THE WORLD BANK GROUP 2005 ANNUAL MEETINGS OF THE BOARDSOFGOVERNORS Summary Proceedings Washington D.C. September 24­25, 2005 3807-CH00_FM_pi-viii.pdf 3/24/06 7:22 AM Page i THE WORLD BANK GROUP 2005 ANNUAL MEETINGS OF THE BOARDS OF GOVERNORS SUMMARY PROCEEDINGS WASHINGTON D.C. SEPTEMBER 24­25, 2005 3807-CH00_FM_pi-viii.pdf 3/24/06 7:22 AM Page ii 3807-CH00_FM_pi-viii.pdf 3/24/06 7:22 AM Page iii INTRODUCTORY NOTE The 2005 Annual Meetings of the Boards of Governors of the World Bank Group, which consists of the International Bank for Reconstruc- tion and Development (IBRD), International Finance Corporation (IFC), International 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 on September 24­25, 2005 in Washington, D.C. The Honorable Andre-Philippe Futa, Gover- nor of the Bank and the Fund for the Democratic Republic of the Congo, served as the Chairman. The Summary Proceedings record, in alphabetical order by member countries, the texts of statements by Governors, the resolutions and reports adopted by the Boards of Governors of the World Bank Group. The texts of statements concerning the IMF are published separately by the Fund. W. Paatii Ofosu-Amaah Vice President and Corporate Secretary THE WORLD BANK GROUP Washington, D.C. February, 2006 iii 3807-CH00_FM_pi-viii.pdf 3/24/06 7:22 AM Page iv 3807-CH00_FM_pi-viii.pdf 3/24/06 7:22 AM Page v CONTENTS Page Opening Address by the Chairman Andre-Philippe Futa Governor of the Bank and the Fund for the Democratic Republic of the Congo . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Opening Address by Paul Wolfowitz President of the World Bank Group . . . . . . . . . . . . . . . . . 5 Report by Trevor Manuel Chairman of the Development Committee . . . . . . . . . . . 14 Statements by Governors and Alternate Governors . . . . . . 19 Australia . . . . . . . . . . . . 19 *Mozambique . . . . . . . . 82 Bangladesh . . . . . . . . . . 22 Myanmar . . . . . . . . . . . . 86 Belarus . . . . . . . . . . . . . . 24 Nepal . . . . . . . . . . . . . . . 89 Belgium . . . . . . . . . . . . . 27 Netherlands . . . . . . . . . . 93 Canada . . . . . . . . . . . . . . 30 New Zealand . . . . . . . . 95 China . . . . . . . . . . . . . . . 35 *Norway . . . . . . . . . . . . 100 Cyprus . . . . . . . . . . . . . . 38 Pakistan . . . . . . . . . . . . . 104 *Estonia . . . . . . . . . . . . . 40 Papua New Guinea . . . 107 Fiji . . . . . . . . . . . . . . . . . 42 Philippines . . . . . . . . . . . 110 France . . . . . . . . . . . . . . 46 Russian Federation . . . 111 Germany . . . . . . . . . . . . 48 Slovenia . . . . . . . . . . . . . 117 Greece . . . . . . . . . . . . . . 50 Spain . . . . . . . . . . . . . . . 119 Indonesia . . . . . . . . . . . . 52 Sri Lanka . . . . . . . . . . . . 120 Iran, Islamic Republic of 54 *St. Kitts and Nevis . . . 122 Ireland . . . . . . . . . . . . . . 58 Switzerland . . . . . . . . . . 126 Israel . . . . . . . . . . . . . . . 60 Thailand . . . . . . . . . . . . 130 Japan . . . . . . . . . . . . . . . 63 Tonga . . . . . . . . . . . . . . . 132 Lao PDR . . . . . . . . . . . . 70 *Tunisia . . . . . . . . . . . . . 133 Malaysia . . . . . . . . . . . . 72 Turkey . . . . . . . . . . . . . . 137 Malta . . . . . . . . . . . . . . . 75 United States . . . . . . . . 140 *Marshall Islands . . . . . 78 Vietnam . . . . . . . . . . . . . 142 * Speaking on behalf of a group of countries. v 3807-CH00_FM_pi-viii.pdf 3/24/06 7:22 AM Page vi Page Concluding Remarks by Paul Wolfowitz . . . . . . . . . . . . . . . . 146 Concluding Remarks by the Chairman Andre-Phillipe Futa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148 Remarks by Saisnarine Kowlessar, Alternate Governor of the Bank for Guyana . . . . . . . . . . . . . . . . . . . . . . . . . . . 150 Documents of the Boards of Governors . . . . . . . . . . . . . . . . 151 Schedule of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151 Provisions Relating to the Conduct of the Meetings . . 152 Agendas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153 Joint Procedures Committee . . . . . . . . . . . . . . . . . . . . . . . . . . 154 Report I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155 Report III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157 MIGA Procedures Committee . . . . . . . . . . . . . . . . . . . . . . . . 159 Report I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160 Resolutions Adopted by the Board of Governors of the Bank between the 2004 and 2005 Annual Meetings . . . 162 No. 564 Transfer from Surplus to Fund the Trust Fund for Liberia . . . . . . . . . . . . . . . . . . . . . . . . 162 No. 565 Transfer from Surplus to Fund Trust Funds for Tsunami Recovery in India and Indonesia . . . . . . . . . . . . . . . . . . . . . . . . . . 162 No. 566 Forthcoming Annual Meetings of the Boards of Governors . . . . . . . . . . . . . . . . . . . . . . . . . . . 163 No. 567 Remuneration of the President . . . . . . . . . . . 163 No. 568 Direct Remuneration of Executive Directors and Their Alternates . . . . . . . . . . . . . . . . . . . . 164 Resolutions Adopted by the Board of Governors of the Bank at the 2005 Annual Meeting . . . . . . . . . . . . . . . . . 165 No. 569 Financial Statements, Accountants' Report and Administrative Budget . . . . . . . . . . . . . . 165 No. 570 Allocation of FY05 Net Income . . . . . . . . . . 165 Resolution Adopted by the Board of Governors of IFC between the 2004 and 2005 Annual Meetings . . . . . . . . 167 No. 241 Membership of Malta . . . . . . . . . . . . . . . . . . . 167 vi 3807-CH00_FM_pi-viii.pdf 3/24/06 7:22 AM Page vii Page Resolution Adopted by the Board of Governors of IFC at the 2005 Annual Meeting . . . . . . . . . . . . . . . . . . . . . . . 169 No. 242 Financial Statements, Accountants' Report, Administrative Budget and Designations of Retained Earnings . . . . . . . . . . . . . . . . . . . . 169 Resolution Adopted by the Board of Governors of IDA between the 2004 and 2005 Annual Meetings . . . . . . . . 170 No. 209 Additions to Resources: Fourteenth Replenishment . . . . . . . . . . . . . . . . . . . . . . . . . 170 Resolution Adopted by the Board of Governors of IDA at the 2005 Annual Meeting . . . . . . . . . . . . . . . . . . . . . . . 185 No. 210 Financial Statements, Accountants' Report and Administrative Budget . . . . . . . . . . . . . . 185 Resolutions Adopted by the Council of Governors of MIGA between the 2004 and 2005 Annual Meetings No. 71 Reclassification of Slovenia . . . . . . . . . . . . . . . 186 No. 72 MIGA 2005 Review for FY00­04 . . . . . . . . . . 186 Resolution Adopted by the Council of Governors of MIGA at the 2005 Annual Meeting . . . . . . . . . . . . . . 188 No. 73 Financial Statements and Accountants' Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188 Reports of the Executive Directors of the Bank . . . . . . . . . 189 Transfer from Surplus to Fund the Trust Fund for Liberia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 189 Transfer from Surplus to Fund Trust Funds for Tsunami Recovery in India and Indonesia . . . . . . . . 189 Forthcoming Annual Meetings of the Boards of Governors: Change of 2005 Annual Meetings Date 190 Remuneration of the President . . . . . . . . . . . . . . . . . . . . 191 Report to the Boards of Governors of the Bank and the Fund by the Joint Committee on the Remuneration of Executive Directors and Their Alternates . . . . . . 194 Allocation of FY05 Net Income . . . . . . . . . . . . . . . . . . . 199 Report of the Board of Directors of IDA Additions to Resources: Fourteenth Replenishment . . 201 vii 3807-CH00_FM_pi-viii.pdf 3/24/06 7:22 AM Page viii Page Report of the Board of Directors of IFC Membership of Malta . . . . . . . . . . . . . . . . . . . . . . . . . . . . 259 Reports of the Board of Directors of MIGA Reclassification of Slovenia from a Category Two Member Country to a Category One Member Country . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 260 MIGA 2005 Review for FY00­04 . . . . . . . . . . . . . . . . . . 262 Accredited Members of Delegations at the 2005 Annual Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 289 Accredited Members of Delegations (MIGA) at the 2005 Annual Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 320 Observers at the 2005 Annual Meetings . . . . . . . . . . . . . . . . 332 Executive Directors and Alternates, IBRD, IFC, IDA . . . . 337 Directors and Alternates, MIGA . . . . . . . . . . . . . . . . . . . . . . 339 Officers of the Boards of Governors and Joint Procedures Committee for 2005­06 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 341 Officers of the MIGA Council of Governors and Procedures Committee for 2005­06 . . . . . . . . . . . . . . . . . 342 viii 3807-CH01_Futa_p001-004.pdf 3/24/06 7:21 AM Page 1 OPENING ADDRESS BY THE CHAIRMAN THE HONORABLE ANDRE-PHILIPPE FUTA GOVERNOR OF THE BANK AND THE FUND FOR THE DEMOCRATIC REPUBLIC OF THE CONGO I would like to welcome you all to the 2005 Annual Meetings of the World Bank Group and the International Monetary Fund. It is a great honor for my country and me personally to be chairing these meetings. From the outset, please allow me to extend our deepest condolences to those who have suffered as a consequence of latest natural disasters-- famine in Niger, hurricane Katrina in the US and Tsunami in the East Asia region. In memory of those who lost their lives during these tragic disas- ters let us observe one minute of silence. In the present complex interna- tional environment, often characterized by uncertainty, wars and acts of terrorism, natural calamities of that magnitude once again confirm the urgent need for better international cooperation at all levels. Poverty and desperation often are breeding grounds for disaffection and violence. We live in an interdependent world, and what happens in one region will affect all of us. I would like to extend a warm welcome to the new President of the World Bank, Mr. Paul Wolfowitz. We look forward to his leadership of the Bank. We also welcome the continued strong leadership of the IMF by Mr. Rodrigo de Rato. Let me also express our profound appreciation to former President James Wolfensohn, for the energy and focus which he had brought to the work of the World Bank Group throughout the ten years of his exceptional stewardship. Global Macroeconomic Issues I am pleased to note that the global economy has continued to expand strongly, with inflationary tendencies remaining subdued. Nonetheless, despite the favorable economic conditions, growth diver- gences remain, and global imbalances continue to increase. At the same time, oil prices have continued to rise, and while the increases appear to have had a limited impact thus far on the global economy, the situation needs to be continuously monitored. More than ever, the roles of the Bank and the Fund in enhancing the coherence and consistency of the international monetary, financial, and trading systems are crucial. Bank assistance and IMF surveillance pro- vide the foundation for international cooperation to address economic risks and threats. 1 3807-CH01_Futa_p001-004.pdf 3/24/06 7:21 AM Page 2 Assistance to LICs and the Millennium Development Goals Earlier this month, at the UN Summit in New York, world leaders and development partners took stock of progress toward achieving their vision for development. They reaffirmed their commitment to the goals set by a UN Millennium Summit in 2000 to half poverty by 2015. At the same time, they have voiced concerns that without bold actions the MDGs will not be reached. I am pleased to note that the World Bank and the IMF remain fully engaged in efforts to help countries foster growth and reduce poverty through the attainment of the Millennium Development Goals (MDGs). The two institutions need to continue their efforts in assisting low-income member countries to maintain macroeconomic and finan- cial stability, build institutions, and provide important policy advice. In this regard, I welcome the recognition of the need to adapt to new chal- lenges and changing needs of the member countries in the IMF's medium-term strategy. Providing more fiscal space for investment in key areas such as infrastructure is now long overdue. The second Global Monitoring Report, published jointly by the Bank and the Fund, set out an agenda of actions that can help build the momentum needed to attain the MDGs. The report specifically called for special attention to be given to accelerating progress in Sub-Saharan Africa, the region farthest from attaining the goals. As I invite your attention to the issues pertaining to developments in Africa and the important lessons that can be learned from African and specific country experience, please allow me from now on to con- tinue my speech in French. Focus on Africa Assistance to Africa was one of the major topics on the agenda of UN Summit in New York and the G-8 summit at Gleneagles. Their out- comes represented not just a commitment by the Heads of State and Government to increased assistance but also to increased performance by the countries in Africa. Why focus on Africa? It is the only region where people are poorer today than they were 30 years ago. Poverty is being exacerbated by the spread of HIV/AIDS, malaria, and other diseases, lack of basic services and infrastructure, corruption and poor governance, violence and a technology deficit. Yet, Africa is changing. There are more elected gov- ernments and fewer civil wars. A number of countries have enviable growth rates. African governments, through the African Union and New Partnership for Africa's Development (NEPAD), are showing the leadership necessary to take this progress further. 2 3807-CH01_Futa_p001-004.pdf 3/24/06 7:21 AM Page 3 Some key outcomes of the UN and G-8 summits captured this momentum very well. It was recognized that positive change is taking place in Africa. The international community made some unprece- dented commitments, the most significant of which is the doubling of aid to Africa--from $25 billion to $50 billion by 2010. Strong impetus was given to debt reduction with the proposal by the G8 to cancel the debts to the IDA, the Fund, and the African Development Bank of many countries, the majority of which are in Africa. The importance of investing in infrastructure was also emphasized, and indeed should be the focus of the Bank and the Fund. Trade While the recent commitments made by donor countries indicate a great step forward, the developed world can do more than reduce debt and increase financial aid, particularly when it comes to liberalizing trade, especially in agricultural products. There are many artificial bar- riers in developed countries against imports from poor countries, while developing countries need equitable market access. These policies are mandating continuing poverty around the globe. Phasing out agricultural subsidies in rich nations would be an impor- tant part of tackling poverty in the world's poorest ones. African coun- tries are anxious to receive a positive response to a call made four years ago by a group of Sahel countries for a "Compensation Fund" to redress damage caused to cotton producing economies by the OECD subsidies. While we acknowledge the important role of Bretton Woods Insti- tutions, results will always take place at the country level and the coun- tries themselves have to take the lead in advancing the reform agenda. Lessons from DRC When you elevated me to this Chair last year, you not only honored me personally, but you also honored my country, the Democratic Republic of the Congo. I would like to take this opportunity to share with you a lesson or two from my experience in managing a strong part- nership that my country has built with the Bretton Woods Institutions in the last few years. For a decade, my country was affected by armed conflicts and natu- ral disasters which led to millions of fatalities and enormous collateral damage. As was to be anticipated, political divisions and disastrous eco- nomic consequences ensued. In spite of these difficult conditions, the Government decided to adopt, with the IMF's technical assistance, fol- lowed by the Bank's financial support, a staff monitored program (SMP) aimed at breaking the long standing hyper-inflation cycle and 3 3807-CH01_Futa_p001-004.pdf 3/24/06 7:21 AM Page 4 introducing rigorous monetary and budgetary policies along with a set of first generation structural reforms. The outcome was outstanding. The budget's deficit, which varied between ­3 and ­7 percent of GDP during the 90s, turned into a surplus of 0.6 percent of GDP by 2001. Inflation dropped from 600 percent per annum through the 90s down to 135 percent in 2001 and to 16 percent in 2002. Real GDP growth reached 3 percent, turning positive for the first time in 10 years. In June 2002 based on the success of the SMP, the country adopted a three-year economic growth and poverty reduction program. A year and a half later, DRC reached a Decision Point under the Heavily Indebted Poor Countries (HIPC) Initiative. As we speak today, the country is striving to finalize the Poverty Reduction Strategy Paper (PRSP) and is determined to move to the Completion Point by 2006. In this regard, I just want to draw one or two lessons from my coun- try's experience. First, conflict affected countries are faced with a dou- ble challenge: the population lives in great misery and the state is almost nonexistent. The first order of business must therefore be the restora- tion of peace, within and outside the borders. This can only be achieved with the help of and under the leadership of the international commu- nity. A second lesson concerns the magnitude of aid and the quickness with which aid is delivered. The faster and the deeper aid is delivered the faster one can stop the deterioration in economic indicators and ultimately the faster poverty reduction can be achieved. Third and last lesson, no program can be accomplished successfully in the absence of ownership of the program by the leadership and if cer- tain norms of good governance and transparency are not met. Conclusion Those are the few thoughts I wanted to share with you on several important issues we are going to discuss, among others, in the course of our meetings--the global macroeconomic situation, trade, assistance to low-income countries, with special focus on Africa and lessons to be learned from specific country experience, as well the achievement of the Millennium Development Goals. The international community set the stage by the endorsement of the Millennium Development Goals that pledged to substantially reduce poverty in the developing world by 2015. The leaders of devel- oping countries have responded with an impressive commitment to pur- sue economic and political reforms. While bold statements have been made on both sides, the world is now expecting bold action. Let us now turn to the work at hand. I hereby declare the 2005 Annual Meetings of the World Bank Group and the International Mon- etary Fund open. 4 OPENING ADDRESS BY PAUL WOLFOWITZ THE PRESIDENT OF THE WORLD BANK Call for Action I am very pleased to welcome you to Washington for the Annual Meetings of the World Bank Group and the International Monetary Fund. It is an honor to address you, for the first time, as President of the World Bank Group. And it is also with an enormous sense of responsi- bility that I assume this leadership role in an institution that stands at the heart of global efforts to give the poorest people of the world the opportunity for a better future. And I would like to express my gratitude to my colleague Rodrigo de Rato at the International Monetary Fund, and to my own Board of Directors--they have provided close and valuable support during the last few months. I would especially like to thank Jim Wolfensohn who could not be here today. I know we all wish him well and a speedy recovery. His lead- ership over the last 10 years did so much to build the morale and the image of this institution and to focus us on our central mission of poverty reduction. Jim also brought crucial issues--such as corruption and the role of civil society--to the forefront of the development agenda. The World Bank Group is much stronger today thanks to his leadership. We meet today at an extraordinary moment in history. There has never been a more urgent need for results in the fight against poverty. And there has never been a stronger call for action from the global community. The night before the G-8 Summit in Gleneagles, I joined 50,000 young people gathered on a soccer field in Edinburgh for the last of the Live 8 Concerts. The weather was gloomy, but the rain did not dampen the enthusiasm of the crowd. All eyes were riveted on the man who appeared on the giant video screen--the father of South Africa's free- dom. And the crowd roared with approval when Nelson Mandela sum- moned us to a new struggle--the calling of our time--to "make poverty history." Anyone who faces the facts agrees that there is an urgent need for action. Every day, thousands of people living in extreme poverty, many of them children, die from preventable diseases. The scale of death and deprivation in Africa is particularly alarming. Since 1981, the number of Africans living on less than $1 a day has nearly doubled from 164 mil- lion to 314 million. But much can be done to help people escape from poverty, to save lives and to create hope. The call to end poverty 5 3807-CH02_Wolfowitz_p005-013.pdf 3/24/06 7:21 AM Page 6 reaches across generations, continents and nationalities. It spans reli- gions, gender and politics. From concert stadiums to street demonstrations to high profile summits--citizens and leaders--from rich and poor countries alike-- have been moved by the suffering. They demand action. At Gleneagles this July, a landmark agreement was reached. The G-8 leaders pledged to double aid to Africa and to cancel the debt of the poorest countries. So we are at a turning point and there are grounds for hope. The last few decades, in fact, have witnessed dramatic improvements in conditions of the world's poorest people. In the last twenty five years, the number of people living on less than $1-a-day decreased by some 400 million--the largest drop in centuries. People in developing countries are living longer--on average nearly fifteen years longer--than they did forty years ago. Thirty years ago, 50 percent of the population in developing countries was illiterate. Today, that proportion has been cut in half. Much progress has been made--and more is possible. The achieve- ments we have seen in large parts of Asia and Latin America can trans- form other parts of the world. A few weeks ago, I met with a poor Pakistani woman from the vil- lage of Dhok Tabarak who was participating in a rural development project sponsored by the Pakistan Poverty Alleviation Fund with help from the World Bank. I asked her whether the success of her project could be reproduced elsewhere in Pakistan. With passionate conviction she said, "Why not? The Japanese have done it. The Chinese have done it. Why can't Pakistan do it?" What a difference forty years makes. I recall reading pessimistic analyses in the mid-1960s that said South Korea was doomed to failure because it lacked the ingredients deemed necessary for successful devel- opment. Yet in the span of a few decades, Korea and East Asia have experienced the greatest increase in wealth for the largest number of people in the shortest time in the history of humanity. If we can liberate the energies of the African people and unleash the potential of the private sector to create jobs, Africa will not only become a continent of hope, but a continent of accomplishment. When Africa's challenges seem overwhelming and the statistics stag- gering, let us remember--for every Afro-pessimist today, there was an Oriental fatalist forty years ago. Evolution of Development Thinking We have also come a long way in the last 40 years in our under- standing of how development works. We know it can be a complex and--in some ways--mysterious process. 6 3807-CH02_Wolfowitz_p005-013.pdf 3/24/06 7:21 AM Page 7 Forty years ago, scholars sought to explain economic growth primarily in terms of inputs of labor and capital. When a third variable--technology-- was introduced, that was considered a remarkable innovation. Today, we have a much broader and better understanding of what drives development and growth. We know that sustained economic growth is essential for development and reducing poverty. And, we also know that many of the drivers are not measurable in numerical terms. Because they are harder to measure, harder to predict and often harder to influence, there is a tendency to discount these factors as "soft." That would be a mistake--because sustainable development depends as much on leadership and accountability, on civil society and women, on the private sector and on the rule of law, as it does on labor or capital. Let me speak briefly about each of these four factors. Leadership and Accountability Perhaps the most important determinant for reducing poverty is leadership. But, development is a team sport, so the leadership we're talking about is not a matter of individual performance; it must stand on a bedrock of trust, respect and teamwork. As Nelson Mandela told me-- real leadership requires understanding, that you're not acting as an indi- vidual, that--in his words--you're representing the collective. Or, as he also put it plainly many years ago, "There's no limit to what you can achieve as long as you don't give a damn who gets the credit." Effective leaders also recognize that they are accountable to their people. Effective leaders listen. Institutions of accountability like civil society and a free press can help leaders listen, help hold them account- able for results and expose corruption. Corruption drains resources and discourages investments. It benefits the privileged and deprives the poor. It threatens their hope for a bet- ter quality of life and a more promising future. Accountable and sound governance, on the other hand, nurtures the soil in which a robust civil society and an energetic private sector can flourish. Civil Society and Women A second key factor is civil society, and particularly its role with respect to women. Civil society organizations contribute to accountability by providing an important bridge between citizens and their governments. But, they are more than that. CSOs are engines of growth and instruments of opportunity. In every country I have visited, they offered a wealth of 7 3807-CH02_Wolfowitz_p005-013.pdf 3/24/06 7:21 AM Page 8 experience in learning, adapting, sharing knowledge and contributing to growth in their local communities. And civil society organizations are particularly important for empowering women, who are a key factor for successful growth. As one poor woman told me in Pakistan, "Development is like a cart with two wheels--one man and one woman. If one of the wheels isn't moving, the cart won't go very far." Millions of women have benefited from vigorous CSOs like the Bangladesh Rural Advancement Committee and the Grameen Bank that provide small loans to help them start businesses. The profits from these businesses are being used to send children, and especially daugh- ters, to school. A third important factor is the private sector. A vibrant private sec- tor is the most important engine of growth and job creation. Private Sector One of the biggest obstacles to the growth of small and medium businesses is lack of credit. The Bank Group has provided sound policy advice to support micro-lending, but we need to explore innovative ways to expand access to financial services, including both local and regional needs and approaches. MIGA and the IFC offer vital resources and advice to address risk, credit and equity needs. One of the IFC's and the Bank's most impor- tant contributions to fostering an investment-friendly climate is the Doing Business Report which evaluates conditions in 155 countries. That report points out that in many African countries, the costs to register a business are so prohibitive, that most entrepreneurs are forced to operate outside the formal economy. The report is a critical tool for developing countries to determine where more reforms are needed. Rule of Law And finally, we cannot make headway in the fight against poverty without supporting equality before the law and the legal empowerment of the poor. These are essential components to unleash the social and economic energy of poor communities. Knowing that laws can be upheld--that rights are protected--that contracts will be enforced--encourages people to invest in their future. And a sound legal framework also needs to be complemented by a regu- latory environment that is consistent, coherent and applied with fairness. As one African businessman said to me, "Bribery isn't the issue. I just wish there was less room for bureaucrats to interpret the rules." 8 3807-CH02_Wolfowitz_p005-013.pdf 3/24/06 7:21 AM Page 9 Focus on Making a Difference As we continue to work closely with our partners in 184 countries, we in the World Bank Group must recognize that we cannot be all things to all people. Just as our partners have unique concerns, the Bank Group has unique capabilities. If we try to be experts at every- thing, we risk being successful at nothing. To learn--to develop exper- tise, we need to listen to our partners. As a Governor of a State in Nigeria said to me, "I don't need one more PhD coming here to tell me what my problems are. I need help with solutions." To find those solu- tions, we need to strengthen our knowledge and expertise in such areas as education, health, infrastructure, energy and agriculture. Education One of the encouraging signs I saw on my trip to South Asia is the premium Pakistan and India are now placing on girls' education. It seems that Pakistani men increasingly agree that their daughters need to be educated as well. Through the Education for All Fast Track Initiative, the Bank plans to join other donors to double the enrollment of girls in 60 countries over the next five years. We have a plan. Now we need the resources. We will need to raise at least $2.5 billion per year to fulfill the dreams of thousands of school children eager for a brighter future. Health And like education, the health problems of the poorest people pose a human tragedy, impedes growth and obstructs opportunity. In the last five years, the Bank has invested nearly $2 billion to roll back the tide of HIV/AIDS and to restore hope and opportunity for vic- tims. I pledge to remain deeply engaged in this fight for life and human dignity. But it is also clear to me that the Bank needs to increase its com- mitment to fighting malaria. When nearly 2,000 African children die of malaria every day, we must act. We must fight malaria with the same urgency as HIV/AIDS. And the experience of Vietnam proves that with focus, great results can be achieved. Facing a malaria epidemic in 1991 that affected a million people, the Government of Vietnam targeted its assistance at the village level, distributing bed-nets, drugs and insecti- cides. Within five years, outbreaks ended and mortality dropped by 97 percent--97 percent. In more than a dozen countries in Africa, the World Bank will com- mit $600 million over the next three years to a new "Booster Program" to control malaria. We have set clear targets for ourselves: we will make 9 3807-CH02_Wolfowitz_p005-013.pdf 3/24/06 7:21 AM Page 10 bed-nets available so that 60 percent of the populations will be covered; and so that within 24 hours of symptoms, 60 percent of the populations will have access to treatment. Infrastructure One of the most persistent messages I have heard during the past few months from people in developing countries, poor and rich, citizens and leaders alike, was the need to restore our role in infrastructure investment. Infrastructure is the lifeline to many other things: to health care, to education, to jobs, to trade. We will not see an end to poverty when 90 percent of businesses in Nigeria rely on backyard generators for power. We will not see incomes grow when poor Latin American farmers have no roads to transport their produce to markets. And we will not see improvements in health as long as more than 2 billion people lack access to safe sanitation. But in addressing these infrastructure challenges, we need to learn the right lessons from past mistakes. Intelligent management of a country's natural resources is essential to ensure that short term gains are not made at the expense of long term health of the poor and their environment. Energy and Sustainable Development So intelligent management of resources and the environment con- tributes to growth. The international community as a whole needs to make a more concerted effort to mitigate and adapt to climate change, while meeting the energy needs of the developing world. The mandate from Gleneagles gives us the opportunity to think out- side the box. We are advancing the energy and development dialogue as we seek innovative ways to use new technologies. We will strengthen our cooperation with middle income partners like Brazil, China, India, Mexico and South Africa who face growing demand for energy. The goal is to achieve a new, more climate-friendly development path, that meets the energy needs of the developing world. Agriculture Forty years ago as a management intern at the U.S. Bureau of the Budget, I wrote a paper attempting to demonstrate why the U.S. should provide subsidized fertilizer to Pakistan rather than dumping wheat and destroying the local markets. Forty years later, it seems we are still doing something similar in Africa--supporting emergency famine relief instead of improving agri- cultural production to prevent famine. 10 3807-CH02_Wolfowitz_p005-013.pdf 3/24/06 7:21 AM Page 11 In Asia and Latin America, the Green Revolution of the 70s and 80s played a vital role in reducing poverty and hunger and fostering eco- nomic growth. Yet, total aid to that sector declined dramatically during the 1990s. We have begun to reverse the trend and it is producing important results. Latin American and African researchers have collaborated to increase cassava productivity by more than 40 percent. And, there is hope that more research will lead to improvements in the nutritional value of basic crops. But investments in agriculture alone will not improve farm incomes. Rich countries must end agricultural subsidies that distort prices and restrict market access for poor farmers. Successful liberalization of trade in the next Doha round is as impor- tant for enabling people to escape from poverty as are increases in aid or debt relief. Africa So, what does this mean for Africa? Much of the hardest work ahead for the World Bank Group and other donors lies there, as the Chairman pointed out already. With staggering needs in education, nutrition, clean water and sanitation, healthcare and jobs--the challenges are daunting. Nonetheless, I am hopeful. As Nigeria's President Obasanjo said to me in June, "Africa is a continent on the move." Africans are stepping up to their responsibilities and taking charge of their future. In Nigeria, senior officials have been jailed for corruption. In South Africa, a Deputy President was dismissed because his adviser took a bribe. A new generation of African leaders is setting examples by step- ping down when their terms of office end or when they are voted out. But let us remember, the responsibility doesn't belong to the devel- oping world alone. At Gleneagles, a partnership was forged between Africa and the G-8 countries--a partnership designed to deliver results. Those partners pledged performance for assistance. The Millennium Development Goals are an important start in defin- ing the terms for that new compact. They define a vision for lifting mil- lions out of poverty by 2015. But also, let us remember the MDGs cannot be achieved without growth. We need to recognize the importance of shared growth and equity to achieve the MDGs. Without sustained growth, real poverty reduction is impossible. But growth alone is not enough. As the World Develop- ment Report points out this week, we need to create equality in oppor- tunities for the poor, not only to improve their own lives, but to increase their ability to contribute. 11 3807-CH02_Wolfowitz_p005-013.pdf 3/24/06 7:21 AM Page 12 To improve opportunity, accelerate shared growth and help fulfill the MDGs, the Bank launched an Africa Action Plan earlier this month. That plan sets forth 25 initiatives to be led by African countries over three years, with measurable outcomes. This time next year, you can count on getting a progress report. Implications for the World Bank Whether investing in education, health, infrastructure, agriculture, or the environment, we in the World Bank must be sure that we deliver results. And by results, let me be clear. I mean results that have a real impact on the daily lives of the poor. We stand accountable to them. We cannot just count the number of schools, clinics, and businesses that are established. It is also about the quality of the curriculum, the quality of the health care delivery and the quality of the jobs created. We must address both the qualitative as well as the quantitative chal- lenges that deny opportunities for the poor. And we must remember we are but one player in this global effort-- which must be guided and defined at the country level. We must remember that we are part of a team. In Rwanda, I had the privilege of meeting Dr. Agnes Binagwaho who heads their National AIDS Council. She told me with great pride that if a man shows up alone at a clinic, he is sent home to bring his wife and children before he can receive care. Dr. Binagwaho stands her ground firmly on another equally impor- tant point. She politely but firmly insists that Rwanda's donors support one integrated health plan--no more special interest spending, she tells them. By asking us to better coordinate our assistance to improve results, she and her small medical team waste less time with donors and spend more time saving lives. Expanding country coordination will demand greater participation from World Bank Group staff in the field. So we need to continue efforts to decentralize our team; moving more of the right people to the field to better serve our partners' development needs. And our efforts to develop capacity must include our own staff, particularly women and staff from developing countries. Finally, and importantly, we in the World Bank Group have our own responsibility to fight corruption. Fighting corruption is not just the obligation of developing countries. Think about it. For every bribe- taker, there is a bribe-giver who needs to be called to account. We are well aware that our own projects can be targets of corrup- tion, and we are taking action. 12 3807-CH02_Wolfowitz_p005-013.pdf 3/24/06 7:21 AM Page 13 Among other things, for two years the World Bank Group has been working on a new anti-corruption tool called the "Voluntary Disclosure Program." In exchange for reduced sanctions and assurances of confidentiality, this program allows firms to volunteer information about their involve- ment with fraud or corruption on Bank-financed projects. The program promises to assure that spending is properly dedicated to the service of the poor and to set the highest standards in this key area. Beyond the Poorest Countries Let me conclude with a reminder of the obvious--the world is changing, so we must be able to change also. As we move forward with our mission to make poverty history, we must be prepared to grow as an institution. We must be ready to grad- uate with our partners and respond to new and emerging challenges. Today, in Middle Income Countries, more than 1 billion people still live in poverty. We must not forget them. To help the middle income countries grow and prosper, we need to continue to tailor our knowl- edge and financing to their specific needs. With time, and with results, the needs of those partners will evolve. Success will bring new challenges that will require new responses. So innovation and adaptation will be critical if the Bank is to remain rele- vant in this changing world. Sometimes, the problems of success are as daunting as the problems of challenges. So let us work today to chart our course for the future--a future in which today's poor become tomorrow's entrepreneurs; a future in which today's disease leads to tomorrow's medical breakthrough; and a future in which today's child will be tomorrow's leader. 