THE WORLD BANK GROUP 53427 1990 ANNUAL MEETINGS OF THE BOARDS OF GOVERNORS SUMMARY PROCEEDINGS WASHINGTON, D.C. SEPTEMBER 25-27, 1990 THE WORLD BANK GROUP 1990 ANNUAL MEETINGS OF THE BOARDS OF GOVERNORS SUMMARY PROCEEDINGS WASHINGTON, D.C. SEPTEMBER 25-27, 1990 INTRODUCTORY NOTE The 1990 Annual Meetings of the Boards of Governors of The World Bank Group. which consists of the: International Bank for Reconstruction and Development (IBRD). International Finance Corporation (IFC), In- ternational Development Association (IDA). Multilateral Investment Guarantee Agency (MIGA) and International Centre for the Settlement of Investment Disputes (ICSID). held jointly with that of the International Monetary Fund, took place in Washington, D.C., September 25-27, 1990 (inclusive). The Honorable George Saitoti, Governor of the Bank and Fund for Kenya, served as Chairman. The Summary Proceedings record in alphabetical order of member countries. the texts of statements by Governors relating to the activities of The World Bank Group. The texts of statements concerning the IMF are published separately by the Fund. T. T. THAHANE Vice President and Secretary THE WORLD BANK GROUP Washington, D.C. January 1991 1IJ CONTENTS Page Remarks by George Bush President of the United States 1 Opening Address by the Chairman George Saitoti Governor of the Fund and Bank for Kenya .................... 5 Annual Address by Barber B. Conable President of The World Bank Group ........................... 12 Report by B. T. G. Chidzero Chairman of the Development Committee. . .. . . . . . . . . . . . . . . . . . 21 Statements by Governors and Alternate Governors 24 Page Page Afghanistan ............. 24 Japan ................... . 125 Australia ................ 27 Korea ................... . 130 Austria.................. 31 Kuwait ................. . 134 Bangladesh .............. 33 Lao People's Belgium .... ......... .... 36 Democratic Republic .. , 137 *Brazil .................... 40 Malaysia ................ , 140 Bulgaria ................. 45 Malta ................... . 143 Canada.................. 47 Namibia ................ . 148 Chile .................... 50 Nepal ................... . 149 China.................... 54 Netherlands ............ . 153 *Cote d'Ivoire ............ 58 New Zealand ........... . 157 Czechoslovakia ........ . . 64 *Norway ................. . 161 *Denmark ................ 68 Pakistan ................ . 164 *Dominica ................ 69 Paraguay ............... . 167 EI Salvador.............. 74 Peru .................... . 170 Fiji ...................... 77 Philippines ............. . 178 France................... 80 Poland .................. . 180 Germany................ 82 Portugal ................ . 182 Greece .................. 86 Romania ............... . 184 *Honduras ................ 91 *Somalia ................. . 186 India..................... 96 South Africa ........... . 190 Indonesia ................ 99 Spain ................... . 192 Iran, Islamic Republic Sri Lanka .............. . 196 of ...................... . 104 Thailand ................ . 199 Iraq ..................... . 107 Tonga ................... . 202 Ireland ................. . 109 Turkey .................. . 204 Israel ................... . 113 United Kingdom ....... . 206 *ltaly .................... . 117 United States ........... . 211 Italy .................... . 121 Viet Nam ............... . 213 *Western Samoa ........ . 215 * Speaking on behalf of a group of countries. v Page Concluding Remarks by Mr. Conable .................................. 218 Concluding Remarks by the Chairman, George Saitoti ............... 220 Remarks by Jorge Gallardo Zavala, Governor of the Bank and Fund for Ecuador .......................................... 223 Documents of the Boards of Governors ............................... 224 Schedule of Meetings ................................................ 224 Provisions Relating to the Conduct of the Meetings ........... ,.... 225 Agendas .............................................................. 226 Joint Procedures Committee ........................................... 227 Report II ............................................................. 228 Report III ............................................................ 229 Report V ............................................................. 230 Report VI ............................................................ 232 MIGA Procedures Committee......................................... 234 Report I .............................................................. 235 Report II ............................................................. 236 Resolutions Adopted by the Board of Governors of the Bank Between the 1989 and 1990 Annual Meetings ............................ 238 No. 437 .... 1990 Regular Election of Executive Directors. . . . .. .. . 238 No. 438 .... Direct Remuneration of Executive Directors and their Alternates ............. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 238 No. 439 .... Benefits of the Executive Directors and their Alternates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 238 No. 440 .... Membership of the Czech and Slovak Federal Republic ................................................ 239 Resolutions Adopted by the Board of Governors of the Bank at the 1990 Annual Meetings .......................................... 243 No. 441 .... Membership of the People's Republic of Bulgaria..... 243 No. 442 .... Membership of the Republic of Namibia .............. 246 No. 443 .... Forthcoming Annual Meetings ......................... 248 No. 444 .... Financial Statements, Accountants' Report and Administrative Budget ................................. 249 No. 445 .... Allocation of FY90 Net Income ....................... 249 Resolutions Adopted by the Board of Governors of IFC Between the 1989 and 1990 Annual Meetings ................................ 250 VI Page No. 164 ... .Increase of Subscription by France, India, Italy, Japan and Republic of Korea to the Capital of the Corporation ............................................. 250 No. 165 .... Membership of Romania............................... 251 No. 166 ... .Increase of Subscription by the Arab Republic of Egypt, Spain and Turkey to the Capital of the Corporation ............................................. 253 No. 167 .... Membership of the Czech and Slovak Federal Republic ................................................ 254 Resolutions Adopted by the Board of Governors of IFC at the 1990 Annual Meetings .......................................... 257 No. 168 .... Membership of the Republic of Namibia .............. 257 No. 169 .... Financial Statements, Accountants' Report and Administrative Budget ................................. 259 Resolutions Adopted by the Board of Governors of IDA Between the 1989 and the 1990 Annual Meetings. .. . . . . . .. .. . . . . . . . . . . . . . . . . 261 No. 150 .... Additions to Resources: Ninth Replenishment........ 261 No. 151 .... Membership of the Czech and Slovak Federal Republic ................................................ 274 Resolutions Adopted by the Board of Governors of IDA at the 1990 Annual Meetings .......................................... 277 No. 152 .... Membership of the Republic of Namibia .............. 277 No. 153 .... Financial Statements, Accountants' Report and Administrative Budget ................................. 279 Resolutions Adopted by the Council of Governors of MIGA Between the 1989 and 1990 Annual Meetings. . . .. . . . . . . . . . . . . . . . . . . . . . . . 280 No. 15 ..... Election of Additional Directors....................... 280 No. 16 ..... Election of Directors ................................... 281 No. 17 ..... Membership of the Czech and Slovak Federal Republic ................................................ 282 Resolution Adopted by the Council of Governors of MIGA at the 1990 Annual Meetings ................................................ 283 No. 18 ..... Membership of the Republic of Namibia .............. 283 Reports of the Executive Directors of the Bank ...................... 284 1990 Regular Election of Executive Directors ...................... 284 Forthcoming Annual Meetings ...................................... 285 Allocation of FY90 Net Income ..................................... 286 Rules for the 1990 Regular Election of Executive Directors 287 VIJ Page Executive Directors Elected at 1990 Regular Election................ 291 Reports of the Board of Directors of IFC ............................. 297 Increase of Subscription by France, India, Italy, Japan and Repub- lic of Korea to the Capital of the Corporation ................... 297 Increase of Subscription by the Arab Republic of Egypt, Spain and Turkey to the Capital of the Corporation.................... 297 Report of the Executive Directors of IDA ............................ 299 Additions to IDA Resources: Ninth Replenishment ................ 299 Reports of the Board of Directors of MIGA .......................... 314 Election of Additional Directors .................................... 314 Third Regular Election of Directors ................................ 315 Membership of the Czech and Slovak Federal Republic............ 317 Membership of the Republic of Namibia............................ 317 Rules for the Third Regular Election of Directors (MIGA) .......... 318 Directors Elected at the 1990 Regular Election (MIGA) ............. 321 Report of the Chairman of the Development Committee ............. 324 Annual Report of the Development Committee ...................... 325 Accredited Members of Delegations at 1990 Annual Meetings....... 339 Observer at 1990 Annual Meetings .................................... 367 Representatives of International Institutions .......................... 367 Special Invitees ......................................................... 367 Executive Directors, Alternates and Advisors- IBRD, IFC, IDA ................................................ 368 Directors and Alternates- MIGA ........................................................... 369 Officers of the Board of Governors and Joint Procedures Committee for 1990-91 .......................................... 370 Officers of the MIGA Council of Governors and Procedures Committee for 1990-91 .......................................... 371 viii .,----".,-----------------'--- REMARKS BY THE HONORABLE GEORGE BUSH, PRESIDENT OF THE UNITED STATES It really is a pleasure to be back with you this year, to welcome you all to Washington for this important work. And it is a particular pleasure today to welcome the new members from Bulgaria, the Czech and Slovak Federal Republic, and Namibia, and, of course, the Special Invitees from the Soviet Union. Your presence here reminds us all of how events of the past year are producing a new partnership of nations-a fundamental, indeed inspiring, change in the world's political and economic order. The movement toward democratic rule, already strong throughout the 1980s, accelerated during what I call the Revolution of '89. The rights of the individual have been reaffirmed, with greater adherence to the rule of law. The freedom to choose political leaders-and even political systems- has triumphed in countries that only a year ago were ruled by single-party regimes. And hand-in-hand, new economic freedom has begun to emerge as well. Today, leaders around the world are turning to market forces to meet the needs of their people. Of course, change has not come easily. But as I said last year, at this same meeting: "The jury is no longer out. History has decided." And today, the results of global experiment are unmistakable. Today, the consensus is this: Governments by themselves cannot deliver prosperity. Rather, the key to economic growth is setting individuals free-free to take risks, free to make choices, free to use their initiative and abilities in the marketplace. We are seeing this, for example, in the restoration of private ownership in countries where the State once controlled every aspect of economic life. And for efficient production, private ownership is still the most powerful incentive known to man. Matched by the rejuvenation of markets, the ability to make individual economic choices is the fastest, most effective way to achieve and sustain broad-based economic growth. And that is why leaders everywhere are undertaking difficult economic reforms, building stronger, more versatile private sectors, improving efficiency, and making governmental decision making more rational. That process takes time. Economic adjustment is often difficult. And in recent months, a new challenge has arisen which could hinder this process of change: Iraq's illegal and unprovoked aggression against the sovereign nation of Kuwait. Clearly, the greatest harm is to Kuwait and its people. And when the Saudi border was opened, Kuwait's newest refugees brought fresh tales of the cruelty and horror inflicted on the Kuwaiti people and foreign nationals by the occupying forces of Saddam Hussein. 1 And today, other countries already facing painful economic and political transformations must now deal with added hardships. Serious challenges have emerged for countries rocked by unpredictable tides in the flow of oil, trade, displaced workers, and refugees. This staggering burden, which is pressing upon these most seriously af- fected countries, calls for a generous response from the world community. Toward that end, we have already begun to mobilize financial resources for the front-line states and to ensure responsible sharing among creditors. The initial response to that effort has been impressive. Now, in order to trans- form commitments into concrete contributions, I am pleased to announce the formation of a Gulf Crisis Financial Coordination Group, under the Chairmanship of Treasury Secretary Brady, with the aim of achieving effec- tive, timely, and sustained financial support to these most seriously affected countries. But let us not forget, an even larger group of countries represented here will suffer from higher oil prices and other economic dislocations. While world attention has rightly focused on those countries closest to the situation and bearing the heaviest economic burden. I can tell you that the rest of the world is certainly not forgotten, and never will be. This gathering of world financial leaders gives us an opportunity to discuss how we can work together to address the special financial burden of this crisis and do so in a way that will sustain the dramatic, worldwide transition to free markets. The IMF and World Bank-given their central role in the world econ- omy-are key to helping all of us through this situation by providing a combination of policy advice and financial assistance. The political leader- ship of the UN must be matched by the economic leadership of the IMF and the World Bank. Secretary Brady will be making some specific suggestions in his remarks for possible means of utilizing current IMF and World Bank programs more effectively. But let me say it again: We are determined not to allow the brutal behavior of one aggressor to undermine the historic process of dem- ocratic change or to derail the movement toward market-oriented economic systems. Let me continue, more broadly, with a vision of the role of the United States and of a world economy we can all share. First, we believe that the United States should contribute to economic stability and growth. And perhaps the greatest contribution the United States can make to the health of the international economy is to get our own house in order. Our budget deficit must be brought under control and reduced. Second, the United States is strongly committed to promoting develop- ment and growth in the newly emerging democracies of Latin America, Central and Eastern Europe, Africa, and Asia. We're working in all four 2 regions to ease debt burdens under the Brady Plan. In this hemisphere,' where debt overhang impedes progress, we announced the Enterprise for the Americas Initiative to promote economic growth by expanding trade and investment, to reduce debt owed to the United States Government, and to provide funds for needed local environmental projects. In Eastern Eu- rope, where massive restructuring is needed, we are working with other nations to provide billions of dollars in assistance to the newly emerging democracies. And in Africa, where underdevelopment hangs on so stub- bornly, many of the lowest-income countries have already benefited from reductions in debt owed to the U.S. Third, the United States is committed to the central role of the IMF and World Bank in helping bring about economic reforms. Reform efforts can only be successful if countries carry through on their responsibilities. And that means regulatory reform and privatization, sound macroeconomic and structural policies, and open borders for trade and investment. This is why your work here in Washington this week is so important. For more than 40 years, the Fund and the Bank have been quietly enlisting the talents and the energies of the developed and developing world in a global struggle against poverty. And today, in a world where ideology no longer confronts, and big-power blocs no longer divide, the Bank and the Fund have become paradigms of international cooperation. Indeed, we especially appreciate your efforts in carrying out a study of the Soviet economy that is unprecedented in its scope. This study will produce recommendations for economic, financial, and structural reform. As the coming week unfolds, part of your task will also be to plan for the future of your two great institutions. And I pledge the continued support of the United States for a World Bank and IMF which so clearly advance our common struggle to improve the quality of life for all people every- where. For this reason, we strongly support the IMF quota increase and the strengthening of the IMF arrears policy. And we would also like to challenge both institutions to intensify their focus on building dynamic private sectors in member countries-one of the most important stimulants for energizing these new market economies. And we would also ask the World Bank to place a high priority on three other issues vital to sound and sustained growth. First is protecting the environment. As I said here last year: Environmental destruction knows no borders. Second, eradicating poverty must continue to be a central mission of the Bank. And third, we strongly support greater efforts to integrate women into the developmental process. Finally, as we plan for the future, we must work together for success in another important international economic institution-the GATT. As we meet today, less than 70 days remain in the four-year Uruguay Round of global trade talks. Lasting reform is essential for developed and 3 developing countries alike. It is the key to a successful Round which estab- lishes new rules and opportunities for all countries. These negotiations are one of the world's greatest economic opportunities of the decade. But much remains to be done. The Round is not just a trade issue, it is a growth issue. And it's not just an exercise for bureaucrats in Geneva. The trade talks are the "last train leaving the station," and countries throughout the world must jump aboard. It can be the engine of economic growth that carries us into the 21st century. The Round promises to remove barriers in four crucial areas, areas un- touched in previous rounds: services, investment, intellectual property, and agriculture. As a matter of fact, agricultural reform remains a major stum- bling block, Indeed, it threatens to bring down the rest of the Round. We must let farmers compete with farmers, instead of farmers competing with the deep pockets of government treasuries. We need a successful res- olution of the agricultural issues if we are to have an agreement. If countries around the globe don't muster the political courage to face these tough issues in the time remaining, we will forfeit new markets for our businesses, impose higher prices on our consumers, and forgo new jobs and higher incomes for workers in all countries. Worst of all, we will endanger a vital, proven framework of international cooperation. A collapse of the Round will inevitably encourage increased protectionist pressure and political instability. That is something we can ill afford as we forge a new partnership of nations against aggression in the Persian Gulf. I urge you to work actively within your governments to ensure success. And I urge my counterparts around the world, as we did at the Houston Economic Summit, to instruct your negotiators to bring all the components of the Uruguay Round to a successful conclusion by December. In all these efforts, there is much at stake. Almost 35 years ago President Eisenhower first appeared at an IMF/World Bank meeting. He spoke of the lessons he learned while waging a war that brought together so many dif- ferent soldiers from so many different lands. Ike noted, as I do now, that there were people in the audience who were our allies in that grand effort. He said: "We early found one thing: Without the heart, without the enthusiasm for the cause in which we were working, no cooperation was possible. With that enthusiasm-subordinating all else to the advancement of the cause- cooperation was easy." As the unity of the United Nations has demonstrated in the past two months, the worldwide enthusiasm for today's noble "cause"-the cause I've described as a "new partnership of nations"-is not only unprece- dented, but truly remarkable. And I urge you to seize that enthusiasm in your meetings this week, to forge the new levels of cooperation needed to succeed. 4 OPENING ADDRESS BY THE CHAIRMAN, THE HONORABLE GEORGE SAITOTI, GOVERNOR OF THE FUND AND BANK FOR KENYA Introduction and Welcome It is a great honor for me to welcome you to these Forty-Fifth Annual Meetings of the International Monetary Fund and the World Bank Group. All of us present here join together in extending a warm welcome to our newest member, the Czech and Slovak Federal Republic. We also extend a hearty welcome to the delegates from Bulgaria and Namibia, both of which we expect will become members of our institutions during these Annual Meetings. I am also happy to note that Mongolia and Switzerland are cur- rently in the membership process, and that we have with us Special Invitees from the U.S.S.R. World Economic Outlook The past year has been marked by extraordinary political and economic events, all of which have significant implications for the world economy. Three of these developments stand out as particularly important at this juncture. First, one year ago the Berlin Wall stood tall, a symbol of intense world divisions. Today we meet on the eve of the reunification of Germany. I am sure that all of you will join me in warmly welcoming the German unification and the restructuring and move toward liberalization of countries in Eastern Europe. These countries are already beginning to attract significant amounts of capital and this points to what may be a central theme of these meetings, namely, the growing imbalance between the demand for and the availability of capital. We welcome the increase in investment in Eastern Europe and hope that it does not take place at the expense of the developing nations. Second, we are also happy to note the continued and rapid progress toward a united Europe, a development that could have important economic and political implications, particularly for the access to world markets of developing countries. We are indeed living in times when it can be claimed that history is being made. Third, I must, however, strike a more somber note on account of the recent developments in the Middle East, and of their adverse impact on the world economy. Economic growth will likely slow down in 1990, after seven years of global expansion, even though the prospects for specific regions differ widely. As a whole, the industrial countries, which were expecting a moderate growth and a slight decrease in inflation in 1990191, will experience an economic slowdown while inflation and interest rates may rise. Within this group, Japan and the Federal Republic of Germany are still expected 5 to post significant gains, but relatively slow growth is projected in North America, the United Kingdom, and a number of smaller industrial coun- tries. The scenario for oil importing developing countries is even less encour- aging. As a result of the increase in oil prices, growth is expected to slow down and inflation may remain very high in 1990. They will experience a fall in income as a result of the deterioration in their terms of trade; their exports are expected to decline as a result of reduced demand in industrial countries; and the increase in world interest rates will raise debt burdens. Within the group of developing countries, Asia as a whole is projected to enjoy continued rapid growth rates, but for those in Europe and the Western Hemisphere, the need to tackle large imbalances will likely result in almost stagnant output in the short term, except perhaps in the major oil exporting countries. Many of the Middle Eastern countries will suffer from the loss of export markets and a sharp drop in workers' remittances. The worst-affected region will be Africa. Lower exports, increased costs of oil imports, and higher debt-service payments are a vicious combination. Most countries will need substantial net inflows of additional resources, combined with the strong implementation of growth-oriented adjustment programs to overcome the crisis and improve living standards for their peoples. Let us hope that these gloomy predictions will not materialize and that the new spirit of international cooperation that has been established will soon restore peace and order in the region and normalcy in the oil market. Meanwhile, I am happy to note that the multilateral financial organiza- tions are engaged in imaginative efforts to support those countries that are worst affected by this crisis. In a brief review of the world economy, the urgent and continuing problem of poverty in a number of countries has to be mentioned. The World Bank has once again sharply focused on this issue in this year's World Develop- ment Report. Poverty remains a daunting problem in a large part of the world. It is "shameful," to quote the World Bank, that "more than one billion people in the world are living in poverty." The eradication of poverty has to be an important theme for our deliberations this week. An Action Agenda How can we work together to face the challenges ahead, to consolidate the gains of the recent past, and to spread these gains more evenly? This is a demanding goal. I will single out four areas on which to focus our attention: First, there is a need to coordinate more effectively economic policies among the large industrial nations in order to avoid a global recession. The mechanisms for policy coordination have improved considerably during the past decade, and the political willingness to adjust national economic poli- 6 cies to the demand of the world community is increasing. Right now, the economic outlook is particularly cloudy. The recessionary tendencies in some countries are now added to the uncertainties flowing from the crisis in the Persian Gulf. Governments around the world will have to exercise considerable international statesmanship to steer successfully through the uncertain seas that lie ahead. Second, the need to improve international cooperation through a freer international trade system remains high on the agenda. The benefits to be derived from freer international trade in goods and services are well known. Time is now rapidly running out for the completion of the Uruguay Round of trade liberalization under the auspices of GATT. I urge all participants in the Round to work toward its prompt and successful completion and to move forward and boldly dismantle the multitude of special agreements, such as those for agricultural products and textiles. These restrict the trading opportunities for developing countries. The inequality of nations at the bargaining table can, so easily, give rise to a perpetuation of poverty. Third, the problems of poverty remain acute in large parts of the world. The solutions are complex, politically and economically. Actions to reduce poverty must largely start at home, but the active financial support of the international agencies and industrial countries is also required. Specific and imaginative actions, such as buy-back or exchanging debt for environmental action or forgiving debt, as certain creditors have generously already done, are needed to alleviate the debt problem, which in many countries has aggravated poverty. At the same time, poor countries need to design their policies more deliberately to reduce the incidence of poverty and to enhance the potential for more widespread employment opportunities for income generation. I am happy to note that the design of adjustment programs is now begin- ning to take into account their social aspects, especially the impact of these programs on the vulnerable sections of the population. Further progress along these lines is called for. Fourth, we are all now beginning to grasp the complex problems of pro- tecting the environment from exploitation, but we are far from any solution. This is a global problem, but it is more acute and somewhat intractable in the developing world. Nevertheless, we know that it is imperative to preserve the environment, so that our children can inherit a better world. For us in Kenya, President Moi has been in the forefront and actively involved in various international forums to help focus world attention on these issues. The awareness of these problems is therefore growing in Kenya and we are spending increased resources to protect and reserve our environment, often with technical and financial assistance from a number of friendly nations. However, I would like to point out that poor countries often find it hard to bear the costs of these measures and I urge increased resources to tackle these fundamental issues. 7 The four issues that I have raised embrace some of the more urgent problems facing the world today. I would urge you to focus attention on these problems, all of which are of a global character, requiring international cooperation among governments and within international institutions such as the Fund and the Bank. Developments in Sub-Saharan Africa Let me now turn for a moment to the economic situation in Sub-Saharan Africa. The region is currently experiencing a modest recovery, after years of stagnation; yet it is fragile at about 3 percent a year, barely the population growth rate and nowhere near what is needed to raise meaningfully per capita incomes. And this modest recovery may well be jeopardized by the increase in oil prices. Africa's predicament is characterized by weak agri- cultural growth, declining industrial output, poor export performance, climbing debt burdens, and deteriorating social indicators. Although many of the problems of the region have been externally generated, we, as Afri- cans, recognize that the primary responsibility for our development rests with our people and their leaders. We cannot afford to borrow foreign ideologies and models for our own development. We know that if Africa is to avert hunger and provide productive employment to its growing labor force, our economies must grow at a much faster rate, the initial source of which must come from agriculture. We also need a sustained growth in our exports, more savings, increased investment, and indeed enough foreign exchange to pay for the essential imports. Two thirds of the countries in Sub-Saharan Africa have embarked upon the difficult, trying, and risky process of structural adjustment aiming to achieve a much faster rate of growth of their economies. They have dem- onstrated their willingness and capacity to undertake demanding reform programs which have, at times, threatened the already fragile fabric of their societies. In a number of countries the last three or four years have seen a dramatic and welcome change in the pattern of incentives in their econ- omies, appropriate exchange rate, trade and other macroeconomic policies geared to economic stability and improved production and productivity. All these measures require domestic commitment and consensus. Above all, to be successful, adjustment measures, and in fact more rapid economic growth, in Africa are critically dependent on adequate financial and tech- nical assistance from the international financial institutions and the inter- national donor community. This is vital in order to ensure a net inflow of real resources to the region, a requirement more acute now than ever be- fore. The external resource requirements for those countries that adopt and implement sound economic policies in Sub-Saharan Africa will only be met if the donor community increases gross official development assistance by 8 at least 4 percent annually in real terms. Concessional debt relief mecha- nisms are necessary so that debt-service payments are not worse than in recent years. Looking ahead, I would like to single out three issues that I believe are essential for the future of Sub-Saharan Africa. The first is the need to build capacity, human and institutional. This requires a substantial increase in investment in Africa's human resources, so that the great potential that lies therein can be realized. Indeed, it may be the main key to raising the productivity in many countries. Emphasis must be placed on improving the quality of basic education. We should prepare our children for a more rigorous and demanding post-secondary educational regime which will equip them with the skills necessary for a broader participation in the economy. A second crucial need is to increase the participation of women in eco- nomic activity. Programs and policies that focus on increasing women's productivity in agriculture and promote income generating opportunities for them must be given very high priority. They should be encouraged and assisted to learn skills that enable them to engage more effectively in com- mercial enterprises. To benefit from these, they must have easier access to credit. Third, African nations need to encourage more private investment and venture capital from abroad. The economic adjustment measures have al- ready started sending the right signals to the investors, at least in my own country, Kenya. However, we need to continue our efforts to put our econ- omies in shape so as to encourage capital repatriation and become more attractive to international business. We must also recognize that, in the longer run, the flow of financial resources into Africa will increasingly have to be commercial. Developments in Kenya Allow me as a practitioner to dwell for a brief moment on Kenya's recent experience. There is indeed some merit in sharing our experience with my fellow Governors from the region. Beginning in 1985 we put together a set of policies and strategies to deal with our growing employment needs and to strengthen the growth processes in the country. We had the full support of our people for the implementation of these policies. Today I am indeed proud to say that Kenya's real GOP growth rate averaged over 5 percent between 1985 and 1989. Kenya is in fact one of the very few African nations where per capita incomes rose steadily in real terms in the second half of the 1980s. We also managed to reduce inflation from a peak of over 22 percent in 1982 to about 10 percent in 1989. No doubt, the unique political stability we have is a critical factor that has contributed to economic stability and growth. 9 The trade policy reforms of 1988 along with the decontrol of prices for a number of commodities and reduction of tariffs have helped our manufac- turing sector by reversing the decline in investment witnessed in the early 1980s and spurring gross fixed capital formation. Furthermore, Kenya's agriculture has provided for food security while growing by over 4 percent in real terms between 1985 and 1989, mainly as a result of provision of market incentives. On the population front, we are beginning to witness the fruits of decades of development and education. Demographic transition is already in place in Kenya, long regarded as having the world's highest population growth rate. Recent data indicate that that rate has declined by about 15 percent in the last five years. Reforms are also under way in the financial sector and in capital markets to deepen the financial base and encourage domestic savings. We have also taken several steps to promote exports in the medium and the long term, and are putting together an outward-looking, export-oriented strategy that is essential to achieving an even faster rate of growth of the economy and improved welfare for the majority. Let me draw some important lessons from our experience. First is the need to build a national consensus for reform and widespread political commitment. Here we have been fortunate to enjoy the full backing of our President, H. E. Daniel Arap Moi, who has given consistent and clear backing to the reform process. Second, the reform process must be formu- lated by those who will be affected by it. There is a price for reform. There are indeed losers in the process and the social aspects of adjustment must be very carefully evaluated right from the beginning. Third, reform pro- cesses should be gradually implemented, giving the right signals to the public and the private sectors and avoiding sudden changes in policy. Fourth, coun- tries need able professionals and technical specialists and supportive insti- tutions to design, implement, and evaluate reform strategies and .programs. Finally, and most important, a critical factor for success in adjustment measures is the inflow of substantial resources to the economy. Unless such resources are forthcoming, particularly of the right quality and with ade- quate flexibility, reform programs run the risk of reversal within a short period of time. This is particularly important for countries implementing trade reform while facing simultaneously a significant drop in earnings from traditional exports. Role of the Fund and the Bank I do not wish to elaborate on the roles of the Fund and the Bank in facing the emerging challenges in the world economy. I leave this task to the Managing Director and the President. Let me, however, state that the two institutions must now demonstrate increased flexibility and be responsive in their search for answers to the 10 issues to which I have alluded. The Bank has just had a greatly needed capital increase. The $15.5 billion replenishment of IDA's resources is wel- come and the donor countries' contributions-particularly the special con- tributions made by several donors-are greatly appreciated. A similar in- crease is also being sought by IFC, and I urge members to agree promptly to such an increase. Finally, it is essential for member countries to move speedily toward the ratification of the just agreed 50 percent increase in Fund quotas. This, as you know, will also require acceptance of the pro- posed Third Amendment to the Articles of Agreement. Some of us have had our reservations and these have been duly recorded, but the time has come to demonstrate statesmanship. The Fund requires the quota increase to deal with the emerging crisis. Conclusion We are meeting at a time of tensions and new difficulties. Global events are rushing ahead at a dramatic pace. But a new sense of international cooperation is being established. We are meeting at a time indeed when world history is being made. If the outlook for the 1990s is to be promising and if we are to build on this new spirit of international cooperation, action by both industrial and developing countries is required. The developing countries must show their commitment to growth by implementing strong programs adapted to their own particular circumstances. Industrial countries must both ensure their own growth and create a favorable international economic environment for such progress in the developing world. We have much to discuss in the few days that we are here. I am confident about these meetings and I hope that all of you do share this confidence. Let us work together to build a better world. 11 ANNUAL ADDRESS BY BARBER B. CONABLE PRESIDENT OF THE WORLD BANK GROUP Introduction Welcome to the 1990 Annual Meetings. I extend a warm welcome to Bulgaria, Czechoslovakia and Namibia who have just become-or are about to become-our newest members. I would also like to welcome our distin- guished guests from around the world. In his inaugural address, John F. Kennedy summoned his compatriots "to bear the burden of a long twilight struggle . . . . a struggle against the common enemies of man: tyranny, poverty, disease and war itself." The World Bank was created 45 years ago to help nations recover from the scourges of war and poverty. Preserving peace and promoting economic growth are still the greatest challenges we face. We meet in the shadow of the Gulf crisis. We meet as Eastern European nations are attempting to transform themselves into pluralistic, market- oriented societies. We meet when a billion of our fellow human beings continue to live in abject poverty. How will history judge our response to these challenges? How will we contribute to the spread of freedom and economic opportunity? As the Cold War ends, we must seize this historic opportunity to secure economic and social progress for all peoples. Crisis in the Gulf Superpower rivalry has dissipated, but the Gulf crisis poses an obvious threat to world peace. Unless quickly resolved, it will have a serious effect on the world's poor and on developing countries. The burden will be espe- cially heavy for countries least able to meet increased external payments. Egypt, Jordan and Turkey are already grappling with serious economic dislocation. Major disruptions are being faced by a number of other coun- tries, as well. We are working with affected countries, with the United Nations system and others to assess the impact and the needs. One of the most distressing effects of the crisis is the exodus from Iraq and Kuwait of hundreds of thousands of workers to their home countries. The repatriation and resettlement of these workers is creating a major economic and social problem for the governments concerned. The loss of remittances, reduced exports of goods and services, plus, of course, the hike in oil prices have already imposed a burden on these struggling economies. These are urgent, pressing problems which demand a swift response. No one can predict how deep and lasting the effects of this crisis will be, but forceful measures now will forestall greater problems later. Prompt 12 actions by governments of affected countries and by the international com- munity are necessary. The World Bank is already taking action. We have the flexibility to re- spond quickly in such crises. We have launched a program of emergency assistance to help deal with the resettlement of returning workers and their reintegration into the econ- omy. The Bank is not a relief agency, but it can help by financing expendi- tures for rehabilitation and other services which generate immediate em- ployment and income, while building productive assets. The talent, skill and entrepreneurship which brought these workers to the Gulf in the first place must be preserved and harnessed for the future. We are also accelerating disbursements from existing loans and credits, increasing cost-sharing and advancing lending operations. And most importantly, we are assisting our borrowers in designing suit- able policy responses to the crisis. We are having discussions with many of you on what further the Bank can do. Naturally, we stand ready to help coordinate immediate assistance from the international community and to mobilize additional resources for specific countries, as required. I am pleased by the quick response of many bilateral donors. This support now must be channeled effectively. If the crisis continues, other bilateral and multilateral efforts will be required to mobilize additional concessional resources to assist necessary adjustment efforts in the affected countries. One option is to raise funds, separate from IDA, in an effort to assist a broader range of affected coun- tries. Other options could also be explored. We will coordinate closely with the IMF and others. The Changing World Before the Gulf crisis broke out, international attention was focused on the truly extraordinary changes taking place, notably in Eastern Europe and the Soviet Union. These developments have brought us a long way towards resolving ideological strife. The countries of Eastern Europe will continue to need strong financial and technical support in their efforts to develop competitive, market-oriented economies. Difficult choices will have to be made, and the political tolerance of the people will be sorely tested before economic gains materialize. Comparable reform seems also to be starting, with some difficulty, in the Soviet Union. Teams from the World Bank, the IMF, the OECD and the EBRD are in Moscow assessing the problems and needs. The welcome presence here of guests from the Soviet Union is a symbol of the mutual willingness to explore the great issues of reform. This new collaborative atmosphere is the result of a broad and growing consensus that economic improvement requires economic pluralism, which, 13 in turn, begets political pluralism. Around the world, people are seeking freedom-freedom to participate in decisions which determine their desti- nies, freedom to lead better lives. Many societies are seeking a balance between public and private enter- prise, while simultaneously decentralizing government and broadening par- ticipation in decision-making. As Voltaire aptly stated, "When once a nation begins to think, it is impossible to stop it." This movement, these ideas, these new economic and political structures, together, will transform our world. The relaxation of East-West tensions will help strengthen the global econ- omy, as a previously divided world coalesces into a more cooperative whole. But the ghost of endemic global poverty will haunt all of us, unless we can reduce the ranks of the poor. As the 1990s unfold, success in reducing poverty should be the measure of global economic progress. Reduction of Poverty as a Goal Reducing poverty is possible. Developing countries, bolstered by inter- national support, have made impressive advances against poverty. In the two decades after 1965, developing country annual consumption per capita rose from $590 to $985 in real terms; life expectancy rose from 51 to 62 years; and the net enrollment rate in primary education increased from 73 to 84 percent. These are not mere statistics. They speak of real achievements which have improved the quality of peoples' lives-achievements to which the World Bank has contributed considerably over many years, achieve- ments of which we can all be proud. Development on this scale and at this speed is unprecedented. Despite these impressive advances, poverty has proven a stubborn foe. For instance, three of the world's most populous nations-India, China and Indonesia-have made great progress towards reducing poverty. Even so, more than one billion people, half of them in South Asia, still live on less than a dollar a day. Over the next ten years, the population of the developing world is likely to increase by at least 850 million people, many of whom will be born into absolute poverty. Some regions have regressed economically. Living standards in Latin America have fallen below those of the 1970s. Parts of Sub-Saharan Africa have suffered a veritable collapse of living standards, institutions and infra- structure. Given Africa's rapidly rising population, the number of poor people will continue to increase, even if economic growth accelerates. There, poverty reduction faces its greatest challenge. A Strategy for Development and Reduction of Poverty Poverty reduction is an integrating theme for the many facets of the Bank's work, and it is the raison d'etre for our operational emphases. Our 14 World Development Report 1990 sets out a clear strategy for reducing pov- erty. The premise of the strategy is that the poor's most abundant asset is their labor. Experience suggests two related ways of improving and utilizing that asset. First, economic growth which encourages the productive use of labor by removing policy biases will increase income-earning opportunities for the poor, particularly in farming and small and medium enterprise. Second. expanded and better directed educational and health services for the poor will augment their income-earning potential. These two elements form the core of this poverty reduction strategy. In addition, carefully targeted transfers and social safety nets are necessary to assist those most vulnerable-for instance, the children, the aged, the sick and the handicapped-who, through no fault of their own, will not be reached. We can, we must reduce the suffering of these dependent poor. This strategy derives from years of experience and a growing consensus in the development community about what is needed to reduce poverty. Since the World Bank began operations in 1946, it has adjusted its lending program as needs have changed and capacities have evolved. We know a great deal about who the poor are, where they are, and how they live. We understand what keeps them poor and what must be done to improve the quality of their lives. Poor people everywhere-the landless laborer in Bangladesh, the sub- sistence farmer in Ghana and the slum dweller in Peru-have low incomes, few opportunities, and limited access to social services and political power. Ladies and Gentlemen, we have good reason for intensifying our attack on poverty. Impressive results are possible. New industries have flourished in East Asia, and agricultural reforms favoring small farmers in Zimbabwe resulted in significantly increased cotton and maize output. The incidence of poverty in Indonesia was reduced from 60 percent to 20 percent during the 1960s and 1970s, and the child mortality rate in Colombia declined sharply. Economic Growth: Cornerstone for Strategy Economic growth is the cornerstone of successful development and pov- erty reduction. Steady growth has been crucial to the reduction of poverty in countries such as India and China. Conversely, the number of poor people has risen in parts of Latin America and Sub-Saharan Africa, as growth has slowed or even ceased. The precondition for restoring growth in many countries is structural adjustment. Major economic imbalances must be redressed; the poor suffer most from distortions such as high inflation. Inadequate restructuring hurts the poor, by reducing consumption and availability of social services. We have seen in programs in Ghana and 15 Bolivia, however, that social services can be preserved and even expanded, despite budgetary constraints. In fact, the poor benefit from restructuring. Indonesia's restructuring mainly affected industry, while Tanzania's was directed chiefly at agricul- ture. Demand for labor is rising in both countries. Economic growth is driven by the entrepreneurial spirit of individuals. A vibrant private sector, therefore, is vital. Most of the income-earning op- portunities for the poor are generated by the private sector, many in the dynamic informal urban sector and in the labor-intensive agriculture sector. World Bank's Role in Reducing Poverty The World Bank lends heavily for agriculture, infrastructure and energy, all of which generate jobs and support efficient use of labor. Our projects also stress technology, incentives and institutions which promote growth and the productive use of labor. Bank activities today reflect the importance we give to providing people with the opportunity to improve their lives. Better education, health and nutrition directly address the basic causes and worst consequences of pov- erty. Education, particularly of women, improves health, lowers fertility, and increases labor productivity. Likewise, better health and nutrition raise peoples' productivity and their ability to learn. Family planning is important to reducing poverty. Rapid population growth imposes additional burdens on already-strained education and health services, and tilts the labor market against the poor. High mortality rates associated with childbearing reinforce the need for family planning. It is appalling that each year half a million women-99 percent of them in the developing world-die in childbirth. As George Bernard Shaw wrote, "The greatest of evils and the worst of crimes is poverty." The World Bank is rapidly increasing its lending for the social sectors- primary education where we are tripling our lending, basic health care, family planning and nutrition. Our special focus on women in development seeks to expand economic opportunities, while easing their burden in se- curing food, water and health services for their families. We have intensified our support for efficient food production and for targeted nutrition programs to replace costly general food subsidies. We are helping countries design better delivery systems for social and public services, and are encouraging the involvement of communities, NGOs and the private sector. Together, we can reduce poverty. Environmental Considerations Any poverty reduction strategy is sustainable only if it respects the natural environment. A healthy economy cannot survive in an unhealthy environ- 16 ment, as we see in regions as diverse as the Sahel and the Andean High- lands. Poor people and poor countries suffer most from environmental degra- dation. Measures to improve the quality of the air they breathe, the soil they till, and the water they drink can greatly improve the quality of their lives. I remember talking to a woman in the slums of Bombay and asking her what she needed most. She replied, "With my children I stand for two hours in line to get water not fit for drinking. What do you think I need most?" As the World Bank pursues poverty reduction, our commitment to envi- ronmentally sustainable development will continue. We will encourage eco- logically sound patterns of energy use, agricultural development, industrial- ization and human settlement. As you know, I have pledged significant increases in forestry expenditures. We will also help to combat desertifica- tion, soil salinity and urban pollution. Because industrial countries have contributed most to the destruction of the global environment, they have a particular responsibility for improving it. Some environmental issues-for instance, concern about the ozone layer-transcend national boundaries. We will support global funding ini- tiatives, such as the Montreal Protocol, to deal with these issues. I am pleased by the successful outcome of last Saturday's meeting on the Global Environment Facility. Support was expressed for the proposal that the Bank, in association with the UNEP and UNDP, assist developing coun- tries to address global aspects in their environmental programs. There was broad agreement that assistance should be additional and concessional, and most donors indicated their willingness to contribute to the facility. Implementing the Poverty Reduction Strategy Ladies and Gentlemen, implementation of the poverty reduction strategy could reduce the number of poor people in developing countries by at least 300 million, roughly one-third, by the year 2000. Child mortality rates could decline with improved health ~rvices, and primary education could become almost universal. This progress is achievable, despite rapidly rising populations, including an expected increase of about 100 million poor people in Sub-Saharan Africa. The World Bank is determined to press Africa's recovery. Special and sustained action is required from the entire international community. I welcome the support given to the second round of the Special Program of Assistance for Africa. In Africa and elsewhere, governments must be committed to poverty reduction. Scarce resources-financial, natural and human-must be used 17 more effectively. People are seeking better choices and more control over their individual destinies. Development is most likely to succeed where government is honest, com- petent, responsive and just; where accountable institutions function accord- ing to objective rules; and where red tape is minimized. Successful implementation of the strategy also depends a great deal on the external economic environment, which is largely determined by indus- trial countries. A satisfactory outcome to the Uruguay Round is crucially important. The degeneration of the multilateral trading system into regional blocs, or per- sistent adherence to restrictive policies, constrains global economic growth. The future of hundreds of millions of poor people all over the world depends on the negotiation of this agreement. I urge GATT participants to resolve their differences for the global good. In addition to removing trade restrictions, industrial countries must pro- vide adequate financial resources and sound investment to support the strat- egy. Otherwise, poverty reduction will remain an ambitious dream. Private direct investment is a powerful engine of growth. Developing countries must improve their investment climates to attract private capital- whether it be foreign, domestic or flight capital. The World Bank Group, including the International Finance Corporation and the Multilateral Investment Guarantee Agency, is committed to im- proving the opportunities for private investment everywhere. Early approval of a capital increase for the IFC will enhance its ability to strengthen private sector development in borrowing countries. Despite recent debt-reduction agreements, debt remains an obstacle to growth in many developing countries. We must continue to pursue ways to lighten further the load of both private and official debt. I welcome the proposal put forward last week by the United Kingdom, in what has become known as the Trinidad Terms, and other recent proposals by the Dutch and French Governments. These are important initiatives which, when trans- lated into an agreed set of actions, would help ease the burden of official debt in the poorest countries. Increased flows of official development assistance are also needed, if developing countries are to succeed in implementing poverty reduction strat- egies. Official aid flows have fallen as a percentage of industrial countries' gross domestic product, just as the need has been most acute. This is unacceptable. The Gulf crisis has dampened hopes for a peace dividend. But it should not. Just as an example, if members of NATO cut their military outlays by only 10 percent, they could double their development aid. Moreover, devel- oping countries "pend around $200 billion a year on weapons; many spend more on arms than on health and education combined. Financial resources must be redirected to higher priorities. 18 Collective International Action Against Poverty Ladies and Gentlemen: As the 1990s begin, the World Bank is equipped with a strong capital base, a replenished IDA, a highly motivated and skilled staff. and almost half a century's unequalled experience. We will do all we can to make this a decade of economic growth and poverty reduction. Development is a slow process, a constantly moving tapestry. Success in reducing poverty will require patience. It will also require determined, collective action. The cooperative spirit in which the international commu- nity has responded to the Gulf crisis should inspire our approach to other common causes, especially poverty. Let me suggest four ways in which we can work together to reduce pov- erty. First, developing country governments should establish sustainable growth policies and spending priorities for poverty reduction. They must marshall and make efficient use of scarce resources. The World Bank will work with interested nations to formulate and implement the specific pro- grams which will bring the strategy to life. Others must also help. Second, we should agree on ways to measure better how country policies affect the poor. Good intentions are not enough; objective standards must be built into our efforts to improve the quality of life. Indicators such as child mortality, primary school enrollment, nutrition, real unskilled wages, and real agricultural producer prices could be used to measure progress in reducing poverty. Third, good performance should be increasingly important in allocation of development assistance. Where recipients do not pursue a broad poverty reduction strategy, assistance should be limited and carefully directed to- wards the neediest groups. Where countries adopt effective strategies, re- source flows should be increased to reinforce their implementation. IDA already gives considerable weight to a country's efforts to reduce poverty, in allocating its scarce concessional funds. Fourth, the entire international community should be committed to sub- stantial poverty reduction. The UNDP's Human Development Report 1990, the Bank's World Development Report, and the extraordinary Children's Summit this coming weekend in New York are fresh evidence that the international community has common concerns, directions and strategies. We must tap the international reservoir of skills and experience to translate this common concern into action. Conclusion "We cannot have communities half sound and half unsound," wrote John Gardner in No Easy Victories. "Bitterness, anger and social disintegration cannot be sealed off. They will inevitably affect the whole community and 19 the whole world. It isn't going to be a decent society for any of us until it is for all of us." Lifting poverty's burden from hundreds of millions of people means new freedom for them-freedom from hunger; freedom from ignorance; free- dom from avoidable ill health; freedom to determine their own destinies; freedom to participate in growth and improvement-in short, freedom for a future brighter than the past. Together, we can, and I believe we will, reduce poverty. Thank you. 20 -----------.....----- .. ----- REPORT BY B. T. G. CHIDZERO CHAIRMAN OF THE DEVELOPMENT COMMITTEE The Annual Report on the work of the Development Committee for the year ended June 30, 1990 has been formally submitted to the Chairman of the Boards of Governors. I will, therefore, only highlight the major issues discussed and conclusions reached by the Committee. The main focus of the Committee's attention this year was on the following broad range of problems and issues. Problems and Issues in Structural Adjustment The Committee reviewed the experience with structural adjustment pro- grams. It identified the essential ingredients for the achievement of success- ful programs including, in particular, strong political commitment, broad public support, adequate and timely financing, and an enabling external economic climate. The Committee particularly emphasized the primary role of adjusting countries in the design of their reform or adjustment programs. At the same time, members urged industrial countries to adopt macroeco- nomic and trade policies supportive of developing countries' adjustment efforts. In this connection, the Committee decided to discuss the impact of industrial countries' trade, agricultural, and industrial policies on develop- ing countries in the spring of 1991. Debt Strategy and Development Prospects of Severely Indebted Countries The Committee reaffirmed its support and welcomed the progress achieved so far in the implementation of the strengthened debt strategy for the severely indebted middle-income countries. The importance of adjust- ment programs as a basis for debt and debt-service reduction was also stressed. The Fund and the Bank were asked to continue to provide support for debt and debt-service reduction packages, with the necessary flexibility under their established guidelines. In the case of the lower middle-income countries, largely indebted to bilateral official creditors, members welcomed the recent arrangements by Paris Club creditor countries and the decisions by a number of creditor countries which would contribute to alleviating the burden of bilateral debt of some of these countries. The Committee invited all creditor countries to consider taking further measures on a coordinated and case-by-case basis. The Committee welcomed the debt relief that cred- itor countries have provided to an increasing number of low-income coun- tries implementing Bank- and Fund-supported programs. Members also welcomed the request made to the Paris Club in the Houston Declaration to review the implementation of the existing options that apply to the poor- est countries and encouraged the concerned creditors to complete this re- view rapidly. The Committee called for early consideration through the Paris 21 Club of the proposals made by France, the Netherlands, and the United Kingdom, for further bilateral official debt relief to these countries. Development of Sub-Saharan Africa The Committee reviewed the World Bank's report, Sub-Saharan Africa: From Crisis to Sustained Growth, and endorsed the approach of the strategic agenda outlined in that report. In this context, members emphasized that sustained growth and development required firm commitment and good governance on the part of the concerned Sub-Saharan African governments, given their primary responsibility in the design and implementation of their development strategies. The complementary roles of the IMF and the World Bank were also stressed. It was agreed that the need to mobilize additional financing for Sub-Saharan Africa's reforms and development remained pressing. Members called on donor countries to pledge sufficient amounts of assistance to ensure the full financing for the second phase of the Special Program of Assistance to Africa. The Committee welcomed the outcome of the Conference on Africa held last July in Maastricht at the initiative of the Dutch Government. Private Sector Development Noting the growing emphasis given by a number of developing countries and the countries in Eastern Europe to the role of the private sector and to market-oriented policies in their development strategies, the Committee recognized the complementarity which exists between the public sector and the private sector. The Committee especially encouraged the IMF and the World Bank Group to give a very high priority to private sector development in their operations and to strengthen their activities in this area. The Com- mittee also urged the IFC Board of Executive Directors to complete by the end of the year its review of the operational policies and adequacy of the capital of the Corporation. Poverty Reduction and Women in Development The Committee agreed that the objective of effective reduction of poverty is a matter of the highest priority. It was recognized that governments of developing countries have the primary responsibility and the objective of poverty reduction would be most effectively achieved through the adoption of national development strategies based on sound macroeconomic and structural policies. It was stressed that developing countries' efforts should be supported by industrial countries. To this end, members agreed that aid donors and multilateral development agencies should examine their aid pro- grams to make them more supportive of the goal of poverty reduction. Members also welcomed the commitment by the President of the World 22 Bank to submit to the Board of Executive Directors, for its early consid- eration, proposals for fully translating the conclusions of the 1990 World Development Report into the Bank's operational framework. Recognizing the critical contribution of women to economic growth and development, the Committee encouraged governments and bilateral and multilateral development institutions to further integrate women in devel- opment objectives in their programs. Members also urged the World Bank to increase further the resources it devotes to women in development activ- ities and to strengthen its institutional capacity for this purpose. Other Issues The Committee reiterated its call on the IMF and the World Bank to keep under study, in close consultation with the GATT, the implications of regional trading arrangements for developing countries' economic pros- pects. In respect of the Uruguay Round, members expressed with concern that major uncertainties remained in areas of particular interest to devel- oping countries. The Committee reiterated its call on all parties concerned to reach an agreement by December 1990, noting that this was essential to support the adjustment programs pursued by many countries. The Committee welcomed the progress made toward the establishment of a program, including funding mechanisms, to address global environ- mental problems and urged the donors and the World Bank, working in collaboration with UNEP and UNDP, to complete their work before the next Development Committee meeting. Concluding Remarks As stressed in the World Development Report, poverty remains a major challenge for all of us in this decade. The implications of the Middle East crisis and economic slowdown in the industrial countries will aggravate poverty and debt problems while making it more difficult for developing countries to pursue their reform and growth programs. Indeed, there is need more than ever for concerted and action-oriented measures to meet the immediate or short-term problems as well as the long-term objectives of growth, poverty eradication, and sustained development. After serving as Chairman for four years, I have become even more convinced of the critical role of the Development Committee and I am confident that the Committee will continue to play an important and central role in discharging its mandate. I would like to take this opportunity to place on record my sincerest appreciation and gratitude to all members of the Committee, the Managing Director of the Fund, the President of the Bank, and their staffs, as well as to the Secretariat of the Committee for their support and cooperation dur- ing my tenure as Chairman. 23 STATEMENTS BY GOVERNORS AND ALTERNATE GOVERNORS l AFGHANISTAN: MOHAMMAD HAKIM Governor of the Bank On behalf of my Government, I wish to express my appreciation to the organizers of the Forty-Fifth Annual Meetings of the International Mone- tary Fund and the World Bank, and for their careful preparation and sincere efforts, which will undoubtedly contribute to the success of the ensuing consultations among the member states of the Bretton Woods family. The forum provides an appropriate opportunity to review economic and financial events since the last meeting, in September 1989, which leaves one with mixed feelings. There has been a growing expansion in the volume of world trade, which exceeds the 7.5 percent predictions of the IME This is not the general trend in most of the developing countries for which the Annual Report of the IMF gives a remarkable decline of 4.6 percent in the average growth rate of those countries in 1989, together with a decline in per capita income, continuous inflation, a deficit in the trade balance, and a decline in living standards. Unfortunately, the number of the least developed countries also increased in the last decade, from 31 to 42, encompassing more than 400 million people who suffer illiteracy, poverty, hunger, disease, homelessness, and a high mortality rate. Of this total, 10 out of 42 less developed countries, including Afghanistan, are landlocked and have enormous transit problems. The special problems and inherent disadvantages of being landlocked, es- pecially the adverse effect on socioeconomic development efforts, have long been discussed and recognized by all the members of the United Nations. With the single exception of the Land-Locked Fund for Developing Coun- tries, which was unfortunately abolished a few years ago, no viable addi- tional measures in favor of the landlocked countries have been put into effect. On the other hand, in the past 12 months the general growth of world trade was accompanied by relatively large fluctuations in the value of major convertible currencies and by problems of marketing. However, there has also been a gradual but significant "opening of doors" to market economies in almost half of the world, including the U.S.S.R. and Eastern Europe. This has been accompanied by a new arrangement of economies, price reforms, privatizations, stock companies, and the creation of an organiza- tional shell of the future market economy. This rejoicing to the world of iComprising statements relating to the work of the World Bank Group. Omitted passages are indicated by dots (. .. J. Statements relating to the International Monetary Fund are produced in the IMF Summary Proceedings. 24 free markets shall certainly bring forth drastic changes and deep re-evalu- ation of financial and monetary policies, which according to some econo- mists will bring a boost of 10 to 15 percent in the world trade volume in the initial stages. In trade, protectionist and other trade-distorting measures, especially nontariff barriers, continue to have a severe adverse impact on the export earnings and national incomes of developing countries, especially the least developed. This impact could be quite substantial in relation to the level of official development assistance. My delegation supports the recommenda- tions of the Joint Ministerial Committee of the Boards of Governors of the Bank and the Fund on the Transfer of Real Resources to Developing Coun- tries, which emphasize the responsibility of the industrial countries in re- ducing trade barriers and promoting a more liberal multilateral trading system so as to enhance and ensure sustained, export-oriented economic growth and development. Our world has also gone, in recent months, through a critical situation that caused, and is still going to cause, unbearable disorders in international economic transactions, particularly in normal stock exchanges and pricing systems. The recent Gulf crisis and the dire fuel supply prospects will continue in 1990-92 to top the list of serious concerns of financial and trade planners, who virtually foresee the upcoming constraints in economic de- velopment, particularly in the developing countries .... . . . In viewing the extraordinary events as regards real prices in the oil and commodity markets-which by themselves require special scrutiny- we have not witnessed any return to order and stability in international currency markets, through the structural adjustments and macroeconomic policy coordination, as recommended at last year's Annual Meetings. This year, there has been no stop in the increasing uncertainty of export revenues in the developing countries whose budgets are already pressed by a hllge debt-service burden totaling $1,370 billion, scarcity of resources, external financial constraints and financial outflows, regional disputes, high military expenditures, increasing population-by 4 percent this year-in the least-developed countries, and a decline in official development assis- tance. An austerity program is urgently needed as is far greater and far more serious financial assistance to the developing countries, especially to the least developed, in the form of substantially strengthened resources. The need is felt for the Fund to review its assistance and lending capacity quotas, so as to redress macroeconomic imbalances. According to the current report of the World Bank, owing to the relax- ation of tensions in the world, if the major industrial countries add 10 percent of their military expenses to their official development assistance, the volume of assistance would be doubled. It is hoped that the special consideration for the plight of these developing countries, embodied in the documents of the ministerial conference on the 25 developing countries held in Dacca in February 1990 and the Paris Confer- ence of September 1, 1990, may attract the attention of this meeting too. At this stage, it is essential to point out that lending to the developing countries, especially the least developed, should be devoid of political con- sideration. In this context, the suspension of pending loans, amounting to $71-97 million, to tHe Republic of Afghanistan on the basis of political considerations is moh deplorable. We hope that the IMF and the World Bank will utilize the~r influence toward the eradication of this undesirable trend and negative p(j)licy. Afghanistan is one of those countries that is moving toward national reconciliation, for wI1ich this year the prospects are very visible. A new atmosphere of confidence, vitally needed for attracting foreign assistance, is appearing. The new Government of Mr. Khaliqyar-70 percent of its composition is nondependent on any political grouping-is a symbol of an end to the party's monopoly of administration and economic centralization. A positive reorientation toward a decentralization of the country's economy is practically beginning. We have already embarked on a comprehensive socioeconomic endeavor based on privatization and a multisectoral economy where superfluous government controls are being drastically reduced. The Constitution of the Republic of Afghanistan, which was amended this year, not only guarantees and encourages private and foreign investment in almost all fields, such as industry, commerce, construction, transport, and agriculture and agro-economic services, but also has permitted private investment in forestry, pastureland, energy supplies, mines, and sales of communication devices. In Afghanistan, during last year's constitutional readjustment, besides state-owned banks and insurance institutions, stock banks and mixed and private land and air transport enterprises have been privatized. The state has also been bound by the Constitution to encourage and attract foreign investors, as foreign investors can share more than 50 percent of the total capital according to the law on foreign investment. It is to be mentioned that the privatization of state-run enterprises is under study and will soon be decided upon. We have undertaken a well-analyzed rehabilitation plan for two five-year periods during the 1990s. The first stage will be devoted to the repatriation of millions of displaced persons and the revitalization of normal life. Thus, as was declared by H.E. President Dr. Najibullah in the Paris Conference of September 1990, we shall remain dependent on foreign assistance. The country will need, according to preliminary estimates, over $6 billion from foreign sources to cover its program. There have been new criteria for the types of taxation and duties; and scope for better and beneficial utilization of international assistance and credits has been widened. There is a considerable move toward the desira- 26 bility of a liberal economic order and the elements of reform that would induce such an order. But, owing to the war, my country faces huge financial losses and devas- tation, a drastic budget deficit, and imbalance of payments with almost a stop in socioeconomic development. Owing to the reduction of domestic production, the deficit in foreign trade amounts to over $530 million, which is equivalent to 137 percent of annual export earnings. As a result, GNP has declined by 1.2 percent annually, and owing to population growth, per capita real income has fallen by 3 percent. Agriculture GNP decreased from Af 61.9 billion to Af 47.3 billion (23 percent) in the last ten years. There is also much dissension about the proper sequence of our drastic economic reforms, which warrants close attention. Afghanistan, as a landlocked developing country, is an integral part of the world economy. My country is facing the most difficult task of postwar reconstruction, which is to catch up its share in the economic transactions of the world. This can never be carried out in the absence of an especially high level of international assistance, of which the Fund's share is pivotal. I consider this an appropriate place to call for the revitalization of a virtually halted financial, technical, and humanitarian aid package to Af- ghanistan, which totaled $2.5 billion in 1979, but of which not more than a very small percentage has been channeled. Expressing my deep appreciation for the recent UN initiatives on human- itarian assistance, as the representative of Afghanistan, I also feel proud of the fact that my country has been a long-time member of the Fund and the Bank, and I reassure our full compliance with, and loyalty to, all principles and decisions adopted. In conclusion, while planning great hopes for the deliberations and deci- sions of the Annual Meetings to alleviate the problems that stand in the way of our country's prosperity and well-being, I sincerely wish that under your able chairmanship, Mr. Chairman, we may move toward fulfillment of these expectations in a more fruitful and comprehensive way. AUSTRALIA: SIMON CREAN Governor of the Fund and Bank I welcome this my first opportunity to participate on behalf of the Aus- tralian Government in the Annual Meetings of the International Monetary Fund and the World Bank. To those new member countries attending their first Annual Meetings, the Czech and Slovak Federal Republic, Bulgaria, and Namibia, I wish to extend a warm welcome. Substantial growth has occurred over the past eight years due to the greater willingness of governments to set fiscal and monetary policies in a medium-term context and to undertake structural reforms. 27 Recent developments in the Gulf region and increases in the price of oil have added a considerable degree of risk to inflation and output growth. Such risk, however, needs to be placed in some perspective. If oil prices remain at around present levels, the increases in price would be much lower than those experienced in the oil price shocks of the 1970s. In addition, many economies are now more flexible and most industrial countries are now less reliant on oil than in the past. The present situation clearly entails risks of a breakout in world inflation. Even before the oil price increases, inflationary pressures were strengthen- ing in a number of countries. It is therefore essential that policies continue to promote price stability in a medium-term framework. Australia recognizes that external imbalances between the major econ- omies have narrowed in recent years and have been financed relatively smoothly thus far, although more progress is required in order to limit the possibility of disruption to activity and the emergence of protectionist pres- sures. More effort needs to be made in improving savings in those countries with external deficits. The trend toward fiscal consolidation needs to be maintained; we also need to continue pressing ahead with structural reforms and measures to remove rigidities and to improve the responsiveness of markets. Australia is able to demonstrate its own commitment to fiscal responsi- bility by posting its fourth consecutive budget surplus, a trend that has seen a turnaround from a central government deficit of 4 percent of GDP six years ago to a surplus today of over 2 percent. We are also placing renewed emphasis on achieving better responses to adjustment by implementing labor-market reforms and tackling particular rigidities in sectors of the economy through substantial microeconomic re- form programs, particularly in transportation and telecommunications. Wages policy through the accord with the trade union movement has continued to contribute to appropriate macroeconomic settings and nonin- flationary wages growth, but is now also being used to drive efficiencies in the work place by linking reward to training, multiple skills, and changes in work organization. In all economies the challenge to develop policies for adjustment must, however, be judged against their social viability as well as their economic, financial, and technical viability. Governments must therefore confront the difficult challenge of ensuring that adjustment policies and the need for them are widely understood. This in turn highlights the value, in our view, of strengthening consultative mechanisms to involve the parties directly affected by structural changes necessary for national development in an attempt to gain broad-based support for these policies. No greater is the extent and consequences of market-oriented structural reforms likely to be evident in the period ahead than in the economies of Eastern Europe and the U.S.S.R. Significant injections of capital will be 28 required for Eastern European countries to reform and restructure. How- ever, the availability of such financing will critically depend upon both the appropriateness of the policies pursued by the reforming governments and their political stability. The Bretton Woods institutions must playa respon- sible role in this. They must also remain cognizant of their original charters as they relate to members' development needs and to the needs of members experiencing external account difficulties. No issue is more crucial to the course of the world economy over the next decade than achieving a successful outcome to the Uruguay Round. A successful outcome would help sustain growth in trade and activity, enhance the effects of structural reforms, ease debt problems, and contribute to the relief of poverty in many developing countries. On the other hand, failure of the Round would bring severe risks for renewed protectionist pressures. A successful outcome for the Round cannot be achieved without a sub- stantial outcome on agriculture. This must involve concrete and agreed proposals for substantial and progressive reductions in specific trade-dis- torting agricultural support and protection measures (including export sub- sidies) over an agreed time frame. Significant reductions in tariffs and bar- riers to trade in the area of textiles, and progress on services, intellectual property rights, and trade-related investment measures will also be impor- tant. Australia is therefore very concerned that the negotiations in agriculture, and in the Round as a whole, have fallen further behind schedule. It is worrying that so much remains to be done in the limited time which is available between now and December. It is of greater concern that there is a lack of political will in the major economies to consider seriously the substantial reductions in nontariff barriers which have affected agricultural trade. It is a disappointment that several major participants have not shown the leadership in tackling trade barriers that their positions in the trading system warrant-indeed, some have proved obstructive. Australia and other effi- cient agricultural producers in the Cairns Group will continue to push hard for liberalization and to oppose obstructions that continue to be tolerated by the major economies. The time for paying lip service to trade liberalization is well over. Gov- ernments in major economies must provide fresh and flexible mandates to their GATT delegations to resolve quickly the impasse in agriculture and other key areas. The timetable agreed to by the Trade Negotiations Com- mittee meeting-all offers, including on agriculture, on the table by October IS-must be strictly adhered to. We then have only a month or so to reconcile the substantive differences. If this Round fails, we face an uncon- trollable retreat into economic fragmentation and disharmony. The preservation of an open multilateral trading system is one necessary step for addressing the enormous and complex problem of world poverty. 29 During the 1990s, a major test facing the community of nations and inter- national organizations will be their ability to reduce substantially the num- bers of people living in absolute poverty. The main responsibility lies with the governments and peoples of developing countries themselves, as they recognize. They can draw on the collective development experience of the past 30 years, as distilled in this year's World Development Report. But their efforts deserve a supportive external environment, including increased volume and quality of official development assistance and a fair and open international trading environment. Environment problems also pose a major challenge for the world economy in the years ahead. Australia has fully supported the Bank's efforts to integrate the consideration of environmental issues into its policy and op- erations work, and welcomes the progress made so far. However, we con- sider that the Bank's environmental work will not be fully effective until at least the substance of environmental impact statements is publicly released early enough for public response before discussion of projects in the Board. Australia has been active in promoting initiatives to deal with global envi- ronmental problems and has ratified the Montreal Protocol. At this stage, however, we have a number of questions about the desirability of the pro- posed Global Environment Facility and how it would operate relative to other funding mechanisms directed toward global environmental issues. Australia supports the increased emphasis given to private sector devel- opment in the Bank Group's activities in recent years. We particularly welcome the soon to be established South Pacific Project Facility and its regional office. This will assist in the urgent task of developing small busi- ness in the Pacific region. The question of increased funding for the International Finance Corpo- ration also needs to be addressed. In this regard, consideration needs to be given to alternative sources of funds, including an injection of private equity into the Corporation along the lines adopted for the Asian Finance and Investment Corporation. Australia is very aware of the difficulties of countries with severe debt- servicing problems. We applaud the efforts of those countries that have managed, by their commitment to sound economic policies, to maintain creditworthiness while continuing to grow. Such countries should not be disadvantaged by measures to assist others that have not followed this course. Australia recognizes that debt restructuring and debt-service reduction negotiations may be justified for some most heavily indebted states: we welcome the various recent proposals that have been put forward in this regard. Any such arrangement must, of course, be based on a real com- mitment to economic reform by the countries concerned. Care also needs to be taken that such arrangements should not result in the undue transfer of private risk to the official sector. 30 Australia notes with concern that improvement in the position of women in developing countries is often hindered by factors such as legal and regu- latory constraints, or social, cultural, and religious traditions. Development policies and programs that have a bias toward men exacerbate the problem. Women have particularly suffered the negative impacts of structural adjust- ment programs and Australia therefore supports the Bank's intention to give more explicit attention to women's issues in policy dialogue with gov- ernments, including structural adjustment and other macro issues. Over recent years public interest in Australia in the work of the World Bank has been particularly high. Last year, reflecting public and parliamen- tary scrutiny of the Bank's performance in areas, such as environmental conservation, debt reduction, structural adjustment, and poverty allevia- tion, the Australian Parliament introduced a requirement that the Treasurer report annually on our participation in the Bank, assessing its managerial efficiency and financial and economic effectiveness. The first Annual Report provides a detailed statement of our concerns in a number of areas, and I commend it to other members who may be interested. Australia remains confident that, by working together through the Fund and the Bank, our solutions to these problems will help benefit the world as a whole. AUSTRIA: FERDINAND LACINA Governor of the Bank First, let me express my warm welcome and best wishes to our new members and guests participating in the Annual Meetings, especially to the Czech and Slovak Federal Republic, since that country is not only our neighbor but has also become a fellow member of our constituency. We take great satisfaction in seeing this country, one of the founding members, rejoining the Bretton Woods institutions. The joining of these countries carries our organizations a step further toward the founding fathers' vision of them as global instruments for pro- moting the sound development of the world economy. As the scope of their actions comes ever closer to the truly global, the Bretton Woods institutions will meet new challenges and shoulder much greater responsibilities. Given the performance of the Fund and the Bank over the past 45 years, I am confident that they will be equal to their new task of shepherding and supporting countries through their ardently desired process of transforming their centrally planned economies into market-oriented economies. The first requirement for enabling the Bank and the Fund to play the role assigned to them is to provide them with resources adequate to the task. For this reason, the Ninth General Review of Quotas of the Fund, on which we agreed a few months ago, should be ratified by all members so that it can enter into force as soon as possible. 31 Another task adding to the great urgency of adequate funding is the recent crisis in the Persian Gulf region. The adverse effects of the oil price hike will damage the adjustment programs of both the developing countries and the Central and Eastern European countries. I acknowledge the im- mense efforts and great flexibility shown by both the Bank and the Fund up to now; there can be no doubt that in the future the Bank and the Fund will have to make full use of their existing instruments to cope with the pressing problems of both groups of countries. I wish to stress that the provision of technical assistance, on both the macroeconomic and micro- economic levels, is especially important. To help with the transition of the countries of Central and Eastern Europe, another important multilateral assistance organization, the European Bank for Reconstruction and Devel- opment (EBRD), was created some months ago. I hope that this new insti- tution can begin operations as soon as possible and that it will be able to work in close cooperation with the Bretton Woods institutions. The multilateral efforts to support the economies in transition will need to be supplemented by the donor community on a bilateral basis. Austria has created various instruments for its support of the transition process in Central and Eastern Europe, notably the East-West Fund, which supports investors who are willing to make direct investments in Eastern Europe. Besides this, my country has been very active in providing technical assis- tance, either on a multilateral or on a bilateral basis. Another serious consequence of the Gulf crisis is its damage to the eco- nomic prospects of the oil importing, debt-distressed developing countries. We have to find efficient ways of easing the extra debt burdens now imposed on these countries. Austria supports all multilateral initiatives for debt and debt-service reduction, especially for the poorest countries. Therefore, I intend to propose to the Austrian Parliament that it examine the possibility of reducing or canceling official Austrian claims on the Sub-Saharan coun- tries that are eligible under the Special Program of Assistance. Just before these Annual Meetings began, there was another meeting of the group discussing the Global Environmental Facility. I hope the negoti- ations for its creation can be successfully concluded in the next few months, for I am convinced that this facility is urgently needed to solve our global environmental problems. Austria will be ready, when the time comes, to make an appropriate contribution to the Global Environmental Facility. Finally, I come to the most salient issue of these last months of 1990: the successful conclusion of the Uruguay Round. An open multilateral trading system is even more important than aid flows for sound long-term develop- ment. In their adjustment programs, many developing countries have in- cluded import liberalization on a unilateral basis, knowing that trade bar- riers hurt both the importing and the exporting countries. It would be highly desirable for the industrial countries to use these last weeks of Uruguay 32 Round negotiations to match the willingness of the developing countries by providing access to their own markets on a generous basis. Let me conclude by once more expressing our thanks to the Bretton Woods institutions for their valuable contributions to economic development and my conviction that they will be able to address the new challenges of the future with the same success they have achieved in meeting the chal- lenges of the past four and a half decades. BANGLADESH: MOHAMMAD ABDUL MUNIM Governor of the Bank It is both a great honor and a pleasure for me to represent the Government of Bangladesh in the Annual Meetings of the World Bank Group and the Fund. Let me start by congratulating you, Mr. George Saitoti, on your election as Chairman of the Annual Meetings. I join my fellow Governors in extending my hearty welcome to the Czech and Slovak Federal Republic, Bulgaria, and Namibia to the Bretton Woods family. I also welcome Mon- golia, Switzerland, and the U.S.S.R. to these meetings. We are meeting at a very crucial time; the international economic climate is uncertain and volatile. The momentum of growth in the developing coun- tries is slackening due to slowdown in the industrial countries, decline in the transfer of financial resources, rising trend of interest rates and inflation, deteriorating terms of trade, and increasing protectionism in the industrial countries. The global economic outlook now appears much more dismal due to recent events in the Middle East. The aggregate real GDP growth of the developing countries is likely to decline to 2.25 percent in 1990 from 3 percent in 1989 and 4 percent in 1988. Higher oil prices, trade disruptions with Iraq and Kuwait, and loss of workers' remittances have already severely affected some of the developing countries. If the Gulf crisis continues, the growth-oriented structural reforms and poverty reduction programs of the net oil importing developing countries will be disrupted. This extraordinary situation calls for a quick and flexible response both from the Bank and the Fund, and from the international donor community for additional economic assistance for countries hard hit by the crisis. Apart from setting up a new special facility for oil and making the enhanced structural adjustment facility a permanent feature with additional resources, the Bank and the Fund should take a flexible approach toward conditionalities to accelerate dis- bursement of funds. Bangladesh is one of the worst sufferers of this crisis. Our estimate shows that in fiscal year 1991, Bangladesh will incur a loss of $500 million by way of higher oil prices at $25 a barrel, and a loss in export earnings and workers' remittances; this constitutes about 2.5 percent of our GDP. In addition, the country will face a serious fiscal burden; revenue 33 receipts will suffer, and a considerable amount shall have to be spent on repatriation and resettlement of returning workers. We have launched the Fourth Five-Year Plan in July 1990. During the Third Five-Year Plan, Bangladesh undertook major structural reforms and achieved substantial progress particularly in agriculture and infrastructure development with an annual GOP growth of nearly 4 percent, despite un- precedented floods and other natural calamities. Our experience shows that structural adjustment, though necessary, is not a sufficient condition for economic growth with social justice, unless it promotes the growth of the real sector by utilizing the inherent dynamism of the poor and the disad- vantaged who in Bangladesh constitute the majority. The Fourth Plan ob- jectives are to achieve an annual GOP growth of 5 percent, poverty allevia- tion, employment generation, increased productivity and incomes for women in development, and increased self-reliance. These objectives are to be achieved througb human resource development, decentralized partici- patory planning, community involvement, and substitution of scarce capital for abundant labor, and by adopting group-based planning along with de- sirable structural adjustment. The Plan also seeks to develop a dynamic private sector through liberalization, deregulation, and privatization. We are well aware of our development constraints. Unfortunately, Bang- ladesh is also a victim of serious environmental degradation. We need to make significant investment to save ourselves from recurring flood devas- tations. This has made our development process more complex and painful. We are required to achieve an annual growth rate of 5 percent to make any meaningful dent on poverty alleviation. In this gigantic task, we seek the active support of the international community. The structural adjustment policies of the developing countries, though pursued with determination, have not produced the desired res':!lts, due mainly to the absence of a favorable international economic environment and a more symmetrical adjustment and effective coordination of macro- economic policies by industrial countries and inadequate inflows of external resources. The debt overhang is still a major impediment to development for many developing countries. Although, some progress-much less than initially expected-has been made in reducing the commercial debt of the highly indebted middle-income countries, the problem is still far from being resolved, due to reluctance of the commercial banks to participate in the financial packages that require new money. For heavily indebted lower mid- dle-income countries with debts mainly to official creditors, reduction of official debt and debt-service burden is imperative for their return to normal debtor-creditor relations. Under the Toronto terms, considerable debt reflief has been provided to low-income countries of Sub-Saharan Africa; these terms are required to be extended to other low-income countries outside Africa that are implementing strong adjustment policies. We also strongly endorse the British Plan unveiled at the Commonwealth Finance Ministers' 34 ~----.----.------ -------- Conference for writing off up to $18 billion of debt owed by the world's poorest nations to Western governments. The declining share of the developing countries in world trade in the face of their persistent trade liberalization process is disquieting. We urge in- dustrial countries to roll back their protectionist measures and improve market access to exports of finished and semi-finished goods as well as primary commodities from developing countries. We look forward to a suc- cessful completion of the negotiations of the Uruguay Round that will take into account the special interests of the developing countries. We are increasingly concerned at the continued decline of aggregate net flows of the 1980s and consistently negative aggregate net transfer of re- sources to developing countries. The President of the Bank in his report to the Development Committee clearly stated that stagnation in aid flows is totally inconsistent with the need to restore growth and reinvigorate devel- opment, and he underscored the need for a substantial expansion in aid flows. For low-income countries, the greater concern is the stagnation in the net disbursements of official development assistance (ODA), which is their main external resource for development and poverty reduction. We endorse the Development Committee's call on donor countries, particularly those with assistance levels below the 0.7 percent ODA/GDP target, to make further efforts to secure financial flows to developing countries. In this connection, I would like to call on the rich nations to fulfill their pledge of aid commitments to the least developed countries in the present decade in order to realize the targets of the Plan of Action adopted in the Second UN Conference on Least Developed Countries held in September 1990 in Paris. We welcome the recent agreement on the IDA-9 Replenishment for the period FY91-93 at $15.5 billion, which would maintain the real value of IDA-8. We welcome the Bank's renewed emphasis on poverty reduction, envi- ronment, and women in development. There is much to commend the World Development Report 1990, which recognized the importance of transfers and safety nets to those in extreme need in evolving effective strategies to reduce the incidence of global poverty. Poverty is the result of the lack of development; poverty alleviation is manifestly a gigantic task, when more than one third of the population of the developing countries lives in absolute poverty-more so, in the least developed countries. Effective poverty alle- viation will need strong political commitment, both national and interna- tional; a substantial expansion of aid flows oriented to poverty reduction; and implementation of sound macroeconomic, structural, and open trade policies by the developed countries. We are pleased with the progress made in establishing a Global Environmental Facility, with additional concessional financing for environmental activities in developing countries having an im- pact on global environment. We would, however, like to emphasize that the incorporation of environmental considerations into Bank operations should 35 conform to the objectives and priorities of the national development plans of developing countries and should not add new conditionality. Since most of the environmental problems originated in the industrial countries, they need to take effective steps to remedy them. In fiscal year 1990, there was considerable improvement in the IDA lend- ing operations; IBRD also had a successul year. The continued expansion of IFC's operations is welcome; it should, however, assume a more dynamic role where the private sector is still weak. MIGA achieved considerable progress, both in its guarantee operations and in its policy and advisory services. This is encouraging. We are glad to note that Fund quotas have been increased by 50 percent, and another review of quotas will be con- ducted by March 31, 1993, or earlier, if there is a clear need. The 1980s was a lost decade for the poor. The new decade commenced with high hopes and aspirations, but the Gulf crisis has cast a long and deep shadow on our future prospects. The crisis had already affected many of the developing countries, and they need additional assistance on an emer- gency basis and without any delay to sustain their growth. Economic growth and poverty reduction in the developing countries, as well as global envi- ronmental protection, are important issues vitally affecting all of us. It is therefore imperative that both developed and developing countries address these issues jointly. I hope we will not fail in this. BELGIUM: PHILIPPE MAYSTADT Governor of the Bank This year our Annual Meetings are dominated by the economic conse- quences of the events in the Gulf region, and by the responses which to- gether we would like to set into motion with the support of the Bretton Woods institutions. Whatever actions we take in response to these chal- lenges will be more effective if we are careful not to lose sight of the fundamental problems, systemic in nature, to whose solution the Bretton Woods institutions will have to make an essential contribution. Responses to the Gulf Crisis The Gulf crisis calls for us to respond on three levels: -Our macroeconomic policies must limit the inflationary consequences of the oil price increase; -We must help the developing countries most directly affected by the crisis; and -We must ensure that the International Monetary Fund will have the resources needed to fulfill the role we would like to see it play. First, during our preparatory meetings, and particularly during the meet- ing of the Interim Committee, I was impressed by a strong desire for con- 36 tinuity; the countries in deficit must keep their budgetary policies restrictive while continuing to aim their monetary policies at price stability. In addition, I noted the consensus that has emerged on the danger of attempting to block the internal price effects of the resurgence of the price of energy, or to offset this price hike by raising wages; such actions would only aggravate the situation by fueling inflationary expectations and would lead later on to a hardening of budgetary and monetary policies. Second, we must manifest our solidarity with the developing countries which suffer the most direct effects of the Gulf crisis and the embargo decreed by the Security Council of the United Nations. Belgium has already agreed to participate. in the framework of the European Community, in a global scheme of medium-term financial assistance to the most directly affected countries. In addition, we support the proposals of the Managing Director of the Fund and the President of the World Bank for preventing the adjustment programs of these countries from being disrupted by sudden change in their international environment. . . . . . . The Gulf crisis must not be permitted to make us forget the more fundamental systemic problems which the Bretton Woods institutions must act decisively to help solve. I am thinking essentially of the following three problems: -strenghtening the coordination of macroeconomic policies; -the debt problem; and -the transition of the countries of Central and Eastern Europe toward a market economy. Coordination of Macroeconomic Policies I see three areas where adjustment policies can be made more effective to the extent that they can be implemented through a clearly defined process of international coordination, aimed at medium-term goals: The first is the level and orientation of savings. Especially because of the financial requirements of German unification and of Central and Eastern European reform, the problem of the international distribution of savings flows has become more acute: will savings flows from Japan and Europe still be available in the same proportions for financing the twin deficits of the U.S. balance of payments and the U.S. budget? Is there not a serious risk of an imbalance between the financing needs and the available savings? Resolving these tensions solely by raising interest rates could have negative effects on growth and weaken financial systems that already face other challenges. For the United States, the confidence of the markets could be secured if the U.S. authorities announced a medium-term program for reducing the budget deficit and increasing household savings. Within the European Community. the Federal Republic of Germany is also in a position to reduce future interest rate tensions by means of a harmonious blend of monetary and fiscal policy tools. 37 Second, now more than ever we need to center our deliberations on the essential contribution that a stabilization of exchange rates could make to the coordination of macroeconomic policy. The exchange rate, instead of being treated as a simple residual variable, should be an object of interna- tional cooperation. The experience of the European Monetary System dem- onstrates the key role that exchange rate discipline can play in promoting a greater convergence of macroeconomic policies and creating a more stable and favorable environment for economic growth. I was especially pleased to hear my Japanese colleague in the Interim Committee express the hope for the cooperative establishment of an international monetary system en- suring more stable relationships among the currencies of the triad composed of the United States, Japan, and the European Community. The Fund could playa central role in the establishment of such a system. Finally, a sustained coordination of balance of payments policies is indis- pensable for the success of the great commercial negotiations now under way in the framework of the Uruguay Round, which we hope to see com- pleted during the Brussels meeting scheduled for next December. Coordi- nation of balance of payments policies is needed to ensure that the com- mercial tensions which arise among the three major zones will not be settled bilaterally but will continue to be resolved in a multilateral context leading to improved resource allocation for all, including the developing countries. New Initiatives for Dealing with the Debt Problem It cannot be denied that a certain number of heavily indebted countries have made remarkable progress with the implementation of measures aimed at restoring their macroeconomic equilibrium and regaining the road to durable growth. Their progress has been greatly aided by financing from the Fund and the World Bank, including financing intended to facilitate operations for the reduction of commercial debt and debt service. This is in contrast to some other heavily indebted countries, which con- tinue to struggle against great difficulties and have apparently not yet man- aged to find satisfactory solutions within the framework of the debt strategy as it has developed up to now. These consist principally of low-income countries, and countries in the lower rank of the middle-income countries, whose debt is mostly owed to official creditors. Permit me to revisit two proposals concerning the debt of this group of countries, which I made during last May's Development Committee meet- ing. First, I am an advocate of the systematic use of contingency clauses per- mitting the financial obligations of indebted countries to be modified from year to year on the basis of fluctuations in exogenous variables-such· as exchange rates and the level of interest rates-which affect their ability to meet their debt-service obligations. These contingency clauses would per- 38 - - - - .._------_.