THE WORLD BANK GROUP 53426 1989 ANNUAL MEETINGS OF THE BOARDS OF GOVERNORS SUMMARY PROCEEDINGS WASHINGTON, D.C. SEPTEMBER 26-28, 1989 THE WORLD BANK GROUP 1989 ANNUAL MEETINGS OF THE BOARDS OF GOVERNORS SUMMARY PROCEEDINGS WASHINGTON, D.C. SEPTEMBER 26-28, 1989 INTRODUCTORY NOTE The 1989 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 26-28,1989 (inclusive). The Honorable Kyu Sung Lee, Governor of the Bank and Fund for Korea, 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 1990 11l CONTENTS Page Opening Remarks by George Bush President of the United States 1 Opening Address by the Chairman Kyu Sung Lee Governor of the Bank and Fund for Korea .................... 6 Annual Address by Barber B. Conable President of The World Bank Group ........................... 11 Report by B. T. G. Chidzero Chairman of the Development Committee. . . . . . . . . . . . . . . . . . . . . 24 Statements by Governors and Alternate Governors 27 Page Page Afghanistan ............. 27 Lao People's Democratic Angola.................. 31 Republic ............. 121 *Argentina ............... 34 Malaysia ................. 124 Australia ................ 38 Malta.................... 126 Austria.................. 41 Nepal.................... 130 Bangladesh .............. 44 Netherlands ............. 134 Belgium. ... ... .......... 47 New Zealand ............ 138 *Brazil .................... 51 Nicaragua ............... 140 Canada.................. 60 *Norway .................. 145 China.................... 63 Pakistan ................. 149 *Cote d'Ivoire ............ 67 Panama.................. 150 Fiji ....... ..... ... ....... 73 Papua New Guinea ..... 157 *France ................... 75 Peru ..................... 160 Germany................ 79 Philippines .............. 163 Greece .................. 84 Poland................... 166 Hungary................. 87 Romania ................ 167 *Iceland .................. 91 *St. Lucia ................ 172 India..................... 94 South Africa ............ 176 Indonesia ................ 97 Spain.................... 179 Iran, Islamic Republic Sri Lanka ............... 182 of...................... 102 *Syrian Arab Republic... 185 Ireland .................. 104 Thailand. . . . . . . . . . . . . . . . . 188 Israel .................... 108 Tonga.................... 191 Italy ..................... 110 United Kingdom ........ 193 Japan .................... liS United States. . . . . . . . . . . . 198 Viet Nam ................ 201 *Western Samoa ......... 203 * Speaking on hehalf of a group of countries. Yugoslavia ............... 205 v Page Concluding Remarks by Mr. Con able .................................. 209 Concluding Remarks by the Chairman, Kyu Sung Lee ............... 211 Remarks by George Saitoti, Governor of the Bank and Fund for Kenya ................................................. 214 Documents of the Boards of Governors ............................... 215 Schedule of Meetings ................................................ 215 Provisions Relating to the Conduct of the Meetings ................ 216 Agendas .............................................................. 217 Joint Procedures Committee ........................................... 218 Report I .............................................................. 219 Report III ............................................................ 221 Report of the MIGA Procedures Committee ......................... 223 Resolutions Adopted by the Board of Governors of the Bank Between the 1988 and 1989 Annual Meetings ................. 225 No. 433 .... Membership of the People's Republic of Angola...... 225 No. 434 .... Direct Remuneration of Executive Directors and their Alternates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 228 Resolutions Adopted by the Board of Governors of the Bank at the 1989 Annual Meeting ........................................... 229 No. 435 .... Financial Statements, Accountants' Report and Administrative Budget ................................. 229 No. 436 .... Allocation of FY89 Net Income ....................... 229 Resolutions Adopted by the Board of Governors of IFC Between the 1988 and 1989 Annual Meetings ................................ 230 No. 161 .... Amendment of Resolutions Nos. 149 and 153 Con- cerning the Increase of Members Subscriptions to the Capital of the International Finance Corporation ..... 230 No. 162 .... Membership of the People's Republic of Angola...... 231 Resolution Adopted by the Board of Governors of IFC at the 1989 Annual Meeting ................................................. 233 No. 163 .... Financial Statements, Accountants' Report and Administrative Budget ................................. 233 VI Page Resolution Adopted by the Board of Governors of IDA Between the 1988 and 1989 Annual Meetings ................................ 234 No. 148 .... Membership of the People's Republic of Angola...... 234 Resolution Adopted by the Board of Governors of IDA at the 1989 Annual Meeting ................................................. 237 No. 149 .... Financial Statements, Accountants' Report and Administrative Budget ................................. 237 Resolutions Adopted by the Council of Governors of MIGA Between the 1988 and 1989 Annual Meetings ............................ 238 No. 11 ..... Membership of the Polish People's Republic .......... 238 No. 12 ..... Admission of New Members........................... 239 No. 13 ..... Election of Directors................................... 240 No. 14 ..... Membership of the People's Republic of Angola...... 240 Report of the Executive Directors of the Bank ....................... 242 Allocation of FY89 Net Income ..................................... 242 Report of the Board of Directors of IFC .............................. 243 Amendment of Resolutions Nos. 149 and 153 Concerning the In- crease of Members Subscriptions to the Capital of the Interna- tional Finance Corporation ........................................ 243 Reports of the Board of Directors of MIGA .......................... 244 Membership of the Polish People's Republic Admission of New Members ...................................... 244 Second Regular Election of Directors (MIGA) ..................... 245 Rules for the Second Regular Election of Directors (MIGA) ........ 248 Directors Elected at the 1989 Regular Election (MIGA) ............. 251 Report of the Chairman of the Development Committee ............. 254 Annual Report of the Development Committee ...................... 255 Accredited Members of Delegations at 1989 Annual Meetings ....... 265 Observer at 1989 Annual Meetings .................................... 291 VB Page Representatives of International Institutions 291 Executive Directors, Alternates and Advisors- IBRD, IFC, IDA ................................................ 292 Directors and Alternates- MIGA ........................................................... 293 Officers of the Board of Governors and Joint Procedures Committee for 1989-90 .......................................... 294 Officers of the MIGA Council of Governors and Procedures Committee for 1989-90 .......................................... 295 Vl\l OPENING REMARKS BY THE HON. GEORGE BUSH PRESIDENT OF THE UNITED STATES We in the United States are keenly aware of the importance of these annual gatherings, which drive the work of all of us in maintaining a strong international economic and financial system. This is my first opportunity to speak to you as President. But I have followed the activities of the International Monetary Fund and the World Bank throughout my years of public service. I have visited many of your homelands, and seen firsthand the problems created by inadequate growth and development-problems that your two distinguished institutions are working to solve. We have witnessed a dramatic shift over the past few years in the debate over how to achieve sustained growth and development. All across the world, there has been an almost simultaneous rediscovery of the power created when individuals are given the freedom to act in their own best interests. True, we're here today mainly to discuss economic freedom. But make no mistake. In the end, both economic freedom-and political freedom- are essential and inseparable companions on the road to national prosperity. The jury is no longer out. Look at the two economic systems and see who has prospered and who has struggled. Let's put an end to this econmic experiment. Because history has decided. It is not climate, natural resources, or cultural traditions that make the difference. I said it in my inaugural address: "We know what works: free- dom works. We know how to secure a more just and prosperous life for man on earth: through free markets, free speech, free elections, and the exercise of free will unhampered by the state." In Latin America, Africa, and Mexico, courageous leaders are turning away from state control of their economies. Economic restructuring and deregulation are opening the door to private initiative. And already they are seeing results. Even more stunning is the transformation in thinking in the communist countries-in both the Soviet Union and in Eastern Europe. During our recent travels in Poland and Hungary, we were impressed by the people. But we were also impressed by the almost universal acceptance of the free market as the best hope-indeed, the only hope-for reversing the economic fortunes of these two proud countries. And we welcome the efforts of the Soviet Union to liberalize and decen- tralize their economy. I have said many times that I want to see perestroika suceed. A more open and humane Soviet Union can only be in the interest of the West. And as we see the evidence of that reform, we can match it with steps of our own. 1 The rediscovery of these basic truths in the East has been matched by a recommitment to them in the West. Today the members of the European Community are dedicated to eliminating internal barriers to economic ac- tivity by the end of 1992. And, Europe's leaders assure me that this will not be at the cost of new external barriers to trade with the Ee. The Peruvian economist, Hernando de Soto, has helped us understand a worldwide economic phenomenon. By walking the streets of Lima, not analyzing official statistics, he found that the poor of Latin America-who have never read Jefferson or Adam Smith-ran their affairs democratically, outside the formal economy, organizing their private, parallel economy in a free and unregulated manner. De Soto's great contribution has been to point out what, in retrospect, may seem obvious: people everywhere want the same things. And when left alone by government, people everywhere organize their lives in remarkably similar ways. De Soto's prescription offers a clear and promising alternative to eco- nomic stagnation in Latin America and other parts of the world. Govern- ments must bring the "informal" workers into the regular economy-and then get out of the way, and let individual enterprise flourish. We each must do our part. The industrial countries have a special re- sponsibility. We must coordinate economic policies to help provide sustained growth with low inflation, reduced trade imbalances, and greater stability in exchange markets. We in the United States are working especially hard to reduce the Federal budget deficit, and to increase our national savings rate. All our nations have a responsibility to ensure a fair and open trading system. We have a tremendous opportunity to advance that cause now, by making a success of the Uruguay Round of trade negotiations. Making the political commitments necessary to ensure a success will not be easy, but we must strengthen the GATT, and allow our markets to open in a mutual, step-by-step fashion. As we seek to extend and expand growth in the world economy, the debt problems faced by developing countries are central to the agendas of the IMF and the World Bank. Over the past year, the international community's strengthened approach to these problems has provided new hope for debtor nations. America's Secretary of the Treasury, Nick Brady, has helped direct the focus on debt reductions as a complement to continued new lending- bringing developing nations and commercial banks back to where they be- long: the negotiating table. Quick action by both the IMF and the World Bank has given this new strategy vital support. By making clear the terms under which they will support the reduction of debt burdens-and by working with countries to 2 develop the necessary economic reform programs-these institutions have made it possible to reduce debt burdens and provide a solid foundation for growth. Thanks to these initiatives, Mexico reached an agreement with its creditor banks enabling Mexico to make enormous progress in reducing its debt burden. It also helped restore confidence in the Mexican economy which has already resulted in a return of capital and new foreign investment. This agreement underscores the benefits other debtor countries stand to realize from this approach. Mexico's savings from this package will free resources for productive use in the economy, leading to increased investment and improved growth. What Mexico has done is not a miracle. It is a product of hard work and sustained commitment. The strengthened debt strategy is flexible enough to address the unique needs of each country. But the strategy will not work without sound eco- nomic policies in debtor countries. Inefficient, unrealistic, and growth-stifling policies must go. Benefits are available to a broad range of other countries that pursue economic reforms. Several are now actively engaged with the IMF and the World Bank, and with the banking community. Commercial banks have a special role in making this process work and must follow through on efforts made with Mexico and the Philippines, and broaden their efforts with other countries. We encourage these steps not as self-sacrifice-but as self-interest. True, success not only will help the debtor nations, but it will also strengthen the banks, by putting their portfolios on a sounder footing. One of the lessons of the 1980s, especially the debt crisis, is that we're all in this together. And when we cooperate, we all come out winners. The IMF and the World Bank are at the crossroads of our cooperative efforts. The IMF must continue to foster the sound economic policies nec- essary for sustained growth. As part of that· responsibility, the Fund has assumed an important and welcome role in the strengthened debt strategy. The United States recognizes that the IMF must have adequate resources to fulfill its critical role. We will continue to work with other members, in the hope of reaching a decision on quotas by the end of the year. The United States has always supported the IMF and will continue to do so. We all look to the World Bank to help build the foundation for a future global prosperity that reaches all peoples. Its efforts to promote structural reform and development are crucial to resolving debt problems. The Bank's decisions to take on new responsibilities on the debt front are welcome. Also, to address the significant problems of the poorest countries, the International Development Association was established and will continue to have the support of the United States. 3 We have also learned, as I emphasized Monday at the UN, and last summer at the Paris summit, that environmental destruction knows no bor- ders. To make growth truly sustainable, we must weigh environmental consid- erations more heavily as we make economic decisions. We must also find ways to strengthen our environmental and developmental efforts, through innovative thinking such as "debt for nature transactions." Over the years-as we've come to understand the effect of environmental destruction on the long-term growth of developing countries-the World Bank has increased the priority it assigns to environmental concerns. We applaud those efforts. But there is more to be done. We need to work more cooperatively to develop constructive solutions to global warming, including measures to promote energy efficiency and conservation and greater protec- tion of forest resources. In addressing the challenges of the 1980s, we have come to a deeper understanding of the importance of cooperating as a community of nations to address common problems. I can think of no better current example than the need to work together to deal with international drug trafficking and money laundering. It is a worldwide problem. Drug money undermines honest businesses, corrupts political institutions, and even threatens the security of nations. To conceal their obscene profits, drug barons must wash their money by cycling it through financial institutions and illegitimate shell corporations. The United States renews its call upon all countries to ratify the United Nations Vienna Convention, and make money laundering a criminal and extraditable offense. We need tough measures to track down and confiscate the profits of drug-related crime. I am encouraged by the G-7 democracies' interest in a coordinated re- sponse to the money laundering menace. I urge everyone to join with us to explore new ways to stop money laundering in its tracks. And there may be no greater opportunity before us all today than the challenge of Poland and more broadly Eastern Europe-where countries are in the throes of dramatic political and economic change. The United States and its international partners have already undertaken new initiatives toward Poland. But now, in light of clearly growing needs, the recent accession of a Solidarity-led government, and our self-evident stake in its success, we must do more. We understand the Polish Government has under consideration a bold plan for economic recovery. I call on the IMF and the World Bank to work rapidly with Poland to develop such a program and ensure its successful implementation. For its part, the United States intends to be out in front of this effort, to take advantage of this historic development and to ensure its success. Today our mutual efforts to improve global growth, to ease the burdens of developing country indebtedness, and to open up markets for trade, have 4 demonstrated anew that progress is best achieved by facing pressing issues together. This is a lesson we must carry with us into the 1990s if we are to pass on to future generations a global economy that is strong and resilient, and able to provide for the aspirations of the citizens of all our countries. 5 OPENING ADDRESS BY THE CHAIRMAN, THE HONORABLE KYU SUNG LEE GOVERNOR OF THE BANK AND FUND FOR KOREA It is a privilege to welcome you to the Forty-Fourth Annual Meetings of the World Bank Group and the International Monetary Fund. As Chair- man, and on behalf of all of you, I would like to express our thanks to the people of Washington, D.C. for their hospitality during these meetings. All of us present join together in extending a sincere welcome to the delegates from our newest member country, the People's Republic of An- gola, who are taking part for the first time in our meetings. It is a special honor, not only to me, but to the Republic of Korea, to chair the Annual Meetings of the two institutions that have contributed so instrumentally to the development and prosperity of our country. For this, we express our deep gratitude to all members. Korea's Relations with the International Community As Korea's national welfare changed, so have its relations with the Bret- ton Woods institutions. We were pleased, last November, to accept the obligations of Article VIII of the Fund's Articles of Agreement. Moreover, Korea has contributed to the enhanced structural adjustment facility and is actively participating in replenishment discussions for IDA-9 to continue meeting responsibilities of membership. As a major beneficiary of a multilateral, open trading system, Korea pledges to contribute to the prosperity of the world economy by shouldering its international responsibilities to the best of its ability. Recent Economic Performances The world economy turned in a very impressive performance in 1988, growing at the highest rate since 1984, while world trade registered its strongest expansion of the decade. In 1989, there are signs of a moderation of growth to more sustainable levels in industrial countries, with underlying inflationary pressures beginning to subside. On the other hand, economic activity in much of the developing world continues to be relatively weak with few signs of improvement in external balances. Nevertheless, we can still be modestly optimistic that the current pace of world economic expansion will continue at least over the immediate future. Major Developments in the 1980s: Global Interdependence In this final year of the 1980s, these meetings are a fitting occasion for reflecting briefly on the major developments over this decade, which offer both encouraging signs and cause for concern. 6 First, looking at the positive side, major industrial countries have main- tained the longest economic expansion in the postwar period. And, despite the recent loss of momentum, there has been progress in reducing external imbalances through macroeconomic policy coordination. In addition, we can commend all the participants of the Uruguay Round for making important advances toward a more open trading system since September 1986, particularly at the Uruguay Round midterm review. To help solve the problem of external debt, all interested parties, both debtors and creditors, the Bank, and the Fund have agreed to support the strengthened debt reduction strategy. For another heartening sign, one can look to the momentum of economic reform well under way in the centrally planned economies, which has brought about greater reliance on market mechanisms, with positive impli- cations for world trade and East-West relations. On the negative side, the vicious cycle of protectionism and inadequate structural reform has not only intensified the problem of market rigidities, but has also led to concerns that the open trading system is under siege from unilateral acts and bilateral deals. Furthermore, persistent external imbal- ances among major industrial countries have led to exchange rate instabil- ities and high interest rates, threatening the very foundation for sustained world economic growth. All of these unprecedented developments, both positive and negative, are clear manifestations of global interdependence. The interdependence of the world economy achieved over the many years of expanded trade and integration of financial markets is creating new opportunities, as well as difficult problems, for the international community. Balanced Growth for the 1990s Today, much of the developing world suffers from deteriorating terms of trade and persistently high interest rates. In contrast to the 1960s and 1970s, when the gap in the standards of living between industrial and developing countries was reduced, in the 1980s, the gap has actually increased. Furthermore, pervasive poverty and heavy debt-servicing burdens con- tinue to weigh heavily on many developing countries. If these adverse conditions persist, the spirit of international cooperation for common prosperity may be undermined. In the long run, because of global interdependence, sustained growth is impossible without balanced growth. Therefore, we must strive harder than ever before to achieve bal- anced growth. In this connection, the emergence of middle-income countries is a signif- icant step toward balanced growth. These middle-income countries, by shar- ing development experiences and appropriate technologies with the low- income countries, can help them maximize utilization of all available re- 7 sources, thereby contributing to their economic growth. The growing influ- ence of the middle-income countries on the world economy, therefore, is a promising trend that should be nurtured. Policy Action for International Community What policy actions must we, the industrial and developing countries as well as the Bank and the Fund, take to lay the basis for the balanced and durable growth of the world economy? Starting with the industrial countries, the first policy imperative is to promote a favorable financial and trade environment. Industrial countries with budget and current account deficits must strengthen fiscal policy to reduce the burden on monetary policy. Such action would contribute to reducing real interest rates, encouraging investment, and alleviating external imbalances. Countries with external surpluses should continue to promote adequate growth of domestic demand in excess of output growth, principally through enhanced structural reforms. Industrial countries can act to promote a favorable external environment by resisting protectionism and ensuring the success of the Uruguay Round. Among other benefits, an open trading system will help developing countries expand exports, assisting their efforts to grow out of debt. Moreover, de- veloping countries are liberalizing their own trade regimes under programs supported by the Bank and the Fund. Industrial countries should do no less. The second policy imperative for industrial countries is to encourage adequate resource flows to developing countries. If these developing coun- tries are to endure the demands of often far-reaching adjustment, technol- ogy and new money will be vital. Debt reduction will also be important where the level of debt is incompatible with the restoration of confidence and the resumption of growth. Commercial banks could be encouraged to provide resources for trade, investment, and debt reduction programs, partly through changes in tax regimes and regulatory and accounting sys- tems. Developing countries have equally important responsibilities in this action agenda. First and foremost, they should persevere with strong, growth- oriented adjustment programs. The most pressing task is to create a favor- able domestic environment that would raise domestic savings, enhance pro- ductive investment, and induce the repatriation of flight capital. At the same time, the quality of investment deserves priority attention to maximize growth potential. The Bretton Woods institutions, for their part, should assist countries in designing and implementing growth-oriented adjustment programs. In this connection, the timely decision by the Bank and the Fund Boards to support debt and debt service reduction is to be welcomed. As mobilizers of external 8 finance for adjustment, the Bank and the Fund must retain a strong catalytic role, encourage greater efforts by commercial banks, and remain vigilant to the needs of all developing countries. Economic Reform in a Multilateral Framework Diligent efforts of all member countries, as well as the Bank and the Fund, in carrying out their fair share of responsibilities, as outlined above, may be a necessary condition, but hardly a sufficient condition for the achievement of balanced growth. The unprecedented level of global inter- dependence mandates new economic policy responses regarding macroeco- nomic and structural reforms. Needless to say, shortsighted unilateral actions motivated by national in- terest would only bring short-term gains at the expense of long-term growth potential of the world economy. The international community cannot look only to the smaller countries for a solution to global imbalances, for their actions cannot compensate for insufficient adjustment by the major indus- trial countries. There is an obvious need, therefore, to extend multilateral cooperation to every facet of economic policy for a more efficient manage- ment of the world economy. In this regard, I think it is important to be reminded of the wisdom and the spirit of the founders of the Bretton Woods institutions and GATT, which have played an instrumental role in promoting world peace and pros- perity. In particular, it should be noted that these three great institutions were founded in order to achieve balanced growth through greater respect for market mechanisms and favorable treatment of developing countries. With renewed faith in the founding spirit of these institutions, we should coordinate our economic reform efforts. In this context, I would like to urge the Fund, as well as the Bank, to substantially enhance their policy advice and surveillance activities to strengthen multilateral disciplines for macro- economic and structural reform. Activities of the Bank and the Fund Turning now to the activities of the World Bank Group, the increased resources committed by shareholders in 1988 are already contributing to several significant initiatives. For example, there will be greater focus on poverty reduction in country assistance strategies by promoting productive employment and expanding access to health care, education, and physical infrastructure for the poor. Environmental concerns are being more fully integrated into the main- stream of the Bank's operational and policy work. In addition, there is increased attention to private sector development, which will be tailored to individual country circumstances. 9 With respect to the members of the World Bank Group family, I would like to stress that IDA-9 negotiations are of paramount importance and should be completed urgently, with a larger replenishment being a worthy goal. I am pleased to note that, in 1989, IFC's net income nearly doubled for the third successive year. MIGA, along with IFC, is also providing advice and technical assistance to developing countries to help promote foreign direct investment. To advance all the far-reaching endeavors of the World Bank Group, shareholders that have not already done so are urged to subscribe fully to the general capital increase. Turning to the activities of the Fund, multilateral surveillance-the Fund's primary function-has been important in assisting macroeconomic policy coordination and it must be deepened further to correct imbalances without endangering sustainable growth. The Fund, like the Bank, has adapted greatly to the changing circum- stances in the world economy. Assistance to low-income countries under the structural adjustment facility and the enhanced structural adjustment facility has risen significantly, and the extended Fund facility has been revitalized, with a number of new arrangements already in place. If the Fund is to continue to play its role effectively as the world's central monetary institution, it is crucial that its size be kept commensurate with the size of the world economy, so that it may be adequately equipped as in the 1960s and 1970s, to cope with adverse contingencies. In recognition of this need, I would urge that all member countries reach an agreement on a substantial quota increase, and that the Ninth Review of Quotas be com- pleted by the end of this year. The distribution of any quota increase will, of course, have to take into account each member's relative position in the world economy. Conclusion As we bring the 1980s to a close, it is clear that the level of global interdependence will deepen in the years ahead. I believe we all agree that the aim of our deliberations at these meetings, therefore, should be to preserve and enhance our commitment to global prosperity through international cooperation. With all nations doing their fair share in a strengthened institutional framework for multilateral coop- eration, the new horizon of the 1990s will indeed be bright. 10 ANNUAL ADDRESS BY BARBER B. CONABLE PRESIDENT OF THE WORLD BANK GROUP Introduction Mr. Chairman, Governors, Ladies and Gentlemen: I would like to wel- come you all to these Annual Meetings. I particularly want to welcome the delegation of Angola, the newest and 152nd member of the Bank Group. Before proceeding with my remarks, I want to say how sad we all are about the tragic loss last week of the Bank Governor for Chad, Mahamat Soumaila, and Mr. Midallal Ali Abakar, a member of the Chadian delega- tion. Our sincerest sympathy to their families, friends and colleagues. We have been hard at work over the weekend, and during the next few days, I look forward to continuing our friendly and productive discussions of the important business at hand. Our business-working for the future welfare of all people-could hardly be more pressing. As we enter a new decade, the World Bank-your World Bank-wants to make that future brighter, more productive and more ful- filling for the people of the developing countries. Of course the first task must always be to deal practically and efficiently with the problems of today. But we must never lose sight of that great vision. As we enter the 1990s, we must take a hard look at the development priorities for the decade ahead-priorities both for developing countries and for the international community as a whole. The Outlook for Development The development record of the 1980s has been mixed. Some developing countries have made extraordinary strides in the past ten years. Their rapid growth and new presence in world markets are an inspiring example. The outlook for their peoples, from Korea to Indonesia, from Thailand to Maur- itius, is one of hope and new achievements. But the 1980s have also been a painful decade. We have learned a bitter lesson: development can be reversible. More developing countries have suf- fered reverses in the last decade than have experienced success. The con- sequences of decline will be felt well into the 1990s-in Sub-Saharan Africa, in the debtor countries of Latin America, and in Central Europe. Yet, as we begin the new decade, the potential for progress is great. The political and ideological forces which have polarized the world for half a century are diminishing. Political and economic power is becoming less concentrated. There is a new recognition of the pressures that bind countries together: the need for peace and mutually assured security, the rapid emerg- ence of a truly global economy, and the imperative of managing the world's resources in the interests of people everywhere. 11 This new reality should lead more countries to seek solutions through cooperation, despite the differences that remain. The result should be more plural economic and political institutions, and expanded opportunities for individuals and communities. The possibilities of building a peaceful, pros- perous and sustainable world economy in the 1990s grows stronger as these forces take hold. In short, to quote the social philosopher John Gardner, "The prospects never looked brighter and the problems never looked tougher. Anyone who isn't stirred by both of those statements is too tired to be of much use in the days ahead." A vigorous World Bank is planning to be of use in ways I shall describe. The State of the Bank With your support, the World Bank Group has had a strong and active year since we last met. We committed a record $21 billion in Bank and IDA resources and mobilized an additional $9.3 billion in cofinancing. IFe's commitments rose by one-third to $1.3 billion, and its net income vitually doubled-as it has in each of the last three years-to almost $200 million. The Bank Group's newest member, MIGA, has put in place operating procedures, and has started its business of policy advice and guarantees for private investment. We at the World Bank are keenly aware of the scale of the problems that face our members. The Bank's development work has continuously evolved to meet the changing needs of its Borrowers. Adjustment lending has come into its own. The breadth, depth and intensity of the Bank's policy dialogue with its Borrowers has increased, and Bank efforts in the areas of resource mobilization and aid coordination have grown. Our operational collabora- tion with non-governmental organizations has increased sharply. So, too, has our commitment to environmentally-sound development. And most re- cently-following announcement of the Brady initiative-the Bank ap- proved its first loans with set-asides to facilitate debt reduction in Mexico and Venezuela. The Bank is also working on debt reduction initiatives in other countries, such as Chile, the Philippines and Costa Rica. Change is the only constant in human endeavor, and the Bank, as a human institution, is no exception. But one thing that has not changed over the Bank's 43-year history is its basic mission-to reduce poverty and accelerate growth. The Bank spends a great deal of time analyzing economic statistics and worrying about macroeconomic performance. But, in the end, we know that what we are dealing with is people, not statistics. Unless the quality of life of individual poor people is improved by what we do, no amount of statis- tical analysis or macroeconomic planning will justify our work. Mr. Chairman, as we gather on the threshold of a new decade-the one in which the Bank will celebrate its 50th anniversary-I am pleased to 12 report to you that the state of the Bank is good. This unique institution has continually demonstrated its resiliency and adaptability in responding to our Borrowers' needs. The Bank's main asset, of course, is its corps of extraordinarily skilled and committed staff. Their capacity for change, their ability to build and apply the Bank's knowledge, experience and financial creativity have been, and will continue to be, central to the success of our efforts to improve the lives of the world's poor. To continue our fight against poverty in the poorest countries of Sub- Saharan Africa and Asia, a Ninth replenishment of IDA is vitally needed, since full commitment of IDA8 funds is rapidly nearing completion. Nego- tiations for IDA9 are underway. It IS my hope tht they will be brought to a successful conclusion in the near future, and that the 9th replenishment will be at least as large, in real terms, as was IDA8. Anything less would let down hundreds of millions of people living in conditions of squalor. Any- thing less would be a grave disappointment. The International Monetary Fund, our sister institution, is also seeking a quota increase. I urge our member Governments to give quick and favorable consideration to this increase, too, so that the Fund can sustain and expand its own very important work. The Task Ahead The task ahead is clear. The development agenda for the 1990s must be to harness growth and use resources creatively, so as to improve the quality of life for hundreds of millions of poor people everywhere. This is the real challenge of development, and the central task of the World Bank and its partners, particularly the Governments of developing nations. Priorities for the Next Decade: Using National and International Resources More Efficiently Mr. Chairman, the development needs of the 1990s will be enormous: to overcome stagnation in Africa, to move beyoJ1d debt paralysis in Latin America and elsewhere, to offer growth and hope to Asia's hundreds of millions of poor people, to assist reform and renewal in countries moving away from centrally planned economies, and to reverse the degradation of developing countries' natural resources. In all of this the developing coun- tries carry the main burden of responsibility for their own future. But the industrialized world also has a vital part to play-not just in providing external resources, but also in assuring the developing countries of access to their markets, and in conducting their own economic policies so as to create a global "enabling environment" for growth. External Resources and Country Performance External finance will be crucial, not only in monetary terms, but also because with it comes new technology, knowledge and access to markets. 