Annual Address by GEORGE D. WOODS President of the Bank and its Affiliates SHOULD LIKE first to join the Chairman nant continuing problem. In the case of In any event, Bank assistance for IDA I in thanking His Excellency, the President of Brazil, for his words of welcome. His the Bank, the consequence of a high rate of disbursement plainly must be large bor- can only be marginal; the chief supporters will always be the more prosperous mem- country comprises nearly half the area and rowings. Since our last meeting we have ber countries. Agreement among govern- population of South America. It is two and arranged to borrow $700 million, of which ments concerning the amount, the shares, a half times as large as Western Europe, $380 million was new money and $320 and the conditions of the next replenish- including the British Isles and Scandina- million was for refunding. ment of IDA's finances has not yet been via, and has a fourth of the population- Over the past year, IDA has been able reached. This past summer, however, dis- there are about 87 million Brazilians. It is to make commitments and carryon its cussions of these questions have become rich in minerals and agricultural resources. operations, due in large part to extraordi- both more concrete and more intense, and It has a third of all known iron reserves nary support given to the Association from I am encouraged to feel that they will now and the world's fourth largest potential several sources. The Swedish Govern- move forward to definite conclusions. In for hydroelectric power. In production, it ment, for the sixth consecutive year, made fact, I feel that here-in the atmosphere of ranks first in coffee, third in manganese, a welcome special contribution to IDA. this Meeting-solutions may begin to take fourth in sugar, and eighth in iron ore. The Swiss Government has started legis- form. I am sure all concerned recognize Despite a long history of recurring eco- lative machinery for authorizing a loan to that it is essential that the IDA replenish- nomic difficulties, Brazil has managed in IDA on the same highly concessionary ment be agreed upon as rapidly as pos- the last 20 years to triple its Gross Na- terms IDA accords to its borrowers-a sible and that results be achieved which tional Product and to more than double the loan which will break new ground in IDA will permit IDA to respond, much more real per capita production and income of finance, being the initial borrowing by the adequately than in the past, to the priority its people. This is a vast and fascinating Association. And the Bank, with the ap- needs of the less developed countries. country which well mirrors the aspirations proval of the Governors at last year's Mr. Chairman, when we turn from our and the problems of the developing na- Annual Meeting, made a transfer to IDA own operating preoccupations to look tions. We are happy to be here. from its net earnings of the fiscal year around us, we see a troubled world. Pain- Mr. Chairman, you and the other Gover- 1965/66. ful dislocations and adjustments are tak- nors have the detailed record of the World This year, the Governors are asked to ing place in nations of Africa, Asia and the Bank Group's activities of the past fiscal approve Bank support for IDA again, but Middle East. year in the Annual Reports of the Group- only in a token amount. The Governors will During the past year, conflicts, domestic the World Bank itself, the International recall that Bank transfers to IDA have been and external, have pre-empted the ener- Finance Corporation (IFC) and the Inter- considered each year in the light of the gies, the concern and the resources of national Development Association (IDA). Bank's own financial position. The guiding nations, both industrial and developing. I will not take your time by repeating what policy, approved at Tokyo in 1964, has The tragedy of armed conflict and prepa- you already have before you on the printed been that transfers are made only in rations for it is more than the diversion page. Suffice it to say that the operations amounts "not needed for allocation to re- of manpower and scarce funds from pro- of the Bank Group continue to grow. Once serves or otherwise required to be retained ductive uses. The tragedy is also in the again commitments were more than a bil- in the Bank's business and (which), ac- turning away from development it pro- lion dollars and in more numerous and var- cordingly, could prudently be distributed duces around the world. Conflicts, within ied transactions than before. The growth as dividends." and among the developing countries espe- of the operations of IFC, our private enter- The transfer to IDA recommended this cially, feed the prophets of doom who prise arm, now newly backed by a line of year is in a token amount for a simple claim that economic development does not credit from the Bank itself, was especially reason: the volume of Bank disbursements, work. They slow whatever momentum may marked. Disbursements of the Group ex- against commitments previously made, is have been achieved. They harm not only ceeded a billion dollars. Technical serv- rising; and the needs of the Bank for the countries directly involved; they harm ices to members increased. Our activities finance to carryon its operations, as I the cause of development everywhere. in the coordination of aid continued, and have said, will be correspondingly heav- Deep-rooted social unrest short of out- we feel that we are slowly making head- ier. At the same time, the Bank has not right conflict exists in many societies, and way in this complex and vital task. After been given the access to capital markets solutions are neither simple nor swift. several years of preparation, we brought that its operations warrant. We have been Towering high over all the economic prob- into being the International Centre for Set- disappointed, but I hope only temporarily, lems is the fact of rapid population growth tlement of Investment Disputes to encour- in our plans for offering long-term issues -now proceeding fast enough to double age the flow of private investment into the in