10919 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT SECOND ANNUTAL REPORT 1946 - 1947 K. S. Venkatraman SECOND ANNUAL REPORT TO THE BOARD OF GOVERNORS FOR THE YEAR ENDED JUNE 30 (INCLUDING LENDING AND BORROWING OPERATIONS TO AUGUST 10) 1947 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT WASHINGTON, D. C. INTERNATIONAL BANNK FOR RECONSTRUCTrIoN AND DEVELOPMENT September 11, 1947 My dear Mr. Chairman: In accordance with Section 10 of the By-Laws of the International Bank for Reconstruction and Development, I have the honor to submit to the Board of Governors the Second Annual Report of the Bank, as approved by the Executive Directors. This report includes financial statements as of June 30, 1947, based on an audit of the accounts of the Bank made pursuant to Section 19 of the By-Laws. It also incor- porates, pursuant to Section 19 of the By-Laws, an administrative budget for the fiscal year ending June 30, 1948, prepared by the President and approved by the Executive Directors. While the financial statements cover the fiscal year ended June 30, 1947, the remainder of the report reflects the activities of the Bank for the period from the first annual meeting of the Board of Governors to August 10, 1947. Sincerely yours, JOHN J. McCLOY President THE RIGHT HONORABLE HUGH DALTON, Chairman, Board of Governors, International Bank for Reconstruction and Development. TABLE OF CONTENTS PAGE INTRODUCTION . ............................................................ 5 ROLE OF THE BANK . ........................................................ 7 Unanticipated Post-War Needs .......................: 7 Underlying Concepts ................ ......................................... 8 The Problems . .............................................................. 8 General ................................................................... 8 Europe ................................................................... 9 Latin America, Asia, Africa and the Middle East ................................. 12 Restoration of Investor Confidence .............................................. 14 Funds Available for Loans ..................................................... 15 LOAN PRINCIPLES, PROCEDURE AND OPERATIONS .......................... 15 Provisional Principles . ........................................................ 15 Loan Procedure . ............................................................ 17 Loan Operations . ............................................................ 18 BORROWING OPERATIONS ................................................... 19 MANAGEMENT AND ORGANIZATION ......................................... 20 MISCELLANEOUS . ............................................................ 22 Relationship with Other International Organizations ................................ 22 Increases in Membership and Subscribed Capital .................................. 23 Subscriptions and Voting Power of Member Countries .............................. 23 Election of Additional Executive Director ........................................ 28 Financial Statements and Reports ............................................... 23 Administrative Budget ............. ........................................... 23 Additional Reports to Board of Governors ........................................ 23 Appendices . ................................................................ 25 A Balance Sheet as of June 30, 1947 ......................................... 25 B Statement of Income and Expenses for the Twelve Months Ended June 30, 1947 26 C Statement of Members' Currencies Held by the Bank as of June 30, 1947 .... ..... 27 D Statement of Subscriptions to Capital Stock and Voting Power of Members as of June 30, 1947 ....................................................... 28-29 E Notes to Financial Statements ............................................ 30 F Auditors' Report, August 6, 1947 ........................................... 32 G Administrative Budget for the Fiscal Year Ending June 30, 1948 ............. 33 H Governors and Alternates as of August 10, 1947 .34 I Voting Power and Subscriptions of Member Countries as of August 10, 1947 .35 J Executive Directors and Alternates and Their Voting Power as of August 10, 1947. . 36 K Standing Committees of the Executive Directors .37 L Decisions of Executive Directors Interpreting Articles of Agreement and Resolutions of Board of Governors .38 DURING THE YEAR that has elapsed since the First Annual Report was presented, the International Bank has commenced its operations both as a lender and as a borrower; it has developed and clarified many of its basic policies and procedures; and it has strengthened its organizational structure. This Second Annual Report contains a record of what has been done in these three fields. It is axiomatic that reconstruction and development, the twin purposes of the Bank, must move forward together. Creation of conditions of economic health through- out the world requires an increase in the present world levels of industrial and agri- cultural output and of international trade; this, in turn, requires both restoration of productivity in war-devastated countries and increase of productivity in under- developed nations. To date the most pressing calls upon the Bank have been for purposes of recon- structing the war-damaged nations of Europe; in that field there is for the moment not only great urgency but also great opportunity for rapid improvement in the level of productivity and, with it, improvement in the level of trade among all the members of the Bank. But while European recovery has of necessity been stressed, plans for recon- struction and development elsewhere have also been given consideration, and at a later stage the emphasis will tend to be on the development phase of the Bank's activities. It is not cause for despondency that, only two years after the conclusion of the war, economic stability has not yet been achieved and much still remains to be done in raising or restoring the standard of living. Reconstruction and development both take time. They require the efforts of millions of individuals to repair and build up normal life and activities. They require sound and detailed economic planning. They require the development of sound budgetary policies to ensure financial and monetary stability. They require the creation of fair and efficient government controls during the transition period. These things cannot be quickly achieved after political, economic and human dislocations of the magnitude experienced during the recent war. Despite all obstacles, considerable progress toward increasing the level of pro- duction throughout the world has been made. Given continuance of the will to succeed by the peoples themselves, given willingness by their leaders to submerge individual differences, that progress can be continued and its pace increased. It is the design and purpose of the International Bank to contribute to this end. International Bank for Reconstruction and Developrnent (5] ROLE OF THE BANK Unanticipated Post- War Needs enough to meet the needs. Several countries, it When the Bank's charter was drafted at Bret- is true, have proceeded rapidly with their re- ton Woods in the summer of 1944, high hopes covery programs, often at the cost of seriously were held that the Bank would prove to be the idepleting their monetary reserves. Others still principal instrument for restoring the war-torn require a large measure of assistance to enable nations of the world to economic life, The criti- them to import the necessary food acd fuel, cal short-range relief needs were to be met fibres and fertilizers, to eradicate hunger and through donations by UNRRA; the external malnutrition and to achieve stability. These financing needed for the more permanent re- basic demands must be met; they necessarily covery programs was to be supplied by loans aggravate the difficulties in the way of importing from the Bank. Recovery was conceived of pri- the equipment and materials needed for purposes marily in terms of the rebuilding of factories, of long-range reconstruction mines, railroads and other specific productive The problem is not confined to the areas which facilities. were directly devastated. The dislocating conse- We now know that the problem is deeper and quences of the war have likewise extended to more difficult than was envisaged at Bretton many other countries, whose resources have been Woods. The deadening effects of the utter and strained and whose plant and equipment have prolonged disruptions of trade have been more been impaired as a result of the heavy demands serious than was anticipated in 1944, delays in placed on their economies by the war. satisfying the most elemental needs for food and Because the requirements are greater than fuel have been greater, and the dislocations of anticipated, because the scope of activity and the industrial mechanism, of governmental or- loaniable resources of the Bank are limited, it is ganizations and patterns, and of human re- manifest that the Bank can provide only a part sources, have been of more profound significance. of the answer to the problems which confront the Unforeseen political conflicts have accentuated world today. There must be continued assistance the economic difficulties. As a result, the re- from other sources, such as that contemplated for quirements of recovery today are not limited to Europe by the so-called Marshall Plan, in fields the rebuilding of individual productive facilities. which are either beyond the competence or They include rehabilitation and reconstruction beyond the resources of the Bank. For both po- of entire national economies. litical and economic reasons, such assistance The resources of UNRRA did not prove suffl- must be of limited duration and on a diminish- cient fully to accomplish the purposes sought. ing scale. For the same reasons, the assistance Several countries made substantial additional must be large enough to enable the recipient amounts available in the form of credits and nations to achieve stability-that is, to live with- grants. Total post-war assistance extended by out assistance-within a reasonably short period Canada has been more than $2,050 million. of time. Swedish aid has been the equivalent of about As of the time this report is written, the shape $800 million and total credits and grants from and content of the Marshall Plan are still in the the United States have aggregated approxi- process of formulation. The extent, the timing, mately $15,000 million. In spite of its own heavy even the form which United States assistance war damage, the United Kingdom has made may take, are not yet known. Developments in credits and grants equivalent to approximately this connection cannot help but greatly affect the $3,800 million available to other war damaged role of the Bank in the process of European re- countries. Other devastated areas have also ex- construction. tended credit to those in even worse plight, Statistical and economic material concerning despite the immediate sacrifices involved. the extent of the dollar needs of the world is set All of this assistance, however, has not proved forth in the Second Annual Report of the Inter- lnternational Bank for Reconstruction and Development national Monetary Fund; it will not be repeated velopment of industry and agriculture. The stra- here. But it does seem worth stressing that the tegic use of comparatively modest sums can in need for American dollars shown by the Fund's this way have beneficial effects out of all propor- report-the so-called "dollar problem"-is funda- tion to the size of the investment. mentally a matter of production. The great need In the second place, the Bank believes that it for American dollars today simply reflects the should encourage necessary action by its member facts (1) that the rest of the world is not yet pro- governments to assure that the Bank's loans will ducing enough to enable it to obtain the neces- actually prove productive. The promotion of sary goods and services through domestic pro- sound financial programs, the removal of unnec- duction and normal international trade channels, essary trade barriers, and the regional integration (2) that consequently these goods and services of production plans, where appropriate, are some are being purchased in large part in the United of the fields in which the Bank, as it acquires States because, with its immense productive experience and builds up the confidence of the mechanism intact, the United States is one of responsible officials of its members, may be able the few countries, and certainly by far the most to exert a helpful influence. important one, able to supply such goods and ser- Implicit in what has already been said is the vices, and (3) that procurement in the United third fundamental concept which has been de- States requires dollars. The present "dollar prob- veloped, that the Bank must play an active rather lem" will be solved when, and only when, pro- than a passive role. The Executive Directors and duction in the other nations of the world is in- the management are convinced that it is not creased to such an extent that the necessary enough simply to examine and pass judgment products can be obtained through the normal upon loan applications as they are presented. flow of international trade, with exports of goods Rather the Bank must take advantage of its inter- and services available to pay for essential national cooperative character to initiate and de- imports. velop plans to the end that the Bank's resources are used not only prudently from the standpoint Underlying Concepts of its investors but wisely from the standpoint of Although the Bank cannot meet relief needs, the world. although it cannot fulfill all pressing rehabilita- tion requirements, it can make a substantial con- The Problems tribution to both reconstruction and develop- GENERAL ment. The special problems which presently exist The Bank's task is to help raise the level of the in these fields are analyzed in the succeeding world's production as greatly and as rapidly as section of this report. In this section, there are it can. It cannot accomplish this task simply by set forth certain fundamental concepts concern- examining the need of individual countries for ing the Bank's functions which underlie its activi- external assistance for their reconstruction or de- ties in both areas. velopment. Rather, the Bank must emphasize The first of these fundamental concepts is that the financing of those projects or programs, be the Bank cannot, and was never intended to, they for reconstruction or development, which provide the external financing required for all promise