTelecommunications1.70
PakistanProject Preparation0.80
TanzaniaHighway7.50
Credits extended during the second quarter of fiscal 197038.30
Credits extended during the first quarter of fiscal 197083.40
Total credits extended during the first half of fiscal 1970121.70

Investment in tourism has been recognized as a potentially important area of Bank activity. In the past, tourism was dealt with as a part of the Bank’s other project work. Tourism in a number of member countries has benefited from Bank assistance for the development of transportation and other infrastructure. In addition, several of the national development finance companies established with Bank assistance have made promotion of tourism projects, chiefly hotel enterprises, an important part of their activities. The Bank’s affiliate, the International Finance Corporation, has also undertaken a number of investments in projects designed to develop tourism.

A loan for tourism may take the form of Bank financing for an integrated program of infrastructure works—road or airport construction, provision of better water or power supplies—in an area whose main existing activity is tourism or where tourism is the most promising activity. Alternatively, the Bank may make such a loan to an institution in the borrowing country whose function is to create and develop a tourism complex. Finally, the Bank might make a loan for “superstructure” rather than infrastructure, i.e., hotels and other related facilities designed to attract visitors to an area already possessing adequate basic infrastructure.

Assistance to Industry

Industrialization occupies a significant place in the development plans of most developing countries. Helping the development of industry has been an important aspect of the World Bank Group’s activities for many years. By December 31, 1969, the Bank, IDA, and IFC had committed a total of $2,398 million for the development of industry.

Bank Group assistance for industry has taken various forms. The Group has assisted manufacturing enterprises with financial and technical assistance. It has helped to establish development finance companies in a number of developing countries. The companies play a significant role in the economies of these countries. As well as providing productive enterprises with finance by supplying them with equity or loan capital, or by underwriting issues of their securities, institutions of this kind can give technical and managerial assistance to entrepreneurs, and can act as financial intermediaries, bringing together local and foreign capital and skills for mutually beneficial joint ventures. Moreover, by encouraging the investment of domestic savings in business ventures, development finance companies can also assist the evolution of their countries’ capital markets. In addition IDA credits totaling $580 million have, in some special cases, financed imports of industrial raw materials and components necessary for maintaining and expanding productive capacity.

The Bank plans to play a more active role in the development of industry in less developed countries. Looking toward this goal, the Bank has set up a new Industrial Projects Department with Mr. Hans Fuchs, formerly Director of IFC’s Engineering Department, as Director. The purpose of this new Department will be both to expand Bank lending in the industrial sector and to make practical recommendations to the developing countries as to how best they can accelerate their industrial growth.

The Bank has also taken steps to augment the resources of IFC. In December 1969, the Bank agreed to lend IFC an additional $100 million to provide funds for the Corporation’s lending operations.

IFC is the member of the Bank Group that furthers economic development by encouraging the growth of private enterprises. In 1966, IFC made arrangements to borrow $100 million from the Bank, and has since made loan commitments covering nearly all of that amount. The earlier loan and the $100 million now being provided are being consolidated into a single loan of $200 million.

Aid Coordination

The Consultative Groups on development assistance to Tunisia and Morocco met under the chairmanship of the Bank during the quarter ended December 31, 1969.

The Consultative Group for Tunisia, which has been in existence since 1962, met in Paris on October 23 and 24. Members of the Group that attended the meeting were Belgium, Canada, Denmark, Finland, France, Germany, Italy, Kuwait, the Netherlands, Spain, Sweden, Switzerland, the United Kingdom, the United States, the African Development Bank, the International Monetary Fund, the United Nations Development Program (UNDP), and the Bank and IDA. Attending as observers were representatives of the European Investment Bank and the Development Assistance Committee of the Organization for Economic Cooperation and Development (OECD).

The Group heard reports by the Bank and the Tunisian Secretary of State for Planning and Finance on Tunisia’s current economic situation and its plans for the future, and discussed ways in which members of the Group could contribute to Tunisian development. The Secretary of State described the scope and character of the new Four-Year Plan and the important recent changes in policy relating to agriculture. The Group welcomed the proposed economic policies and the changes in the organization of agricultural production. Members of the Group expressed satisfaction with the recent progress made by Tunisia and concluded that the country’s performance and development prospects justified continued assistance. Members also described the size and character of their respective programs of assistance to Tunisia. They recognized, however, that Tunisia was facing serious problems of balance of payments and urged that new foreign borrowing be on more extended terms and that aid on concessionary terms continue to be made available.

The second meeting of the Consultative Group on development assistance to Morocco was held in Paris on October 21 and 22, 1969. Members of the Group attending the meeting were Belgium, Canada, France, Germany, Italy, Kuwait, Spain, the United Kingdom, the United States, the Fund, UNDP, and the Bank and IDA. Attending as observers were representatives of Denmark, the Netherlands, Switzerland, the European Investment Bank, and the Development Assistance Committee of OECD.

The Group heard reports by the Bank and the Finance Minister of Morocco on that country’s current economic situation and its plans for the future, and discussed ways in which members of the Group could contribute to Moroccan development. The Minister explained the objectives of the Development Plan 1968-72 with its emphasis on agriculture, tourism, manpower development, and population planning, and the measures which the Government was taking to mobilize the internal resources to help carry them out. It was generally recognized that these efforts could not meet all of Morocco’s needs and that continued assistance from members of the Group was necessary if the objectives of the Plan were to be met. Members of the Group expressed satisfaction with the progress that Morocco has made since the first meeting of the Group. The Group concluded that Morocco’s recent economic performance and development prospects justified continued assistance from members of the Group in order to maintain and increase the momentum already achieved.