several European member countries. It the population of the less developed coun- less developed countries. is highly desirable that we borrow sub- tries in a single generation. Here in Brazil, For the second consecutive year, I must stantial amounts in those markets in the it is expected almost to double in twenty report to you that finding finance for the current fiscal year, and there is good evi- years. It is encouraging to see some coun- operations of the Bank and IDA is a domi- dence that we will be able to do so. tries beginning to make advances in the 6 field of population control, but present of multilateral agencies, there are reasons capita income bracket of only $300 to $600 measures constitute only a beginning. for discouragement. a year. There are at least 25 countries 1 , Experts say that at best, the rise of On the other hand, this situation is not many of them from this income group, in population curves will not begin any pro- exceptional. There have been many years which Gross National Product grew dur- nounced deceleration for another 15 or 20 in which exactly these same observations i ng 1966 at a rate between five and ten per years. In that time, the less developed could have been made at the Annual Meet- cent, and there are nine countries 2 in which countries must greatly increase both the ing of this Board of Governors. Progress recent average growth rates, if continued, output and the nutritional value of food: is always slow, always difficult. The way will double Gross National Product within they must produce more, both to feed ahead always seems blocked by frustra- the 1960s. more people and to feed people more. tions, postponements, errors of commis- The economies of many developing The food requirements - to double the sion and, even more, of omission. But we countries have been maturing. Progress present output by 1980 and to triple it by must plough ahead. Responsible and dedi- in the industrial sector, as we all know, the end of the century according to the cated ministers in developing countries has been particularly rapid, and exports Food and Agriculture Organization of the should not lose heart. Harassed parlia- of manufactures, while still originating United Nations-seem staggering. ments and men of broad vision in indus- chiefly in a limited number of countries, However, none of the formidable prob- trialized countries should take a second have increased by 70 per cent in the 1960s. lems facing the developing countries can breath as we approach the close of the Institutions have also matured-evidenced be attacked singly or by technical means Development Decade of the Sixties and by an encouraging flow of technical assist- alone. The world is not going to be saved face the Seventies. Each must at intervals ance among the less developed countries simply by chemical fertilizers and "the appraise the problems of the other. In the themselves. An impressive infrastructure pill." The changes needed by the less de- interest of the long-range well-being of of physical facilities, especially in the veloped countries touch virtually all of both, there must be a constructive recon- form of power installations and transpor- society. They will come about as part of ciliation between the natural impatience tation services, representing billions of a larger transformation of social and eco- of the poorer, newer nations on the one dollars, has been put in place. And-for nomic organization-as part of the larger hand, and the pressing problems facing the first time in history-the improvement process we call economic development. the legislators and Cabinet ministers of of the fortunes of mankind has been ac- In that process, education must playa the rich countries on the other. cepted as an international objective and pervasive part, teaching new skills and The Chinese have a proverb that a jour- responsibility. cultivating new attitudes toward social and ney of a thousand miles must begin with Those of us who are deeply involved economic change. In too many of the less a single step. In the case of economic with the problems of the developing coun- developed countries, however, educational development, we have taken not only the tries necessarily think and talk a great deal systems are not yet adequate for this single step but many, many steps beyond about the difficulties we face. I would like essential purpose. They have yet to strike that. Over the years, all those steps add to hear more talk about some of the suc- a proper balance between various levels up to a journey for which there is no exact cess stories in development. It is time that and kinds of education, and in too many precedent in the history of man and from we began to say to the taxpaying public cases, the curricula being followed were which, I believe, there is no turning back. and the legislatures of the industrial coun- not designed for, and have not been Remember that for most of history the tries that the development effort they are adapted to, the country in which they are lot of human beings has fluctuated only and will be asked to support can be suc- being taught. The schools and universities between varying degrees of poverty. For cessful and has been successful in some are not yet doing enough to develop farm- most of mankind, life has been nasty, important sections of the world. Among ers, engineers, administrators, teachers brutish and short. the countries which would currently be and the legion of other skilled workers Something new is happening in today's on my personal list for special mention geared to the development needs of the world. Over the past 15 years, economic for economic achievement would be Iran, economy. growth in less developed countries em- Israel, Korea, Malaysia, Mexico, Pakistan, Development takes capital. Four-fifths bracing not less than half of mankind has the Republic of China, Thailand, Tunisia, of the investment being made today is be- been proceeding as fast as in the indus- Venezuela and Yugoslavia. ing made out of the resources of the de- trialized countries. Over this span of 15 The reasons why some countries have veloping