the greatest increase in productive out- meritorious projects of reconstruction and devel- put in the shortest possible time. opment. Rather, the Bank's function is to provide It is not always possible, nor does it serve a catalyst by which production may be generally any useful purpose, to draw a sharp line of dis- stimulated and private investment encouraged. tinction between reconstruction and develop- The Bank believes that its funds must be used ment. Certainly the order of priority of claims chiefly to finance programs or projects which will upon the Bank's resources does not depend upon eliminate bottlenecks to production, or which any such distinction. It is normally true that will generate increases in production of related money spent on repairing a damaged source of goods or in related areas, or which will otherwise production will effect greater results, and in a serve effectively to stimulate the revival or de- shorter time, than the same amount spent in [8] International Bank for Reconstruction and Development building an entirely new source of production. cleared of mines and war wreckage and restored However, strategic new projects may make a to the plow. Despite the unprecedented destruc- similarly quick and essential contribution to pro- tion of railroad bridges, marshalling yards, cars ductive output. It is the extent of the contribu- and locomotives, trackage and other facilities, tion which matters, and not whether it results remarkable strides have been made in the restor- from a development or reconstruction project. ation of the railroad network. By the middle of As the Bank's charter so wisely provides, it is 1947, in fact, reconstruction had proceeded so "the more useful and urgent projects, large and rapidly and the available equipment was being small alike" which must be dealt with first, with used with such intensity that, although less "equitable consideration" to be given to both equipment was available than before the war, development and reconstruction. in many countries of Europe more passengers and more freight were being carried than in EUIROPE 1938. On the basis of the tests set forth in the pre- In other fields, too, there has been encouraging ceding paragraph, the Bank has up to now neces- improvement. Cotton textile production in Eu- sarily given particular emphasis to the problems rope increased from about 500,000 net tons in of European recovery. In Europe the need for 1945 to about 850,000 net tons in 1946 and is assistance in repairing the devastation caused by expected to reach 1,400,000 tons in 1947; this the war is urgent. There, too, the productive compares with about 1,600,000 tons average pro- capacity and skills already exist; to put them to duction in the immediate pre-war period. Con- work by furnishing the necessary new machinery sumption of raw rubber, both natural and syn- and replacement equipment, and the necessary thetic, increased from about 140,000 long tons stocks of fuel and materials, presents a great and in 1945 to approximately 285,000 long tons in immediate opportunity to raise the level of world 1946 and will probably be about 310,000 tons in output. Moreover, restoration of the productive 1947, indicating the rate of increase in the pro- capacity of Europe will have prompt and impor- duction of rubber goods. Cement production for tant consequences on the expansion of the econo- a selected group of European countries for which mies of other regions. Europe will then be able comparable data are available more than not only to supply more of the goods and of the doubled from 1945 to 1946, from a monthly aver- skilled technicians required for the expansion age of 650,000 tons in 1945 to about 1,500,000 in programs of countries in other areas, but also to 1946. At the beginning of 1947 European ship- purchase more of the products of such other yards had under construction about 3,165,000 countries and thus to contribute to their expan- gross tons of merchant vessels, almost 50% above sion. the mid-1939 total; 1,540,000 gross tons were The requirements of Europe are not limited launched in 1946, as compared with 1,070,000 to reconstruction; there are a number of Euro- in 1945. pean countries, some devastated by war and Progress has, however, by no means been uni- others not, which are underdeveloped. In so far form. Although in some countries total industrial as the requirements of such nations are for de- production has reached or exceeded pre-war velopment, many of the same problems are pre- levels, in others it is still considerably below sented as are discussed in the succeeding section that level, and agricultural production is far be- of this report. To date, however, loan requests low that of pre-war years. It should be empha- from European countries have been primarily for sized, too, that restoration of production to pre- reconstruction programs and this section is ac- war levels by no means indicates that the pre- cordingly limited to a discussion of the problems war standard of living has been attained. The involved in such programs. extent of war devastation has been so great that Much progress has already been made toward a substantial portion of the gross national prod- the reconstruction of the nations of Europe, due uct of each of the countries concerned must be both to their own efforts and to foreign grants diverted from current consumption to reconstruc- and credits. Vast areas of arable land have been tion of the basic stocks of wealth-housing, International Bank for Reconstruction and Development [ 9 1 transport, plants, tools, machinery and raw ma- sary drain upon its dollar resources would be terials, removed. The major bottlenecks remaining in the re- Before the war European coal requirements construction of Europe are food, fuel, and man- were met primarily by production within Europe power. It may be of value to examixe each of itself. Germany and the United Kingdom pro- these in turn. vided almost three-fourths of the import needs FOOD. Much of the arable land of Europe of other European count-ies and Poland an addi- served as a battleground in the war. Even after tional 9%. Exports of United States coal to Eu- such land has been cleared of mines and rubble, rope were inconsiderable. Ia 1946, however, total it cannot be restored quickJy to full productivity. coal imports by all European countries fell to v~ ~ ~~ ~ucl productivity,o . about one-half of their pre-war level, and Ger- Lack of scientific cultivation during the war re- quires now the intensive application of fertilizers, many and the United Kingdom met only about the world supply of which is comiderably short 36% of the reduced total. Poland contributed a th wde sply of . larger percentage share but less actual tonnage. Of demand. Agricultural machinery, too, IS in short supply in most European nations, and To the limited extent to which they were met, short supply in most Europearn nations, and imDport requiremnents were satisfied primarily by much of the existing machinery has been under- *im eqs pre Uirmtse Statisfied pimi by maintained an isrn 'on shipments of United States coal. D)espite the maintained and is run down.high cost, the huge shipping expenses, and the It took eight years after WRorld War I for hig cot h uesipn xess n h Itutookpeaniagricultuars afto er inoflld WaR fovery lack of the qualities and types of coal desired, European agriculture to recover in full. Recovery United States coal exports to Europe have may proceed more rapidly this time, but even soared. In 1946 these exports were 16.1 million with increased production and imnroved har- long tons. For the first half of 1947, they were vesting, the requirements for imported foodstuffs 14.8 million and for the entire year will probably will be on a large, if declining, scale for some . . time to come. Th mantd of th nee isin be about 37 millilon. Including the cost of ship- ticed tocomehe estmagteutha in 197 neuoe wiin- ping the coal in United States vessels (which dimpote approxestimatel 13., miln tons of broea equals or exceeds the cost of the coal itself in the Tnited States), Europe spent about $250 mil- grains as compared with pre-war imports aver- W - r ~~~lion in 1946 and will probably spend about $535 aging 9.4 million tons a year. Because of rising million in 1947 for American coal. prices and the necessity for securing imports Examination of all the loan applications which from the high-priced dollar area, it is estimated tha exenituesin 1947 for imotdgrain and have been received from European members of that expenditures in 1947 for imported grain the Bank reveals that the basic need is fuel. It grain products from the United States and Ar- i gentina alone will amount to $1200 million or is of primary interest to the Bank, therefore that s prouct from te the production of fuel, and particularly coal, be siX times the cost of such products from these i'cesd To d-i eid h aksn ehi areas in 1939. ~~~~~increased. To this end, the Bank sent a techni- uroeas ine3 r o e o cal group to survey the Silesian and Ruhr coal aEproblemsneedfor ofosubsi ce. T t neeis as part fields, and has been investigating the possibilities a problem of subsistence. That need is also part ope to itt ocrbt o ouino 7 and parcel of the basic problem of restoring open to it to contribute to a solution of the Euroes c i to t rn ou prestoduc problem. The Bank desires to do everything For cad acte to sup andumaiai vital within its power to assist in this matter, for with- ity is as essential as adequate machinery to en- out sufficient fuel even the existing capital equip- ity,is as essential as ad full prdctivit yo. nment of Europe cannot be fully used and the able workers to achieve their full productivity. pace of effective reconstruction will at best be FUEL. The importance of energy resources, of slow. coal in particular, in the reconstruction of Europe is so fundamental that it neither needs emnphasis MANPOWER. The manpower deficiencies of nor is capable of overemphasis. If European coal Europe are not so easy to analyze quantitatively production could be increased to pre-war levels, as the needs for food and fuel. They are, how- a large part of Europe's production problern ever, equally important. Tremendous dislocations would be on its way to solution, and an unneces- of people occurred as a result of the war. Great [ 10 I International Baek foir R?c-ozstrvctior and Development arnies were recruited; war casualties, both mili- funds and materials required are to come from tary and civilian, were heavy, and included many within the country itself. Outside assistance is of the most skilled technicians; a large segrment vital, but it represents a small percentage of the of the labor force was shifted from production total effort. for the civilian economy to the production of war However, there are undoubtedly further con- materiel; millions of workers were moved by structive and essential steps which the European force or persuasion away fromn their homelands. nations, acting both individually and collectively, Though great strides have been taken toward can take. Largely these are not dependent upon the reintegration into the economy of the labor external aid. No objective analysis of conditions forces thus dislocated, much remains to be done. as they exist today can avoid facing them frankly. There are still large pools of manpower which One of the most important is the restoration of are either employed in non-productive pursuits financial stability within the various countries, to or are not employed at all, The mnost striking the extent that such stability can be achieved example consists of the hundreds of thousands through a balanced budget of current expendi- of displaced persons who have been kept in idle- tuLres, a sound and equitable tax systern, and the ness in camps in Gernany and Austria, where curtailrnent so far as possible of unproductive they drain rather than contribute to the world's governmental expenditures. With confidence in productive output. There has also been, as a his money, the laborer is more willing to work, result of unsettled political conditions, an un- the farmer more willing to sell the food he pro- economic diversion of labor to the continued duces. The ineentive to hoard food and other maintenance of large armed forces and to the products, as well as gold and foreign exchange, military production necessary to supply them. is removed. There is once more a stimulus to Administrative staffs, particularly in government save, without which the domestic investment re- service, have tended to remain swollen in many quired for reconstruction is unavailable. The countries, at the expense of the labor force en- drain of labor towards the black market is gaged in directly productive work. All of these eliminated; so too is the waste of manpower in- pools represent potential sources of manpower volved in the operation of the barter economy for production. Fruitful results might be ob. which inevitably arises when the money system tained, too, bv further exploration of the possi- deteriorates. These results can be accelerated bilities of permitting the voluntary immigration by foreign assistance, but they depend primarily of German and Italian labor, not capable of upon a willingness on the part of the peoples of being employed with full effectiveness within the countries involved to pay the costs and make Germany and Italy themselves. the necessary sacrifices. The need for financial reforms in mnany coun- Etmopr rrstLu must make the major contribu- tries of Europe is generally recognized. But tion to the solution of all of these problems. The adoption of the measures necessary to achieve future of every economic unit, whether it be a such reforms is a difficult matter, particularly in local region, a nation, or an integrated continent, nations whose energies have already been se- must depend primarily upon its willingness and verely strained. Since, however, the alternative ability to utilize to the full and for productive to remedial action is only greater distress, this purposes its own resources. problem must be squarely and promptly met. Before pointing out some of the fundamental The deliberations now under way with respect measures whieh are generally accepted as essen- to the Marshall Plan, or discussions conducted tial to continued European recovery, the Bank within the framework of the Economic Commis- wishes again to draw attention to the notable sion for Europe, may provide the opportunity for extent of progress already made by many coun- the European nations to work out together some tries. By hard work and austerity much has been mechanisn to facilitate the desired result, per- accomplished. Furtherrnore, all of