Before I call upon the President of the World Bank Group of organizations and the Managing Director of the International Monetary Fund to present their reports on the year’s activities and their plans for the future, I should like to make a few introductory remarks.

Before I call upon the President of the World Bank Group of organizations and the Managing Director of the International Monetary Fund to present their reports on the year’s activities and their plans for the future, I should like to make a few introductory remarks.

First, I want to thank the Governor for the United States for his message of welcome. We are grateful to the Government and people of America for the gracious manner in which they are once again welcoming us for our Annual Meetings. I wish to extend a warm welcome to all Governors, Alternates, and other members of official Delegations, to those who will participate in the many consultations during these meetings, to observers representing countries which have applied for membership and those representing other organizations, and to our guests from the financial community and from the press. I would also like to extend my special welcome to the Governors for Malawi and Zambia, who for the first time are participating at these Annual Meetings. Their membership will no doubt be of added strength to the Bank Group of organizations and to the Fund.

These Annual Meetings are always landmarks, for on no other occasion do those responsible for the financial and economic policies of so many nations meet, compare experiences, and consult together on their problems, policies, and programs. For several years these meetings have reflected the increasing preoccupation of all our members with the two fundamental and interrelated problems which concern us both in our official capacities at home and as Governors of the Bank and of the Fund. The first problem is, how to improve the volume of international liquidity so that it will meet the needs of expanding trade among all nations and of accelerating economic growth, particularly among our less developed members. The second is the problem of how to provide adequate financial resources for the task of development, without so burdening the borrowing countries with ill-timed debt as to turn sour the sweet fruits of growth.

These two vital questions—the form and volume of development finance and international liquidity—have been major topics at previous Annual Meetings, at the United Nations Conference on Trade and Development, and at many other gatherings of leaders in the field of finance and development in recent years. The first is characteristically the concern of the World Bank Group, the second, that of the International Monetary Fund. In referring briefly to the activities of the two organizations since we last met, it is only natural and convenient to consider the two problems in turn. But I must emphasize that we are really discussing problems which are closely interrelated and which are the common concern of both developed and developing countries, since world prosperity depends alike on appropriate answers to the question of the pace of development and to the question of international liquidity.

The past year has been an eventful one for the World Bank Group, and I believe that I reflect the view of most Governors when I say that the Group has expanded its influence and justified our continuing faith in its ability to meet the many challenging and complex issues of economic development. And it is no less true today than in the past that the Bank’s capacity for imagination, flexibility, and growth is attributable in large measure to the skill and dedication of its staff and to the vision of its leadership.

The last two years have no doubt been one of the most progressive periods in the history of the Bank Group. We have watched with deep satisfaction the increasing flexibility brought about in the policies under the able leadership of Mr. Woods, so that these institutions became better equipped to make greater and more fundamental contributions in accelerating the rate of economic development. This is reflected in the recent policy of the Bank to increase assistance in the fields of agriculture and education.

That many obstacles to economic growth are not yet overcome is borne out by the Annual Reports of the Bank Group. In fact, one of the most useful contributions to our discussions is the staff study, contained in this year’s Annual Report of the Bank and the International Development Association, analyzing “Trends and Outlook in Development Finance.” I, for one, welcome this public appraisal of the economic and financial environment in which development must take place.

The findings leave us little room for complacency. While there is no doubt of the technical capacity of this world to overcome the crippling disabilities of poverty and ignorance, the will to succeed will bear fruit only in an atmosphere in which all, both developed and less developed, are prepared to see and act on the facts, Toward the creation of such an atmosphere, the Bank has made another contribution.

Further contributions toward the same end, I am confident, will be made through the studies which the Bank staff is currently undertaking at the request of the United Nations Conference on Trade and Development. As you know, these studies are concerned with some of the most crucial and perplexing problems in the field of international trade and development. We have received the report of one such staff study dealing with the proposal made by Governor Horowitz to the UNCTAD in 1964, designed to increase the flow of capital to the developing countries on IDA terms. The staff’s analysis and identification of the main policy issues have helped to clarify some of the complex problems involved in this imaginative proposal. We are now looking forward to the results of further studies which we can confidently expect will do equal justice to the Bank’s reputation for technical competence and objectivity.