13 3807-CH03_Manual_p014-018.pdf 3/24/06 7:21 AM Page 14 REPORT BY TREVOR MANUEL CHAIRMAN OF THE DEVELOPMENT COMMITTEE As Chairman of the Development Committee, I am pleased to report to you on the Committee's work during the two meetings held in 2005. Progress on Millennium Development Goals As in 2004, the main focus of our meetings has been implementation of the actions and partnerships agreed in Monterrey and Johannesburg to meet the Millennium Development Goals (MDGs). During this year, which marks the fifth anniversary of the adoption of the MDGs and which has been called the "Year of Development," this work has had a special significance. At our Spring meeting we assessed progress that had been made over the five years since adoption of the MDGs, as an important input into meetings over the Summer, in particular the UN World Summit held in New York this month. We based our discussion on the analysis in the second annual Global Monitoring Report (GMR) prepared by the staff of the Bank and Fund in collaboration with others. We recog- nize the importance of the GMR as an important tool to monitor progress made on MDGs. While we welcomed progress made on actions by both developed and developing countries, we noted that overall progress had been less than envisaged. At our Fall meeting we have been able to welcome some important progress made over the summer in agreeing proposals for further debt relief and in commit- ments to more and more effective development assistance. Despite this progress and the stronger policies put in place in many developing countries, we remain concerned that the MDGs will not be met in many countries, particularly in Sub-Saharan Africa. Further and stronger efforts are needed by all parties to the Monter- rey agreement--developing countries, developed countries and the international institutions. The Committee has discussed actions being taken by many develop- ing countries to strengthen policies and institutions. We endorse the emphasis on country-led and owned development strategies linked to medium term budget frameworks, which should provide a way to oper- ationalize the MDGs at the country level. Successful strategies need to include macroeconomic stability, stronger public financial management, good governance, promoting a strong private sector, and expanding infrastructure and service delivery in education and health. The Bank- Fund review of the poverty reduction strategy approach points to the 14 3807-CH03_Manual_p014-018.pdf 3/24/06 7:21 AM Page 15 need for further efforts to strengthen these strategies and their imple- mentation in many countries. We have discussed and call for rapid implementation of the Education for All Fast Track Initiative, including closing the financing gap; and stepping up the fight against major dis- eases including HIV/AIDS and malaria. We have also considered and welcome the review of Bank conditionality and call for consistent appli- cation of the proposed good practice principles designed to strengthen country ownership and leadership. Need to Increase Aid and Debt Relief Stronger country policies must be matched with increased aid and debt relief. We have therefore welcomed agreement reached for a sub- stantial replenishment of the International Development Association (IDA), and the commitments made by many donors this year to time- tables for achieving the target of 0.7 percent of GNP for ODA. We have also discussed proposals for innovative sources of development financ- ing, and have asked the Bank to assist with implementation issues, as appropriate, to ensure that these initiatives are coherent with the over- all performance- and country-based aid architecture. We have also noted ongoing work on blending arrangements and advance market commitments for vaccines. Further, we have discussed and welcomed the G8 proposal for 100 percent cancellation of debt owed by eligible heavily indebted poor countries to IDA, the African Development Fund (AfDF), and the International Monetary Fund, as providing a valuable opportunity to reduce debt and increase resources for achieving the MDGs. We are agreed on the need for an "interdependent package" with dollar for dollar compensation for IDA that is truly additional to existing com- mitments and that maintains the financial integrity and capacity of IDA to assist poor countries in the future. Donor countries must ensure financing to fully compensate IDA for forgone reflows resulting from debt relief in order to reach a final agreement on the proposal. As important as mobilizing more aid is, we recognize that there is an urgent need to improve the quality of aid. The Committee has discussed issues relating to aid financing and aid effectiveness at both its Spring and Fall meetings. We welcome progress toward establishing tangible indicators and targets for commitments made in the Paris Declaration on Aid Effectiveness. We stress the importance of Mutual Accountabil- ity between donors and recipient countries in order to realize the aid effectiveness agenda. We have asked the Bank to work closely with the OECD Development Assistance Committee and other partners to sup- port the delivery and improve the quality of increased assistance, through systematic monitoring and follow-up on aid commitments, and 15 3807-CH03_Manual_p014-018.pdf 3/24/06 7:21 AM Page 16 through vigorous implementation of the agreed agenda on managing for results, harmonization, and alignment. Action Plan for Africa A special focus of our discussions has been the development chal- lenges in sub-Saharan Africa, the region farthest from achieving the MDGs. In this context we have welcomed the World Bank Group's ambitious Africa Action Plan, which will support African countries in their efforts to increase growth and tackle poverty. We commend its comprehensive approach toward developing an African private sector, creating jobs, enhancing exports, expanding infrastructure, raising agri- cultural productivity, strengthening human development, building capacity (including in conflict-affected and fragile states), and increas- ing regional integration. The Committee expects to see timely and vig- orous implementation of the Plan, which correctly focuses on building state capacity and improving governance, strengthening the drivers of growth, and promoting broad participation in growth and sharing its benefits. The Committee has asked for regular reporting on progress in implementation of the Plan. Doha and Aid for Trade The Committee supports stronger country policies and more and more effective aid must be complemented with ambitious moves to increase openness and market access and to ensure that trade benefits the poor. Without a timely and ambitious outcome for the Doha Devel- opment Agenda, developing countries will not achieve the economic growth needed to meet the MDGs. Progress at the December Hong Kong Ministerial meeting will be critical to a successful conclusion of the Doha Round in 2006. Now is the time for action by all WTO mem- bers to move the negotiations forward, and we have called upon devel- oped countries to show leadership. We have stressed the importance for the global economy and for meeting the MDGs of achieving an out- come that includes: (i) a major reform of agricultural trade policies to expand market access and eliminate trade-distorting subsidies; (ii) action to open markets in manufactures and services; and (iii) in- creased aid for trade to address supply-side constraints and enhance the capacity of developing countries to take advantage of expanded trade opportunities. We have endorsed the proposal for an enhanced Inte- grated Framework for Trade-related Technical Assistance, and sup- ported a strengthened framework for assessing adjustment needs so that IFI and donor assistance mechanisms can be better utilized. We 16 3807-CH03_Manual_p014-018.pdf 3/24/06 7:21 AM Page 17 have also asked the Bank and the Fund to continue their global advo- cacy role on trade and development. Infrastructure Action Plan Increased investment in infrastructure, alongside strong programs for education and health, is key to faster growth and progress in reduc- ing poverty. We therefore welcome the progress made by the Bank Group in implementing its Infrastructure Action Plan and strengthen- ing public-private partnerships to leverage investment and maximize impact. We hope the Bank will now continue deepening and scaling up of support for infrastructure service delivery, to respond to needs in both low- and middle-income countries. Climate Change We have also discussed the importance of countries integrating cli- mate concerns into their policy formulation, and support the World Bank's efforts, including through the Global Environment Facility, to assist member countries in measures to mitigate and adapt to the impact of climate change and improve energy efficiency and access to renew- able and cost-effective energy. We welcome efforts to follow up on the Gleneagles plan of action with early consultations with partner coun- tries and institutions to identify pragmatic investment and financing policy options. Voice and Participation Enhancing the voice of developing and transition countries in our institutions is of vital importance. The Committee intends to continue its discussions of this issue with a view to building the necessary politi- cal consensus to make progress, taking into account also progress made in the context of the IMF quota review. New Bank President Our Spring Meeting was the last meeting of the Development Com- mittee attended by Jim Wolfensohn in his capacity as President of the World Bank, and we expressed our deep appreciation for his talented leadership at the Bank. At our Fall meeting we welcomed the new Pres- ident of the World Bank, Paul Wolfowitz. We wish him a successful tenure. 17 3807-CH03_Manual_p014-018.pdf 3/24/06 7:21 AM Page 18 End of Tenure This will be my last report to you as Chairman of the Development Committee, and I would like to take the opportunity to thank all mem- bers for their support for the work of the Committee during my term of office, and to wish every success to my successor, Mr. Alberto Car- rasquilla, Minister of Finance and Public Credit of Colombia. 18 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 19 STATEMENTS BY GOVERNORS AND ALTERNATE GOVERNORS AUSTRALIA: PETER COSTELLO Governor of the Bank and the Fund The global economic outlook remains favorable, aid flows are increasing, many of the world's poorest countries will receive further debt relief and the Doha development agenda remains at the forefront of the fight against poverty. This puts us in a strong position; however, too many people still live in poverty. The challenge is to ensure that the opportunities that have been created are not squandered. Global economic activity needs to remain strong through reforms to broaden and deepen economic growth. Aid needs to be made more effective and developing countries need to continue to strengthen their institutions and governance. Debt relief needs an accompanying focus on debt sustainability to prevent history from repeating itself. Very importantly, we all need to throw our support behind the Doha development agenda--trade and investment opportunities are far more important than aid and debt relief in lifting countries out of poverty. Economic Outlook While the outlook for the world economy remains favorable, reflect- ing accommodative policy settings, healthy corporate balance sheets and benign financial market conditions, medium-term risks are skewed to the downside and remain centered on global current account imbal- ances. Associated with this, growth divergences across regions remain wide, with the expansion still led by the United States and China, increasing the world economy's exposure to developments in these economies. A key challenge for the membership is to ensure that there is a broadening and deepening of global growth, under-pinned by a mix of policy, structural and relative price adjustments. Australia's economic expansion is now into its 14th year, and as noted in the recently released Article IV report, continued strong growth is anticipated. This strong performance is under-pinned by an ongoing commitment to a medium-term macroeconomic framework and structural reforms, with low unemployment, increased competi- tion, low inflation and the near elimination of public debt among the benefits. 19 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 20 Aid Global aid flows have increased significantly in recent years and are projected to increase even further between now and 2010. Australia has played its part, and will continue to do so. Since 2000­01 Australia's aid has increased by more than 30 percent in real terms. At the recent UN Summit in New York, Australia announced a substantial commitment of additional aid, with the goal of doubling Australia's aid by 2010 to around A$4 billion. This commit- ment is subject to annual budget review, taking into account the effec- tiveness of the additional funding and strengthened governance and reduced corruption in recipient countries. This decision reflects the Australian Government's ongoing commit- ment to helping developing countries, while recognizing that it is ulti- mately up to countries to take primary responsibility for their own development. Australia's aid program will continue to have a particular focus on the Asia-Pacific Region. Many people in Asia remain in poverty and the recent United Nations Investing in Development report has identi- fied that the Pacific is off-track with respect to almost every Millennium Development Goal and falling back in some areas. While poverty in the Pacific does not have the same profile as poverty in Africa, the core problem of both regions is that they contain certain fragile states (Low- Income Countries Under Stress--LICUS), as well as many small states. Finding ways to effectively engage with fragile states is a key challenge for the entire international community. For these reasons the Australian aid program focuses on those countries in the Asia-Pacific region; the Government has demonstrated this commitment by implementing large, long-term and whole-of- government development programs in Solomon Islands, Papua New Guinea and Nauru and a partnership to support Indonesia's reconstruc- tion and development efforts. Debt Relief The proposal for 100 percent multilateral debt relief for Heavily Indebted Poor Countries (HIPCs) being considered at this meeting has our support. We urge the World Bank and the Fund to implement this proposal as soon as possible to enable poor countries to benefit from it. We also emphasize that it is important that the savings from debt relief are applied to poverty reduction programs in an environment of improving governance and institutions and not lost due to corruption or mismanagement. 20 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 21 I would also like to emphasize the importance that the Australian Government places on ensuring that countries do not build up unsus- tainable debts in the future. The joint IMF/World Bank Debt Sustain- ability Framework can play an important role here. Preventing unsustainable borrowing from occurring in the future will require all creditors and borrowers to accept that it is not in anyone's interest for countries with excessive levels of debt to continue to receive assistance in the form of loans. We therefore urge the IMF and the World Bank to further refine and promote the Debt Sustainability Framework as the key tool to inform the lending and borrowing decisions of today to ensure that HIPCs do not need debt relief in the future. Trade Liberalization Meaningful trade liberalization is the single greatest contribution the international community can make to achieving sustainable reduc- tions in poverty. Without it, our efforts on aid and debt relief will at best be of limited benefit, and at worst counterproductive. If 2005 is to become known as the `Year of Development' then it is critical that the global community supports the Doha agenda. Australia welcomes the leadership shown by President Bush when he pledged that the United States is ready to eliminate all tariffs, subsi- dies and other barriers to the free flow of goods and services as other nations do the same. As has been emphasized at these meetings, the Doha Round will not be a development round if countries do not begin to tear down barriers to agricultural trade. This is particularly the case for sub-Saharan Africa. To provide one example, research by the Food and Agricultural Policy Research Institute (quoted in the forthcoming September 2005 World Economic Outlook) indicates that removing global agricultural subsidies would raise cotton prices by 12 percent over the period until 2012, equivalent to over US$200 million a year for African producers. Role of the IMF in Low-Income Countries We welcome the Fund's recent reassessment of its role in low-income countries. A key consideration for the Fund is how it interacts with the international community to provide assistance. The Fund should focus on its core mandate around macroeconomic and financial stability as the underpinning for growth and poverty reduction. It is important for the Fund to ensure that all of its instruments for assisting low-income countries--including the new Policy Support Instrument, the new Shock Facility and debt relief--are effective and complementary. 21 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 22 The Medium-Term Strategy of the IMF We have been encouraged by the Fund's recent medium-term strat- egy (MTS) discussions, and we welcome the strategic approach outlined in the Managing Director's Report. In particular, we welcome the inten- tion to better focus the Fund's work in several areas. We encourage greater focus on areas within the Fund's core man- date, including international monetary co-operation, global prosper- ity and financial stability, and temporary balance of payment support. Within these areas, the MTS has usefully set out the general emphases that will be needed for countries at different stages of economic development. Ultimately, the challenge for the Fund will be to translate the MTS into action. This will depend fundamentally on organizational and cul- tural change within the Fund, including budget reform and priority set- ting for resource allocation, and we look forward to further consideration of these critical governance issues. Quotas We welcome the Fund's acknowledgement in its MTS that the cur- rent quota allocation puts its legitimacy at risk. We wish to see these issues addressed in the context of the Thirteenth General Review and agree that even if there is no general increase, there is a need to con- sider revised quotas at that time. The challenge for the membership remains to generate wide-spread support for an option that balances greater recognition of rapidly-growing economies, particularly in Asia, with the need to provide smaller developing nations with adequate voice. BANGLADESH: SAIFUR RAHMAN Governor of the Bank and the Fund I am honored to have the privilege of addressing once again the Annual Meeting of the Bank and the Fund. I extend my warmest felic- itations to Mr. Wolfowitz on taking over the stewardship of the Bank. I wish him all success. I also extend our deep appreciation to Mr. de Rato for the excellent leadership he has been providing the Fund. The common goals we set for ourselves through Monterrey Consen- sus rekindled hopes of a better life for about three billion poor people of the world who earn less than two dollars a day. Insecurity of liveli- hood and lives of these poor people is a threat to peace and security anywhere in the world. Large scale awareness worldwide about the his- toric global compact brought about by Monterrey Consensus as well as 22 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 23 the wide-ranging participatory process in developing PRSPs have pop- ularized MDGs throughout the developing world. Three years have already elapsed, yet we are far away from our set goals. It is high time for us to act together to deliver on these promises in order to meet the growing aspirations of the poor. Our failure to do so will expose us to new challenges and risks. Many developing countries across the regions have continued to improve their policies and governance framework within their own country--specific socio-economic realities. Faster reduction of income poverty is a formidable task without stronger economic growth led by sizeable investment in infrastructure and capacity building. Reduction in the level of human poverty requires substantial investment focused in health and education sectors. Lack of availability of needed assistance would not only be a major roadblock to MDGs, but will also create new challenges for the developing countries to sustain domestic support to accelerate the pace of reforms. We welcome recent initiatives to increase aid commitments, provide debt relief, introduce innovative sources of development financing and improve quality of aid and its effectiveness. We expect to see real actions on these initiatives and hope committed aid would be directed to the poorest countries on the basis of their actual needs, demonstrated utilization performance and improved governance. No amount of aid is likely to deliver poverty reduction without sound institutions and good governance. Aid alone is not the panacea for poverty reduction. The Monterrey Consensus recognized trade as the engine of growth. We urge upon the developed countries to provide the needed market access to exports of low income countries. The Bretton Woods Institutions should also play greater advocacy role in this regard. Global economic conditions, through their impact on trade and cap- ital flows, play a major influencing role on prospects of economic growth and poverty reduction in the developing countries. Global imbalances continue to persist and inflationary pressure is building up. Recent oil price hike has become a nightmare for low income countries. As a result, their macro-economic balance and Poverty Reduction Strategies have been thrown out of gear. We must set up a new financing facility to absorb the rising oil price shocks on the low income countries. Let me now say a few words about the developments in my country over the last four years under the able leadership of Prime Minister Begum Khaleda Zia. We have achieved an annual average growth rate of about 5.5 percent in recent years. We have made impressive gains in human development raising our country to the category of medium developed countries in Human Development Index. We have already achieved two MDGs. We have liberalized our trade, tariff and investment 23 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 24 regimes. As part of governance improvement we are implementing a series of institutional reforms in almost all sectors to minimize waste, inefficiency and curb corruption. Let me conclude, Mr. Chairman, wishing the Bretton Woods Institu- tions continued success and hoping all of us would fulfill respective commitments and carry out respective responsibilities to translate our common vision into reality. BELARUS: ANDREI V. KOBYAKOV Governor of the Bank Since time immemorial humankind has sought to establish more effective social relations and to create a mechanism in the system of government that would guarantee every citizen the freedom to choose his economic and social way of life. The new states that emerged at the turn of the 21st century naturally want to build their own "happy homes." Some copy their neighbors, others become infatuated with trendy theories, while still others come under the wing of the powerful. Belarus is also looking for its path to prosperity. The results of this search are stirring more and more interest, especially in the context of the latest events that have occurred in the global economic community. The global problems stemming from the global economic recession, from energy price increases, from the stagnation of a number of highly developed countries, from the decline of GDP in many countries and from economic shocks as a whole, have a negative impact on global eco- nomic ties and hamper the development and strengthening of trade and socioeconomic relations between nations. In addition, a number of seemingly noneconomic factors, such as the aftermath of natural cata- clysms, international terrorism and social conflicts within nations, have an adverse effect on national economic indicators and international economic relations. For almost a decade now the Republic of Belarus has been a stable country, bolstering its economic, social and political positions in the international community step by step. This can be attributed to a strong and effective government that works for people's welfare and does not allow anarchy or interethnic or political conflicts. One of the most important components of the Belarussian development model is a strong social policy that is oriented above all toward improving people's living standards. In recent years problems associated with the economic recession in the industrialized countries have increasingly come to the fore. The steady prevalence of capital flight over trade in goods and services low- ers GDP. In terms of economic growth, Belarus consistently ranks 24 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 25 among the leading countries of Europe and the CIS. In terms of GDP, Belarus was the first post-Soviet republic to surpass its 1990 level. GDP grew 11 percent in 2004, and in the first six months of 2005 it was 8.9 percent higher than over the same period in 2004 (the forecast for 2005 is 8.5­10 percent). Industry is undergoing steady and dynamic growth. The 6.7 percent decrease in the energy intensiveness of GDP from January through May 2005 (the forecast for 2005 is 6 percent) at a time of rising world energy prices demonstrates that GDP growth continues to be achieved without a significant increase in the consumption of fuel and energy resources. The profitability of production has increased, and the pro- portion of enterprises operating at a loss has declined. The Republic of Belarus's monetary and credit sector is operating reliably, as evidenced by the stability of the Belarussian ruble, the continual decline in the inflation rate and the steady increase in the flows of investments in fixed capital. Significant factors in the development of investment infrastructure and financial and insurance services markets include the geographical location of Belarus, its well-developed industrial and transportation infrastructure, growing export capacity, research and technology facili- ties and an amply skilled work force. Our country's trade and economic relations are also growing stronger. Belarus maintains trade relations with more than 150 countries. Belarus is a European supply corridor through which a substantial quantity of Russian goods is exported to the EU countries. Belarus has a well-developed transportation infrastructure, which is to be further developed under government programs. The volume of foreign trade in goods and services has shown growth. In actual prices it increased by 11.1 percent over January­May 2004, with exports increasing by 19.3 percent and imports by 3.2 percent. The 16.1-percentage point differential between the growth rate of exports of goods and services and the growth rate of imports produced a balance-of-payments surplus of $698.6 million in the trade of goods and services from January through May 2005. Of this total, the balance- of-payments surplus for trade in goods was $318.5 million, and for serv- ices, $380.1 million. I would like to highlight in particular the changes that have resulted from the ownership-reform process. More than 4,000 state-owned facil- ities with a total of almost 1 million employees were restructured dur- ing the entire privatization period from 1991 through July 2005. Most of the facilities were converted to open joint-stock companies. In the medium term, there are plans to beef up the social orientation of the country's development. The Republic of Belarus Program for Socio-Economic Development for 2006­2010 provides for a further 25 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 26 improvement in living standards and in the quality of life based on the development and effective utilization of human potential, equipment overhaul, and upgrades in the structure of economy, while increasing its competitiveness. This shows that Belarus has chosen the correct path of development, which enables us to take a leading position both economically and socially. It is no secret that the republic is running into certain difficul- ties and problems in the socio-economic sector. A number of economic and political reforms are proceeding with a weak momentum. But one must take account of the fact that the country's economy is in a transi- tional stage of development. The government is making every effort to speed up the republic's integration into the global community and strengthen its international economic ties. These processes would have more momentum, if the country had a more detailed program of coop- eration with the Fund and the Bank. Over the years Belarus and the World Bank Group have executed a number of important agreements that define the framework of cooper- ation: the Memoranda of Understanding (1994 and 1997), the Cooper- ation Strategies (1999 and 2002) and loan agreements on specific projects. At the same time, as we have previously noted, the time has come for a substantial revision in the format of our cooperation with the Bank. The lessons of recent years dictate the need for a more balanced and flexible approach to determining the program of cooperation, which takes into account its changing priorities and the trends in the republic's macroeconomic situation. In formulating its economic policy, the Government of Belarus makes use of the recommendations by experts from the International Monetary Fund. In recent years these recommendations played a role in the significant tightening of monetary and credit policy, the unifi- cation of the national currency's exchange rate, the easing of restric- tions in foreign trade and the progress that has been achieved in privatization. Working with the IMF has produced concrete results in improving the system of collecting, compiling and disseminating statistical infor- mation and devising actions to take against the funding of terrorism and money laundering. In the short term, cooperation with the Fund will continue across a broad spectrum of technical assistance areas. In this connection we would like to count on fuller recognition from the Fund of the positive results the Republic of Belarus has achieved in economic policy and development, as well as in the creation on that basis of a favorable information base, which is essential for attracting foreign investors. We would also hope that, despite certain difficulties in the relationship, the 26 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 27 International Monetary Fund will take into consideration the specific characteristics of the Republic of Belarus's socio-economic develop- ment and its desire to continue close cooperation. I would like to conclude by delivering high praise to the authorities of the city of Washington, the staff of the International Monetary Fund and the World Bank and the security service for the wonderful job they did in organizing the Annual Meetings. BELGIUM: JEAN-PIERRE ARNOLDI Temporary Alternate Governor Even if the world economy has proved to be remarkably resilient in the face of recent evolutions, important regional divergences can still be observed and global imbalances remain worrying. It is of course to every country to put in place appropriate national policies in order to tackle these problems. However, individual action is not enough. Indeed globalization with its benefits but also with its challenges rein- forces the necessity of an intensified and more efficient international co-operation. IMF Medium-Term Strategy The Fund has a key role to play in the ongoing process of globalisa- tion, which should indeed be the main focus of its action. Of course, it should be made clear that the IMF cannot solve all the challenges linked to globalisation. Other institutions, in particular the WTO, also have an important role to play. The action of the Fund should remain focused on surveillance not only from a bilateral point of view but also from a regional and multi- lateral point of view. External imbalances and macro-financial stability issues should continue to be closely followed. In particular, we think that there remains substantial room to strengthen the coverage of finan- cial sector issues. Indeed, given the increased importance of financial markets in our globalized economy and the differences in the surveil- lance of the financial sector across countries, progress in this area is essential. Where FSAP assessments have been made, their conclusions must be tightly integrated in Article IV reports. Consequently, these reports must provide clear information on progress on previously iden- tified financial sector weaknesses. However, efforts to improve financial sector surveillance cannot rely solely on full FSAP assessments, given resource constraints and the voluntary nature of this program. In this regard, a more thorough appraisal of the soundness of the financial sys- tem in Article IV reports for countries not opting for a full FSAP would be a step in the right direction. 27 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 28 A profound review of the Fund's current financial system, consid- ering in particular concrete proposals for broadening its income base, is critical to our shared goal of equipping the Fund for the future. Dur- ing the last decades, the Fund has embraced a vast expansion of its activities and the cost of running the Fund has expanded significantly. Today, the Fund is an institution providing primarily non-financial services to its members. At the same time, however, the Fund's income comes almost exclusively from a margin applied on its lending opera- tions. This is an issue that must be effectively addressed in an institu- tion whose success should, over time, result in a reduction of its lending activities. Although a consensus on the establishment of an investment account is a step in the right direction, more could be done to this end. The current discussion on voice and representation is an important one. We stand ready to consider alternative quota formulas that take into account members' relative positions in the international financial system and the ability of members to contribute resources to the Fund. For member countries whose quotas are considered out of line, given their relative importance in the world economy, we support ad hoc increases in their quotas, to be discussed on a case-by-case basis according to country specific circumstances. Equally important is the erosion of the relative importance of basic votes since 1946. These were meant to symbolise and underpin the co-operative nature of the Fund. Hence, we would welcome an increase, in such a way that basic votes would again constitute a considerable part of total votes. I would also like to stress that the IMFC should continue to evolve towards a more strategic dimension with an important role of giving impetus to the Board. Strategy Vis-à-Vis Low-Income Countries The Bretton Woods institutions have an important role to play in low-income countries by providing adequate policy advice and techni- cal assistance as well as the financing that low-income countries need in order to promote growth and to fight poverty. Belgium, as shown by the important contributions of my country to the financing of this facility, has always considered that the PRGF is and should remain the cornerstone of the IMF financial assistance to low- income countries and considers it important that this instrument be pre- served in the future. The proposed Policy Support Instrument can also be useful for more advanced countries and the new Shock Facility should complete the range of IMF instruments. 28 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 29 Despite undisputed progress, a long way remains before achieving the Millennium Development Goals (MDGs). In this context, my coun- try remains committed to reach the agreed UN target on Official Devel- opment Assistance by 2010. Belgium supports the recent G8 proposal on debt cancellation for countries that qualify for HIPC debt relief. It offers a major opportunity for the alleviation of the debt burden these countries are facing and for the mobilisation of additional concessional resources. This initiative, to be fully effective, must be adequately funded and not weaken the capacity of the IMF and the IDA to provide financing to the poorest. A major feature for the Fund is to be able to continue providing assistance while respecting the uniformity of treatment principle. With respect to IDA, it is our firm view that the costs associated to the debt cancellation should be borne by all donor countries according to their shares agreed upon for IDA-13. My country agrees that HIPC conditionality is appropriate and suf- ficient. We think that there is a need to close monitoring of the continu- ity of the eligibility of the recipients and of the use of resources so as to avoid the building up of a new unsustainable debt level. I would like to express my appreciation of the progress achieved during the Annual Meetings; the commitments made by the G8 coun- tries are an important contribution for a final agreement on all neces- sary arrangements in the IMF and in the World Bank. Belgium also welcomes the Bank's action plan for Africa which focuses on results and aid efficiency. The Africa Action Plan contains the elements to make it a success story provided transparency on aid allocation and on its use is fully ensured. The proposal to track and closely monitor public expenditure is a step in the right direction. However, we do feel that a stronger focus on capacity building is war- ranted. Belgium firmly believes that regional integration is an impor- tant element in stimulating South-South trade and economic growth but also in restoring peace. The success of the Action Plan depends on the increase of total resources and on the willingness of other donors to support and to collaborate with the World Bank. In addi- tion, the importance of coherence between different initiatives, namely the EU's strategic partnership with Africa, needs to be stressed. Finally, let me stress the importance of trade for poor countries. The outcome of the WTO Hong Kong ministerial meeting is of great conse- quence for the world economy in general and for the developing world in particular and, we should all strive to make it a success. In the mean- time, it is also important for political leaders to resist unavoidable pro- tectionist pressures. 29 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 30 CANADA: RALPH GOODALE Governor of the Bank and the Fund As we meet here in Washington this weekend, it is a time to reflect on how we can work together to make a positive change in our world. The ravages of Hurricane Katrina felt in the southern United States last month remind us that we are all vulnerable to loss. It is a lesson that must guide us in all our efforts, this weekend and beyond. I would like to take a moment to express my sincere condolences to those who have lost so much over the past several weeks. Canada offers you our friend- ship and support as you begin the difficult process of rebuilding. Hurri- cane Katrina and the tsunami in Asia last year remind us how interdependent the world has become. The Bretton Woods Institutions are there to help members maximize the benefits of this increasing glob- alization, while mitigating the risks. This weekend's meetings could rep- resent a turning point in our collective efforts to promote global prosperity and reduce poverty and vulnerabilities. Five years since the Millennium Summit and ten years remaining to the international dead- line to achieve the Millennium Development Goals (MDGs), we must focus our collective attention to helping countries, especially those in Africa, achieve the MDGs. We also have a window of opportunity to complete the process of debt relief for low-income countries at the International Development Association (IDA), the African Develop- ment Fund and the International Monetary Fund (IMF). For the IMF, this weekend's meetings are also an opportunity to take stock of its role in supporting the international monetary system and its success in ful- filling its mandate of fostering a stable and prosperous global economy and financial system. The conclusions of the Managing Director's Strategic Review both reaffirm the central relevance of the Fund's man- date to its members and demonstrate clearly the institution's capacity for renewal. Focusing on the MDGs and Africa As leaders emphasized during the UN summit a few days ago, with only a decade left to meet the MDGs, many countries, especially in Africa, are at risk of not reaching them. Success will likely require a sig- nificant scaling up of actions by both donors and recipients. Good poli- cies, increased aid and improved aid effectiveness are critical to achieve the necessary progress. Certainly, some progress has been made. Global poverty rates are falling, led by Asia, and real progress has been made in Latin America and the Caribbean. But in other parts of the world, we are not seeing the results that we hoped. In Africa, many countries are off track on all 30 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 31 the MDGs, with more than 300 million people still living in abject poverty and two million expected to die this year from HIV/AIDS. The Commission for Africa was motivated by a desire to meet these challenges. The Commission emphasized the underlying principle that development--and the achievement of the MDGs--must be led by Africa itself. And it laid out concrete actions where donors could sup- port African initiative. The World Bank's Africa Action Plan is a wel- come contribution to this response. Aid will only have a meaningful impact in countries with strong domestic institutions and an environment that allows enterprise and human initiative to flourish. To this end, we must continue to work to strengthen Poverty Reduction Strategies (PRS) by broadening their content, strengthening their focus on the poorest and improving the effectiveness of the participatory processes, including greater involve- ment of parliamentarians and civil society. Credible, costly, results- based PRSs can serve to attract greater levels of support. At the global level, more concentrated efforts must be made to level the playing field and to ensure that developing countries become better integrated into the global trading system. A successful Doha round that lowers tariffs and non-tariff barriers, for example, could lift over 100 mil- lion people worldwide out of poverty by 2015. This was a key message of the Commission for Africa report. We welcome the work of the World Bank and IMF on "Aid for Trade" to overcome the constraints on some countries' abilities to benefit from the lowering of trade barriers. Aid budgets are increasing, and are increasingly focused on the poorest countries. Recent commitments made by donor countries mean that total annual ODA flows in 2010 will be around US$50 billion more than in 2004. Significantly, at least half of this increase will be directed to Africa--resulting in a doubling of ODA to that continent. Canada will double its overall international assistance by 2010, and double its assistance to Africa by 2008. Canada is focusing its bilateral assistance on 25 countries--14 of them in Africa--where aid is most needed and most likely to be effective. With strong support from Canada and other donors, IDA has been able to increase funding for its programs by 25 percent over the previous replenishment--the largest expansion of IDA resources in two decades. Canada increased its contribution by almost 40%. Donors have also recognized the vulnerability of poor countries to exogenous shocks, and are addressing these through pro- posals such as an IMF concessional facility to help countries faced with short-term difficulties arising from adverse shocks to their balances of payments and the broadening of the World Bank Group's efforts on cat- astrophic insurance. Aid must also be delivered and used effectively. Mutual accounta- bility between donors and recipients for results is essential. To this end, 31 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 32 we strongly support the Bank's direction to enhance its framework for monitoring, reporting and following up on the delivery of aid commitments. We are also encouraged by the World Bank's efforts to deepen the harmonization and alignment of aid resources. It will be critical to ensure that our commitments with respect to untying aid are met. We welcome the initiative by the OECD-DAC to move this forward. It will be important to continue discussions to ensure that developing countries have the capacity to employ increased resource flows effectively. Completing the Process of Debt Relief for Low-Income Countries Reducing unsustainable debt burdens in low-income countries is an essential part of helping them achieve sustained growth and poverty reduction. Canada has contributed more than $2.3 billion to this cause, and we are committed to a further $1.3 billion in further debt relief. We must keep the momentum going. The debt forgiveness plan proposed by G-8 Finance Ministers is an unprecedented multilateral effort to complete the process of debt relief for low-income countries. By freeing up fiscal space for critical invest- ments in health and education, this initiative will help to promote growth and reduce poverty. The proposal provides additional resources for poor countries, ensures that they are treated equitably, maintains the financial capacity of the international financial institutions, and pro- vides the proper incentives for good governance. There remain many issues to be resolved, but we have the will to move forward. It is our hope that we can come to an agreement this weekend to push ahead with this proposal. Canada will do its share to implement this initiative. If we want to ensure that poor countries have the fiscal flexibility to promote macroeconomic stability/growth and implement poverty reduction strategies, we also need to be sure that the more vulnerable countries do not slide back into a debt trap. In this regard, countries need to avoid unnecessary borrowing and to access financing on highly concessional terms. We therefore support the proposed Policy Support Instrument (PSI) for instances when a lending relationship with the Fund is not necessary. Such an instrument would provide a structured mechanism for regular provision of policy advice, and, just as impor- tantly, allow the Fund to provide the "public good" of an assessment of country policies useful for donors and markets. Finally, the strategic provision of grants is another key tool for avoiding a new build-up of unsustainable debts. We strongly support IDA's and the African Devel- opment Fund's grant allocation frameworks, which are based on debt sustainability considerations. 