the national haps through establishment of an international recovery programs with which the Bank is fami- panel of skilled and impartial technicians to in- liar provide that by far the largest part of the vestigate and make recommendations, perhaps Inuternational Bank for Reconstruction and Development [ 11 ] through some other device. The Bank would be the importation of machinery and equipment. pleased to give any possible assistance. Just as important as the restoration of capital Another important step which the European facilities is the restoration to normal levels of countries can take without external assistance is Europe's depleted stocks of industrial raw mate- the integration of their reconstruction and pro- rials. A normal inventory of such materials is duction programs on a regional basis. Even be- essentially part of capital; the rebuilding of such fore the war, such integration would have ob- inventories is an integral part of reconstruction. viated many difficulties. Certainly now, with the If the European nations themselves take the fundamental change in trade patterns which has necessary steps to lay a firm foundation for re- taken place, with the progress which has been construction, if adequate aid is given by the made in technological knowledge, it cannot be United States to enable those nations to surmount regarded as sufficient simply to restore the pro- the immediate obstacles, the loans of the Bank ductive mechanism of Europe as it was in 1939. should prove of invaluable aid in revitalizing The restoration of production must be so planned Europe's productive mechanism. If this can be as to take full advantage of the economies of the accomplished, the effects will be felt throughout specialization of labor; Europe is too impover- the world and the economies of all the Bank's ished to afford the uneconomic luxury of produc- members will benefit accordingly. tive programs which overlap, for reasons of au- tarchy or otherwise. In this connection much can be accomplished TIAM AIA, EAR A by the gradual removal or lowering of the trade barriers which now hinder the free international The urgency of the recovery of Europe does flow of goods. While some restrictions are neces- not detract from the importance of the prompt sary during the transitional period, the eventual reconstruction and development of the other goal must be to eliminate such restrictions to the areas of the world needing assistance, Latin greatest practicable extent. Success in the estab- America, Asia, Africa and the Middle East. In- lishment of an effective International Trade Or- deed, it should not be very long before the ganization would be a step forward in this financing of development projects in those areas direction. will tend to become the primary concern of the Finally, the productive facilities of Germany Bank. must promptly be utilized for the benefit of the To achieve an expanding world economy, to over-all European economy. This report is not raise standards of living by increasing interna- the place to discuss the necessary security pre- -tional trade, requires more effective utilization cautions to guard against the possible renewal of the vast resources, both material and human, of German aggression. It is appropriate, how- of these generally less highly developed regions. ever, to point out that security precautions will The development of the productive potentialities be self-defeating if the countries intended to be of these areas presents at once a challenge and safeguarded are deprived of their economic well- a great opportunity. being because, in the absence of agreement on Such development is necessarily a long pro- the form and content of such precautions, Ger- cess, but it is one which needs to be initiated man production is left to stagnate. The nations without delay. The Bank now has underway of Europe and of the world need the potential various investigations and negotiations which it exportable output of Germany, particularly of hopes will result in substantial assistance in this the Ruhr and its coal mines. connection. The Bank's resources, applied in the The role of the Bank in helping to solve the proper places and under proper conditions, problems which have been sketched will become should serve as a powerful stimulating agent. clearer once the nature and scope of any aid to The Bank cannot, of course, do the whole job; be given under the Marshall Plan become it cannot by itself do even a substantial portion known. But it is apparent already that the Bank's of the job. Development on the scale that is part will not be limited to assistance in financing within the range of practicability needs financial [ 12 ] International Bank for Reconstruction and Development assistance in amounts which only established terms of some loans provide conditions which credif and the consequent free flow of private are presently so onerous that they cannot form capital can provide. the basis of a realistic settlement. On the other Some of the nations within the areas here hand, it is important for the countries concerned under discussion have well developed industrial to give clear evidence of their desire to do their or agricultural economies. But the economies of utmost to reach fair and equitable agreements most of the nations in these areas are either with their creditors. It may be worthwhile, there- young and immature or old but underdeveloped. fore, to explore the possibility of setting up, with The expansion of every such country has always the cooperation both of the debtor nations and required the assistance of foreign private capital their foreign bondholders, an impartial body of and technical skills. This has been true of many technical experts who, after investigation, would European countries, of North America, and of make recommendations for just settlements of economically developed nations elsewhere as the debts due. With the implementation of such well. The reasons are obvious. An underdevel- settlements, a great deterrent to the renewed oped economy does not have a sufficiently high flow of private capital for development purposes national income to provide savings of the mag- would be eliminated. nitude required for investment in large-scale The Bank would be willing and anxious to development programs; external financial assist- contribute, whether by the provision of personnel ance is therefore essential. The labor force of from its staff or otherwise, toward the success of such a country, too, is for the most part un- any project such as the one suggested. skilled in advanced industrial and agricultural Existing defaults are the most obvious obstacle techniques; to provide the technicians necessary to the restoration of credit. In some cases, the for the operation of a more highly developed basic causes for default were beyond the control economy requires in many instances the importa- of the borrowing country. In others, however, tion of foreign experts to guide and train the they were the result of unsound financial and local workers. The same is true of the requisite economic policies. In such cases, agreement with managerial and administrative skills. creditors would inspire more confidence and go There exist today a number of deterrents to further toward reestablishing credit if under- the free flow of private capital, and with it of taken as part of an integral program of financial foreign technical, managerial and administrative reform. A sound budgetary system and a sound skills, to the underdeveloped nations. If the monetary system are necessary to the develop- Bank, by use of its resources, its influence and ment countries in their efforts to maximize pro- the technical specialists on its staff, can help to duction and to halt the strong inflationary forces remove some of these deterrents, it will have which have in many cases already become ap- achieved an important task in the development parent. Certainly the Bank could grant financial field. assistance with much greater assurance that its The first step is the improvement of the credit loans would prove productive and sound if the position of many of the countries concerned. d There are several things which those underde- development plans it may be asked to help Ther are several things which those underde- finance were, where necessary, accompanied by veloped nations with a poor credit standing can a p do to improve their position. Perhaps the most a program for financial reforms of this type. And effective would be for them to clear up their ex- flearly, where such remedial measures are called ternal debt records. It is not suggested that every f p c o underdeveloped country with outstanding for- into the areas involved unless the reforms are eign bonds in default should or could resume undertaken. payment on its bonds in accordance with their As in the case of the debt record, so too in original terms. As in the case of many corporate the case of the budgetary and monetary situa- obligations, adjustments are sometimes the only tion, it may prove practicable to utilize the ser- practicable solution for difficulties which have vices of an international panel of experts to make been encountered. Furthermore, the original investigations and to recommend remedial ac- [13 ] International Bank for Reconstruction and Development tion. In this field, again, the Bank would be glad The less well developed nations need inter- to Tender assistance. national assistance for full realization of their po- Another step which would encourage the free tentialities. They need not only financial assist- flow of private capital from abroad for develop- ance but technical assistanee. Because they lack ment purposes would be assurance that such the advanced technology and skills which charac- capital will not be subject to inequitable and terize the more highly developed nations, the restrictive legislation. Foreign private invest- Bank may well be requested to exercise more ments are properly subject to such regulation and initiative in considerinrg their problems and to control of private capital, foreign and domestic participate more actively in the formulation of alike, as the country concerned deems necessary their plans. While the Bank cannot undertake to to carry out its national policies. It is also right furnish technical assistance from its own staff on and proper that the underdeveloped nations any large scale, it can help its member nations should protect themselves against economic or to select and procure the necessary private tech- political exploitation as a result of the influx of nicians. The Bank stands ready at any time to foreign capital, for in the past exploitation and consult with mernber governments on this matter. abuses not infrequently accompanied invest- The Bank hopes that, as a result of the efforts ments made in underdeveloped countries. But of its less well developed members themselves, the need for protection against exploitation does stimulated and assisted by the efforts of the Bank not either require or justify the inequitable treat- to the extent desired by those members, rapid ment of foreign capital. Risk capital, whether in progress will be possible. For in the very magni- the form of direct or equity investment, is even tude of the development potentialities of these more essential to developmenit than loan capital; nations lies the best hope of the world for greater such investment cannot be attracted without as- economic well-being in the future. surance of fair and equitable treatment and of continued opportunity to earn a reasonable Restoration of Investor Confidence return, Confidence in international investment was In pointing out some of the steps which the severely shaken by the depression of the 1930's. Bank believes would be of assistance in encour- It is the Bank's hope that, by its activities in the aging the flow of foreign capital to the less well fields of reconstruction and development, it can developed areas, there is no suggestion that all help to restore that confidence. The thoroughness remedial measures wlich mnay appear necessary with which applications for loans are investi- in the case of any given country must be corn- gated and the responsibilities which the Bank pleted before that country may qualify for a accepts, not only for the proper application of loan from the Bank. To the contrary, financial the loan proceeds but also for following economic assistance from the Bank may formn part of an developments in the borrowing country during integral plan involving both long-range financial the entire period during which the loan is out- reform and long-range development of produc- standing, are means to that end. tive facilities. But while the Bank is willing to It must not be forgotten that if there was bad consider making a loan concurrently with the borrowing in the inter-war years, there was also adoption by the borrowing country of whatever bad lending. As a result of reckless competition, program for financial and monetary stability and encouiragemetnet was sometimes given to borrow. the reestablishment of credit may appear neces- ers and lenders alike without sufficient under- sary in the particular case, the Bank cannot as- standing of what was involved; loans were often sist a country which neither has such stability or made for unproductive purposes, sufficient care credit nor a willingness to take action to achieve was not always exercised to see that a loan was them. Such lending would be neither prudent used for the purpose for which it was granted; nor productive. Furthermore, it would cause the and high interest rates, instead of encouraging Bank to lose the confidence of the investment investors to inquire into the likelihood that the community, and, with it, the very source of the borrower could meet its obligations, failed to do major portion of its loanable funds. anything but encourage them to invest their [14 ] International Bank for Reconstruction and Development money. It is important that there should be in States. It has also received from the Belgian the future a greater sense of responsibility both Government permission to lend Belgian francs, in borrowing and lending than has frequently up to the equivalent of $2,000,000, out of the been the case in the past. Belgian paid-in capital. The Bank hopes and ex- pects that its few other members which are now Funds Available for Loans in a position to do so will in like manner, when Sound lending by the Bank is important, not the occasion arises, permit their paid-in capital only that its loans may prove productive, not to be used for loans. As economic recovery pro- only that confidence in private international in- ceeds in other nations, they too will be expected vestment may be restored, but also that the Bank to make available their paid-in capital. may be able to borrow from the financial com- At present, however, the demand is primarily munity the funds necessary for the Bank's own for United States dollars and the availability for lending operations. For it cannot be too often lending purposes of the Bank's capital funds is emphasized that the Bank must rely on pri- practically limited to the approximately $725,- vate investment funds rather than on its paid- 000,000 represented by such dollars. For loan- in' capital for the main portion of its loanable able resources in excess of this amount, the Bank resourceS. must look to the sale of its securities in the pri- The capital funds of the Bank required to be vate investment market, for the time being pre- paid in by member governments amount to only dominantly the United States market. 