---- mit, in some years, a postponement of principal repayment or a partial capitalization of interest. I am glad that this idea of contingency clauses has been revived by my British colleague in his recent proposals. Second, I share the belief of Chancellor of the Exchequer Major that the menu of options established pursuant to the Toronto agreement for low- income countries, heavily indebted countries, and countries implementing adjustment programs supported by the Fund or the World Bank falls short of what is needed to put most of these countries back on the road to development and external viability. The proposal I made last May was for the industrial countries to place in a common "pool" or fiduciary fund ("Trust Fund"), all or part of their claims on countries meeting the Toronto conditions, whenever installments of these claims are rescheduled in the Paris Club. On the basis of the analyses of a country's payments capacity made by the Fund and the Bank in the course of its adjustment, the "Trust Fund" would be able to authorize adjustments of principal and/or interest obligations of a larger size than those provided under the Toronto options. Moreover, the "Trust Fund" could accept all or part of the debt-service payments in a country's own currency, which would then be reinvested in local development projects mutually agreed on. Finally, payments in foreign exchange received by the "Trust Fund," which would likewise be applied to development purposes, would serve to complete the special Funds managed by the World Bank, to the particular benefit of Sub-Saharan Africa. I hope that this proposal, despite having attracted less attention, could also be the object of an in-depth study by the Paris Club. The Transition of Central and Eastern Europe Toward Market Economics Belgium was particularly gratified by the decisive change of course made by the countries of Central and Eastern Europe toward democracy and market economics, and by the fact that the reunification of Germany could occur in the context of a European Community which is on the threshold of decisive choices for economic and monetary union and toward political ullion. However, the transition period will not be without peril for the Central and Eastern European countries, and the Bretton Woods institutions will have an essential role to play: First, as was emphasized by both Mr. Conable and Mr. Camdessus, the profound reforms that these countries must accomplish will have a much better chance of succeeding and of gaining wide popular support if a safety net is provided from the very start to cope with the harshest social costs of the transition. The zeal of the newly converted must not make the new leaders of these countries forget that the economic model that makes the countries of the European Community appear so attractive to the countries of Central and Eastern Europe is that of the social market economy. 39 Second, for reform plans to succeed, their structure must be both coher- ent and comprehensive. Partial reforms run the risk of getting stalled. The Bretton Woods institutions, like all the rest, have only limited experience with this kind of truly systemic adjustment. This limited experience makes it all the more important that all institutions participating in the dialogue with the reforming countries should share their experiences and coordinate their actions closely. Third, we must not underestimate the magnitude of the external financing which will be required for the reconversion of the Central and Eastern European economies to succeed. These needs will be aggravated by the double shock of the oil price hike and of the obligation to correct the foreign currency exchange patterns that prevailed within COMECON. The Bretton Woods institutions, like other sources of public funds, must vigilantly max- imize their catalytic effects on private flows, especially those resulting from direct investments which will make an equally decisive contribution .... . . . Now that the political model of democracy and the economic model of the market economy appear to prevail decisively throughout the world, it is more important than ever for us to organize, at both the international and the national level, the common body of rules that will enable economic agents, competition, and the initiative of enterprises to make their full contributions to the prosperity of all. BRAZIL: ZELIA MARIA CARDOSO DE MELLO Governor of the Fund and Bank (on behalf of the Latin American Governors of the Fund) I am honored by the privilege of addressing you in the name of Argentina, Bolivia, Chile, Colombia, Costa Rica, the Dominican RepUblic, Ecuador, EI Salvador, Guatemala, Haiti, Honduras, Mexico, Nicaragua, Panama, Paraguay, Peru, Spain, Suriname, Trinidad and Tobago, Uruguay, Vene- zuela, and my own country. Our countries have a particular perception of the world economic situa- tion. For the past ten years they have witnessed from afar a decade of continuing growth in other parts of the world, mainly in the industrial countries. Our stagnation or slow growth was partly due to the cumulative effect of past domestic policies that, although generating development in the short run, created the seeds of macroeconomic disequilibria, economic inefficiency, and social inequality. There is no denying, however, that the international economic environment played an important role in the process of stagnation and decline of the Latin American countries. Contrary to widespread common wisdom, it was not isolation from the world economy that characterized previous developments in the region, but our inability to change past forms of integration in the international economy combined with a new phase in our relation with the international financial community 40 marked by overborrowing and, of course, its counterpart, overlending. These factors introduced new rigidities in our economies so that when the international economic situation abruptly changed, countries in the region were plunged into a period of recurrent crises. The prevalence of a negative external environment and the lack of durable solutions to the region's prob- lems, mainly on the debt front, aggravated internal problems and hindered stabilization efforts and structural reforms. Throughout the decade the re- gion seemed to be cast apart from world economic development. The beginnings of major changes were being felt in the area through the re-establishment of democratic institutions, thus laying the foundation for structural reforms, for a redefinition of our region's role in the international economy, and for a new partnership for growth between our countries and the international financial community. It is our firm intention to join this process and to proceed to recover lost ground. New and stronger stabilization programs are being applied with the common aim of defeating inflation and restoring fiscal equilibrium. Struc- tural reforms are under way in tune with worldwide developments to rede- fine the role of the public sector, reduce its presence in the productive sector, recover the regulatory role of the State, and gradually open our economies to competition from abroad. And, what is more significant, all this is being accomplished in free societies and through the functioning of democratic institutions. It is in this context that we are determined to find from the international community the support we need to put our economies in order and to solve our common problems, especially the debt overhang. To relaunch growth we need a supportive, more predictable, international environment, in par- ticular a well-coordinated multilateral trading and financial system. This is especially important at a time when the international economy and the economies of most developing countries again face serious risks. Coupled with the uncertainty generated by recent events in the Gulf area, there is the prospect that the limited progress achieved so far in dealing with some of our problems can be set back. In these circumstances, we must come forward with appropriate contin- gency measures of support for affected countries and address our common problems in a coordinated way. We are determined not to waiver in our efforts at stabilization and the resumption of growth. In particular, we urgently need to solve the debt overhang in a way compatible with our stabilization programs and our ability to pay. Special assistance in the financial, technical, and administrative areas must be provided for the poorest countries to permit them to revitalize their economies. At the same time, official lenders and commercial banks must have special regard for those countries that have managed to avoid resched- uling and are implementing adjustment programs but require new money and refinancing of amortization installments. All these initiatives must be 41 undertaken in a multiyear framework, so that governments can dedicate themselves to taking and carrying out decisions, instead of spending so much time on protracted negotiations. In another three months the Uruguay Round will come to a close. Latin America has indicated its interests and priorities. It has reaffirmed that the Round must yield balanced results. The trading system emerging from this multilateral exercise must immediately benefit every participant, including developing countries. In order to increase their participation in world trade, these countries need positive results regarding agriculture, textiles, tropical products, and safeguards. Needless to say, an open and more stable trading environment will help internal efforts for structural adjustment under-way in Latin America, through trade expansion and increased efficiency. In agriculture, the time has come to define the exact coverage of the negotiations and to adopt measures conducive to the elimination of export subsidies and internal support. In textiles, if no decision is taken now on the modality for the phasing out of the Multifiber Arrangement, there will be no time to complete the negotiations before December. Results of ne- gotiations on tropical products should not be held back by difficulties in other areas. It must be made clear that results concerning these products are not only needed but essential to a final package. A more discriminatory discipline on safeguards is essential to guarantee the stability of concessions. Latin America has contributed to the successful outcome of the negotia- tions. It has shown flexibility and understanding and has offered alternatives, particularly in the new areas, to advance the process. Other parties must also take their share of responsibility and show the same willingness to compromise. Latin America wishes fully to participate in the decisions leading to the conclusion of the Round, in every area of negotiations, to be in a position to share their benefits and to implement their results. The best trading system cannot support growth if the working of the international monetary system interferes with trade. It is incumbent upon this institution to see to it that the policies of all member countries promote reasonable exchange rate stability. This is not to be sought by exotic methods that would interfere with the free flow of goods, services, and capital. Rather, it is to be achieved by all countries promoting stable underlying conditions and engaging in appropriate exchange market intervention. The Fund must be able to make its advice effective in all member countries; today, only debtor countries obliged to borrow from the Fund need follow its recommendations. In defending a strengthened IMF role one must also give the institution the resources it needs to accomplish its tasks, in partic- ular in the present circumstances. That is why we support the increase in IMF quotas. The debt problem is one of the most significant factors explaining the economic stagnation of Latin America in the 1980s. It contributed to budg- 42 etary problems, to escalating domestic indebtedness, to the inflationary process, and to the poor overall macroeconomic performance of the region. Since the beginning of the debt crisis, Latin America has transferred roughly $250 billion to creditor countries, whereas it has received only $50 billion in financial resources. The figures are eloquent enough: the region exported resources in amounts several times greater than those contem- plated in the Alliance for Progress and the Marshall Plan. Creditors and debtors alike should work together to avoid the 1990s being a mere repetition of the 1980s, when an enormous transfer of resources was accomplished at the cost of neglecting basic human needs. We must recog- nize the exceptional circumstances of the present indebtedness crisis. We shall, therefore, look for negotiated solutions that are also exceptional in nature, going beyond palliative or temporary relief. In this context, careful attention should be given to the Latin American and Caribbean proposal on external debt as presented by the Secretary General of the Latin Amer- ican Economic System (SELA) and approved by the Latin American and Caribbean Council. If the political will is present, there will be a definitive solution to the problem of indebtedness. Such a solution must be inspired solely by the future of economic and political relations with the region, and should en- visage the well-being of its people. It has to allow for increased foreign investment, since the region's share in global foreign investment fell from 13 percent in 1980 to no more than 5 percent in 1989. It has to create a new momentum for domestic investment, which decreased sharply in the 1980s in parallel with the outflow of capital. It has to take into account the need to balance our budgets and to bring domestic indebtedness to a reasonable level. In fact, the need for the public sector to buy from the private sector the foreign currency required to service the foreign debt has obliged us to greatly increase our internal indebtedness. The Brady Plan must be strengthened urgently. To this end, an even more active participation is required from the Bretton Woods institutions in the mobilization of substantial additional resources to support growth-oriented adjustment. Instead of focusing largely on the monitoring of domestic pol- icies of individual debtor countries, these institutions should adopt a more comprehensive, systematic approach that takes all aspects of the debt prob- lem into account. It should be said that the International Monetary Fund, under the guidance of its Managing Director, Mr. Michel Camdessus, has been moving in that direction. There is an increasing understanding of the links between sound economic reforms and genuine efforts to solve the debt problem. A strengthened debt strategy must also rely upon a greater participation of governments of creditor countries. The negotiations with commercial bank creditors would benefit from their broader view of their own interests. Governments can adopt adequate legal and regulatory measures and give 43 incentives that contribute to more meaningful negotiating results. Debt relief is also important for official bilateral debt. In this regard, we welcome the statements made by France, the Netherlands, the United Kingdom, and the United States, which openly acknowledge the possibility of reducing official debt. It is desirable that these initiatives be broadened and lead to similar initiatives by other creditor countries. The decision of the Japanese Government to earmark a portion of its trade surpluses for a parallel fund for debt reduction operations is also a precedent for other governments. The sooner a definitive solution to the debt problem is found, the better not only for Latin America, but for all those who can benefit from increased economic relations with our region, particilarly in the areas of investment and trade. Let me now add a few words on my own country. In the face of a monthly inflation rate that had reached more than 80 percent when the present Administration took over, we adopted a plan addressed to the rapid and decisive reduction of monetary expansion and price rises and to the recovery of growth. Considerable results have already been attained so far. Inflation has de- clined to a monthly rate of somewhat over 10 percent per month and is expected to fall further until the end of the year. Part of the success must be ascribed to the attainment of an operational fiscal surplus of the public sector, in contrast with a deficit of nearly 8 percent in terms of GDP last year. The legal framework compatible with our modernization and privati- zation objectives has been established. Foreign trade has been radically liberalized. Our industrial policy is directed at fighting monopolistic prac- tices and other market imperfections. The difficulties that remain are largely due to the persistence of inflation- ary expectations after almost eight years of unrelenting price rises. We have shown no hesitation in using all instruments at our disposal to convince society that the Government will not yield in its anti-inflationary purpose. Just recently a major tightening of monetary policy has been undertaken. This policy will continue until the back of inflation has been broken .... . . . One point, however, is crucial to us and should be clearly understood by all involved. We are only going to accept commitments we can be sure to fulfill in the context of our stabilization program and in the light of our growth objectives. The possibility of overcoming the serious problems the Latin American region has faced since the beginning of the 1980s will depend partly on the countries themselves. The processes of economic integration open the door for the establishment of stronger markets and economies. The policies of trade liberalization adopted throughout the region will increase efficiency and productivity. They are in line with the efforts toward modernization. The reforms now under way in the region will also increase the potential for the already complex and diversified economies of Latin America to absorb 44 greater amounts of investment resources. The better integration of Latin America in the world economy should rely upon domestic economic health and social justice. Democracy has been the political means we have chosen to attain our economic and social goals. In sum, we do not have problems only. The changes that are taking place in our region are the basis for the hope and optimism with which we look toward the increasing role that our region can play in the world economic system. Before closing I should like to extend our warm welcome to our new fellow members, the Czech and Slovak Federal Republic, Bulgaria, and Namibia. BULGARIA: I. DRAGNEVSKI Govenor of the Fund I have the pleasure to express our appreciation for granting full member- ship to Bulgaria in the International Monetary Fund and the International Bank for Reconstruction and Development. We are convinced that by becoming a member of the Fund and the Bank, Bulgaria will set up a solid basis for broadening and deepening the mutually advantageous cooperation in the different aspects of financial activities. Bulgaria's accession to these international institutions, among other things, is clear evidence of the intention of the People's Republic of Bulgaria to follow the policy of opening its economy and integrating it with the world economy and the international trading and financial system. It is, as well, a basic international prerequisite for implementing the process of democrati- zation in my country through rule of law, mUltiparty parliamentary democ- racy, and transition to a market economy. We consider our accession to these organizations to be recognition of our policy by the international community. Allow me to express our gratitude to the missions of the Fund and the Bank who visited our country and contributed to the necessary procedures so that our membership could become a fact within a reasonable time. Despite the current difficulties, we feel encouraged that this international support will assist our efforts aimed at overcoming the structural imbalances and speeding up the transition to a market-oriented economy. It is well known to you that the crisis in our economy manifests itself in an increasingly difficult macroeconomic situation, a drop in production, an increase of foreign debt, a shattered consumer market, a rising budget deficit, deteriorating financial problems in the enterprises, and growing in- flationary pressures. The difficulties in our economy are sharply aggravated by the recent developments in the international environment: - The threat of a permanent rise in the oil price where the country depends on imports for 80 percent of its energy consumption. 45 -The consequences of the Gulf crisis and our strict observation of Res- olution 661 of the Security Council, resulting in dit;ect damages to Bulgaria, which just for the rest of 1990, amount to $1.4 billion. -The decrease in oil deliveries and other primary and raw materials from our traditional foreign trading partners. -The expected decline in CMEA trade as a result of the transition to convertible currency payments and world market prices. To be able to take the economy out of this situation, it is necessary to carry out a radical economic reform which will ensure a rapid transition to a market-oriented economy. The dynamization of economic life and the restructuring of the national economy can and should be done in accordance with the demands of the market, both at home and abroad. The essence of the economic reform under way at present is the realization of a transition from a centrally planned economy to a market economy supported by an active social policy. I would like to mention the main characteristics of this transition: -The introduction of different forms of property, and in this connection, the intensification of the processes of privatization. -The transformation of the market into the main regulator of produc- tion, exchange of goods, and consumption. -The social orientation of economic development and integration with the world economic structures. The first steps toward a market economy are already being implemented. Equal conditions for the development of all types of ownership have been created. A series of measures to deregulate economic activity have been taken. This brought about legal guarantees for freedom of private economic activity. A partial liberalization of prices has been undertaken in line with the conditions of the present stage of economic reform. The system of obligatory state orders has been abolished. A unified exchange rate was introduced for all enterprises for buying and selling convertible currency by using the market rate of the currency auctions. A new reform of interest rates has been developed envisaging a considerable increase in the average level of interest rates on deposits and credits. The transition of our country to the principles of the market economy necessitates widening the scope of our cooperation with other countries and international financial organizations. Under these circumstances, the inter- national factor and the international support for the reforms under way are vitally important. Being aware of these realities, our country has also ap- plied for membership in the organizations affiliated with the International Bank for Reconstruction and Development-the International Finance Cor- poration and the Multilateral Investment Guarantee Agency. At the same time, I would like to stress that we do understand the necessity of doing our own job, and of finding our own way, bearing in mind the economic realities of the country and its historical and cultural traditions. 46 The expected sharp aggravation of the economic crisis through external factors reinforces the urgency of concerted internal mobilization of efforts and puts forward the issue of the needs of large-scale international assis- tance. In this process, we would like to have the support of the Fund and the Bank in implementing the economic reform, and at the same time estab- lishing a closer contact with other countries and the international financial community. I would like to believe that the challenges which the changes in the coun- tries from Central and Eastern Europe call forth will create an expanded environment and added possibilities for the two global financial organiza- tions, the Fund and the Bank, to look for means and instruments for the faster integration of those countries in the world economy. CANADA: MONIQUE LANDRY Temporary Alternate Governor of the Fund and Bank In recent years, the major industrial countries of the world, and an in- creasing number of developing countries, have pursued their national eco- nomic policies within a common framework. This framework, which em- phasizes the need for a medium-term policy, is based on three interdependent and complementary elements. The first is the need to make steady and credible progress in reducing fiscal deficits, thereby freeing re- sources in support of private sector investment and growth. The second is a monetary policy aimed at establishing a noninflationary environment in which decision making is not distorted by inflationary expectations. The third element consists of structural reforms aimed at strengthening market forces and encouraging a more efficient allocation of resources, both do- mestically and globally. Together, these three elements form a consistent policy "package" that is contributing to sustainable growth and rising living standards in both industrial and developing countries. This framework has been the basis of the policy program that we have been implementing in Canada since 1984. We have sought to follow a policy path that takes the medium- to long-term view. Canada's economic perfor- mance over the past six years provides strong evidence that this policy approach works. Since 1983, real output in Canada has grown at an average annual pace of over 4 percent. This sustained expansion has translated into a significant gain in prosperity for the average Canadian. On a per capita basis, personal incomes, after correcting for inflation, are 16 percent higher than in 1983. But, achieving these results has required tough decisions. We have had to deal with a well-entrenched budgetary deficit and have intro- duced structural reforms, despite strong resistance by vested interests. Re- cently, as the economy has reached capacity limits, we have also had to take strong action to counter rising inflationary pressures. As difficult as these 47 decisions have been, without them our performance would have deterio- rated, not strengthened. Canada is, of course, not the only industrial country to have benefited from this policy framework. Indeed, the strong sustained growth of indus- trial countries, since the early 1980s is testimony to the validity of a policy approach that emphasizes the three elements I have referred to. But all of us continue to face ongoing challenges. We face the challenge of containing and then reducing inflation. We face the challenge of increasing global savings to meet the needs of developing countries and the adjustments in Central and Eastern Europe. We face the challenge of making substantial progress in liberalizing world trade. And finally, we face the challenge of the recent run-up in oil prices and the increased volatility and uncertainty in financial markets that has resulted from developments in the Middle East. Meeting these challenges successfully will require that we in the industrial countries remain firmly committed to our policy framework and intensify our efforts. It will require a similar commitment on the part of developing countries. A number of developing countries have been following this policy framework with considerable success. Others, including Central and East- ern European countries, have more recently recognized the need for such a policy approach and are moving rapidly to introduce market-oriented reforms. Indeed, we have all been impressed by the commitment of coun- tries in Eastern Europe to adopt our policy framework and implement the necessary stabilization and structural reforms. Let me turn now to the impact of other recent, but less welcome, devel- opments in the world economy and their implications for macroeconomic policy. The analysis of the IMF suggests that, in the present circumstances, it would be a mistake to accommodate rising inflationary pressures by easing policy. I support this view. It is entirely consistent with the policy framework we have been following for some years. If we were to reverse our policy stance in the face of continued inflationary pressures and higher world oil prices, we would risk losing the hard-won progress that we have made over the past decade. Recent developments in world financial markets support this conclusion. It seems to me that much of the volatility of asset prices and the increase in long-term interest rates can be attributed to concern that industrial coun- tries might change their policy direction. In an environment of uncertainty it is absolutely critical that we pursue the policies that will lead to the achievement of noninflationary growth. In Canada, and in some other industrial countries, growth has now begun to slow. This is a natural consequence of an extended period of strong growth that has finally pushed spending beyond our capacity to produce. While the slowing will be difficult, it will, nevertheless, bring a better bal- ance of demand and supply and lay the foundations that are essential for a 48 reduction in inflation and interest rates and a return to solid economic growth. Just as we need to bring into better balance the supply and demand for output, we need to bring into better balance the supply and demand for savings. There is no doubt that, despite some temporary slowing of growth, there has been, and will continue to be, a growing demand on global savings. All of us have a responsibility to intensify efforts to increase global savings. This means that deficit countries, including developing countries, must make further progress in correcting their fiscal imbalances, and surplus countries must continue to sustain noninflationary growth. This brings me to the third element of our policy framework. In previous IMF and World Bank meetings we agreed on the importance of structural adjustment policies to increase the productive capacities of our economies and reduce underlying inflationary pressures. Over the past several years, many countries have moved to reduce the structural impediments to the efficient allocation of resources. But, there is still more we can do, both individually and multilaterally. In this context, I would like to comment on the singular importance of the current Uruguay Round of multilateral trade negotiations. With only some 80 days remaining before the Round is scheduled to conclude, it is clear that the negotiations are now at a critical stage. Maximum efforts must be made to ensure that they achieve the greatest possible results. We must strengthen the multilateral trading system and ensure that developing coun- tries are integrated more fully into it. We should, therefore, ensure in these final weeks that our negotiators are given the necessary mandates to achieve the greatest liberalization possible. It is encouraging to note that there is a growing appreciation in many developing countries and in Central and Eastern Europe of the need to establish a framework of market-oriented institutions and sound policy to stimulate private savings and investment. I firmly believe that the best way we can assist these countries is by fostering an open and prosperous inter- national economic environment while encouraging them to pursue market- based solutions to their economic problems. However, the experience of the early 1980s clearly demonstrated that international trade and development depend critically on stable economic growth. Sustained, long-term growth is within the reach of all countries. For that to happen, we must remain committed to the broad range of structural initiatives and macroeconomic policies we know are appropriate. As in previous situations of rapid change and unexpected turns of events, we are today in the unenviable position of having to make hard policy choices. We must maintain our resolve to pursue policies consistent with long-term sus- tainable growth in an environment characterized by price pressures and a temporary slowing of world growth. Ultimately, each country is responsible 49 for its own fate and must make its own decisions. But, our integrated world demands that we recognize the external linkages that constrain us. It also puts a particular responsibility for good domestic policies on the major industrial countries. Fortunately, in coping with the challenges that the current situation pre- sents, we can turn to the International Monetary Fund and the World Bank to play their supportive and often vital role in helping countries while serving to secure an open and dynamic international economy. By providing finan- cial support and, more important, policy guidance and technical advice, the Fund and the Bank can help their members to make the right choices. We will all benefit from the resulting collective improvement in economic per- formance. CHILE: ALEJANDRO FOXLEY RIOSECO Governor of the Bank I would like to thank the Governors of the International Monetary Fund and the World Bank for my selection as Chairman of the Development Committee. I consider that selection an honor and a privilege. I hold the unshakable belief that the new world that is being forged day by day before our eyes affords an opportunity for developing and industrial- izing countries to join a virtuous circle of better integration into the world economy, macroeconomic stability, and better employment and welfare op- portunities for those entering the labor force. Economic globalization can be an efficient instrument for generating that virtuous circle, if countries support the process by investing heavily in their human capital, their people. This is the way to overcome at the root the dilemma between growth and redistribution. Investment in people is a pre- requisite for successful integration into the international economy. I accept the Chairmanship of the Development Committee with a mes- sage of optimism, an assertive message: Our countries can-as the countries of southern Europe have demonstrated earlier-strengthen their democra- cies and their economies through this process of opening up to an expanded economic field and an international economic system, which offers un- thought of opportunities if only we do things well. I represent a country that after a long period has regained democracy- a country proud of its freedoms, of the civilized manner in which it resolves its conflicts, and of the enthusiasm with which it looks toward the future. Chile's economy is a market economy, open as few others to international trade. It today exports 30 percent of its GOP. In 1995 Chilean exports will account for more than 35 percent of the national product, a degree of economic openness equivalent to that now found in the economies of the Scandinavian countries. 50 -------.....-- .. -_.---------_..... There are no subsidies or exemptions in Chile's economy. We have a balanced budget, with a deficit equal to zero. Public spending goes heavily for investment in human capital, investment in people. We are proud to say that the budget that the Government will send to Congress for approval in early October calls for expenditures in the social sectors-such as education, health, housing, and social security-equivalent to 65 percent of total public outlays. We thus have an economy that is open internationally and an econ- omy that is increasingly shared. The economic policies of President Aylwin are based on three principles: first, an unshakable commitment to macroeconomic stability as the best way to achieve sustained growth; second, efforts to internationalize the economy, both commercially and financially; and third, increasing social efforts in the areas of health, housing, and education, duly placed within a framework of balanced public expenditure. Maintaining Macroeconomic Equilibria All of us here today know the intensity with which inflation and balance of payments crises have affected Latin America in recent years. Chile also fell victim to that experience, having experienced hyperinflation in the early 1970s and major recessions in 1975-76 and 1982-83. In the past five years, and at high cost to many Chileans, Chile has corrected many of the imbal- ances experienced at the start of the decade. Since 1985 output has re- covered, rising significantly, while inflation has remained among the lowest in the region. Between 1985 and 1988, growing trade surpluses made it possible to make punctual external debt payments. These trends partially reversed in 1988 and 1989 when expansionary pol- icies, especially in the monetary area, heated up the economy again, threat- ening to undermine stability. Domestic spending increased alarmingly, reaching growth rates of 12.7 percent in 1989 and 22.8 percent for 1988-89. As a result, imports rose by 35 percent in 1989, and inflationary pressures mounted. Annual inflation in the last quarter of 1989 was 30 percent and rising. We have had to support an adjustment process, a basic requirement on the road to sustained growth and moderate inflation. Using primarily a contractionary monetary policy, rooted in absolutely unchanged public spending in real terms during the first seven months of 1990, we sought to lower growth in domestic spending, hold back growth in imports, and curb inflation. The results of these measures can be seen today. Adjustment has cooled down the economy, leading to an annual GDP growth rate of 2.6 percent during the first half of the year. The inflationary trend has been slowed, and we hope to finish the last quarter of the year with an annualized rate lower than the annual rate of 30 percent inherited from the previous Government, 51 despite the negative impact of the rise in petroleum prices in a country that imports 85 percent of its oil needs. For 1990 we expect the overall situation in the balance of payments to be sound. The boom in direct foreign investment this year should be reflected in net inflows of some $1.2 billion, which is substantially higher than in 1989. The climate of confidence enjoyed by the economy has prompted a major inflow of financial capital, which in the first half of the year helped increase the Central Bank's international reserves by over $1.2 billion. This situation is projected to persist for the year as a whole, culminating in a large balance of payments surplus. Once the adjustment of 1990 is completed, we may expect the Chilean economy to resume sound economic growth. Adjustment has not compro- mised the foundations of growth. Investment this year will be the largest in the last 20 years, exceeding 20 percent of GDP. The Government has set sensible targets that can be reached without future costs. This is why we expect the economy to start growing again during the last quarter of 1990 and to attain a growth rate of 4-5 percent in 1991. In the longer term, and in light of investment trends, it may be said conservatively that Chile is ready for sustained growth at an annual rate of 5 percent. The Internationalization Strategy Over recent years Chile has achieved a high rate of growth in its trade, based on the creation of a climate of enterprise and sound export activity, particularly in mining, agriculture, fisheries, and forestry. Nontraditional exports are the most dynamic; comparing the first half of 1989 and 1990, we note that total non-copper exports increased by 17 percent. Maintaining and improving this performance will require persisting with policies to ensure a competitive, stable real exchange rate within a climate conducive to inter- national trade. If trade is to be a significant source of growth for Chile, Chilean exports must enjoy broade access to foreign markets. Protectionism is especially dangerous for small, open nations. This is why we are actively participating in the Enterprise for the Americas Initiative proposed by President Bush, and next week we will sign a basic trade and investment agreement with the United States, which we hope will open the U.S. market even further to our products. Chile is also engaged in trade negotiations with several Latin American countries, including Venezuela, Argentina, and Brazil, with a view to establishing reciprocal zero tariff arrangements within five years. In the case of Mexico, our presidents will sign a commitment next week which will lead to a broad economic complementation agreement within four months. Foreign investment is a further central component of the internationali- zation strategy for our economy. Chile has flexible foreign investment laws, 52 a stable economy, and a legitimate popular government. This situation is already yielding fruit. Foreign investment fund placements on the Santiago mercantile exchange have grown and prospered. These and other ap- proaches, in conjunction with other, more traditional forms of direct in- vestment, have led to a remarkable surge in foreign investment in Chile. The Social Effort The third link in the chain of policies is the emphasis placed on social aspects. The observation that economic growth by itself does not necessarily bring greater welfare to all groups, especially the poorest ones, is almost an axiom in development theory. This axiom has been confirmed in Chile in the last few years. High rates of growth have coexisted with a deteriora- tion in the quantity and quality of public services and serious problems in housing, education, and especially health. The World Bank's World Development Report 1990 has the following proposition as its central theme: in all recent cases of successful develop- ment, sustained growth has been accompanied by a strong component of investment in people, provision of services, and accumulation of human capital. Something of this kind is what we are trying to do in Chile today. President Aylwin's program envisages a significant increase in social ex- penditure and the creation of new technical education and labor training programs. Just in this last area, we hope to train 160,000 young people in the next three years. Our social expenditure policy contrasts with the populist policies-with unsustainable fiscal deficits or excessive external indebtedness-pursued by some highly indebted countries, which ultimately cause inevitable damage to the very sectors they proposed to help. Six months after the inauguration of President Aylwin's administration, Chile has a balanced budget-an achievement we will maintain in coming years. This means that no additional social outlays can be made until the resources to finance them have been collected in a noninflationary manner. This rule was implemented in a recently approved tax reform which mod- erately increased the value-added tax and raised corporate taxes. Not until this reform was approved by Congress-by a vast majority that included most opposition congressmen-did we propose a supplementary budget allocating nearly $500 million in additional resources to health, education, housing, and other social headings. These resources have meant that real social outlays this year have been the highest ever in Chilean history. The effort will continue forward, as this tax reform will continue to yield new revenues over the next four years for use to finance our social program. A Valuable Experience We are modestly moving forward in Chile with economic policies that democratically join fiscal prudence with a greater social effort as they seek 53 to move us into a new stage of our export development. Results so far are promising, but a long road still remains ahead. Along this path, we have received cooperation from the international financial community. We have an ever broader and deeper relationship with the World Bank and the Inter-American Development Bank, and we hope that it will be reflected in over $4 billion in project financing in coming years. We are completing a successful stand-by arrangement with the Inter- national Monetary Fund, all of whose targets have been strictly complied with. We are presently studying ways to adapt our relationship with the Fund gradually in line with developments in the Chilean economy. We have also recently concluded a voluntary collaborative agreement with international banks, which constitutes a practical confirmation of everything that has been said about our economy in the last few years. Our creditors and the Chilean negotiating team have agreed to a significant extension in the maturity of our entire commercial debt, thereby eliminating all repay- ments on this debt between 1991 and 1994. We have also agreed to maintain the annualized interest payments system and to make existing contracts more flexible in order to facilitate future debt conversion operations. Finally, a club of banks has agreed, on the basis of a voluntary arrangement, to purchase a Chilean bond issue for a total of $320 million at a moderate cost in keeping with the country's financial circumstances. This financing is an important step forward along Chile's return to the voluntary capital markets from which it had been absent since 1982. All these are indications of the attractive prospects offered by the Chilean economy. They are also indications of what can be achieved when countries and members of the international community-multilateral organizations, financial entities, investors-try to work together in a cooperative spirit. In the increasingly interdependent world we are entering, such instances of international cooperation will be ever more crucial, especially for countries such as Chile that have decided to adopt the approach of internationalizing their economies. We are convinced that with this cooperation, but mainly through the efforts of all Chileans, we shall attain a highly productive economy, an economy that responds adequately to the needs of its people. CHINA: WANG BINGQIAN Governor of the Bank Mr. Chairman, first of all, please allow me, in the name of the Chinese delegation, to express our sincere congratulations on your assuming the chairmanship of this assembly. We believe that the present Annual Meetings will achieve great success under your leadership. And I would also like to take this opportunity to warmly welcome new members of the Bretton Woods institutions. 54 Mankind has entered the 1990s. In retrospect, the development of the world economy over the past decade has been very disappointing for the developing countries as a whole. Notwithstanding the continuous economic growth of the developed countries, which has lasted longer than any cycle in the postwar period, most of the developing countries have not derived the growth impetus as predicted. To the contrary, their development efforts have been repeatedly frustrated by the increasingly unfavorable external environment-worsening terms of trade, mounting protectionism, declining flows of resources, volatile financial markets, and higher interest rates. With the exception of Asia, all the developing regions have had a disturbing tendency to stagnate or even decline in terms of their GDP per capita growth. The developing countries account for an ever-decreasing share; whether in the total increase in global wealth or in the annual volume of world trade. This serious imbalance in the development pattern of the world economy has resulted in a widening rather than in a narrowing of the disparity between the North and the South. For the near term, the slowdown in world economic growth and the occurrence of tension in the Gulf have created additional uncertainties for the prospects of the world economy, which are bound to increase difficulties for the development efforts of many developing countries; particularly low- income oil importing countries. The present-day world constitutes an integrated whole in which countries are interdependent and interact with one another. Maintaining balanced growth in all regions is a prerequisite for the sound development of the world economy. It is a narrow-minded and short-sighted view that only the developing countries need the developed countries, and not vice versa. As a matter of fact, the developed countries are inevitably dependent on the developing countries for access to commodity markets, more opportunities for capital investment, and supply of raw materials. It is inconceivable that the developed countries would be able to maintain the required economic growth rates while four fifths of the world population is bogged down in increasing poverty and lasting backwardness. Unless efforts are made to reverse the trend of polarization between the North and the South in a timely fashion, the peace and stability of the whole world will be very hard to maintain. Therefore, reversing this trend is essential not only to improv- ing the living standard of approximately four billion people but also to guaranteeing the peace for more than five billion people. China hopes that the 1990s-the last decade of the twentieth century-can be a new era to strive for the reinvigoration of the world economy and the attainment of common prosperity. We have been hampered by the debt problem for more than eight years. During the past 18 months, the international community has taken some new measures to reduce the official debt burden of low-income countries and the commercial debt of the heavily indebted middle-income countries. 55 The multilateral financial institutions have also made substantial contribu- tions in this respect. All of these are positive steps. It should be pointed out, however, that the overall debt situation remains serious; the implemen- tation of debt and debt-service reduction is moving very slowly, and the scope of debt relief is very limited. We have yet to find sustainable, just, and comprehensive solutions. The Chinese Government has always maintained that persistence of the debt issue is, in essence, a manifestation of the stunted growth of the debtor's economy. Therefore, any effort or program aimed at debt and debt- service reduction must give priority to revitalizing the economies of the indebted countries rather than put debt service before development. In our opinion, to address the debt problem, it is imperative to create an external environment in favor of development of the debtor countries, to provide them with adequate new money, to expedite effectively the implementation of various programs of debt and debt-service reduction, and to broaden the scope of debt relief initiatives. China supports the international financial institutions for their continued role in this respect; we, however, urge all the more strongly that the creditor countries and the commercial banks make substantial contributions commensurate with their status, capacity, and interests. About one third of the world population in many developing countries is struggling in dire poverty for a minimum livelihood. The international com- munity should be seriously concerned about this situation. The ultimate solution to the reduction and eventual elimination of poverty lies in eco- nomic development. We agree that the countries concerned should adopt correct policies, including those to control excessive population growth and to strengthen their own capability to reduce poverty. However, we are of the view that the international community is also duty-bound to provide financial and technical assistance, as well as to foster an environment that will permit development. The economic growth of the low-income countries depends on stable commodity prices, access to world markets, and inflows of concessional funds, which in turn are to a great extent determined by the policies and actions of the developed countries. China is appreciative of the many efforts of the international financial institutions in recent years to make the reduction of poverty one of their priorities. It is hoped that the international financial institutions will take into consideration the situations of different countries, rely on indigenous capabilities, and always strive to achieve practical results. We have noted with appreciation the progress made by the World Bank in environmental protection and its follow-up action programs. In this con- nection, the crucial point is the proper treatment of the relationship between environmental protection and economic development. Given the fact that the environmental degradation in the developing countries has its root causes in poverty and underdevelopment, we should not talk about environ- 56 mental protection simply as an end in itself or treat environmental protection and economic growth as two aspects mutually exclusive, but rather make them an organic and mutually reinforcing combination. We maintain that to impose environmental consideration in operational practice as a condition for lending is neither desirable nor acceptable. We hope that the Global Environment Facility will be set up as soon as possible, and that it will genuinely add to the World Bank's existing environmental protection activ- ities in terms of concessional financial flows and technology transfer. The vitality of the IMF and the World Bank lies in their role in helping to stabilize the international currency system and promote economic devel- opment in their member countries. The history of more than forty years has proved that the independent decision-making power, as stipulated in their Articles of Agreements, is a fundamental condition as well as an important guarantee for these international institutions to adhere to their objectives faithfully and fulfill their mandates effectively. It is regrettable, however, that for more than a year the World Bank's lending to China-a developing country that meets all the criteria for borrowing and has earnestly fulfilled all of its obligations-has been obstructed by external forces. Like most of the member countries, we could not but feel greatly concerned over the future of this institution. We hope that this international institution will overcome external interference as soon as possible and continue with its efforts to execute its mandate. As far as China is concerned, the present decade is a crucial phase for achieving the overall strategic objectives of its modernization program. We plan to redouble the GNP by the end of this century, raising the living standard of the people to a level of modest prosperity. At the end of 1988, we adopted the policy of rectification and deepening reforms to redress the overheated economy. Thanks to the efforts made over the past two years or so, encouraging changes have taken place in the Chinese economic situation. At present, agriculture has registered a bumper harvest in summer crops; industrial production is accelerating its upturn; absorption of excess liquid- ity in circulation is proceeding normally; inflation has been further con- trolled; foreign trade has achieved a surplus; the international balance of payments continues to improve; adjustment in industrial structure and prod- uct mix has made some progress; the output of energy and raw materials has increased in varying degrees; resource allocation is being gradually rationalized; and township and village enterprises, which serve as the main- stay of rural economy, have also had further development through adjust- ment. All in all, the Chinese economy is heading in the direction of contin- uous improvement. Of course, we are not free of difficulties. Many deep-rooted problems accumulated over the years in the national economy remain to be resolved. Some new issues, which cropped up in the course of cooling down the overheated economy, have yet to be addressed. In order to meet the targets 57 of economic development strategies for the 1990s, we are stepping up the designing of the Eighth Five-Year Plan and the next Ten-Year Program. One of the objectives of this task is to seek, from the medium- and long-term perspective, a systematic and organic integration of all the aspects regarding future development of the economy and the deepening of reforms. From our experiences gained over the past four decades, neither economic construction nor reform could be pursued in disregard of the actual situation of the country, in a hasty attempt to achieve results beyond possibility. Therefore, while concentrating every effort on economic constructions, we will firmly adhere to the fundamental principle of promoting a sustained, steady, and well-coordinated development of the national economy. The Chinese people have further realized from the success achieved dur- ing the 1980s that China will have no future without adherence to the socialist road, nor will she have hope without further reforms and opening to the outside world. Therefore, whatever may happen in the international arena, we in China will press ahead with the economic and political reforms in a steady and coordinated manner, and actively develop contacts and cooperations with the outside world. We are also willing to further expand cooperation with the IMF and the World Bank. China will never close its door already opened. And we firmly believe that through the arduous efforts of the Chinese people, together with international cooperation based on equality and mutual benefits, China will surely be able to achieve the estab- lished development goals. Looking ahead, the future of the world is bright. We may have different political, economic, and social systems, but we all cherish peace and seek development. As a member of the international community, China's eco- nomic development cannot be insulated from that of the world economy. We are willing to make our contribution to the strengthening of international cooperation and the promoting of common prosperity. COTE D'IVOIRE: KABLAN D. DUNCAN Governor of the Fund and Bank (On behalf of the African Governors) Despite some improvements in the global economy, the gap between the developed and developing countries has widened significantly. Between 1983 and 1989-a period characterized by one of the longest economic expansions in the global economy-the average rate of growth of per capita income in the industrial economies was higher than in developing countries, leading to a more pronounced disparity in the standard of living between the richer and poorer countries. This gap is even wider if the newly industrializing Asian economies are excluded from this comparison. That situation is un- likely to change in the near future, especially for the heavily indebted co un- 58 tries where there is much uncertainty over the prospects for improvement in their economic growth over the medium term. In this respect, it should be noted that high interest rates in industrial countries, resulting from, among other things, excessive reliance on monetary policy to fight inflation, continue to aggravate the debt-servicing problem, against the background of the projected deterioration in the terms of trade of developing countries and the decline in export earnings. These problems have been exacerbated with the onset of the current Gulf crisis. The impact of this crisis will certainly weigh more heavily on the low-income, non-oil exporting coun- tries. We, therefore, urge the Fund and the Bank as well as the international community to develop as quickly as possible an adequate response to help countries cope with the additional financial burden. In sum, the economic horizon continues to pose major challenges for policymakers in both the industrial and developing countries-challenges that must be approached collectively with foresight and imagination. The major industrial countries have a pivotal role to play in this regard by ensuring that their policies are consistent with long-term growth and stability, not only in their respective economies but also in the developing countries .... . . . The situation in Africa is particularly grave: many countries have experienced the longest period of economic decline on record. While ac- knowledging that domestic policies have contributed to the problem in some instances, the adverse effects of natural disasters and an unfavorable exter- nal environment have, in general, been the major causes of that decline. In particular, the terms of trade of the African region declined by about 5 percent per year on average between 1982 and 1989, while the region's indebtedness grew to unmanageable proportions, rising from about 154 percent of exports of goods and services in 1982 to more than 226 percent in 1989. The stock of debt for Sub-Saharan Africa grew even faster to more than 320 percent of exports of goods and services in 1989 and to about 69 percent of GDP, the highest among the developing regions. The economic crisis in Africa is brought into focus by the sharp decline in per capita income in the 1980s, with the drop in some countries being well over 40 percent. The implications are quite alarming, and are com- pounded by the fact that Africa accounts for the large majority of the world's least developed countries and a highly disproportionate share of global poverty. We are concerned that in spite of the strenuous efforts made by African countries over the years to carry out policy reforms and implement structural adjustment programs, the general socioeconomic deterioration has continued unabated. Lack of resources has severely constrained the region's ability even to maintain existing infrastructure, arrested, and in many cases, even reversed progress toward reducing infant mortality and illiteracy, which are the highest among developing regions, constrained hu- 59 man resource development, and frustrated efforts toward combating wide- spread disease and malnutrition. In the United Nations Development Pro- gram's recent Human Development Report, most African countries are ranked at the lowest end of its human development index. Not only is this situation intolerable and unacceptable from a human perspective, but it also severely constrains Africa's economic potential. Adequate infrastructure and a healthy, literate, and well-trained population arc indispensable to enhancing productivity, which remains the bedrock for sustained improve- ment in living standards. The conclusion is clear: Africa needs a more imaginative, forward-looking strategy to revive the process of development in the region. Taking stock of the 1980s, it is obvious that our economic problems cannot be solved by short-term financial programming. This is not to minimize the importance of policy measures aimed at achieving price and financial stability; rather, the point is to duly recognize that there is no automatic link between the achievement of this goal and growth with social progress. African Gover- nors, therefore, call on the international community to commit itself to a Special Agenda for Africa in the 1990s, emphasizing increased productivity, the transformation of the primary commodities sector through, among other things, increased processing, the creation of new opportunities for invest- ment, employment, and higher levels of economic growth and social devel- opment, while giving particular attention to the reduction of poverty. In essence, therefore, we are making the point that short-term stabilization targets should be consistent with long-term developmental objectives be- cause the former will remain elusive in the absence of fundamental changes in the structure of our economies. This is the challenge of the 1990s: to ensure that Africa does not relive the experience of the "lost decade of the 1980s" and moves with determination along the road to progress and sus- tained growth. We are convinced that the agenda for Africa in the 1990s, for which we seek the full support of the international community, should focus, among other things, on the following three broad areas: (1) Full internalization of the development process through the design and implementation of structural adjustment programs and policy reforms that fully take into account the human condition, the need for real and significant social and economic transformation, particularly in the rural areas where the majority of our people live, as well as increased popular participation in the adjustment and development process; (2) Acceleration of the measures toward regional economic cooperation and integration leading to the establishment of an African Economic Com- munity as decided by the Assembly of the Heads of States and Government of the Organization of African Unity held in July 1990, including the ration- alization and strengthening of existing subregional economic groupings to form the building blocks for such a community; 60 - --~.-.----.--- (3) In light of the above, the development of intensive programs for capacity building through the development of a strong base for effective management of our economies and more public accountability. It is recognized that the primary responsibility for economic reform in Africa rests with the Africans themselves and their governments. We have already taken major steps to ensure greater accountability in the public sector, reduced impediments to private sector initiative, and implemented policies to increase domestic savings and attract direct foreign investment. We recognize that efforts must continue to strengthen our institutions in order to make them more effective tools for improved economic manage- ment. Not only will this reduce our reliance on outside technical assistance, but it will also place us in the position to truly "own" the adjustment programs that we have to implement. For these reasons, we welcome the Bank's initiative to establish a capacity-building program aimed at upgrad- ing national and regional institutions. The international community should be aware that the drastic fall in per capita income in Africa, which characterized the 1980s, is a major constraint to the extent to which domestic savings can be increased in response to new policy measures and incentives. Our development efforts, therefore, must rely heavily for now on concessional external financing from both bilateral and multilateral sources. It is in this context that we urge the international community to support our efforts by increasing the flow of real resources in Africa, which in the past several years has fallen far short of what was needed. Recent events in other parts of the world should not divert the attention of the donor community from the need to make a special effort to assist Africa. For this reason, we call upon the donor community to support the global coalition for Africa. The International Monetary Fund and the World Bank have been sup- portive of our reform efforts, as evidenced by the financial and technical assistance to a large number of African countries. The two institutions should be adequately endowed with resources to be able to effectively carry out their mandate, while serving as catalysts for mobilizing finance from other sources, including direct foreign investment. We would like to emphasize the determination of our countries, during the decade of the 1990s and beyond, to promote local core industries through regional cooperation in order to meet Africa's requirements for essential factor inputs, including equipment for farm operations, food pro- cessing, building, and construction. We congratulate donors for concluding the Ninth Replenishment of IDA. Certainly, IDA has an important role in funding programs and in mobilizing donor support. The dialogue between IDA and our countries on economic performance and the reduction of poverty, in particular, is crucial to strengthening the partnership between the Bank and Africa. Hence, we consider the preparation of a core poverty program for IDA-recipient Af- 61 ric an countries a matter of high priority, and hope that steps are being taken to substantially increase disbursements from the low level of 1989. We also urge the international community to respond generously to the proposal for a substantial sixth replenishment of the African Development Fund for which consultations are currently under way. As for IFC, we urge that a consensus on the size of the capital increase be arrived at without delay. In the meantime, the Corporation can and should do more to promote private sector activities in our countries, including helping the process of privati- zation and rationalization of state enterprises, and providing increased as- sistance to small- and medium-sized industries. Africa's need for development finance underscores the crucial role of the World Bank in helping our countries to implement and sustain economic reforms supported by policy-based adjustment lending and investment fi- nance. There is still an enormous need for investment in infrastructure, health, education, and manpower development in Africa. Of course, the structural adjustment facility and the enhanced structural adjustment facility will continue to be an important channel for Fund assistance to low-income countries, given their focus on growth-oriented adjustment in a stable mac- roeconomic environment and the concessional nature of their resources. Once again, we urge renewed efforts to make programs supported by the Fund and the Bank more supportive with respect to the promotion of economic growth, social progress, and the alleviation of poverty. In this connection, we draw attention to the recent World Bank report-Sub-Sa- haran Africa: From Crisis to Sustainable Growth-that makes the point that a sustained 4-5 percent annual growth rate is essential to provide for even moderate increases in per capita incomes and consumption in Africa. The report also underlines that an appropriate share of that growth should be geared to meeting social development needs as a basis of achieving progress in both economic and human terms. This orientation should be the motive power for African adjustment and development programs in 1990. We also reiterate our call for greater flexibility in program design, espe- cially with regard to (1) the pace of adjustment, including the timing and sequencing of policy measures; (2) contingency financing, given the high degree of uncertainty in primary commodity markets on which African economies are highly dependent; (3) the role and magnitude of debt relief, with a view to materially reducing the constraint of the debt burden on the adjustment process over the longer term; and (4) the social cost of ad just- ment, bearing in mind the importance of developing adequate safety nets as well as promoting human resource development. Our emphasis on flexi- bility is an attempt to draw on the lessons of experience to find more feasible scenarios to tackling the problem of economic growth and development. The enormous debt burden facing African countries calls for strong and specific action. Although the level of debt is small, in relation to the total outstanding debt of developing countries, the burden is quite heavy. As the 62 Development Committee noted in its communique of May this year, despite the concessional debt rescheduling by the Paris Club and the partial can- cellation of ODA debt of many low-income countries, they still face uncer- tain prospects for an early return to external viability. There is an obvious need to re-evaluate the existing debt relief measures for the low-income countries. We also welcome the recent proposals of the British Chancellor of the Exchequer, Mr. Majors, calling for further improvements on debt relief under the Toronto initiative. The debt-service problem facing lower middle-income countries also needs to receive high priority. Evidence shows that they will also need concessions similar to those accorded the low- income countries. Against this background, we applaud the French initia- tive announced in June by President Mitterand to reduce the interest rate on the official debt of some lower middle-income African countries and to extend grants rather than loans in the future to the poorest African coun- tries. We strongly urge other industrial countries to follow suit. Besides, we strongly recommend that the now unworkable distinction drawn between low-income and middle-income countries be abandoned, since it tends to deprive the latter of debt relief initiatives, even though they suffer just as much from a heavy debt burden. In line with the recommendation of the Heads of State of the OAU, we reiterate the need for an international conference on the African debt situation, in order to find an effective so- lution to this problem. The Bretton Woods institutions need to keep in mind one cardinal prin- ciple as they devise proposals to strengthen their policies and practices on arrears. It is that the major aim should be to assist countries falling into arrears to become current. The question of arrears is complex and calls for understanding and flexibility in dealing with the countries concerned. Em- phasis should be laid not on punitive measures, but on constructive and cooperative solutions by assisting members to become current and to put their economies on the path of sustained growth and development. Only through cooperative measures can the two institutions carry out their full mandate in all member countries. The linkage between poverty and environmental degradation is now bet- ter understood. Moreover, it is clear that sustainable development in Africa, as elsewhere, is also dependent on sound population policies as well as on proper management of the environment. We support the establishment of well-balanced programs to address environmental problems, such as defo- restation and desertification. Properly conceived debt-for-nature swaps may also help to protect the environment. So far, the Bank's work in the envi- ronmental area, which aims at assisting member countries in taking a com- prehensive view of environmental issues, is a step in the right direction. There are, however, some environmental problems that are of a global character, such as proper disposal of toxic wastes and CFCs. Therefore, we urge the speedy conclusion of negotiations on establishing a Global Envi- 63 ronment Facility. We must emphasize, however, that resources put at the disposal of the facility should be concessional and in addition to the assis- tance allocations that would have otherwise been available. The facility should also not be used as yet another vehicle for imposing further condi- tionality on developing countries. We remain committed to promoting the contribution of the private sector to the development process. However, the circumstances in most of our countries leave no doubt that the public sector has to continue to play an appropriate role. Liberalization should promote complementarity between the public and private sectors, to ensure a balanced development of our economies. The Africa Project Development Facility (APDF) has proved its potential in the first three years of existence. We welcome the decision of donors to extend the facility for another four years, and expect that the second phase will witness a major expansion of its coverage in the region. In conclusion, we believe that the 1990s must become a decade of recovery and progress in Africa. We recognize that the restoration of economic growth will require determination as well as a joint and sustained commit- ment from ourselves and our development partners. There is abundant diagnosis of the problems facing our continent. The challenge is to energet- ically and systematically implement, in a concerted manner, the programs for Africa's recovery and growth. The IMF and the Bank Group can and should be of immense assistance in the realization of our goals. As none of us can accept the cost of failure, we all need to collaborate more closely to meet the challenges of the 1990s. CZECHOSLOVAKIA: VACLAV KLAUS Governor of the Bank As you know, the Czech and Slovak Federal Republic was one of the founding fathers of the Bretton Woods institutions. We were then, and are now, very proud of this. We expected at that time to remain conscientious and reliable·members and partners, but circumstances soon dictated other- wise. After the 1948 triumph of a totalitarian regime and its economic counterpart-central planning-it very soon became clear on all sides that there was no way for Czechoslovakia to participate in the International Monetary Fund and the World Bank. Our country renounced its member- ship, with the result that finally, early this year, we had to apply for mem- bership all over again. We now have a chance to reverse the developments of the past four decades: more than 40 years of Communist dogma, intol- erance, and rigidity, of irrational economic arrangements and disastrous economic policies. History will never forgive us if we do not seize this unique opportunity with all our might. We strongly believe our membership in the 64 Bretton Woods institutions will help us in this endeavor. The decision, at the end of 1989, to reapply for membership was one of the first decisions made by the new Czechoslovak Government. We wish to express our grat- itude to all of you who have helped make the time between our first letter and last week's signing of all the necessary documents so short. In the past decades, the citizens of Czechoslovakia have experienced a gradual but substantial loss of illusions about the potential of a centrally planned economy (and society). With each passing day it has become clearer to Czechs and Slovaks that the only practical and realistic way of improving their standard of living will be to abolish totally the institutions of central planning; to dismantle controls over prices, wages, the exchange rate, and foreign trade; and to radically transform the existing system of property rights. To put it differently, the newly formed Government now has a unique opportunity to transform the wasteful and irrational economy of Czechoslo- vakia into a normally functioning market system. Our task is not a centrally orchestrated shift in our economy's sectoral structure, nor even a massive transfer of modern technology; it is larger, and consists of the full-scale replacement of the entire economic system. Of course, there is a real danger that the short- or medium-term costs of the transformation process-in terms of output, employment, and infla- tion-will be so heavy and so painful that there will be attempts to postpone the necessary systemic changes and to recentralize the economy again, or once again to look for untried, intellectually challenging, but in principle dirigistic and interventionist solutions. The Czechoslovak transformation strategy, called the scenario for eco- nomic reform, recently prepared by the Government and approved by the Parliament a week ago, is a plan for implementing several crucial reform steps in the proper sequence. The strategy can be briefly summarized as follows: 1. Sound macroeconomic policy is vital if the transformation is to suc- ceed. Restrictive monetary and fiscal policies will be necessary because: -we do not want to unleash inflation, with its debilitating effects on economic decisionmaking and resource allocation; -we are very pessimistic about the short-term growth potential of the unreformed economy, and about the speed of the supply response in a reforming economy; -we want to squeeze out the least efficient parts of the economy as soon as possible, which cannot be done when there is excess demand and easy sales of any product; -we want to start the real restructuring without being crippled by the burden of repaying a "reform-neutral" foreign debt. We know that reasonable macroequilibrium is a fundamental requirement for a market economy to operate effectively. Our analyses indicate that to 65 achieve this, we do not need anything resembling a monetary reform; it will suffice to impose strong limits on further monetary expansion while allowing the price level to grow up to the money supply. 2. The early and rapid transformation of property rights-the "wholesale privatization" of the economy-is absolutely crucial. First of all, the old- style enterprises do not react and do not respond to new incentives, new signals, or new changes in the environment. In addition, with the reform already under way, chaotic, extremely inefficient, and extremely unjust pri- vatizations are taking place which in no way fulfill our intentions as archi- tects of the transformation. There is no time to wait. The final draft of the Transformation Act was to be discussed within the Government of Czechoslovakia during the week of this Annual Meeting and will be sent-with minor modifications-to the Parliament for its ap- proval in the next few days. The privatization process will be divided into two parts-the privatization of small-scale businesses, based on standard privatization techniques, and the privatization of large enterprises using a mixture of standard and nonstandard methods. Because of the lack of domestic capital, we plan to augment the wealth of the popUlation by dis- tributing a part of the state's property in the form of free (or nearly free) vouchers to the public at large. The vouchers will be used as claims for shares of state-owned companies. 3. Prices, foreign trade, and foreign exchange rates will be liberalized starting January 1, 1991. Relative prices must be changed at an early stage of the reform process. Most of the changes must be, and will be, accom- plished by the invisible hand of the market, rather than by administratively orchestrated actions. If prices are not free to adjust to changing market forces, they cannot perform their basic functions, with the result that other means of allocation-well known to us for decades-will take over. The price liberalization process cannot be partial or gradual because either way the economy will remain trapped in a state of macrodisequilibrium. A consensus is growing in Czechoslovakia on this need to work quickly in dismantling controls. Because we understand that gradualism does not work, it is a road we do not intend to travel. By this stress on the fundamentals of the transformation process, we hope to avoid the danger, later on, that we might be required, under pressure, to make a series of ad hoc decisions that could lead us far off our course. And we are well aware that there will be such pressures: that there will be social unrest and populist opposition. This is all the more certain because our reform measures will coincide with dramatic external changes and external shocks of unknown kinds and unforeseeable magnitudes. This bring me to my final point. We know that there have been cases where major fiinancial assistance caused the deceleration, not the acceler- ation, of the necessary systemic changes that we consider of the utmost importance. We do not intend to postpone the institutional and structural 66 ------------... steps we have already announced toward a rationally functioning market economy, nor to delay putting an end to the paternalistic behavior of the Government; and we are determined not to prolong either the life of the extremely inefficient "nonsystem," which exists even when central planning has gone and the markets are still underdeveloped and severely constrained, or the interval during which various interest groups (including the bureauc- racy and black or shadow marketeers) will be able to extend and strengthen their positions. At the same time, however, we do need a very specific kind of financial assistance: we need a macroeconomic stabilization package to function as a necessary buffer, absorbing, for a very limited period of time, some large short-run fluctuations of various economic variables that will exceed their long-run equilibrium values. We know it is important to distinguish between activities that are tem- porarily uneconomic and activities that are permanently inviable; a distinc- tion must be made between price increases based on short-run supply ri- gidities and relative price adjustments based on long-run demand and supply relations in the world economy. All truly reforming countries need to have this form of macroeconomic stabilization assistance at their disposal while the real transformation is under way. Without the recent changes in the world economy, we would have needed a stand-by arrangement, as well as a standard stabilization (or transforma- tion) program, to mitigate short-run economic hardships affecting large social and economic groups in our truly reforming country. But the last oil shock, coinciding for us with the demise of COMECON and the dissolution of its protected, mutually debilitating trade area, is expected to greatly alter our economic outlook and the impending costs of adaptation. The synergic effect of all the recent external changes will be extremely severe: practically speaking, we are facing the three oil shocks of the last two decades all at the same moment. It will far exceed our limited capacity to absorb such shocks, and the standard methods of macroeco- nomic stabilization assistance will not be sufficient. It seems clear to me that some additional, extra financing will be neces- sary. The expansion of the compensatory and contingency financing facility is one potential step in the right direction: it would provide a flexible re- sponse to the continuing uncertainties surrounding the political and military situation in the Middle East. Extra financing is not an acceptable remedy for inappropriate economic policies, but some additional economic assis- tance will be necessary, and the urgency of the matter should not be under- estimated. In the case of Czechoslovakia (and the other Eastern European countries as well), the extra need poses a serious threat to the success of our economic reforms. Some Western observers, considering the conversion of centrally planned economies into market-organized ones to be this cen- tury's most important, most difficult, and most challenging issue of eco- 67 nomic policy, looked into the annals of history for an era of comparable significance. But that was before the advent of the Middle East crisis. My English does not offer me adjectives for describing the problem now. It will not be solved by external financing, but external financial assistance can help a great deal. It is especially by giving us time to adapt that will improve our reform program's chances of success. DENMARK: NIELS HELVEG PETERSEN Governor of the Fund (on behalf of the Fund Nordic Countries) I have the honor of addressing this meeting on behalf of Denmark, Fin- land, Iceland, Norway, and Sweden. First of all, the Nordic countries would like to express their heartfelt welcome to Namibia, the Czech and Slovak Federal Republic, and Bulgaria as members of the International Monetary Fund. Let me begin with a brief discussion of the present world economic set- ting. Looking at developments so far, there are several positive signs to be registered. Economic growth has been rather satisfactory in many parts of the world. External imbalances among the major trading nations have been reduced, and in Eastern Europe large-scale reforms in the direction of market-based economies are under way. However, there are still a number of important issues to be dealt with. Inflationary pressures persist in many countries. Debts are a heavy burden for the majority of developing countries, and necessary economic adjust- ments are often too slow and inadequate. This difficult situation may well take a turn for the worse if oil prices remain at a high level. In most European countries there are still relatively high levels of unemployment, which point to the need to address this problem more effectively through structural reforms. One major source of uncertainty is, of course, the future developments in oil prices. It is essential to maintain the credibility of policies aimed at reducing inflation. Only by doing so will there be realistic possibilities for sustained long-term growth. Consequently, we must resist the temptation to make short-term accommodating adjustments undermining anti-inflationary policies. A general policy response along these lines will also help to avoid a new, deep recession similar to the one we experienced in the early 1980s. Our experience from the 1970s has taught us that we must maintain-or rather strengthen-economic and structural policies. There is no room for what one might call "an oil excuse." The only certain result of postponing necessary measures is that, far from easing economic difficulties, it will actually increase them, except in the very short term. The recent changes in oil markets remind us once more in a dramatic way of the continuing need for energy saving. 68 All economies will clearly have to adjust to meet these changing condi- tions, but all do not have the same ability to do so. If oil prices remain at a high level, the situation of the net fuel importers among the developing countries will become even more difficult. This will certainly also be the case for most Eastern European countries, which face even higher relative oil price increases. . . . ... I will now turn to another important problem that will have a major impact on the quality of growth for many years ahead. The progressive liberalization of trade over the past 40 years has been a major factor- perhaps the most important one-behind the unprecedented economic growth and prosperity in countries with market-oriented economic systems. The open, multilateral trading system is, however, now threatened on two fronts: first, the GATT system needs to be strengthened and brought up to date in areas covering services, agriculture, textiles, trade-related areas such as intellectual property rights and investment measures, the stricter use of the balance of payments clause, and reversal of the trend toward unilateral and bilateral trade-restrictive measures. All these are important areas. We must seek substantial and ambitious results on all fronts in the Uruguay Round. Thus, the negotiators in the Uruguay Round have a tremendous task in front of them. Regrettably, the growing acknowledgment in most countries of the economic merits of a fully liberalized multilateral trading system does not seem to have sufficient impact on some of the trade negotiators of the Contracting Parties. The political message must therefore be: There is no acceptable alternative to substantially improved trade discipline and effec- tive trade liberalization in all areas under negotiation. Secondly, large economic imbalances should not be used as a pretext for trade-restrictive measures. Such measures lead to a misallocation of re- sources and to even more intractable economic problems. Tendencies of that nature must be halted and reversed. Many countries need a better coordi- nation of economic and trade policies. Therefore, on the international front the coordination and cooperation between the Fund, the Bank, and the GATT must be improved and strengthened. DOMINICA: MARY EUGENIA CHARLES Governor of the Bank (on behalf of the Joint Caribbean Group) It is my honor and pleasure to speak on this occasion on behalf of the members of the Caribbean Community dnd Common Market (CARICOM), namely Antigua and Barbuda, The Bahamas, Barbados, Belize, Dominica, Grenada, Guyana, Jamaica, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, and Trinidad and Tobago. 69 We welcome Namibia, Bulgaria, and the Czech and Slovak Federal Re- public to membership of the Fund and the Bank. Their accession to mem- bership heralds a new phase of global cooperation. The theme of my speech today is that this new phase presents us with exciting prospects for world development in the 1990s and that the devel- oping countries should be assisted to take advantage of the new opportun- ities that will be offered. These new developments require fresh thinking, and bold approaches are necessary to uplift the millions in the developing world in particular from the degradation of poverty and hopelessness during the new decade. Yet the evidence suggests that while the developments in Europe and Africa could create enormous opportunities for expansion, the economies of the developing countries are likely to contract unless imme- diate action is taken to secure for them continued and increased flows of resources, both in terms of a fair share in world trade and financial assis- tance. In addition, the crisis in the Gulf region will make permanent changes in the pattern of Middle East and world economic activity no matter how it is settled. The impact on the countries of the Caribbean will be particularly severe because of their openness and vulnerability and the acute debt prob- lems of two of the largest territories, Jamaica and Guyana. Apart from Trinidad and Tobago, all the other Caribbean countries are importers of oil and will be faced with higher import bills and a further deterioration in their external balance that will require further adjustments. We agree with the emphasis that is being put at this meeting on prudent policies to minimize the impact of an extended oil crisis, but we see a danger in further contraction of our economies. What we need is expansion to enable us to take advantage of the new opportunities and prospects arising from the new phase of global cooperation and to surmount the shocks that will spread from any steep rises in the price of oil. We are not confident that policies prescribed for the developed countries will help us in the developing countries to gain a larger share of the growth in world trade and investments, especially if any reduction in deficits will be at the expense of the commodity exports and tourism earnings of the poor countries. Moreover, the obligations of the United States in the present crisis in the Gulf region and the cost of unification of Germany could further reduce the supply of capital and consequently apply increased pressure on interest rates. This clearly points to the need for appropriate fiscal and monetary policies in the developed countries. Since we were here last year, we in the Caribbean have seen considerable activity from the Fund and the Bank. In this respect, we welcome the success of the Guyana Support Group and commend the efforts of the Fund and the Bank, which have seen the return of Guyana to eligibility and borrowing status in the Fund and the Bank, and also in the Caribbean Development Bank. Jamaica continues to meet its obligation to the Fund 70 and the Bank and has been taking bold measures in liberalizing the ex- change rate regime to enhance the prospects for success in the long run. However, initiatives such as that taken by MIGA to help Jamaica host an investment conference in 1991 are being threatened by short-run difficulties. Many of the smaller countries in the Caribbean have been beneficiaries of assistance from the Fund and the Bank. A blend of IDA and IBRD loans helped St. Lucia to finance an imaginatively conceived water project. A blend of IDA and IBRD funds has also been made available to the Carib- bean Development Bank to assist its poorest members. The Bank has taken other initiatives that are beneficial to our region: -A study of the trade policies of CARICOM, with special emphasis on the impact on the smaller states -A review of the problems and long-term prospects of the OECS states -A comparative study of the special problems of small island economies around the world that has some relevance to our development prospects Similar initiatives are also being taken by the Bank to assist in developing agricultural research, reforming land tenure, and promoting agricultural diversification and human resource development in the region. We are also pleased with the concern, of the Bank in particular, about the effect of adjustment on poverty, and we look forward to an imaginative collaborative approach by both the Fund and the Bank to devise effective strategies to bring relief to the distressed millions, whose condition of life has been made worse by the slow and insignificant response to adjustment policies in terms of job opportunities and improvements in social amenities. We are also pleased with the intentions of the fund to provide resources under the compensatory and contingency financing facility to finance some of the cost of the increases in oil prices. But while these prospects are exciting, the support of these institutions in the Caribbean has been far from enough. None of the policies of the Fund and the World Bank make explicit reference to the small size and vulnerability of small island states, especially those that are exposed to frequent natural disasters. The competition that takes place in large econ- omies does not exist in microeconomies, where just a few firms control the market. The fact that the effectiveness of otherwise sensible macroeconomic policies is hindered by inefficient markets and undeveloped financial services in small developing countries is too often ignored. There is the need, therefore, to develop programs that address these deficiencies and that provide longer-term assistance, a higher level of conces- sional flows, and more flexible conditions, which will allow for a more gradual process of adjustment than that now contained in current Fund and Bank packages. There is also the need to design special arrangements for those small countries that are most vulnerable to natural disasters and that incur con- siderable debt in repeatedly replacing lost assets, especially social and eco- 71 nomic infrastructure, destroyed by hurricanes, volcanoes, or floods. Simi- larly, special arrangements need to be made for small island states that are exposed to man-made disasters, such as oil spills, to mitigate the economic consequences of such disasters that could cause a major setback for tourism- dependent countries. Despite these obvious weaknesses, the graduation policies of the World Bank and the conditionalities associated with loans of both the Bank and the Fund do not distinguish between large and small countries. The inter- national communities should not accept that per capita income alone is a satisfactory criterion for graduating countries from IDA and IBRD lending. We all know that there must be many more considerations for small island economies. We all know that per capita income alone is no measure of the sustainability of the level of development of countries that have to rely almost entirely on external markets (including capital markets). The Fund and the World Bank will need to rethink the conditions that they apply to small states. The World Development Report itself acknowl- edges that the strategy choices that all governments make reflect both eco- nomic and political factors. It is true that trade should be liberalized and that income tax burdens should be reduced. Yet care has to be taken to do so without increasing the propensity to import and thereby weaken the balance of payments. Similarly, agricultural development programs are designed as if farmers in the Caribbean have the assets and the technology to compete on a global scale. The fact of the matter is that they do not. And even if the Uruguay Round went well and stopped subsidization of agriculture in the main OECD countries, that will not be the end of the matter. Farmers in the Caribbean need credit, and they will need technical assistance. This is why we will welcome a regional agricultural research project and a human resource development project. Preparation of both projects should be accelerated if we are to gain from the likely beneficial impact of liberal- ized world trade, of Europe after 1992, and of the Canada-U.S. free trade areas of President Bush's Enterprise for the Americas Initiative. We note with concern that while some middle-income countries have remained current in their debt obligations and are pursuing structural ad- justment within the context of Fund arrangements, these countries have not benefited in any substantial way from the current debt strategy, particularly with respect to debt relief. We, therefore, urge the international community to show a greater degree of flexibility and imagination in providing adequate solutions to the debt and debt-service burdens of these countries. In this respect we are grateful for the initiatives already taken by Canada to forgive significant amounts of debts owed by less-developed countries, and for the recent decision by the United Kingdom to write off a substantial part of Guyana's debts. 72 We welcome also the new initiative of Chancellor Major, referred to as the Trinidad and Tobago Terms, which will enhance the present Toronto Terms and offer greater relief to debt-distressed countries. More important, we would like to see his new initiative implemented with greater urgency than we have seen in the past with other debt initiatives. In addition, we hope that the Caribbean countries may soon benefit from the new terms proposed by Chancellor Major. We further urge that serious consideration be given to providing resources to reduce the interest burden of debt to multilateral institutions. This is extremely necessary in the present situation, where real interest rates are already so high and are likely to increase further and capital is so expensive. For countries that are undertaking major adjustment programs involving debt rescheduling and balance of payments support, the composition and timing of support becomes critical. The experience of Guyana under the Paris Club, structural adjustment loans, and ESAF arrangements indicate the following: -Too high a proportion of commodity support does not permit timely conversion into export earnings and could lead to a mismatch with cash obligations. -The logistics of negotiating SAL and ESAF programs are far too com- plex and drawn out, so that the impact of adjustment is considerably diminished as a result of delays in disbursing funds. In fact, just as actions concerning macroeconomic policies must be swift and decisive, so too must the release of financial support for adjustment programs be quick and consistent with their needs. The present bold and far-reaching adjustment program that Jamaica is undertaking needs the fullest cooperation of the Fund and the Bank. Finally, we wish to emphasize the importance of the development of the appropriate financial institutions and the associated dialogue, which are as important as the other forms of assistance. We do need to review the various aspects of the incentive framework in our countries with the staffs of the Bank, the Fund, and IFC. There should be a greater investment in dialogue with our countries than has been the experience so far. IFC, whose capital increase we support, needs to increase its activities in the Caribbean. And MIGA should extend its promotional activities to the Caribbean so that investable resources that are available within the region could flow more readily to investment opportunities that are ready for development. IFC should not expect investment to materialize in these small economies with- out helping to cultivate the environment that will give rise to such invest- ment. We expect to see in the near future more missions related to discuss- ing the opportunities in our respective countries. If I may summarize, first, the major task rests with the Managing Director of the Fund and the President of the World Bank to help lower the cost, 73 and increase the availability of capital. The Fund surveillance should be strengthened to achieve this end. Second, small states need to receive ap- propriate analyses, and appropriate conditionalities should be devised for them. Third, graduation should be associated more with sustainability than with per capita income. Fourth, poverty reduction will require greater flex- ibility in program design and more search into poverty conditions in the Caribbean. Fifth, consideration should be given to subsidizing high interest rates. Sixth, support for adjustment involving debt relief and balance of payments financing must be quick and consistent with the needs of the programs. Negotiating procedures need to be improved to reduce the time required for implementation. Seventh, the Fund and the Bank should spend more time talking with us about the incentive framework that will trigger investments in our very small states. To ensure the survival of the small states in the Caribbean and in other parts of the world, these tasks must be given the highest priority. I am confident that I can leave them in the capable hands of the Managing Director of the Fund and the President of the World Bank. EL SALVADOR: MIRNA LIEVANO DE MARQUES Governor of the Bank I join those who preceded me here in welcoming the new members of the International Monetary Fund and the World Bank Group, Bulgaria, the Czech and Slovak Federal Republic, and Namibia, and I thank you, on behalf of the Government of El Salvador, for the opportunity to present to this meeting the most significant advances of our Economic and Social Development Program. When President Cristiani took office in June 1989, El Salvador was deeply mired in the most profound economic and social crisis in its history. Ten years of terrorist aggression, misguided economic policies, adverse terms of trade, and the earthquake of 1986 had plunged one third of the population into extreme poverty, encouraged the emigration of 1 million Salvadorans to other lands, and widened the gaps between social sectors. In the economic sphere: -Domestic output stagnated. -The public sector deficit represented some 4.5 percent of output and was largely financed with resources from the Central Reserve Bank. The Central Government's domestic arrears amounted to almost $240 million (4.8 percent of GOP). -Approximately 40 percent of the financial sector's portfolio, or roughly $520 million, was in arrears. -The trade deficit approached $620 million (12.5 percent of GOP) in 1989; the Central Bank had no foreign exchange reserves, while the country's external payments arrears reached $160 million. 74 The situation was equally critical in the social area: -One third of the population was in absolute poverty and could not meet its basic food needs. The infant mortality rate stood at 56 per thousand. -Thirty percent of the adult population was illiterate. -The average educational level was 4.5 grades for the nation as a whole and only 3.1 grades in rural areas. In response to this situation, an economic and social program was imple- mented with a view to gradually eradicating extreme poverty and achieving sustainable economic growth. This program was designed to complement the effort to strengthen democratic institutions, the national judicial system, human rights, and the search for peace through a negotiated solution. Acknowledging that the living conditions of its citizens could hardly be improved in the absence of economic growth, the Government gave priority in its Economic and Social Program to reducing the grave macroeconomic imbalances in order to lay the foundations for economic revitalization and re-establish EI Salvador's creditworthiness. Accordingly, it set in motion a stabilization program, together with structural reforms aimed at replacing an economic system characterized by privilege, protection, and inefficiency with a competitive, open system. In addition, the Salvadoran Government recognizes that all citizens must share in the benefits of growth if economic reform is to be successful and domestic peace more attainable. Hence, the design of the economic and social strategies sought to ensure their correspondence and consistency in both approach and implementation. The Economic Stabilization Program for 1989-90 includes a set of mea- sures in several areas: Government Finance: Effective budgetary control was established with a view to reducing government expenditure, including spending by public enterprises. Efforts are also being made to change the expenditure structure by increasing social outlays while beginning to cut military expenses, despite the present situation. A reform of the tax system was also begun to simplify it, reduce evasion, and abolish tax exemptions. It is expected to raise the tax burden from 7.6 percent of GDP in 1989 to 9 percent in 1990 and roughly 12 percent of GDP in 1994. Moreover, electricity, transportation, water and telecommunications tariffs were increased in order to reduce the operating deficit of the state enterprises. These measures are expected to lower the fiscal deficit from 4.8 percent of GDP in 1989 to 3.5 percent in 1990. Money and Credit: Central bank credit to the Government was signifi- cantly reduced, most special lines of credit and portfolio ceilings were abol- ished, and interest rates were increased to positive real levels. Foreign Exchange: The exchange system was decontrolled, exchange mar- kets were unified, and the Exchange House was authorized to operate, thus significantly reducing the marked overvaluation of the colon. 