32 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 33 Reinvigorating the Fund The measures already discussed are needed to improve the chances of the most vulnerable countries of achieving the Millennium Develop- ment Goals. However, there are risks in the global economy that affect all countries, including ongoing global imbalances and high and volatile oil prices. The IMF plays an important role in mitigating these risks, but changes in the international financial system since the Fund's establish- ment mean it will need to adapt its governance, surveillance, lending and capacity building activities as well as its relationship with members and stakeholders. IMF Managing Director Rodrigo de Rato has recog- nized this pressing need and has tabled substantive reforms. We wel- come his proposed Strategic Directions. The Fund's central mandate continues to be relevant and the mission of the Fund--to promote global prosperity and financial stability-- remains as valid as it was in 1944. We welcome the Managing Director's conclusion that the Fund's four broad lines of activity--surveillance, lending, capacity building, and its work to assist low-income countries-- represent the right channels by which it can achieve its objectives. The key challenge for the Fund is now to move forward in the directions outlined in his report, with the objective of "re-tooling" the IMF to meet the challenges of the 21st century. Among the many welcome aspects of his report is its clear recogni- tion that the Fund, as a policy advisor, can only be effective when the recommendations that flow from its solid analytic work are communi- cated in a persuasive and influential manner. This requires that the Fund engage more broadly, so that its policy recommendations become an integral part of the public debate on reforms. For these reasons, we wholeheartedly endorse the Review's goal of developing a communica- tions strategy based on best practices. The proposed strengthening of surveillance, a core function of the IMF, provides an opportunity to better influence policy development and help prevent crises. Tightening the focus of surveillance, both within and between countries, on policy areas and issues of national rel- evance and systemic importance for global economic and financial sta- bility would strengthen its impact. A more selective and focused approach should allow the Fund to tailor its advice to the constraints and opportunities within countries. An element of this is better inte- grating technical assistance into the surveillance process, to ensure that members have the expertise and sustained capacity to implement reforms. Taking a longer-term view of specific issues of importance to the global economy, as proposed by the Managing Director, would strengthen the Fund's contribution to global efforts to maintain interna- tional financial stability. 33 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 34 Further clarifying the international approach to crisis resolution will help in both crisis prevention and resolution. Today's crises (with origins in the capital account of the balance of payments) are too large for the Fund to respond to merely by providing financial assistance of increasing size. Rather, the magnitude of capital account crises, the need to avoid distorting private sector investment decisions and the inability of the Fund to act as a true lender of last resort underscore the need for lending to be guided by "rules of the game." The establish- ment by the Fund in 2002 of a policy framework to guide decisions on exceptional access is a key step in this direction. This framework should be reviewed in order to clarify its application and strengthen its credibility. Improving the Fund's ability to respond to crises also requires it to understand better the dynamics of capital account crises, including the behavior of private capital markets. The Fund must identify the factors that will support sustained re-access to international capital markets in a manner that places less emphasis on large-scale assistance. The IMF serves and is accountable to its members through a gov- ernance structure based on the principle that quotas and the associ- ated structure of voting power should aim to reflect countries' relative economic weight. However, differences in the patterns of growth among members have created a situation whereby the structure of quotas embodies in some respects a legacy of the past, not the reali- ties of today. In order to sustain the legitimacy of the Fund as a uni- versal and cooperative institution, a determined effort is needed to ensure that the distribution of quotas, voting power, and voice reflect developments in the global economy. While there is no need for con- sideration of a general quota increase at this time given the overall adequacy of the Fund's resources, a redistribution of quotas and vot- ing power to those rapidly-growing economies, largely in Asia, whose quotas have not kept pace with their greater role in the global econ- omy would further strengthen the legitimacy of the Fund's governance arrangements. There is an urgent need to begin a process that will achieve these objectives. Concluding Remarks Poverty on a global scale is falling, but the challenges of meeting the MDGs in Africa remain. This weekend we are discussing how we can make achieving the MDGs in all parts of the world a reality. The only way to do so is to work together. Developing countries and their development partners, including the private sector and civil society, need to work together to make tomorrow better for all people. Finally, as we look 34 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 35 ahead to the risks and challenges facing the global economy, there can be no doubt about the value of a strong, effective IMF and World Bank. CHINA: JIN RENQING Governor of the Bank Since our meeting last year, the global economy has been growing steadily following a robust performance in 2004, with world trade expanding and FDI turning around. According to the preliminary esti- mates of the major international financial institutions, the global econ- omy will maintain a relatively rapid growth of 4% in 2005. Taking this opportunity, we would like to express our appreciation to the Bank and Fund for their constructive role in facilitating interna- tional coordination and cooperation, promoting global economic devel- opment and reducing poverty, as well as our thanks to the hard work of the staff of the two institutions. Despite the encouraging situation in the global economy, we should by no means overlook some downside risks, among other things, aggra- vating global economic imbalances, resurgence in trade protectionism, oil prices hike, persistent large deficits with the major economies, unsta- ble exchange rates between major currencies, and emerging inflation pressure, adding more uncertainties to regional and global economy. Furthermore, unfair international economic order and the lack of exter- nal assistance remain to be the crippling factors for the developing countries in their pursuit of development. In order to address those global destabilizing factors and create a bright prospect for human beings, international community needs to enhance dialogue and coordination on an equal basis for a win-win result. To this end, we should: --Maintain stable growth of the global economy through our joint efforts. Economic growth is the most effective way to improving wel- fare of the people in all countries of the world. We, therefore, should work together to promote a balanced and sustainable growth in the world economy by adopting effective fiscal and monetary policies and pressing ahead with institutional reforms and restructuring. --Address the deep-rooted problems impeding global economic development through enhanced policy dialogue. The interna- tional community should act more aggressively to reform the international financial architecture, support the establishment of a multilateral trading system, and make joint efforts in stabilizing international energy markets, so as to create a benign financial, trade and energy environment for the common development around the globe, particularly in the developing countries. 35 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 36 --Realize the MDGs through effective partnership. Developed countries should come up with concrete plan to deliver their com- mitments in funding, debt relief and market access, especially in meeting the target of increasing ODA to 0.7% of their GNIs, and continue to explore new arrangements for development financing, so as to provide sufficient financial support to achieve the MDGs. --Give further attention and support to the Least Developed Coun- tries. Africa and the HIPCs are facing greater development challenges, which deserve special attention from the international community as well as additional assistance. The experience of many countries shows that constant improvements and re- alignments in government capacity is critical for a country to achieve long term stability and sustained growth. In this connec- tion, government capacity building in those countries should receive special support from international aid agencies. The Bank and Fund are shouldered with the important mission in the sphere of global governance. I would also like to take this opportu- nity to share with you my reflections on how the two institutions could further play their role in reducing poverty and promoting development. First, the two institutions should continue to play their role as the major platform for global development financing, while improving and strengthening their capacity in resources mobilization and transfer. For this end, three things should be done. One, the financial capacity should be enhanced, financing cost and costs of doing business further reduced, and flexibility and targeting to client countries improved. Two, new financing arrangements should be explored while actively pushing for- ward the improvement and experiment of some new financing initia- tives. Three, supervision should be stepped up over the developed countries in fulfilling their ODA obligations. Second, the two institutions also have the responsibility to guide economic globalization in the right direction by using their comparative advantages as multilateral financial institutions. In this context, they should, inter alia, provide global public goods to correct global imbal- ances; help developing countries participate in the international rule- making through multilateral coordination and technical assistance; promote balanced, orderly flow of production factors such as capital, technology and labor; perform symmetric monitoring of the global eco- nomic development; and facilitate the international financial architec- ture reform, South-South cooperation, and regional cooperation to stabilize global economic development. Third, the two institutions should strengthen Middle Income Countries strategy to maintain the integrity of their development func- tions. Only if the developmental needs of the developing countries of 36 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 37 different developmental stages are satisfied, can the two institutions effectively perform their functions of promoting global balance and sus- tainable development, Forth, the two institutions should contribute to enriching the data- base of global development by constantly distilling their experience and innovating their development philosophies, supporting the ownership of their member countries, and promoting the diversification of devel- opment models. The two institutions should adhere to a scientific atti- tude of finding truth from practice, testing truth with practice, and develop truth in practice, while abandoning the dogmatist mentality, and giving full respect to ownership and diversity of client countries. Fifth, the two institutions should reform their own governance struc- ture, increasing participation of developing countries in decision mak- ing. In doing so, the increasing strength of developing countries as a whole should be reflected, and the views of all member countries expressed in a balanced way, to ensure that the policies of the two insti- tutions will be in the interest of the vast developing countries as well as the world at large. At the same time, the two institutions should also stick to their development mission and professionalism, and resist any attempt or practice to politicize their businesses. Since last Annual Meetings, the Chinese government has adopted a series of macroeconomic measures in response to new conditions and problems in economic and social development. The government has pursued prudent fiscal and monetary policies, brought under control some destabilizing and unhealthy factors, and maintained relatively rapid economic and social development. In the first half of 2005, GDP increased to USD 814.6 billion, up 9.5% over the same period of last year. Personal income continued to increase rapidly, and domestic con- sumption accelerated, while CPI is well contained with a modest increase of 2.3%. Total volume of export and import reached USD 645 billion, up by 23% over the same period of last year. By the end of June, foreign exchange reserve reached USD 711 billion. The economies of Hong Kong, China and Macao, China also con- tinue to perform well. The GDP of Hong Kong registered a real growth of 8.1% in 2004, and the economic recovery became more pronounced in 2005. The GDP of Macao grew by 8.6% and 8.2% respectively for the first two quarters of 2005. The central government will continue to pro- mote economic cooperation between the mainland and Hong Kong and Macao and promote common prosperity, in accordance with the basic state policies of One County and Two Systems, Hong Kong People Administering Hong Kong, Macao People Administering Macao, and a high degree of autonomy. The Chinese government aims to achieve comprehensive, harmo- nious and sustainable development and establish a harmonious socialist 37 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 38 society, guided by the scientific development view and relying mainly on its own efforts to reform and innovate. Our objective for the first 20 years of this century is to quadruple the GDP to USD 4 trillion by 2020, and increase the GDP per capita to USD 3000. This would mean quad- rupling of size of domestic market and, and it will bring unprecedented opportunities for all other countries. With China's economic development and its growing contribution to the world economy, China's economic policies have attracted a lot of attention, especially regarding the exchange rate policy. I would like to take this opportunity emphasize that, the Chinese government has been consistently pursuing an independent and responsible policy approach in its exchange rate regime. On July 21, the Chinese govern- ment made an important step forward in reforming its exchange rate regime, moving to a market-based managed floating exchange rate regime with reference to a basket of currencies. The objective was to establish a managed floating exchange rate regime based on market supply and demand, and maintain the RMB exchange rate basically stable at an adaptive and equilibrium level. The reform was carried out in an independent, controllable and progressive way. The reformed exchange rate regime and more flexible RMB exchange rate have strengthened the government's ability to manage the macro- economy and improved the prospect of rapid, sustained and balanced growth. China will continue to increase its support to other developing coun- tries as our overall national strength improves. At the High-level Panel on Financing for Development of the UN Summit on September 14, President Hu Jintao announced a number of measures to provide more help to other developing countries, including according zero tariff treat- ment, debt relief, providing USD 10 billion concessional of loans, public health cooperation, and training personnel of various professions, etc. As a member of international community, China is willing to partic- ipate in international cooperation and develop economic cooperation with other countries based on the principle of equal treatment and mutual benefits so as to achieve common prosperity. China will con- tinue to provide assistance to other developing countries to the extent possible and help them overcome difficulties and strengthen capacity for country-driven development. CYPRUS: MICHAEL SARRIS Governor of the Bank It is an honor to submit a statement to the 2005 Annual meetings of the Governors of the International Monetary Fund and the World Bank Group. 38 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 39 Global economic growth will reach 4 percent in 2005. The adverse impact of higher oil prices is mainly behind the modest deceleration of growth this year. However, despite a solid performance significant regional divergences are emerging, with strong growth in North Amer- ica and Asia and weaker performances in the EU and Japan, and in Africa. These divergences--exacerbated in many instances by domestic macroeconomic policies and by a lack of progress in implementing structural reforms--are contributing to a further widening of global imbalances. Low levels of investment in growth-enhancing activities and the lack of reforms of labor and product markets, together with aging populations, are also contributing to lower long-term growth. The main challenge for governments is to follow polices, both domestically and in concert with other countries, which are conducive to growth in the short and long term, and which will help to gradually eliminate global imbalances. An abrupt unwinding of the large current account deficits could trigger financial crises in emerging markets, but also in more advanced economies, and could set back the global eco- nomic recovery. To this end, Cyprus supports the EU's emphasis on sound fiscal poli- cies and the sustainability of public finances in the long term, and the promotion of structural reforms. The economy of Cyprus continued to perform well in 2005. GDP is forecast to expand by around 4 percent and inflation is set to accelerate slightly to 2 1/2 percent. The Government of the Republic of Cyprus intends to rigorously implement its fiscal consolidation plan as set out in its Convergence Programme of 2004. Accordingly, the budget deficit will fall to below 3 percent of GDP in 2005 and 1 3/4 percent in 2006. Structural reforms will also be pursued vigorously. Achievement of these goals will also enable Cyprus to adopt the euro by 2008. The Government of the Republic of Cyprus is working for a just, and viable, solution of the Cyprus problem, and for reunification of the island so that all Cypriots may enjoy the benefits of EU membership, and prospective euro adoption. Nonetheless, an economically-viable solution is key for the long-term economic success of the island, also in light of the rules inside the European Monetary Union. The Govern- ment of the Republic of Cyprus will work toward the reunification of the island, and will support all efforts towards that end. Cyprus welcomes the IMF Managing Director's Report on the Fund's Medium Term Strategy. Globalization has brought important benefits to many countries, but has also increased the need for more effective surveillance of the world economy. Hence, the Fund ought to play an especially important role in promoting macroeconomic and financial stability, and supporting sustainable growth. To this end, the Fund must continue to undertake in a transparent and objective 39 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 40 fashion, with the collaboration of the World Bank, its surveillance and to increase its focus on external vulnerability, global imbalances, debt sustainability, with special emphasis on how to achieve the UN Millen- nium Development Goals. Cyprus supports efforts to achieve the Millennium Development Goals not only by accelerating debt relief to the poorest countries, but also through providing financial and technical assistance to help imple- ment national poverty reduction programs, and improve governance. In this regard, Cyprus aims at raising significantly its share of ODA/GNI by 2015. A successful conclusion of the Doha Development Agenda will also have a great impact on world growth and on reducing poverty. Cyprus is strongly committed in strengthening the international fight against money laundering and the financing of terrorism--in particular through reinforcing mutual co-operation and improving legal frame- works and procedures for freezing all financial assets and property of terrorist organizations,--and supports efforts by the IMF and the World Bank to achieve this goal. ESTONIA: AIVAR SOERD Governor of the Bank (on behalf of Estonia, Latvia, and Lithuania) It is a great privilege for me to address this distinguished audience today at this year's Annual Meeting and to speak on behalf of the Republics of Estonia, Latvia and Lithuania. Let me also thank, in the name of the Baltic States, the U.S. authorities for once again hosting the Annual Meetings here in Washington D.C. The Baltic States have made remarkable progress in both building up state institutions after regaining independence, as well as in creating an economic climate that supports development. The north-eastern cor- ner of Europe, with the Baltic countries, is one of the most dynamic parts of the European Union. If we look at the developments achieved over the last decade, the Baltic States have had the highest average growth rates after Ireland. Development has been especially favorable for us since becoming members of the EU--economic growth has accel- erated and unemployment has quickly declined. Our recent success has its roots in our economic policies. The Baltic States have small and open economies. We have experienced the value of strong institutions and sound policies, as well as the necessary push for development that can be provided by outside assistance, in our case mostly from the European Union, but also from other good partners. As we have seen the dividends of good policies and valuable outside assistance, the Baltic States are on the way from being aid recipient countries to becom- ing donors and slowly but steadily increasing our aid commitments. 40 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 41 In the current year, as it has often been called the year of develop- ment, full attention has been given to global development problems. Let me emphasize the importance of the Millennium Development Goals in our joint mission towards socially, ecologically and economi- cally sustainable global development. These goals are achievable, but only if we all strengthen our efforts. We, the Baltic countries, consider the role of the Bank extremely important in this process, and particu- larly so in two areas--enhancing the effectiveness of global develop- ment work and increasing cooperation between different actors on both international and country levels. We welcome the Bank's sustained efforts in strengthening of national governance, combating corruption and helping client countries to implement policy reforms, as these are some of the most significant prerequisites for development and reduction of poverty. In order to ensure real ownership of reforms and development programs by gov- ernments, the Bank also has an important role in helping national authorities to strengthen their administrative capacity. The latter is in our view critical for achieving true country ownership as it is envisaged by the PRSP framework. Finally, having seen what a difference in economic development opening up a country's economy can make, I would like to emphasize the importance that we give to the principle of free trade. While we acknowledge that the WTO is the institution charged with moving trade negotiations forward, the World Bank also has an important role in helping developing countries to truly reap the benefits of open markets. We should also bear in mind that the Bank has an important role to play in middle income countries, especially given the number of the poor living there. It is however critical for the Bank to offer com- petitive and sufficiently sophisticated products for especially the upper middle-income countries in order to remain a truly valuable partner. There is an important role also for the technical advice that the Bank can still provide in these countries, taking into account les- sons from other governments that have already gone through the reform process. In this regard, I would like to point out the positive track record and significant transition experience that the Baltic countries have obtained and that we are more than happy to share with others. To conclude, let me welcome Mr. Wolfowitz as the new President of the World Bank Group and wish him every success in carrying on with the important mission of global development. We hope to give our best possible contribution to the Bank's mission together with the Nordic countries in our constituency, as well as with all other fellow sharehold- ers of this institution. 41 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 42 FIJI: SAVENACA NARUBE Alternate Governor of the Fund It is a great privilege and honor for my delegation to participate in this year's annual meeting of the International Monetary Fund and the World Bank Group on behalf of the Government of the Fiji Islands. May I at the outset congratulate you Mr. Chairman for your appoint- ment to chair the joint annual meeting. I wish to pay tribute to the outgoing President of the World Bank Group, Mr. James Wolfensohn, for his outstanding stewardship of the Bank during a period of vast global challenges. His commitment and determination to confronting the economic challenges of our genera- tion is commendable. Indeed, his legacy is a World Bank that is firmly committed to a world free of poverty. We warmly welcome the new President of the World Bank, Mr. Paul Wolfowitz. We assure him of our usual cooperation and support and wish him well during his tenure as the head of the institution. We meet at a period when the global economic system continues to face new challenges. It is at times like this that a collaborative and part- nership approach to addressing economic challenges is vital. Terrorism Recent events remind us all of our vulnerability to the threats of ter- rorism. These unfortunate events undermine security, freedom and peace. The associated economic and human costs are enormous. Together, we can eradicate terrorism and combat money laundering. We therefore need to harness every effort and resources needed to tackle this serious threat to our lives and economic progress. We urge the Fund and the Bank to continue their role in the fight against terrorism. We are pleased to note the work by the Fund to help draft legislation for Countering the Financing of Terrorism. I wish to report that Fiji recently enacted a Financial Reporting Transactions Act to help curb terrorist financing and money laundering through the reporting of suspicious financial transactions. The Asia Pacific Group on Anti Money Laundering also concluded following their country assessment that Fiji generally has in place adequate preventative mea- sures in this area. Oil Price The unprecedented surge in oil prices is adversely affecting small open economies like Fiji. Like other net importers of energy, our bill for oil imports is escalating and this is expected to worsen since there is no 42 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 43 indication of oil prices falling. This exogenous shock seriously threatens the current accounts of small countries and undermines price stability. Most of these countries already face many challenges and hardships such as narrow export base, increased poverty and high debt levels. I urge the Fund and the Bank to assist developing member countries lessen the impact of the higher oil price. I join the call for the Bank and the Fund to establish a facility to help member countries deal with high oil prices. At the same time Mr. Chairman, a facility that encourages the generation of renewable energy would not only alleviate our heavy reliance on fuel imports, but also strengthen our internal and external balances. Millennium Development Goals Fulfilling the Millennium Development Goals presents a huge chal- lenge even to countries with impressive growth performance. We com- mend the efforts by the Fund and the Bank in assisting member countries implement strategies that will help achieve the MDGs, partic- ularly on poverty reduction. The emphasis of such strategies should be on job creation to reduce poverty in a sustainable way. I also suggest that the convergence of goals and measures embodied in the Millennium Development Goals, the Poverty Reduction Strategy Program and other programs coordinated by the Fund and the Bank be brought together into a single nationally-driven development frame- work for growth and poverty reduction for members. On the subject of debt, we commend the decision by the G-8 coun- tries to provide debt cancellation to Heavily Indebted Poor Countries (HIPC). The initiative to cancel multilateral debt of some of the poor- est and most indebted countries is of great importance. Such gesture will help their efforts to achieve the Millennium Development Goals. At the same time, we share the view that the provision of a full debt relief should only be made without compromising the sustainability of the Bank and the Fund, particularly the International Development Association (IDA), and its effectiveness in assisting other member countries. Uniformity of treatment is also an important issue. We encourage an amicable and quick resolution to this matter to enable this debt relief to be implemented as soon as possible. The Bank and the Fund also need to pay due consideration to the group of countries, particularly small island states that do not benefit from the debt relief initiative. Despite our many vulnerabilities, we have avoided falling into an unsustainable debt situation by undertaking difficult and painful reforms and implementing prudent macroeconomic policies. These countries also need support and encouragement. The international community should consider extending the appropriate 43 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 44 incentives to this group of countries that have maintained prudent debt management despite enormous economic challenges. One of the ways that this can be done is to reduce borrowing costs for this group of coun- tries which are not eligible for concessionary facilities of the Bank. In addition, the access to blend financing by these countries can also be considered. Doha Development Round We call for a rapid conclusion of the Doha Development Trade Round. Achieving a successful outcome of the Doha Round requires commitment by both developed and developing countries. I agree with the G-8 leaders at the Gleneagles Summit that we need to use the lead up to the WTO Ministerial Meeting in Hong Kong S.A.R. well to pre- pare for a comprehensive agreement in 2006. Improved market access continues to be the greatest need of developing countries. Whilst trade liberalization under the Round will help ensure that the world economy remains on a path of steady growth, we urge that the specific needs and conditions of the developing small states be given due consideration. We encourage the Fund to explore ways of easing adjustment costs associated with trade liberalization including through Trade Integration Mechanism and capacity building. Regional Action Plans We support the Africa Action Plan, which aims to assist efforts of African countries to reduce poverty, and achieve the MDGs. We believe that such a Plan should be results-focused with concrete actions, and meas- urable indicators and outputs, which are to ensure effective use of resources. In our region a Pacific Plan is currently being considered by mem- bers of the Pacific Islands Forum. The primary objective of the Plan is to enhance development by greater regional integration and coopera- tion through trade. We look forward to the Bank and Fund's support of the implementation of the Pacific Plan. In these action plans, we cannot stress enough the importance of an effective partnership with development partners and would like to place special emphasis on their effective monitoring and evaluation mechanisms. Fiji's Economic Performance I am pleased to announce that a Fund Mission, which recently con- cluded its visit to Fiji this year following the Article IV consultation last year, acknowledged Fiji's good economic performance since 2000 with 44 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 45 average growth of 3.5 percent. This level of performance reflects increased investments and buoyancy in consumer confidence. The mix of monetary and fiscal policy has worked well to raise domestic demand, which has driven growth in the last four years. Our economic fundamentals remain firm with low inflation, adequate foreign exchange reserves and moderate debt level. However, we fully agree with the Fund that the emphasis should now be on sustaining this performance into the future. Government is committed to maintaining macroeconomic stability through fiscal con- solidation and appropriate monetary policy. However, being a small open economy with a narrow resource base, the challenges of development are enormous. We face the removal of our preferential markets, the adverse effects of globalization, large vari- ability in outputs, small productive base, low endowments of natural resources and now, high international oil prices. We therefore need sup- port Mr. Chairman. We need the support and assistance of the interna- tional community and in particular the two Bretton Woods institutions. As usual, our needs are concentrated in the areas of training, technical assistance, policy advice and institutional strengthening. Governance With the assistance of the World Bank, the Asian Development Bank and Donors, the Fiji Government is implementing measures that improve governance. These include reforming the civil service and pub- lic enterprises, building institutional capacity and developing human resources. Fiji has agreed to participate in a joint IMF and World Bank Finan- cial Sector Assessment Program (FSAP). This is part of our commit- ment to comply with international codes and standards that will strengthen financial regulation and oversight, promote transparency and accountability and enhance our resilience to exogenous shocks. However, the burden of compliance can be enormous and I reiterate our need for institutional and human resource capacity building in this important area. Representation at the Fund/Bank The structural misalignment of representation that exists in the Fund and the Bank needs to be urgently addressed. It is critical that quota shares be reassessed to ensure adequate voice and participation by all members. In this regard, Fiji continues to support the 13th general review of the IMF quotas, which will provide the best opportunity for the mem- bership to make progress in this regard. Similarly, the strengthening of 45 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 46 capacities in the Executive Directors Offices of the Bank and the Fund will be a step in the right direction. I urge the Bank and the Fund to take necessary measures towards addressing these issues as soon as possible. Technical Assistance Programmes We are grateful to the Bank and the Fund for their continuing tech- nical assistance to Fiji in the areas of macroeconomic and financial pol- icymaking. We have received assistance in the areas of telecommunications, public sector reforms, financial supervision, pay- ment systems, and monetary policy. Indeed, we acknowledge that by helping to build institutional and human capacity in formulating sound economic policies, the Fund and the Bank's technical assistance con- tributes to the building of a strong economy and maintaining stable growth. We are satisfied with the work of the Pacific Financial Techni- cal Assistance Centre in the region and thank the Fund and other spon- sors of the Centre. We also thank the Bank's Representative Office in Sydney for their support. FRANCE: THIERRY BRETON Governor of the Bank and the Fund As we conclude the strategic discussions on the future of the Inter- national Monetary Fund and the World Bank, begun more than a year ago, I would like to reaffirm what I see as a shared concern: the man- dates of these two institutions must continue to be growth and financial stability on the one hand, and poverty reduction on the other. These two missions must be carried out by the IMF and the World Bank, so as to take maximum advantage of the synergies available to the two institutions. I would like to stress this point: attempting to streamline the interventions of these two institutions should not lead us to waste useful synergies. I would like today to concentrate on three priorities. First, we must promote growth and financial stability. This requires first of all better governance of the world oil market. The international financial institutions have a role to play in the face of rising oil prices. The oil market is currently an unregulated market, which, because of the poor information available, suffers from many imperfections. The IMF and World Bank have the legitimacy to intervene in this area. I applaud the increasing consideration of energy issues in the work of the Fund. More progress needs to be made, such as improvement of the conditions of oil investment and of the quality of the data dissem- inated by each country, through the adoption, as encouraged by the IMF, of international standards, or indeed greater integration of energy 46 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 47 policies in country surveillance. Likewise the World Bank and the regional development banks must facilitate investment in order to increase refining capacity, which is lacking in all parts of the world, both in developed and developing countries alike We must also deal with the consequences of the surge in oil prices, particularly for the countries most affected. The current economic envi- ronment calls for the urgent adoption, within the Poverty Reduction and Growth Facility, of a financing window for countries with serious balance of payments difficulties caused by an exogenous shock. We have delayed too long and it is now urgent that the necessary decisions be taken. We must also strengthen international financial stability. Financial stability is a public good, which benefits everyone and must be taken in hand by the international community. The IMF has the lead role in this task, but the World Bank must also make a contribution. The Fund must develop its role as insurer, both to encourage coun- tries to follow good policies and to protect them from the negative affects of contagion in financial crises We are today seeing a strong demand for these insurance instruments among the emerging countries. We fully support this demand. The World Bank must also participate in this effort, particularly through its involvement in financial sector assessment programs and reports on the observance of standards and codes. Second, we must act to achieve the Millennium Development Goals. We must first implement the debt cancellation proposal. The proposal of the G-8 to cancel 100 percent of the debt of the heavily indebted poor countries to IDA, the IMF and the African Development Fund has raised considerable and perfectly understandable expectations. The biggest expectation concerns the additionality of the resources released by the cancellation of these debts. This is a particular concern of my country. Like the IMF and the World Bank, we are taking care to ensure that this debt cancellation does not harm the financial intervention capacity of the IFIs in the poor countries. We must then energetically implement the poverty reduction part- nership. Under impetus from the World Bank in particular, and I know that President Wolfowitz attaches great importance to this strategic approach, the international community has gradually adopted interven- tion frameworks: poverty reduction strategy contracts, the Paris decla- ration, performance-based management of aid, etc. The beneficiary countries have been closely involved in these actions. Today, while much remains to be done, we know better how to aid the poor countries effectively and legitimately. We have our road map for 2015, and the Bank's Plan for Africa will be one of its key elements. 