ANNUAL ADDRESS BY EUGENE R. BLACK, PRESIDENT OF THE BANK T is a great pleasure to be greeting you in New more progress within our borrowing countries; there I Delhi. I know I speak for all of you in thanking has been more cooperation among our member the Government of India for their gracious invitation countries. to us to meet here. During the fiscal year which ended on June 30 last, There could not be a more fitting background for Bank lending amounted to $711 million or over 75% our discussions in this eventful year. India has more than the average of the previous three years. This become a symbol of mankind's hope in economic marked increase promises to be sustained in the pres- development-the hope that the material wealth ent year. Already, in the three months that have necessary for human dignity and self-respect can be elapsed since the close of the fiscal year, new loans by created without destroying individual freedom the Bank have amounted to nearly $380 million. which is the foundation of human dignity and We have moved to a new, higher level of lending self-respect. activity, and the reasons are not hard to find. We are Indian civilization has survived, unbroken, more operating in many more countries and territories; than 5,000 years of history. During these many membership in the Bank has grown from 44 to 68 centuries the Indian people have been exposed to countries over the past decade. And we are getting every kind of alien influence; they have lived cheek an increasing number of adequately prepared appli- by jowl with famine, flood and pestilence. Yet cations from member countries with whom we have Indian civilization has never lost its inner strength been in close relationship for many years. The and identity. It has bequeathed enduring gifts to record shows that member countries are beginning mankind. Moreover, modern India has not felt the to build up the organizational structure and to adopt urge to resort to narrow nationalism in earning the the administrative procedures necessary for sustained important place that she holds in our world of today. and rapid growth. India is now taking economic development into In the past 15 months we were able to conclude the center of her life, with all the radical changes nine loans with India amounting to the equivalent of that economic development inevitably entails. No $275 million. We concluded seven loans with one privileged to play even a small part in India's Japan, four with Ecuador, and three with Pakistan. great adventure today can help but feel that the We continued lending substantial amounts in Mexico destiny of humanity in the 20th Century will be and the Belgian Congo. profoundly influenced by the extent of India's suc- At the same time new members of the Bank are cess in absorbing these changes without sacrificing coming forward, sometimes remarkably quickly, respect for individual liberty . with bankable development programs. During the The Annual Report of the World Bank which is year Morocco, Malaya, Tunisia, Sudan, Libya and before you today tells a story of how peoples and Spain joined the Bank. A $39 million railway devel- governments in many underdeveloped countries are opment loan to Sudan has already been successfully beginning to work out the complicated problems of negotiated and we have recently announced a $35 economic development and beginning to reap the million power loan to Malaya. Nigeria, not yet a rewards of their efforts. The Report documents a member of the Bank in its own right, but looking year of activity far in excess of anything we have toward its independence next year, also signed its been able to present heretofore. There has been first Bank loan, $28 million for railway development. 10 Finally, some big projects, which had been under hope that the Bank can continue to look to the study in the Bank for several years, reached the Federal Republic as a substantial source of develop- lending stage. The huge Yanhee power, flood- ment capital. control and irrigation project in Thailand is an ex- Private participations in Bank lending operations ample. It was in 1953 that this project was intro- also showed a welcome increase during the year. In duced to the Bank. Since it is by far the largest all we were able to sell $87 million to private in- undertaking ever attempted by Thailand, consider- vestors either out of portfolio or at the time of loan able advance preparation was necessary. Last fall negotiations. Participations were arranged in 22 of the Bank deemed the preparatory work done, and the year's 34 loans, many more than in any previous we signed a $66 million loan to finance the first year, and some of the participations were very large. stage. In our $32.5 million loan to Tata Iron and Steel This is but one example of several similar projects Company of India, nine American and Canadian which are now under consideration. The Bank has private banks took the first five maturities, totalling no intention of easing its insistence on thorough $15 million. (Incidentally, if I am not mistaken, study and investigation of these large undertakings, this is the first time a private Indian company has but the fact is that more and more of the necessary raised money in the North American markets since prerequisites are being met before proposals for World War II.) Then again, twenty private banks, financing are made to us. including seven from Germany, participated in our The Bank's new, higher rate of lending was $75 million loan for industrial development in matched by more borrowing. New borrowings from southern Italy. all investors reached a gross total of $650 mil- The Bank continued its policy during the year of lion, much the highest figure ever recorded in a joining in investment operations with the market. single fiscal year. The Federation of Rhodesia and Nyasaland, for the The bulk of the year's borrowing was again done first time, floated an issue of its own bonds in the in the United States market where we floated three United States market, simultaneously with the sign- issues of dollar bonds totalling $375 million. In ing of a