The Bank has been no less objective in reappraising its own role and that of its affiliates, and in seeking and implementing new policies and new approaches to the problems of development. The details are available in the Annual Reports, and I shall confine myself to a brief summary of what seem to me the most significant innovations from the point of view of the developing countries.

First, it has been explicitly recognized that agriculture and education, being basic to development, are no less the concern of international development institutions than highways, ports, factories, and electric power systems. Already, in a very short time, the Bank’s new programs in these fields, pursued in conjunction with the Food and Agriculture Organization of the United Nations and the United Nations Educational, Scientific, and Cultural Organization, have begun to produce encouraging results. I believe they will have a beneficial effect far beyond the limits of Bank and IDA financing for agricultural and educational projects.

Second, and at least equally important, has been the Bank Group’s intensified concern with the problems of industrial development. Over the years, the three institutions together have provided more than $1,600 million to assist the growth of industry. IFC now acts for the whole Group in technical evaluation and supervision of industrial and mining projects, and the Corporation’s role as the Bank’s principal instrument for industrial development will be further strengthened when governments complete the process of approving amendments to the Articles of Agreement, adding greatly to IFC’s potential resources.

Other important and welcome innovations have been the adjustments that have been made in the Bank’s lending terms, taking account, whenever possible and appropriate, of the economic position of the borrower; the reduction by 50 per cent of the commitment charge on outstanding portions of Bank loans; and the evidence of greater willingness on the part of the Bank and IDA to consider the financing of local currency expenditures in connection with important priority projects which might otherwise have to be postponed or abandoned.

An important achievement of the past fiscal year, which is a monument to the diligence and tenacity of the Bank’s President and of its General Counsel, Mr. Broches, is the Convention on the Settlement of Investment Disputes Between States and Nationals of Other States, which Convention I had the privilege to sign last week on behalf of my Government.

Even though no one associated with the Bank expects the voluntary procedures provided for by this Convention to work miracles, they could, no doubt, bolster confidence and result in a gradually growing flow of private investment to the less developed countries. If the Convention does this, it will more than justify the months and years of effort that have been devoted to it.

It is also gratifying to know that the Bank is determined, after long and careful study, to do all it can to improve the effectiveness of existing coordinating groups, and to organize new ones whenever this can be done in a way that will advance the development of a member country.

For many years, the Bank has provided a wide range of technical assistance to its less developed members, and this phase of its activities has been so expanded as to become almost a new kind of service. I refer not only to increases in the budgetary allotments for economic surveys, for studies of development programs and projects and for other forms of assistance, but also to the establishment of special offices to assist the governments of Eastern and Western Africa in the identification and preparation of projects. These offices in Africa will, I hope—as they have indeed started to do—continue to work in close cooperation with the African Development Bank in Abidjan. In addition to helping the preparation of projects for individual countries, these special offices could also assist in working out multinational projects, so that a coordinated development can be realized in the various regions of the African Continent.

I refer also to the cooperative arrangements with FAO and UNESCO and to the commendable efforts of the Economic Development Institute to adapt its valuable training programs to the needs of members. Many of us also applaud the agricultural and industrial project evaluation courses as well as the general development course.

I shall say only a few words about a most crucial question: the replenishment of IDA’s resources. As the Bank staff has said in the chapter of the Annual Report on “Trends and Outlook in Development Finance,” the falling due of IDA replenishment “affords an opportunity to adapt government policies to present conditions.” Present trends, one must conclude, are not entirely favorable. The outlook does not inspire unalloyed confidence. The facts point inescapably to the need for a far larger volume of finance for development on IDA terms. Industrialized countries in whose favor the terms of trade have been improving during the past few years, and those who have been accumulating the balance of payments surpluses, should now be invited to contribute substantially to the resources of IDA, and at the same time to make a conscious effort to increase capital exports to those countries which suffer from adverse balance of payments and adverse terms of trade. Let us hope that the opportunity to adapt appropriate and timely policies to meet present conditions will not be lost.