countries themselves, but the years, the Gross National Product in the been more successful than others are dif- all-important leaven for the loaf must developing countries has more than dou- ferent from case to case, but they are not come from outside. With the rate of private bled, and per capita income-despite the international investment currently down, rapid growth of population-has increased llncluding Bolivia, Chile, Colombia, Costa Rica, Greece, Guatemala, Honduras, Jamaica, Kenya, Korea, Malaysia, with parliamentary bodies in some of the by 40 per cent. Mexico, Nicaragua, Nigeria, Panama, Peru, Philippines, largest aid-providing nations reluctant to Among the countries of the world, the the Republic of China, EI Salvador, Spain, Tanzania, Thailand, Trinidad & Tobago, Turkey and Venezuela. augment bilateral programs, and with de- fastest rate of growth, in fact, is now being 'Greece, Israel, Jordan, Korea, Nicaragua, Panama, the lays in enlarging the financing capability experienced by those nations in the per Republic of China, Spain and Thailand. 7 mysterious or unidentifiable. The Bank is caused, in part, by mistaken policies- tiona I Product of the industrial countries, continually informed about both progress among them, overvalued exchange rates the flow of public and private finance to the and setbacks in the development perform- and too much priority to import substitu- developing countries is one hundredth; ance of its member countries. It is our tion, no matter how uneconomic. In part, but as a proportion of what the developing business to know why things work well it is due to neglect of quality and continu- countries have available to invest in de- when they do and why things go badly in ity of supply. But some part of the difficulty velopment, it is one-fifth. Here again, a other cases. Our conclusions about the has been the lack of cooperation given by change that would be marginal to the in- facts of economic growth and our judg- the industrialized countries through the dustrial countries would be greatly mag- ments about the effects of various factors, removal of impediments to the exports of nified in the finances of the poor. including government policies, in promot- the developing countries. Apart from the question of volume, ing or impeding that growth are regularly Suppose that the exports of the less de- which currently presents very real politi- communicated to member governments, veloped countries, instead of declining as cal and budgetary problems in certain in- through our Executive Directors, in our a proportion of world trade, had been able dustrialized countries, much can be done economic reports. I commend these re- last year to maintain the same modest to enhance the value of such development ports to any Governor who may from time position that they had occupied five years finance as is available. to time need evidence to sUbstantiate the earlier. On that supposition, the less de- claim that economic development, where veloped countries would have had a 1 First, greater continuity of financing it is pursued with vigor and intelligence, from one year to the next would lead to per cent larger share of world exports- is worthy on merit of the support of the a steadier and more effective effort in the and that 1 per cent would have earned industrialized nations. developing countries themselves. The steps them well over $1 billion more of foreign That is not to say that progress has that several countries are taking to formu- exchange than their exports actually did been fast enough, or that throughout the earn in 1966. late their annual development assistance less developed world, the formidable bar- If a 1 per cent adjustment in shares budgets within the framework of multi- riers to self-supporting economic growth of world export trade would bring about year targets is greatly to be welcomed. are about to fall. But forward movement is a billion-dollar improvement in the for- Second, the long-debated question of under way, and on an enormously wide tunes of the poor countries, then surely the terms of aid has become acute. If the front-forward movement that has tangi- the matter is worth consideration and ac- volume of development finance does not bly affected the lives of present genera- tion. Price stabilization for selected pri- grow, and if there is no improvement in tions in the developing countries, and mary products is a closely related subject the terms, development aid will simply promises still more for the generations to simi larly entitled to consideration, even eat itself up. Service on past official debt, come. though it admittedly presents difficult including both interest and amortization, Mr. Chairman, I am increasingly im- problems. If the less developed countries already offsets two-fifths of the official pressed-and at times depressed-by the are encouraged - and permitted - to im- flows of capital to the developing coun- scope of the changes which traditional prove their export earnings, many prob- tries. For some aid-giving countries, the societies must make in order to modernize lems will become more manageable: net transfer of official capital, on the basis themselves. These changes have to reach external debt crises will be fewer, the of present policies, soon will be zero. to the very core of the lives of peoples in need for aid will diminish, the attraction Since 1962, as our Annual Report relates, the less developed countries. By contrast, for private capital will grow. payments on debt service have more than in the industrialized countries, only mar- On the volume of development finance, doubled in East Asia, have increased by ginal changes in their relations with the Mr. Chairman, my views are well enough 90 per cent in South Asia, and have risen underdeveloped countries would be of the known not to need-and perhaps not to by almost 75 per cent in Africa. Latin greatest significance. bear-repetition today. Official transfers American debt continues to be heavy. Take trade: as we know, exports-espe- from the industrial countries to the less Almost half of all current debt service is cially of primary