13 Financial flows will depend on many factors, including economic growth in the industrial countries. Any observer of the development scene knows that the prospects for public and private resource flows for the 1990s have changed. But development during the coming decade cannot, and must not, be held hostage to external finance. Governments and the donor community must focus on the creative mobilization and use of both domestic and inter- national resources. This is a fundamental requirement for healthy economic growth. It is also the best way to lay the basis for more sustainable, high- quality flows of long-term external finance. There is no substitute for good macroeconomic policies and strong ad- justment programs in the quest for economic stability and growth. These are the essential preconditions for external finance. When Governments have the courage and farsightedness to make deep-seated, sustained and credible changes, the international community should be ready to respond by providing swift, strong and reliable financial support, and by helping to reduce the sometimes painful impact of adjustment on individuals-partic- ularly on the poor. Savings and Investment Efficiency An important priority for most developing countries is to raise savings and investment rates, so as to use the energies of their people to the fullest. The developing countries which grew fastest and most consistently over the last 20 years were those that managed to sustain savings and investment at high levels-a quarter of GDP or higher. Even more important, the rapidly growing developing countries used their resources more efficiently. If devel- oping countries are to make up lost ground, what needs to be done is clear. Reforming the Financial System The financial systems of developing countries often hold the key to eco- nomic growth. If financial institutions are undeveloped, mistrusted or shac- kled by inappropriate controls, they cannot mobilize savings efficiently and allocate them to the most productive use. This year's World Development Report shows that the economic shocks of the 1980s have combined with bad government policies to undermine financial systems to a dangerous degree. Governments have weakened banks by controlling the allocation of credit, and they have disguised public sector deficits by recourse to the banking system. In many countries, the so-called quasi-fiscal deficit has become a major source of financial instability and inflation. And weak regulations have made it all too easy for banks to compound past lending mistakes by throwing good money after bad. These are not arcane technical problems: they inflict massive human damage. Because of them, people find their savings rendered worthless, the prices of everyday necessities running wildly out of control, and vital public 14 services-such as schools and health clinics-decaying for want of re- sources. Financial stability is a quality-of-life issue, too. To tackle these difficulties, interest rates need to be progressively freed. This will guide scarce savings to their most productive use. Many countries also need to reduce financial restrictions. At the same time, they require stronger regulation and legal and accounting standards. Competition should be strengthened to ensure that savers and entrepreneurs do not face financial monopolies serving entrenched interests. The Bank is assisting reforms of this sort through its financial sector lending. And IFC is helping several countries to establish securities markets and the financial institutions that will operate in them. Using Public Money Rationally If countries are to grow, and to harness that growth to the quality of life, Governments must make better use of the resources they themselves claim from the economy. This means sound public finance. Many countries will have to endure prolonged fiscal austerity during the 1990s. The capacity of the public sector will continue to be severely con- strained. This forces all of us-in industrial as well as developing coun- tries-to think afresh about priorities, and about the productivity and eq- uity of taxation and spending. Public sector deficits must not be allowed to continue fueling inflation and to crowd out the private investments that are essential to drive renewed growth. Governments need to take a fresh look at the efficiency and equity of taxes-at how to broaden the tax base; reduce excessive burdens on productive people; phase out special exemptions; and rely less on trade taxes which distort incentives against exports. In short, the pursuit of sound public finances must not mean imposing ever higher taxes on sections of the population whose productivity is discouraged by an unfair or excessive tax burden. Instead, the causes of fiscal deficits must be brought under control. When resources are tight, Governments have a particular duty to look more closely at the effectiveness-and the equitable use-of the money they spend. Developing countries need to use public funds for building functioning school systems, not white elephant projects in industry. They need essential services to be adequately maintained, not public employment expanded beyond the numbers that can be decently paid and effectively used. They need Governments to provide essential urban infrastructure, not divert scarce resources to luxuries for select groups. Better ways must be found for public expenditure to complement and spur private production, not displace it. Debt Reduction and Sound Policies Another important way to ensure that developing countries get the exter- nal resources they need is to bring their indebtedness-in those cases where 15 it is a binding constraint-down to manageable proportions. You, our share- holders, have put the Bank and the Fund at the center of international efforts. We have seen major breakthroughs in the debt strategy in the last year, from the Toronto Summit agreement to the Brady initiative. These devel- opments are welcome and encouraging. They strengthen our collective abil- ity to respond to each country flexibly, according to need and merit. We are far from the end of the debt crisis. New solutions continue to be needed for each country. The financial, regulatory and other problems which Third World debt poses will continue to be a challenge to our collective creativity. Military Expenditure As we think about the tasks of development in the coming years, we can no longer neglect a sensitive component of the fiscal problem: military spending. All countries have the sovereign right and responsibility to defend themselves. But let us hope that, in the changing political climate of the 1990s, resources are increasingly allocated to more productive purposes, in industrial countries as well as developing countries. While there is much variation among developing countries, as a group low-income countries currently allocate around 20 percent of central gov- ernment budgets to defense. In the mid-1980s military spending in devel- oping countries exceeded spending on health and eduction combined. While many components of national budgets have been cut, the $200 billion which the developing world spends annually on the military has largely been pro- tected. And arms are often a prime source of external debt: military debt accounts for a third or more of total debt service in several large developing countries. Developing countries on one side, and their arms suppliers and creditors on the other, must adapt to a world where budgets are tight. It is important to place military spending decisions on the same footing as other fiscal decisions, to examine possible trade-offs more systematically, and to explore ways to bring military spending into better balance with development prior- ities. In evaluating their military expenditures, Governments should be re- alistic, but they also should remember the human consequences of these choices. The Bank's Operational Role Steady effort in all these directions can dramatically improve developing countries' prospects in the 1990s by creating new opportunities for the enterprise of their citizens. 16 The Bank will use its strengths flexibly to support these efforts by our members. We will retain our capacity for rapid disbursement of finance. This commitment is evident in our adjustment programs, and in the financial support the Bank is extending for debt reduction. Adjustment lending and debt reduction operations will continue to playa critical role in our support for Sub-Saharan Africa and the heavily-indebted countries. As we move into the 1990s, the Bank also will stress increasingly our core business: supporting efficient, long-term investment which multiplies do- mestic entrepreneurial energies and productivity, and which directly ad- dresses the needs of poor people. We can best do that by lending which promotes better economic policies, rational investment priorities and the development of human resources in key sectors; which creates productive assets of high quality; and which is a catalyst for other private and public development finance. We will seek other opportunities to play this catalytic investment role in our regular lending program, in our aid coordination activities, and in the Bank Group's ex- panding collaboration with the private sector. The Bank's role as a promoter of efficiency and of market-oriented in- vestment will be particularly important in the complex task of reforming centrally planned economies, as changes in these countries develop. We have a responsibility to maintain support for badly needed structural change in all countries, even when political conditions make that difficult. The Bank has a substantial involvement in several socialist countries, and our knowl- edge of the challenges of reform in these economies has greatly expanded. But there are few precedents to guide the reformers, and the economic and political uncertainties are formidable. We are strengthening our knowledge, and we will continue to build our programs in collaboration with others, and in line with the progress that these countries achieve. Priorities for the Next Decade: Environment and Individual Lives As all of us here think about development priorities in the coming decade, we should focus both on costs and resources, as well as on goals and ideals which are worthy of the great effort which will be needed. We must dare to be visionaries, even as we strive to be prudent treasurers. This is, perhaps, the hardest challenge of all. In the coming decade, it will be impossible to improve the quality of life in developing and industrial countries alike unless we do much more to conserve our global environment. We must deal with population problems, with energy needs and with sustainable agriculture. But we cannot do so by choking off the hopes of poor people and poor countries. We must protect the environmental quality of life in the fullest sense-by extending economic choice and opportunity, by ensuring strong economic growth and by reduc- ing mass poverty in the developing world. 17 Expanded Bank Environment Effort We are all very much aware of the great environmental challenges facing the world. The Bank is taking new initiatives in what is now a common international effort. We are urgently adding to our skills and knowledge, and we have greatly expanded the environmental values in our lending. A third of all our projects, half of our energy projects and 60 percent of our agricultural projects last fiscal year contained specific environmental com- ponents. We will lend $1.3 billion for free-standing environmental projects over the next few years and will triple our forestry lending. The Bank has greatly expanded collaborative work on the design and financing of environmental programs. We are actively involved in joint pro- grams with member Governments and with others, such as the United Nations Environment Program, the European Investment Bank and the regional development banks. As part of these efforts, we are building the foundations for better management of tropical forests in Ghana and Sri Lanka, for stronger protection from pollution of water supply and coastal waters in Chile and Yugoslavia, and for international collaboration on schemes such as the Environmental Program for the Mediterranean and the Asian Capital Cities Clean-Up Project. These are just a few examples. My main purpose today, however, is not to report on our current pro- grams. Instead, I wish to emphasize what I see as the key environmental task for the coming decade: to bring together the world's need for collective environmental security, and the need of poor people to be able to choose better lives for themselves and their families. Population Policy Nowhere is the connection between poverty, individual potential and the environment more dramatic than in population policy. Rapid expansion of population endangers growth in individual incomes and improvement of the quality of individual lives. This is not only, or even primarily, an aggregate problem of "too many people". The real concern is that excessive population growth puts heavy, sometimes intolerable, strain on the pressure points of urban and rural environments that are least able to bear it. The consequence is to further undermine the ability of hundreds of millions of people to escape from poverty. The solution to this exceptionally difficult and sensitive problem does not lie in attempts at massive social engineering by Governments or by the international community. Population figures reflect decisions by millions of individuals and couples as they confront the everyday realities of life: work, health, the survival chances and economic prospects of prospective children, their own old age. But we can help to make available to women, and to 18 -------------_.------_... men, the ability to make decisions which will meet the needs of individual families, and serve the wider society as well. No single step will provide the answer. Approaches must be adapted to each country's circumstances. Direct support for family planning programs and policies is essential, and must go hand in hand with action to increase productivity and welfare-especially for women-through better access to education and health services, better jobs, and higher incomes. Greater access to family planning information and services can be pro- vided through many different channels: through Governments' primary health care services, through the private sector, and through voluntary or- ganizations. Countries such as Indonesia, Zimbabwe and Botswana have demonstrated that family planning programs work-not only as an instru- ment of population policy, but as a way to improve the welfare of every- body-men, women and children. Indonesia's family planning program has grown from a coverage of 50,000 couples to over 17 million couples in less than 20 years. Zimbabwe and Botswana have stressed human resource development, along with family planning. As a result, many of their people are educated, health services are widely available, and mortality is among the lowest in Africa. Other countries with active family planning programs have been equally successful. Helping to reduce population growth is a priority for the Bank. We lent over half a billion dollars for population projects over the past five years. We expect to raise this level to $800 million in the next three years. This constitutes nearly a tripling of our population lending on an annual basis. Families need to feel confident that their children will survive and lead better lives. Households need the assurance of economic well-being which comes with secure property rights, a decent education, and basic income- generating skills. Poor people-especially when they live in environmentally or economically precarious conditions-need to be able to spread their risks, to take advantage of economic opportunities and, above all, to have secure access to food. Sustainable Agriculture This brings me to a second fundamental environmental task for the decade ahead: the promotion of sustainable agriculture. Despite the growth of cities, the coming decade will see many more people in the rural areas of Africa and Asia, and an even larger growth in the workforce which rural areas will have to absorb on and off the farm. Governments will face these pressures-and the accompanying degrada- tion of natural resources-with little prospect of a leap in yields such as the Green Revolution provided 20 years ago. We have to find ways of raising farm output which are within reach of poor people-techniques which do not rely too much on chemical inputs and engineering investments. Other- 19 wise, the present frightening rates of soil and water depletion will continue, and the livelihoods of millions of people, from the Yangtse River system to the African savannah, will be endangered. Government policies must playa major role. Underpricing of chemical fertilizers and pesticides can lead to poisonous over-use, and it discourages better methods of restoring essential nitrogen to the soil and of controlling pests. Improper pricing of water leads to waste. Subsidized electricity results in overpumping of groundwater aquifers. Unrealistic stumpage rates lead to overcutting rather than conservation of forests. Changes in such policies should aim to reflect the true economic value of land and water resources. Reform would save Governments money which they now spend on subsidies and incentives, and it would also encourage the better use of all the resources that contribute to agricultural growth. In dealing with the new challenges of sustainable agriculture, we must always be willing to re-examine existing attitudes and conventional wisdom. For instance, experts in the field of agricultural development are beginning to pay more attention to the ability of small-scale farming to spread risks and conserve biodiversity. We need to support small farmers by promoting the broader application of some basic "benign" technologies. We need to reinforce the diversity of such farms, rather than encourage dependence on a single crop. In agriculture, as in the population issue, there is a strong link between policy reform, improving the incomes and economic security of poor people, and safeguarding the environment. If we can forge those links effectively and increase attention to nutrition and health, we can in the upcoming decade make great progress toward ending hunger in the world. The Importance of Education Mr. Chairman, development must expand people's horizons. It must ex- pand opportunities-but it must also endow each individual with skills and with knowledge of how the world works, so that those opportunities can be seized. People, as I have said before, are our most precious resource. In the new century, the dividends from knowledge will grow as dramati- cally as the penalties of ignorance increase. Much of the gulf between misery and opportunity, squalor and hope, can be bridged by education, by invest- ing in the bright inquisitiveness of children and the thirst for knowledge of enterprising adults. Education, and human resource development more broadly, must be a central focus of the development effort in the 1990s. Education adds to the choices people can make. At the very least, we must ensure the availability of primary education for all children, boys and girls alike. In this, the World Bank will playa growing part. 20 Global Need for Cleaner Energy So far I have talked of environmental problems which are essentially national in character: they mainly affect the quality of individual and com- munity life within countries, and their solution lies within the grasp of national authorities. But in the new decade the world must also deal much more effectively with problems which are regional and global in reach-acid rain, ocean pollution, nuclear hazards, ozone depletion, climate change. At the heart of many of these global problems is energy. This is a vital issue for developing countries, given their vast energy needs. Fossil fuels are the main source of the gases which may produce long-term global warm- ing and changes in the climate. If these changes occur, the poor in devel- oping countries would be least able to cope. Most of these fuels are now burned in industrial countries. Industrial countries account for over 75 percent of carbon dioxide emissions, the main cause of global warming. And virtually all of the CFCs escaping into the atmosphere and depleting the ozone layer come from industrial countries. Clearly, therefore, the major responsibility to reduce emissions rests there. But plans for electrification and industrialization of major developing nations over the next decade call for big increases in the burning of coal, the least carbon-efficient of the fossil fuels. On present trends, the devel- oping world will double its share of carbon dioxide emissions from coal- fired power plants by the turn of the century-in contrast to the strong move away from coal-based power generation in industrial countries. China and India alone plan coal-based thermal power plants with a combined capacity around 150,000 MW Wood burning for land clearance and fuel is another potent source of developing countries' emissions of greenhouse gases. If the danger of global warming from present and future energy use is to be reduced, international cooperation will be indispensable. We cannot now know the precise timing or extent of the threat. But we cannot let that be an excuse for inaction. Greater efficiency in the use of energy is a fundamental requirement for all countries, and is amply justified on purely economic grounds. Too many countries still subsidize the profligate and environmentally harmful use of energy by industry and by households, and provide few incentives for the introduction of more efficient technologies. A complementary approach in the 1990s would be to encourage the use of gas, a plentiful and relatively "clean" fuel, while vigorously pursuing research and development of more ambitious energy alternatives for the new century. Taken together, increased efficiency and increased use of cleaner fuels could greatly reduce greenhouse gas emissions from developing country plants-perhaps by as much as a third by the end of the century. 21 Energy is vital to development. We cannot turn our backs on the needs of the poor countries. Unlike industrial countries-which, as we all know, are the source of most of the environmental damage in the world today- developing countries cannot forego growth or switch to more expensive fuels without help. Unless the necessary resources are made available, they will be compelled to use energy sources which seem cheapest in the short term. In the same way, poor people cannot switch to cleaner and more efficient means of cooking and heating unless new technologies are brought within their economic grasp. Closer international collaboration is needed to tackle these growing prob- lems of the global environment. Industrial countries should accept their own long-neglected responsibilities and put their environmental house in order. Developing countries need to put aside any remaining defensiveness and recognize that determined action is in their own national interest. The key will be to think globally and act locally. If that can be done, we will help the developing countries to avoid repeating the damaging mistakes of the industrialized world. Extending the necessary help to make this possible is in all our interests. Shared Responsibilities for the 1990s Mr. Chairman, my address today has been about the basic goal of devel- opment-enhancing the quality of hundreds of millions of individual human lives. No amount of statistical argument will help the cause of development, unless individuals find better lives. Our work, in the words of Pericles, must be "woven into the stuff of other (peoples') lives." This is what makes development work challenging and singularly exciting. If the international community can concentrate its effort on that simple and inspiring goal, the 1990s can be a decade of great hope and achievement. I have argued that we must build on the new atmosphere of reduced international tension and the emergence of more pluralistic societies to create a more open world economy, in which developing countries can par- ticipate as productive and efficient partners. Despite the scarcity of addi- tional external finance, we must creatively mobilize resources and ensure that these are used for high-priority investments and social services. We must meet the growing environmental challenge through closer international cooperation and by expanding the opportunities and economic freedoms of people everywhere, particularly the poor. All this requires action now-on development resources and growth, on population and education, on renewed agricultural development, on pre- serving our common global heritage-if we are not to return to these meet- ings year after year to review an ever-worsening picture. 22 If we do act, I believe we can help developing countries to assume fuller responsibility for their own economic destinies, even as they participate more actively in a growing global economy. We can reduce poverty and protect the environment in ways which respect the rights and hopes of individual people. We can meet the global environmental challenge while respecting the sovereignty of poor countries. And we can encourage greater diversity in economic and social institu- tions, so that the abilities of every single one of us can flourish to enhance all our lives, and not be stifled or brushed aside. If we do act effectively together, I believe we will be able to look back on this time as a turning point. We will have laid the ground for nations and peoples to work together in building an efficient, peaceful, and unpolluted world economy. In tackling the problems of the coming decade, the World Bank is just one institution-but a powerful and resourceful one. In partnership with other multilateral institutions and with you, our shareholders, we will meet the challenge. 23 REPORT BY B. T. G. CHIDZERO CHAIRMAN OF THE DEVELOPMENT COMMITTEE The Annual Report on the work of the Development Committee for the year ending June 30, 1989 has been formally submitted to the Chairman of the Boards of Governors. The main focus of the Committee's attention this year was on problems and issues in structural adjustment, development prospects for severely indebted countries and the evolving debt strategy, the promotion of economic recovery and development in Sub-Saharan Africa, and the World Bank's support for the environment. In addition, the Com- mittee discussed international trade developments, the Ninth Replenish- ment of IDA, and trends in the transfer of real resources to the developing countries. Problems and Issues in Structural Adjustment The Committee conducted the first global review at ministerial level of experience with growth-oriented structural adjustment programs supported by the Bank and the Fund. The essential ingredients for the achievement of successful and sustainable programs were identified and included, in partic- ular: political commitment, broad public support, integration of poverty considerations, adequate and timely financing, and supportive external eco- nomic conditions. Members concluded that while growth-oriented structural adjustment can yield positive results even under unfavorable external conditions, the pace, scale, and sustainability of benefits could be adversely affected by an un- supportive external setting. The industrial countries were accordingly called on to adopt economic policies supportive of developing countries' adjust- ment efforts. I would stress the importance of ensuring that the conclusions that the Committee reached on the question of structural adjustment programs are translated in practice into Bank- and Fund-assisted programs, and that these be monitored by the Committee. Development Prospects for the Severely Indebted Countries The problems of all groups of severely indebted countries were discussed at both meetings. The Committee continued its review of the debt strategy of the middle-income heavily indebted countries. It expressed concern at the decline in the prospects for growth and development of these countries. Members, therefore, welcomed proposals to strengthen the debt strategy by including debt and debt service reduction. Members called on the World Bank and the Fund to offer assistance for adjustment programs and to support voluntary market-based debt reduction transactions and debt ser- vice. The Bank and the Fund were asked to develop and implement specific 24 proposals to achieve these objectives as expeditiously as possible. In Sep- tember, the Committee reaffirmed its support for the strengthened debt strategy and commended the Fund and the Bank for taking prompt action. Members were encouraged by the progress made in several cases in the negotiation of debt and debt service reduction arrangements with banks. In the case of the low-income debtor countries, the Committee welcomed the arrangements worked out by the Paris Club to provide concessional debt relief. Members also agreed to continue the collaborative framework for donor action under the Special Program of Assistance coordinated by the Bank and to discuss in the spring of 1990 the long-term perspective for Sub- Saharan Africa. The Committee welcomed measures announced recently by several donors to forgive official development assistance debt owed by low-income countries in that region. It noted steps taken by the Bank to support commercial debt reduction in eligible IDA-only countries. As the debt problems of these countries remain severe, the Committee requested the institutions to undertake an evaluation of the impact of the various debt relief measures taken so far. The members also drew attention to the exter- nal financial problems of countries that had avoided debt service difficulties and urged that efforts be made to maintain an orderly and adequate flow of finance to these countries. Environment and Development A report by the World Bank on its efforts to support the environment and to increase public awareness of Bank environmental activities was re- viewed by the Committee at its September meeting. Members commended progress achieved so far, including the preparation and release to Executive Directors of environmental impact assessment guidelines. The Bank was encouraged to increase public access to environmental information on proj- ects and programs. The Committee recognized that additional external financial and technical support on appropriate terms was needed by the developing countries to help meet the costs of integrating environmental considerations into development projects. The Bank was asked to prepare a study of the mechanisms and financial requirements that may be needed. The Committee also emphasized the links between population growth and poverty and environmental degradation and called on governments, multilateral development institutions, and bilateral agencies to strengthen their efforts in the field of population. Other Issues The Committee reviewed current international trade developments, not- ing that the Uruguay Round had now entered its final and critical phase. All countries were called on to take the fullest advantage of the unique opportunity provided by the Round. The Bank and the Fund were requested 25 to keep under study, in close consultation with the GATT, the possible implications of regional trading arrangements for developing countries for discussion at a future meeting. In reviewing the status of trends in the transfer of resources, the Com- mittee noted the continued decline in net flows to the developing countries. Donor countries below the 0.7 percent ODA/GDP target were urged to redouble their efforts to increase assistance levels. The Committee made a strong call for a substantial replenishment of IDA to meet the pressing needs of IDA recipients for concessional assistance. Concluding Remarks The Committee has come to grips with the key issues outlined above and has, I believe, cast its net wide in coverage of different groups of countries and their pressing problems in a policy- and action-oriented manner. The work of the Committee has, therefore, become more relevant than ever. 26 STATEMENTS BY GOVERNORS AND ALTERNATE GOVERNORS! AFGHANISTAN: HAMIDULLAH TARZI Governor of the Bank Mr. Chairman, on behalf of the delegation of the Republic of Afghanistan I would like to join the previous speakers in extending my congratulations on your assuming the Chairmanship of the forty-fourth Annual Meetings. We are aware that the outcome of our deliberations in the banking and monetary field will have a crucial bearing on the hopes of millions of people, especially those living in the developing and least-developed countries. We are confident, however, that under your able and committed guidance, the work of this most important Annual Meeting will prove successful in the sense that-as Mr. Conable of the World Bank put it in his recent speech- we will work for the future welfare of all people. My delegation has come to this meeting in a spirit of understanding and cooperation and to contribute constructively toward finding solutions to problems facing the world economy-within the global context character- ized by the deterioration of the trade and financial environment. In order to stimulate recovery and thus revitalize development, the most serious attention should be devoted to the three key interrelated sectors: commod- ities, trade, and finance. With regard to commodities, it is common knowledge that this sector constitutes the principal domestic economic activity for many developing, and almost all least-developed, economies and that its importance cannot be overestimated. Speaking about trade, due to the current unfavorable situation of serious decline in real resource flows, the developing countries are obliged to in- creasingly depend on trade. However, the various protectionist measures and large financial imbalances of the developed countries tend to undermine the development role played by exports in this field. It may be recalled that the liberalization and facilitation of international trade and the removal of subsidies were explicitly emphasized by Mr. Camdessus, Managing Director of the IMF, in his very eloquent speeches both in Berlin and at these present Washington Annual Meetings. This holds true especially in the agricultural sector, which, beyond doubt, is the most significant for the developing coun- tries, although, of course, textiles and other semi-manufactured items can- not be excluded. 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. 27 Moreover, the least -developed countries have been increasingly margin- alized in world trade. Based on UNCTAD estimates, their share of world exports declined from 1.5 percent in 1950 to an insignificant 0.4 percent in 1986-principally because of structural and geographic handicaps, such as being landlocked or a remote island country. These geographic disadvan- tages, being unique, should be evaluated and treated on a quite different basis than chronic underdevelopment. Unfortunately, due to the lack of political will the whole issue of landlocked and island developing countries is being put on the international shelf-abandoned and forgotten. This can also be said for the halfhearted implementation of the Substantial New Program of Action (SNPA). In the arena of finance, the fall in export earnings, the heavy burden of debt servicing, and the contraction of private bank lending, combined with the nonimplementation of official development assistance (ODA) commit- ments and International Development Association (IDA) resources, have resulted in severe liquidity problems for the developing countries. This at times even affects their political stability. Moreover, the detrimental and corroding effects of external debt are posing for many developing countries a continuing impediment to access to international lending and to a revival of their imports. This is combined with an ever-increasing and alarming depletion of scarce and meager foreign exchange assets. However, the fluctuations in the major world currencies seriously endan- ger international exchanges, lead to considerable speculative surges on the money market, and sustain protectionist trends. Thus, it is clearly the task and moral responsibility of the leading international financial institutions, such as the World Bank and the IMF, to regain their pre-eminence as truly development-oriented financing agents and to find viable solutions, perhaps by means of political dialogue in a forum such as UNCTAD, to the debt problem, which is mainly the result of the developed countries' macroeco- nomic policies. In this context it cannot be overemphasized that interest payments on external debts should take into account the actual foreign exchange available to the developing and least-developed countries. Other- wise it will result in a debilitating reverse flow of real resources from the developing to the developed countries. At this point it should be underlined that the usual IMF procedure for ad hoc debt relief-whereby the debtor country in most cases is required to make a stand-by agreement with the IMF as a precondition to obtaining debt relief oriented toward medium-term balance of payments support to temporarily enhance the debtor country's debt-servicing capacity-does not take into consideration the basic cause of the debt crisis because it fails to distinguish symptoms from underlying causes. These causes-all of which are beyond the control of the developing countries-include shortfalls in export revenue, decreases in multilateral and/or bilateral financial inflows, 28 tariffs, subsidies, and other trade restrictions imposed by the developed countries on the developing countries' trade, especially in regard to agri- cultural products. It may be recalled that in the early 1970s-when the total external debt of the developing countries stood at only US$21.6 billion according to IBRD figures-the UN General Assembly adopted Resolution 3039 at its twenty- seventh session, which states, inter alia, and I quote: l. Requests the Trade and Development Board to study, through its Committee on Invisibles and Financing Related to Trade at its sixth session, the problems deriving from the burden for the developing coun- tries represented by the servicing of their external debt, including the desirability and feasibility of the establishment and operation of a spe- cial fund for the financing, and/or compensation, of the interest on that debt; 2. Further requests the Secretary General of the United Nations Con- ference on Trade and Development to prepare, after consultation with the President of the International Bank for Reconstruction and Devel- opment and the Managing Director of the International Monetary Fund, a study on the matters referred to in paragraph 1 ... Therefore, our delegation proposes that, based on the aforementioned United Nations General Assembly resolution, the IBRD and the IMF at- tempt a serious followup on this interest-subsidy scheme. Much has been said by the IMF authorities and especially by Mr. Cam- dessus, Managing Director of the IMF, on the need for structural adjustment policies on the part of developing countries. While not discounting or de- nying the validity of this line of thought and despite Mr. Conable's obser- vations in his recent speech in Washington D. C. on the diminishing political and economic power, the fact remains that the debt problem, including other chronic economic and financial ailments of the developing countries, ema- nate, for the most part, from the macroeconomic and financial policies of the major industrial countries. Therefore we believe that without political will and real reform in the overall economic and financial policies of the major developed countries-the efforts of the developing countries toward structural reform or adjustment, better economic management, and the disciplined monetary and fiscal policies mentioned in Mr. Camdessus' speech, especially under imposed wartime economic conditions, could prove to be more of an academic than a practical exercise. That is why the developing countries, since the establishment of the World Bank and IMF, the two most powerful international organizations, have consistently called for realistic reform in the monetary, financial, trade, and service sectors of the world economy; in the absence of a frank joint effort toward this goal, efforts made by the developing countries' economies to increase the volume of exports and other measures are, in the end, nullified 29 as a result of protectionism and other trade practices and policies of the industrial countries. Despite the fact that our Revolution is entering into its eleventh year, contrary to the provisions and articles of the Geneva accords to which Afghanistan has faithfully abided, and notwithstanding the agreed-upon goals and aspirations of the recent meeting of Heads of State or Govern- ments in Yugoslavia-whose main premises recommend nonalignment and noninterference and in which our Head of State, Dr. Najibullah actively participated-nevertheless, our country is still confronted with foreign-in- stigated and extremist-perpetuated, large-scale human and material losses. Notwithstanding these internal and external obstacles and impediments and large-scale armed confrontations and destructive activities carried out by the aforementioned elements, Afghanistan has and is carrying out an impressive program of reconstruction, rehabilitation, and general regener- ation of the national economy. In the economic arena the Republic of Afghanistan is making every effort to further strengthen the state sector, whose role in the overall socioeco- nomic development aimed toward promoting public welfare is undeniable. However, concurrently, the Government is attaching great importance to the further promotion and participation of the private sector in the country's socioeconomic development. For example, various incentives-such as tax holidays, custom duty exemptions on raw materials, ample foreign exchange allocations, and, above all, the newly promulgated Foreign and Domestic Investment Law, which provides vast possibilities for joint initiatives in the commercial and industrial fields-indicate the Government's desire for the further expansion, promotion, and development of the historic role of pri- vate