75 Foreign Trade: Most quantitative restrictions on trade were abolished, and export and import procedures were simplified. Prices: Price controls were lifted on 230 items. The stabilization program is being supported by a stand-by arrangement approved by the Fund's Executive Board in August. In addition, EI Salvador renegotiated a portion of its external debt with the Paris club last week and is engaged in negotiations with other countries to lighten its debt-service burden. The economic stabilization effort has been accompanied by pro- found structural reforms aimed at creating a more efficient and more com- petitive economic system. Trade Reform: The Government has abolished the foreign trade monopo- lies in coffee, sugar, and cotton and begun a tariff reform, the first stage of which includes a maximum duty of 35 percent and a minimum of 5 percent. The objective is to work together with other Central American countries to establish as uniform a rate as possible, in the 15-20 percent range, by 1994. Tax Reform: The Government of EI Salvador is preparing preliminary studies for introducing a value-added tax in 1992 and is implementing a program to modernize tax administration and budgetary information and control systems with support from the Fund and other agencies. Financial Sector Reform: Priority has been given to strengthening the Superintendency of the Financial Sector and to rehabilitating banks and savings and loan associations, and the first steps have been taken to privatize these institutions. Prices: Price range systems are being introduced for essential grains in order to prevent excessive fluctuations and encourage their production. As a result of this policy, maize producer prices increased by more than 11 percent in real terms, while consumer prices remained below the previous year's levels. Land Reform: Peasants qualifying for land reform who are organized into cooperatives have been given the option between individual or collective ownership. In either case, the Government will deliver property titles to encourage efficient land use and rural investment. Institutional Reform: Efforts are under way to privatize state enterprises and functions and to decentralize and debureaucratize the public adminis- tration. All these structural adjustment measures have been discussed with the World Bank. A structural adjustment loan is expected to be signed with the Bank by year's end, together with supporting sectoral loans from the Inter- American Development Bank (lOB) and the World Bank. The Government of EI Salvador, aware that the process of stabilization and structural adjustment imposes high social costs, particularly on the lower income sectors, has established four Compensatory Social Programs, involving direct subsidies, community works, employment generation, and household income enhancement. Direct subsidy programs include public 76 transportation and basic housing purchase subsidies and special food distri- bution programs for mothers and infants (through health care stations) and for school children (through school lunches). Community works programs are being carried out through joint efforts in the municipalities and the direct participation of the poorest communities. Employment generation programs include reconstruction programs using resources available but unused since the 1986 earthquake and food-for-work programs in environmental protection projects, housing construction, and projects in communities of displaced persons. In addition, in order to offset in part the drastic fall in real wages, the Government exempted wage earners with monthly incomes below $200 from income tax. Also, the minimum salary for civil servants and other workers was raised by 15 percent, on average, during the last months of this year. World Bank support has been instrumental in implementing the structural reforms in social sectors, par- ticularly education and health. Aware, on the one hand, that the immense needs of the population require immediate solutions and, on the other, that the structural reforms under way in the social area need time to mature and yield the expected results, the Government has been working over recent months on the estab- lishment of the El Salvador Social Investment Fund (FISS), which will channel resources for social projects identified by communities and volun- tary private organizations. This project has already obtained financial sup- port from the lOB and the U.S. Agency for International Development. The FISS is expected to start operations in October 1990. To rescue EI Salvador from its critical economic and social situation and improve its international credit standing, President Cristiani's Administra- tion has implemented a far-reaching program of stabilization and structural adjustment. The process of stabilization and adjustment, in itself difficult, has had to face unforeseen external developments, such as declining external bilateral aid, falling coffee prices, the FMLN offensive of last November, and, lately, rising petroleum prices. In spite of this, the Government of EI Salvador has persevered with the dialogue for peace and the structural adjustment program, whose first results can now be discerned. This domes- tic effort has been backed by the IMF and the World Bank and other international organizations and friendly countries. The challenges of the future are enormous, and we hope to have your continued support. FIJI: J.N. KAMIKAMICA Governor of the Bank I welcome this opportunity to address these Annual Meetings and to thank our hosts for the reception and hospitality. We shall share our views and also listen to and learn from the experiences and observations of fellow Governors as we face some of the most pressing development issues con- 77 fronting the international community today. I also wish to express, on behalf of the Government of the Republic of Fiji, our greetings to the Czech and Slovak Federal Republic, Bulgaria, and Namibia on having joined the mem- bership of our two Bretton Woods institutions this year. Your statement, and, similarly, those made earlier by the Managing Director of the Fund and the President of the Bank have hit the nail on the head. Your statements have all dealt with the current issues in a forthright, frank, and urgent manner. At the outset, I should wish to highlight the severe repercussions that we in the developing world, and especially in our case, the economically fragile small island nations, are having to bear as a direct consequence of the recent and regrettable crisis in the Gulf region. The immediate impact of this crisis will only serve to further compound the extreme difficulties that already beset our small economies and, in many instances, jeopardize the economic growth strategies and policies that may have just been adopted and are currently being implemented. It is thus with cautious optimism and much uncertainty that we view our social and economic prospects for the future. Undoubtedly, a conducive international economic environment is essential if we are to make any headway in dealing capably with the important issues before us today. The past decade, in general, was a most difficult period for many developing countries including not just those in the Sub-Saharan re- gion in Africa and low-income countries in Asia, but, particularly, the many small island economies such as those we find in the South Pacific region. Many countries in the developing world have experienced consistent periods of stagnant or declining per capita GDP growth rates, coupled with rapid increases in inflation, and associated problems of high interest rates and a weakening in their terms of trade. In this regard, we note the recent pro- jections for a slowing down in world economic growth this year, reflecting a moderation of growth in both industrial and developing countries. As we have already noted, prospects for world economic growth in 1991 are very much an uncertainty at this time, although there were, prior to the Gulf crisis, more encouraging signs for a resurgence in growth next year. In the light of the current turn of events in the Gulf region, it is all the more important that developing countries put in place sound macroeco- nomic policies in support of structural adjustment programs they may be implementing. The roles played by the Bank and the Fund in their respective support of these adjustment efforts are recognized and appreciated. We would also urge the two institutions to continue their support and, in ad- dition, examine methods of expanding the adjustment operations to other countries, with a view to improving confidence and the prospects for in- vestment flows. We are particularly cognizant of these linkages, for, as I had mentioned last year, our strong economic growth in the past two years has enabled Fiji to institute certain deregulation measures and policies which we will continue to pursue in the foreseeable future. It is our ex- 78 pressed hope that the recent promulgation of our new Constitution will engender further increases in confidence in the economy both at home and abroad and generate further private sector investments. We believe that our membership in the Multilateral Investment Guarantee Agency (MIGA) will indeed support our investment promotion in Fiji. The problems of severe indebtedness faced by a number of developing member countries continue to thwart their adjustment and growth efforts. While several initiatives for debt and debt-service reductions have been put in place, in which both he Bank and the Fund have had supportive roles to play, we are of the view that much more could be done and that progress in the overall debt strategy is moving somewhat slowly. In this regard, I would like to commend the proposal by the United Kingdom for greater debt relief for poorer countries, as was recently announced in Trinidad and Tobago. It is critical that such initiatives be supported, for while some relief has already been obtained through the Paris Club reschedulings, the prospects of re- turning to capital market access remain highly uncertain. Similarly, while it is crucial that urgent attention ought to be given to severely indebted coun- tries, we have continually stressed that due recognition should also be given to the several indebted middle-income countries that have not had to resort to a restructuring of their external debt obligations and are duly facing up to their debt problems. It is only proper that the Bank, the Fund, and other development assistance agencies ensure that there is sufficient flow of finan- cial resources to these countries. I touched earlier on the need for a conducive international economic environment as being a prerequisite for growth in developing countries. Underscoring the urgent need for bringing about such an environment is the need to establish a more open multilateral trading system. We support continuing efforts in that direction. Strategies for the effective reduction of poverty in the 1990s, which formed the basic theme of this year's World Development Report, are timely and ones we need to continue to emphasize and remind ourselves of as being the top-most priority in our development endeavors, particularly during this coming decade. The need for environmental enhancement strategies and the promotion of women's role in development are vital considerations also. Fiji is fully committed to supporting private sector investment and initi- atives that will facilitate the strengthening of this sector. Manufacturing, particularly of garments and other value-added, resource-based products, continues to attract overseas private investors. Progress is also being made in enhancing the sector's already heavy involvement in the tourism and sugar sectors in the economy. In the public sector, selected enterprises have been identified for a phased program of privatization, and we are particularly appreciative of the role that the Bank has played in strengthening this sector in Fiji, through both technical and financial assistance. We are also pleased that IFC has recently established a South Pacific Project Facility and look 79 forward to a much closer working relationship between IFC and Fiji, par- ticularly in our private sector. In this regard, we observe with much interest the discussions currently under way for a proposed capital increase for IFe. The demand for IFC's assistance and services will certainly increase in a substantial way over the next few years, and we can, therefore, see the urgency of ensuring that it will be capable of adequately meeting the needs of all member countries .... . . . In closing, I should like to record our gratitude to the Fund and the Bank for the various kinds of financial and technical assistance that we have received through the provision of experts and the work of various missions. We are encouraged by the new spirit of international cooperation, which has been enhanced by developments in Eastern Europe over the past year, and which augurs well for the future. We recognize that as we enter the decade of the 1990s, the international financial system faces many chal- lenges. Fiji, for its part, will continue to support the various initiatives being developed and pursued by the Bretton Woods institutions to address and seek solutions to these issues now and in the future. FRANCE: PIERRE BEREGOVOY Governor of the Fund In the history of the twentieth century, 1989 will go down as a decisive year for the economies of Eastern Europe and the Union of Soviet Socialist Republics. Breaking with decades of central planning and management, they have decided to adopt the rules of the market and engage in interna- tional trade. A symbol of the acceleration of history, German reunification will become effective on October 3, 1990. This is a new opportunity for potential growth and a stirring challenge for the European Economic Com- munity. For the immediate future, the world economy must face the uncertainties born out of the Gulf crisis and the slowdown of the U.S. economy as well as certain European economies. During the coming months, our economies are going to have to navigate between two risks: a resumption of inflation and a slowdown of activity. Both represent threats to the stability of the financial markets. The firmer our resolve on these two fronts, the better we shall be able to safeguard noninflationary growth and hence employment. In these circumstances, the attitude of governments will be decisive. The invasion and subsequent annexation of Kuwait by Iraq were vigorously condemned by the international community. Nowhere can it be accepted that might makes right. We must be firm. An unshakable embargo against Iraq is the condition for returning to a normal situation based on respect for international law. The spirit of solidarity demonstrated in the political arena must also extend to economic matters. For its part, France will work toward greater 80 international cooperation. The IMF and World Bank, whose actions I sa- lute, have in this regard a major role to play. We are not starting from zero. As regards debt, progress has been made for the poorest countries as well as for the middle-income ones. Some of the impetus provided by the heads of state in Houston has already been turned into reality by the Paris Club. We fully expect to reach in the near future a new, more diversified menu incorporating, along with conventional rescheduling, debt-reduction and debt-service options, not to mention the vital option of new money. Our meetings this week have shown us that an international consensus is building on all these issues. The promptness with which the international community has responded to the opening of the centralized economies of Eastern Europe is also remarkable; the courageous reforms initiated by these governments, Poland and Hungary in particular, were immediately supported by substantial flows of aid and technical assistance. The establishment of the EBRD was accom- plished in record time. We are gratified to note that the Czech and Slovak Federal Republic and Bulgaria have completed the procedures for joining the IMF. Other countries have just joined the Bretton Woods institutions, or are in the process of doing so. I am thinking in particular of Switzerland, whose quota we hope will be consistent with its role in the international economic and financial system. The Fund and the World Bank will then be better able to fulfill their universal role. These institutions are based on cooperation, and each country must play by the rules; hence, no effort should be spared in securing compliance with them. That is the objective of the cooperative strategy that we introduced in 1988 to resolve the problem of arrears, and which we strengthened last spring. It can now be applied to countries in arrears that are willing to cooperate. This is particularly the case of Viet Nam, whose efforts we intend to support. ... . . . What direction should we take in the years ahead? I suggest that we examine and take action in four areas: 1. Draw long-term lessons from the Gulf crisis. Our economic history has already shown on three occasions that petroleum prices exert consider- able influence on the world economy and that their volatility undermines sound and durable growth. It also shows that neither producers nor consumers gain over the long run from excessive price fluctuations. The leading industrial countries have been committed since 1985 to systematic management of exchange markets so that the value of curren- cies is consistent with economic realities. It should be possible to apply this approach to the petroleum markets. These are still insufficiently transparent, and the rules of competition-a prerequisite for the smooth running of the market economy-are rarely applied, leading to sharp fluctuations which seriously disturb the world economy. The IMF, which 81 is mandated to monitor the key determinants of economic activity, cannot ignore this issue, and I thank Mr. Michel Camdessus for having agreed to study it. 2. The fight against poverty. I already indicated to the Development Com- mittee the priority accorded by France to this goal. The recent Confer- ence on the Least Developed Countries in Paris adopted an action pro- gram that advocated increased aid to those countries and the cancellation, by those creditors that have not yet done so, of all debt contracted as official assistance. 3. Ensure environmental protection. The establishment of a special fund to protect the ozone layer is a first step in this regard. Last year France proposed a new financial instrument to coordinate and mobilize funds allocated to specific projects. I hope it becomes operational as soon as possible under the form of a global environmental facility. 4. The integration of the U.S.S.R. into the world economy. I am delighted that, following the Houston summit, the International Monetary Fund, the World Bank, OECD, and EBRD undertook to carry out, in close cooperation with the EEC, an in-depth study on the Soviet economy, of which we have high expectations. That study could be the prelude to the Soviet Union's joining the international monetary institutions. The world economy is today in a better position than it was during the oil shocks of the 1970s. However, we must react quickly and resolutely to restore the favorable expectations of economic agents and prevent the in- crease in oil prices from wiping out the efforts made by the developing countries and unsettling the economies of the industrial countries. The difficulties must stimulate our imaginations. Economists must reduce uncertainties; politicians must reduce social inequities everywhere and bridge the gap between the North and the South in order to give the human race the opportunity to reconcile its difference. FEDERAL REPUBLIC OF GERMANY: KARL OTIO POEHL Governor of the Fund First of all, I should like to extend a warm welcome to the new members and the special invitees of the U.S.S.R. We are now rapidly approaching the state of true universality of our two institutions. The IMF and World Bank Group can look back on the period since our last Annual Meetings with satisfaction. Their policy advice and financial support has helped a substantial number of member countries in their pur- suit of economic, financial, and structural policies that have improved the prospect for better internal and external economic balance and more solidly based economic growth. Ever so often, such improvements only become apparent after a period of painful adjustment. There is often a temptation to blame these adjustment pains on the unwillingness of the Fund or the 82 -- __----------- .. Bank, or both, to provide more financial support under less onerous con- ditions. Faced with large outstanding claims against many highly indebted countries and often difficult negotiations with them, bank creditors also often wish for more generous help from the Fund and the Bank, as from other public sources. But neither the Fund nor the Bank through their support can eliminate the need for appropriate adjustment efforts on the part of borrowing countries and for private capital flows. We strongly feel that both institutions must adhere to the principles under which they have operated successfully in past years: the IMF as the insti- tution at the center of international monetary cooperation; the World Bank Group as the institution at the center of economic development. Both in- stitutions have evolved over time, their fields of action have expanded in various directions in response to emerging needs, moving them closer to- gether. Closer contacts and cooperation between the managements and staffs have become necessary and are now well established. This coopera- tion should help assure the complementarity of their efforts, but should also help them retain their separate identities. Our two institutions are well equipped to meet the calls of the years ahead. The adoption by the Board of Governors of the Resolution to in- crease the IMF's quotas has set the stage for providing the financial re- sources it needs to fulfill its role. I also welcome the progress made in tackling the arrears problem. The expeditious resolution of the remaining arrears cases will be essential for the Fund's financial integrity and its ability to attract the necessary resources to finance its activities. The history of the existing arrears does, of course, provide important lessons for the Fund; in particular, the need to pay due regard to the repayment capacity of borrow- ing countries and the medium-term viability of their adjustment strategies. The World Bank Group likewise is well prepared. Its capital base and its proven lending procedures should ensure that the credit standing of the IBRD in the financial markets remains excellent. Its high credit standing is an essential requisite to enable it to perform its traditional tasks and con- tribute to the solution of many members' debt problems. The need to safe- guard its financial position must also determine the nature and extent of the bank's commitments in the field of non-project loans for solving struc- tural adjustment problems. In this context, I expressly welcome the improve- ment in cooperation between the Bank and the Fund in the adjustment oriented assistance. The replenishment of IDA resources within the framework of IDA-9 will help this institution to continue with its assistance to low-income countries. We are also very much in favor of an early increase in the capital of the IFe. By strengthening the private sector, IFC makes an important contri- bution to the reconstruction and revitalization of many members' econo- mies. I also welcome the commencement of the activities of the Multilateral Investment Guarantee Agency. 83 Turning to developments in my own country, we certainly can look back on an eventful year. The economy of the Federal Republic of Germany fortunately has been in a strong position to face up to the new challenges. Growth of real GNP has continued strong and unemployment has declined in spite of massive inflows of new labor, above all from Eastern Germany and Eastern Europe. Both developments have occurred in an environment of low inflation. The unification process has led already to a substantial reduction of our large current account surplus. This is clearly in the interest of better balance in international payments generally. The adjustment has come about, pri- marily, through increased imports in response to higher domestic demand in both West and East Germany. It has been helped by a strengthening of the deutsche mark on the exchange markets vis-a-vis a number of curren- cies. The positive results of our fiscal and monetary policies over the past few years are a sound point of departure for dealing with the challenges con- fronting us. We have no illusions about the magnitude of the task. The need for adjustment in the productive sectors as well as in the institutional and "technical" infrastructure in Eastern Germany is very substantial. The un- avoidable frictional losses in the course of the changeover and the magnitude of the transfer of resources required are likely to be larger than originally anticipated. In any event, nobody should be surprised to find that decades of economic mismanagement cannot lYe put right overnight. Substantial changes are under way, and they are, I believe, quite impres- sive: -The currency conversion as from July 1 was effected very smoothly. No " buying spree" has occurred. The supply situation has improved in- stantly. Free market prices have caused many consumer goods to be- come cheaper; on average, the price level seems not to be higher than before. -The establishment of many small- and medium-size enterprises and substantial recourse to investment credit are evidence of a dynamic response to the new environment. -The unification of Germany on October 3 will complete the legal and institutional framework for an efficient market economy including rad- ically new rules for private ownership. Revitalizing the East German economy can be expected to run along orderly lines. The transfer of real and financial resources will be substantial, but it will not overtax our capabilities within the limits of financial integrity. It will not be bought by any concessions as far as monetary stability is concerned. The challenge of German unification will not only test our own perfor- mance and political skills. It will, of course, also have an impact on our 84 partners and on the international community as a whole. The conversion of Eastern Germany into a market economy should serve as an encouragement to other countries in Central and Eastern Europe to persevere on the diffi- cult road to reform. It will promote progress toward economic and political freedom and higher living standards, and this certainly not only in Germany. It will thus enhance international political stability and also contribute fa- vorably to the promotion of economic prosperity throughout the world. Let me quote from the last World Economic Outlook of the IMF: "The overall effect of unification on the world economy would be clearly positive as it would raise output in the industrial countries in the short run and would have favorable effects on the productive capacity of the world econ- omy in the longer run." The opportunities offered are surely greater than the risks involved. The doors are open to enterprises from all other countries to make use of the new business and investment opportunities, and they are welcome. There will be no change in the role played by Germany in the international community and in the multilateral institutions. Our commitment to the task of development will remain strong. In 1989, the Federal Republic's official development assistance (ODA) was again increased markedly. Also, in the current year and in the years ahead we will contribute our fair share toward assisting the developing countries, the burden of unification notwithstand- mg. The commitment to European integration at all levels-economic, mon- etary, social, and political-will also remain at the top of our agenda. The project of the European Economic and Monetary Union entered its first stage on July 1, 1990. In December the Intergovernmental Conference will be convened to negotiate the necessary treaty changes for the further stages, including the establishment of a European Central Bank System. This will be the centerpiece of EMU. It is not surprising that the substance and timing of future steps are hotly discussed between the partner countries. EMU involves the permanent fixing of exchange rates between members' currencies and their disappearance eventually when a common currency is introduced. The ability of individual countries to act independently of each other has already been reduced substantially as integration of their econ- omies and financial markets has progressed and as exchange rates have been tied together in the European Monetary System. EMU will carry this pro- cess to its final stage, depriving individual countries of any remaining scope for independent action especially in monetary policy. A key part of national sovereignty will have to be transferred to the Community level if EMU is to come about. In our view the European Central Bank System must be fully committed to price stability as the priority objective of monetary policy; it must be independent of political influence from national governments and EC insti- 85 tutions; it must be comprehensively and solely responsible for monetary policy; and it must be furnished with all the instruments necessary to this end. It will be the goal of the coming Inter-Governmental Conference to create the legal basis for the establishment of such a system. This is a very ambi- tious political objective. It deserves all the enthusiasm brought to it by its most fervent supporters. But enthusiasm is not all that is required. Reason and realism are also needed to guide us in the design of a European Central Bank System and of the other key features of EMU, as well as in decisions on the timing of the further steps to move forward to EMU. Allow me to conclude with a brief word of gratitude addressed to our host country and its people. Within another week the two Germanys will be fully reunited, only 11 months after the breakdown of the Berlin Wall last November. This event and what followed aroused great sympathy and support all over the world. Speaking here in Washington today on behalf of my Government, I may be permitted a word of special thanks to our American friends. We have reason to be forever grateful to the American people and government-and especially to President Bush-for their encouragement and active role over the past year. This is yet another example of the generosity and pioneering spirit which motivate the American people. Without their understanding and support, which could by no means be taken for granted even 45 years after World War II, all this might have proved impossible. GREECE: EFfHIMIOS CHRISTODOULOU Governor of the Bank The state of the world economy reflects the effects of policies pursued over the last year, but it is also influenced by the crisis in the Persian Gulf and extraordinary events and developments in Europe. In 1989, world out- put growth decelerated while consumer prices increased at a faster pace. However, the slowdown in economic activity was not universal. In certain low-inflation European countries, output growth in 1989 was the highest of the 1980s, while in most other European countries it remained at the high 1988 levels. The acceleration of inflation in the industrial countries in 1989, particu- larly in the first half of the year, reflected higher U. S. dollar prices for oil and non-oil commodities, high rates of capacity utilization, and adverse weather in some countries. Projections made by the IMF staff prior to the Gulf crisis, on the as- sumption of unchanged policies, envisaged a deceleration of both world output growth and of inflation in 1990, while projections for 1991 suggested that economic activity would pick up and inflation would stabilize. 86 " __0, ' _ _ _ _ _ _ _ _ _ __ These projections have recently been adjusted in light of the anticipated likely effects of developments in the Gulf. According to IMF staff projec- tions, the rise in oil prices is expected to produce a moderate decline in GOP growth and a moderate increase in the inflation rate of industrial countries. It is evident, however, that the new oil shock will be a major challenge for the oil importing developing countries and Eastern Europe, which are going through a difficult phase of transition, facing serious exter- nal debt problems and trying to implement wide-ranging structural reforms. The crisis in the Gulf poses a threat to the world economy. Although conditions in the world oil market are less tight today than in 1973174 and 1979/80, when the two oil price shocks occurred, a continuation of the present crisis could destabilize markets. To limit the stagflationary effects of such an event, the policy mix should be adjusted appropriately. If esti- mates about the duration of the crisis warrant it, putting strategic oil re- serves of OECD countries on the market should be seriously considered. According to some estimates, after production adjustments the anticipated actual reduction of oil exports from the Gulf will amount to only 5.5 percent of the world oil supply, and if this is true, it should not be allowed to destabilize markets with detrimental effects on production and inflation. The effects of persistently higher oil prices could be very serious for a number of oil importing countries, like my own, that are already engaged in stabilization and structural reform efforts. Their situation will be aggra- vated by lower external demand, higher inflation, and higher interest rates; in many cases, the required import adjustment may be difficult to achieve in the short run without major dislocations. A careful reassessment of the adjustment and financing needs of these countries is required on a case-by- case basis, if past mistakes are to be avoided. It is unavoidable that real resources be transferred from the oil importing industrial and developing countries. We must make sure, however, that this does not entail the aban- donment or postponement of long-term strategies aimed at redressing mac- roeconomic imbalances, increasing efficiency, emphasizing market mecha- nisms, and raising capital formation. This calls for the coordinated action of every agent and mechanism involved. Oil importing developing countries, particularly some low-income coun- tries, will bear the brunt of the crisis, in terms of reduced growth and deterioration of their external accounts. Coordinated action by the countries themselves, the IMF, the World Bank, and the international community must therefore be strengthened. Leaving aside the frontline countries-for which an international donor program is already being developed-assis- tance schemes must be quickly devised for those oil importing countries that are in the middle of applying strong macroeconomic measures and structural adjustment programs. In 1989 and 1990, the world witnessed a series of extraordinary events that are bound to change the shape of the world economy. One set of events 87 is related to the sweeping changes that are taking place in the political and economic systems of Eastern European countries. Another concerns the increased momentum toward European integration. The restructuring and opening of the economies in Eastern Europe will have positive effects for the world economy in the long run. However, the introduction of sweeping reforms could have adverse consequences for these countries in the short run. The European Community is playing an active role in assisting the process of restructuring by providing financial and technical assistance. The European Bank for Reconstruction and Devel- opment, which will provide technical and financial support to Eastern Eu- rope, in cooperation with the IMF and the World Bank, is expected to play an important role in this process. In 1989 and 1990, the process of European integration gained momentum. Two intergovernmental conferences will convene before the end of the year to negotiate a revision of the Treaty of Rome, as required for the realization of two fundamental objectives: economic and monetary union, and political union. The first stage of economic and monetary union started on July 1, 1990, and by its end all currencies of the member states will join the ex- change rate mechanism of the European Monetary System, all capital con- trols will be abolished, and all remaining obstacles to the free movement of persons and goods will be removed. The process of European unification will have obvious beneficial effects, in terms of world political, economic, and monetary stability. Its success, however, depends on a number of conditions that must be fulfilled. The process must be completed in the minimum possible time, so that the expected benefits show up as soon as possible to counter the unavoidable costs of transition. The process of economic and monetary union must move in parallel with the process of political union, since no progress can be achieved in one without the other. Furthermore, for monetary union to be accomplished, economic union must proceed at an equal pace, since it would be impossible to establish irrevocably fixed exchange rates and a single currency, without having attained all the economic goals explicitly set in the Single European Act. This calls for enhanced fiscal discipline, as well as more efficient mechanisms for economic and social cohesion. For the success of the whole assignment, it is imperative that all EEC member countries fully participate in all stages of the process involved. The successful transition to the final stage of economic and monetary union, with a single monetary policy and a single currency, depends on rapid nominal convergence among the member economies and increased coordi- nation of policies. without rapid nominal convergence, a regime of fixed exchange rates combined with free capital movements might produce seri- ous imbalances and tensions in financial markets. The European Community remains committed to open markets and to the strengthening of economic relationships with the rest of the world. The 88 renewal of the Lome agreement demonstrates the willingness of the Com- munity to maintain and broaden its trading relations with the rest of the world, in particular with the developing countries. The Community also urges other countries to make efforts to meet the deadlines regarding the objectives of the Uruguay Round. The implementation of trade liberalization measures will help the devel- oping world. In this connection, it is encouraging to see that the cooperative debt strategy is yielding certain, albeit limited, results and that many over- indebted developing countries are now implementing suitable structural ad- justment policies. The need for direct financial assistance is more obvious in the case of the poorest, heavily indebted countries. It is hoped that the negotiations for the refinancing of the World Bank's Special Program of Assistance and the replenishment of the African and Asian Development Funds will come to a timely and positive conclusion. In this connection, if I may point out, it is satisfactory that the recent conference of the UNCTAD in Paris was marked by convergence, despite existing differences on some aspects of debt, public aid to development, human rights, and the environment. The program of action for the next decade, compared with that of the 1980s, is certainly more concrete and susceptible to synergies and coordinated efforts. Proper weight must be given to restoring productive apparatus, promoting private sector initiative, and freeing market mechanisms, as well as to coordinating the mobilization of all partners involved, including all social partners and nongovernmental organizations. Let me now refer to economic policy in my country. During most of the 1980s, a policy based on extensive government intervention, ever-increasing public and external borrowing, and unrealistic price and incomes policies, brought the Greek economy to the verge of a break down. At the end of 1989, major problems facing the economy fell into two categories: sizable macroeconomic imbalances and serious structural rigidities, which had ac- cumulated over the years. At the beginning of 1990, the public debt/GDP ratio was projected to be about 110 percent, growth and investment pros- pects were deteriorating, inflation was accelerating, and the current account deficit was widening. High interest rates, required for monetary stability, exerted downward pressure on capital formation and boosted public debt- servicing outlays. Imports were growing at an accelerated pace, while ex- ports decelerated owing to the slow-down in world demand and to deterio- rating relative price competitiveness. Dealing with macroeconomic imbalances and promoting sustainable non- inflationary growth had become increasingly difficult, as structural ineffi- ciencies prevented rapid expansion and diversification of the resource base. It was clear to the new government, which was elected last April, that in these circumstances proper solutions should be sought only within the 89 framework of a comprehensive medium-term adjustment program aimed at both redressing imbalances and initiating extensive structural reform. Such a program is currently in force, covering almost a four-year period (1990- 93) during which the inflation rate is targeted at one-digit figures from the current 20 percent average annual rate. A central element of this medium-term program is fiscal consolidation that will reduce the net PSBRlGDP ratio by 11.5 percentage points. The primary deficit is expected to be reduced to around 5 percent of GDP in 1990, from 9.4 percent last year, and will gradually evolve into a 4 percent surplus by 1993. Fiscal consolidation will ease the task of monetary author- ities. A downward trend of interest rates is expected as inflationary expec- tations subside and government borrowing diminishes. The medium-term program combines macroeconomic stabilization with far-reaching structural reforms, including tax reforms and the privatization of publicly controlled enterprises. The four-year strategy aims at tackling major structural deficiencies, such as overregulated output and factor mar- kets, antiquated public administration structures, a financial structure sub- ject to serious constraints, and selective subsidization; incomes policies that discourage work effort and the acquisition of skills, labor-market regula- tions that reduce private employment opportunities and induce the public sector to act as a substitute for unemployment benefits; and insufficient economic and social infrastructures, especially in education, health, trans- port, communications, and utilities. In the last five months, important tranches of measures initiating the medium-term program have already been introduced. A first stabilization package, in April, provided for increases in public utility and value-added tax rates and in excise taxes on oil, tobacco, and alcohol, as well as for substantial cuts in government subsidies and in the wage bill of the public sector. Soon after, a package of privatization and liberalization measures was introduced, whereby monopoly privileges of some public enterprises were abolished, and trade interventio.n agencies were closed down. Proce- dures are now under way for the privatization of publicly controlled manu- facturing firms. A new Law for Modernization and Development was passed last summer introducing major changes in labor-market legislation measures to modernize public administration, provisions for the development of the stock exchange, and a more efficient system of investment incentives. A bold social security bill is now before Parliament, introducing major reforms in pension schemes, that will rationalize the system and reduce its substan- tial deficit. The Greek Government is firmly committed to fully implement its pro- gram, especially in view of the serious implications of the recent oil crisis. As an EEC member, Greece counts on the full support of the European Community, which has already provided explicit assurance that problems facing the Greek economy will be confronted within and by the "European 90 --------------- family." With the Community's support, the firm implementation of the reconstruction program will soon lead to positive results, which, besides being desirable in themselves, will allow the Greek economy to participate fully in the ongoing process of Europe's economic and monetary union. HONDURAS: BENJAMIN VILLANUEVA Governor of the Bank (On behalf of the countries of Latin America, Spain, and the Philippines) It is a great honor for me to address this meeting on behalf of Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, Ecuador, El Salvador, Spain, the Philippines, Guatemala, Guyana, Haiti, Mexico, Nicaragua, Panama, Paraguay, Peru, the Dominican Republic, Suriname, Trinidad and Tobago, Uruguay, Venezuela, and my own country, Honduras, at the dawn of a new decade in which the governments of our countries, firmly resolved to make their mark on history, have already undertaken, within a democratic frame- work, profound economic and social changes. The countries of Latin America are facing, with ever greater prospects of success, a series of challenges, although the international environment is still totally unfavorable. The first great challenge is to restore the GDP per capita that Latin America lost over the last decade. The current state of things is such that we have to run fast merely in order to stand still. The second challenge is how to deal with the inevitable social costs of adjust- ment. The third is to reverse the process whereby Latin America has be- come a persistent net exporter of capital and to find ways to service an external debt that requires ever larger external transfers of resources. The concerns of the Latin American countries are still almost the same as those we described last year, with the further difficulty that a new inter- national situation, of extreme gravity for some of our countries, is devel- oping as a result of the political and military conflicts in the Middle East. Therefore I would like to retrace the proposals that Latin America made in this forum last year, so that we can identify areas in which progress has been made, the obstacles still in front of us, and the new actions that we must take in light of the latest developments in the world economy. Maintaining a policy of constant extenal transfers of funds entails a com- pounding of the sacrifices and uncertainties of the 1980s. The most signifi- cant negative feature of recent years, apart from the stagnation and high inflation of the past decade, is this massive external transfer of funds. In- deed, as the distinguished Governor for Brazil noted, since the beginning of the debt crisis, Latin America has transferred some $250 billion to cred- itor countries, whereas it has received only $50 billion in return, a most eloquent indication of the fact that the region has exported resources in amounts several times greater than it obtained through the Alliance for Progress or than were involved in the Marshall Plan. We have still not found 91 a concrete solution to this basic problem and we must do so as a matter of urgency. We cannot allow the economic agenda for the 1990s to continue being obstructed by the external debt problem, thereby absorbing energies in bilateral and multilateral forums which ought to be devoted to tackling the problems of the future, rather than focused on the negative inheritance of the past. The governments of the industrial countries and the multilateral institutions that they largely control must playa much more active role in approaching the debt question as a real problem of international develop- ment and an essential issue in international public policy. In recent years there has been a significant decline in net financial flows both from the International Monetary Fund and the World Bank. As a result, we have already proposed that the role of both institutions should be reconsidered, particularly in light of the serious crisis that we foresee in the 1990s. The response we have received to date is that conditionality in both organizations has been expanded and strengthened and growing efforts are being made to increase their influence on the process of national eco- nomic policy formulation and implementation. On previous occasions we observed that, where Latin America is con- cerned, the performance of the multilateral organizations was proving to be inappropriate for the new reality of democratic societies in which the elected congresses of representatives of the people now playa much more significant role in the definition of national policies. In our view, the Bretton Woods institutions must urgently develop a more positive approach designed to provide effective support for the economic efforts made by member coun- tries, and according to priorities defined by these countries themselves rather than by priorities that aim to resolve the problems of those institu- tions. We continue to stress that new themes, such as the environment, the role of women in development, a renewed concern for social issues, and espe- cially the fight against poverty, ought to provide new opportunities for a positive approach in the 1990s. An examination of the adjustment programs of the various countries on whose behalf I am speaking today, including my own country, Honduras, which is currently engaged in a comprehensive program of structural eco- nomic reorganization, reveals a common emphasis on restoring domestic and external financial stability through the reduction of imbalances in the public finances and exchange rate adjustment. At the same time the role of the state is being redefined through the privatization of various activities which, once transferred to the private sector, can increase productivity and raise the international competitiveness of our countries. A key issue on the agenda for the 1990s is how the benefits of growth are to be distributed. The urgent need in our countries to find rapid solutions to short-term problems generated by financial imbalances frequently results 92 in the impact of adjustment policies on income distribution receiving less than due attention, although in general such policies have greatly reinforced social inequity. To mitigate this impact on the most vulnerable social sectors, targeted social programs have been designed which, through income supplements and by creating temporary and permanent employment opportunities, have somewhat reduced the costs of adjustment. It is nonetheless generally rec- ognized that such programs are marginal in nature, and their effects cannot solve the prolems of millions of Latin Americans who are still living on incomes that put them below the poverty line. Unquestionably, bolder mea- sures are required in order to deal with this issue effectively in a broader context of economic and social development programs. In the short and medium term, adjustment is imposing major sacrifices on our populations and is sharpening social and political tensions. While we firmly believe that the adjustment process is necessary to alleviate eco- nomic problems, it is not sufficient if the necessary ingredients of external debt relief and greater net flows of external funds are not forthcoming. The dead weight of external debt service on the public finances has increased the costs of adjustment, in that the scarce resources required for develop- ment have to be applied to servicing the external debt, as the first step in the enormous task of restoring our relations with the international financial community. Notwithstanding the progress made in the negotiations on financial pro- grams in some countries in the region, flows of external funds to Latin America are still insufficient, particularly when it is borne in mind that the greater part of the external financing obtained has taken the form of the involuntary accumulation of arrears. Given this situation, we must express our concern about the World Bank's position regarding the discontinuation of global credit lines. It is apparent that such programs have represented the only multilateral financing window for the private sector; the withdrawal of these funds would be a severe blow for the Latin American economies which, apart from having no alternative sources of funds, are designing their economic policies around the mobili- zation of resources for the private sector. The International Finance Corporation has a significant proportion of its portfolio in Latin America. We therefore regard it as extremely important that agreement on its capital increase is reached before the end of this year. This would be a positive step that would partly offset the ongoing external transfers of resources. We welcome the reforms introduced by some industrial countries as re- gards the restructuring of the external debt. However, at the present junc- ture, the countries of Latin America are in favor of a global strategy that includes relief not merely on debts to the commercial banks and bilateral official organizations, but also debts to the multilateral financial agencies. 93 We therefore support in their entirety the conclusions of the Group of Twenty-Four regarding the debt strategy and the role that the Bretton Woods institutions ought to play at the present time. We see a clear need to increase organized multilateral cooperation. Although some progress has been made along the right lines, we are convinced that much remains to be done. Immediate action must be taken to alleviate the impact of the Gulf crisis on the developing countries. We believe that there is a need for in- creased access to IMF and World Bank resources, for expansion of the compensatory financing facility, and for broader access to, and coverage by, the concessional financing windows of both institutions. Given the present situation it is clear that new official initiatives are required. We therefore congratulate the Government of the United States for its initiative on behalf of the Americas, which we trust will be translated into concrete actions in the short term, and the Governments of the United Kingdom and the Netherlands for their recent proposals regarding the of- ficial debts of low-income countries. We believe, however, that these initia- tives should be extended also to the severely indebted middle-income coun- tries, which will only be able to resume their development process if they receive support in the form of partial cancellation of their debts and addi- tional resources on concessional terms. We are also gratified by the decision of the Government of Japan to allocate part of its trade surplus to a parallel fund for debt reduction operations, a precedent that ought to be followed by other governments. I would like to take this opportunity to raise certain questions which, while vital for Latin America in general, are even more urgent for the countries of Central America in the present international economic context. The natural desire for integration of our economies is again being pursued with renewed vigor. We regard integration as an important instrument that will enable us to exploit our limited resources, but we also see it as an effective means of securing new and dynamic links with the international economy. Opening our economies, strengthening our vocation as exporters, and pursuing economic liberalization are not necessarily incompatible with the construction of complementary production systems that can generate comparative advantages through efficient utilization of resources at the re- gional level. The Antigua Declaration issued by the presidents of the Central Ameri- can nations last June, and the intensity with which these presidents have been working, indicate the political desire of peoples and governments to achieve peace and to embark on major political reforms. Although there is still a long way to go, we have made significant progress in strengthening and consolidating the democratic process. At the present time all the coun- tries in Central America have democratically elected governments and to a large extent armed conflict has ceased. These are clear signs of the signifi- 94 cant progress made in strengthening citizens' rights, establishing the legiti- macy of state authority, and pacifying the region, which are necessary con- ditions for attaining new levels of development. Central America has now reached a particularly delicate and sensitive stage. The fragile social and political structure of our economies is seriously threatened by the impact of the increase in oil prices on our already pre- carious balance of payments situation. We have projected that paying these new prices would increase our already very heavy external debt burden by the equivalent of somewhat more than 9 percent of our export earnings. The Central American countries wish to call the attention of this important multilateral gathering to the paradoxical situation in which we find our- selves. On the one hand, the absolute amount of our debt is small in relation to the sums owed by the large debtors and to the volumes of funds handled by the international financial system, but, on the other hand, the normal financial ratios are higher in relative terms than for most of the countries in Latin America. It should furthermore be borne in mind that in Central America most of our commitments are either bilateral or to multilateral organizations. These are precisely the areas in which the least progress has been made in alleviating the external debt situation .... . . . The experience of the Central American countries with the Bretton Woods institutions indicates that the role of the latter is to provide enhanced and timely assistance to our countries, and not to demarcate areas of influ- ence, seek uniformity in economic policy advice or, still less, exert coordi- nated pressure on our countries. The Central American countries join the rest of Latin America in opposing the three kinds of cross-conditionality that are a continuing feature of the operations of these institutions. Given current world economic conditions and the social situation in Latin America in particular, we should put aside any strengthening of conditionality and concentrate instead on far more positive approaches that can truly solve the basic problems facing our economies. We are convinced that the question of arrears to the Bretton Woods institutions is merely one manifestation of a much larger problem of external indebtedness and production structures which must be tackled in its broader context. In this new phase we hope to have the firm support of all those present here, since it is now that we need it most if we are not to give up our legitimate aspirations. We wish to express our total support for the initiatives proposed by the Regional Conference on External Debt sponsored by the Permanent Sec- retariat of the Latin American Economic System in June 1990 for solving the external debt problem, based on the premise that no remedy can be found that does not incorporate a substantial reduction in principal and interest and does not drastically reduce external transfers of funds. We are sure that these proposals, strengthened by the official initiatives now cir- 95 culating, will be accepted by the international financial community. All our efforts to transform our economies will be useless if we cannot achieve a consensus on the part of the international financial community to provide the external resources our development requires. We must stress the importance of reaching agreement in the Uruguay Round to further reduce the obstacles to international trade, establish rules and discipline in trade matters for the future and incorporate in the multi- lateral trade system those areas which to a large extent have been excluded from it. Finally, I would like to appeal to all those present, who represent the core around which our hopes for the economic and social development of our peoples revolve, that we boldly face the challenges of the future to which the new economic thinking of the 1990s is leading us, and that we include in this thinking innovative, constructive and realistic ideas that will resolve not only the debt problem but also the short-term and structural problems of poverty, the environment, and the lack of foreign exchange to recover the real income lost over the past decade; and, even more important, to confront the crises now facing the international economy. Before ending, I would like to join in congratulating the Czech and Slovak Federal Republic, Bulgaria and Namibia on becoming new members of the Bretton Woods institutions. We hope to be able to extend the same welcome in the near future to Switzerland and Mongolia. INDIA: MADHU DANDAVATE Governor of the Fund and Bank At the outset I would like to welcome Bulgaria, the Czech and Slovak Federal Republic, and Namibia as new members, and special invitees from the U.S.S.R. As we enter the last decade of the twentieth century, the world economy is at a difficult juncture. There were signs of fatigue at the end of the 1980s as economic growth slowed down. The recent developments in the Middle East, which have introduced a serious element of uncertainty into the situ- ation, are bound to accentuate the problems in the industrial countries and even more so in the developing world. The implications and consequences for the developing world, particularly the oil importing developing countries, would be far reaching. The crisis will increase import bills, reduce workers' remittances and affect exports to the Middle East. In addition to the economic costs of evacuation and re- habilitation, the human cost in terms of hardship imposed on migrant work- ers would be enormous. Further, the economic slowdown in the industrial countries would have an adverse effect on export prospects, and higher interest rates would increase the burden of debt servicing. Taken together, 96 these factors would dampen growth and fuel inflation, thereby affecting the living conditions of millions in the developing countries. The task before us is twofold. In the short term, we have to adopt im- mediate measures which would minimize the economic and social costs of adjustment for people and countries who can afford it least. In the medium term, we must endeavor to return to the path of sustained growth and price stability in the pursuit of equity and justice in international economic rela- tions. It was only right that both the Development Committee and the Interim Committee devoted a substantial part of their deliberations to the task of devising a proper international response to the immediate crisis. I was also happy to hear from President Con able and Managing Director Camdes sus of the measures that both their premier multilateral institutions propose to take in order to respond effectively to the need for additional financing. We strongly support the measures outlined by Mr. Con able to enhance the Bank's contribution to project financing and formulation of other measures to increase the flow of world Bank assistance to developing countries. As a quick response is essential, I hope that particular attention will also be given by the Bank management to simplifying procedures for procurement and for disbursement. ... . . . In the medium term, the importance of a transfer of resources and its far-reaching implications for the world economy cannot be stressed enough. This issue, already of critical importance, has assumed even greater significance in the light of recent events. We are of the view that this issue should once again become the focal point of deliberations in the multilateral financial institutions. For any reasonable international effort in this area, it is necessary to find ways and means to halt and reverse the recent negative trend in international resource transfers. Our mandate must be to ensure transfer of real resources to developing countries; we seem to be accomplishing quite the opposite. The present trends have to be reversed. The fundamental objective of development is the removal of mass poverty. Experience shows that poverty reduction cannot be tackled in isolation. For any meaningful and durable assault on poverty, an integrated development strategy is essential. We need growth, but we also need programs which address directly the problem of poverty and unemployment. This is because the backlog of unemployment is so large that economic growth, by itself. cannot suffice to solve the problems within an acceptable time frame. There is evidence of gains made in some productive sectors being eroded by losses in terms of trade. There is also evidence of the process of development and poverty alleviation being stalled due to a sluggish supply response because of infrastructure bottlenecks. I do not wish to take up more of your time in elaborating on these issues, which have been discussed at length in the Development Committee. I 97 would, however, like to make a few suggestions on the role of the World Bank Group in poverty alleviation. First, it is absolutely essential that the concessional proportion of the World Bank Group's assistance is increased substantially in the years to come, both through expansion of IDA resources as well as through insti- tution of a new interest subsidy mechanism. It is self-evident that poverty programs, at the initial stages, cannot be financed at market rates of inter- est. Second, the share of the Bank Group's lending, particularly through its concessional window, should be increasingly devoted to direct poverty alle- viation programs. Third, the procurement and disbursement procedures should be revised to respond to decentralized and dispersed programs where the unit of ex- penditure in each location is relatively small. Fourth, in terms of expertise and manpower planning, the Bank would need to pay greater attention to developing specialization in areas relevant to poverty alleviation. Fifth, the appraisal procedures would also need to be reviewed to respond more effectively to poverty alleviation programs where the benefits in finan- cial terms may not be as easily quantifiable as in traditional Bank-financed projects. We share fully the global concerns about the environment. In fact, envi- ronmental issues are not only an important concern of the Government in my country, but involve a large number of voluntary organizations and people at the grassroots level. We welcome the progress made toward establishment of the Global En- vironment Facility. We are glad that it has been recognized that the funding for this facility must be both genuinely additional and concessional. In fact, it would be more appropriate if these funds were to be passed on as an outright grant to facilitate adoption of a program for safeguarding our com- mon environmental heritage. Coming to issues concerning the international monetary system, we must recognize that the global context is one of dynamic change. Our responses should not, therefore, spring from beliefs which do not take adequate ac- count of reality. The specificities in time and space, the diversity of economic conditions, the different stages of development, and the imperatives of pro- tection of the environment require a qualitatively different response from the one we have given so far and which has resulted in periodic eruptions of disorder in the world economy. The challenge has to be met squarely by revitalizing the whole concept and the institutional structure of international cooperation. Unilateral or bilateral efforts to reshape the world should give way to a genuinely coop- erative effort. Neither unipolar nor tripolar arrangements will ensure a smooth and orderly growth of a multipolar world economy. . 98 · .. We have many challenges to face. The international community has to respond speedily and decisively in order to lay the foundation for a stable, sustained, and equitable growth in the world economy. Those of us who come from a developing world menaced by challenges like poverty have no attraction for a world which continues to be divided into the rich and the poor. Let us endeavor to ensure that through peoples' involvement and resources and cooperation of the multilateral financial institutions, our cherished dream of building one world without poverty and ignorance is accomplished. INDONESIA: J. B. SUMARLIN Governor of the Fund and Bank As I reviewed the data on global trends at the beginning of August, I came to the same conclusion as that with which I opened my remarks a year ago. On that occasion, I noted that "the prospects for the world economic situation are a little less bright, but basically the same as those we faced a year ago." Developments over the intervening year have more or less vali- dated that expectation. Unfortunately, the sudden eruption of the crisis in the Persian Gulf calls into question even those weak expectations. Uncer- tainty has increased sharply. Clearly, the ensuing military buildup and the need to meet the urgent needs of the refugees flowing out of the area will give rise to a significant diversion of the world's resources into nonproductive uses. The magnitude and duration of these claims on resources can only be guessed at for the moment, but already that diversion is large. A tabulation in the New York Times of last week already identifies ap- proximately $20 billion in pledges of financial support from various national governments and the European Community. To figures like this must be added the additional resources that will be needed for extra economic as- sistance to countries adversely affected by the embargo of Iraq and higher oil prices. Currently, resources on the order of $7 billion or $8 billion are being discussed for this purpose, with the Bank and the Fund playing a central role. Prudent planning must assume that the Gulf crisis will reduce global economic prospects. The pace at which the roles of important participants in the world econ- omy are changing has quickened since we last met. To the changing role of Japan and the newly industrializing economies and Europe's further inte- gration, which were noted a year ago, must now be added the wholly un- foreseeable implications of the changes in Eastern Europe and the U.S.S.R. German reunification and the imminent integration of several Eastern Eu- ropean countries into the global market economy also contribute to the uncertainties of future developments. Against the background of these uncertainties now facing the global econ- 99 omy there are a number of issues that I believe require our careful attention. Among these I would list the developments in the international monetary and financial system, developments in the global trading system, the contin- ued problems of the heavily indebted developing countries, the integration of Eastern Europe into the market system, the ultimate impact of the Gulf crisis, the persistent problem of widespread poverty, and the protection of the global environment. Let me say a few words on each of these topics. The world's monetary and financial system has shown impressive ability over the last two decades to weather severe pressures. Nevertheless, un- healthy fiscal imbalances persist and policy coordination among the major economies is still inadequate. Even before the impact of higher oil prices there was mounting evidence that inflationary pressures were on the rise. Moreover, today the system is faced with challenges that will put its strength to the test anew. . . . ... The current exogenous shocks such as the Gulf crisis, the costs of German reunification, and the rehabilitation of Eastern Europe's econom- ies, come at a time when the soundness of major segments of the financial system is called into question by rising levels of non performing loans and inadequate capitalization. The high cost, and the impact on confidence, of dealing with such problems as those of the savings and loan industry in the United States, the impact of weak real estate markets in a number of important economies, and the rising default rate of so-called junk bonds are all placing further strains not only on the banking system but also on insurance companies and pension funds. It is a measure of the seriousness of these developments that the major credit rating organizations are pro- gressively downgrading the securities of major financial institutions; re- cently, this has even included the major banks in Japan, now the leading financier of the world economy. Perhaps more fundamental, the weakness of the worldwide savings per- formance in the face of increased demands for finance from expanding economic activity and trade complicates the fight against inflation. Inade- quate levels of savings also make the efforts to strengthen the capital base of the financial system more difficult. It is to be hoped that fiscal policies will increasingly be designed to encourage higher levels of savings consistent with the demand for finance. It is crucial to the future health of the world economy that the larger trade groupings-Europe post-1992, possibly enlarged by part of Eastern Europe in the foreseeable future, North America, perhaps extended to the entire Western Hemisphere, along with Japan-become outward-looking, open participants in world trade, not self-sufficient blocs of protectionism. Which way these blocs go-expanded trade or greater protection-will de- pend to an important degree upon the outcome of the Uruguay Round. Among the most important unresolved issues still facing the negotiators in those discussions are the reduction of non tariff barriers represented by 100 the Multifiber Arrangement (MFA) and the pervasive subsidies and barriers that characterize trade in agricultural products. Unless the issues now cov- ered by the MFA can be rolled into the provisions of the GAIT and agri- cultural protectionism can be significantly reduced-especially as applied to tropical products of importance to many developing countries-we place expanding world trade and development at risk. Moreover, failure on this score can complicate the role of the Fund in prescribing sound adjustment programs for countries in need of such programs. Clearly, barriers to trade in agricultural products and labor-intensive manufactures could be expected to close off many benefits from sound adjustment policies. We recognize the importance of bringing services within the scope of a more liberal trading system and the case for protection of intellectual prop- erty rights. However, we feel strongly that agreement on these issues should not be linked to a resolution of the issues in commodity trade. All major areas should be dealt with on their merits or else there will be serious risk that satisfactory results will elude us in all key areas. Present readings indicate that one cannot be fully confident that those negotiations will have a constructive and trade-expanding conclusion. We must all try to reassert our political will to achieve the desired outcome of those discussions. The empirical evidence on the welfare gains that would accrue to all parties from significant liberalization of trade is now over- whelming. Such gains could go a long way toward redressing many of the problems of debt and development that currently seem so daunting. Unfortunately, many developing countries are still laboring under unre- solved debt burdens that are sharply limiting their efforts to restructure and resume growth. There have been more imaginative initiatives and there has been some access to new money for a few countries previously denied access to the markets. No new proposal, however, has had a significant impact measured against the total problem, and access to new money has been quite sporadic at best. Much satisfaction is expressed that the international financial system has weathered the impact of the debt crisis on the banking system's capital structure. This, of course, is good. Any significant collapse among the institutions of the banking system would have very undesirable repercus- sions extending far beyond the debt issue itself. This point notwithstanding, it is important to point out that the ability of the banking system to cope with the impact upon itself of the debt problem still leaves the debtor countries in an extremely unsatisfactory situation. It must also be noted that, in quantitative terms, other threats to the financial system loom as large as or larger than does developing country debt. An increasing number of the debtor countries are adopting adjustment programs based on sounder economic principles. Yet their problem shows discouragingly little improvement. The debt-servicing burden is com- pounded by falling terms of trade, an unacceptable level of nontariff and 101 tariff barriers to their trade, and now, for the majority of these economies, the impact of sharply higher energy prices. A satisfactory solution to the debt crisis will entail resolution of all these issues. Finally, I feel compelled to repeat a point I made last year: a comprehen- sive solution to the debt problem should include facilities to assist the heavily indebted but performing countries. They have been able to continue to honor their debts through sacrifice on their part and by adopting sound adjustment policies. If they are "forgotten" in the provision of facilities and reduction of debt, it would reflect ill on the prescription of sound adjustment policies and reduce the creditability of the advice recommending such pol- icies. Politically, one can only welcome the political changes that have swept through Eastern Europe and the U.S.S.R. The concomitant rapprochement between the super powers can be expected to bring many benefits to the world community-economic as well as political. Nevertheless, prudence requires a recognition that the transformation in individual countries will be difficult and requires a careful consideration of possible negative effects from these developments, at least in the shortrun. Politically, while a desire for change seems to be almost universal through- out Eastern Europe and the U.S.S.R., there are very divisive attitudes as to how to go about reform in each country. Debates about the specifics of political decentralization and the means of achieving private ownership of the means of production are already heated in several countries. Historical ethnic and national feelings should not be allowed to give rise to civil turmoil or strife within or between the countries of Eastern Europe. Economically, restructuring the economies of Eastern Europe is likely to require heavy infusions of capital, most of which will need to come from outside the region. Thus, a new and sizable claim on international financial resources has been created that will compete with both the investment needs of the industrial countries and the development and debt alleviation needs of the developing countries. Orderly evolution of the world economy will require careful and equitable balancing of these competing claims. Moreover, to be successful in meeting their economic goals, the countries of Eastern Europe will need to greatly expand their international trade. While this creates opportunities for their potential trading partners, it also requires an increasingly open and liberal international trading system. Thus, Eastern Europe, as well as the developing countries, requires success in the Uruguay Round negotiations. The recent decision of the COMECON coun- tries to conduct their future trade in hard currencies will have to be accom- modated within the available world liquidity. This could place yet another strain on international liquidity. Speaking as an oil exporter and as a member of OPEC, let me say that my country is not at all happy about current oil price developments. We do not welcome the present high level of prices. First, they are based more on speculation and political accident than on market factors. Therefore they 102 are an unsound basis upon which to make business decisions in this sector. Second, they are likely to have undesirable effects. While these effects are likely to be less severe than the impact of the two oil shocks of the 1970s, they may still be serious, especially the longer it takes to resolve the crisis. Abrupt price changes of the magnitude that we are witnessing can push the industrial countries toward recession, and they greatly add to the debt and trade problems of the vast majority of the developing countries. While a few developing countries, 11 according to the World Bank, will benefit from higher oil revenues, all of the remaining developing countries-a far higher number-will suffer adverse effects. Moreover, the impact will be larger for them than it was in the 1970s, since the developing countries now account for a higher share of oil consumption-28 percent now compared with 18 percent in 1973. It must also be noted that the continuance of prices at their current level for any length of time can give rise to disruptive international flows of funds at a time when the world's financial system is already stretched by inade- quate capitalization of financial institutions and increasing failures in im- portant segments of the system. Recycling petro-dollars may be more dif- ficult for an already weakened financial system still dealing with the debt implications of the last round of recycling. Finally, prices that are too high can lead to long-term fuel choice and consumer investment decisions that are not in the interests of the oil pro- ducers. Unfortunately, the crisis in the Persian Gulf that has led to these developments looks less and less like a flash in the pan. One can only hope that good sense on the part of all parties and a firm political will on the part of the international community will produce a resolution of the crisis .... . . . I welcome the Fund's and the Bank's response, which increases the flexibility of their facilities in order to meet the needs of member countries arising from the Gulf crisis. The main continuing challenge will be to find new modalities that will allow both the Fund and the Bank to play an effective role as new developments require new actions. We are pleased to note the increasing attention and resources that the World Bank is giving to the twin problems of poverty and environmental protection. Dealing effectively with both of these problems is fundamental to improving the quality of life for all our people, and that is the ultimate development goal. Last year, I noted my Government's approval of the increased emphasis on the environment that actions of the World Bank had reflected. It is gratifying to note that in the year since then the Bank's efforts in these two areas have expanded, and it seems to us to have become more effective. In closing, let me again underscore the fact that seldom in the life of these two organizations have opportunities and challenges been mixed to such a high degree. The winding down of the cold War, the opening up of Eastern Europe, the reunification of Germany, and more recently the revitalization 103 of the United Nations and what we hope is a significant breakthrough on the Cambodian issue all auger well for the future. But on the other side of the ledger, the Gulf crisis, strains in the international financial system, the continuing debt burden, and potential deterioration of the global trading system are important factors promising trouble in the future, if we fail to address them effectively. Both care and imagination will be necessary in our deliberations and our actions. ISLAMIC REPUBLIC OF IRAN: MOHSEN NOURBAKHSH Governor of the Bank "0' You men! Surely, We have created you of a male and a female, and made you tribes and families that you may know each other; surely the most honorable of you with Allah is the one among you most careful (of his duty); surely Allah is Knowing, Aware." (Holy Our'an, Chapter XLIX, Verse XIII) At the outset, I wish to express my appreciation to the organizers of these joint Annual Meetings for their efforts and hope that these important gath- erings will effectively lead to a lasting solution of the existing global prob- lems. I also welcome Namibia, Bulgaria, and the Czech and Slovak Federal Republic, who are attending these meetings for the first time as the new members of these institutions, and wish them success in their development efforts. We are on the brink of a new decade marked by profound developments and challenges for the international community, stemming from greater regional integration, economic and political unification, and the march to- ward greater market orientation. The lessons drawn from our experience of the past decade should form an appropriate basis for our policies and strategies of the future. Experience has demonstrated that without effective international cooperation, a lasting solution to the many problems and challenges that confront the world today will be as elusive as ever. Developing and developed countries should work together in a spirit of international cooperation in order to enhance global development and avoid economic crises. The Persian Gulf crisis that has overshadowed the recent events has dif- ferent dimensions, one of which is the developments in the international oil market that are going to raise the import bills of many oil consuming coun- tries, including the developing nations. While we fully sympathize and share these concerns, based on past experience, the temporary and reversible nature of such developments should be noted, adding to the uncertainty that surrounds the future trend of the international oil market. As far as we are concerned, a stable international oil market will be beneficial for both 104 the oil producers and consumers. To achieve stability, an effective and mean- ingful cooperation between consumers and producers is of utmost impor- tance. To this end, the industrial countries are expected not only to refrain from further increasing their prevailing high levels of strategic oil reserves but also to use their current reserves to relieve the current pressure on the international oil market and to restore market stability. For many oil producing countries in the region, including the Islamic Republic of Iran, this crisis has imposed additional costs relating to the necessity of taking defensive precautionary measures and the costs involved in the settlement of refugees. Tens of thousands of refugees have fled Kuwait and are now settled in the various provinces of Iran, where the reconstruc- tion process had already started, thus disrupting the reconstruction opera- tions. It is unfortunate to note that, shortly after the beginning of the crisis, the price of the industrial countries' manufacturing exports has risen, re- sulting in erosion of any increase in the oil export earnings of oil producers and fueling global inflation. Turning to the world economic situation, 1990 is the second consecutive year in which the global economic growth slowed down, especially in the developing countries. Economic growth in these countries will fall to 2.4 percent in 1990, and, considering their population growth, their per capita income will experience a real decrease. The global slowdown in economic growth was accompanied by inflationary expectations and increased interest rates in the industrial countries, with significant negative effects on the Third World. The growth of world trade, an important factor in economic development, slowed down in 1989 and is expected to fall further during 1990 and 1991. Developing countries' terms of trade deteriorated during the past decade, with adverse effects on their economies. Concerning the debt problem, the rising stock of external debt, as well as the heavy debt burden, significantly contribute to intense poverty and eco- nomic problems in many developing countries. Although recent interna- tional measures supported by the Fund and the Bank have somewhat alle- viated the debt burden of the indebted developing countries, the progress achieved so far is quite limited .... . . . The industrial countries, commensurate with the greater size of their economies, should contribute significantly to enhance global savings and economic growth, and reduce interest rates as well as inflation. Needless to say, the developing countries will also continue with the necessary adjust- ments and policy reforms to enhance savings, attract investments, and re- store normal international financial relations. The incidence of poverty has increased in many developing countries of the world during the past decade, so much so that a third of the population of the developing countries-more than 1 billion persons-now live in con- ditions of poverty. Poverty alleviation, which is now a focal issue on the 105 agenda of international development organizations, cannot come about while there are negative transfers of resources from the developing coun- tries. In fact, effective alleviation of poverty in the wOrld'requires greater financial support by donor countries, as well as multilateral development institutions, through greater debt relief, including debt cancellation and the granting of highly concessional financial assistance. I shall now briefly review the economic developments in the Islamic Re- public of Iran over the past 12 months. Upon victory of the Islamic Revo- lution in 1979 followed by the outbreak of the imposed war, most sectors of the economy faced recession, and production fell considerably to the extent that the economy experienced negative GDP growth for a number of years. However, in 1989, upon the adoption and implementation of new economic policies by the Government, the rate of growth of the GDP turned positive. The preliminary estimates and projections indicate that, based on im- proved economic prospects, the GDP will increase significantly in 1990 compared with 1989. The industrial sector has experienced marked expan- sion, and gross capital formation and investment volumes have been within the planned targets. New economic policies resulted in an increase of 52 percent in government revenues in 1989, which is about twice the figure projected in the Five-Year Economic Development Plan. The budget deficit in 1989 was halved compared with the preceding year, while most of the development projects have received adequate funding. According to the reports prepared by the Fund consultation mission that visited the Islamic Republic of Iran in February 1990, the budget deficit was contained to between 4 and 8 percent of GDP during most of the war years, a remarkable figure compared with those countries that have not even been involved in a war. The budget deficit is expected to be limited to 4 percent of the GDP in the current year. The report also adds that the defense budget increased by less than 4 percent annually during the 1980s, when the war was still raging. The new economic policies in Iran aim to increasingly revitalize the var- ious economic sectors, reduce restrictions, enhance people's participation in economic activities, sell government-owned shares in various state com- panies and institutions to the public, activate the stock market, establish free trade and industrial zones, and engage in joint investments with foreign firms. Considerable progress was made during the past year in further de- regulating the foreign exchange and trade system and reforming the mone- tary and banking sectors. In this connection, new exchange rates reflecting economic fundamentals were announced, and, in the area of banking, higher rates of returns on bank deposits, based on Islamic modalities, were introduced. It is noteworthy that through implementation of the First Five-Year De- velopment Plan of the Islamic Republic of Iran, the budget deficit is ex- pected to be eliminated, inflation brought under control, and distribution 106 of income improved toward greater equity. Government revenues will in- crease through tax reform, and dependency on oil exports will ease. Improved economic conditions have set the stage for continued expansion. Support and participation of our people in the task of development is en- couraging. During eight years of the war, our people accepted hardship and showed great sacrifice and dedication, contributing significantly toward the cost of the war. As a result, our country relied on its own domestic resources and did not resort to foreign borrowing to conduct the war. These prudent financial policies, together with public support and enthusiasm, have now set the stage for our reconstruction drive. Finally, the recent earthquake that occurred in the north of Iran inflicted heavy human casualties, as well as significant material damages. However, through public participation and government efforts, reconstruction opera- tions have been under way. Meanwhile, I take this opportunity to express our gratitude to all those countries that rendered humanitarian assistance to the victims of this earthquake. IRAQ: ABDUL MONEIM OTHMAN Temporary Alternate Governor of the Fund and Bank It should be quite obvious that what is going on in our region goes well beyond being a dispute over ordinary economic and border matters. That is partly why it was not originally the intention of the Iraqi delegation to make a statement at these Meetings. Of course, ordinary economic and political matters cannot be easily disentangled, and we believe it was entirely appropriate for these Meetings to address issues relating to the economic impact of what has become known as the Gulf crisis. Iraq-an original Bretton Woods signatory-indeed welcomes the consideration that is being given by the Fund and the World Bank to the introduction of adaptations in their facilities and lending policies, with a view to ameliorating the impact of the crisis on the economies of a large portion of the membership. Unfor- tunately, however, some of the references to the recent developments in the Gulf that have been made at these meetings involved, in our view, a great deal of misrepresentation and downright distortion. Iraq has, therefore, found it necessary to have its firmly held views on the Gulf question reiter- ated. What has taken place on August 8, 1990 is nothing but a reintegration into Iraq of a dear part of it that had for long been artificially and unlawfully separated from its motherland through deliberate colonial design and ma- nipulation. Let there be no mistake about this. Iraq's boundaries extend from the town of Zakho in the north to the Gulf in the south, and the Iraqi Government is the only legitimate representative of this land. Indeed, a fair-minded examination of well-documented events since the latter part of the 19th century would reveal beyond any doubt that the artificial boundaries 107 that were drawn in southern Iraq, and the tireless and vicious efforts to perpetuate them, were nothing but a manifestation of a wanton desire on the part of the colonial powers to deprive Iraq-a country ancient in its civilization and rich in its heritage-from access to the waters of the Gulf, an access that it has possessed throughout history. This is an important sense in which Iraq considers the recent events in the Gulf as more than a dispute over ordinary economic and border matters. There are, no doubt, other senses in which that is so. For one thing, and this is something that is often conveniently overlooked, Iraq has been, well before the events of August 2, becoming increasingly a target for relentless attacks from quarters well-known for their extreme sensitivity to the revival of Arab nationalism. This, at least in part, explains the reaction to the events of August 2, which to say the least, was disproportionate. Indeed, it is not at all an exaggeration to suggest that it was not the events of August 2 that have led to the present crisis, but rather the disproportionate and completely unjus- tified reaction to those events. Clearly, and given its magnitude, that reaction cannot be explained in terms of apprehension about the security of oil supplies. Although access to Arab oil has become de facto considered by the West as a birthright, apprehension about the steady flow of that oil cannot explain the disproportionate reaction to the events of August 2. That reaction has to be seen for what it really is. And that is a wicked attack aimed at crippling Iraq, a country that is seen as a threat to the so-called new world order, because of the inspiration it stands to provide to countries that are guided in their aspiration to realize their full potential by home- grown values. It is indeed the homegrown "can-do" attitude in the Third World countries that is under attack. It has been said at this forum that at no point in history has the kind of isolation that is being imposed on Iraq been experienced. To this, let me say that fair-minded people everywhere know very well how the U.N. sanc- tions, which are presumed to be a gauge of that isolation, came to pass. Beyond this, let me assure you that Iraq does not feel isolated. For it sees its stance vis-a-vis the present crisis as a genuine reflection of the desire of the vast majority of the Arab people to restore their self-esteem, which the colonial powers have for centuries tried to undermine. Before closing, let me say that Iraq is fully prepared to do what it can to ameliorate the adverse impact of the present crisis on the economies of the developing world. In this regard, Iraq would reiterate its offer of free oil to developing countries that have been adversely affected by the present crisis. Iraq's offer of free oil is a serious offer and is one that indeed was made in good faith. And it is indeed most unfortunate that, like other Iraqi initiatives since the onset of the Gulf crisis, this offer has not received the attention it deserves. In fact, it should not come as a surprise that Iraq's offer is a serious and genuine one. After all, Iraq has an enviable record in extending 108 financial assistance to developing countries both within and outside the region. And it is Iraq's earnest hope that the present crisis will soon be resolved peacefully so that it can attend to the task of rebuilding its economy and resume its financial assistance to other developing countries. Finally, a lot is being said these days about the new world order. Let me say that Iraq cannot but support the emergence of a just world order that truly reflects the aspirations of people everywhere. But, it should be em- phasized that for the new world order to be really new, the world has to consist, and indeed it has to be perceived as consisting, of true partners and not of masters and obedient surrogates. IRELAND: ALBERT REYNOLDS Governor of the Fund and Bank As we reflect on the past decade, we can conclude, with good reason, that useful progress has been made in the management of the world econ- omy. Our common objective is to provide prosperity for all peoples and, to this end, we support institutions such as the International Monetary Fund and The World Bank. We must work together toward a fairer distribution of the world's resources and this implies a readiness to make compromises, to give second place at times to national interests, and to recognize that individual nations have differing priorities. It implies that the rich and the powerful will have due regard at all times to their obligations toward the poorer members of the world community. After much hesitation, a consistent program for the gradual resolution of the debt problem has been initiated. There has been a belated response to the destruction of the environment, and we have learned to appreciate the importance of proper conservation of energy resources. On the downside, we must acknowledge the uneven rates of progress and the huge inequalities that persist. The single greatest achievement of the past decade, however, is the growing appreciation of the importance of coordination in all aspects of economic and social development. World Economy Balanced economic growth is the key to progress, and the news on the world economy is reasonably good. Growth in the industrial countries has been buoyant, prices have been, in general, relatively stable, and there has been a steady increase in the volume of world trade. So far, the modest slowdown this year is not a cause of undue concern and we hope that the crisis in the Gulf area will not lead to a serious downturn. Some adjustment will probably be required but, provided we do not repeat the mistakes of the 1970s, the world economy should continue on the path of sustainable growth. Undoubtedly, a further deterioration in the present crisis could destroy this prospect. We hope that such an outcome can be avoided. 109 Inflation remains a persistent threat to the global economy, and we look to the stronger nations, in particular, to ensure that this threat is kept in check. There is reason for concern about the global adequacy of savings, particularly in view of the expected increase in demand for investment funds. It is disappointing that unemployment continues at an unacceptably high level in many countries and that there are no concerted efforts to find adequate solutions. While the problem of external imbalances has eased to some extent, it still remains a barrier to economic expansion and to continuing financial stability. Greater adjustment is needed on the part of the major surplus and deficit countries. The problem of inflation must be tackled using the widest possible range of policy instruments. Undue reliance on monetary policy will lead to an excessively high level of international interest rates. It is especially important just now not to add to the difficulties facing the world economy, when growth is already slowing down and events in the Gulf area are causing concern about the future. Undue reliance on interest rates to fight inflation can also give rise to economic imbalances across sectors. Small business enterprises and personal borrowers, particularly those with large mortgages, suffer disproportionately. High interest rates also have a devas- tating effect on the heavily indebted countries. The Uruguay Round is now in its final and most difficult phase. Our negotiators face the difficult task of achieving agreement on a package that is extensive, difficult, and ambitious. The Director-General of the GATT has wisely laid down a strict timetable to ensure that the deadline of De- cember is respected and we will honor this deadline. Although we have serious difficulties with certain aspects of the negotiations, notably agricul- ture, we see the successful completion of the negotiations as vital to the good development of the world economy in the next few years. One of the biggest challenges facing the world economy in the 1990s will be the integration of the centrally planned economies of Eastern Europe. They face a fundamental transformation over a short period. While the job of creating the proper framework for a market economy is their own re- sponsibility, they will need considerable assistance, and the International Monetary Fund and The World Bank are already at the forefront in provid- ing help. The agreement on a new European Bank for Reconstruction and Development in such a short time is a practical demonstration of what is possible where there is a consensus about the need for urgency. Debt The huge debt problem is still with us but the new initiatives of the debt strategy are working reasonably well and can be improved with experience. In most countries, the debt crisis is only a symptom of deeper economic problems. It is not enough, therefore, to manage the debt; it is essential at 110 the same time to correct the underlying economic weaknesses and distor- tions. There has been a positive international response to those heavily indebted countries who have demonstrated their commitment to implement necessary economic policies and, hopefully, this will encourage others to follow their example. I very much welcome the positive approach by the Houston summit to the debt problem and, in particular, the recognition that relief on debt of low-income countries to official creditors needs to go further than at present. The Gulf crisis and the attendant rise in oil prices has painful implications for indebted, oil importing developing countries. I would support any mea- sures which the Fund and the Bank could take to counter these adverse effects in countries that are implementing adjustment programs with Fund or Bank support. Poverty The devastating effects of poverty are all too familiar. It is depressing to see the income gap widening sharply in the developing countries and to see conspicuous waste on prestige projects in the midst of proverty. It is a sobering thought that one third of the world's population lives below the proverty line. Progress toward greater prosperity should be biased in favor of the poor. The poor countries need more generous assistance from the rest of the world and there must be, in turn, a genuine commitment from them to good management of their economies, the elimination of distor- tions, and the maintenance of a healthy climate for investment. This can be very difficult because the process of economic restructuring is often slow and uneven. We must be patient and persistent in our efforts to achieve a better distribution of the world's resources. We cannot afford to be patient, however, in the face of abject proverty and destitution which is still so widespread, and I would ask whether our ability to respond to desperate situations is sufficient. There is a genuine desire to help; it is more difficult to translate good intent into practice. Negotiations on the Ninth Replenishment of the International Develop- ment Association were brought to a conclusion in the past year, and we now have a guarantee of continuing resources for this priority activity for some years ahead. While Ireland would have supported a somewhat larger budget, we are pleased that the new arrangements will allow for continuation of the present level of activity. and we have made a supplementary contribution to ensure this. Environment Concern about environmental degradation wrought by economic progress is now entrenched in modern thinking. We have finally realized that care for the environment is important, both for its own sake and because it is 111 vital to sustainable economic progress. Indeed, some would redefine the very concept of development, in view of the pressures on the earth's re- sources. Despite the greater awareness, however, serious abuse is still a fact of life even in the developed countries. We cannot expect otherwise until we in- tegrate economics more fully into efforts to protect the environment; nor can we expect poorer countries to give high priority to the environment if we do not lead by example. Pollution knows no borders. National boundaries do not count. I welcome the initiative now being taken to establish a global environmental facility to help the poorer countries. We are fortunate in Ireland that so far we have escaped the worst effects of destruction of the environment, and the bad experiences of some other countries have alerted us to the need to be ever vigilant. European Developments It is an exciting time in Europe and European developments have domi- nated the headlines over the past year. The movement toward economic and monetary union in the European Community, the dramatic changes in Cen- tral and Eastern Europe, and the unification of Germany have released new dynamic forces which will transform the economy. There will be greater integration of European markets generally, and Europe will emerge as a much more powerful influence in the world economy. The emphasis in Europe is on the liberalization of capital movements and the removal of barriers, and this is the only way forward if the world econ- omy is to continue to develop to its true potential. The Irish Economy Events in Europe will have a big impact on the future development of the Irish economy, and we welcome the movement toward greater integration. I am happy to report steady economic growth in Ireland and an improving financial environment. Following several difficult years through the 1980s, the process of financial adjustment, begun in 1987, is continuing successfully. Inflation, expected to be in the region of 3lj4 percent this year, is low by general European standards, and the prospects for employment are getting better. As a small and totally open economy, our prosperity depends to a large degree on continuing growth in world trade and the ongoing integra- tion of national economies into the global economy. We welcome very much the efforts being made to remove barriers and to develop more open systems of trading. The International Monetary Fund and The World Bank continue to dem- onstrate a great professionalism and sense of purpose in fulfilling their mandates, and we must ensure that they have adequate resources to look ahead with confidence .... 