47 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 48 Finally, we must henceforth unambiguously confirm the commit- ment of the IMF to the poor counters The IMF must participate fully in the efforts to achieve the Millen- nium Development Objectives, as Rodrigo de Rato has underscored. In particular, it is essential that the PRGF remain the preferred instrument for the IMF's involvement in the poor countries and that it be refinanced so as to cover the demand for future loans assessed by the IMF at SDR 1 billion per year. I am convinced that the Fund must be wholeheartedly committed to the poor countries and join its efforts with those of the development banks. Third, we need stronger governance for more legitimate institutions. I see the need today to reestablish the legitimacy of these two institu- tions, at a time when they seem to be challenged by some countries. Two aspects appear important to me. --Strengthen their political governance. To that end, I suggest that the ministers, at their meeting, take concrete decisions on strategic issues instead of simply providing guidelines. And then it will be up to the Executive Board to implement them. In this regard, it is time for the IMF to establish the Council, the cre- ation of which was decided in 1974 and included in its Articles of Agreement, but which, more than thirty years later, has yet to be established. --Fair representation and full participation in the decision-making process for all members of these institutions are necessary. These objectives certainly call for an increase in the volume of quotas of the IMF and a change in their distribution. This discussion must be begun today with a view to the conclusion of the 13th review in 2008. I will not go into detail on the various proposals, but I would like to make two comments. First, we must base our actions on facts and not on preconceived ideas. Second, we must be able to find a solution that is favorable to all and not close the door on any option at this stage. No decision can be made if it is based on opposition among countries or entire zones. GERMANY: AXEL A. WEBER Governor of the Fund I am pleased to be back in Washington for the Annual Meetings of the IMF and World Bank. I would like to thank the United States for the excellent organization of the meetings despite the strained secu- rity situation that has again forced a shortening of the meetings. It is extremely important, in my opinion, to have enough time at this 48 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 49 occasion to intensively discuss the urging global challenges. The IMF and the World Bank with their universal membership provide the ideal plat- form to come to cooperative solutions of the problems at hand. There- fore, I hope that we can return to the usual three-days format soon. The overall outlook for the global economy is broadly positive albeit downside risks remain, in particular, the possibility of persist- ently high and volatile oil prices. In addition to the already forceful growth in other parts of the world, conditions are in place to improve the economic dynamism in Europe. Also, I am confident that in Ger- many conditions are in place for the recovery to broaden further since the implemented structural reforms contribute to an improvement of domestic demand and employment. The broadly favorable macroeco- nomic environment should be resolutely used to spur fiscal consolida- tion. The existing global imbalances can only be reduced in cooperative efforts by member states from nearly every region of the world. In this regard, I welcome the first steps that some countries have already taken. Now it is important to continue with necessary measures. Given the substantial developments in the global economy since the foundation of the Bretton Woods Institutions more than 60 years ago, a major issue currently under consideration is the future strategic direc- tion of the IMF. In order to remain an effective and economically lead- ing institution, the IMF has to be prepared for the new challenges resulting from globalization. The Fund's monetary mandate thereby guides the scope of its future tasks. Let me outline some principles of general relevance in this regard: First, surveillance and economic policy advice remain the Fund's key instruments for promoting macroeconomic stability. Second, in providing financial assistance to members with balance of payments difficulties clear access limits are fundamental. This is the only way to give adequate incentives to debtors and creditors and to preserve the Fund's credibility, predictability and financial integrity. Moving the Fund towards the role of a general risk insurer by introduc- ing precautionary credit lines above normal access limits, however, would necessitate a significant change to the Fund's financing mecha- nism. Namely, such an insurance by the IMF would neither be compat- ible with its principle to provide financial assistance at deliberately not risk-adjusted terms nor with the current system of refinancing short- term Fund credit through risk-free official reserves. Third, a better division of labor with other international institutions, notably the World Bank, is indispensable. Finally, for countries only seeking the Fund's seal of approval for prudent policies without having a need for balance of payments financ- ing, non-financial policy support instruments would provide a useful 49 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 50 signaling tool. I therefore welcome the proposed Policy Support Instru- ment for low-income countries. As regards low-income countries more needs to be done to achieve the Millennium Development Goals, also in the developing countries themselves. Therefore, I welcome the significant progress that has recently been achieved in our efforts to overcome the extreme poverty in low-income member countries: The G8 debt proposal provides an unprecedented opportunity to complete the process of debt relief for Heavily Indebted Poor Countries, to strengthen their capacity to respond to external shocks, and to free up resources these countries need for poverty reduction. I call upon all shareholders to support the proposal. The debt relief should be subject to clear criteria and condi- tionality. It has to be fully financed, based on a fair burden sharing, without weakening the financial position of the International Financial Institutions. In any case, a new lend-and-forgive-cycle must be avoided in the future. Nevertheless, further lending under the Poverty Reduc- tion and Growth Facility may be required, in particular for low-income countries suffering from exogenous shocks. In order to retain the IMF's legitimacy every member country should be adequately represented in the Fund. But I note that there are currently significant differences between actual and calculated quotas for a number of member states in nearly every region of the world that call for correction. As quota shares not only define a member's voice in the Executive Board but also its financial responsibilities vis-à-vis the Fund, the core criterion for quota determination should remain the rel- ative economic strength. I am convinced that we will come to a fair and feasible solution that respects the interests of all members. GREECE: GEORGE ALOGOSKOUFIS Governor of the Bank The global expansion remains on track, with world growth projected to remain above 4% in both 2005 and 2006. Long-term rates are unusu- ally low worldwide and credit spreads are tight. However, downside risks to the global outlook do exist. The high and volatile oil prices pose a significant risk to the sustainability of the global expansion. In addi- tion, growth disparities between major regions have widened, as the expansion continues to be led by the United States and China while growth projections for the euro-area have been revised downwards. These developments underscore the need for a cooperative approach to resolving global imbalances, including more ambitious efforts to remove impediments to long-term growth in Europe. Greece's economic growth was exceptionally strong last year, under- pinned by low interest rates and strong construction activity associated 50 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 51 with the Olympic Games. Labor market conditions improved during 2004, as the unemployment rate dropped by almost a full percentage point to 10.4% in the first quarter of 2005. Inflation, however, remained above the euro-area average, thus gradually eroding competitiveness. Growth is expected to remain robust, at 3.6% in 2005 and rise slightly in 2006, despite the high oil prices and weak economic activity in the euro zone. This robust growth performance, well above the euro-area average, is driven by private consumption and investment, exports and tourism. Structural reforms in product and labor markets underlie this performance. Fiscal consolidation remains one of the government's key priorities. The fiscal audit launched in March 2004 resulted in upward revisions of the general government deficit and debt for the period 1997­2004. These revisions have led to an increase in transparency that provides a solid basis for assessing the fiscal stance. Significant progress has been achieved in 2005, with the deficit of the general government set to decline from above 6% of GDP in 2004 to 3.6% in 2005. The Greek government is committed to correcting the excessive deficit by end-2006 through expenditure restraint in the public sector, measures to contain borrowing by public enterprises and entities, a broadening of the tax base and systematic efforts to tackle tax evasion. The target for 2006 is to further reduce the deficit to 2.8% of GDP. In parallel with fiscal consolidation, the Greek government is imple- menting an ambitious agenda of structural reforms, to help increase pri- vate investment, employment and potential growth. This agenda includes an acceleration of the privatization process, a new framework for PPPs, and reforms to increase flexibility in the labor market and in retail shopping hours. We are also pursuing efforts to improve the com- petitiveness of the Greek economy by promoting competition, reducing administrative barriers, and cutting corporate taxes while improving tax administration. The key to strong economic performance in an environment of intense global competition is downsizing the state sector, building strong institutions, removing obstacles to the efficient allocation of resources and tackling poverty. The pursuit of these objectives is greatly facilitated by international and regional policy coordination. The Fund's lending facilities and global, regional and country surveil- lance, as well as the Bank's country programs and lending policies, are instrumental in the pursuit of these objectives. We welcome the recent review of the Fund's medium-term strategy, to streamline surveillance and increase focus on the most pressing macroeconomic issues that arise from globalization. We also welcome the Bank's initiatives to reduce global poverty, and strongly support the Bank's continuing presence in Southeastern Europe. We fully endorse the attainment of 51 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 52 the Millennium Development Goals by 2015 and the recent G-8 initia- tive for debt cancellation of eligible countries. INDONESIA: JUSUF ANWAR Governor of the Bank On behalf of the government and people of the Republic of Indone- sia, let me convey our heartfelt sympathy and prayers to the people of Louisiana, Mississippi and Texas. We understand all too well of your suffering. Our own tragedy in Aceh and the hurricanes of the Gulf Coast remind us once again how humble we are in the face of nature and the generosity people and nations are capable of. It is also my privilege to congratulate and welcome a dear friend of Indonesia, Mr. Paul Wolfowitz to your new post as President of the World Bank. We are certain the Bank will benefit from your experience working with developing countries and we look forward to our associa- tion with you. Before I address specific Bank issues, let me share a few thoughts about the 2005 World Summit. The Government of Indonesia is absolutely committed to achieving the Millennium Development Goals. All of our economic and financial policies must be judged by the extent to which they contribute to the rapid and permanent reduction in poverty. In the face of continuing global risks and opportunities, the Fund continues to play an important role that focuses on strengthening crisis prevention and resolution, and so we look forward to understanding better how this role might be made even more effective. I would like to thank the Bank and all of our development partners for the tremendous staff support and financial assistance, including the debt moratorium, during the tsunami. I would also like to highlight three Bank related issues: debt relief and the importance of IDA's financial viability; fund replenishment; and equal treatment for devel- oping countries. First, IDA Financial Viability. We understand that proposed Debt Relief will use IDA funds. The total cost to IDA is a substantial share of IDA's balance sheet and, inevitably, a drain on IDA resources. In our view, IDA is one of the key resources available for least developed countries and so its financial viability is critical. We strongly recommend that IDA replenishment be concluded prior to Debt Relief implemen- tation, which requires us to move forward the IDA replenishment schedule. Second, allocating IDA Funds. We propose that IDA funds be tar- geted more effectively in fighting poverty. To do this, allocations should not be limited to IDA Only Countries but should include IDA Eligible 52 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 53 Countries. IDA eligible countries continue to encounter pockets of very serious poverty and limiting resource eligibility impedes efforts to com- bat it and achieve global MDGs. Efforts are also needed to lower bor- rowing costs and diversify products to better match developing countries needs, especially through new "client friendly" financial prod- ucts. I request the Bank's Management to seek ways to enhance the use of IDA for poverty reduction especially through basic infrastructure. Third, Uniformity of Treatment. We expect programs to be extended to eligible countries based on clear and relevant criteria and that its management should resist pressures to apply different standards in different regions. I see that conditionality forms part of this year's progress report. As a Borrowing Country member, we have often found that conditionality is too rigid and we appreciate the new Development Policy Loans that provide greater flexibility and ownership. To this end, I share the view of the progress report on Conditionality and congratulate you on the substance it presents. Now, let me turn to a few key developments in Indonesia. This year saw the continuation of a democratic transition in Indonesia. Our Pres- ident, Mr. Soesilo Bambang Yudhoyono, was directly elected and began his term in office with a pledge to combat corruption and required the cabinet to take the same pledge. The task is not going to be easy but there have been a number of reforms including those in my own min- istry that create improved incentives and a better framework. More importantly, there has been a rapid increase in number of high profile cases in the courts that have sent a strong signal to the market. We are relatively pleased with our economic growth rate achieving 5.9 percent in the first semester of 2005 including over 13 percent growth in investment. These are the best numbers since the crisis, and we hope to build on this momentum. Near term policy direction remains committed to macro stability and the recent turmoil in the exchange and bond market demonstrates just how important this remains. To quarantine a rapid depreciation in the Rupiah, we've had to raise interest rates. Even more imperative, is the government's commitment to reduce domestic fuel subsidies as part of a broad strategy to bring prices to international levels, diversify energy sources and increase production. Longer term, the government remains committed to fiscal sustain- ability with budget deficits below 1% of GDP. To achieve this, fiscal pol- icy will focus on tax and custom reforms, more efficient spending and reallocating poorly targeted fuel subsidies to better-focused programs aimed towards achieving MDGs. We are now finishing our first year of major budget and institutional reforms at the Ministry of Finance. These reforms are aimed at improving 53 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 54 budget, treasury, and in subsequent stages, revenue processes for improv- ing governance and reducing corruption. As with any major reforms, we have had our share of teething problems. Initiating and working through our new processes were compounded by the drain on resources as we responded to the crisis in Aceh. The 2006 budget is already in a much stronger position than this past year's, giving us ample time to reap the rewards gained from more efficient and prioritized spending and improved governance. We continue with accelerating our fiscal reforms with this year's launching of a major tax reform package. Amended laws on general provision of tax, income tax, VAT, customs-excise is ready to be dis- cussed with our parliament, and a new regional tax code will soon fol- low. A common theme of these laws is our commitment to making our tax environment more business friendly through stream-lining proce- dures and lower tariffs. And, we are equally concerned with broadening the tax base and equity through improving law enforcement and com- bating smuggling with zero tolerance. Bank Indonesia, our Central Bank, has also pushed ahead with a number of reforms this year. In addition to tightening monetary policy, BI has enacted a number of complementary regulations designed to reduce excess liquidity and limit the ability to obtain financing for for- eign exchange transactions without underlying transactions. In the financial sector, supervision standards are being raised to international levels for improving transparency and corporate governance. Finally, and perhaps most importantly, on September 22nd we established the country's Deposit Insurance Agency, a critical step in phasing out the government's blanket guarantee scheme. Finally, let us strengthen our cooperation and efforts in achieving our overarching mission in combating poverty. IRAN: DAVOUD DANESH JA'FARI Governor of the Bank "In the name of God the Compassioned the Merciful" At the outset, on behalf of the people and the government of the Islamic Republic of Iran, I wish to express my deepest sorrow and regret on the tragic event of Hurricane Katrina. Let me hereby express my heartfelt condolences to the family of victims of this sad event. I should avail the opportunity to welcome and congratulate Mr. Wol- fowitz for his election as the World Bank Group President. In fact this critical responsibility acquire more focus on poverty reduction, eco- nomic development of member countries with the special attention to environmental standards, good governance, transparency and account- ability. There is no doubt that the framework of the corporate policies 54 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 55 of the institution would assist the World Bank management in paving the ground for accomplishing the Bank's ultimate mission and assisting the developing countries to achieve Millennium Development Goals. Let me also express my highest gratitude for Mr. Wolfensohn's relentless efforts during his ten year term in the office in fighting global poverty and assisting the world's poor to forge better lives. In fact under his wise leadership some considerable achievements and reforms were implemented to help the Bank to accomplish its mission. He put more emphasize on some major areas including corruption, debt relief, the environment and gender. He also made the developing countries more engaged in the decision-making process and activities of the Bank dur- ing his tenure as the World Bank President. I wish him all success and hope that these significant approaches and results will be more attended and strengthened. Although the world economy has witnessed high average GDP growth during the past recent years, as an evidence to economic improvement in most of developing countries, still the poor nations that desperately need new job and business opportunities, are falling even further behind the developed countries. Therefore, enacting more effi- cient and tailored macroeconomic and social policies along with apply- ing structural and regulatory reforms is required by all nations especially the developing countries to ensure the sustainable growth. It seems that despite the availability of the incentives and stability in the macroeconomic condition, there are still some major barriers and obstacles in the area of investment climate and strengthening the pri- vate sector as the key factors for economic development. This is a field in which the international financial institutions such as the World Bank can play an important role by rendering more targeted technical and financial assistance as well as improving the accessibility of developing countries to the global market. There is no doubt that promotion of the private sector in member countries will have a large impact on sustained development and poverty reduction in these countries. In this context the role of IFC as an important member of the World Bank Group is significant. Particularly the MENA region seeking domestic and foreign investment in the region's private sector which is with no doubt the driv- ing force for growth and development. Therefore, I once again, urge the more serious and active presence of the IFC in the region. I would like to take this opportunity to touch another important issue concerning the cooperation between the Bank and the borrower countries on the projects financed by the World Bank. The articles of agreement of the Bank make specific arrangement to ensure appro- priate utilization of the loan and transparency and efficiency in the proj- ect implementation process. Although these criteria and guidelines are 55 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 56 somehow envisaged in the member countries' internal rules and regula- tions for project procurement, there are still major obstacles in regard with effective and timely disbursement and implementation of World Bank financed projects. Therefore in order to tackle the problem, con- ducting a diagnosis study for concerned member countries is required to identify the bottlenecks in public procurement regime, legal and reg- ulatory framework and procedures and mechanisms on one hand, and extending efforts to show flexibility in the Bank's procurement guide- lines as far as possible on the other hand. I would like to point out two issues which have recently been dis- cussed among World Bank members: The positive impact of trade and market access for goods and serv- ices supplied by developing countries on the employment, welfare and growth of the economies are apparent. For years the developed coun- tries insisted that the developing countries should lift tariff and non- tariff barriers to trade in order to help their countries as well as economies of partner countries growth faster to the benefit of all par- ties. Unfortunately we observe that the developed economies have not completely implemented what they have preached for many years. High levels of tariff especially on the agricultural products in developed countries are great impediment to access the market for the products of developing countries which adversely affect the economic situation and aggregate poverty in many developing countries especially African countries. Therefore we urge the developed countries to eradicate the barriers to the export of the developing country's products. This will be a vital policy reform towards sustainable poverty reduction. We also generally welcome the new initiatives to enhance debt relief for HIPCs. Any mechanisms that reduce the debt burden of heavily indebted developing countries and help them get out of debt spiral worth supporting. However this new initiatives should be implemented in a way that ensure additional financial resources of IDA and other international institutions. It is also vital to take appropriate measures in order not to jeopardize the long term sustainability of IDA as the most important and effective vehicle of development aid to low income developing countries. Now let me bring to your kind attention the latest developments in my country. The Islamic Republic of Iran has pursued the economic and social and reform strategies within the framework of the country's Development Plans. In this regard a package of reform policies were implemented in the context of the third five-year development plan during the period of 2000/04 and many considerable and significant results have been achieved. The Islamic Republic of Iran has the second largest population in MENA region. Most of them are young with increasing expectations of 56 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 57 a better life and future. There are also a large number of well-educated women seeking opportunities to partake in different areas of economic and social activities. Despite significant progress in the country's activ- ities for poverty reduction and human development, creating enough job opportunity to meet the new flows into labor market along with extensive reduction of unemployment is required. In order to over- come this problem, high and sustainable economic growth with enough employment opportunities should be ensured. We strongly believe that economic development can not be achieved unless attractive invest- ment climate and broader participation of private sector in the econ- omy is provided and promoted. In the same line the strategic policies deduced from the article 44 of the constitution implying the boundaries and areas of performance of state-owned, cooperative and private enti- ties were elaborated and specified by the government. In these new introduced policies, the ground is paved for more private sector involvement in different economic and financial activities, specially in those areas that previously were monopolized by the Government. Therefore the legislative framework for contribution of the private sec- tor in different areas of activity such as heavy industry, banking, insur- ance, power supply, communications and transportation sector is provided. Greater transparency in the macroeconomic regime, budget reforms, tax reforms, unification of foreign exchange rate, downsizing the government's role in economic activities through privatization of SOEs, dismantling of monopolies and promoting competitive market, reducing the non-tariff trade barriers, adopting smart and targeted sub- sidies, attracting foreign investments and protecting private sector investment, establishing private commercial banks to pave the ground for privatization of state-owned banks and developing an effective social security system are the evidence to the Government of Iran's commitment to implement structural reforms within the framework of the third five year Development Plan. These employed reforms and programs together with strong macroeconomic performance, have caused an average growth rate of around 5.5 percent during the period of the third development plan, which is one of the highest in the region. In addition the unemployment rate is dropping continuously reaching 10.3 percent last year. By reaching the end of the third development plan in 2004, the fourth five-year development plan was ratified six months ago. In fact this Plan in compliance with the objectives set by Twenty Year Eco- nomic Vision Document of the country, draws the guidelines and spec- ifies the framework for the new government policies and approaches. Achieving the continuous increasing and sustainable economic growth, providing the ground for the competitiveness of goods and services in 57 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 58 local and foreign market, promoting non-oil exports, extending efforts for shifting the growth structure toward the knowledge economy are some of the major highlights of the economic approach of the fourth five-year development plan. I would like to emphasize that while the new government is very much committed to the said 20 years Economic Vision Document and the Development Plan, one of the most important priorities of the gov- ernment is the issue of expansion of Equity in the society by economic and social means, by providing for example, equal job opportunities, education, health and social activities, in order to reduce the Gini Index. Furthermore, anticorruption campaign will also be implemented more forcefully. At the end I should express my appreciation to the World Bank management and staff for their extraordinary work and commitment. There is no doubt that in case of my country with a growing portfolio, the dedication and relentless efforts of the Bank's management and staff have played a crucial and significant role. In fact we consider the World Bank as an important center for synthesis of expertise, views and experiences in a global scale to illuminate the development gateway. IRELAND: BRIAN COWEN Governor of the Bank and the Fund A new President brings the opportunity to reinvigorate the policies and activities of the Bank. For Paul Wolfowitz this is his first annual meeting as President of the World Bank. I wish him every success and look forward to working with him in relation to the prime objectives of the Bank. Tsunami It is almost nine months to the day since we witnessed the almost unimaginable effects of the Tsunami. Its sheer magnitude spurred the International Community to react in a way and at a speed which was exceptional by normal standards. This action resulted in significant progress in the early months. We should be encouraged by the benefits which such a speedy response conferred on the people affected and be prepared to learn from this experience. G8 Proposal on Multilateral Debt Relief The recent announcement by the G8 Finance Ministers that they will finance 100% cancellation of World Bank, African Development Bank and IMF debt owed by a group of the world's poorest countries is 58 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 59 a most welcome development. This agreement represents very signifi- cant progress towards solving the so far intractable problem of third world debt. Ireland was one of the first countries to support debt cancellation. Our official policy, adopted in 2002, called for 100 percent debt cancel- lation for all HIPCs. The success of a debt relief or debt cancellation scheme can be measured by how much it increases the money available to the benefi- ciary Government for poverty reduction and advancing towards the Millennium Development Goals. Additionality is therefore, an essen- tial requirement. We also, believe that a country's requirement to repay debt must not prevent it from maintaining an adequate level of expenditure on services and investments, without which growth and development are impossible. I am very glad that the G8 countries have come to the same conclusion. Our objective must be to achieve long term debt sustainability while ensuring adequate resourcing of the Millennium Development Goals. This will require significant increases in grant ODA, particularly by the larger economies. The increasing flow of oil revenue will help some states to extend and expand their overseas development aid budgets. This they should now do. Ireland is a strong supporter of the IDA over the years. This year Ireland has significantly increased its contribution to the IDA 14 Replenishment. Debt relief will impact on the operations of IDA and we need to protect it. European Proposals for Development Finance The UN Summit in New York earlier in the month focused again on the need for additional finances to achieve the Millennium Develop- ment Goals. In the context of steadily increasing ODA, Ireland considers the most appropriate mechanism is to provide direct grants. In May this year Ireland together with other EU states agreed a fur- ther package which set an intermediate collective target of 0.56% ODA/GNI by 2010 as an interim stage to achieving 0.7% by 2015. Ireland has gone even further. In the three years 2005­2007, we will spend almost C2 billion on ODA, so that by 2007 it will have reached 0.5% of GNI. And it will continue to increase thereafter. At the UN Summit we recommitted Ireland to reaching the UN target of 0.7%. This will be achieved in 2012, some three years earlier than the agreed EU target date of 2015. Given current economic projections, this will mean a tripling of Ireland's ODA above current levels. This commitment is very demanding. But my Government believes that it is achievable. 59 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 60 Trade While ODA and debt relief will significantly assist poor countries, trade is the key to underpinning growth. All countries, must now main- tain the commitment and flexibility they have shown so far in advanc- ing the Doha Development Agenda Framework Agreement. An agreement is almost within our grasp and we must not let it slip away. Governance and Economic Policies Recipient countries too, must play their part. Good governance and sound economic policies are the central planks of economic and social reconstruction that are necessary for less developed countries to emerge from poverty. Therefore, initiatives to build capacity in devel- oping countries deserve our full support. Conclusion Good progress has been made but we need to redouble our efforts to provide the significant but necessary finance to address the needs identified in the Millennium Development Goals. ISRAEL: STANLEY FISCHER Governor of the Bank It is a special pleasure for me to be here today as Governor of the Bank of Israel and to address you as Governor for Israel. I would like to make brief comments on three issues: first, the Israeli economy; second, the debt relief proposal; and third, the Fund's Medium Term Strategy paper. The limited time available will not allow me to cover other important topics, including the global economy and the impacts on it of the increases in the price of oil, as well as the poten- tial roles of the Bank and the Fund in improving access to microfinance. The Israeli Economy Following the deepest recession in the country's history, the Israeli economy has for the last eight quarters been growing at an average annual rate of more than 4 percent. Inflation is close to its target of 2 percent per annum. The balance of payments is in a small surplus, and foreign direct investment and financial inflows are likely to reach record levels this year. Controls on capital flows have been removed progres- sively over the last fifteen years, and the capital account is essentially totally liberalized. The exchange rate floats freely and the Bank of 60 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 61 Israel has not intervened in the foreign exchange markets since 1997. Nonetheless--or is it "accordingly"?--the exchange rate of the shekel against the dollar and against the relevant basket of foreign currencies has displayed an impressive stability despite an at times difficult secu- rity situation. For someone whose intensive involvement with the Israeli econ- omy began during the hyperinflationary crises of the early 1980s, this situation represents an extraordinary achievement. That is not to say that the situation is perfect: the government debt ratio remains too high and needs to be reduced; government spending exceeds half of GDP and needs to be further reduced; unemployment at around 9 percent, although declining, is also too high; and more needs to be done to improve the standard of living of the poorest members of the population. The achievements of the Israeli economy are due in part to improved economic policies based on the understanding that the only way to sustainable growth, particularly for a small economy, is to pur- sue market-based policies and to embrace the possibilities that global- ization offers. The pace of reforms has accelerated impressively over the last three years, and I believe that the reform process will continue and strengthen. At present we are near completion of a new and mod- ern central bank law that will clearly define the independence of the Bank of Israel, while increasing its accountability and transparency. These policies and reforms are essential to growth. No less so is the dynamism and technical sophistication of the private sector, which con- tinues its integration into the global economy as Israeli companies seek markets and production bases abroad. The problems of the economy can only be solved with continuing growth and with continuing policy discipline, which contributes to the continuation of growth. They are also more likely to be solved in an environment in which the prospects for peace with our neighbors con- tinue to improve. The G8 Debt Relief Proposal I would like to make only two points regarding the G8 proposal to augment debt relief to the heavily indebted poor countries. First, it is very important that the proposal leads to an increase in net capital inflows to the countries receiving debt relief, and does not do so at the expense of other countries that need economic assistance. That is to say that donor countries need to increase their own provision of aid, and should not rely mainly on financing by the Bank and the Fund that will deplete these institutions' capacity--particularly that of the Bank--to provide assistance in the future. 61 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 62 Second, it remains true that in many countries aid needs to be used more effectively than it has been in the past. Problems of governance and of institution-building will continue to need special and increased attention as the level of aid builds up. The donors too can make an important contribution by coordinating their aid through the interna- tional agencies. The typical situation in which a recipient country has to manage numerous aid projects in coordination with tens of different governments and agencies is both inefficient and also unnecessary. The Fund's Medium-Term Strategy Paper The strategy report is focused and significant. Allow me to make five brief comments. First, the report rightly emphasizes the role of surveillance. Surveil- lance matters because it helps member governments improve their poli- cies as a result of the exchange of views and analysis with the staff and within the Board. But it matters no less because it informs a wider pub- lic, and in this regard I applaud the desire of the Fund to broaden its outreach in member countries. However, the current delivery schedule of Article IV reports is far too slow, an anachronism of the era before the email and the internet, and it means that those reports have little impact on the private sector. There is no good reason why Article IV reports should not appear within a month of the conclusion staff's visit to the country. It would also be desirable for the Fund to increase its use of interim reports. Second, the strategy report discusses adding to the Fund's publica- tions an annual report on the macroeconomics of globalization. Global- ization is not a separate topic that deserves a separate report, but rather provides the context in which economies operate. Its impact needs to be analyzed and taken into account in the Fund's existing publications, the WEO and the Global Financial Stability Report. Adding a third report would not increase the overall quality of the Fund's surveillance; rather it would likely reduce the scope, depth and impact of the existing reports. Third, despite the failure of the Contingent Credit Line facility, I would like to support the continuing effort to find a way to provide a precautionary line of defense for members with sound policies who are vulnerable to contagion effects from external financial disturbances. Fourth, I continue to believe that orderly capital account liberaliza- tion should be a goal of the Fund's policies. To be sure, that does not mean instant liberalization, nor does it mean liberalization pursued in a perverse way, for instance by opening first to short term flows. But it does mean that in this area too, integration into the global economy can contribute to the efficient operation of the domestic economy. And in 62 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 63 many countries, including mine, it has contributed to the efficiency and growth of the economy. Fifth, I would like to support some reallocation of quotas, to recog- nize the changing role of countries in the global economy and in its management. As we all know, this is an area in which the easy solution is for the sum of the quotas to exceed 100 percent of the total. But I am confident that with persistence and creativity, progress can be made-- not least under the guidance of a veteran of many EU negotiations. Since taking up my new job I have frequently heard the Israeli say- ing: "Your success will be our success." In the case of the Bretton Woods twins, we wish you success in the years ahead, for we know that "Your success will be the whole world's success." JAPAN: SADAKAZU TANIGAKI Governor of the Bank and the Fund Introduction Let me begin my remarks with a sincere welcome to Mr. Wolfowitz, who is here for the first time after assuming the position of President of the World Bank. I hope that, under his strong leadership, the World Bank will continue to be effective, efficient and relevant to the eco- nomic development of developing countries. Global Economy and Financial Markets--Outlook, Risks, and Policy Responses World Economy I welcome the continued expansion of the global economy in an increasingly integrated world. I hope to see this momentum sustained, while I note that oil price developments remain a major risk that war- rants vigilance over time. In this regard, I would like to underscore the importance of closely monitoring developments in Asian countries that have high oil dependency and are increasingly gaining significance in the world economy. While global imbalances, particularly the sustainability of the U.S. current account deficit, do not appear to present an imminent risk to the global economy, a further widening of that deficit might add uncertainty to the global economy in the longer run. Against this background, advanced countries should vigorously implement structural reforms, including fiscal consolidation, in order to strengthen a foundation con- ducive to long-term growth. At the same time, emerging market and 63 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 64 developing countries should further enhance their efforts toward resilience against shocks. I welcome the recent steps taken by China and Malaysia toward increased flexibility in their foreign exchange regimes. These reforms should increase the latitude of economic policies and enhance the flex- ibility of their economies to absorb shocks, thereby contributing to the growth and stability of the global economy. In order to further strengthen the WTO-centered multilateral trade system, each country should make decisive strides toward the success of the Hong Kong Ministerial Conference in December. Japan's Economy Japan's economy has steadily strengthened its foundation through structural reforms, as seen in the substantial decline in major banks' nonperforming loan ratios. Improvement in the corporate sector has been spreading to the household sector, and the economic recovery sup- ported by domestic private demand is expected to continue. Continuous efforts to accelerate and strengthen structural reforms are called for to raise productivity, which is needed to respond to the unprecedented rapid pace of aging of our population, and to meet the growing challenges of globalization. In particular, fiscal consolidation remains the top priority on the government's policy agenda, and steady implementation of fiscal structural reform efforts will continue, with a view toward achieving a primary surplus for the combined central and local governments in the early 2010s. Regarding monetary policy, the Bank of Japan will maintain its quantitative easing policy in accordance with the current commitment based on the consumer price index and will support the private sector's activities from the monetary front. The Strategic Direction of the IMF Since a Strategic Review of International Financial Institutions (IFIs) was proposed last year on the occasion of the 60th anniversary of the Bretton Woods Institutions, the IMF's future direction has been dis- cussed in various fora. I applaud the Managing Director's leadership in presenting us with a succinct and well-balanced report on the IMF's medium-term strategy. "Globalization," which is proposed as the organ- izing principle of the IMF's medium-term strategy, has brought about enormous and rapid changes in the world economy. In order to appro- priately cope with those new changes, and to continue to function as one of the key IFIs, it is important for the IMF to focus its discussions on the roles it truly has to play, and to undertake necessary reforms in 64 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 65 an effective manner. In this context, I believe the following three issues are of particular importance. Prevention and Resolution of International Financial Crises The first issue is the prevention and resolution of international financial crises. Globalization has provided both opportunities and challenges to every country in the world, and supporting members' efforts to respond to its challenges have become one of the major roles of the IMF. The experience of financial crises since the 1990s has taught us how important it is in a globalized economy to prevent capital account crises, and to appropriately manage and resolve them once they have occurred. In recent years, increased access to expanding international capital flows is being observed in three large emerging regions, namely Latin America, Central and Eastern Europe, and Asia. Ample interna- tional funds are currently flowing smoothly, thanks to unprecedented low interest rates. However, this benign environment could be reversed at any time. Therefore, it is important to adapt the IMF's precautionary arrangements to a preventive framework that would enable member countries with sound policies to cope more effectively with possible cap- ital account crises. I strongly encourage resumption of the discussions on precautionary arrangements with exceptional access, so that the IMF could respond effectively and efficiently to massive financing needs should a capital account crisis occur for any member country. In view of the increasing importance of capital flows in the current environment, there is a growing need to deepen our understanding of capital movements and to enrich the analysis of the financial sector and capital markets. In order to better fulfill this function, it is paramount for the IMF to review its work in this area, including its organizational structure. Review of IMF Governance The second issue is the review of the IMF's governance. Over the past 60 years, thanks to the free trade regime and the international financial