20% of the Bank's total subscribed capital; as The Bank can secure the funds it needs from of August 10, 1947, this paid-in capital aggre- private investors only if it can convince them gated $1,599,985,000, not including $4,915,00 that its loans will be sound business risks. To be authorized deferments. The remaining 80%9 of sure, investors in the Bank's securities have the the subscription of each member is subject to guarantee afforded by the uncalled 80% of the call only if needed to mect the obligations of the capital subscriptions of the Bank's members. By Bank. It is not available for lending purposes; it reason of this guarantee, the Bank is enabled to is there essentially only for the protection of make loans of a size which the investment market those who invest in the Bank's securities. is unwilling to undertake, and in some cases for Of the $1,599,985,000 paid-in capital, only projects for which, though constituting prudent $727,075,000 is represented by United States business risks, private financing is not yet avail- dollars; the remainder is represented by the able. However, despite this guarantee, it will not local currencies of the various members of the be possible for the Bank to sell its securities in Bank other than the United States. The Bank has the market in the amounts needed to carry out received permission from the United States Gov- its objectives unless investors have confidence ermnent to use for lending purposes the entire that their funds will be used only for economic- amount of the capital paid in by the United ally sound and productive purposes. LOAN PRINCIPLES, PROCEDURE AND OPERATIONS Provisional Principles tee after a careful study of the merits of the The basic character of the Bank's lending oper- proposal, and the borrower must be unable to ations is prescribed by its Articles of Agreement. obtain the loan elsewhere under conditions Loans may not be for relief purposes or for po- considered by the Bank to be reasonable. litical purposes; they must be for either recon- But the Articles of Agreement tell only a part struction or development. There are also certain of the story. Out of the examination of loan ap- conditions which under the Articles must be plications, the study of the problems raised by met: there must be reasonable prospects of re- those applications and the discussions which payment, the project or program to be financed have taken place with the representatives of pros- must be recommended by a competent commit- pective borrowers, there have emerged a number Irternational Bank for Reconstruction aond Development [ 15 ] of principles which have been adopted by the complete. It is not the Bank's policy to grant Bank as a provisional guide to the use of its loans in such cases for the whole period of the charter powers. Some of these principles have plan, but to lend in the first instance sufficient to been alluded to in earlier sections of this report. cover the needs of a limited period. At the end For convenience of reference, however, they are of that period a further application may be summarized below. made, which will be considered in the light of the progress made with the assistance of the first ACCEPTANCE OF RISK. Since one of the pri- loan and of the position as it then appears. This mary purposes of the Bank is the revival of pri- policy has the advantage that the Bank does not vate foreign investment, it is obvious that the commit itself to long-range forecasts of condi- Bank must not refrain from making loans simply tions either in the borrowing country or in the by reason of the general economic and political market in which it will have to raise the neces- uncertainties which at present obstruct the free sary funds; moreover, it enables the Bank to dis- flow of private capital; indeed, an essential ob- charge more effectively its continuing responsi- jective of the Bank's loans is to help to remove bility for the proper utilization of loans. This these general uncertainties and to establish con- principle is subject to some modification in ex- ditions in which private capital will be able once ceptional cases of projects requiring a long pe- more to play its part. Nevertheless, the Bank riod of time to complete. cannot make imprudent loans. It must act with care and wisdom in building up its portfolio, for CONTROL OVER USE OF PROCEEDS. When on that portfolio, and on the confidence which it a loan has been made, the proceeds are made will inspire in the investing public, the Bank available to the borrower only against evidence must ultimately rely for its capacity to raise that the goods or services to be paid for with funds. those proceeds are within the purposes of the loan as set forth in the loan agreement. Arrange- STRATEGIC USE OF FUNDS. This principle ments are also made, by observation within the has been explained, and its importance stressed, borrowing country, to assure that the goods so in earlier portions of the report. To reiterate in purchased are in fact put to their intended use. general terms, the Bank believes that, in the pres- ent state of the world, its funds should be so used INFORMATION AND CONSULTATION. The as to result in the greatest possible increase in Bank needs to know not only that its funds are productivity in the shortest possible time. The being used for the purposes for which they were Bank is primarily a cooperative rather than a intended, but also the extent to which achieve- profit-making institution. It exists for the benefit ment of those purposes contributes as antici- of its members. Its chief concern is that its loans pated to the reconstruction or development plan shall be used for purposes which are constructive of the borrower. The Bank is also directly in- and practical and which will be beneficial both terested in the general economy of the borrower, to the borrower and to the world. since this affects the security of the loan. The Bank, therefore, requires that the borrower keep SELF-HELP. The Bank's resources must not it fully informed, through the regular submission be used simply to relieve the borrowing nation of statistical and other information and through of tasks which that country could justifiably be consultation, with respect to all significant eco- required to perform itself. The major effort in nomic and financial developments. This calls for the reconstruction or development of any nation a much closer relation between the Bank and its must be made by the peoples of that nation borrowers than has been usual between creditor themselves. and debtor in the international field. Such a rela- tion is possible because the Bank is fundamen- LIMITED COMMITMENTS. A single loan ap- tally a cooperative international institution which plication may relate to a reconstruction or de- lends only to its member countries or upon their velopment plan which will take several years to guarantee; since the borrower or guarantor is a [ 16 ] International Bank? for Reconstruction and Development member of the institution, it has an interest in the economic and financial situation of the pros- the Bank's success and, indeed, participates in pective borrower. In other cases, the loan ap- the framing of its lending policy. plication consisted of little more than a request for financial assistance, with no implementing RATE OF INTEREST AND COMMISSION. program or supporting documentation. The interest rate charged by the Bank must be As a result of its experience, the Bank prefers such as to enable the Bank to meet the cost of to hold informal exploratory discussions with borrowing and still leave a sufficient margin to prospective borrowers before any formal loan cover operating expenses and to build up appro- application is filed. Where such discussions have priate reserves. In the case of the French and been held, they have enabled the applicant to Dutch loans, this rate was determined to be frame its plans and program, and to shape its 31A4% per annum. Current policy is to charge in- application, in conformity with the policies and terest only from the date of disbursement and requirements of the Bank. Such preliminary dis- on the amount disbursed, and to charge in addi- cussions, too, serve to avoid applications of a tion a commitment fee at the rate of 11/2% per type which the Bank cannot finance. annum from the date on which the Bank under- The investigation which the Bank makes of takes a firm commitment to make the loan up each loan application covers not only the pro- to the time of disbursement. gram or project for which the funds are sought, The Articles of Agreement require that the but as well all important aspects of the borrow- Bank charge a commission at least during the er's economic position. The studies made include first ten years of its operation of not less than surveys of the borrowing country's agriculture, 1% and not more than 11/2% per annum on all industry and mineral resources; of its manpower, guarantees and on all loans made out of bor- production and transport situation; of the state rowed funds. This so-called "statutory commis- of its external trade and balance of payments; sion" is to be set aside in a special reserve avail- and of the condition of its internal finances, par- able to meet the obligations of the Bank in the ticularly its budget and currency position. The event of default on its loans. Current policy is debt record of the prospective borrower is also to charge a uniform commission of 1% on the studied and, if it has defaulted on its obligations, outstanding amounts of loans, regardless of the investigation is made of the causes of the default, source of the funds. of the efforts made to reach a settlement with creditors, and of the borrower's attitude towards REDEMPTION PROVISIONS. The Banik de- a possible resumption of debt service. In the nor- sires to encourage borrowers, wherever possible, mal case, representatives of the Bank investigate to redeem loans prior to maturity. Provision is conditions in the borrowing country on the spot. accordingly made in loan agreements for re- Where necessary, the plans and estimated costs demption at any time prior to maturity, subject of engineering projects are examined with the to the payment of an appropriate premium, and assistance of such technical experts as may be for waiver of this premium by the Bank in cases required for a proper appraisal. where it can use the amount so repaid in its cur- Though the Bank is precluded from making rent operations. or denying loans to achieve political objectives, there is an obvious and necessary interrelation Loan Procedure and inter-action between political events and During the early stages of the Bank's develop- conditions and economic events and conditions ment, consideration of a loan to any particular in any country. The soundness of any loan de- member country was normally initiated by the pends fundamentally on the financial and eco- filing with the Bank of a formal request for nomic prospects of the borrower. In so far as funds. In some cases a fully documented loan those prospects may be affected by conditions application was lodged, setting forth in detail of political instability or uncertainty in the bor- the purposes for which the loan was requested rowing country, those political conditions must and comprehensive information with respect to be taken into consideration. In considering the InternationalBankforReconstructionandDevelopment 17 ] merits of any loan application, therefore, the are beyond the control of France. But to the Bank must give due weight to political condi- extent that France has been able to speed her tions in the borrowing country to the extent they own recovery considerable success has been might affect the financial and economic pros- achieved. Her external debt record has been pects of that country. excellent. The Bank believes that its loaiA will hasten the process of reconstruction, that it will Loan Operations result in raising the level of France's produc- FRENCH LOAN. On May 9, 1947 an agree- tion, and that the risks involved are of the type ment was signed granting a loan of $250 million which the Bank was designed to accept. to the Credit National, a semi-public French corporation created In 1919 to assist in fiinancing DU7TC LOAN. On August 7) 1947, a loan of reconstruction and development of the French $195,000,000 was granted to the Kingdom of the recons o ad dNetherlands. The loan proceeds are to be de- econoiny. The loan is guaranteed by the French n Goenet Th aplcto ha bee mad voted exdlusively to the reconstruction of pro- Goemet Th aplcto ha bee .1 nad1 ductive facilities in the Netherlands hotneland. originally for an amount of $500 million, but t dcie ofacilitroceeds are to be ar plied to the Bank considered it necessary to limit its com- Neerlands East Indies or for ilitary purposes. mitment to the needs of the immediate future, Ntelands Eas orig orymilitay purs stating, that it would be willing to consider an Application was originally made for an amount n a fo F lt in t of $535,000,000 to cover a reconstruction pro- yearadithat theldeciion on anch apprica- gram from 1947 through 1949, but the Bank tion would be made in the light of conditions limited its commitment to needs arising from the then pealing, wi pthicua referencetoth 1947 portion of the program. The Bank will be tp rogresadeing, c parrinuta teferenceontr- repared to consider requests that may be made progress made in carrying out the reconstruc- P tion program. for further credits for 1948 and 1949 in the light The importance of France in the economic Po- of the progress made as a result of the present loan and of such needs as may then exist. sition of Europe made it particularly fitting that The abnormallyc heavyd importsy necessaxys t Frac shul be th fis conr inwose The abnormallv heavy imports necessary to