enterprise in the overall development of the national economy. In order to substantiate the above statement, let me give a few figures: over 60 percent of foreign trade, over 70 percent of GNP, and over 90 percent of agricultural production and activities relate to the private sector. According to the studies made by the Office of the UN Coordinator for Humanitarian Assistance, Afghanistan, as one of the lowest per-capita- income countries in the world, would be entitled to a total aid package of more than US$2.5 billion during the 1980-87 period, based on an annual average of US$17 per capita. However, it is not only ironic but lamentable that, with the exception of the very substantial, appreciable, and timely bilateral and multilateral financial and technical assistance made available to us by the U.S.S.R. and some other friendly countries, aid as a whole virtually halted beginning in 1979; during 1980-86 Afghanistan received only the equivalent of US$1 per capita in contrast to the US$17 per capita it is due as a developing country. Before concluding my remarks as Minister of Finance and Governor of the Bank for the delegation of Afghanistan, I feel it is my duty to recall the fact that a few weeks prior to the current Bank and IMF meetings, a bank- 30 related source saw fit to widely publicize some inaccurate information con- cerning my country's being in arrears in IDA obligations and thus excluded from further financial assistance. As things turned out, this unfounded expostulation was later belatedly retracted by the same source that had initiated its publication through the mass media. My delegation, representing the Republic of Afghanistan, as a loyal, true, and long-time member of the Bank and Fund, deplores this indiscreet and untimely action, which tended to cast doubt on the financial integrity of its faithful member. We sincerely hope that in the future the concerned hon- orable authorities of the Bank and IMF will see to it that similar unsub- stantiated and misguided comments, incompatible with the worldwide rep- utation and undeniable international prestige of such august and respectable world institutions, are not repeated to the detriment of the reputation of one of its, perhaps materially poor but true and loyal, members. ANGOLA: AUGUSTO TEIXEIRA DE MATOS Governor of the Fund I would like to begin by thanking all those present for having made possible the presence of delegates from the People's Republic of Angola at these meetings for the first time, an event marking a new stage in the recent history of Angola. I would like to take advantage of this opportunity first of all to share the message of peace that the Government of my country has been repeating to the world. Most of the countries of southern Africa have become inde- pendent only recently, and sources of instability left over from the colonial past still remain. Our experience shows that only a combination of domestic policies of national reconciliation and a foreign policy of cooperation for development can bring lasting peace to this region. The only realistic path to the peaceful cohabitation of the peoples of southern Africa is respect and a strengthening of the national sovereignty of the existing states. The reconciliation, under international law, of all legitimate national interests is unquestionably the path to take, even if, in the long term, only the economic development of the region as a whole can consolidate the political initiatives for peace. The past has shown, and the present has borne out, that Angola, owing to its transportation network and productive potential, especially in the field of energy, constitutes an essential ingredient in the balance of the region. Angola's restoration of economic relations with its neighbors is an essential step if we wish to avoid the situations of dependency which are today a source of mistrust and instability. We are aware of the responsibilities we have as a result of our geopolitical position, which is why we call upon the international community to give the Government of the People's Republic of Angola the support it needs to play its proper international role. Our commitment to a path of national recon- 31 ciliation and international cooperation is serious; it is not by making the economic life of my country difficult, but rather by treating Angola as a reliable economic partner, that it will be possible to help achieve peace. If I may, I would like to dwell for a moment on the reasons taken into account by the Government of my country in submitting its application for membership in the Bretton Woods institutions. Although various economic problems led us to favor negotitaions with the IMF over other economic policy actions, the decision behind the presence here today of an Angolan delegation was based on a series of principles. And it is on the basis of these principles that we have already begun to restructure our national economy. Angola's nonparticipation in the inter- national financial organizations has meant that we have been unable to avoid falling into situations of financial dependency, and as a result our foreign trade is today to an alarming degree bilateral. Being forced to purchase at high prices and unable to sell at better prices, Angola found itself the victim of increasingly uneven trade, year after year. To break this cycle of impoverishment would in itself have been sufficient reason to join the IMF as quickly as possible, but we were also motivated in our decision by our domestic problems. At national independence, the Government of the People's Republic of Angola chose to leave the escudo zone and to adopt an independent national currency. Since then the Angola banking system has issued our currency-the kwanza, which will soon form part of the IMF reserves-independently. Initially, and for a long time, we did not have enough experience in managing our national currency and were consequently unable to avoid serious monetary imbalances, the most obvious and harmful of which was undoubtedly the considerable gap existing between the official and unofficial exchange rates. We believe today that these imbalances-which, according to the leading economic indicators, led to the poor performance of our economy-were unavoidable, as we did not have specialized banking institutions or financial instruments adapted to the financing needs of the major economic sectors. We certainly do not wish to deny the pertinence of these indicators, but we do feel that our current problems are not so serious that they prevent us from considering the future with optimism. The frequent reference made by our international partners to our economic potential supports us in this view. It is this confidence in the economic future of Angola which has led us to begin the rehabilitation of our economy. In the area of economic management we have adopted the principle of monetary stability, even if the current situation of our country means that we must consider this ob- jective a serious challenge. During the past two years, the Government of the People's Republic of Angola has passed laws and regulations that will permit the establishment of a network of diversified banking services, and has identified the kinds of 32 banking instruments which will help channel savings to public investment in an orderly fashion. Other laws and regulations will be passed to give all enterprises, whether they be public, semipublic or private, national or for- eign, free access, without discrimination, to the financial market as soon as possible. In addition, recently approved legislation on foreign investment is pro- moting initiatives in the fields of banking and insurance, which will facilitate the influx of foreign capital on the domestic market. National production and distribution companies will thus benefit from critical new opportunities. The rate at which all of this will be achieved will depend, inter alia, on the reorganization of the public treasury and the central bank. We do not feel that these tasks call for solutions unique to Angola, as a general framework to be followed can be taken from the experience of countries which today have solid monetary institutions. It is for these reasons as well that we hope to call upon the undeniable expertise of the IMF and the World Bank to help us build up the Angola economy on sound monetary bases. It should not be surprising to you that we share the currently widespread opinion that the external debt lies at the heart of the problems threatening the functioning of the world economy. This is a central issue in the design of our economic policy and we refer to it without hesitation, for, as everyone knows, in its relations with creditors the People's Republic of Angola has adopted the principle-which I reaffirm here today-of treating external financing for what it really is, namely contracts which must be respected. Fairness and common sense both lead us to this attitude: we realize that no foreign investment will flow into a country unless it can earn a normal return there. Accordingly, we plan to adopt in the near future a system for record- ing exchange operations which will enable Angola to honor its regular ex- ternal debt service payments without necessarily having to incur net capital exports. In this way, the obligation to provide a return on capital already invested in our country will be reconciled with the need to attract a regular flow of new capital for the development of the agricultural, handicrafts, industrial, commercial. and services activities now lacking for our people. Our request to join the IMF and the World Bank was made responsibly, and we will do everything in our power to measure up to our new member- ship status. I would like to repeat our thanks to all the governments which have permitted us to be here among you in Washington today, and I must also mention the gratification felt by all the members of my delegation since our arrival in this great and beautiful country in seeing for ourselves the truth of the image of U.S. hospitality. We, the representatives of the Government of the People's Republic of Angola, are thus among you today, prepared to fulfill all the duties and assume all the rights set forth in the Articles of Agreement of the Interna- tional Monetary Fund and the World Bank. 33 ARGENTINA: NESTOR RAPANELLI Governor of the Bank (behalf of the Fund Member Countries of Latin America) We are addressing this Annual Meeting of the International Monetary Fund at a particularly important time for our region and for the entire world. International relations are undergoing unprecedented and dramatic changes, of proportions unheard of in the postwar period. Industrial coun- tries are joining together in trading zones the size of continents. Fiscal and external imbalances persist among the major developed countries and are transmitting instability and rigidities to the international monetary system. The incessant and increasing impact of science and technology continues to be the principal source of international economic growth and a source of profound changes in the productive structures of both the industrial coun- tries and newly industrializing countries. A new decade is beginning, and beginning in a world that is quite differ- ent-politically, economically, and socially speaking-from the one we now live in and have been living in. Considering these enormous changes, what is there left for a representative of Latin America to say in cis annual message here? Where does Latin America fit in the multifaceted develop- ment process that is taking shape before our very eyes? Or are we moving toward a world of large, insulated centers of growth and prosperity sur- rounded by vast, arid expanses marked by abject poverty, living on the edge, and underconsumption? The answer to these questions is categorical and unequivocal. All people on Earth want to be a part of the virtuous circle of economic progress. Everyone, even those governed by doctrines which exalt central planning, now recognizes the virtues of free trade, private initiative, the allocation of resources in a manner consistent with prices freely determined by the mar- ket, and, finally, the potential for change that human beings have when freed from overregulation and excessive constraints. The Latin American countries are also attracted by development and share both the desire to achieve it and an understanding of the effort they will have to make. Their peoples are working with perseverance and courage to streamline their economies, improve productivity, create the security and stability needed to promote domestic and foreign investment, and, by es- tablishing clear rules-·of the game, to end the problem of capital flight. Finally, and above all, they are working to overcome inflation, our conti- nent's endemic ill, which is corroding and destroying the very foundations of economic and social coexistence. The fiscal effort being made by our countries to attain this objective is unprecedented in the world. We must not only eliminate the deficit, which comparative statistics show is no easy task anywhere in the world, but also 34 must generate a current account surplus so that we can fight the external debt problem with real resources. The problem is that, in many countries in our region, export earnings as weIl as the proceeds from assets held abroad go to the private sector, while the Government bears the burden of the external debt overhang. In fact, the extreme difficulty of achieving a fiscal surplus has led countries to issue domestic currency with which to purchase the foreign exchange needed to make debt service payments. This has again and again unleashed high inflation and even hyperinflation in some of our countries. Many social programs must be put aside, and important functions forgone by the Government, in order to obtain the required surplus. Just as difficult as achieving a budgetary surplus is attaining a positive trade balance, in that our efforts to export are increasingly impeded by protectionist measures adopted by our potential purchasers. In some cases we must compete with the subsidization of domestic industry in the devel- oped countries; in others, there are tariff and nontariff barriers to imports from our countries. If we add to the cost of debt service the obstacles to international trade, it is clear that the future is quite problematic, if not to say virtually impos- sible. In addition, the high interest rates on our external liabilities, more than reflecting supply and demand on the international market, are a reflection of policies implemented by the developed countries to solve their own fiscal and trade macroimbalances. By placing excessive emphasis on the use of monetary instruments, such policies tend to draw attention away from the need for such countries to make fiscal adjustments themselves, even as our adjustments must be effected without any aIlowance for extenuating circum- stances. The debtor countries thus find themselves obliged to bear the burden of their own adjustment and, through interest rates which swell the external debt, to bear part of the adjustment burden of the industrial countries. On the subject of the solution to the debt problem, I would just like to emphasize a few basic points: the need in the debtor countries to implement macroeconomic adjustment and structural reform programs that are aimed at achieving sustained economic growth and improving their external ac- counts; the need for the creditor countries to contribute by modifying do- mestic regulations so as to promote debt reduction operations and by pro- viding larger financing flows: the need for the multilateral organizations, particularly the World Bank and the Fund, to play an active, leading role, and for them to be provided with the resources they need to take on this important task. I would like to take this opportunity to confirm our support for a substantial increase in Fund quotas. FinaIly, I would like to emphasize the need for greater cooperation on the part of the commercial banks in 35 financing our programs and in implementing debt and debt-service-reduc- tion operations. All things considered, as President Menem has just said, this is a typical case of "mutual guilt": we happily and irresponsibly ran up our debt, but real interest rates on these loans also rose unfairly. We must all cry "mea culpa" and assume our share of the responsibility-debtors and creditors and the governments of both. If we do, the solution will be an intelligent response by all to the realities of the situation. We believe that at this juncture there can be no doubt that approaches toward a definitive solution to the debt problem must inevitably include a substantial and realistic reduction in the level of debt and debt service. Perhaps this is a new name for a new Marshall Plan-from which Latin America never benefited-because the past and present impact of the debt on our people has been every bit as lethal as war. I would like to underscore the spirit with which our countries, particularly Argentina, are doing their share in solving the crisis. Our starting point is our awareness of the enormous changes taking place in the world and the basic prerequisites for entry into the international currents of growth, technological progress, and trade. In the case of Argentina, the point of departure for our Government was a flare-up of hyperinflation resulting from many years of successive and painful adjustments and collapses and from a long period of what could almost be called structural stagnation. The people of Argentina have understood the need for drastic change. We have undertaken sweeping and definitive fiscal reforms that will bring us in what remains of 1989 and throughout 1990 a surplus compatible with the proper functioning of the economy. All state subsidies have been elim- inated, except for minimum allocations to the poorest sectors and those aimed at achieving equal opportunity in the education system. Emergency taxes have been introduced, along with sharp increases in the rates for public services. The domestic public debt has been rescheduled. We are in the process of making the running of the Central Bank independent of the decisions of the executive branch. Last, we are laying the basis for a sound and solvent public sector over the long run. This will once and for all remove the danger of inflation. We are proposing a production revolution through a new economic system that will operate with the greatest possible freedom and only the necessary minimum of regulation. A broad-based market economy, combining economic freedom with so- cial justice and personal interest with solidarity, will be the vehicle for promoting competition amid stability and consolidating the conditions for economic takeoff. This will be achieved through broad privatization of public enterprises; the lifting of restrictions on imports and exports of goods and services; 36 -------------_.·.....- ... - ... deregulation of the exploitation of natural resources; customs reform that stimulates production, on an equal basis and without subsidies, for both the domestic and export market; tax and labor reform; modernization of the social security system; the dismantling of public and private monopolies; deregulation of the local capital market; and, last, the definitive establish- ment of equal rights and obligations for domestic and foreign investment. This is a bold and drastic program, being implemented by a government of the people chosen in free elections, democratically succeeding another government, also freely elected in accordance with our Constitution. We are thus bearing witness to a qualitative change, a watershed in our history, a true and authentic effort to put the past behind us and face the future resolutely. The first fruits have already been reaped. Whereas inflation in the month of July was more than 200 percent, the September figure will be a single digit and that projected for 1990 will not exceed 15 percent a year, which makes us once again part of the civilized economic world. Stability is a public good that we shall consolidate. The firmness of our people's resolve is in direct proportion to the depth of the crisis. They have lined up behind a disciplined program for revolu- tionary change. We have been trapped for too long in a vicious circle of debt, inflation, and stagnation. We know this vicious circle by heart: · fiscal deficits that bring in their wake inflation, capital flight, falling investment, and declining economic growth, which erodes fiscal revenue and triggers even greater inflation; · growing external debts with increasingly costly refinancing operations to pay new and higher interest charges on loans secured long ago, perhaps too long ago; · public services steadily deteriorating under growing disinvestment by the private and public sectors; and · social alienation, with the poor becoming increasingly poor, watching in a daze as the train of prosperity rushes through their lives without stopping and disappears inexorably into the distance. The people of Argentina have now cried ENOUGH. "We shall speak with deeds and not just with words," said our President Menem-deeds, daily deeds-large and small-that restore the confidence of local and foreign investors, stem capital flight and increase investment, growth and employ- ment; deeds that make it possible for the State to develop a tax base enabling it to finance its operations and achieve its basic purposes; deeds that bring Argentina back into the mainstream of the major trade and technological forces that spur global growth. We have not remained buried in the crisis. We are not willing to perish as did Lot's wife in Genesis, transformed into a pillar of salt, for having looked back upon a past of ashes, ruin, and death. The people of Argentina 37 wish to become part of the virtuous circle of economic progress and stability, with the unshakable will of a nation that has endured great suffering and whose natural riches have been left idle for too long. We are resolved to mold our own future, to enter fully into the 1990s, turning the page on the past, on inflation, and the specter of debt. As Minister of the Economy of the Argentine Republic, I ask for your sympathetic understanding in this effort, and for the willingness to open economies so that the large markets receive our products as freely as we will receive theirs. We must work together to resolve the debt problem for which there will be no lasting solution until economic growth, increased commercial and technology exchanges, and the flow of productive invest- ments make our Latin American countries not a bank account that must be paid off as soon as possible, but creditworthy nations to which potential suppliers of funds again compete to lend. This is the path for Latin America as it leaves the 1980s and enters the 1990s-from the decade of indebtedness to the decade of growth, from a decade of sovereign debt and fiscal bankruptcy to a decade of solid and powerful private initiative as an agent for change, from a decade of failure and stagnation to a decade of competitiveness, technology, and efficiency. AUSTRALIA: J. S. DAWKINS Governor of the Bank and Fund Australia joins with other members in welcoming Angola as a member of the Bretton Woods institutions. The outlook for the world economy remains generally favorable. The rate of growth in world output and trade is expected to be slower than experi- enced in recent years, but the present consensus is that the moderation in the pace of activity is unlikely to develop into a pronounced cyclical down- turn. The slowing will be welcome for its dampening effects on inflationary pressures. The achievements of the past years have been substantial. The high rate of investment in the industrial countries has been a notable feature. The strength of business confidence in part reflects the success of the sound and stable macroeconomic policies pursued by many countries in recent years. The growing emphasis being given to structural reform is laying the foun- dation for sustained growth at levels higher than we were able to achieve throughout the 1970s and early 1980s. The continued success of past efforts will depend largely on our ability to deal with a number of emerging challenges to the world economy. Foremost among these is the threat of inflation. The average rate of consumer price increases in the industrial countries is expected to be well above the outcome for recent years. Many countries 38 -------------_ .._--_ ..... - have already experienced significant increases in unit labor costs. If these pressures get out of hand and lead to a wage and price spiral, the achieve- ments of past years would be eroded. Gains in employment, structural reform, and the liberalization of world trade would be set back. The una- voidable rise in interest rates would have a particularly negative effect on investment and on the debt-servicing burden of the highly indebted coun- tries. The role of governments and of central banks is therefore to adhere to their medium-term perspective and remain vigilant against price pres- sures. The continued existence of the large external account imbalances of the major industrial countries continues to be a serious cause for concern. A gradual moderation in the pace of economic activity in countries where demand has been running excessively high will work in favor of narrowing external account imbalances. A significant reduction in the U.S. fiscal deficit also remains important because of the contribution it can make toward increasing national savings and reducing that country's large external deficit. International economic policy coordination has an important role in meet- ing the challenges still facing the world economy. The Fund has an important role in that process. However, the fundamental prescriptions remain un- changed. There can be no lasting benefits from international policy coor- dination that do not go hand in hand with domestic economic policies that are sound, well-directed, and, at times, courageous. One of the most pressing areas for policy reform is agricultural protection. In addition to its manifest benefits for consumers in the industrial countries, the liberalization of agricultural trade is among the most important means of assisting developing countries. It is important that the Uruguay Round negotiations produce significant progress with trade liberalization and re- form, particularly for agricultural trade. It is worth relating that agricultural exports figure prominently for many highly indebted countries, and industrial countries can hardly condemn high debt while their own distorted domestic policies prevent these countries from benefiting from their efficient unsubsidized agricultural products. It would do well for our remarks on debt and its solution to take account of the importance of substantial liberalization in the international trade sys- tem-access and subsidies. How incongruous it is to hear Europe's exhor- tation for the adoption of free market policies in other countries and their admiration for reforms in Eastern Europe, while remaining wedded to the quaint excesses of the CAP. ... . . . The problem of overdue obligations to the Fund is a pressing one. Australia supports the measures which the Executive Board is now taking to counter new arrears, to reduce existing overdue obligations, and to bring back into current status those members with long-standing arrears. Al- though the problem is not as serious for the Bank, arrears have expanded 39 rapidly in recent years and will need to be reversed, if they are not to undermine the Bank's capacity to assist all its members. The Fund and the Bank will need to cooperate closely in addressing the arrears problem. The developing countries have shared only unevenly in recent world eco- nomic growth, not least because of the barriers to access erected by the industrial countries to their participation. I have already spoken about the contribution that liberalization of agricultural trade could make to devel- oping countries. Developing countries also need to undertake adjustments in their domestic policies. The experiences of a number of adjusting coun- tries, especially in Asia, suggest that growth-oriented adjustment programs can yield substantial benefits, even in an unfavorable external environment. Indeed, the justification for such programs becomes even greater as the external environment worsens. We would therefore encourage the develop- ing countries to increase their efforts to adopt comprehensive adjustment programs. Of the difficulties facing the developing countries, the problems of the heavily indebted are among the most pressing. It is now widely accepted that the debt problem can only be resolved through a cooperative approach which produces debt and debt service reduction on a scale which is signifi- cant enough to reduce obligations in line with the service capacity of the debtor countries and encourages growth and a resumption of normal market access. To this end, we support the objectives of the Brady Plan and wel- come the measures taken to implement it by the Fund and the Bank. The resources of these institutions should be applied with the maximum possible leverage, and we would welcome further contributions from major creditor countries. At the same time, we are concerned that the participation by the Fund and the Bank in the resolution of the difficulties faced by heavily indebted countries not lead to a shift to the public sector of private sector risks, impairing the financial strength of the institutions and their ability to assist other members in need. The contribution that tax and regulatory changes in major creditor countries can make to the willingness of the commercial banks to participate in debt and debt-service reduction should be examined. Given these concerns, we support the strategy which is cau- tiously evolving in the light of experience. The debt problems of the low-income countries require a different re- sponse. Concessional Toronto terms for official commercial debt are appro- priate for the poorest, most heavily indebted countries. The benefits have so far been concentrated on Sub-Saharan Africa. IDA-recipient low-income countries in other regions should receive similar consideration in the context of strong adjustment programs. However, we do not consider that a case has been made for the extension of these terms to other countries. In addressing the international debt problem, the Fund and the Bank should not lose sight of countries that have strived successfully to remain current in their debt servicing. The Bank's expanded cofinancing operations 40 are a welcome addition to the instruments of catalytic support for these countries. However, their use should not be viewed as a substitute for con- ventionallending to these countries. We believe that the Fund and the Bank are now working effectively together. Their cooperation has been especially fruitful in their work in debt strategy, guidelines, and operations. This is a welcome contrast to the dif- ficulties that appeared in the relationship in 1988. We welcome the agree- ment reached between the Managing Director and the President in March 1989, which has clarified the respective responsibilities and relationships of the two institutions. Global environmental problems are a major source of concern for the Australian Government. We are actively supporting international initiatives to find solutions, including the promotion of environmentally sound devel- opment activities funded by multilateral development institutions. Concern for the environment must become a central and integral part of economic thinking and practice, and environmental concerns should be integrated fully into the design, implementation, and evaluation of all Bank programs and projects. We welcome the progress made by the Bank in this area and in increasing public awareness of its activities. The Bank needs to pay more attention, however, to the link between macroeconomic, sectoral, and population policies and the environment. A way also needs to be found to increase project-specific information in a timely fashion, while respecting the Bank-borrower relationship. IDA is an efficient and effective vehicle for development assistance to the poorest countries. Australia is a strong supporter of the Association, and hopes to see a prompt and generous Ninth Replenishment. The application of IDA's scarce resources is as important as the size of the replenishment. One important criterion is that the availability of funds to borrowers be determined by uniform criteria based on the effective use of funds, rather than by arbitrary regional or country allocations. Looking forward, there are grounds for cautious optimism. We can see many of the problems which confront us and we have the capacity to deal with them. Working together through the Fund and the Bank, we can ensure that our solutions benefit the world as a whole. AUSTRIA: FERDINAND LACINA Governor of the Bank Let me begin by welcoming Angola as a new member of the International Monetary Fund and the World Bank. The picture one gets from looking at the world economy is more positive on balance than had been expected a year ago. Growth in the industrial countries has been high, and productive investment has been vigorous. Unemployment has come down, although not as much as might have been 41 expected in a booming economy. My country, Austria, is a good example of successful development. We have acheived above-average growth rates with- out endangering price stability, while our unemployment rate is about one- third the average for Western Europe. In several Eastern European countries we see efforts toward a fundamen- tal reform of the economic system, while in others this reform process has not yet started. A difficult period lies ahead for those countries which are engaged in restructuring both their political and their economic systems, a process which entails many risks. The advice and support offered by the Bretton Woods institutions to countries like Hungary and Poland could, in my view, at least minimize some of the hardships of the painful transition from centrally planned to market economies. Among the developing countries, a rather small group of dynamic econ- omies enjoys high growth rates, but a large number of countries suffer from a variety of internal and external problems. Because wide variations in these countries' individual situations rule out any common solution, we will have to continue dealing with these issues on a country-by-country basis. Developing countries need increasing access to the markets of the indus- trial countries, not only to provide jobs for their quickly growing labor forces, but also to enable them to grow out of their debt. It is my strong conviction that now, when many developing countries are liberalizing their trade and foreign investment policies, it is high time for industrial countries to respond with significant initiatives of their own in liberalizing their trade relations with the developing countries. Given trade's great importance for development, I urge the industrial countries to seize the opportunity offered by the present favorable economic climate to roll back protectionism and liberalize trade with developing coun- tries. Progress in this field is as important as progress in increasing devel- opment assistance. In the financial sector, too, we should appreciate the liberalization efforts made by several developing countries. The adjustment programs pursued by developing countries often require them to shift from negative to positive real interest rates in order to promote domestic savings and reverse capital flight. This is a situation quite different from that of the industrial countries, where the level of real interest rates has been high for several years. In order to help reduce the debt burden of the developing countries, industrial countries should aim at lower interest rates. Reducing their external trade imbalances, and also their public sector imbalances, could help the major countries to reach this goal. We all agree that the Fund and the World Bank Group have a central role to play in the adjustment process, not only as providers of technical assistance, but also as advisers armed with their own resources which they can use to catalyze additional resources from other financiers. 42 ---------------------- I support the modified approach to the debt strategy, although the expe- rience gained so far is insufficient to permit evaluation. To ensure success, the debtor countries will have to continue, and in some cases to strengthen, their adjustment policies for a long time to come, and financiers will have to support them by extending assurances with respect to the provision of future resources. There is no question that the Bretton Woods institutions have responded quickly. But their exposure to a number of countries cannot be further increased without affecting the structure of their portfolio. Efforts are there- fore needed to mobilize financing from other sources for countries that have already obtained quick Bank-Fund assistance, and permit the extension of the strengthened debt strategy to other countries. To enable them to fulfill their role in the adjustment process, the Bretton Woods institutions must be provided with adequate financial means. The delay of one-and-a-half years now in completing the Fund's Ninth Quota Review threatens to undermine the Fund's position in the international monetary system and to have an adverse effect on commercial banks' atti- tude toward the modified debt strategy. I therefore urge all Governors to agree on a very substantial quota in- crease at these Annual Meetings so that further formal steps toward con- cluding this quota increase can be taken between now and the end of the year. By the same token, timely approval of a substantial replenishment of the resources of IDA is required. In this connection, I would like to an- nounce that Austria is prepared to increase its share in those resources. Finally, let me come to a subject of global importance: the preservation of our natural inheritance. The population growth of recent decades has increased the demand for living space and arable land and has quickly raised our awareness of the constraints of natural resources. In densely populated industrial areas, concerns about pollution have been with us for quite some time. During recent years, however, public sentiment opposing further damage to the environment has risen worldwide. And now we see what I consider a precondition for any change toward a new envi- ronmental policy. namely, ongoing public discussion of environmental issues all over the world, in both urban and rural areas, and in both the industrial and the developing countries. In conclusion, let me stress my conviction that the current improvement of the economic situation in the industrial countries provides better pros- pects for the world economy as a whole. Enlarging the room for maneuver should make it easier to equip the IMF and the World Bank with adequate resources, enabling them to function as efficient instruments of international solidarity. 