112 · .. There are great challenges and opportunities as we move into the new decade. In managing the international economy, we have learned well from the mistakes of the past, and real progress has been made in improving coordination. There is a greater discipline than before and a willingness to tackle effectively problems such as debt accumulation and arrears which threatened the very foundations of international cooperation. There is a greater realization than before of the fact that the interests of all members are interdependent. There are still great impediments to prog- ress and sometimes too much rhetoric and too little real commitment to solving difficulties. We are very much indebted to the Fund and the Bank for their contributions to development, and we have the utmost confidence in their abilities to maintain their high standards. ISRAEL: MICHAEL BRUNO Governor of the Bank It is an honor and a privilege to address this distinguished gathering on behalf of the State of Israel. We wish to welcome Bulgaria, the Czech and Slovak Federal Republic, and Namibia to the Fund and The World Bank. The Annual Meetings of the Fund and The World Bank provide an opportunity to reflect on the pertinent problems of the world economy as well as on the common lessons of reform processes going on in individual countries. Much has been and will be said during these meetings about the issues of international economic policy, be it the need for the enhanced flow of financial resources from the developed economies to the less-developed ones, the need to keep more open and liberal trading systems, the impact of rising oil prices, or the problems of coordination among the industrial countries, which in turn determine the growth and stability of the world economy as a whole. We would like to reflect here mainly on the lessons that can be derived from both the successes and the failures of adjustment and structural change that have been going on in several semi-industrial economies. During the past decade, several countries have gone through rather ex- treme inflationary experiences, largely as a result of international crises reflecting failed responses to external shocks or mounting debt problems. External causes apart, these crises can almost always be attributed to com- mon internal roots, notably large and sustained budget deficits. Yet the nature of the inflationary process across countries and over time has varied and so has the mix of stabilization cures. Both the common features as well as the differences form an important lesson for future policy formulation. The inflationary process in some of these cases, such as Bolivia (and more recently, Yugoslavia, Poland, and, by default, also Argentina and Brazil), has reached hyperinflation at more than 50 percent per month. This process is bound to be of relatively short duration (say, no more than two 113 to three years), because it is highly explosive. Its shock cure-no gradualist approach could ever work-rests on the orthodox measures involving sharp fiscal (and monetary) reform. Cumulative recent experience has also drawn attention to the somewhat different phenomenon of high (chronic) inflation, which is a prolonged and more stable process. It may last from five to eight years and show monthly rates of, say, between 5 and 25 percent. This, for example, characterized the inflationary process in Argentina, Brazil, and Israel up to 1985 and in Mexico up to 1987. The quasi-stability of that process comes from an inher- ent inflationary inertia, which in turn is strongly tied with a high degree of indexation or accommodation of the key nominal magnitudes (wages, the exchange rate, and the monetary aggregates) to the lagged movements of prices. It is the obvious way in which an inflation-prone system attempts to protect itself from the evils of inflation, thus giving it a longer lease on life and delaying its more fundamental cure. The origin of the latter, as in the case of hyperinflation, comes from government finances. Its cure by necessity must involve the same sharp orthodox fiscal (and monetary) measures. Similarly, the very high rate of inflation makes a gradualist approach too costly, if not impossible. Yet, there is one major difference in such chronic inflation cases. When there is infla- tionary inertia, the orthodox cure, although necessary, is not sufficient in and of itself. The correction of fundamentals may not, by itself, remove inflationary inertia, as the Mexican example has shown. Supplementary direct interven- tion in the nominal process, such as a temporary synchronized freeze in wages, prices, and exchange rates, may be extremely important, because it can substantially reduce the initial cost of disinflation and thus make it socially and politically more palatable. This two-pronged approach to sta- bilization, applied to Argentina, Israel, and Brazil in 1985-86 and later on to Mexico, came to be known as the heterodox program. Two of these countries, however, Argentina and Brazil, failed to stabilize, mainly because their fundamentals were not set in place, and the two countries subsequently went into hyperinflation, which is being attacked by orthodox measures. The lesson of that experience is that the exercise of wage-price controls with insufficient, or only temporary, fiscal correction will inevitably lead to an inflationary explosion. In the other two countries, Israel in 1985 and more recently Mexico in 1988, the heterodox stabilization program has been suc- cessful, while structural adjustment is still going on. Successful adjustment inevitably involves real unemployment costs. In Israel, the cost of disinflation appeared with some delay. Two years after a seemingly costless transition from 500 to 20 percent annual inflation, the economy went into a deep two-year slump, leading to a substantial rise in unemployment during 1989. While some unanticipated events may have deepened the recession, its main cause was rooted in the slow recuperation 114 from the distortive effects of a long (1S-year) inflationary era as well as real age overshooting, excessively high initial real interest rates, and a heavy tax burden on the business sector. Since then real interest rates have come down sharply, real unit labor costs have recently started falling in the wake of rising unemployment, and output is beginning to grow again. One of the lessons seems to be that without a temporary cost in rising unemployment, it is hard to establish government creadibility in following a stable exchange rate policy immediately after the initial shock of stabilization. In contrast to Israel, Mexico's recent example shows that early awareness by a determined political leadership of the depth of the crisis-before an- nual inflation hits 200 percent-can save some of the more painful adjust- ments afterward. A more severe external crunch, motivating quick fiscal action, and a more flexible labor market, cushioning the internal shock in Mexico, have certainly helped a lot. Implementation of a bold structural adjustment program, including the privatization of state-owned enterprises and vigorous deregulation and liberalization of external trade, may explain why, in spite of relatively high real interest rates and a real appreciation, private investment and renewed growth can take place during an ongoing stabilization process. High inflation, after all, is but one manifestation of an underlying deep crisis in the real economy. Even successful stabilization of prices is in most instances no more than a necessary first step in a more protracted structural reform process, almost like anesthesia preceding the more serious real sur- gery. This is borne out in many of the more successful recent adjustment efforts. While Chile's stabilization, for example, was lengthy and painful, its very recent history is especially illuminating, since it represents a stage that has probably not yet been reached in other successful stabilization experiences. Well-functioning goods markets, a competitive real exchange rate, a restoration of basic macroeconomic balances-all of these have been conducive to a resumption of the noninflationary growth of exports, invest- ments, and GOP. The structural reform process in my own country, which was slow to come about, has very recently received an extra push. Two weeks ago, the Israeli Government decided on a series of further liberali- zation measures to open up the labor, capital, and foreign exchange mar- kets. This forms part of a market-oriented reform strategy, the need for which was reinforced by the massive influx of immigrants. At the same time, it will help prepare the economy for the new Europe of the 1990s. Recent dramatic developments in Eastern Europe have turned our inter- est in the direction of the economic reform process going on in that part of the world. It is interesting that in spite of the vast difference in structure and political-economic regime, the first adjustment stage of a deep reform process closely resembles the above shock therapy. Yugoslavia's and Po- land's reform programs are the most recent fresh examples. In spite of the institutional differences there are many lessons to be learned from the 115 Western experience and many pitfalls to be avoided. One common lesson is that a strong political leadership that credibly expresses its preference for stabilization and structural change as well as a social consensus on the key economic issues (even if divided on other political issues) are important prerequisites for the success in both Western and Eastern groups of coun- tries. Their absence explains much of the recent failures of stabilization. The structural reform in Eastern Europe poses great challenges to our way of thinking on economic policy, since neither theory nor previous ex- perience tells us how one should go about moving from a highly centralized, collective property, command economy to a decentralized, private property, market-oriented economic system. Partially liberalized markets may give the wrong signals about pertinent prices for business planning. One example of that is the irrelevance of a free-market-determined exchange rate for export planning when foreign exchange is the only means of saving in an otherwise distorted economy. In a case like this, domestic currency becomes grossly undervalued because the demand for foreign exchange is then dom- inated by portfolio investment considerations and not by the supply and demand for tradable goods. Another likely mistake is to believe that moving from a centrally con- trolled system to a market-oriented one may mean that everything, including fiscal and monetary policy instruments, should be decentralized. One of the main problems of a centrally controlled system is the existence of hidden public sector deficits originating in the quasi-fiscal, cheap credit allocation functions of central banks as well as in the collectivization of losses stem- ming from lack of financial accountability at the individual enterprise level. It is important to stress that even in the best run and most liberal market- based industrial economies, monetary and fiscal policy must always remain under very strict central control. In my own country, although it is primarily a market-oriented economy, there have been trade-union-owned as well as collectivized subsectors of the economy, which were run on the basis of a mutual guarantee and a soft budget constraint. These are now undergoing very tough and painful reform processes with an emphasis on establishing microfinancial accountability. Having to do this for the whole economy, as is the case in Eastern Europe, must be a very tall order indeed. The role of the Fund and The World Bank in promoting and monitoring the adjustment and structural change of the Eastern European countries will be central in the coming years. Another very important agent in pro- moting and financing the reform process will be the newly established Eu- ropean Bank for Reconstruction and Development, of which my country is proud to be one of the founding members. If there is one central lesson that has been learned from all recent country adjustment programs, both the failed and the more successful ones, it is the absolute necessity of supporting the internal reform with the variety of sustained, even if temporary, external 116 financing arrangements through, or with the help of, our international in- stitutions. Without these, the internal economic and social costs of adjust- ment will make the task insurmountable. One example of such need, in the context of Eastern Europe, may be the use of foreign loans to finance the reconstruction of individual enterprises in the process of liberalizing and privatizing the production and distribution systems. Another role will be to support joint ventures and foreign private investment. To sum up, based on recent experience, one can be confident that a determined and forward-looking government, if supported by internal social consensus and prudent economic support from outside, can successfully transform even the most ailing economic system. ITALY: GUIDO CARLI Governor of the Fund (on behalf of the Member States of the European Communities) Since Italy currently holds the Presidency of the Council of the European Communities, I have the honor of addressing this meeting on behalf of the member states. After enjoying an expansionary phase for eight consecutive years, the world economic climate remained quite satisfactory in the first half of this year. This outcome-which is due to both the success of the anti-inflationary monetary policies being pursued in most industrial countries and progress in structural reforms-has contributed to the establishment of the under- lying conditions needed to foster sustainable and balanced noninflationary growth in the medium term. On the positive side, it should also be noted that the pattern of growth has contributed to support internal and external adjustment. This should be given fresh impetus by the adoption of further policy measures in the countries most concerned. The Community economy is expected to remain strong during the period ahead, with the gradual completion of the internal market and German reunification. These will help to stimulate activity in other countries, thereby promoting adjustment and prolonging the expansion. The recent developments in the Middle East, if persistent, may adversely affect the outlook for growth and inflation. Meanwhile, the uncertainty of the situation has already been reflected in financial markets, and to a lesser extent in foreign exchange markets, worldwide. The new crisis in the Gulf region emphasizes the fundamental policy prescription of fighting inflation, fiscal consolidation, and structural reforms, including energy conservation required to maintain sustainable growth in the world economy over the medium term. Past experience has shown that we should accept the conse- quences for nominal incomes rather than trying to offset the adverse effects of a higher oil price level. 117 At the global level, the generation of savings adequate to fulfill the strong investment demand is a major objective. In this context, it is urgent that those countries running substantial fiscal deficits, such as th~ United States, Canada, and Italy, bring these down; and that industrial countries generally take measures aimed at fostering adequate levels of private saving. This would help to ease the burden currently borne by monetary policy and to reduce the upward pressure on world interest rates, to the particular benefit of the developing countries. At the same time, and within the constraints just mentioned, surplus countries should contribute to a further reduction of external imbalances, in particular by accelerating the pace of structural reforms. As far as inflation is concerned, the stance of monetary policies should remain prudent, in view of emerging cost pressures in a number of industrial countries and in particular the risk of escalating oil prices. It is clear from experience that the pursuit of noninflationary growth is essential to the proper functioning of the international monetary system. New perspectives and challenges are being opened up for the world econ- omy by the epochal changes which are occurring in the international eco- nomic and political system. Most of the Eastern and Central European countries are now undertaking important reforms of their economies in order to introduce market principles. Output is expected to decline in these countries in the near future but, beyond the short term, economic perfor- mance should improve significantly, with positive effects for the world as a whole, as market-based incentives, including trade at world-market prices, become more widespread. The European Community is playing a vital role in supporting the tran- sition process in Central and Eastern Europe, as demonstrated by its co- ordination of G-24 support, both technical and financial, for Poland and Hungary, which has now been extended to cover other countries in this area. The member states welcome the creation of the European Bank for Re- construction and Development, which will provide technical and financial support in close cooperation with international institutions active in this area. The Community, furthermore, agreed at the European Council meet- ing in Dublin in June to study measures of financial assistance to the Soviet Union. In order to boost sustainable growth over the longer run, structural re- forms complementing macroeconomic policies are strongly needed. The construction of the single market in the European Community will strengthen market forces and thus the technological and economic compet- itiveness of the European Community. It also demonstrates the commitment of member countries to further liberalize and deregulate their markets. In this context, a successful conclusion of the Uruguay Round would have wide-ranging favorable consequences. It is, therefore, particularly important 118 that the objectives of these negotiations, including the liberalization of financial services with a view to ensuring effective market access, are achieved within the prescribed deadlines. Major concessions will be re- quired of all parties concerned in the next few months. The newly indus- trializing economies are also urged to acknowledge their responsibilities in a world trade system managed according to the GATT principles. Other developing countries should increasingly do the same. The member countries of the European Community are now in the first stage of the process leading to economic and monetary union. Our experi- ence in the European Monetary System shows that a system of stable ex- change rates and close coordination of economic policies, based on a com- mon objective of noninflationary growth, gives valuable results in terms of the stability of the economic environment, and in particular in terms of price stability. With capital movements close to full liberalization and growing exchange rate stability, increased coordination of economic and monetary policies with a view to bringing down inflation rates to a low level in all member states will, in the context of economic and social cohesion, help to create the conditions for the successful transition to economic and monetary union. Far from being an obstacle, the economic and monetary reunification of Germany will provide fresh impetus to the integration process. In turn, European economic and monetary integration can be welfare-improving only if it takes place in the context of open markets and a strengthened economic relationship with the rest of the world. At the end of a decade of unsatisfactory results, economic perspectives for the developing world remain uncertain. Only some Asian countries have been able to take full advantage of several years of undisrupted growth of the industrial world, while a number of unfavorable factors, including a deterioration of the terms of trade, rising interest rates, and increasing debts have, in combination with unsatisfactory economic policies, hindered pros- pects in other developing countries. The cooperative debt strategy, which has recently been strengthened, is yielding encouraging results. A growing number of developing countries is now implementing strong macroeconomic and structural adjustment pro- grams, being aware that the creation of a favorable economic environment is an essential prerequisite for mobilizing domestic savings, attracting in- vestment, and stimulating the repatriation of flight capital. All industrial countries must remain strongly committed to supporting those adjustment efforts through the provision of adequate financing and the implementation of trade liberalization measures. The renewal of the Lome agreement clearly demonstrates the willingness of the Community to act positively in these areas. The forthcoming increase of IMF quotas and the earlier incease in the World Bank's capital will enable these institutions 119 to continue to meet members' requests for financial assistance and to cata- lyze assistance from other sources. The commercial banks, too, have an important role to play by responding in a timely and adequate way to debtor countries' needs. As to environmental matters, an important result was achieved last June in London, when it was agreed to set up a financial mechanism to assist developing countries in complying with their obligations under the Montreal Protocol. In this context, we strongly support the initiative of the World Bank-in cooperation with the United Nations Environment Program and the United Nations Development Program-to establish a Global Environ- mental Facility to finance pilot projects in areas of particular interest. The poorest countries, particularly the severely indebted ones in Sub- Saharan Africa, continue to depend heavily on the availability of conces- sional flows. They are benefiting from official debt reschedulings by the Paris Club under Toronto terms and from the cancellation of overseas de- velopment aid debt by an increasing number of creditor countries. They will have available the resources of the Ninth Replenishment of the International Development Association. Negotiations have also been launched for the refinancing of the World Bank's Special Program of Assistance into 1991- 93 and for the replenishment of the African and Asian Development Funds. As major contributors to these initiatives, the countries of the European Economic Community are looking forward to a timely and positive conclu- sion of the related negotiations. We also support the Paris Club's continuing review of additional options to address the specific problems of those of the poorest and the lower- middle-income countries which are highly indebted to governments and which are implementing strong adjustment programs. We also welcome the recent decision by the Paris Club as regards the lower-middle-income coun- tries to lengthen further the repayment of their debts and introduce a debt- swap option. The contribution of both the Fund and the Bank has been instrumental to the progress achieved so far in the strengthened debt strat- egy. The relevant guidelines approved by the two institutions remain valid and should be implemented prudently and with the necessary degree of flexibility. The IMF should continue to play its irreplaceable surveillance role and to support the correction of domestic and external imbalances in all member countries. In addition, the Fund and the Bank should further intensify their efforts to encourage structural reforms. The recent increase of oil prices and its consequences could be damaging to the many developing countries which are net oil importers and vulnerable at present to outside shocks. It is, therefore, important that the IMF and the World Bank stand ready to assist the countries most affected in their efforts to deal with the problems which have arisen. Furthermore, the member states of the Community are 120 studying the possibilities of assistance to certain of the countries most af- fected by the Gulf crisis. The design of economic reforms in the economies of Central and Eastern Europe will require particular attention. In this respect we welcome the Czech and Slovak Federal Republic. We also note with satisfaction the invitation given by the Houston summit to the IMF and to other interna- tional organizations for a joint study of the Soviet economy. In addition to the mandate on this subject given to the Commission by the European Council, the Community is cooperating fully with the IMF and the other organizations in these endeavors .... ITALY: GUIDO CARLI Governor of the Fund First of all, I welcome as a new old member the Czech and Slovak Federal Republic. Later in the day, Bulgaria and Namibia will also join the Bretton Woods institutions. By enlarging their geographic coverage, the world char- acter of the Fund and the Bank is enhanced, together with our common responsibility for effective international cooperation. As these meetings take place, the world situation is still imbued with the sense of epochal changes that brought about the momentous developments of the past year. These events, which indeed open a new era in modern history, are marked by the bold decisions of the Eastern and Central Eu- ropean countries and the U.S.S.R. to change radically their political and economic systems. In this context, German reunification is to be seen as the natural outcome of the long awaited removal of the artificial barriers placed between East and West. The most important developments of the last few months are the threat- ening events in the Middle East, which endanger peace and bring a sense of urgency to our meetings. The oil price hike ensuing from the Gulf crisis complicates the short-term management of the global economy and poses new difficulties to most countries bearing a heavy debt burden and to coun- tries undertaking the transition from a planned to a market economy. In facing this adverse circumstance, we can be reassured by the positive results obtained during the noninflationary cyclical expansion that spanned the past nine years. Yet, chances of success in coping with present difficulties depend to a large extent on the cooperative nature of our policy response to the Gulf crisis. Cooperation remains paramount since imbalances are still large, signs of financial fragility have appeared, and global markets make for an instant transmission of turbulence. Our past experience has taught us four policy lessons that are crucial to manage the present situation. First, all countries should allow a prompt and full adjustment of domestic energy prices. This is especially important in 121 those economies in which the presence of administered energy prices in- duces excessive energy consumption. Second, strong emphasis should be given to internal adjustment, thus avoiding an excessive reliance on external financing. In this respect, the International Monetary Fund and the World Bank will continue to play their roles both through direct provision of funds and policy advice, and by mobilizing concessional resources from donors. Third, the persistence of large international payments deficits, coupled with the increasing global scarcity of saving, calls for a resolute curtailment of fiscal imbalances in a number of countries. Fourth, an increasing degree of coordination of monetary policies is desirable in order to maintain exchange rate and financial market stability. Mindful of this, the European Commu- nity is making a strong effort to ensure the appropriate conditions for the achievement, by stages, of the Economic and Monetary Union. Synchronism, nervousness, and, to some extent, fragility have come to characterize financial and stock markets. Recently, they have been sparked by uncertainties stemming from the Gulf crisis, which requires international cooperation and the firm steering of national monetary authorities. This would consolidate our success in developing more efficient and stable finan- cial markets. The progressive deregulation has resulted in a growing integration of major offshore and domestic financial markets but has introduced new ele- ments of risk. The access to larger private capital sources, while making it easier for deficit countries to finance their external imbalances, has en- hanced the overall risk of domestic financial instability owing to changes in expectations or economic conditions abroad. The speed, magnitude, and complexity of financial transactions, today, create powerful links of a truly global nature that demand of national au- thorities a greater sense of collective responsibility and the use of appro- priate control instruments. First and foremost, monetary policy should avoid fueling an asset price inflation, which even if it does not affect the goods market in the short run, makes for a swelling bubble, whose burst may burn many. Secondly, what has been agreed internationally to preserve the stability of financial intermediaries should be reinforced and enlarged to cover as many markets as possible. The supervisory activities of the financial au- thorities should encompass bank and nonbank financial operators; interna- tional standards should be strengthened to impose limits on risk-taking and maturity transformation activities of financial operators; minimum bank capital requirements should be integrated by including market risks; and the tax treatment of financial transactions to avoid international misalloca- tions of saving flows and counterproductive tax competition remains a chal- lenging issue to be tackled someday. All this, of course, cannot but rest on the willingness of governments to 122 cooperate. Tighter international collaboration and the governments' deter- mination to frame major national problems within an international perspec- tive will strengthen competition on solid ground. Recent developments in Eastern and Central European countries have brought a unique and inspiring challenge to our institutions After almost half a century during which international, political, and economic relationships have evolved in a context of rigid separateness, a precipitous sequence of events has dismantled the artificial barriers that have prevented Eastern and Central Europe from benefiting from the eco- nomic progress experienced in the Western world. These countries are now undertaking historical changes that will have a profound beneficial impact on their economies and on the world. I want to express my complete support and encouragement for the huge efforts their governments and peoples are convincingly making. There are, indeed, no historical precedents to guide policymakers in such difficult tasks and, besides some common features, there are relevant dif- ferences among countries undertaking the reform process. However, the most recent developments in Central and Eastern European countries unveil aspects and problems of the transition process. The success so far achieved confirms the benefits of a quick stabilization of the economy, through a combination of liberalization measures and firm demand-management policies. The restoration of basic internal and external equilibria through macroeconomic management sets the stage for imple- menting structural measures. But it is becoming, now, more evident that stabilization is only the first, and perhaps the easiest, phase of the overall program. The cost of stabilization efforts could be high if the supply re- sponse, the ultimate goal of reform, is slow. Price liberalization, freer trade, and a more productivity-related system of wage fixing are the preconditions for any structural adjustment. While the progress already made is encouraging, sectoral distortions and techno- logical backwardness, which are the main limits to a prompt supply re- sponse, should be removed through courageous structural adaptations of which privatization of firms and banking reform should be the backbone. Indeed, privatization and banking reform can only succeed if implemen- ted together. The latter unaccompanied by the former would only perpetuate the accumulation of nonperforming loans in the portfolios of banks. This, in turn, would, de facto, force the central banks to keep afloat banks bur- dened by bad credit, thus endangering the effectiveness of monetary policy. On the other hand, privatization without banking reform would fail to en- sure that capital is allocated efficiently to firms, or to provide capital at all. An improved operation of the banking system, in the context of the present privatization efforts, would decisively enhance the much needed mobilization of financial resources for productive purposes and increase 123 financial saving. The legislative, regulatory, and supervisory framework re- quires strong political will and an active participation of the international financial community. I, therefore, warmly welcome the World Bank and IMF efforts in this field. Both institutions can offer a decisive contribution not only by helping to prepare comprehensive structural programs, but by fostering the concrete support of the world financial community, whose participation they can catalyze and incite. To make current efforts in Eastern and Central Europe fully successful, we need to rely on deeply felt conviction and prompt im- plementation of international cooperation. Since the inception of the strengthened debt strategy, some progress has been made in a number of countries to alleviate the external debt problem. Adjustment efforts coupled with debt relief are paying off in a number of cases and the return to market access-although limited-by a few highly indebted countries indicates that external viability appears a less elusive goal than just a few months ago. However, the large size of the debt problem continues to call for strong efforts from all parties concerned. In this context, due attention should be given to the suggestions made in the Craxi Report on Debt commissioned by the UN Secretary General. The financial situation of middle-income countries appears less uncertain after the decision taken by Paris Club creditors to consent to longer repay- ment periods and to limited swaps of official debt on a voluntary basis. However, this group of countries should continue to implement far-reaching structural reforms and comprehensive medium-term adjustment programs aimed at attracting foreign direct investments. Severely indebted low-income countries have continued to benefit from official creditor assistance, as well as from generous treatment in accordance with the Toronto terms, which are to be further reviewed by the Paris Club. Significant efforts have also been made by the Bretton Woods institutions to grant concessional credits. Still, in spite of adjustment efforts, medium- term balance of payments viability remains doubtful in a significant number of cases. To ease the official debt burden of low-income countries, a bill allowing the conversion of ODA loans into grants is under consideration by the Italian Parliament. Debt is not the only scourge: poverty and environmental degradation are not less worrying from the political, economic, and social points of view. The alleviation of poverty is an area in which the leading role of the World Bank is particularly needed. Growth plans should be promoted to intensify the access of the poor to health and education services, thus allowing them to increase their productivity and react fully to economic incentives. We also praise the Bank for the increased attention it is providing to the environmental issues within the framework of its activity. We must recognize the strong interdependence between growth and environment; in a world characterized by a high rate of depletion of nonrenewable resources, care 124 for the environment should increasingly become part of the efficient allo- cation of resources. JAPAN: RYUTARO HASHIMOTO Governor of the Fund and Bank It is a great pleasure to have the opportunity again this year to address the Forty-fifth Annual Meetings of the International Monetary Fund and the World Bank as Governor for Japan. With the global tide toward market-oriented economies, the Annual Meetings are important occasions for reviewing the tasks ahead for the world economy in the 1990s as well as for addressing the very urgent question of the economic consequences arising from the Gulf crisis in collaboration with Fund and Bank management. 1. The Gulf Crisis and the World Economy I would like first to elaborate on our measures to respond to the crisis in the Gulf, which is the most serious problem we are now faced with. The Gulf crisis is not only disrupting world peace and security, it is also casting a dark shadow over the prospects for world economic development and prosperity. Mindful of the importance of peace and stability in the Gulf region and of the restoration of international law and order, Japan announced active measures to contribute commensurate with its standing in the international community. On August 29, Japan decided to provide $1 billion in assistance for the multinational security efforts in the Gulf region, which included the provision of materials and transportation support. In addition, on Septem- ber 14, we announced that we were prepared to provide additional funds amounting to a maximum of $1 billion, paying due regard to subsequent developments in the Middle East. We are also in the process of assisting refugees waiting in Jordan and other nations to return to their home coun- tries. Moreover, Japan decided to extend economic assistance in the total amount of $2 billion to those front-line nations such as Egypt, Turkey, and Jordan which have suffered severe economic damage. Of the $2 billion, $600 million will be provided expeditiously as untied emergency commodity loans, with extremely low interest rates, to Egypt, Turkey, and Jordan to meet their urgent needs during 1990. The remaining $1.4 billion will be provided to assist those affected Middle Eastern countries in the medium term, taking into account their needs through 1991. The concrete uses for this $1.4 billion will be determined in such a manner as is consistent with the coordinated efforts in the multilateral support structures, including the Bretton Woods institutions, to assist those countries. The Fund and the Bank have extremely critical roles to play in interna- tional support for the front-line states, as well as for the non-oil-producing 125 developing countries and the Eastern European nations hard-hit by higher oil prices. The Fund and the Bank, as the dual foci of the international financial system, now are being called upon to display sufficient flexibility and adaptability in the face of this crisis .... . . . We also welcome the positive initiative being taken by the Bank in response to the crisis in the Gulf, including support measures centering on adjustment lending to the developing countries whose economies have been hard-hit by the crisis. The Bank's adjustment lending is a most effective tool not only because it promotes economic adjustment in the borrowing countries but also because its quick disbursement offers effective support flexibility. If such financing can be provided rapidly. it should also be possible for co-financing and other bilateral assistance to be made available promptly in step with the Bank's efforts. 2. The Present State of the World Economy I would like next to move on to the present state of the world economy. The world economy is performing well overall. entering the eighth year of its current expansion. We recognize that the efforts by the industrial countries for greater policy coordination and structural adjustment have contributed greatly to this process. While the industrial countries are now less affected by the rise in oil prices than they were during the first and second oil crises, the effects of these price hikes on price movements and economic growth require vigi- lance, thus mandating even greater efforts in policy management and co- operation for economic stability. For the non-oil-producing developing countries and the countries of East- ern Europe, higher oil prices are expected to worsen their trade balances and foreign currency reserve positions. It is thus imperative that even greater care be taken in our support for these countries to ensure the success of the market-oriented economic reforms now taking shape in Eastern Europe and the developing countries. Turning to the Japanese economy, non-inflationary growth led by domestic demand has been sustained since 1986, and steadfast progress has been made in reducing our external imbalances. The current account surplus has dropped from 4.5 percent of GNP in fiscal 1986 to 1.9 percent in fiscal 1989. For fiscal 1990, while higher oil prices will unavoidably affect prices and economic growth to some extent, the Japanese economy, still being robust, is expected to sustain non-inflationary growth led by domestic demand, with appropriate policy management. The rise in oil prices, in the meantime, will accelerate the pace of decline in the current account surplus. 3. Market-Oriented Economic Reforms I would next like to touch upon the worldwide tide toward market- oriented economic reforms. 126 Looking back at Japan's own economic history, it has been our experience that privatizing state-owned enterprises enhances economic efficiency, which in turn contributes to economic growth. In the 1980s, for example, we successfully privatized three public corporations. We find it most gratifying that the countries of Eastern Europe, Latin America, and Asia have become increasingly aware of the need to privatize state-run enterprises, to support private sector development, and to strengthen market mechanisms in their endeavors for structural adjustment. In promoting that process, we believe it is also beneficial to utilize the catalytic function of the international financial institutions. Looking especially at Eastern Europe, for which international support structures such as the European Bank for Reconstruction and Development (EBRD) have been established, we hope that the Fund and the Bank will continue to extend their support to the countries of that region. In this context, the participation of the Czech and Slovak Federal Republic and the People's Republic of Bulgaria, whose membership we have just voted for, is most welcome. At the same time, I would like to extend a sincere welcome to the third new member, the representative from the Republic of Namibia. The Fund, the Bank, the OECD, and the EBRD are expected to com- plete a detailed study of the Soviet economy by the end of 1990 as agreed upon at the recent Houston economic summit, so as to make their due contributions to the reform efforts in the Soviet Union. In addition to the demand for resources in the developing countries, economic reforms in Eastern Europe and other devleopments are expected to generate additional massive demand for capital. If we are to meet this demand, it is highly advisable that every country foster savings while dis- couraging dissavings, in order to avoid higher interest rates to the utmost and to ensure steady development of the world economy. Furthermore, if we are to facilitate the smoother functioning of market economies worldwide, it is imperative that every effort be made to maintain and strengthen the liberal and multilateral trading system. It is crucial that the Uruguay Round be successfully concluded by the end of this year. 4. Currency Stability Next I would like to say a few words about currency stability. The foreign exchange market is currently in a relatively stable situation, and it is felt that exchange rates among the major currencies have come to reflect the economic fundamentals more accurately. We believe that we owe this to the accumulation of efforts by the major industrial countries for policy coordination and coordinated actions on exchange markets during the late 1980s. The outlook for the future points in the direction of greater international interdependence, which will further expedite globalization of the world economy. Under the circumstances, and given both the achieve- 127 ments we have attained in the process of accumulated cooperation, and the accelerated movement for economic and currency integration in Europe, I wonder if it might not be possible, in a longer perspective, to explore a more stable international monetary system that solidly substantiates the spirit of cooperation thus far. In that endeavor, avenues could emerge to secure more stable relations among the currencies in the triad of the United States, Japan, and the EC. 5. Debt and Development Issues (1) Japan's Basic Position I would next like to explain Japan's basic position on debt and devel- opment issues. First of all, it is essential that support for the developing countries be considered and implemented on a case-by-case basis in accordance with each country's situation. Second, international support cannot succeed unless the developing countries themselves endeavor to reconstruct their economies through structural adjustments. On the other hand, international support will surely be forthcoming for countries that do undertake the appropriate policies and structural adjustments. Third, in order to finance growth in the developing countries, it is essential to ensure that the necessary new money is available, whether from official or commercial sources. Japan, for its part, has made active efforts to provide new money through its program to recycle at least $65 billion over a five-year period to 1992. Fourth, while it is true that there are some lower-middle-income coun- tries where the accumulation of official debt casts a shadow over recon- struction, these countries need, at the same time, to aim for structural reform and growth through the inflow of new money with appropriate conditionalities. It would not contribute to the country's bright future if, with over-emphasis on the immediate problem of debt accumulation, concern for large-scale compulsory official debt reduction led to a cut-off of new money to that country now and in the future. We hold these concerns as the largest donor of official new money to the developing countries, and we would like to emphasize once again the need to treat the issue of official debt reduction in a cautious and prudent manner. I would next like to touch upon some new contributions that Japan is initiating in line with this basic approach. Last year, I stated that Japan was prepared to contribute about $300 million to the Bank over a three-year period to establish a special fund for technical cooperation to the developing countries and for the devel- opment of human resources for policy planning and implementation. This July, we contributed about $100 million as the first year's installment on 128 this pledge, and I am pleased to report that the fund is already in oper- ation. Through this fund and other measures, we would like to continue to contribute in a number of important areas. First, Japan intends to playa fair role in support of the Bank's African Capacity Building Initiative to develop human resources in Africa. Second, recognizing the importance of private sector development in the developing countries, Japan intends to step up its technical coopera- tion for identifying and formulating projects for Bank financing. Third, in order to give more consideration to the environment in de- velopment, Japan has been making special and voluntary contributions to the Bank for the last two years to facilitate technical cooperation relating to the environment. We intend to continue this cooperation for global environmental protection. Fourth, on the role of women in development, it was our own experi- ence, during the early postwar years when Japan was still subject to food shortages, that educational programs on nutrition, health care, and other areas of interest to the female farming population improved their stan- dards of living and contributed to sharp increases in agricultural produc- tion. Building upon this experience, Japan intends to take an active part in providing technical assistance and other educational programs, so as to identify and formulate projects supporting the role of women in devel- opment. (2) The Role of the Fund and the Bank in Debt and Development Issues Finally, I would like to address the role of the Fund and the Bank in debt and development issues. While we have the highest regard for the contribution that the Fund and the Bank have made in international endeavors on debt and devel- opment issues, we very much hope that the Fund and the Bank will continue to playa key role in promoting economic structural adjustment in the devleoping countries. We are, therefore, grateful that, following the Bank's General Capital Increase, agreement has been reached on the Fund's Ninth General Re- view of Quotas to strengthen its financial resources. We hope that all countries will move quickly to bring the Ninth General Review of Quotas into effect along with the prerequisite Third Amendment to the Articles of Agreement embodying the strengthened arrears strategy. Looking at the Bank Group, in addition to its traditional loan func- tions, it is important that the Bank strengthen its expanded co-financing operations (ECO) and other catalytic functions. With regard to the activ- ities of the International Finance Corporation (IFC) to promote and 129 encourage private sector development in developing countries, we hope that better regional balance will be taken into account and that greater activity will be seen in the Asia-Pacific region. Likewise, we hope that the activities of the Multilateral Investment Guarantee Agency (MIGA) to alleviate investment risk will result in an expanded flow of investment to the developing countries. 6. Closing Last year, Japan became for the first time the world's largest donor of Official Development Assistance. Moreover, with the recent Quota Review, Japan will take on increased responsibilities in the Fund as it already has in the Bank. We very much appreciate the cooperation extended by the mem- ber countries and the efforts made by Fund management toward agreement on the Review. Recognizing our renewed responsibilities in the international community, we would like to stress our determination to make every possible effort to meet these responsibilities. At the very time that the world economy seemed to be moving toward greater convergence around market-oriented economies, a crisis has arisen in the Gulf to try our resolve. Will we be able to cope with this crisis through international cooperation? This is the first hurdle that we must overcome on the way to global economic integration centered on market mechanisms, and is also a touchstone as to whether we will be able to sustain the international regime of cooperation led by the Fund and the Bank now in its 45th year. Thus it is that we are gathered today in Washington in an effort to bring our collective wisdom and courage to bear on the issues before us and to develop policy responses in conjunction with the Fund and the Bank to surmount this crisis. KOREA: YUNG-EUY CHUNG Governor of the Fund and Bank It is a great pleasure for me to have this opportunity to address the Forty- Fifth Annual Meetings of the Fund and the World Bank here in Washington. I truly believe this year's meetings will be of particular significance since 1990 marks the beginning of a crucial decade with new hopes and challenges for the world. Before proceeding with my remarks, I would like to extend my warm welcome to the delegates of the new member countries, the Czech and Slovak Federal Republic, Bulgaria, and Namibia, and the participants from Switzerland, Mongolia, and the Union of Soviet Socialist Republics, who are attending these meetings as Observer, Special Guest, and Special Invi- tee, respectively. I would also like to thank the Fund's Managing Director, Mr. Camdessus, the World Bank's President, Mr. Conable, and all the staff members who, 130 through their efforts, have made these meetings both possible and success- ful. My thanks also go to the citizens of Washington, D.C. for their warm hospitality. The World Economy In reviewing the performance of the world economy, while the growth rate in 1989 subsided from that of 1988, the world economy nevertheless has maintained modest growth for eight consecutive years. This is due to a relatively steady and gradual increase in industrial production and foreign trade in the midst of overall commodity price stability. This year, however, there is a growing concern that inflationary pressures stemming from the rise in oil prices, combined with an economic slowdown and a decline in world trade, may result in a turnaround from the present trend of sustained growth to one of stagflation. In particular, the recent crisis in the Middle East, which has caught the world unprepared, is fueling fears of a third oil crisis and poses a grave threat to the world economy. This sudden turn of events is not only likely to have extremely adverse effects on oil importing developing countries, but may also cause severe disturbances for the world economy as a whole. This unforeseen crisis comes at a time when the world economy is suffer- ing from various structural imbalances. For instance, almost one third of the population of the developing world still lives in poverty, and many developing countries are burdened with the servicing and restructuring of excessive foreign debts. In the midst of these difficulties, some positive trends are also emerging. The transformation of the economic landscape in Europe-most notably the historical reunification of Germany, the consolidation of the European Community, and the economic reform efforts of Eastern European coun- tries-is of significant importance and will surely alter the world economic order. In addition, the rapid pace of liberalization and globalization of world economies is adding momentum to the restructuring of the international economic environment. Vision for the 1990s The 1990s will undoubtedly be a critical decade for the rectification of the many structural problems plaguing the world economy which had be- come aggravated in the 1980s despite sustained growth. In order to maintain growth in the 1990s in the midst of these problems and changes in the world economy, active cooperation between East and West and between North and South is needed now more urgently than ever before. In particular, close policy coordination among major developed countries is extremely vital. 131 Accordingly, all nations must avoid the temptation of reverting to nation- alism to further their own narrow self-interests and should rather pursue the ideal of cosmopolitanism, since working toward global prosperity is the only sure way to national prosperity. In this regard, the Uruguay Round ought to be concluded in such a way as to gain the full support of both industrial and developing countries. In addition, international financial organizations should also strengthen their roles in the world economy in order to support the framework of multilateral cooperation. The Korean Economy The Korean economy has been, since last year, experiencing difficulties, such as high inflation and a deterioration in the balance of payments situa- tion. The current economic slowdown seems to be part of a cyclical adjust- ment after three consecutive years of high growth. It also seems to have resulted from the process of structural transformation of the Korean society during the transition to a mature democracy. External factors, such as the rippling effects of sluggish growth in world trade, rising protectionism, and instabilities in the international foreign exchange and financial markets, have also become burdens on the Korean economy. In spite of these internal and external problems, Korea will forge ahead with appropriate and practical liberalization and internationalization poli- cies to fulfill its role and responsibilities as a member of the international community. Internally, we will also intensify our efforts to promote struc- tural adjustment as well as to enhance productivity and technological de- velopment in order to effectively respond to the adverse changes in the domestic and global economic environment. In keeping with this policy direction, Korea has already liberalized im- ports and foreign exchange transactions substantially. In addition, for the liberalization of the capital market, Korea has also announced "The Mid- Term Plan for Capital Market Liberalization" and has been implementing this plan on a gradual basis to prepare for full deregulation of the capital market. Furthermore, to contribute to the common goal of world prosperity, Ko- rea has been making efforts to enhance relationships with other developing countries. As part of this endeavor, Korea has made significant contributions to the ESAF and IDA. Moreover, Korea perceives the market-oriented reforms of the Eastern European countries as a historic development and actively supports the establishment of the European Bank for Reconstruction and Development (EBRD) and will strengthen cooperative economic ties with these nations. 132 The World Bank and the International Monetary Fund Turning to the activities of the Bank and the Fund, the continued efforts and accomplishments of these two institutions in achieving balanced world economic growth and reducing the debt burden of developing countries deserve the highest praise. I would like to take this opportunity to propose several recommendations for the activities of the Bank and the Fund in the 1990s. Bank and Fund First, the Bank and the Fund should place special emphasis on stabilizing exchange rates and interest rates and expediting a smooth flow of funds. To do so, they must strive to prevent excessive fluctuations of the exchange rates of major currencies as well as instabilities in the world financial mar- kets which have intensified uncertainties in the world economy and hindered the management of economic policies of the developing countries. Second, the recent rise in oil prices arising from the current crisis in the Middle East will possibly lead to lagging economic growth and surging inflationary pressures among developing economies, which can ultimately result in economic stagnation. It may also cause further deterioration in the debt situation of oil importing developing countries. Accordingly, the Bank and the Fund should commence a comprehensive review of the current strategies for dealing with the debt problem. At the same time, the Bank and the Fund ought to actively support the economic reform efforts of the Eastern European countries together with the EBRD now being established to ensure that the transition to a market- oriented economy is smooth and successful, but not at the expense of other developing countries. Bank The Bank, for its part, should increase its efforts to expedite the flows of resources and technology to developing countries in order to promote de- velopment in the private sector, to establish stable market economic systems, and to raise efficiency in the utilization of resources among these countries. In particular, assistance from the Bank ought to be directed toward revising the legal and institutional structures, enhancing activities of the private sector, and improving the managerial capabilities of entrepreneurs. Furthermore, the ongoing efforts to reduce poverty among the developing countries and to protect the world environment should be strengthened. Closing ... In the first year of this decade, the world has been witnessing a tremendous transformation of the international economic order, through 133 such events as the unification of Germany, the consolidation of the EC, and the reform movements in the Eastern European countries. At the same time, however, overall imbalances in world development still exist, and un- certainty over the future seems to be growing. Therefore, the 1990s call for closer global cooperation than ever before. In this connection, the roles of the Fund and the Bank have also become more critical. I would like to close with a small reminder that the key to our success in making a smooth adjustment to the historical changes occurring in the world and in achieving global prosperity lies in cooperation rather than conflict, and in compromise rather than confrontation. I hope that all nations of the world will display the proper wisdom and resourcefulness in meeting the challenges of the 1990s through cooperation and conciliation. KUWAIT: SHEIKH ALI AL-KHALIFA AL-SABAH Governor of the Fund and Bank On August 2, Kuwait, an active member of the Bretton Woods institu- tions, a member of the United Nations and the Arab League, fell victim to a naked act of brutal aggression committed by the Iraqi regime. With no provocation or justification, a ruling tyrant in Iraq invaded our country, shattered and looted our economy, inflicted untold hardships on the people of Kuwait and rendered homeless hundreds of thousands of innocent people. This wanton act of aggression has no precedent in the annals of Arab history. Never before has an Arab country done to a sister country what Saddam Hussein did to the people of Kuwait. The crude and calculated invasion of Kuwait by Saddam Hussein violates the most basic principles of international law, tramples on all norms of human decency, and makes a mockery of Arab brotherhood and solidarity. At this difficult time, we are heartened by the fact that the aggressor stands isolated and condemned by the world community. For the first time, all nations of the world-East and West, North and South-are unanimous, not only in their condemnation of aggression but in their determination that the aggressor must not benefit from his aggression. No words can express the gratitude of the Government and people of Kuwait to all those who stood up in defense of law, justice and world order. Since its independence in 1961, Kuwait has always endeavored to be a responsible member of the world community. Our oil policy has reflected the need for stability of oil prices at levels which are conducive to sustained growth in the world economy. Our investment policy has reflected our con- fidence in the international financial markets as well as the emerging markets of the developing countries. It has demonstrated our long-term commitment to foster the development of our country through technology, management, and the promotion of export markets in an increasingly competitive envi- 134 ronment. Last but not least, our aid policy-and I want to emphasize this- has reflected our resolve to contribute to the development of other devel- oping countries and to work closely with Arab regional organizations, The World Bank Group, and the IMF toward stable and sustainable economic growth. It is a matter of pride for us that the Kuwait Fund for Arab Eco- nomic Development was the first development institution created by a de- veloping country to help other developing countries. Over the last 28 years, the Fund has been actively involved in development assistance. By the end of June 30, 1990, the Fund commitments reached a level of KD1.7 billion (US $5.8 billion), benefiting 65 developing countries. As I already indicated, the Fund will continue its development operations and will save no effort to pursue the realization of its objectives through close cooperation with ben- eficiary countries. Kuwait also took the initiative in establishing both the Arab Fund for Economic and Social Development and the Inter-Arab In- vestment Guarantee Corporation and played an instrumental role in the creation of the Arab Bank for Economic Development in Africa and the OPEC Fund for International Development. We are also proud to have been the first developing country on IDA's donors list. Soon after independence, our country adopted a constitution based on democratic principles, freedom and security of the individual, and freedom of the press. Our people will remain united and committed to continue the evolutionary process after the end of the occupation. During those years, we emphasized education, institution building, and management skills. Many of our institutions and those in partnership with other Arab countries are well established in international markets. These include, apart from the Kuwait Fund, the Kuwait Investment Authority, Kuwait Petroleum Corporation, Kuwait Institution for Scientific Research, the Arab Fund for Economic and Social Development, and a number of other banking and investment institutions. In all of them, development is a joint effort between Kuwaitis and other nationalities who have made Kuwait their home. Our citizens also realize that with prosperity comes responsibility. At the time of the invasion, there were more than 70 Kuwaiti non-governmental organizations contributing substantially toward clinics, schools, and emer- gency relief in the poorest countries of the Middle East, Asia, and Africa. Today, in spite of the occupation, the legitimate and recognized Govern- ment of Kuwait, headed by His Highness the Amir of Kuwait Sheikh Jaber Al Ahmad AI Sabah, and its major institutions continue to function. While there is extensive damage to physical assets inside Kuwait, external assets are safe. By the end of the second week after the invasion, the Kuwait Investment Authority was in full control of all foreign assets. The Kuwait Petroleum Corporation continued its activities of exploration, production, refining, and marketing operations. The Central Bank continues to support foreign operations of the Kuwaiti banks. Kuwait Airways remains in oper- 135 ation through charters and leases and it is shortly expected to begin regular service to Cairo. The Kuwait Fund and the Arab Fund have regrouped skeleton staff and are expected to begin operations soon. Our priority has been to keep as many institutions as possible in operation and to function normally in the international market. On the other hand, it is so essential for us to emphasize the necessity of the Kuwaiti banking system to meet unconditionally its foreign obligations pertaining to the interbank and foreign exchange transactions. The Central Bank of Kuwait is working in this direction and the banks are in the process of reconstructing their books, and in a matter of weeks, we hope to solve this issue to the utmost satisfaction of the world banking community. This would not have been possible without the close cooperation and coordination of the coun- tries in which Kuwaiti assets are located and the dedication and loyalty of our multinational staff. Mr. Chairman, the invasion of Kuwait is expected to precipitate a severe economic crisis in countries whose economies are strongly linked to the Gulf. The international community should respond positively by providing additional concessional assistance to assist countries most immediately af- fected by the crisis. We also expect the Fund and the Bank to assist member countries in developing policy responses, adjusting their lending programs to meet each country's changed circumstances, and mobilizing and coordi- nating donor support. The Fund and the Bank also should continue to monitor the impact of the crisis, particularly with respect to a large number of developing countries that have adopted strong adjustment programs that remain vulnerable to a deteriorating external environment. Many of the countries affected by the crisis continue to be burdened by debt, making it difficult for them to put their economies on a sustainable growth path. The international community has, over the past two years, developed several initiatives to reduce the debt burden of both the low-income and middle- income countries. We would urge the donor community to widen the debt- reduction options for the countries affected to include substantial reduction of official debt. Mr. Chairman, Kuwait has always stood ready to bear a fair share of the burden, and more, because of our strong commitment to development. Today, that commitment remains the same, but with even greater resolve. We have allocated $2.5 billion to assist countries immediately affected by the crisis in addition to some assistance toward food, shelter, and transport of evacuees through international organizations such as the Red Cross and the Red Crescent. This is besides the assistance of the Kuwait Fund. We also intend to increase our contribution in IDA-9 to support the efforts of the poorest members and have indicated a willingness to generously support further IBRD and IMF efforts to help in the adjustment process of those countries most affected by implementation of UN resolutions. We will also actively support and participate in the Gulf Crisis Financial Coordination 136 group announced this afternoon by President Bush, a leader whose com- mitment to peace is only matched by his determination to resist aggression and defend international law. With respect to debt, we plan to pursue His Highness, the Amir's debt initiative more vigorously to ease the burden on the poorer highly indebted countries. The initiative calls for: First: Debt and debt-service reduction by official and commercial credi- tors and in some cases total forgiveness, on a case-by-case basis, to allow sustainable adjustment and growth. This excludes national, regional and multilateral development institutions. Second: Flexible programs with realistic conditionalities by the World Bank and the IMF to include appropriate measures, such as social funds to alleviate the effects of adjustment on the poor. Third: Expansion of technology transfer, human resource development and technical assistance with the aim of conserving national resources and protecting the environment in a joint effort between industrial and devel- oping countries. Mr. Chairman, it is our unshakable faith and hope that Kuwait will rise again to take its place as a full and honored member of the world commu- nity. To achieve this noble goal, no sacrifice is too great for the people and Government of Kuwait. LAO PEOPLE'S DEMOCRATIC REPUBLIC: SISAVATH SISANE Governor of the Bank It is indeed a great pleasure and honor for me to lead the delegation of the Lao People's Democratic Republic in attending the Annual Meetings of the International Monetary Fund and the World Bank, which are taking place in Washington, D.C. May I, first of all, on behalf of the Lao Delegation, express my deep appreciation and sincere thanks to the organizers of the meetings and the host government for the usual smooth arrangements made as they have always been to ensure the success of our meetings. May I also express sincere congratulations to the staff members of the Fund and the Bank who have worked with me and my colleagues in the Lao People's Democratic Republic to produce data, initiate projects, and arrange facilities and credits and whose understanding of our problems has furthered our efforts to hasten the pace and direction of change in our economy. As is well known, the Government of the Lao People's Democratic Re- public has worked out objectives of national economic development aimed at transferring the economy from one of subsistence to a market economy. The small agriculturalist, the individual entrepreneur, and the larger capi- talist shall participate fully in the agricultural, commercial, and industrial life of the country. An end to multiple price practices, more autonomy to 137 business management without surrendering accountability, and a recogni- tion by government of the economic laws that determine our future shall provide further stimuli for sustained economic growth. We shall improve the living conditions of the people without destroying the world around them. The people must abandon the practice of slash-and-burn cultivation that damages our forests and cooperate in our forest resource management program by careful logging and active reforestation. We are restructuring our economy, a process started in mid-1986. I mentioned some of these measures and the early successes in my statement to the Annual Meetings in Berlin (West) in 1988 and again here last year. We are now in the second year of our Fund- and Bank-supported struc- tural adjustment program. The fundamental macroeconomic objectives of the adjustment process are to: -achieve an average growth rate of 5 to 6 percent; -reduce inflation to that prevailing in trading partner countries in the convertible area by the end of 1992; and -make further progress to balance of payments viability. The principal constraints which hinder our economic development are four in number: -structural obstacles in agriculture and forestry; -a narrow and weak export base; -the pitiful state of our roads and the consequent limited access to both domestic and foreign markets; and -the extreme shortage of skilled labor in the key sectors. I add a fifth, the weakness of our financial sector, and a sixth over which we have no control, the weather. Several years of drought pushed up our inflation rate and slowed our growth. The international institutions support our efforts to restructure our economy. Our many donors offer tangible support, as witnessed by the numerous projects under way and in the plan- ning stages. Many donor countries, also members of the United Nations, that support our development and restructuring efforts are not yet members of the Fund and the World Bank. Our target for growth in 1989 was modest. The actual growth rate was slightly over 9 percent. This remarkable performance is mostly due to the hard work of our farmers, who took full advantage of favorable weather conditions to produce around 1.4 million tons of paddy, almost 40 percent more than in 1988. Our inflation rate in 1989 was also high-over 50 percent. The Govern- ment took a number of measures in the second half of the year to slow the growth of credit. The measures were successful. For a number of months toward the end of the year the consumer price index did not rise. Fears of hyperinflation abated. The good rice harvest had a significant effect on prices. 138 Seasonal factors pushed the consumer price index upward toward the end of the first quarter of 1990 and again during the second quarter. Lower inflation in the second half of the year will enable us to meet two important economic targets for 1990. One is to experience real growth of around 6 percent and the other is to keep inflation below 25 percent for the year. The World Bank approved a structural adjustment credit of SDR 30.8 million on June 9, 1989. The initial drawdown took place last year. The Executive Board approved the second tranche in July of this year.... . . . Last year I spoke of our efforts to restructure our banking, financial, and commercial systems. A key element in our economic adjustment process is the restructuring of our banking system. In the past 12 months, we have made positive progress toward a more responsive system, attuned to the needs of the customer. The State Bank created two commercial banks in 1988 from its Vientiane branches. In November last year, I signed the pro- tocol that gave autonomy to the country's largest commercial bank, Banque pour Ie Commerce Exterieur Lao. A joint venture bank between Thai investors and the Government of the Lao People's Democratic Republic opened its doors to the public in October, and, in December, a Thai bank opened a representative office in Vientiane. The State Bank created an autonomous commercial bank, the Phak Tai Bank, from four of its provin- cial branches in the South in April this year. Yet another autonomous bank, the Lao May Bank, was created from the provincial branches in Savannak- het and Khammouane shortly before these Annual Meetings. In June, our Supreme People's Assembly enacted the Bank of the Lao People's Demo- cratic Republic Act. The Act gives central bank functions to the new bank. Assets and liabilities of the State Bank pass to the Bank of the Lao People's Democratic Republic. I acknowledge the contribution of the Legal and Central Banking Departments of the Fund to the original draft of the law. Our regional development institution, the Asian Development Bank (AsDB), has continued its technical assistance to the State Bank. An IMF central banking expert is working alongside the AsDB team. Following a financial sector review in the third quarter, we have discussed with AsDB officials the scope and direction of a large financial sector program loan. The loan will give us the opportunity to remedy the deficiencies and correct the weaknesses of the banking sector. The deficiencies are structural and technical. Personnel at all levels lack experience of international markets and modern financial practices. Before I conclude, let me express my support to strategies of the World Bank and the Fund on poverty reduction, debt, role of women in develop- ment, privatization, human resources development funds, and structural adjustment. In conclusion, I wish that our Annual Meetings be crowned with brilliant success. 139 MALAYSIA: DAIM ZAINUDDIN Governor of the Fund and Bank As we take our first strides into the decade of the 1990s, the scenario ahead holds both opportunities and dangers. The liberalization and integra- tion of the Eastern Europe economies in the world economy, sustained technological change, and economic globalization point to enhanced oppor- tunities for the 1990s. At the same time, however, reduced resource flows, the deepening of poverty, and uncertainties regarding the Uruguay Round are negative developments that require our urgent attention. More recently the Gulf crisis has imposed an additional burden on the oil importing developing countries as they continue to grapple with the continuing problems of poverty, debt, and reduced resource flows. The crisis may also affect some of the progress achieved by developing countries that had successfully undertaken structural adjustment. In this situation, we welcome the initial steps taken by the IMF and the Bank to mitigate the adverse effects of the oil price increase on developing countries. As the situation develops and more data become available, we hope the Fund and the Bank will work out appropriate special loan and financial arrangements that could give short-term financial support to developing countries as they face this additional economic hardship. While the Gulf crisis is currently of immediate concern, we should not lose sight of the underlying economic problems that continue to plague the developing countries. The debt problem continues to be a matter of serious concern. While we can note with some satisfaction the continued efforts undertaken by all parties concerned since the last Annual Meetings, and, in particular, welcome the efforts of the Paris Club in rescheduling the official bilateral debts and lengthening repayment periods for debtor coun- tries, we remain concerned about the somewhat slow progress achieved in negotiations on financing packages between a number of middle-income countries and their creditor banks. We, therefore, urge the creditor banks to undertake a more realistic and flexible stance, since the debtor countries would only be able to undertake adjustment efforts successfully if they are less burdened with debts. On the part of the debtor countries, the central element in their efforts should be a reorientation of their economies to attract non-debt-creating flows of funds through the liberalization of do- mestic regulations to encourage direct foreign investment, privatization, and financial sector reforms. At the same time the developed countries can play a critical role by fostering a more stable and predictable financial and eco- nomic environment for the developing countries. The magnitude of the debt problem requires mutually supportive policies on the part of all concerned to ensure a successful resolution. The issue of resource flows to developing countries is another matter of continuing concern. It is disheartening to note that resource flows from both 140 private and official sources have declined ahd remained stagnant over the past few years. It is also appropriate at this point to voice the concern of many developing countries that the financial support and commitment by developed countries to the nations of Eastern Europe can be at their ex- pense. While we naturally applaud this financial support, we would continue to emphasize the need for the developing countries to be assured of a continuous flow of resources. The inadequacy of resource flows to developing countries may be miti- gated through increased trade. The successful conclusion of \the Uruguay Round of trade negotiations is therefore all the more important. However, the progress of the negotiation is far from satisfactory. The principal interest of developing countries, including Malaysia, lies in improved market access, as well as a reduction in tariff escalation. Changes in current trade policies of the industrial countries will make important contributions to the inter- national economic environment more conducive to development. In partic- ular, we wish to draw attention to several areas. First, the tariffs applied by the industrial countries to trade with developing countries are on average higher than those on trade between industrial countries. Second, the tariffs are generally higher on processed products than on raw materials, with the result that processing industries in developing countries face high rates of effective protection in industrial countries' markets. Third, the rapid growth of nontariff barriers over the past two decades has tended to be more pronounced for products exported by developing countries. The incidence of nontariff measures is particularly high in agriculture and textiles, both sectors of major importance to many developing countries, including Ma- laysia. We share the views of other members of the Cairns Group that export subsidies on agriculture are the most distorting of all trade measures. The developing countries would also like to see progress being made in assimi- lating the textiles and clothing trade into the GATT from the regulation of the Multifiber Arrangement (MFA). Most of all we believe it is essential that negotiations in all areas proceed at the same pace and give rise to mutually beneficial concessions. In reality, however, we observe that nego- tiations in areas that are of interest to developed countries have reached a more substantive and advanced stage than the negotiations in areas of interest to developing countries. Although developing countries, being weaker, have more to fear from the failure of the Uruguay Round-as such failure could encourage the search for unilateral and bilateral solutions and contribute to the creation of protectionist blocs-its success is in the long- term interest of all of us. As the deadline for agreement approaches, we urge a renewed commitment on the part of all concerned-particularly the developed countries, whose decisions make a difference-in order to ensure its meaningful completion. Turning to the World Bank, it is heartening to note that in the past fiscal year, the Bank's net disbursement to member countries reached $5.7 billion 141 compared with $1.9 billion in fiscal 1989. The IFC, which has been an active provider of funds to the private sector, either as equity or loan, has increased its total loan commitment by 20 percent and net disbursement by 23.2 percent. These are encouraging signs, and we wish to extend our warm congratulations to the management and staff of both institutions for a job well done. We have also noted with interest that the Bank is venturing into areas other than financing development projects and programs. The Bank, for example, is involved in the effort to alleviate the debt problem of member countries. For fiscal 1990, more than $1.8 billion has been approved by the Bank for purposes of debt servicing. We are also seeing greater Bank involvement in the Eastern European countries with a total loan package of $1.1 billion being approved for Hungary and Poland. These initiatives indicate that the Bank is aware of its responsibility in a changing economic environment, and we applaud this. At the same time, however, we should not forget that the Bank was established with the main objective of financing projects for development. The Bank has to balance its operation so that its traditional activities are not neglected. We are happy to note that for the coming fiscal year the Bank is planning a lending program of $17 billion and IDA commitments of SDR4.4 billion, which, we trust, will ensure adequate resources to meet these traditional needs. Many of us will also be watching IFC activities with interest. The decade of the 1990s will see the private sector playa more active role in developing countries to become the catalyst of growth as the public sector goes back to its more traditional function. As such, we are seeing an increasing number of countries undertaking an active program of privatization and liberaliza- tion. We believe that the IFC can be helpful to developing countries as they embark on programs to strengthen the role of the private sector, and we therefore welcome and encourage the IFC strategy of playing complemen- tary roles in investment, capital mobilization, and financial services .... . . . The decade of the 1990s will see increased concern with the issues affecting the environment and the quality of life. In this connection, it is heartening to note that the Bank has taken action and will continue to integrate environmental considerations in all stages of the project cycle. However, it cannot be denied that the integration of environmental consid- erations into development projects could result in increased cost. While developing countries are ready to play their role in ensuring a better envi- ronment, the additional financial support required to meet the environmen- tal criteria must be made available. The establishment of a fund to compen- sate developing countries for compliance with the Montreal Protocol is indeed an important first step in the right direction. As we understand it, the Bank and the United Nations have mooted suggestions for setting up financing facilities to cover other areas of environmental concern such as biodiversity, water pollution, and global warming. Such facilities would in- 142 - - --------.--------. --------- deed be welcome, but the success of these funds and other activities to improve the environment requires the commitment, especially of the devel- oped countries, since they are financially in a position to provide the nec- essary support. It must be added that such facilities, if they are to be meaningful, must be made accessible to developing countries without strin- gent conditionalities. While we are rightly concerned with environmental issues, and while we seek to encourage and facilitate the role of the private sector, we cannot forget that the objective of all our policies is the reduction, and ultimately the eradication, of poverty. It is sad indeed to note that 1 billion people in the developing countries continue to live in poverty. In this connection, this year's World Development Report, which focused on poverty and related issues, is a very useful and timely document that could be used as a guide for policy formulation. The report highlights the need to contain the number of poor in Africa and reduce the number elsewhere by almost 400 million by the end of the century. These are targets we believe can be achieved. Additional resources that could become available for development as de- fense expenditures are reduced, well-conceived and well-implemented pol- icies. a supportive international economic environment, and strong and continuing commitment on the part of all concerned are critical ingredients for success. We trust these will be forthcoming in the current hopeful inter- national climate. The hopeful, even optimistic, note on which the decade of the 1990s began has been tempered somewhat by the Gulf crisis. The dangers posed by current developments in the Middle East, however, should not blind us to the fundamental issues affecting growth and development such as debt, resource flows, and trade. If the hopeful signs represented by the liberali- zation of Eastern Europe, technological change, and economic globalization are to be meaningful to the developing member countries, these issues, which affect them more immediately, require the commitment and support of the international community. It is in the joint interest of us all to provide such support. MALTA: GEORGE BONELLO DU PUIS Governor of the Bank It is a great pleasure and honor for me to address once again the Annual Meetings of the IMF and the World Bank. I would like, first of all, to take this opportunity to extend a warm welcome to the Czech and Slovak Federal Republic, the newest member of the Fund and the Bank, as well as to Namibia and Bulgaria. I am sure that other countries will, in the very near future, accede to the Bretton Woods institutions, as prospects for further global economic integration improve significantly in light of the momentous developments that have taken place in Eastern Europe over the past year, 143 especially following the historical meeting between President Bush and Pres- ident Gorbachev in Malta last December. Unfortunately, the dramatic but positive changes in the Central and East- ern European region have been overshadowed recently by the serious crisis in the Gulf area. This has already resulted in a surge in oil prices that is bound to have adverse effects on world economic activity. Before the recent turmoil in oil markets, current projections were already pointing to some easing in world economic growth after the rapid expansion of recent years. The moderation was expected to be experienced by both industrial and developing countries. Although it may be premature to assess the precise effect of higher oil prices on the world economy, it is certain to have a more severe impact on the non-fuel exporting developing countries. In this regard, it is also relevant to point out that notwithstanding the fact that the decline in the overall level of growth in the developing countries is expected to be moderate, the sharp diversity in regional growth patterns is expected to persist. Thus, while in the newly industrializing economies of Asia expansion, though decelerating from previous levels, is expected to remain robust, in the indebted countries of the Western Hemisphere and in most of Africa output growth is still expected to stagnate. In the developing countries of Europe, as well, current projections of growth point to a neg- ative outturn, although this is mostly attributable to the performance of Eastern European countries that are undertaking macroeconomic ajustment programs in addition to structural reforms. The uncertain economic outlook as a result of the latest developments in the Gulf may lead to a worsening of the external environment to the detri- ment of the developing countries, particularly those that are facing external debt problems. There is a strong possibility that industrial countries may overreact to an intensification of inflationary pressure generated by an up- surge in oil prices by tightening their financial policies further. While it is recognized that an acceleration of inflation in a number of industrial coun- tries has justified the introduction of counterinflationary measures, an ov- erreliance on monetary policy has led to a prolonged rise in international interest rates, which has the potential of undermining the stability of the international financial system and jeopardizing prospects for world eco- nomic growth. Higher interest rates compound the already severe problems of developing countries in servicing their debts and have negative conse- quences for investment. Fiscal restraints should therefore play a more effective role especially in certain industrial countries. In this regard, we are glad to note that Fund and Bank studies continue to emphasize the need for industrial countries to raise their savings ratios by fiscal consolidation and by the removal of distortions affecting private saving. Such changes in domestic policies, which contribute positively to a more supportive external environment, can be achieved only by continued policy coordination among the major industrial 144 countries. We therefore continue to urge the Fund to exert more influence in surveillance exercises by the Group of Seven in order to ensure that the policy decisions of the industrial countries do not render the external envi- ronment more hostile. Of course, global economic cooperation is not a one-sided affair, and developing countries have recognized that they too have to play their part in improving the international climate by implementing economic policies that enhance the potential for longer-term noninflationary growth and mac- roeconomic stability. Notwithstanding adverse economic circumstances, many developing countries have in recent years adopted more cautious fi- nancial policies. They have also implemented fundamental reforms to re- move structural rigidities from their economies. These measures have been aimed at liberalizing trade, reorganizing public sector enterprises, and de- regulating the financial sector. Most of all, there is a growing awareness of the importance of creating a domestic environment that is favorable to private sector activities. In this regard, I am glad to say that the development strategy pursued by my Government continues to lay emphasis on private sector investment and market-oriented policies. Over the past year, we have continued to adopt legislation and administrative practices that are compatible with private sector development. These have focused on the trade, fiscal, and financial systems. Thus, while we have continued to ease trade restrictions to make the domestic market more accessible to imports, we have stepped up our efforts to promote exports by introducing an export credit guarantee scheme to cover commercial and political risk. We have also introduced a radical tax reform involving a sharp cut in the marginal rate of income tax. Further tax reforms are expected to be introduced in coming years; the ultimate objective is the adoption of a broadly based consumption tax aligned with EC tax systems in anticipation of Malta's membership in the European Community. In late July, in fact, my Government presented a formal appli- cation for membership in the European Community. In matters pertaining to the financial system, we have taken steps to restructure the longer-term lending institutions. We have also encouraged the commercial banks to strengthen their capital base by the issue of equity for public subscription. Our efforts to involve more private participation in the development of the country are also expected to be boosted by the setting up of a stock exchange, which we hope will come into operation by the end of the year. Recent World Bank reports highlight the fact that private sector devel- opment depends to a large extent on public sector provision of a supportive infrastructure and social services that include investment in human re- sources. The important role of the public sector in this regard has been recognized by my Government, which has embarked on a vast program to upgrade the country's infrastructure, particularly in the fields of power and 145 water supplies, telecommunications, and airport facilities. We have also set up an employment and training agency to enable workers to obtain and develop new skills and provide them with employment opportunities. At the same time, we are striving to improve the efficiency of the government civil service by gradually implementing the reforms recommended by a commis- sion set up for this purpose. In considering the subject of foreign investment flows, we note with some concern that although net financial flows to developing countries have in- creased slightly in recent years they still remain significantly below the levels of the early 1980s. There is now the threat that given the vast investment requirements of Eastern Europe official assistance may be diverted from the rest of the developing world. We must, of course, emphasize that we strongly support the political and economic changes that have taken place in Eastern Europe and have demonstrated our readiness to assist, in a small way, in the reintegration of these countries in the global economy by sub- scribing to the capital of the recently established European Bank for Re- construction and Development (EBRD). We do hope, however, that the much needed official assistance to the Eastern European countries will not be forthcoming at the expense of other equally deserving countries. Developing countries also need increasing access to the markets of the industrial countries. This is a vital prerequisite for further economic prog- ress. It is therefore worrying to note that notwithstanding the determined efforts of developing countries to adopt outward-oriented trade policies, the multilateral trading system continues to be undermined by protectionist tendencies in a number of industrial countries. Nontariff barriers aimed at trade in manufactures have proliferated, and these have negative repercus- sions for the growth prospects of those developing countries implementing structural adjustment programs. Trade restrictions by industrial countries also prevent smaller developing countries from establishing a strong manu- facturing base. A successful outcome to the Uruguay Round negotiations is therefore essential to prevent a renewed drift toward protectionism. We believe that the Fund and the Bank should continue to playa central role in the debt strategy. We also support the policies involving the use of Fund and Bank resources for debt-reduction and debt-service-reduction mechanisms. However, since the resources of the Fund and the Bank are for the benefit of all member countries, including those that have striven to maintain financial integrity, we believe that availability of such resources should not be jeopardized by the excess allocation of funds to debt-reduction and debt-service-reduction facilities. The economic plight of the lower-income developing countries, particu- larly those of Sub-Saharan Africa, is also a matter of grave concern to the international community, and this has been most effectively brought out in the World Bank's World Development Report 1990 entitled "Poverty." It is obvious that financial assistance to these countries should continue to in- 146 clude a high degree of concessionality combined with additional debt relief based on the arrangements established at the Toronto summit of Western leaders in 1988. The deep structural weaknesses of these countries make it incumbent on the Fund and the Bank to design adjustment programs that focus more on long-term development objectives rather than short-term needs. We feel that it is the duty of all other countries, including relatively better off developing countries, to contribute to facilities established by the Fund for the specific needs of the poorest developing countries. I am glad to say that despite limited resources and urgent investment needs, my Government has made a contribution to the Fund's enhanced structural adjustment fa- cility (ESAF). Malta also contributes to Fund resources in the form of interest forgone on the creditor position it has consistently maintained with the Fund over the years. Our support for the poorest countries is also manifested in the fact that we are subscribing to the World Bank's general capital increase even though our country is not eligible for financial assis- tance from the Bank. Malta also continues to support calls for the resump- tion of SOR allocations in view of the continuing fall in the ratio of SORs to non-gold reserves and in the light of the Fund's efforts to promote the SOR as the principal reserve asset. Turning to environmental issues, it is a point of satisfaction to note the active role the World Bank is playing in this area. The Bank's decision to integrate environmental consideration into its projects should continue to create a new awareness of the need for environmental protection measures in many countries. Its initiative in launching a Mediterranean environmental technical assistance program earlier this year contributes to a solution of environmental problems at the regional level. I am pleased to say that my Government has also continued to participate actively in UN forums on the conservation of the global climate. Malta is a member of the Inter-Govern- mental Panel of Climate Change. It has also proposed the establishment of a Euro-Mediterranean center to deal with regional aspects of environmental problems. My Government recognizes that a cooperative effort by both the indus- trial and the developing countries is required in order to address the essen- tial problem of environmental degradation. However, for this strategy to be successful. developing countries should be assisted in developing environ- mentally benign technologies. Since both funds and technology are very scarce in the developing countries, in contrast to the position in industrial countries, my Government fully supports the proposal to establish a Global Environment Facility by the World Bank in collaboration with the UNEP and the UNO P. . . . . . . In concluding, I would like to express my Government's continued support for the Fund and the Bank in their unstinting efforts to establish an external economic environment conducive to growth and development. 147 NAMIBIA: OTIO HERRIGEL Governor of the Fund It is my honor and pleasure to address you as my country's representative on the occassion of our first attendance at the Annual Meetings as a full member of both the International Monetary Fund and the World Bank. But, first of all, I would like to thank you all for the special words of welcome that have been extended to Namibia, and I would also like to express my appreciation to the Fund and Bank staffs, who have made Namibia's mem- bership possible within a relatively short preparation period. Namibia brings with it a rather unique experience and a vivid awareness of the necessity and reality of international collaboration. Since the accep- tance of Namibia's Constitution and subsequent independence on March 21, 1990, the policy of national reconciliation has indeed taken ground throughout the country and this demonstrates that the people of Namibia and its Government have realized that economic progress can only be achieved in a democratic and peaceful environment. In a similar spirit, Namibia will also honor its newly acquired responsibility of international cooperation. We are convinced that, in contemporary times, economic interdepend- ence among member states is a growing necessity. The future economic development and financial strength of our young nation will invariably de- pend upon the orderly and equitable flow of trade and financial resources between ourselves and our trading partners. While this phenomenon is crucial for Namibia and other developing countries, we firmly believe that it is also in the interest of advanced economies to facilite and promote such equitable trade and financial arrangements to the mutual advantage of us all. To break from its isolation and to ensure a smooth transition, Namibia decided to become a signatory of certain regional economic treaties, such as the Southern African Development Coordination Conference, the South- ern African Customs Union, and agreements relating to the Common Mon- etary Area. The Southern African region is undergoing important funda- mental changes and Namibia is prepared to play a positive role in the constructive framework of cooperation. Independence for Namibia has brought forward various prospects and, naturally, also new responsibilities for the Namibian economy. As a sover- eign entity, there is increased hope for material foreign capital inflows and for opening up new markets for Namibia's exports. The lifting of pre-inde- pendence trade sanctions has reopened markets that had been blocked for some time. Namibia is now in full command of its natural resources and this could unfold many new opportunities in the country. In many of the restructuring and adjustment efforts, we recognize that Namibia will require extensive technical expertise and assistance from both 148 the Fund and the World Bank. Thus far, we have received substantial tech- nical aid and hope that this formal acceptance of our membership will afford even greater opportunities in this regard in the future. The Government is aware that the Namibian economy offers great poten- tial arising from its spare production capacity and vastly untapped re- sources. The Government, therefore, is anxious to harness these resources in order to create a more conducive climate for economic progress, growth, and employment. To give momentum to this process, private investments locally and from abroad are keenly encouraged. In this regard, we also look forward to collaboration and assistance from the Bank and its associates, IFC and MIGA. In conclusion, I would like, once again, to express my deep appreciation to you, Mr. Chairman, and all members of the International Monetary Fund and the World Bank for the warm welcome accorded my delegation and myself. Namibia looks forward to a fruitful and productive relationship as a member of these great institutions. I also take this opportunity to welcome and congratulate the Governments and people of Bulgaria and the Czech and Slovak Federal Republic on the occasion of their countries' membership in the two Bretton Woods institutions. I wish Switzerland and Mongolia well as they complete the membership process. NEPAL: DEVENDRA RAJ PANDAY Governor of the Bank It is a great pleasure and privilege for me to address this joint Annual Meetings of the International Monetary Fund and The World Bank as the representative of the Government formed after a successful people's move- ment for the restoration of democracy in Nepal. At the outset, I take this opportunity to express our sincere gratitude to the President of the United States, Mr. George Bush, for his inspiring and eloquent address. I also join other fellow Governors in extending our hearty welcome to the Czech and Slovak Federal Republic, Bulgaria, and Namibia as new members of the Bretton Woods institutions. Recent experiences worldwide seem to confirm the synonymy between democracy and economic development. Development efforts cannot be sus- tained without the establishment of democratic institutions to enforce public accountability and to give a definite purpose and direction to economic management. At present, the Nepalese Government is engaged in bringing about full democratization of Nepal's polity and this, in turn, should form the basis for improved economic management and performance. The 1990s seem to be a challenging decade for the world. The fundamen- tal changes taking place in Eastern Europe, the reunification of Germany, and the European market unification by 1992 will all have a profound impact 149 on the international economic environment. There is a genuine concern in the developing countries that they may be left out of this new and fast- changing scenario, especially in relation to access to external resources and markets for exports. The enormous resources necessary to supplement mar- ket-oriented reforms in the centrally planned economies, we hope, would not affect the developing countries' access to external finance. The world economy continues to face the problems of large payments imbalances among major industrial countries, large fiscal deficits in the United States, volatile exchange rates, external indebtedness of developing countries, and the negative transfer of resources from these countries. The tight monetary policy stance adopted by the developed countries to combat inflation has accentuated the problems for the less developed countries through higher interest rates. The recent happenings in the Gulf region have also cast a shadow over the sustainability of world economic growth, at least in the immediate future, not to speak of the human misery these events have entailed. Nepal is one of the least developed oil importing countries hardest hit by the present crisis. And this has happened to us at a time when we are facing the daunting task of finding our way out of the legacy of an era of economic mismanagement under the old political regime where, in a period of 30 years, there was little or no growth in per capita GDP. As a result of a popular national movement, Nepal went through a major political change in April 1990 that brought a democratic political order to the country. The present Government is now mainly involved in the twin tasks of institutionalizing the democratic polity, on the one hand, and pre- paring a sound economic framework for the future, on the other hand. Our efforts in the latter will be concentrated in stabilizing the economy and in streamlining strategies and policies to meet our development objectives by taking good cognizance of our resources and capabilities. For us, therefore, there is an urgent need for strengthening international cooperation to face the challenges ahead. The role of the Fund and the Bank in fostering a more conducive global economic environment, in ad- dressing developing issues, and in facilitating resource transfers to the de- veloping countries assumes extra urgency. May I say that the theme of these meetings, which emphasizes economic growth and poverty reduction, is a heartening development for us since the objective of our own development endeavors cannot but be on the same lines. "A decade of economic growth and poverty reduction," in the words of Mr. Conable, is starting happily at a time when we are commencing our own first decade of democratic gov- ernment in Nepal, and, now, we hope to have institutions and policies necessary to respond to this challenge. We will pursue the objective of poverty alleviation through a strategy of increasing labor absorption and enhancing labor productivity. The essential component of this strategy is to organize and empower the people-the 150 poor and the deprived, including the women, in conformity with the spirit and principles of democracy-so that they can participate and take the lead in their own development. In this broader context, we see the role of a dynamic private sector including, what I may call, the rural household sector in our economy. These are the policy areas around which there is national consensus in Nepal-a fact that will assure the future continuity of the policies and programs of the present Government. The success in tackling poverty largely depends, in addition to adequate resource flows, on our ability to pursue the program of poverty alleviation in the context of adjustment while generating technological and institutional choices appropriate for efficient and sustainable growth. This entails more attention to the potential trade-offs between macroeconomic stability and equity. We are happy to note that greater attention is now being given to the distributional aspects of economic growth by the Fund and the Bank, including measures to mitigate the transitory adverse effects of economic reforms on the poorest segment of the society. In the area of debt and debt-service relief, we take note of the positive developments and emphasize that parallel efforts are needed at a much higher level to restore external viability to the severely indebted low-income countries and to prevent the structurally handicapped countries like Nepal from falling into the debt trap. Equally important is the environmental concern that will continue to dominate as another international development issue through the 1990s or perhaps even beyond. Though world attention is gradually shifting to the affluence-related environmental problems, we, the developing countries, are also much concerned with the poverty-related problems of the environment. Let me state here that we welcome the initiative on the setting up of the Global Environment Facility, while we look forward to working with the international community in the management of our own fragile environment and ecological system that is under pressure from conditions of poverty and rapid population growth. In the changed context marked by political liberalization and economic reforms, more attention is being paid to the issues of market and private sector development and enhancing the role of women. In our view, there is no alternative to private sector development matched by the efforts of a good government. The related financial sector reforms should proceed in a gradual manner, consistent with a country's administrative capacity and stage of development, and in a broader perspective with full awareness of essential trade-offs and balances. While developing countries continue to implement painful adjustments and reforms, there is an equal need for the developed economies to create a more conducive external environment by reducing trade barriers and by maintaining stable exchange and interest rates. We firmly believe that greater policy coordination among developed countries would contribute toward this goal. 151 While the Fund and the Bank are to be commended for their collaborative efforts to reduce the debt burden of some heavily indebted countries, as well as in their support to countries undergoing structural reforms, it is, however, disappointing that net resource transfers to developing countries have remained negative. This calls for greater efforts, especially by the Bank, to increase disbursements. A country like Nepal needs to do its share in reforming its own management to facilitate this process. In this context, the conclusion of IDA-9 negotiations is an encouraging development, especially for the low-income countries whose capacity to borrow on commercial terms is severely limited. IDA resources are vital to reduce poverty, protect the environment, and to help implement effective programs of adjustment in low-income countries .... . . . Nepal has been implementing the Structural Adjustment Program with Fund and Bank support. The economic situation calls for the contin- uation of the adjustment efforts. The Government is committed to maintain the internal and external balances with judicious use of fiscal and monetary instruments as well as by undertaking institutional reforms to enhance the efficiency of resource allocation. As we move ahead in preparing and implementing our policy program and reform packages for rapid, sustainable, and equitable development, we need external assistance more than ever before in this crucial transitional phase of Nepal's history. The fact that an accountable Government is com- mitted to deploy both domestic and external resources efficiently and re- sponsibly to the cause of the poor should make the case of Nepal special and all the more appealing for external support. It will be difficult for the people of Nepal to understand that the lending institutions and other members of the donor community do not owe us consideration and some respite in respect of preconditions and conditions attached to projects for financing, when we are trying to consolidate dem- ocratic gains and begin an era of economic development after freeing our- selves from a political system that, with all the resources at its command, was able to contribute very little to economic growth, poverty reduction or, for that matter, respect for human rights and human dignity. The factors that contributed to this dismal record are primarily internal, as indicated, including the consequences of a somewhat unfavorable resource endow- ment. But will it not be helpful if the Bank and the other important donors also make an assessment of their own perception, judgment, and perfor- mance of the past in respect of our development problem as we move ahead to an era of more productive partnership? In the recently concluded Second UN Conference on the Least Developed Countries, we discussed multifaceted problems of this group of countries, Nepal included, and the serious setbacks that they suffered in the 1980s. We took several important decisions, which culminated in the adoption of an action program for the 1990s that aims at bringing these countries onto the 152 path of sustained growth and development. We, in particular, were over- whelmed and encouraged by the solidarity demonstrated by the world com- munity to the cause of the least developed countries wedded to pluralism, democracy, and development. In view of the urgent need to concentrate the efforts of the world com- munity on uplifting the living conditions in the least developed countries where the poorest among the poor live, there is a need to group these countries separately in the World Economic Outlook analysis and in various types of studies and analyses for the programming purposes conducted by the Bank. A separate grouping will show clearly the effects of developing efforts and their inadequacies over a certain period of time in these coun- tries. This will also permit meaningful discussion on conditions and criteria for graduation of countries in this group out of the status of least developed to a more advantageous position. I want to repeat here what I said at the Paris Conference of least developed countries that Nepal hopes that it will not have to participate as a least developed country in yet another such conference ten years hence. To this end, we will commit all our resources and political will, and we hope to continue receiving goodwill and support from our development partners. NETHERLANDS: W. KOK Governor of the Bank One World First of all, I wish to welcome our new members, the Czech and Slovak Federal Republic, Bulgaria, and Namibia and I look forward to the mem- bership of Switzerland and Mongolia. I also note with pleasure that we have the U.S.S.R. delegation as Special Invitees with us. This interest in the Bretton Woods institutions illustrates that the world is growing toward unity, a process that has gathered momentum during the past year. Indeed, the past year has brought the demise of the East-West political divide. The consensus is growing on how to run economies and on their link with political freedom. The rapid growth of international trade and financial flows. and the international spillovers of domestic policies, make "splendid isolation" illusory. Policy coordination in a multilateral framework should therefore come more and more to the forefront. Gulf Crisis We meet at a moment of political and economic uncertainty due to the Gulf crisis. The uncertainty and the rise in oil prices resulting from the crisis occur at a time when economic growth in North America is tapering off, and many developing countries are still tackling the consequences of an 153 excessive debt burden. Fortunately, economic growth is strong in Europe and Japan. Regarding the economic policy reaction to the recent oil price increases, a clear signal should be given in industrial countries, the developing world, and Eastern Europe alike, that policy shall remain aimed at containing inflation and government deficits, and that structural adjustment shall be pursued. This implies that no new distortions should be introduced into the economy through attempts to insulate it from the rise in oil prices. Govern- ments should step up their efforts to make their economies more flexible, so that they will be able to absorb external shocks more easily. The one-off increase in domestic prices as a consequence of the oil price increase should not be translated into a cost-price spiral. This would give rise to a recurrence of stagflation. Recent developments should not distract us from fundamental issues such as the transformation of the planned economies into market economies, the stability of the international monetary system, the threat of protectionism, the unbalanced distribution of prosperity in the world, and the degradation of the environment. On each of these, I would like to say a few words. Eastern Europe The transition in Eastern Europe from a planned economy to a mixed, market-oriented system has led us into terra incognita. One thing is certain: such an economic reform can be successful only if it is comprehensive, consistent, purposefully executed and presented clearly enough to acquire democratic legitimation. It requires a change in economic, social, and po- litical attitudes, organization, and institutions. Comprehensive reforms are a precondition for attracting the necessary foreign capital and techniques. The blessing of the existence of the multilateral institutions has seldom been more clear. The IMF, The World Bank Group, the OECD, and, in due course, the European Bank for Reconstruction and Development stand ready to assist these countries in a concerted effort in the design and imple- mentation of programs, projects, and financing schemes. Additional efforts may be called for. As an example, I draw your attention to the Dutch proposal to create an "energy community for Europe," in which Western Europe would supply the technology and capital that would enable Eastern Europe to exploit its natural resources more efficiently and to develop its energy infrastructure .. Developing World ... The changed international situation requires a coordinated response in support of developing countries. The outlook for many of these, quite uncertain even before the present crisis, has now become gloomy. Although there are wide variations among individual countries, the majority of oil 154 importing developing nations is severely affected. Contrary to previous oil shocks, commercial financing is now far less available, and for many heavily indebted countries it will be very difficult, if not impossible, to attract financing from other sources. This gives quite a different dimension to the reform process that is cur- rently under way in many developing countries. For developing countries themselves a rapid domestic adjustment is needed in order to avoid the emergenqe of unsustainable external and internal imbalances. External creditors as a group would be well advised to support these reforms in order to maintain the momentum of adjustment. The IMF and The World Bank have a key role to play in coordinating assistance to developing countries. For debtor countries with large amounts of commercial debt it is impor- tant that the implementation of the strengthened debt strategy be stepped up. However, the negotiations with the commercial banks are still long and drawn out. These negotiations can be expected to remain difficult in the future. The IMF and the World Bank have an important role in providing the right incentives. The IMF could focus the negotiations by presenting a medium-term framework for adjustment and financing that would pave the way for a return to external viability. For the severely indebted lower-income countries the strengthened debt strategy can offer but limited relief, owing as they do the bulk of their debt to official creditors. The prospects for these countries of returning to normal debtor-creditor relationships have been bleak for many years already. The Netherlands was among the first to forgive concessional ODA-debt. Many other donor countries were to follow suit. Regrettably, this has not proved to be sufficient to restore viability. The Netherlands, therefore, now pro- poses that the community of creditor nations be prepared to start a program of gradual cancellation of bilateral official debts of the poorest developing countries facing severe debt problems. I note with satisfaction that other creditor countries are indicating their willingness to think and act along the same lines. The Netherlands would favor the elaboration of joint proposals and is willing to take an active part in discussions in the appropriate forums in order to create a broad basis for consensus and progress. Such a scheme should be considered seriously and constructively by the Paris Club. Can- cellation could be part of a gradual process that is made conditional on the implementation of sound economic policies in the context of IMF programs. Otherwise, it would only give temporary relief, with no prospect whatsoever of a return to financial viability for these countries. For the creditor coun- tries, the budgetary consequences of implementing the Netherlands pro- posal could be met by charging development aid budgets with a reasonable but limited percentage of the amounts involved, so as to secure true addi- tionality. The international community should stand ready to support those coun- tries especially heavily hit by the Gulf crisis through a coordinated approach 155 to alleviate their loss. In principle, the European Community decided two weeks ago to offer financial assistance to Jordan, Egypt, and Turkey as part of a wider international effort. The IMF and the World Bank should playa leading role by helping to assess financing needs and by supporting their adjustment programs. The current international crisis also gives another dimension to poverty. The World Bank in its recent World Development Report called upon de- veloping countries to pursue a strategy consisting of the kind of growth that creates jobs, the provision of basic social services such as education and health services for the poor, and, as a complement, well-targeted income support to protect the most vulnerable. The present crisis requires that The World Bank in its own policies give special weight to these complementary elements. Environment Growing interdependence in the world is clearly demonstrated by the environmental problems. The continuing degradation of the environment is truly universal. The solution of global environmental problems must remain a top priority for all of us. The future of mankind is at stake. Developing countries have to play their role too. But, if developng countries are to contribute to solving global environmental problems, and they incur addi- tional costs, or are confronted with a scarcity of resources, the industrial nations should be prepared to give financial support; support that should be truly additional. The Netherlands supports The World Bank proposal for the establishment of the Global Environment Facility. This Facility, although operating in the first phase as a pilot scheme, should reflect the joint responsibilities of all nations. The Netherlands, therefore, strongly feels that this global character calls for a fair and multilateral burden sharing. The Gulf crisis again proves the point that there is a universal need for energy conservation and for alternative energy sources. Conclusion In conclusion, I have advocated a more coordinated approach in a mul- tilateral framework to the problems we are facing today. The developments in the last year may mark the dawn of a new era, in which the countries of the world will draw closer together. Coordination is possible only if we can agree on its objective. This objective should be an open international econ- omy that combines equity, freedom, and efficiency. Ultimately, coordination will be sustainable only if it is supported by the people. Since World War II the right to self-determination of nations has swept through the world and changed its face. I hope that present move- 156 ments toward freedom in the various regions will leave their mark upon the world to a similar degree. NEW ZEALAND: RICHARD PREBBLE Governor of the Fund It is a pleasure and an honor to be able to address these Annual Meetings. There are a number of major challenges facing the international economic community. Foremost in our minds must be the recent events in the Middle East. Whatever the outcome of these developments, they are already having an impact on world interest rates and inflation outcomes. The world econ- omy has been subjected to unexpected pressures which may have ramifica- tions for economic growth in the immediate future. The predicted slowing of world economic growth during 1990, coupled with the uncertainty about oil prices, cannot help but cause concern to all countries. Let us take this opportunity to learn from the experiences of the 1970s. The results of the economic mistakes made at the time of the earlier oil shocks are still with us. Many countries, including New Zealand, which borrowed heavily in an effort to cocoon themselves from higher prices are still laboring under the resulting debt burden. Those countries which re- covered quickly from the shocks were those which implemented policies such as allowing higher prices to flow through to oil users and keeping monetary policy firm. Although the initial effects were painful, these poli- cies led to positive growth in their economies. Dearer oil is not deadly: The failure to respond to it appropriately, however, can be very costly. The world economy cannot afford to ignore the lessons of the past. The lesson from the oil shock of the 1970s is that higher oil prices need not lead to either inflation or recession. In New Zealand the oil shock in the 1970s led to double-digit inflation for a decade because the Government loosened monetary policy to accommodate higher fuel prices. The effect of the relaxed inflation targets was that higher oil prices led to higher prices generally. In other countries, such as the Federal Republic of Germany, where monetary policy was not relaxed, higher oil prices did not lead to inflation. Inflation destroys jobs, industries, exports, and economies. Inflation cre- ates the illusion of growth but, like an addictive drug as the high wears off. the user then feels even worse. It has taken five years of pain to get rid of inflation. The New Zealand Government has learned from the 1970s and is sticking to its inflation target of 0 to 2 percent. New Zealand notes that there is no country in the OECD that is advo- cating a relaxation of monetary policy. Such policies are now recognized as irresponsible populism. Any country that deliberately creates inflation is destroying its own people's jobs, savings, and its own economy and exports. 