Fonstranctisou the firksthountrply in whosc prc make good war damage and losses, taken in con- construction the Bank should play an active part. junction with the loss of Germany as the prin- France is vital to Western Europe because of cipal source of imports and as an important her size and her productive capacity and the prbe of her recvrcantbdioedfm market, and with the decline of supplies and troblem of v er recovels cannot E e asvorcea hrom revenue from the Dutch East Indies, have placed the recovery of Western Europe as a whole. a heavy strain on Dutch foreign exchange re- By the end of 1946, France had made remark- sources. Thirty-five per cent of essential im- able progress in erasing the effects of the war ports in 1947 will have to come from the United and of enemy occupation. The volume of pro- States; in 1938 the United States supplied only duction had been restored to approximately 11% of Dutch imports while Germany provided 90%0 of the 1938 level and the volume of exports more than 20%. to 75%. But this expansion in production and In granting the loan, the Bank has taken into in exports had involved heavy imports necessi- account the importance of the recovery of the tating a depletion of gold and foreign assets by Netherlands to the economic well-being of Eu- over $1,600 million and the inciurring of debt rope and of the world as a whole. It has also abroad to the extent of $2,600 million. given due weight to the qualities of determina- The Bank is fully awvare of the uncertainties tion and energy which the Dutch people have and difficulties facing France. Leaders of the displayed in the past, and which have been well French Government themselves have stated that exemplified in the remarkable progress already they realize that unless France's budgetary dif- made in restoring output and in combating in- ficulties are overcome, the ensuing fiscal instabil- flation. The excellent debt record of the Nether- ity will endanger the entire reconstruction pro- lands and its long tradition as an imnportant gram. Some of the factors impeding recovery creditor nation make it a good credit risk. [ 18 1 rInernational Bank for Recocmstraction and Development The progress already made gives prowise that in the Dutch East Indies. the 1947 goals can be reached. As regards the future, the Netherlands, which has always been OTHER LOAN APPLICATIONS. At the time highly dependent on international trade, is this report is written, the French and Dutch bound to remain sensitive to international po- loans are the only ones which have been made litical and economic factors, among which the by the Bank. Qther applications which have speed with which free convertibility of Euro- been received are in various stages of consider- pean currencies can be restored is of prime im- ation and processing, from the most prelirninary portance. This sensitivity calls for enterprise and steps in obtaining information to an advanced adaptability on the part of the Dutch people. stage of negotiation. Should any additional loans There clearly exists a stern necessity, not only be made before the time of the second annual for further increase of industrial output, but also meeting of the 3oard of Governors, descriptive for a reorientation of trading relationships in the material concernintg them will be made avail- light of the changed situation in Gerrmany and able to the Governors. Apart from France and the Netherlands, applications have been received from the following countries for the purposes indicated. Millions of Dollars CHILE .......... 40 Hydro-electric, forestry, harbor, urban and suburban transport, and railway projects. CZECHOSLOVAKIA ..... . 350 Reconstruction of war damage and losses. Restocking of raw materials. Rehabilitation projects. DENMARK . ...... . 50 Reconstruction and modernization of agriculture and industry. IRAN . . . . . . . . . . 250 Modernization and develQpment of industry, agriculture and transport. LUXEMOUB5.. . . . 20 Reconstruction and modern,ization purposes. MEXIcO . . . . . . . . . 209 Irrigation, hydro-electric, pipeline, highway, railroad and harbor projects. POLAND . . . . . . . . 600 Equipment and materials for reconstruction of coal min- ing, iron and steel, textiles, electricity and transport. BORROWING OPERATIONS EARLY in the spring it became apparent that an visit the Bank and talk at first hand with its informational campaign should be inaugurated principal officers and its Executive Directors. to acquaint the American public with the organ- Moreover an intensive effort was made to obtain ization and purposes of the Bank and the basic the enactment in several states of the United facts regarding its powers and operations. To States of legislation permitting insurance com- that end the officers of the Bank accepted many panies, commercial banks and savings banks to invitations to speak before interested groups invest in securities issued by the Bank. Favor- throughout the United States. The Bank also able laws were adopted, or favorable adminis- issued pamphlets describing its organization and trative rulings made, in many states. functions. Representatives of comnmercial banks, On July 15, 1947 the Bank made the first pub- savings banks, insurance companies, securities lic offering of its bonds. This cQnsisted of $100,- dealers and investment services were invited to 000,000 Ten Year 21/4% Bonds due July 15, 1957 International Bank for Reconstruction and Development 19 and $150,000,000 Twenty-Five Year 3% Bonds of this portfolio which determines the Bank's due July 15, 1972. Both issues of bonds were ability to borrow, and therefore to lend, in the priced at par. The offering was made through sizeable amounts contemplated by the drafts- more than 1,700 securities dealers throughout men at Bretton Woods. the United States, more than twice the largest At present, the United States is the only mar- number of dealers who had ever before partici- ket available in which the Bank's securities can pated in a single securitv distribution. be sold in large amounts. Furthermore, as has The offering was substantially over-subscribed been pointed out, the present demand for loans and the bonds immediately sold at a premium is almost exclusively a demand for dollars, to over the public offering price, facts wvhich are make purchases in the dollar area. But these hopeful indications for the future. But it must should not be continuing conditions; as produc- be remembered that a major factor contributing tion and available supplies increase in other to the success of the offering was the impor- areas of the world, other currencies will be avail- tance attached by American investors to the able for the purchase of the goods required for guarantee afforded by the 80% uncalled por- reconstruction and development and nations tion of the United States subscription to the other than the United States will be in a posi- capital of the Bank. As the operations of the tion to permit the export of capital. It may be Bank become much more substantial, the Bank's reasonably anticipated, therefore, that in the portfolio of loans will be of increasing signifi- future, as conditions improve, non-American cance in the investor's judgment as to the worth capital may be tapped by the Bank's borrowing of the bonds. Fundamentally, it is the character operations. MANAGEMENT AND ORGANIZATION THE YER covered by this report has been the understanding that he would remain only mnarked by important changes in the manage- until the Bank had been organized and that he ment and organizaticin of the Bank. felt that the basic organization had been com- On December 4, 1946, Mr. Eugene Meyer pleted and the time had come for the selection submitted his resignation as President, effective of a permanent head. Mr. Harold D. Smith, Vice December 18. In doing so, Mr. Meyer explained President of the Bank, died suddenly on Jan- that he had accepted the position initially on uary 23, 1947. President John J. McCfoy Robert| Richard H. Demuth| ese.rch Dire c tior fDecfor of Loan Director reIrrosn Secretory' eer!Cue? PbjRltons Anistofia okfn Charles C. Pineo |LonB X Rist D. Crena de longh| Morton M. Mendels Chester A. McLoin Drew Dudley Chauncey G. Parker E. Fleetwood Dunstan [ 20 ] International Bank for Reconstruction and Develotment On February 23, 1947, the Executive Directors ment of the Bank's funds and securities and for elected Mr. John J. McCloy as President of the developing and maintaining a program of fiscal Bank. On the same day, they approved the ap- operations, an accounting system, and a pro- pointment of Mr. Robert L. Garner as Vice gram of budgeting and budgetary control. It is President. Mr. McCloy and Mr. Garner both also responsible for controlling the disbursement took office on March 17. of the proceeds of loans and for checking the Since that time, the organizational structure end use of the goods purchased with such pro- of the Bank has been further developed and ceeds. strengthened. A chart showing this structure, to- gether with the names of the principal officers of SECRETARY'S DEPARTMENT. The Secre- the Bank, appears on the opposite page. tary's Department is responsible for providing The President is the chief executive officer of secretariat services to the Board of Governors, the Bank. Under him, the Vice President acts the Executive Directors and the management, as general manager with responsibility for assur- for the custody and authentication of official ing the effective operation of the other offices documents, for the processing of applications and departments. It is the Vice President, too, for membership, and for transmitting general who directs the formulation of policy recom- communications and information to member mendations for the President. countries and their representatives. The functions of the other principal units of LEGAL DEPARTMENT. The Legal Depaxt- the Bank may be summarized as follows:LEA DPRT N.ThLeaDprt ment, under the General Counsel, advises with regard to questions concerning the application LOAN DEPARTMENT. The Loan Department of any laws and regulations affecting the oper- is responsible for discussions with potential bor- ations of the Bank, prepares or reviews legal rowers and for handling all loan applications, documents for use in such operations and is including analysis of the application, investiga- generally responsible for all legal work in con- tion of conditions within the applicant country, nection with the Bank's activities. and negotiation of the terms of the loan agree- ment. It is also responsible for maintaining con- PUBLIC RELATIONS DEPARTMENT. The tinuous contact with all important developments Public Relations Department is responsible for in the borrowing country and for consultations keeping the public, including investors in with representatives of the borrower which may the Bank's securities, informed with respect to be necessary during the life of the loan. The the purposes, organization and activities of the Loan Department also develops recommenda- Bank, and to this end for developing and main- tions for policies and procedures relating to taining appropriate information and publicity loan operations. programs. RESEARCH DEPARTMENT. The Research DEPARTMENT OF ADMINISTRATION. The Department is responsible for obtaining infor- Department of Administration is responsible for mation and preparing studies and analyses for the internal administration of the Bank, includ- the use of the management and the Executive ing personnel, office management, organization Directors in their determination of economic and and methods planning, and internal auditing. financial policy, for preparing specific studies of an economic and financial character as re- MARKETING DEPARTMENT. The Market- quested by other departments of the Bank, and ing Department has its headquarters at the for maintaining liaison on economic matters with Bank's office in New York City. It is responsible other appropriate organizations. for the sale of securities issued by the Bank and the various operations in connection there- TREASURER'S DEPARTMENT. The Treas- with. It maintains contact with the investment urer's Department is responsible for manage- markets, continuously studies market conditions E 21 ] Intercational Banzk for Reconstruction and Development and trends and advises with regard to the timing ternational organizations, and for developing of offerings of securities by the Bank and the policy recommendations with respect to matters terms and conditions of the securities to be not falling within the jurisdiction of any of the offered. other departments. STAFF OFFICE. The Staff Office, under the Assistant to the Vice President, is responsible As OF AUGUST 10, 1947, the operating staff of for the development of liaison policy and the the Bank consisted of 341 persons, representing coordination of liaison activities with other in- 19 different nationalities. MISCELLANEOUS Relationship with Other International rope and for Asia and the Far East. Bank rep- Organizations resentatives also maintained close contact with The close working relationship Nvhich has ex- the United Nations Secretariat, particularly with isted from the beginning between the Bank and the Economic Affairs Department, in order to isted rom th bgnigetenavoid unnecessary duplication in the collection the International Monetary Fund has been devel- atsicssor ovelapin in r h sties oped increasingly during the past year and has o proved. of great value. Frequent meetings are Through participation in the work of the Co- held between the President of the BXank anld ordination Committee and its various subsidiary the Manwaging Director of the FuBd, and be- Consultative Committees, the Bank was enabled tween the heads of the comparable departments to exchange views with the United Nations Sec- tween the heads ofathe comparable depasion nts retariat and with the other specialized interna- of the two orgranizations; on occasion, join meetings of the Executive Directors and of tional organizations on such matters as employ- their committees have been held. The result has ment and personnel policies, public information been that each institution has been kept fully activities, the use of cormmon administrative informed of the activities and policies of the services and the provision of expert advice an other, and it has been possible to avoid both assistance to member governments. conflict of decision and unnecessary duplication The Bank has also sought to collaborate with of effort. In certain admninistrative fields, such other specialized international organizations, as the maintenance of facilities used by both or- particularly with the Food and Agriculture Or- ganizations and the