World Bank loan. Similar transactions, connection with these offerings, we were able to involving Belgium and South Africa brought the identify nearly 200 important institutional investors total from issues offered in this way in the United who were buying World Bank bonds for the first States market to about $75 million in the past year. time. This represents a most significant broadening Other joint operations now being discussed may well of the market. amount to a considerably increased figure in the I might add that we were very pleased with current year. the reception of our latest bond issue. In August we Finally, member countries during the year, re- offered $75 million in two-year dollar bonds. Sub- leased for lending a further $149 million from their scriptions amounting to $127 million were received 18% capital subscriptions. Helpful as this has been, from investors in 26 different countries. We were I would be remiss in my duty if I did not point out sorry that it was impossible to allot the full amount that some half a billion dollars equivalent in 18 % subscribed for in each case, particularly by the central capital is still too hedged about with restrictions to banks of member countries. As it was, the entire issue be of any use to us. Acute balance of payments was placed outside of the United States. situations may make this inevitable in some cases, The increasing role being played by the Federal but I would welcome a more positive approach on Republic of Germany as a supplier of development the part of member governments toward their re- capital to the Bank is very gratifying. This year the sponsibilities to the Bank in this particular regard. Deutsche Bundesbank loaned us $250 million. I The Bank's advisory and technical services were 11 also more in demand during the year than ever cers of industrial development banks in 11 different before. The Bank's role as mediator in two inter- countries to discuss operating problems and policies national disputes is undoubtedly well known to you. of common interest. The signing of the compensation agreement between Finally, the Bank's regular advisory services to the United Arab Republic and the reorganized Suez member countries on development problems were Canal Company took place in July. I wish I was also expanded during the year. Resident bank rep- able to announce also an agreement between India resentatives are now at work in nine different coun- and Pakistan for a settlement of the Indus waters tries. Survey missions to Libya and Tanganyika are question. But this still lies ahead. So long as this being organized, and an agricultural mission to Peru, dispute exists it will be a cause of serious friction organized jointly by the Bank and FAO, began its between these two member countries. And it is of field work in June. The Economic Development the utmost importance to their economies that a Institute, our staff college established in 1955 to pro- negotiated settlement should be reached, so that vide courses on practical problems of economic both may be able to proceed with their plans for the development for senior administrative officers from improvement of their agriculture in the knowledge the underdeveloped countries, completed its third that the needed water will be available. Mr. Iliff, course in March, and 21 officials from 18 different who for much of the year was shouldering a large countries and territories are enrolled for the fourth share of the burden of both the Suez and the Indus course which will start later this month. The Bank's negotiations, is continuing his efforts to bring the general training program for junior officials from two sides together and in the Bank we consider this underdeveloped countries completed its tenth year. a good omen. Under this program 82 men and women from 52 The study which the Bank undertook jointly with member countries and territories have had a year of the Italian Government last year to determine the work in the Bank alongside the regular Bank staff. commercial feasibility of using atomic power for the From the record I have cited considerable en- production of electricity in Italy has been completed. couragement can be drawn by those who share Some of the world's leading experts on nuclear my belief that the great transformation going on in power lent their time and talents to this study. We the underdeveloped world today is the most impor- expect to publish their conclusions in due course. tant fact of the 20th Century. The countries whose I hope they will be of help to many member govern- efforts and ingenuity have made this record possible ments as they approach the problems presented by have given real substance to our hopes that more the introduction of this revolutionary new source of economic development is the way out of the whirl- energy. pool of ferment and frustration in which so much of The Bank continues to encourage the growth and the underdeveloped world finds itself. establishment of industrial development banks. A But if there is encouragement, there are also new private development bank started operations in challenges ahead which command our attention Pakistan last spring. The World Bank, besides lend- today. In the first place the very progress that has ing the new bank over $4 million in foreign ex- been achieved raises some fundamental problems change, helped to interest private investors from the about the adequacy of present sources of inter- United States, the United Kingdom and Japan in national development capital. In the second place joining Pakistani stockholders in the venture. Dis- the record is very uneven. While some countries are cussions looking to the establishment of similar forging ahead, others are lagging behind or even banks in several other member countries were car- back-sliding, and there is a real danger in the ried forward during the year. In May the Bank months ahead that those who are successful may be gathered together, in Washington, the executive offi- penalized by those who flounder. 