43 BANGLADESH: A.K. KHANDKER Governor of the Bank At the outset, may I join my fellow Governors in expressing our deepest condolence at the sad demise of Bank Governor Mr. Mahamat Soumaila and Mr. Midallal Ali Abakar of the Chad delegation. I congratulate you, Mr. Kyu Sung Lee, on your election as Chairman of the Annual Meetings. We welcome Angola as a new member of the Bretton Woods institutions. The current international economic situation is still characterized by un- certainties; the world economic outlook over the medium term appears to be a slackening of growth with little prospect for sustained growth for the developing countries. The industrial countries witnessed sustained rapid growth for the seventh year in a row, but this strong growth and their large and widening external imbalances have given rise to renewed concerns for inflation leading to restrictive policies. In the developing countries, growth was inadequate and marked by significant disparities between regions and groups; the heavily indebted countries continue to stagnate; in Sub-Saharan Africa, the downward trend of real per capita GOP is yet to be arrested; and the low-income developing countries are groping with the abject poverty of their populations. Nonetheless, this year has also seen some positive developments-reso- lution of the debt problem now enjoys official support, and there is a growing consensus among the international community for concerted actions to pro- tect the environment. Our country, Bangladesh, is a victim of serious environmental degrada- tion. It is heavily populated, with low per capita GOP and limited natural resources. The country is characterized by a fragile ecosystem susceptible to disruption and damage by human activities and interference with nature both within our borders as well as in the region. Our efforts to attain sustainable growth and alleviate poverty are offset by frequent visitations of devastating floods. The Government's prompt relief and rehabilitation measures and the courage and resilience of the people during the 1988 floods avoided a catastrophe that could have had far worse consequences. In this, we gratefully acknowledge the help and understanding of the international community. It is not possible for the country to bear this recurrent scourge. The Government of Bangladesh has already initiated some projects to mitigate the adverse effects of floods, but the solution of the problem will need extensive international help. At the initiative of the UNOP and the govern- ments of France, the United States, and Japan, four major studies on flood problems in Bangladesh have been completed. We are grateful to the World Bank for its role to bring about a synthesis and integration of the major recommendations of these studies. An international conference under the 44 auspices of the World Bank and Bangladesh, hosted by the Government of the United Kingdom, will be held in London on December 11 and 12, 1989, to present an integrated action plan as well as to mobilize financial resources required for flood control in Bangladesh. We are looking forward to the successful conclusion of this meeting. In this context, I would like to express, on my behalf and on the behalf of the Government and the people of Bangladesh, our gratitude to the Group of Seven for their call on the international community, at the 1989 Paris summit, to support the Govern- ment of Bangladesh in finding a solution to this major problem. I would urge the donor countries to actively support our efforts. We are launching the Fourth Five-Year Plan in July 1990. The central strategy of the plan is poverty alleviation through human resource devel- opment and participatory decentralized planning. The plan also emphasizes greater self-reliance through substitution of scarce capital for abundant labor. Structural reforms, including deregulation and privatization will be deepened, and measures for increased production in agriculture and indus- tries will be intensified. The successful implementation of this plan will move the poor and disadvantaged groups from the periphery to the center of the economic process. The problems confronting the developing countries are many and varied. Most of them undertook structural adjustments and reforms at considerable social and political risk to attain sustainable growth paths. Their efforts have been offset by deteriorating terms of trade, protectionism, higher interest rates, growing debt burdens, and negative resource flows. As a result, no significant growth has been achieved in many developing coun- tries, and the crisis has become more acute, especially in the least-developed countries (LDCs). Structural adjustment has proved to be a complicated, slow, and painful process, and its success and sustainability require a more favorable international environment and symmetrical adjustment and en- hanced policy coordination by developed countries. Further, the program should incorporate contingency measures for coping with any unanticipated shortage of funds. IDA and the IMF should, in their operational programs, pay more attention to the special needs of the LDCs in the light of the Substantial New Program of Action (SNPA) for these countries. It has to be clearly recognized that there are qualitative differences in the economic characteristics and problems of the LDCs. We hope that the Second UN Conference on LDCs in the 1990s will succeed in formulating and adopting appropriate policies and a program of action for accelerating the develop- ment process in these countries. Declining terms of trade and rising protectionism in the 1980s have been a source of concern for the developing countries; the 1980s have also wit- nessed a continued worsening of the debt crisis, resulting in low levels of investment and low growth rates in many developing countries. Following the Toronto economic summit in June 1988, some progress has been made 45 in reducing the debt burdens of many severely indebted low-income coun- tries, but more is required to be done. We appreciate the initiative of the Bank for reducing the private debt of eligible IDA-only countries by setting aside US$100 million from IBRD net income. We also appreciate the new debt strategy of the Bank and the Fund in support of private debt and debt service reduction of the severely indebted middle-income countries and hope that the commercial banks adopt a realistic and constructive approach and channel new money for growth in these countries. One key constraint of world economic growth has been the insufficient flow of capital to the developing countries. There has been a continuous decline of the net resource flows to the developing countries-it stood at US$45 billion on average in 1986-88, compared with US$110 billion in 1980- 82, measured in constant 1986 prices. The decline is due to sharp contraction of private flows to the developing countries. The President of the Bank, in his report to the Development Committee, has indicated that the overall magnitude of net resource flows to developing countries is clearly inadequate given the needs of achieving adjustment, sustained growth, and poverty reduction. There is, therefore, a need for taking further steps to increase the flows. Of particular concern is the near stagnation in the flow of official devel- opment assistance (ODA), which is the major source of concessional re- sources for the low-income developing countries undertaking structural ad- justment and reforms and promoting growth and alleviation of poverty. There was an increase in the flows in 1988, but the level of net flows still stands at the 1984 level. We join the Development Committee in urging the donors, especially those whose assistance levels are below the 0.7 percent ODA/GNP target, to reverse the current declining trend in overall financial flows and the negative transfers of several developing countries. In this context, I need hardly stress the importance of a substantially larger IDA- 9 replenishment, commensurate with the needs of the IDA-eligible coun- tries, and look forward to its successful negotiation. We welcome the Bank's efforts to reduce poverty and protect the envi- ronment. Since the bulk of environmental degradation has been caused by the industrial countries, they are required to act on their environmental shortcomings; for the developing countries, environmental degradation is the result of overpopulation, poverty, lack of development, and paucity of resources. There is, therefore, need for renewed emphasis and thrust on accelerated growth and development through additionality, along with en- vironmental protection and upgrading, and not for making the environment a vehicle for further conditionality in Bank lending. Fiscal 1989 saw significant improvement in the IBRD and IDA lending activities. It was also a very successful year for IFe. We would, however, like IFC to expand its activities to more countries and to have a more 46 balanced regional distribution of its operations. We hope some of MIGA's proposals for promoting foreign investment will materialize soon .... . . . A large segment of the population of the developing countries is living in absolute poverty; the environmental degradation is threatening the global ecological balance and the very survival of humanity. These are big challenges and need to be addressed jointly both by the developed and developing countries. Let us recognize these and resolve to act. Let posterity not say we left behind a world not worth living in. BELGIUM: PHILIPPE MAYSTADT Governor of the Bank We have seldom met in an atmosphere of euphoria like that which per- vades the corridors of these Annual Meetings. Beyond doubt, we can congratulate ourselves on the uninterrupted con- tinuation of growth in spite of the stock market crisis of October 1987. The growth of the industrial countries has been wholly satisfactory and the danger of inflation has so far largely been contained. Moreover, the large balance of payments disequilibria, which persist among the industrial coun- tries have easily been financed by the markets. This euphoria will nonetheless prove treacherous if it obscures the poten- tial risks connected with the persistent large payments imbalances which already show a tendency to snowball, and if it gives us the illusion that a global, definitive solution to the debt crisis has been found. More generally, economic policy and international cooperation cannot be reduced to crisis management. We must possess, at both the international and national levels, an adequate arsenal of economic policy instruments and institutional mechanisms which are capable not only of reacting to crises but also of promoting, over time, the necessary adjustments. At the national level, we must avoid overloading monetary policy; besides budgetary policy, whose contribution to the adjustment remains crucial, it is in our interest to retain the incomes policy instruments needed to prevent cost slippages, as well as instruments for setting structural reforms into motion. The same need also exists at the international level. Independently of crisis situations, we must possess clear rules of play and appropriate insti- tutional mechanisms which will help create confidence, reduce uncertain- ties, encourage sound economic policies, and create the kind of environment in which market forces can best realize their potential. Let me illustrate this point of view with particular reference to exchange rate discipline and the debt strategy, and indicate its implications with regard to the increase in the Fund's resources. Finally, I will discuss two important dimensions of the development problem-the struggle against poverty and 47 the protection of the environment-which also require voluntary actions that cannot be left to market forces alone .. The Debt Strategy . . . Mr. Brady has given a decisive impetus toward a more dynamic approach to the debt strategy. Belgium supports this approach, and at the same time would like to shed some light on the conditions needed for this approach's potential benefits to be fully realized. First of all, we have to maintain an equitable balance between the heavily indebted countries, which will probably benefit from the new emphasis on debt or debt service reduction, and the other developing country members of the Fund and the Bank which, out of respect for their financial obliga- tions, have made often considerable sacrifices to preserve or regain access to the financial markets. This means that we must not give the impression that debt reduction strategies are necessarily preferable to strategies involv- ing new loans. Strategies based on a judicious assumption of new borrowing should continue to be encouraged whenever favorable conditions are pre- sent, in particular the prospect that debt ratios will be stabilized at a sus- tainable level. Even for the heavily indebted countries which do not yet meet all these conditions, debt reduction should continue to be considered a complement rather than a substitute for additional borrowings. In the second place, the success of the new debt strategy will require us to give an enhanced leadership role to the Bretton Woods institutions: a) To restore confidence to the relations between the heavily indebted countries and their creditors, each of these countries should prepare, in close cooperation with the Fund and the Bank, first, a medium- term scenario which would cover both the totality of the adjustment measures and development policies it intends to implement; and, sec- ond, a financing plan identifying the financial flows which will be required to restore its balance of payments to a position of viability capable of ensuring their return to normal access to the international financial markets. This medium-term scenario would include targets for the repatriation of flight capital. b) The intellectual leadership of the Fund is also needed to help the heavily indebted countries and their creditors arrive at a well-informed judgment about the best strategy for achieving a sustainable debt ser- vice position in the medium term. Left entirely to themselves, the markets are unlikely to be able to organize an optimal choice or bal- ance beween new loans and the reduction of pre-existing debts. c) It would be unwise for the Fund and the Bank to commit large amounts of resources to the debt strategy very early in the game unless their role in the organization and coordination of the financial efforts required from all participants has been clearly accepted from the out- set. 48 d) The involvement of the Bretton Woods institutions in the debt strategy must be sufficiently long-term in nature. From this standpoint the Bank is especially well placed to ensure that the debt strategy and the development strategy are linked. The dialogue it maintains with the indebted countries on all aspects of their development strategies, and its assurances that it stands ready to continuously support the debt strategy with advice and financing, can only help in the restoration of stable financial relations between the countries concerned and all their creditors. In the case of countries which have lost all access to the financial markets, the Bank is called on to playa larger role; it alone can obtain from these countries their commitment to long-term devel- opment strategies capable of forming a basis for catalyzing financing commitments of a similar long-term nature from the lending commu- nity. e) As part of a long-term strategy for addressing debt and development issues simultaneously, I would suggest that the Bank and the Fund should exercise their intellectual leadership on the complex question of the connections between the distribution of wealth and income, taxation, and capital flight. At first glance, there seems to be a cor- relation between the phenomenon of capital flight, excessive concen- tration of wealth and income in a limited part of the population, and serious deficiencies in taxation systems. Reforms aimed at a better distribution of wealth and income and more equitable, efficient taxa- tion systems should be included in the conditionality of the Bretton Woods institutions and would contribute to the establishment of a macroeconomic framework favorable to long-term local investment of these countries' available savings. In the third place, complementary initiatives seem needed to encourage the commercial banks to play the important role expected of them under the enhanced debt strategy. a) First of all, we must take still greater care to ensure that there is nothing in our accounting, prudentiaL or fiscal regulations which less- ens the banks' willingness either to lend new money or to accept reductions in debt or debt service, in accordance with the individual circumstances of each debtor. b) In addition, the Fund might introduce into its arrangements a perfor- mance clause under which a country's access to the Fund's resources would be suspended if it failed to honor fully its obligation toward those commercial banks which had not only agreed to extend new loans in support of a structural adjustment program but had also agreed to assign to these loans a repayment schedule to be modified as a function of certain parameters affecting the debtor country's bal- ance of payments (interest rates, certain primary commodity prices, etc.). Experience has shown that adjustment programs are more likely 49 to be sustainable if uncertainty concerning their future financing can be reduced. The compensatory and contingency financing facility added to the Fund's instruments last year works in this way, but its impact would be significantly increased if the commercial banks could be persuaded to include similar contingency clauses in their loan agreements. Fourth and finally, we must be ready to take initiatives complementing the decisions of the Toronto summit in favor of the overindebted low-income countries which demonstrate perseverance in the implementation of struc- tural adjustment programs. In this spirit, Belgium has taken three mea- sures: -cancellation of debts it had made to 13 poor countries of Sub-Saharan Africa in the form of state-to-state loans; -a combination of several of the options adopted at the Toronto summit for its largest African debtor; and -acceptance of interest and principal payments in local currency from that same debtor, these payments b~ing earmarked for the financing of jointly selected priority development projects in that country. This last formula should doubtless be added to the Toronto "menu," since it establishes a direct link between debt reduction and development by guaranteeing that the resources freed by debt reduction will be used for investment in the country concerned .... Protection of the Environment and the Struggle Against Poverty ... In my speech at the Annual Meetings in Berlin (West), I stressed the continuing major challenge with which the struggle against poverty confronts our international institutions, and I suggested that the World Bank should more systematically incorporate the poverty dimension into the ad- vise it gives to countries. In this year's discussions, special attention is being given to problems of the environment, for which I am glad. I can only encourage the World Bank in its efforts to take the lead in this area and to integrate environmental concerns systematically in the design of the projects and programs which it finances. In fact, there should be no conflict between the objectives of development, sound resource management, and protection of the environment. From a long-term standpoint, these objectives are convergent rather than compet- mg. Such conflicts as may exist, exist in the short term. It is true that some observers have established a link between overindebtedness and excessive exploitation of tropical forests. It is precisely the aim of our debt strategy to reduce the pressures which lead to such overexploitation, to unblock external constraints, and to restore growth. Nonetheless, it is clear that 50 ------------------- growth alone cannot suffice to reduce the pressures on the environment. Protection of the environment in fact requires that the distribution of the benefits of growth should be sufficiently equitable, and that no group should remain in a situation so precarious that its subsistence depends on activities which damage the environment. To address these complex situations, it is desirable for the Bank to involve itself more deeply in the formulation of the development strategies of the countries concerned, and to ensure that these strategies pay more attention to the objectives of the struggle against poverty, to reforms in taxation, and to the other measures needed to pro- mote a more equitable distribution of wealth. The decade of the 1980s witnessed, all over the world, an unleashing of the dynamism and the creativity of the markets. The economic perfor- mances of the industrial countries, the "quiet revolution" at work in the developing countries, and the astonishing transformations of which we are spectators in certain countries of Eastern Europe suggest that this funda- mental choice was the right one. Nonetheless, to enable this same dynamism and this creativity to fully realize their potential in the 1990s, we will have to find a new balance between the forces of the market and the interventions by public authorities which are needed to create stable, pertinent, and fair rules of play, and to inspire the confidence of all participants in the world economy. The Bretton Woods institutions, by their nature, are beyond doubt the best placed to create these rules and inspire this confidence. To aid their efforts they can count on Belgium's active and resolute support. BRAZIL: MAILSON FERREIRA DA NOBREGA Governor of the Bank and Fund (on behalf of the countries of Latin America and the Philippines) It is an honor to address this meeting of the Governors of the World Bank on behalf of Argentina, Bolivia, Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, EI Salvador, Guatemala, Haiti, Honduras, Mexico, Nic- aragua, Panama, Paraguay, Peru, the Philippines, Spain, Suriname, Trini- dad and Tobago, Uruguay, Venezuela, and my own country, Brazil. I should like to address three main items; (1) policy problems and policy issues in structural adjustment, (2) the debt situation in Latin America and the current debt strategy, and (3) the World Bank's support for the envi- ronment. With respect to the first point. the fundamental problem has been force- fully presented by the Managing Director of the Fund in his written sub- mission to the April 1989 meeting of the Development Committee. Recent experience in the implementation of structural adjustment pol- icies has been sobering. All too often, setbacks in economic progress have interrupted the implementation of adjustment policies, resulting 51 not only in a loss of momentum, but actually in a loss of ground painfully gained. The record is indeed a rather mixed one. There have been a few successful experiences, some dismal failures, and, for the most part, a wide gray area of outcomes, which have not allowed for sustained growth and the resump- tion of investment. A recent empirical analysis, for example, indicates that out of 83 developing countries, only 13 (of which 2 are in Latin America) could be considered as high-performance countries (in 1987 and 1988), in the sense of having satisfied predefined criteria for both growth and invest- ment. At least 58 developing countries failed to satisfy both criteria in 1987 and 1988. The reasons for this, of course, vary from country to country, and involve problems in (a) the design of programs, (b) sustainability in their imple- mentation, (c) the external environment, and (d) financing external require- ments for adjustment with growth. It should be clear, however, that the four .aspects are interrelated and must be addressed jointly in considering the experience of any single country. The statement of the Minister of Finance of Ecuador, on behalf of our chair, to the Development Committee meeting, has touched on these points. We fully share the view that there could hardly be an effective design or sustainable implementation of growth-oriented structural adjustment pro- grams without squarely addressing the problems posed by the debt over- hang, as well as the crisis of the public sector facing many of our countries. Let me comment on these issues, before turning to the debt situation in Latin America, its interactions with the crisis of the public sector, and the current debt strategy. (a) Improving the design of macroeconomic and structural adjustment policies could help to establish policy credibility at an early stage. However, policy credibility cannot be established without taking fully into account-in the very act of designing the programs-the legacy of real or perceived structural weakness of the country in question. These could be deep-rooted structural problems, such as inadequate infrastructure, poorly developed markets, institutional and managerial weaknesses in the public and private sectors, lack of critical skills or poor base of human resource development, and undiversified produc- tive base with limited potential for quick supply response. The design of macroeconomic and structural adjustment policies will not be effec- tive if these economic and social realities are not taken into account in establishing the conditions and performance criteria attached to the operation. These conditions should be focused, able to be monitored, reduced in number, properly sequenced, and circumscribed to varia- bles that are under the effective control of the authorities of the coun- try in question. 52 ....... __..-----_._-------- (b )The degree of political commitment to, and public support for struc- tural reform in the adjusting country is an essential element for the sustain ability of the adjustment process. But it should be noted that both commitment of the authorities and support of public opinion will be progressively harder to maintain, while adjustment continues with- out payoffs in terms of growth and while human and social conditions deteriorate. In addition, there is a consensus that the primary respon- sibility for the design of structural adjustment programs should remain with the national authorities of the country in question, which, after all, must implement the program. Although the policy advice and the policy dialogue with the Bank and the Fund are surely welcome, the national authorities must be satisfied that these programs represent an appropriate, realistic, and feasible course of action. (c) The existence of an external environment supportive of structural ad- justment is necessary-albeit not a sufficient-condition for sustained domestic reform programs. Four elements are particularly crucial: (i) the provision of adequate medium-term external financial support for serious adjustment efforts, adequately defined in terms of volume, terms, and conditions; (ii) nonrecessional adjustment in industrial countries as well; (iii) reduction of protectionist barriers in industrial countries; and (iv) lower real interest rates. Given the enormous un- certainties now prevailing, it is imperative that the contingency mech- anisms be incorporated in the design of adjustment programs. (d)Last, but by no means least, is the crucial importance of estimating the external financial requirements for growth-oriented adjustment. It is clear by now that the external financial assistance that will be re- quired by developing countries, even if they manage to step up their domestic savings, will have to involve, in the years ahead, a vastly increased role for the official sector. This is not necessarily a transfer of risks from the private to the official sector, as it is usually under- stood, but surely a transfer of tasks from the private to the official sector. Part of these tasks will involve accelerating steps to reduce debt and debt service burdens as an essential ingredient in the design and im- plementation of effective and sustained adjustment programs. In this connection, both the Bank and the Fund will have to pay increased attention (a) to realistic estimates of sustained current account deficits and especially of feasible balances in trade and nonfactor services and (b) to an internal adjustment program consistent with growth, that is, a set of policies that will bring about a matching financeable fiscal deficit plus a private savings surplus over investment at levels of investment high enough to sustain output growth, which is not the case for the indebted countries at the mo- ment, given the magnitude of the net real resource transfers abroad. 53 For these countries, there could hardly be an effective design or sustained implementation of growth-oriented structural adjustment programs without squarely facing the problems posed by the debt overhang in the very design of the program. This means that, for many countries, we will have to evolve toward official estimates of the magnitude of debt and debt service reduction that are consistent with the achievement of sustained growth (in the sense described above), instead of leaving this entirely to protracted, voluntarily negotiated schemes between each individual debtor and its commercial bank advisory committee. This approach has been tried for seven years. It has led debtors nowhere. Let me turn to the debt situation in Latin America, its interactions with the crisis of the public sector, and the current debt strategy. After experi- encing an average rate of growth of nearly 6 percent per year in real terms during the previous two decades, Latin America stagnated in the 1980s. The projected rate of growth for 1989 is zero for the region as a whole. In per capita terms, there is likely to be a fall of about 3.5 percent in the two- year period 1988-89, by far the worst performance among all regions of the world. Although it will be an oversimplification to attribute this dismal perfor- mance solely to the burden of external debt, it cannot be denied that trans- ferring abroad an annual average of around 3 percent of GDP for nearly a decade had deep domestic adverse implications for the debtor countries of Latin America. In fact, the attempt to service external debt by transferring abroad un- precedented and unsustainable shares of GDP further depresses national disposable income, particularly of the public sector-which has been made responsible for virtually all foreign debt, while foreign exchange is mostly privately earned. The buying of foreign exchange by the public sector causes domestic public debt to soar and keeps sustained upward pressure on do- mestic interest rates, always affected by the expected rate of devaluation. The ensuing uncertainty leads to a dramatic shortening of the time hori- zons of the relevant economic agents. Private productive investment is post- poned, while private savings and retained earnings are applied in short-term financial instruments, purely speculative activities, or assets held solely as a temporary hedge against inflation. Furthermore, public investment is sharply curtailed because the financing capacity of the public sector (internal and external) has virtually disappeared. I should note, however, that there is an emerging consensus in Latin America on the need for a deep reform of our public sectors. The focus on the fiscal budget and on the financial disequilibrium of the public sector, broadly defined to include public enterprises, has come to stay as a critical element in any sound, growth-oriented adjustment program. Likewise, there is a growing degree of political support for a comprehensive modernization of public administration, the efficiency of which must be urgently increased 54 if we are to face the challenges involved in achieving noninflationary, sus- tained growth in the years ahead. Compounding the serious problems posed by the crisis of the public sector and the legacy of too high stocks of debt is the observed sharp fall in the net flow of financial resources. For all debtor countries, net borrowing from commercial banks, which had reached the unsustainable figure of US$91 billion in 1981. declined to less than US$6 billion in 1985, and was more than US$9 billion negative in 1988. For Latin America, borrowing from commercial banks declined from US$55 billion in 1981 to minus US$13 billion in 1988, in sharp contradiction with the expectations generated by the Baker initiative of 1985. It is unsus- tainable-economically, socially, and politically unsustainable-a situation in which a poor region finances rich countries for such an extended period of time. At the close of the 1980s, Latin America is in a state of siege. On the one hand, external debt pressures have both international and domestic implications. On the other hand, protectionism in industrial countries and the regionalization of international trade represent a new constraint on the expansion of trade and trade-related investment in the region. The combi- nation of these constraints poses serious threats to the integration of Latin America into the international economic system. Latin America is not, however, only a problem region. It is, at the same time, and perhaps more important, a continent of opportunities. It is com- pleting a successful process of political transition toward democracy. It is in the midst of opening up to the world, gradually liberalizing its trade regime, and modernizing its industry. In this endeavor, it counts on an extensive and diversified productive structure, on a considerable technological capability, on a high level of potential savings, as well as human and natural resources, which, together, could support a new wave of prosperity. Given the appro- priate domestic and international conditions, the desired change would not be more difficult to achieve than, for instance, the ones observed in major countries devastated by the last World War, countries that not only achieved reconstruction but also formed a base for expansion of the world economy, of which they are now major pillars. The dismal 1980s have been marked by the legacy of the problems and attempted policy responses of the 1970s. How can we avoid having the 1990s being held hostage to the problems and attempted solutions of the decade coming to an end? First of all, it is important to continue with the policies for structural adjustment, particularly those related to reform of the public sector. But in the 1980s the burden of adjustment was concentrated on the debtor coun- tries. Now it is necessary to achieve more symmetry in the adjustment between debtors, creditors, and commercial banks. Policy coordination among industrial countries has been inadequate and insufficient to achieve this objective. Too much reliance on monetary policies, without the required 55 complementary actions on the fiscal front, has put an upward pressure on interest rates. A great part of the positive results, achieved at high social costs by the adjustment policies of debtor countries, has been offset by the lack of adjustment and macroeconomic policy mismatches among major industrial countries. The other area in which the need for more symmetry in the adjustment is clear is trade. This is a vital area for debtor countries forced to generate sizable trade surpluses to attempt to keep current on external debt obliga- tions. Many of these debtors have been implementing trade liberalization measures. Nevertheless, protectionism in industrial countries, words not- withstanding, has increased precisely in relation to trade in products that are of interest to developing countries. Such products have been subjected to admimstered trade and have faced an increase in nontariff barriers, which are becoming progressively less transparent. In addition, they have been hit by unilateral measures and by attempts to establish bilateral mechanisms for resolving disputes, outside the scope of the existing multilateral frame- work. One striking outcome of this situation is that the increase in the volume of international trade in the past two years had a limited impact on developing co~ntries. In the second place, if we really want to avoid having the 1990s see a continuation or even a c1eepening of the problems of the 1980s, it is essential to move toward a definite solution to the international debt problem. The gradualist approach has been shown to be insufficient-merely postponing the problems and often aggravating them. The Brady approach should be seen as a right step in the direction of solution to the international debt crisis. We are encouraged by the positive initiatives, particularly of the Japanese Government, to increase the re- sources available to debtor countries in the form of parallel financing. We also welcome the involvement of the Fund and the Bank in the efforts to reduce debt and debt service, by rapidly approving specific guidelines and identifying available resources. It is important to consider the Brady approach as an evolving strategy. Accelerating the implementation of the first agreements is important, but so is the need to avoid too modest results, with discouraging effects on other countries. The Brady initiative must be strengthened. This strengthening will re- quire a more direct and active involvement of international financial insti- tutions in the negotiating process, the mobilization of a more significant volume of resources, and official estimates of the requirements for growth- oriented adjustment. The Fund and Bank guidelines for debt reduction operations need to incorporate, among other things, a front loading of the enhancements and to allow for the fungibility of resources aimed at debt and debt service reduction. The Bretton Woods institutions have a major role to play, particularly the Fund, which is responsible for a sound global 56 economy and a stable international monetary system. These institutions must take a more active role in signaling the process and in taking an overall systematic view of the problem, instead of concentrating solely on monitor- ing the domestic policies of each individual borrowing country. The strengthening of the Brady initiative also requires a more active role on the part of governments of industrial countries. These countries need to adopt changes in regulatory tax and accounting frameworks to facilitate and stimulate debt and debt service reduction operations. While some "carrots" are there in terms of enhancements through official resources, there seems to be the need for both "sticks" and carrots to lead commercial banks toward more effective debt relief. Governments should also be involved in increasing the flexibility of mechanisms for Paris Club negotiations. In this context, the question arises whether such operations should not also com- prise debt reduction instead of only principal and interest rescheduling. Such action would serve as an effective demonstration to the commercial banks that governments are prepared to do what they are demanding from commercial banks. Stronger efforts to waive sharing and negative pledge clauses are part of this cooperative undertaking. Without such concerted efforts, a generally agreed framework, and offi- cial guidance through the exercise of clear and bold leadership, the risk is high that we will continue muddling through, with marginal improvements in the situation of a few debtors after long and protracted negotiations with commercial banks, with no clear mediating role by the official sector. A substantial change will be one that signals to the market a more durable solution, an increased confidence in the debtors' capacity to repay, the resumption of their growth, and the restoration of their creditworthiness. Solutions that imply a continuation of substantial negative transfers are not solutions, but the continuation of the sacrifices and uncertainties of the 1980s. Consideration should be given to a carefully prepared international con- ference to address these issues at a high level. In short, we should not allow the international economic agenda of the 1990s to continue hindered by the debt problem, dislocating energies that in multilateral and bilateral forums could be used to address problems of the future, rather than concentrating on legacies of the past. Finally, the time has come to rethink the role of both the Fund and the Bank in the 1990s. In the past few years, there has been a considerable decline in net financial flows from both institutions. Last year, for example, net flows from the Fund to Latin America were negative in the amount of US$900 million. For the World Bank, the figure was a negative flow of over US$1.2 billion. At the same time, conditionalities have been amplified and strengthened, while excessive efforts have been spent in monitoring and attempting to increase the influence of both institutions in domestic eco- nomic policymaking. 57 In the case of Latin America, this behavior has been proving inadequate to the new realities of democratized societies, in which political represen- tation in parliaments has an increased role in the definition of national policies. It is necessary to develop a more positive approach from the Bret- ton Woods institutions, designed toward effective assistance to the economic efforts of member countries, according to priorities defined by these coun- tries themselves. My last point is the issue of the environment. Environmental degradation is now an important item in the agenda of the international community. The approach we take toward solving this problem through international coop- eration should start from the recognition that the industrial countries have a major responsibility for the global environment problems. As the Presi- dent of the World Bank stated recently in a speech on the environment delivered in Tokyo: "North America and Europe ... together are respon- sible for nearly three quarters of the carbon dioxide emissions that contrib- ute to global warming, while accounting for only about 8 percent of the world's population. The developing world, almost 80 percent of the world's population, is responsible for only 7 percent of the industrial emission of carbon dioxide. Industrialized countries are also responsible for the damage caused by CFCs." We, in Latin America, have not been shying away from doing our part in preserving our national environment in spite of the serious setbacks to our development efforts in the 1980s. The achievements are many. Laws and regulations have been passed creating a modern legal system of environ- mental protection. In Brazil, environmental protection is now a constitu- tional obligation. Institutional reforms have been put in place to guarantee enforcement of legal obligations. A large number of protected areas have been created, covering large tracts of land and providing for the protection of national habitats and important ecological reserves. New experiments in ecological zoning have meant new approaches toward development, mainly in the Amazo'n region. Efforts to combat fires in the Amazon, recently with the support of the World Bank, have led to a marked decrease in defores- tation. The results achieved this year have been extremely important. In all its efforts in the environmental area, Brazil is striving to make its development objectives compatible with the protection of the environment. That, and not environmental conservation as an isolated objective, is the great challenge before us. To take into consideration this fact is also to adequately face the problem of the international financial requirements for the environment and the need for the industrial countries to provide an adequate level of additional and concessional resources. To illustrate the need for additional financing, I will mention the fact that in Brazil, for example, total costs for hydroelectric investment projects have increased lately by roughly 20 percent due to environmental concerns. 