order that have been sustained by GATT/WTO and the Bret- ton Woods institutions, many member countries have realized sustain- able economic growth and advanced their level of development. These countries are now expected to play increasingly important roles in the global economy. These emerging economies, which used to be benefici- aries of financing from the Bretton Woods institutions, are now expected to play a more active role and assume greater responsibilities in the global community, including the role of providers of funds. For 65 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 66 these countries to play this larger role, their will and responsibilities need to be better reflected in the decision-making process of our insti- tutions. Hence, a review of IMF governance has become one of the urgent problems that needs to be addressed. It is important to recognize that the current distribution of IMF quo- tas represents another form of unsustainable global imbalance. Many emerging market economies, including those in Asia, are markedly underrepresented in terms of their current economic strength and rela- tive positions in the global economy. A quota distribution that does not reflect a country's current economic size and the scale of its balance of payments needs results in distortions and unfairness in determining countries' access limit to IMF resources. A more balanced quota distri- bution is also important from the viewpoint of ensuring a better regional balance in the composition of the Executive Board. Japan, as a member of Asian countries, maintains a strong interest in these points. Since the issue of quotas is crucial in order to secure the IMF's polit- ical legitimacy, discussions on this issue should be undertaken in a prompt manner. Japan strongly supports the views expressed in the medium-term strategy that the resolution of the quota issue is beneficial to every IMF member. I fervently hope that a broad consensus on the principles of how to redistribute quotas can be reached in time for the next Annual Meetings. The Role of the IMF in Low-Income Countries The third issue is the IMF's role in low-income countries. In these countries, capacity building in the area of fiscal and monetary policies, the financial sector, and debt management is essential to garner, man- age and utilize increased aid inflows in an effective manner, while main- taining macroeconomic stability. The IMF's support in the areas of its core expertise is expected to play a complementary role vis-à-vis the longer-term support to structural reforms extended by multilateral development banks, such as the World Bank. I welcome the progress being made by the IMF on enhancing its toolkit to support low-income countries. I will watch closely with great interest what roles the Policy Support Instrument and a second window under the Poverty Reduction and Growth Facility for sudden exogenous shocks will be able to play. The Role of the IMF in Asia Next, I would like to offer our views on the role of the IMF in Asia. In parallel with the rapid growth in the region, significant progress has been made in regional cooperation, including financial cooperation, in Asia. Nevertheless, the IMF should continue to play an important role 66 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 67 in this region, including by establishing a new relationship that is not limited to conventional financial support. Japan has been actively promoting regional financial cooperation, mainly through the ASEAN+3 Finance Ministers' process, including efforts to strengthen regional economic surveillance and policy dia- logue, to promote the Chiang Mai Initiative (CMI), and to make progress in the Asian Bond Markets Initiative (ABMI). These initia- tives aim at preventing and resolving financial crises, and are expected to serve as a regional self-help and support mechanism against crises and to supplement the existing global insurance provided by the IMF. More recently, the ASEAN+3 Finance Ministers agreed in May 2005, on (i) measures to strengthen the CMI (known as the "CMI Sec- ond Stage") such as integration and enhancement of the regional eco- nomic surveillance into the CMI framework and a significant increase in the size of swaps, (ii) initiation of discussions on the CMI's future, including transformation of the current network of bilateral swap arrangements into a single financial arrangement, and (iii) adoption of the ABMI Roadmap that features an exploration of the possible issuance of an Asian currency-basket. Clearly, regional financial coop- eration in East Asia has been elevated to the next level. In the current globalized economy, sharing the lessons of one region with another is becoming increasingly important. The IMF is expected to play a pivotal role in this exercise, by analyzing and discussing desir- able monetary and exchange rate regimes in this region through its sur- veillance function, and by establishing preventive frameworks to deal with rapid capital movements. The swiftly evolving developments in Asia require the IMF to main- tain continuous dialogue with Asian member countries, deepen mutual understanding, and pursue its expected roles in the region. In this regard, the useful and encouraging discussion that took place at the "High-Level Seminar on Asian Financial Integration," co-hosted by the IMF and the Monetary Authority of Singapore in that country earlier this month, has nourished our hope for the future relationship between the IMF and Asia. I hope this dialogue will gather further momentum in the period ahead. Current Status of Development Issues Next, I would like to state my thoughts on development issues. Five years have passed since the Millennium Development Goals (MDGs) were agreed upon, and both developed and developing countries have further reinforced their efforts on the development agenda. Japan is determined to make the most of efforts to progress toward the MDGs and has thus committed to increase ODA volume by US$10 billion in 67 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 68 aggregate over the next five years. Japan also intends to double ODA to Africa in the next three years, where progress toward the MDGs is at risk, and has announced its action plan to implement the Paris Declaration to improve aid effectiveness. To make steady progress toward the MDGs, I believe the following three points are particu- larly important. First, we need to support developing countries in achieving sustain- able growth. Sustainable economic growth is imperative to achieving poverty reduction. From this viewpoint, I appreciate that the World Bank attaches great importance to improvement of the investment cli- mate and infrastructure development. With regard to infrastructure development in particular, we need to give more priority to addressing the emerging challenges we are facing, such as relevant institutional reforms, improvement in service quality, and environmental impact, rather than focusing on lending volume. Continuous dialogue with stakeholders is also necessary. Second, we need to strengthen our focus on each country's different circumstances, while securing ownership of developing countries. Donors should align their assistance with the priority that is embodied in the developing country's own development strategy, such as the Poverty Reduction Strategy Paper (PRSP). For that purpose, the PRSP needs to be more specifically linked with the Mid-Term Expenditure Framework (MTEF) and budget process in developing countries, and needs to clearly prioritize their policies. Third, it is important to provide additional resources commensurate with the improvement of developing countries' absorptive capacity. We should also recognize that it takes some time for capacity building efforts to produce their expected outcomes and for these outcomes to become truly owned by developing countries. Last but not least, it is crucial to deepen the academic dialogue in the development field in order to implement development effectiveness. From this point of view, Japan will host the Annual Bank Conference on Development Economics (ABCDE) next spring for the first time in East Asia. ABCDE intends to make an essential contribution to devel- opment polices and provide opportunities to discuss interdisciplinary development. Supporting Africa There is no doubt that in Africa, where progress toward the MDGs is at risk, developing countries must strive to construct stable govern- ments and economies and to strengthen governance, while developed countries must certainly make further efforts to assist these efforts by developing countries. Japan has committed to double ODA to Africa in 68 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 69 the next three years. And I welcome the Bank's Africa Action Plan that focuses on capacity building and growth. Japan also believes that to reduce poverty through sustained growth, we should deliver aid in such a way that it leads to wealth creation through private sector development. We have to bear in mind the notion that it is more important for countries to grab hold of a fishing rod than to be given fish. From this viewpoint, Japan plans to provide the following support to Africa. First, we will provide more than US$1 billion assistance over the next five years to implement the Enhanced Private-Sector Assistance for Africa (EPSA for Africa), which is a comprehensive initiative with the African Development Bank to promote private sector growth in Africa. To expedite the delivery of EPSA in the future, support from other donors is indispensable. I hope that all countries concerned will share the purpose of this initiative and participate. Second, we will initially contribute US$2 million to the Private Enterprise Partnership for Africa (PEP-Africa), the initiative IFC took this year to promote private sector development in Africa. Third, we intend to make an initial contribution of US$1 million to launch a new facility at MIGA. This new facility intends to promote pri- vate investment in Africa, by supporting small- and medium-sized enterprises that meet MIGA's environmental and social standards. Fourth, as a major donor in the agricultural sector, we will reinforce our support toward achievement of the Green Revolution and better livelihood in rural areas, through development and diffusion of NER- ICA (New Rice for Africa), education, and infrastructure build-up. As about 70 percent of Africa's population lives in rural areas, agricultural development and improvement of rural livelihood is imperative for socio-economic stability. We expect that African countries will strengthen their efforts in the agricultural sector in accordance with the "Declaration on Agriculture and Food Security in Africa," and hope that donors will reinforce support for their efforts. Debt Relief On debt relief for Heavily Indebted Poor Countries (HIPCs), I am pleased that the G-8 debt cancellation proposal, in which Japan partic- ipated, is being discussed at this year's Annual Meetings. It aims to pro- vide debt relief to HIPCs that have reached the completion point, leading to 100 percent cancellation of their debt owed to the IMF, IDA, and the African Development Fund (AfDF). I hope that this proposal will be implemented with the support of other members. The G-8 debt cancellation proposal does not stand alone in address- ing the issue of debt sustainability in low-income countries. Progress has 69 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 70 recently been made on this issue, as IDA has launched a new "traffic light" system from the beginning of the IDA 14 period. The enhanced HIPC Initiative, to which Japan has made the largest contribution as an official bilateral creditor, continues to be effective, while we have to maintain our efforts to encourage non Paris Club and private creditors to participate in the Initiative. As financial institutions, the World Bank and the IMF must fully take into account the importance of fostering a credit culture in the medium- and long-term perspective in order to achieve sustainable growth in low-income countries and prevent moral hazards associated with uncontrolled expansion of debt relief. In addition, so as to ensure that debt relief would further accelerate low-income countries' efforts to achieve economic growth and poverty reduction and that all the resources provided are used for those goals, I expect the World Bank and the IMF to report to us on improvements on transparency and the drive against corruption in all areas. Conclusion Since the establishment of the World Bank and the IMF sixty years ago, the world economy has changed dramatically. In response to these drastic changes, both institutions need to articulate their respective roles and to vigorously review their core activities, includ- ing crisis prevention, crisis resolution, and support to low-income countries. I would like to conclude my remarks by extending my best wishes to both of these institutions on the successful reviews of their work. LAO, PDR: CHANSY PHOSIKHAM Governor of the Bank It is an honor and a great pleasure for me to represent the Govern- ment of the Lao People's Democratic Republic at the 2005 Annual Meetings of the Boards of Governors of the World Bank and Interna- tional Monetary Fund. Let me join my fellow Governors in congratulating Mr. Chairman, the President of the World Bank, the Managing Director of the IMF, and the Government and people of the United States of America for the excellent arrangements made for this important meeting. I would also like to take this opportunity to express my congratula- tions to President Wolfowitz for being elected as a new President of the World Bank Group. I believe that the Bank under Mr. President's lead- ership will further enhance its role in supporting the poverty reduction of all regions in the world. 70 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 71 The people and the Government of the Lao PDR are delighted and proud to see the successful conclusion of the financial close of The Nam Theun 2 Hydroelectric Project, one of the highest priority projects in the Lao PDR. This project has received strong and close support of the World Bank from a very early stage. The World Bank has also provided a grant of US$20 million for the project's equity investment of the Gov- ernment as well as the partial risk guaranty for the project. The Nam Theun 2 Hydroelectric Power Project will play an impor- tant role in supporting the poverty reduction, improving the country's development indexes as well as other development goals of the Lao PDR. This project has been thoroughly planned, through which we have learned a great deal on the capacity building for project planning, project management, conducting the consultation, and encouraging the participation of all stakeholders in the preparation process as well as enhancing coordination with the donors. The Nam Theun 2 Hydroelectric Project will be a first-class model in environmental protection, cross-border cooperation, and coopera- tion between the public and private sector. In addition, the project has also contributed to the Government's efforts in poverty reduction, capacity building, and the effective use of natural resources. I would like to take this opportunity to inform the meeting on the Lao PDR's economic performance for the first six months of the fiscal year 2004­2005; our macroeconomic was stable, inflation has been reduced to an average of 6.5 percent, the exchange rate was stable, and there has also been an increase in private domestic and foreign invest- ment from US$533 million in 2004 to an estimated US$1.249 million in 2005. The economic growth for 2005 is estimated to be about 7.4 per- cent, this growth will be partly contributed by the start of the construc- tion of the Nam Theun 2 Hydro-electric Project. The Government will continue to pursue the appropriate fiscal poli- cies with the aim of increasing revenue collection and strengthening expenditure controls in order to maintain the stability of the Lao econ- omy. We also aim to limit the inflation rate to a single digit, stabilizing the exchange rate in order to make the investment climate more favor- able for ensuring that economic growth achieves its target of a higher rate than previous year. In realizing these goals, the Government will intensify its efforts to achieve all the targets outlined in the revised budget of fiscal 04­05, as approved by the National Assembly. In addition, we have revised tax and customs laws, arbitration law, and anti-corruption law. The Government has engaged in improving the tax and customs collection mechanism, particularly from large tax pay- ers, as well as strengthening the public expenditure management. We are currently working closely with the World Bank, the International Monetary Fund, and other international financial institutions on the 71 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 72 Public Expenditure Management Strengthening Program, the Public Expenditure Review, and the implementation of the actions under the Poverty Reduction Support Credit. We highly value the support from the international community including the bi-lateral and multi-lateral organizations, the interna- tional financial institutions, including the World Bank and the IMF. This support is very important for the socio-economic development of our country. In 2005, the World Bank has adjusted its policy on Laos from extending credit to giving grant aid in support of the development of the Lao PDR. The support for this year has included three Grant Aid proj- ects in the amount of US$29.5 million, and there are also a number of projects in the preparation and negotiation stages. We would like to take this opportunity to urge the World Bank Group to continue giving the same importance and support to the socio- economic development and poverty reduction efforts of the poor coun- tries of our region as the Bank does with other regions of the world. The continued same level of support will be an important factor in assisting the poor countries of this region to achieve their Millennium Develop- ment Goals. In conclusion, in the name of the Government of Lao PDR, I would like to express my sincere appreciation to the managements and staffs of the Bank and the Fund, and fellow member countries for the support given to the Lao PDR. I wish the meetings a great success. MALAYSIA: ZETI AKHTAR AZIZ Governor of the Bank and the Fund As we strengthen our global relationships, there needs to be greater engagement with the entire spectrum of member countries. If we are to achieve a more balanced global growth, greater stability in the global financial system and significant progress in the fight against poverty, there needs to be greater appreciation and understanding of the global issues from the perspective of the emerging and developing economies. In the current environment, the risks to global growth have increased, presenting us with an even more challenging environment to achieve these goals. Should the trend of higher oil and asset prices, and rising interest rates continue, their combined effect could diminish the near-term global growth prospects. In this environment, appropriate policies are vital to ensure that any moderation in growth does not evolve into a fundamental economic slowdown. While countries have strengthened their resilience, international cooperation becomes important in addressing these issues. At the national level, widespread reform efforts have intensified. These have been reinforced by regional initiatives. Of equal importance are reforms at the international level. It 72 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 73 is the nature of the leadership that is exercised at the international level, and the actions initiated, that will determine the effectiveness and rele- vance of the role of the international financial institutions in the global economy. In Asia, significant progress has been made at the regional level in strengthening the underlying economic structures and fundamentals. The economies in Asia continue to be among the fastest growing in the world, and thus contributing to the rebalancing of global growth and stability. In addition to promoting domestic sources of growth, economies in Asia have also enhanced regional economic and financial cooperation, including measures to strengthen regional surveillance and financial support mechanisms, and to deepen the regional capital mar- ket. The greater economic and financial integration in Asia has been a mutually reinforcing force in strengthening growth in the regional economies. Intra-regional trade and investment flows in Asia have con- tinued to increase significantly in recent years. Progress has also been made in the further deregulation and liberalization of the economic and financial sector, thereby increasing the potential for the Asian economies to contribute to global growth and stability. Malaysia's own performance has been favorable, with continued steady growth being experienced. The Malaysian economy has contin- ued to shift to new areas of comparative advantage, to new areas of growth, with the private sector being the main driver of growth. Resources have continued to shift towards the services sector, towards strengthening linkages in the manufacturing sector, and to the resource- based industries and the agricultural sector. This has contributed to a well-diversified economic structure and has increased the resilience of the economy to external developments. The financial sector has also seen significant transformation. The restructuring, consolidation, and internal rationalization of the banking sector are now virtually com- pleted. Governance and risk management practices have also been improved while structural enhancements have been made in the capital market, significantly enhancing its role in the financial system. A com- prehensive and robust Islamic financial system now also operates in parallel with the domestic, conventional financial system. Against the background of strengthened economic fundamentals and financial system, Malaysia has taken the opportunity to sequen- tially deregulate and liberalize the financial system. This includes the introduction of a new interest rate framework that is market-driven, the liberalization of foreign exchange administration rules to promote greater efficiency and enhance risk management in foreign exchange transactions, and the introduction of new foreign players into our financial system. In July this year, Malaysia adopted a managed float for the Ringgit exchange rate to better position Malaysia to respond to 73 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 74 structural changes in the global and regional environment. Under this arrangement, the Ringgit is monitored against a basket of currencies of Malaysia's major trading partners. In this world of greater uncertainty, there has been significant focus on the issue of surveillance and risks and vulnerabilities. Experience has shown that surveillance has improved policy performance as well as the ability to take pre-emptive action to contain the impact of disruptive and destabilizing developments. These efforts, however, need to be bal- anced by efforts to enhance the capacity of countries not only to man- age the risks and vulnerabilities, but also to sustain their own capacity to support growth and development. Capacity building involves helping countries to help themselves. It requires enhancing the institutional capacity of the country. Support in putting in place the necessary insti- tutional structures, arrangements and systems would increase the potential for the sustainability of the development process. Strengthening these foundations is vital to the deregulation and lib- eralization process. They represent the pre-conditions to any reform agenda. In this regard, capital account liberalization needs to be man- aged in accordance with the country's own institutional capabilities and implementation capacity. Supporting financial infrastructures, sound and strong financial institutions, developed financial markets, and a more market-driven environment are key to the success of the liberal- ization process. On the support for the low-income and poorer countries, the uneven progress made in meeting the Millennium Development Goals is of deep concern. The debt relief proposal of the G-8 to assist the Heavily Indebted Poor Countries (HIPC) is a welcome step. Debt cancellation, however, addresses the symptoms and not the cause of poverty. Experi- ence has shown only a few countries have graduated from the debt relief programme under the HIPC Initiative. Many still continue to be burdened with unsustainable levels of debt. It is important to recognize that the task of assisting the lower- income countries does not stop short at providing financial assistance. Development of education and health is an important part of the Mil- lennium Development Goals. The IFIs also need to assume a greater role in encouraging the developed nations to invest and create job opportunities in the Heavily-Indebted Poor Countries and other poor nations as a long-term plan to assist low-income countries to achieve the Millennium Development Goals. Finally, we share the view that the legitimacy, credibility and effec- tiveness of the Fund and the Bank hinges on the degree to which its rep- resentation reflects the relative significance of its respective membership. The 13th General Review of Quotas represents an impor- tant opportunity to ensure that all members, especially the developing 74 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 75 and emerging economies, have an adequate representation in the insti- tutions that is consistent with their relative positions in the world econ- omy. It is important for voices from the constituency of the emerging and developing world to not only be heard but to be listened to. We look forward to the commitment of the international community in pre- serving the fundamental, core principle of equality in the governance structure of the Bretton Woods Institutions. This greater engagement within the international community will contribute to increasing the prospects for a greater shared global economic prosperity. MALTA: TONIO FENECH Governor of the Bank It is a pleasure and an honor for me to address the Annual Meet- ings of the International Monetary Fund and the World Bank. I take this opportunity to thank the United States Government and the Washington Authorities for hosting these meetings and providing the necessary organizational facilities to ensure that these proceed smoothly and successfully. This is the first Annual Meeting addressed by the new president of the World Bank Group, Mr. Paul Wolfowitz. I congratulate him on his appointment and wish him success in the chal- lenging tasks ahead. On behalf of my country I would also like to express our solidarity with the people of the United States for the dam- age and loss of life endured as a consequence of the natural disasters that hit their country. This year's meetings take place against an international economic background characterized by growing uncertainty as a result of the surge in oil prices. There is no doubt that high and rising oil prices will have a significant impact on consumption and growth in the major economies in the months ahead, but the countries that will be affected most will be emerging markets and other oil importing developing countries. The persistence of large global current account imbalances, with their destabilizing effects on long-term interest rates and exchange rates, are also a matter of concern. A sudden rise in long-term interest rates could also dampen growth prospects as household wealth is affected negatively through a decline in asset prices, particularly prop- erty prices. The implications of these projected scenarios are that growth would be more subdued from levels forecasted earlier this year. The weaken- ing trend in manufacturing output in a number of countries during the first half of the year appears to have been arrested and activity in this sector is expected to strengthen later in the year. World trade is also expected to recover due to relatively strong import demand in particu- lar regions such as the US, Canada and the OPEC countries. 75 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 76 A hostile economic environment augments the problems faced by small open economies such as Malta. Following membership of the European Union in May last year, my country has adopted a totally lib- eralized trade and capital regime and implemented a program of reforms to strengthen the market infrastructure. The aim of these poli- cies is to enable the economy to take full advantage arising from Euro- pean Union membership. However, as a result of these more open policies, the Maltese economy is more exposed to developments over- seas. At present these include depressed demand for our exports as well as a persistently rising oil importation bill. In addition, over the summer months Malta has had to face a regular influx of illegal immigrants from the North African coast. Providing food and accommodation for these large numbers of immigrants has placed a significant burden on the island's physical infrastructure and on its financial resources at a time when the Government is pursuing a policy of fiscal consolidation. Malta continues to recognize the benefits of regional integration and through membership of the European Union it has access to the vast single market of the European hinterland. To take further advantage of the opportunities that are offered by this market we have taken the first steps that will lead to full participation in Economic and Monetary Union (EMU) and the adoption of the single currency, the euro. Thus in early May 2005 Malta joined the Exchange Rate Mechanism II (ERM II) thus pegging its currency fully to the euro. To emphasize our commitment to the fixed exchange rate policy that has delivered price stability to our country over many years, we have unilaterally commit- ted ourselves to keeping the currency fixed in terms of the euro, at the central parity rate. Our adherence to a fixed exchange rate policy and our efforts to align our economy closely with that of our European partners under- pins our macroeconomic policies, implying the need for more fiscal dis- cipline following the expansionary stance of recent years. In line with our medium-term fiscal program, we are reducing the fiscal deficit sub- stantially so that from a deficit/ GDP ratio of 5.2% in 2004 we expect to register one of below 4% this year and under 3% in 2006. We expect to achieve our targets through, amongst others, better control of recurrent expenditure and the implementation of structural reforms. On Fund and Bank matters we would like to express our strong sup- port for the important work that these two institutions undertake in the international economy. Our commitment to the Bretton Woods institu- tions was further underlined recently by our decision to join the Inter- national Finance Corporation (IFC). Malta also welcomes the increased attention being attached to the development of small states. We believe that small states face peculiar realities and specificities to which the Bank and Fund can assist through 76 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 77 their specialized competences. Moreover, closer collaboration amongst small states can be facilitated through the creation of a global network of small states. We recognize that the role of both the Fund and the Bank should be reviewed and reassessed from time to time to ensure that they adapt to the new challenges of globalization. We, therefore, note with interest the Report of the Managing Director on the Fund's Medium Term Strategy. The report offers a critical assessment of the Fund, particu- larly of its internal workings and governance. It puts forward positive proposals to redefine the Fund's role and to make it more effective in its primary task of ensuring a stable international monetary system. In this regard we strongly support an enhancement of the Fund's commit- ment to monetary and financial stability through more effective surveil- lance of members at the global, regional and country level. We are convinced that the Report should not only be discussed and debated, but should be the basis for the implementation of those reforms that are so necessary to give the Fund strategic direction. Malta actively supports initiatives which promote economic devel- opment and poverty reduction in low income countries. Consequently, we favor a continued involvement of the IMF in low income countries. The Fund's role in this regard should be to complement that of the World Bank Group, which is primarily responsible for development issues and for combating poverty and improving the living standards of people in the developing world. Thus besides contributing expertise in the macroeconomic field, the Fund should continue to offer structural lending and other financial assistance to these countries. This should also be the case when natural disasters disrupt the social and economic life of such countries. While we note that considerable progress has been achieved in the eradication of poverty and hunger, a lot still remains to be done if the Millennium Development Goals are to be achieved within the planned time frame. Here it is satisfying to note that the G8 in its recent Summit agreed to increase total official development assistance to Africa and to cancel the multilateral debt of some of the poorest and most indebted countries. These decisions will certainly provide further thrust to devel- opment initiatives aimed at assisting entire populations to achieve eco- nomic growth and social advancement. This notwithstanding, there is a need for additional resources to finance development aid and in this regard developed countries have to strengthen their efforts to achieve the internationally agreed target of 0.7% ODA/GNI. Even though my country's resources are severely limited, we will strive to achieve the target of 0.17% set by the EU for Member States that joined the EU after 2002. Finally I am pleased to say that in order to demonstrate our solidarity with developing countries that are endeavoring to rebuild 77 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 78 their economies in the face of tremendous challenges, my government has decided to cancel all official claims against Iraq. I would like to conclude by expressing our appreciation to the Board, management and staff of the Fund and the Bank for their con- tinued support and fruitful co-operation. Once again I wish them suc- cess in their daunting tasks of promoting global financial stability and reducing poverty in the developing countries. I feel confident that both institutions have the resources and strong leadership to make the changes necessary to be able to face these challenges successfully. MARSHALL ISLANDS: JEFFERSON BARTON Governor of the Bank (on behalf of the Pacific constituency: Kiribati, Federated States of Micronesia, Marshall Islands, Palau, Samoa, the Solomon Islands, Vanuatu) On the occasion of the Fifty-Ninth (59th) Annual Meetings of the International Monetary Fund (the Fund) and the World Bank Group (the Bank), I am honored to address this eminent group on behalf of the Pacific constituency- comprising of, Kiribati, the Federated States of Micronesia (FSM), the Republic of the Marshall Islands, the Republic of Palau, Samoa, the Solomon Islands, and Vanuatu. May I take this opportunity to express our deepest sympathy to the US Government and its people on the tragic events that have been brought by Hurri- canes Katrina and Rita. I wish to extend our congratulations to you, Mr. President, on your election and in taking over leadership of the World Bank Group. We are confident that your leadership will bring about an innovative platform that will deliver best results from the Bank's strategic operations in the developing countries, in complement to the invaluable work of the Fund. With the recent acceleration of growth in 2004, the world's develop- ing regions are now growing faster than their average growth rates of the 1980's and 1990's. The economic surge has been fueled in large part by the ongoing economic boom in China as well as increased economic activities taking place in Japan and the United States. However, eco- nomic growth this year and 2006 is expected to moderately slow down due to deceleration in growth in a number of developed countries, increasing oil prices, and anticipated increase in interest rates that will slow investment growth. The extent of the slowdown should be eased by the strong momen- tum of the impact of both the Bank and the Fund's vigorous work in many developing countries. The far-reaching structural reforms carried out in these countries that include efforts to rationalize public expendi- tures, reduce current account deficits and pay down debts, would enable 78 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 79 them to withstand the debilitating impacts of these exogenous shocks, one of which is the continuing increase in the price of oil that is impact- ing not only these countries but is also adversely affecting the rest of the world economy. The economic success of many developing countries in the past year has been achieved so far; however, the favorable prospects for the next two years are still short of equipping these countries to fully achieve the Millennium Development Goals (MDGs) by 2015. Many of them would still need to continue to improve macroeconomic management of their economies, maintain structural flexibility and foster an investment cli- mate that is conducive to both economic growth and development, which are prerequisites for attainment of the MDGs. Equally important is the need to reduce trade barriers, and at the same time, step up development assistance for the developing countries to enable them to achieve rapid and sustained per capita growth of 3.5 percent per year between 2006 and 2015. As a matter of fact, without such growth, many developing countries would not be able to reduce extreme poverty by half by 2015. It is therefore incumbent on the devel- oped world, including the two Bretton Wood Institutions, to help out these countries. For Sub-Saharan Africa, our Pacific Member Countries welcome the recent G8 debt relief proposal (and the donors' progressing towards the target of dedicating 0.7 percent of GNI to ODA) that will primarily benefit the Sub-Saharan African region and would urge the most effec- tive use of the freed up resources along with other bilateral aids to revi- talize infrastructure and improve health and education services in order to achieve the MDGs. We are pleased with the efforts of the developed countries in help- ing out this region of the world and we would like to encourage them to continue to lead in this effort, especially by further opening up their agricultural markets and continuing to reduce distortionary agricultural subsidies. The global economic boom has been slow to take hold among the seven Pacific Island Countries in our constituency, largely due to our very "given" nature of our island economies. Our region's economic aspirations are stifled by our own remoteness and isolation from major markets, tensions emanating from the confluence of colonial systems, susceptibility to natural disasters, narrow resource base, heavy depend- ence on foreign aid, and inadequacy of human capital. All of these have substantially explained why our small island economies have been stag- nant for so long and have not kept pace with an increasing population which averages 3 percent per year. The key to moving our island economies forward will be through improving our macroeconomic management through appropriate public 79 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 80 policies, adequate institutional capacity and a robust private sector. These, we believe, will definitely lead our small economies to achieve sustainable development and long-term growth. We welcome the Bank's well-crafted Pacific Strategy. We believe that such strategy will assist the PICs, to strengthen our public service delivery, improve our private sector, and increase employment. We agree that the blend of Bank engagement measures proposed in the strategy, from technical assistance and high-quality policy advice to gap-filling financing, are appropriate to the social and economic context of our island economies. We believe that the strategy, in conjunction with and in taking into consideration our unique challenges, will deliver better results and will lead to better reforms of our small and fragile economies. However, the real success will only come about if there is a strong partnership between the Bank, the islands and all other donor partners such as the Fund. Our Pacific Island member countries have already laid the founda- tions that will be necessary in delivering results within the context of anticipated Bank assistance to the PICs. Considerable progress has been made in enhancing our capacity and strengthening our economic management, including a wide array of legislative and administrative actions taken to strengthen our institutional capacity. However, there still remains a greater challenge to build on those foundations to deliver improved outcomes of better institutions, poli- cies and performance that will generate economic growth and employ- ment, at both the national as well as the regional levels. The new Bank Strategy, especially in view of its country-specific, is timely and appro- priate to equip the Pacific Constituency Members in addressing such challenge. We welcome the G8 Plan of Action on Climate Change and we encourage the Bank to increase investment aimed at tackling climate change, increase support for small vulnerable island state through increasing financial support to the Global Environmental Facility (GEF). This is a global issue that requires not only the Bank, but also requires a more broad and concerted effort on the developed as well as the developing countries. Within the context of our development goals, ranging from eco- nomic growth to security, our leaders have endorsed a strategic frame- work called the "Pacific Plan" which consists of a few key principles aiming at enhancing regional cooperation and integration. The Pacific Plan has a timeframe of ten years, and, being a regional development manifesto for all the island countries in the Pacific, such plan provides an opportunity for the Bank and the Fund to engage bet- ter with the Island member countries, and with the Pacific Islands Forum, to support regional cooperation and integration. 