12 The whole future of economic development de- on a fixed timetable and in scarce foreign exchange. pends on a continuing flow of investment capital To a considerable extent, this is a reflection of the -domestic and foreign-in and to those countries widely observed phenomenon that rapid economic that undertake the difficult task of organizing for development brings heavy pressure on a country's development. The promised rewards are appearing balance of payments. Export earnings rarely rise at in countries which have shown themselves able to the tempo necessary to serve the expanding domestic invest development capital effectively: their record economy adequately and measures of so-called "im- of progress stands as testimony to this fact. But will port substitution" are frequently disappointing in international capital continue to flow in an adequate their results. In some developing countries this per- stream as development gathers momentum in these sistent pressure may be accentuated at times through countries and in others who follow their good adverse developments in their commodity trade, example? sometimes (though by no means always) beyond Up to now there has been no reason for me to their effective control. In these circumstances, sub- suggest at these meetings that the financial resources stantial periods of time may be required to carry out available to the Bank were insufficient in amount for the adjustments necessary to convert rising produc- the task the Bank is designed to perform. In our tivity at home into an equally healthy foreign trade earlier experience, the most significant limitation on position. Meanwhile, it may be imprudent for our operations was the lack of suitable projects; such countries to undertake additional foreign this is still the limitation in some member countries. exchange obligations even for the execution of proj- Later, weakness in fiscal management and its effects ects which, taken by themselves, would strengthen on what we in the Bank call "creditworthiness" the economy and promise eventual beneficial effects. emerged as another limitation on our lending; it is In member countries which find themselves in these still a substantial limitation. situations, further Bank lending may be limited sim- But despite the persistence of these limtations, we ply because there may be insufficient foreign ex- are now confronted with a situation of another kind. change to service our loans. We are approaching the day when the Bank may be These prospects have led us to look with increas- getting a larger number of meritorious applications ing concern at the amount and character of the from its member countries than we shall be able to Bank's financial resources. It would be a sad set- find money for on reasonable terms. As the in- back to the efforts and achievements of the past creased tempo of our lending implies, many of our decade if the flow of international development member countries are satisfying the tests of project capital should stagnate just when governments in the preparation and fiscal management; moreover, underdeveloped world have made significant prog- among our rapidly increasing membership, all our ress in persuading their people to accept the changes new members are capital hungry. For the first time and to make the sacrifices necessary for future in the Bank's existence, the quantity of financial growth. I can think of no quicker way to destroy resources available to the Bank may soon be seri- the hopes of hundreds of millions of expectant ously inadequate. people than that we, to whom they look, should be And there is another-a qualitative-aspect of unprepared and unequipped for new situations as this situation. Some of our rapidly developing mem- they unfold. ber countries, for one reason or another, and for In the past few months, some important proposals reasons not directly attributable to poor financial have been put forward by prominent leaders who and economic management, are approaching the obviously believe that the time for new approaches limits of their present capacity to assume additional is in the offing. The President of the United States, obligations which, like Bank loans, must be serviced and also the Commonwealth Finance Ministers 13 meeting in Montreal, have asked for decisions lead- borrowers about how the requirements for economic ing to an increase in the resources of the Bank and growth can be adapted to fit into the economic, the Monetary Fund. The United States Govern- social and political structure of underdeveloped ment, pursuant to a resolution of the American countries. There has been plenty of plain speaking Senate, is studying the possibility of a new form of in our negotiations; but the give and take has led to international development finance. There have been increasing agreement about what it takes to create proposals also for regional development institutions new material wealth. As a result I think member in the Middle East and in Latin America. countries credit the Bank with trying to reach objec- It would not be appropriate at this time for me to tive conclusions, uninfluenced by political considera- comment specifically on any of these new initiatives. tions. All of them are interesting but some of them raise Over any long period of time it certainly must be complicated issues requiring careful study by all of much more difficult to measure objectively the us. But I welcome the widespread awareness of the need for development capital outside the framework new need for financial resources which prompts of an international organization. In the best of cir- these suggestions, and I applaud the emphasis cumstances, economic and financial negotiations, being placed on international agencies as the means when conducted bilaterally between governments, for helping to provide the resources. There is a tend to become complicated by extraneous consid- need for new supplies and sources of international erations of international politics; an appeal to strictly development capital, and I believe that international economic criteria is not easy. At the same time organization can be the practical, 20th Century way economic and financial negotiations