157 The latter part of last year saw a number of exciting international devel- opments which were just starting to appear on the world stage at the time of the 1989 Annual Meetings. The imminent union of Germany and the reappraisal of much of the basis of economic management by countries in Eastern Europe are two that come to mind. It is pleasing to see the interest being shown by those Western European countries in reactivating their passive membership in these institutions. We welcome the expressed interest in membership in the International Monetary Fund and The World Bank by the nonmember European countries. In particular, New Zealand was pleased to support the application of the Czech and Slovak Federal Republic for membership in the Fund. New Zealand looks forward to moves which will achieve universal membership in these institutions and the participation of all nations. In 1942, New Zealand was one of a number of countries participating in a program of separate but interrelated discussions under the Mutual Aid Agreement to consider what could be done about postwar reconstruction efforts, especially in Europe. Included in these discussions was the complex question of postwar monetary and economic policy. The discussions eventually led, after several years, to the establishment of these two institutions meeting here today, which have played such an important part in the stabilization and development of the world economy through the decades since the war. New Zealand is a small country, both geographically and economically, but it remains committed to working for the ideals which these two institutions were established to uphold. New Zealand is ready to play its part again in international efforts to assist the countries of Eastern Europe in their move from relatively inefficient production and distribution systems based on central planning to more market-oriented ones. The small size of our economy limits our ability to contribute financial assistance. However, we can offer expertise and insights on some of the aspects of the changes needed. Since 1984, New Zealand has adopted a wide-ranging set of microeco- nomic reforms. We have spent the last six years removing a large amount of inefficient regulation and establishing more market-based incentives. It has not been an easy task. The process of reform has not been accomplished without painful adjustment by the various sectors involved, as well as by the country as a whole. During the past six years, New Zealand has moved to abolish import licensing and has substantially reduced tariffs, as well as removed govern- ment subsidies. Government assistance to agriculture, which had reached high levels in the early 1980s, was subjected to major reform, resulting in the termination of a number of assistance schemes. The removal of agricul- tural assistance has inevitably imposed many difficult adjustments on the sector. These have been compounded by last year's severe drought in many areas of the country, which led to a steady decline in stock numbers. How- 158 ever, there are encouraging signs that the adjustment process is paying off in terms of a stronger and more diversified, and thus more resilient, agri- cultural sector. Our manufacturing sector has also faced major policy changes, the most important of which is the reduction in import protection. Import licensing has been removed for almost all products and what licensing still remains is scheduled to go by the end of 1992. At the same time, tariffs have been reduced unilaterally; further reductions will take place on a planned sched- ule through 1996, when almost all tariffs will be at a level of 10 percent or less. Not surprisingly, the reductions in import protection have reduced the price and improved the range of imported goods available in the domestic market. They have also meant that New Zealand exporters now have access to more competitively priced inputs, which is leading to the development of a more open manufacturing sector with higher levels of both imports and exports. Since 1984, the financial sector has been completely overhauled. Interest rate controls, credit growth guidelines, government security ratios, and foreign exchange controls were all removed in 1984/85. Other reforms, in- cluding the liberalization of bank registration, were also implemented to increase competition and efficiency in the financial system. The stock market collapse in October 1987, which mirrored other international collapses, put added strain on many companies and some have not survived. Nevertheless, as a result of the adjustment process, we now have a far more open and competitive private sector, which will be better placed to respond to devel- opments in the world economy in the future. New Zealand was fortunate to have an established infrastructure from which to make its changes, but it has been a challenge which protectionism in other countries has made more difficult. Protectionism in the world econ- omy disadvantages those countries whose economies are undergoing struc- tural adjustment. The developing countries rely on their exports to provide the funding basis for their economic growth, but barriers prevent them from obtaining adequate compensation for these exports. There is some evidence of an increasing trend to protectionist attitudes throughout the world-a trend which greatly concerns New Zealand. I would like to urge participant countries in the Uruguay Round of GATT to make every endeavor to bring those negotiations to a positive and satis- factory conclusion. There is still much to be done in the few months re- maining to the negotiators. Failure to reach agreement would have signifi- cant adverse effects on international trade. Various studies of multilateral trade liberalization indicate that large benefits would result from a success- ful conclusion to the Uruguay Round. It was recently estimated, for exam- ple, that a 50 percent reduction in all tariff and nontariff barriers in the United States, the European Community, and the Asia-Pacific region would raise GDP in these three regions by 5 percent. 159 It is now recognized that the benefits from free trade include not only the traditional "static" gains from improved allocation of resources. There are also important "dynamic" benefits that flow from increased incentives to innovate and compete. The benefits from opening trade could be more advantageous for devel- oping countries than many of the assistance programs currently in existence. There are strong arguments for providing favorable conditions for commod- ity-producing countries to gain wider markets for their goods and, in so doing, to help alleviate their balance of payments problems. The New Zealand Government welcomes the statement of President Bush at these Annual Meetings. As an agricultural exporting country we fully endorse the President's call-"we must let farmers compete with farmers, instead of farmers competing with the deep pockets of government treasur- ies." The President's reminder that the world has but 70 days to conclude a new agreement on trade is timely. Much needs to be done. The GAIT talks are "the last train leaving the station" if the world economy is to grow. If the train is left at the station, it is possible that the world's trade will be disrupted by a trade war. There is no reason why the 1990s cannot be a decade of growth and prosperity. But there will be no economic growth without growth in trade. There will be no growth in trade until agricultural protectionism is rolled back. So a successful GAIT round must be the financial community's number one priority. Freer trade will lead to free people. Free trade is the key to world pros- perity and, ultimately, world peace. In two years' time, the integration of the economies of Western Europe will present further challenges to small economies such as New Zealand's. The degree to which this integration will include other European countries in the future is open to speculation at the moment, but regardless of the composition of the European Community, it will have an immense impact on the world economy. It will be in the interest of both the Community and the international community as a whole to ensure that the policies of the Community retain an outward-looking orientation. The international economic community is becoming increasingly aware of the interrelated nature of the problems facing the world. It is encouraging to see that international problems are not being addressed in isolation, but as part of an intergrated whole. We must not let national considerations overrule our duty to the rest of the world. I believe that the larger and more prosperous countries can do more to foster greater cooperation in creating a better climate for trade and commerce in which the poorer countries have a better chance. Organizations such as the Fund and The World Bank have a central role in creating greater awareness among us of our obligations and in implementing policies for improvement. We must give them the necessary support to fulfill their responsibilities. 160 ------.--------~'----~-" - NORWAY: TOM VRAALSEN Alternate Governor of the Bank (on behalf of the Bank Nordic countries) On behalf of the five Nordic countries, Denmark, Finland, Iceland, Nor- way, and Sweden, I would first like to welcome the Czech and Slovak Federal Republic, Bulgaria, and Namibia as members of The World Bank. The 1980s were extremely difficult for many developing countries. Falling per capita growth rates; insufficient levels of external resource flows; in- creasing, and in many instances unmanageable, debt burdens; and deteri- orating terms of trade resulted in serious setbacks. However, some devel- oping countries continued to make important strides. During this decade there emerged a new recognition of the importance of sound domestic economic policies. We witnessed a growing awareness of the need to remove or reform old structures in order to establish a sustain- able basis for development. The rationale for macroeconomic adjustment accompanied by structural reforms became apparent. The effectiveness of existing policies, not least for attacking poverty, was questioned. The role of the private sector vis-a-vis governments in the development process was also being reconsidered. The lesson we learned is the need to combine elements of previous strategies into a new workable synthesis based on macroeconomic adjustment and development of human capital. Even if the global economic effects of the Middle East crisis cannot be fully estimated at this point, we have already witnessed serious disruptions in the immediate neighboring countries. We know that the crisis will put a heavy strain on the already difficult economic situation in many other de- veloping countries. This is especially the case for the most heavily indebted countries and least developed countries. The Bank, together with other multilateral institutions, should take immediate steps to address the new problems these countries are facing. It must be considered a priority matter to secure an orderly continuation of the reform policies. We are greatly encouraged by the relaxation of the tension between the major powers and the transition to political pluralism and market-oriented economies in Eastern and Central Europe. Similar positive trends are now emerging in many developing countries. We welcome the increasing recog- nition that democratization, respect for human rights, and broad popular participation are preconditions for development. We must keep in mind that each country is responsible for its own devel- opment and for promoting the welfare of its citizens. But the international community must offer its support. The poorest and most vulnerable devel- oping countries need special consideration. We, developing and developed countries alike, must build a true partnership for development. This was the political message from the recent Second UN Conference on the Least Developed Countries. 161 Sustainable growth requires structural reforms and restoration of mac- roeconomic stability. It also requires policy changes to stimulate invest- ments. The effects and benefits of adjustment programs have been exten- sively discussed over the past few years. This debate, and not least the two important evaluations of adjustment lending undertaken by the Bank, have contributed to a better understanding of what policies and changes are required for longer-term development. It has clearly brought out the impor- tance of preventing and mitigating adverse consequences of adjustment for the most vulnerable groups in society. Many developing countries are still facing severe obstacles to growth. The debt problem is one such obstacle. The debt overhang undermines the efforts of many countries to get back on the path of steady growth. Continuation of comprehensive reform programs, adequate transfers of financial resources, and a stable international economic environment are key elements of the strengthened debt strategy. The international financial institutions must provide both policy advice and financial assistance to help countries persevere in their efforts. But the bulk of the necessary financing must come from other sources. Though debt relief is no panacea, it is increasingly being recognized as an essential component of the debt strategy. As regards the severely indebted middle-income countries, indications are that some are making tangible progress, in spite of inadequate financing from commercial banks. Such shortfalls can lead to underfinancing of ad- justment programs and increase the risk that the official creditors, including the multilateral institutions, have to bear an unreasonably large part of the financial burden. In spite of substantial efforts to ease the debt burden of the poorest countries, the situation remains precarious for many of them. This is a matter of major concern. In addition, the recent oil price increase adds to the already heavy burden. We believe it is time to consider debt relief measures beyond the Toronto terms. We have noted with considerable in- terest recent proposals to this effect. We hope for an expeditious and con- structive examination of these proposals in the relevant forums. Additional debt relief is also needed for certain debt-distressed lower middle-income countries. The Nordic countries therefore welcome the prog- ress made so far in the Paris Club with regard to this group. In 1989, official development assistance stagnated. Overall net resource flows to developing countries declined. We are now at an all-time low, that is, less than half the 0.7 percent ODA target. This is a serious and deplorable situation. We fully agree with President Conable that this is totally incon- sistent with the actual needs, particularly in a situation where many devel- oping countries are undertaking courageous economic and social reforms that need our support. Equally discouraging is the fact that the share of international develop- ment assistance to the least developed countries is far below the 0.15 percent 162 target. An increased effort to assist this group of countries must remain one of our main goals. In order to tailor support to changing needs, it is important that donors are flexible in their development assistance. This has a bearing upon the formulation of the Bank's strategy and priorities. Generally, the Bank has demonstrated its ability to adapt to changing needs. We welcome that fighting poverty, reversing environmental degra- dation, and promoting the role of women in development have become priority areas for the Bank in the 1990s. The Nordic countries fully endorse the two-track strategy for attacking poverty outlined in this year's World Development Report-namely, em- phasis on economic growth based on labor-intensive investments and on efforts to rai!-1e standards of basic health and education. These two tracks are mutually supportive. We welcome the consensus on these issues mani- fested in the communique from the Development Committee. The World Development Report, as well as the recent report on Sub-Saharan Africa, outlines new strategies which now need to be made operational. It is also of crucial importance to address rapid population growth through family planning. Today many developing countries put stronger emphasis on the role of the private sector. This is reflected in a growing demand for the services of the IFC. The Bank Group should playa central role in supporting the devel- opment of the private sector. This includes the creation of an environment conducive to entrepreneurship. The Nordic countries support a substantial capital increase for the IFC. I fully endorse the view of President Conable that we should aim at reaching an agreement on the capital increase by the end of the year. I welcome the expanded Bank program to assist member countries in Eastern and Central Europe. We all know that these countries are con- fronted with a daunting task of reconstruction. However, it is important that the Bank's program in Eastern and Central Europe can be implemented without diverting staff and budget resources from the programs for the poorest countries. Together with the Fund, the Bank should play an active role in the coordination of international efforts to facilitate the transfor- mation of Eastern European economies. In addition to traditional project lending, the Bank should focus on areas in which it has a particular com- petence, such as demonopolization, privatization, and sector reforms. A close collaboration with the European Bank for Reconstruction and Devel- opment should be established. The Bank's first annual report on the pressing issue of the environment shows that important progress has been made, not least during fiscal year 1990. As a leading developing institution, the Bank has a crucial role to play by fostering the necessary conditions-economic, institutional, and regulatory-for sound environmental policies and plans. Its vast experience 163 of project financing and technical assistance should be put to an even better use for integrating environmental concerns in its operational activities. Efforts to deal with threats to the global environment are accorded high priority by the Nordic countries. Such efforts require the provision of new and additional concessional resources to developing countries undertaking actions to improve the global environment. We are encouraged by the prog- ress made in establishing a Global Environment Facility, and look forward to a broad multilateral agreement in the coming months. We are today at a turning point in history. Lessons of three development decades are drawn. The results for the poorer developing countries are discouraging. But experience has shown the path forward. This meeting has confirmed that a new international consensus is being forged for a devel- opment strategy for the 1990s. What is needed now is to translate this consensus into action. PAKISTAN: SARfAJ AZIZ Governor of the Bank I congratulate the Chairman on presiding over these Annual Meetings at a most challenging time. Kenya stands out as a model of sustained growth and stability in Africa. Your inspiring address has been a source of guidance and hope in our deliberations. I also welcome Namibia, Bulgaria, and the Czech and Slovak Federal Republic as new members of the Fund and the Bank. I also join previous speakers in expressing my appreciation for the excellent arrangements made for these meetings. While the world was still in the midst of celebrating the end of the Cold War, while the applause to herald far-reaching reforms in Eastern Europe was still ringing in the air, and while the first few steps on the path of sustained growth and stability were being taken, the world was overtaken by a gigantic crisis arising from developments in the Middle East. The adverse impact of this crisis on oil importing countries has been severe. For countries like Pakistan, the balance of payments has been affected not only by a sharp increase in prices of oil and oil products but also by a substantial decline in home remittances and loss in exports to these countries. The Gulf crisis will impose on Pakistan a minimum additional burden of $1.1 billion due to the expected increase in the oil import bill, loss in workers' remitt- ances, loss in exports from enforcement of sanctions, and the cost of reha- bilitating expatriate Pakistanis returning from Kuwait and Iraq. This esti- mate is based on an average oil price of $24 per barrel. If the price of oil exceeds $30 per barrel, the adverse impact may be between $1.7 billion and $2.0 billion. The majority of developing countries are net oil importers and face a sharp deterioration in their terms of trade. These countries have little elbow room. Most of them are in the midst of an adjustment process. While these 164 ._-----_._.._---_.. __ _-_ .. .... countries have to take all feasible measures to face the new situation, their capacity is limited in relation to the magnitude of the adverse impact. Therefore, it is imperative that supportive arrangements are put into effect to help developing countries overcome the adverse impact of this crisis. Intensive consultations are in progress this week to explore the scale and modalities of this assistance within a coordinated framework. May I offer some suggestions on the role that the Fund and the World Bank can usefully perform in these circumstances .. The World Bank ... The World Bank must complement the role of the IMF in helping its member countries to overcome the effects of the current crisis. As the experience of dealing with the crises of the mid-1970s and the late 1970s clearly shows, provisions of larger amounts of assistance on harder terms will only create an unbearable burden of debt in the future. The key to sustainable growth will be larger flows of concessional assistance from the Bank in the coming year. In the past decade, the World Bank has introduced a number of innova- tions and improvements in its operation by increasing allocations to social sectors, expanding program lending for structural adjustment, paying greater attention to environmental issues, launching new initiatives on Sub- Saharan Africa, and accepting the reduction of poverty as a major devel- opment goal for the 1990s. But, as a major channel for the transfer of resources to developing countries, the Bank's role has been narrowing. Because of rising debt-financing costs of the past loans, the net transfer of resources from the IBRD has been negative for the fourth successive year. With IDA's net flow of $3.4 billion, the total net flow from the Bank and IDA was marginally positive in the fiscal year 1990. Considering the rising need for liquidity and resource transfers, this is hardly reassuring. We hope it will be possible for the Bank to augment the resources avail- able under IDA-9 through additional contributions. In this regard, we wel- come the announcement by the Governor for Kuwait to increase their con- tribution to IDA-9. We furthermore hope that a part of the additional resources under IDA-9 can be used to provide emergency assistance to countries that had a large number of emigrant workers in Kuwait and Iraq, for their repatriation and resettlement; and to expand the meager resources currently available to the IDA debt-reduction facility created in 1989 and to extend this facility to a larger number of countries by changing the eligibility criteria from "IDA only" to "IDA-eligible" countries. It is also important that the Toronto terms with recently suggested improvements be applied to all IDA-eligible countries, especially those that have been most severely affected by recent shocks. I would like to propose that in line with the arrangements being evolved by the IMF, the World Bank should also consider establishing a subsidy 165 account to reduce the interest rates on a part of the IBRD loans for IDA- eligible countries, to keep their future debt burden within manageable lim- its. We are greatly encouraged by the recent initiative of the World Bank to give greater attention to the objective of poverty reduction and the specific target of reducing the population suffering from absolute poverty by more than 400 million in the coming decades. In his address yesterday, Mr. Con- able also highlighted the need to measure the impact of various policies on the objective of reducing poverty. These have far-reaching implications for the program of structural reforms currently being undertaken by the Fund and the Bank. Sustained growth, a stable balance of payments regime, and a balanced fiscal system are no doubt necessary conditions for reducing poverty but would not by themselves be sufficient. We would need in most cases a very different kind of structural adjustment to deal with such obsta- cles as inequitable distribution of land; net transfer of resources from the agriculture sector through price, import, and exchange rate policies; adverse terms of trade for the agriculture and rural sectors; and the overreliance of the fiscal system on indirect taxes. We do not have a meaningful analytical framework and criteria for a structural adjustment package for poverty reduction. I also believe that some elements of this package, such as agri- cultural and food subsidies, would not always be consistent with the tradi- tional adjustment packages. We hope, therefore, that The World Bank would follow up its initiative in this area, by joining forces with agencies such as the IFAD, UNICEF, and UNDP to evolve a structural adjustment framework for poverty reduction in selected countries. In the absence of such a framework, I am afraid direct intervention in support of the poor will have only a limited impact. Finally, may I say a few words about Pakistan's efforts at structural reform to improve the efficiency of resource allocation and to attain the viability of the economy over the medium term. In recent years, Pakistan has not only achieved impressive growth with relative price stability, but has also been implementing a broadly based program to liberalize the economy. More specifically, the program has emphasized wide-ranging financial reforms to make the sector market-oriented, liberalization of sanctioning investment, lifting of controls on domestic trade, decontrol of prices, and maintenance of a flexible exchange rate regime. In addition, a program to privatize nationalized enterprises has been initiated. While this has been a difficult process, the resultant improvement in policy environment has started paying dividends. Although much of the gains of adjustment have been clouded by the Gulf crisis, the achievements are by no means unimpressive. It is also encouraging that we have developed a bipartisan political approach toward economic reforms. The structural adjustment programs finalized with the IMF and The World Bank have not been affected by the political changes that occurred in 1988 and 1990. However, we need the continued under- 166 ,-,.'-"--,--------- standing and support of international financial institutions to carry this program forward to the desired objectives. In conclusion, may I express the hope that the strong measure of solidarity shown in the recent Gulf crisis by countries of the North and the South will lead to what President Bush called "a new partnership of nations" for sustainable and equitable growth in the world economy in the coming dec- ade. PARAGUAY: CARLOS ALBERTO KNAPPS Alternate Governor of the Fund On behalf of the Government of the Republic of Paraguay, I have the honor to present my most cordial greetings to the Chairman of the joint Annual Meetings, the Managing Director and members of the Executive Board of the International Monetary Fund, and the President and Executive Directors of the World Bank Group, as well as the Governors and delegates of the member countries of the participating institutions. We welcome into our fold the Czech and Slovak Federal RepUblic, Bul- garia, and Namibia as new members of our two institutions. Our attendance at this gathering bears witness to our gratitude for inter- national cooperation and solidarity and the renewed hope that the Fund and the Bank will continue to be the main players in overseeing the inter- national financial system and the channeling of sufficient resources to the developing countries. In grappling with instability and stagnation, the developing countries have made great efforts to take up the challenge of economic adjustment. The results are for the most part modest, and have meant high social costs. Most of the developing countries continue to suffer from inflation or, in seeking to consolidate stabilization, face stagnation or recession, despite the favorable results of efforts in the export arena. Specifically, economic conditions deteriorated in Latin America in 1989 despite its large trade surplus, owing to generally modest expansion in the value of exports and a contraction of imports in countries where the activity declined. Despite that surplus, the number of countries with arrears in servicing their external debt increased. The scenario of stagnation and high inflation that the region faced was shaped largely by a phenomenon that characterized the decade: the transfer of financial resources abroad. Beleaguered by external debt service and with limited access to new external financing, most of the regional countries continue to manifest the symptoms of a complex syndrome of structural imbalances, fiscal deficits, and low levels of investment, which are reflected in prolonged stagnation, often accompanied by rapid inflation and a marked erosion of real wages. 167 This year saw the imminent danger of an international outbreak of hos- tilities, which seriously threatened the stability of international markets and the possibilities for the developing countries to make greater headway in their recovery efforts. Under the circumstances, it is vital that international attitudes continue to change and commit further to improving the external economic environ- ment which we borrower countries face, namely, the financial and world development situation. In this respect, we support the initiatives aimed at reducing or eliminating barriers to international trade for products from the developing countries, as well as measures to reduce significantly the burden of external financial commitments on the most vulnerable economies. The international financial organizations playa key role in supporting the stabilization and economic adjustment programs of the member countries, contributing funds and acting as a catalyst and beacon for other sources of financing, especially commercial. The stabilization and adjustment programs should provide for longer terms and be based on sufficiently flexible criteria that respond to the struc- tural constraints on the development of each country. Paraguay's Economy The economic policy changed significantly in February 1989, when the new government took office, with the introduction of corrective measures to combat internal disequilibrium. The exchange and price systems were liberalized. Greater control of public spending was introduced and ceilings placed on public credit, along with an end to exchange subsidies and other trade restrictions. The establishment of the free exchange system in February 1989 brought transparency to external and fiscal accounts and eliminated the heavy quasi- fiscal deficits. The tariff system was simplified, the result being an improve- ment in fiscal receipts generated by external trade. Tax increases helped finance the increase in expenditure and resulted in a surplus in the current accounts of the Central Government. Inflation was curbed with a more rigorous monetary policy. The economy grew in 1989 at the reasonable rate of 5.8 percent, with a substantial expansion in exports. Economic growth occurred in all sectors such as agriculture, the manufacturing industries, trade, and basic services. Arrears in servicing the external public debt and income from short-term capital prevented a negative transfer of capital. The Central Bank's inter- national reserves rose significantly, in contrast to the losses experienced during the previous eight years. The external debt with Brazil was renegotiated on favorable terms, for a period of 20 years with 8 years grace, at the LIBOR rate and with a fee of 13/16 of 1 percent per year. A mechanism whereby Brazilian debt instru- 168 ments are swapped for Paraguayan debt instruments was approved, sparking the possibility of a considerable reduction in the actual amount of the debt, given the quotation for Brazilian paper in the secondary market. The partial cancellation of the debt with Brazil in 1989 and total cancel- lation in 1990, via a swap of debt instruments, substantially reduced Para- guay's debt with that country and at the same time its total public external debt. Nevertheless, arrears mounted significantly with Paris Club creditors. A sharp increase in exports reduced the relative share of income that ex- ternal debt service represented from sales abroad. Monetary expansion was affected by gains in international reserves and a larger volume of domestic lending by the Central Bank to the private sector. Rises in the consumer price index were squelched by greater credit and monetary discipline in the second half of 1989. Inflation for the year was 28.5 percent. In 1989 the Central Bank introduced a system of more realistic interest rates with regard to inflation, liberalizing the borrowing rate on savings deposit certificates, a new instrument in the financial market, and raising the lending rate of the banks to 28 percent. In 1990 Paraguay's Central Bank introduced new measures aimed at the gradual reform of the financial system. In order to stimulate domestic sav- ings, all bank borrowing rates were liberalized and the rediscount rate to the banks raised. The liquidity of the banks was raised carefully, using marginal cash re- serve requirements on demand and term savings deposits. With a view to exercising greater control of domestic liquidity and making the financial operations of the banks and financial entities more efficient, the issuance of monetary regulation certificates and establishment of a Mon- etary Board were approved. The Central Bank is now studying new mechanisms and instruments with a view to the modernization of the financial system and more efficient control of the country's money market. These would include the liberali- zation of the lending interest rate. The National Congress has before it a draft law that would authorize the banks to make loans in foreign exchange to finance operations associated with foreign trade. Closely linked to the financial reforms is a draft law now undergoing final review that would provide the Central Bank with a new charter designed to make its administrative and functional structure more flexible and respon- sive. Equally far along is another draft law that would amend the Law on Banks and Financial Entities consistent with the necessary control and supervision that a more competitive market would require. As for public sector reforms, government authorities and the public in general are considering a proposed tax reform aimed at giving the tax system the necessary elasticity so that it can automatically benefit from the effects 169 of economic growth and the general price level; streamlining the tax system and concentrating collection into a few wide-based taxes; avoiding duplica- tion of taxes on the same tax base time and time again; limiting and defining exemptions and avoiding inequity, redistributing the tax burden, and includ- ing sectors now unjustifiably excluded. This brief report on the measures adopted, progress made, and projects in the works shows the resolve and efforts of the Government of Paraguay to reform its economic system and recover self-sustainable growth, as a necessary ingredient for the embryonic process of democratization in the never-ending pursuit of the country's well-being and progress. In concluding these comments, I would hope that the future action taken by the International Monetary Fund and World Bank meets with success. PERU: JUAN CARLOS HURfADO MILLER Governor of the Bank I am addressing this meeting at a time when my country, Peru, is involved in a traumatic process of economic and political change. On the outcome depends, perhaps, our survival as a democratic nation. In August, as a result of the disaster inherited from the previous govern- ment, inflation was about 400 percent a month, an unprecedented figure on this continent. Under the stabilization program introduced by the new gov- ernment, inflation has been reduced in September to around 5 percent. The department which I manage eliminated in a single day the entire public sector cash deficit. This required drastic adjustments to the prices of con- trolled products and to public service tariffs. To give but a single example, fuel prices had to rise by more than 30 times, I repeat, more than 3,000 percent, a sacrifice that no government has ever been compelled to demand from its people. But despite all predictions, the men and women of Peru, although distracted by recent rhetorical excesses and threatened by terrorist groups, have not just stoically accepted their portion of this effort, but, as independent public opinion surveys demonstrate, are supporting the gov- ernment of President Fujimori, which, despite the inevitable pain caused by such a drastic adjustment, has restored hope of a better future. I hope you will therefore allow me to focus this brief address on the current situation in Peru. When we have brought the effort now begun to a successful conclusion we, the Peruvian authorities, will be able to contribute to the debate on the vital issues that have brought us together here today. However, at the present time our entire effort is concentrated on the enor- mous challenge facing us: to ensure that we put behind us, and forever, the second longest hyperinflation in world history, and to ensure that we are fighting with the best possible weapons to reduce the poverty of our people. There are numerous indicators of the disaster that we inherited as a result of the application of mistaken ideas. In recent years the Peruvian State 170 could not maintain order, guarantee public security, or provide basic ser- vices, especially to the poorest groups. Per capita incomes fell to levels comparable to those of 30 years ago; real wages are now half what they were 5 years ago, and financial intermediation has fallen by four-fifths. Public investment is only 1 percent of GOP; only 1 km of every 5 km of roads is in good condition; oil production has fallen by 40 percent; our infant mortality rate is 50 percent higher than in neighboring countries, and at the present time only one out of every five Peruvians is properly em- ployed. This year's World Development Report focuses on the urgent and dramatic issue of poverty. More than half of all Peruvians are currently living in conditions of extreme poverty. The crisis is reflected not merely in the economic and social indicators referred to above; it has also dramatically affected the moral character and effectiveness of many of our institutions. Peru today needs a cultural trans- formation if it is to recover the full exercise of the values that are essential for proper civil coexistence; the government of President Fujimori, of which I am honored to be a member, is committed to leading this process. Con- cepts such as justice, honesty, truth, and social solidarity require a new social and political interpretation so that they can serve as the four-dation for the development of an efficient economy and effective State. The 1980s in Latin America saw a succession of fiscal crises, and the nonperformance of external obligations, for reasons that have been thor- oughly discussed at previous meetings. In this new decade the region must rediscover the lost path of growth. To this end, it is essential that the State act honestly, practice austerity, and provide the conditions in which our firms can prosper, develop technology, and generate abundant jobs in a competitive and flexible environment, taking into account the enormous changes now going on in the world. This means that we must restore macroeconomic stability and ensure that it is sustained over time. It also means that structural reforms must be initiated to generate sufficient confidence so that Peruvians and foreigners begin to invest again in Peru, in projects that owe their competitive advan- tage not to State incentives, subsidies, or privileges, but to the appropriate exploitation of Peru's natural resources, the imagination and leadership of its creative spirits, and the efforts and perseverance of its workers. To stabilize the economy and to reduce inflation from last month's 400 percent to prevailing international levels, the internal financing of public expenditure has been eliminated. Significant reforms have also been made in customs duties by eliminating all nontariff barriers and retaining only three levels of duty: 15 percent, 25 percent, and 50 percent. These measures will be refined over time in order better to meet our objectives. I would also like to inform these Meetings that, because of the bankrupt nature of the tax administration we inherited, we must still have recourse to inefficient emergency taxes. In order to correct this problem, we have requested leg- 171 islative powers from the congress, already approved by the senate, to alter completely the taxation system. A tax reform will come into effect in Jan- uary 1991. We are going to simplify the tax system considerably and elimi- nate preferential treatment in order to obtain larger yields, greater equity, and an appropriate degree of efficiency in combatting tax evasion. In commercial matters we aim to achieve a uniform customs tariff of 25 percent within two years. It should also be noted that the Government has initiated action with a view to distributing and guaranteeing property titles, simplifying administrative procedures, and reducing the cost of access to the legal system. We shall also undertake a comprehensive reform of the State, which entails restoring the capacity to deal effectively with the scourge of drug traffic and with terrorism. We shall also set in motion a program to rationalize and privatize State enterprises. I would like to acknowledge the goodwill shown by the managements and staffs of the World Bank and the International Monetary Fund toward our government. The efforts recently made by the missions sent to Lima by these organizations and by the Inter-American Development Bank dem- onstrate how technical discussions can enrich proposals for stabilization and structural reforms. We look forward to working closely with the multilateral organizations in the analysis of the reforms contained in our medium-term economic program, the objective of which is, I repeat, to improve the well- being of Peru's population through policies which, by ensuring fiscal equi- librium and macroeconomic stability, guarantee the growth of GDP per capita, and raise the percentage of the population properly employed, while also increasing the real value of wages and improving the quality of life. Our struggle and our unstinting efforts are aimed at eradicating poverty. We are especially grateful for the assistance of the Managing Director of the International Monetary Fund and the President of the World Bank in helping us to obtain the resources necessary both to payoff Peru's arrears to the multilateral organizations and support our medium-term economic program. On behalf of the Government of Peru, I am pleased to announce to the international financial community that, in light of projections of our fiscal and external resources, Peru will in the second half of October resume prompt payment of its current obligations to the multilateral organizations. We also intend to agree on a reference program with the IMF and The World Bank in order to obtain the external resources needed to support the medium-term reforms. Next January, the Government intends to participate in a meeting of the Paris Club in order to re-establish a dialogue with Peru's official creditors. Immediately afterwards, formal conversations will resume with the Advisory Committee of the commercial banks. I would also like to inform you that some creditor banks that had started legal proceedings against Peru have dropped these actions as result of a legal agreement between the parties. 172 ----------------- As a representative of Peru I bring to this meeting not complaints but news of achievements which, although fragile, represent an historic advance in the attempt to restore the minimal stability in our economy that would enable us to return to the path of growth. The performance of Peru's economy in recent years shows the folly of the notion that, on the threshold of the twenty-first century, a country can live by turning its back on the huge changes now occurring in world finance and international trade. The result was a cumulative inflation of two million percent. The changes in Peru's economy over the next five years, should show the world what can be done by the effective application of sound policies and by international assistance to a nation currently experiencing what are per- haps some of the most difficult and dramatic moments in its entire history. The achievements of President Fujimori's government in a mere 60 days since taking office testify not to the qualities of its members but to the courage and patience of the people of Peru, who have not only understood but endorsed an adjustment of such magnitude that, in the opinion of some analysts, it could risk the very foundations of our future survival as a dem- ocratic nation. Peru today is once again standing up to adversity and has declared war on poverty. Now we need your understanding and support. 1. The Inherited Situation The previous government's use of misguided policies led to a period of hyperinflation which, until the recent stabilization program began, was the second longest in world history. When the new government took over, infla- tion in the preceding 12 months was running at more than 3,000 percent. Inflation in the last month on an annual basis was over 300,000 percent, and during the previous administration inflation was more than 2,000,000 percent. During that time the price system collapsed as a result of price controls, multiple exchange rates, and tariff, nontariff and tax policies that were haphazard and complex. The plunge in tax revenue generated a chronic deficit for the central government beginning in 1986, owing primarily to tax exemptions, the re- duction in key taxes and rates, cumulative delays in collection, and a growing lack of control. Tax revenue fell from 14 percent of GOP in 1985 to 4 percent of GOP in the first half of 1990, destroying the financial viability of the public sector. At the same time, the average real interest rate in the first half of 1990 was greater than 100 percent annually. Spending by the central government was also down sharply, as the gov- ernment could not provide minimum health and education services. Social expenditure fell from US$45 per capita at the beginning of the 1980s to US$15 in 1989. Furthermore, the prices and tariffs of the largest public 173 enterprises were subject to political manipulation, and their administration, inefficient in itself, was hampered by a massive increase in employees who were members of the government's party. Subsidies for these prices and tariffs-gasoline, water, electricity, and telephone-rose to US$2.5 billion annually (12.5 percent of GDP). The subsidies had a regressive impact because they primarily benefited those in the high-income brackets. This very damaging situation caused a marked deterioration in income distribu- tion and the quality of public services. The social debt that mounted is now reflected in infant mortality 50 percent higher than in neighboring countries. Real wages fell by half between 1985 and 1990, during which period per capita GDP declined by 12 percent. Social services fell to unprecedented levels. The hospitals did not have medication or food for their patients, and schools lacked basic educational materials. Thberculosis and illiteracy have increased to record levels. That social debt with the low-income sectors, perpetrated by the previous administration, requires immediate attention and a budget larger than Peru can meet using tax revenue. Thus, the urgent need for donations and external assistance for our Emergency Social Pro- gram. Basic infrastructure for transportation, communications and energy has also suffered terribly. For example, solely to rehabilitate the roads infra- structure existing in 1985 would cost more than US$1 billion. The automo- tive fleet, railways, port infrastructure, and communication systems cannot sustain the level of production they did five years ago and are severely undermining international competitiveness. Peru has been accumulating arrears in its payments on its external debt since 1983. That year, natural disasters and the economic crisis triggered a 12 percent fall in GDP. In 1985, the government of Alan Garcia publicly declared unilateral withholding of external debt payments. In addition, the previous government withdrew from the negotiating table, a move that caused Peru to be isolated financially, commercially and diplomatically from the international financial system. As a result of nonpayments on Peru's total external debt of approximately US$20 billion, arrears of more than US$10 billion have accumulated. This makes the position of the new government especially difficult. The arrears affect both Peru's debt with the international banking system and with suppliers, multilateral agencies, and governments. In order to recover macroeconomic stability and sustain a growth rate that would permit an improvement in the well-being of its people, Peru needs a substantial reduction and restructuring of its international obliga- tions, as well as structural reforms that enable it to increase efficiency in its productive sectors and the rate of return on future investments. This would enable the country's economy to return to a long-term horizon that restores hope among its people, especially the poorest. 174 2. The Stabilization Program The stabilization program launched by the government of President Fujimori is the first step in attacking the root causes of the macroeconomic disequilibria that characterized Peru's economy at the end of July this year. Taxes and the rates charged by state-owned enterprises have been increased to eliminate the public deficit. It is expected that the tax burden will double in the next three months, with the real income of the government having risen by more than 40 percent in the first month following the start of the program, despite tremendous inflation and recession at the outset. The price of gasoline rose more than thirty-fold and most public services more than 10 times. The exchange market was unified and a floating system introduced. The Central Bank accumulated international reserves in the process, and net international reserves rose from less than US$105 million at the end of July to US$320 million in the third week of September. Even though wages are low, stringent restrictions have been placed on wage increases in the public sector. The legal minimum wage has been adjusted to reflect projected inflation and economic forecasts. As regards monetary policy, the decision not to make loans of any type to the public sector has been adhered to faithfully. The only source of new money has been external, a process that the Central Bank has been pru- dently overseeing. There are already marked signs of remonetization in the economy, and it is hoped that by the end of September liquidity will return to its levels prior to the stabilization program. Sweeping tariff reform has begun. The many prohibitions and require- ments regarding import licenses have been eliminated, along with all duty exemptions. Three duty levels of 15 percent, 25 percent, and 50 percent have been established (with an average actual duty of about 20 percent), in comparison to the almost 50 rates that existed before, which meant a max- imum duty of 120 percent. Until December 31, 1990, an additional surtax of 10 percent will be charged for fiscal reasons. These measures are the first step toward tariff unification, which will be gradually adopted. All price controls (with the exception of the legal minimum wage man- dated by the Constitution) have been eliminated, and prices are now subject to the free interplay of supply and demand. Lastly, an Emergency Social Program has been launched to compensate the lower income for the impact of the difficult social situation inherited from the previous administration and the recessive effects of the stabiliza- tion program. The program is being implemented with the active partici- pation of the more than 700 NOOs in Peru. And, despite the difficulties inherent in the program's increase in coverage, it is bearing fruit, although additional resources are needed to meet its basic objectives in full. 175 The achievements are admittedly fragile. Fiscal equilibrium is based on emergency taxes, and public spending is lower than it has been in the past. The government's party does not have a majority in Congress. Fortunately, the Senate has already approved powers so that the Executive Branch can legislate in tax matters before November 30, 1990. However, the technical teams needed for successfully implementing the reforms described below are still insufficient. 3. The Development Program In order to consolidate the stabilization program, the government consid- ers it necessary to begin immediately a development program consisting of both structural reforms and infrastructure rehabilitation. The goal is to ensure a dynamic process of investments in projects that are socially and financially profitable, in the context of an institutional framework that allows Peruvians to look forward to a brighter future. In the five years of its term, the current government will introduce tax reforms, restructure the public sector, expand external trade, rebuild the financial system and ensure its solvency, make the labor market more flexi- ble, deregulate production, and simplify adminisrative red tape. In the fiscal arena, the number of taxes will be reduced, exemptions eliminated, rates streamlined, and tax administration improved in order to make collection more transparent, equitable and efficient. This is expected to result in a tax burden equivalent to 13 percent in 1991, which will be raised gradually to 18 percent in 1994. Public spending will have to be restructured in order to both strengthen the managerial capacity of its administration and concentrate its functions in providing adequate security, rendering services, and meeting the mini- mum needs of the poorest. In order to revitalize external trade, prior to December 1992 duty rates will be unified. At the same time, temporary import arrangements will be strengthened, taxes and subsidies to exports eliminated, and the customs operating system will be restructured and strengthened. In rebuilding the financial system, the government will repeal the law on nationalization of the banking system. Likewise, the gradual liberalization of interest rates and cash reserves will continue, together with the strength- ening of banking supervision and reform of the deposit guarantee system. The functions of the Development Bank and especially the Agrarian Bank will be concentrated so that they meet only the specific needs of the most depressed sectors. The labor market will be made more flexible in the context of the mandate by the Constitution. The State will not interfere in the setting of wages in the private sector and will be moderate in determining minimum wages in line with the objective of price stability. Public sector wages and salaries will reflect the payment capacity of the central government. 176 The government will increase cooperation with the Liberty and Democ- racy Institute presided by Economist Hernando de Soto, in order to affirm the right to land ownership, deregulate production, and simplify adminis- trative procedures. In the productive sectors, the government will focus its efforts on the rehabilitation and strengthening of infrastructure projects such as mining, fishing and the creation of markets, energy, potable water and drainage, roads, and storage facilities. Efforts will be made to involve the private sector in the development and administration of the rehabilitation works and the productive sectors and infrastructure. Public investments will be properly planned and assessed so that they produce the expected benefits. The framework for the role of the State as an entrepreneur will be re- thought so as to concentrate State action on works associated with the provision of services and rehabilitation of infrastructure. In this process, enterprises that are not financially viable will be liquidated, and those that do not rightfully belong in the public sector will be privatized. Social security will be reformed to improve health care services and guarantee that pensions maintain their real value over time. The Emergency Social Program, which provides assistance to the low- income sectors during stabilization, will be gradually converted and inte- grated over the medium run into stable education, health, nutrition, and housing policies that make it possible to meet the objectives without re- sorting to direct forms of assistance. 4. Reintegration into the International Financial System The government will seek to rejoin the international financial system by resuming in the second half of October debt service payments to The World Bank and the Inter-American Development Bank. The government hopes to coordinate its program with the IMF, Inter- American Development Bank and World Bank so that it can be used as a basis for an upcoming meeting in December or January with the Consult- ative Group of the Paris Club. The government is counting on substantial support from the multilateral agencies in technical assistance, funds needed for structural adjustment and rehabilitation, the Emergency Social Program and strengthening of public administration, as well as for the financing of new projects. From member countries of the Paris Club the government will seek the favorable Toronto terms that will both provide relief on the accumulated debt and lead to the granting of new lines of credit for external trade and cofinancing with the multilateral institutions for new investment projects. Likewise, the necessary financial cooperation will be sought for settlement of the unpaid outstanding debt with the multilateral agencies. 177 With the Advisory Committee of the creditor commercial banks, the government will begin formal talks in the first quarter of 1991 on finding a mutually acceptable formula for the payment of its obligations. PHILIPPINES: JESUS P. ESTANISLAO Governor of the Bank and Alternate Governor of the Fund Events are at times dramatic reminders of basic truths. In the Philippines, the drought, a massive earthquake, and now the floods of 1990 have been reminders of how small human undertakings are beside the acts of nature and of its creator. For the world, the latest developments in the Middle East bring forth the basic truth once again: that we are a family of nations, with a code of conduct that needs to be enforced for the common good of all. It is at times such as these when conviction is deepened that nationalism is too narrow, even regionalism is too limited, and internationalism becomes a necessity. In the 1990s, more than in any previous decade, no one can escape from the interdependencies being woven ever more tightly within the global community. Due to these intricate and complex interdependencies, all of us are con- fronted with the continuing need to respond to challenge and with the pressing demand to undertake reforms. Responses and reforms may appear more quickly under other political circumstances. But in an open society, driven by people power, authorities must listen and take heed of peoples' opinions and sentiments. Procedures must be followed. Negotiations, which often seem too protracted, petty and partisan, must be undertaken. Con- sensus must be gathered and built up. Indeed, democracy may seem to be so much slower and messier. But for the Philippines, it is the surer and safer way of getting results. Our experience during the past decade has shown that almost seven years of authoritarian rule had brought economic destitution and that more than three years in an open, democratic regime enabled the economy to recover. Hobbled by debt, besieged by antidemocratic forces from the right and the left, daily criticized by sectors that had confused freedom with licentious- ness, we have managed within the democratic process to make the economy grow in real terms at 6 percent per year, to bring annual inflation down to below double digit, and to reduce the absolute level of our foreign debt stock as well as the relative burden of servicing our foreign debt. Since December 1989, however, external shocks have been endlessly hitting the Philippine economy. Growth has consequently slowed down. Inflation rates have gone up to slightly more than 12 percent per year. Imbalances have built up and are now causing considerable concern, especially since they are making the task of carrying out fundamental reforms so much more difficult. 178 We, however, cannot use the external shocks as an excuse for delaying reforms. Indeed, it is with a deep sense of urgency that we must bring our macroeconomic balances back on track so as to move forward decisively to make the Philippine economy more outward oriented, more internally dy- namic, and more externally competitive. It is precisely when the odds get to be longer and when problems seem to be mounting that we should not sacrifice long-term objectives for short-term gains. We should never lose sight of our long-term vision, even while fron- tally addressing short-term imperatives. As we fix immediate problems, we should take care not to create struc- tural problems. It is in this context that I wish to call attention to the common concerns we have about the Philippine economy. We have been able to fix the absorptive capacity problem. We are now able to manage increased capital flows for public infrastructure. We suffer from a higher public sector deficit as a result. Consequently, instead of looking through the traditional narrow lens at the bigger public sector deficit, we must begin to appreciate this positive change behind it and to respond to it differently. Previously, with the absorptive capacity problems, the Philippine economy may not have been grossly underfinanced. Now it definitely is, and the net negative flow of financing has now become a definitive restraint on growth. It has forced us to supplement inadequate external resource flows with heavier domestic borrowings, and these have now reached levels that should not be further breached. Against this background, our people have found it increasingly difficult to understand why we should be held to rigid rules. We had an opportunity to further reduce our debt stock through cash buy-backs. Until now, we have not been able to take advantage of that opportunity because the rigid rules on fungibility have not been relaxed. A case-by-case approach is supposed to be taken. But until now, there has been a refusal to draw a circle around the Philippine case, despite the external shocks we have been subjected to and the revealed market preferences that are supposed to drive the current debt alleviation program. In the current environment, when debt stock condonation and debt service condonation have been formally presented before the United States Congress, and when other innovative debt alleviation schemes have been initiated at the official level, the Phil- ippine people are confused and frustrated that despite our good record of foreign debt management, we are unable to proceed on the second round of our debt reduction initiative because the rules have not been relaxed. Our domestic rhetoric and internal political dynamics oftentimes cause confusion and exasperation even among friends who are supposed to un- derstand democratic complexities. Let me assure my fellow Governors, how- ever: no responsible sector of Philippine society-be it the executive branch or the legislative branch, be it church or business-seriously advocates unilateralism in our foreign debt management. We still believe confrontation 179 to be the wrong way and negotiation to be the smartest route toward the best results. We are staying on course, arguing for our cause through reason and appeal to the moral principles of justice and solidarity. We are not measuring the strength of our position by the intransigence of our stand, nor by the stridency of our statements. But we cannot hide our impatience nor can we rein in our earnest efforts toward faster movement, greater flexibility, and effective, immediate maximum debt relief. Flexibility is a requirement for effectiveness. We cannot merely impose conditionalities, disregarding concessionalities. We cannot mechanically project numbers, disregarding the human face of reforms, because, if we want reforms to succeed, they have to be sold with their costs accepted and their gains widely understood. The Philippines together with the rest of the world stand at an important crossroad. Either we go uphill toward full reform, or we slide right back to where we were in the crisis period at the beginning of the previous decade. Our choice is as clear as that made by people power everywhere. We are willing to pay the price of that choice. Our prayer is that we will find more than token understanding as we persist in hanging on to that choice, price and all. POLAND: LESZEK BALCEROWICZ Governor of the Fund A year ago I spoke here of Poland's extreme economic difficulties. The country was besieged by a vicious combination of hyper-inflation, declining output, and acute shortages. Decades of central planning had severely dis- torted the price structure and resulted in an inefficient, state-dominated economic system. It was a dramatic situation which required fast, bold, and imaginative action by the newly elected Solidarity Government. We accepted the challenge and carried out a thorough diagnosis, with the expert assistance of the IMF and The World Bank, for which we are pro- foundly thankful. We then embarked on a crash legislative program to form a strong legal foundation for the unprecedented operation of reversing a centrally planned economy to a market economy. That reform program, enormous in both its scope and intensity, was launched on January 1, 1990. We are very well aware of the high stakes. There are no ready, tested, and proven models to be followed. Everything must be introduced, tested, and corrected while being implemented. These operations require unflinch- ing resolve on the part of the Government and great sacrifices on the part of our society. We have both, but we know that the political tolerance of society may be brittle. We are proud of the strong resolve of the Polish people to put their house in order and to accept the costs of economic reform. But the results must show prospects for a better life. 180 We are doing our best to continue the bold economic reform program essential to the future of Poland and also important to the global reversal toward a market economy which we all praise. We need strong, unflinching, sustained, and innovative support as well as the cooperation of the inter- national economic community. The Polish reform program consists of two interrelated parts: a stabili- zation program designed to stifle hyper-inflation and balance the market; and a program of systemic changes designed to produce a modern, com- petitive, free-market economy. The stabilization strategy, which is being constantly reviewed to ensure that it achieves its objectives, consists of the following basic elements: (a) reduction of the budget deficit, achieved mainly buy cutting subsidies; (b) maintenance of a tight monetary policy based on positive real interest rates; and (c) implementation of a tough, tax-based wage restraint policy. At the same time, we initiated a number of important systemic changes: -We have liberalized prices. The proportion of prices freely determined by the market has risen from 50 percent to 90 percent. -All administrative rationing of goods and services has been abolished. -We have reformed the banking system. The Central Bank has been separated from the budget, and a two-tier banking system has been set up. A liberal policy of concessions has allowed for the formation of private banks, and some state banks are being prepared for privatiza- tion. -Competition has been invigorated by a sweeping liberalization of for- eign trade, the breaking up of monopolies, and the introduction of a unified and stable exchange rate, as well as convertibility of the zloty for current account transactions. Poland was the first Eastern European country to achieve this. -Privatization of small companies is progressing. Road transport, which used to be almost totally state-owned, is now 50 percent in private hands. Some 15,000 shops have passed into private ownership, and there are 20,000 more private firms than existed a year ago. So far, the economic reform program has been progressing encouragingly. The following are just a few positive signs that we are on the road to full recovery. Inflation has dropped from a monthly level of 80 percent in Jan- uary to 1.8 percent in August. The budget deficit has been reduced from the equivalent of about 8 pecent of GDP in 1989 to only 1 percent, and by the end of the year we shall probably have a balanced budget. Massive and widespread shortages that were part of Polish life for decades have been eliminated, and a balanced market is well established. The exchange rate has remained rock-steady for almost nine consecutive months. And, foreign trade has performed well, particularly in hard currency exports which rose by almost a 25 percent in the first eight months of this year. 181 We are most encouraged by the achievements outlined above. Regretta- bly, there are painful costs to be borne. Polish society is paying a heavy price for the transition to the market economy. The price of stifling inflation has been recession and a substantial fall in production, though I am pleased to add that the preliminary data for August show a welcomed reversal of this trend. There has also been a significant fall in living standards, with average real incomes down by about 30 percent this year. And unemploy- ment has grown to a current level of about 6 percent. The society accepted the hardships with understanding. Poles understand that things must get harder before they get better. However, in our work we have to consider the necessity of maintaining the confidence of society in the reforms and its tolerance for harsh measures. We are very apprehensive that just as the Polish economy seems to be showing the first faint signs of recovery, unexpected world events have un- favorably influenced our situation. I am referring first to the Gulf crisis. Poland was active in trade with Iraq, and loss of that export market will bear heavily on our economy. We will also be deprived of oil supplies from Iraq, and the increased world oil prices are a severe blow to our recovery. We are also very unfavorably influenced by the decomposition of the CMEA. The sharp decline of Soviet oil supplies to Poland will also deal a severe blow to the Polish recovery and impose a massive new burden on Poland's foreign exchange. Severe disruptions will also cripple the industries traditionally geared to supply the U.S.S.R. Finally, we welcome the unifi- cation of Germany; however, we cannot help but notice the related decline of demand for Polish exports, especially in the engineering industry. All of these obstacles compound our difficulties now just when Poland is at the crossroads. We are prepared to respond to these new challenges with resolve and determination. but we will need international assistance and understanding, particularly expressed in a lasting and satisfactory solution of the Polish debt burden. We experienced international solidarity in the past, and we sincerely hope this will be the case in the future. The interests of Poland and the world require it. PORTUGAL: LUIS MIGUEL COUCEIRO PIZARRO BELEZA Governor of the Bank It is a great honor and a pleasure for me to address these Annual Meetings of The World Bank and the International Monetary Fund. The world economy is entering the ninth consecutive year of uninter- rupted growth. This historical performance was made possible by a mix of monetary policies oriented toward financial stability and structural reforms aimed at strengthening the efficient functioning of market mechanisms. As was rightly stressed in last year's World Development Report, financial 182 ---------------------------------------- stability, especially in the context of unrepressed financial markets, is the right environment for steady growth and social development. I would add that the evidence for my country is, if anything, stronger than suggested by The World Bank. The European Communities assume these goals as fundamental in the context of the just-born Economic and Monetary Union. When the full union is achieved, there will be a single currency and a single monetary policy carried out by a central monetary authority that will have the une- quivocal mandate of ensuring price stability and, of course, the single mar- ket, including perfect capital mobility is just around the corner. We are fully committed to this integration process and, in particular, to full economic and monetary union. I believe that both the challenges from, and the opportunities afforded by, EMU are the greatest for a country such as mine. In the long run, given sound monetary and fiscal policies, the prospects for the Portuguese economy are very good. The fact that growth has been based primarily on the sustained expansion of investment and exports, strongly suggests the long-run sustainability of recent trends. In fact, our growth is widely forecast to be one of the strongest of the EC through the 1990s. The recent events in the Persian Gulf have introduced an important ele- ment of uncertainty in the outlook of growth and price stability for the world economy. It is important to recognize that the sharp rise in oil prices is basically the consequence of the effect on demand of the increased uncertainty. It is not the result of a structural shift in supply. Nevertheless, these reactions may well have lasting effects, as the so-called shock of 1979-80 testifies. The experience with the previous oil shocks shows that it is completely futile to try and offset the decline in real incomes derived from the terms of trade loss. It is therefore important: first, to pass the increase in crude oil prices on to final users, that is, consumers and firms should be given the appropriate price signals; second, to ensure that the change in relative prices is not offset by nominal increases in other prices and incomes; and third, to pursue tight, nonaccommodating budgetary and monetary policies. One possible, unfortunate consequence of this policy reaction may be a rise in world interest rates given, in particular, the scarcity of world savings relative to investment at current rates. But our common experience is eloquent enough. There is no alternative if conditions for steady growth are to be preserved. There is a very substantial role to be performed by the International Monetary Fund and The World Bank in supporting the appropriate policy responses. The availability of stabilization assistance associated with posi- tive conditionality could be the most appropriate. I would like to welcome the ongoing considerable efforts in this direction by both organizations. The 183 proposals put forward by the United Kingdom, France, and the Netherlands ought to be considered in this light. Our current involvement in development assistance will reflect these principles. One of the most important points of our policy agenda is a broad priva- tization program. This is a crucial part of Portugal's overall strategy to reduce the weight of the state in the economy and strengthen the role of the private sector and of market mechanisms in resource allocation. Priva- tization is also important as a means of reducing the debt burden. By law, the proceeds from the sale of state-owned enterprises are to be used to reduce the public debt. Allow me to suggest that our experience in this field may be useful for other countries initiating or considering such a program. But let me make clear that I am not suggesting that we have discovered something new. In fact, as Alfred Marshal once said, "It is all in Adam Smith": In every great monarchy of Europe the sale of Crown lands would produce a very large sum of money, which, if applied to the payment of public debts, would deliver from mortgage a much greater revenue than any which those lands have ever afforded to the Crown .... When the Crown lands had become private property, they would, in the course of a few years, become well improved and well cultivated. ROMANIA: THEODOR DUMITRU STOLOJAN Governor of the Fund and Bank I welcome the opportunity to address this distinguished gathering and would like to welcome the new members of the Bretton Woods family. Even in the darkest moments of our existence, our membership in the Fund and Bank still left us feeling that we were part of the civilized world. Now, for the first time, we are free to express our gratitude to the staff and management of these two institutions for their support to us. We are firmly resolved to do our best to improve our relations with these two institutions. In line with this, I am pleased to announce that Romania has just joined the International Finance Corporation. We are expecting substantial tech- nical and financial support from IFC to help develop the emerging private sector of our economy. Also, we come here with hope that our problems and the great challenges which we are now facing will be well recognized and understood. Romania is currently pursuing its economic reform program with a view to shortening the period of transition to a market-oriented system in the broad framework of a multi-party democracy. The firm commitment of the Romanian Parliament and Government to a market economy, in the context of a general policy of stability and structural 184 adjustment, is illustrated by the following main measures which have already been taken: -The totally rigid command system of planning has been abolished. Market institutions and a market-based approach to the distribution of physical and financial resources are also being introduced. -A framework of incentives has already been created in Romania, al- lowing for up to 100 percent ownership by foreign investors. -State enterprises are being converted to commercial companies and, with a view to privatizing these companies, one-third of the state's ownership is being freely given to the people. For the remaining two thirds, shares will be issued and sold to Romanian and foreign inves- tors. - Reform of the banking and tax system is under way. Starting on Sep- tember 5, 1990, the National Bank of Romania was split into a central issuing bank and a commercial bank, as a first step toward creation of a merchant banking system. We are now facing the crucial problem of speeding up implementation of the reform program, with emphasis on stability and structural adjustment. To this end, new measures are to be taken in the coming months with a view to: -completion of tax and banking reforms; -promotion of a tight fiscal and monetary policy; -introduction of a social security safety net; -liberalization of prices; and -preparations to make the national currency convertible. We are aware that implementation of such comprehensive, market-ori- ented reform policies is doubly difficult for us for both domestic and external reasons. First of all, we have to change the old mentalities of the people with respect to property, the management of the economy, and incentive mechanisms. Second, the Gulf crisis will deeply affect our external position because of the increases in the price of crude oil, as well as the losses we have to bear in joining the international embargo against Iraq. Apart from this, Romania will suffer another important shock due to the restructuring of COMECON relations and the forthcoming change in the conduct of our economic relations with this group of countries, on a freely convertible currency basis, starting next year. We are also aware that, even though at the present time Romania has no external debt, this was achieved at huge social and economic cost. The most harmful aspect is the isolation of our economy from technological advances in the rest of the world. Despite these difficulties, the present Government of Romania is fully committed to the goals of democracy and market economics. There is no turning back. However, we realize that, even if we mobilize all our domestic 185 resources, economic reform cannot be successfully implemented without technical and financial support from the Fund, The World Bank, and the international financial community at large, because of the far-reaching and comprehensive nature of the changes involved. Therefore, we expect that the IMF will be prepared to extend financial support to us through a Stand-By Arrangement in order to sustain our economic reform program, as well as through other facilities as needed to achieve convertibility of our currency. At the same time, we need the sup- port of The World Bank Group to finance our structural adjustment and a number of investment projects. In presenting this overview of the problems that confront us, I simply wanted to bring to your attention our difficulties and to express the hope that our efforts will benefit fully from international financial support. In concluding, I should like to make my message as clear as possible: Romania is fully committed to moving toward a market-oriented economy. It depends to some extent on the international financial community how short our journey toward this goal can be made. SOMALIA: ABDIRAHMAN JAMA BARRE Governor of the Bank (on behalf of the Arab Governors) It is a great honor for me to speak to this distinguished gathering on behalf of Arab Governors of the International Monetary Fund and The World Bank. I would like to take this opportunity to welcome the new members to the Bretton Woods institutions, as well as those who are on their way to becoming members. The international character of our two institutions will no doubt be enhanced by these important additions to their memberships. The Iraqi invasion of Kuwait and the ensuing uncertainty in the interna- tional oil market have, no doubt, complicated the task of global economic management. The Fund and the Bank are called upon to respond to the needs of the current situation. We welcome the efforts being made in the Executive Boards of the two institutions to explore adaptations to their policies that would facilitate a timely and appropriate response. This is particularly crucial for those members who are most directly and seriously affected. For some countries in our region, the adverse consequences of recent events, particularly those associated with the interruption of trade and the loss of income from workers' remittances and tourism, are certain to be quite staggering. The current circumstances in the countries in ques- tion call for immediate and adequate external support, including finding permanent solutions to the severe external debt difficulties that they face. The urgency of the situation in these countries has been recognized by the 186 international community, and the Bretton Woods institutions should act with the speed and imagination that current circumstances require. In addition to the recent unfortunate events in the Gulf region, a great deal has happened since our last meeting a year ago. During this period we have witnessed momentous changes in East-West relations, which all but ended the state of polarization that had characterized the international order for decades. The dramatic changes that have occurred in Central and East- ern Europe are a clear indication that we are indeed stepping into a new era in the world's modern history. These developments are, in our view, part of a broader historical process that is not confined to Europe. Indeed, we view the unmistakable trend toward reform in the developing countries as a manifestation of the same sense of pragmatism as that shown in the search for ways to fulfill people's aspirations everywhere for a better quality of life, materially and otherwise. The challenge, however, is to ensure that this process of systemic reorien- tation will succeed in bringing about the desired objectives. If central plan- ning and public sector control of resources have often inhibited the produc- tive and efficient use of resources, it does not follow that a reorientation of the system would automatically ensure that the totality of social and eco- nomic objectives will be attained. This should be kept in mind in formulating programs of structural and systemic change in which the Fund and The World Bank are playing an important role. The recent unfortunate developments in our region are a stark reminder of the high degree of interdependence that characterizes today's world econ- omy. It is our strong hope that stability will soon be restored to our part of the world so that energies and resources will be redirected back to meeting the needs and aspirations of our people, which are the same as those of people everywhere. As you know, the Arab countries represent a broad cross-section of the developing world. As such, we understand the problems and challenges facing the various groups of developing countries. Among us, we have low- income countries, including my own country, which are striving to reverse the alarming decline in their standards of living that has occurred in recent years. We also include indebted middle-income countries, who are strug- gling to put their economies on a path of noninflationary growth and exter- nal viability. Among us also are oil exporting countries, which are making great efforts to diversify their economies while adapting to the sharp fluc- tuations in their income associated with oil market developments. Despite their dependence on one nonrenewable resource, the oil exporting Arab countries have provided generous external assistance to other developing countries inside and outside our region. Development and balance of pay- ments assistance from Arab donors has amounted to more than 100 billion dollars during 1973-87. 187 I mention all this only to underscore the fact that the Arab countries, in their diversity, face the same challenges and responsibilities as the rest of the world, particularly the developing world. The developments of the past year and the more recent events in the Gulf region, important as these may be, have not changed in any fundamental way the task facing the international community over the medium term. Indeed it remains essential that a sustained and cooperative approach be followed to achieve progress in resolving the major difficulties facing the world economy. This continues to require that industrial and developing countries, as well as international institutions, play consistent and mutually reinforcing roles. Industrial countries need to adopt macroeconomic policies that ensure noninflationary growth in the world economy. This requires, among other things, that deficit countries reduce their excessive absorption of global savings. Structural distortions in industrial countries, particularly those that affect global resource allocation, should be eliminated. An open and mul- tilateral trade system remains of paramount importance to global growth and external adjustment. We therefore attach great importance to a suc- cessful conclusion of the current Uruguay Round of trade talks. In addition to adopting policies conducive to global growth and adjust- ment, major creditor countries will need to strengthen the existing mecha- nisms for bringing down the debt burden of developing countries to a more substainable level. The framework that has been established to facilitate debt and debt-service reduction for countries whose debt is owed mainly to commercial banks is beginning to show some positive results, but efforts should be sustained to ensure that the framework is effective in easing the debt burden for all the countries that had been targeted by the 1989 debt initiative. During the past few years, a number of welcome steps have been taken by the official creditor community to help the low-income countries deal with their especially difficult situation. This notwithstanding, and given the continued deterioration of their economic performance and in their stan- dards of living, the effort to assist these countries should be sustained and strengthened. Creditor countries also have an important role to play in easing the debt burden of middle-income countries, and especially the lower middle-income countries, which are heavily indebted to official creditors. This is one aspect of the global debt problem that has not received adequate attention in the past. We therefore welcome the more recent indications that major creditors are indeed considering ways of providing the type of debt relief that is consistent with the debt-servicing capacity and external viability of these countries. It goes without saying that a favorable external environment and external financial support are only necessary conditions for developing countries to 188 be able to put their economies on a path of noninflationary growth and external viability. It is the responsibility of developing countries themselves to adopt and implement the policy changes needed to achieve these objec- tives. The pragmatic approach to policymaking that one observes in the developing world today is an indication that developing countries are ready to do their part. But to help sustain the adjustment process, the international community needs to assist in mitigating the short-term costs associated with policy reform. The Bretton Woods institutions have a crucial role to play in this regard. First, they need to ensure that adjustment programs are designed and phased in a way that takes into account the particular circumstances of each country. Concern about the short-term costs of adjustment, particularly for the more vulnerable segments of the population, is justified not only in its own right but also because of its implications for the sustainability of ad- justment. Second, the direct financing role of the two institutions remains crucial. We therefore consider it essential that they be provided with enough re- sources to enable them to respond to members' needs in a timely and adequate manner. In this regard, it is our strong hope that the coming into effect of the Fund's quota increase will not be unduly delayed. With respect to The World Bank and its affiliates, we commend the agreement reached on the IDA-9 Replenishment and appreciate the efforts of donor countries that made this successful conclusion possible. We also welcome the agreement in principle reached with donors on the second phase of the Special Program of Assistance for Africa and hope that the coming pledging meeting of donors in October will ensure adquate funding of this vital program. The World Bank has been rightly focusing attention on a number of key areas of special operational emphasis, including the interrelated issues of alleviating poverty, protecting the global environment, and enhancing the role of women in development. We welcome in particular the greater em- phasis now being given to alleviating the plight of the poor, who now account for one third of the developing world population. Obviously, this task re- quires not only sound strategies but also sufficient transfer of resources. In this connection, we look forward to larger and more broadly based Bank lending commitments and greater attention to the Arab region, where op- erations have been far from adequate. Third, the two institutions playa vital role in coordinating and catalyzing financial support to members from other sources. We see it very much in line with this role that the Fund and the Bank draw the attention of the international community to the particular needs and problems of various groups of their memberships, including the financing needs of the lower middle-income countries, which I referred to earlier.... . . . As shareholders in the Fund and the Bank, we want these two 189 institutions to maintain their financial soundness. The problem of arrears continues to be of concern to us. Therefore we welcome the significant efforts that have been made to resolve this problem since our last meeting. We are heartened by the progress achieved in a number of cases. But a full resolution of this problem should remain the objective. This can be achieved only through the cooperation of all parties concerned and through assur- ances to countries in arrears that when they do their part on the policy front, the necessary international support will indeed be forthcoming. SOUTH AFRICA: B. J. DU PLESSIS Governor of the Fund It is a pleasure to associate myself with fellow Governors in welcoming the Republic of Namibia, the People's Republic of Bulgaria, and the Czech and Slovak Federal Republic to this year's Annual Meetings. Their associ- ation with these institutions will no doubt benefit their people. Our best wishes in particular go to our neighbor, Namibia, where over many years we contributed to economic development, particularly to its infrastructure. As elsewhere in the developing world, all the countries in the Southern African region, including South Africa, still fall far short of fulfilling the basic needs and the aspirations of their people. Indeed, dealing with the problems of developing world is a daunting task that calls for inspired lead- ership, original thinking, and the cooperation and support of the world community. The plight of the African continent and the need for concerted action have been highlighted by the World Development Report 1990 which singles out Sub-Saharan Africa as the one region that has not shared in economic progress and the reduction of poverty. A clarion call for constructive action emanates from the Report's finding that per capita consumption is no higher in the region now than it was 25 years ago, and that by the end of the century Sub-Saharan Africa may account for more than 30 percent of the poor of the developing world against 16 percent in 1985. In past years we have emphasized from this platform, the interdependence of the Sub-Saharan region and the need for those countries to stand together to meet future challenges. With the emergence of a democratic new South Africa, the time has never been more opportune for us to reaffirm our understanding of this reality. As part of the family of African nations, we reiterate that we have both the potential and desire to playa meaningful role in addressing the particular and pressing problems of our region. Re- grettably, and not entirely of our own making, our resources of finance and trained manpower are still limited. There are nevertheless many areas in which we are willing and able to assist. Indeed, the rapidly changing internal political situation in South Africa and the general acceptance of the irre- 190 versibility of the process of change should greatly facilitate closer and more visible cooperation. The momentous changes and events of the past 12 months on a wider canvas have also significantly influenced Southern Africa. Former adversar- ies are not only identifying and developing common objectives elsewhere, but also both inside my country and in our region. Countries and regions are moving away from strife and armed conflict toward more representative political systems and constitutional structures. These new conditions are clearly more conducive to supporting productive economic activities. Our region already benefits from no longer being an arena for international power play. I hope many other developing countries will now also no longer need to devote substantial portions of their national budgets to maintaining large security establishments. This is certainly happening in South Africa. As the peace dividend increases, and to the extent that prudent economic policies take effect, South Africa and other countries in our region will be able to spend progressively more on the alleviation of poverty by providing shelter, basic health services, and appropriate education. These advantages will be attainable only through the consistent applica- tion of sound fiscal and monetary policies, involving a fundamental eco- nomic restructuring. Since these adjustments normally take a long time to implement, this will be no easy task. It will demand courageous leadership and the understanding and tolerance of the population. Over the past few years, South Africa has worked at restructuring its economy on the principles of a socially responsible, market-oriented system. In this effort, firm control over public sector spending necessitated drastic changes in budget priorities in favor of socioeconomic expenditure. Despite these growing demands, we also had to apply strict monetary policy in order to create and maintain a stable financial environment conducive to long- term growth and development. This clearly is the only sound manner in which to meet these legitimate demands in the long term. The developing world is already feeling the effects of donor fatigue. In addition, it has to contend wiht the imminent potential for a weakening in world demand, new problems with inflation, an international shortage of development capital, rising interest rates, declining demand, and lower prices for their exports of primary products. All of these factors are likely to be exacerbated by the consequences of the Gulf crisis and soaring oil prices. Indeed these countries, as innocent bystanders to this particular event, will pay the heaviest penalty, and a special and generous provision to address this issue, as referred to by President Bush, is a welcome and essential development. In Africa, including South and Southern Africa, people are moving in large numbers to urban centers in search of jobs, often for the sake of trying to secure their very survival. Without adequate employment opportunities, these migrants will face stark deprivation and even starvation. Hungry peo- 191 pIe without proper shelter, amenities, and fuel are also unlikely to appreciate such lofty aspirations as the long-term benefits of environmental protection. In addition, the welcome evolution toward more representative government could be severely undermined in those countries in which economic devel- opment and growth fall short of providing for basic needs. The current and prospective setbacks for developing countries occur after difficult years of dealing with the pressures of the reverse flow of capital to the first world. Disinvestment in whatever form or for whatever reason affects the poor first-and overwhelmingly. South Africa, and consequently to a marked extent our whole region, knows first hand the severe penalties this process incurs-this despite our country's good record and its low debt ratios. Like other developing countries which were compelled to become capital exporters, we could achieve the surpluses needed to service the outflow on the capital account only by severely and consistently restricting the growth of the domestic economy. This has obviously led to the destruction of many potential and actual job opportunities and an inability to generate sufficient revenue for essential social expenditure. As the World Development Report 1990 correctly ac- knowledges, economic growth and stability are primary conditions for al- leviating and reducing poverty. Poverty, rather like trade, knows no bound- aries, especially in the regional context-and this is so in Africa. The World Development Report paints a somber picture of the extent of poverty in its many facets but also provides convincing evidence that signif- icant progress can be made in pushing back its boundaries through the consistent application of appropriate policies. I can only echo President Conable's words that the reduction of poverty should be one of the inter- national community's fundamental objectives in the 1990s. South Africa, with its present rather limited means, and its own urgent need to address the problems of poverty and socioeconomic development within its boundaries, is nevertheless prepared to play its part in dealing with the related economic problems of Southern Africa, and further afield, in a spirit of cooperation and interdependence. SPAIN: CARLOS SOLCHAGA Governor of the Fund Allow me to begin by thanking this assembly for having agreed that Madrid will host the Forty-Ninth Annual Meetings of the IMF and the World Bank in October 1994. In addition, I should like to take this opppor- tunity to extend the warmest greetings to Bulgaria, the Czech and Slovak Federal Republic, and Namibia as they join the Bretton Woods institutions, and I think we can all take pride in the fact that these meetings are being attended by special invitees from the U.S.S.R. 192 The new memberships, as well as those now in the offing, are a tribute to the fundamental intellectual strength of the multilateral approach per- sonified by our two institutions, and a reflection of the dramatic and heart- ening political changes that have occurred since our last meetings. Significant changes have also emerged in the economic arena. In our statements to these meetings over the last seven years, we, the Governors of the industrial countries, have sought to emphasize the positive aspects of economic trends in our countries. Since 1982, we have with increasing op- timism drawn attention to the high rates of growth and job creation achieved in the developed countries, the remarkable achievements in the fight against inflation, and the acceptable results achieved in the efforts to reduce the financial imbalances in our public sectors. With rare unanimity, we sub- scribe to the view that the duration and intensity of this expansionary phase has been attributable to a highly effective economic policy mix. On the one hand, there have been supply policies designed to give the market a stronger role in resource allocation and to introduce greater flexibility into our re- spective systems of production. In addition, there have been demand poli- cies intended to promote a well-established, balanced, and noninflationary macroeconomic environment, capable of accommodating rates of economic growth that are both significant and sustainable in the medium term. Yet despite the economic bonanza of recent years, we have consistently warned that the persistence and magnitude of certain international imbal- ances posed risks and uncertainties that could well put an end to this ex- pansionary phase. The disappointing balance of international payments for developing countries in the last decade-a consequence of these countries' unsustainable policies and the constraints imposed by their exceedingly high levels of external indebtedness, the repeated and increasingly sophisticated threats to the multilateral commercial system, the volatility and arguably flagrant maladjustment of exchange rates on international currency markets, the build-up of external imbalances among the world's leading industrial countries, and the downward resistance of the U.S. budget deficit-have lately been a cause of considerable concern to these meetings. The recent developments in the Gulf and the subsequent rise in the price of crude oil have resulted in an economic climate dominated by uncertainty. If the prevention of declining expectations and worsening imbalances used to be a necessity during the period of expansion, it has now become an urgent priority for our economic policy. Fortunately, the lessons of the two oil crises in the 1970s provide us with unequivocal guidance as to the broad policy outlines to pursue, and espe- cially as regards the errors that must never again be repeated. First, we know that failure to react promptly to genuine upheavals of this nature has irremediable and potentially heavy costs in terms of GDP, employment, and welfare. For all of these reasons, and notwithstanding the fact that the present oil crisis seems liable to prove less disruptive than its predecessors, 193 it is vitally important for economic policies to be promptly adjusted to reflect the new international situation. The required policy changes are reasonably self-evident. For one thing, recorded increases in prices must be rapidly passed on to consumers, both in order to prevent distortions in the structure of relative costs of factors of production, and to prevent inappropriate demand patterns from taking root. At the same time, it is imperative for all economic transactors-the public sector, business people, and workers-to recognize that the outward trans- fer of resources entailed by the rising price of oil has caused an impoverish- ment which society as a whole cannot circumvent. It is crucial for each of these economic groups to acknowledge that attempts to pass off the costs of the crisis onto other economic transactors will merely lead to higher inflation, reduced economic growth, a fall in investment, and reduced job creation; in short, behavior of this nature will lead to further, persistent economic impoverishment. In our opinion, it is also imperative for society to perceive burden sharing as something that has both fairness and credibility. Although the extent to which such a goal is achieved will basically depend on the particular indus- trial relations model prevailing in each country, the Spanish experience causes us to look favorably upon the possibility of concluding a Social Progress Pact with workers and employers, as a means of minimizing the anticipated costs of a temporary crisis and reinforcing solidarity in this area. The heavy losses in terms of welfare and employment that resulted from earlier crises have assuredly convinced our economic transactors of the dangers inherent in any sort of wishful thinking as regards increases in their nominal incomes. In any event, it must be made clear that without moder- ation in nominal wages and in unit profit margins, the market will ultimately exact a penalty by forcing up unemployment, inducing a fall in investment, and reducing the economy's medium-term potential rate of growth. Given that the ultimate objective of economic policy in the coming months must be the achievement of a rate of increase in nominal spending that prevents the onset of inflationary pressures and intolerable deteriora- tion in external accounts, moderation in nominal incomes will be instru- mental in determining the degree of adjustment that monetary and fiscal policies will require. The less the moderation in wages and business profit margins, the greater the deflationary dose that will need to be administered through interest rates, public expenditure cuts, and accelerated fiscal con- solidation. It would be highly desirable both for the response to the crisis to consist of a balanced contribution from each of the economic policy instruments for managing demand, and for there to be no faltering in the process of market streamlining, as in this way the restoration of internal and external equilibrium would be easier, the slowdown in growth would be of shorter duration, and the burden sharing would have fewer pernicious distributional 194 effects. Yet adjustments will occur one way or another, whether in terms of prices, or in terms of quantitites. In the interrelated world in which we live, the economic policy guidelines I have just mentioned cannot be treated in isolation from the international response to the crisis. Once again, the experience of the 1970s conclusively indicates that an internationally coordinated response is the preferred eco- nomic policy option. This is so, first, because in an international environ- ment dominated by the use of orthodox policies, international markets are thus less likely to suffer from excessive volatility that would amplify the adverse effects of the actual upheaval; and second, because a uniform and orthodox international response would leave no doubt as to the heavy price which a country would have to pay if it decided to deviate from the agreed course of action. This "discipline" argument is by no means insignificant, particularly if one is prepared to recognize that the current international monetary system may lack the means necessary to accelerate the process of economic con- vergence. With their well-nigh unlimited access to international capital markets, the developed countries are able for prolonged periods of time to finance financial policies which until very recently would have been quite untenable. For a very large group of developing countries embroiled in external debt, their virtual estrangement from international capital markets prevents them from taking rapid advantage of the benefits of orthodox macroeconomic behavior. This asymmetry in the incentive system, coupled with the absence of binding and irreversible codes to govern an increasingly wide spectrum of international transactions, serves to weaken any resolve to implement virtuous economic policies in the short term, notwithstanding the undenia- ble advantages that accrue from such policies in the long term. Action must be taken now to remedy this shortcoming in the existing international economic framework, and while it might be unrealistic to imagine that such a goal can be accomplished immediately, we should waste no opportunity to begin eliminating the least desirable features of that economic framework. Beyond any doubt, the first priority must be to strengthen our multilateral and open trading system through the satisfactory completion of the Uruguay Round. Nor would it be inappropriate to seek to derive benefit from a number of regional attempts to establish institutions and rules designed to ensure the collective achievement of economic stability. The Economic and Monetary Union in the European Economic Community is the most so- phisticated and well-developed example of this. As a member of the Ee, Spain supports such a program unreservedly, given that we are fully convinced of the benefits accruing to member coun- tries and the international community from the establishment of an Eco- nomic Union in Europe, and the emergence-at the end of a multistage 195 process, each staged with its own particular objectives and special content- of a Monetary Union characterized by a single currency, a European Central Bank, and a common monetary policy for the 12 members of the EEC. Although such a community-oriented approach might today seem to resist replication on an international scale, it should not be forgotten that what seems reckless today might cease to be reckless in a very short time. Any world such as ours, which has witnessed dramatic political and economic changes over the last year, is at least entitled to be optimistic. SRI LANKA: D.B. WIJETUNGA Governor of the Fund and Bank On behalf of His Excellency R. Premadasa, President of the Democratic Socialist Republic of Sri Lanka, the Government, and the people of Sri Lanka, let me express our warm felicitations and good wishes to all of you. At the outset, we warmly welcome into our membership fold the Czech and Slovak Federal Republic, Bulgaria, and Namibia. The resiliency of our Bretton Woods institutions stood us in good stead in the 1980s even though crises management demanded too much of our attention. At first, we grappled with the 1979-80 oil price shock and then it was the debt crisis. But we closed the decade in a sense of eager antici- pation. The Fund and the Bank both gave operational content to some of our primary concerns through financial facilities tailored to the circumstan- ces and needs of low-income countries. For the crises-ridden heavily in- debted developing countries (LDCs), the strengthened debt strategy pro- vided a light at the end of the tunnel. The exercise of the Fund's surveillance function contributed, through international policy coordination, to reduced tensions in financial markets and, in particular, to greater stability in the exchange markets. These building blocks, together with the windows of opportunity provided by the Uruguay Round on the trade front, and the World Bank's thrust on poverty alleviation and the global environment, provide a strong foundation and the framework to close the final decade of this century on a note of achievement-to prove that human ingenuity is also capable of halting and firmly reversing these man-made problems. Yet, at this time, our attention is pre-empted by another crisis: the eco- nomic and financial fallout from political tensions in the Gulf region. The Fund's World Economic Outlook concludes that the non-oil LDCs will be affected more than the industrial countries. Per capita income growth, thus far elusive to many LDCs, now takes another beating. The broad statistical aggregates conceal wide country disparities. Compliance with the manda- tory sanctions of the United Nations is associated with extreme hardship in particular cases. Output, employment, income, and balance of payments effects arise from substantially higher prices for oil and from disruptions to export markets and to migrant labor. 