80 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 81 We are encouraged by the World Bank Group's recent increased com- mitment towards improving relationship with the Pacific island member countries and their key development partners. We welcome this initiative to work alongside the Bank, the Fund and our other development part- ners to harmonize donor assistance, and enhance our development efforts. Given infrastructure's vital contributions to growth, poverty reduc- tion and achievement of the MDGs, the Pacific Constituency welcome the Annual Meetings' renewed focus on infrastructure with an assess- ment on the progress that had been made to tackle infrastructure chal- lenges and the pending challenges on the optimal levels of infrastructure investment that will ensure sustained growth. As you rightfully referred to in your excellent speech yesterday, it is with infra- structure that all other development goals and objectives such as the MDGs, will easily be achieved. The Pacific Constituency has enjoyed donor funding for infrastruc- ture development, but access to basic public services still remains lim- ited and service provision is, therefore, inadequate. Inadequate allocations for infrastructure maintenance have led to poor infrastruc- ture in our countries, and many times scarce resources are put towards operating and maintaining infrastructures that have little or no eco- nomic return. Indeed, this must change. In view of The Infrastructure Action Plan of 2003, we are pleased to note that total Bank lending for infrastructure in FY05 has reached over $7.4 billion, making up 33 percent of the Bank's total portfolio. We are also pleased to note that not only the lending volume has increased but lending quality has also remained high. The Bank's business in this sector also involves a number of non- lending services, and we are cognizant of the Bank's utilization of such services in its new Pacific Strategy. The Bank plans to work with our constituency members to initiate innovative public partnerships and draw lessons from other appropriate regional and national infrastruc- ture projects to help the Pacific island member countries put in place necessary reforms to enhance coordination, accountability and capacity in infrastructure management. There is consensus that those who use aid towards poverty reduction programs are effectively utilizing aid. When countries fight poverty through sustainable development, with good performing institutions in place and practice sound economic management in fiscal and monetary terms, aid is being put to good use. Good governance, rigorous budget- ary processes and investment-friendly climate also play a role in a coun- try's effective use of aid. Our Pacific constituency members have had our share of both progress and challenges in these trends, and we are continually commit- ted to developing our small economies with the inflows of aid. 81 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 82 Donors have a significant role to play in ensuring that aid is effec- tively used. Their policies and procedures must reinforce such trends. It is within that context that we welcome the Bank reports on "Aid Effec- tiveness" and "Aid Financing and Conditionality." Finally, I would like to express our deep and sincere appreciation to the staff and management of the Bank and the Fund for their tireless efforts in promoting the needs of our Constituency. We very much appreciate your continuous support and assistance. On our part, we are ready to exert our share in developing our countries and working with you as we venture further into this new millennium. MOZAMBIQUE: MANUEL CHANG Governor of the Fund (on behalf of the African Governors) I am greatly honored to address this important gathering on behalf of African Governors of the International Monetary Fund and the World Bank. Let me take this opportunity to thank the American authorities for their hospitality. I would also like to congratulate Mr. Paul Wolfowitz on his appointment as President of the World Bank and we wish him great success in this challenging task. We look forward to a constructive and mutually beneficial partnership under your leadership. I would also like to acknowledge the continued engagement of Mr. Rodrigo de Rato, Managing Director of the International Monetary Fund with African countries. This year's annual meetings take place in the context of renewed focus of the international community on achieving the Millennium Develop- ment Goals, and the challenges posed by crippling debt and effectiveness of aid, with Africa at the center stage of the international development agenda. Poverty remains widespread in Africa, and based on the current growth rates and actions, it is unlikely that our countries will meet most of the MDGs by year 2015. However, as demonstrated by some of our countries, progress can be accelerated if the international community delivers on its promises of substantial additional resources to support home-grown policies and programs, including in the governance area. Our countries have made significant progress in macroeconomic sta- bilization and structural reforms. Moreover, we recognize that poverty can only be reduced through concerted efforts for sustained growth and development. That is why we remain resolute in our commitment to the development agenda, with the focus on strengthening governance, improving the distribution of generated resources, improving investment climate and fighting poverty. To complement and support our efforts, it is crucial that the international community honors its commitment made at Monterrey to provide adequate financing. My remarks will focus on a 82 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 83 few areas where action of the international community is urgently for African countries to make towards the MDGs. Accelerating growth in African countries. Putting Africa on the path of high and sustained growth rates which is required to meet the Millennium Development Goals will entail paying more attention than usual to developing infrastructure, promoting trade, enhancing regional integration, and ensuring the development of the private sec- tor. In this endeavor, it is critical that the Bretton Woods Institutions implement an ambitious action plan. At this juncture and on behalf of fellow African Governors, let me thank the Bank for the commitment shown by preparing the Africa Action Plan. We undertake to work with you, through our Executive Directors, to ensure its effective implementation. Africa's huge infrastructure deficit requires immediate attention. The World Bank should devise innovative financing mechanisms and instruments, and ensure a better coordination of its agencies in support- ing private participation in the development of infrastructure. Fund program design should allow adequate fiscal space to accommodate investment in infrastructure. Equitable and fair global trade provides the most effective means of unleashing Africa's growth potential than any amount of aid. We wish therefore to call upon the Fund and the Bank to play a vigorous advo- cacy role to ensure an ambitious outcome from the Doha "Aid for Trade" agenda as rightly documented in the Commission for Africa report. On our part, African countries will continue with efforts to lib- eralize trade and to make concrete progress towards regional integra- tion in line with the NEPAD action plan. There is also need to intensify support to ensure competitive pro- duction in Africa, enhance our countries' capacity for global trade, addressing constraints at country level and dealing with challenges of unfair trade. We urge the World Bank to design appropriate instru- ments to support regional institutions and programs. On its part, the Fund should step up its policy advice and technical assistance to pro- mote regional integration and enhance capacity in the areas of negotia- tion as well as design and management of regional projects. As regards private sector development, we welcome the IFC's Strategic Initiative for Africa and the sub-Saharan African component of MIGA's strategic directions approved in 2005. However, while we already note increased actions on the Continent, overall performance in supporting private sector development is still far below our expecta- tions. The World Bank Group should set up within the IFC equity funds, to help the private sector further invest in promising sectors; it should also create a concessional non-sovereign window to support small- and medium-sized enterprises. We further urge the Bank to 83 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 84 explore mechanisms for providing long-term financing for small and medium enterprises. We welcome the G-8 proposal to cancel the multilateral debt of heavily indebted poor countries. We would like to stress the need for an urgent implementation of the proposal as expectations in African coun- tries are high. It is also important to step up efforts to help HIPC coun- tries reach the completion point and, therefore, to qualify for debt cancellation. We firmly believe that significant additional resources will be required beyond the HIPC initiative and the proposed debt cancel- lation, to finance programs for accelerating growth and poverty reduc- tion. In this regard, we urge the Bank to handle issues of growth, debt sustainability and development financing in a comprehensive and holis- tic manner. We urge the Bretton Woods Institutions to move quickly to finalize the modalities for implementing the G-8 proposal, while safeguarding their capacity to extend future assistance to low-income countries. Our countries strongly believe that the concerns raised following the G-8 announcement will be answered quickly. First, conditionality should not interfere with the urgent need for debt cancellation. Second, debt can- cellation for eligible countries should take place as soon as possible, preferably right after these Annual Meetings. Third, the G-8 proposal is for one-off cancellation and not a piece-meal and gradual operation, which would not generate the same growth impetus nor have the same beneficial impact on progress towards the MDGs. And fourth, the G-8 proposal underlines additionality of resources in the Bretton Woods Institutions' lending capacity. Therefore, a clear process for securing donors' commitments needs to be put in place in order to preserve their lending capacity to low-income countries. There is need for an expanded debt cancellation initiative. An extension of the G-8 proposal to cover non-HIPC developing countries, many of them with similar income and poverty levels as the HIPC coun- tries, would spur their progress towards the MDGs. Therefore, consid- eration should be given to a more general approach to debt relief by the G-8 and other donor countries, taking into account poverty and income levels. IMF conditionality, domestic program ownership and the IMF's sig- naling role. Fund-supported programs have played a critical role in assisting our countries in their move towards economic development. While some progress has been made in recent years to enhance the effectiveness of these programs, more efforts are needed, notably in streamlining conditionality, enhancing domestic program ownership, and closing the gap in the Fund's tool kit for low-income countries. Progress in streamlining conditionality in Fund-supported programs remains short of expectations. Conditionality should not undermine or 84 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 85 hold up donor disbursements for critical projects/programs such as HIV/AIDS programs or for a hospital project. Concerning the IMF's tool kit, some low-income countries have home-grown programs and do not need Fund resources. For these countries, we hope that the recently approved Policy Support Instru- ment (PSI) could serve effectively as a "seal of approval" or a signaling mechanism aimed at underscoring the credibility of individual country policy frameworks for the donor community and international financial markets. The role of the World Bank and the IMF in capacity building. The Bretton Woods Institutions must ensure that all their technical assis- tance programs contribute more efficiently to human and institutional capacity development than has previously been the case. Additional funds need to be raised to extend the African Technical Assistance Cen- tre (AFRITAC) program to other sub-regions in Africa, especially in light of the positive assessment of existing AFRITACs. We also urge the BWIs to scale up their financial support to human and institutional capacity building initiatives in Africa, such as the African Institute of Science and Technology (AIST), which is an outstanding initiative of the Nelson Mandela Institute. We call on the donor community to sup- port this excellent initiative. On a broader note, we urge the Bretton Woods Institutions to continue to provide technical assistance free of charge as a public good to the membership. The World Bank and the IMF are also encouraged to scale up their financial support to African capacity building organizations and initia- tives such as the African Institute of Science and Technology (AIST), which is an exciting initiative of the Nelson Mandela Institute and the African Diaspora aimed at developing regional universities of science and technology on the African continent. We call on the World Bank, the International Monetary Fund and other development partners to support this excellent initiative. My last point relates to a need for much more attention to middle- income countries. We welcome the progress made by the World Bank in supporting middle-income countries in reversing the decline of lend- ing to these countries in order to enable them to achieve higher growth and meet the MDGs. In this regard, we encourage the World Bank Group to continue scaling up this support and strengthen its role in middle-income countries by providing innovative, flexible and afford- able financial products. To conclude, we are encouraged by the renewed focus of the inter- national community on the special needs of Africa, which require spe- cial attention. Immediate actions by the international community as well as at country and regional levels are required, as the human and social cost of inaction can only increase. Commitments made in the past 85 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 86 and more recently need to be honored by the donor community in order to obtain tangible results in Africa's efforts towards poverty reduction. We strongly urge the donor community at large to find the needed con- sensus as soon as possible to enable the implementation of the G8 pro- posal as well as the formulation of broader efforts for debt relief and development financing. MYANMAR: HLA TUN Governor of the Bank It is indeed a great pleasure for me to represent Myanmar and address the 2005 Annual Meetings of the International Monetary Fund and the World Bank. First of all, Mr. Chairman, please allow me to extend my warm congratulations on your election to the Chair. I would also like to welcome the new President of the World Bank, Mr. Paul Wolfowitz. I would like to join my fellow Governors to take this opportunity to express our appreciation to the Fund and the Bank and the Govern- ment of the United States of America for successfully convening these meetings. I would like to offer my deepest sympathy to the Government and people of the USA for the tragic loss of lives and devastation caused by Hurricane Katrina recently. We are truly saddened by the extent of the destruction that your country has suffered along the Mississippi River basin. Please accept our deepest condolences to those who have suf- fered and lost their families and loved ones. As you are aware, the global economy is improving. However, as in previous years, risks still remain. The major one being the continued rise in oil prices, which has posed serious concerns across the emerging markets (including Asian economies) and caused many governments to cut their growth targets. Therefore, both developed and developing nations need to work closely together in order to address those issues as well as unforeseeable natural disasters, so as to achieve strong and sus- tainable global economic growth. I would now like to briefly touch on some recent developments of Myanmar. In order to achieve economic growth while at the same time lift the living standards of the people, Myanmar has been implementing National Development Plans with the aim of accelerating growth and achieving equitable and sustainable development. Due to the efforts of the Government together with the ever diligent endeavors of the peo- ple, Myanmar has achieved significant growth rates with relatively low inflation in recent years. The greatest challenge that we face today is to successfully imple- ment the objectives of the Millennium Development Goals (MDGs). I 86 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 87 am pleased to inform you that while implementing the national plans and programs, in line with the country's political, economical and social objectives, Myanmar has been able to achieve significant progress in attaining some of the targets of the MDGs. Some of the MDG targets have already been exceeded and some are expected to be achieved much earlier than the targeted time frame. However, there is no deny- ing that there are still some challenges ahead and more efforts will be needed to meet some of the targets by the year 2015. We wish the international community to know that Myanmar does not accept any form of terrorism and is continuing its efforts at combat- ing financing of terrorism as well as fighting money laundering. We have already enacted the relevant laws and rules, such as the Control of Money Laundering Law and Rules and Mutual Assistance in Criminal Matters Law and Rules. With regard to combating financing of terror- ism and money laundering, we have also strengthened our regulatory and supervisory systems consistent with international norms and stan- dards, especially the 40 + 9 special recommendations. Myanmar has also enacted the Anti-Trafficking of Persons Law on the thirteenth of this month. Myanmar is an active member of various international agencies as well as various regional groupings. It is also one of the Greater Mekong Sub-region (GMS) countries striving for collective prosperity through pragmatic cooperation. Myanmar's border trade with neighboring coun- tries has been increasing yearly. Therefore, in order to facilitate better economic cooperation and smoother trade flows, as well as border area development and expansion of cross border tourism, Myanmar is also participating in various regional projects; such as the Ayeyarwaddy, Chaophraya, Mekong Economic Strategy and the East-West Corridor projects. To enhance trade in the region, bilateral as well as trilateral talks and negotiations have been held with respective countries (such as India, Thailand, Bangladesh) resulting in agreements to construct roads and rail network among the participating countries. It should be noted once again that the achievements that have been attained thus far, in the economic, social, legal and infrastructure fronts, have been without foreign official development assistance from bilat- eral and multilateral sources but undertaken with our own resources together with the assistance of some of our friendly neighboring coun- tries. I would like to state that we would have achieved more if our efforts have been underpinned by international support. However, I am sad to say that what little assistance we have from the international community has been suspended. At the time when we, in order to achieve the MDGs, are giving priority to improve the social sectors, the Global Fund, which is an international financing agency designed to help the fight against HIV­AIDS, tuberculosis and malaria, 87 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 88 terminated its assistance to Myanmar last month. Grants termination of the Global Fund is against values and principles embodied in the MDGs. It contradicts the 8th MDGs which sets out to strengthen part- nership. Therefore, the international community is urged to respond positively and in the spirit of social justice to this unjust action. At this juncture, I would like to stress that, in pursuit of our common goals of attaining sustained development, while fighting against poverty, and terrorism and money laundering, there is a need to strengthen international cooperation. The international agencies' treatment of Myanmar had been unjustified. However, Myanmar reaffirms its com- mitment to reinforce its national efforts to achieve the global common goals and that we intend to continue to work and cooperate closely with them. At the same time, we would like to stress that international organizations should avoid any bias that unjustly discriminate against some while favoring others. Myanmar has been a longstanding and legitimate member of the Fund and the World Bank, but both institutions have suspended their financial assistance to Myanmar since 1987. Myanmar has been deprived of its legally entitled assistance for more than a decade. I would like to reiterate that the multilateral institutions should consider resuming their assistance to Myanmar without any political influence. We are still look- ing forward to having normal relations with these institutions. The Fund and the Bank should adhere to their principles which were clearly stated when they were founded. They should not loose track of the fact that different countries develop differently, according to their stages of economic structure and institutional capacities. In order for them to operate their mandates effectively, members need to have ade- quate voice and representation in these institutions. There is need for equal partnership between developed and developing nations. As we understand, the existing representations and voting powers in these institutions are inconsistent with the increasing role of the emerging market economies in global growth. This issue of under-representation of developing countries in the decision making process should be addressed. I would also like to point that there is lack of continuity in mission work. Especially, in the case of Myanmar, composition of consultation mission members differ yearly, which makes it difficult for the missions' side to understand and assess the true state of our economy. On our side also we have to start all over, again and again, from the very beginning. All of these lead to loss of time, energy and understanding on both sides. Mutual trust should be enhanced by continuity of at least the mis- sion head and therefore we call for addressing this issue accordingly. In conclusion, I would like to state that I look forward to resuming normal relations with both the Fund and the World Bank, so as to have 88 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 89 better cooperation and collaboration for mutual benefit. We, on our part, would continue to implement our plans for socio economic growth with stability. NEPAL: MADHUKAR S.J.B. RANA Governor of the Bank It is indeed an honor and privilege for me to address the 2005 Annual Meetings of the Board of Governors of the World Bank Group and the International Monetary Fund. On behalf of His Majesty's Government of Nepal I thank the Bank and the Fund for the excellent arrangements made for this joint meeting. Similarly, I would like to record our sincere appreciation to the government and people of the United States of America for the warmth and hospitality extended to us. At the outset, I would like to congratulate the Bank President, Mr. Paul Wolfowitz, on his appointment. As a personality with such vast array of knowledge and experience we in the developing world, espe- cially those representing States-in-conflict, gripped by insurgency and terrorism, are particularly hopeful that during the tenure of his leader- ship of the World Bank Group new development policies and strategies would be in the offing to strengthen weak States in the interest of national, regional and collective security and the global war on terror- ism. We endorse the vision of President Wolfowitz that development support needs to have two themes--the need to create the conditions for robust, private-sector-led economic growth as the core element of the agenda to achieve the development goals; and the need for good governance, including capable and accountable national leadership, effective and transparent public financial management, a determined attack on corruption, and promotion of rule of law. We are also encour- aged by President's statement on effective delivery and utilization of the prospective increases in aid flows. We are also inspired by the address of Mr. de Rato and look forward to participating fully in the globaliza- tion process. We are encouraged by his flexible approach to dealing with growth and economic stability. May I also take this opportunity to express how shocked and dis- tressed the entire Kingdom was on seeing on television the fury of the hurricane, Katrina; and on seeing and reading on its aftermath of such ghastly proportions with the death, destruction and despair. We deeply empathize with America, and the people of New Orleans, and pray to the Almighty for everlasting peace for the departed souls. We are con- fident that America, being America, New Orleans will rise, once again, as a historic city that is "taller and better" in the passionate words of President Bush. The fury of Mother Nature humbles us all and, in doing so, it brings us all together as one common humanity to help one 89 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 90 another; and materially and financially--no matter how small the mon- etary assistance being rendered. The global economic expansion is returning to a more sustainable pace in 2005. Soaring oil price and its volatility has, however, threatened the robust growth potential. The current oil market condition particu- larly hurts the most vulnerable and least developed countries, by gener- ating the prospect for a sustained inflationary pressure in the economy. The growth of developing Asia is expected to remain robust in 2005, and is expected to continue at the same pace in 2006. As China and India are expected to grow significantly during this period, Nepal being located between these two countries is prepared to take the geographic advantage. Nepal has already initiated activities to turn itself into a transit point between these two giant economies. However, we realize that we need to have considerable amount of resources and technology to create and upgrade the infrastructures required to become a transit economy. The Bank-Fund PRSC/PRGF initiatives for low-income countries based on country-owned poverty reduction strategies have been extremely useful. It is our expectation that enhanced level of financial support will be extended to conflict-affected countries from additional resources made available through IDA 14th Replenishment. The conflict-affected countries not only need additional financial support in a harmonized manner, the poverty reduction strategy for these coun- tries should also be tailored to the specific country situation. It is in this context we welcome the Paris Declaration on Aid Effectiveness and are committed to its implementation. We also would like to urge donors to step up their efforts to improve the coordination and alignment of their support on their part. For many developing countries, trade is equally and even more important than development cooperation funding in generating the necessary resources to achieve the developmental objective. Trade is a critical engine of growth and a country like Nepal is in need of improved market access in high income markets as well as financial resources to remove supply side constraints through increased invest- ments in trade infrastructure (roads, electricity) and trade facilitation with technology and institutions. We welcome the debt relief proposals of the G-8 Finance Ministers in Gleneagles recently. We would like to support the initiative as we see such initiative as part of the support to low-income countries helping them achieving the MDGs. However, we are equally concerned that this initiative should not put pressure on IDA resources. We urge that if the world community really wants to help poor countries to get rid of their debt, the HIPC initiative should make the criteria flexible and accom- modate all debt ridden poor countries in an inclusive manner. We, 90 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 91 therefore, urge developed countries to contribute more funds for this initiative. Nepal supports the quest for enhancing the voice and partic- ipation of developing and transition countries in the decision-making processes at the World Bank and the International Monetary Fund. We also welcome the Bank's renewed focus on infrastructure financ- ing. This, we hope, will help poor countries like Nepal to overcome defi- ciency in infrastructure and at the same time accelerate the pace of economic growth with balanced regional development of its macro- economy. Moreover, there is a greater need of infrastructure financing in Asia where there is enormous potential for mutually beneficial trade in energy and water resources to develop new, and improve the existing, transport corridors and bolster the efficiency of transport and trade facilitation services. We welcome the review of World Bank and IMF loan conditionalities with a view to simplifying them. It is imperative that conditionalities should not be used as a mechanism to exert pressure for changing domes- tic policies in developing countries that exacerbate political instability. Let me briefly reflect upon the recent macroeconomic situation of Nepal. The Nepalese economy achieved a slower growth of Gross Domestic Product (GDP) at 2.0 percent in FY 2004/05 compared to 3.3 percent in FY 2003/04. Non-agricultural sector did not perform well in FY 2004/05 while agriculture sector also declined. In spite of rise in petroleum prices, the inflation remained at a moderate rate of 4.5 per- cent in FY 2004/05. Our growth outlook for current year is lower than what is seen elsewhere in Asia. However, we have been able to main- tain macro-economic stability by maintaining budgetary discipline and adopting prudential monetary policy. We have been consistent in our approach to targeting our efforts to poverty reduction and achieving MDGs by 2015, which is now given additional emphasis through the implementation of His Majesty's Gov- ernment's 21-point program. Nepal has made significant progress over the last 15 years in reducing poverty, improving access to education, health services and drinking water, and biodiversity conservation and alternative energy. It is a remarkable achievement considering the diffi- cult situation in the country in recent years as the MDG report 2005 reflects. This is a reaffirmation of Nepal's commitment to reducing poverty and advancing human development. However, despite the continued efforts and with some positive signs in the poverty reduction front, all the MDGs may not be attained by Nepal unless some concrete efforts are taken. A recently conducted Needs Assessment study has estimated that Nepal needs additional 7.6 billion US Dollars to achieve the MDGs by 2015. While we have to look for ways to meeting this financing gap, we should also be innovative in our approach to implementing targeted programs effectively amidst 91 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 92 on-going conflict. The government is now increasingly involving com- munities and community-based organizations in implementing develop- ment activities and for service delivery, which has been found to be effective in conflict-affected areas. We are fully aware that rapid economic reform is extremely vital for creating conducive environment for private investment. The govern- ment has continued financial sector reform program. The emphasis of this program is cleaning up the non-performing assets of the commer- cial banking system and at the same time taking stringent action on large well-connected defaulters. There has been significant progress in the privatization of state-owned enterprises, which is on the one hand helping generate extra resources for the government to finance activi- ties related to poverty reduction and on the other hand making produc- tive assets available to efficient private sector. Let me reiterate that Nepal does not have adequate physical infra- structure necessary for enhanced private investment and sustainable economic growth. Since government resources are not enough, we are now promoting public-private partnerships in the creation of vital infra- structure at all levels--community, local and national. Our poverty reduction efforts in the recent past have been encourag- ing. However, the fact that still around 31 percent of the population lives below absolute poverty is extremely worrying as it the core reason for insurgency and terrorism. Poverty cannot be reduced without giving peo- ple access to productive assets and income generating opportunities. We have conceived the role of Land Bank in this context which will, no doubt, bring structural changes to the rural economy through tenancy reforms. May I take this opportunity to explain the directions of recent polit- ical developments in Nepal, which has often been wrongly reported in the international media? When the parliament was dissolved in June 2002 by the Prime Minister having majority in the Lower House of par- liament, the promise made was to hold fresh elections within six months. The elections could not be held, as security situation seriously deteriorated. Between June 2002 and January 2005, there were four dif- ferent Prime Ministers and none of them could hold elections as prom- ised. The security situation did not improve and people at large desperately wanted restoration of peace and resolution of conflict. It was this popular sentiment that led His Majesty, who is also the custo- dian of the Constitution, to act for the improvement of security and restoration of peace. The security situation in these past eight months has substantially improved. The government will be holding municipality elections in the near future. This is a step for the full-fledged resurrection of the elected bodies at all levels and eventually within two years from now, the parliamentary elections will be held. His Majesty has no intention of 92 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 93 prolonging his rule. His wish is to strengthen the democratic process, but security and peace is very important at the moment. His Majesty has reiterated this pledge to the people that he wishes to reign and not rule. Nepal is fighting terrorism and there has been some success as evident from the improvement in security situation in these recent months. This momentum needs to be strengthened by improved governance and enhanced development activities. At a time when Nepal needs generous international support to suppress the menace of terrorism by accelerat- ing the development activities and improving government service deliv- ery, we are worried by the Bank's recent review of Country Assistance Strategy, which indicates reduced level of funding even as it recognizes significant achievements made in implementing reforms and develop- ment performance. It will definitely weaken Nepal's efforts for achiev- ing MDGs, reducing poverty and consolidating democracy. Moreover, the declined government spending would trigger the total loss of reform momentum and worsen the environment for development activities and private sector investments thus giving fresh impetus to terrorism and helping undesirable elements to take the country towards anarchy. Therefore, I urge the World Bank to retain the present lending sta- tus and release the second tranche of Poverty Reduction Support Credit (PRSC II) to Nepal, as most of the promised actions have been success- fully carried out. The government is fully committed to implementing the remaining actions. Nepal in this hour of crisis, ridden by terrorism, deserves all the support in a clear, consistent, sustained and dependable manner if the gains made thus far by implementing PRSP and economic reform programs are to be sustained. We are thinking of next genera- tion of reforms that will target the improvement of lives in the rural areas. This is the only way by which recurrence of conflict and armed insurgency can be totally prevented. And in our mission, we want the World Bank to be a partner. NETHERLANDS: GERRIT ZALM Governor of the Bank I would like to focus on five topics. First, the challenges for the global economy. Second, multilateral debt relief. Third, domestic resource mobilization and trade. Fourth, microfinance. And finally, the IMF strategic review. I am encouraged by the healthy world economic outlook. In many countries around the globe, growth continues to be strong. The 2006 World Development Report "Equity and Development" rightly illus- trates the importance of equality of opportunities for long term eco- nomic growth. I would like to highlight three specific issues with respect to the economic outlook. 93 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 94 First, the need to forego more damaging effects of expensive oil. So far, the world economy has weathered the oil shock well. But it is cru- cial that second-round effects through inflation and wages are kept at bay. It is also crucial to avoid distortionary measures. Price measures and subsidies cause distortions in energy markets and prevent the nec- essary adjustment. Price signals are crucial if we want markets to func- tion properly. Second, the continuing challenge to ensure an orderly adjustment of global external imbalances, without resorting to protectionist measures. The reform of China's exchange rate regime presents a first welcome and important step towards more exchange rate flexibility in Asia. In any case, as simulations in the WEO indicate, an orderly adjustment of global imbalances primarily needs a structural increase of private and public savings in the United States. Europe will move ahead further on the path of structural reform. Third, the urgency to take appropriate measures to ensure medium and long term sustainability of public finances in view of the costs of ageing (both pensions and health care). The present economic momen- tum should be effectively used to implement budgetary consolidation in all major economic areas of the world. Turning to debt relief. At the Spring meetings The Netherlands already expressed its support for a new round of multilateral debt relief to low-income countries in order to help these countries achieve the Millennium Development Goals. To maximize the benefits of multilat- eral debt relief, the Netherlands consistently pointed at four key princi- ples. First, its financing should be truly additional, making more resources available for development and protecting the financial solid- ity of the participating institutions. Second, a wide group of countries should be able to benefit from debt relief. Third, it should benefit coun- tries that follow strong economic policies in order to reduce moral haz- ard and increase MDG effectiveness. And fourth, safeguards should be in place to break the vicious circle of lending and forgiving. I am very pleased to note that the discussions in the last months and weeks have brought fruitful results on all four points. I therefore sup- port the current debt relief initiative and expect it can be finalized soon. As you know, I am a strong advocate of scaling up external assis- tance. Each country should live up to its commitment of at least 0.7% GNP of Official Development Assistance. However, there is one poten- tial pitfall. Research tells us that more often than not external assistance crowds out domestic resource mobilization. This brings me to the third issue: the importance of increasing domestic resource mobilization. Domestic resource mobilization clearly outperforms external assistance in terms of predictability and ownership. It avoids aid dependency, facil- itates investment in infrastructure and buttresses growth with equity, as 94 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 95 indicated in the new World Development Report. So I invite recipient countries to increase their domestic resource mobilization. In addition to domestic resource mobilization, aid should be accom- panied by trade. I therefore encourage all countries to maintain their commitment and flexibility to make significant progress in multilateral trade liberalization. As fourth point, I would like to stress the need to make a success of the UN International Year of Microcredit. The potential benefits of microfinance are large, not only for poverty reduction but also for broad-based macro-economic performance. I would like to encourage the IMF and the World Bank to review data availability on microfi- nance. Adequate data are a valuable input to national strategies directed at increasing access to financial services for the poor. Further- more, I encourage the IMF and World Bank to continue to address microfinance in their Financial Sector Assessment Programmes where appropriate. On a final note, I would like to call your attention to the joint paper of Belgium, Sweden, Switzerland and the Netherlands on the IMF Strategic Review. In this paper, we call for a renewed focus on the IMF's core areas and more effectiveness and efficiency within these areas. We also attach importance to the issue of quota and representa- tion. Member states' quota should remain a reflection of their relative positions in the international financial system. Apart from increasing the number of basic votes, I am prepared to consider ad hoc quota increases for the most clearly underrepresented emerging economies, based on the current system of quota formulas. Let me conclude by stressing once again the value of mixed constituencies such as ours, that are so instrumental for consensus building in the Bretton Woods institutions. NEW ZEALAND: ANGELA HAUK-WILLIS Governor of the Bank Introduction Firstly I would like to extend my sympathies on behalf of all New Zealanders towards those affected by the devastation inflicted on the United States by Hurricane Katrina. The offers of help from around the world, including from New Zealand, demonstrate how instant global communications have brought the international community together. It means we are all aware and affected by suffering in other countries. This is a very important year for development issues. Later this year our Trade Ministers will meet in Hong Kong to develop a framework for the Doha Development Round that could have enormous positive 95 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 96 benefits for global welfare. Last week most of the world's leaders gath- ered in New York for the 2005 World Summit, the largest such gather- ing of world leaders in history. As we mark five years since the United Nations Millennium Decla- ration, recent reports have warned that countries will fall short of the Millennium Development Goals, on current trends. Two fifths of the world's population still lives on less than US$2 a day; 100 million chil- dren of primary school age are still out of school, the majority of them girls; and in some regions infant mortality rates and nutrition levels have worsened since 1990. Africa is the region in danger of missing the goals by the widest mar- gin and it is appropriate that the Development Committee this year should focus on an "Africa Action Plan." The World Bank and other partners should not lose sight of the needs of fragile states in all regions, including the Pacific where many small remote economies are also off track for meeting the MDGs. There have been real improvements in human development since 1990: life expectancy in developing countries has increased by 2 years; there are 3 million fewer child deaths annually and 30 million fewer children out of school. Impressive growth rates in some countries including China and India mean that more than 130 million people have escaped extreme poverty since 1990. Both developing and developed countries have made great strides in implementing the Monterrey con- sensus through improvements in governance and increases in develop- ment financing. The progress we have made so far demonstrates that with a renewed global effort, we can achieve the MDGs by the 2015 deadline. Aid and Debt Relief The recent announcements by the G8 to double aid to Africa and cancel the debts of Heavily Indebted Poor Countries (HIPCs) will deliver significant extra resources to help achieve the MDGs. New Zealand, for its part, is committed to working with develop- ment partners--particularly in our Asia Pacific region--to achieve the MDGs. In this year's Budget the Government announced a substantial increase in ODA volume, including a 23% increase this year. This is the largest annual increase in New Zealand's ODA ever made. New Zealand is also supportive of the G8 debt relief proposal and we are prepared to commit resources to funding this important