between sover- of meeting that need. eign nations often tend to irritate normal political When we talk about the need for development relationships. Objectives tend to compete, and even capital, we are talking about something that can be to conflict, with one another, often leading to a measured objectively. Development capital, as we deterioration on all fronts. all know, is not just money. It is money applied By removing from the realm of short-term polit- effectively to the stimulation of economic growth. ical considerations as much as possible of our long- That means that it is money welded into an amal- term concern with economic growth, I think we gam with a very special set of attitudes, institutions serve both the ends of economic development and and technology. the ends of reduced international tension. For this I do not think I need to dwell on these special reason in particular, I hope full consideration will be requirements again before this audience. Surely given in the months ahead to the possibilities of there is nothing mysterious in the criteria that should strengthening international organization in the devel- apply to the allocation of development capital in the opment field. We should remember that we are not world today. The criteria are, or by now should be, engaged here in a short-term exercise, but in a well understood both at the exporting and at the search for arrangements, set in a framework of con- receiving end. tinuity, for dealing with a set of problems that is We have had nearly 13 years of experience in the bound to be with us for generations. Bank which have yielded ample evidence that a wide But whatever the arrangements for channeling area of agreement does exist about these criteria. capital into the underdeveloped countries, par- We have negotiated loans with borrowers of widely ticular care must be taken not to penalize those who different cultural backgrounds and widely different are striving to do the job well, out of a misguided political philosophies. Yet again and again we have concern for countries whose difficulties are not seen doctrinal controversy dissolve into agreement primarily the result of a lack of development capital. in practice. We have learned a great deal from our As I have said, the development record in the 14 underdeveloped countries is very uneven. And the How much more hope there would be if even a principal reason why it is uneven is the tendency in fraction of the huge sums being spent on arms and some countries to look on the various sources of armaments today could be diverted to creating new, development capital as fountains whose bountiful real wealth! For centuries, nations have been trying waters will make good, and go on making good, to settle their differences by shooting at one another. resources which are being allowed to seep away in And even today nations are still adopting this old- economic waste-rather than regarding them, as fashioned posture, today when science has given us they should be regarded, as reservoirs that will irri- a new source of energy of unsurpassed power, which, gate parched economic fields. if misused, is capable of destroying whole com- I cannot accept a claim on the limited supply of munities in the twinkling of an eye. international development capital which merely de- Now economic development, too, destroys as well mands relief for a government from the unpleasant as creates. It destroys old habits and attitudes to- and politically unpopular necessity of putting its own wards life even as it fills human needs; what is financial and economic house in order. I particu- destroyed is often as important as what is created. larly cannot accept such a claim when it is supported And the problems economic development creates are only by arguments completely irrelevant to develop- sometimes as inhuman as the problems it solves. ment needs-by appeals to sentiment, or by the ex- Thus, while mankind is slowly being relieved of the ploitation of a strategic position in the international plague of chronic disease, he is burdened with the political line-up. There is little advantage to be gained terrible problems of overpopUlation. if money is poured continually and continuously That modern science and technology can impov- into a purse, if in that purse there is a great hole. erish people as well as enrich them is a profoundly To condone such claims on the supply of inter- sobering thought for those of us who have been national development capital is to penalize those brought up in the optimistic tradition of the modern countries that are making the necessary sacrifices to industrial countries. But it is not inevitable that do the development job well. It must not be for- more good shall be destroyed than is created. In gotten that, ultimately, it is the savings of the people fact, the only certain thing in this world is that of the capital exporting countries which is the source science and technology will continue to force funda- from which external capital for the underdeveloped mental changes on the whole structure of human world comes. This source is not limitless; indeed, society. Within broad limits men can decide whether or the demands on it already exceed the supply. In not these changes impoverish more than they enrich. these circumstances there is a weighty responsibility As I see it, economic growth is at once the best on the shoulders of every government that is a re- hope and probably the only real hope for mankind cipient of external assistance-a responsibility to today. But this hope needs constant nourishment if create conditions where its capital can be invested it is to survive this turbulent century. It can die wisely and productively. Those governments who under the weight of arms even if those arms are fail to recognize this responsibility break faith with never actually engaged in warfare. It can be killed those who do. by the same bullets that kill men. It can be snuffed The Bank's story is a quiet one-very different out by the misapplication of the very science that from the clamorous tales that we have been read- boasts