196 Face as we should this new crisis, we cannot, however, ignore some im- pediments in the external environment that were already evident before the latest crisis. The world economy was slowing down by another notch. The overreliance on monetary policy in the industrial world to stamp out any hint of inflation, together with the expected larger demand from Eastern Europe on world savings, was already driving interest rates up. The reduced world growth prospects, of course, will depress commodity markets. These trends were already undermining one of the prerequisites for satisfactory performance of LDCs, namely, a favorable international economic environ- ment. Many LDCs are currently making heroic efforts at generating higher savings even at their low income levels as part of an economic adjustment strategy. The industrial countries have to accept responsibility for a better savings performance in a way that the needs of Eastern Europe are har- monized with the pressing needs of other LDCs at a level of interest rates consistent with their debt-servicing capacity. Multilateral institutions, as well as the commercial creditor community, have complementary roles to play in promoting this objective, namely, that investment should flow where eco- nomic and social returns are greatest. In this context, we welcome the recent bilateral initiatives to cancel some of the ODA debt. Such actions provide much-needed cash flow support to the balance of payments, as do new inflows. The proposals made last week by Chancellor of the Exchequer Major are well timed. We urge that it would be fully consistent with the spirit of the proposal to include, therein, those low-income countries that serviced debt on time despite the debt burden. Without detracting from the underlying imperatives, we have to find solutions to the economic problems of the Gulf crisis. Such solutions should emphasize the financing element in our response and thus reflect the tem- porary character of the problem. For, to do otherwise, as for instance through sharp adjustments, would unduly weaken our economies while also undermining our cooperative commitment to solve the political problem. In a situation arising from violent conflict and tension, it is natural that a high level of visibility is attached to countries in the immediate vicinity of the conflict. This is rightly so. However, on a more sober and balanced assessment, the higher oil prices and disruption to some export markets have economic effects that permeate a wider range of countries, the vast majority being LDCs. For migrant labor, an economic shock is compounded by a social trauma, and national governments will be in the front line in accepting responsibility for their welfare. The international community has responded strongly to the UN directive to impose economic sanctions so as to speed up settlement of the issue. In recognition of the adverse impact that such actions have on participants, certain initiatives are being developed. We would urge that these be suitably coordinated to ensure that the multilateral endeavor reflected in the UN- 197 mandated economic sanctions is matched by a multilateral focus in the disbursement of assistance to the severely affected countries. A speedy response from the International Monetary Fund and The World Bank is called for in the light of the risks posed to the world economy. While underscoring the multilateral character of the problem, it could help catalyze additional support from other sources. The creation of a facility along the lines of the 1974 oil facility would be a courageous first step. At the same time, existing financial facilities should be reviewed with respect to procedures and practices. Having in mind, particularly, those members having or about to have Fund-suppoited programs, the actual access to financial facilities should be increased. The Fund's compensatory and con- tingency financing facility deserves special mention for adaptation to the exigencies. To be truly effective for the low-income countries, such financing should be at concessional interest rates. Earlier in the year at its spring meeting, the Interim Committee endorsed the maintenance of maximum access limits to Fund facilities until the Ninth Quota Review becomes effec- tive. The present and prospective comfortable liquidity position should pro- vide the required latitude for the Fund to bring forward, as well as raise, actual access beyond the conservative averages of the last few years. As it is the low-income countries that are most in need of a safety net, the structural adjustment facilities of the two institutions should be closely ex- amined to permit a larger financing role in particular cases. Needless to add, the situation of arrears countries that are cooperating with the Fund and the Bank deserves special consideration. Despite these setbacks-and we should never be complacent about the future-our ultimate objective of higher living standards, poverty allevia- tion, and a better environment should be kept in perspective. We commend The World Bank for focusing on these issues through analyses and recom- mendations so as to prod the international community. These are interre- lated subjects and should be tackled in a comprehensive framework, and, because the benefits therefrom would spill over national and geographical boundaries, should be of central concern to the international community. The World Bank's 1990 World Development Report on poverty comes out at a time when Sri Lanka has substantially strengthened its economic poli- cies, is making quantum jumps in restructuring the economy, and is imple- menting a multifaceted poverty alleviation program. After a major revamp- ing under the direction and guidance of President Premadasa, the Sri Lanka strategy has essentially moved away from general commodity subsidies on to direct transfers to the poor. This has vastly improved the efficiency of the scheme through better targeting. An emphasis on community participation is an important supplement to determine eligibility thresholds, and thereby both targeting and administration has been facilitated. While upgrading unacceptably low consumption levels, the program is linked to generating productive rural and urban employment. Together with fiscal policies that 198 seek to provide for the development of social infrastructure, the poverty alleviation program will provide a powerful impetus to human resource development in Sri Lanka. We are greatly encouraged by the increasing emphasis placed by the international community on policies that tackle poverty. We would note that the Sri Lanka strategy is implemented within the broad framework of mac- roeconomic stabilization, structural reform, and investment in human cap- ital. This setting will greatly facilitate the absorption and efficient utilization of donor support with a minimum of further effort needed on the part of donors to ensure that the resources pledged reach the intended beneficiaries. It is hoped that these characteristics will bring forth greater flexibility in donor support as, for example, through general balance of payments fi- nancing. While poverty alleviation is central to the mandate of the World Bank, like the donor community, an active complementary role should be played by the Fund in this area. The Fund, like a central bank, is a monetary institution set up to provide temporary balance of payments financing. The evolution of the international monetary and trading system has been such that policy reform and adjustment are taking longer than anticipated to yield the desired results. Long before the Baker proposals on debt, we agreed that Fund-supported adjustment programs should provide for a rea- sonable growth rate. Economic adjustment involves hardships to some, and, without offsets, the domestic consensus to sustain policy reform would not exist. The program will fail. It is this same need for domestic consensus that drives us to insist that poverty alleviation and social concerns be given closer attention in Fund programs. In recommending the adoption of policy tools, considerations of economic efficiency should be tempered by social and equity concerns. As social structures vary across countries, the standard policies should be capable of adaptation to suit differing circumstances. Through our recent decisions on the Fund's Ninth Quota Review and the Bank's capital increase, we have substantially strengthened the finances of the two institutions. Putting these resources to optimum use with due regard to their security calls for a parallel effort at improving the capacity for designing effective programs and timely policy advice. We would urge the respective Executive Boards and managements to intensify their efforts in this direction. Fund and Bank policies have converged in a number of areas. We trust that this trend will yield effective programs whose benefits will reach a much wider circle and at an earlier stage of implementation than we have been accustomed to in the past. THAILAND: VIRABONGSA RAMANGKURA Governor of the Bank It gives me great honor to have the privilege of addressing these Annual Meetings of The World Bank and the International Monetary Fund for the 199 first time. On behalf of the Government and the people of the Kingdom of Thailand, I wish to extend our warmest greetings to my fellow Governors, distinguished delegates, guests, and staff members of The World Bank Group and the International Monetary Fund. I look forward to welcoming all of you to Bangkok for the 1991 Annual Meetings. Permit me also to join my fellow Governors in welcoming Bulgaria, the Czech and Slovak Federal Republic, and Namibia as members of our Bretton Woods institutions. The 1980s showed a mixed picture of the world economy. Industrial coun- tries, to a large extent, succeeded in maintaining sustained economic growth, whereas many developing countries encountered serious difficulties in their attempt to promote the well-being of their peoples as a result of an absolute decline in incomes. According to the World Development Report 1990, the 1980s was a lost decade for many of our colleagues in the devel- oping world. We are alarmed and dismayed by the unfortunate disruptions in the Middle East. The sudden rise in oil prices has placed a severe burden on all developing countries and may trigger greater distress for the heavily indebted countries. The fear of triggering recession in major developed economies, rising inflationary pressures, and higher interest rates will lead to a decline in international trade and greater restrictions in capital flows in the short term. We fervently hope that the international community will find some solutions and ensure its nonrepetition. We have entered the decade of the 1990s with new hope and aspirations of enhancing and improving the quality of life for the less fortunate in our member countries. As in the past, the reduction of poverty and hunger, and the development of human resources, are the major and truly long-term challenges facing most of the Third World countries. In this context, it is gratifying, but mystifying, to learn that the issue of poverty, which is the sole raison d'etre behind their establishment, has once more become the central priority in The Bank Group and the Fund agenda. Providing social services has also become an integral part of the poverty reduction strategy. I earnestly hope that under the able leadership of our President, Mr. Con- able, and our Managing Director, Mr. Camdessus, the strategies for poverty reduction and, more important, the adequate provision of capital resources will bring about the desired objectives. Recently, it has been increasingly accepted by the developing countries that an effective and dynamic private sector is the most effective engine for economic growth and development. Eastern Europe is a prime example. There is still much to be done in terms of removing administrative con- straints, encouraging both domestic and foreign private investments, and divesting or permitting the commercialization of public enterprises. We welcome, in this regard, the Bank Group's continuing efforts to encourage and facilitate the involvement of the private sector in overall economic development. The Bank Group's activities, we feel, need to be deepened, particularly in the areas of financial sector and trade policy reform. The 200 International Finance Corporation continues to perform its important role of promoting private sector development through its investment, resource mobilization, and advisory services. If IFC is to deliver a similar level of investment and technical assistance services in the future, the Corporation should be adequately capitalized so as to be able to respond to the increasing resource needs of its member countries. It is necessary though that IFC emphasizes its equity role rather than being a mere financial intermediary with narrow pecuniary objectives. Serious consideration should, therefore, be given to a substantial increase in IFe's capital. While welcoming the Brady Plan and acknowledging the efforts made by the Bank and the Fund in addressing the debt problems of the developing countries, we would continue to urge the donor community to give urgent attention to this problem, as the progress achieved so far has not been sufficient to make a major impact toward the resumption of growth and development. As the countries in the world have become increasingly inter- dependent, finding a prompt and lasting solution to the debt issue will be in the best interests of both developed and developing countries. It must be emphasized that the burden should not be transferred to these two institu- tions, and that the developing countries which have been financially prudent should not be burdened or punished. We concur with the current thinking that economic development must be consistent with a sound and sustainable environment. The present state of global environmental degradation caused by rapid development in the West is a matter of serious concern to all countries, and it is only appropriate that all countries should henceforth be committed to environmental protection and development. But as the industrial countries were and still are the major source of global environmental degradation, the primary responsibility for taking appropriate actions rests with them. Developing countries, too, have a role to play, but they will need additional financial resources-if possible on concessional terms-to assist them on issues of the environment. Given the specter of recession in major developing economies, rising inflation, and disruption in the Gulf, there remains growing concern about the restrictive nature of international trade. The Uruguay Round of trade negotiations remains to be completed; it is hoped that an outcome will emerge that does not narrowly serve the interests and concerns of only a few but balances the interests of all countries, and, in particular, protects and allows improved fair access for the developing countries. A substantial negative transfer of resources to developing countries has been recorded in the past decade despite various promises and attempts to increase the flow of resources to these countries. If we are to move ahead toward revitalizing the world economy, substantial resources will be re- quired by the developing countries so as to reverse the current trend in net flows of resources and thus enable them to cope with the challenges of the 1990s, in particular the elimination of absolute poverty. 201 We in Thailand are truly convinced that enabling women to raise their own productivity and income would enhance overall national economic de- velopment. This could be achieved, as we have done, bY' providing them with equal access to education, comprehensive family planning and health care services, credit facilities, and opportunities to expand their access to labor markets. The rapid pace with which the changes in Eastern Europe are occurring is welcomed, as are changes that we are observing with much interest. While their integration into the world economy will also benefit peace and har- mony, we do hope that the high priority attached to restoring sustained growth in developing countries in Asia and Africa will not be altered or compromised. . . . ... In conclusion, our objective is to achieve a sustainable and expanding world economy. To achieve this goal, the efforts of all parties concerned must be mutually re-enforced. Developed countries must open up their markets to developing countries by reducing all forms of trade barriers. Furthermore, their growing budget deficits must be significantly reduced and inflation controlled, while maintaining a real growth in aid levels and the facilitation of private sector investments of developing countries. With- out these positive actions, the developing countries will be deprived of the much needed resources for their development. The developing countries, for their part, must ensure the establishment of a conducive macroeconomic environment by adhering to sound economic and financial measures and by undertaking the necessary reforms that would contribute to such an enabling environment. The Bank and the Fund, as well as other international organizations, must be ready to play their part in helping the developing countries to undertake investment and adjustment policies that can be sustainable over time. The commercial banks must also be more forthcoming in their lending to the devleoping countries. Finally, on behalf of the Government of the Kingdom of Thailand, I look forward to welcoming all of you in Bangkok at the next Joint Annual Meet- ings, and I can assure you that we will spare no effort to make the meetings a success, and your stay a very pleasant and memorable one. TONGA: JAMES CECIL COCKER Governor of the Bank I am honored to represent the Kingdom of Tonga at the Forty-Fifth Annual Meetings of the International Monetary Fund and The World Bank Group. I join other Governors in expressing thanks to the Chairman, Mr. Saitoti, to President Conable, Managing Director Camdessus, the manage- ment of the Fund and the Bank, and the Government of the United States for the excellent arrangements under which we meet. 202 May I take this opportunity to welcome new members, the Czech and Slovak Federal Republic, Bulgaria, and Namibia. We meet in troubled and uncertain times. The best case scenario projects increasing international interest rates, a slowing of growth in the industrial countries, and increasing inflationary pressures. Tonga, although small and relatively isolated, will not be immune to these developments. We are almost totally reliant on imported energy. I would now like to make some comments on domestic economic policies in Tonga. In the 1980s Tonga embarked on a strategy to promote growth of the private sector to broaden the base of the economy. Our 1990/91 budget policies continue to place emphasis on the devieopment of the private sector. The government has provided additional incentives to farmers and fishermen through income tax exemptions and additional support for the manufactur- ing sector, as well as ensuring continued lines of credit specifically for de- velopment in all sectors in the economy. Tourism is considered an area with potential for providing employment and foreign exchange earnings in the 1990s; an extension of income tax holidays to 15 years has been implemented for hotel development. Through the assistance of various bilateral aid donors as well as multilat- eral agencies, the government has been able to improve air transport infra- structure, thus facilitating significant growth in tourist arrivals. The govern- ment intends to improve supporting infrastructure further by extending street lighting to rural areas, upgrading roads, and providing additional incentives to tourist operators to enable them to compete effectively in the international arena. While placing emphasis on measures to foster economic growth and pro- vide employment, the government will continue to pursue its social policies of alleviating rural and urban poverty through programs to improve health facilities and to provide access to education and to basic shelter, particularly in the isolated northern islands of the Kingdom .... . . . We await with hope, therefore, a successful conclusion of the Uru- guay Round of negotiations under the GATT. The expansion of world trade is critically dependent on this. We urge the contracting parties to consider the common good as negotiations proceed, especially in view of the pro- jected decline in aggregate growth rates for low- and middle-income coun- tries. Turning to World Bank matters, I would like to record Tonga's thanks to donors for reaching agreement on the Ninth IDA Replenishment. This will ensure continuity of IDA's vital role, particularly in the areas of poverty reduction, environment protection, and support for the strengthening of policy-making institutions. Tonga is also appreciative of the loan granted by IDA this year. Tonga supports an increase in IFC capital to enable it to meet demands for finance and technical services in the 1990s. The establishment of the 203 South Pacific Project Facility and the office, initially in Sydney, is welcomed. It is hoped that this can facilitate the introduction to Tonga of investors in the tourism and industrial sectors. However, in Tonga, as in much of the South Pacific region, the small scale of many projects precludes them from IFC financing and equity participation. Until domestic capital markets can be developed-and this is not something that can happen overnight-there is a perceived need for an equity participation scheme to help bridge the equity gap for entrepreneurs with viable projects but insufficient equity capital. Growth of the small-scale private sector is essential to the balanced growth of our economy. Perhaps the IFC could consider the feasibility of a regional equity fund for small-scale enterprises as part of the Project Facil- ity. Tonga is very conscious of the value of its membership in both the Bank and the Fund. Apart from the obvious benefit of access to Bank resources, the regular consultations and technical missions help us to focus on areas of concern in the economy. We are also grateful for the long-term technical assistance provided by the Fund in the establishment of our central bank; we hope this assistance can be continued until the reorganization of our financial sector has been completed to enable the Bank to play its role in the development of a more market-oriented economy in Tonga. In conclusion may I wish the Bank and the Fund success in the coming year in meeting the difficult challenges ahead. TURKEY: GUNESTANER Governor of the Fund I would like to begin by expressing our appreciation to the managements and staffs of the International Monetary Fund and The World Bank Group, both for their excellent arrangement of our meetings' setting and their valuable contributions to our meetings' substance. I join other speakers in welcoming the new members-the People's Republic of Bulgaria, the Re- public of Namibia, and the Czech and Slovak Federal Republic, which very recently has reclaimed its membership in our institutions-and in greeting the representatives of the U.S.S.R., who are attending these meetings for the first time in a special status. In our view, 1990 continues to be a year filled with extraordinary events. Among the most positive, to my mind, have been the developments in the Eastern European countries, especially their choice of free market princi- ples as the new basis for their economies. I also find the unification of Germany exciting. I welcome these events not least because I believe their demonstration of the failure of the centrally planned model of development will make a great and long-lasting impression on the developing countries. Just when hopes for a peaceful world were highest, we were shocked by the unexpected developments in the Middle East. We find the Iraqi invasion 204 of Kuwait intolerable in every way. Its repercussions are already being felt throughout the world and will surely continue to be felt as long as this problem lasts. Solving this crisis is a real challenge for the international community: overcoming the difficulties will require a great degree of inter- national solidarity. The crisis erupted at a time when many industrial and developing coun- tries, which had made various degrees of progress with their implementation of the structural adjustment strategy, had begun to harvest its rewards. Efforts to promote a more efficient use of resources, including trade liber- alization, the elimination of industrial and agricultural subsidies, and the creation of employment opportunities, had borne some fruit and seemed to promise us a better vision for the 1990s. At this critical stage, I believe that the formulation of future stabilization measures should give particular attention to preventing the emergence of recessionary trends, which could eventually undo the hard won gains already achieved by growth policies. The instabilities and uncertainties now ap- pearing in the world markets definitely bring dark risks rather than prom- ising prospects. Elimination of these risks will require the effective pursuit of concerted actions by the international community. We must now be quick to take the measures necessary to limit the damage that the crisis can inflict on our economies. Turkey is one of the countries hardest hit by the Gulf crisis, due to its unique location and its extensive trade and business relations with the coun- tries involved in the crisis. You will all appreciate that Turkey faces the certainty that the crisis will have some negative effects on its economy. Turkey has immediately taken measures to alleviate the financial impact. The 64 percent increase in domestic oil prices now fully reflects the increases in international oil prices, and the central bank rediscount rate has been increased. Fiscal discipline has been improved, and additional revenue- increasing measures, such as raising the rates of the value-added tax, and the excise tax on cigarettes and alcoholic beverages, have been implemen- ted. Additional sales of land and state corporations have been organized to offset the swelling costs of the crisis. We expect that our implementation of these measures, assisted by favorable external economic circumstances and supported by appropriate external financing, will enable Turkey, during 1991, to continue to have a viable balance of payments position, reduce inflation, and maintain relatively high real income growth. Notwithstanding the impact of the crisis on our economy, Turkey is de- termined to pursue its pre-crisis adjustment program. However, the presence of a favorable international financial and trade environment is crucial for our attainment of these targets. I am confident that the developments in the Gulf region will not affect Turkey's access to the international financial markets. I would like to hope that Turkey's efforts and achievements in the area of trade liberalization will be matched by other countries. On this 205 issue, let me quote Professor Stanley Fischer: "Recent Uruguay Round developments have been disappointing. The obligations of the industrialized countries are clear. At many fora-including this (assembly)-they have for long, and rightly, preached the virtues of an open trading system and open economies to the developing countries. Many developing countries, many with the help of the Bank and the Fund, have significantly reduced trade barriers and opened their economies. But the time has come for the indus- trial countries to practice what they preach. More is at issue than consistency and good faith. The phenomenal prosperity of post-World War II was fueled by the growth of trade in a gradually liberalizing international economy. The growing resort to nontariff barriers has stopped that progress, and can easily lead to a system of managed trade between regional trading blocs. It would be a tragedy if the industrial countries destroy the international economic system set up at Bretton Woods at this time of its triumph. We need more vision (and wisdom) in the Uruguay Round negotiations than we have seen so far." Let me now make a few remarks on the policies of the Fund and the Bank. If the Annual Meetings serve a purpose, it is to give us an opportunity to ask ourselves whether our institutions can successfully continue to meet the challenges of the times. They are put today to their most severe test since their creation: can the Bretton Woods institutions effectively assist Central and Eastern Europe in its transition from a command to a market ecomomy? ... . . . In conclusion, today's increasingly globalized world makes the 1990s a decade of opportunities. It offers an opportunity for ensuring that world economic growth will be sustained; and because no country can thrive while remaining isolated in a globalized world, it offers both an opportunity and an imperative for seeking multilateral solutions for the shared problems stemming from short- and medium-term constraints. I feel confident that the IMF and the Bank Group will continue to fulfill their roles, by catalyzing resources, by channeling funds to support the growth and development prospects of our countries, and by directly addressing the problem of main- taining the momentum of the structural adjustment process worldwide. UNITED KINGDOM: JOHN MAJOR Governor of the Fund IMFIWorld Bank Issues Mr. Chairman, I should like first to extend a very warm welcome to the Czech and Slovak Federal Republic, Bulgaria and Namibia as the newest members of the Fund and Bank. And I look forward to Switzerland and Mongolia becoming members before long. They will all be very welcome. 206 To existing members I wish to say that I hope they will all soon be able to ratify the Third Amendment to the IMF Articles, so that the Ninth Quota Review can be brought into effect. I know some countries have had doubts about introducing a power to suspend members in arrears, but I hope they will agree that those doubts should now be set aside in the interest of providing the Fund with the additional resources we have agreed. That is important and should not be delayed. World Economy It is no surprise that our meetings this week have been dominated by the invasion of Kuwait by Iraq. Our discussions have tended to focus on the economic impact. But there are wider implications we should not overlook. If we allow Iraq to profit from the invasion and annexation of her neighbour, no small country will feel secure. We must not let that happen. And to- gether, I am sure we will not. As a signal of our resolve, nothing could have been clearer than the unprecedented cooperation in the United Nations to impose mandatory sanctions. It was impressive and welcome. And that spirit of concern and cooperation has been readily evident at these meetings too. But there has naturally been concern over the economic implications of events in the Gulf, and particularly the impact of higher oil prices. I will turn later to the developing countries. But for the industrial coun- tries, higher oil prices will inevitably bring higher inflation and slower growth. It is too early to judge how big a problem we will have to face and how long oil prices will stay high. But whatever the scale of the problem it is crucial to respond to these pressures with nonaccommodating monetary policies. We cannot avoid an initial impact on inflation. But we can-and we must-prevent it from becoming embedded in higher core inflation. If this means that interest rates in some cases have to be raised, or in others, have to be kept high for longer than would otherwise have been necessary, then that is what we must do. There is no other sensible policy. There is no scope for easing monetary policy to offset the contractionary effect of oil prices on activity. I am greatly encouraged by the number of speakers at these meetings who have endorsed this view. We must also back up a tight monetary policy with appropriate fiscal policies: there must be no relaxing the effort to reduce excessive budget deficits. The apparent imbalance between available savings and intended investment remains considerable and the developments in Eastern Europe and the Gulf can only add to the pressures. Governments must play their part in reducing them. Fortunately the industrial countries today are better able to face an oil price rise than they were in the seventies. They have substantially reduced 207 their dependence on oil over the last 20 years. The United Kingdom for example has seen a fall since 1973 of some 30 percent in energy consumption when measured relative to GOP. And the underlying strength of our econ- omies is greater. Furthermore, these days we have a better understanding of each other's economies and better policy coordination. While that has been widely ac- knowledged, the extent of the progress we have made will now be put to the test. As yet we don't know how severe that test will be. Monetary Debate in Europe I would like to turn for a moment to the question of economic and monetary union about which there is great debate in Europe. It began in earnest last year, and has been gathering momentum in recent months. There is much common ground between the member states of the Com- munity. Not least in our ultimate objectives. Together, we have already taken substantial steps toward economic and monetary union, and there are fur- ther important changes to come. The questions at the heart of the current debate are how we should move forward to monetary union and at what pace. The Oelors Committee blue- print looks to an early commitment to a single currency and a single mon- etary authority. I have recently offered a more evolutionary approach. Rather than sweeping away our traditional system of national currencies and replacing it with a single Community currency, I would prefer to see the development of a common currency, the hard ecu, alongside existing currencies. If in the long term it was the wish of governments and of their citizens, this could itself become a single currency. But that is a decision best left for the future. Whatever the precise decisions we ultimately take, I am clear that if the Community attempted to move prematurely toward monetary union, with- out greater economic convergence, the strains and stresses on our national economies would be intolerable. I was interested to see that the Bundesbank last week endorsed that view very clearly. In recent years the European Monetary System has operated as a powerful force for convergence. The performance of those countries within the Ex- change Rate Mechanism has been impressive. They have manifestly bene- fitted from the framework of monetary discipline provided by the mecha- nism. Success did not come overnight. Nor by magic. And it has certainly not eliminated the pain involved in bringing down inflation. But I doubt if this pain can ever be avoided. In time, low inflation will lead to stronger growth and lower unemployment. The more credible the anti-inflation artillery, the sooner this will happen. It is that credibility of purpose that has been one of the hallmarks of the ERM. Increasingly it has functioned like a modern day gold standard with the deutsche mark as the 208 anchor. It is true that conflicts can emerge between the obligations of ERM membership and the evidence from domestic monetary indicators; but these occur less often and for shorter periods than is often claimed. And they need to be weighed against those problems faced by countries outside the mechanism. Reading the domestic monetary tea leaves has become a tricky business that is made still more difficult by the effects of financial liberali- zation. I am, therefore, in no doubt that joining the ERM is the right policy for the United Kingdom, and we will join when we are in a position to make a success of it. The most important reason for delay has been the differential between inflation in the United Kingdom and other ERM countries. But what matters here is less the difference between headline figures, which measure what has happened over the last 12 months, than the prospective movements in price levels from now on. U. K. Economy The origins of the upturn in U. K. inflation have been extensively analyzed and discussed. As we know, to some degree this upturn has been shared by other industrial countries-but not to the same extent. Since mid-1988 we have had an extended period of monetary tightening. Interest rates were raised to 13 percent in November 1988, 14 percent in May 1989 and 15 percent in October 1989. The effects of this policy have been frustratingly slow to come through. But now the evidence that it is working is unambiguous. As usual, inflation itself is proving slow to turn down. But it is now only a matter of time before it begins to fall. The headline inflation rate will probably peak soon and diminish noticeably through next year. And before long the tight monetary policy stance should deliver a lower underlying rate of inflation. For us as for other countries, the picture is now complicated by the unwelcome increase in oil prices. In some ways the United Kingdom will be less affected than many since we are more or less self-sufficient in oil. The Government's finances benefit from higher oil prices while the current ac- count is relatively unaffected. But the United Kingdom is by no means immune. Indeed, in the short run, higher oil prices are likely to feed more quickly into the measured inflation rate in the United Kingdom than else- where because we have not sought to prevent or delay the proper market response to events in the Gulf. Higher world oil prices will also contribute to the weakening of economic activity. We now face the likelihood of some months of low growth. It is not possible to say how low. Or, precisely, for how long. That will depend in part on how far businesses and employees raise other prices and wage costs to compensate for higher oil prices. Such action can only add to the weak- ness of activity and increase unemployment. 209 I have no doubt that we face the most difficult few months in the cycle. Whatever happens now we are bound to see inflation continuing high while activity weakens and unemployment rises. But we know from past experi- ence that this discomfort will be temporary as long as policy continues to be focused on reducing inflation. Developing Countries; Debt, Etc. So far I have focused primarily on the impact of higher oil prices in the industrial countries. But our discussions here must be equally concerned with the implications for developing countries. Although some parts of the developing world stand to gain from higher oil prices, most lose out. And there are some who suffer more directly from the conflict in the Gulf, not least from the suspension of trade with Iraq. Just as industrial countries must adjust to higher oil prices, so too must developing countries. For them, the lessons of the seventies are just as clear. Piling up debt in an attempt to avoid adjustment proved far more painful in the long run. And with real interest rates now higher, it makes even less sense to add to their existing debt burden. But there is a group of very poor, very heavily indebted countries, partic- ularly in Sub-Saharan Africa, which have no realistic prospect of being able to service their debts, even taking account of the relief already available under Toronto terms. The overhang of debt and the inevitable recourse to annual Paris Club reschedulings places a heavy burden on these countries. That is why I have proposed a four-point plan to help such countries, including doubling the relief available under Toronto terms and rescheduling all their eligible official debt at the same time, rather than requiring annual reschedulings. I hope all creditor governments will support these proposals when the Paris Club reviews the options for the poorest debtors. Trade One important step which the industrial countries can take to help de- veloping countries is to open up our markets and pursue a liberal trade regime. The cost to the developing countries of protectionism by the indus- trial countries greatly exceeds the total value of aid flows. It is a real prob- lem. It is clearly absurd that industrial countries should with one hand encourage developing countries to build up their export potential, and with the other hand deny them access for their goods. We meet at a crucial time in the Uruguay Round with much still to do if we are to complete the negotiations by the end of this year. It is vital that everyone recognizes the urgency of reaching agreement, and stands ready to make compromises. 210 Conclusion Mr. Chairman, 1989 and 1990 have been momentous years. We have seen changes in Eastern Europe, Southern Africa, and elsewhere more radical than any of us imagined just two years ago. More recently we have seen the nations of the world unite to confront a stark challenge to peace and inter- national order. Rightly we have focused in recent days on the immediate economic effects and our policy response. But we should not forget the clear long-term message of these events: that economic and political freedom, good government, and respect for the individual are not only ends in them- selves but the best means to security and prosperity. UNITED STATES: NICHOLAS F. BRADY Governor of the Fund and Bank I would like to welcome the newest members of the International Mone- tary Fund and The World Bank: the Czech and Slovak Federal Republic, Bulgaria, and Namibia. I would also like to welcome the Special Invitees from the Soviet Union. We meet amid dramatic change in the world economy-change that pre- sents both important challenges and opportunities. Eastern Europe is undergoing a fundamental transformation to pluralism and market econ- omies. The forces of democratization and economic reform are sweeping through Latin America. Most recently, we have been confronted with the political and economic challenge of the Gulf crisis. The world's response has been unprecedented. We have forged a powerful political and diplomatic front within the United Nations, and are giving it tangible support with a multinational military deployment in the Arabian Gulf. And we are building a united economic front as well. The economic strength represented by all of you in this room must be mobilized to demonstrate collective resolve and make clear our intention not to yield to aggression. Over the years some have questioned the value of these Annual Meetings, saying that they are little but the perambulations of bankers, Ministers, and Governors. This is not the case. The IMF and The World Bank have a long tradition of confronting, sorting out, and overcoming global economic chal- lenges. We now have a unique opportunity to extend this tradition. As President Bush stated yesterday, the world relies on these institutions for economic leadership, during the Gulf crisis and beyond. In response to the Gulf crisis, President Bush announced the formation of a multilateral coordination group to assure an effective distribution of the free world's financial resources to the front-line states. Now, the IMF and The World Bank also must extend their hands to assist these and other affected countries .... 211 · .. The World Bank should also provide major assistance to those coun- tries seriously affected by the events in the Gulf. This could take the form of: -immediate grant and loan assistance to transport and resettle worker refugees; -expansion of the Bank's lending programs; -acceleration of disbursements; and -strengthening of lending to the energy sector. The Gulf crisis has also posed new economic challenges for the industrial world. The oil price increase will make it harder to steer between the twin risks of higher inflation and slower growth. We need to maintain a careful balance between continued growth-which is essential to achieve our shared objectives-and price stability, which is essential to protect the gains we have made and to ensure that the growth process is not illusory. Recognizing that we live in a world that must pay attention to both risks is half the battle. The other half is to navigate successfully between these risks. The Gulf crisis has complicated this task, and it will test our ability to steer a course which was already narrow. Nevertheless, I believe we are well-positioned to meet this challenge and to move ahead through this important decade on a path of durable and broadly-shared growth. For our part, we must reduce our fiscal deficit on a lasting basis. President Bush has shown strong leadership in the budget summit process, and we remain committed to achieving a meaningful, enforceable five-year deficit reduction package. The job is not yet done, but our determination is firm. On another front, we have been inspired by Eastern and Central Europe's courageous rejection of statism and their embrace of democratic and free market principles. Here again, the Bretton Woods institutions need to play a central role in helping to develop sound market systems and attract the resources necessary to do so. Recent efforts of the Fund and Bank in supporting Poland, Yugoslavia, Hungary, and others illustrate the impor- tance of their contributions. We also look forward to the completion of the Soviet country study requested at the Houston summit. There is a real thirst in the Soviet Union for knowledge about how a market system works. We should not disappoint them with anything short of our best advice. We have also been inspired by the ascendance of a new generation of leaders in Latin America, born of increasingly vibrant democracies, and dedicated to the market-oriented economic reforms that will bring economic revival and prosperity. President Bush's "Enterprise for the Americas Ini- tiative" will encourage and deepen the political and economic transforma- tion of Latin America. By building on the successes of the strengthened debt strategy, this initiative is an effort to reduce the debt that has burdened and distracted reform efforts in the past. With the full participation of the Bank, the Fund, and the IDB, the Enterprise Initiative will serve to pro- 212 mote investment reform and trade liberalization and enable substantial debt reduction on obligations to the U.S. Government. Other important projects proceed with force. In the poorest countries, especially of Sub-Saharan Africa, the Fund and the Bank must continue their commendable work to provide concessional resources toward sustained growth and the alleviation of widespread poverty. At the same time, the Bank must strengthen its efforts to deal effectively with environmental prob- lems, especially in protecting tropical forests and developing environmental impact assessments and action plans. The Fund and the Bank can best serve the future by adapting to the changing needs of the world economy, and we must support them by pro- viding adequate resources and policy guidance. In May, we took an impor- tant step when we agreed to a substantial increase in IMF quotas. The quota agreement, and the associated strengthening of the IMF arrears strat- egy, is a strong package that merits our support. Funding for The World Bank Group also remains a priority. The founders of the Bretton Woods institutions drew on the lessons of the past to create dynamic, forward-looking institutions. They envisioned the IMF and World Bank as living institutions that would channel the energies and hopes of the world community into a collective response to new opportunities and challenges. Perhaps this spirit was best captured by Secretary of the Treasury Morgenthau, who said: "The Conference at Bretton Woods has erected a signpost-a signpost pointing down a highway broad enough for all men to walk in step- and side by side. If they will set out together, there is nothing on earth that need stop them." We have set out together, and we remain united. You have my congratu- lations for the important progress that has been made, and my assurance of firm U.S. support for the mission that lies ahead. VIET NAM: CAO SI KIEM Governor of the Fund and Bank On behalf of the Government of the Socialist Republic of Viet Nam, I warmly welcome the admissions of the Czech and Slovak Federal Republic, Bulgaria, and Namibia to the International Monetary Fund and The World Bank. Since the last Annual Meetings, the world has witnessed many important changes that will have considerable effects on the economies of member countries in the future. Over the past year, the Fund and the Bank have participated in this process through the formulation of stabilization, as well as development, policies .... 213 · .. We also appreciate the Bank's efforts in addressing other issues, such as poverty, environmental deterioration, and protection of less-favored so- cial groups. These efforts have brought about encouraging results. Yet, in order to solve these problems successfully, the Bank should take specific measures and solutions on a case-by-case basis. In this connection, we welcome the Ninth IDA Replenishment. Over the last year, Fund-Bank collaboration has expanded significantly. The main instruments of that collaboration have been the preparation of policy framework papers and joint Fund-Bank missions to deal with prob- lems relating to arrears vis-a-vis international creditors. Allow me to highlight Viet Nam's recent developments in the context of these major world changes. The Vietnamese Government has started im- plementing a comprehensive economic program for almost the past two years. The objective is to shift away from a highly subsidized bureaucratic economy to a market-oriented economy. The major policies and measures are aimed at strengthening the public sector while developing private sector economic activities. In pursuit of these objectives, policies were implemen- ted in the major sectors of the economy. In the agricultural sector, a piece- work contract system was introduced to individual farmers, which was ac- companied by a reform of the land tenure system. In the industrial sector, budgetary subsidies to state enterprises were eliminated, while they were given complete financial and management autonomy. In the financial sector, the official exchange rate was adjusted to a level more consistent with market forces, and interest rates were increased considerably-to 12 percent a month in April 1989. Considerable efforts were also made to improve both budgetary and monetary policies. These policies and measures have produced encouraging results. In 1989, agricultural output increased considerably. For the first time, Viet Nam became not only self-sufficient in food, but it also became a major rice exporter. Output in the light industry, construction, and services sectors increased significantly. Inflation decreased from an annualized rate of 14.2 percent a month in 1988 to 2.3 percent a month during the year. The Viet- namese authorities have also managed the official exchange rate in a flexible manner. Exports in convertible currencies doubled those of the previous year allowing an improvement in the balance of payments position. Inter- national reserves increased from the level of one week of imports in 1988 to four weeks at the end of 1989. At the same time, Viet Nam's economic relations with the international financial community have improved greatly. In June 1989, the Vietnamese Government signed an agreement on economic, cultural, scientific, and technological cooperation with the French Government. Similar agreements were reached with the governments of Italy, Sweden, and Finland. Economic and commercial relations between Viet Nam and the members of the As- 214 sociation of Southeast Asian Nations (ASEAN), as well as Southwest Asian countries, have widened. During 1990, the Vietnamese Government continued its reform effort through promulgation of a number of laws aimed at strengthening the basic economic structure. These included an amendment to the Foreign Invest- ment Law, three tax laws, and several decree-laws, the most important of which are Decree-Laws on the central bank and commercial banks. We are now preparing a Commercial and Company Law, decree-laws on ownership and bankruptcy, and other regulations aimed at creating a strong legal framework for economic reform and foreign investment in Viet Nam .... . . . As regards relations between the Bank and Viet Nam, over the past two years, the Bank has sent various economic and sector review missions to study the overall economic situation and identify priority sectors and projects in preparation for the Bank's resumption of its operations in Viet Nam. We endorse the Bank staff's view that primary focus for financial support should be on infrastructure and key economic sectors, such as agriculture, transport, energy, light and export industries, and on social and welfare projects in health and education. The Vietnamese Government is committed to continue the economic policy reform and will undertake stronger and more comprehensive policies. With this view, we warmly welcome international financial institutions, for- eign countries, and investors to cooperate with and invest in Viet Nam under the Foreign Investment Law. The economic reform in Viet Nam, which is continuing and developing in the right direction, is in urgent need of financial assistance from the international community, especially since this reform has already caused considerable social difficulties. In the context of development in the world, in the region, and domesti- cally, we strongly wish the Fund and the Bank to express its support of Viet Nam's efforts. Such financial assistance would permit Viet Nam to complete successfully its economic reform, solve its arrears problems, and normalize its relations with the international financial community. WESTERN SAMOA: TOFILAU ETI ALESANA Governor of the Bank (on behalf of Kiribati, Solomon Islands, Vanuatu, and Western Samoa) On behalf of the countries in our constituency, Kiribati, Solomon Islands, Vanuatu, and my own country, I wish to join previous speakers in welcoming the Czech and Slovak Federal Republic, Bulgaria, and Namibia, and also our Special Invitees from the U.S.S.R. to the Annual Meetings. I would also like to express our appreciation for the excellent arrangements for these meetings. 215 Our warmest thanks to the President of the United States, Mr. George Bush, for his welcoming address and to the American people for hosting this year's Annual Meetings in Washington, D.C. The pace of world economic activity, which decelerated last year from a very rapid growth in 1988, is projected to taper off further during 1990. World trade, which also fell in 1989 from the high level of the year earlier, is expected to decline further this year. These trends have produced and will continue to produce adverse effects on many developing countries, especially our small island economies. The small island countries of our constituency are characterized by a limited resource base, a high degree of vulnerability to adverse weather, and weak infrastructure. These countries rely heavily on the export of lim- ited primary products. The international prices of these commodities have been on a downward trend over recent years and this has contributed to a widening of our external trade deficits. Except for Vanuatu, which was able to offset its trade deficit with a larger surplus from its services account, other countries like my own rely heavily on a net inflow of funds from abroad to meet imbalances in our external accounts. Moreover, the wide fluctua- tions in international foreign exchange markets since mid-1989 and in early 1990 have made the management of our economies much more difficult. The continued acceleration of interest rates in major industrial countries has tended to raise the cost of funds for development financing which will further hamper our own development efforts. A further common characteristic of our small island countries is a heavy dependence on imported fuel, which is the major input in our production of electricity. The recent increase in the price of oil and the likelihood of further increases will have significant adverse effects on our island econ- omies, particularly in the areas of tourism, fishing, transportation, and industrial production. In this connection, we would ask for the inclusion of the small island countries in any program of assistance established to coun- teract the detrimental effects of the oil price increases. A greater volume of external funds is needed by many developing coun- tries not only for longer-term structural adjustment requirements, but also for meeting balance of payments needs. The transition of countries in East- ern Europe, from centrally planned to open market economies, will raise the external financing needs of those countries. Futhermore, with the impact of monetary and economic unification in Germany, total capital outflows from a unified Germany are likely to decline. The recent decision to move ahead with the process of the Fund's quota increase is therefore a welcome step. It is important that the Fund continue to take into account the special needs and conditions of the small island countries and, in this regard, we would urge the Fund to be flexible in the application of its conditionality requirements when considering further financial assistance to these coun- tries. 216 We ask The World Bank Group not to overlook our financial require- ments during the coming decade of larger global needs for development finance. Our needs are relatively small, but meeting them could produce large catalytic effects on structural economic adjustments. IDA, in partic- ular, needs to increasingly take into account the prevailing social and eco- nomic structure of recipient small island countries when designing financial conditions to be attached to project loans. Greater flexibility within the general framework of varying conditions for different project loans should be more in conformity with the actual situation of those small island coun- tries and would thereby generate greater beneficial results. The IFC initia- tive of combining its financing measures with technical assistance for project identification and formulation would help meet the needs of those countries, where the level of evaluation of project design is not yet well developed. Our constituency will continue to need help under the technical assistance programs of the Fund and the Bank. We would, therefore, strongly rec- ommend that financial resources earmarked for these programs be either maintained at current levels or increased .... . . . I would like to turn now to the issue of the environment, which is one of the major concerns of our constituency. The small island countries, especially the low-lying atolls, are particularly vulnerable to adverse changes in the environment resulting from pollution and global warming. In this regard, we welcome the proposed establishment of the Global Environment Facility and we urge the Fund and the Bank to continue to give priority to environmental protection. In conclusion, I wish to express our appreciation to you, Mr. Chairman, for the admirable way in which you have conducted the Annual Meetings. I also wish to thank Mr. Camdessus and Mr. Conable, as well as the Fund and Bank staffs, for their untiring work over the past 12 months to enhance economic and social development, especially in small island countries. 217 CONCLUDING REMARKS BY MR. CONABLE In your eloquent opening statement, Mr. Chairman, you correctly em- phasized: "A new sense of international cooperation is being established. We are meeting at a time indeed when world history is being made." That sense of cooperation is exemplified by the response of the interna- tional community to the Gulf crisis. The threat to peace is serious. The economic problems posed are no less serious, especially for developing countries. There has been broad agreement during our Meetings that countries most affected by the Gulf crisis need swift assistance. I welcome the support expressed for the Bank's proposed response to the crisis. We are urgently examining the needs of our most affected member countries and are launch- ing programs of assistance. We will collaborate closely with the IMF and keep the situation under careful review, building on our close exchanges with delegations here. If the crisis persists, additional concessional funds may be necessary, and we will be prepared to help raise and coordinate the flow of such funds. The World Bank's business, Mr. Chairman, is development. Whatever immediate perils we face, our long-term mission is to reduce poverty. That mission must be carried out with renewed determination. Mr. Chairman, there is no question about the value of these Meetings. They reflect accu- rately the concerns of development. They are opportunities for us to ex- change ideas in a fast-changing world, and the Bretton Woods institutions draw considerable momentum from the political support generated at these meetings. The reaction to our emphasis on reducing poverty, and on the develop- ment strategy necessary to achieve it, has been favorable. Governors have expressed support for the strategy of encouraging growth by removing biases against productive use of labor, investing in human resources through education, health, and nutrition, and providing safety nets to reach the dependent poor. If we pursue this strategy, we can reduce the number of poor people significantly by the end of the century. Success in reducing poverty should be the measure of global economic progress. Development and poverty reduction will not be sustainable in the long term, however, without halting and reversing environmental degradation. Development is only sustainable in a sound environment. The poor are least able to adapt to environmental degradation. For these reasons, there will be a growing emphasis on the environment in the Bank's programs. Support given here to the Global Environment Facility (GEF) underlines the broad consensus that protecting the environment and promoting development are inseparable. I hope agreement can be reached on all outstanding GEF issues, including its funding, by the end of the year. 218 We all agree on the importance of a satisfactory outcome to the Uruguay Round. We welcomed the statement by President Bush that "The Round is not just a trade issue, it is a growth issue." GATT has greatly facilitated world economic growth, and failure in the negotiations would considerably increase the difficulties we all face, not the least reducing poverty. I call again on the GATT participants to bury their differences for the global good. Growth, which is indispensable to poverty reduction, requires invest- ment. The private sector must become the engine of growth and poverty reduction in developing countries. Governors have acknowledged the need for creating in developing countries a climate more favorable to private capital. In this regard, I am pleased by the support expressed for a prompt and substantial increase in the International Finance Corporation's capital base. For the poorest countries, concessional flows are crucial. I share the concern voiced by many Governors over the stagnation of concessional flows to developing countries, just as many countries are bravely undertaking reform. Official development assistance should be increased and be better directed to poverty reduction. The proposals on debt relief for low-income countries advanced by the United Kingdom, the Dutch, and the French Governments have been the subject of considerable discussion during these meetings. It would be most useful if the Paris Club could give urgent consideration to these ideas. Growth and recovery in too many developing countries is still constrained by debt. In concluding, may I, Mr. Chairman, offer my sincere thanks to Mr. Bernard Chidzero, Governor of Zimbabwe, who has so ably guided the Development Committee. In addition, my congratulations to his successor as Chairman of the Development Committee, Alejandro Foxley, Governor of Chile. I also would like to congratulate the Governor of Ecuador, who will be Chairman of the 1991 Annual Meetings in Thailand. A special thanks to you, Mr. Chairman, for your admirable conduct of our meetings. We have had earnest consultation about the changes taking place around the world and their impact on development. The 1990 Annual Meetings have been most productive. My best wishes to you all for a safe journey home. We look forward to seeing you again next year. 219 CONCLUDING REMARKS BY THE CHAIRMAN, THE HON. GEORGE SAITOTI It is now my duty as Chairman of the Boards of Governors to bring these Annual Meetings of the Fund and the Bank Group to a close. I must thank Mr. Camdessus, Mr. Conable, and my fellow Governors for their thoughtful and valuable contributions to our discussions. Recent Developments We all deplore that just before these Meetings were convened, the world economic outlook was overshadowed by developments in the Middle East. Our discussions over the past few days have therefore been heavily influ- enced by those events. Since we meet each year, not just to review past developments and achievements, but also to try and chart a credible and feasible path for our economies, individually and collectively, the uncertain- ties ahead have meant that our deliberations this week have been particu- larly important. I am encouraged by the resoluteness with which Governors have agreed that the recent events should make us double our efforts to control inflation, reduce payments imbalances, and improve the conditions for sustainable growth through mobilization of savings and investment. Governors have agreed that monetary policy must remain tight and nonaccommodating of the necessary oil price adjustments; that fiscal correction must continue, where needed; and that structural policies aimed at raising the efficiency of resource use must be intensified. While countries do their part by adopting the correct policies, the Fund and the Bank have been called upon to make active use of, and to adapt as necessary, their instruments to provide stability to the system. Governors therefore welcomed the proposals put forward by Mr. Camdessus and Mr. Conable to enhance the responsiveness of our institutions to the new circumstances. The facts that the Bank has already embarked on a program of emergency assistance and that the Fund has the flexibility to adapt access and also its facilities are welcome signs of our institutions' ability to cope with the unforeseen. Debt We in the developing countries have accepted that the primary responsi- bility for the resolution of our economic difficulties and the stimulation of our development lies with ourselves through the adoption of appropriate policies, including structural reforms. However, this does not absolve the industrial countries and the international financial institutions of the need to support our endeavours. In this context, Governors stressed the catalytic role of the Fund and Bank in raising the necessary financial resources to support members' ad- 220 justment programs. Governors welcomed the forgiveness by certain creditor countries of the aDA obligations of low-income countries, as well as the recent decisions of the Paris Club regarding official debt owed by lower middle-income countries. They encouraged further initiatives toward official debt relief. Despite progress on the reduction of debt and debt service, such steps are now more urgent given that the oil importing developing countries will be hardest hit by the increase in oil prices. Need for Resources For our institutions to maintain their central role, as well as to meet their other responsibilities, they must be equipped with sufficient resources. I am, therefore, pleased to note that Governors have followed the urging of my opening statement and called for the prompt ratification of the quota increase, with its implied acceptance of the Third Amendment to the Ar- ticles of Agreement, together with an early agreement of the capital increase for the IFC. Eastern Europe Excitement about the movements in Eastern Europe toward market-ori- ented economies has been contagious. Such developments are the very es- sense of the work at the Fund and the Bank-countries taking steps that allow them to help themselves, while taking their rightful place as players in the world economy. In this context, Governors stressed the importance of continued Fund and Bank technical and financial support to these coun- tries. By the same token, they welcomed the study of the Soviet economy that is being undertaken in cooperation with others by the Fund and the Bank. Trade If the countries of Eastern Europe are making such dramatic efforts to move to market reform, it seems only fair and logical that the international trading system should also move toward greater liberalization as soon as possible. Governors stressed that the successful resolution of the Uruguay Round is a unique opportunity that cannot be allowed to slip away, and they urged the firm political determination of all to bring negotiations to a suc- cessful conclusion. Environment In discussing the environment, it was noted that the poorest countries suffer the most from environmental damage, and yet it is the industrial countries that are primarily to blame for it. Governors stressed the inter- dependence between the need for environmental protection and economic 221 growth. In this context, they welcomed the progress achieved to date toward the establishment of the Global Environmental Facility. Poverty I mentioned in my opening remarks that poverty would be an important theme of our discussions, and indeed it has been. Governors pointed out that the Fund, the Bank, and the international financial institutions must aim at facilitating not only higher economic growth, but a better quality of growth. Programs to improve health and education, for example, not only help the poor's earnings capacity but also greatly enhance their welfare. Poverty is therefore not only an issue for the Bank, but, on the macroeco- nomic level, the Fund must not ignore it. Raising the living standard of all people, while working toward a more even distribution of the fruits of growth, has to be the primary goal of each of our efforts and of the support of these efforts by our institutions. Conclusion While these meetings began under a cloud of uncertainties, we leave with a sense of reassurance. We now know that we are united in our ambitions for growth and equity and in our determination to cope with adverse de- velopments. Let us use this unity as an inspiration when we return to our countries and work to put into practice the advice that we have given and received over these past three days. This sense of reassurance and renewed commitment is due, in no small measure, to the efforts and initiative of Mr. Camdessus and Mr. Conable, and I would be remiss if I failed to convey our gratitude to them. In closing, I wish you all a safe and pleasant journey to your homes, and I congratulate, and wish all success to, Ecuador, which will succeed Kenya in the Chairmanship of the Boards of Governors. I hereby adjourn the 1990 Annual Meetings of the Boards of Governors of the International Monetary Fund and the World Bank and its affiliates. 222 ECUADOR: JORGE GALLARDO ZAVALA Governor of the Bank As a founding member of the International Monetary Fund and the World Bank, Ecuador is honored to accept the chairmanship of the Forty-Sixth Annual Meetings of the two institutions in Bangkok in 1991. This is an honor to our country, our people, and our region. Ecuador will strive to carry out the duties of the Chairman with the same courtesy, responsibility, and efficiency that have characterized these meet- ings under the distinguished chairmanship of Mr. Saitoti, the Governor for Kenya. The ongoing efforts by the International Monetary Fund and the World Bank to aid global economic growth and development have been joined in the past 12 months by new initiatives, such as the Enterprise for the Amer- icas, announced by President Bush, for promoting economic growth in Latin America by expanding trade and investment, while reducing external debt and providing funds for local and environmental aspects. Efforts are also under way to respond to the remarkable transformation now taking place in Eastern Europe. We hope the international community will find ways to facilitate this process while continuing with the ongoing efforts elsewhere in the world. In addition, we must now also formulate our response to a new and unexpected challenge. I am referring to recent developments in the Middle East. Because of the Gulf crisis, the oil importing countries, especially in the developing world, will be facing significantly greater difficulties in the short run, and the front-line states in the Middle East are facing severe disruption of their economies. The list of issues facing us remains large. The debt crisis is still with us. Poverty alleviation needs renewed world attention. Continuing attention is also needed to policy and regulatory changes in a great many countries. In our interdependent world, solutions to these and other problems must be sought as part of a global cooperative effort. Managing Director Camdessus and President Con able deserve our grat- itude for their leadership and vision in guiding this global effort. I would also like to take this opportunity to extend our thanks to the Executive Directors and the staff of the two institutions for their excellent work and dedication. It will be a great pleasure to work with them in the year ahead. I am looking forward to welcoming all of you at our next Annual Meetings in Bangkok, Thailand, in October 1991. 223 DOCUMENTS OF THE BOARDS OF GOVERNORS SCHEDULE OF MEETINGS! Tuesday September 25 10:00 a.m. -Opening Ceremonies Address from the Chair Annual Address by Managing Director, International Monetary Fund Annual Address by President, The World Bank Group2 Following the-Joint Procedures Committee conclusion of -MIGA Procedures Committee the Opening Ceremonies 3:00 p.m. -Annual Discussion Wednesday September 26 9:30 a.m. -Annual Discussion 3:00 p.m. -Annual Discussion IMF Election of Executive Directors IBRD Election of Executive Directors MIGA Election of Directors 6:15 p.m. -Joint Procedures Committee 6:30 p.m. -MIGA Procedures Committee Thursday September 27 9:30 a.m. -Annual Discussion Following the Procedures Committees Reports conclusion of Comments by Heads of Organizations the Annual Discussion 'All sessions were joint sessions with the Board of Governors of the International Monetary Fund. 2The World Bank Group consists of the following: International Bank for Reconstruction and Development (I BRD) International Finance Corporation (IFC) International Development Association (IDA) International Centre for Settlement of Investment Disputes (ICSID) Multilateral Investment Guarantee Agency (MIGA) 224 PROVISIONS RELATING TO THE CONDUCT OF THE MEETINGS· ADMISSION 1. Sessions of the Boards of Governors of the International Mon- etary Fund and the World Bank Group Organizations will be joint and shall be open to accredited press, guests, and staff. 2. Meetings of the Joint Procedures Committee shall be open only to Governors who are members of the Committee and their advisers, Executive Directors, and such staff as may be necessary. PROCEDURE AND RECORDS 3. The Chairman of the Boards of Governors will establish the order of speaking at each session. Governors signifying a desire to speak will generally be recognized in the order in which they ask to speak. 4. With the consent of the Chairman, a Governor may extend his statement in the record following advance submission of the text to the Secretaries. 5. The Secretaries will have verbatim transcripts prepared of the proceedings of the Boards of Governors and the Joint Procedures Committee. The transcripts of proceedings of the Joint Procedures Committee will be confidential and available only to the Chairman, the Managing Director of the International Monetary Fund, the Pres- ident of the World Bank Group, and the Secretaries. 6. Reports of the Joint Procedures Committee shall be signed by the Committee Chairman and the Reporting Members. PUBLIC INFORMATION 7. The Chairman of the Boards of Governors, the Managing Di- rector of the International Monetary Fund and the President of the World Bank Group will communicate to the press such information concerning the proceedings of the Annual Meetings as they may deem suitable. 'Approved on April 11, 1990 pursuant to the By-Laws, IBRD Section 5(d), IFC Section 4(d) and IDA Section I(a). 225 BANK AGENDA 1 1. 1989/90 Annual Report 2. Financial Statements and Annual Audit 3. Allocation of Net Income 4. Administrative Budget 5. Membership of Bulgaria 6. Membership of Namibia 7. Joint Development Committee 8. Rules for the 1990 Regular Election of Executive Directors 9. Places and Dates of Forthcoming Annual Meetings 10. Procedures Committee for 1990/91 IFC AGENDA 1 1. 1989/90 Annual Report 2. Membership of Namibia 3. Financial Statements and Annual Audit 4. Administrative Budget IDAAGENDA 1 1. 1989/90 Annual Report 2. Membership of Namibia 3. Financial Statements and Annual Audit 4. Administrative Budget MIGA AGENDA 2 1. 1989/90 Annual Report 2. Membership of Namibia 3. Third Regular Election of Directors 4. Selection of Officers and Procedures Committee for 1990/91 IApproved on August ZO, 1990 pursuant to the By-Laws, IBRD Section 5(a), IFe Section 4(a) and IDA Section I(a). 2Approved on August 13, 1990 pursuant to Section 4(a) of the MIGA By-Laws. 226 JOINT PROCEDURES COMMITIEE Chairman . ........................... Kenya Vice Chairmen ...................... .Denmark Indonesia Reporting Member . .................. Morocco Other Members Chile Morocco Costa Rica Nepal Denmark Nigeria Djibouti Paraguay France Portugal Gabon St. Kitts and Nevis] Germany Saudi Arabia India Turkey Indonesia United Kingdom Japan United States Kenya Yemen, Republic of 'Not a member of IFC. 227 REPORTIJ1 September 25, 1990 At the meeting of the Joint Procedures Committee held on September 25, 1990, items of business on the agendas of the Boards of Governors of the Bank, IFC, and IDA were considered. The Committee submits the following report and recommendation on Bank business: 1. Application for Membership-People's Republic of Bulgaria The Committee considered the Report by the Executive Directors dated September 10, 1990, concerning Bulgaria's membership in the Bank. The Committee recommends that the Board of Governors of the Bank adopt the draft Resolution .... 2 The Committee submits the following report and recommendation on Bank, IDA, and IFC business: 2. Application for Membership-Republic of Namibia The Committee considered the Report by the Executive Directors of the Bank and IDA and the Board of Directors of IFC dated September 19, 1990 concerning Namibia's membership in the Bank, IFe, and IDA. The Committee recommends that the Boards of Governors of the Bank, IDA and IFC adopt the draft Resolutions .. Approved: lsi George Saitoti lsi Mohammed Dairi Kenya-Chairman Morocco-Reporting Member This report was approved and its recommendations were adopted by the Boards of Governors on September 25, 1990. 'Report I related to the business of the Fund. 2See page 243. 'See pages 246 and 277. 228 REPORT III September 25, 1990 The Joint Procedures Committee met on September 25,1990 and submits the following report and recommendation: Places and Dates of Forthcoming Annual Meetings The Committee considered the Reports of the Executive Boards of the Fund and of the Bank on forthcoming Annual Meetings and recommends that the invitation extended by the Government of Spain be accepted, and that the Resolutions proposing that the 1994 Annual Meetings be convened in Madrid, Spain on October 4, 1994 and that the 1995 and 1996 Annual Meetings be convened, respectively, on October 10 and October L in Wash- ington, D.C. be adopted. 1 Approved: lsi George Saitoti lsi Mohammed Dairi Kenya-Chairman Morocco-Reporting Member This report was approved and its recommendations were adopted by the Boards of Governors on September 25, 1990. 'See pages 248 and 249. 229 REPORT Vi September 27, 1990 At the meeting of the Joint Procedures Committee held on September 26, 1990, items of business on the agendas of the Boards of Governors of the Bank, IFC, and IDA were considered. The Committee submits the following report and recommendations on Bank and IDA business: 1. 1990 Annual Report The Committee noted that the 1990 Annual Report and the activities of the Bank and IDA had been discussed at these Annual Meetings. 2. 1990 Regular Election of Executive Directors The Committee noted that the 1990 Regular Election of Executive Di- rectors of the Bank had taken place and that the next Regular Election of Executive Directors will take place at the Annual Meeting of the Board of Governors in 1992. 3. Financial Statements, Annual Audits, and Administrative Budgets The Committee considered the Financial Statements, Accountants' Re- ports, and Administrative Budgets contained in the 1990 Bank and IDA Annual Report, together with the Report dated August 6, 1990. The Committee recommends that the Boards of Governors of the Bank and IDA adopt the draft resolutions .... 2 4. Allocation of Net 1ncome of the Bank The Committee considered the Report of the Executive Directors dated June 5, 1990, on the Allocation of FY90 Net Income .... 3 The Committee recommends that the Board of Governors of the Bank adopt the draft resolution .... 4 lReport IV related to the business of the Fund. 2See pages 249 and 279. 'See page 286. . 4See page 249. 230 _.__.._ _ _-----_. .. ... The Committee submits the following report and recommendations on IFC business: 1. 1990 Annual Report The Committee noted that the 1990 Annual Report and the activities of IFC had been discussed at these Annual Meetings. 2. Financial Statements, Annual Audit, and Administrative Budget The Committee considered the Financial Statements and the Account- ants' Report contained in the 1990 Annual Report, and the Administrative Budget attached to the Report dated August 13, 1990. The Committee recommends that the Board of Governors of IFC adopt the draft resolution. I Approved: lsi George Saitoti lsi Abdelmalek Ouenniche Kenya-Chairman Morocco-Reporting Member This report was approved and its recommendations were adopted by the Boards of Governors on September 27, 1990. 'See page 259. 231 REPORfVI September 27, 1990 The Joint Procedures Committee met on September 26, 1990 and submits the following report and recommendations: l. Development Committee The Committee noted that the Annual Report of the Joint Ministerial Committee of the Boards of Governors of the Bank and the Fund on the Transfer of Real Resources to Developing Countries (Development Com- mittee) has been presented to the Boards of Governors of the Fund and the Bank pursuant to paragraph 5 of Resolutions Nos. 29-9 and 294 of the Fund and Bank, respectively. The Committee recommends that the Boards of Governors of the Fund and the Bank note the report and thank the Development Committee for its work. 2. Officers and Joint Procedures Committee for 1990191 The Committee recommends that the Governor for Ecuador be Chair- man, and that the Governors of Lesotho and the Netherlands be Vice Chairmen, of the Boards of Governors of the Fund and of the World Bank Group, to hold office until the close of the next Annual Meetings. It is further recommended that a Joint Procedures Committee be estab- lished to be available, after the termination of these meetings and until the close of the next Annual Meetings, for consultation at the discretion of the Chairman, normally by correspondence and, if the occasion requires, by convening; and that this Committee shall consist of the Governors for the following members: Bangladesh, Bolivia, Canada, Cameroon, Ecuador, France, Germany, Ghana, Grenada, Iceland, Japan, Lesotho, the Nether- lands, Poland, Saudi Arabia, Syrian Arab Republic, Thailand, Togo, Tuni- sia, United Kingdom, United States, and Vanuatu. 232 It is recommended that the Chairman of the Joint Procedures Committee shall be the Governor for Ecuador, and the Vice Chairmen shall be the governors for Lesotho and the Netherlands, and that the Governor for Bangladesh shall serve as Reporting Member. Approved: lsi George Saitoti lsi Abdelmalek Ouenniche Kenya-Chairman Morocco-Reporting Member This report was approved and its recommendations were adopted by the Boards of Governors on September 27, 1990. 233 MIGA PROCEDURES COMMITTEE Chairman ........................... .Kenya Vice Chairmen ...................... .Denmark Indonesia Reporting Member .. ................. Tunisia Members Canada Portugal Chile Saudi Arabia China Switzerland Denmark Togo Germany Tunisia Indonesia Turkey Japan United Kingdom Kenya United States 234 ----------~----- - REPORfI September 25, 1990 The MIGA Procedures Committee met on September 25, 1990 and sub- mits the following report: Application for Membership-Republic of Namibia The Committee considered the Report of the Board of Directors of MIGA concerning Namibia's membership in MIGA. The Committee recommends that the Council of Governors adopt the draft resolution .... 1 Approved: /s/ George Saitoti /s/ Mustapha Kamel Nabli Kenya-Chairman Tunisia-Reporting Member This report was approved and its recommendations were adopted by the Council of Governors on September 25, 1990. I See page 283. 235 REPORfII September 26, 1990 At the meeting of the MIGA Procedures Committee held on September 26, 1990, the items of business on the agenda of the Council of Governors of MIGA were considered. The Committee submits the following report and recommendations on MIGA business: 1. 1990 Annual Report The Committee noted that the 1990 Annual Report and the activities of MIGA had been discussed at this Annual Meeting. 2. 1990 Election of Directors The Committee noted that the 1990 Election of Directors of MIGA had taken place and that the next Election of Directors will take place at the Annual Meeting of the Council of Governors in 1992. 3. Officers and Procedures Committee for 1990191 The Committee recommends that the Governor for Ecuador be Chairman and Governors for Lesotho and the Netherlands be Vice Chairmen of the Council of Governors of MIGA to hold office until the close of the next Annual Meeting. It is further recommended that a Procedures Committee be established to be available, after the termination of this Annual Meeting and until the close of the next Annual Meeting, for consultation at the discretion of the Chairman, normally by correspondence and, if the occasion requires, by convening; and that this Committee shall consist of the Governors for the following members: Bangladesh, Cameroon, Canada, Ecuador, France, Germany, Ghana, Grenada, Japan, Lesotho, the Netherlands, Poland, Saudi Arabia, Togo, Tunisia, United Kingdom, United States, and Vanuatu. 236 It is recommended that the Chairman of the Procedures Committee shall , be the Governor for Ecuador and the Vice Chairmen shall be the Governors for Lesotho and the Netherlands, and that the Governor for Bangladesh shall serve as Reporting Member. Approved: /s/ George Saitoti /s/ Mustapha Kamel Nabli Kenya-Chairman Tunisia-Reporting Member This report was approved and its recommendations were adopted by the Council of Governors on September 26, 1990. 237 RESOLUTIONS ADOPTED BY THE BOARD OF GOVERNORS OF THE BANK BETWEEN THE 1989 AND 1990 ANNUAL MEETINGS Resolution No. 437 1990 Regular Election of Executive Directors RESOLVED: (a) THAT the attached Rules for the 1990 Regular Election of Executive Directors are hereby approved; and (b) THAT a Regular Election of Executive Directors shall take place at the Annual Meetings of the Board of Governors in 1992. (Adopted August 9, 1990) Resolution No. 438 Direct Remuneration of Executive Directors and their Alternates RESOLVED: THAT, effective July 1, 1990, the annual rates of remuneration of the Executive Directors of the Bank and their Alternates pursuant to Section 13(e) of the By-Laws shall be as follows: (i) As salary, $106,440 per year for Executive Directors and $88,940 per year for their Alternates; (ii) As supplemental allowance (for expenses, including housing and en- tertainment expenses, except those specified in Section 13(f) of the By-Laws), $9,000 per year for Executive Directors and $7,200 per year for their Alternates. (Adopted August 20, 1990) Resolution No. 439 Benefits of the Executive Directors and their Alternates RESOLVED: 1. THAT, effective November 10, 1988, the interim measures related to changes in U.S. estate tax legislation made applicable to the staff as of that 238 date shall apply to Executive Directors of the Bank and their Alternates to the same extent as they apply to the staff. 2. THAT the changes in the Staff Retirement Plan of the Bank made applicable to staff participants as of March 20, 1990 and May 1, 1990 re- spectively, shall also apply, effective as of the same dates, to those Executive Directors of the Bank and their Alternates who are participants in the Plan. (Adopted August 20, 1990) Resolution No. 440 Membership of the Czech and Slovak Federal Republic WHEREAS the Government of the Czech and Slovak Federal Republic (hereinafter called Czechoslovakia) has applied for admission to member- ship in the International Bank for Reconstruction and Development in ac- cordance with Section l(b) of Article II of the Articles of Agreement of the Bank; WHEREAS, by Resolution No. 426, adopted on April 27, 1988, the Board of Governors has increased the authorized capital of the Bank by 14,000 additional shares to provide for the admission of new members; and WHEREAS, pursuant to Section 19 of the By-Laws of the Bank, the Executive Directors, after consultation with representatives of the Govern- ment of Czechoslovakia, have made recommendations to the Board of Gov- ernors regarding this application; NOW, THEREFORE, the Board of Governors hereby RESOLVES: THAT the terms and conditions upon which Czechoslovakia shall be admitted to membership in the Bank shall be as follows: 1. Definitions: As used in this resolution: (a) "Bank" means International Bank for Reconstruction and Develop- ment. (b) "Articles of Agreement" means the Articles of Agreement of the Bank. (c) "Subscription" means the capital stock of the Bank subscribed to by a member. 239 (d) "Member" means member of the Bank. (e) "1988 General Capital Increase Resolution" means Board of Gov- ernors' Resolution No. 425 entitled "1988 General Capital Increase" adopted on April 27, 1988. (f) "1988 Additional Capital Increase Resolution" means Board of Gov- ernors' Resolution No. 426 entitled "1988 Additional Increase in Authorized Capital" adopted on April 27, 1988. (g) "1979 Additional Capital Increase Resolution" means Board of Gov- ernors' Resolution No. 347 entitled "1979 Additional Increase in Authorized Capital Stock and Subscriptions Thereto" adopted on January 4, 1980, as amended by Resolution No. 419, adopted on August 17, 1987. 2. Membership in the Fund: Before accepting membership in the Bank, Czechoslovakia shall accept membership in and become a member of the International Monetary Fund. 3. Subscription: By accepting membership in the Bank, Czechoslovakia shall subscribe to 5,095 shares of the capital stock of the Bank at par on the terms and conditions set forth or referred to in paragraph 4 hereof. 4. Payments on Subscription: (a) Upon accepting membership in the Bank, Czechoslovakia shall pay to the Bank under Article II, Section 7(i) of the Articles of Agree- ment on account of the subscription price of each of the shares sub- scribed pursuant to paragraph 3 of this resolution: (i) Gold or United States dollars equal to 0.875% of the said sub- scription price; and (ii) An amount in its own currency which, at the appropriate pre- vailing exchange rate, shall be equal to 7.875% thereof. (b) The Bank shall call the amounts of subscription under paragraph 3 of this resolution payable under the said Article II, Section 7(i) which are not required to be paid under paragraph 4(a) above only when required to meet obligations of the Bank for funds borrowed or on loans guaranteed by it and not for use by the Bank in its lending activities or for administrative expenses. 5. Acceptance of Subscription: Before the Bank shall accept Czechoslova- kia's subscription to the shares set out in paragraph 3 of this resolution, the following action shall have been taken: (a) Czechoslovakia shall have taken all action necessary to authorize such subscription and shall furnish to the Bank all such information thereon as the Bank may request; and 240 (b) With respect to and on account of the subscription price of the said shares, Czechoslovakia shall pay to the Bank the amounts set forth in paragraph 4(a) above. 6. Representation and Information: Before accepting membership in the Bank, Czechoslovakia shall represent to the Bank that it has taken all action necessary to sign and deposit the instrument of acceptance and sign the Articles as contemplated by paragraphs 7(d) and (e) of this resolution and Czechoslovakia shall furnish to the Bank such information in respect of such action as the Bank may request. 7. Effective Date of Membership: Czechoslovakia shall become a member of the Bank with a subscription as set forth in paragraph 3 of this resolution as of the date when Czechoslovakia shall have complied with the following requirements: (a) become a member of the International Monetary Fund; (b) made the payments called for by paragraph 4 of this resolution; (c) furnished the representation, and such information as may have been requested, pursuant to paragraph 6 of this resolution; (d) deposited with the Government of the United States of America an instrument stating that it has accepted in accordance with its law the Articles and all the terms and conditions prescribed in this resolution, and that it has taken all steps necessary to enable it to carry out all its obligations under the Articles and this resolution; and (e) signed the original Articles held in the archives of the Government of the United States of America. 8. Limitation on Period for Fulfillment of Requirements of Membership: Czechoslovakia may fulfill the requirements for membership in the Bank pursuant to this resolution until December 28, 1990, or such later date as the Executive Directors may determine. 9. Additional Subscription on Terms and Conditions of the 1979 Additional Capital Increase Resolution: Czechoslovakia may subscribe 250 shares of the capital stock of the Bank on the terms and conditions specified in paragraphs 2 and 3 of the 1979 Additional Capital Increase Resolution, provided, however, that notwithstanding the provision of paragraph 2(b) of the said Resolution. Czechoslovakia may subscribe such shares up to the date on which Czechoslovakia may subscribe additional shares under para- graph lO below. 10. Additional Subscription on Terms and Conditions of the 1988 General Capital Increase Resolution. Czechoslovakia may subscribe up to 4,179 shares of the capital stock of the Bank on the terms and conditions specified 241 in paragraph 3(a) through 3(e) and 5 of the said Resolution, provided, however, that Czechoslovakia may subscribe 196 of the said shares only after Czechoslovakia shall have subscribed the shares referred to in paragraph 9 above. 11. Shares from Additional Shares Authorized under Resolution No. 426: The number of shares to be subscribed by Czechoslovakia pursuant to paragraphs 3, 9 and 10 of this resolution shall be subtracted from the number of shares authorized under the 1988 Additional Capital Increase Resolution and available to provide for the admission of further new members, and, to the extent any such shares are not subscribed by Czechoslovakia by the dates set forth or referred to in this resolution, they shall be added back to the said number of shares. (Adopted September 14, 1990) 242 RESOLUTIONS ADOPTED BY THE BOARD OF GOVERNORS OF THE BANK AT THE 1990 ANNUAL MEETINGS Resolution No. 441 Membership of the People's Republic of Bulgaria WHEREAS the Government of the People's Republic of Bulgaria (here- inafter called Bulgaria) has applied for admission to membership in the International Bank for Reconstruction and Development in accordance with Section l(b) of Article II of the Articles of Agreement of the Bank; WHEREAS, by Resolution No. 426, adopted on April 27, 1988, the Board of Governors has increased the authorized capital of the Bank by 14,000 additional shares to provide for the admission of new members; and WHEREAS, pursuant to Section 19 of the By-Laws of the Bank, the Executive Directors, after consultation with representatives of the Govern- ment of Bulgaria, have made recommendations to the Board of Governors regarding this application; NOW, THEREFORE, the Board of Governors hereby RESOLVES: THAT the terms and conditions upon which Bulgaria shall be admitted to membership in the Bank shall be as follows: 1. Definitions: As used in this resolution: (a) "Bank" means International Bank for Reconstruction and Develop- ment. (b) "Articles of Agreement" means the Articles of Agreement of the Bank. (c) "Subscription" means the capital stock of the Bank subscribed to by a member. (d) "Member" means member of the Bank. (e) "1988 General Capital Increase Resolution" means Board of Gov- ernors' Resolution No. 425 entitled "1988 General Capital Increase" adopted on April 27, 1988. (f) "1988 Additional Capital Increase Resolution" means Board of Gov- ernors' Resolution No. 426 entitled "1988 Additional Increase in Authorized Capital" adopted on April 27, 1988. 243 (g) '"1979 Additional Capital Increase Resolution" means Board of Gov- ernors' Resolution No. 347 entitled "1979 Additional Increase in Authorized Capital Stock and Subscriptions Thereto" adopted on January 4, 1980, as amended by Resolution No. 419, adopted on August 17, 1987. 2. Membership in the Fund: Before accepting membership in the Bank, Bulgaria shall accept membership in and become a member of the Inter- national Monetary Fund. 3. Subscription: By accepting membership in the Bank, Bulgaria shall sub- scribe to 2,677 shares of the capital stock of the Bank at par on the terms and conditions set forth or referred to in paragraph 4 hereof. 4. Payments on Subscription: (a) Upon accepting membership in the Bank, Bulgaria shall pay to the Bank under Article II, Section 7(i) of the Articles of Agreement on account of the subscription price of each of the shares subscribed pursuant to paragraph 3 of this resolution: (i) Gold or United States dollars equal to 0.875% of the said sub- scription price; and (ii) An amount in its own currency which, at the appropriate pre- vailing exchange rate, shall be equal to 7.875% thereof. (b) The Bank shall call the amounts of subscription under paragraph 3 of this resolution payable under the said Article II, Section 7(i) which are not required to be paid under paragraph 4(a) above only when required to meet obligations of the Bank for funds borrowed or on loans guaranteed by it and not for use by the Bank in its lending activities or for administrative expenses. 5. Acceptance of Subscription: Before the Bank shall accept Bulgaria's sub- scription to the shares set out in paragraph 3 of this resolution, the following action shall have been taken: (a) Bulgaria shall have taken all action necessary to authorize such sub- scription and shall furnish to the Bank all such information thereon as the Bank may request; and (b) With respect to and on account of the subscription price of the said shares, Bulgaria shall pay to the Bank the amounts set forth in par- agraph 4(a) above. 6. Representation and Information: Before accepting membership in the Bank, Bulgaria shall represent to the Bank that it has taken all action necessary to sign and deposit the instrument of acceptance and sign the Articles as contemplated by paragraphs 7(d) and (e) of this resolution and 244 Bulgaria shall furnish to the Bank such information in respect of such action as the Bank may request. 7. Effective Date of Membership: Bulgaria shall become a member of the Bank with a subscription as set forth in paragraph 3 of this resolution as of the date when Bulgaria shall have complied with the following requirements: (a) become a member of the International Monetary Fund; (b) made the payments called for by paragraph 4 of this resolution; (c) furnished the representation, and such information as may have been requested, pursuant to paragraph 6 of this resolution; (d) deposited with the Government of the United States of America an instrument stating that it has accepted in accordance with its law the Articles and all the terms and conditions prescribed in this resolution, and that it has taken all steps necessary to enable it to carry out all its obligations under the Articles and this resolution; and (e) signed the original Articles held in the archives of the Government of the United States of America. 