initia- tive. The proposal is particularly well designed to deliver benefits to all IDA only countries through the allocation of additional funding using the IDA performance based allocation system. Despite this, there are some inequities involved in providing assistance to HIPC countries that 96 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 97 will leave them with less debt than equally poor--indeed sometimes even poorer--low income countries. We believe this excellent initiative should be endorsed at this meeting and that further consideration then be given to addressing the unsustainable debt burdens of other low income countries. Governance, Aid Effectiveness, and Trade Increased levels of finance alone will not be sufficient to achieve the MDGs. Improvements in governance, trade policies and aid effective- ness are all essential for reducing poverty. As the United Nations Development Program noted recently, no amount of international cooperation can compensate for the actions of governments that fail to prioritize human development, fail to respect human rights, fail to tackle inequality or fail to root out corruption. The need for country ownership and commitment to reform has been recog- nized in the World Bank review of conditionality. We recognize that conditionality has its place and welcome the trends highlighted in the review of declining use and complexity around conditionality. However, we are concerned that the decline in conditions has been offset by increasing use of benchmarks and triggers that are also perceived as binding conditions by recipient countries. A careful balance is required. Most importantly, whichever conditions are finally agreed must have a high level of country ownership and commitment. Under the right conditions, trade can be a powerful catalyst for human development. We support fundamental reform of the world trading system, particularly through enhanced market access, as this will provide the major benefit to developing countries, especially in agricul- ture. To quote the Bank, "A round that does not begin to tear down the barriers in agriculture will not be a development round." Achieving an ambitious outcome from the Doha Round requires a renewed commit- ment and sense of urgency from all WTO members. We also acknowl- edge that aid for trade is required to help developing countries take advantage of the opportunities provided by reducing trade barriers. Alongside increases in aid volumes, New Zealand would like to see further work on aid effectiveness, to increase the value of each aid dol- lar while delivering more control to developing countries over their own development path. New Zealand expects that the Bank and the Fund will implement fully the Paris Declaration on Aid Effectiveness and ensure that they work in closer partnership with donors, based on country-driven priorities and plans. As our recent OECD peer review noted, the creation of a new agency--NZAID--with a dedicated focus on poverty reduction has been an impressive success. NZAID is playing a key role in promoting 97 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 98 the harmonization agenda in the Pacific. This has been through a range of initiatives ranging from awareness raising to piloting sector-wide approaches in the education and health sectors. At the partner country level, discussions increasingly take place between NZAID, AusAID and partner governments on how we can all work together more effec- tively to enable better co-ordination and to lessen the transaction costs of aid management. Small Pacific States There are many challenges facing small Pacific island states--some of these are serious and immediate. The role of the World Bank and IMF in helping the Pacific nations face these challenges and tap into the dynamism of the wider region is very important. Both organizations play an important role in the region as valuable sources of expert knowledge and technical assistance which help build capabilities. I would like to highlight a few positive developments in the Pacific region since our last annual meeting: World Bank Board agreement to a new Pacific strategy that will guide operations in the region for the next five years. We urge the Bank to remain vigilant to ensure its engagements with small state partners in the Pacific are appropriately tailored to their unique needs and acute capacity constraints. New Zealand is working in partnership with the Government of Tonga and the World Bank on a NZ$14 million project to improve the quality and accessibility of education in Tonga. New Zealand's grant com- mitment has meant the Tongan Government does not need to take out a large loan to support the project. This joint approach is an innovative model which could be useful in other Pacific Island countries and sectors. A positive review by the IMF of its Pacific Financial Technical Assis- tance Centre (PFTAC). New Zealand is pleased to be able to work with the IMF to support the work of this centre and our recent increase in funding is a reflection of our confidence in the value that they are adding to the region. Forum Economic Ministers who met in June this year in Tuvalu, one of the smallest independent countries in the world, agreed to improve the business environment in the countries of the Pacific. Using the World Bank analysis conducted as part of the Cost of Doing Business survey, Ministers from 14 countries agreed to halve the regional average cost of doing business against a range of indicators including the time and cost of starting a business, the cost of enforcing a contract and time taken to resolve bankruptcies. New Zealand, along with Australia and other members of the Pacific Islands Forum, involvement in the Regional Assistance Mission to the 98 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 99 Solomon Islands (RAMSI). RAMSI is a comprehensive approach to security, economic reform and delivery of services through a whole-of- government approach. A recent IMF report has highlighted the serious challenges facing the Solomon Islands in order to rebuild the economy but the first steps have been taken through the establishment of law and order and some important initial steps in the economic reform programme. IMF Strategic Review New Zealand welcomes the work initiated by the IMF on its focus and direction. We welcome the moves by the Fund to focus its activities on issues of core importance; improve the level of cooperation with the World Bank to avoid duplication of effort; and streamline the effective- ness of country surveillance by focusing more on country needs rather than a standardized `tick-box' approach. The core mandate of the Fund continues to be based on interna- tional monetary co-operation, global prosperity and financial stability, and temporary balance of payment support. The focus should continue to be on providing confidential policy advice on macroeconomic policy frameworks and associated exchange rate and financial sector regimes. The strategic review has made progress in some areas particularly clarifying the Fund's role in low income countries. The introduction of a non-lending IMF program and the idea of a new subsidized shocks lending window are positive developments. We look forward to further work on specifying the division of labor between the World Bank and the IMF in low income countries. We welcome the recent steps towards improved collaboration. Some key issues still remain to be addressed over the next twelve months. The costs and trade-offs associated with the new initiatives con- tained in the medium term strategy will need to be considered in discus- sions in the context of the medium-term budget next year. Long term issues regarding financing the Fund in a future where there may be fewer balance of payments crises, will be an important part of completing the Strategic Review and the thinking about medium term budgetary issues. The thirteenth review of quota coming up next year is a key oppor- tunity to address some of the imbalances in representation at the IMF (and subsequently the World Bank). Failure to reach agreement could have serious consequences for the legitimacy of the Fund and the com- mitment of some members particularly in Asia. Options for Internal Reform of the World Bank Over recent years the World Bank has taken on a plethora of new roles without testing whether it should continue with the old ones. The 99 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 100 expansion of roles has been matched by a recent history of excessive and rising costs. We would like to see a strategic review exercise similar to the IMF process conducted at the World Bank to renew the mandate for the scope of activities and general direction of the Bank. New Zealand and other members of our constituency have advocated improvements in the Bank's internal processes and structures. We have been pleased to see some progress, for example, in the adoption of multi- year budgeting. Despite some recent progress, there are still serious orga- nizational weaknesses including unclear roles, responsibilities and accountabilities, poor incentives on individual staff members and inade- quate indicators of Bank performance and feedback to decision-making. Conclusion New Zealand values highly its partnership and engagement with the IFIs. New Zealand just recently became the 171st country to sign the MIGA Convention, formally joining us further into the World Bank Group. We look forward to continuing to work together with other members to achieve our shared goals of reducing global poverty and promoting economic development. I wish to take this opportunity to extend my public thanks to John Austin, New Zealand's recent Executive Director of the World Bank for his tireless efforts on behalf of New Zealand and the rest of our con- stituency and the energy he has brought to his role on the World Bank Board. We look forward to working with our new Korean Executive Director, Dr Joong-Kyung Choi. Lastly I would like to welcome new World Bank President Paul Wol- fowitz to his first Annual Meeting and wish him all the best for the chal- lenges that lie ahead. NORWAY: HILDE FRAFJORD JOHNSON Governor of the Bank (on behalf of the Nordic countries: Denmark, Finland, Iceland, Sweden, and Norway) I am honored to be addressing the 2005 Joint Annual Meetings on behalf of Denmark, Finland, Iceland, Sweden, and Norway. Let me begin by thanking the US authorities for once again hosting the Annual Meetings here in Washington D.C. One of the great heroes of our host country, Abraham Lincoln, has said that "You cannot escape the responsibility of tomorrow by evading it today." It is the "responsibility of tomorrow" that must guide our actions today. 100 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 101 I am talking about the responsibility to improve the lives of the mil- lions who spend every day in a state of misery incomprehensible to you and me. I am talking about keeping our word, delivering on our promises, translating pledges into progress--for those who need it the most. I am talking about staying on track for the MDG deadline, now only ten short years away. We have just concluded the UN summit in New York, and we wel- come the progress made. However, I think we must all agree that the outcome gave us considerably less than we had hoped for. The Nordic-Baltic constituency fully endorses the international partnership for development, building on the Monterrey Consensus and the Millennium Development Goals (MDGs). The UN summit and our meetings this weekend clearly show that MDG progress depends on continuing and strengthening our global partnership. Sound national policies and good development strategies are crucial, but not enough. Policies and strategies must be reinforced by the successful conclusion of a development-focused Doha round, adequate levels of development assistance, and targeted debt relief. This means we are all responsible, all equally involved--or not involved. Because the danger is this: when everybody is responsible, this can mean that nobody really is. It can mean that when 2015 comes around, we will have to look back and admit that we evaded our respon- sibility. It can mean that we failed to meet the most significant challenge of our generation. It is up to us to prevent this from happening--right now. We know very well what has to be done. MDG assessments show us where the problems are greatest. Africa comes last--on every count. Women and children are still the losers in the global prosperity game. This means we must intensify our efforts to give assistance where it is most desperately needed. Africa and the poorest countries must be a priority. This is not happening today. Much of global ODA is going elsewhere--to those who are better off. This must change. And we must ensure that the support we give to Africa and to the poorest is based on additionality, and that it delivers to those who need it most. The Nordic countries welcome the World Bank's Africa Action Plan. Many of Africa's leaders are making renewed efforts to advance the continent. We applaud their initiatives and stand ready to support them. Because Africa is making progress--just not fast enough. The picture is complicated. Armed conflicts, HIV/AIDS and gover- nance problems are posing challenges that can seem insurmountable. Africa's leaders cannot meet these challenges without assistance. But with sound leadership on the inside, and solid support on the outside, I know that this continent--the continent where I grew up--will be able 101 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 102 to take great strides over the next decade. The commitments of the G8 and other donors will lead to an increase in ODA to Africa of around 25 billion dollars a year by 2010, more than double the aid for 2004. We urge the Bank, in partnership with the Fund, to act swiftly and concertedly on the recommendations in the Africa Action Plan. Includ- ing measures to increase net transfers. Following the sound reviews of conditionality and poverty reduction strategies, as well as the discus- sions on aid for trade, the Bank must act quickly, so that the recommen- dations of this annual meeting, and the results of the Development Committee discussions, can be put into practice at once. The Nordic countries remain convinced that the most credible, reli- able and durable approach to financing the funding gap for the MDGs would be to make faster progress in increasing aid budgets and raising ODA towards the UN target of 0.7 percent of gross national income. Therefore we welcome the renewed firm and time-bound commitment by many developed countries to reach this target. We urge those donors that have not yet done so to make concrete pledges towards this target. In addition to providing aid, we need to better integrate low-income countries in the world economy. We must enable them to sustain and accelerate economic growth. We must ensure that trade becomes a vehi- cle for growth and poverty reduction. We welcome the efforts of the World Bank towards this end. The Nordic countries stand ready to deliver on the development promise of the Doha Ministerial Declara- tion. We are willing to make Doha a `Round for Free' for the poorest countries. And we recognize that the link between trade and develop- ment is not automatic: developing countries need our support to over- come supply-side constraints on their participation in international markets. The Nordic countries continue to be strong supporters of debt relief and the HIPC initiative. But it has become increasingly obvious that we need to go beyond the HIPC initiative if debt sustainability is to be achieved. The Debt Sustainability Framework is very important, as it focuses on prudent future borrowing and lending. In addition we need a debt relief proposal that can reduce the debt burden now. This is why the Nordic countries welcome and support the G8 initiative for multi- lateral debt cancellation to poor countries. The fact that the global fight against poverty is now at the top of the G8 agenda is very promising. The Nordic countries are pleased about the statement in the G8 pro- posal that donors will provide additional contributions to the IDA and the AfDF. Without this compensation, which ensures an increase in net transfers to poor countries, the proposal will undermine multilateral development co-operation and will not bring in additional resources. We will hold the G8 countries accountable. We will also assist wherever we can in hammering out a debt relief deal that follows the 102 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 103 principles of the G8 proposal. While we assume that the G8 countries will deliver on their promises of compensation, we want to stress the need for up-front payments or binding commitments. Let me remind everyone that the IDA was promised full compensa- tion for the cost of HIPC. But IDA 14 ended up with a gap of around 50 million dollars, money that is desperately needed for reaching the MDGs. On a purely exceptional basis, Norway has decided to pick up this bill. The IDA should not be punished because of broken promises. In the process of finalizing the design of the multilateral debt relief, the Nordic countries will give full attention to the issue of compensation to the IDA and AfDF and the question of additionality. We believe the success of the proposal depends on the G8 communiqué being followed to the letter--and especially in these two key areas. We must ensure that IDA has robust financial capacity and viability, otherwise we risk undermining its role in helping developing countries reach the MDGs. We must ensure full donor compensation to the IDA for lost reflows due to debt relief. This compensation must come in addition to donors' regular contributions to the IDA. We think the World Bank idea of benchmarking would help safeguard the compensa- tion. As already said we do of course assume that the G8 deliver on their promises, and I can assure you that the Nordic countries will do their part. We fully support the G8's emphasis on good governance, accounta- bility and transparency for securing the full benefit of debt cancellation. But further debt relief should not mean conditionality beyond what is required under the HIPC initiative and existing IDA arrangements. The debt relief proposal could have far-reaching implications for the Bretton Woods institutions. However, if all parts of the proposal are coherently implemented, the institutions will be able to take a firmer stand in the global fight against poverty. Poverty eradication through pro-poor economic growth, social inclusion and empowerment will con- tinue to be the overarching objective of all Bank operations. The Bank is in a unique position to combine financing with policy advice. Its global role must be safeguarded and strengthened. Now we need to find a mechanism for monitoring the compensation to the IFIs and the follow-up of the G8 proposal. We need a broader approach to make sure everyone brings in new money in response to new promises. Recycling will not do. We need fresh funds and firm com- mitments. We need to trust--but we also need to verify. We need bench- marking and tracking mechanisms. The poor are waiting for us to deliver. They do not want hot air and heady debates. They want evi- dence that all of us will pay what we have promised--without delay. The poor are tired of rhetoric, resolutions and reports. They want a better life, a new chance, a way out. 103 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 104 The World Bank and the donor countries can and must help. The past year has been a good one in terms of promises and pledges. But, to quote Kofi Annan, "Pledges are good, but cash is better." The poor have seen too many promises come and go, leaving very little behind them. They have become accustomed to expecting little and receiving less. It is up to us to show them that the promises we made this time are different, that our commitments stand firm, that we are shouldering the responsibility of tomorrow, together. We can, we must, and we will. PAKISTAN: SALMAN SHAH Governor of the Bank It is an honor and a privilege to participate in the Annual Meetings of the Board of Governors in this "Year of Development." I would like to express my gratitude to the Bretton Woods Institutions and the United States government for their hospitality and excellent meeting arrangements. Since the last Annual Meetings of the World Bank and IMF in Sep- tember 2004, a number of important international events including the G-8 Summit in Gleneagles in July and the UN Millennium Declaration Review Summit in New York last week have deepened consensus on key elements of the development agenda. And we have witnessed the renewed commitment of countries and multilateral institutions to write off debts, reduce poverty and pursue the achievement of the Millen- nium Development Goals. Donors have renewed this commitment most notably in the form of IDA14 Replenishment and the G8 Debt Relief Plan for the poorest countries. These, and other, financing com- mitments are a welcome response to the considerable progress that the recipient countries have made in improving their policies, institutions and governance. Yet, the challenge to achieve the MDGs has become more daunting as another year has gone by and 2015 has drawn closer. It is now more likely that many countries will miss the MDGs, largely because of missed opportunities for investing in pro-poor growth and human development. There simply has not been enough concessional money around in the multilateral financing system to scale up development assistance to make a real difference. What is needed is a large increase in concessional assistance and net resource transfers to poor countries. The Bank and donors have a shared responsibility to find ways and means to urgently increase the net transfers. The G8 Debt Relief Proposal is indeed a welcome initiative in that direction. However, it needs to be implemented in a manner so that the financial integrity, resourcefulness and future lending capacity of the 104 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 105 IDA, IMF and AfDB are fully protected. This would require binding commitments from donors to reimburse fully the cost of debt write off to the institutions concerned. The additional resources thus becoming available to IDA should be allocated to all IDA-eligible countries based on its existing performance based allocation system. Attaching new conditionality to these resources would have the undesirable con- sequences of slower utilization thus undermining the objective of increasing net transfers. We welcome the World Bank's initiative to develop the Africa Action Plan. Funded with adequate resources, this plan offers consider- able promise and potential, and a real opportunity to improve the lives of people in the world's most under developed region. We wish the African people and governments, the Bank and the donors every suc- cess in its implementation. One of the great challenges developing country governments face is to pursue growth with equity. We believe that growth will only be sus- tainable if it is coupled with equity. The people have to be the drivers of growth and participants in the growth process. We in Pakistan have launched the "KHUSH HAL PAKISTAN" program to implement community driven development initiative across the country to realize the MDGs focusing on the weaker and more deprived communities. This program designed to upgrade rural and urban infrastructure improves the quality of life of the poor, also provides resources for health, education, skills development and microfinance facilities to encourage full participation of all segments of society in the develop- ment of the country. We look forward to the support of MDBs, particu- larly the World Bank in partnering in this initiative. Growth and private sector development are intrinsically linked. Without market access, the potential of private sector in developing countries cannot be fully realized. It is important that private sector contribution to economic output is maximized. But it is equally impor- tant that that output also finds markets on the basis of fair competition. Agriculture subsidies, non-tariff barriers in rich countries and restric- tions on the free movement of service providers deny poor countries' producers market access on fair terms. We applaud the advocacy role that the Bank is playing in promoting free and fair trade. The Bank can and does influence the policy direction in developing countries and helps them with behind-the-border reforms. In the absence of any leverage over rich countries, advocacy is the only means through which it can bridge the gap in policy and perceptions between developed and developing countries. We would urge the Bank to step up advocacy for a successful conclusion of the Doha Round. After long years of neglect, the Bank did well to formulate the Infra- structure Action Plan in 2003. In Pakistan, the Bank has already scaled 105 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 106 up its assistance program including enlarged support for investment in infrastructure. We appreciate the progress that is being made in its implementation. And we note that infrastructure lending is planned to be increased by one billion dollars a year in the next few years. How- ever, we think that it may not be sufficient to meet the growing infra- structure deficits and investment needs of developing countries. We urge further scaling up and also leveraging it to mobilize private invest- ment through public-private partnerships (PPPs), making full use of the facilities and instruments available with IBRD, IDA, IFC and MIGA, including equity investment, guarantees and local currency loans. We believe that the Bank Group is in a good position to help recipient countries mobilize resources for infrastructure investments without undue exposure to foreign exchange risk, since infrastructure services are priced in domestic currencies. Finally, we encourage the Bank Group to increase its support for municipal infrastructure through municipal fund activities. Finally, a word about voice and participation of developing and tran- sition countries. This is an important part of the Monterrey Consensus. We appreciate the work that has so far been done on this aspect at the Bank and the Fund. However, this work has not led in any directions where concrete actions can be implemented to achieve a real enhance- ment in voice of developing country shareholders. We are convinced that any measures that fall short of increasing developing countries' vot- ing power would be inadequate to achieve the purpose. I urge fellow Bank Governors to come to an understanding on how to settle the issue of voice through voting power. Before I close, let me update the audience on Pakistan's economy. I am happy to state that Pakistan's economy continues to gain strength. The fiscal year ending on June 30, 2005 has been an eventful one. The economy has mounted a strong recovery with a sustained improvement in prospects. The most important achievements of the year include: high real GDP growth of 8.4%, supported by a strong growth in large-scale manufacturing (15.6%), a sharp pick up in agriculture (7.5%), a contin- uing robust performance in service sector (7.9%), and an extraordinary strengthening of consumer demand; a double-digit 12% growth in per capita income reaching $736; investment upturn gaining a stronger foot- ing, particularly private sector investment, which remained buoyant owing to a rare confluence of various positive developments; strong growth in consumption of energy reflecting rising level of economic activity; fiscal deficit remaining almost on target at 3.3% of GDP; high rates of export and import growth; sustained high level of workers' remittances at $4.2 billion; continued accumulation of foreign exchange reserves and a stable exchange rate; a sharp decline in public debt (61.7% of GDP) and external debt burden (32.5% of GDP); and most 106 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 107 importantly, the passing of the Fiscal Responsibility and Debt Limita- tion Act 2005 mark important milestones for the country. Notwithstanding the significant improvements in these economic parameters, we are not complacent. We are aware of the challenges lying ahead. The main challenges include sustaining the growth momen- tum with macroeconomic stability; creating employment opportunities; raising the income levels of our people; and improving the country's social indicators in sync with the strength of the economy. In order to address these challenges, the Government has a clear roadmap and a workable strategy in place. PAPUA NEW GUINEA: BART PHILEMON Governor of the Bank I would like to thank the President of the World Bank Group, Man- aging Director of the International Monetary Fund, and the United States Government for hosting the Joint Annual Discussion and for the warm welcome that we have received. This is an excellent opportunity for all of us to share, and learn from, the wealth of experience and knowledge that organizers and participants bring to these discussions. I would also like to thank the Fund for seeking to have the Pacific Islands Forum Secretariat attend this year. We are increasingly aware of the importance of developing and maintaining cooperation and consul- tation between member governments in the Pacific and these meetings are an opportunity for us to develop a shared understanding of the key issues and challenges facing our region and the world. Papua New Guinea hosted the Melanesian Spearhead Group Sum- mit earlier this year and next month we host the African Caribbean and Pacific Leaders' Summit and the Pacific Island Forum Meeting. These events--in our 30th year of Independence--reflect our commitment to working closely with other countries to build healthy regional economies within an integrated global economic framework. At the time of my first address to this forum during the 2002 Annual Meetings, Papua New Guinea had gone through a protracted period of poor economic performance. Economic growth had contracted for three years in a row, external conditions had deteriorated and the exchange rate had fallen. The deficit had increased. Inflation had risen sharply and the subsequent interest rate rises, coupled with high levels of public debt, were putting severe stress on the budget. Papua New Guinea faced a substantial challenge to restore eco- nomic and financial stability and to put the economy back onto a solid medium-term growth path. In the past three years we have worked hard to address those chal- lenges and I can report that we have made some good progress. 107 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 108 On the political front, we have started to see some much needed political stability, which is a necessary condition for macroeconomic and financial stability and for sustained economic growth. The current gov- ernment has now been in office for several years and looks set to serve out its full term. Political stability has been enhanced by a range of measures including the introduction of Limited Preferential Voting and the enactment of the Political Parties and Integrity Act. Political stability has enabled us to introduce more policy stability. The Government is setting its fiscal policy within the range of medium- term frameworks. These frameworks--the Medium Term Fiscal Strat- egy, the Medium Term Development Strategy and the Medium Term Debt Strategy--lay out clear medium-term plans which the Govern- ment has followed in recent years, and will continue to follow. The Medium Term Fiscal Strategy maps out an affordable and sus- tainable path of public spending and the Medium Term Development Strategy sets out the Government's medium-term development priori- ties. The Medium Term Debt Strategy maps out a path of debt adjust- ment to provide for better management of public debt and reduced exposure to risk. These strategies have been complemented by an ambitious reform agenda. Government's broader public sector reform has been promoted under the Strategies for Supporting Public Sector Reform 2003-2007, and the Public Expenditure Review and Rationalization process which has had solid donor support. Trade and financial services liberalization, and a range of other reform initiatives aimed at reducing business impediments, have created a more supportive environment for private sector growth. We have also benefited from a supportive global economy. Global economic activity has been solid and the prices of the major commodi- ties that we export to the rest of the world have increased sharply. Together, prudent economic and financial and economic manage- ment, and a supportive world economy, have started to produce results. There is now increased investor and consumer confidence in macroeco- nomic management and longer-term growth prospects for Papua New Guinea's economy. Economic growth is now expected to reach 3.0 percent in 2005. Invest- ment has increased, profits are up and more jobs have been created. Inflation has fallen to around 1 percent in 2005. Interest rates have fallen sharply. The exchange rate has stabilized and the current account is in surplus. Foreign exchange reserves have also remained high and are around near-record levels. As we move into 2006 we can have some confidence that our economy will continue to expand. On the fiscal side, the combined effect of solid expenditure control and buoyant revenues is that the budget balance for 2005 is likely to be 108 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 109 a substantial surplus. This follows a small surplus in the previous year. As a result of these good outcomes, the Government has been able to pay off some of its debt. Public debt as a percentage of GDP has fallen substantially over the past couple of years. Despite these good results we are not complacent. We recognize that the macroeconomic situation is still fragile and that we can easily be derailed by adverse domestic or global shocks. We also understand how easily it is for fiscal discipline to slip, espe- cially when conditions look like they are improving. We are very much aware of the daunting challenges we face in get- ting our economy to work well at the micro level and in improving serv- ice delivery to the community. We are aware of the risks from the HIV/AIDs pandemic and other health-related issues, and the difficulty in putting in place systems to manage these risks. More generally, we recognize the ongoing challenge we face to grow the economy and meet our development aspirations. Like other developing countries, we know we can not, and should not, face these challenges alone. The increased linkages between coun- tries through trade and investment, and the commonality of interests in poverty reduction, health, security and a host of other issues means that cooperation and shared solutions to shared problems is becoming increasingly important. We are fortunate to have the knowledge and expertise, and in many cases the financial support of our development partners around the world. We need to ensure that we are able to make use of this support most effectively. International institutions can help to do this by ensuring that support is properly targeted and coordinated, and that it is provided in such a way that it complements institutional development and policy design. More specifically, in Papua New Guinea's case, we need to harmo- nize our development efforts, meshing the development support from our partners with Papua New Guinea's core medium-term develop- ment strategies and development priorities. National ownership, lever- aged by international support, will be a potent force to sustain our momentum. I look forward to our discussions at this meeting and the insights that participants will bring. We have much to discuss and hopefully much to learn. In concluding, I would like to acknowledge and express my Govern- ment's sincere gratitude to the management and staff of the World Bank and the Fund for their continuous support in Papua New Guinea's development effort. 109 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 110 PHILIPPINES: MARGARITO B. TEVES Governor of the Bank First, I would like to welcome the new President of the World Bank, Mr. Paul Wolfowitz and assure him of the Philippines' support. Let me also express my appreciation for Mr. James Wolfensohn under whose leadership the Bank radically changed the way it conducted business-- emphasizing social sectors, the knowledge bank, and decentralization. Our meeting comes on the heels of a series of high-level meetings in this "Year of Development," most recently the United Nations 2005 World Summit in New York. These meetings have significantly built and deepened consensus on the development agenda at a time when the global economy is threatened by major risks--persistent global imbal- ances, high and volatile oil prices, and a possible tightening of financial market conditions. Mitigating these risks would require urgent policy coordination among systemically important countries. The Philippines reiterates its support for the achievement of the Mil- lennium Development Goals (MDGs). We welcome the G-8 Debt Relief Proposal as a major concrete step towards this, particularly for those eligible highly indebted poor countries (HIPCs) in Africa. We look forward to its early implementation, giving due consideration to issues of additionality, fair burden sharing, and the financial sustainability of the IDA. We also welcome the Africa Action Plan developed by the Bank. While understanding the attention given to the world's poorest countries, we would like the Bank to address more vigorously the needs of Middle Income Countries (MICs). MICs too need assistance to achieve the MDGs. As the 2004 Annual Review of Development Effec- tiveness (ARDE) observes, "Most MICs, even though they have pock- ets of poverty and large numbers of near poor, have development goals that do not center on poverty reduction." The ARDE then goes to say that "the Bank should further articulate its mission of poverty reduction and progress on the MDGs in ways that align with these visions." Clearly, the Bank must deepen its engagement with MICs. One way to do this is to offer innovative and flexible financial prod- ucts. The lending products it presently offers are not flexible enough for the needs of MICs. The Bank has no refinancing windows where MICs can qualify for more liberal re-financing terms and conditions premised on its commitment to reforms. This is particularly important for MICs with high debt service such as the Philippines. A proposed refinancing window would enable a MIC to refinance expensive debts with lower cost Bank funds. The interest savings from the refinancing would then be channeled to MDG projects. To address the risk of moral hazard and policy reversal, the Bank could incorporate a penalty rate that the MIC would have to pay, should the reforms not materialize. 110 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 111 We can also come up with creative ways to provide infrastructure for MICs. The MDGs cannot be achieved without growth. However, for countries to grow, they need to increase infrastructure spending. Many MICs have "fiscal space" problems that prevent them from pro- viding the necessary public investment in pursuit of the MDGs. Under this situation, expanding public investment in infrastructure, even if economically justified, will increase fiscal stresses in MICs. Private investment is also not picking up the slack. The Bank, together with MIGA and IFC, should work together more closely to address this issue. In addition, the Bank can scale up its local currency financing for infrastructure projects. Finally, the Bank must listen more closely to MICs. The needs of MICs are more diverse and require a more tailored approach to devel- opment assistance. We need to pay more attention to implementation issues, including the removal of policy and operational aspects that impede decentralization. The Bank needs to be ready to discuss the full range of policy options and the trade-offs involved, with due consider- ation to a realistic assessment of the political economy and the imple- mentation capacity for reform. The fates of the low-income countries and MICs are closely inter- twined with the Bank. MICs provide valuable lessons to the Bank in its role as a knowledge bank. They also generate income for the Bank, allowing it to sustain its assistance to low income countries. Both share a common interest in economic growth with equity as a way to achieve the MDGs. Both will surely benefit from a successful conclusion of the Doha Round. Indeed, the gains that can be generated from the Doha Round could readily offset the 0.7% GNP target of developed countries as official development assistance to developing countries. In closing, I would like to reiterate the Philippine commitment to reaching the MDGs by 2015. We are committed to pursuing responsible reforms that will provide us with the fiscal space to achieve this. By steadfastly implementing our reform program, we hope to engender a virtuous cycle of fiscal improvement, more MDG investments and growth. RUSSIA FEDERATION: ALEKSEI KUDRIN Governor of the Bank and the Fund The Global Economy and Financial Markets We welcome the continuing strong growth of the global economy but, at the same time, we note increasing uncertainty. On one hand, the relatively high growth rates in the environment of subdued inflation is the evidence of the enhanced resilience of the global economy, even at 111 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 112 a time of soaring oil prices. On the other hand, the continuation of the current trends is leading to a further deepening of global current account imbalances against a backdrop of remaining wide growth diver- gences across regions. One cannot help but be concerned that further development of the global economy on the basis of the prevailing pat- terns is increasing the risk of a disruptive adjustment. Much that has transpired recently in the global economy and on the financial markets is difficult to explain. In a high-demand environment, long-term interest rates remain at record low levels. Exchange rates have recently been changing in the direction opposite to the one, which is necessary for a gradual easing of global imbalances. Over a number of years, accommodative monetary policy and the associated increase in liquidity have not led to higher prices of goods and services, but rather to significantly higher asset prices, including housing. The only macro- economic indicator that is behaving in an explicable manner is the world price of oil, whose ascent reflects mostly a substantial increase in demand in the face of limited possibilities for raising supply. Under these circumstances the price of oil is becoming the main indicator of overheating of the global economy. Today the global economy is far less sensitive to changes in oil prices than it was during the oil crises of the 1970s and 1980s. However, fur- ther increase in oil prices could lead to a considerable deceleration of global growth. In this connection much is being said about the need for increased investment in oil exploration, extraction, and refining in order to significantly boost future supplies of petroleum products to consumers. While we do not dispute the importance of the above- mentioned measures, we note, however, that there exist substantial opportunities for stabilizing the oil market through raising its efficiency, including on the basis of increasing its transparency. Additional mea- sures can also be adopted to reduce demand. In particular, possibilities include decreasing or eliminating subsidies for consumption of petro- leum products, and increasing their taxation in countries where the level of consumption is especially high. We welcome new IMF research on global imbalances which has allowed making a number of interesting conclusions. First, the greatest impact on the easing of global imbalances over the short-term may come from the depreciation of the U.S. dollar relative to Asian currencies, while over the medium-term it may come from a substantial reduction in the U.S. budget deficit. More- over, the impact of structural reforms in Europe and Japan on adjustment of global imbalances is found to be rather limited over the entire period of analysis. Such assessments permit to rank the individual components of the cooperative strategy by their impor- 112 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 113 tance and thus pay more attention to those components that may have the greatest impact. Second, the analysis of the dynamics of global savings and invest- ments demonstrates that current account imbalances are a mirror reflection of the gaps between savings and investments across different regions. Thus, there is a correspondence between the sharp drop in sav- ings in the U.S. beginning in the late 1990s and the trend toward decreased investments in East Asian countries (other than China) observed in the same period. Therefore, the traditional recommenda- tion to increase U.S. savings is supplemented by a new proposal to raise investments in Asian countries (other than China) and in oil exporting countries. It is recommended that the latter, in particular, spend a larger part of their growing revenue from oil exports on increasing their investments, and that they boost expenditures in areas where social returns are high. It appears, however, that the optimum balance between saving and spending of oil revenue should be determined by the economy's absorption capacity, as well as by a clearer understand- ing of the degree, to which the observed increase in oil prices is a per- manent rather than a temporary phenomenon. Returning to the issue of global imbalances, we would like to note that one obstacle to the implementation of the cooperative strategy for addressing them is associated with the need for all contributors to this strategy to accept certain short-term losses, for example, in growth rates. The voters and business communities should consent to these losses for the sake of the long-term benefits not so much for their own countries but for the global economy as a whole, which makes such a strategy difficult to implement from a political standpoint. This situa- tion once again demonstrates the increasing tension between the grow- ing integration of the global economy and the continuation of economic management at the national level. The situation on the world financial markets continues to be benign in the sense that low interest rates and decreasing credit risk premia are providing a beneficial financing environment for the official sector, cor- porations, and households. Cheap financing, however, leads to the underestimation of risks and the accumulation of excessive debt, a situ- ation that may subsequently turn into a financial crisis. The Fund's Global Financial Stability Report underscores the duality of the pre- vailing situation, and suggests that the same developments occurring on the financial markets simultaneously can be favorable over the short- term but also be connected with the growing vulnerability of the global economy over the medium-term. It seems to us that such an assessment of the current situation is somewhat complacent in light of the steadily growing risks of a disruptive adjustment on the financial markets. 