establishment of staff pen- ganization of the United Nations. Informal ar- sion and health programs, it has been possible rangements have been made with the FAO See- to arrange for joint action by the Bank and the retariat for the exchange of views and of infor- Fund. mation; in addition, Bank representatives have Relations with the United Nations have also participated in several international conferences been further developed during the past year. convened by the FAG. The Bank has also taken The proposed agreement setting out the relations an active part in the work of the Preparatory between the Bank and the Unlited Nations is Committee responsible for drafting a charter for the subjeet of a separate report and accordingly the proposed International Trade Organization. will not be discussed here. Even in the absence Invitations were accepted for Bank repree of such an agreement, it has been possible to sentatives to attend meetings of the Interna- maintain close and effective liaison with the vari- tional Chamber of Commerce and of the Board ous organs of the United Nations which have of Governors of the Bank for International responsibilities in fields related to those of the Settlements. Contact has also been bad with the Bank. Bank representatives attended as ob- Pan-American Union and it is expected that a servers all meetings of the Economic and Social Bank representative will attend the Ninth Con- Council, its Economic and Employment Com- ference of American Republics which convenes mission and its Economic Commissions for Eu- in Bogota, Colombia, on January 15, 1948. E22J International Bank for Reconstruction and Development Inwreases in MembershiP and are a Balance Sheet showing the financial posi- Subscribed Capital tion of the Bank as of June 30, 1947, a State- Membership in the Bank has increased from ment of Income and Expenses, an Auditors' Re- 38 to 45 since the First Annual Meeting of the port, and a number of schedules giving further Board of Governors. The countries admitted to details concerning the assets and liabilities, cap- membership during the past year, listed in the ital and financial operations of the Bank. order in which they joined the Bank, are Colom- bia, Venezuela, Tutrkey, Italy, Syria, LebAnon Administrative Budget and Australia. An application for membership Theme is attached as Appendix G the admin- has been received from Finland; this is the sub- istrative budget of the Bank for the fiscal year ject of a separate report to the Board of Gov- ending June 30, 1948. This budget has been ernors. prepared by the President and approved by the Through the access of new members and Executive Directors in accordance with Section through an increase in the capital subscription 19 of the By-Laws of the Bank. of France by $75 million, the Bank's total sub- The budget as presented represents the best scribed capital increased from $7,670 million as estimate by the management and Executive of September 1, 1946 to $8,224.5 million, as of Directors of the minimum cost of effective ad- August 10, 1947. ministration for the current fiscal year. It must be pointed out, however, that it is not possible Subscriptions and Voting Power or to foresee all contingencies which may arise. Member Countries If, therefore, unanticipated conditions develop In accordance with Resolution XII adopted which necessitate changes in programs, appro- by the Board of Governors at the First Annual priate adjustments in the estimates will be re- Meeting, the subscription of France to the cap- quired ital stock has been increased from 4,500 shares to 5,250 shares. Additional Reports to Board of Governors By Resolution XIII adopted at the First An- In addition to this Annual Report, the follow- nual Meeting, the Board of Governors also au- ing reports are being submitted for the consider- thorized an increase in the subscription of Para- ation of the Board of Governors at the Second guay to the capital stock of the Bank from 8 Annual Meeting: shares to 14. (1) Report and recommendations on the ap- Election of Additional Executive Director plication of the Republic of Finland for mem- Resolution No. 10 adopted at the Inaugural bership in the Bank; Meeting of the Board of Governors provided for the election of an additional Executive Director (2) Report and recommendations regarding under certain conditions of increased member- increases in the subscriptions of Iran and Egypt ship. On August 6, 1947 the Executive Directors, to the captal stock of the Bank; having determined that these conditions had been fulfilled, ordered the election of an addi- (3) Report and recommendations on selection tional Executive Director, and determined that of the Advisory Counci of t ; the member countries eligible to vote were Den- mark, Colombia, Venezuela, Turkey and Italy. Report andh recommenations; The election is expected to be completed by the agreement with United Nations; time of the Second Annual Meeting. (5) Report regarding site of future annual Financial Statements and Reports meetings. Attached as Appendices A to F, inclusive, (6) Report on Loan Regulations No. 1. International Batzk for Reconstruction and Development r 23 1 Ajpendices (3) Executive Directors and Alternates and In addition to the appendices to which refer- Their Voting Power as of August 10, 1947 ence has already been made, there are included (Appendix J). in this report for the information of the Board of Governors the following appendices: (4) Standing Committees of -Dhe Executive (1) Governors and Alternates as of August 10, Directors (Appendix K). 1947 (Appendix H). (5) Decisions of Executive Directors Interpret- (2) Voting Power and Subscripttons of Member ing Articles of Agreement and Resolutions of Countries as of August 10, 1947 (Appendix I). Board of Governors (Appendix L). [ 24 ] Internataonal Ban}k for Recorstruction and Developm.:ent 4PPENDIX A Balance Sheet-June 30,1947 EXPRESSED IN UNITED STATES CUBRRENCY (See Notes to Financial Statements) ASSETS Due from Banks and Other Depositories Member currency-United States ................ 61,829,306.54 Member currencies-other than United States-Note A 108,220,798.86 $ 170,050,105.40 Investment Securities United States Treasury Certificates of Indebtedness ($155,700,000 face amount, at cost less amortiza- tion of premium) ......... .................. $ 155,710,195,61 Accrued interest .............................. 556,622.11 156,266,817.72 Receivable from Members Non-negotiable, non-interest-bearing, demand notes -Note B Payable in member currency-United States ..... $ 415,785,000.00 Payable in member currencies-other than United States-Note A ......... .................. 764,123,446.11 $1,179,908,446.11 Calls on subscriptions to capital stock Due prior to June 30, 1947-Note C ........... $ 525,400.00 Due on or before June 25, 1951-Note D ........ 4,915,000.00 5,440,400.00 1,185,348,846.11 Loan Outstanding Loan commitment-Note E ............ . ...... $ 250,000,000.00 Less-Unused portion of commitment ............ 158,000,000.00 Principal outstanding .......................... $ 92,000,000.00 Accrued interest and commissions ................ 318,020.51 92,318,020.51 Miscellaneous Receivables and Other Assets 147,364.51 Total Assets $1,604,131,154.25 LIABILITIES, RESERVES AND CAPITAL Liabilities Accounts payable and accrued expenses $ 261,507.57 Special Reserve-Note F 33,452.05 Capital Capital Stock Authorized 100,000 shares of $100,000 par value each Subscribed 80,245 shares ....... ............ $8,024,500,000.00 Less: Uncalled portion of subscriptions-Note G 6,419,600,000.00 $1,604,900,000.00 Deduct-Excess of expenses over income: At June 30, 1946 $ 125,158.36 Twelve months ended June 30, 1947 938,647.01 1,063,805.37 Net Capital 1,603,836,194.63 Total Liabilities, Reserves and Capital $1,604,131,154.25 'siernational Bank for Reconstruction and Development APPENDIX B Statemnent of Income and Expenses For the Twelve Months Ended June 30, 1947 EXPRESSED IN UNITED STATES CURRENCY (See Notes to Financial Statements) Income Interest earned on investment securities .................... 919,060.88 Income from loans: Interest .................... ........................ 108,719.16 Commitment charge ....... ........................... 175,849.30 Com-nission ......3............. 83,452.05 $1,237,081.39 Deduct-Amount equivalent to commission appropriated to Special Reserve (Note F) ........ ..................... 33,452.05 $1,203,629.34 Expenses Salaries: Executive Directors and Alternates ...... ................ $ 239,178.11 Officers and others ............ o 804,110.77 81,043,288.88 Expense allowances-Executive Directors and Alternates ....... 9,693.63 Provision for taxes on salaries and expense allowances .......... 183,654.43 Travel: Transportation and moving to and from seat of Bank-Execu- tive Directors and Alternates ....... .................. $ 12,732.51 Officers and others ............5 51,277.63 Board of Governors and Alternates ............ ; .......... 41,263.42 E:xecutive Directors and Alternates ...... ................ 14,674.96 Officers and others ............ ........................ 44,259.69 164 008.21 Rental of office quarters ..98,579.86 Furniture and equipment purchased 205,093.70 Stationery, printing and supplies ..139,712.46 Cable charges ..11,290.76 Repairs, maintenance and alterations, rented quarter rs 63,943.73 Handling charges and storage of gold 44,844.12 Expenses (other than travel) annual meeting Board of Governors 10,569.92 Miscellaneous expenses .106,592.59 Bond issue expense (Note H) .60,804.06 2,142,276&35 Excess of Expenses Over Income $ 93S,647.01 [ 26 2 International Back for Reconstruction and Development APPENDIX C Statement of Members' Currencies Held by the Bank June 30, 1947 (See Notes to Financial Statements) AMOUNT EXPRESSED TOTAL UNIT OF IN MEMBER CURRENCY RATE OF EXCHANGE EXPRESSED IN NAME OF MENMBER CURRENCY (RESTRICTED) (NOTE A) U. S. DOLLARS Belgium Franc 17,605,453.60 $ = 43.8275 $ 401,698.80 Bolivia Bolivianv 529,200.00 $ = 42.00 12,600.00 Brazil Cruzeiros 349,650,000.00 $ - 18.50 18,900,000.00 Canada Dollar 584,948.50 $ 1.00 584,948.50 Chile Peso 195,299,070.00 $ 31.00 6,299,970.00 China Dollar 12,960,000,000.00 $ 12,000.00 1,080,000.00 Coloinbia Peso 11,024,937.00 $ 1.74999 6,300,000.00 Costa Rica Colon 2,021,400.00 $ 5.615 360,000,00 Cuba Peso 63,000.00 $ s= 1.00 63,000.00 Czechoslovakia Koruna 11,218,500.00 $ 50.00 224,370.00 Denmarlk Krone 560,396.07 Krone $.2083764219 116,773,34 Dominican Republic Dorn. Dollar 3,600.00 $ 1.00 3,600.00 Ecuador Sucre 7,776,000.00 $ 13.50 576,000.00 Egypt Pound 774,256.00 Eg. Pound = $4.133 3,200,000.00 El Salvador Colon 450,000.00 8 2.50 180,000.00 Ethiopia Dollar 1,341,589.72 Eth. $ $.4025 539,989.86 Franece Franc 115,165,268.50 $ = 119.10669 966,908.51 Greece Drachma 22,500,000,000.00 8 - 5,000.00 4,500,000.00 Guatemala Quetzal 357,361.82 $ 1.00 357,361.82 Honduras Lempiza 3,600.00 $ 2.00 1,800,00 Iceland Krona 1,167,947.50 $ 6.488597 180,000.00 India Rupee 2,378,152.17 Rupee $.30225 718,796.50 Iran Rial 1,393,200.00 $ 32.25 43,200.00 Iraq Dinar 267,990.074 Dinar $4.03 1,080,000.00 Italy Lira 7,290,000,000.00 $ - 225.00 32,400,000.00 Lebaon Found 1,786,050.00 $ 2.205 810,000.00 Luxembourg Franc 726,649.59 $ G 43.8275 16,579,77 Mexico Peso 56,803,500,00 $ 4.855 11,700,000,00 Netherlands Guilder 1,315,492.00 $ 2.65285 495,878.77 Nicaragua Cordoba 720,000.00 $ 5.00 144,000,00 Norway Krone 438,901.12 $ 4.96278 88,438.56 Panarna Balboa 36,000.00 S= 1.00 36,000.00 Paraguay Guarani 441,599.78 $= 3.09 142,912.55 Peru Sol 204,750.00 $ 6.50 31,500.00 Philippines Peso 2,400,000.00 $ -s 2.00 1,200,000.00 Pol0Ad Zloty 21,885,000.00 $ 100.00 218,850,00 Syria Pound 2,579,850.00 $ 2.205 1,170,000,00 Turkey Lira 216,720.00 Lira $3.57143 77,400.00 Union of South Africa Pound 44,647.P4 S.A. P $4.03 179,928.10 United Kingdom Pound 586,455.-/7 R = $4.03 2,%3,413.78 United States U. S. Dollar 61,709,873.55 U. S. S = 61,709,873.55 Uruguay Peso 2,871,003.60 $ = 1,519049523 1,890,000.00 Veuezuela Bolivar 4,572,750.00 $ 3.35 1,365,000.00 Yulgosl4via Diner 360,186,000.0Q $ 50.0266 7,199,880.00 Restricted Currencies (Note J) $169,930,672.41 Unrestricted Currency (all held in United States Dollars) 119,432.99 Total (Note 1) $170,050,105.40 International Bank for Reconstruction and Development [ 27 j APPENDIX D Statement of Subscriptions to Capital Stock and (See Notes to Financial Statements) Amounts Paid In (Note A) Number Subscription In-Currency Member of Shares Price U. S. Dollars of Member Subscribed (Note K) Other Than U. S. Dollars 1 Belgium 2,250 $ 225,000,000 $ 4,500,000 $ 405,000 2 Bolivia 70 7,000,000 140,000 12,600 3 Brazil 1,050 105,000,000 2,100,000 18,900,000 4 Canada 3,250 325,000,000 6,500,000 585,000 5 Chile 350 35,000,000 700,000 6,300,000 6 China 6,000 600,000,000 9,000,000 1,080,000 7 Colombia 850 35,000,000 700,000 6,300,000 8 Costa Rica 20 2,000,000 40,000 360,000 9 Cuba 350 35,000,000 700,000 63,000 10 Czechoslovakia 1,250 125,000,000 1,875,000 225,000 11 Denmark 680 68,000,000 1,020,000 122,400 12 Dominican Republic 20 2,000,000 40,000 3,600 13 Ecuador 32 3,200,000 64,000 576,000 14 Egypt 400 40,000,000 800,000 3,200,000 15 El Salvador 10 1,000,000 20,000 180,000 16 Ethiopia 30 3,000,000 60,000 540,000 17 France 5,250 525,000,000 10,500,000 970,409 18 Greece 250 25,000,000 375,000 4,500,000 19 Guatemala 20 2,000,000 40,000 360,000 20 Honduras 10 1,000,00( 20,000 1,800 21 Iceland 10 1,000,000 20,000 180,000 22 India 4,000 400,000,000 8,000,000 720,383 23 Iran 240 24,000,000 480,000 43.200 24 Iraq 60 6,000,000 120,000 1,080,000 25 Italy 1,800 180,000,000 3,600,000 32,400,000 26 Lebanon 45 4,500,000 90,000 810,000 27 Luxembourg 100 10,000,000 200,000 18,014 28 Mexico 650 65,000,000 1,300,000 11,700,000 29 Netherlands 2,750 275,000,000 5,500,000 496,098 30 Nicaragua 8 800,000 16,000 144,000 31 Nornvay 500 50,000,000 1,000,000 90,000 32 Panama 2 200,000 4,000 36,000 33 Paraguay (Note L) 8 800,000 16,000 144,000 34 Peru 175 17,500,000 350,000 31,500 35 Philippines 150 15,000,000 300,000 1,200,000 36 Poland 1,250 125,000,000 1,875,000 225,000 37 Syria 65 6,500,000 130,000 1,170,000 38 Turkey 430 43,000,000 860,000 77,400 39 Union of South Africa 1,000 100,000,000 2,000,000 180,000 40 United Kingdom 13,000 1,300,000,000 26,000,000 2,375,750 41 United States 31,750 3,175,000,000 219,215,000 42 Uruguay 105 10,500,000 210,000 1,890,000 43 Venezuela 105 10,500,000 210,000 1,365,000 44 Yugoslavia 400 40,000,000 600,000 7,200,000 80,245 $8,024,500,000 $311,290,000 $108,261,154 [ 28 InternationalBank for Reconstruction anddDevelopment APPENDIX D Voting Power of Members as of June 30,1947 (See Notes to Financial Statements) Amounts Paid In (Note A) Non-Interest-Bearing, Amounts Pay- Amounts