58 A second major element of this positive approach has to do with its political framework, both domestically and internationally. Latin America has established democratic political systems, which allow the broad partici- pation in the decision-making process of all those to whom the governmental decisions are directed, including local communities and nongovernmental organizations. The communities and local associations have an important role to play in the national decision-making process, influencing not only the policies adopted at the executive level but also the legislative process. Internationally, we should avoid having a much unbalanced influence in the policies adopted by the World Bank and other international organiza- tions and avoid creating a situation in which a few countries speak for themselves in the name of humanity. What is in the global interest is in the interest of each sovereign state, and what is in the exclusive national interest has to be decided nationally. Similarly, we should avoid any tendencies to concentrate important polit- ical decisions, disguised as technical, in international bureaucracies, as we discuss policies, measures, and projects that have an impact on the environ- ment. These are questions that have to be decided by those who are closer to the problems, that is, by the politically represented national societies. The Bank should take this into consideration when discussing specific guide- lines, so as to avoid bureaucratic solutions for problems that have to be dealt with in a social and political context. Intergovernmental multilateral cooperation may also be endangered if we allow third parties, usually from a few industrial countries, to interfere directly in the process of negotiations between representative national au- thorities and the Bank. They could favor a further concentration of power in the hands of those countries that already control much of the international decision-making process or reinforce the centralization of the decision-mak- ing process in international bureaucracies to the detriment of the national priorities, set as a result of processes of internal consultation. In line with these ideas, the information related to a negotiating process should only circulate among the parties in that negotiation, which have a responsibility toward the societies they represent. This positive approach would contrast sharply with tendencies toward an increase in conditionality, which not only may become a dangerous instru- ment of interference in policies that should be established according to national priorities but could also become an excuse for reducing the amount of resources to be transferred to the countries that need them. In the context of this positive approach, the Group of Twenty-four Ministerial Declaration issued last Saturday, opposed "the use of environmental concerns as a disguised instrument for protectionism and for reducing the net flow of financial resources to developing countries." In conclusion, new areas, such as the environment, the renewed concern with social issues, and especially the fight against poverty, should open new 59 perspectives for a positive approach in the 1990s. This, however, may not occur if the tendency prevails to increase conditionalities instead of increas- ing available resources on adequate terms and conditions, if the emphasis is on belt-tightening adjustment to service external obligations instead of on squarely addressing more deep-rooted problems hindering the restoration of investment and growth, such as the debt overhang and the crisis of our public sectors. Let us cut the Gordian knots that paralyzed our economies in the 1980s and look ahead with the courage to explore innovative alternatives, which should have the objective of reinforcing and expanding the international economic system, based on solidarity and multilateral cooperation. CANADA: JOHN MCDERMID Temporary Alternate Governor of the Bank and Fund Introduction It is a great honor for me to have the opportunity to address these Joint Annual Meetings of the World Bank and the International Monetary Fund. I join others in congratulating Barber Conable and Michel Camdessus for their skillful management of our twin institutions through these demanding times. I also welcome the representatives of Angola, which has recently assumed membership in our institutions. At the meetings of the Interim and Development Committees, my col- league Mr. Wilson and I have spoken of the increasing integration of the world economy and of the challenges this integration poses for policymak- ers. In our view, the challenges are fourfold: -First, we need to put in place balanced policies that will provide a stable macroeconomic environment. -Second, we need to improve efficiency and productivity through mar- ket-oriented structural reforms. -Third, we need to continue to work on the implementation of the strengthened debt strategy. -Fourth, we need to give a greater role to environmental considerations in our decisions. The Policy Framework I am encouraged by the consensus I see at these meetings on the policy framework needed to deal with these issues. It is indeed remarkable that governments everywhere have reached a shared diagnosis of policies needed to strengthen economic performance. The key elements of this framework are a medium-term orientation, policies that will promote macroeconomic stability, and greater reliance on market forces-a view captured by the phrase "structural adjustment." 60 In the current environment, our first priority in maintaining macroeco- nomic stability must be to reduce domestic imbalances that have threatened a resurgence of inflation. Higher interest rates have been necessary to con- front inflationary pressures. However, monetary policy is being asked to carry too much of the burden. Countries with large fiscal deficits need to implement effective fiscal consolidation measures. In our April budget, we made clear our commitment to implementing responsible monetary and fiscal policies that work to defuse inflation pres- sures. Hard as these decisions are, we believe they will ultimately improve the well-being of Canadians. We have also placed a high priority on the need for structural adjustment. We have privatized many state-owned corporations, implemented the Can- ada-U .S. Trade Agreement. introduced a new regulatory regime for the financial sector. and reformed the personal and corporate income tax sys- tems. We are moving ahead with a major reform of our system of indirect taxation with the introduction of a new goods and services tax. These reforms are needed to improve the efficiency and competitiveness of the Canadian economy. Macroeconomic stability and greater economic efficiency are important to all of us as trade expands and the global economy becomes increasingly integrated. The increasing integration of the world economy means that international cooperation in economic policy must be strengthened. We have responded to the need to enhance international cooperation in a variety of ways: -The Venice summit resulted in the formation of the Group of Seven. -OECD's "outreach" program is increasing contacts between the in- dustrial countries and the newly industrializing economies of Asia. -The presence at these meetings of the GATT Secretary-General, Mr. Arthur Dunkel. is a symbol of our determination to strengthen ties between the Bretton Woods institutions and the GATT. The Fund and the Bank have been at the center of international cooper- ation for almost 50 years. and I believe that the flexibility and adaptability shown by the Fund and Bank will help ensure that they continue to playa central role as we look ahead to the challenges of the 1990s. Today I would like to address the needs of our international institutions- their leadership role in the global economy. the resources they will need to fulfill this role, and their priorities. which must reflect the concerns of the shareholders. Trade Let me begin with the GATT. Nowhere is the need for increased inter- national cooperation greater than in international trade. Trade liberalization not only breaks down the barriers between economies, but also serves as a 61 catalyst for freeing up domestic markets. Thus, there is an important syn- ergy between trade liberalization and domestic structural reforms. Ominously, trade liberalization, which was in the vanguard of market- oriented reforms in the postwar period, has paused in the 1980s. This is why an early and substantial resolution of the Uruguay Round negotiations is critical. Significant progress in agriculture, services, strengthening of the GATT, and trade-related investment and intellectual property concerns are all needed if the trading environment is to complement the forces leading to domestic structural reforms. Resources for the Bretton Woods Institutions The Fund and Bank both will need additional resources to discharge their responsibilities as we enter the 1990s. Resources and leadership are inse- parable partners for these institutions to work .... . . . The World Bank has played a key leadership role in financing and guiding development for over 40 years. Canada's continuing commitment to development is well known. We are pleased with the Bank's increased emphasis in recent years on structural adjustment, poverty alleviation, and food security-issues that are of high priority for us. If the Bank is to continue to play this role effectively, it must have ade- quate resources. In this connection, the Ninth Replenishment of the Inter- national Development Association (IDA) is essential, and Canada firmly supports a substantial and early replenishment. It is my strong hope that a replenishment at least as large in real terms as IDA-8 can be achieved. Canada is prepared to do its fair share to ensure that IDA has adequate real resources. Others must do the same. I wholeheartedly endorse the view of the Development Committee that the negotiations must be completed by the November meeting of IDA Deputies in Kyoto. I share the concerns expressed by many about the growing arrears prob- lem at the Fund and other international financial institutions-a problem that could seriously constrain the resources of the institutions if we allow it to get out of hand. The different approaches currently being explored to address arrears need to be pulled together to give us a cohesive, targeted, and effective strategy for dealing with the problem. Environment We must recognize that sustainable development requires a medium-term policy framework where economic and environmental policies are inextric- ably woven together. Too often we speak of sound economic policies and sound environmental policies as if they are somehow separate issues. Sus- tainable growth is not possible unless the environmental impacts of our economic activities are fully taken into account. 62 At last year's Annual Meetings in Berlin (West), Michael Wilson, Finance Minister for Canada, made a number of concrete proposals for improving the Bank's support for environmentally sustainable development. I am pleased with the progress that has been made on these proposals in the past few months. We will continue to look for further action in these areas in the coming year: -Of particular importance are the recently completed environmental assessment guidelines. We look forward to their early implementation. -Furthermore, we welcome the publication of the Bank's first annual report on its environmental activities, following upon Mr. Wilson's initiative of last year. -We also welcome the special program of technical assistance, which was established within the Bank earlier this year for environmental activities. We consider this to be a particularly important initiative, and yesterday announced that Canada will contribute $5 million to this program and its related activities. Conclusion The establishment of the Bretton Woods institutions during a period of global strife some 45 years ago was an act of great vision. They have served us well. If we are to prosper in the face of rapid change in the global economy, then the continued leadership of the Bank and the Fund is indis- pensable. We in Canada look forward to addressing these challenges with all of you. CHINA: LI GUIXIAN Governor of the Fund Mr. Chairman, first of all, please allow me to congratulate you on your assumption of the chairmanship. It is. my belief that your wisdom will con- tribute to the achievements of this year's Annual Meetings. I would also like to join previous speakers in extending a warm welcome to the Angolan delegation, which is participating in the Annual Meetings for the first time. As the world is entering the 1990s, a major task of this year's Annual Meetings should be to review the developments of the world economy during the past decade and to look to the future with a view to resolving the major problems of the world economy in order to create an environment for sus- tainable growth during the next decade. Since the early 1980s, the world economy has undergone seven consecu- tive years of growth. However, this growth has been unevenly distributed, as most developing countries have not duly benefited from it, particularly 63 the low-income Sub-Saharan African countries, whose economies have come to a standstill. Prompted by the growing interdependence of the world economy, the major industrial countries have strengthened their economic policy coordi- nation and have achieved some positive outcome. Nevertheless, external imbalances remain large due to the limitation of such coordination in re- solving their underlying economic problems. Moreover, such coordination so far has not given adequate consideration to the interests of the developing countries. Their large external imbalances have been the root cause of volatile financial markets and intensification of international trade frictions, posing a direct threat to the stability of the world economy. This adverse external environment has aggravated the burden of economic adjustment for the developing countries, and, coupled with protracted debt problems, many of these countries have been entrapped in the vicious circle of low growth and high inflation. In order to have sustained growth in the world economy, it is essential that both developed and developing countries join together to create a favorable economic environment for growth. In an increasingly interdepen- dent world economy, the sustained growth of the developed countries cannot be ensured without the economic development and financial stability of the developing world. Because of the crucial impact of their economic policies on the world economy and trade, the developed countrie:o-particularly the major industrial countries-should bear primary responsibility for improv- ing the world economic environment. Drawing on past experience, the in- ternational community should work out a new and effective code of conduct for further international economic cooperation in the 1990s. The international community has made new efforts toward reducing the debt burdens of the developing countries since we met last year in Berlin. The IMF and the World Bank have also adopted active measures to assist the heavily indebted countries to implement their debt reduction schemes. We welcome such efforts. It is our hope that the international community will take fully into consideration the varied difficulties of all indebted coun- tries and adopt effective measures to further reduce the debt burdens of the debtor countries. Particular efforts should be made to provide additional funds to help debtor countries restore economic growth while carrying out economic adjustment. We urge the developed countries to increase their financial assistance to the developing countries and to open wider their markets to the developing countries' exports in order to eradicate the debt problem, maintain the stability of the international monetary system, and promote sustained world economic growth. Moreover, effective measures should be adopted to roll back protectionism and promote international trade to help the debtor countries break the vicious circle and restore eco- nomic vitality. 64 It is our hope that the IMF and the World Bank will playa more important role in the world economy during the 1990s .... . . . Almost a year has elapsed since negotiation of the Ninth Replenish- ment of IDA was initiated. In view of the urgent needs of the low-income countries for concessional flows, we are of the view that the Ninth Replen- ishment should constitute a real increase over the previous one. We urge the donor countries to make further efforts so that negotiations can be completed as scheduled. A serious and urgent historical task facing mankind is to maintain eco- logical balance while promoting economic development. The Chinese Gov- ernment is of the view that environmental protection is the common re- sponsibility of all countries. However, the serious pollution of the global environment has been caused mainly by the developed countries, and they have a major responsibility to clean it up. The root cause of the environ- mental deterioration of the developing countries lies in their poverty. The international community should furnish both financial aid and technical expertise to the developing countries to assist them in their efforts to protect the environment. We have noticed the World Bank's useful and commend- able work in recent years in environmental protection. In the meantime, we call on the World Bank to better combine the goals of environmental pro- tection and economic development in its activities in these areas. We dis- agree with the imposition of additional conditions for loans on the grounds of environmental considerations. Effective measures and channels should be explored to enable the developing countries to realize the dual goals of development and environmental protection. The IMF and the World Bank are international financial institutions, whose purposes are to maintain order in the international monetary system and to promote economic development in their member countries. The Articles of Agreement of both institutions provide that they act according to economic, rather than political, considerations. To abide by the provisions of the Articles of Agreement is undoubtedly a solemn international obli- gation for both member countries and the two institutions. Based on this principle, China has established good cooperative relations with the Fund and the Bank ever since it resumed its seat in the two institutions in 1980. It is our hope that such cooperative relations continue to develop in a normal fashion without outside interference. In just three days the People's Republic of China will celebrate its fortieth anniversary. Under the leadership of the Communist Party of China, the Chinese people, through hard work, have brought about tremendous changes in a country that was once backward and riddled with poverty. Particular mention should be made of the past 10 years, in which policies of reform and opening to the outside world were implemented. GNP growth registered an average annual increase of 9.6 percent during the past 10 65 years, compared with 7.1 percent from 1952 to 1988. During this period, China has enjoyed all-round development, with the fastest growth in eco- nomic development, from which the people have benefited the most. From the past 40 years of experience, the Chinese people have come to realize that the Four Cardinal Principles are the foundations of the country and that reform and opening to the outside world lead to prosperity. The achievements of reform and opening policies during the past 10 years have injected vitality and dynamism into the Chinese economy. Of course, it is by no means easy for a complex country like China to implement reform and the opening to the outside world, and at times we will encounter diffi- culties and setbacks. At present, the major problems facing the Chinese economy remain the disequilibrium between aggregate demand and supply, as well as the irra- tional structure of industries and products. To address these problems, the Chinese Government has adopted a policy to rectify the economic order, consolidate the economic environment, and deepen economic reform. The essence of this effort is to reduce the excessive absorption of national income so as to redress the disequilibrium between aggregate demand and aggre- gate supply and to gradually bring down inflation to a sustainable level. The current austerity program is aimed at creating a favorable environment for furthering reform and opening to the outside world. Consequently, the Chinese economy has improved as a result of the adjustment efforts of the past year. Since the beginning of 1989, the overheating of the economy has been gradually brought down, the much-feared stagflation has not tran- spired, price hikes have been eased, and agricultural production has enjoyed a marked increase. In general, prospects for the national economy are promising. Based on past experiences and lessons, economic reform has remained on a healthy path of development. All reform measures that have been promulgated will be continued and improved upon, and all measures that have been implemented on a trial basis will continue in an organized and gradual manner. In addition, a number of new areas of reform are being explored. As a matter of course, there are numerous difficulties to be surmounted. We are in the process of carrying out an adjustment program within three years aimed at creating a socialist commodity mechanism with Chinese characteristics, in which economic planning and market forces are combined so as to enable the Chinese economy to develop in a sustained, stable, and coordinated manner. We respect all foreign governments and friends who would like to develop relations with us on equal terms, and it is our intention to further develop and expand our friendly relations with them. We have been continuing our efforts to improve the investment climate in order to attract foreign investors to China. We shall continue to utilize external financing in various forms in light of the principles of equality and mutual benefit. The Chinese Govern- 66 ment places high priority on creditworthiness and enjoys sufficient capacity to service its debts. The reform and opening in the past 10 years have brought primary pros- perity and vitality to China and genuine benefits to the people. Now the policy of reform and opening is popular and deep-rooted among the Chinese people. No matter what setbacks and difficulties may arise on our way forward, the determination of the Chinese Government and its people in continuing the reform and opening policy shall never be altered. We are fully confident that the socialist modernization process in China will be pushed forward. It is our wish to strengthen and develop further the ex- change and cooperation with the international community and to play our part in contributing to the promotion of economic prosperity throughout the world. COTE D'IVOIRE: ABDOULAYE KONE Governor of the Fund (on behalf of the African Governors) Let me first of all, on behalf of the African Governors, welcome the People's Republic of Angola, the new member of our institutions. The African Governors note the encouraging performance of some as- pects of the world economy in 1988: economic growth was sustained both in the industrial countries and in some of the developing countries, the volume of international trade reached an historically high level, and the rate of inflation remained relatively moderate in the major industrial countries. We also note, however, that in spite of these positive developments, there are reasons for concern as simultaneously there has been a further widening of the gap between the rich and poor countries, more particularly the Af- rican countries. Indeed, while it is true that the rate of economic growth in the developing countries as a whole slightly exceeded that in the industrial countries, the fact remains that the rate of growth of per capita income in the developing countries, estimated at 2.6 percent, was significantly lower than the rate of 3.4 percent recorded in the industrial countries. With regard to the situation in the African countries, there are grounds for grave concern because, for the third consecutive year, the living standards of our peoples have declined further; the rate of economic growth attained in 1988 at 1.7 percent was far below the rate of population growth. Moreover, while world trade increased significantly in 1988, Africa's share continued to decline. The short-term outlook is no better for Africa. Indeed, according to available projections, living standards in Africa are expected to continue to decline in 1989 while those in both the industrial and the other developing countries are expected to show further improvement. In this context, the most immediate challenge facing Africa is to reverse the downward trend in per capita incomes, which have deteriorated to unacceptably low levels. 67 We are very much aware of the fact that we must face this challenge pri- marily through our own efforts, but we also need the support of our partners in the international community. As we have emphasized in the past, the fundamental causes of the poor economic performance of the African countries are, among others, the persistent downward trend of the prices for our export commodities, the debt overhang compounded by an excessive debt service burden, and a lack of adequate financing which has led to drastic cutbacks in investments. In our opinion, the fostering of a favorable international economic envi- ronment, characterized, inter alia, by markets open to our exports, a de- crease in real interest rates, and stability in the exchange rates of the major currencies, is a prerequisite for ensuring success for the adjustment pro- grams being implemented by African countries. The prime responsibility of the industrial countries in this regard needs no further elaboration, given the magnitude of the impact that their economic and financial policies have on this environment. In this context, we are greatly concerned about indus- trial countries' excessive recourse to monetary policy instruments in their attempt to achieve international adjustment. While this strategy has been intended to control inflation, it has also contributed to large fiscal imbal- ances. So long as these imbalances persist, the resulting increased demand for international savings will keep interest rates at high levels. The industrial countries must therefore resolutely implement measures to reduce these imbalances so as to create the conditions for a sustained decrease in interest rates. In this context, it is pertinent to mention the important role that effective surveillance by the Fund on the economic policies of these coun- tries, in particular their interest rate policies, could play in order to ensure that they are moving in the right direction in the interest of all members of the international community. There should be no doubt about the readiness of our countries to assume their share of the global responsibility. The African countries reaffirm their commitment to work toward improving their domestic economic environ- ment by continuing to implement wide-ranging structural adjustment pro- grams and to strive to mobilize additional resources through appropriate policies in support of these programs. The need for the industrial countries to support these adjustment programs with adequate resources and con- ducive trade policies cannot be overemphasized. But regrettably, as shown clearly in the midterm review of the United Nations Program of Action for African Economic Recovery and Development (UN-PAAERD), while many African countries embarked upon far-reaching programs to reform their economies, there was a simultaneous decrease in real resource flows to Africa. We, therefore, call upon donor countries to provide the financial assistance required for the success of our programs. We also urge them to dismantle protectionist barriers to our exports. 68 The Bank and the Fund must continue to play their catalytic role in the mobilization of external resources for all member countries in need, partic- ularly those undertaking adjustment programs. In the context of their as- sistance in the design of such programs, they should give greater consider- ation to the economic, social, and institutional realities of the African countries, so as to maximize the chances of success and the sustain ability of these programs. In this connection, and in view of the increased preva- lence of poverty in our countries, the need to integrate effective measures to protect the poorest segments of the population and to reduce unemploy- ment has become more urgent. The question of how to integrate most appropriately policies on the social dimension into adjustment programs recommended by international institutions is under active consideration in Africa. We urge the Fund and the Bank to cooperate closely with the African countries in order to consider how best to incorporate the outcome of these deliberations in the adjustment programs they support. While we were encouraged by the relative stability of the exchange rates of the major currencies brought about by the Louvre and Plaza Accords, we must acknowledge that the effectiveness of international policy coordi- nation has been severely tested in recent months by the erratic fluctuations in the exchange rates of the major currencies. In view of these developments, and given the persistence of large domestic and external imbalances in the major industrial countries, we strongly urge these countries to further strengthen the coordination of their macroeconomic and structural policies. The continued deterioration in the terms of trade is one of the most serious problems facing African countries. Indeed, many of them have seen the fruits of decades of development efforts wiped out by the sharp decline in the export prices of their commodities. The perpetuation of such a situ- ation is unacceptable, and ways and means should be found to bring it to an end. We remain convinced that the best form of assistance that the developed countries can provide to our countries in this area is to ensure a just and equitable remuneration for our export products and to provide access to their markets without any restriction, direct or disguised. A fair remuneration for our export products, combined with adequate external financial assistance, would help to alleviate the acute shortage of financing and to increase the level of investment. To this end, we strongly urge the international community to play its role by actively supporting us in our quest for a reform of the raw materials markets. In particular, steps should be taken to enhance the effectiveness of the common fund for raw materials. In this connection, we are pleased to note that the United Nations Secretary- General has appointed a group of experts to examine in depth the question of raw materials from the African countries and the prospects for diversi- fying Africa's exports. In the meantime, existing mechanisms within inter- national institutions (STABEX, SYSMIN, CCFF, etc.) should be revitalized 69 and better adapted to the needs of the developing countries. It is thus regrettable to note that the Fund, moving against the tide, has reduced the effectiveness of its facility for the compensatory financing of export fluctua- tions by merging it with the contingency facility and has, in the process, increased its conditionality. Our large external debt and debt service burden continue to drain our scarce resources, thereby wiping out any possibility for economic growth. We have continually called the attention of the international community to the debt burden of the African countries as a source of grave concern, despite its relatively modest amount in absolute terms. We note that the problem of Africa's indebtedness has been receiving increasing attention from the international community, as indicated by the various initiatives taken to solve the debt problem. We are also pleased that the plan to ease the debt of the poor countries of Africa, which the Group of Seven adopted in Toronto, has become operational. However, we are compelled to note that its impact has remained limited. The proposal made by Presidents Fran<;ois Mitterrand of France and George Bush of the United States to extend forgiveness of a part of their countries' development assistance loans to the 35 poorest and most indebted countries of Africa is a timely decision. It constitutes an acknowledgment of the fact that, if any solution to the debt problem of the African countries is to be viable, it must necessarily entail a reduction in the stock of existing debt. This is why the African Governors are encouraged by the various initia- tives which led to the adoption of a new debt strategy that now emphasizes debt and debt service reduction. We note the recent progress made by the Executive Boards of the Fund and the Bank to define the modalities of the two institutions' participation in debt and debt service reduction operations. We wish to underline the importance of extending the advantages of the new strategy, to all the indebted middle-income countries, and the low- income countries as regards their commercial debt, with due regard to their low income levels and their capacity to pay. While the new strategy attempts to provide some answers to the problem of the commercial debt of the middle-income countries, the fact remains that the problem of their official debt has yet to be fully addressed. The same is true of the poorest countries' debts to international or regional development institutions. In an attempt to find solutions to the debt problem of these countries, several proposals, ranging from debt relief from the international organizations to total debt forgiveness, have been put forward in various forums. The dilution of the voting power and relative shares of African countries in the two Bretton Woods institutions continues to be a source of major concern to us. We, the African Governors, strongly urge that the voting power and relative shares of our countries be preserved and steps be taken to ensure their meaningful representation in the two institutions. 70 We would like to comment briefly on the collaboration between the two sister Bretton Woods institutions. The African Governors recognize that this collaboration could considerably improve the assistance which the Fund and the Bank provide to our countries. However, it should be stressed that in order to avoid any duplication of efforts and, in certain cases, even working at cross purposes, the two institutions must work together to en- hance the quality of future adjustment programs and mobilize adequate external resources for our countries. Moreover, the Bank should devote greater efforts to intensifying the fight against poverty in the member coun- tries and to helping our countries mitigate the adverse social impact of adjustment on the least advantaged groups of our population. The Ninth Replenishment of IDA resources is of major concern to our countries. Since its establishment, IDA has evolved as the principal source of concessional assistance to the poorest countries. In recognition of the specific financial requirements of Sub-Saharan Africa, including adjustment needs, the IDA-8 donors asked the Association to allocate 50 percent of the resources to the countries of that region. While sizable and generous, these resources fall far short of the minimum requirements of the African countries, almost all of which are engaged in courageous adjustment pro- grams that justify sizable amounts of external assistance. As you know, we are in the final year of the IDA-8 Replenishment oper- ation. We therefore urge the management of the Bank to ensure that, in accordance with the wishes of IDA donors, everything possible be done during this last year to see to it that Africa actually does receive 50 percent of the IDA-8 resources. The negotiations of the Ninth Replenishment of IDA resources (IDA-9) have entered their final phases. The need to ensure the continuity of high- priority programs developed under IDA-8 for Sub-Saharan Africa is clear evidence of the fact that we accord IDA-9 the highest priority. We consider that a substantial real increase in the amount of IDA-9 over and above that of IDA-8 and the allocation of at least 50 percent of this amount to Africa would enable the Bank to address the urgent needs of the poorest countries and to support their reform policies and programs to combat poverty in an effective manner. In this regard, the time has come to explore the possibility of allocating a portion of IDA resources, even if modest, to the lower middle-income countries of Africa. We therefore strongly urge the donor countries to conclude the negotia- tions as rapidly as possible so as to avoid any interruption in the Associa- tion's operations at the beginning of the period covered by the Ninth Re- plenishment. The Special Program of Assistance (SPA) for the heavily indebted coun- tries of Sub-Saharan Africa undertaking adjustment has now entered its operational phase. The program represents an effort to find an approach 71 which emphasizes both adjustment and growth. This is important since, without economic growth, adjustment is not sustainable. To date, 19 countries have met the eligibility criteria and have been in- cluded in the program. We note that US$5.1 billion have been allocated to these countries, that agreements have been signed for US$2.2 billion, and US$l.1 billion have been disbursed. IDA funding for the SPA has been fully allocated. Therefore, the task for IDA now consists in moving forward with the dialogue with these countries in order to speed up disbursements. For the cofinanciers, the more important task consists in meeting the objectives already announced for the commitment and disbursement of funds. For the bilateral creditors, emphasis should now be placed on implementing all aspects of the Toronto-Berlin consensus and the existing measures for can- celling concessional debt and rescheduling of nonconcessional debt on im- proved terms and conditions. According to the review meeting held in April 1989 between the World Bank and participating donors, the SPA has met with some success. Al- though we appreciate the positive manner in which the donors responded to this initiative, it must also be recognized that much remains to be done. In this regard, we stress that the Bank must ensure that all the eligible countries have access to SPA resources. In addition, the coordination of efforts between the Bank and donors should be aimed at ensuring true cooperation with the countries themselves. The structural problems of de- velopment in Africa require increased and continued support from the international community, beyond the three-year period covered by the SPA. It is disappointing to note that many countries undertaking structural adjustment programs are experiencing unsatisfactory growth. This poor economic performance has resulted, inter alia, in decreased living standards for the people. While sustained growth requires a satisfactory external bal- ance, this objective must be achieved in a way that permits and facilitates the pursuit of development programs, including the priority objective of poverty alleviation. It has now become absolutely essential, in designing adjustment programs, to provide for special measures designed to protect the most vulnerable groups during the adjustment period. The adjustment strategy must necessarily be adapted to the particular circumstances of the countries concerned and modified in light of changes in economic and financial conditions. Programs must therefore be flexible and realistic. The Bank's efforts should also be aimed at mobilizing the additional resources which are essential to the implementation of economic reforms in the countries concerned. We welcome the efforts of the International Finance Corporation (IFC) in establishing the African Enterprise Fund (AEF) and the African Man- agement Services Company (AMSCO) in order to finance small-scale proj- ects and to promote better business management. However, we would like 72 ._---_ ....