8. Limitation on Period for Fulfillment of Requirements of Membership: Bulgaria may fulfill the requirements for membership in the Bank pursuant to this resolution until June 28, 1991, or such later date as the Executive Directors may determine. 9. Additional Subscription on Terms and Conditions of the 1979 Additional Capital Increase Resolution: Bulgaria may subscribe 250 shares of the capital stock of the Bank on the terms and conditions specified in paragraphs 2 and 3 of the 1979 Additional Capital Increase Resolution, provided, however, that notwithstanding the provision of paragraph 2(b) of the said Resolution, Bulgaria may subscribe such shares up to the date on which Bulgaria may subscribe additional shares under paragraph 10 below. 10. Additional Subscription on Terms and Conditions of the 1988 General Capital Increase Resolution. Bulgaria may subscribe up to 2,288 shares of the capital stock of the Bank on the terms and conditions specified in paragraphs 3(a) through 3(e) and 5 of the said Resolution, provided, how- ever, that Bulgaria may subscribe 195 of the said shares only after Bulgaria shall have subscribed the shares referred to in paragraph 9 above. 11. Shares from Additional Shares Authorized under Resolution No. 426: Of the number of shares to be subscribed by Bulgaria pursuant to paragraph 3 of this resolution, 1,800 shares shall be subtracted from the number of shares authorized under the 1988 Additional Capital Increase Resolution and available to provide for the admission of further new members, and, to the extent any such shares are not subscribed by Bulgaria by the date set 245 forth in paragraph 8 of this resolution, they shall be added back to the said number of shares. (Adopted September 25, 1990) Resolution No. 442 Membership of the Republic of Namibia WHEREAS the Government of the Republic of Namibia (hereinafter called Namibia) has applied for admission to membership in the Interna- tional Bank for Reconstruction and Development in accordance with Sec- tion 1(b) of Article II of the Articles of Agreement of the Bank; WHEREAS, pursuant to Section 19 of the By-Laws of the Bank, the Executive Directors, after consultation with representatives of the Govern- ment of Namibia, have made recommendations to the Board of Governors regarding this application; NOW, THEREFORE, the Board of Governors hereby RESOLVES: THAT the terms and conditions upon which Namibia shall be admitted to membership in the Bank shall be as follows: 1. Definitions: As used in this resolution: (a) "Bank" means International Bank for Reconstruction and Develop- ment. (b) "Articles of Agreement" means the Articles of Agreement of the Bank. (c) "Subscription" means the capital stock of the Bank subscribed to by a member. (d) "Member" means member of the Bank. (e) "1988 General Capital Increase Resolution" means Board of Gov- ernors' Resolution No. 425 entitled "1988 General Capital Increase" adopted on April 27, 1988. (f) "1979 Additional Capital Increase Resolution" means Board of Gov- ernors' Resolution No. 347 entitled "1979 Additional Increase in Authorized Capital Stock and Subscriptions Thereto" adopted on January 4, 1980, as amended by Resolution No. 419, adopted on August 17, 1987. 246 2. Membership in the Fund: Before accepting membership in the Bank, Namibia shall accept membership in and become a member of the Inter- national Monetary Fund. 3. Subscription: By accepting membership in the Bank, Namibia shall sub- scribe to 605 shares of the capital stock of the Bank at par on the terms and conditions set forth or referred to in paragraph 4 hereof. 4. Payments on Subscription: (a) Upon accepting membership in the Bank, Namibia shall pay to the Bank under Article II, Section 7(i) of the Articles of Agreement on account of the subscription price of each of the shares subscribed pursuant to paragraph 3 of this resolution: (i) Gold or United States dollars equal to 0.875% of the said sub- scription price; and (ii) An amount in its own currency which, at the appropriate pre- vailing exchange rate, shall be equal to 7.875% thereof. (b) The Bank shall call the amounts of subscription under paragraph 3 of this resolution payable under the said Article II, Section 7(i) which are not required to be paid under paragraph 4(a) above only when required to meet obligations of the Bank for funds borrowed or on loans guaranteed by it and not for use by the Bank in its lending activities or for administrative expenses. 5. Acceptance of Subscription: Before the Bank shall accept Namibia's sub- scription to the shares set out in paragraph 3 of this resolution, the following action shall have been taken: (a) Namibia shall have taken all action necessary to authorize such sub- scription and shall furnish to the Bank all such information thereon as the Bank may request; and (b) With respect to and on account of the subscription price of the said shares, Namibia shall pay to the Bank the amounts set forth in par- agraph 4(a) above. 6. Representation and Information: Before accepting membership in the Bank, Namibia shall represent to the Bank that it has taken all action necessary to sign and deposit the instrument of acceptance and sign the Articles as contemplated by paragraphs 7( d) and (e) of this resolution and Namibia shall furnish to the Bank such information in respect of such action as the Bank may request. 7. Effective Date of Membership: Namibia shall become a member of the Bank with a subscription as set forth in paragraph 3 of this resolution as of the date when Namibia shall have complied with the following requirements: 247 (a) become a member of the International Monetary Fund; (b) made the payments called for by paragraph 4 of this resolution; (c) furnished the representation, and such information as may have been requested, pursuant to paragraph 6 of this resolution; (d) deposited with the Government of the United States of America an instrument stating that it has accepted in accordance with its law the Articles and all the terms and conditions prescribed in this resolution, and that it has taken all steps necessary to enable it to carry out all its obligations under the Articles and this resolution; and (e) signed the original Articles held in the archives of the Government of the United States of America. 8. Limitation on Period for Fulfillment of Requirements of Membership: Namibia may fulfill the requirements for membership in the Bank pursuant to this resolution until June 28, 1991, or such later date as the Executive Directors may determine. 9. Additional Subscription on Terms and Conditions of the 1979 Additional Capital Increase Resolution: Namibia may subscribe 250 shares of the capital stock of the Bank on the terms and conditions specified in paragraphs 2 and 3 of the 1979 Additional Capital Increase Resolution, provided, however, that notwithstanding the provision of paragraph 2(b) of the said Resolution, Namibia may subscribe such shares up to the date on which Namibia may subscribe additional shares under paragraph 10 below. 10. Additional Subscription on Terms and Conditions of the 1988 General Capital Increase Resolution. Namibia may subscribe up to 668 shares of the capital stock of the Bank on the terms and conditions specified in paragraph 3(a) through 3(e) and 5 of the said Resolution, provided, however, that Namibia may subscribe 195 of the said shares only after Namibia shall have subscribed the shares referred to in paragraph 9 above. (Adopted September 25, 1990) Resolution No. 443 Forthcoming Annual Meetings RESOLVED: "THAT the invitation of the Government of Spain to hold the Annual Meetings in Madrid in 1994 be accepted; 248 THAT the 1994 Annual Meetings be convened on Tuesday, October 4, 1994; and THAT the 1995 and 1996 Annual Meetings be convened, respectively, on Tuesday, October 10 and October 1, in Washington, D.C." (Adopted September 25, 1990) Resolution No. 444 Financial Statements, Accountants' Report and Administrative Budget RESOLVED: THAT the Board of Governors of the Bank consider the Financial State- ments, Accountants' Report and Administrative Budget, included in the 1989/90 Annual Report, as fulfilling the requirements of Article V, Section 13, of the Articles of Agreement and of Section 18 of the By-Laws of the Bank. (Adopted September 27, 1990) Resolution No. 445 Allocation of FY90 Net Income RESOLVED: 1. THAT the Report of the Executive Directors dated June 5, 1990 on "Allocation of FY90 Net Income" is hereby noted with approval; 2. THAT the addition to the General Reserve of the Bank for the fiscal year ended June 30, 1990 of $750 million of net income is hereby noted with approval; and 3. THAT any excess of net income over $750 million shall be retained as surplus pending a decision on its further disposition prior to March 31, 1991. (Adopted September 27, 1990) 249 RESOLUTIONS ADOPTED BY THE BOARD OF GOVERNORS OF IFC BETWEEN THE 1989 AND 1990 ANNUAL MEETINGS Resolution No. 164 Increase of Subscription by France, India, Italy, Japan and Republic of Korea to the Capital of the Corporation WHEREAS the following countries have indicated their desire to sub- scribe for additional authorized and unissued shares of the Corporation: France 3,606 shares; India 2,555 shares; Italy 4,034 shares; Japan 23,738 shares; and Republic of Korea 3,637 shares; and WHEREAS the Directors of the Corporation have concluded that it is desirable that said countries should be permitted to increase their share- holdings and have made recommendations to the Board of Governors re- garding this matter; NOW, THEREFORE, THE BOARD OF GOVERNORS RESOLVES THAT: A. France is hereby authorized to subscribe an additional 3,606 shares of the Corporation on the terms and conditions provided for in this Resolution. B. India is hereby authorized to subscribe an additional 2,555 shares of the Corporation on the terms and conditions provided for in this Resolution. C. Italy is hereby authorized to subscribe an additional 4,034 shares of the Corporation on the terms and conditions provided for in this Resolution. D. Japan is hereby authorized to subscribe an additional 23,738 shares of the Corporation on the terms and conditions provided for in this Resolution. E. Republic of Korea is hereby authorized to subscribe an additional 3,637 shares of the Corporation on the terms and conditions provided for in this Resolution. 250 .-.---------_._----- F. The subscription price per share shaH be $1,000 in terms of United States doHars, and such subscription price shaH be paid in United States dollars or other freely convertible currency or currencies; pro- vided that, if payment is made in such a currency or currencies other than United States dollars, the Corporation shall exercise its best efforts to cause such currency or currencies to be promptly converted into United States dollars and the same shall constitute payment of, or towards, the subscription price only to the extent that the Corpo- ration shaH have received effective payment of United States dollars. G. France, India, Italy, Japan or Republic of Korea may at any time on or before June 30, 1990, subscribe the number of shares of capital stock of the Corporation listed above by depositing an Instrument of Subscription with the Corporation, in a form acceptable to the Cor- poration, and by paying in cash in full for such shares. H. France, India, Italy, Japan or Republic of Korea may elect, in respect of the shares to be subscribed by them respectively, to extend the date for subscription and payment under paragraph G until August 1, 1991. I. Any shares of capital stock remaining unsubscribed after the date prescribed under paragraph G hereof, or as extended by any of the members under paragraph H, shall remain authorized and unissued, issuable by the Corporation in accordance with its Articles of Agree- ment. (Adopted February 7, 1990) Resolution No. 165 Membership of Romania WHEREAS the Government of Romania has applied for admission to membership in the International Finance Corporation in accordance with Section 1(b) of Article II of the Articles of Agreement of the Corporation; and WHEREAS, pursuant to Section 17 of the By-Laws of the Corporation, the Board of Directors, after consultation with representatives of the Gov- ernment of Romania has made recommendations to the Board of Governors regarding this application; 251 NOW, THEREFORE, the Board of Governors, hereby RESOLVES: THAT the terms and conditions upon which Romania shall be admitted to membership in the Corporation shall be as follows: 1. Definitions: As used in this resolution: (a) "Corporation" means International Finance Corporation. (b) "Articles" means the Articles of Agreement of the Corporation. (c) "Dollars" or "$" means dollars in currency of the United States of America. (d) "Subscription" means the capital stock of the Corporation subscribed by a member. (e) "Member" means member of the Corporation. 2. Subscription: By accepting membership in the Corporation, Romania shall subscribe to 1,504 shares of the capital stock of the Corporation at the par value of $1,000 per share. 3. Payment of Subscription: Before accepting membership in the Corpora- tion, Romania shall pay $1,504,000 to the Corporation in full payment of the capital stock subscribed. 4. Information: Before accepting membership in the Corporation, Romania shall furnish to the Corporation such information relating to its application for membership as the Corporation may request. 5. Effective Date of Membership: Romania shall become a member of the Corporation with a subscription as set forth in paragraph 2 of this resolu- tion, as of the date when Romania shall have complied with the following requirements: (a) made the payment called for by paragraph 3 of this resolution; (b) furnished such information as may have been requested by the Cor- poration pursuant to paragraph 4 of this resolution; (c) deposited with the International Bank for Reconstruction and De- velopment an instrument stating that it has accepted without reser- vation in accordance with its law the Articles and all the terms and conditions prescribed in this resolution, and that it has taken all steps necessary to enable it to carry out all its obligations under the Articles and this resolution; and (d) signed the original Articles held by the International Bank for Re- construction and Development. 252 6. Limitation on Period for Fulfillment of Requirements of Membership: Romania may fulfill the requirements for membership in the Corporation pursuant to this resolution until December 28, 1990, or such later date as the Board of Directors may determine. (Adopted September 4, 1990) Resolution No. 166 1ncrease of Subscription by the Arab Republic of Egypt, Spain and Turkey to the Capital of the Corporation WHEREAS the following countries have indicated their desire to sub- scribe for additional authorized and unissued shares of the Corporation: Arab Republic of Egypt 131 shares; Spain 7,753 shares; and Turkey 1,500 shares. WHEREAS the Directors of the Corporation have concluded that it is desirable that said countries should be permitted to increase their share- holdings and have made recommendations to the Board of Governors re- garding this matter; NOW, THEREFORE, THE BOARD OF GOVERNORS RESOLVES THAT: A. The Arab Republic of Egypt is hereby authorized to subscribe an additional 131 shares of the Corporation on the terms and conditions provided for in this Resolution. B. Spain is hereby authorized to subscribe an additional 7,753 shares of the Corporation on the terms and conditions provided for in this Resolution. C. Turkey is hereby authorized to subscribe an additional 1,500 shares of the Corporation on the terms and conditions provided for in this Resolution. D. The subscription price per share shall be $1,000 in terms of United States dollars, and such subscription price shall be paid in United States dollars or other freely convertible currency or currencies; pro- vided that, if payment is made in such a currency or currencies other 253 than United States dollars, the Corporation shall exercise its best efforts to cause such currency or currencies to be promptly converted into United States dollars and the same shall constitute payment of, or towards, the subscription price only to the extent that the Corpo- ration shall have received effective payment of United States dollars. E. The Arab Republic of Egypt, Spain or Turkey may at any time on or before March 31, 1991, subscribe the number of shares of capital stock of the Corporation listed above by depositing an Instrument of Sub- scription with the Corporation, in a form acceptable to the Corpo- ration, and by paying in cash in full for such shares. F. The Arab Republic of Egypt, Spain or Turkey may elect, in respect of the shares to be subscribed by them respectively, to extend the date for subscription and payment under paragraph E until August 1, 1991. G. Any shares of capital stock remaining unsubscribed after the date prescribed under paragraph E hereof, or as extended by any of the members under paragraph F, shall remain authorized and unissued, issuable by the Corporation in accordance with its Articles of Agree- ment. (Adopted September 4, 1990) Resolution No. 167 Membership of the Czech and Slovak Federal Republic WHEREAS the Government of the Czech and Slovak Federal Republic (hereinafter called Czechoslovakia) has applied for admission to member- ship in the International Finance Corporation in accordance with Section 1(b) of Article II of the Articles of Agreement of the Corporation; and WHEREAS, pursuant to Section 17 of the By-Laws of the Corporation, the Board of Directors, after consultation with representatives of the Gov- ernment of Czechoslovakia has made recommendations to the Board of Governors regarding this application; 254 NOW, THEREFORE, the Board of Governors, hereby RESOLVES: THAT the terms and conditions upon which Czechoslovakia shall be admitted to membership in the Corporation shall be as follows: 1. Definitions: As used in this resolution: (a) "Corporation" means International Finance Corporation. (b) "Articles" means the Articles of Agreement of the Corporation. (c) "Dollars" or "$" means dollars in currency of the United States of America. (d) "Subscription" means the capital stock of the Corporation subscribed by a member. (e) "Member" means member of the Corporation. 2. Subscription: By accepting membership in the Corporation, Czechoslo- vakia shall subscribe to 3,404 shares of the capital stock of the Corporation at the par value of $1,000 per share. 3. Payment of Subscription: Before accepting membership in the Corpora- tion, Czechoslovakia shall pay $3,4()4,000 to the Corporation in full payment of the capital stock subscribed. 4. Information: Before accepting membership in the Corporation, Czech- oslovakia shall furnish to the Corporation such information relating to its application for membership as the Corporation may request. 5. Effective Date of Membership: Czechoslovakia shall become a member of the Corporation with a subscription as set forth in paragraph 2 of this resolution, as of the date when Czechoslovakia shall have complied with the following requirements: (a) become a member of the International Bank for Reconstruction and Development; (b) made the payment called for by paragraph 3 of this resolution; (c) furnished such information as may have been requested by the Cor- poration pursuant to paragraph 4 of this resolution; (d) deposited with the International Bank for Reconstruction and Devel- opment an instrument stating that it has accepted without reservation in accordance with its law the Articles and all the terms and conditions prescribed in this resolution, and that it has taken all steps necessary to enable it to carry out all its obligations under the Articles and this resolution; and 255 (e) signed the original Articles held by the International Bank for Re- construction and Development. 6. Limitation on Period for Fulfillment of Requirements of Membership: Czechoslovakia may fulfill the requirements for membership in the Corpo- ration pursuant to this resolution until December 28, 1990, or such later date as the Board of Directors may determine. (Adopted September 14, 1990) 256 RESOLUTIONS ADOPTED BY THE BOARD OF GOVERNORS OF IFC AT THE 1990 ANNUAL MEETINGS Resolution No. 168 Membership of the Republic of Namibia WHEREAS the Government of the Republic of Namibia (hereinafter called Namibia) has applied for admission to membership in the Interna- tional Finance Corporation in accordance with Section l(b) of Article II of the Articles of Agreement of the Corporation; and WHEREAS, pursuant to Section 17 of the By-Laws of the Corporation, the Board of Directors, after consultation with representatives of the Gov- ernment of Namibia has made recommendations to the Board of Governors regarding this application; NOW, THEREFORE, the Board of Governors, hereby RESOLVES: THAT the terms and conditions upon which Namibia shall be admitted to membership in the Corporation shall be as follows: 1. Definitions: As used in this resolution: (a) "Corporation" means International Finance Corporation. (b) "Articles" means the Articles of Agreement of the Corporation. (c) "Dollars" or "$" means dollars in currency of the United States of America. (d) "Subscription" means the capital stock of the Corporation subscribed by a member. (e) "Member" means member of the Corporation. 2. Subscription: By accepting membership in the Corporation, Namibia shall subscribe to 404 shares of the capital stock of the Corporation at the par value of $1,000 per share. 3. Payment of Subscription: Before accepting membership in the Corpora- tion, Namibia shall pay $404,000 to the Corporation in full payment of the capital stock subscribed. 4. Information: Before accepting membership in the Corporation, Namibia shall furnish to the Corporation such information relating to its application for membership as the Corporation may request. 257 5. Effective Date of Membership: Namibia shall become a member of the Corporation with a subscription as set forth in paragraph 2 of this resolu- tion, as of the date when Namibia shall have complied with the following requirements: (a) become a member of the International Bank for Reconstruction and Development; (b) made the payment called for by paragraph 3 of this resolution; (c) furnished such information as may have been requested by the Cor- poration pursuant to paragraph 4 of this resolution; (d) deposited with the International Bank for Reconstruction and De- velopment an instrument stating that it has accepted without reser- vation in accordance with its law the Articles and all the terms and conditions prescribed in this resolution, and that it has taken all steps necessary to enable it to carry out all its obligations under the Articles and this resolution; and (e) signed the original Articles held by the International Bank for Re- construction and Development. 6. Limitation on Period for Fulfillment of Requirements of Membership: Namibia may fulfill the requirements for membership in the Corporation pursuant to this resolution until June 28, 1991, or such later date as the Board of Directors may determine. 7. Additional Subscription: Namibia may subscribe up to 497 additional shares of the Corporation on the following terms and conditions: (a) The subscription price shall be $1,000 in terms of United States Dol- lars, and such subscription price shall be paid in United States Dollars or other freely convertible currency or currencies; provided that, if payment is made in such a currency or currencies other than United States Dollars, the Corporation shall exercise its best efforts to cause such currency or currencies to be promptly converted into United States Dollars and the same shall constitute payment of, or towards, the subscription price only to the extent that the Corporation shall have received effective payment of United States Dollars. (b) Namibia may at any time on or before August 1, 1991 (or such later date as the Directors may determine) subscribe up to the number of additional shares of capital stock of the Corporation mentioned above (the Additional Shares) by depositing an Instrument of Subscription with the Corporation, in a form acceptable to the Corporation, in which it commits itself to pay for such total number of shares in a manner consistent with paragraph (c) (2) of this section. (c) Payment of the subscription price for the Additional Shares sub- scribed shall be made in cash in full, either: 258 (1) for all such shares at any time or for some such shares from time to time, provided that such payment shall not be made in amounts and at times less favorable to the Corporation than those speci- fied in the following sub-paragraph (2); or (2) (i) for eighty percent (80%) of the total number of Additional Shares subscribed at the time an Instrument of Subscription, in a form acceptable to the Corporation, is received by the Corporation; and (ii) for the remainder, twenty percent (20%) of the total number of Additional Shares subscribed, in cash in full on August 1, 1991 or, at the election of Namibia, within a period of six months after such date; provided, however, that if an Instrument of Subscription is received by the Corporation on or (if the Directors have determined to extend the subscription period) after August 1, 1991 then payment shall be made in cash in full in respect of all the Additional Shares subscribed pursuant to such Instrument of Subscription. (d) At the request of Namibia, in respect of the Additional Shares to be subscribed by it, the Directors may extend the date for subscription or any period of payment under paragraph (c) (2) above by up to six months. (e) To the extent that any Additional Shares, which have been subscribed pursuant to this Resolution, shall not have been paid for in cash in full on or before the last date prescribed for payment for such shares in accordance with this Resolution, the subscription of such shares shall become void. (f) Any shares of capital stock remaining unsubscribed after the date prescribed under paragraph (b) hereof shall remain authorized and unissued, issuable by the Corporation in accordance with its Articles of Agreement. (Adopted September 25, 1990) Resolution No. 169 Financial Statements, Accountants' Report and Administrative Budget RESOLVED: THAT the Board of Governors of the Corporation consider the Financial Statements and the Accountants' Report, included in the 1989/90 Annual 259 Report, and the Administrative Budget attached to the Report dated August 13, 1990, as fulfilling the requirements of Article IV, Section 11, of the Articles of Agreement and of Section 16 of the By-Laws of the Corpo- ration. (Adopted September 27, 1990) 260 RESOLUTIONS ADOPTED BY THE BOAD OF GOVERNORS OF IDA BETWEEN THE 1989 AND 1990 ANNUAL MEETINGS Resolution No. 150 Additions to Resources: Ninth Replenishment WHEREAS: (A) The Executive Directors of the International Development Associ- ation ("the Association") have considered the prospective financial require- ments of the Association and have concluded that additional resources should be made available to the Association for new credit commitments for the period from July 1, 1990 to June 30, 1993 in the amounts and on the basis set out in the Report of the Executive Directors (the "Report") ap- proved on January 30, 1990 and submitted to the Board of Governors;l (B) The members of the Association consider that an increase in the resources of the Association is required and intend to request their legis- latures, where necessary, to authorize and approve the allocation of addi- tional resources to the Association in the amounts and on the conditions set out in this Resolution; (C) Members of the Association that contribute resources to the Asso- ciation in addition to their subscriptions ("contributing members") as part of the replenishment authorized by this Resolution ("the Ninth Replenish- ment") are to make available their contributions pursuant to the Articles of Agreement of the Association ("the Articles") partly in the form of sub- scriptions carrying voting rights and partly in the form of contributions not carrying voting rights ("subscriptions and contributions"); (D) Additional subscriptions are authorized for contributing members in this Resolution on the basis of their agreement with respect to their pre- emptive rights under Article III, Section l(c) of the Articles, and provision is made for the other members of the Association ("subscribing members") intending to exercise their rights pursuant to that provision to do so; and (E) It is desirable to provide for the possible need for a portion of re- sources to be contributed by members to be paid to the Association as advance contributions; NOW THEREFORE THE BOARD OF GOVERNORS HEREBY AC- CEPTS the Report, ADOPTS its conclusions and recommendations AND RESOLVES THAT a general increase in subscriptions of the Association is authorized on the following terms and conditions: See page 299. 1 261 1. Authorization of Subscriptions and Contributions (a) The Association is authorized to accept additional resources from each contributing member in the amount specified for each such member in Table 1 attached to this Resolution, and such amount shall be divided into a subscription carrying voting rights and a contribu- tion not carrying voting rights as specified in Table 2 attached to this Resolution. (b) The Association is authorized to accept additional subscriptions from each subscribing member of the Association in the amount specified for each such member in Table 2. 2. Agreement to Pay (a) When a contributing member agrees to pay its subscription and con- tribution, it shall deposit with the Association an instrument of com- mitment substantially in the form set out in the Annex to this Reso- lution ("Instrument of Commitment"). (b) When a contributing member agrees to pay a part of its subscription and contribution without qualification and the remainder is subject to enactment by its legislature of the necessary legislation, it shall deposit a qualified instrument of commitment in a form acceptable to the Association ("Qualified Instrument of Commitment"); such member undertakes to exercise its best efforts to obtain legislative approval for the full amount of its subscription and contribution by the payment dates set out in paragraph 3 of this Resolution. 3. Payment. Each contributing member that agrees to do so without qual- ification shall pay to the Association the amount of its subscription and contribution in three equal annual installments by November 30, 1990, November 30, 1991, and November 30, 1992; provided that: (a) If the Ninth Replenishment shall not have become effective by Oc- tober 31, 1990, payment of the first such installment may be postponed by the member for not more than 30 days after the date on which the Ninth Replenishment becomes effective; (b) the Association may agree to the postponement of any installment, or part thereof. for not more than one year if the amount paid, together with any unused balance of previous payments by the mem- ber concerned, shall be at least equal to the amount estimated by the Association to be required from that member, up to the due date of the next installment, for purposes of disbursements for credits com- mitted under the Ninth Replenishment; (c) if any contributing member shall deposit an Instrument of Commit- ment with the Association after the date when the first installment of the subscription and contribution is due, payment of any install- ment, or part therof. shall be made to the Association within 30 days after the date of such deposit; and 262 (d) if a contributing member has deposited a Qualified Instrument of Commitment and thereafter notifies the Association that an install- ment, or part thereof, is unqualified after the date when it was due, then payment of such installment, or part thereof, shall be made within 30 days after the date of such notification. 4. Mode of Payment (a) Payments pursuant to this Resolution shall be made, at the option of the member (i) in cash, on terms agreed between the member and the Association that shall be no less favorable to the Association than payment under subparagraph (a)(ii) or, (ii) by the deposit of notes or similar obligations issued by the government of the member or the depository designated by such member, which shall be non-negotia- ble, non-interest bearing and payable at their par value on demand to the account of the Association. (b) The Association will encash the notes or similar obligations to meet its operational commitments, as practicable over reasonable intervals of time, on a pro rata basis. 5. Currency of Denomination and Payment (a) Members shall denominate the resources to be made available pur- suant to this Resolution in SDRs or the currency of the member, except that if a contributing member's economy experienced a rate of inflation in excess of fifteen percent per annum on average in the period 1986 to 1988, as determined by the Association as of the date of adoption of this Resolution, its subscription and contribution shall be denominated in SDRs. (b) Contributing members shall make payments pursuant to this Reso- lution in SDRs, a currency used for the valuation of the SDR, or with the agreement of the Association, in another freely convertible cur- rency, and the Association may freely exchange the amounts received as required for its operations. Subscribing members shall make pay- ments in the currency of the member. (c) Each member shall maintain, in respect of its currency paid by it under this Resolution, and the currency of such member derived therefrom as principal, interest or other charges, the same converti- bility as existed on the effective date of this Resolution. (d) The provisions of Article IV, Section 1(a) of the Articles shall apply to the use of a subscribing member's currency paid to the Association pursuant to this Resolution. 6. Effective Date (a) The Ninth Replenishment shall become effective and the resources to be contributed pursuant to this Resolution shall become payable 263 to the Association on the date when contributing members whose subscriptions and contributions aggregate not less than SDR 9196 million shall have deposited with the Association Instruments of Commitment or Qualified Instruments of Commitment (the "Effec- tive Date"), provided that this date shall be not later than October 31, 1990, or such later date as the Executive Directors of the Association may determine. (b) If the Association determines that the availability of additional re- sources pursuant to this Resolution is likely to be unduly delayed, it shall convene promptly a meeting of the contributing members to review the situation and to consider the steps to be taken to prevent a suspension of the Association's lending operations. 7. Advance Contributions (a) In order to avoid an interruption in the Association's ability to com- mit credits pending the effectiveness of the Ninth Replenishment, and if the Association shall have received Instruments of Commit- ment from contributing members whose subscriptions and contribu- tions aggregate not less than SDR 2299 million, the Association may deem, prior to the Effective Date, one-third of the total amount of each subscription and contribution for which an Instrument of Com- mitment has been deposited with the Association as an advance contribution, unless the contributing member specifies otherwise in its Instrument of Commitment. (b) The Association shall specify when advance contributions pursuant to subparagraph (a) are to be paid to the Association. (c) The terms and conditions applicable to contributions to the Ninth Replenishment, except for paragraph 9 of this Resolution, shall apply also to advance contributions until the Effective Date, when such contributions shall be deemed to constitute payment towards the amount due from each contributing member for its subscription and contribution. (d) In the event that the Ninth Replenishment shall not become effective by October 31, 1990, or such later date as the Association may deter- mine pursuant to paragraph 6(a) of this Resolution, (i) voting rights shall be allocated to each member for the advance contribution as if it had been made as a subscription and contribution under this Res- olution, (ii) each member not making an advance contribution shall have the opportunity to exercise its pre-emptive rights with respect to such subscription as the Association shall specify, and (iii) advance contributions shall be taken into account in the next general replen- ishment of the Association's resources. 264 8. Commitment Authority (a) Subscriptions and contributions shall become available for commit- ment by the Association for credits to eligible members in three successive tranches of one-third of the total amount of each such subscription and contribution: (i) the first tranche shall become avail- able to the Association for commitment for credits from the Effective Date, provided that advance contributions may become available ear- lier under paragraph 7(a) of this Resolution; (ii) the second tranche from November 1, 1991 or the Effective Date, whichever is later; and (iii) the third tranche from November 1, 1992 or the Effective Date, whichever is later. (b) Any qualified part of a subscription and contribution notified under a Qualified Instrument of Commitment shall become available for commitment by the Association for credits when it has become un- qualified. (c) The Association shall promptly inform contributing members if a member that has deposited a Qualified Instrument of Commitment and whose subscription and contribution represents more than 20 percent of the total amount of the resources to be contributed pur- suant to this Resolution has not unqualified at least 66 percent of the total amount of its subscription and contribution by November 30, 1991, or 30 days after the Effective Date, whichever is later, and the total amount thereof by November 30, 1992, or 30 days after the Effective Date, whichever is later. (d) Within 30 days of the dispatch of notice by the Association under subparagraph (c), each other contributing member may notify the Association in writing that the commitment by the Association of the second or third tranche, whichever is applicable, of such member's subscription and contribution shall be deferred while, and to the extent that, any part of the subscription and contribution referred to in subparagraph (c) remains qualified; during such period, the As- sociation shall make no commitments for credits in respect of the resources to which the notice pertains unless the right of the contrib- uting member is waived pursuant to subparagraph (e). (e) The right of a contributing member under subparagraph (d) may be waived in writing, and it shall be deemed waived if the Association receives no written notice pursuant to such subparagraph within the period specified therein. (f) The President of the Association shall consult with the contributing members where, in his judgment: (i) there is a substantial likelihood that the total amount of the subscription and contribution referred to in subparagraph (c) could not be committed to the Association without qualification by June 30, 1993, or (ii) as a result of contrib- 265 uting members exercising their rights under subparagraph (d), the Association is or may shortly be precluded from entering into new unconditional credit commitments. (g) The Association may enter into credits, conditional on such credits becoming effective and binding on the Association when resources under the Ninth Replenishment become available for commitment by the Association. 9. Allocation of Voting Rights. Voting rights calculated on the basis of the current voting rights system shall be allocated to members for subscriptions as follows: (a) Each member which has deposited with the Association an Instru- ment of Commitment shall be allocated one-third of the subscription votes specified for each such member in Table 2 on each effective payment date pursuant to paragraph 3 of this Resolution; provided that (i) any member which deposits such instrument after any of these dates shall be allocated, as of the date of such deposit, the subscrip- tion votes to which such member would have been entitled if such instrument had been deposited prior to the first of these dates, and (ii) if the member fails to pay any amount of its subscription and contribution when due, the number of subscription votes allocated from time to time to such member under this Resolution shall be reduced in proportion to the shortfall in such payments, but any such votes shall be reallocated when the shortfall in payments causing such adjustment is subsequently made up. (b) Each member which has deposited with the Association a Qualified Instrument of Commitment shall be allocated subscription votes to the extent of payments made in respect of its subscription and con- tribution, and each member exercising its right pursuant to paragraph 8( d) of this Resolution shall have the number of subscription votes allocated to it reduced in proportion to the amount of its subscription and contribution subject to deferral, but any such votes shall be reallocated to the extent that the deferral terminates. (c) Each member shall be allocated the additional membership votes specified in Columns b-5 and c-3 of Table 2 for its subscription on the date such member is allocated the first one-third of its subscrip- tion votes pursuant to this paragraph. 10. Associated Agreements. The Association is authorized to enter into agreements with countries not members of the Association in order to enable them to associate themselves with the Ninth Replenishment by pro- viding resources for purposes and on terms consistent with this Resolution. (Adopted May 8, 1990) 266 ._--.. _------ TABLE 1: CONTRIBUTIONS TO THE NINTH REPLENISHMENT (AMOUNTS IN MILLIONS) Average Basic Supplementary Total Exchange Contributions Contributions Contributions National Rates SDR Share SDR SDR Currency May to Oct Contributing Amount % Amount Amount Amount' /989 Members (/) (2) (3) (4) (5) (6) Australia 232.41 1.99 232.41 382.50 1.6458 Austria 93.43 0.80 93.43 1597.86 17.1018 Belgium b 180.90 1.55 180.90 9210.00 50.9124 Canada 554.75 4.75 554.75 828.63 1.4937 Denmark 151.83 1.30 151.83 1435.21 9.4529 Finland 116.95 1.00 23.39 140.34 768.00 5.4724 N France 852.60 7.30 35.00 887.60 7304.86 8.2299 0\ Germany. Federal Rep. 1284.00 11.00 58.00 1342.00 3260.93 2.4299 -...l Hungary. Republic of 10.92 0.09 10.92 838.00 76.7191 Ireland 12.00 0.10 2.00 14.00 12.74 0.9101 Italy' 619.00 5.30 6.00 625.00 1100356.66 1760.5791 Japan 2183.97 18.70 239.80 2423.77 433128.48 178.7001 Korea 17.50 0.15 11.50 29.00 24422.30 842.1483 Kuwait 7.94 om 7.94 2.97 0.3742 Luxembourg 5.84 0.05 5.84 297.30 50.9124 Netherlands 350.37 3.00 35.04 385.41 1055.91 2.7397 New Zealand 17.05 D.15 17.05 36.55 2.1433 Norway 165.84 1.42 165.84 1472.92 8.8815 Saudi Arabia' 291.98 2.50 291.98 1377.74 4.7187 Spain 81.75 0.70 3.25 85.00 13014.83 153.1156 Sweden 305.99 2.62 305.99 2527.84 8.2612 United Kingdom 782.49 6.70 782A9 619.03 0.7911 United States 2523.81 21.61 2523.81 3180.00 1.2600 Subtotal 10843.33 92.84 413.98 11257.31 Basic Average Contributions Supplementary Total Exchange Contributions Contributions National Rates SDR Share SDR SDR Currency May to Oct Contributmg Amount % Amount Amount Amount' 1989 Members (1) (2) (3) (4) (5) (6) Donors With High Inflation Ratesd Argentina' Brazil 10.00 0.09 10.00 Colombia' Greece 6.00 0.05 6.00 iceland 4.00 0.03 4.00 Mexico 20.00 0.17 20.00 Poland 4.00 0.Q3 4.00 South Africa 9.03 0.08 9.03 Turkey 10.00 0.09 5.00 15.00 Yugoslavia 5.00 0.04 --1:QQ Sub-Total 68.03 0.58 5.00 73.03 N 0\ All IDA Members 10911.36 93.42 418.98 11330.34 00 Switzerland f 184.46 1.58 184.46 380.00 2.0600 g Other Supplementary Contributions 418.98 3.59 Accelerated Encashmentsb 26.80 0.23 26.80 Reduction: Unit of Oblig.h 79.97 0.69 79.97 Unallocated 57.43 0.49 57.43 Total 11679.00 100.00 11679.00 aCalculated by converting the SDR amounts in column (4) to national currencie~ using an average of daily exchange rates (for busines~ days) for the period May 1, 1989 to October 31. 1989 (column (6». bThe~e countries have agreed to make a portion of their contribution in the form of inve~table resources, which has the effect of enhancing thelT value to the Association. Proportion to be paid in cash by Italy is 16.67% of each Installment. cSaudl Arabia's contributIOn is still under consideration. dCountnes with rates of inflation greater than 15% per annum during the 1986-88 period. ContributIOns of these donors will be denominated in SDRs. e Argentma and Colombia are not yet in a position to confirm their contributIOns to IDA9. f SWitzerland i:-. not a member of IDA, but IS associating itself with IDA9 by providing resources for purposes and on terms to be agreed separately between IDA and SWitzerland. !!.Exchange rate used IS as of the date of agreement, December 14, 1989. hRepresents the reduction due to changes III the unit of obligation from IDA8 to IDA9 for donors with high domestic inflation rate~. Note: Totals may not add due to rounding. ADDITIONAL SUBSCRIPTIONS, CONTRIBUTIONS AND VOTES (Amounts in Current USD Equivalent) Subscnptions and Contributions Subscriptions and Contnbutions Through IDA8' Additional Resources b and Votes Under IDA9 Through IDA9 ContributIOns Contrib. Add'i Additional Contnbutions CarrylOg Add'i Add'i CarrYtng Subs. Membership Carrying Member Subscriptions No Votes Resource~ Subser. No Votes Votes Votes Sub~cnptions No Votes (a·l) (a·2) (b·1) (b·2) (b-3) (b-4) (b·5) (d.l) (d·2) Austraha 26,790,201 991,082,872 292,840,000 549,560 292,290,440 21,982 4,200 27,339,761 1.283,373,312 Austria 6.957.865 357.963.591 117,720.oo0 222,040 117,497,960 8,882 4,200 7,179,905 475,461,551 Belgium 12,027,448 828,805,947 239,900,000' 450,033 239,449,967 18,001 4,200 12,477,481 1,068,255,914 Canada 52,247,737 2,533,522,028 698,990,000 1,307,813 697,682,187 52,313 4,200 53,555,550 3,231,204,215 Denmark 12,138,808 616,619,026 19l,300,000 359,919 190.940,081 14.397 4,200 12,498,727 807,559,107 Finland 5,347.259 314,932.886 176,830,000 339,296 176,490,704 13,572 4,200 5,686,555 491,423,590 N 0"- France 71,811,757 3,110,870,547 1,118,380,000 2,1l6,642 1, 116.263,358 84,666 4,200 73,928,399 4,221,133,905 '0 Germany 77,919.777 5.757,778,379 1.690,920,000 3.174,330 1,687,745,670 126,973 4,200 81,094,107 7,445,524,049 Iceland 150,484 13.813,008 5.040.000 9,548 5,030,452 382 4,200 160,032 18,843,460 Ireland 3,896,692 58.183,449 17,640,000 33,085 17.606,915 t.323 4,200 3,929,777 75,790,364 Italy 27,446,384 2,231,918,690 809,290,000' 1,532,765 807,757,235 61,311 4,200 28,979,149 3,039,675.925 Japan 58,198,055 8,116.107,727 3,053,950.000 5,792,963 3,048,157,037 231.719 4,200 63,991,018 11,l64,264,764 Kuwait 5,361,637 600,408,377 10.000,000 4.321 9.995,679 173 4,200 5,365,958 610,404,056 Luxembourg 514.835 25,161,357 7,360,000 13,810 7,346,190 552 4,200 528,645 32,507,547 Netherlands 37,256,689 1,625,985,169 485,620,000 911,967 484,708,033 36,479 4,200 38,168,656 2.110,693,202 New Zealand 120.375 60,366.585 21,480.000 40.669 21,439,331 1,627 4,200 161,044 81,805,916 Norway 9,559,893 606,637,288 208,960,000 394,932 208,565,068 15,797 4.200 9,954,825 815,202,356 South Africa 12,272,740 63,340,768 11,380,000 20,444 11,359,556 818 4,200 12,293,184 74,700,324 Sweden 16,665,327 l,592,214,202 385.550,000 716.745 384,833,255 28,670 4,200 17,382,072 1,977,047,457 Ullited Arab Emirates 447,075 216,227,905 0 0 0 0 0 447,075 216,227,905 United Kingdom 170,141,200 4,583.228,883 985,940,000 1,816,714 984,123,286 72.669 4,200 171,957,920 5,567,352,169 Umted States 424.538,111 14,340,368,931 3,180,000.000 5,873,865 3,174.126,135 234,955 4,200 430,411,976 17 ,514,495,066 Sub· Total Part I 1,031.810,355 48,645,537.615 13.709,090,000 25.681,462 13,683,408,538 1.027,258 88,200 1,057.491,817 62,328,946,153 ADDITIONAL SUBSCRIPTIONS, CONTRIBUTIONS AND VOTES (Amounts in Current USD Equivalent) Additional Subscriptions. ContnbutlOns and Votes under IDA9 Resources m Subscnptlons, Contnbutions for Resources in SDRs Subscriptions and Subscriptions and Votes Allocated For SDRsor or Freely Convertible Currency m Excess of Subscnptions and Contnhutions Contributions Through IDASd Exercise of Preemptive Rights freely Subscriptions for Exercise of Preemptive Right Through IDA9 Convertible Contributions Add'i Additional Currency from Contributions Add'i Contributions Carrymg Additional SubseT. Membership Part II AdditIOnal Additional Carrymg SubseT. Carrying Part Il Members Subscriptions No Votes Subscriptlonse Votes Votes Members f Resources g Subscnptions No Votes Votes Subscriptions No Votes (a-I) (a-2) (e-I) (e-2) (e-3) (e-4) (e-5) (e-6) (e-7) (e-8) (d-I) (d-2) Afganlstan 1.373.470 27,326 1.093 4,200 1.400,796 0 Angola 8.588,741 0 171.915 6,877 4,200 8,760,656 0 Algeria 5.484,842 0 109.741 4,390 4.200 5594,583 0 Argentina 25,833,205 75.473.348 557,042 22,282 4.200 26.390,247 75.473,348 Bangladesh 7.323.471 0 146,629 5,865 4,200 7,470,100 0 Belize 272,056 0 5.416 217 4,200 277.472 0 Benin 680,820 0 \3,626 545 4,200 694,446 N --.J Bhutan BoliVia 67,959 1.441.947 0 0 l.346 28,754 54 U50 4,200 4,200 69,305 1.470,701 ° 0 0 Botswana 217,847 0 4,383 175 4.200 222,230 ° ° BraZil 25,870,630 89,685,923 565.198 22,608 4,200 12,600,()()() 12.034,802 23.643 12,01l.l59 946 26.459.471 101.697,082 Burkma Faso 680,601 \3,626 545 4,200 694,227 Burundi Cameroon 1.034.480 1.373.470 ° 0 20,680 27,326 827 1.093 4,200 4.200 1.055,160 1.400.7% 0 0 0 Cape Verde 108,922 2.181 87 4,200 Ill,I03 Central Afncan Rep. 680,601 0 \3,626 545 4,200 694,227 0 ° Chad 680,601 0 \3,626 545 4,200 694,227 0 Chile 4,805,237 0 96,312 3,852 4,200 4,901.549 0 China 41.248,740 837,655 33.506 4.200 42,086,395 Colomb13 4,883,345 ° 29'<)95,715 1\3,251 4.530 4,200 4,9%.596 0 29,095,715 Comoros 108,922 0 2.181 87 4,200 1l1,103 0 Congo 680,601 0 \3,626 545 4,200 694,227 0 Costa Rica 272.089 5.342 214 4,200 Cote d'lvoire Cyprus 1.373.470 1.034,480 ° ° 27,326 20,680 1.093 827 4,200 4,200 277.431 1.400.796 1,055.160 0 0 0 Djibouti 217,847 0 4.383 175 4,200 222,230 0 Dominica 108,922 0 2.181 87 4.200 1l1,103 0 Dominican RepubliC 545,138 68,614 11.050 442 4,200 556,188 68,614 Ecuador 885,\35 0 17,731 709 4.200 902,866 0 Egypt' 6,914.450 0 156.438 6.258 4,200 7,070,888 0 EI Salvador 407,831 23,707 8,108 324 4,200 Equatonal Guinea 435,573 415,939 23,707 0 8,760 350 4,200 Ethiopia 680,869 23,707 444,333 0 13,653 546 4,200 FIJI 762,295 694,522 23,707 0 15.332 613 4,200 Gabon 680,601 777,627 0 0 13,626 545 4,200 694,227 0 Gambia. The 363.423 0 7,299 292 4,200 Ghana 3,212,195 370,722 0 0 64,222 2,569 4,200 Greece 3,475,146 3,276,417 0 17.104,625 78,457 3,138 4,200 7,56(),000 7,481.543 14,698 Grenada 7.466,845 588 3,568,301 24,571.470 121.943 0 2,324 93 4,200 Guatemala 544,570 0 124,267 0 10,962 438 4,200 555,532 0 GUinea 1.373,470 27,326 1.093 4,200 Guinea-Bissau 189,615 1,400,796 0 0 3,670 147 4,200 Guyana 1.102,911 193,285 0 0 22,114 885 4,200 Haiti 1.034,480 1.125,025 0 0 20,680 827 4,200 Hondura~ 407,613 1,055.160 0 0 8,087 323 4,200 415,700 0 Hungary 10,210,000 12,440,000 208,664 8,347 4,200 13,76!),000 13,551,336 26,623 13,524,713 1.065 10,445,287 India h 55,()()5,683 0 1.345,811 53,832 4,200 25,964,713 Indonesia 15,109.188 56,351,494 0 0 302,583 12,103 4,200 Iran, Islamic Rep. of 6,180,262 15,411,771 0 123,774 4,951 4,200 Iraq 1,034,480 6,304,036 0 N 20,680 827 4,200 -.J 1,055,160 0 ..- Israel 2,293,337 934,200 47,184 1.887 4,200 Jordan 407,613 2,340,521 934,200 0 8,087 323 4,2(X) Kampuchea. Democratic 1.389,163 415,700 0 0 27,925 1.117 4,200 Kenya 2,286,687 0 1.417,088 0 45,737 1.829 4,2()() Kiribati 81.6!)5 2,332,424 0 0 1.624 65 4,2()() 83,229 0 Korea 1.790.1 10 30,736.175 50,670 2,027 4,200 36,540,()()() 36,489,330 71 ,687 30.417,643 2,867 1.912,467 Lao People'~ Dem Rep. 680,6!)1 0 67,153,818 13,626 545 4,200 Lebanon 613,()()() 0 694,227 0 12.389 496 4,200 Le~otho 217.847 625,389 0 0 4,383 175 4,200 Libena 1.034,480 222,230 0 20,680 827 4.200 1,055,160 0 Libya 1,373,470 27,326 1,093 4,2()(l Madagascar 1.374.365 1.4()(),796 0 27,326 1.093 4,2()() Malawi 1.034,4BO 1.401.691 0 20,680 827 4,200 MalaYSia 3.429,896 68,591 1.055.160 0 2,744 4,200 Maldives 40,742 3,49B,487 0 809 32 4.200 41.551 0 Mali 1.1B.l,801 23,629 945 4,2IJO Mauntama 680,601 1.207,430 13,626 545 4,200 MauntlUs 1.171.752 35,560 23,575 694,227 943 4,2(X) Mexico 12,045,520 55,296.550 270,370 1.195,327 35,560 IO,BI5 4,200 25,200,()()() 24,929,630 48,977 24,880,654 Morocco 4,S05.237 1.959 12,364,B66 80,177,204 0 96.312 3,852 4,200 4,901.549 0 ADDITIONAL SUBSCRIPTIONS, CONTRIBUTIONS AND VOTES (Continued) (Amounts in Current usn Equivalent) Additional Subscriptions, Contributions and Votes under IDA9 Re~ources in SubscTlptions and Subscriptions. Contributions for Resources m Subscriptions and SDR~ or Contributions Through SuhscriptlOns and Votes Allocated SDR~ or Freely Convertlble Currency in Excess ContnbutlOns Freely IDA8 d For Exercise of Preemptive Rights of Suhscriptions for Exercise of Preemptive Right Through IDA9 Convertible Contnbution'\ Add'i AdditIOnal Currency from ContrIbutIOns Add'i Contributions Carrying Additional Suhscr. Membership Part II Additional Additional Carrying Sub~cr. Carrying Part II Members SubscriptIOns No Votes SuhscriptlOnse Votes Votes Members f Resources& Subscriptions No Votes Votes Subscriptions No Votes (a-I) (a-2) (e-I) (e-2) (e-3) (e-4) (e-5) (e-6) (e-7) (e-8) (d-1) (d-2) 1,864,324 37,221 1,489 4,200 1,901545 Mozambique Myanmar 2,750,341 ° 0 55,176 13,626 2,207 545 4,200 4,200 2,805,517 694,227 ° ° Nepal Nicaragua Niger 680,601 407,613 680,601 8,087 13,626 323 545 4,200 4,200 415,700 694,227 ° 4,573,252 91,467 3,659 4,200 4,664,719 N Nigena Oman Pakistan h 407,831 13,736,958 23,707 118,533 8,108 322,794 324 12,912 4,200 4,200 415,939 14,059,752 23,707 118,533 ° --.J 28,082 680 27 4,200 28,762 N Panama Papua New Guinea 1.171.387 ° 23,541 942 4,200 1,194,928 ° ° 407,613 8,087 323 4,200 415,700 Paraguay Peru Phlhppmes 2,409,035 6,863,267 180,180 48,401 J37 ,835 1.936 5,513 4,200 4,200 2,457,436 7,001,102 180,180 ° ° Poland 41,978,513 14,186,675 843,919 33,757 4,200 5,040,000 4,196'(181 8,244 4,187,837 330 42,830,676 18,374,512 Rwanda 1,034,480 20,680 827 4,200 1.055,160 0 176,931 ° 3,540 142 4,200 180,471 St Kitts & Nevis S1. LUCia 204,098 95,251 0 4,071 1.903 163 76 4,200 4,200 208,169 97,154 ° ° S1. Vincent Sao Tome & PrinCIpe Saudi Arabia l 95,301 10,196,731 ° ° 1.583.327,925 1.910 1.225,102 76 49,004 4,200 4,200 367,890,000 366,664,898 720,347 365,944,551 28,814 97,211 12,142,180 1,949,272,476 ° ° Senegal 2,286,687 0 45,737 1.829 4,200 2,332,424 0 1,034,480 20,680 827 4,200 1,055,160 SIerra Leone Solomon Islands Somaha 121.943 1,034.480 ° ° 2,324 20,680 93 827 4,200 4,200 124,267 1,055,160 0 0 ° Spain 14,383,474 ° 198,076,995 413,066 16,523 4,200 107,100,000 106,686,934 209,596 106,477,338 8,384 15,006,136 304,554,333 Sf( Lanka 4,124,285 82,496 3,300 4,200 4,206,781 Sudan Swaziland 1,373,470 435,694 ° ° 27.326 8,767 1.093 351 4,200 4,200 1,400,796 444,461 ° ° 0 Syrian Arab Rep. Tanzania 1,292,551 2,286,687 ° ° 0 25,791 45,737 1,032 1,829 4,200 4,200 U18,342 2,332,424 ° 0 Thailand 4,123,786 82.496 3.300 4,200 4.2116.282 Togo 1.034.4RO 20.oRIi R27 4,200 1.055,100 Tonga 95.251 1.903 70 4.21XI 97.154 TrImdad & Tohago 1.837.619 36.807 1.472 4.2(KI 1.874,426 TunisIa 2.056,476 41.279 1.651 4.200 2,097.755 Turkey 7.918.9111 lIl.8311.946 103.139 6.526 4,211() 18.90().OOO 18.736.861 30.810 18.700,050 1.472 8.118.851 29.530,996 Uganda 2.2Sb.b87 o 45.737 1.829 4.200 2.332.424 o Vanuatu 258.435 5.145 206 4.200 263.580 o VIet Nam 2.050.476 41.279 1.651 4.200 2.1197.755 o We'itern Samoa 121.943 2324 93 4.20U 124.267 o Yemen Arab Rt:public 585.015 11.716 469 4.200 590.731 o Yemen, PDR 1.6116.900 II 32.301 1.~92 4.21)) 1.639.261 o Yugu~lavlcl 5.776.241 74.191.067 164JOO 6.572 4.200 6.300.()()I() 6.135.7(KI 12.1154 6.123.646 482 5,952.595 80.314,713 ZaIre 4.111.397 82.414 3.297 4.200 4.193.811 o ZambIa 3.601.540 73,457 2.938 4.2(1() 3.734.997 5.0116.100 111.808 4,475 4.2(1() 5.717,968 Sub-Total P,lf! 11 446.331.762 2.191.854.152 1II.020.5U3 424.820 4R7.200 600.890.()()I() 596.907.116 1.172.679 595.734.437 40.9117 458.124.943 2.787.588,589 GRAND TOTAL 1A78.142.117 511.837.391.767 14.309.980.()()() 1,515.616.761 65.116.534.742 ..! A~~umlOg all member.;; gIve (unqualified) formal notificatIOn under the Third. Fourth. Fifth, SIxth, Seventh and Eighth Replenishments. The~~ amounts have heen calculated, for purposes of the votmg nght~ adJu~tment among Part I Contnbuting Members, hy multiplYing the ~ubscnptiom and contnhutlOns up tu and including the Third Replemshment (which were expre~sed In term~ of Umted State~ dollar~ of the weight and finene~~ In effect on January I, 1960) by 1.2U635 and addmg thereto the dollar equI\aients of the ~ub~cription" and contnbutlon~ under the Fourth. Fifth. Sixth. Seventh and Eighth RepJemshments, a<; of September 27, 1973. March 14, 1977, October 5.1979, January 13, 1984 and Augmt 29, 1988 re~pectively, h ContnbutlOm to the Nlflth Replenl<;;hment are expressed w SDRs as "et forth m Table 1, column (4), of the NInth Replenishment Re~olution The U.S. dollar equivalent ha') been obtained hy comertlng the SDR amounb u~lllg an average of daily exchange rate~ (for business days) for the U ,S, dollar versus the SDR over the period May I, 19X9 to October 31, 1989. Contnbutions are divided wtn suhscnptlOns carryIng vutes a~ shown in column (b-2) and cuntrihutions carrying no vote~ a~ ~hown In column (b-3) l Include~ the calculated effective value of contnbutiom re ... ultmg from partial payments In ca~h (in the form of ,"ve~table funds). oJ A~~uming all member~ give notIfication under the Thud. Fourth. Fifth. Sixth, Seventh and Eighth Replem~hments and calculated a~ explained In footnote a. 0: Equivalent In current United State~ dollar~ at IMF representative exchange rate~ a') of October 31. 11,181,1 ! Expres5ed In current United States dollars a~ obtaillcd hy coverting the SDR amount~ (Table 1 column (4)) uo;ing an average of daily exchange rates (for busllle~~ days) for the US dollar ven!>us the SDR over the period May I, 19fN to Octoher 31, lY89. g The amount') ~hown III column (c-5) rcpresent the total suh'icflptiom and contflhutlons of Part II contnbutlllg membt:r~ making avaliahle re50urce~ in SDR", or freely convertible currency under the Nillth Repknl~hment minm the additIOnal ~ub~cflptlOns for the exercIse of the preemptive nghts under ArtICle Ill, Section I(c) of the ArtIcles, a~ shown in column (c-l). The amounts in column (c-5) arc diVided into subscflptions carrylllg vote~ a~ ",hown in column (c-6) and contflbutlOm carrying no votes a~ ~hown m column (c-7). h Egypt. India and Pakl~tan have each notified the AssociatIon of theIr wtention to exercise their fights under Article III. SectIOn l(c) of the Artlcle~ tu ~ub~crihe an amount to enable them to mamtalfl their relative votlllg power In respect of the resource~ to he made available In SDR~ or freely convertIble currenCies by Part II members j Saudi Arahla \ contnbutlon is ~tlil under conSideration Resolution No. 151 Membership of the Czech and Slovak Federal Republic WHEREAS the Government of the Czech and Slovak Federal Republic (hereinafter called Czechoslovakia) has applied for admission to member- ship in the International Development Association in accordance with Sec- tion 1(b) of Article II of the Articles of Agreement of the Association; WHEREAS the Government of Czechoslovakia has expressed its inten- tion to seek legislative approval to make a financial contribution to the Association as part of the Ninth Replenishment of the Association's Re- sources (the Ninth Replenishment) authorized by Resolution No. 150 of the Board of Governors of the Association adopted on May 8, 1990 (the Ninth Replenishment Resolution); and WHEREAS, pursuant to Section 9 of the By-Laws of the Association, the Executive Directors, after consultation with representatives of the Gov- ernment of Czechoslovakia, have made recommendations to' the Board of Governors regarding this application; NOW, THEREFORE, the Board of Governors hereby RESOLVES: THAT the terms and conditions upon which Czechoslovakia shall be admitted to membership in the Association shall be as follows: 1. Definitions: As used in this resolution: (a) "Association" means International Development Association. (b) "Articles" means the Articles of Agreement of the Association. (c) "Dollars" or "$" means dollars in currency of the United States of America. 2. Initial Subscription: (a) The terms and conditions of the membership of Czechoslovakia in the Association other than those specifically provided for in this res- olution shall be those set forth in the Articles with respect to the membership of original members listed in Part II of Schedule A thereof (including, but not by way of limitation, the terms and con- ditions relating to subscriptions, payments on subscription, usability of currencies and voting rights). (b) Upon accepting membership in the Association, Czechoslovakia shall subscribe funds in the amount of $5,470,000 expressed in terms of 274 United States dollars of the weight and fineness in effect on January 1, 1960, that is to say, pursuant to the decision of the Exec- utive Directors of the Association of June 30, 1986 on the valuation of initial subscriptions, $6,598,735, and shall pay the latter amount to the Association as follows; (a) ten percent either in gold or in freely convertible currency, and (b) ninety percent in the currency of Czechoslovakia. As of the date Czechoslovakia will become a mem- ber of the Association, 1,594 votes shall be allocated to Czechoslo- vakia in respect to such subscriptions, consisting of 1,094 subscription votes and 500 membership votes. 3. Effective Date of Membership: Czechoslovakia shall become a member of the Association with a subscription as set forth in paragraph 2(b) of this resolution as of the date when Czechoslovakia shall have complied with the following requirements: (a) become a member of the International Bank for Reconstruction and Development; (b) made the payments called for by paragraph 2 of this resolution; (c) deposited with the International Bank for Reconstruction and De- velopment an instrument stating that it has accepted in accordance with its laws the Articles and all the terms and conditions prescribed in this resolution, and that it has taken all steps necessary to enable it to carry out all its obligations under the Articles and this resolution; and (d) signed the original Articles held in the archives of the International Bank for Reconstruction and Development. 4. Limitation on Period for Fulfillment of Requirements of Membership: Czechoslovakia may fulfill the requirements for membership in the Asso- ciation pursuant to this resolution until December 28, 1990, or such later date as the Executive Directors of the Association may determine. 5. Additional Subscriptions: Upon or after acceptance of membership, Czechoslovakia shall also be authorized at its option to make the following additional subscriptions: (a) An additional subscription in the amount of $846,697 which shall carry 39,868 votes, calculated on the basis of 26,268 subscription votes and 13,600 membership votes, and which shall be subject to the following terms and conditions: (i) Payment of such additional subscription shall be made in the currency of Czechoslovakia within 30 days after Czechoslovakia notifies the Association of its intention to make such additinoal subscription. 275 (ii) the rights and obligations of the Association and Czechoslovakia with regard to such additional subscription shall be the same (except as otherwise provided in this resolution) as those which govern the 90% portion of the initial subscriptions of original members payable under Article II, Section 2(d) of the Articles by members listed in Part II of Schedule A of the Articles, provided, however, that the provisions of Article IV, Section 2 of the Articles shall not be applicable to such subscription. (b) Czechoslovakia shall be authorized at its option to participate in the Ninth Replenishment of the Association's Resources by a subscrip- tion and contribution of SDR 10 million. Payment of such subscrip- tion and contribution shall be made on the same basis, and the rights and obligations of the Association and Czechoslovakia with respect to such subscription and contribution, including the allocation of votes therefor, shall be on the same terms and conditions as provided in Resolution No. 150, adopted on May 8, 1990, for the resources in SDR or freely convertible currency made available to the Association hy other Part II contributing members pursuant to the said Resolu- tion. In respect of such subscription and contribution, 7,109 subscrip- tion votes and 4,200 membership votes shall be allocated to Czechoslovakia. (Adopted September 14, 1990) 276 RESOLUTIONS ADOPTED BY THE BOARD OF GOVERNORS OF IDA AT THE 1990 ANNUAL MEETINGS Resolution No. 152 Membership of the Republic of Namibia WHEREAS the Government of the Republic of Namibia (hereinafter called Namibia) has applied for admission to membership in the Interna- tional Development Association in accordance with Section 1(b) of Article II of the Articles of Agreement of the Association; WHEREAS, pursuant to Section 9 of the By-Laws of the Association, the Executive Directors, after consultation with representatives of the Gov- ernment of Namibia, have made recommendations to the Board of Gover- nors regarding this application; NOW, THEREFORE, the Board of Governors hereby RESOLVES: THAT the terms and conditions upon which Namibia shall be admitted to membership in the Association shall be as follows: l. Definition: As used in this resolution: (a) "Association" means International Development Association. (b) "Articles" means the Articles of Agreement of the Association. (c) "Dollars" or "$" means dollars in currency of the United States of America. 2. Initial Subscription: (a) The terms and conditions of the membership of Namibia in the As- sociation other than those specifically provided for in this resolution shall be those set forth in the Articles with respect to the membership of original members listed in Part II of Schedule A thereof (including, but not by way of limitation, the terms and conditions relating to subscriptions, payments on subscription, usability of currencies and voting rights). (b) Upon accepting membership in the Association, Namibia shall sub- scribe funds in the amount of $650,000 expressed in terms of United States dollars of the weight and fineness in effect on January 1, 1960, that is to say, pursuant to the decision of the Executive Directors of the Association of June 30, 1986 on the valuation of initial subscrip- 277 tions, $784,128, and shall pay the latter amount to the Association as follows: (a) ten percent either in gold or in freely convertible currency, and (b) ninety percent in the currency of Namibia. As of the date Namibia will become a member of the Association, 630 votes shall be allocated to Namibia in respect to such subscriptions, consisting of 130 subscription votes and 500 membership votes. 3. Effective Date of Membership: Namibia shall become a member of the Association with a subscription as set forth in paragraph 2(b) of this reso- lution as of the date when Namibia shall have complied with the following requirements: (a) become a member of the International Bank for Reconstruction and Development; (b) made the payments called for by paragraph 2 of this resolution (c) deposited with the International Bank for Reconstruction and De- velopment an instrument stating that it has accepted in accordance with its laws the Articles and all the terms and conditions prescribed in this resolution, and that it has taken all steps necessary to enable it to carry out all its obligations under the Articles and this resolution; and (d) signed the original Articles held in the archives of the International Bank for Reconstruction and Development. 4. Limitation on Period for Fulfillment of Requirements of Membership: Namibia may fulfill the requirements for membership in the Association pursuant to this resolution until June 28, 1991, or such later date as the Executive Directors of the Association may determine. 5. Additional Subscriptions: Upon or after acceptance of membership, Na- mibia shall also be authorized at its option to make the following additional subscriptions: (a) An additional subscription in the amount of $100,647 which shall carry 16,722 votes, calculated on the basis of 3,122 subscription votes and 13,600 membership votes, and which shall be subject to the following terms and conditions: (i) Payment of such additional subscription shall be made in the currency of Namibia within 30 days after Namibia notifies the Association of its intention to make such additional subscription. (ii) The rights and obligations of the Association and Namibia with regard to such additional subscription shall be the same (except as otherwise provided in this resolution) as those which govern the 90% portion of the initial subscriptions of original members payable under Article II, Section 2( d) of the Articles by members listed in Part II of Schedule A of the Articles, provided, however, 278 --"""~" --"""---- that the provisions of Article IV, Section 2 of the Articles shall not be applicable to such subscription. (b) A further additional subscription in the amount of $18,225 which shall carry 4,929 votes, calculated on the basis of 729 subscription votes and 4,200 membership votes, and which shall be subject to the following terms and conditions: (i) Payment of such additional subscription shall be made in the currency of Namibia within 30 days after Namibia notifies the Association of its intention to make such additional subscription. (ii) The rights and obligations of the Association and Namibia with regard to such further additional sUbscription shall be the same (except as stated in this Resolution) as those which are applicable to the subscriptions authorized for Part II members under Sec- tion D of the Ninth Replenishment Resolution (No. 150) adopted by the Board of Governors on May 8, 1990. (Adopted September 25, 1990) Resolution No. 153 Financial Statements, Accountants' Report and Administrative Budget RESOLVED: THAT the Board of Governors of the Association consider the Financial Statements, Accountants' Report and Administrative Budget, included in the 1989/90 Annual Report, as fulfilling the requirements of Article VI, Section 11. of the Articles of Agreement and of Section 8 of the By-Laws of the Association. (Adopted September 27, 1990) 279 RESOLUTIONS ADOPTED BY THE COUNCIL OF GOVERNORS OF MIGA BETWEEN THE 1989 AND 1990 ANNUAL MEETINGS Resolution No. 15 Election of Additional Directors WHEREAS Article 41 (a) of the Convention provides that Directors shall be elected in accordance with Schedule B to the Convention; WHEREAS Paragraph 4 of Schedule B provides that one fourth of the number of Directors shall be elected separately, one each by the Governors of members having the largest number of shares; WHEREAS Paragraph 3 of the Rules for the Second Regular Election of Directors provided that sixteen Directors would be elected and that, in the event that France became a member of the Agency on or before the close of nominations for the said election, an additional Director represent- ing France would be elected separately; WHEREAS France is expected to join the Agency as one of the members entitled to elect a Director separately as stated above; WHEREAS Article 32(b) of the Convention provides that the number of Directors may be adjusted by the Council to take into account changes in membership; WHEREAS the Board has recommended that upon France becoming a member of the Agency the Council increase the number of Directors from sixteen to seventeen and provide for a separate by-election to the seven- teenth seat in which France will be entitled to vote, without waiting for the next regular election of Directors; WHEREAS the Board has also recommended that, in the event the number of Directors has been increased to seventeen as stated above and that additional States become Category Two members before May 25, 1990 and bring the total number of shares subscribed by Category Two members which did not participate in the Second Regular Election of Directors to 2,000 or more, an additional Director be elected by such Category Two members; NOW THEREFORE the Council of Governors resolves as follows: RESOLVED: 1. THAT upon France becoming a member of the Agency: 280 (a) the number of Directors shall be increased to seventeen; and (b) France shall be entitled to elect separately a Director pursuant to paragraph 4 of Schedule B to the Convention and the candidate nominated by France in such election shall be automatically elected. 2. THAT in the event that, before May 25, 1990, the number of shares subscribed by Category Two members which shall not have participated in the Second Regular Election of Directors shall be 2,000 or more, the num- ber of Directors shall be further increased to eighteen and the said Category Two members shall be entitled to elect a Director, provided, however, that such increase shall not take place until France shall have become a member of the Agency. 3. Each Governor participating in the election of the additional Director provided for in paragraph 2 above shall cast for one person all the votes he is entitled to cast and a simple majority of the votes cast by participating governors shall constitute election, but the Director so elected shall be deemed to be elected by all Category Two members entitled to participate. If no candidate receives a majority of the votes cast on the first ballot, additional ballots shall be held, and the candidate who received the lowest number of votes on the preceding ballot shall be ineligible for election. 4. Any Director elected pursuant to paragraphs 1(b) or 2 above shall hold office until the effective date of the Third Regular Election of Directors. (Adopted January 22. 1990) Resolution No. 16 Election of Directors RESOLVED: (a) That the Third Regular Election of Directors shall take place III accordance with the attached Rules. I I See page 318. 281 (b) That the Fourth Regular Election of Directors shall take place during the Annual Meeting of the Council of Governors in 1992. (Adopted August 27, 1990) Resolution No. 17 Membership of the Czech and Slovak Federal Republic WHEREAS the Government of the Czech and Slovak Federal Republic (Czechoslovakia) has applied for admission to membership in the Multilat- eral Investment Guarantee Agency (Agency); and WHEREAS, pursuant to Section 17(c) of the Agency's By-Laws, the Board of Directors has made recommendations to the Council of Governors regarding this application; NOW, THEREFORE, the Council of Governors hereby RESOLVES that: 1. Before becoming a party to the Convention Establishing the Multilateral Investment Guarantee Agency (Convention), Czechoslovakia shall accept membership in and become a member of the International Bank for Recon- struction and Development. 2. Upon deposit of its instrument of ratification, acceptance or approval of the Convention, Czechoslovakia shall be obligated to: (i) subscribe at par to 667 shares of the capital stock of the Agency; and (ii) pay in full to the Agency the paid-in portions of the subscription price of such shares in accordance with Articles 7 and 8 of the Convention. 3. With effect from the date of the fulfillment of the conditions set forth in paragraph (2) above, Czechoslovakia shall be admitted to membership and shall be classified as a Category Two and developing member country for the purposes of the Convention. (Adopted September 14, 1990) 282 RESOLUTION ADOPTED BY THE COUNCIL OF GOVERNORS OF MIGA AT THE 1990 ANNUAL MEETINGS Resolution No. 18 Membership of the Republic of Namibia WHEREAS the Government of the Republic of Namibia has applied for admission to membership in the Multilateral Investment Guarantee Agency (Agency); and WHEREAS, pursuant to Section 17(c) of the Agency's By-Laws, the Board of Directors has made recommendations to the Council of Governors regarding this application; NOW, THEREFORE, the Council of Governors hereby RESOLVES that: 1. Before becoming a party to the Convention Establishing the Multilateral Investment Guarantee Agency (Convention), the Republic of Namibia shall accept membership in and become a member of the International Bank for Reconstruction and Development. 2. Upon deposit of its instrument of ratification, acceptance or approval of the Convention, the Republic of Namibia shall be obligated to: (i) subscribe at par to 107 shares of the capital stock of the Agency; and (ii) pay in full to the Agency the paid-in portions of the subscription price of such shares in accordance with Articles 7 and 8 of the Convention. 3. With effect from the date of the fulfillment of the conditions set forth in paragraph (2) above, the Republic of Namibia shall be admitted to mem- bership and shall be classified as a Category Two and developing member country for the purposes of the Convention. (Adopted September 25, 1990) 283 REPORTS OF THE EXECUTIVE DIRECTORS OF THE BANK June 26, 1990 1990 Regular Election of Executive Directors 1. Pursuant to Resolution No. 429 of the Board of Governors, a Regular Election of Executive Directors will take place at the 1990 Annual Meeting of the Board of Governors. 2. The Executive Directors recommend that seventeen Executive Directors be elected. 3. The Executive Directors have noted that there was some uncertainty as to the voting power certain members will have at the time of the election because members could subscribe shares under the 1988 General Capital Increase at any time prior to the election. In view of this uncertainty, the Executive Directors recommend that the maximum and minimum percent- ages of eligible votes required for election of an Executive Director be ten percent and three percent, respectively. They believe that such percentages would provide a range that is broad enough in the circumstances. 4. The Executive Directors recommend that the date from which the 1990 Regular Election will be effective be November 1, 1990. 5. The Executive Directors consider the present structure of the Board acceptable and believe it desirable that both wide geographical and balanced representation be maintained. As in previous years there is strong feeling among Executive Directors that a lack of such wide geographical and bal- anced representation would call for prompt corrective action. 6. The Executive Directors note that under the Articles of Agreement of the International Finance Corporation (the Corporation) and the Interna- tional Development Association (the Association) the elected Directors will serve ex officio as members of the Board of Directors of the Corporation and Executive Directors of the Association. 7. The Executive Directors recommend that the subsequent Regular Elec- tion of Executive Directors take place at the Annual Meeting of the Board of Governors in 1992. 8. The Executive Directors recommend the adoption by the Board of Gov- ernors of the attached Rules for the 1990 Regular Election of Executive Directors. 284 9. The draft Resolution, embodying the above recommendations, is pro- posed for adoption by the Board of Governors .... 1 This report was approved and its recommendation was adopted by the Board of Governors on August 9, 1990. August 31, 1990 Forthcoming Annual Meetings The Governor of the Bank and Fund for Spain has invited the World Bank Group and the International Monetary Fund to hold the 1994 Annual Meetings of the Boards of Governors in Madrid during the period of Oc- tober 4-6, 1994. The Executive Board has considered the assurances given by the Government of Spain, has reviewed the proposed arrangements in Madrid, and has noted that acceptance of the invitation would be in accor- dance with the traditional practice of meeting elsewhere than in Washington, D.C. every third year. Acceptance of the invitation from the Government of Spain also would permit related decisions to be taken that the Annual Meetings should be convened in Washington, D.C. in 1995 and 1996. Accordingly, the Executive Directors recommend that the Board of Gov- ernors adopt the resolution .... 2 This report was approved and its recommendation was adopted on September 25, 1990. I See page 238. 'See page 248. 285 June 5, 1990 Allocation of FY90 Net Income 1. The Bank's net income for the fiscal year ended June 30, 1990, amounts to $1046 million. The General Reserve has been increased by a net trans- lation adjustment due to exchange rate changes of $626 million. As of June 30, 1990, the Special Reserve created under Article IV, Section 6 of the Bank's Articles of Agreement totalled $293 million and, without regard to the 1990 fiscal year's income, the General Reserve amounted to $9195 million. Total reserves including accumulated net income therefore amounted to $10534 million, of which the $293 million in the Special Re- serve is kept in liquid form, the remainder being used in the business of the Bank. 2. The Executive Directors have considered what action to take, or to recommend that the Board of Governors take, with respect to the net income for the fiscal year ended June 30, 1990. The Executive Directors have concluded that the interests of the Bank and its members would best be served by: (a) the addition of $750 million of the net income of the Bank to the General Reserve; and (b) the retention of any excess of net income over $750 million as surplus pending a decision on its further disposition prior to March 31, 1991. 3. Accordingly, the Executive Directors recommend that the Board of Gov- ernors note with approval the present Report and adopt the draft Resolu- tion .... 1 This report was approved and its recommendation was adopted by the Board of Governors on September 27, 1990. 'See page 249. 286 RULES FOR THE 1990 REGULAR ELECTION OF EXECUTIVE DIRECTORS 1. DEFINITIONS: In these Rules, unless the context shall otherwise require, (a) "Articles" means the Articles of Agreement of the Bank. (b) "Board" means the Board of Governors of the Bank. (c) "Chairman" means the Chairman of the Board or a Vice Chairman acting as Chairman. (d) "Governor" includes the Alternate Governor or any temporary Al- ternate Governor, when acting for the Governor. (e) "Secretary" means the Secretary or any acting Secretary of the Bank. (f) "Election" means the 1990 Regular Election of Executive Directors. (g) "Eligible votes" means the total number of votes that can be cast in the election. 2. DATE OF ELECTION: The election shall be held during a plenary session of the 1990 Annual Meeting of the Board to be held Wednesday, September 26, 1990. 3. BASIC RULES-SCHEDULE B: Subject to the adjustments set forth in the Rules, the provisions of Sched- ule B of the Articles shall apply to the conduct of the election, except that: (a) "three percent" shall be substituted for "fourteen percent" in Para- graphs 2 and 5 and "ten percent" shall be substituted for "fifteen percent" in Paragraphs 3, 4 and 5 thereof; and (b) "seventeen persons" shall be substituted for "seven persons" in Par- agraphs 2, 3 and 6, "sixteen persons" shall be substituted for "six persons" in Paragraph 6, and "the seventeenth" shall be substituted for the "seventh" in Paragraph 6 thereof. 4. EXECUTIVE DIRECTORS TO BE ELECTED: Seventeen Executive Directors shall be elected. 5. NOMINATIONS: (a) Any person nominated by one or more Governors entitled to vote in the election shall be eligible for election as Executive Director. 287 (b) Each nomination shall be made on a Nomination Form furnished by the Secretary, signed by the Governor or Governors making the nom- ination, and deposited with the Secretary. (c) A Governor may nominate only one person. (d) Nominations may be made until 12 o'clock noon on the day preceding the election. The Secretary shall post and distribute a list of persons nominated. 6. SUPERVISION OF THE ELECTION: The Chairman shall appoint such tellers and other assistants and take such other action as he deems necessary for the conduct of the election. 7. BALLOTS: One ballot form shall be furnished before a ballot is taken to each Gov- ernor entitled to vote. On any particular ballot only ballot forms distributed for that ballot shall be counted. 8. BALLOTING: Each ballot shall be taken as follows: (a) Ballots shall be conducted by deposit of ballot forms used by Gov- ernors eligible to vote, in a ballot box. (b) When a ballot shall have been completed, the Chairman shall cause the ballots to be counted and shall announce the names of the persons elected as soon as practicable after the tellers have completed their tally of the ballots. If a succeeding ballot is necessary, the Chairman shall announce the names of the nominees to be voted on and the members whose Governors are eligible to vote. (c) If the tellers shall be of the opinion that any particular ballot is not properly executed, they shall, if possible, afford the Governor con- cerned an opportunity to correct it before tallying the results; and such ballot, if so corrected, shall be deemed to be valid. 9. When on any ballot the number of nominees shall not exceed the number of Executive Directors to be elected, each nominee shall be deemed to be elected by the number of votes received by him on such ballot; provided, however, that, if on such ballot the votes of any Governor shall be deemed under Paragraph 4 of Schedule B to have raised the votes cast for any nominee above ten percent of the eligible votes, no nominee shall be deemed to have been elected who shall not have received on such ballot a minimum 288 of three percent of the eligible votes, and a succeeding ballot shall be taken for which any nominee not elected shall be eligible. 10. If, as a result of the first ballot, the number of Executive Directors to be elected in accordance with Paragraph 4 above shall not have been elected, a second, and if necessary, further ballots shall be taken. The Governors entitled to vote on such succeeding ballots shall be only: (a) those who voted on the preceding ballot for any nominee not elected; and (b) those Governors whose votes for a nominee elected on the preceding ballot are deemed under Paragraph 4 of Schedule B to have raised the votes cast for such nominee above ten percent of the eligible votes. 11. If the votes cast by a Governor raise the total votes received by a nominee from below to above ten percent of the eligible votes, the votes cast by the Governor shall be deemed under Paragraph 4 of Schedule B not to have raised the total votes of the nominee above ten percent. 12. If on any ballot two or more Governors having an equal number of votes shall have voted for the same nominee and the votes of one or more, but not all, of such Governors could be deemed under Paragraph 4 of Schedule B not to have raised the total votes of the nominee above ten percent of the eligible votes, the Chairman shall determine by lot the Gov- ernor or Governors, as the case may be, who shall be entitled to vote on the next ballot. 13. ABSTENTION FROM VOTING: If a Governor shall abstain from voting on any ballot, he shall not be entitled to vote on any subsequent ballot and his votes shall not be counted within the meaning of Section 4(g) of Article V towards the election of any Executive Director. If at the time of any ballot a member shall not have a duly appointed Governor, such member shall be deemed to have abstained from voting on that ballot. 14. ELIMINATION OF NOMINEES: If on any ballot two or more nominees shall receive the lowest number of votes, no nominee shall be dropped from the next succeeding ballot, but if the same situation is repeated on such succeeding ballot, the Chairman shall eliminate by lot ode of such nominees from the next succeeding ballot. 289 15. ANNOUNCEMENT OF THE RESULT: After the tally of the last ballot, the Chairman shall cause to be distributed a statement setting forth the result of the election. 16. EFFECTIVE DATE OF ELECTION: The effective date of the election shall be November 1, 1990, and the term of office of the elected Executive Directors shall commence on that date. Incumbent elected Executive Directors shall serve through the day preced- ing such date. 17. GENERAL: Any question arising in connection with the conduct of the election shall be resolved by the tellers, subject to appeal, at the request of any Governor, to the Chairman and from him to the Board. Whenever possible, any such questions shall be put without identifying the members or Governors con- cerned. 290 _ _ _ _ _ _ _ _ _ _ _ _ _.0.." EXECUTIVE DIRECTORS ELECTED AT 1990 REGULAR ELECTION Elected by Number Executive Director the votes ot of Votes Ibrahim AI-Assaf Saudi Arabia 25,390 25,390 Fawzi Hamad AI-Sultan Bahrain 869 Egypt, Arab Republic of 4,239 Jordan 1,638 Kuwait 7,703 Lebanon 590 Maldives 513 Oman 1,126 Pakistan 6,311 Qatar 1,346 Syrian Arab Republic 1,486 United Arab Emirates 2,635 Republic of Yemen 1,491 29,947 J. S. Baijal Bangladesh 2,974 Bhutan 519 India 31,942 Sri Lanka 3,062 38,497 Mohamed Belhocine Afghanistan 550 Algeria 5,442 Ghana 1,106 Iran, Islamic Republic of 13,543 Libya 4,650 Morocco 3,041 Tunisia ~ 29,301 Felix Alberto Camarasa Argentina 10,302 Bolivia 1,252 Chile 7,181 Paraguay 940 Peru 3,242 Uruguay 1,828 24,745 291 Elected by Number Executive Director the votes ot otVotes Cesare Caranza Greece 1,195 Italy 25,390 Malta 903 Poland 6,372 Portugal 5,710 39,570 Jacques de Groote Austria 11,313 Belgium 25,236 Czechoslovakia 5,595 Hungary 8,300 Luxembourg 1,467 Turkey 7,629 59,540 Jonas Haralz Denmark 10,501 Finland 6,556 Iceland 1,508 Norway 8,537 Sweden 15,224 42,326 Eveline Herfkens Bulgaria 3,177 Cyprus 1,070 Israel 2,916 Netherlands 35,753 Romania 2,501 Yugoslavia 4,631 50,048 292 Elected by Number Executive Director the votes ot otVotes Jabez A. Langley Angola 2,926 Botswana 865 Burundi 652 Ethiopia 1,228 Gambia, The 555 Guinea 975 Kenya 2,711 Lesotho 622 Liberia 713 Malawi 864 Mozambique 772 Namibia 1,105 Nigeria 7,352 Seychelles 513 Sierra Leone 653 Sudan 1,100 Swaziland 690 Tanzania 977 Uganda 867 Zambia 1,827 Zimbabwe ~ 30,083 293 Elected by Number Executive Director the votes ot otVotes Jean·Pierre Le Bouder Benin 737 Burkina Faso 737 Cameroon 1,107 Cape Verde 535 Central African Republic 734 Chad 734 Comoros 532 Congo, People's Rep. of the 770 Cote d'Ivoire 1,662 Djibouti 564 Equatorial Guinea 651 Gabon 804 Guinea-Bissau 553 Madagascar 1,048 Mali 902 Mauritania 755 Mauritius 947 Niger 728 Rwanda 837 Sao Tome and Principe 528 Senegal 1,413 Somalia 802 Togo 870 Zaire 2,893 21,843 Moises Nairn Costa Rica 381 EI Salvador 391 Guatemala 1,373 Honduras 610 Mexico 10,803 Nicaragua 591 Panama 466 Spain 17,008 Venezuela 11,677 43,300 294 -----------_._------ -- Elected by Number Executive Director the votes at atVotes Chang-Yuel Lim Australia 21,860 Kiribati 511 Korea, Republic of 9,622 New Zealand 4,946 Papua New Guinea 976 Solomon Islands 538 Vanuatu 579 Western Samoa ~ 39,580 Ernest Leung Brazil 14,250 Colombia 6,602 Dominican Republic 1,424 Ecuador 1,805 Haiti 849 Philippines 4,091 Suriname 662 Trinidad and Tobago 1,745 31,428 Frank Potter Antigua and Barbuda 542 Bahamas, The 1,321 Barbados 1,198 Belize 579 Canada 31,793 Dominica 533 Grenada 548 Guyana 844 Ireland 5,521 Jamaica 2,074 St. Kitts and Nevis 525 St. Lucia 802 St. Vincent ~ 46,808 295 Elected by Number Executive Director the votes of of Votes Vibul Aunsnunta Fiji 978 Indonesia 11,286 Lao People's Oem. Rep. 350 Malaysia 8,494 Myanmar 2,006 Nepal 793 Singapore 570 Thailand 3,813 Tonga 527 Viet Nam 793 29,610 Wang Liansheng China 35,221 35,221 /s/ O. L. Poulsen (Denmark) /s/ H. Tampubolon (Indonesia) Teller Teller 296 REPORT OF THE BOARD OF DIRECTORS OF IFC Increase of Subscription by France, India, Italy, Japan and Korea to the Capital of the Corporation 1. The Board of Directors of the International Finance Corporation (the Corporation) has considered the Memorandum to the Board of Directors from the President dated December 14, 1989, (the "Memorandum"), on the subject of an increase of subscription to the capital of the Corporation by France, India, Italy, Japan and Korea. 2. The Board of Directors, having duly considered the matter and having taken into account the Memorandum, has found the proposal set out in paragraph 10 thereof to be desirable. Accordingly, the Board of Directors submits to the Board of Governors, for a vote without meeting, the proposal which is set out in the draft Resolution attached to this Report. Pursuant to Section 11 of the Corporation's By-Laws, the Board of Directors waives the requirement that no Governor may vote on the Resolution until seven days after its dispatch. 3. The Board of Directors recommends that the Board of Governors of the Corporation adopt such draft Resolution. I This report was approved and its recommendations were adopted on Feb- ruary 7, 1990. Increase of Subscription by the Arab Republic of Egypt, Spain and Turkey to the Capital of the Corporation 1. The Board of Directors of the International Finance Corporation (the Corporation) has considered the Memorandum to the Board of Directors from the President, dated July 12, 1990 (the "Memorandum"), on the sub- ject of an increase of subscription to the capital of the Corporation by Egypt, Spain and Turkey. 2. The Board of Directors, having duly considered the matter and having taken into account the Memorandum, has found the proposal set out in paragraph 9 thereof to be desirable. Accordingly, the Board of Directors submits to the Board of Governors, for a vote without meeting, the proposal which is set out in the draft Resolution attached to this Report. Pursuant to Section 11 of the Corporation's By-Laws, the Board of Directors waives See page 250. 1 297 the requirement that no Governor may vote on the Resolution until seven days after its dispatch. 3. The Board of Directors recommends that the Board of Governors of the Corporation adopt such draft Resolution .... I This report was approved and its recommendations were adopted on September 4, 1990. 'See page 253. 298 REPORT OF THE EXECUTIVE DIRECTORS OF IDA Additions to IDA Resources: Ninth Replenishment I. Introduction 1. By the end of June 1990, the International Development Association will have committed the donor resources made available to it during the Eighth Replenishment. In anticipation of this, the representatives of the donor governments, the IDA Deputies, began negotiations for the Ninth Replen- ishment of IDA's resources in February 1989 under the chairmanship of Mr. Ernest Stern, IDA's Senior Vice President, Finance. These negotiations have now been completed. IDA9 is intended to provide resources to fund credits that will be committed during the period July 1, 1990 to June 30, 1993. 2. Prior to the start of formal negotiations, an initial meeting of the IDA9 Deputies in Berlin on September 24,1988 set the agenda for the negotiations which began on February 22-23, 1989 in Washington, D.C. Meetings were also held on May 16-17, 1989 in London, on July 6-7, 1989 in Copenhagen, on September 21-22, 1989 in Washington, D.C., on November 2-3,1989 in Kyoto and on December 14, 1989 in Washington, D.C. A number of Dis- cussion Papers and Technical Notes served as background documents for these meetings. 3. The donors have recommended a replenishment of SDR 11.68 billion. Together with advance commitments against future repayments by IDA borrowers, this will enable IDA to support sound economic policies, poverty reduction, and programs to protect the environment in borrowing countries. This report details the understanding of the donors on IDA's programs during the replenishment period, the allocation of IDA resources, the agreed burden sharing among donors, and the recommended procedures to be followed in implementing the replenishment. II. Role of IDA 4. At the first formal meeting on February 22-23, 1989, the Deputies re- viewed the evolution of IDA's role during the period FY85-88. The early to middle 1980s was a period of development crisis and shrinking resource availability in many IDA recipient countries. Priority had to be given to creating the foundation for resumed growth and to increasing the efficiency of resource mobilization and use. Drawing on its experience as a develop- ment institution and its understanding of economic processes, IDA sup- ported policy changes, institutional development and investments needed to 299 achieve long-term growth, poverty reduction and more efficient use of re- sources. In support of policy change, IDA sharply expanded its adjustment lending, especially in Sub-Saharan Africa. By the second half of the 1980s, many IDA recipients had responded to the need to adjust their economies and, in a number of countries, adjustment had moved beyond the broad macroeconomic variables to increasing concern with sectoral policies, insti- tutional capacity and the supply response. 5. The donors indicated substantial support for the evolution which had taken place in IDA's programs. They identified three program areas for higher priority: · poverty reduction, which remains central to IDA's mandate. Donors encouraged an even stronger focus on poverty in IDA's programs and greater weight in lending allocations to poverty alleviation as an ele- ment in performance. · support for sound macroeconomic and sectoral policies. Donors urged IDA to work to strengthen policy-making institutions and to address the policy framework through all elements of its economic and sector work and lending operations. · the environment. Donors recognized the significant steps which had been taken to broaden and intensify IDA's programs for environmental protection and improvement and were concerned that the Association should recognize the priority they attached to a further expansion and strengthening of environmental activities. 6. The donors stressed that IDA's lending program should retain a focus on the poorest countries and on the poorest sections of the population. IDA was asked to ensure that poverty reduction will be central to its policy dialogue with recipient countries, to encourage these countries to adopt measures to protect the poor during the process of adjustment, and to increase the weight given in the performance criterion for the allocation of IDA resources to an effective commitment to poverty reduction by govern- ments. 7. Donors asked IDA's management to view the program emphasis on pov- erty reduction broadly, encompassing all sectors and integrated in all oper- ational activities. Poverty reduction should inolve the poor fully in a sus- tainable and equitable development process, by improved access to productive resources, such as land, credit, employment and social services. The donors recognized the importance of national plans and strategies to eliminate the causes of and alleviate poverty. They also recognized the importance of a wide range of carefully targeted direct interventions relating to human resource development. In particular they welcomed the significant 300 increase proposed in the share for human resources in lending during the IDA9 period. They noted that IDA should emphasize the provision of basic services in health care and primary education, improving efficiency of deliv- ery of such services and broadening access by disadvantaged sections of the community. 8. The donors welcomed the expanding attention to matters such as reduc- ing the rate of population growth, improving health, nutrition, education and training, institutional development, and women in development. The donors pointed out the linkages among these programs to reduce poverty. They saw two areas as being especially key to successful efforts in the long term. First, they placed emphasis on IDA's activities in the area of popu- lation policy, including lending to support governments in developing appro- priate policies, establishing information, education and communications programs, and expanding coverage and quality of maternal and child health care services. Second, they stressed the need for IDA to take cognizance in its project design of the role of women in development both through in- creasing their access to education and to productive assets and through attention to women's role as decision-makers on questions of family con- sumption, health and education and as entrepreneurs and members of the labor force. 9. Donors encouraged IDA to undertake further analytical work to improve borrowers' ability to develop better targeted interventions for poverty re- duction. They noted the need for further steps to develop IDA's approach to poverty reduction along the lines of the guidelines on poverty from the Development Committee of September 1988. They also noted the difficult and long-term nature of this work and underscored the importance of de- veloping staff capabilities and experience as well as the need to coordinate with other donors in this field-notably the UNDP. 10. The donors considered it important for IDA to continue to playa central role in developing and supporting adjustment programs, both through quick-disbursing adjustment loans and through investment lending. They recognized that investment lending will remain the mainstay of IDA's lend- ing programs and that some 75 percent of IDA's resources are used for investment purposes. The donors underlined the need to maintain an ap- propriate balance between quick-disbursing adjustment lending and invest- ment lending, which were seen as mutually reinforcing, with the right mix to be determined on a country-by-country basis. As in IDA8, the share of quick-disbursing adjustment lending should remain at around 25 percent for IDA9 and should not exceed 30 percent of total IDA lending. The donors requested that the regular reports on adjustment lending prepared by the Bank pay special attention to IDA countries as a group, so as to facilitate 301 careful monitoring of the implementation of adjustment programs. They also requested that the Executive Directors develop appropriate procedures for regular review and approval by the Executive Directors of tranche re- leases of adjustsment credits. 11. The donors also expressed the view that it was critical to support the supply response to adjustment measures being undertaken and asked IDA's management to ensure adequate funding for infrastructure and the produc- tive sectors. They cited the need for recipient countries to take advantage of the capabilities of the private sector, both domestic and foreign, in sup- port of development of output, services and trade and urged further steps to encourage an enabling policy environment for private activity-including in particular the development of the financial sector. 12. Donors stressed the importance of collaboration between IDA and the Fund if the two institutions are to provide effective support to recipient countries in the design and implementation of adjustment programs. They acknowledged the progress that has been achieved in this area, and called for continued progress in implementing the agreements already reached on: · increased IDA involvement in the Policy Framework Paper (PFP) pro- cess; · joint PFP missions with more IDA participation than at present; · IDA leadership of some PFP missions; and · greater use of PFPs in consultative groups. In order to build on this strengthened collaboration, and to help ensure consistency of advice, the donors asked the Executive Directors to examine any further steps that might be taken to implement the agreements reached, particularly in coordinating Fund and IDA support for programs in coun- tries where both institutions are engaged in adjustment lending and where their operations are strongly interdependent for success. This examination should be designed to strengthen the mutually reinforcing nature of the operations of the two institutions, bearing in mind their respective roles. They might, for example, consider the advantages and disadvantages of steps such as: strengthening the review and decision processes of the IDA and IMF Boards of Executive Directors with respect to the content of adjustment programs; promoting closer collaboration of the two Boards; and improving the procedures for reviewing PFPs. 13. Donors expressed concern about members' arrears to the international financial institutions and emphasized the importance they attach to address- ing such arrears. In cases of arrears to the Bank or IDA, existing policy is not to lend until the arrears are cleared. In cases of arrears to the Fund, donors recommended that IDA, in considering any new credits to a member 302 in arrears, work with the member, the Fund, and as appropriate, the inter- national community, in order to help develop a plan for the elimination of those arrears, and pay particular attention to the extent and seriousness of efforts being made by the member to eliminate such arrears. 14. The donors noted that a borrowing country's basic development strategy must be environmentally sound in order to assure the sustainability of the resource base, economic growth and poverty alleviation. They welcomed the efforts currently under way to support environmentally sustainable de- velopment. They urged IDA to accelerate these efforts and advocated mea- sures at three levels: first, at the level of IDA's lending operations; second, in IDA's country programs and dialogue; and third, with regard to global or regional initiatives. At all three levels IDA should strengthen its dialogue with governments and non-governmental organizations (NGOs) on environ- mental concerns. 15. Donors took note of IDA's efforts to ensure that its projects and ad- justment loans are designed and implemented to support positive environ- mental actions and minimize or eliminate potentially harmful environmental impacts. A new "Operational Directive on Environmental Assessments" was issued in September 1989. For those projects where the impact is ex- pected to be significant, the Environmental Assessment (EA) will ensure a rigorous technical review at a sufficiently early stage of project preparation to encompass the environmental impact in decisions on site selection and project design. A central objective is to use the Environmental Assessment work to build borrower capability and commitment to incorporate environ- mental issues in their development programs and projects. It should provide a mechanism to strengthen intra-government coordination, provide environ- mental training for public officials, address the concerns of potentially af- fected parties, and, where appropriate, involve local NGOs in the prepa- ration and implementation of the project. Although Environmental Assessments are the responsibility of the borrower, IDA will indicate when it considers such an analysis is necessary, provide technical support, and review the final document as a part of its project appraisal process. 16. The donors welcomed the development of the new environmental as- sessment procedures. They also noted with satisfaction that the introduction of the new procedures would be followed by a review of all existing guide- lines and the development of new guidelines where needed. This will ensure that guidelines for the following sensitive ecosystems will be in place by the end of the IDA9 period: tropical rainforests, tropical dry forests, wetlands, mountain regions, and coastal resources. The tropical rainforest guidelines will be completed in mid-1990. More detailed project design guidelines will also be reviewed and updated. 303 17. At the country level, donors noted the progress being made in integrat- ing environmental concerns into IDA's policy dialogue with recipients and in the design of its country programs. The key issues have l;>een identified for all recipient countries through the preparation of Environmental Issues Papers (EIP). These are being followed up through Environmental Action Plans (EAP) for tackling priority issues in borrowing countries. The donors urged that by June 30, 1991, or at the latest before the end of the IDA9 period, EAPs be completed for all IDA recipients with priority given to those countries where major problems have been identified, and the results incorporated into country lending strategies. Recognizing the resource in- tensity of this work, donors welcomed the action taken by Japan, Canada, Norway and Sweden to provide grant financing which can be used by IDA recipients in conjunction with such work, and expressed the hope that other donors would support this initiative. 18. The donors also supported stepped up efforts to address global or re- gional problems. They urged that IDA should continue to participate ac- tively in the evolution of global policies which recognize the responsibility of the industrial countries as well as the developing countries for creating environmental conditions that will underpin sustainable growth. In partic- ular, they cited the need for IDA to support the Tropical Forestry Action Plan (TFAP) and programs for energy efficiency and conservation. The donors urged IDA to expand considerably its support for TFAP forestry sector reviews and to ensure IDA participation in reviews for those countries with major tropical forest resources. Strong support was expressed for IDA's plans to triple lending for the forestry sector between FY90 and FY92. They also recommended IDA to expand its efforts in end-use energy efficiencies and renewable energy programs and to encourage least-cost planning in borrowing countries. IDA should consider increasing its exper- tise in this area and further integrate the Energy Sector Management As- sistance Program (ESMAP) activities into lending operations. 19. Donors emphasized the importance of increasing access to environmen- tal information about specific projects and programs and promoting public participation. IDA is paying increasing attention to promoting a constructive dialogue with concerned public groups on its environmental activities. A number of steps have already been taken, such as the indication provided in monthly operational summaries of which projects have substantial envi- ronmental components and the provision of substantial information through newsletters and publications of IDA's environmental program. In addition, the Operational Directive on environmental assessments expects borrowers to take fully into account the views of affected groups and local NGOs in project design and implementation. The donors welcomed these steps, but emphasized the importance they attached to being able to satisfy their 304 constituencies that IDA was indeed working to improve the environment. Donors noted that the Operational Directive requires that for any prospec- tive project which has potentially significant environmental consequences, an EA report will be submitted to the Association as part of the appraisal process. The preparation of the EA report would be part of an ongoing process of consultation with affected groups and relevant local NGOs and the completed report would be made available to such groups. This report would also be made available at this stage to the Executive Directors for information. This would be well in advance of their consideration of the project since appraisal typically takes place 180 days or more before presen- tation to the Executive Directors. Management would report to the Exec- utive Directors that it was satisfied that meaningful consultations had in fact occurred as prescribed above and would describe these consultations. 20. Donors urged that IDA playa catalytic role in facilitating debt for nature transactions in support of sustainable development. In those coun- tries where recipient governments request IDA's assistance for their envi- ronmental programs, IDA could assist this process by bringing together the government and private parties or in the context of sector or project lending operations or otherwise. They asked that the Executive Directors consider the specific modalities of such assistance including both lending and non- lending approaches. 