Unpaid Subject to Call Non-Negotiable ment of Which ment on or Before to Meet Obliga- Number of Demand Notes is Postponed ne 30, 1947 tBons of Bank Votes (Notes B and 1) (Note D) (uNote C ) ( Note G) $ 40,095,000 $ - $ - $ 180,000,000 2,500 1 1,247,000 400 5,600,000 320 2 - - - 84,000,000 1,300 3 57,915,000 - 260,000,000 3,500 4 - - - 28,000,000 600 5 106,920,000 3,000,000 - 480,000,000 6,250 6 - - - 28,000,000 600 7 - - - 1,600,000 270 8 6,237,000 - - 28,000,000 600 9 22,275,000 625,000 - 100,000,000 1,500 10 12,117,600 340,000 - 54,400,000 930 11 356,400 - - 1,600,000 270 12 - - - 2,560,000 282 13 4,000,000 - - 32,000,000 650 14 - - - 800,000 260 15 - - - 2,400,000 280 16 93,529,591 - - 420,000,000 5,500 17 - 125,000 - 20,000,000 500 18 - - - 1,600,000 270 19 178,200 - 800,000 260 20 - - - 800,000 260 21 71,279,617 - 320,000,000 4,250 22 4,276,800 - 19,200,000 490 23 - - - 4,800,000 310 24 :- - - 144,000,000 2,050 25 - - - 3,600,000 295 26 1,781,986 - - 8,000,000 350 27 \ . - - 52,000,000 900 28 49,003,902 - - 220,000,000 3,000 29 - - - 640,000 258 30 8,910,000 - - 40,000,000 750 31 - - - 160,000 252 32 - - - 640,000 258 33 3,118,500 - 14,000,000 425 34 1,500,000 - - 12,000,000 400 35 22,275,000 625,000 - 100,000,000 1,500 36 - - - 5,200,000 315 37 7,662,600 - - 34,400,000 680 38 17,820,000 - - 80,000,000 1,250 39 231,624,250 - - 1,040,000,000 13,250 40 415,785,000 - - 2,540,000,000 32,000 41 - - - 8,400,000 355 42 - 525,000 8,400,000 355 43 - 200,000 - 82,000,000 650 44 $1,179,908,446 $4,915,000 $525,400 $6,419,600,000 91,245 fInternational Bank for Reconstruction and Develop,ment [ 291 APPENDIX E Notes to Financial Statements NOTE A NOTE B Amounts in currencies other than United States Demand notes delivered to the Bank in stibstitu- dollars have been translated into United States dol- tion for currency of member, in accordance with lars at the rates recognized in making capital pay- Section 12 of Article V. ments by rnember countries. In the cases of thirty- NOTE C four members these rates are the established par As of June 80, 1947, the Governments of Vene- values under the International Monetary Fund' valusudertheIntrnato M y F zuela and Bolivia had not completed payment in Agreement. In the cases of ten members (Brazil, their currencies of calls on stock subscriptions which China, Dominican Republic, Greece, Italy, Lebanon, were due on or before May 26, 1947. At June 30, Poland, Syria, Uruguay and Yugoslavia), the par 1947, the equivalent of $525,000 was due from values of their currencies have not yet been so Venezuela and the equivalent of $400 was due from established. Bolivia. Both of these members have subsequently No representation is made that any of such curren- paid the amounts due by delivering demand notes as cies is convertible into any other of such currencies provided in Section 12 of Article V. at any rate or rates. NOTE 0 Article II, Section 9, of the Bank Articles of Agree- Payments postponed until June 25, 1951, in ac- ment contains the following provisions with regard cordance with the provisions of Article II, Section 8 to maintenance of value of certain currency holdings (a) (i). These amounts are payable in gold or of the flank: United States dollars. (a) Whenever (i) the par value of a member's NOTE E currency is reduced, or (ii) the foreign exchange On May 9, 1947, the Bank entered into a loan value of a member's currency has, in the opinion of agreement with Credit National pour faciliter la the Bank, depreciated to a significant extent within that member's territories, the member shall pay to rverino des domCaes cue parola iuerre pro-nt the Bank within a reasonable time an additionAal viding for a loan to Credit National in the amount the Bank within a reasoabof $250,000,000, or the equivalent thereof in other amount of its own currency sufficient to maintain the currencies, and a guarantee agreement relating value, as of the time of initial subscription, of the amoun of the currency of such member which is thereto with the Republic of France. Such agree- amount of the currencye whici ments became effective on June 9, 1947. Unless held by the Bank and derived from currency otherwise agreed, the loan commitment expires as to ally paid in to the Bank by the mnember under Article anyerwise porthe at cember e1 r 1947o II, Section 7 (i), from currency referred to in Article any unused portion at December 31, 1947. IV, Section 2 (b), or from any additional currency NOTE F furnished under the provisions of the present para- The amount of commissions received by the Bank graph, and which has not been repurchased by the on loans made or guaranteed by it is required under member for gold or for the currency of any member Section 6, Article IV, to be set aside as a special which is acceptable to the Bank. reserve to be kept available for meeting obligations (b) Whenever the par value of a member's cur- of the Bank created by borrowing or guaranteeing (b) Whenever the par value of a member's cur- las rency is increased, the Bank shall return to such loans. member within a reasonable time an amount of that NOTE G memnber's currency equal to the increase in the value Subject to call by the Bank only when required to of the amount of such currency described in (a) meet the obligations of the Bank created by borrow- above, ing or guaranteeing loans. (c) The provisions of the preceding paragraphs NOTE H may be waived by the Bank when a uniform pro- On July 15, 1947 through a public offering in the portionate change in the par values of the currencies United States the Bank sold $100,000,000 aggregate of all its members is made by the International principal amount of its Ten Year 21/4% Bonds due Monetary Fund. July 15, 1957, and $150,000,000 aggregate principal [ 30 j International Bank for Reconstruction and Development amount of its Twenty-Five Year 3% Bonds due July whose currency is involved; provided, however, that, 15, 1972. The public offering price of each issue if necessary, after the Bank's subscribed capital is was 100% plus accrued interest. Selling concessions entirely called, such currencies may, without restric- were allowed to dealers at the rates of 1/4 of 1% for tion by the members whose currencies are offered, be the Ten Year Bonds and 1/2 of 1% for the Twenty- used or exchanged for the currencies required to Five Year Bonds sold to them. meet contractual payments of interest, other charges NOTE I or amortization on the Bank's own borrowings or to The currencies of the several members and the meet the Bank's liabilities with respect to contractual notes substituted for any part of such currencies are payments on loans guaranteed by it. The United held on deposit with designated depositories in the States has approved the use by the Bank in the territories of the respective members, making of loans of such 18% of the subscription of the United States to the capital stock of the Bank. NOTE J (Article IV, Section 2(a) and (b).) These currencies are derived from the 18% of the subscriptions to the capital stock of the Bank which NOTE K is payable in the currencies of the respective mem- In terms of United States dollars of the weight bers. Such 18% may be loaned by the Bank, and and fineness in effect on July 1, 1944. funds received by the Bank on account of principal NOTF L of loans made by the Bank out of such currencies Resolution XIII adopted by the Board of Govern- may be exchanged for other currencies or reloaned, ors at its First Annual Meeting authorized an in- only with the approval in each case of the member crease in the subscription of Paraguay to $1,400,000. International Bank -Sor Reconstruzction and Davelo pinent 31 1 APPENDIX F Auditors' Report PRICE, WATERHOUSE & CO. AMERICAN SECURITY BUILDING WASHNGTON 5, D. C. August 6, 1947 To INTERNATIONAL BANK FOR RECONSThUCTION AND DEVELOPMENT, Washington, D. C. We have examined the financial statements listed below of International Bank for Reconstruction and Development as of June 30, 1947. Our exam- ination was made in accordance with generally accepted auditing standards applicable in the circumstances, and included such tests of the accounting records and other supporting evidence and such other procedures as we considered necessary. In our opinion, such financial statements, with the notes thereto, present fairly the position of the Bank at June 30, 1947, expressed in United States currency, and the results of its operations for the twelve months then ended, in conformity with generally accepted accounting principles applied on a basis consistent with that of the preceding year. PRICE, WVATERHOUSE & Co. Financial Statements Covered by the Foregoing Opinion Balance Sheet as of June 30, 1947 Statement of Income and Expenses for the twelve months ended June 30, 1947 Statement of Members' Currencies held by the Bank at June 30, 1947 Statement of Subscriptions to Capital Stock of the Bank and Voting Power of Members, June 30, 1947 Notes to the Financial Statements [ 32; Intrnataonal Bank fo- iEcconstruction and Develo ment APPENDIX G Admuinistrative Budget FOR THE FISCAL YEAR ENDING JUNE 30, 1948 There is outlined below the Administrative Budget for the Fiscal Year ending June 30, 1948 as prepared by the President and approved by the Executive Directors in accordance with Section 19 of the By-Laws: Personal Services ........................... $2,383,500 Travel ................................... 205,400 Rent, Utility Service, and Building Alterations. . 307,200 Supplies and Equipment ..................... 155,400 Books and Printing ......................... 97,000 Communication Service ......... ............ 48,000 Contribution to Staff Benefits ................. 251,000 Miscellaneous (Reporting Service, Regional Offices and contingencies) ................. 400,000 Other Expenses ..................5.......... l,000 Total Administrative Expenses ..... $... 3,862,500 Offices of Executive Directors ....... 333,500 Annual Meeting, Board of Governors 165,000 498,500 Total Operating Expenses ............. $4,361,000 In addition, it is estimated that bond registration and issuance ex- penditures will aggregate $3,987,000, making the total estimated expenditures $8,348,000. [ 33 ] Iflternatioftal lDank for Reconstrctidlon and IJevelopmeng APPENDIX C Administrative Budget FOR THE FISCAL YEAR ENDING JUNE 30, 1948 There is outlined below the Administrative Budget for the Fiscal Year ending June 30, 1948 as prepared by the President and approved by the Executive Directors in accordance with Section 19 of the By-Laws: Personal Services ........................... $2,383,500 Travel .................................. 205,400 Rent, Utility Service, and Building Alterations. . 307,200 Supplies and Equipment ..................... 155,400 Books and Printing ......................... 97,000 Communication Service ......... ............ 48,000 Contribution to Staff Benefits ................. 251,000 Miscellaneous (Reporting Service, Regional Offices and contingencies) ................. 400,000 Other Expenses ............................ 15,000 Total Administrative Expenses ..... 3... S3862,500 Offices of Executive Directors ....... 333,500 Annual Meeting, Board of Governors 165,000 498,500 Total Operating Expenses ...... ....... $4,361,000 In addition, it is estimated that bond registration and issuance ex- penditures will aggregate $3,987,000, making the total estimated expenditures $8,348,000. [ 33 ] leternatioftal Bank for Recons&uclion and Dlevelopment APPENDIX G Administrative Budget FOR THE FISCAL YEAR ENDING JUNE 30, 1948 There is outlined below the Administrative Budget for the Fiscal Year ending June 30, 1948 as prepared by the President and approved by the Executive Directors in accordance with Section 19 of the By-Laws: Personal Services .............. ............. $2,383,500 Travel ................................... 205,400 Rent, Utility Service, and Building Alterations. . 807,200 Supplies and Equipment ..................... 155,400 Books and Printing ......................... 97,000 Communication Service ......... ............ 48,000 Contribution to Staff Benefits ................. 251,000 Miscellaneous (Reporting Service, Regional Offices and contingencies) ................. 400,000 Other Expenses ................ ............ 15,000 Total Administrative Expenses ........ $3,862,500 Offices of Executive Directors ....... 333,500 Annual Meeting, Board of Governors 165,000 498,500 Total Operating Expenses ...... ....... $4,361,000 In addition, it is estimated that bond registration and issuance ex- penditures will aggregate $3,987,000, making the total estimated expenditures $8,348,000. [ 33 3 International Bank for Reconstruction and Development APPENDIX H Governors and Alternates (As of August 10, 1947) COUNTRY GOVERNOR ALTERNATE AUSTRALIA (becamc mebey rn August S, 1947) BELGIUM Gaston Byskens Maurice Frere BOLIVIA 'Rene Ballivian-Calderon Jaime Gutierrez-Guerra BRAzIL Francisco Alves dos Santos-Filho Edgard de Mello CANADA D. C. Abbott Graham F. Towers CHL Arturo Maschke Fernando Illanes CHINA 0. K. Yui T. L. Soong COLOMBI4 Emilio Toro Diego Mejia COSTA RICA Julio Pena Morua Angel Coronas-Guardia CUBA Guillermo Belt Miguel A. Riva CZECHOSLOVAKIA Alois Kral Joseph Hanc DENMARK Carl Valdemar Bramsnaes Hakon Jespersen DOMINICAN REPUBUC Jesus Maria Troncoso Jose Ramon Rodriguez ECUADOR Leonardo Stagg Sixto E. Duran-Ballen EGYPT Abmed Zaki Bey Saad Ahmed Selim EL SALVADOR CatalinQ Herrera Manuel Melendez-Valle ETMOPIA George A. Blowers FRANCE Robert Schuman Pierre Mendes-France GREECE A. J. Sbarounis Grigorios Zarifopoulos GUATEMALA Manuel Noriega Morales Leonidas Acevedo HoNDURAS Julian R. Caceres Jorge Fidel Duron ICELAND Magnus Sigurdsson Thor Thors INDIA Sir Chintaman Deshmukh N. Sunidaresan IRAN A. H. Ebtehaj Mocharraf Naficy IRAQ Ali Jawdat A. M. Gailani ITALY Donato Menichella George Cigliana LEBANON Charles Malik George Hakim LuXEMBOURG Pierre Dupong Hugues Le Gallais MEXICO Anlonio Espinosa de los Luciano Wiechers Monteros NETHERLA1ns P. Lieftinck M. W. THoltrop NICARAGUA Guillerrno Sevilla Sacasa Rafael A. Huezo NORWAY Gunnar Jahn Ole Colbjoemsen PANAMA J. J. Vallarino Roberto Heurternatte PARAGUAY Harmodio Gonzalez Ruben Benitez PERU Carlos Montero Bernales Jose Barreda Moller PHILIPPLNE REPUBLIC Joaquin M. Elizalde Narciso Ramos POLAND Konstanty Dabrowski Janusz Zoltowski SYRIA Faiz el Khoury Husni A. Sawwaf TURKEY Nurullah Esat Sumer Nahit Alpar UNION OF SOUTH AnucA Jan Hendrik Hofmeyr M. H. de Kock UNrrED KiINGDOM Hugh Dalton Sir Gordon Munro UNrrED STATES John W. Snyder William L. Clayton URUGUAY Hugo Garcia VENEZUELA Carlos A. D'Ascoli Hector Santaella YUGOSLAVIA Stane Krasovec Vaso Srzentic E 34 ] Intermational Bank ,-cr Reconstrnctior and Development APPENDIX