-._._------ these efforts to be increased and extended to all African countries. We urge AMSCO to increase its reliance on African consultants for its operations. After the first year of operations of the Multilateral Investment Guarantee Agency (MIGA), it is encouraging to note that 51 of the 73 signatory countries have ratified the Convention. Results at the level of the interna- tional community are equally encouraging. As regards advisory services, we note with interest the activities undertaken by the policy and advisory units and the foreign investment advisory units in providing advice to the developing countries. Notwithstanding these encouraging results, the Agency has yet to prove that it has the capacity to serve the member countries effectively in all spheres of private sector development; it must grow rapidly and on solid foundations. In conclusion, urgent action is needed to resolve the debt crisis to enable Africa to obtain maximum benefits from adjustment programs and move toward lasting growth with social justice. It is a matter of concern that Africa has not shared in the benefits of the growth recorded in the developed countries. There are other important problems outstanding, such as long- term growth prospects, regional integration, and the development of indus- trial potential. It must be recognized that severe resource constraints will continue to be felt sharply in Africa during the 1990s. We therefore reiterate that it is necessary to mobilize additional assistance and to return to higher levels of investment so as to maintain satisfactory rates of growth and achieve the objectives of development, including the alleviation of poverty. FIJI: J.N. KAMIKAMICA Governor of the Bank I wish to record our appreciation for the arrangements made for this meeting in Washington, and also to thank Mr. Con able and Mr. Camdessus for their excellent and comprehensive statements, which have helped to put into perspective the issues before us. We note that significant global improvements have been made in overall economic conditions last year, in particular the expansion in trade and the strengthening of output. However, it is of concern to us that the benefits from such an expanded and vibrant global economic environment have yet to be felt in a number of developing countries. Indeed, a lot of these coun- tries have been experiencing low economic growth, rising debt service ob- ligations, and high inflation for most of the 1980s. Many of these countries are, however, currently undertaking structural adjustment programs in order to lay the foundation for sustainable growth. It is clear that these efforts in themselves, while useful and commendable, will not be sufficient. They will also require the support and cooperation of the international community. Policy reforms and structural programs in 73 developing countries in my view will be successful in the long term only if they are undertaken within a more favorable external environment and with an adequate inflow of external resources to support those policy initiatives. However, the growing protectionist sentiments in the developed countries that import the major part of the developing world's commodities and man- ufactured goods tend to counteract the structural adjustment initiatives in developing countries. This trend poses extreme difficulties in the domestic markets of developing countries and also serves as a threat to the objective of a more open global trading system. It is, therefore, essential that all efforts be made to counter protectionist policies and that the current Uru- guay Round of trade negotiations is concluded successfully soon .... . . . Regarding the debt crisis, we acknowledge the efforts taken so far by the Bank and the Fund in addressing this critical issue, which threatens the financial and socioeconomic survival of a number of developing coun- tries. The implementation of the debt strategy will involve close cooperation between the two institutions to assist debtor countries to formulate and implement appropriate economic policies that will enable them to re-estab- lish sustainable growth in the medium term. As regards the Fiji economy, I am pleased to record that the level of real GOP, which had fallen by over 6 percent in 1987, fell only marginally in 1988 and that the outlook for 1989 is for a real economic growth of over 10 percent. With the turnaround in the economy during 1988 and positive developments on the political front this year, the Fiji authorities were able to implement some deregulation measures and to modify some of the finan- cial restrictions that were imposed during the latter part of 1987. Fiji has continued during its difficult times to maintain good relations with both the Bank and the Fund. We are most grateful for the various kinds of financial and technical assistance that both organizations continue to render through the provision of experts and the work of various missions. For its part, Fiji will continue to support the initiatives for maintaining the stability of the international financial system that are being developed by both institutions. In this regard we look forward to early action on the increase in Fund quotas and on a further allocation of SORs. In addition, while Fiji is not currently experiencing debt-servicing problems, we are fully aware of the need for a coordinated strategy to deal with the debt crisis and trust that the steps being taken by both the Fund and the Bank to strengthen their operations in this area will succeed. Indeed, we recognize that the prospects for sustainable growth in developing countries depend very much upon successful solutions being found to these problems. Only through such international cooperation can we look forward to a stable, prosperous, and peaceful future. 74 FRANCE: PIERRE BEREGOVOY Governor of the Fund (on behalf of the Member States of the European Communities) Since France currently holds the Presidency of the Council of the Euro- pean Communities, I have the honor of addressing this meeting on behalf of the member states. During the past two years the world economy has performed considerably better than expected. In Europe, too, the current and medium-term eco- nomic outlook has improved markedly. This reflects primarily the cumula- tive effects of the policy reforms undertaken since the beginning of the 1980s, characterized by increased reliance on market forces, a reduction of public intervention, and the removal of structural barriers to growth. More- over, the growing optimism in Europe is supported by the ongoing realiza- tion of the single European market, which is already giving a strong stimulus to private investment and economic activity in general. Inflation did pick up in the latter part of 1988, although at different speeds from one country to another, and the rise in short-term interest rates in several countries, which started roughly in mid-1988, continued until re- cently. However, recent developments are cause for a little optimism on the price front. The rise in inflation in the industrial countries in the early months of 1989 now appears to be abating, thanks largely to a prompt monetary policy response. There are now a number of factors making for the moderation of inflationary pressures, such as the greater flexibility of productive systems, the higher interpenetration of economies, the tightness of monetary policy, the softness of oil prices, and the slowing of growth in certain overheating economies. There is no cause for complacency all the same. Wage trends in various countries are worrisome and could trigger a resurgence of inflation; even where such strains are not being felt, we must maintain vigilance on wage dynamics. This is why we must stay on our guard against inflation and continue to fight it through a better mix of fiscal, monetary, and structural policies. It is only in this way that we can avoid an overburdening of mon- etary policy and the accompanying threats to employment and growth. Risks could also arise from the recent development of the current account imbalances. Although some progress has been achieved in reducing these, the adjustment process appears to have come to a halt and· the level of deficits and surpluses remains a matter of concern. Further efforts are called for on the part of both deficit and surplus countries, in order to redress the disequilibria between savings and invest- ment and hence to achieve more balanced external accounts. This will, in turn, contribute to steadier, more predictable world economic development, in particular by reducing the vulnerability of the world economy to adverse shifts in sentiment in financial markets and to threats of rising protection. 75 It is particularly essential to secure a continued and substantial reduction of the U.S. fiscal deficit as well as measures to encourage private savings in that country. At the same time, Japan should continue its efforts for a greater opening of its markets. The newly industrializing economies could also help foster more balanced world economic growth. They can contribute significantly to the process of reducing current account imbalances by accepting the appropriate GATT undertakings and by allowing their exchange rates to reflect their competi- tive position. This necessary international compatibility in respect of economic perfor- mance calls for continued-and, if need be, more strenuous-efforts to further improve the functioning of the international monetary system. In this context we continue to support the role played by the IMF in the process of international policy coordination, notably via its surveillance function, and we also welcome the growing use of indicators to strengthen this sur- veillance. The EEC countries have contributed significantly to that process through the EMS, and they are continuing to do so by reaffirming, at the European Council in Madrid on June 26 and 27, 1989, their determination to move gradually toward economic and monetary union. In our view, the commit- ment to a system of stable exchange rates and economic policy coordination based on the shared objective of noninflationary growth has proved its effectiveness in Europe, yielding valuable results in terms of monetary sta- bility. Our experience too could be useful in the effort to improve the international monetary system. The importance attached in the process of international economic coop- eration to reforms designed to make national economies more effective and more flexible represents a most favorable development with regard to bal- anced noninflationary world economic growth. Trade policy reforms occupy a major position among these, alongside measures to reduce subsidies and to improve tax systems and the workings of the labor market. With respect to multilateral trade negotiations, the European Community welcomes the progress achieved last April in the framework of the Uruguay Round. It played, and will continue to play, an active role in strengthening the integrity of the multilateral trade system and widening its coverage. It is important that efforts are made by developed countries to ensure that developing countries obtain full access to their markets. The construction of the single European market demonstrates our con- cern to open up our frontiers, thereby helping to make our economies more flexible. We believe that it will represent a further step forward in the multilateral liberalization process and will stimulate trade in goods and services. The situation in the developing countries, particularly the highly in- debted ones in Sub-Saharan Africa and in Latin America, is a matter of 76 prime concern to us. In spite of improved raw materials prices, their situa- tion and their balances of payments are still fragile. What is more, in many cases investment, especially productive investment, has been curtailed, thereby restricting their growth prospects. Lastly, their debt levels are in some cases an obstacle to the restoration of a viable economic situation because the fruits of growth are entirely pre-empted by their debt obliga- tions. The developing countries, the multilateral financial institutions, and the developed countries have taken measures to cope with this situation. Recent progress provides grounds for guarded optimism. The first requirement, if developing countries are to achieve growth rates commensurate with their needs, which include financial stability and exter- nal viability, is the resolute pursuit of strong macroeconomic and structural policies in order notably to mobilize domestic savings, attract investment, and stimulate the repatriation of capital. Several countries have implemen- ted courageous policies, which have yielded positive results in many cases. These must be pursued and intensified. Putting these sound economic policies in place is often not enough, how- ever. Industrial countries, international organizations, and commercial banks must jointly support these efforts by providing adequate financing. Encouraging progress has been achieved in this respect in recent months. Concerning, first, the poorest countries, significant debt or debt service relief has been granted. Thirteen countries have already benefited from the debt service reduction measures on which the Paris Club reached consensus in September 1988. The ECC countries account for more than three quarters of the amount thus rescheduled. Looking beyond that, several EEC member states have significantly increased the proportion of grants in their devel- opment aid or converted sizable quantities of loans into grants. Lastly, the conclusion by the IMF of the enhanced structural adjustment facility ar- rangements, to which the Community's members are major contributors, and the application of the World Bank's special program of assistance to the poorest and most heavily indebted countries are evidence of the com- mitment of the multilateral institutions to increasing the volume of support for the adjustment efforts of the low-income countries. We are hopeful that these combined efforts of the donor community to reduce the debt burden and provide new resources will soon be reflected in increased net flows to these countries, thus reversing the adverse trend of the 1980s. A sustained effort is necessary and we must be vigilant to ensure that the provision of increased resources is maintained for a sufficiently long period to allow a strong revival of growth. The efforts of the international community must not, however, be con- fined to contributing financial resources: it is essential for the poorest coun- tries to find stable and growing outlets for their exports. It is with this in mind that we are currently negotiating the renewal of the Lome Convention, 77 seeking to adapt its instruments more closely to the needs of the countries for which it is intended. Regarding the most heavily indebted middle-income countries, here also recent trends provide grounds for cautious optimism. The decisions taken at the Washington meetings last April have already contributed in an im- portant way to the new agreements of the Governments of Mexico and of the Philippines with creditor banks. Given the persistently high ratio of debt service to exports, it is crucial that other heavily indebted countries be allowed to qualify themselves for these debt relief measures. Even so, these countries still face many difficulties. The EEC member states strongly support recent work done by the IMF Executive Board to make the debt reduction approach, agreed at our last meeting in April, operational as soon as possible. Such action must be complemented by free access for these countries to export markets. Recent developments in certain Eastern European countries confirm that higher and more balanced growth must be based on the implementation of sound economic policies and structural adjustment measures. Attention will have to be given to the degree of support which the international community should provide. To perform effectively their task of safeguarding the integrity of the in- ternational monetary system and of helping the component parts of the world economy to develop in harmony, the Fund and the Bank need ade- quate resources. These roles of the Fund and the Bank can only be fulfilled if countries scrupulously observe their financial obligations to them. Under no circum- stances can arrears be regarded as acceptable, as their effect is to increase the cost of the resources made available to other members of these institu- tions. The Fund is a monetary institution and the revolving character of its resources is to be preserved. For its part, the Bank has to safeguard its credit rating and access to capital markets. Accordingly, our countries en- dorse the cooperative strategy pursued in recent months to resolve the issue of arrears, combining a firm stand on principles-in the interests of the debtor countries themselves-with a concern to avoid any measures that might prove counterproductive. Close cooperation is another necessary condition of effective action by the Fund and the Bank. This is why we welcome the agreement on the definition of their respective areas of primary responsibility reached by the two institutions last March, and the terms of the report approved in June by the Ministers and Governors of the Group of Ten. Lastly, the two institutions must not be left short of resources, given the scale of the tasks before them. With respect to the Fund, we welcome the impending completion of the Ninth Review of Quotas. We hope that, as a result, the Fund will revert to a size somewhat more commensurate with the scale of the world economy. In doing so, we should avail ourselves of 78 the opportunity to reduce the Fund's borrowing and to review the policy of enlarged access. The question of the resumption of SDR allocations during the remainder of the fifth basic period from 1988 to 1991 should be kept under consideration. With respect to the Bank, we believe that a substantial reconstitution of the resources of the International Development Associa- tion is essential. If these conditions are met, the Bretton Woods institutions will be able to go on performing their difficult but vital task, continuing to enjoy our full support. These, Mr. Chairman, are the remarks I wanted to make on behalf of the European Community. In the name of France, I would like to mention two points that are also of concern to the European countries. First, the protection of nature and our environment: a key issue for the future of the planet. The industrial countries have key responsibilities for reducing the greenhouse effect and the spread of pollutant waste. Each country must mobilize its own resources, but France believes that the World Bank must also be provided with specific additional resources so that it can encourage large-scale programs. I therefore suggested yesterday to the World Bank that it should study a special program for the environment, financed by voluntary contributions that would be additional to IDA's nor- mal resources. The sum of SDR 1 billion would be required, and for its part France is ready to provide F 900 million over three years. Second, very recent events also lead us to express our solidarity with Poland and Hungary, both member countries of the Fund and the World Bank. These countries deserve our support. They have decided to undertake bold programs of economic reform. Their task is immense. France believes that all the instruments at our disposal should be used: Fund and World Bank loans, technical cooperation, bilateral financial assistance, EEC as- sistance, and, in the case of Poland, rescheduling of Paris Club debts. My country will not stint in its efforts in this direction, because we are convinced of the historic importance of current developments. Everything must be tried and everything done to give democracy a chance everywhere. FEDERAL REPUBLIC OF GERMANY: THEO WAIGEL Governor of the Fund I. This is a time of change and historical opportunities. In many areas-in economic relations, politics, in questions of environmental protection and of security-we can sense a new willingness to communicate and cooperate. 79 This is the response to the interdependence which has evolved and to the growing awareness that we share a common destiny. Everywhere, people are demanding more individual and economic self- determination. The relations between neighboring countries in East and West have entered a new phase. II. The failure of central economic planing has become obvious. All over the world, we are witnessing a reorientation in favor of the real foundations of economic progress, namely, individual initiative and effort encouraged by the market system. This resurgence of the free-market spirit is a source of hope to all those who have been denied the opportunity to develop their creative potential because of oppressive state interference. The reform processes initiated in Poland and Hungary are particularly encouraging to those who strive for more freedom, self-determination, and better living conditions. To be successful, this reform process needs outside support. We must use all the instruments available, through both bilateral and multilateral approaches, to enable the people of these two nations to help themselves. Above all, these countries need productive investment to enhance the potential for growth and to promote structural change. My Government supports a timely agreement of Poland and Hungary with the Fund and the World Bank on a program of sustained, market- oriented reforms. This would also provide the basis for enabling Poland and its commercial bank creditors to make use of the new elements of the strengthened debt strategy. III. The Fund and World Bank playa key role in the process of international cooperation. Both institutions now stand ready to provide financial support to indebted developing countries to help them achieve significant debt re- duction through voluntary agreements with commercial banks. This repre- sents an important extension and strengthening of the debt strategy and demonstrates the responsiveness of these two institutions. And it puts into practice an idea which was first taken up in the communique of the Interim Committee in Berlin (West) last year. Political sensitivity and economic realism, solidarity, and patience, but also confidence-these are qualities which are required for our cooperation in the Fund and the World Bank. The basic objective of this cooperation remains unchanged: to promote sustainable economic growth and to im- prove social conditions in the developing countries. We in the industrial countries must not lose sight of how much effort is required to implement reforms under the difficult conditions in which the developing countries find themselves. Nevertheless, to postpone reforms 80 means foregoing opportunities for economic progress and withholding from the socially disadvantaged the prospect of a better life. To be successful, however, reform programs must be regarded by the governments concerned as their own, and they must be accepted by the population. The programs supported by the Fund and the World Bank must therefore be oriented toward sustained growth; they must offer a clear prospect of better social conditions; they must lead to a normalization of relations between creditors and debtors. We also need a feeling for economic realities. Without credible economic reforms, outside help will not fall on fertile ground. For flight capital to return, people must have faith in their country's economic policy. However, to achieve the necessary revival of productive investment in the developing countries, their limited domestic savings need reinforcement through exter- nal assistance. The industrial countries will find it easier to mobilize taxpayer support for such assistance if it can be clearly seen that the help given is being put to productive use and benefiting broad segments of the population in the developing countries. There are, no doubt, many countries whose debt has grown to such proportions that it hampers economic development. The German Govern- ment last year substantially extended its program of cancellation of ODA debt owed by very poor countries to almost OM 9 billion. For years now we have been providing new development aid to the least-developed countries in the form of grants. The Fund and the World Bank are now prepared to support debt reduction arrangements, case-by-case, if such arrangements help to achieve the objectives of the debt strategy-economic growth and creditworthiness. To be sure, in doing so, the Fund and World Bank are exposing themselves to new risks. It is therefore all the more important that Fund and Bank loan arrangements are conditional upon credible reform programs, as the maintenance of their financial integrity is in the interest of all their member countries. We also need solidarity. Both creditors and debtors must do their part to promote renewed growth and better living conditions in the developing countries. For the Fund this means we must ensure the continued strength and effectiveness of this central institution through a substantial quota in- crease. We need the solidarity of the industrial countries, but we also need solidarity within the developing countries. Last but not least, we owe solidarity to the coming generations. Our goal is a sustainable process of development which protects the natural environ- ment-the basis of our existence. It is precisely here that we can see that all countries share a common destiny. The Paris economic summit has pro- vided new impetus in important areas. We must confront the alarming danger of irreversible environmental damage. The World Bank has, in the meantime, made environmental policy a regular component of its dialogue 81 with borrowing countries. The Bank should resolutely continue on this course and deserves our full support. We need patience because there is no quick-fix solution for the problems of debt and underdevelopment. Success can only be achieved through per- sistent cooperation and solutions tailored to the individual case. Let us now concentrate our energies on making effective use of the available opportun- ities and instruments and make them work. IV. In spite of the still existing problems and difficulties, we have good reason to be confident. A number of countries have maintained their creditworthi- ness in spite of their large debt. Their economic upswing is continuing, at an impressive rate in some cases. Others have initiated a change for the better with their reform policies. Their success serves as an encouragement for all. The unbroken economic expansion in the industrial countries should continue to contribute to a favorable international economic environment. The durability of the expansion in the industrial countries reflects the fundamental improvements which have been achieved in the conditions for growth since the beginning of the 1980s. The success achieved proves us right in pursuing a policy which relies on market forces, removes obstacles to growth, and rewards qualification and skills, risk-taking, and hard work. In this atmosphere, business investment is now reacting positively to the opportunities and challenges offered by structural change, technological progress, regional integration, and high-capacity utilization. This will strengthen the foundations of growth and prevent the emergence of infla- tionary bottlenecks. Investment in Europe is gaining additional momentum from the internal European market planned for 1993. It is not without pride that we can point to the new eurodynamism, which stands in sharp contrast to the once fashionable catchword "eurosclerosis." The German Govern- ment-and I stress this-can conceive of the internal European market only as a market which is open to the outside. The basic idea of the internal European market applies both inside and outside: releasing forces for growth in a larger economic area by dismantling barriers. But let us not forget the old insight: inflation does not solve any problems, it just creates new ones. Monetary policy has played its part in preserving price stability as a foundation for sustained growth and secure jobs. Our policies must be consistent and coordinated. This also requires budgetary discipline, encouraging competition and a sensible wage policy. The further reduction of persisting large external imbalances remains a continuing objective of our cooperation. Better external balance will sup- port the stability of the financial markets and it will remove a pretext for protectionism. Those industrial countries whose budget deficits are too high serve both their own interests and those of their partners if they put into 82 practice their declared intention of budget consolidation. This would release resources for productive private investment; it would facilitate the task of monetary policy of ensuring the financing of tension-free growth; and it would strengthen their external position. The surplus countries must, both in their own interest and that of the world economy, further improve the conditions for domestically led growth. In the long run, such growth can only be achieved by continually improving fundamental economic conditions. Short-term fine-tuning of demand is nothing but a dead end. The dynamic German market offers our partner countries growing opportunities for marketing their products. More and more use is being made of these opportunities; we strongly welcome this. Germany's trade surplus' with the United States has dropped sharply, and our trade balance with the developing countries remains in deficit. v. In the Federal Republic of Germany, the economic upswing, now in its seventh year, stands on a solid foundation. In the current year economic dynamism has even increased. Our lively business investment augurs well for the continuation of the upswing in the time to come. The excellent state of the German economy and its good prospects are underpinned by the significant improvement in the underlying conditions for growth. We are now reaping the fruits of the economic reforms of recent years in Germany, too. We have improved our country's basic economic strength by reducing and reforming taxes, by promoting market forces, through privatization and deregulation. We have responded to long-term changes in our demographic and social structures by reforming the health and pension systems. Next year, domestic demand will get an additional boost from a further tax cut amounting to about 1 percent of the national product. And in the coming years we will continue our policy of deregula- tion and removing structural barriers to adjustment. IV. In the pursuit of our domestic objectives, we are all well advised to consider the international effects and repercussions of national action. To maintain steady growth while achieving an orderly reduction of global eco- nomic imbalances, there is no alternative to the closer economic and mon- etary cooperation among the major industrial countries. Our cooperation must now prove itself through a successful and timely conclusion of the multilateral trade negotiations in the GAIT. Here we have an opportunity to make real progress in: -opposing unilateralism in world trade; -making regional integration part of an open trade system; 83 -enlisting the cooperation of the newly industrializing countries in a free multilateral trade system; and -offering the developing countries new prospects for growth and trade. Let us seize this opportunity to strengthen free world trade as an engine of economic progress for all countries. GREECE: DIMITRIOS CHALIKIAS Governor of the Fund The world economy continued to perform strongly in early 1989 as it did in 1988. Industrial countries enjoyed high growth driven by a rapid expan- sion of investment. Newly industrializing countries also achieved high growth rates, mainly owing to buoyant exports of manufactures by the Asian countries. By contrast, GNP growth in low-income countries and in coun- tries with debt-servicing difficulties was modest and lower than that achieved in the mid-1980s, with the 15 heavily indebted countries at the bottom of the scale. Wage moderation and weak prices of oil and some other vital commodities during 1988 enhanced profitability and business confidence in industrial countries, resulting in stronger investment. They also led to lower unem- ployment and almost unchanged inflation, despite the relative tightening of labor markets. In the first quarter of 1989, inflation accelerated somewhat, partly owing to higher oil prices and the appreciation of the U.S. dollar. Also, unemployment in certain OECD countries remains high by historic standards, owing to labor market imperfections, insufficient structural ad- justment, and tight monetary and fiscal policies in some countries. Regarding the balance of payments, recent developments in current ac- counts give cause for some concern. The pace at which imbalances are reduced has slowed down, while exchange rates have been more volatile than in most of the period following the Louvre Accord. In particular, movements in the U.S. dollar were not always consistent with fundamentals. While it is true that cooperative efforts by the Group of Seven, mainly through concerted intervention in foreign exchange markets, helped to sta- bilize exchange rates, further efforts are necessary on the part of both deficit and surplus countries in order to achieve and sustain more balanced external accounts. To this end, it is imperative that deficit countries reduce their fiscal imbalances and encourage private savings, while surplus countries open up their markets and, especially the newly industrializing ones, allow their exchange rates to reflect their external position. Developments in economic policies in 1988 witnessed the dominant role of monetary policy. Following some easing of monetary conditions aimed at absorbing the effects of the stock market crash, monetary policy became uniformly tighter in industrial countries since the second quarter of 1988, 84 --------.------- with short-term interest rates rising to resist inflationary pressure and/or prevent a fall in exchange rates. Less progress was made toward fiscal con- solidation because of conflicting objectives of different countries, partly resulting in external imbalances and in an excessive burden on monetary policies. A common structural characteristic of fiscal policies was the move toward the reform and simplification of tax systems and the reduction in marginal tax rates. Over the last few years, many industrial countries have intensified their efforts toward structural reforms aimed at supply side improvements and more efficient use of resources. Among other things, these reforms aim at rationalizing the way governments intervene in the economy, by eliminating barriers to competition. This should not be taken to imply that all govern- ment intervention is harmful to the functioning of markets. Abuse of power-either due to monopoly or to asymmetries of information-and market imperfections justify intervention, even in the most advanced market economies. In countries where markets and institutions are less developed, there is even wider scope for intervention, including measures to improve the functioning of the market mechanism and of the institutions that support it. In particular, government intervention in labor markets should take the form of a suitable mix of educational, training, housing, and tax policies aimed at matching the demand and supply of different skills. Recent developments toward the economic and monetary integration of Europe contribute to the stability of the world economy. The rapid progress that has been achieved in recent years is due to the pursuit of a number of parallel objectives: completion of the internal market, monetary integration, and economic and social cohesion. There exists broad agreement among the EEC countries over these objectives, although individual countries are de- bating the speed of implementation and the instruments to be used. If transitional costs are to be minimized and benefits maximized, member countries should follow macroeconomic and structural policies conducive to monetary stability and sustainable growth. In this connection, I would like to briefly refer to recent economic devel- opmentsand the stance of economic policy in my country. Since the begin- ning of 1988, the performance of the Greek economy can be characterized as mixed. On the positive side, real economic growth and private investment expanded considerably, while in the same year the current account deficit, as a percent of GOP, fell to a low level and was financed by autonomous private capital flows. On the negative side, inflation decelerated only mod- erately in 1988 and has stabilized at the high level of about 13 percent, while underlying inflationary pressures have been rising. On the other hand, the stance of economic policy and the policy mix have changed significantly since early 1988. Incomes policy and fiscal policy have been relaxed and monetary policy has had to bear the burden of achieving internal and exter- nal stability. 