21. In addition to these areas of program emphasis, the donors asked that their support for IDA's expanded role in aid coordination be recorded. They particularly noted IDA's role in promoting the Special Program for Africa which they viewed as providing a framework for the efforts of the donors to provide timely and appropriate assistance to Africa. They noted that more use could be made of the PFPs, which are prepared regularly by many low income countries in collaboration with the IMF and IDA, as a basis for coordination of aid contributions. III. Country and Regional Allocations 22. The donors reviewed the criteria governing allocations of IDA re- sources. They endorsed the continued use during the IDA9 period of the existing criteria to ensure that IDA resources are allocated both on the basis of need (relative poverty, country size and lack of creditworthiness) and the capacity to use resources effectively (performance). They emphasized that the global character of IDA demands that these criteria be applied univer- sally and objectively, giving due consideration to the individual circumstan- ces of recipient countries. 23. The donors also expressed their support for the increased emphasis IDA has given to performance in recent years and emphasized that perfor- 305 mance should continue to be a key determinant of allocations of individual countries. There was broad agreement that the definition of performance should include three main components: · sound economic management; · efforts towards growth with equity, and poverty reductions; and · efforts towards sustainable long-term development. The donors stressed IDA's long-term relation with its borrowers. They expressed support for the revision of guidelines for IDA allocations to iden- tify specific factors to be considered by management in reviewing perfor- mance. 24. In view of the scarcity of IDA resources in relation to prospective needs, the donors underlined the importance of ensuring that IDA operations in countries with relatively weak performance be limited in size and restricted to activities that promise productive use of IDA funds. Given IDA's long- term relationships with its borrowers, there may be a good rationale for maintaining a core program, except in extreme circumstances. However, the donors stressed that IDA's programs should not be regarded as entitle- ments. For those countries in which lending operations are seriously preju- diced by lack of an adequate standard of performance, IDA should limit lending to the minimum needed to maintain the dialogue, but continue its non-lending activities, in particular economic and sector work, to encourage improvements in performance. 25. Donors underscored the importance of sound macroeconomic and sec- toral policies as a basis for effective use of IDA funds in all recipient coun- tries, and urged that IDA's regular assessments of country performance specifically include a determination on the adequacy of these policies, with a view to identifying where performance is necessary to help build sustain- able and increasingly self-supporting development. In order to ensure that IDA credits are approved in the context of adequate macroeconomic and sectoral policies, the donors recommended that the Executive Directors assess the policy framework for each IDA borrower annually, or as necessary in the case of small borrowers, and record their conclusions. This would be done in the context of a lending operation and under procedures which the Executive Directors will determine. As a basis for the deliberations of the Executive Directors, management should prepare documentation which covers the following points: · assessment and determination of performance (as discussed above) including any major issues in macroeconomic and sectoral manage- ment, poverty reduction and the environment; · the progress in implementation of the plans set forth in the PFP or other relevant country documents; 306 ------------- --- · the state of the policy dialogue; · the country lending strategy and priorities; · the possible need for IDA-supported adjustment and the choice and sequencing of adjustment operations; · the composition of project lending; · aid coordination with other multilateral and bilateral agencies and co- operation with the IMF; and · criteria by which progress would be judged. 26. With regard to relative poverty, the donors endorsed IDA's focus on the poorest countries. They were of the view that IDA eligibility criteria- i.e. an operational cut-off of $580 and an historical eligibility ceiling of $940, both in 1987 dollars-should remain as they are at present for two reasons. First, the operational cut-off of $580 in 1987 dollars strengthens IDA's claim on donor resources in support of poverty reduction. Second, the historical eligibility ceiling 0 $940 in 1987 dollars has been used by the UN and others to determine eligibility for other concessional assistance, and so should not be discarded. The donors recommend that IDA have flexibility in exceptional cases to extend eligibility temporarily to countries above the operational cut-off, which are undertaking major adjustment efforts. 27. The donors noted the exception which has been made for the small island economies which would otherwise have little or no access to Bank Group assistance because of their limited creditworthiness for IBRD fi- nancing. 28. The donors also proposed to continue the practice of past replenish- ments by recommending that allocations to the two largest active IDA borrowers be limited to 30 percent of total replenishment resources, assum- ing that their performance continues to warrant this level of support. This ceiling is needed because allocations based on country size and relative poverty alone would make it impossible to fund meaningful programs in other countries. 29. The donors also reviewed allocations by region. As indicated earlier, there was agreement that IDA should maintain its character as a global institution and that country size, relative poverty, lack of creditworthiness, and performance, should be applied in determining allocations, with the exceptions noted above. 30. The donors noted that IDA's support of economic restructuring in Af- rica during IDA8, by concentrating resources on adjusting countries and by marshalling donor cofinancing through the Special Program for Assistance, 307 merited continued support. They stressed the links between adequare re- source flows to Africa during the IDA9 period and the prospects for sus- taining programs in the current adjusting countries and for starting or re- suming programs in other countries. In countries with advanced adjustment programs it is now necessary to move to the next phase of adjustment and promote the supply response through carefully targeted investment and maintenance lending. 31. Donors recognized the need to sustain the high priority programs de- veloped in IDA8 for Sub-Saharan Africa, as well as the need to provide consistent support for adjustment and other long-term development pro- grams for low-income countries in other parts of the world. Some IDA-only countries in Asia, the Middle East and Latin America have received lower per capita allocations of IDA resources than Africa countries of similar size and performance characteristics. It was recognized that potential funding requirements of these countries, as well as potential new entrants, could be significant during IDA9. 32. The donors were aware that IDA is likely to have considerable difficulty in balancing the need to maintain its support for ongoing programs in Africa-where governments are showing sustained commitment to adjust- ment, growth, poverty reduction, population policies, human resources de- velopment, and natural resource management-with the need to apply its criteria in a global fashion and respond to changes in country situations calling for expanded IDA lending outside Africa. Accordingly, donors agreed that IDA should have increased flexibility in allocating IDA9 re- sources among countries, based on global criteria. They recommended how- ever, that assuming performance continues to warrant, the level of support for Africa should not be reduced and the share allocated to Africa should be between 45 and 50 percent of IDA9 resources. 33. The donors also noted, however, that while the allocation of resources was broadly appropriate for the current group of IDA recipients, there was the possibility of substantial new demands on IDA resources during the IDA9 period. They agreed that in the event these new demands materialize on a significant scale, resources could be re-allocated from all regions. IV. Size and Burden Sharing of the Ninth Replenishment 34. The issue of size of the Ninth Replenishment was discussed extensively, starting with the London meeting, on the basis of two illustrative scenarios. The discussion focussed on the response capacity that IDA would have at the different replenishment levels. The donors agreed that there would remain important unmet demands at any realistic replenishment size and 308 that it was critical to balance the need to put IDA in a position to meet the demands of the FY91-93 period with the budget realities of the donor countries. 35. In view of the strong case for maintaining the real level of IDA8 in the IDA9 replenishment, the donors agreed to recommend a replenishment of SDR 11.68 billion-the amount estimated to be the equivalent of the total IDA8 replenishment at 1989 prices. In addition to donor contributions, the representative for Switzerland agreed to recommend a bilateral agreement with the Association for SwF 380 million (about SDR 184 million at the exchange rate of 12/14/89) on an untied grant basis. As in previous replen- ishments there remains a small unallocated gap which it is hoped can be reduced or eliminated through additional special contributions. notably in the form of accelerated encashments. With the commitment authority of SDR 1.58 billion from reflows. and assuming that the unallocated gap is filled. total commitment authority of the Association. including the grant from Switzerland, during the IDA9 period will be SDR 13.26 billion. 36. Donor shares and contributions are shown in Table 1. 1 The local cur- rency equivalent of donor shares in the SDR total are estimated on the basis of average exchange rates for the six-month period ending October 31. 1989. In addition to their basic contributions. the following donors provided sup- plementary contributions in amounts also shown on Table 1: Finland, France, Federal Republic of Germany, Ireland, Italy, Japan, Korea, The Netherlands, Spain and Turkey. In order to enhance the value of their contributions. Belgium and Italy have agreed to permit IDA to accelerate the encashments of part of their contributions. The donors. however, noted that these supplementary contributions are made on an exceptional basis for IDA9 and should not be regarded as part of the burden sharing in discussions on the next replenishment. v. Implementation Arrangements 37. The implementation arrangements for IDA replenishments are well es- tablished through past practice. The objective of these arrangements is to ensure that donors act together in meeting the obligations they have under- taken with respect to the replenishment. IDA's authority to commit funds against the replenishment resources only becomes effective therefore when a substantial majority of donors have taken the necessary steps. Effectiveness and Commitment Authority 38. In IDA8, effectiveness required notification by donors representing 80 percent of the agreed replenishment. This meant that IDA8 could not be- 'See page 267. 309 come effective without the US notification. In recognition of the delay in IDA commitments which would result (since the US budget is generally only finalized in October), donors agreed to an advance contribution scheme triggered by notification from donors representing 20 percent of the replen- ishment. In IDA8 the advance commitment scheme became effective on September 24, 1987, while full effectiveness was achieved on March 4, 1988. 39. The same requirement has been applied to the release of annual com- mitment authority.l Because the US budget is only finalized four months after the start of the fiscal year, IDA has had to approach donors to ask for an early release of their second and third tranches so as to avoid delays in signing credits as a result of insufficient commitment authority. This is administratively cumbersome both for IDA and for donor authorities. 40. The donors recommend that the principle of triggering effectiveness and tranche releases through notification by donors accounting for 80 per- cent of total contributions should be retained for IDA9. They recognize, however, that current arrangements are a potential cause of delay. Given the decision taken by the Executive Directors that the Association can undertake advance commitment of future reftows it will be possible to use these to bridge delays in commitment authority from donors. During the IDA9 period it will be possible to commit up to SDR 1.05 billion in anyone year either in advance of full effectiveness or in years two and three in advance of release by the US of its contribution. When the necessary noti- fications are received, the excess of advance commitments against reftows over the figure authorized by the Executive Directors will be treated as if it had been commited against donor resources. In case of further delay, the donors recommend that once this commitment authority is exhausted, IDA make use of advance commitment authority based on voluntary releases when donors representing at least 20 percent of total contributions have notified IDA. 41. In view of the availability of commitment authority from reftows the donors note that the same approach can be applied to bridging delays in 'Funds to meet the US commitment to IDA are voted annually by Congress as part of the Budget. Unlike other donors, the US participates in IDA replenishments by depositing a Qualified Instrument of Commitment because it can only make its annual commitment to IDA once appropriations authority has been enacted by Congress. In view of the uncertainties attached to this process and the possibility of delays in receiving the US commitment, pro-rata release arrangements have been incorporated into the replenishment agreements in some form since I DA5, under which other donors may exercise the right to reduce the second and third tranches of their authorized subscriptions and contributions on a pro-rata basis proportionate to any US shortfall. In the past where delays have occurred. most donors have waived this right in order to provide IDA with sufficient commitment authority and avoid interruptions to the commitment of credits to borrowers. 310 tranche releases for the second and third year of the replenishment. At the same time, donors wished to retain the arrangements under which donors would have the right to reduce their authorized subscription and contribu- tion on a pro-rata basis in the event that the delay referred to in paragraph 39 were to occur. In this event the arrangements would be limited to the period of the delay. Payment and Encashment Arrangements 42. No change is envisaged in the payment and encashment arrangements as compared with IDA8. These arrangements already provide for consid- erable flexibility in payment methods and encashment schedules to be agreed between IDA's management and donors. Donors asked management to explore alternative encashment arrangements for consideration in the context of the next replenishment. Valuation 43. Most donors denominate their contributions to IDA replenishments in their national currencies. IDA commits and disburses these resources in terms of SDRs. IDA is therefore exposed to an exchange risk insofar as the SDR value of the local currencies at the time they are pledged is different from the SDR value at the time they are disbursed. 44. In the past, when there have been shortfalls in disbursement resources, IDA has met these mainly through using repayments from borrowers, com- bined with some use of its net income. With the decision to commit against future repayments, however, the opportunity cost of this approach has be- come more obvious. In designing the new policy on advance commitments of reflows, care has been taken to ensure that there is enough response time so that new commitments could be stopped in the event that IDA encounters an exchange-rate induced shortfall of resources. However the use of reflows to cover this type of exchange risk could result in a serious disruption of IDA's planned operations and it is obviously desirable to see if there are other ways of reducing the risk. 45. The change from the dollar to the SDR as IDA's unit for commitment, which was made in IDA6, has substantially reduced IDA's risk from the exchange rate fluctuations of the major currencies. There is still a residual foreign exchange risk to IDA from such exchange rate fluctuations, however, since the basket of donor contributions to IDA is different from the SDR currency basket. One obvious way to eliminate this residual risk would be for all donors to pledge in SDRs. This has been discussed from time to time, but not agreed. 311 46. In recent replenishments, the unintended effect of some countries not denominating their contributions in their national currencies has been to reduce the similarity between IDA's "basket" of donor contributions and the SDR. The donors acknowledged the increased foreign exchange risk which results from this, but felt it important that donors retain the option of denominating their contributions in either their national currencies or the SDR. 47. A second source of foreign exchange risk for the Association is the rapid depreciation of the local currencies of a number of donors. In recognition of this several of these donors have in recent years denominated their pledges in US dollars rather than their domestic currencies. In IDA8, Col- ombia, Mexico and Turkey did so. However, a number of other donors with high rates of domestic inflation and currency depreciation, continued to denominate their contributions in their local currencies so that the size of the replenishment, which included the full SDR value of these pledges at the time they were given, was over-stated, while IDA was exposed to a foreign exchange risk covering the loss of value between the end of the commitment period and the date of encashment of these funds. 48. As a result of the depreciation of the currencies of those donors with high inflation rates during the IDA8 period, and contributions denominated in local currency, IDA8 commitments and disbursements are likely to be below the SDR values at the time of agreement. Insofar as the shares of these donors in the replenishment are inflated by the use of the original value of their local currencies, they also give a misleading impression of both the size of the replenishment and burden sharing. In the case of IDA8, the real value of the contributions from high inflation donors had declined by 0.75 percent of the IDA8 replenishment total by end-1989 from the original 1.17 percent at the time of the replenishment agreement. 49. In the circumstances, it has been agreed to extend the approach which has already been adopted by some donors, of denominating their contri- bution in convertible currency, to all donors with rates of inflation above 15 percent per annum in the period 1986-88. 1 These high inflation donors have been asked to denominate their contributions to IDA9 in SDRs. Considering the economic difficulties faced by a number of these donors and the fact that denomination in SDRs will likely involve larger real contributions than in the past, adjustments were made in the amounts of their contributions. This difference, shown in Table 1 as the reduction from the changes in the unit of obligation, accounts for 0.69 percent of the replenishment total. lAs measured by the rate of change of the National Consumer Price Index, or the GNP deflator in case of one donor for which the CPI is not available. 312 Contributions denominated in SDRs from the high inflation donors account for 0.58 percent of the IDA9 replenishment, compared with the real value of IDA8 contributions from these donors which now stands at 0.42 percent of the IDA8 replenishment. Annual Reviews of Implementation 50. The donors recommend that the Executive Directors review annually progress in the implementation of IDA9, including progress in following up the various recommendations made in this report. Voting Rights 51. The donors addressed the IDA voting rights system briefly, and recom- mended that it should remain as at present. Recommendation 52. The Executive Directors recommend that the Board of Governors adopt the draft Resolution .... I This report was approved and its recommendation was adopted by the Board of Governors on May 8, 1990. I See page 261. 313 REPORTS OF THE BOARD OF DIRECTORS OF MIGA December 6, 1989 Election of Additional Directors 1. France has now adopted legislation authorizing the ratification of the MIGA Convention and is anticipated to become a member of MIGA before the end of the year. France has requested to elect separately an additional Director for it before the Third Regular Election of Directors. To accom- modate this request, Directors recommend to Governors adoption of the attached resolution. The resolution would increase the number of Directors to seventeen from sixteen, entitle France to elect separately an additional Director, and provide for the election of an eighteenth Director by Category Two countries which have not participated in the last Regular Election if such countries reach at least 2,000 shares of MIGA's capital. 2. Article 32(b) of the MIGA Convention authorizes the Council of Gov- ernors to increase the number of Directors to take account of changes in membership. Paragraph 4 of Schedule B to the Convention provides that one-fourth of the total number of Directors shall be elected separately by MIGA's largest shareholders. There are now 16 Directors. Under this pro- vision, the United Kingdom, the fourth largest shareholder in MIGA, elected separately a Director of its own. France will acquire a number of shares equal to that of the United Kingdom, and will be entitled to elect a Director separately. It is therefore recommended that the number of Direc- tors be increased to 17 and that a separate election be opened to enable France to elect an additional Director. 3. Since its inception, the Board has been composed of an equal number of Directors from Category One and Category Two countries, respectively. To maintain such parity on the Board, the Council of Governors' Resolution No.6, which enabled by-elections before the Second Regular Election, provided for a by-election by new Category One countries as soon as they had 3,000 shares in the aggregate and for a by-election by new Category Two countries with 2,000 shares in the aggregate. In keeping with this precedent, it is recommended that Category Two member countries not represented in MIGA's Board be entitled to elect an eighteenth Director whenever their shares total at least 2,000. This report was approved and its recommendation was adopted on January 22, 1990. 314 July 9, 1990 Third Regular Election of Directors (MIGA) 1. On August 14, 1989, the Council of Governors adopted Resolution No. 13, entitled "Rules for the Second Regular Election of Directors," which (a) set out the Rules for the Second Regular Election of Directors and (b) provided that the Third Regular Election of Directors will take place at the Annual Meeting of the Council in 1990. 2. Attached hereto is a draft resolution on Election of Directors with at- tached Rules for the Third Regular Election of Directors. These rules are patterned after the Rules for the Second Regular Election of Directors. This report recommends an adjustment in the number of Directors to be elected to maintain the parity between Directors of Category One and Category Two countries. 3. Since the Second Regular Election, two Category Two countries (Bot- swana and Swaziland) and two Category One countries (France and Ireland) have become members of the Agency. As a result of MIGA's intensive membership activities, six Category Two countries, which have signed and ratified the MIGA Convention, and five other Category Two countries, which have only signed the Convention, have been working towards com- pletion of their membership requirements before the 1990 Annual Meeting of the Council of Governors. Furthermore, three additional Category Two countries have indicated that they intend to become members of the Agency and should do so prior to the 1990 Annual Meeting. 4. The Rules for the Second Regular Election of Directors set the number of Directors at sixteen. However, according to Resolution No. 15 entitled "Election of Additional Directors" and adopted on January 22, 1990, an additional Director was elected separately by France, thus increasing the number of Directors to seventeen. 5. The above-mentioned resolution set out, among other things, "THAT in the event that, before May 25, 1990, the number of shares subscribed by Category Two members which shall not have participated in the Second Regular Election of Directors shall be 2.000 or more, the number of Direc- tors shall be further increased to eighteen and the said Category Two mem- bers shall be entitled to elect a Director. provided, however, that such 315 increase shall not take place until France shall have become a member of the Agency." On May 25, 1990, the shares subscribed by Category Two countries since the Second Regular Election of Director~ had not reached 2,000. Therefore, the eighteenth Director was not elected when France became a member on December 28, 1989. 6. The Board is now composed of an unequal number of Directors from Category One and Category Two countries. In view of the considerable interest expressed during the preparation of the MIGA Convention and more recently in the maintenance of parity of representation, the Board of Directors recommends that the number of Directors be increased to eigh- teen, in order to provide for nine Directors to represent Category One and Category Two members, respectively. 7. Paragraph 8 of the Rules for the Second Regular Election of Directors set the maximum and minimum percentages of voting power applicable to the Second Regular Election at 15 and 3, respectively, of eligible votes. These percentages appear appropriate for the election of the number of Directors recommended in this report and it is recommended that they be made applicable to the Third Regular Election of Directors.! 8. Pursuant to Section 10 of the By-Laws, the terms of Directors elected in the Third Regular Election shall be determined by the Council. It appears desirable that the terms of MIGA's Directors should coincide with those of the World Bank's Executive Directors to facilitate elections of persons hold- ing positions on both boards. The next Regular Election of the Bank's Board will take place at the Bank's Annual Meeting in 1992. Directors, therefore, recommend the term of office of Directors to be elected at the Third Regular Election be for two years and that the Fourth Regular Elec- tion of Directors be held at the Annual Meeting of the Council of Governors in 1992. 9. Attached is a draft resolution 2 embodying the above recommendations. This report was approved and its recommendations were adopted on August 27, 1990. lIn the unlikely event that these percentages are inappropriate due to additional new countries having become members of the Agency prior to the Third Regular Election, the Council of Governors could modify them before the start of the election. 2 See page 281. 316 August 6, 1990 Membership of the Czech and Slovak Federal Republic 1. In accordance with Section 17 of the By-Laws of the Multilateral Invest- ment Guarantee Agency, the application of the Czech and Slovak Federal Republic (Czechoslovakia) for membership in MIGA is herewith submitted to the Council of Governors. 2. Representatives of Czechoslovakia have been consulted informally re- garding the terms and conditions recommended in the draft resolution and they have raised no objection thereto. 3. The draft resolution' is recommended for adoption by the Council of Governors. This report was approved and its recommendation was adopted on September 14, 1990 September 25, 1990 Membership of the Republic of Namibia 1. In accordance with Section 17 of the By-Laws of the Multilateral Invest- ment Guarantee Agency, the application of the Republic of Namibia for membership in MIGA is herewith submitted to the Council of Governors. 2. Representatives of the Republic of Namibia have been consulted infor- mally regarding the terms and conditions recommended in the draft reso- lution and they have raised no objection thereto. 3. The draft resolution 2 is recommended for adoption by the Council of Governors. This report was approved and its recommendation was adopted on Septem- ber 25, 1990. 'See page 282. oSee page 283. 317 RULES FOR THE THIRD REGULAR ELECTION OF DIRECTORS (MIGA) 1. DEFINITIONS: In these Rules, unless the context shall otherwise require, (a) "Convention" means the Convention establishing the Agency. (b) "Council" means the Council of Governors of the Agency. (c) "Chairman" means the Chairman of the Councilor a Vice Chairman acting as Chairman. (d) "Governor" includes the Alternate Governor or any temporary Alternate Governor, when acting for the Governor. (e) "Secretary" means the Secretary or any acting Secretary of the Agency. (f) "Election" means the Third Regular Election of Directors. (g) "Eligible votes" means the total number of votes that can be cast in the election of the Directors to be elected pursuant to the provisions of paragraphs 6 to 11 of Schedule B to the Con- vention. 2. DATE OF ELECTION: The election shall be held during the Third Annual Meeting of the Council, on September 26, 1990. 3. BASIC RULES-SCHEDULE B: The provisions of Schedule B to the Convention shall apply to the conduct of the election. For this purpose: (a) Eighteen Directors shall be elected. (b) Five Directors shall be elected separately, one each by the Gov- ernors of the five members having the largest number of shares. The person nominated by each of the said Governors shall be deemed to be elected upon being so nominated. (c) The Directors not elected separately pursuant to paragraph 3(b) above shall be elected in accordance with the rules in paragraphs 4 through 11 below. 4. NOMINATIONS: (a) Any person nominated by one or more Governors entitled to vote in the election shall be eligible for election. 318 (b) Each nomination shall be made on a Nomination Form furnished by the Secretary, signed by the Governor or Governors making the nomination, and deposited with the Secretary. (c) A Governor may nominate only one person. (d) Nominations may be made until 12 noon on the day before the election. The Secretary shall post and distribute a list of persons nominated. 5. SUPERVISION OF THE ELECTION: The Chairman shall appoint such tellers and other assistants and take such other action as he deems necessary for the conduct of the election. 6. BALLOTS: One ballot form shall be furnished before a ballot is taken to each Governor entitled to vote. On any particular ballot only ballot forms dis- tributed for that ballot shall be counted. 7. BALLOTING: Each ballot shall be taken as follows: (a) Each Governor entitled to vote shall deposit a ballot, signed by the Governor, in the ballot box placed in the office of the Sec- retary. (b) When a ballot shall have been completed, the Chairman shall cause the ballots to be counted and shall announce the names of the persons elected as soon as practicable after the tellers have certified the tally of the ballots. If a further ballot is necessary, the Chairman shall announce the names of the nominees to be voted on and the members whose Governors are eligible to vote. (c) If the tellers shall be of the opinion that any particular ballot is not properly executed, they shall, if possible, afford the Gover- nor concerned an opportunity to correct it before certifying the tally of the results; and such ballot, if so corrected, shall be deemed to be valid. 8. For the purposes of paragraph 6 of Schedule B to the Convention, the following percentages of total votes are decided, namely, a maximum of 15 percent of eligible votes and a minimum of 3 percent of eligible votes. 9. ANNOUNCEMENT OF THE RESULT: After the tellers shall have certified the tally of the last ballot, the Chairman shall cause to be distributed a statement setting forth the result of the election. 319 10. EFFECTIVE DATE OF ELECTION: The effective date of the election shall be November 1, 1990, and the term of office of the elected Directors shall commence on that date. Incum- bent Directors shall serve through the day preceding such date. 11. GENERAL: Any question arising in connection with the conduct of the election shall be resolved by the tellers, subject to appeal, at the request of any Governor, to the Chairman and from him to the Council. Whenever possi- ble, any such questions shall be put without identifying the members or Governors concerned. 320 MULTILATERAL INVESTMENT GUARANTEE AGENCY September 26. 1990 DIRECTORS ELECTED AT THE 1990 REGULAR ELECTION 1. Directors elected separately by the Governors of the four member countries having the largest number of shares: Member Nominating Number Candidate Elected the Candidate of Votes Gerhard Boehmer Germany 5,248 E. Patrick Coady United States 20,696 Jean-Pierre Landau France 5,037 David Peretz United Kingdom 5,037 Masaki Shiratori Japan 5,272 1I. Directors elected by the Governors of member countries other than those listed in Part 1 above: Member Voting for Number Candidate Elected the Candidate of Votes Alhaji Ahmadu Abubakar Angola 480 Botswana 258 Kenya 456 Lesotho 258 Malawi 302 Namibia 350 Nigeria 1,544 Swaziland 271 Zambia 692 4,611 Ibrahim A. AI-Assaf Saudi Arabia 5,259 Fawzi Hamad AI-Sultan Bahrain 302 Egypt 921 Jordan 334 Kuwait 1,684 Oman 329 Pakistan 1,246 Tunisia 430 5,246 321 Member Voting for Number Candidate Elected the Candidate ot Votes Cesare Caranza Italy 2,997 Malta 299 Poland 1,415 Portugal 796 Spain 1,462 6,969 Nicolas Flaiio Chile 963 Ecuador -.ill 1,435 Jonas Haralz Denmark 895 Finland 777 Norway 876 Sweden 1,226 3,774 Eveline Herfkens Cyprus 345 Netherlands 2,346 Switzerland 1,677 4,368 Jean-Pierre Le Bouder Burkina Faso 276 Cameroon 350 Cote d'Ivoire 462 Madagascar 339 Senegal 412 Togo 302 Zaire -----.:m 2,866 Chang-Yuel Lim Fiji 292 Indonesia 1,876 Korea 904 Vanuatu 258 Western Samoa ~ 3,588 Janos Martonyi Czechoslovakia 1,258 Hungary 1,091 Turkey ----.lli 3,274 322 -----------..-._._-_. __ .... Member Voting for Number Candidate Elected the Candidate of Votes Frank Potter Barbados 287 Canada 3,142 Grenada 258 Guyana 313 Ireland 546 Jamaica 470 St. Lucia 258 St. Vincent ~ 5,532 M. Mustafizur Rahman Bangladesh 728 Ghana 574 Sri Lanka ~ 1,918 Wang Liansheng China 5,261 lsi O. L. Poulsen (Denmark) lsi H. Tampubolon (Indonesia) Teller Teller 323 REPORT OF THE CHAIRMAN OF THE DEVELOPMENT COMMITTEE September 24, 1990 Sirs: As Chairman of the Joint Ministerial Committee of the Boards of Gov- ernors of the Bank and the Fund on the Transfer of Real Resources to Developing Countries (Development Committee), I have the honor to pre- sent herewith to the Boards of Governors the XVIth Annual Report by the Committee on the progress of its work for the period July 1989-June 1990. The report is presented in compliance with Section 5(i) of the Bank Board of Governors Resolution No. 294 and the Fund Board of Governors Reso- lution No. 29-9, adopted on October 2, 1974. Yours sincerely, lsi B. T. G. Chidzero 324 REPORT OF THE JOINT MINISTERIAL COMMITTEE OF THE BOARDS OF GOVERNORS OF THE BANK AND THE FUND ON THE TRANSFER OF REAL RESOURCES TO DEVELOPING COUNTRIES (July 1989-June 1990) I. INTRODUCTION The Committee held its 37th and 38th regular meetings during the period under review. Both meetings, chaired by B.T.G. Chidzero, Senior Minister of Finance, Economic Planning and Development of Zimbabwe, were con- vened in Washington, D.C., the first on September 25,1989 and the second on May 8, 1990. The meetings were conducted on the basis of the usual format, with a morning plenary session for general statements and an afternoon Plenary session for an in-depth discussion on selected aspects of the items on the agendas. A luncheon for members was held at each meeting for a private exchange on a specific topic related to an agenda item (the implications of the external environment for structural adjustment programs was discussed in September 1989 and the adequacy of official flows to severely indebted countries and the experience with official debt relief for those countries in May 1990). The Committee's discussions were assisted by a number of issues papers and reports prepared by the staffs of the IMF and the World Bank, as well as by the written opening statements of the Chairman and the reports of the President and the Managing Director. In addition, papers related to the agenda items were preented in advance by the following observers: -African Development Bank -Asian Development Bank -GAIT -Inter-American Development Bank -International Fund for Agricultural Development -Islamic Development Bank -OPEC Fund for International Development -UNCTAD II. INTERNATIONAL ECONOMIC SETTING The Committee discussed several important international development issues aimed at promoting and sustaining growth and development in de- veloping countries, against the background of a volatile and uncertain ex- 325 ternal economic climate facing them. The 1980s, in general, were very dif- ficult years for most developing countries. At the end of the decade, apart from Asia, GOP per capita growth rates were stagnant or declining in all developing regions. The growth of real GOP in developing countries as a whole fell from 4 percent in 1988 to 3 percent in 1989. GOP per capita growth rates for the Sub-Saharan African, Latin American and the Carib- bean regions were negative in both 1988 and 1989. The GOP per capita growth rate was also negative for the region comprising the developing countries of Europe, the Middle East and North Africa in 1989 due to the absence of growth in Eastern Europe. These unsatisfactory trends coincided with the seventh consecutive year of expansion in the industrial countries. The weakness in the terms of trade, higher interest rates, as well as the persistence of protectionist agricultural, industrial and trade policies in many industrial and developing countries continued to influence adversely the economic prospects of many developing countries. The level of non-fuel primary commodity prices despite a recent modest rise, in real terms, re- mained a constraint to the ability of a number of developing countries dependent on commodity exports to adjust their balance of payments. At the same time, problems of severe indebtedness continued to affect the adjustment and growth efforts of many developing countries. In this connection, the negotiations of debt and debt service reduction arrange- ments under the strengthened debt strategy announced in the spring of 1989 and the implementation of debt relief measures in favor of the severely indebted low-income countries were seen as important steps in addressing the debt problem. The above-mentioned developments and the sharp acceleration of infla- tion in many of the developing countries underscored the need for sound macroeconomic and structural policies and the need for the adoption and the implementation of adjustment programs. In fact, an increasing number of developing countries adopted growth-oriented adjustment programs sup- ported by the World Bank and the IMF, thereby improving confidence and the prospects for investment flows and the repatriation of flight capital. The situation also underscored the importance of strengthening adjustment ef- forts underway as well as creating a supportive external environment through the adoption and implementation by all countries of appropriate monetary, fiscal as well as structural policies aimed at eliminating existing trade barriers. In spite of a number of positive developments regarding official devel- opment assistance flows, aggregate transfers of resources to developing countries continued to fall particularly as a result of the drying up of com- mercial flows to severely indebted middle-income countries. The reversed flow of resources from developing to developed countries, which started in 1987, continued in 1989. 326 III. INTERNATIONAL DEVELOPMENT ISSUES The September 1989 and May 1990 agendas of the Committee were de- termined in the light of the current international development situation, macroeconomic trends and main problem areas outlined above. The Com- mittee had discussions on the following issues confronting the developing countries: (1) Structural adjustment. (2) The debt strategy and its impact on the development prospects of the severely indebted countries. (3) Long-term perspective for the development of Sub-Saharan Africa. (4) The contribution of the private sector to development and the roles of the World Bank and the IMF. (5) Environmental issues. (6) Transfer of resources. (7) International trade developments. 1. Structural adjustment The Committee had initiated its first global review of experience with growth-oriented structural adjustment programs assisted by the World Bank and the IMF by focusing mainly on the design and implementation of those programs at its April 1989 meeting. In the Fall of 1989, the Committee reiterated that the essential ingredients in the design and implementation of successful structural adjustment pro- grams were: (a) strong political commitment by developing countries to sound macroeconomic policies; (b) broad public support for programs; (c) integration of poverty-reduction objectives, environmental considerations, and contingency planning in the design of programs; (d) strengthening of administrative and institutional capacity; (e) adequate and timely financing to support programs; and (f) a favorable external economic climate enabling developing countries to implement structural adjustment programs. In reviewing the implications of the external macroeconomic climate for the adjustment process in developing countries members were of the view that, while growth-oriented structural adjustment could yield positive re- sults even under unfavorable external conditions, the pace, scale and sus- tainability of benefits would be adversely affected by an unsupportive ex- ternal setting. Accordingly, members generally considered that the adoption by industrial countries of economic policies, supportive of adjustment efforts of developing countries, would also help improve their own economic per- formance; moreover, it would assist the integration of developing countries into the world economy. The Committee requested the World Bank and the IMF to prepare a report on the impact of industrial countries' trade, agri- cultural and industrial policies on developing countries for its Spring 1991 327 meeting. The Committee also asked the Bank and the Fund to keep under review the results of structural adjustment programs that developing coun- tries undertake. 2. The debt strategy and its impact on the development prospects of the severely indebted countries The Committee continued its review of the debt strategy and its impact on the development prospect of all severely indebted countries at its two meetings under review. It also agreed to continue this review process at its September 1990 meeting. (a) Strengthened debt strategy In the Fall of 1989, the Committee reaffirmed its support for the strength- ened debt strategy it had endorsed at its Spring 1989 meeting, based on a cooperative framework between the debtor countries, the commercial banks and official creditors. The Committee underscored the need for a flexible case-by-case approach to realistic commercial bank financing packages, in- cluding both debt and debt-service reduction and new financing as appro- priate. It welcomed the rapid adoption of guidelines by the World Bank and the IMF for their support for voluntary debt and debt service reduction packages. Members encouraged debtor countries to develop strong eco- nomic reform programs in cooperation with the two Bretton Woods insti- tutions. They also re-emphasized the importance of special efforts by debtor countries to attract foreign direct investment, promote the repatriation of flight capital and implement appropriate debt equity swap programs. They stressed that the implementation of officially supported debt and debt-ser- vice reduction should not divert World Bank and IMF financial support from countries which have performed well. The Committee also expressed its appreciation of the substantial financial support of the Japanese Govern- ment for adjustment programs by debtor countries and encouraged other countries in a position to do so to take similar action. In the Spring of 1990, the Committee welcomed the progress achieved so far in the implementation of the debt strategy. Members reiterated the need to maintain the case-by-case approach and stressed again the central im- portance of the adoption of adjustment programs by debtor countries. They also noted that the combination of adjustment programs and commercial bank financing arrangements could help improve confidence in the econ- omies of debtor countries. The Committee called on the World Bank and the IMF to continue to provide support for debt and debt-service reduction programs, with the necessary flexibility, under their established guidelines which they reaffirmed and to keep the strengthened debt strategy under review. The Committee also called on the World Bank and the IMF to emphasize measures to promote investment and capital repatriation in coun- try reform programs. 328 (b) Severely indebted lower middle-income countries Members expressed their concern about the development needs of se- verely indebted lower middle-income countries whose debt is mainly to official creditors. In the Fall of 1989, the Committee stated that special attention should be given to that issue. In the Spring of 1990, members reiterated this concern noting that a number of lower middle-income coun- tries had uncertain prospects for a return to external viability and sustained growth. The Committee, therefore, asked the World Bank and the IMF to continue to analyze the debt problems of these countries as well as those of severely indebted middle-income countries with significant official debt. (c) Severely indebted low-income countries The debt issues of low-income countries has been one of the major con- cerns of the Committee since the mid-eighties. In this connection, the Com- mittee welcomed the following measures: (a) concessional official debt re- schedulings by the Paris Club under Toronto terms in favor of severely indebted low-income countries undertaking adjustment programs; (b) can- cellation by an increasing number of creditor countries of official develop- ment assistance (ODA) debt owed by many low-income countries, particu- larly in Sub-Saharan Africa; (c) utilization of IDA reflows for the benefit of IDA-only countries with outstanding IBRD debt; and (d) activation by the World Bank of a $100 million facility to assist eligible IDA-only countries to reduce their debt to commercial banks. Members, however, expressed their concern that despite efforts by the Paris Club and other debt relief measures mentioned above, a number of countries had uncertain prospects for an early return to external viability. The Committee, therefore, re- quested the World Bank and the IMF to undertake an evaluation of the benefits of debt relief and other measures taken so far in favor of the severely indebted low-income countries. Members also considered that, given the low debt service capacity of these countries, their new commitments for assistance to them should be provided on highly concessional terms. (d) Indebted countries which have avoided debt restructuring The importance of the needs of a number of indebted developing coun- tries which had not restructured their external debt obligations and which had been implementing sound macroeconomic policies was also recognized by the members. The Committee urged that efforts be made to maintain adequate financial flows to these countries, including multilateral flows, to support their adjustment, development and poverty reduction efforts. 3. Long-term perspective for the development of Sub-Saharan Africa In the Spring of 1990, the Committee reviewed the World Bank's report "Sub-Saharan Africa: From Crisis to Sustained Growth" and endorsed the approach of the strategic agenda outlined in that report. Members partic- ularly emphasized the following points made in the report: (a) sustained growth and development required firm commitment and good governance 329 on the part of the concerned governments of the Sub-Saharan African coun- tries given their primary responsibility in the design and implementation of their development strategies; (b) the need for adequate, effective and well- coordinated funding from donors and multilateral institutions, noting that large aDA flows to those countries would continue to be required in the 1990s; and (c) resources should be channelled more selectively to countries implementing adjustment programs, thereby maximizing the effectiveness of external assistance. The Committee emphasized the complementary roles of the World Bank and the IMF in the long-term development process of Sub-Saharan Africa, and requested that it be kept informed of the progress in implementing the long-term strategic agenda. In this respect, the initiative of the Government of the Netherlands to convene an international conference on Sub-Saharan Africa in Maastricht in July 1990 was welcomed. The Committee also welcomed the agreement, in principle, of donors for an extension of the Special Program of Assistance (SPA) beyond 1990 and urged them to indicate their levels of adjustment assistance for 1991-93 at the SPA donor session to be held in the Fall of 1990. Members also suggested that donors continue to consider steps to untie their commitments in the framework of the SPA and to further harmonize procurement and disburse- ment procedures. 4. The contribution of the private sector to development and the roles of the World Bank and the IMF The discussion of this question at the Spring 1990 meeting was a reflection of the growing emphasis given by a number of developing countries to the role of the private sector, including the promotion of domestic and foreign investment, and to market-oriented policies in their development strategies in order to increase efficiency in utilizing scarce resources and to mobilize higher levels of domestic resources. In the discussion, members noted that it was also a timely and important issue given recent developments in East- ern Europe. The Committee emphasized the importance of creating an enabling en- vironment favorable to private sector activities through macroeconomic sta- bility, structural adjustment, and appropriate price and investment policies. The need to adopt legislation and administrative practices compatible with sound private sector develoment was also stressed. At the same time the Committee underscored the complementarity of the roles of efficient and well-managed private and public sectors in developing countries, noting that infrastructure and social services, including investments in human re- sources, were needed to support private sector development and economic growth in general. The Committee also noted that the confidence of private investors could be enhanced through the adoption by all countries of open markets and sectoral adjustment policies and a supportive financial climate. 330 .... _----_._------- In view of the drying up of private flows, particularly from commercial banks at the end of the 1980s and the continuous debt servicing problems of developing countries, members recognized that foreign direct investment was a valuable non debt-creating external resource. The Committee, there- fore, stressed the need for developing countries to mobilize foreign direct investment and repatriate flight capital. It noted the importance of the role that such foreign direct investment can play in transferring technology, im- proving managerial skills and facilitating market development. The Committee urged the World Bank and the IMF to assist developing countries' efforts to implement long-term institutional, regulatory and legal reforms, consistent with their socioeconomic situations. The Committee encouraged the World Bank Group agencies to give a very high priority to private sector development in their operations and to continue to expand the scope of their activities in this area. Members also emphasized the importance of close coordination within the World Bank Group so as to ensure that private sector considerations were better integrated into its operations while avoiding duplication. The Committee requested the World Bank to move expeditiously to implement its action plan for private sector development to help achieve this objective. Given the rapidly growing needs for private sector assistance, the Com- mittee outlined the important roles of the International Finance Corpora- tion (IFC) and the Multilateral Investment Guarantee Agency (MIGA). Noting the need for IFC to have adequate means to fulfill its role in the coming years, the Committee encouraged the IFe's Board of Executive Directors to continue its discussion of the adequacy of the capital of the Corporation, including modalities of subscription. The Committee also em- phasized the benefits that countries could derive from membership in the MIGA. The Committee requested that the implementation of the World Bank's action plan for private sector development be reviewed at the Fall 1990 meeting and that members be kept informed of progress in the discussion of the adequacy of the IFe's capital. 5. Environmental issues At both its meetings under review the Committee reiterated the impor- tance it attached to environmental issues. The Committee had a special plenary session in September 1989 devoted to "World Bank support for the environment" at which members welcomed the progress by the World Bank in integrating environmental issues into Bank activities, including the prep- aration and release of environmental impact assessment guidelines thus providing an opportunity for interested parties to comment. Members also expressed their satisfaction on the steps taken to increase public awareness of World Bank activities in the enviornmental area and encouraged the World Bank to increase public access to environmental information on proj- 331 eets and programs. The Committee noted that the integration of environ- mental considerations into development projects could result in increased costs as well as benefits and could require technological transfers to the developing countries. It was also recognized that additional external finan- cial and technical support from donor governments and multilateral devel- opment institutions could help meet these costs and requirements. In this connection, the Committee requested the World Bank to prepare a study of mechanisms and financial requirements that might be needed to address the environmental challenges of the developing world. While it was recognized that the bulk of global enviornmental pollution so far stemmed from the industrial countries, the Committee agreed that a cooperative effort was required by both the industrial and the developing countries in addressing this critical problem. The Committee, therefore, urged all countries to take measures to penalize polluters and to check the flow of exports and imports of environmentally damaging materials. Mem- bers took special note of the importance of the global climate change issue. The World Bank's increasing emphasis on energy conservation and effi- ciency programs and on conversion to less environmentally damaging fuels was welcomed. The World Bank was encouraged to assist in the introduction of alternatives to chlorofluorocarbons. Members commended the World Bank's efforts in increasing its work in conservation and sustainable devel- opment of forestry resources and, more generally, in the promotion of en- vironmental action plans. The World Bank was also encouraged to assist countries in the development of arrangements such as debt-for-nature swaps. In the Spring of 1990, the Committee noted the progress being made by the World Bank on a number of environmental issues, such as the new Operational Directive on Enviornmental Assessment, the integration of environmental concerns into economic analysis and the growth in lending for freestanding environmental projects. The World Bank was encouraged to continue its efforts to take environmental considerations fully into account in its operations. The Committee noted that there would be a comprehen- sive review of World Bank-related environmental issues in the World Bank's 1990 Annual Report on Environment in accordance with the request it had made at its September 1988 meeting in Berlin. The Committee stressed that the aforementioned report should include a review of the progress made in respect of Bank-related issues which had been discussed in its previous meetings, such as environmental impact assessment guidelinees, environ- mental action plans, energy efficiency and conservation, forestry protection, and debt-for-nature swaps. Members considered a report prepared by the World Bank on funding global environmental protection. The Committee agreed that the World Bank should play an important role in this area and do further work to develop methods to assist developing countries to take actions which would 332 contribute to the reduction of global enviornmental problems. Members also agreed that efforts should continue to be made to develop proposals for a pilot mechanism for this purpose, taking into account the Bank's existing programs. The Committee urged the World Bank to take steps to strengthen and expand its environmental programs and thus assist devel- oping countries to contribute to the acheivement of the same objective in accordance with their priorities. The World Bank was also urged to proceed with this work expeditiously in close collaboration with UNEP and UNDP and in consultation with other interested parties. The Committee under- lined the need for sufficient flexibility to attract as wide support as possible. Emphasizing the importance it continued to attach to environmental issues, the Committee decided to consider those further at its Fall 1990 meeting. 6. Transfer of resources Given the mandate of the Committee, the question of the transfer of resources to developing countries was considered by the members as a standing agenda item at both its meetings under review. In the Fall of 1989, the Committee noted that net flows in real terms were well below the levels of the early 1980s. Although flows of official develop- ment assistance actually increased in 1988, reversing the earlier decline of the mid-1980s, the Committee nevertheless recognized that more needed to be done by all countries to support the objectives of growth and poverty reduction. The Committee again repeated its call on donor countries, par- ticularly those with assistance levels below the 0.7 percent ODA/GDP tar- get, to make further efforts to secure financial flows to developing countries. The Committee also made a special call for the international community to continue to support high priority programs in Sub-Saharan Africa. Since a sharp decline in private flows to heavily indebted countries and their debt-service difficulties had been noted, the Committee called for sustained efforts on the part of all countries to stimulate the flow of private direct investment and the repatriation of capital as well as to create an economic climate conducive to external and domestic investment. The Com- mittee also stressed the need for strengthening the resources of the Bretton Woods institutions. The Committee particularly emphasized the urgency of completing negotiations by the November 1989 meeting of IDA Deputies and of achieving agreement on a substantial replenishment of IDA9. In the Spring of 1990, the Committee expressed its appreciation for a number of positive developments, such as the successful negotiations for the Ninth Replenishment of IDA which would begin on July 1, 1990, the signing of the Lome IV Convention, and a modest increase in official development finance in 1989. The Committee also welcomed the understandings reached by the Interim Committee on the Ninth General Review of Quotas that would allow the IMF to continue to play its role at the center of the inter- national monetary system. In spite of these developments, the Committee 333 noted with concern the significant decline in aggregate net flows to the severely indebted middle-income countries in 1989, reflecting a sharp drop in private flows. Members noted the implications of this negative trend on domestic investment in those developing countries at a time when many of them were struggling with severe poverty problems. Members also expressed their concern about the impact of the recent rise in interest rates on the cost of debt services of severely indebted countries. Members stressed that financial support for reforms in Eastern Europe called for adequate resources so that the requirements of this region could be met while also allowing increased financial flows on appropriate terms to developing countries. The Committee also welcomed the decision to create the European Bank for Reconstruction and Development (EBRD) and called on the World Bank Group and the IMF to work with the EBRD in assisting economic and political reforms and the transition to market economies in Eastern Europe. Since it is in the interest of all borrowers and shareholders to have over- dues handled in a way which continues to allow these institutions to keep the costs of borrowed funds to the lowest level possible, the Committee asked the World Bank, in consultation with the regional development banks, to review the current policies and procedures for handling overdues and to present a report to the Committee at its next meeting. 7. International trade developments Members were concerned with the impact of trade policies on developing countries and the uncertain prospects for a successful conclusion of the Uruguay Round of trade negotiations. They noted the adverse effects of industrial and agricultural protectionism on the effective implementation of structural adjustment programs of the developing countries. Therefore, the importance of an open multilateral trading system in improving the external economic environment for the success of such programs was stressed. Members heard from the GATT representative that the multilateral trade negotiations under the Uruguay Round were in their final phase and that, while much progress had been achieved, a nuinber of key agricultural, industrial and other issues remained unresolved. The Committee, therefore, called on all countries to reach an early agreement on these issues and to agree on a strengthened multilateral trading system based on predictable and uniform rules to promote trade liberalization by all countries. The Committee stressed that the successful conclusion of the Uruguay Round negotiations was essential to prevent the drift toward protectionism. Mem- bers also emphasized that an improvement in market access and greater participation by developing countries in GATT benefits were essential and, in many cases, more important than ODA flows or debt relief in facilitating the structural adjustment and growth-oriented efforts of developing coun- 334 tries. The Committee reiterated its call on the World Bank and the IMF to keep under study, in close consultation with the GATT, the implications of regional trading arrangements for developing countries' economic prospects for consideration at a future meeting. 335 ANNEXA MEMBERS OF THE DEVELOPMENT COMMITTEE Member Countries 1. Mohammad Abalkhail Saudi Arabia Minister of Finance and National Economy Saudi Arabia 2. Ibrahim Adbul Karim Bahrain, Egypt, Iraq, Jordan, Kuwait, Lebanon, Minister of Finance and National Socialist People's Libyan Arab Jamahiriya, Mal- Economy dives, Oman, Pakistan, Qatar, Somalia. Syrian Bahrain Arab Republic. United Arab Emirates. Republic of Yemen 3. Pedro Aspe Costa Rica. El Salvador. Guatemala, Honduras, Secretary of Finance and Public Mexico. Nicaragua, Spain, Venezuela Credit Mexico 4. Pierre Beregovoy France Minister of State for Economy. Finance, and the Budget France 5. Mohamed Berrada Afghanistan, Algeria, Ghana, Islamic Republic Minister of Finance of Iran, Morocco, Tunisia Morocco 6. Nicholas F. Brady United States Secretary of the Treasury United States 7. Guido Carli Greece, Italy, Malta, Poland, Portugal Minister of the Treasury Italy 8. B.T.G. Chidzero' Botswana, Burundi. Ethiopia, The Gambia, Senior Minister of Finance, Kenya, Lesotho, Liberia, Malawi, Mozambique, Economic Planning and Nigeria, Sierra Leone, Sudan, Swaziland, Tan- Development zania, Uganda, Zambia, Zimbabwe, (Angola) Zimbabwe 9. Madhu Dandavate Bangladesh, Bhutan, India, Sri Lanka Minister of Finance India 10. Jorge Gallardo Zavala Brazil, Colombia, Dominican Republic, Ecua- Minister of Finance and Public dor, Guyana, Haiti, Panama, Suriname, Trinidad Credit and Tobago Ecuador 11. Enrique Garda Argentina, Bolivia, Chile, Paraguay, Peru, Uru- Minister of Planning and guay Coordination Bolivia 12. Ryutaro Hashimoto Japan Minister of Finance Japan 'Saihou S. Sabally, Minister of Finance and Trade, The Gambia, served as Alternate Member to permit B. T. G. Chidzero to serve as Chairman. 336 ANNEXA MEMBERS OF THE DEVELOPMENT COMMITTEE Member Countries 13. Paul J. Keating, M.P. Australia, Kiribati, Korea, New Zealand, Papua Deputy Prime Minister and New Guinea, Philippines, Seychelles, Solomon Treasurer of the Commonwealth Islands, Vanuatu. Western Samoa of Australia Australia 14. Wim Kok Cyprus. Israel. Netherlands. Romania, Yugo- Deputy Prime Minister and slavia Minister of Finance Netherlands 15. MOise Koumoue Koffi Benin, Burkina Faso. Cameroon, Cape Verde, Minister of Economy, Finance and Central African Republic. Chad, Comoros. Peo- Budget ple's Republic of the Congo. Cote d'Ivoire, Dji- Cote d'Ivoire bouti. Equatorial Guinea. Gabon. Guinea. Guinea-Bissau, Madagascar. Mali, Mauritania. Mauritius, Niger, Rwanda, Sao Tome and Prin- cipe, Senegal. Togo, Zaire 16. John Major United Kingdom Chancellor of the Exchequer United Kingdom 17. Philippe Maystadt Austria, Belgium, Hungary, Luxembourg. Tur- Minister of Finance key Belgium 18. Pramual Sabhavasu Fiji. Indonesia. Lao People's Democratic Repub- Minister of Finance lic. Malaysia. Myanmar. Nepal, Singapore, Thai- Thailand land, Tonga. Viet Nam 19. Arne Skauge Denmark, Finland. Iceland, Norway, Sweden Minister of Finance Norway 20. Wang Bingqian China State Councillor and Minister of Finance China 21. Jiirgen Warnke Federal Republic of Germany Federal Minister for Economic Cooperation Federal Republic of Germany 22. Michael H. Wilson Antigua and Barbuda, The Bahamas. Barbados, Minister of Finance Belize, Canada, Dominica. Grenada, Ireland, Canada Jamaica, St. Kitts and Nevis. St. Lucia, St. Vin- cent and the Grenadines 337 ANNEXB Agenda of Development Committee Meeting, September 25,1989 PROVISIONAL AGENDA 1. Problems and issues in structural adjustment 2. Development prospects for severely indebted countries and the evolving debt strategy 3. World Bank support for the environment 4. Reports: (a) status of the negotiations for the ninth replenishment of IDA (b) trends in the transfer of real resources (c) current international trade developments 5. Annual Report of the Committee 6. Other Business Agenda of Development Committee Meeting, May 8,1990 PROVISIONAL AGENDA 1. The contribution of the private sector to development, and the roles of the Bank Group and the Fund 2. The debt strategy and its impact on the development prospects for all severely indebted countries 3. Long-term perspective for development of Sub-Saharan Africa 4. Reports: (a) Progress report on environmental issues; (b) trends in the transfer of resources; (c) current international trade developments. 5. Other Business 338 ACCREDITED MEMBERS OF DELEGATIONS AT 1990 ANNUAL MEETINGS Afghanistan Argentina Governor Governor Mohammad Hakim Antonio Erman Gonzalez Alternate Governor Alternate Governor Mohammad Ehsan Jorge Murillo Advisers Aigeria<> Alberto Gustavo Albamonte Roberto Luis Arano Governor Heralio Arganaras Ghazi Hidouci Raul Baglini Felix Alberto Camarasa + + Alternate Governor Jorge F. Christensen Kacem Brachmi Hector Dalmau Eduardo Jose Del Amor Advisers Edgardo C. Demaestri Boubekeur Adjali Guido Jose Maria di Tella M. Attoui Jorge Dominguez Rachid Belbaki Eduardo J. Escasany O. Benderra Diego Estevez Ahmed Bennai Ernesto V. Feldman Abderrahmane Bensid Anibal Forchieri Ali Benzerga Alieto A. Guadagni Mohamed Elias Ms. Liliana Gurdulich de Correa M. Kashi Joaquin Izcue Sid Amar Lazli Ms. Noemi La Greca Ahmed Tas Oscar Lamberto Jorge Osvaldo Lauria Ortus Angola Daniel Marx Ms. Monica Merlo Governor Roberto A. Mori Fernando de Castro Paiva Jesus Sabra Ms. Maria Sanchez de Sereni Alternate Governor Norberto Schor Ms. Marinela Martins Amaral Ribas· Jose Antonio Zapata Antonio G. Zoccali Adviser Ms. Clotilde da Silva Alves Mariano Australia Governor Antigua and Barbuda# Simon Crean Governor Alternate Governors John E. St. Luce Christopher Doepel· C.I. Higgins· Adviser Neil F. Hyden· PaulO. Spencer Mervyn John Phillips· Temporary <> Not a member of IFC If Not a member of IDA ~ Not a member of MIGA + Executive Director + + Alternate Executive Director 339 Advisers Alternate Governor Peter Callan Rasheed M. AI-Maraj' Robert G. Carling + + Roger Q. Freney Advisers Keith M. Hall Ahmed Sayed Abdul Rahman R. Hillman Sheikh Ahmed Saqer AI-Khalifa A.M. Hinton Saeed Al Marzooq Michael J. Kooymans Michael McLeod Don Traynor Bangladesh K. Waller Governor Mohammad Abdul Munim Austria Alternate Governors Governor A.H.S. Ataul Karim' Ferdinand Lacina M. Mustafizur Rahman' + + Enam Ahmed Chaudhury Alternate Governor Othmar Haushofer Advisers Advisers Helmut Brohs Mahbubul Alam Dietmar Ecker Quamrul Hai Gerhard Janschek M. Nazimuddin Johann Kernbauer Herbert A. Lust Walter Rill Barbados# Governor The Bahamas# L. Erskine Sandiford Governor Alternate Governors Sir Lynden O. Pindling Carl Denzil Clarke' Winston A. Cox Alternate Governor Warren Rolle Advisers Advisers Ralph V Carvallo Owen S.M. Bethel Anthony Cave Roosevelt Butler Andrew Fabian O. Cox Joseph R. Curry Sir William Douglas David Davis Erskine Griffith Albert Grey Mrs. Margaret Cecile Hope Margaret E. McDonald Sean McWeeney Benjamin Rahming Belgium Marco Rolle Governor Bahrain<># Philippe Maystadt Governor Alternate Governor Ibrahim Abdul Karim Alfons Verplaetse Temporary < > Not a member of [Fe # Not a member of IDA Not a member of MIGA + ExecutIve Director + + Alternate Executive Director 340 Advisers Bhutan < > Jean-Pierre Arnoldi Gregoire Brouhns Governor Jacques de Groote + Lyonpo Dawa Tsering Ms. Marcia de Wachter Mrs. Anne Grootaert Alternate Governor Luc Hubloue Yeshey Zimba Frank Moss Philippe Peeters Jean-Jacques Rey Bolivia Bernard Snoy Edgar van de Pontseele Governor Enrique Garcia Rodriguez Belize Alternate Governor Jorge Quiroga Ramirez Governor Said W. Musa Advisers Guido Antezana Vigano Alternate Governor Jose Alberto Arias Sartorelli Joseph D. Waight David Ascarrunz Carvajal Roberto Barbery Advisers Mrs. Beatriz Bedoya de Acha James V Hyde Fernando Calvo Unzueta Mrs. Yvonne S. Hyde Roberto Capriles Juan Cariaga Osorio Jorge Crespo-Velasco Benin Eduardo Derksen Carlos H. Fernandez Mazzi Governor Luis Fernando Gonzalez Paul Dossou Fernando Gutierrez Guido Edwin Hinojosa Cardoso Alternate Governors Jose Justiniano Alassane D. Ouattara* Julio Leon Prado Fatiou Adekounte Enrique Limpias Carlos Alberto Lopez Gaston Pacheco Advisers Gonzalo Paz Pacheco Hekou Adougba Carlos Quintela Candide Ahouansou Erwin Reimers Arana Abou Bakar Baba-Moussa Fernando Ruiz Osseni da Gloria A. Ms. Maria Isabel Siles de Mazzi Joseph Fanou Luis Eduardo Siles Vargas Andre Soungalo Fayama Javier Zuazo Gilbert Houeto Issoufou Kanda Amadou Kane Botswana Pascal Irenee Koupaki Lategan Lawson Governor Corneille Mehissou Festus G. Mogae Mbaye Diop Sarr Mande Sidibe Alternate Governor Nestor Wadagni Baledzi Gaolathe Temporary < > Not a member of IFe # Not a member of IDA Not a member of MIGA + Executive Director + + Alternate Executive Director 341 Advisers P. Zhotev Ms. S. Dubane Ivan Maximov E.W. Johwa O.K. Matambo M.P'S. Matila Burkina Faso Michael O. Molefane Botsweletse K. Sebele Governor G.N. Thipe Frederic Assomption Korsaga Alternate Governor Brazil Pierre Tahita Governor Advisers Zelia Maria Cardoso de Mello Jean Kotie Diasso Paul-Desire Kabore Alternate Governors Gaspard Jean Ouedraogo Marcos Giannetti da Fonseca* Amadou Beba Sy Jorio Dauster Magalhaes e Silva' Abdou Tahirou Clodoaldo Hugueney Filho* Alexandre Kafka' Burundi Antonio Kandir* Pedro S. Malan* + + Governor Eduardo Marco Modiano* Gerard Niyibigira Antonio Claudio Sochaczewski* Ibrahim Eris Alternate Governor Salva tor Nkeshimana Advisers Advisers Jose Roberto N. Almeida Gregoire Banyiyezako Carlos Alberto Amorim, Jr. Athanase Budigi Eimar Andrade Avillez Astere Girukwigomba Nilo Barroso Neto Julien Kavakure Pedro Bodin Laurent Niyungeko Mauricio Eduardo Cortes Costa Willy Ntunzwenimana Pedro Luiz Carneiro de Mendonca Sergio R.O. Nascimento Marcos Caramuru de Paiva Cameroon Joaquim Luis Cardoso Palmeiro Joao Almino de Souza Filho Governor Julio Zeiner Marcel Niat Njifenji Alternate Governors Bulgaria<># Simon Ngann Yonn Paul Pondi* Governor Roger Tchoungui * B. Belchev Alternate Governor Advisers A. Paparisov Daniel Astier Mebara Atangana Advisers Jean-Baptiste Djoumessi E. Dimitrov Andre-Blaise Kesseng a Mbassa M. Dimitrov Simon Mamba a Nyam N. Neov Roger Ndine Mbassa Temporary <> Not a member of IFC # Not a member of IDA Not a member of MIGA + Executive Director + + Alternate Executive Director 342 Jean Philippe Njeck Alternate Governor Isaac Njiemoun Gregoire Zowaye Martin A.L. Okouda Advisers Mrs. Lucienne Darlan Canada Jean-Pierre Gospodarovitch Governor Joseph Koyagbele Michael H. Wilson Joseph Pingama Jean-Pierre Sohahong-Kombet Alternate Governors Monique Landry* Chad<> Douglas E. Smee* David Dodge* Governor Marcel Masse Ibni Oumar Mahamat Saleh Advisers Alternate Governors Bill Alexander Jean-Felix Mamalepot* Martin Bakker Ahmed Kerim Togoi Steve Cobrin Ferry de Kerckhove Peter Fiori Advisers Gerry Grant Lemaye Favitsou-Boulandi Robert Hage Michel Nguetoye Guelina Glen D. Hodgson Cia be Guile Miss Jill E. Johnson Pierre Moussa Michael G. Kelly Auguste Tene-Koyzoa Ms. Brenda Kulas Serge-Blaise Zoniaba Michael Mackenzie Ms. Carolyn McAskie Chile Don McCutchan Frank Potter + Governor Robert L. Richardson David C. Sevigny Alejandro Foxley Rioseco Alister Smith Philip Somerville Alternate Governor Eduardo Aninat U. * Cape Verde Advisers Carlos Abumohor Touma Governor Julio Barriga Arnaldo C. de Vasconcelos Franca Jose Borda Aretxabala Leon Dobry Folkman Alternate Governor Edward M. Dreyfus Antonio Hilario da Cruz Ernesto Edwards Risopatron Juan Guillermo Espinosa Adviser Ignacio Guerrero G. Jose Luis Fernandes Lopes Mrs. Margarita Hepp Luis Cristian Hohlberg Sergio Larrain Prieto Central African Republic < > Andronico Luksic Craig Ricardo A. Massu M. Governor Ricardo Matte Thierry Bingaba Claudio A. Pardo Temporary < > Not a member of IFC # Not a member of IDA Not a member of MIGA + Executive Director + + Alternate Executive Director 343 Adolfo Rojas Gandulfo Alternate Governor Andres V Sanfuentes Vergara Said Mohamed Mshangama Jorge Schneider Hernandez !talo Traverso Augusto Tromben Nordenflycht People's Republic of the Congo Alternate Governor China Dieudonne Diabatantou Governor Advisers Wang Bingqian Jean Christophe Ackondjo Joseph Baroung Alternate Governors Ambroise Foalem Jin Liqun' + + Ikourou-Yoka Wang Liansheng' Roger Issombo Zhang Junyi' + Maurice Kitantou-Diamante Zhang Shengman' Richard Noukelak Xiang Huaicheng Henri Okemba Guillaume Owassa Armand Razafindrabe Advisers Aboubakar Samory Cui Tiankai Geng Jianyue Li Yong Costa Rica Wang Chunchao Wu Jinkang Governor Yi Xiaozhun Thelmo Vargas Madrigal Yu Gesheng Zhao Xiaoyu Advisers Zhu Xian Manfred Amrhein Edgar Ayales Alfonso Campos Brenes Colombia Ms. Silvia Charpentier + + Arturo Cuevillas Governor Ricardo Longhan Rudolf Hommes Mario Maroto Rolando Ramirez Paniagua Alternate Governors Oscar Marulanda Gomez' Jorge Elias Ramirez Armando Montenegro' Oscar Rodriguez Mario Rojas Gustavo Moreno Montalvo' Luis Alvaro Sanchez' Eduardo Wiesner' + Cote d'Ivoire Governor Advisers Kablan D. Duncan Manuel Martinez R. Victor Mosquera-Chaux Alternate Governor Ms. Graciela Palacios Meiresonne Leon Naka Enrique Umana Advisers Comoros<> P.M. Adansi Jean Batigne Governor Alioune Blondin Beye Mohamed Ali Soilihi J. Kofi Bucknor Temporary < > Not a member of IFC # Not a member of IDA Not a member of MIGA + Executive Director + + Alternate Executive Director 344 Alain Nicaise Coffie Djibouti Kouakou Desbhy E.M. Diarrassouba Governor Lancina Dosso Mohamed Djama Elabe Ismael Gaspar-Martins Tekalign Gedamu Alternate Governor Charles Gomis Ibrahim Kassim Chehem I.U.Iheme Raymond Eby Kabran Adviser Amadou S. Loum Roble Olhaye Ferhat Lounes Eliamon Noel Delphin G. Rwegasira Albert Bra Saraka Dominica Wilson K. Tarpeh Eugene Yai Governor Tehi Yoro Mary Eugenia Charles Alternate Governor Cyprus Gilbert Williams Advisers Governor Hannelore Angela Benjamin George Syrimis Jake A. Hansen Alternate Governor Michael Erotokritos Dominican Republic Governor Czechoslovakia Luis F. Toral Cordova Governor Alternate Governor Vaclav Klaus Hector Manuel Valdez Albizu· Alternate Governor Advisers Jaromir Zahradnik Ms. Maritza Amalia Guerrero Ms. Gladys M. Santana Mario Read Vittini Denmark Ecuador Governor Ole Loensmann Poulsen Governor Jorge Gallardo Zavala Alternate Governor Sten Lilholt Alternate Governor Edison Ortiz-Duran Advisers Niels Bodelsen Advisers Mogens Camre Miguel Babra Lyon Henning Christophersen Javier Baquero Ms. Anne Meldgaard Danilo Carrera Drouet Laurids Mikaelsen Pablo Cordova Cordero Ib Petersen Gustavo Darquea-Espinosa Jan Host Schmidt Ms. Monica de Gross Temporary <> Not a member of IFC # Not a member of IDA Not a member of MIGA + Executive Director + + Alternate Executive Director 345 Marcos Espinel Edgar Leonel Saballos Munguia Ramon L. Espinel Miguel Angel Salaverria Pedro K. Gomez-Centurion R. Victor Manuel Hoyos S. Roberto Isaias Equatorial Guinea<> Guillermo Lasso Mendoza Oscar Loor Risco Governor Jaime Moncayo Garcia Marcelino Nguema Onguene Galo Montano Perez Carlos J. Moreno C. Alternate Governor Rodrigo E. Moscoso Miguel Edjang Angue Jose Luis Nieto Cesar Robalino-Gonzaga Ethiopia Patricio L. Rubianes Gerardo Ruiz Navas Governor Moises Tacle Tekola Dejene Jorge Yunes Patricio Zuquilanda Alternate Governor Seyoum Alemayehu Egypt Advisers Governor Merkorewos Hiwet Kamal EI Ganzoury Mitiku Jembere Amerga Kassa Amdetta Alternate Governor Shiferaw Wolde Michael Maurice Makram-Allah Getahun Terrefe Legesse Tikehere Advisers Youssef Boutros-Ghali Fiji Sayed M. Elbous EI Sayed Abdel Raouf EI Reedy Governor Alaa Khalil J.N. Kamikamica Mohammed Samir Salem Koraiem Hamdy Metualy Alternate Governor Erfan A. Shafey Rigamoto Taito EI Salvador Advisers Tevita Banuve Ratu Finau Mara Governor Rajesh Prakash Sharma Mirna Lievano de Marques Alternate Governor Finland Jose Roberto Orellana Milia Alternate Governors Advisers Veikko Kantola * Alberto Benitez Bonilla Ilkka Ristimaki * Ms. Carmen Elena Brizuela de Aleman Osmo Sarmavuori Claudio M. de Rosa Jose Evelio Serrano Roberto Jimenez Ortiz Advisers Ms. Nelly Lacayo-Anderson Mrs. Inga-Maria Groehn Jose Roberto Lopez Calix Ms. Birgitta K. Kantola Temporary <> Not a member of IFC # Not a member of IDA Not a member of MIGA + Executive Director + + Alternate Executive Duector 346 Mrs. Anna-Liisa Korhonen Gabon Erkki Laurila Peter Laurson Governor Seppo Moisio Richard Onouviet Kari Rainer Nars Ossi J. Rahkonen Alternate Governor Jukka Robert Valtasaari Raymond Ndong-Sima Advisers Ms. Yolande Assele France Eyamba Tsimat Alfred Mabika Mouyama Governor Marius Nziengui-Moussodou Jacques de Larosiere Fabien Ovono-Ngoua Rene Ziza Alternate Governors Jean-Pierre Landau' + The Gambia Denis Samuel-Lajeunesse' Governor Alieu M. Ngum Advisers Alternate Governor Philippe Adhemar Mamour M. Jagne Jacques Andreani Jacques Attali Advisers Marc Antoine Autheman Rebily David Asante Mrs. Pascale Beracha Momodou A. Ceesay Mrs. Isabelle Bouillot Edward E. Fillingham Claude Cam bray K. D. Ouedraogo Francis Cappanera Mamadou Saidi Jean-Francois Cirelli Abdoulie M. Touray Philippe de Fontaine Vive + + Jean-Claude Faure Alain R. Fernandez Germany Jean-Paul Fitoussi Andre Gauron Governor Daniel Giroux Juergen Warnke Geraud Guibert Ms. Mireille Guigaz Alternate Governors Philippe Lagayette Gerhard Boehmer' + Philippe Legris Fritz Fischer' Miss Anne Le Lorier Eberhard Kurth' Paul Lemerle Horst Koehler Gerard Moulin Robert Ophele Patrick O'Quinn Advisers Mrs. Stephane Pallez Hans-Juergen Brueckner Pierre Pissaloux Enno Carstensen Mrs. Jeanne-Marie Prost Bernd Esdar + + Jean-Michel Severino Tobias Geib Jean-Francois Stoll Claus Grobecker Michel Ungemuth Hans-Dieter Hanftand Patrice Vial K.O. Henze .. Temporary < > Not a member of IFC # Not a member of IDA Not a member of MIGA + Executive Director + + Alternate Executive Director 347 Peter Jabcke Grenada Ulrich Junker Ms. Susan Knoll Governor Hagen Graf Lambsdorff George Ignatius Brizan Andreas Maestle Burkhard Port Alternate Governor Wolfgang Rieke Lauriston F. Wilson, Jr. Horst H. Rinke Peter Roesgen Advisers Hans-Peter Schipulle Carl Mitchell Hans Martin Schmid Denneth Modeste Mrs. Inge Segall Gerhard Sennlaub Wolfgang Solzbacher Guatemala Michael von Harpe Ralf Zeppernick Governor Juan Francisco Pinto Casasola Ghana Alternate Governors Jose Antonio Blanco G.' Governor Jose Antonio Perez Morales' Kwesi Botchwey Advisers Alternate Governor Samuel Apea Julio Noriega Ms. Eugenia Oliva de Rodriguez Jorge Papadopolo W Advisers Daniel Yaw Adjei Kwaku Agyei-Gyamfi Guinea Ernest K.A. Amoa-Awua Clemens Dan Anyomi Governor N.C.O. Holm Ibrahima Sylla P.S.M. Koranteng Percival Alfred Kuranchie Alternate Governor K.N.Owusu Ousmane Kaba Elie E. Saleeby Advisers Frederick Bangoura Greece Saikou Barry Kabine Komara Governor Moussa Sangare Efthimios Christodoulou Youssouf Sylla Idrissa Thiam Alternate Governor George Vlachos Guinea-Bissau Advisers Governor Petros Kontos Manuel dos Santos Spyros Papanicolaou George Provopoulos Alternate Governor Constantinos Thanopoulos Rui Dia de Sousa · Temporary < > Not a member of IFC If Not a member of IDA Not a member of MIGA + Executive Director + + Alternate Executive Director 348 Advisers Hungary Alfredo Cabral Alfredo Torres Governor Ferenc Rabar Guyana Alternate Governor Imre Tarafas Governor Carl Greenidge Advisers Alternate Governors Adam Batthyany Cedric Hilburn Grant' Lajos Bokros Winston Jordan' Istvan Ipper Mihaly Patai Ms. Zsuzsanna Sule Bela Torok Advisers Cargill Alleyne Clarence Ellis + + Iceland Hubert Stanislaus Thompson Governor Haiti Jon Sigurdsson Governor Alternate Governor Onill Millet Olafur R. Grimsson Alternate Governor Advisers Georges Henry Mar Gudmundsson Jonas H. Haralz + Advisers Ingvi S. Ingvarsson Jean-Philippe Elie Sigurgeir Jonsson Marcel Leger Finnur Sveinbjoernsson Ms. Monique Pierre-Antoine India Honduras Governor Governor Madhu Dandavate Benjamin Villanueva Alternate Governors Advisers J.S. Baijal* + Juan Agurcia E. J.L. Bajaj* Guillermo Bueso Bimal Jalan Mrs. Marta Julia Cox Ms. Maria Antonieta Dominguez Jorge Ramon Hernandez Alcerro Carlos Lopez Contreras Advisers Felix Martinez Dacosta Pradeep V. Bhide Miss Analia Napky Ashok Chawla Carlos A. Urbizo S. Rajan Katoch Paul Vinelli Sundaram Krishna Richard Zablah Anil Kumar Jose Benjamin Zapata Ananthanarayanan Seshan Temporary <> Not a member of (Fe II Not a member of IDA Not a member of MIGA + Executive Director + + Alternate Executive Director 349 Indonesia Israel Governor Governor 1.B. Sumarlin Michael Bruno Alternate Governor Alternate Governor Hasudungan Tampubolon Yaacov Lifshitz Advisers Advisers Sofjan Djajawinata Magen Altuvia Ignatius Hardijanto Valery Amiel William Hollinger Oriel Ben Hannan Abdul Rachman Ramly S. Liebes Bachrun Subardjo Amnon Neubach Eitan Rub Yair Seroussi Islamic Republic of Iran Freddy Wieder Governor Mohsen Nourbakhsh Italy Alternate Governor Governor Mohammad lavad Vahaji* Carlo Azeglio Ciampi Advisers Alternate Governor Ahmad Abdeliyeh Mario Sarcinelli Mohammad Mehdi Rahbari Amlashi Ahmad Reza Ansari Advisers Asghar laafari Valedani Francesco Alfonso Kamran Khatami Carlo Calia Ali Sabzalian Cesare Caranza + Mohamad Sadeghi Francesco Cerulli Mrs. Maryam Taazimi Pieriuigi Ciocca Raniero Vanni D' Archirafi Claudio di Veglia Iraq Francesco Fransoni Paolo Janni Alternate Governor Bruno Mangiatordi Abdul Moneim Othman* Ms. Francesca Manno Giuseppe Pasqua Salvatore Rebecchini Alessandro Roselli Ireland Giovanni Sacco Fabrizio Saccomanni Governor Lorenzo Savorelli Albert Reynolds Alessandro Sottosanti Carlo Trezza Alternate Governor Augusto Zodda Michael Somers' Advisers Jamaica# Declan Ingoldsby Adrian Kearns Governor Samuel N. McConnell Seymour Mullings Temporary <> Not a member of IFe " Not a member of IDA Not a member of MIGA + Executive Director + + Alternate Executive Director 350 Alternate Governor Shinichi Yoshikuni Omar Davies Yukio Yoshimura + + Advisers Horace G. Barber Jordan Miss Sharon R. Brown Miss Cecile Clayton Governor Keith Johnson Khalid Amin Abdullah Mrs. Jennifer Lester Ms. Chevanne Powell Alternate Governor Locksley Smith Nabil Issa Sweis Miss Shirley Tyndall Advisers Imad Badran Japan Ismail T. El-Zabri Adeeb Khalil Haddad Governor M. Mumtaz A. Hamadah Ryutaro Hashimoto Taher H. Kanaan Alternate Governors Tadao Chino" Kenya Yoshiaki Kaneko" Masaki Shiratori" + Governor Shigemitsu Sugisaki" George Saitoti Makoto Utsumi" Mikio Wakatsuki" Alternate Governors Koji Yamazaki" Charles S. Mbindyo* Junichi Yonezawa" George M. Mitine* Yasushi Mieno Eric C. Kotut Advisers Mari Amano Advisers Denis Daudi Afande Toshihiko Amano Shanti K. Chakrabarti Yasuharu Fushimi Miss Wacuka Ikua Keizo Goto Silas Ita Hiroshi Hirabayashi G.K. Koech Motomichi Ikawa William N. Meda Takayuki Kamoshida Mwambia Kanyanjua Shigeo Kashiwagi Harry N joroge Shizuharu Kubono R.H.Okwaro Yasuhiro Maehara S.S. Ole Surtan Satoru Miyamura Michael A. Sergon Zenbei Mizoguchi Daikichi Momma Kazuya Murakami Akira Nagashima Kiribati Makoto Nakagawa Osamu Shiozaki Governor Rintaro Tamaki Teuea Toatu Satoshi Watanabe Ken Yagi Alternate Governor Yutaka Yamaguchi Kieran Holmes · Temporary < > Not a member of IFC (I Not a member of IDA Not a member of MIGA + Executive Director + + Alternate Executive Director 351 Korea Alternate Governor Soulingong Nhouyvanisvong Governor Yung-Euy Chung Advisers Somsanith Nhoybouakong Alternate Governors Phonsavanh Sipaseuth Young-Tai Kim' Chang-Yuel Lim*+ Hyung-Sup Shim' Lebanon Myoung-Ho Shin* Myong Hyun Sohn' Governor Ali EI-Khalil Advisers Alternate Governor Young-Min Baang Habib Abu-Sakr Kun-Ho Cho Kyong-Lim Choi Advisers Yeon-Johg Choi Meguerditch Bouldoukian Noh-Choong Huh Fouad Saadeddine Chebaklo Chi-Bon Ji Mounib Mustapha Hammoud Gyu-Bok Kim Abdul Hafiz Itani Jong-Jeong Kim Ali Abdallah Jammal Yoo-Sung Kim Adnan Kassar Chang-Koo Lee Salim Kheireddine Bong-Sung Qum Ahmed Lakdari Yoon-Jin Rhee Nadim Moukheiber Min-Ho Son Assaad F Sawaya I1-Hyun Suk Fuad A.B. Siniora Joseph Torbey Kuwait Lesotho Governor Sheikh Ali AI-Khalifa AI-Sabah Governor E.R. Sekhonyana Alternate Governor Bader Meshari AI-Humaidhi Alternate Governor Tom Liphapang Tuoane Advisers Abdullah A. AI-Gabandi Advisers Mohamed Abdulmohsin AI-Mershed K.E. Lekaka Fahad AI-Rajaan Jerry M. Letsie Ahmed A. AI Sabah C.S. Molelle Sheikh Salem Abdullah AI-Ahmed A.M. Monyake AI-Sabah Masupha E. Sole Hisham Ibrahim AI-Waqayan Thuso Nimrod Thokoa Mohammed Haider Ghuloum William Thabo Van Tonder Abdul Karim Sadik Lao People's Democratic Republic< > Liberia Governor Alernate Governor Sisavath Sisane Mrs. Mary B. Dennis Temporary < > Not a member of IFe # Not a member of IDA Not a member of MIGA + Executive Director + + Alternate Executive Director 352 Libyan Arab Jamahiriya Ms. Josiane Raveloarison Guy Razafinony Alternate Governors Kassem M. Sherlala* Bashir Ali Khllllat Malawi Governor Advisers EZ. Pelekamoyo Nuri Abdussalam Baryun Bashir M. EI-Nahiese Alternate Governor Muftah Ali Sherif Graham H.R. Chipande Advisers George Jay Honde Luxembourg Mrs. C. Mandiza Harry M. Mapondo Governor George G.B. Masamba Jean-Claude Juncker Alternate Governor Malaysia Yves Mersch Governor Advisers Daim Zainuddin Christopher Bearne Lucio Izzo Alternate Governors Roger Lavelle Albert S. Talalla* Alain Prate Tan Sri Dato' Zain Azraai Jacques Silvain Advisers Samsudin bin Hitam Madagascar Hadenan Abdul Jalil Miss Nafisah Mohamed Governor Raja Nazrin Jean Robiarivony Nordin Yahaya Alternate Governors Pierrot J. Rajaonarivelo* Richard Randriamaholy* Maldives Nirina Ideal Andriamanerasoa Governor Fathulla Jameel Advisers Tantely Andrianarivo Alternate Governor Henri Jean-Marie Mohamed Ahmed Didi * Jocelyn Rafidinarivo Mamy Ramanjatoson Daniel Ramarokoto Mali Jean Clariel Ramasinaivo Gaston Ramenason Governor Henri Ranaivosolofo Diango Cissoko Solofo Rasoarahona Roland Ratsimandresy Alternate Governor Miss Olga Ratsiraka Souleymane Dembele Temporary <> Not a member of IFe # Not a member of IDA Not a member of MIGA + Executive Director + + Alternate Executive Director 353 Advisers Alternate Governor Harouna Niang Madhukarlall Baguant Mohamed Alhousseini Toure Advisers Jagnaden P. Coopamah Chitmansing Jesseramsing Malta<># J. Koonjul Bipin Rudhee Governor George Bonello du Puis Mexico Alternate Governor Edgar Wadge Alternate Governors Ariel Buira' Advisers Antonio Cervera Sandoval' Alfred Falzon Fernando del Villar Moreno' Salvatore J. Stellini Oscar Espinosa' Juan Jose Paramo Diaz' Guillermo Prieto Fortun* Marco Provencio' Mauritania Jose Angel Gurria T. Governor Moustapha Ould Abeiderrahmane Advisers Raul Avendano Alternate Governors Manuel Cavazos Mohamed Ould Michel' Fernando C1avijo M'Rabih Rabou Ould Cheikh Bounena Jose Juan de Olloqui Gonzalez Jose Luis Flores Salvador Gonzalez Advisers Ricardo Ochoa Rodriguez Amadou Diaw Ricardo Penaloza Webb Boubou Farba Dieng Moises A. Pineda Padron Ibrahima Gadio Jorge Pinto + Enis Mezghanni Jesus Rodriguez y Rodriguez Ahmed Ould Abdessalam Juan Manuel Romero Mohamed Ould Amar Manuel Suarez Mier Ahmed Ould Boucheiba Abdellah Ould Daddah Ahmed Salem Ould Hassen Mohamed Ahmed Ould Lemrabott Morocco Sidi el Moctar Ould Nagi Sidi Mohamed Ould Nagi Governor Mohamed Ould Oumarou Mohamed Berrada Abdellahi Ould Sidaty Bekaye Ould Sidi Mohamed Alternate Governors Abdelmalek Ouenniche' Mohammed Dairi Mauritius Advisers Governor Mohamed Aboulfadl Beergoonath Ghurburrun Mohamed Aissaoui Temporary < > Not a member of IFC # Not a member of IDA Not a member of MIGA + Executive Director + + Alternate Executive Director 354 _--_._._-------- .... Omar Akalay Alternate Governors Noureddine Bensouda Mohan Man Sainju* Fouad Benzakour Sashi Narayan Shah Abdellatif louahri Omar Kabbaj Abdellatif Loudyi Advisers Mounkid Mestassi Shambhu Malia El Mostafa Sahel Narayan D. Shrestha Abdellah Salah Eddine Tazi Ali Tricha Thami Yahyaoui Netherlands Mozambique Governor Governor W Kok Eneas Da Conceicao Corniche Alternate Governors Alternate Governor Nicolas Biegman' Mrs. Luisa Dias Diogo Ian de long' Ms. Eveline Herfkens' Advisers l.P' Pronk loaD Augusto da Conceicao Pais lose Frederico da Cruz Viola Advisers Paul Arlman + Myanmar Mrs. Marie Renee Bakker Matthijs Bienefeit Governor Emile den Dunnen U Min Aung Frans l.F.M. de Neree tot Babberich Ronald Keller Alternate Governor lan laap Kleinrensink U Soe Thwin* lohan H. Meesman Vimy A. Servage Advisers Alphonsus Stoelinga U Myo Aung laap H. Weeda Hla Myint 00 Aung Pe New Zealand Namibia# Governor Governor Graham C. Scott Theo-Ben Gurirab Alternate Governor Alternate Governor Hessel Baas' Paul W Hartmann Advisers Les Gibson Nepal Derek Gill Gerald S. Halliday Governor Colin Pratt Devendra Raj Panday Ian Storkey Temporary < > Not a member of IFC # Not a member of IDA Not a member of MIGA + Executive Director ++ Alternate Executive Director 355 Nicaragua S.M. Baba Christopher Chima Governor Mrs. 0.0. Coker-Ogbuehi Emilio Pereira Tony Ede K.E.O. Efretei Alternate Governors Ricky Enwere Raul Lacayo Solorzano R.N. Ezeife Haroldo Montealegre* Ayodele Fadare B.C. Ihekire Advisers Shehu Usman librin Luis Alaniz Mrs. E.O. Ladejobi Noel Sacasa R.O. Mowoe Enrique 1. Vanegas Chris E. Nemedia M.O.Ojo B.Omomukuyo Niger Mrs. H.A. Oseni B.O. Tonwe Governor Ms. Nonye Udo Almoustapha Soumaila M.A. Uduebo Richard Uku Alternate Governors Malam Ismaila Usman Mamadou Diop* Nassirou Sabo Norway Governor Advisers Arne Skauge Amani I. Baoua Ibrahim Beidari Alternate Governor Adani IlIo Tom Vraalsen Abdou Maidaji Malam Annou Mamane Advisers Haboubacar Maman Ms. Anne Sofie Bjelland Idrissa Samna Kare Bryn Saidou Sidibe Kristen Christensen Eivind Dingstad Kjell Halvorsen Nigeria Henrik Harboe Mrs. Mette Kongshem Governor Ms. Tordis Langseth Alhaji Abubakar Alhaji Trond Folke Lindberg Asbjoern Loevbraek Alternate Governor Mrs. lorunn Maehlum + + Alhaji Ahmadu Abubakar Tor B. Naess Kjeld Vi be Advisers Y. Seyyid Abdulai Oman Buhari Abdullahi Alhaji Hamzat Ahmadu Alternate Governor E.A. Ajayi Abdul Wahab Khayata* M.A.B. Akpobasah Alhaji Ibrahim Aliyu Shobowale Akanni Animashawun Advisers Patrick E. Archibong Mohamed Nasser Al-Khasibi A.S. Arikawe Ms. Fauziya Hamoud Alkindy Temporary < > Not a member of IFC # Not a member of IDA Not a member of MIGA + Executive Director + + Alternate Executive Director 356 Pakistan Miss Cristina Martinez Pedro O. Montorfano Governor Ms. Mariana Munevar Sartaj Aziz Alternate Governor R.A. Akhund Peru Advisers Governor Choudri Mueen Afzal Juan Carlos Hurtado Miller Tariq Fatemi M. Ashraf Janjua Alternate Governor Nasim Qureshi Romulo Grados Fuentes' Advisers Panama Carlos E. Alonso Marco V. Balarezo Governor Augusto Blacker Guillermo Ford B. Jorge Camet Bernardo Dolmos Vengoa Alternate Governor Elmer Evangelista Luis H. Moreno. Jr. Victor Joy Way Joel Jurado Advisers Raymundo Morales + Juan Manuel Castulovich Jorge Valdez Juan Luis Moreno Villalaz Felix Armando Quiros Philippines Eduardo Vallarino Governor Papua New Guinea Jesus P. Estanislao Governor Alternate Governors Morea Vele Ernest Leung' Cayetano W Paderanga. Jr.' Alternate Governor Vicente Paterno' Ms. Fiu Williame' Margarito Teves' Advisers Matatia Saroa Advisers Veali Vagi Gil S. Beltran Rafael B. Buenaventura Roberto F. de Ocampo Paraguay Franklin Ebdalin Ms. Evelyn M. Escudero Alternate Governor Edgardo B. Espiritu Juan J. Diaz Perez' Octavio Victor R. Espiritu Jose R. Facundo William B. Go Advisers Benito Legarda. Jr. Ms. Elizabeth Cabanas Vitaliano N. Nanagas. II Victor H. Cabanas Santanina Rasul Dionisio Coronel Renato C. Valencia Jorge Francisco Gulino Ferrari Reginald S. Velasco Amado Martinez Deogracias Vistan Temporary < > Not a member of [Fe # Not a member of IDA Not a member of MIGA + Executive Director + + Alternate Executive Director 357 Poland Romania<># Governor Governor Wladyslaw Baka Theodor Dumitru Stolojan Alternate Governor Alternate Governor Grzegorz Wojtowicz Marian Crisan Advisers Advisers Andrzej I1czuk Stanel Ghencea Ms. Beata Lenard Mrs. Teodora Mioara Ionescu Michal Ostalski Mrs. Irina Luca Zbigniew Piotrowski loan Petre Mada Mrs. Adriana Marinescu Mircea Moisescu Portugal# Traian Munteanu Alexandru Orascu Governor Mrs. Valeria Pascariu Luis Miguel Couceiro Pizarro Beleza Anton Preda Vladimir Soare Alternate Governors Vasile Voloseniuc Fernando S. Carneiro* + + Jose Manuel Alves Elias da Costa * Rwanda Joao Mauricio Fernandes Salgueiro* Emilio Rui da Veiga Peixoto Vilar* Carlos Manuel Tavares da Silva Governor Manuel Franca e Silva* Benoit Ntigulirwa Alternate Governor Felicien Ntahondi Advisers Jose M.E Braz Adviser Horacio Piriquito Casimiro Augustin Maharangali Vitor Louca Rabaca Gaspar Ms. Maria Pimenta Couto Ferreira Mestre Jose Inacio Toscano St. Kitts and Nevis<> Governor Qatar<># Kennedy A. Simmonds Governor Alternate Governor Abdullah Khalid AI-Atiyyah William V. Herbert Alternate Governors Advisers Nasser Mohd. AI-Hajri* Erstein M. Edwards Abdulla AI-Mulla* Irvin R. Sweeney Advisers St. Lucia Ahmed Ebrahim Seddiqi Al Emadi Emil Barood Governor Maqbool H. Khalfan John Bristol Temporary < > Not a member of [Fe # Not a member of IDA ~ Not a member of MIGA + Executive Director + + Alternate Executive Director 358 -------------_.._ .... Alternate Governor Waslallah AI-Harthi Ausbert ER.P. d'Auvergne Mohammad AI-Mazyad Suleiman AI-Ofi Advisers Sulaiman AI-Olayan Bertram Clarke Omran Mohammed AI-Omran Joseph Edmunds Abdelaziz AI-Orayer Talal I. AI Qudaibi Ali AI-Raffa St. Vincent and the Grenadines<> Abdullah Sulaiman AI-Rajhi Abdulaziz Alsaghyir Governor Fahad Muhammad AI-Saja Karl E. V. John Saud AI-Saleh Abdulaziz A. AI-Sehail + + Alternate Governor Abdulaziz AI-Turki Randolph Cato' Abdulaziz AI-Wohayeb Wahib Binzagr Advisers EI-Refai Kamel Eisa Burns Bonadie Abdullah EI-Kuwaiz Kingsley Layne Marcos G. Ghattas Burton Williams Richard R. Herbert Muhammad Saleh Jukhdar Sao Tome and Principe<> Khalil Abdulfattah Kordi Abdulaziz O'Hali Governor Omar Abdullah Sajeeni Agapito Mendes Dias Abdulhadi Ali Shayif Andre van Hove Alternate Governor Jose Luis Neto D'Alva* Senegal Advisers Epiphane Ayi Mawussi Mrs. Alice Nkom Governor Moussa Toure Saudi Arabia Alternate Governor Abdoul Aziz Diop Governor Sheikh Mohammad Abalkhail Advisers Alternate Governors Boubacar Ba Ibrahim A. AI-Assaf' + Samcidine Dieng Muhammad AI-Jasser* Assane Masson Diop Jobarah AI-Suraisry* Lamine Diouf Osama Faquih * Papa Assane Diouf Sheikh Hamad AI-Sayari Cheikh Ibrahim Fall Silcarneyni Gueye Mrs. Diarietou Mane Advisers Andrew K. Mullei Ahmed Abdullatif Babacar N'Diaye Abdullah Abulsamah Fara Ndiaye Abdulrahman R. AI-Abdullatif Mamadou Diagna N'Diaye Khalid AI-Aboodi Momar Kebe Ndiaye Mansour AI-Dalaan Mamadou Samb Muhammad AI-Gunaibit Bira Kane Sene Temporary < > Not a member of IFe # Not a member of IDA Not a member of MIGA + Executive Dtrector + + Alternate Executive Director 359 Seychelles# Alternate Governor Said Ahmed Yusuf Governor Mrs. Danielle de St. Jorre Advisers Abdi Aden Dahir Alternate Governor Ahmed Abdulle Gure Bertrand Rassool Abdullahi Mohamed Jama Ghulam H. Jewayni Adviser Mohamed Hajir Mohamed Jen Weeling Lee Mohamud Abdi Nur Osman H.O. Samatar Jama Hussein Warsame Sierra Leone South Africa Governor Thomas Taylor-Morgan Governor Christian Lodewyk Stals Alternate Governor Y.T. Sesay Alternate Governor Johannes A. Lombard Advisers Brimah Conteh Advisers Soule Funna Simon S. Brand Sayo B. Kanu B. Cameron Francis Karemo J.H. Cross F. B. L. Mansaray P. Duminy S.B. Marah Martin R. Grote Grahame J. Nathan Pieter G.J. Koornhof Sidique Sesay Andre la Grange N.S.B. Wellington Francois Ie Roux Elias Links Harry Heinz Schwarz Singapore# Pieter van Huyssteen Governor Teh Kok Peng Spain Alternate Governors Governor S.R. Nathan' Mariano Rubio Jimenez Choo Whatt Bin Alternate Governor Apolonio Ruiz Ligero Solomon Islands Advisers Eduardo Aguilar Alternate Governor Ms. Rocio Alberdi Francis Bugotu' Carlos Blasco Manuel de la Camara Juan de la Mota Somalia Julio Duran Vicente J. Fernandez Governor Miguel A. Fernandez Ordonez Abdirahman Jama Barre Valentin Laiseca · Temporary <> Not a member of IFe if Not a member of IDA Not a member of MIGA + Executive Director + + Alternate Executive Director 360 Luis Maria Linde Adviser Luis Lopez Moreno Glenn A. Alvares Jaime Lorenzo Manuel Lorenzo Pedro Mejia Miguel Muniz de las Cuevas Swaziland Mrs. Maria Perez Ribes Jose Juan Ruiz Governor Luis Ruiz Arbeloa Andreas Fakudze Luis Sempere Mrs. Pilar Serret Alternate Governor Mrs. Noreen N. Maphalala Sri Lanka Advisers Prince Lonkokhela Dlamini Alternate Governors Ms. Nomathemba Dlamini K.M. Abeysinghe' Miss Lucy Goodhart Susantha de Alwis' Samuel Sipho Kuhlase R. Paskaralingam Absalom Vusani Mamba Miss Adelaide Phindile Mkhonza Advisers Sweden Lloyd Fernando Mrs. S.L. Kuruppu Governor S.c. Mannapperuma Erik Asbrink K. Shanmugalingam N. Somaratne Alternate Governors P.G. Wilson Sven-Olof Johansson' Bengt Save-Soderbergh' Sudan Advisers Governor Lennart Bage Abdel Rahim Mahmoud Hamdi Mrs. Inga Bjork-Klevby Staffan Crona Alternate Governor Hakan Emsgard Mohamed Khair El Zubair Mikael Eriksson Anders O. Henriksson Advisers Jorgen Holmquist Abdalla Ahmed Abdalla Carl-Ivar Ohman Isam Bashir Ibrahim Carl Tham Agil El-Mannan Mohamed Atta El Mannan El Ageid Yahia Mohamed Mahmoud Syrian Arab Republic Osman Ahmed Mekki Governor Mohammed Khaled Mahayni Suriname < > + Alternate Governor Governor Adnan Al-Saty Henk Goedschalk Advisers Alternate Governor Ibrahim Adly Iwan Kortram Khaled Al-Mallah · Tempora~y < > Not a member of IFC # Not a member of IDA Not a member of MIGA + Executive Director + + Alternate Executive Director 361 Bourhan Chatti Kawee Keereepart Omar El-Nass Phaithoon Kijsamrej Badie Khattab Aswin Kongsiri Farouk Muwakki Banyong Lamsam Kulthon Nakaprom Prapat Noonpukdee Tanzania Tawee Noonpukdee Methee Pattarakornkul Governor Chalit Phaphan K.A. Malima Sommai Phasee Surachai Pongpitaksopon Alternate Governor Sommart Poonpakdee Simon Mbilinyi Chuchawal Pringpuangkeo Mont Saranusit Advisers Suthee Singhasaneh L.M. Chima Pisit Srikalasin P.L. Kamuzora Rangsin Suebsaeng Ali Karume Vichit Suraphongchai F.M. Kazaura Suthai Unenanond J.P. Kipokola Ms. Panit Visutyothapibal Philip Alfred Magani Prachitr Yossundara John M. Mugasha G. Mwaikambo Charles M. Nyirabu Togo S.Odunga K.K. Ramadhan Governor H.K. Senkoro Barry Moussa Barque R.M. Shirima Alternate Governor Thailand Kwassi Klutse Governor Advisers Virabongsa Ramangkura David R. Ansell Michel K. Assielou Alternate Governors Barthelemy Drabo Nibhat Bhukkanasut* Mahenta Birima Fall Mrs. Prachitt Kambhu* Emmanuel C. Offokaja Phisit Pakkasem* Kossi Rotimi Paass Vitthya Vejjajiva* Panas Simasathien Tonga Advisers Governor Anuthra Asawanonda James Cecil Cocker Goanpot Asvinvichit Acksiri Buranasiri Alternate Governor Khunying Nongyao Chaiseri Penisimani Yea Chakpet Chantaravisot Miss Yupadee Chanyakomol Chalerm Cheo-Sakul 1nnidad and Tobago Chalermpong Cheo-Sakul Mrs. Anya Damrongsri Governor Krit Garnjana-Goonchorn Carlyle Greaves Temporary < > Not a member of IFC ;; Not a member of IDA Not a member of MIGA + Executive Director + + Alternate Executive Director 362 Alternate Governor Alternate Governor John Andrews' James Kahoza Advisers Advisers Terrence Farrell Robert Bagota-Amooti Angus Albert Khan Abbas K. Mawanda Kamal Churaman Mankee Kiriba-Bonsu Mayende Simon Jagdesh Siewrattan George F. Mbowe Mrs. Eva N. Mukasa Ivan K. Mulindwa Tunisia Philip Odida James Odong Governor E. Tumusiime-Mutebile Mustapha Kamel Nabli Justin Zake Alternate Governor Abdellatif Saddem United Arab Emirates Advisers Governor Tarek Ben Hamida Nassar AI-Nowais Abdeslem Ben Younes Tijani Chelly Alternate Governor Mohamed Nejib Hachana Mohammed Khalfan Khirbash Abdelaziz Hamzaoui Elyes Kasri Advisers Mohamed Mestiri Hesham S.A. AI-Sayed Abdul Rahman Mohamed Salah Tekaya Miss Nariman A. Kamber AI-Awadhi Abdelhamid Triki Ali Mohammed Ali Abdulla bin Zayed AI-Nahayyan Obeid Saif Al Nasseri Thrkey Sultan N. AI-Suwaydi Ali Ibrahim Mohamed Ismail Governor Rory N. Keelan Namik Kemal Kilic J.R.M. Lewis Fraser McKenzie Alternate Governor James P. Steele Mahfi Egilmez Ebrahim Abdul Rahman Tahlak Mohamed Ali Zayed Advisers Osman Akiman Tuncay Altan United Kingdom Ibrahim Berberoglu Can Cangir Governor Ahmet Selcuk Demiralp Robin Leigh-Pemberton Yavuz Kocaomer Erdogan Oner Alternate Governors M. Bulent Ozgun A.C.S. Allan" Ms. Bahar Sahin + + Robert Graham-Harrison' + + Cuneyt Sel David Peretz" + Falih Selekler N.L. Wicks" Timothy Lankester Uganda Advisers Governor Roger Bone Jehoash Mayanja Nkangi Sir Terence Burns Temporary < > Not a member of IFe II Not a member of IDA Not a member of MIGA + Executive Director + + Alternate Executive Director 363 J.A.L. Faint Donald C. Templeman E.J.W Gieve Edwin M. Truman Miss Victoria Harris David H.A. Ingram Sir Piers Jacobs Uruguay# Christopher J. Jarvis Martin E.F. Jones Governor Stewart Mills Enrique Braga Silva A.T. O'Donnell Sir Peter Petrie Alternate Governor Brian Quinn Nicolas Herrera' Duncan Sparkes Michael Wood Adviser Carlos Steneri United States Vanuatu Governor Nicholas F. Brady Governor Sela Molisa Alternate Governors E. Patrick Coady' + Alternate Governor Charles H. Dallara' George Pakoa Thomas C. Dawson II' David C. Mulford' Venezuela# Barry S. Newman' John E. Robson' Governor Ronald W Roskens' Miguel Rodriguez Richard T. McCormack Alternate Governors Mrs. Leonor Filardo' Advisers Mauricio Garcia Araujo' Joseph W Barr Francisco Garcia Palacios' W Michael Blumenthal Carlos Hernandez-Delfino' Laurence W Bond Fernando Lauria' Reginald J. Brown Edgard Leal' Robert L. Clarke Moises Nairn' E. Gerald Corrigan Nelson Ortiz' Mark T. Cox, IV + + Miss Sonia Perez R. · Sam Y. Cross Oscar de Rojas' James H. Fall, III Gerver Torres J. Michael Farren George A. Folsom Henry H. Fowler Advisers Oscar M. Mackour Carlos A. Bivero Hollis S. McLoughlin Jose Benjamin Escobar Larry K. Mellinger Modesto Freites G. William Miller Gustavo Garcia Richard E. Neal Mariano Gurfinkel John M. Niehuss Ms. Victoria Manzano Charles Schott a Rafael Martin Guedez L. William Seidman Gustavo Perez Ortega William E. Simon Reinaldo Ruiz Temporary < > Not a member of IFC # Not a member of IDA Not a member of MIGA + Executive Director ++ Alternate Executive Director 364 Antonio Juan Sosa Advisers Arturo Sosa Zoran Acimovic Mrs. Milica Borlja-Gluvacevic Cvitan Dujmovic + + VietNam Mrs. Ana Gligorijevic Mrs. Gordana Hofmann Governor Josip Kulisic Cao Si Kiem Mrs. Ljiljana Milojevic-Borovcanin Dzevad Mujezinovic Alternate Governors Borivoje Nikolic Le Van Chau* + + Milojko Popovic Nguyen Cong Hai* Zaire Western Samoa Governor Bombito Botomba Lompio Governor Tofilau Eti Alesana Alternate Governor Mbonga Magalu Engwanda Alternate Governor Kolone Va'ai Advisers Bolaluete Mbwebembo Advisers Iseleko Leka William Keil Tatanene Manata Unasa Lanea Lio Matungulu Mbuyamo Alankir Philip Henry Penn N'Kandi Mukendi Miss Hinauri Pet ana Ngimbi Kalumvueziko Fale Fatu Sapolu Tansia Molende Monkoy Sir Peter Tapsell George Tuiletufuga Tuaopepe Fili Wendt Zambia Governor Republic of Yemen James C. Mapoma Governor Alternate Governor Farag Bin Ghanem Lennard Nkhata Alternate Governor Advisers Anwar Rizq AI-Harazi* Jacques Bussieres Chris Chirwa Advisers Benny Chundu Jamal AI-Sallal Lazarous Kapambwe Omar Salim Bazara Austin Matate lalal Mohamed Mouwla L.J. Mwananshiku Ahmed Ahmed Ghaleb Saeed E.D. Njobvu Martin G. Sakal a Salvator Mambo Tembo Yugoslavia David Matongo Governor Branimir Zekan Zimbabwe Alternate Governor Governor Boris Skapin Elisha N. Mushayakarara Temporary < > Not a member of IFC # Not a member of IDA Not a member of MIGA + Executive Director + + Alternate Executive Director 365 Alternate Governor Ms. Dinah Zvademoyo Guti Somkhosi Mahamba Malaba V.S. Kumalo Ms. Rosemary Mazula Advisers Ms. Valerie Me Nicol Norman Chakanetsa Siboniso Mtema Stanislaus Chigwedere Joseph Mubika J.B. Cooke Mrs. Rejoyce Zhakata Temporary <> Not a member of IFe # Not a member of IDA Not a member of MIGA + Executive Director ++ Alternate Executive Director 366 OBSERVER AT 1990 ANNUAL MEETINGS Switzerland Franz Blankart Edouard Brunner Jean-Jacques De Dardel Ms. Monique Dubois Jean-Daniel Ulrich Gygi Gerber Daniel Kaeser Alexei Lautenberg Markus Lusser Stephan Nellen Carlos Orga Joerg Reding Jean-Pierre Roth Otto StichJuerg Von Arx REPRESENTATIVES OF INTERNATIONAL INSTITUTIONS International Fund for United Nations Agricultural Development Kenneth K.S. Dadzie Bouna Semou Diouf Iqbal Haji Mrs. Vera P. Gathright Roger Lawrence Bahman Mansuri Carlos A. Massad Tor Myrvang Goran Ohlin Enrique Ter Horst SPECIAL INVITEES U.S.S.R. Viktor V. Geraschenko Thomas I. Alibegov Vadim B. Bakarinov Andrey E. Bougrov Victor V. Rakov 367 EXECUTIVE DIRECTORS, ALTERNATES AND ADVISORS BANK September 27, 1990 Alternate Advisors To Executive Directors Executive Directors Executive Directors Ibrahim A. AL-ASSAF Abdulaziz A. AL-SEHAIL (United States) (Saudi Arabia) (Saudi Arabia) Rumman Ahmad FARUQI Fawzi Hamad AL-SULTAN Mohamed Wafik HOSNY (Pakistan) (Kuwait) (Egypt) Ezzedin M. SHAMSEDIN Paul ARLMAN Cvitan DUJMOVIC Valery AMIEL (Netherlands) (Yugoslavia) (Israel) Vibul AUNSNUNTA LE VANCHAU Somsanith NHOYBOUAKONG (Thailand) (Viet Nam) (Lao, P.D.R.) J.S. BAIJAL M. Mustafizur RAHMAN Prodeep BHIDE (India) (Bangladesh) (India) Mourad BENACHENHOU Salem Mohamed OMEISH Ernest AKO-ADJEI (Algeria) (Libya) (Ghana) Mohammad KHAZAEE TORSHIZI (Iran, I.R. of) Gerhard BOEHMER Bernd ESDAR Tobias GEIB (Fed. Rep. of Germany) (Fed. Rep. of Germany) (Fed. Rep. of Germany) Cesare CARANZA Fernando S. CARNEIRO Andrzej ILCZUK (Italy) (Portugal) (Poland) E. Patrick COADY Mark T. COX, IV Ronald E. MYERS (United States) (United States) (United States) Jacques DE GROOTE Ms. Bahar SAHIN Walter RILL (Belgium) (Turkey) (Austria) J.S.A. FUNNA Jabez A. LANGLEY James NXUMALO (Sierra Leone) (The Gambia) (Swaziland) Leonard K. MSEKA (Malawi) Jonas H. HARALZ Mrs. Jorunn MAEHLUM Seppo MOISIO (Iceland) (Norway) (Finland) Jean-Pierre LANDAU Philippe DE FONTAINE VIVE Gerard LADANT (France) (France) (France) Chang-Yuel LIM Robert G. CARLING Gerald S. HALLIDAY (Korea) (Australia) (New Zealand) Andre MILONGO Jean-Pierre LE BOUDER Ali M. KALFAN (Congo) (Central African Rep.) (Somalia) Yves-Marie Thano KOISSY (Cote d'Ivoire) Idy Adama DlAW (Senegal) Raymundo MORALES Felix Alberto CAMARASA Gaston PACHECO (Peru) (Argentina) (Bolivia) David PERETZ Robert GRAHAM-HARRISON (United Kingdom) (United Kingdom) Jorge PINTO Ms. Silvia CHARPENTIER Ms. Ricio ALBERDI (Mexico) (Costa Rica) (Spain) Samual N. MCCONNELL (Ireland) Frank POTTER Clarence ELLIS David C. SEVIGNY (Canada) (Guyana) (Canada) Masaki SHIRATORI Yukio YOSHIMURA Daikichi MOMMA (Japan) (Japan) (Japan) Eduardo WIESNER Pedro S. MALAN Gil S. BELTRAN (Colombia) (Brazil) (Philippines) ZHANG Junyi J1N Liqun ZHU Xian (China) (China) (China) 368 DIRECTORS AND ALTERNATES MIGA September 27, 1990 Directors Alternate Directors Ibrahim A. AL-ASSAF Abdulaziz A. AL-SEHAIL (Saudi Arabia) (Saudi Arabia) Fawzi Hamad AL-SULTAN Mohamed Wafik HOSNY (Kuwait) (Egypt) Paul ARLMAN Stephan NELLEN (Netherlands) (Switzerland) Gerhard BOEHMER Bernd ESDAR (Fed. Rep. of Germany) (Fed. Rep. of Germany) Cesare CARANZA Fernando S. CARNEIRO (Italy) (Portugal) E. Patrick COADY Mark T. COX. IV (United States) (United States) Jonas H. HARALZ Mrs. Jorunn MAEHLUM (Iceland) (Norway) Jean-Pierre LANDAU Mrs. Stephane PALLEZ (France) (France) Chang-Yuel LIM Djamalius LUDDIN (Korea) (Indonesia) Andre MILONGO Jean-Pierre LE BOUDER (Congo) (Central African Rep.) Alhaji Aliyu MOHAMMED Charles S. MBINDYO (Nigeria) (Kenya) Claudio A. PARDO Patricio L. RUBIANES (Chile) (Ecuador) David PERETZ Robert GRAHAM-HARRISON (United Kingdom) (United Kingdom) Frank POTTER Clarence ELLIS (Canada) (Guyana) Ms. Bahar SAHIN Istvan TOMPE (Turkey) (Hungary) Masaki SHIRATORI Tatsuo FUJINO (Japan) (Japan) ZHANG Junyi JIN Liqun (China) (Chma) 369 OFFICERS OF THE BOARD OF GOVERNORS AND JOINT PROCEDURES COMMITTEE FOR 1990-91 OFFICERS Chairman Ecuador Vice Chairmen .............................. Lesotho Netherlands JOINT PROCEDURES COMMITTEE Chairman .................... Ecuador Vice Chairmen ............... Lesotho Netherlands Reporting Member ........... Bangladesh Members ..................... Bangladesh Bolivia Canada Cameroon Ecuador France Germany Ghana Grenada Iceland Japan Lesotho Netherlands Poland Saudi Arabia Syrian Arab Republic Thailand Togo Tunisia United Kingdom United States Vanuatu 370 OFFICERS OF MIGA COUNCIL OF GOVERNORS AND PROCEDURES COMMITIEE FOR 1990-91 OFFICERS Chairman Ecuador Vice Chairmen .............................. Lesotho Netherlands MIGA PROCEDURES COMMITIEE Chairman .................... Ecuador Vice Chairmen ............... Lesotho Netherlands Reporting Member ........... Bangladesh Members ..................... Bangladesh Cameroon Canada Ecuador France Germany Ghana Grenada Japan Lesotho Netherlands Poland Saudi Arabia Togo Tunisia United Kingdom United States Vanuatu 371 THE WORLD BANK GROUP Headquarters 1818 H Street, N. W Washington, D.C. 20433, U.S.A. Telephone: (202) 477-1234 Telex Nos.: FrCC 82987 ITT 440098 RCA 248423 Facsimile No.: (202) 477-6391 European Office 66 ave d'Iena 75116 Paris, France Telephone: 47-23-54-21 Telex No.: 620628 Facsimile No.: 472-1966 Cable Address World Bank: INTBAFRAD IFC: CORINTFIN IDA: INDEVAS