that it distinguishes the brave new world from ing in our newspapers in recent months. Yet in the old-fashioned. a year characterized by a number of unusually noisy To keep alive this hope, we must ask ourselves: international incidents, there is also a record of Are we really so ignorant in the midst of all our new notable achievement in the economic field. This, I knowledge that we cannot see that economic better- submit, gives solid ground for hope. ment can replace bullets in the affairs of nations 15 just as the truck replaced the ox cart? There may rial world are doomed to disappointment or frus- be many nobler pursuits for man than the creation tration. of new wealth; some may argue that it is nobler to In the capacity and willingness of those respon- die for his country than to save for it. But if-all sible for the direction of public policy to face this around the globe-armaments go on devouring as fact lies the hope that-even in the short run-the large a share of the fruits of man's labor as is the quiet progress of economic growth will make itself case today, the prospects of a rapid emergence of heard ever more clearly over the noise of contention hundreds of millions of people into a tolerable mate- among nations. COMMENTS OF PRESIDENT OF BANK ON DISCUSSION OF ANNUAL REPORT WOULD BE LESS THAN HUMAN if I failed to be affiliate of the Bank, a new International Develop- I moved by the many warm and kindly senti- ment Association to make loans repayable in whole ments that have been expressed during the past few or in part in the currency of the borrowing countries. days. For such success as we may have had would This Conference has not provided the occasion for never have been possible without the generous sup- any real discussion of that proposal, because it has port that I have at all times had from the Executive not yet taken concrete form. But I do want to say, Directors and the loyal service of every member of as I have said on a previous occasion, that I believe the competent staff. On their behalf, as well as on the proposal, although it has some complex aspects, my own, I wish to tender our thanks. is both imaginative and constructive and that it is But even more encouraging than your praise has worthy of the most careful study by all of us . There been the tangible evidence of support for the Bank is an unquestionable and real need in many coun- which has been demonstrated in two concrete ways. tries for additional development investment capital I refer, first, to the very general support that has on terms which impose little or no burden on their been voiced for the proposal of the Governor for balance of payments. If the Bank should be in a the United States that the capital of the Bank be position to make a contribution in this form, I feel increased. The additional strength which this will confident that we would be able to push ahead with provide should enable us to continue to raise money many worthwhile projects which are now held up in the markets of the world at reasonable rates of because they cannot appropriately be financed en- interest and in amounts commensurate with the lend- tirely on a hard loan basis. I venture to express the ing needs of our institution. hope, therefore, that the studies and consultations Secondly, I want to express my appreciation for now to be undertaken by various governments will the announcements of so many of our member result in the preparation of a workable plan which governments that they are ready to make available will attract wide support among the Bank's member to the Bank fuller use of the 18 % portion of their countries. capital subscriptions. The willingness to take this By coming to India this year to carry on our pro- step, in some cases in the face of serious develop- fessional deliberations, I am sure we have all greatly ment needs of their own, is a gratifying vote of benefited. Many of the concepts that bankers deal confidence. with are very impersonal. It is difficult to see the I have, of course, been much interested in what human element in blueprints for a dam or in balance has been said about the proposal to establish, as an of payments estimates. As a matter of fact, there 16 often seems to be a wide gap between our technical Before I close, Mr. Chairman, I should like, if I discussions and our economic forecasts and the ulti- may, to say a word of regretful farewell to someone mate effect which our activities are designed to have who, I am sure, must be the dean of our Gov- upon the realities of the human world. But in India, ernors-Sir Arthur Fadden, the Governor for the human element cannot escape us. There prob- Australia. ably is no other place on earth where the realities Sir Arthur's downright, vigorous and colorful ad- of this century are more on the surface of everyday vocacy of cases, whether in this forum or during the life. Those realities are intensely human-the give and take of loan negotiations, has brought to struggle of the people to survive and to preserve their the Bank a taste of the dynamism of that forward individual dignity and freedom in the face of ap- looking country that he represents. He is now sur- palling material problems. We must always keep in rendering the office in which he has served his country mind that it is these men, women and children-and so well and I am sure that all of you will join with not just abstract technical or financial concepts- me in extending to him our good wishes for a happy which are the real justification for our existence and and congenial future. our work. So, I, for one, am grateful to India for It remains only for me to add my tribute to the inviting us here and giving us a fresh realization of bountiful hospitality extended to us by the Govern- our real purpose. And as this realization gives our ment of India and by the many Indian friends of day-to-day tasks new meaning, I am sure it must the Bank, and also to the outstanding efficiency equally infuse us with new vigor and new courage in which has characterized all of the arrangements discharging our responsibilities. made for this meeting. 17