products-are the chief developed nations have only slightly in- on suppliers' credits, often due to be re- source of foreign exchange for the less creased over the last five years, while the paid before the equipment they finance developed countries. They provide about output and the income of the industrial has begun to make a perceptible contri- four times as much as official develop- countries have been bounding vigorously bution to the productivity of the borrowing ment finance and international private in- to new highs. country. On average, the terms of develop- vestment. Export earnings, historically, The available amount of international ment finance are little, if any, better than and for most developing countries today, development finance is falling farther and they were five years ago. The absolute are the main fuel of development. farther behind the economic capacity of essential, if development assistance is not The total exports of the less developed high-income nations to provide it, and to become an exercise in self-defeat, is for countries, however, have not been grow- farther and farther behind the capacity of a decisive move toward much longer grace ing suffiCiently fast. For some countries, developing countries to use it produc- periods and repayment terms as well as the lag in export growth has been tively. As a proportion of the Gross Na- toward lower initial interest rates. 8 Third, with my experience of the past achieved in the world, unless the ever What began tentatively as the develop- five years-this is the fifth year that I have more violent and disastrous incidence ment effort after World War II is now estab- the privilege of addressing this Governors' of war can be averted, unless some con- lished as a planet-wide undertaking of meeting-I continue to believe that assist- trol can be imposed on the headlong some concern to every government on ance provided through multilateral chan- waste of man's limited inheritance of earth. When the story of our times is writ- nels has advantages of objectivity, econ- coal, oil, and moral energy that is now ten, historians may mark as their out- omy and suitability of which donor coun- going on, the history of humanity must standing contribution the idea that human tries should take greater advantage. In presently culminate in some sort of dis- progress can be deliberately planned, en- this connection, even though the funds aster, repeating and exaggerating the gineered and brought about-and further, flowing multilaterally are not yet adequate, disaster of the Great War, producing that progress need not be confined to the I am encouraged by the amount of devel- chaotic social conditions, and going on minority of the world's population which opment assistance now being designed thereafter in a degenerative process to- lives in wealthy countries. I hope too that within multilateral frameworks - through wards extinction." our times will be noted for the moral im- such devices as consortia and consulta- This prophet was the British author, Mr. perative that has caused the nations to tive groups. H. G. Wells, writing after the First World organize and work together in the cause Finally, let me observe that the effective- War. Mr. Wells was right: mankind did re- of development. Although sometimes ob- ness of development finance would be peat and exaggerate the disaster of the scured, that motive is always at the foun- particularly enhanced if aid-providing First World War in World War II. Whether dation of all our efforts. Indeed one of countries were to evolve common strate- the rest of his prophecy will be fulfilled today's most hopeful signs is the clarion gies of assistance. Economic development remains to be seen; but, certainly, creative restatement of that imperative by those would benefit greatly if the donor coun- acts are even more needed in our day than world leaders who concern themselves tries had consistent and mutually reinforc- they were in his. ing views about the objectives they wish with morality and destiny-by Pope Paul In the field of economic development in his encyclical of last spring, "On the to achieve in their relationships with the and development assistance, policies and Development of Peoples," and by the developing world, about the importance performance that were tolerable 20 or World Council of Churches, earlier this of these objectives to their own national even 10 years ago are not good enough year, in the Report of the World Confer- interests and about the level of resources, for today-they are not likely to survive ence on Church and Society. the mechanisms and the techniques which tomorrow-and this is true with respect should be employed to achieve these Mr. Chairman, it is the proud task of the to both developing and industrialized objectives. Bank Group and its member governments countries. Mr. Chairman, you probably remember to engage in a mission of noble purpose. the story of Cassandra, the Trojan prin- The past is not a sufficient guide, for There exist on this planet the knowledge cess of 3,000 years ago who correctly the situation of humanity today is unprec- and resources to create a future in which foretold the perils that confronted her peo- edented. Never in the past was so much mankind can be decently fed, clothed, and ple, and who, for her pains, was thrown of mankind caught up in a single issue. housed, and beyond that, in which men- from the battlements of Troy. Let me quote Never has technical change been so basic individual men and women-can devote today from a prophet who suffered a less and so effective. Never has social change their talents to improving the quality of disastrous fate. He said: been so rapid. Never has the increase of "The urgent need for a great crea- population been so swift. Always before, life for all. tive effort has become apparent in the the world's opportunities and problems in- Now let us gather the resolve to work affairs of mankind. It is manifest that creased by addition; now they are growing with all our force and ingenuity to make unless some unity of purpose can be by multiplication. that futu re real. 9