85 The main challenge facing the Greek economy today is the reduction of the sizable public sector deficits. Dealing with this problem is becoming increasingly difficult as the high real interest rates required for monetary stability have compounded the problem of deficits in recent years. The reduction of fiscal imbalances requires difficult choices and concerted efforts and it cannot be accomplished in a short time. It is a task that can only be accomplished by pursuing a consistent and credible fiscal policy in the me- dium term. The Greek Government is currently formulating a medium-term fiscal consolidation program aimed at tackling effectively the causes of fiscal imbalances. The persistent implementation of such a program is necessary for achieving sustainable noninflationary growth in the new environment of an integrated European market. Let me now comment on the situation in countries with debt-servicing difficulties and in low-income countries which gives cause for concern and requires concerted international action. Heavily indebted countries are at- tracting insufficient private capital to finance their current account deficits. As a result, they are transferring resources abroad, mainly through interest payments, which exceed, on average, 3 percentage points of their GDP. In addition, the financing of their large fiscal deficits through money creation causes very high inflation, which increases uncertainty, undermines business confidence, and discourages foreign investment. Hence, investment and GNP growth remain low, aggravating their overall economic situation. In low-income countries, low growth is largely due to: (i) the fall in certain commodity prices; (ii) delays in implementing structural reforms to take into account market signals; and (iii) the protectionist policies pursued in the industrial world. Fiscal and current account deficits are being tackled mainly through investment cuts, because very low living standards do not allow a reduction in consumption. In the absence of sufficient development financing, the adjustment process for most developing countries has meant, in effect, adjustment to a narrow- ing resource base, the effects of which were exacerbated by protectionist attitudes on the part of some industrial countries and the burden of external debt-servicing requirements. It is significant to note that, where the action of the Bretton Woods institutions was successful, development finance from other sources was available in adequate amounts to ensure the expansion and diversification of the resource base necessary for sustainable growth as well as for socially and politically sustainable macroeconomic stabilization. Sound macroeconomic policies, together with structural reforms designed to improve the flexibility and the dynamism of developing countries, must be consistently and persistently pursued. The policies and objectives of the IMF and the World Bank, in this respect, are entirely appropriate. However, the interventions of the sister institutions, with all the array of instruments at their disposal, are not and cannot be sufficient to ensure growth in developing countries at an adequate and sustainable rate. There is a need 86 for considerable expansion of aid assistance on concessionary terms in con- junction with the Bank and Fund programs. This is the area in which our efforts must be concentrated in the future. For this purpose, action in two directions needs to be taken. First, a significant expansion of the resources of both the International Monetary Fund and IDA is necessary. More par- ticularly, with regard to the Fund, a substantial increase in quotas is re- quired in order to bring its size closer to that of the world economy but also to enable it to expand its role in support of the adjustment and structural reform process in an environment of growth. In addition, a rapid and sub- stantial replenishment of IDA is particularly important in enhancing the World Bank's role in the development process. Second, it is essential to ensure increased collaboration between the Bank, the Fund, and other multilateral lending institutions, on the one hand, and national aid agencies, other official financing institutions, and international banks, on the other, so as to mobilize the support of the entire international financial community on an adequate scale for comprehensive programs, that is, programs combining adjustment, structural reforms, and adequate investment growth. This will require imaginative joint initiatives on the part of the Bretton Woods institutions and the developing countries concerned, but there has to be a positive response, considerably stronger than has been forthcoming in recent years, from the industrial world. Thus developing countries can be helped effectively to escape from the trap in which they find themselves now and contribute positively toward world stability, growth, and prosperity. My country, despite a number of con- straints, has in this spirit contributed within its possibilities to the enhanced structural adjustment facility of the Fund and is willing to cooperate posi- tively through the European Economic Community toward these ends. HUNGARY: FERENC BARTHA Governor of the Fund It is a great privilege for me to address the Boards of Governors of the World Bank and the International Monetary Fund. I wish to center my remarks on three key issues: -the current situation and outlook for the world economy; -the treatment of the international debt problem; and -cooperation between the developed and the developing countries The World Economy In the past six years we have experienced a long period of positive rates of economic growth in the developed world. The favorable performance of the developed countries reflected an improvement in the process of eco- nomic policy coordination among them, which also helped greatly to ease 87 the acute global problems. However, in light of the rate of development of the world economy as a whole, the achievements of this period seem much less satisfying. From 1982 to 1988, the gross national product (GNP) of the developing world grew by an average 2 percent per year. By any measure, this is a strikingly poor outcome in a world which fundamentally needed a much higher growth rate to narrow the gap between the industrial and the developing economies, and to help the developing nations escape the des- perate situation of heavy external indebtedness. We also cannot help seeing, when analyzing the history of recent years, the extremely high cost imposed by the adjustment process in the industrial economies on the less fortunate part of the world. It is clear to all of us that this process was heavily burdened by great instability of interest rates and exchange markets, and by painful volatility of important export markets and international financial flows. This very hostile environment for the devel- oping economies made their task of growing out of their economic and financial problems extremely difficult. The failure of the governments of the developing countries to materially improve their economic situation in re- cent years can largely be explained by the shortcomings of this environment. The present situation and outlook for the world economy are not very encouraging from the standpoint of the global adjustment problem. The GNP growth rates of the industrial countries are expected to stagnate or fall, real interest rates are at excessively high levels, the world market for goods and services remains segmented by protectionism, and the great majority of the developing countries have insufficient access to the financial markets. Though we know that a key element of any adjustment process is the implementation of rational policies by the indebted nations, they will have to receive concerted support for their national adjustment efforts to succeed. The foregoing conclusions have implications for various aspects of eco- nomic policy and coordination. The expansion of the world economy should receive its most important contribution from the developed economies. We urge the industrial countries to implement their own growth-oriented ad- justment programs by streamlining their government spending, eliminating structural rigidities from their national economies, and reducing and stabi- lizing their national interest rates for the long term. Moreover, successful adjustment by the developing countries will require a much more stable international environment than the world economy currently provides. Achievement of this stability and higher GNP growth rates could effectively be reinforced by the establishment by the industrial countries of a more explicit and symmetrical framework for closer monetary cooperation. With this end in view, we support the Belgian proposal for using the SDR mech- anism for concerted exchange market interventions, which would support the largest countries' adjustment process and would also have a stabilizing effect on the present reserve system. 88 - -------------- - - - - - - - The Debt Problem Another area where cooperation among member countries should be strengthened is the debt problem. The results of the many efforts made in past years to alleviate the overall debt burden have been less than satisfac- tory. We believe the indebted countries must undertake strong, comprehen- sive domestic policy reforms to restructure their economies, and that they must pursue prudent financial policies to restore equilibrium. But these efforts must be accompanied by enough external assistance to alleviate the debt burden and provide fresh capital enabling the debtor economies to implement reasonable adjustment programs. Hungary welcomes the new policy initiatives of the Fund and the Bank to provide financial assistance to support debt reduction. Though the mo- dalities and practice of debt-reduction programs must be further refined, and though the positive results of such programs have yet to materialize, we judge that strategy to be a useful device for mitigating the enormous external debt burdens of a number of countries. At the same time, we believe that any support provided by the Fund and the Bank for debt reduction should come from resources which are additional to their present resources, to avoid any adverse effect on the availability of resources for borrowers who are not benefiting from debt-reduction operations. In this connection, we are concerned by the fact that a part of access to Fund resources is set aside to be used for debt-reduction purposes, and that this set -aside implies a reduction in potential access to resources for balance of payments financing. These arrangements are especially distressing for those countries which have been able in the past to maintain their access to the private capital markets but now face heavy debt service obligations. We believe that these countries, through their efforts to maintain an orderly schedule of debt service payments, have made a basic contribution to the stability of the international financial system, and we wish to stress the need for enhanced financial assistance to support the countries which are not qualified for officially supported debt relief.... Cooperation Between the Developed and Developing Countries ... We nowadays face a growing recognition that a comprehensive ap- proach to the process of growth-oriented adjustment should not omit the kinds of support which can be extended by the governments of the developed countries. The assistance provided by the international financial institutions can only be effective if the other elements of the international environment are conducive to the successful solution of the adjustment problem. A cru- cial element of adjustment solutions is economic cooperation between the developed and the developing countries. By now, the presence or absence of such cooperation has become much more than a question of help ex- tended from one country to another. The real question is how the developed 89 and developing countries can mutually improve and exploit their opportun- ities for faster growth and healthier economic development. To attain such a goal as this, cooperation by all parties is needed. We wish to stress that all countries have important responsibilities in the cooperation process. On the one side are the developing countries, which can contribute to world growth by implementing structural reforms, im- proving their supply performance, expanding and opening up their domestic markets, and avoiding macroeconomic disruptions due to financial imbal- ances. On the other side are the developed countries, which should assist the developing countries' efforts by eliminating trade protectionism, facili- tating the transfer of modern technology, encouraging the flow of private direct capital investment, and promoting industrial and trade cooperation. Industrial country governments can also extend guarantees and other incen- tives to private lenders to facilitate the obtaining of fresh external financing needed for the efficient implementation of adjustment programs by indebted developing economies. I have summarized some key elements of the philosophy which my Gov- ernment considers an appropriate basis for handling global economic prob- lems. Hungary is following a path of systemic modernization through a set of policies which we believe will contribute to the practical realization of that philosophy. In recent years, we have implemented a fundamental reform of our domestic financial system and begun the gradual elimination of the market distortions which flow from state intervention. We initiated a process of deregulation combined with establishment of a modern system of inter- nationally compatible economic laws, lifted the barriers to the operation of private and foreign capital, liberalized external trade and travel, taken steps to restore a rational system of relative prices, and begun a comprehensive reform and streamlining of the public sector. Hungary has opted for the policies of reform and growth and is committed to developing its economic cooperation with other countries. My Government's major endeavor is to maintain the financial equilibrium of the national economy. It is widely recognized that the external balance must be a high priority of economic policies if the momentum of the deeply rooted reform is to be sustained. In that respect, an important achievement is the strengthening of a modern monetary and a transparent fiscal system, which offers an opportunity for the conduct of efficient economic policy. A key factor to the success of Hungary's ongoing economic reform move- ment is the historical change of the sociopolitical system. An emerging era of political democracy based on a fundamental political accord reached by different political forces of our society just about a week ago and the up- coming free elections are hoped to provide a level of consensus that is conducive to social and economic progress. The Hungarian nation is fully aware of the importance of that historic opportunity and of the importance of the nation's success for other regions of the world. The Hungarian Gov- 90 ------- ._-_.--_. ernment greatly appreciates the solidarity and support expressed by the distinguished delegates and by both the Fund and the Bank encouraging the developments in Hungary. It is valued especially because, without mean- ingful international support, the endeavor undertaken by Hungary will not be able to succeed. It is our hope that these efforts will materially contribute to the solution of the global economic problems, and we also hope that these efforts will receive an appropriate response from the member countries of the World Bank and the International Monetary Fund. ICELAND: JON SIGURDSSON Governor of the Bank (on behalf of the Bank Nordic Countries) Speaking on behalf of the five Nordic countries, Denmark, Finland, Ice- land, Norway, and Sweden. I would first like to join previous speakers in welcoming Angola as a new member of the World Bank. At the time of the Annual Meetings, last year, signs could be discerned of a change in the dismal process of decline for much of the developing world. Programs of adjustment were being pursued by many countries and initiatives by international institutions, as well as industrial countries, were being implemented. During the past year these efforts have continued and a process of debt reduction has been set in motion. There are indications that adjustment programs are leading to improved growth in several coun- tries, while good economic performance prevails in most countries without debt problems. Nevertheless, in major parts of the developing world, espe- cially in Sub-Saharan Africa and Latin America, terms of trade remain unfavorable and resources for investment insufficient, while per capita in- come continues to fall. Relatively strong economic growth is likely to continue in industrial coun- tries for the time being. It is of the greatest importance that developing countries can further benefit from this expansion of production and trade to enable them to make better use of their resources and comparative advantages. A timely and successful conclusion of the Uruguay Round would be a most important step in this direction, reducing agricultural export subsidies and import restrictions, dismantling non-tariff barriers and integrating trade in textiles and clothing into the GATT system. Also, in shaping their regional trade arrangements, industrial countries need to give full attention to the position of developing countries. Last but not least, strong efforts by the industrial countries to improve their own internal and external balances will help to create a more stable economic climate world- wide, with lower real rates of interest and better prospects for growth. The implementation of structural adjustment policies remains a vital task in the developing countries. It is most important that these policies are 91 designed in a way that makes them sustainable. In that connection, I would like to single out one aspect, the need to reduce the hardships of the most vulnerable groups. In maintaining adjustment policies over a prolonged period of time, the adjusting countries need all the support the creditor and donor community can provide. Important steps have now been taken to diminish the burden of debt. A timely and forceful implementation of these initiatives is crucial. The major precondition for this is readiness by commercial banks to agree to a signif- icant reduction of debt. Individual creditor countries may facilitate this by appropriate changes in bank regulatory and tax procedures. For the in- debted middle-income countries, progress in debt reduction, combined with effective economic policies, ought to bring about a renewal in the flow of private resources as well as the repatriation of capital. In this process the World Bank will continue to be an important catalyst. It should also, through its Expanded Cofinancing Operations, continue to facilitate the access to capital markets of countries which have avoided severe debt prob- lems. The Nordic countries, for which I am speaking, would in particular like to emphasize the need for sustained support of the low-income countries. While some industrial countries have substantially increased their official development aid, we deplore that others have reduced it. It is widely ac- knowledged that low-income countries, both in Sub-Saharan Africa and in other continents, will not be able to achieve satisfactory growth in the foreseeable future without substantial and increasing external aid. Many of these countries are demonstrating their determination to mobilize their own resources and follow the strict policies required to achieve development. Others are following in their footsteps. It would indeed be regrettable if the industrial nations at this juncture should fail to come forth with sufficient support. This applies specifically to the replenishment of IDA. We believe that an increase in real resources is required. We urge all donors to con- tribute to this and reach a timely agreement on IDA-9. Economic growth, reduction of poverty, and protection of the environ- ment must go hand in hand. Without economic growth, resources for ad- dressing poverty and improving the environment will not be available. And without alleviation of poverty and maintenance of the environment, eco- nomic growth will neither serve a proper purpose nor be able to continue for long. The essence of development strategy, and the basic mission of the World Bank, is to achieve the interweaving of these three strands of policy. Traditionally, the Bank has devoted most of its attention to the creation of infrastructure and the direct promotion of productive activities in the developing countries. More recently, the support of broad policy reforms has been added. It has become increasingly clear, however, that efforts in these directions cannot yield lasting benefits in economic growth and re- duction of poverty unless they are accompanied by a strengthening of hu- 92 man, technological, and institutional capabilities. This implies increased support for research and technology, for building institutions, not least in the field of finance, and for improving management in private as well as public enterprises. This also implies increased support for education, health, nutrition, and population programs through lending, research, technical assistance, and training. In the discussion of the Development Committee and at the Annual Meetings a year ago, the combined goals of economic growth and poverty reduction were clearly established. This implied the Bank's help in the design and implementation of programs and projects aimed directly at pro- viding the poor, such as farmers and small entrepreneurs in industry and services, with necessary means of production. Important work of this kind has been undertaken and experience of previous initiatives has been gained. Nevertheless, an impression is left of a lack of clarity on how to proceed. The countries I represent hold the view that a forceful move should now be made in the direction agreed upon last year. The progress should be re- viewed next year when poverty will be a theme of the World Development Report and a topic on the agenda of the Development Committee. The active engagement of women in the development process has been on the World Bank's agenda for several years. Important studies of the economic role of women have been made. Time has come for action, trans- forming the conclusions we have drawn from these studies into Bank pro- grams and projects. Recognition of the role of Women in Development should be an integral part of the everyday operations of the Bank. In the quest for poverty reduction, population policies must be an integral part of development strategy. As opportunities improve for better education and health services, a stronger basis is created for successful population policies. Increased efforts should therefore be made in this field, initiated in the countries themselves by their own organizations and governments, with strong external support, not least by the World Bank. The World Bank has made good progress in incorporating environmental considerations in its operations. This applies to the preparation of projects and to a lesser extent to economic and sector work. The goal must be to take environmental considerations into account at every level of the Bank's work in common with the basic aims of growth and poverty reduction. Sufficient information on the environmental" aspects of projects and on al- ternative ways of solving problems ought to be made available at an early stage. Ways have to be found in individual cases to merge the aim of eco- nomic growth with that of environmental protection and to strike a reason- able balance between the two when they cannot be made to coincide in the short term. It is also important for industrial countries to remember that exhortations to pay attention to the environmental aspects of development will gain in strength and credibility to the extent they themselves take such aspects into consideration in shaping their own economic policies. 93 We are now approaching the end of a decade which has brought many disappointments but has also given us many new insights into the process of development. As countries gradually come to grips with the problems of adjustment and debt, they will be seeking to lay foundations for stable long- term development. They will be taking stock of the financial resources they themselves can mobilize and the support they can obtain from the outside. They will be giving attention to their human resources and the preservation of their natural endowments. As a most important agent for the support of development, the World Bank will need to consider its own role in this process, to outline a basic strategy for the coming decade with due account to the lessons of the past. This is a task deserving high priority and the Nordic countries are prepared to lend active support to ensure its success. INDIA: S. B. CHAVAN Governor of the Bank and Fund I extend my hearty welcome to the People's Republic of Angola, which has just joined the Bank-Fund family. We are meeting on the threshold of the 1990s, and as we look beyond to the end of the century, the question to ask ourselves is whether we have learned the lessons of the 1980s. The President of the World Bank, Mr. Conable, stated that the objectives of the Bank are to "reduce poverty and accelerate growth." The Managing Director of the IMF, Mr. Camdessus, said that the 1990s must be a decade of opportunities. How near or far are we from these laudable objectives? The 1980s are a decade of low growth, high inflation, and rising poverty for most developing countries. There are, of course, exceptions. India, for instance, has done reasonably well. National income over the 1980s has grown at over 5 percent per annum, the incidence of poverty has come down, inflation rates have been modest, and exports are increasing rapidly. Development has been financed predominantly by high domestic savings, and recourse to external borrowing has been kept within prudent limits. However, even those of us who have done well have had to cope with the declining flows of concessional assistance, rising protectionism in the indus- trial countries, a high degree of exchange rate volatility, and persistent imbalances in the global economy. The progress in the coordinated correc- tion of balance of payments deficits and surpluses among major industrial countries has stalled. The impact of these imbalances on trade policy, ex- change rates, and interest rates contributes, in no small measure, to the current account deficit of developing countries. Since the developing coun- tries lack the finances required to cover these deficits, they have had to implement strong expenditure-reducing policies that hurt investments and growth and erode already low levels of living of the poor. At a time when they need resources to correct the structural imbalances in their economies, 94 there is a net transfer of resources from them to the rich countries. Small economies are being asked to make large adjustments while large economies continue to carryon as before. As long as the imbalances in the industrial countries continue, structural adjustment in the developing countries will remain difficult. A more symmetrical adjustment process is necessary if the global econ- omy is to recover its balance. In particular, it must be ensured that macro- economic policy coordination among industrial countries goes beyond nar- row monetary objectives. Policy coordination should aim at promoting stable and healthy growth and open markets. They should not have narrow national or regional focus and should take into account the impact on the global economy, particularly the developing countries. The belief that the answer lies in the free play of market forces is true to a certain extent, but this is not all that is required. The failure of many structural adjustment programs testifies to this. In developing countries the response to market signals is often constrained by the lack of infrastructure. Investments in energy, transportation, land and water development, and human resource development are essential, both for adjustment and for growth. In this context, I must point out that the overall magnitude of net resource flows to developing countries has been clearly inadequate to meet their developmental needs. Aggregate net flows still remain far below the levels observed in the first half of the 1980s, financial markets continue to be tight, and real interest rates remain significantly higher and more volatile than in the 1970s. Besides, private lending is steeply lower than the levels observed in the 1970s. Net official flows have also declined in real terms though less sharply. In these circumstances, a major global effort is needed to provide additional resources to accelerate the process of growth with equity in developing countries. The Ninth Replenishment of IDA is of critical importance to low-income countries. In many ways, IDA symbolizes the commitment of the interna- tional community to poverty alleviation, a task that is central to the activities of the World Bank. We would urge the donor nations to act in a spirit of understanding and agree to a replenishment of IDA-9 on a substantially higher level than IDA-8. This will go a long way to demonstrate that the ideal of international cooperation to eradicate poverty survives .... . . . Let me, in this context, refer to the problem of debt. A new initiative has been launched to resolve the debt problems of the highly indebted middle-income countries. This development, as well as the initiatives for reducing the debt of the poorest countries, is desirable and welcome. How- ever, low-income countries that have thus far managed to service their debt, often at a great cost, need to be assisted to maintain the momentum of growth. Some of these countries are already facing severe resource con- straints in achieving desired levels of investment for growth and poverty 95 alleviation. They must be helped to maintain the momentum of their de- velopment, particularly by larger flows of concessional finance. In particular, the debt initiative must not reduce the availability of resources for the normal Bank- and Fund-financed programs. The flow of external finance is only one dimension of the development problem. We recognize the value of an open trading system and the multi- lateral arrangements that underpin it. That is why we deplore the increasing use of unilateral and bilateral measures in this sphere. In particular, the adjustment process calls for an early reversal of the increased protectionist measures imposed by the developed countries. This is necessary to enable the developing countries to reduce their external imbalances through ex- pansion of their exports. The Bank's primary task is to promote development and to reduce the incidence of poverty. As suggested by Mr. Conable, the world community should measure the success of international efforts at development by a very simple test: To what extent has it been possible to enhance the quality of life for the poorest segments of the world population? The task remains immense. National governments have to be assisted in their efforts to alle- viate and eradicate poverty. We have always recognized the importance of the environmental imper- ative and had set up a machinery for environmental planning and coordi- nation in the early 1970s, in fact, before the Stockholm Environment Con- ference. We introduced strict legislation on air and water pollution. We have also introduced many fiscal incentives for this purpose. All major projects are subjected to detailed environmental impact assessment, and we insist that all projects must include full provision for environmental safeguards and complete rehabilitation of those who may be adversely affected. Envi- ronmental projects have been taken up for wasteland rehabilitation and for cleaning up major rivers. There is total political commitment to the task of environmental protection at the highest level, and an active judiciary and NGO movement keeps us on our toes. Basically, environmental degradation in developing countries is caused by a lack of development and a paucity of resources. Hence, accelerated growth is a necessary condition for environmental conservation. There should, in principle, be no conflict between development and sound environmental policies. The issue, therefore, is not one of introducing increased and cum- bersome layers of conditionalities. Equally, we should not turn into advo- cates of stagnation and decline in pursuit of environmental protection. Development necessarily involves changes in resource use, and the environ- mental imperative must not become an enemy of such changes. The challenges of protecting the environment are global and require ma- jor actions by industrial countries and not just by developing nations. Global efforts at environmental protection would need to guard against the impo- 96 sition of disproportionate obligations on developing countries when the mas- sive sources of global pollution lie elsewhere. Sustainable growth is in the common interest of the entire international community. Effective initiatives to protect the environment require addi- tional concessional resources. In particular, a global effort is necessary to ensure adequate funding of research, development, and the diffusion of environment-friendly technologies. With this end in view, India has pro- posed the establishment of a Planet Protection Fund under the United Nations. We have proposed that the contributors to, and the beneficiaries of, this fund will include both the developing and the industrial countries. Mr. Chairman, we share your conviction that, while the tasks of poverty alleviation and development, maintenance of stability, and protection of our environment are indeed immense, all of us, acting together, can meet these challenges. INDONESIA: J.B. SUMARLIN Governor of the Bank As I review the data on global economic trends, it seems to me that the prospects for the world economic situation are a little less bright, but basi- cally the same as those we faced a year ago. Overall activity, driven by a deceleration of activity in the industrial countries, is slowing, and this trend can be expected to continue through next year. Inflation has remained under control, although with several major economies pushing against their ca- pacity limits, the potential for inflationary pressures remains. The need for overt policy interventions to control inflation is, therefore, a distinct possi- bility. Disappointingly, little progress has been made in reducing external im- balances. Indeed, the immediate prospect is that they may again widen. Finally, achieving greater policy coordination among the major economies has been slight. However, there have been no dramatic turns for the worse. Overall prospects are not very different from those of last year. I would stress that the prospect of only a slight deterioration in the world economic situation is the most likely scenario, not a certainty. There are many potential events or developments that would make the outcome much more discouraging. Markets could stumble, or policymakers, each subject to his own political process and imperatives, could inappropriately react in addressing the dangerously large fiscal and trade imbalances. The need to deal with major issues in the domestic banking systems in several key coun- tries may divert attention from adequately addressing issues of international importance. Moreover, the world economy's adjustment to very important changes taking place in the role of important participants, such as the enhanced 97 economic importance of Japan and the NICs or Europe's further integration in 1992, could be mishandled. Neither inflation nor rampant protectionism is clearly behind us .... . . . Having said this, I would still make the assumption that we face the prospect of a mild deterioration in the world economic situation as the most likely outcome, based on present evidence. That, therefore, will be my working hypothesis, but we must be on the alert for signs that we have been too optimistic. If this assumption is correct, then the policy objectives should also remain substantially unchanged from those of last year. Of these, in my view, the most important are: to reduce significantly the external imbalances of the major trading nations, so as to achieve a greater stability in the international economy; and to effectively reduce the debt burden of the developing coun- tries, so as to permit them to regain voluntary access to financial markets and to re-establish a process of sustained growth. The first objective requires continued emphasis by the Fund on the need for continued vigilance to avoid a resurgence of inflation, and on improved coordination of differential demand management policies in the major in- dustrial countries. Demand should grow more rapidly than GNP in the countries with balance of payments surpluses, while in the deficit countries, it should be the other way around. Effective coordination of policy would permit the still overly large external imbalances to be reduced on a sustained basis. This would do much to restore market confidence. The fact that important surplus countries are already pushing up against capacity limit does create a problem for this prescription. Nevertheless, enhanced coordination and the reduction of the external imbalances must remain high-priority policy objectives. Keeping inflation under control and restoring external balance represent difficult challenges. To meet these challenges will not be easy. The factors involved are complex and can be at odds with one another. It is, therefore, important not to place too heavy a burden on a single policy instrument- monetary policy-to achieve both objectives. Relying solely on monetary policy as a cure-all runs the risk of generating exchange rate movements that could undo some of the gains in external competitiveness achieved recently. It could also lead to levels of interest rates higher than they otherwise would be, increasing the debt burden we are all trying to reduce. Clearly, the right policy prescription will require a judicious mix of monetary, fiscal, and structural policies so that exchange rates, interest rates, and supply responses can all work together to strengthen the performance of the world economy. Dealing constructively with the debt problems of the developing nations remains one of our most urgent tasks. Re-establishing access to financial markets, or continued access for those countries that still enjoy such access, to obtain the resources necessary to support sustained growth in the devel- 98 oping countries, is an imperative for a sound world economy. To this end, the strengthened debt strategies of the Fund and the Bank are to be wel- comed. A few comments on their implementation are in order. Debt reduction is now recognized as one of the keys to renewed market access. To have a maximum impact on debt reduction, and on the entire adjustment process, it may be necessary for the Fund to be flexible on the timing of disbursements under the strengthened debt strategy-providing more money up-front-without abandoning the principle of conditionality. The secondary market for debt might not evolve in the desired way if the debt reduction effort is too drawn out. It has to be assumed that segments of the commercial markets may be reluctant to provide the required levels of new money in the face of the need to accept discounts on existing loans. Indeed, there are some worrisome implications in the announcements associated with the recent additions to reserves for "troubled loans" made by major U.S. banks in the last few days. These reactions will need to be carefully monitored. Every effort will need to be made to keep the commercial banking community an active, and voluntary, partner in the process of financing sustained growth in the de- veloping countries. The official sources of short- and medium-term finance will need to be prepared to provide the funds and policy support that may be necessary to encourage the maximum participation of commercial lend- ers. The necessary flow of commercial lending may require consideration of changes in the regulatory framework within which commercial lenders op- erate. It may also be necessary to find ways to reduce the seniority of existing debt-both official and commercial-if an adequate flow of net new money is to be induced. Of course, the borrowing countries must also do their share to assure an adequate flow of resources. We recognize that surmounting the debt burden problem is a responsibility of both borrowers and lenders. The borrowers must be seen to be genuinely committed to policies of sound economic management and structural reform. Conditionality does have to be part of the solution. Let me repeat the points I made at our meetings last year in Berlin (West). Inappropriately designed or ineptly applied conditionality can be seriously counterproductive-leading to unnecessary, and unacceptable, levels of hardship. Getting the sequence and timing of the steps in the process right is essential. Nevertheless, it is equally true that good manage- ment and structural adjustment make an important contribution to achieving sustained growth. Last year, I noted that "the experience of Indonesia, and the positive results we have achieved, lead me to state that conditionality-enlightened conditionality, that is, based on strategies of growth-remains an appropri- ate tool to be applied both by the Fund and the Bank in the proper conduct 99 of their affairs." The Fund's surveillance function can play an important role in assuring timely and supportive counsel to members in pursuing their adjustment programs. Events in my country during the year since I made those remarks strongly reconfirm that judgment. Under the policies we continue to pursue with the supportive counsel of these two institutions, the diversification of our econ- omy is moving forward vigorously; our manufacturing sector is growing at an accelerating rate; our non-oil exports are growing; and our financial sector and capital markets are playing an ever-growing role in mobilizing resources and keeping inflation under control. It is important that we main- tain the momentum of our restructuring and growth. In this regard, I would note that the needs and interests of all groups of developing countries should receive evenhanded attention. The countries that have pursued vigorous adjustment programs, usually at significant cost to themselves, should not become the overlooked or forgotten parties in this process. My own country intends, and is able, to continue to honor all of our external obligations. Our needs and the positive opportunities for growth open to us will require the mobilization of substantial financial resources. Even if we maximize our own mobilization of resources and continue to receive sympathetic consideration from bilateral and multilateral official sources of finance, we would anticipate that we would need access to the commercial finance markets to fund productive activities. We would hope, therefore, that we can expect the continued flow of funds, commercial and official, that we will need on terms that reflect our performance record as = Eduardo Amadeo Roberto Luis Arano Governor Raul Baglini Bader-Eddine Nouioua Felix Alberto Camarasa + + Jorge F. Christensen Advisers Jorge Dominguez Ahmed Bennai Aldo Dueler Abderrahmane Bensid Ernesto V. Feldman Mohamed Ali Hammoudi Roque Fernandez Abdelaziz Lahiouel Anibal Forchieri Richard Handley Oscar Lamberto Angola Roque Maccarone Daniel Marx Governor Jorge Matzkin Antonio da Silva Inacio Jesus Rodriguez Juan Carlos Romero Alternate Governors Jesus Sabra Pedro da Cunha Neto· Edward Saiegh Jose Baptista Madeira Torres Emilio Sanchez-Garcia Juan Trilla Advisers Nicolas Weisz-Wassing Jose Manuel Cerqueira Antonio G. Zoccali Helder Carneiro Cirilo Ismael Gaspar-Martins Jeronimo Gaspor de Almeida Australia = Aguinaldo Jaime Antonio Branquinho Maia Governor Ms. Clotilde da Silva Alves Mariano J.S. Dawkins Jose Pedro Morais Ms. Maria Madalena Ramalho Alternate Governors Ms. Marinela Martins Amaral Ribas Christopher Doepel· Johnny Rizq David Morgan· Hernani Ramiro Gomez Santana Mervyn John