Turning now to the Fund, the discussions at this meeting provide us with an opportunity to build upon the developments of the past year. You will all recall that in our meetings in Tokyo a year ago the Fund discussions centered around two themes: the first related to the problems which confront developing countries in trying to fulfill their obligations as Fund members in the face of the overwhelming task of improving the lot of their peoples; the second, which was the subject of the most direct and vigorous confrontation of differing economic viewpoints we have witnessed in these meetings, dealt with the question of international liquidity.

The problems of the developing countries are no less acute than they were a year ago. Indeed, the worsening of terms of trade which many of us have experienced during recent months makes it likely that our balance of payments position in the immediate future may be significantly more difficult than could have been predicted at Tokyo. If this should prove to be the case, all other sectors of our economies are likely to be under strain, since it is in the nature of a developing economy that there is little or no room for maneuver to meet unfortunate contingencies. For this reason I am glad that the Report of the Executive Directors deals extensively with two aspects of the problems which are special to developing countries. I refer to the chapter relating to their fiscal systems and to their external debt problems. I welcome the expanded activities of the Fund in these fields and hope that they will be pursued with vigor in the forthcoming year.

These are not the only problems which make it difficult for developing countries to enter fully into a community of stable exchange rates and minimal external restrictions. I am sure that Governors from such countries will dwell on many others in their statements this week. They will be talking, not of the margin between greater and lesser affluence for their people, but of that harsher margin which separates a small measure of comfort from mere existence—or, indeed, starvation.

During the past year there has been a continuation of the dialogue on liquidity which began in our Tokyo meetings. This has permitted a considerable refinement of concepts and of alternative techniques, but it is clear that no final meeting of minds has yet emerged. The Fund Report has quite rightly expressed the view that it is important that further progress be made toward a truly international consensus about the way in which the international monetary system should develop.

In that Report, the Executive Directors indicate that, while they have not yet attempted to reach a common view on the merits of the various possibilities which they have outlined, they intend to devote further attention to these matters during the coming year. This intention is not only welcome, but also necessary. As Governors, we look to those who are charged with devoting their full attention to our interests—the Executive Directors, the management, and the staff of the Fund—to provide us with ways to deal with the complex technical problems of a modern international monetary system.

But, as Governors, we can, and rightly must, state what broad lines such solutions must follow. I should like to offer some observations, which I hope will be given careful consideration by the Executive Directors of the Fund.

My observation is this—the Fund was conceived, and has operated, as an organization devoted to the interests of all of its members. This means that approaches to the question of international liquidity and the reform of the international monetary system should not fail to take fully into account those interests. The Fund provides the machinery for consultation and collaboration on international monetary problems. This concept of a broadly based international institution was a sound one, and the experience of the last 20 years testifies to this. A majority of the countries represented in this room have had the occasion to welcome the timely financial assistance of the Fund, and all have benefited from its consultative functions; our fortunes are closely intertwined. Any planned or fortuitous change in the status of international liquidity, as, for example, in the status of the reserve currencies, is as vitally important to the developing as to the highly industrialized countries. Governors can only fulfill their international responsibilities by discussing what affects all members in the forum in which all members are represented. Indeed, if it should be decided to convene an International Monetary Conference of the kind to which the Governor for the United States recently referred, to what other vehicle can we as effectively resort as to the Board of Governors of the Fund? To restrict the decision on matters affecting the reform of the international monetary system, a problem of world magnitude, to ten or so major industrialized countries, will be contrary to the spirit which we have tried to foster since the foundation of the Fund.

What I have said about the four institutions which are meeting here today illustrates that there is much to be done in the years ahead to push further with the very useful work they have done in the past. We may have confidence that the institutions, under the vigorous and far-sighted leadership of Mr. Woods and Mr. Schweitzer, will do what is necessary to undertake these tasks. They will want the guidance of this body, and I therefore invite Governors to speak, in the days ahead, frankly and forthrightly on the problems which they face, and on the course which they think the institutions should follow.


Delivered at the Opening Joint Session, September 27, 1965.