I Voting Power and Subscriptions of Member Countries (As of August 10, 1947)a Voting Power of Member Countriet Required Subscriptions to International Bank International Pank Total Subscription Amount Which May Be tJsgd InternatlSubscription (In Millions of Dollars) Number Percent Amount Percent , Only to of of (In Millions of For Bank s Meet Bank's Votes Total of Dollars) Total Own Loans Obligations Australia 2,250 2.41 $ 200.0 2.43 $ 40.00 $ 160.00 Belgium 2,500 2.67 225.0 2.74 45.00 180.00 Bolivia 320 .34 7.0 .09 1.40 5.60 Brazil 1,300 1.39 105.0 1.28 21.00 84.00 Canada 8,500 3.74 325.0 3.95 65.00 260.00 Chile 600 .64 35.0 .43 7.00 28.00 China 6,250 6.68 600.0 7.30 120.00 480.00 Colombia 600 .64 35.0 .43 7.00 28.00 Costa Rica 270 .29 2.0 .02 .40 1.60 Cuba 600 .64 35.0 .43 7.00 28.00 Czechoslovakia 1,500 1.60 125.0 1.52 25.00 100.00 Denmark 930 .99 68.0 .83 13.60 54.40 Dominiican Republic 270 .29 2.0 .02 .40 1.60 Ecuador 282 .30 3.2 .04 .64 2.56 Egypt 650 .70 40.0 .49 8.00 32.00 El Salvador 260 .28 1.0 .01 .20 .80 Ethiopia 280 .30 3.0 .04 .60 2.40 France 5,500 5.88 525.0 6.38 105.00 420.00 Greece 500 .53 25.0 .30 5.00 20.00 Guatemala 270 .29 2.0 .02 .40 1.60 Honduras 260 .28 1.0 .01 .20 .80 Iceland 260 .28 1.0 .01 .20 .80 India 4,250 4.55 400.0 4.86 80.00 820.00 Iran 490 .52 24.0 .29 4.80 19.20 Iraq 310 .33 6.0 .07 1.20 4.80 Italy 2,050 2.19 180.0 2.19 36.00 144.00 Lebanon 295 .32 4.5 .05 .90 3.60 Luxembourg 350 .37 10.0 .12 2.00 8.00 Mexico 900 .96 65.0 .79 13.00 52.00 Netherlands 3,000 3.21 275.0 3.34 55.00 220.00 Nicaragua 258 .28 .8 .01 .16 .64 Norway 750 .80 50.0 .61 10.00 40.00 Panama 252 .27 .2 b .04 .16 Paraguay 258 .28 .8 .01 .16 .64 Peru 425 .45 17.5 .21 8.50 14.00 Philippine Republic 400 .43 15.0 .18 3.00 12.00 Poland 1,500 1.60 125.0 1.52 25.00 100.00 Syria 315 .34 6.5 .08 1.30 5.20 Turkey 680 .73 43.0 .52 8.60 34.40 Union of South Africa 1,250 1.34 100.0 1.22 20.00 80.00 United Kingdom 13,250 14.17 1,800.0 15.81 260.00 1,040.00 United States 82,000 34.23 3,175.0 38.60 635.00 2,540.00 Uruguay 355 .38 10.5 .13 2.10 8.40 Venezuela 355 .38 10.5 .13 2.10 8.40 Yugoslavia 650 .70 40.0 .49 8.00 82.00 Total 93,495 100.00C $8,224.5 100.00 $1,644.90 $6,570.60 a On August 5, 1947, Australia was admitted to member- b Less than .005 per cent. ship. The total of subscriptions and total of votes shown c The figures shown in the table do not add to L00,00 ifi this Appendix differ, therefore, from those as of because of rounding. June 30 shown in Appendix 'D". International Bark f or Reconstructio and Development 3 Executive Directors and Alternates and APPENDIX J Their Voting Power as of August 10, 1947 CASTING VOTES VOTES BY TOTAL PERCENT OF DIRECTORS ALTERNATES OF COUNTRY VOTES TOTAL* APPOINTED Eugene R. Black John S. Hooker United States 32,000 32,000 37.20 Sir Gordon Munro Maurice H. Parsons United Kingdom 13,250 13,250 15.40 Yuen-Ting Shen Y. L. Chang (Temp.) China 6,250 6,250 7.27 Pierre Mendes-France Guy de Carmoy France 5,500 5,500 6.39 N. Sundaresan B. K. Madan India 4,250 4,250 4.94 ELECTED J. W. Beyen W. Koster Netherlands 3,0001 4250 4g4 (Netherlands) (Netherlands) Union of South Africa 1,250J 4 Belgium 2,500 Franz De Voghel Thomas Basyn Norway 750 3,860 4.49 (Belgium), (Belgium) Luxembourg 350 , Iceland 260 Brazil 1,300 Chile 600 Philippine Republic 400 Victor Moller Fernando Illanes Bolivia 320 3670 4.27 (Chile) (Chile) Costa Rica 270 Guatemala 270 Paraguay 258 Panama 252 Leon Baranski Stefan Michalski Czechoslovakia 1,5009 (Poland) (Temp.) (Poland) Poland 1,500 3,650 4.24 Yugoslavia 650 Mexico 900 Cuba, 600 Peru 425 Luis Machado Joaquin Meyer Uruguay 355 (Cuba) (Cuba) Ecuador 282 3,610 4.20 Dominican Republic 270 El Salvador 260 Honduras 260 Nicaragua 258J Graham F. Towers J. F. Parkinson Canada 3,500 3,500 4.07 (Canada) (Canada) Egypt 650 Kyriakos Varvaressos F. Noury-Esfandiary Ireece 490 0 2,20 2.59 (Greece) (Iran) Iraq 3190 2 Ethiopia 280J * The percentages of voting power shown in this Appendix differ from the percentages shown in Appendix I because, as of August 10, 1947, there were several members not represented by an Executive Director. [ 36 I International Bank for Reconstruction andDevelopment Since the First Annual Meeting, the following changes have taken place in the membership of the Executive Directors and Alternates: Executive Directors Date of Appoint- Resigned Appointed or Elected ment or Election Hubert Ansiaux (Belgium) Franz de Voghel (Belgium) November 1, 1946 R. B. Bryce (Canada) Graham F. Towers (Canada) March 7, 1947 Emilio G. Collado (US) Eugene R. Black (US) March 14, 1947 Sir James Grigg (UK) Sir Gordon Munro (UK) May 19, 1947 Alternates Resigned Appointed Date of Appointment Y. L. Chang (China) (Temp.) December 11, 1946 D. Crena de Iongh (Netherlands) W. Koster (Netherlands) January 8, 1947 J. V. Joshi (India) B. K. Madan (India) February 14, 1947 M. Naficy (Iran) M. Nemazee (Iran) (Temp.) March 20, 1947 Aramis Alvarez (Cuba) Joaquin Meyer (Cuba) April 7, 1947 Maurice I. Hutton (UK) Maurice H. Parsons (UK) June 1, 1947 M. Nemazee (Iran) F. Noury-Esfandiary (Iran) July 15, 1947 Alois Kral (Czechoslovakia) Stefan Michalski (Poland) (Temp.) August 6, 1947 APPENDIX K Standing Committees of the Executive Directors COMMITTEE ON FINANCIAL POLICY J. W. BEYEN, Chairman LEON BARANSKI, Vice Chairman EUGENE R. BLACK VICTOR MOLLER SIR GORDON MUNRO GRAHAM F. TOWERS COMMITTEE ON INTERPRETATION COMMITTEE ON LIAISON KYRIAKOS VARVARESSOS, Chairman PIERRE MENDES-FRANCE, Chairman LUIS MACHADO, Vice Chairman N. SUNDARESAN, Vice Chairman FRANZ DE VOGHEL VICTOR MOLLER PIERRE MENDES-FRANCE SIR GORDON MUNRO YUEN-TING SHEN KYRIAKOS VARVARESSOS International Bank for Reconstruction and Development [37 ] APPENDIX L Decisions of Executive Directors Interpreting Articles of Agreement and Resolutions of Board of Governors The following decisions in respect of the interpretation of the Articles of Agreement and of resolutions of the Board of Governors have been made by the Executive Directors during the period covered by this report: I. Decisions regarding calls on the 80% of capital subscriptions of members subject to call only to meet obligations of Bank WHEREAS, in connection with the preparations call which shall be made by the Bank in respect of of the Bank to borrow funds in accordance with the the subscription of such other member? provisions of Section 1 of Article IV of the Articles of Agreement of the Bank and to use the funds so DECISION ON QUESTION NO. 1 borrowed in the making of loans, certain questions The obligations of the respective members of the have arisen with regard to the interpretation of the Bank to make payment of their subscriptions to the provisions of said Articles; and capital stock of the Bank are not dependent on each WHEREAS the Executive Director for the United other, and the failure of one or more members of the States has requested that, before the UVnited States Bank to make payment of a call on such subscrip- shall be asked to approve the borrowing of such tions does not excuse any other member of the Bank funds in the United States, the Executive Directors, from its obligation to make payment of such call or in accordance with Article IX of said Articles, decide of any other call on its subscription to the capital such questions; and stock of the Bank. WHEREAS the Executive Directors, having con- QUESTION NO. 2 sidered such questions, are of opinion that it is ad- If the Bank calls a part of the 80% of the subscrip- visable that such questions be decided before the tionstiscatlsokwhhisubetocllo Bank shall proceed to borrow funds to be used in tos to its capital stock which is subject to call to Beankingall proceedan borrow funds to be used in meet obligations of the Bank created under Sections the making of loans by the Bank; 1 (a) (ii) and (iii) of Article IV of its Articles of NOW, THEREFORE, the Executive Directors Agreement and the aggregate of the payments re- hereby decide as follows: ceived by the Bank pursuant to such call is for any reason insufficient to meet such obligations then ma- QUESTION NO. I tured or about to mature, does the Bank have the If the Bank calls a part of the 80% of the sub- right to make further successive calls on such 80% scriptions to its capital stock which is subject to call (not exceeding in the aggregate the amount remain- to meet obligations of the Bank created under Sec- ing unpaid of such 80%) until the aggregate of the tions 1 (a) (ii) and (iii) of Article IV of its Articles payments received by it on such calls shall be suffi- of Agreement and one or more members of the Bank cient to meet such obligations? fail to make payment of the amount called in respect of the subscription of such member or members, does DECISION ON QUESTION NO. 2 the failure of such member or members to make such If the Bank shall call a part of the 80% of the sub- payment excuse any other member of the Bank from scriptions to its capital stock which is subject to call making payment of the amount of such call in re- to meet obligations of the Bank created under Sec- spect of the subscription of such other member or tions 1 (a) (ii) and (iii) of Article IV of its Articles from making payment of the amount of any further of Agreement and the amount received by the Bank [ 38 ] International Bank for Reconstruction and Developmnent on such call shall be insufficient to meet such obliga- IV of its Articles of Agreement until such obligations tions matured or about to mature, the Bank has the have actually matured. If for any reason the Bank right under its Articles of Agreement to make further will not have available funds sufficient to meet such successive calls on such 80% (not exceeding in the obligations as they mature, it has the right under its aggregate the amount then remaining unpaid of such Articles of Agreement to make calls on such 80% 80%) until the aggregate amount received by it shall sufficiently in advance of the maturity of such obliga- be sufficient to meet such obligations then matured tions in order to meet them as they mature. or about to mature. QUESTION NO. 4 QUESTION NO. 3 Is the Bank under any obligation to make calls on If the Bank has maturing obligations created under the 80% of the subscriptions to its capital stock Sections 1 (a) (ii) and (iii) and, because of a de- which is subject to call to meet obligations of the fault on loans made, participated in or guaranteed Bank created under Sections 1 (a) (ii) and (iii) by the Bank or for any other reason, the Bank does of Article IV of its Articles of Agreement? not have funds available to meet such maturing ob- ligations, does the Bank have the right, in anticipa- DECISION ON QUESTION NO. 4 tion of the maturity of such obligations, to call all or The 80% of the subscriptions to the capital stock part of the 80% of the subscriptions to its capital which is subject to call to meet obligations of the stock which is subject to call to meet such obliga- Bank created under Sections 1 (a) (ii) and (iii) of tions and which then remains unpaid, or must the Article IV of the Articles of Agreement of the Bank Bank defer such a call until such obligations actually is a part of the assets of the Bank of which it is mature? bound to avail itself when and to the extent neces- DECISION ON QUESTION NO. 3 sary in order to meet such obligations. The duty of The Bank need not defer a call of all or part of the the Bank in that regard is implicit in any obligation 80% of the subscriptions to its capital stock which which it creates under such Sections. is subject to call to meet obligations of the Bank (Decisions of the Executive Directors created under Sections 1 (a) (ii) and (iii) of Article at their meeting on April 2, 1947.) II. Decision regarding use of currencies received by Bank on account of principal of loans made out of borrowed funds WHEREAS, in connection with the determina- Bank shall proceed to borrow funds to be used in tion of the terms and conditions of bonds or other the making of loans by the Bank; obligations which the Bank may issue, a question NOW, THEREFORE, the Executive Directors has been raised as to whether or not, under the pro- NOW, dERE as followsr visions of Section 2(c) of Article IV of the Articles hereby decide as follows of Agreement of the Bank, it is authorized to use in The provisions of Section 2(c) of Article IV of the making of loans currencies received by the Bank the Articles of Agreement of the Bank do not limit from borrowers or guarantors in payment on account the use by the Bank of currencies received by it on of the principal of direct loans made by the Bank account of the principal of loans made by it out of out of funds borrowed by it as provided in Section funds borrowed by it as provided in Section 1 of said 1 of said Article IV; and Article IV. Such provisions are intended to make it clear that currencies so received can be used by the WHEREAS the Executive Director for the United Bank, without restriction by its members, for the States has requested that, before the United States purpose of making amortization payments on, or of shall be asked to approve the borrowing of funds in anticipating payment of, or repurchasing, all or part the United States, the Executive Directors, in ac- of the obligations of the Bank. Such provisions do not cordance with Article IX of said Articles, decide such prohibit the Bank from using any currencies so re- question; and ceived for any purpose for which the funds so bor- rowed by it could have been used, including the WHEREAS the Executive Directors, having con- making of loans. sidered such question, are of the opinion that it is (Decision of the Executive Directors advisable that such question be decided before the at their meeting on June 18, 1947.) lhternational Bank for Reconstruction and Development [ 39 ] III. Decisions pursuant to Resolution No. VI of the First Annual Meeting regarding election under Resolution No. 10 of the Inaugural Meeting A member admitted to membership in the Bank If such member abstains from voting in the elec- subsequent to the election of the Executive Directors tion held under Resolution No. 10, the votes which held at the Inaugural Meeting, but prior to the elec- such member might have cast at such election are tion to be held under Resolution No. 10 cannot cast votes which count toward the election of the Execu- its votes for an Executive Director holding office at tive Director elected at such election and are in- the time the election pursuant to Resolution No. 10 cluded in the number of votes which such elected takes place. Executive Director shall be entitled to cast. (Decisions of the Executive Directors at their meeting on August 6, 1947.) 1 40 ] - International Bank for Reconstruction and Developmsew 4j* m