Phillips· Uri Winterstein G.F. Taylor· c.1. Higgins· Antigua and Barbuda# = Advisers Robert G. Carling + + Alternate Governor Denis C. Fitzgerald Starret D. Greene· Roger Q. Freney · Temporary < > Not a member of IFC {I Not a member of IDA = Not a member of MIGA + Executive Director + + Alternate Executive Director 265 A.M. Hinton Bangladesh Michael J. Kooymans John Laker Governor P. Phillips A.K. Khandker Alternate Governors Austria = A.H.S. Ataul Karim* M. Mustafizur Rahman' + + Governor Enam Ahmed Chaudhury Ferdinand Lacina Advisers Alternate Governor Quamrul Hai Othmar Haushofer M. Nazimuddin Advisers Barbados# Johann Kernbauer Herbert A. Lust Governor Klaus Muendl L. Erskine Sandiford Walter Rill Alternate Governors The Bahamas# = Carl Denzil Clarke' Winston A. Cox Governor Advisers Sir Lynden O. Pindling Sir William Douglas Erskine Griffith Alternate Governor Mrs. Margaret Cecile Hope Mrs. Ethelyn C. Isaacs Neville V. Nicholls Ms. S. Rozanne Osborne Advisers George L. Reid Owen S.M. Bethel Delisle Worrell Reno J. Brown Roosevelt Butler Kent E. Campbell Belgium = David Davis Edgar N. Hall Governor Margaret E. McDonald Philippe Maystadt Bernard Nottage Benjamin Rahming Advisers Gino Pierre Alzetta Jean-Pierre Arnoldi Babrain<># Jacques de Groote + Mrs. Wivina Demeester-de Meyer Governor Ms. Marcia de Wachter Ibrahim Abdul Karim Mrs. Anne Grootaert-De Gang Marc Schiepers Alternate Governor Bernard Snoy Rasheed M. AI-Maraj* Jan M.B. Vanormelingen Advisers Belize = Ali Mohammed al Noor Dhafer Ahmed Alumran Governor Abdul Rahman al Wazzan Said W Musa to Temporary <> Not a member of IFC /I Not a member of IDA = Not a member of MIGA + Executive Director + + Alternate Executive Director 266 Alternate Governor Julio Leon Prado Mrs. Yvonne S. Hyde Enrique Limpias Ms. Vivian Ossio de Claver Advisers Gaston Pacheco Jorge Espat Gonzalo Paz Pacheco Edward A. Laing Ms. Helga Salinas Luis Eduardo Siles Vargas Benin = Botswana = Governor Robert M. Dossou Governor Baledzi Gaolathe Alternate Governor Saliou Aboudou Alternate Governor G.N. Thipe* Advisers Lassissi Fatiou Adekounte Advisers Osseni da Gloria A. O. Mmopi Corneille Mehissou Michael O. Molefane Alain Morel Botsweletse K. Sebele Rachidi Radji Brazll= Bhutan < > = Governor Governor Mailson Ferreira da Nobrega Dawa Tsering Alternate Governors Alternate Governor Sergio Silva do Amaral' Kesang Wangdi Wadico Waldir Bucchi Alexandre Kafka' Arnim Lore' Bolivia = Pedro S. Malan' + + Marcilio Marques Moreira' Governor Ricardo Luiz Santiago' Enrique Garcia Rodriguez Advisers Alternate Governor Jose Roberto N. Almeida Jaime Delgadillo Cortez Joaquim Ferreira Amaro Eimar Andrade Avillez Advisers Roberto Azevedo Jose A. Arias S. Luiz Barbosa Carlos Barbery Nilo Barroso Neto Roberto Barbery Benvindo Belluco Jorge Crespo Antonio de Azevedo Bomfim Carlos Delius Narciso da Fonseca Carvalho Eduardo Derksen Ms. Rosa Maria Dalcin Pablo E. Gottret Michal Gartenkraut Jaime Gutierrez M. Clodoaldo Hugueney Filho Mauricio Gutierrez Quiroga Luiz Fernando de Freitas Ligiero Victor Hinojosa Dalmir Sergio Louzada Guido E. Hinojosa C. Zeuxis Ferreira Neves Jose Justiniano Celso Marcos Vieira de Souza Fernando Kempff Joao Almino de Souza Filho Temporary < > Not a member of IFe 1/ Not a member of IDA Not a member of MIGA + Executive Director + + Alternate Executive Director 267 Burkina Faso Alternate Governors Fred W. Gorbet" Governor Paul Krukowski" Pascal Zagre Kevin G. Lynch" John McDermid" Alternate Governor Ms. Wendy Dobson" Henri Bruno Bessin Advisers Advisers Glen Bailey Rebily David Asante Tom Bernes Ibrahim Beidari Howard Brown Philipe Boutboul Joseph Caron Jean-Baptiste Confe Gregory Ebel J.E. Manu John R. W. Fieldhouse Jacques Nignon Peter Fiori Boukary Ouedraogo Gerry Grant Amadou Beba Sy Ms. Jill Johnson Michael G. Kelly Soe Lin Burundi = Michael Mackenzie Don McCutchan Governor Frank Potter + Gerard Niyibigira Robert L. Richardson David Sevigny Alternate Governor William R. White Salva tor Nkeshimana Terry Winsor Advisers Pierre Binoba Bonus Kamwenubusa Cape Verde< > = Salvatore Matata Governor Arnaldo C. de Vasconcelos Franca Cameroon Alternate Governor Governor Antonio Hilario Cruz Mrs. Elizabeth Tankeu Advisers Alternate Governors Manuel Jesus Costa Paul Pondi" Mrs. Ligia Oliveira Simon Ngann Yonn Advisers Central African Republic< > = Mebara Atangana Samuel Bateki Governor Jacob N. Fonderson Thierry Bingaba Jean-Marie Gankou Andre-Blaise Kesseng a Mbassa Alternate Governor Roger Mbassa Ndine Gregoire Zowaye Advisers Canada Mrs. Lucienne Darlan Ambroise Foalem Governor Mr. Gospodarowicz Michael H. Wilson Joseph Pingama Temporary <> Not a member of IFC # Not a member of IDA Not a member of MIGA + Executive Director + + Alternate Executive Director 268 Justin Salamate China Cyriaque Samba-Panza Governor Chi Haibin Chad<> = Governor Alternate Governors Ahmed Kerim Togoi Jin Liqun' + + Wang Baoliu' Alternate Governor Wang Liansheng Zhang Junyi' + Doumde Ngandande' Zhang Zhixiang' Advisers Lemaye Favitsou-Boulandi Advisers Clabe Guile Geng Jianyue Patrick O'Guin Sheng Fulai Hassan Ousmane Shi Yajun Wen Duanyu Zhang Shengman Chile Zhao Gong Chang Zhu Xian Governor Enrique Seguel Morel Colombia = Alternate Governors Francisco Garces G. ' Governor Claudio Reyes Barrientos' Luis Fernando Alarcon-Mantilla Advisers Alternate Governors Carlos Abumohor Touma Ms. Maria Mercedes de Martinez' Alvaro Bardon Munoz Julio Barriga Oscar Marulanda Gomez' Luis Alvaro Sanchez Baracaldo' Carlos Cardoen Hernan Cubillos Sallato Eduardo Wiesner' + Maurice Diemer Leon Dobry Folkman Advisers Juan I. Dominguez Arteaga Felipe Bautista Palacio Octavio Errazuriz Carlos Caballero Argaez Mrs. Margarita Hepp Luis Bernardo Florez Luis Cristian Hohlberg Florangela Gomez Andronico Luksic C. Javier Gomez Restrepo Manuel Martin Saez Julio E. Gonzalez Francisco Massoni Goazza William Jaramillo Ricardo A. Massu M. Alvaro Jaramillo Vengoechea Ricardo Matte Rodrigo Llorente Martinez Osvaldo Ramon Palacios Mery Manuel Martinez R. . Claudio A. Pardo Alberto Mejia Hernandez Juan Eduardo Prado Luis Perez-Escobar Mrs. Pauline Reiss Juan E. Posada Adolfo Rojas Gandulfo Alfredo Quintero Jorge Schneider Hernandez Mario Scarpetta ltalo Traverso Guillermo Villaveces Medina Miguel Weinstein Goldenstein Samuel Alberto Yohai · Temporary <> Not a member of IFC II Not a member of IDA Not a member of MIGA + Executive Director + + Alternate Executive Director 269 Comoros<> = Advisers Bernard Adikpeto Governor Hassen Amalou Mikidache Abdou'Rahim Edward S. Ayensu Abou Bakar Baba-Moussa Alternate Governor Lansina Bakary Tadjiddine Ben Said Massond Jean Batigne Kofi J. Bucknor Alain Nicaise Coffie People's Republic of the Congo = N'Golo Coulibaly Miss Therese Diadhiou Alternate Governor Mrs. Nicole Diaw Dieudonne Diabatantou Lancina Dosso Diarrassouba Mamadou Emmanuel Advisers Ms. Afi Fabre Jean Claude Boucher Tekalign Gedamu Benjamin Bounkoulou Yao Agbo N'De Hounouvi Mathieu Essago Milan Kerno Bienvenu Essami Michel Komlanvi Klousseh M. Guekoumou Kouassi Koffi Emile Mabonzo Pascal Irenee Koupaki Adoum Malloum Ferhat Lounes Clement Mouamba Philippe Jacques Mian Nianga Obassi Nicolas N'Diaye Richard Noukelak Samuel Adekunle Ogunleye Jean-Marie Omog-Samnick Delphin Rwegasira Guillaume Owassa Albert Bra Saraka Armand Razafindrabe Toure Sidia Jack Sigolet Mande Sidibe Emmanuel Tetegan Diarrassouba Tiebenon Costa Rica= Mamadou Taofiqui Toukourou Governor Cyprus Rodrigo Bolanos Zamora Governor Alternate Governor George Syrimis Ms. Silvia Charpentier Alternate Governor Advisers Michael Erotokritos Edgar Ayales + + Rolando Ramirez Paniagua Advisers Ms. Sylvia Saborio George V. Hadjianastassiou Mrs. Victoria Natar Michael Sherifis Cote d'ivoire Denmark Governor Maurice Seri Gnoleba Governor Ole Loensmann Poulsen Alternate Governors Alassane D. Ouattara* Alternate Governor Leon Naka Sten Lilholt Temporary <> Not a member of IFC II Not a member of IDA Not a member of MIGA + Executive Director + + Alternate Executive Director 270 Advisers Ms. Maria Pia Portaluppi Peter Barslund Cesar Robalino-Gonzaga Niels Bodelsen Patricio L. Rubianes Ms. Anne Meldgaard Fernando Vivero Loza Laurids Mikaelsen Patricio Zuquilanda Ib Petersen Egypt Djibouti = Governor Governor Kamal El Ganzoury Mohamed Djama Elabe Alternate Governor Alternate Governor Maurice Makram-Allah Ibrahim Kassim Chehem Advisers Adviser Ali El Hariri Mohamed Ekbal Roble Olhaye Sayed M. Elbous Ashraf El Rabiey Alaa Khalil Dominica = Erfan A. Shafey Alternate Governor Barnard Yankey EI Salvador = Advisers Governor Mrs. H.A. Benjamin Mirna Lievano de Marques Jake Hansen Alternate Governor Dominican Republic = Rogelio Juan Tobar Garcia' Governor Advisers Rodolfo Rincon Alberto Benitez Bonilla Luis Rene Caceres Alternate Governor Mrs. Miriam Hirezi Andres Garcia' Tomas A. Medina Alfredo Milian Ecuador Equatorial Guinea<> = Governor Jorge Gallardo Zavala Governor Marcelino Nguema Onguene Alternate Governor Edison Ortiz-Duran Alternate Governors Casimir Oye Mba' Advisers Miguel Edjang Angue Antonio Acosta Roberto Arosemena Benites Advisers Miguel Babra Lyon Jean-Baptiste Assiga-Ahanda Danilo Carrera Toribio-Micha Ela Mangue Gustavo Darquea-Espinosa Andrew Lawson Oscar Loor Risco Martin Crisanto Ebe Mba Jaime Moncayo Garcia Maurice Moutsinga Temporary <> Not a member of IFe * Not a member of IDA Not a member of MIGA + Executive Director + + Alternate Executive Director 271 J. Yologaza France = Serge-Blaise Zoniaba Governor Jacques de Larosiere Ethiopia = Alternate Governors Governor Mrs. Helene Ploix· + Wollie Chekol Denis Samuel-Lajeunesse· Alternate Governor Advisers Seyoum Alemayehu Philippe Adhemar Mrs. Pascale Beracha Advisers Jean-Francois Cirelli Mitiku Jembere Serge Degallaix Merkorewos Hiwet Ludovic de Montille Getahun Terrefe Jacques Desponts Jean-Claude Faure Alain Fernandez Fiji = Andre Gauron Jean-Michel Godeffroy Robert Granet Governor Ms. Martine Latare J.N. Kamikamica Mrs. Catherine Laurent Mrs. Anne Le Lorier Alternate Governor Paul Lemerle Rigamoto Taito Christian Merle Bernard Morizet Advisers Gerard Moulin Tevita Banuve Christian Noyer Ms. Lorraine Seeto Mrs. Stephane Pallez + + Abdul H. Yusuf Pierre Pissaloux Jean-Francois Pons Claude Rubinowicz Finland Michel Ungemuth Jacques Waitzenegger Governor Erkki Liikanen Gabon = Alternate Governors Governor Kai Helenius· Pascal Nze Osmo Sarmavuori Alternate Governor Advisers Pierre Parfait Gondjout Veikko Kantola Erkki Laurila Advisers Peter Laurson Michael Adande Asko Lindqvist Jean-Pierre Challard-Bilinga Seppo Moisio Ludovic Loussou Kari Rainer Nars Alfred Mabika Mouyama Jorma Paukku Doupambi Matoka Ossi J. Rahkonen Mrs. Consulata G. Mbingt Jukka Robert Valtasaari Francois Miuko-Mitontomme Erkki Virtanen EmmanuelOndo-Methogo * Temporary < > Not a member of [Fe II Not a member of IDA Not a member of MIGA + Executive Director + + Alternate Executive Director 272 --------- ..---.... ------,------ .. Fabien Ovono-Ngoua Ghana Ndong Sima Albert Yangary Governor Rene Ziza G.K. Agama Alternate Governor The Gambia = Abubakr Bin Ahmad Governor Advisers Mamour M. Jagne Clemens Dan Anyomi E. Amoa Awua Alternate Governor Kobena Erbynn Alieu M. N'gum N.C.O. Holm Percival Alfred Kuranchie Advisers Yaw Osafo Marfo Momodou C. Bajo J.A. Nuamah Benjamin J. Carr Kojo Thompson Edward E. Fillingham George Yankey Abdoulie M. Touray Brendan Walsh Greece = Federal Republic of Germany Governor Governor George Souftias Juergen Warnke Alternate Governor Alternate Governors George Vlachos' Gerhard Boehmer' + Fritz Fischer' Advisers Eberhard Kurth' Stelios Argyros Hans Tietmeyer Byron Ballis .. Dimitrios Germldls Advisers Joseph Glyniadakis Ms. Ida Aschenbrenner Petros Kontos Enno Carstensen Nikos Kyriazidis Wolfgang Dix Loucas D. Papademos Kurt Falthauser Spyros Papanicolaou Ms. Sigrid Folz-Steinacker George Provopoulos Tobias Geib Avgoustinos Vitzileos Hans-Dieter Hanftand Michael Vranopoulos K.O. Henze Peter Jabcke Grenada Lutz Kuehne Hagen Graf Lambsdorff Governor Hans-Christian Maass Ben Joseph Jones Alexander Martin Muser Gotthard Reimann Adviser Wolfgang Rieke Mrs. Gloria Payne Banfield Horst H. Rinke Peter Roesgen Mrs. Inge Segall Guatemala = Wolfgang Sieler Gerhard Thiedemann Governor Ralf Zeppernick Rodolfo Paiz Andrade Temporary < > Not a member of IFC /I Not a member of IDA Not a member of MIGA + Executive Director + + Alternate Executive Director 273 Alternate Governor Alternate Governor Gustavo Adolfo Leiva Vasquez Theophile Roche Advisers Advisers Mrs. Perla Lam de Morales Charles A. Beaulieu Percy A. McNutt Cabrera Herve Denis Ms. Eugenia Oliva de Rodriguez Socrate L. Devilme Jorge Papadopolo W. Georges Henry Edgar Pape Serge Merger Ms. Mayra L. Palencia Prado de Quesada Ms. Josefina de Prera Honduras = Governor Guinea = Carlos Falck Contreras Governor Alternate Governors Ibrahima Sylla Cesar Ferdinando Carranza Euceda* Alternate Governor Mrs. Marta Julia Cox' Ousmane Sylla Jorge Ramon Hernandez Alcerro* Rigoberto Pineda Santos Advisers Kekoura Camara Advisers Madi Kaba Camara Daniel Figueroa Alimou Diallo Roberto Galvez Barnes Michel Kamano Felix Martinez Dacosta Kabine Komara Armando San Martin C. Idrissa Thiam Benjamin Zapata Guinea-Bissau = Hungary Governor Governor Manuel dos Santos Imre Tarafas Alternate Governor Alternate Governor Aguinaldo Embalo Tibor Melega Advisers Guyana Janos Bartha Governor Andras Horvai Carl Greenidge Istvan Ipper Mihaly Patai Advisers Gyorgyi Stenger Cargille Alleyne Mrs. Zsuzsa Sule Clarence Ellis + + Gyorgy Suranyi C.H. Grant Hubert Stanislaus Thompson Iceland = Joseph A. Tyndall Governor Haiti = Jon Sigurdsson Governor Alternate Governor Leonce F. Thelusma Sigurgeir Jonsson Temporary < > Not a member of IFC /I Not a member of IDA Not a member of MIGA + Executive Director + + Alternate Executive Director 274 Advisers Fariborz Azamia Birgir Amason Mohammad Djafar Dorudi Jonas H. Haralz+ Ghassem Mehrzad Sadaghiyani Hadi Sadeghi India = Iraq Governor S.B. Chavan Governor Subhi Frankool Alternate Governors J.S. Baijal* + Alternate Governor J.L. Bajaj* Tarek T. Al Tukmechi* G.K. Arora Advisers Advisers Mrs. Shadia Dawood Hussain Pradeep Bhide Mahmoud Ahmed Uthman Ashok Chawla Sundaram Krishna Ireland = Anil Kumar Governor Albert Reynolds Indonesia Alternate Governor Governor Sean P. Cromien J.B. Sumarlin Advisers Alternate Governors Adrian Kearns Abdul Rachman Ramly' Maurice O'Connell Hasudungan Tampubolon Charles V. Smith Michael Somers Advisers Brendan Ward A.S. Achjadi Haryadi Danuwinoto Sofjan Djajawinata Israel = Ignatius Hardijanto William Hollinger Governor DjamaJius Luddin Mordechai Fraenkel Robert E. McNulty Alternate Governor Deddy Nurjaman Eli Yones Sujitno Siswowidagdo Advisers Islamic Republic of Iran = Gal Almog Valery Arnie! Governor Pinchas Dror-Alon Mohsen Nourbakhsh David Gal AviGil Alternate Governor Raphael Meron Amin Daliri* Yair Seroussi Advisers Italy Morteza Alviri Ahmed Reza Ansari Governor Seyed Mojtaba Arastou Carlo Azeglio Ciampi ,. Temporary <> Not a member of IFC # Not a member of IDA = Not a member of MIGA + Executive Director + + Alternate Executive Director 275 Alternate Governor Makoto Utsumi' Mario Sarcinelli Koji Yamazaki' Junichi Yonezawa' Advisers Satoshi Sumita Francesco Alfonso Ms. Anna Blefari Schneider Advisers Francesco Cerulli Nobiru Adachi Pierluigi Ciocca Nobutoshi Akao Francesco Aloisi de Larderel Mari Amano Claudio di Veglia Toshihiko Amano Mario Draghi + Motomichi Ikawa Fabio Fabbri Tadashi Iwashita Francesco Fransoni Shigeo Kashiwagi Paolo Janni Toshio Kobayashi Bruno Mangiatordi Yasuhiro Maehara Francesco Papadia Rei Masunaga Alessandro Roselli Shotaro Miyake Giovanni Sacco Satoru Miyamura Fabrizio Saccomanni Daikichi Momma Felice Scordino Kazuya Murakami Alessandro Sottosanti Akira Nagashima Augusto Zodda Atsuo Nishihara Atsuo Saka Masaji Takahashi Jamaica# Satoshi Watanabe Yutaka Yamaguchi Governor Shinichi Yoshikuni Seymour Mullings Yukio Yoshimura + + Alternate Governor Omar Davies Jordan Advisers Governor Horace G. Barber Ziad Fariz Miss Sharon R. Brown Miss Cecile Clayton Alternate Governor Keith Johnson Mohammad H. Al-Saqqaf Mrs. Jennifer Lester Locksley Smith Miss Shirley Tyndall Advisers Khaldun A. Abuhassan Ismail El-Zabri Japan Taher H. Kanaan Zuhair Khouri Governor Nabil Issa Sweis Ryutaro Hashimoto Alternate Governors Kenya Tadao Chino' Toyoo Gyohten' Governor Yoshiaki Kaneko' George Saitoti Tomomitsu Oba' Takeshi Ohta' Alternate Governor Masaki Shiratori* + George M. Mitine · Temporary <> Not a member of IFC II Not a mem ber of IDA Not a member of MIGA + Executive Director + + Alternate Executive Director 276 Advisers Hoon Shim Denis Daudi Afande Ji-Chang Yoo Raphael Gitau Silas Ita M.J.P' Kanga Kuwait Ben Kipkorir G.K. Koech Governor J.W Mumelo Sheikh Salem Abdulaziz AI-Sabah Mwambia Kanyanjua H.N. Njoroge Alternate Governor Nahashon N. Nyagah Bader Meshari AI-Humaidhi Mwasi Nyatta R.R.Ojee Advisers R.H.Okwaro Abdulkarim Abdulla AI-Muttawa Michael A. Sergon Abdul Aziz Mohammad AI-Othman S.S. Surtan Sheikh Salem Abdullah AI-Ahmed AI- Charles S. Mbindyo Sabah NabiI Hamoud AI-Saqabi Hisham Ibrahim AI-Waqayan Kiribati = Mohammed Haider Ghuloum Abdul Karim Sadik Governor Teatao Teannaki Alternate Governor Lao People's Democratic Republic<> = Manohar Lal Nayyar' Governor Sisavath Sisane Korea Alternate Governor Governor Vannakone Phommasathit' Kyu Sung Lee Advisers Alternate Governors Phonekeo Keovongvichith Byong Kyun Kim' S. Nhoybouakong Kyung-Woo Kim' Phon savanh Sipaseuth Yong-Sung Lee' Myoung-Ho Shin" Myong Hyun Sohn" Lebanon = Kun Kim Governor Advisers Habib Abou-Sakr Kun-Ho Cho Taek-Soo Han Alternate Governor Yee-Mo Jung Raja Himadeh Euisoo Kim Gyu-Bok Kim Advisers Jong-Jeong Kim Raymond Audi Yong Sup Kim Camille Barsamian Chang-Koo Lee Beshara Ghorayeb Chang-Kyu Lee Salim Kheireddine Duk-Hoon Lee Willy Rellecke Chang-Yuel Lim + Mohammad Salem Yoon-Jin Rhee Assaad F. Sawaya Temporary <> Not a member of IFe '* = Not a member of IDA Not a member of MIGA + Executive Director + + Alternate Executive Director 277 Lesotho Alternate Governor Yves Mersch Governor Michael M. Sefali Advisers Ernst-Guenther Broeder Alternate Governor Raymond Kirsch Tom Liphapang Tuoane Roger Lavelle Alain Prate Advisers Jacques Silvain J.M. Letsie Miss T. V. Matsinyane A.M. Monyake Madagascar Ms. Tlalane V. Qhobosheane Masupha E. Sole Governor William Thabo Van Tonder Jean Robiarivony Alternate Governor Liberia = Nirina Ideal Andriamanerasoa Governor Advisers Elijah E. Taylor Stephane Andriamandrainirina Biclair Andrianantoandro Alternate Governor Tantely Andrianarivo Mrs. Mary B. Dennis Henri Jean-Marie Jocelyn Rafidinarivo Advisers Armand Ralaidovy Philip T. Bowen Mamy Ramanjatoson Emanuel Z. Bowier Jean Clariel Ramasinaivo Ignatius N. Clay Gaston Ramenason Francis A. Dennis Henri Ranaivosolofo Samuel D. Greene Ms. Josiane Raveloarison Emmett Harmon Jerome M. Hodge Charles S. McGill, Jr. Malawi Ms. Juanita E. Neal Penti Tarpeh, Jr. Governor Eugenia A. Wordsworth-Stevenson F.Z. Pelekamoyo Alternate Governor Libyan Arab Jamahiriya = R.F. Kavinya Governor Advisers Nuri Abdussalam Baryun Harry M. Mapondo G.G.B. Masamba Alternate Governor C.L. Mphande Bashir Ali Khallat Advisers Malaysia = Bashir M. Nahaisi Governor Muftah Ali Sherif Daim Zainuddin Luxembourg Alternate Governors Mohd. Ramli Wajib* + Governor Albert S. Talalla* Jean-Claude Juncker Zain Azraai Temporary < > Not a member of IFC # Not a member of IDA Not a member of MIGA + Executive Director + + Alternate Executive Director 278 Advisers Issehnou QuId Abdelkader Sam sud in bin Hitam Mohamed Sidya QuId Bah Hadenan Abdul Jalil Sidi Mohamed Quid Biya Miss Nafisah Mohamed Abdellahi Quid Boubacar Nordin Yahaya Ahmed Quid Boucheiba Moustapha Quid Cheikh Mohamedou Abdellah Quid Daddah Maldil'es= Mohamed Lemine Quid Deiddah Ahmed QuId Lafdal Governor Zeidane Quid Sidi Boubakar Fathulla Jameel Thiam Samba Mali = Mauritius = Governor Governor Souleymane Dembele Bergoonath Ghurburrun Alternate Governor Alternate Governor Amidou Qumar Sy Madhukarlall Baguant Advisers Advisers Sekouba Cisse Rundheersing Bheenick Kabine Hari Diane Marc Bourdet Harouna Niang Sri kant Madan Chitnis Jagnaden P. Coopamah Miss Nishtha Anjali Ghurburrun Malta<>#= Chitmansing Jesseramsing Johannes Kneifel Governor Kreshan Lutchmeenaraidoo George Bonello du Puis Rameswurlall Basant Roi Bipin Rudhee Alternate Governor Edgar Wadge Mexico = Adviser Salvatore J. Stellini Alternate Governors Antonio Cervera' Fernando del Villar* Mauritania = Juan Jose Paramo Diaz* Gustavo Petricioli* Governor Humberto Soto' Moustapha QuId Abeiderrahmane Enrique Vilatela Riba* Jose Angel Gurria T. Alternate Governors M'Rabih Rabou QuId Cheikh Bounena Advisers Mohamed Quid Nany* Manuel Cavazos Jose Juan de Qlloqui Gonzalez Advisers Jose Luis Flores Baro Amadou Basserou Salvador Gonzalez Mamadou Cissoko Roberto Martinez Saenz Amadou Diaw Ricardo Qchoa Rodriguez Camara Boubou Dramane Moises A. Pineda Padron Gadio Ibrahima Jorge Pinto + Enis Mezghanni Jesus Villasenor · Temporary <> Not a member of [Fe # Not a member of IDA ~ Not a member of MIGA + Executive Director + + Alternate Executive Director 279 Morocco = Nepal = Governor Governor Mohamed Berrada Bharat Bahadur Pradhan Alternate Governors Ali Bengelloun' Alternate Governors Mohammed Dairi Mohan Man Sainju' Sashi Narayan Shah Advisers Mohamed Aboulfadl Adviser Hassan Abouyoub P.K. Kafle Mohamed Aissaoui Omar Akalay H. Alaoui-Abdellaoui Netherlands Noureddine Bensouda Fouad Benzakour Governor Thami EI-Barki H.O. Ruding Mustapha Faik Rachid Haddaoui Omar Kabbaj Alternate Governors Abdellatif Loudyi Pieter Stek' Mohamed Larbi Nouha R.J. Treffers' Taieb Raouf P. Bukman Albert Sasson Cees Maas' Ali Tricha Thami Yahyaoui Advisers Paul Artman + Ms. Marie Renee Bakker Mozambique = Matthijs Bienefelt Emile den Dunnen Governor Tom de Vries Eneas Da Conceicao Corniche Ronald Keller J.S. Kramer Alternate Governor Vimy A. Servage Ms. Yasmin Patel R. Vermaas Jaap H. Weeda Advisers Robert Zeldenrust Jose F. da Cruz Viola M. Cabral Firmino Silva Santos New Zealand = Myanmar = Governor Governor Graham C. Scott U Min Aung Alternate Governor Alternate Governor U Soe Thwin John B. Gardner' Advisers Advisers Hla Myint 00 Hessel Baas Aung Pe Ms. Caroline J. Boyd Tun Thin Gerald S. Halliday U Soe Win Ross Tanner Temporary < > Not a member of [Fe II Not a member of IDA = Not a member of MIGA + Executive Director + + Alternate Executive Director 280 Nicaragua = E.A. Essiet R.N. Ezeife Governor WA. Fadare Pedro Antonio Blandon Lanzas Cyril Chukuemeka Ifedigbo Mrs. T. Iremiren Alternate Governors Mrs. M.O. Mgbatogu Alejandro Martinez Cuenca* R.O. Mowoe Jose Evenor Taboada Arana N.E.Ogbe O.Ogunleye Adviser Mrs. M.A. Okonkwo Silvio E. Conrado Christopher U. Omamogho B.Omomukuyo G.A.Onabule Niger = Mrs. H.A. Oseni Miss M. Oshunniyi Governor Chukuwuemeka O. Ubu Almoustapha Soumaila Ms. Nonye Udo M.A. Uduebo Alternate Governor Malam Ismaila Usman Abdou Insa Advisers Norway Abdallah Boureima Mamadou Diop Governor Mahamadou Gado Gunnar Berge Gado Kaka Ibrahim Mamane Alternate Governor Nassirou Sabo Steinar Soerbotten * Assoumane Seydi Seydou Sidibe Advisers Saidou Sou ley mane Erik Aarhus Kare Bryn Einar M. Bull Nigeria K. Christensen Kjell Halvorsen Governor B jarne Hansen Alhaji Abubakar Alhaji Aud Kolberg Bernt H. Lund Alternate Governor Mrs. Jorunn Maehlum + + Alhaji Aliyu Mohammed Mrs. Torild Skard Advisers Oman Y. Seyyid Abdulai Alhaji Hamzat Ahmadu Governor Alhaji Garba Ahmed Mohammed Bin Musa Al Yousef E.A. Ajayi M.A.B. Akpobasah Alternate Governor Alhaji Ibrahim Aliyu Saleh Abdullah al Farsy* C.A. Anigbo Shobowale Akanni Animashawun S.M. Baba Pakistan Christopher Chima Tony Ede Governor K.E.O. Efretei A.G.N. Kazi .. Temporary < > Not a member of IFC # Not a member of IDA Not a member of MIGA + Executive Director + + Alternate Executive Director 281 Alternate Governor Peru = Khalid Mahmud Chima Governor Advisers Cesar Vasquez Bazan Choudri Mueen Afzal Qazi M. Alimullah Advisers Zulfikar Ali Khan Carlos E. Alonso Nasim Qureshi Marco V. Balarezo Guido Cano Carlos Lecaros Panama = Raymundo Morales + Ms. Rosa Rodriguez Farias Governor Enrique Rodriguez Morales Gustavo R. Gonzalez J. Alternate Governors Philippines = Jose M. Cabrera Jovane' Mario de Diego, Jr.' Governor Roberto Ley ton ' Vicente R. Jayme Advisers Alternate Governors Edgardo Lasso Valdes Jesus P. Estanislao' Felix Armando Quiros Ernest Leung' Papua New Guinea = Advisers Felix Enrico R. Alfiler Governor Romeo L. Bernardo Paul Pora Rafael B. Buenaventura Jose L. Cuisia, Jr. Alternate Governor Ms. Evelyn M. Escudero Morea Vele Edgardo B. Espiritu Octavio V. Espiritu Advisers Jose R. Facundo Leva Hekwa William B. Go Brian Hull Benito Legarda, Jr. Gabriel Pepson Xavier P. Loinaz Samion Sananke Vitaliano N. Nanagas, II Margaret Taylor Roberto T. Villanueva Thomas Torombe Deogracias Vistan Veali Vagi Edgardo P. Zialcita Jakob Weiss Poland = Paraguay = Governor Alternate Governors Wladyslaw Baka Ovidio C. Otazu Gimenez' Carlos Alberto Knapps Alternate Governor Grzegorz Wojtowicz Advisers Victor H. Cabanas Advisers Amado Martinez Andrzej I1czuk Ceferino Valdez Andrzej Scislowski * Temporary < > Not a member of IFC # Not a member of IDA = Not a member of MIGA + Executive Director + + Alternate Executive Director 282 Portugal# St. Lucia Governor Governor Miguel Cadilhe John Bristol Alternate Governors Alternate Governor Augusto Fernandes Costa Miss Zenith James Rodrigo M. Guimaraes* + + Luis Antonio Gomes Moreno* Advisers Alvaro Pinto Correia * Joseph Edmunds Joao Mauricio Fernandes Salgueiro* Marius St. Rose Advisers Mrs. Maria do Ceu Bastos St. Vincent and the Grenadines<> = Jose M.F. Braz Mrs. Isabel Pinto Correia Governor Vitor Louca Rabaca Gaspar James F. Mitchell Alternate Governor Qatar<>#= Karl E. V. John Governor Nasser Mohd. AI-Hajri Sao Tome and Principe < > = Adviser Governor Ahmad Hamad AI-Nuaimi Agapito Mendes Dias Alternate Governor Romania<>#= Mrs. Maria das Neves Batista de Sousa* Alternate Governors loan Petre Mada * Ion Zipis* Saudi Arabia Alternate Governors Rwanda = Osamah Faquih* Yusuf A. Nimatallah* Governor Sheikh Hamad AI-Sayari Benoit Ntigulirwa Advisers Alternate Governor Ahmed Abdullatif Mrs. Therese Mukabideli Abdulrahman AI-Abdullatif Khalid AI-Aboodi Advisers Mussaid AI-Eshaiwi Christophe Habimana Mohamed AI-Hakami Aloys Uwimana Ibrahim A. Alissa Ibrahim M. Alissa St. Kitts and Nevis<> = Abdulatif AI-Jabr Mohammed AI-Nefai Alternate Governor Sulaiman AI-Ofie Wendell Lawrence Suliman S. AI-Olayan Omran Mohammed AI-Omran Advisers Abdelaziz AI-Orayer Erstein M. Edwards Said AI-Qahtani Irvin R. Sweeney Abdullah AI-Sulaiman AI-Rajhi Temporary < > Not a member of IFe # Not a member of IDA Not a member of MIGA + Executive Director + + Alternate Executive Director 283 Rashed Abdulaziz AI-Rashed Sierra Leone = Rashid Abdulrahman AI-Rashid Ziad AI-Saad Governor Abdullah Abu AI-Samh Hassan G. Kanu Abdulaziz A. AI-Sehail + + Abdulaziz AI-Turki Alternate Governor Yahya AI-Yahya Soule Funna Shaukat Aziz Wahib Binzagr Camille A. Chebeir Advisers Abdullah EI-Kuwaiz George Alibaruho Marcos G. Ghattas J. Sanpha Koroma Richard R. Herbert EB.L. Mansaray Khalil Kordi Christian J. Smith Abdulaziz A. O'Hali Sylvanus Taylor Kevin Pinto Omar Abdullah Sajeeni Abdulhadi Shayif Singapore# = Jobarah E. Suraisry + Andre van Hove Governor George Yeo Senegal Alternate Governors Tommy T.B. Koh' Jaspal Singh Governor Djibo Laity Ka Solomon Islands = Alternate Governor Youssouf Diop Governor Christopher C. Abe Advisers Mamadou Diatta Alternate Governor Abdoul Aziz Diop P. Sharma' Lamine Diouf Cheikh Ibrahim Fall Mamadou Fall Somalia = Amadou Gaye Silcarneyni Gueye Governor Mamoudou Amadou Ly Mohamed Sheikh Osman Babacar N'Diaye Fara Ndiaye Cheikh Tidiane Sakho Alternate Governor Mamadou Sambe Abdulkadir Aden Mohamud Advisers Seychelles# = Mrs. Abdia Sheikh Ahmed Mohamed Haji Ali Ali Abdi Amalo' Governor Abdi Aden Dahir Mrs. Danielle de St. Jorre Hussein Elabeh Fahie Mohamed Ali Hersi Alternate Governor Abdullahi Mohamed Jama Bertrand Rassool Hussein Mohamud Siad Temporary < > Not a member of IFC 1/ Not a member of IDA = Not a member of MIGA + Execulive Director + + Alternate Executive Director 284 ._------------_.__._-----_ .. South Africa = Alternate Governors Susantha de Alwis· Governor R. Paskaralingam Christian Lodewyk Stals Advisers Saravanamuthu Easparathasan Alternate Governor Lloyd Fernando Johannes A. Lombard S.C. Mannapperuma K. Shanmugalingam Advisers N. Somaratne Bernardus L. de Jager Lakshman R. Watawala Martin R. Grote P.G. Wilson Elias Links Chris van der Walt Sudan = Spain Governor Sayed Ali Zaki Governor Alternate Governor Mariano Rubio Jimenez Mohamed Khair El Zubeir Alternate Governor Advisers Apolonio Ruiz Ligero Mohamed El Fatih Zein Al Abidin Hassan Elamin El-Bashir Advisers Agil M. Elmanan Eduardo Aguilar Khalil M. El-Sayed Ms. Rocio Alberdi Bushra Fadlalla Luis Ruiz Arbeloa Mamoum Ibrahim Hassan Baltasar Aymerich Alfonso Carbajo Jose Casas Suriname<># = Manuel de la Camara Julio Duran Governor Vicente J. Fernandez R.W Braam Miguel A. Fernandez Ordonez Valentin Laiseca Alternate Governor Luis Maria Linde Iwan Kortram Juan Maria Lopez-Aguilar Manuel Lorenzo Swaziland = Miguel Muniz de las Cuevas Mrs. Maria Perez Ribes Governor Jose Juan Ruiz Andreas Fakudze Rafael Sagrario Enrique Sanchez Blanco Alternate Governor Luis Sempere Mrs. Noreen N. Maphalala Mrs. Pilar Serret Julio Vinuela Advisers Christopher S. Adam Elliot Bhembe Sri Lanka Prince Lonkokhela Dlamini N. Kirsh Governor S.S. Kuhlase D.B. Wijetunga Absalom Vusani Mamba Temporary < > Not a member of IFC II Not a member of IDA Not a member of MIGA + Executive Director + + Alternate Executive Director 285 Sweden Adam K. Malima Richard E. Mariki Governor John M. Mugasha Kjell-Olof Feldt M.B. Ngatunga S.Odunga Alternate Governors K.K. Ramadhan Sven-Olof Johansson' H.K. Senkoro Bengt Saeve-Soederbergh* Advisers Thailand== Mrs. Inga Bjork-Klevby Staffan Crona Governor Hakan Emsgaard Panas Simasathien Carl-Johan Groth Anders Henriksson Alternate Governors Jorgen Holmquist Nibhat Bhukkanasut* Ms. Gerd Maria Johnsson Mrs. Prachitt Kambhu' Carl Ivar Oehman Phisit Pakkasem* Lars Thornquist Aran Thammano' Advisers Syrian Arab Republic == Laurence Anuja Avilasakul Nophadol Bhandhugravi Governor Anuchata Chaiprapha Mohammed Khaled Mahayni Chakrabhand Chandanasiri Chalerm Cheo-Sakul Alternate Governor Chalermpong Cheo-Sakul Marwan Kodsi Phanporn Dabbaransi Kirkkiat lalichan Advisers Som latusipitak Shafik Al-Akhrass Sukri Kaocharern Bourhan Chatti Banyong Lamsam Adnan Mardini Sommai Phasee Farouk Muwakki Kovit Rojanasomsit Adnan Omran Thienchai Srivichit Bachir Zouheiri Vichit Suraphongchai Vivat Vinicchayakul Amnuay Viravan Tanzania== Prachitr Yossundara Governor K.A. Malima Togo Alternate Governor Governor Simon Mbilinyi Barry Moussa Barque Advisers Alternate Governor Emmanuel Kija Kamba Kwassi Klutse P.L. Kamuzora Ali Karume Advisers EM. Kazaura Yao-Messan Aho J.P. Kipokola David R. Ansell H. Lungwadila Barthelemy Drabo Philip Alfred Magani Mahenta Birima Fall · Temporary < > Not a member of IFe # Not a member of IDA Not a member of MIGA + Executive Director + + Alternate Executive Director 286 Kwassivi Kpetigo Advisers J.K. Orleans-Lindsay Nurcan Akturk Kossi Rotimi Paass Tuncay Altan Miss E. Dela Seddoh Ibrahim Berberoglu Ahmet Selcuk Demiralp Ali Umit Gonulal Tonga = Ms. Bahar Sahin + + Cuneyt Sel Governor Falih Selekler James Cecil Cocker Osman Tunaboylu Alternate Governor Penisimani Yea Uganda = Governor 'llinidad and Tobago = Joshua Mayanja Nkangi Governor Alternate Governor Winston Dookeran Suleiman Kiggundu Alternate Governor John Andrews Advisers David Kabateraine Advisers William Kaberuka Lennox Archer Ms. Lilian Kahenano George Bindley-Taylor Stephen Kapimpina T. Katenta-Apuli Jerry Hospedales Miss Betty Mafabi Angus Albert Khan Abbas K. Mawanda Ewart S. Williams Simon Mayende George F. Mbowe Mrs. Eva N. Mukasa Thnisia Frank A. Mwine Ezra Suruma Governor Juma Y.K. Walusimbi Mohamed Ghannouchi Paul Wamambe Justin Zake Alternate Governor Abdellatif Saddem* United Arab Emirates = Advisers AbdesJem Ben Younes Alternate Governor Habib Ghenim Mohamed Khalfan Kherbash Mohamed Nejib Hachana Abdelaziz Hamzaoui Advisers Elyes Kasri Miss Nariman A. Kamber AI-Awadhi Brahim Riahi Sheikh Suroor bin Sultan AI-Dhaheri Habib Hadj Said Jamal Majid AI-Ghurair Abdulla AI-Hammadi Sultan Nasser AI-Suwaidi Thrkey Nimer Shaka'a Governor Namik Kemal Kilic United Kingdom Alternate Governor Governor Mahfi Egilmez Robin Leigh-Pemberton Temporary < > Not a member of IFC # Not a member of IDA Not a member of MIGA + Executive Director + + Alternate Executive Director 287 Alternate Governors John D. Macomber Frank Cassell' + Eugene McAllister Robert Graham-Harrison' + + Hollis S. McLoughlin N.L. Wicks' William B. Milam Timothy Lankester G. William Miller John M. Niehuss Advisers Charles Schotta N.P. Bayne L. William Seidman Roger Bone Edwin M. Truman J . L. F. Buist Mrs. Emily Landis Walker Sir Terence Burns Charles S. Warner Sumantra Chakrabarti Chalmers P. Wylie J.R.E. Footman E.J.W Gieve Sir Piers Jacobs Uruguay#= Christopher J. Jarvis A.T. O'Donnell Governor Sir Peter Petrie Ricardo Zerbino Cavajani M.A. Power Brian Quinn Alternate Governors Michael Wood Diego Cardoso' Cesar Rodriguez Batlle' United States Advisers Ricardo J. Lombardo Governor Carlos Steneri Nicholas F. Brady Vanuatu Alternate Governors E. Patrick Coady' + Governor Mark T. Cox, IV' + + Charles H. Dallara' Sela Molisa Thomas C. Dawson n' Mark L. Edelman' Alternate Governor Manuel H. Johnson, Jr.' George Pakoa David C. Mulford' John E. Robson' Venezuela# = Richard T. McCormack Governor Advisers Miguel Rodriguez Joseph W Barr William E. Barreda Alternate Governors Robert M. Bestani Mrs. Leonor Filardo* Richard E. Bissell Francisco Garcia Palacios' Robert L. Clarke Edgar Leal' E. Gerald Corrigan Nelson Ortiz' Sam Y. Cross Miss Sonia Perez R. ' George A. Folsom Oscar de Rojas' Henry H. Fowler Pedro Rosas Bravo' Ms. Colleen Getz Arturo Sosa' Sidney L. Jones George A. Laudato Advisers Eugene K. Lawson Alfredo Belloso Villas mil Oscar M. Mackour Alberto Belzares Temporary <> Not a member of IFC # Not a member of IDA Not a member of MIGA + Executive Director + + Alternate Executive Director 288 Carlos A. Bivero Yugoslavia = Ms. Victoria de Manzano Mariano Gurfinkel Governor Mrs. Cory Ocando Branimir Zekan Cesar A. Or antes Antonio Juan Sosa Alternate Governor Carlos Stark Boris Skapin Advisers Viet Nam= Milan Babic Mrs. Milica Borlja Alternate Governors Cvitan Dujmovic+ + Le Van Chau* + + Josip Kulisic Nguyen Cong Hai* Miss Katarina Lalic Tran Xuan Gia * Vladimir Matic Mrs. Ljiljana Milojevic-Borovcanin Borivoje Nikolic Western Samoa Bozo Novoselac Governor Kolone Va'ai ZaIre Alternate Governor Governor Nonomalo Faiga Katanga Mukumadi Yamutumba Alternate Governors Advisers Afamasaga Daniel Betham Kasereka Kasai* Terence Betham Mbonga Magalu Engwanda Kei th Jenvey Ms. Fiame Naomi Mata'afa Advisers Sir Peter Tapsell Bauna Ba Bidounga Herman Schwenke Ilanga Wawa Emony Mondanga Mukumadi Ntambwe Yemen Arab Republic = Mushobekwa Kalimba Wa Katana Mwamba Mulunda Ngimbi Kalumvueziko Governor Funka Buinan Tambwe Mohammed Saeed AI-Attar Alternate Governor Zambia Anwar Rizq Al-Harazi* Governor Advisers James C. Mapoma Khalid A.J. Afif Jamal AI-Sallal Alternate Governor Omar Salim Bazara Lennard Nkhata Ahmed Ahmed Ghaleb Advisers C.L.M. Chirwa People's Oem. Republic of Yemen < > = Benny Chundu WK. Kawana Alternate Governor Mwene Mwinga Jaffer Hamed Mohamed E.D. Njobvu Temporary < > Not a member of IFC # Not a member of IDA Not a member of MIGA + Executive Director + + Alternate Executive Director 289 Martin G. Sakala R. Parke Salvator Mambo Tembo S.A.F. Ullyett Mrs. A. Zanza Zimbabwe = Japan Governor E.N. Mushayakarara Temporary Alternate Governor, MIGA Akira Kasuya Alternate Governor John Collins Temporary Alternate Governor, MIGA Masaji Takahashi Advisers Stanislaus Chigwedere Adviser, MIGA S. Gwasira Yoichi Mukai V.S. Kumalo Somkhosi Mahamba Temba Malaba Switzerland Ms. Rosemary Mazula Ms. Valerie Me Nicol Governor, MIGA Mrs. Winpeg Moyo Dante Martinelli Sibooniso Mtema Joseph Mubika Adviser, MIGA Ms. Dinah Zuademoyo Mutungwazi Stephan Nellen · Temporary < > Not a member of IFC /I Not a member of IDA Not a member of MIGA + Executive Director + + Alternate Executive Director 290 OBSERVER AT 1989 ANNUAL MEETINGS Switzerland Franz Blankart Edouard Brunner Jean-Jacques De Dardel Ms. Monique Dubois Paul Fivat Jean-Daniel Gerber Daniel Kaeser Werner Keller Markus Lusser Dante Martinelli Jean-Pierre Roth Juerg Von Arx REPRESENTATIVES OF INTERNATIONAL INSTITUTIONS International Fund for United Nations Agricultural Development F. Abbate Donald S. Brown G. Faruq Achikzad Mrs. Vera P. Gathright Rafeeuddin Ahmed Bahman Mansuri Yves Berthelot Isaac Cohen Kenneth K.S. Dadzie William H. Draper, III Iqbal Haji Andrew J. Joseph Roger Lawrence Carlos A. Massad Bingu Mutharika Samuel Nana-Sinkam Goran Ohlin Christian Ossa Charles Perry 291 EXECUTIVE DIRECTORS, ALTERNATES AND ADVISORS BANK September 28, 1989 Alternate Advisors To Executive Directors Executive Directors Executive Directors Fawzi Hamad AL-SULTAN Mohamed Wafik HOSNY Ezzedin M. SHAMSEDIN (Kuwait) (Egypt) (United States) Rumman Ahmad FARUQI (Pakistan) Paul ARLMAN Cvitan DU1MOVIC Valery AMIEL (Netherlands) (Yugoslavia) (Israel) 1.S. BAIJAL M. Mustafizur RAHMAN Pradeep BHIDE (India) (Bangladesh) (India) Mourad BENACHENHOU Salem Mohamed OMEISH Ernest AKO-ADJEI (Algeria) (Libya) (Ghana) Mohammad KHAZAEE IDRSHIZI (Iran, I.R. of) Gerhard BOEHMER Alexander Martin MUSER (Fed. Rep. of Germany) (Fed. Rep. of Germany) Frank CASSELL Robert GRAHAM-HARRISON (United Kingdom) (United Kingdom) 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) Mario DRAGHI Rodrigo M. GUIMARAES Andrzej ILCZUK (Italy) (Portugal) (Poland) 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) Chang-Yuel LIM Robert G. CARLING Gerald S. HALLIDAY (Korea) (Australia) (New Zealand) Andre MILONGO Jean-Pierre LE BOUDER AliM. KALFAN (Congo) (Central African Rep.) (Somalia) Yves-Marie Thano KOISSY (Cote d'Ivoire) Idy Adama DIAW (Senegal) Raymundo MORALES Felix Alberto CAMARASA Fernando KEMPFF (Peru) (Argentina) (Bolivia) Jorge PINTO Edgar AYALES Ms. Rocio ALBERDI (Mexico) (Costa Rica) (Spain) Mrs. Helene PLOIX Mrs. Stephane PALLEZ Bernard MORIZET (France) (France) (France) Frank POTTER Clarence ELLIS David SEVIGNY (Canada) (Guyana) (Canada) Charles V. SMITH (Ireland) Mohd. RAMLI WAJIB LE VANCHAU S. NHOYBOUAKONG (Malaysia) (VietNam) (Lao, P.D.R.) Masaki SHIRATORI Yukio YOSHIMURA Daikichi MOMMA (Japan) (Japan) (Japan) Jobarah E. SURAISRY Abdulaziz A. AL-SEHAIL (Saudi Arabia) (Saudi Arabia) Eduardo WIESNER Pedro S. MALAN Romeo L. BERNARDO (Colombia) (Brazil) (Philippines) ZHANG Junyi JIN Liqun ZHU Xian (China) (China) (China) 292 ----------_._---_. _.- ---- ._._ ......_._.- ... DIRECTORS AND ALTERNATES MIGA September 28, 1989 Directors Alternate Directors Fawzi Hamad AL-SULTAN Mohamed Wafik HOSNY (Kuwait) (Egypt) Alhaji Abubakar ALHAJI Andre MILONGO (Nigeria) (Congo) Paul ARLMAN Dante MARTINELLI (Netherlands) (Switzerland) Gerhard BOEHMER (Fed. Rep. of Germany) Frank CASSELL Robert GRAHAM-HARRISON (United Kingdom) (United Kingdom) E. Patrick COADY Mark T. COX, IV (United States) (United States) Mario DRAGHI Mrs. Jorunn MAEHLUM (Italy) (Norway) Claudio A. PARDO Patricio L. RUBIANES (Chile) (Ecuador) Andras PATKO Ms. Bahar SAHIN (Hungary) (Turkey) Frank POTTER Clarence ELLIS (Canada) (Guyana) Masaki SHIRATORI Joji HASHIMOTO (Japan) (Japan) Sujitno SISWOWIDAGDO M. Mustafizur RAHMAN (I ndonesia) (Bangladesh) Jobarah E. SURAISRY Abdulaziz A. AL-SEHAIL (Saudi Arabia) (Saudi Arabia) ZHANG Junyi JIN Liqun (China) (China) 293 OFFICERS OF THE BOARD OF GOVERNORS AND JOINT PROCEDURES COMMITTEE FOR 1989-90 OFFICERS Chairman ................................... Kenya Vice Chairmen .............................. Denmark Indonesia JOINT PROCEDURES COMMITTEE Chairman .................... Kenya Vice Chairmen ............... Denmark Indonesia Reporting Member ........... Morocco Members ..................... Chile Costa Rica Denmark Djibouti France Gabon Germany India Indonesia Japan Kenya Morocco Nepal Nigeria Paraguay Portugal Saudi Arabia St. Kitts and Nevis Turkey United Kingdom United States People's Democratic Republic of Yemen 294 OFFICERS OF THE MIGA COUNCIL OF GOVERNORS AND PROCEDURES COMMITTEE FOR 1989-90 OFFICERS Chairman ................................... Kenya Vice Chairmen .............................. Denmark Indonesia MIGA PROCEDURES COMMITTEE Chairman .................... Kenya Vice Chairmen ............... Denmark Indonesia Reporting Member ........... Tunisia Members ..................... Canada Chile China Denmark Germany Indonesia Japan Kenya Portugal Saudi Arabia Switzerland Togo Tunisia Turkey United Kingdom United States 295 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'lena 75116 Paris, France Telephone: 47-23-54-21 Telex No.: 620628 Facsimile No.: 472-1966 Cable Address World Bank: INTBAFRAD IFC: CORINTFIN IDA: INDEVAS