IFC Investments

Three commitments made by IFC during the fourth quarter brought the Corporation’s total commitments in the 1969 calendar year to approximately $88.2 million.

Joining 15 sponsoring Yugoslav banks and 39 European, U.S., and Japanese banks, IFC helped to finance the International Investment Corporation for Yugoslavia (IICY). Through this new company, private businesses can invest in joint industrial, agricultural, tourist, and other service ventures in Yugoslavia (see Finance and Development December 1969, also Finance and Development Interviews William S. Gaud of International Finance Corporation, in this issue). The Corporation subscribed to $2 million of IICY’s initial equity capital of $12 million.

IICY’s Board of Directors held its first meeting in Paris on December 8, 1969. Operating headquarters of the new company were opened in London on January 15, 1970, temporarily in offices supplied by Barclays Bank Limited, a shareholder of I ICY.

Also during the fourth quarter, IFC made its third investment in Turkey in 1969 when it joined Turkish and Danish sponsors to establish Viking Kagit ve Seluloz, A.S. The Corporation committed $3.1 million in loan and equity to this $9.2 million project, which is planned to be the largest privately owned paper manufacturing operation in that country.

The Viking plant is expected to begin commercial operations early in 1972. The company plans to concentrate initially on quality wrapping paper and toilet tissue, and to market converted products such as envelopes, napkins, and shopping and other bags. The second phase of the project is scheduled for 1972-75, and will expand the plant to produce, in addition, 23,500 metric tons of quality writing and printing paper and 10,000 metric tons of bleached wood or straw pulp annually.

Joint Operation

For the first time, IFC joined with the Private Development Corporation of the Philippines (PDCP) in financing a development enterprise—the expansion of a producer of glazed ceramic floor and wall tiles in the Philippines. PDCP is a private development finance company established in 1962 with the assistance of the World Bank and IFC.

The IFC commitment of $1.3 million to Mariwasa Manufacturing, Incorporated, is part of $4.1 million being raised by the company to finance its expansion program and to supply it with additional working capital. The expansion will enable the company to increase its capacity by 75 per cent, from 9.4 million square feet a year of glazed ceramic floor and wall tiles to 16.4 million square feet. The additional 7 million square feet of tiles a year that will result from the expansion is intended for export.

The IFC commitment to Mariwasa is a stand-by undertaking, available to Mariwasa if the company does not arrange other financing on satisfactory terms. The Corporation agreed to purchase up to $512,820 equivalent in convertible preferred shares and to make a loan of up to $769,000.

The Headline-Making Pearson Commission Report

The Report of the

Commission on International Development

Lester B. Pearson, Chairman

The full report of the Commission established by the World Bank in response to the crisis of declining foreign aid appropriations. Under the direction of Lester B. Pearson, former Prime Minister of Canada, the Commission presents its findings and recommendations “with fresh clarity, candor and conviction…. The fate of this crucial report and of the world community for which it pleads depends on the response it evokes in Washington.”—lead editorial in The New York Times of Sunday, October 5, 1969.

“I am convinced that it will become one of the most important documents of the twentieth century.”—British Prime Minister Harold Wilson.

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THE INTERNATIONAL MONETARY FUND, 1945-1965 Twenty Years of International Monetary Cooperation

Vol. I. Chronicle,680 pp.

Vol. II. Analysis,640 pp.

Vol. III. Documents,549 pp.

Price:$12.50 the set ($5 a volume if sold separately), or the equivalent in the currency of any member of the Fund.

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Automotive Industries in Developing Countries

by Jack Baranson

World Bank Staff Occasional Paper No. 8

Against the background of world industry in which economies of scale are of predominant importance, this book examines the problems of adaptation faced in the transfer of automobile production to a newly industrializing economy. It provides data on comparative production costs in three Latin American countries, the United States, and India and analyzes in some depth the relative cost problem in Argentina, New Zealand and Yugoslavia. From the evidence presented, the study concludes that in 1965 the over-all cost for manufacturing automobile products in developing countries was some 80 per cent above the world market (mainly U.S.) level. A strategy to reduce this excess cost is suggested.

Manufacture of Heavy Electrical Equipment in Developing Countries

by Ayhan Cilingiroglu

World Bank Staff Occasional Paper No. 9.

This study analyzes the attempt of industrializing countries—Argentina, Brazil, India, Mexico, Pakistan and Spain, particularly-to compete in the field of transformers, generators, heavy switchgear, motors, etc. The author finds that the dominance of large international firms and the falling real price of such equipment over time have made the task of the new competitors more difficult.

Case studies of costs of equipment in developing countries include calculations of effective protection and domestic resource cost per unit of foreign exchange saved. They also illustrate some practical problems faced by such manufacturers. For example, essential raw materials, in particular, often cost much more than in developed countries even though they are internationally traded. Finally, the author provides some data on relative price trends which suggest that, over time, competitiveness has improved for some products, and that the infant industry argument may have some validity.

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Aluminum ingot awaits shipment from Norway, the leading supplier of the metal to the European market. Norway has expanded its manufacturing industries in the framework of an open economy with low tariff barriers, an example that might have advantages for developing countries already possessing an industrial base. Read “Industrial Development in an Open Economy” in this issue.

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