113 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 114 IMF Objectives and Medium-Term Strategy The development of the Fund's medium-term strategy continues to be one of the priorities for the institution. In this regard we welcome the IMF Managing Director's new report on this issue and endorse most of his proposals. Globalization can be viewed as the main factor in determining the Fund's objectives for the future and may serve as a basis for the elabo- ration of the Fund's medium-term strategy. Globalization is associated not only with new opportunities but also new risks. Therefore, the Fund's activity should be oriented towards helping its member countries avail themselves of the new opportunities, on one hand, while prepar- ing themselves for the new risks, on the other. We agree that it is necessary to place more emphasis on the research of the long-term consequences of globalization. We believe that such research would be of great value, especially if it includes alternative sce- narios for the development of the international financial system. In addition, it is necessary to conduct a deeper analysis of the finan- cial markets, inter alia the financial markets of individual countries. The objective is to include sections on the development of the financial mar- kets in the majority of Article IV reports. This will require inclusion of financial sector experts into the Fund's country missions. We also have no objection to the proposal for a more active partici- pation of the Fund's country missions in public discussions on economic policy in member countries. In Russia, press conferences held by the head of the Fund's mission on the outcome of economic policy consul- tations have already become standard practice. Such press conferences always attract great interest and are reported widely in Russia's mass media. Finally, we support the proposal to expand research on a set of issues concerning capital account liberalization. We note that the number of countries embarking on capital account liberalization is constantly increasing. In this respect, it is very important that the Fund has the abil- ity to provide high-quality technical assistance to such countries since the alternative for them would be to learn from their own mistakes. Strengthening IMF Support for Low-Income Countries We call on all Fund and Bank members to support the G-8 proposal for a full cancellation of the debt owed to international financial institu- tions by the countries-beneficiaries of the HIPC Initiative. For many of them this will substantially ease the burden of servicing their external debt, which will help them free up additional resources for development purposes. 114 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 115 We believe that the implementation of the G-8 proposal will not undermine the Fund's and Bank's overall financial integrity. At the same time, given the decline in resources that will be available to these organizations for financing low-income countries, their ability to con- tinue their mission in those countries will depend on the donors' ability to deliver on their commitments to finance the initiative. We are pre- pared to work on this issue and hope that all the necessary measures will be taken to ensure adequate financing of the Fund's and Bank's operations in low-income countries. We believe that to be eligible for debt cancellation under the G-8 proposal, countries that have reached the completion point under the HIPC Initiative should continue to fully service their debt up until the cancellation point, and avoid serious lapses in economic policy manage- ment and the quality of governance. At the same time, we think that there is no need to introduce additional conditionality since this would complicate the implementation of the initiative. It is unlikely that those countries that are going to benefit from debt cancellation will refrain from future borrowing from the international financial institutions. In this connection, it is important to ensure that the precedent being created will not be repeated. In order to prevent the emergence of a "lend and forgive" cycle, the Fund and the Bank should devote special attention to monitoring debt sustainability indica- tors in low-income countries. Aid Financing and Aid Effectiveness Improving the quality of aid could raise the effectiveness of develop- ment assistance even at constant aid levels. It is clear however that the existing structure of aid flows is not optimal, and its continued replica- tion would not bring us nearer to achieving the MDGs. At the same time we would like to caution against a simplistic view of what would constitute an improvement in the structure of aid. For exam- ple, we believe it would not be useful to equate it with an increasing share of budget support. Direct budget support is only justified when we can be sure that recipient countries have adequate capacity to use these resources effectively, in terms of both sound public resource management and maintaining reasonable macroeconomic framework. An important aspect of this decision is the distribution of aid flows between investment and consumption as well as between productive and social sectors. We welcome the progress achieved in developing new mechanisms of aid mobilization, in particular in the area of vaccines. We are how- ever cautious with respect to such proposals as introducing airline ticket surcharge in some countries. At the same time we would like to point out that any such proposal would be much more effective if it played the 115 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 116 dual role of mobilizing resources for aid and rectifying structural imbal- ances in international trade that prevent the developing countries from taking full advantage of the international division of labor. In this con- text it could be useful to discuss the feasibility of linking additional vol- untary contributions to development assistance to the level of agricultural subsidies in industrialized countries. Focusing on tangible and measurable results is a major instrument of enhancing aid effectiveness. We welcome the Bank's efforts in this area. However, given the complexity of this issue, the Bank must make sure that these efforts do not lead to additional bureaucratic procedures, delays in project preparation or any other negative developments that could undermine the recent trend of containing the costs of doing busi- ness with international development institutions. As regards the problem of donor coordination, we believe that the best way of overcoming it would be to channel an increased share of external aid through multilateral agencies, such as IDA. PRGF programs continue to be the backbone of IMF assistance to the poorest countries. At the same time we hope that over time more and more of these countries will be able to do without IMF financing, and with this view we support the new Policy Support Instrument. Strengthening the Development Partnership and Financing for Achieving the MDGs: An Africa Action Plan We welcome the fact that the international community is paying increasing attention to the task of development in Africa, and we also share the general concern that Africa is off track to achieve the Millen- nium Development goals. In this connection we strongly support World Bank's Africa Action Plan that forms an integral part of recent interna- tional initiatives to spur development in this region. We note with much satisfaction the recent shift of emphasis towards greater reliance on economic growth as the main engine of lifting these countries out of poverty, a change in attitude that Russia has been advo- cating for some time. We believe it is time to identify development par- adigms that could realistically put Africa on a better growth trajectory. Successful examples in South-East Asia and Latin America suggest that such paradigms should be based on building a socially oriented indus- trial society with massive job creation. Needless to say, increased labor productivity should be the cornerstone of this model. In this respect it is particularly instructive to reflect that labor productivity in Africa has been falling for the last 50 years. Against this background we particularly welcome the renewal of attention to investments in infrastructure, a topic that has been neglect- ed by the multinational institutions for too long. We are happy to see that the Plan envisages doubling infrastructure investment in Africa, 116 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 117 which can form an important step on the road towards self-reliant growth. In practical terms this would mean investing up to 20 billion dol- lars a year in African infrastructure projects, up from the current level of about 10 billion a year. We hope that the bulk of the promised increase in aid to Africa will go towards improving the continent's productive potential, because otherwise we risk wasting this historic opportunity. Infrastructure and the World Bank We are particularly gratified to see World Bank's efforts in the area of infrastructure financing. It seems that only recently the primacy of infra- structure financing for development seemed debatable; yet today, this idea once again enjoys global support. One important example of this shift is that Africa Action Plan gives priority to infrastructure financing. The Bank could make important progress in the area of infrastruc- ture financing by focusing its efforts on developing mechanism for sub- sovereign support without the sovereign guarantee. Clearly, instruments of such support should be used sparingly, only where institutional and macroeconomic conditions are adequate. This sub-sovereign support could be particularly useful for large countries in their efforts to improve fiscal federalism, and could fit well with the ongoing global trend towards urbanization and growing role of major urban conglomerations in sustaining economic growth. SLOVENIA: ANDREJ BAJUK Governor of the Bank It is a great pleasure to address the 2005 Annual Meetings. No doubt, these are important times for the Bretton Woods Institutions and for the countries we represent. The global economic growth remains robust and the financial systems have strengthened. Nevertheless, large current account imbalances are a serious source of concern, and higher oil prices represent a danger. Impressive progress has been achieved in the past decades in the reduction of global poverty. But, there are far too many people that have not enough to eat, have no access to safe drinking water, and cannot afford sending their children to school. Against this background, the calls for increased global policy coordina- tion and solidarity are most warranted because they are both ambitious and fair. We face important tasks ahead. As Harold James's historical research1 reveals, it was in the same set- ting of challenge and responsibility when in March 1946, in the General 1 James, Harold. International Monetary Cooperation Since Bretton Woods. Wash- ington, D.C.: International Monetary Fund and New York: Oxford University Press, 1996. 117 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 118 Oglethorpe Hotel in Savannah, Georgia, the Board of Governors of the Fund and the World Bank met for the first time in order to set in motion the institutions inaugurated in July 1944. Fred Vinson, the US Secretary of the Treasury, was chairing the meeting when Lord Keynes as the Governor for the United Kingdom started his opening remarks with a warning: "I hope that . . . there is no malicious fairy, no Cara- bosse, whom Vinson has overlooked and forgotten to ask to the party. For if so the courses which that bad fairy will pronounce will, I feel sure, run as follows: `You two brats shall grow up politicians; your every thought and act shall have an arrière-penseé; everything you determine shall not be for its own sake or on its own merits, but because of something else'." There are two points I want to make with this reference. First, the multilateral framework put in place in mid-40's turned out to be far more successful than the Governors gathering in Savannah would have thought possible, but yet there is still a long way to go. In almost 60 years since they met, the global growth has been dramatic. The experi- ence and knowledge about how best to adopt the right policies to secure economic stability and to reduce poverty have deepened. Life of hun- dreds of millions of people has improved significantly. Nevertheless, a too large part of this world is still in dire straits. Many countries have grown little or not at all because they have stayed on the sidelines while the others have been moving ahead. They all deserve a chance. They need help in bringing to life the targets set in their poverty reduction strategies, and they need resources to support their economic policies. For all these reasons, the initiatives to secure additional aid flows and to forgive debt are warmly welcome. The second point I want to make is that no matter what is at stake, it is of utmost importance to stick to the legal and economic rules and principles designed by the creators of our two institutions. These rules and principles remain valid. They should be respected even though the economic reality has changed a lot since they were written. We live in times of increasing mutual interdependence. More than ever before, we need the international framework as set up in Bretton Woods, New Hampshire and in Savannah, Georgia. Concerted effort should be made to preserve its mandate and integrity. Two important questions follow from the discussions over the past few months. How to both forgive the multilateral debt of poorest coun- tries and to safeguard the long term financial capacity of IDA and the International Monetary Fund? How to secure legally binding commit- ment that the donors' compensation to IDA for the debt foregone will be paid from the additional development aid budgets? Despite the progress achieved so far, we should not forget that nothing is agreed until everything is agreed upon. 118 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 119 Solving these two questions is a task that we should all feel obliged to undertake. It presents us with great challenge and imposes immense responsibility. We should be able to handle both because I am confident that the Fred Vinson of our time invited everybody. Success will not escape us if, and only if, all invited share the same burden in a commen- surate way. SPAIN: DAVID VEGARA FIGUERAS Alternate Governor of the Bank World Economic Outlook The global economy is growing at an acceptable rate, and this is excel- lent news. However, this does not mean that we should become compla- cent. Over the past few months the principal global imbalances have grown, especially as relates to the current account balance and fiscal bal- ances in certain areas. For those imbalances to be overcome, there must be an adjustment of real exchange rates, growth in savings to mitigate the impact of the current account and public deficits, and structural reforms to revive potential growth in the areas where it has been the least impressive. But beyond this analysis, which is broadly shared, it is essential for that adjustment to occur in an orderly and coordinated fashion in all the areas involved. Steps must be taken to avoid having the adjustment address only, or primarily, exchange imbalances. Indeed, all of our countries must responsibly assume our obligations as global actors. Accordingly, neither can Spain ignore that need. Although the Span- ish economy is currently enjoying a phase of sound growth, the priority of the government's economic policy is to secure that growth as much as possible in the future, by specially nurturing the decisive factor in long- term growth, productivity. In taking up this challenge, we will con- tribute gradually to the elimination of the current account deficit, and in this regard, I feel certain that the measures we have been taking to bolster the various markets, our budgetary emphasis on R&D in infra- structures, as well as the strengthening and modernization of the legis- lation on competition or future social pacts with respect to labor, we will make great strides in the most appropriate direction. Strategic Review Turning to the work of the Fund, I would like to congratulate the Managing Director and his team for designing the medium-term strat- egy. Furthermore, heartened by the successes achieved in the imple- mentation of proposals, we believe it is possible to continue working in that direction over the coming months. 119 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 120 We found the emphasis placed on strengthening the IMF's surveil- lance activities particularly useful. We therefore agree that the review of the procedures for capital account liberalization, the study of the suitability of exchange regimes, and the soundness of financial systems, as well as analysis of the macroeconomic and social implications of globalization should constitute essential parts of the surveillance exer- cise. Also, we feel that the empowerment of the Fund as a forum for the coordination of economic policies should play a highly positive role in this context. Regarding crisis prevention, we feel certain that the implementation of prudent economic policies is key to success. But at the same time, the existence of signs of contagion tell us that we must introduce new instruments that can lead to greater security or guarantees for the implementation of a country's economic policies. It seems to us that such instruments should make it possible, where appropriate, to pro- vide exceptional access to Fund resources, even though their availabil- ity should be subject to the fulfillment of certain macroeconomic policy requirements. That said, for such a development to be possible, it would be necessary to formulate a new credible and foreseeable framework for exceptional access. SRI LANKA: SARATH LEELANANDA BANDARA AMUNUGAMA Governor of the Bank and the Fund May I begin by extending my sympathies to all those people and governments which have had to face natural as well as man-made disas- ters in the recent past. My country too has suffered from both types of ravages and we identify sincerely with those countries in their sorrow. We meet at a time when the world economy is relatively benign. Nevertheless, global imbalances and risks remain. If global growth is to be sustained and imbalances are to be reduced without causing danger- ous instability in markets, concerted and co-operative efforts are needed from the global community. A major cause of concern is the high and rising price of oil in international markets. We stress the importance of all players in the petroleum sector, i.e. producers, suppli- ers and consumers, working together to maintain oil prices at a reason- able level. The Fund too has an important role to play in this regard. We urge that an oil facility to assist low income countries affected by the surge in prices be operationalized soon. This could be in the form of a modification of the CFF. We believe that the International Monetary Fund and the World Bank both have important roles to play in strengthening and sustaining the world economy. The efforts being made by these institutions to 120 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 121 assist low income countries to reach the Millennium Development Goals are extremely important. The Fund's Medium Term Strategy, with its focus on addressing the challenges of globalization, is very wel- come. We welcome also the Fund's continued involvement in support- ing low-income countries. We encourage the broadening of the recent G-8 initiative on further debt relief for HIPCs to include other low- income countries that are similarly disadvantaged due to debt. Let me now speak of my own country. Sri Lanka has graduated from being a low income country, to the lower end of middle income status. We have now reached a per capita income of US$1,040. My country was badly affected by the Tsunami. With the assistance of the international community, we were able to undertake successfully the initial relief work. We are now engaged in the more arduous and longer-term activ- ity of reconstruction and rehabilitation. We are deeply appreciative of the many pledges of assistance that were made and are now being con- verted into firm commitments. Despite the impact of the tsunami, we expect our economy to grow by over 5.5 percent in 2005, with agricul- ture, industry and service all registering robust growth. Our export sec- tor has been performing well despite challenges associated with the end of the Multi Fibre Agreement. Tourism is recovering from the effects of the tsunami. The surge in oil prices has become a major drawback because we are heavily dependent on imports for our energy needs. This is affecting the pace of economic growth, inflation and the balance of payments. We stress, once again, the importance of acti- vating a medium-term financing arrangement to assist low income countries severely affected by the recent sharp rise in oil prices so that open and liberal trade and exchange systems in these countries can be sustained. Another aspect that I would like to emphasize is that the Bretton Woods institutions should reward the countries that have, with proper policies and management, emerged from low income to middle income status. While we welcome and strongly support the emphasis on LICs, it should not be forgotten that these middle income countries too need special attention and support. Our government is committed to prudent macro economic policies promoting economic growth that would be pro-poor and will deliver equitable growth. We are taking measures to ensure that the disadvan- taged segments of our population would benefit from this growth. The private and public sectors are working together to speed up economic prosperity in our country. Our current focus is on the development of infrastructure facilities, particularly in key areas such as Power, Roads and Transport systems, Ports and developing of institutions catering to the needs of the rural and SMI sectors. We are making efforts to achieve the Millennium Development Goals in areas where we need to make 121 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 122 further progress, even though Sri Lanka has a good record in human development. Over the years, my country has achieved considerable success in human development. Our Human Development Indicators bear witness to these achievements. Meanwhile, there are signs of good fortune for Sri Lanka. The pre- liminary findings of a seismic survey recently conducted in the Gulf of Mannar, west of Sri Lanka, has revealed the presence of a world class petroleum system offshore. This indicates a potential for high quality hydro carbon deposits. This prospect is expected to be further defined by additional 2D seismic surveys in December. International licensing is scheduled for the first quarter in 2006. In conclusion, let me thank the Fund and the Bank for the continued assistance extended to Sri Lanka and assure you of our cooperation in the days to come. ST. KITTS AND NEVIS: DENZIL DOUGLAS Governor of the Bank (on behalf of the Member States of the Caribbean Community) It is a great honor for me to speak on behalf of the Member States of the Caribbean Community (CARICOM), namely Antigua and Bar- buda, Bahamas, Barbados, Belize, Dominica, Grenada, Guyana, Jamaica, St. Lucia, St Kitts and Nevis, St Vincent and the Grenadines, Suriname, Trinidad and Tobago and my own country St Kitts and Nevis. Our delegations would like to express appreciation to the man- agement and staff of the Fund and Bank as well as the government of the United States of America, for the excellent arrangements made for these meetings. We are meeting at a time, when the attention of the international community as a whole is on poverty reduction. Global partnership has strengthened and the focus is on achieving the Millennium Develop- ment Goals (MDGs). The current global environment, which despite the risk of higher oil prices and continued building up of global current account imbalances, provides an ideal opportunity for development partners to make firm commitments to reach the MDGs before the deadline of 2015. Global economic growth is projected to moderate at a more sustainable level of 4.3 percent after reaching 5.1 percent in 2004. Within this picture, it is important to note that the world economy is still not resilient to economic and financial crisis. In this regard, it is important that more attention be accorded to global linkages and regional systemic issues, given that countries are much more integrated than before. As the Caribbean economies become more closely inte- grated with each other and into the global economy, we would welcome 122 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 123 the prospect of a Caribbean Regional Economic Outlook as part of the Fund's regional surveillance activities. This Regional Outlook would be consistent with those produced for Sub-Sahara Africa as well as Asia and the Pacific regions. We welcome the progress made on the establishment of a Policy Support Instrument for low income countries by the Fund. This instru- ment can play a crucial role in countries that may not need the Fund's financial support, but may want the Fund to support and monitor their policies. Intensified forms of surveillance have played an important role in middle income countries as is currently the case for Jamaica. We therefore look forward to these instruments continuing to play their valuable role in policy support and signaling. Achieving a significant reduction in the proportion of people living in extreme poverty in the world remains a formidable challenge. A strong commitment is needed by all of us--developing countries and donors alike. Developing countries will have to continue with their reform efforts to improve the processes conducive to growth and poverty reduction. In particular, developing countries will have to inten- sify their governance reform, invest in people and infrastructure, and mobilize the private sector to unleash entrepreneurship. The Bank and Fund, along with other donors will have to scale up their efforts in assisting developing countries and in particular those in the Caribbean to establish strong foundations for their sustainable development. Clearly, this means increased and more effective financial aid. First, ODA should be increased and made more predictable. The EU has adopted a timetable for realizing the ODA targets. This is a highly commendable step and we urge all donors to follow suit. Second, debt cancellation and reduction should be extended and deepened. We welcome the commitment of the G-8 countries to write off the debts of the heavily indebted poor countries at the IMF, IDA and Africa Development Fund (AfDF). It is vital that this debt relief arrangement is unconditionally supported by the international commu- nity and implemented relatively quickly so that additional resources are available for poverty-reducing expenditure. We also hope that this ini- tiative will be extended to other multilateral institutions and other countries, including some in CARICOM, with excessive and unsustain- able debt. For instance, St. Kitts and Nevis, the smallest state in the Western Hemisphere that carries debt in excess of 175% of GDP is a special case deserving special consideration. We have been struck by mammoth hurricanes, we have been deprived of our sugar industry by the forces of trade liberalization. Yet we do not have access to the soft resources of multilateral institutions, and the rules of the game of inter- national economic relations seems too inflexible to deal with the special needs of our tiny island state. 123 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 124 Third, there should be new sources of funds that are more stable and predictable to finance the development agenda of developing countries. In this regard, innovative financing mechanisms should be explored and promoted as additional to increased ODA. A successful conclusion to the Doha Development Round is crucial in achieving the MDGs and for sustainable development. In this con- text, the WTO Ministerial Conference in Hong Kong in December 2005 is an opportunity not to be missed. We recognize that trade reform is a highly political issue and therefore, there must be compromise and real- istic efforts on all sides so that trade can be truly leveraged for sustain- able growth and poverty reduction. It is, however, imperative that the special needs of weak and vulnerable countries, as they relate to the special and differential treatment provisions, should be fully reflected in the outcome of the negotiations. We welcome the continued support by the Bank and Fund in their advocacy for a good pro-poor deal as well as financial and technical assistance to support developing countries in their efforts to maximize the possible gains from trade openness. However, we would like to point out that for developing countries to reap the benefits of trade lib- eralization and to meet the challenge of integrating in the multilateral trading system; they have to incur huge adjustment costs. In this regard, trade related assistance and investment; especially in infrastructure and human capital are urgently required to help vulnerable developing countries in trade-based economic adjustment and to help create real opportunities for development. The timing of the World Bank's position on climate change is appro- priate in light of the effects of the high levels of carbon dioxide emission and pollution as well as the huge differences in approach to the prob- lem by developing, emerging and developed countries. The United Nations Framework Convention on Climate change has identified small island states, such as ours in the Caribbean, as among the most vulner- able to anticipated impact from climate change and the resultant signif- icant effect on sustainable development. We believe that the World Bank can play a major coordinating role in having the key stakeholders resolve to agree on a comprehensive framework to tackle climate change. Such a framework would obviously have to include not only technological improvement but rapid improvement of alternative energy sources, given the impact of high oil prices on the global econ- omy in general and on developing countries in particular. High and volatile energy prices have strained economic growth of oil importing countries, such as those in the Caribbean, not only destroy- ing economic opportunities but also exacerbating the challenges for economic management and diversification of their export sector. We can no longer be complacent about energy matters. We agree with the 124 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 125 Bank's position on investment in the extractive industries and notes that increased access to affordable energy is crucial for poverty reduction and sustainable growth in developing countries. We are pleased that the Bank will scale up its support for renewable energy and hope that this will be done urgently and within the context of sustainable energy sup- plies that are efficient, affordable and accessible. The 2002 Monterrey Consensus encouraged the Bank and Fund to find pragmatic ways of enhancing the voice and participation of devel- oping and transition countries in the work and decision making of these institutions so as to address the development needs and concerns of these countries. We recognize the progress achieved so far in strength- ening capacity at both the Bank and Fund and the need for a consen- sual approach to effectively increase voice. We are aware of the many options available to increase voice and would encourage the directors and governors of the Bretton Woods Institutions (BWIs) and other con- cerned parties to discuss all these options with an open mind so that the voice of developing and transition countries can be advanced in an effi- cient and effective manner. We note the range of country situations that the Bank is engaged in is very large and therefore a major challenge is how to manage several different client segment approaches within the Bank. We also believe that differentiation is critical to developing effective strategies for growth and poverty reduction among the Bank's clients. We encourage the continuing active participation of the World Bank in the Small States Forum who's Agenda is set out in the Commonwealth/World Bank Joint Task Force Report of 2000. This year's Forum focused on a review of the Small States Agenda. The background study document for the review clearly points out that the vulnerabilities of small states outlined in 2000 are not only still relevant but have become more acute and additional vulnerabilities have emerged in some of our Caribbean countries. The huge economic and human losses caused by hurricanes and floods in many of our countries clearly reflect our vulnerability as well as our inability to deal both economically and financially with the dev- astation. It is obvious that countries in the Caribbean region will not only need increased access to ODA to supplement our domestic resources for achieving the MDGs and growth, but also for post disas- ter reconstruction, disaster prevention and mitigation of future cost. We urge the BWIs to continue their efforts in exploring further options for increasing access to grants and new financing modalities. In addition, the BWIs should also take the lead in deepening coordi- nation with development partners on a comprehensive risk manage- ment initiative to promote best practices in reducing disaster risk and future costs. 125 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 126 We accept responsibility for our own development and are commit- ted to strategic repositioning for accelerating growth and poverty reduc- tion with special emphasis on continued strengthening of our financial systems. The region, as usual, will continue to work with the interna- tional financial institutions and the donor community to improve the welfare of our people. Finally, we would like to take this opportunity to wish the new Pres- ident of the World Bank, Mr. Paul Wolfowitz every success in fulfilling the mission of the Bank. SWITZERLAND: JEAN-PIERRE ROTH Governor of the Fund Let me start by warmly welcoming Mr. Wolfowitz as President of the World Bank. I do not have to underscore the multiple challenges the international community currently faces. I am convinced that the Bank, as a global institution, must play a crucial role in dealing with global challenges. We look forward to working closely with you. The recently adopted strategic directions and the wide reform agenda provide an excellent basis to focus and strengthen the activities of the Bank. Assessing strategic directions was also very much at the top of the IMF's agenda in the past year. I thank the Managing Director for taking the initiative last year to undertake a review of the Fund's activities. For an institution confronted with expanding membership demands against the background of a continuously evolving international environment, it is crucial to periodically assess its mandate. Therefore, I welcome the Managing Director's outlining the Fund's priorities in his recent state- ment. I am convinced that this medium-term strategy will allow the Fund to regain a better focus in its main areas of activities. Both institutions continue to play a key role in ensuring that all members of the Bretton Woods Institutions can derive the maximum benefits from a globalizing world. The increasing interlinkages between the various global challenges demand an ever closer cooperation between multilateral institutions. The best foundation for effective cooperation are clearly defined core mandates. In my view, the recent strategic reviews of the Bank's and the Fund's activities have con- tributed importantly to a better focus of the two institutions' goals. I am confident that you, Mr. Wolfowitz and Mr. de Rato, will strive to further strengthen the cooperation between your institutions. This will be par- ticularly important in the context of the international community's efforts to meet the Millennium Development Goals (MDGs). A key factor for achieving the MDGs are sound economic policies in member countries. Significant progress has been made over the past year, given the relatively benign global economic conditions. I am pleased that 126 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 127 the world economy has continued to expand at a strong pace. The down- side risks discussed last year did not materialize. So far, most countries have coped well with the continued rise in oil prices. It is encouraging to note that inflation remains subdued and that global interest rates have not significantly risen from their historically low levels. Most countries have used these circumstances to improve fiscal positions, to implement structural reforms, and to reduce external debt levels. However, this should not give rise to complacency. The continuing favorable global outlook should be seen as an opportunity to further reduce vulnerabilities. Particular attention is necessary to global macro- economic imbalances. These have not diminished and remain a chal- lenge for individual countries and the Fund. As a truly global forum, the Fund must play a coordinating role in addressing these imbalances. I welcome the Fund's ongoing efforts to sharpen the focus of its sur- veillance activities. Effective macroeconomic surveillance remains the Fund's pivotal activity in addressing imbalances at the global, regional, and country levels. Further improving the linkages between country and regional surveillance is essential to capture spillover effects and ensure policy consistency. The Fund also has a key role to play in capi- tal account issues. I welcome the pragmatic approach outlined in the Fund's medium-term strategy. The Fund must bring together its vast experience on capital account liberalization to provide the best advice possible for managing the process under country-specific circumstances. Providing members with temporary financial assistance remains an important role of the Fund. However, resources are limited and this should be signaled more clearly and consistently. In my view, past expe- rience has exposed some weaknesses in the pricing of different instru- ments of Fund credit. Inconsistent use of the various instruments has also raised questions and increased uncertainty. These issues have con- tributed to unduly frequent exceptional access as well as to prolonged use of Fund resources. I look forward to a resolution of these issues, so that the provision of financial resources can take place in a clear frame- work both for members and for market participants. Over the past year, the Fund has put great efforts in better defining its role in low-income countries. This is timely, given its contribution to the global efforts to achieve the MDGs. The Fund's overarching goal remains the promotion of macroeconomic and financial stability through policy advice, capacity building, and financial assistance. I wel- come the important work that has been undertaken to adapt the Fund's instruments to the specific needs of low-income countries. In particular, the evolving non-financial Policy Support Instrument will provide an important signaling instrument for countries with strong economic poli- cies. However, its signal will only be credible, if the instrument truly embodies a sound and credible set of policies. 127 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 128 Looking forward, I think there is scope to better define the Fund's role in the global development partnership. The large demands of low- income countries and development partners have frequently raised unrealistic expectations vis-à-vis the Fund. More clarity on what the Fund can effectively do would make it a more reliable actor, and allow for a clearer division of labor with other partners. I would expect a shift of Fund activities from financing to surveillance and capacity building. I welcome the initiative for further multilateral debt relief. This ini- tiative is of particular importance to many of the poorest countries, as it should reduce their heavy debt burdens and free resources for human development and sustainable economic growth. The success of debt relief in truly contributing towards poverty alleviation and meeting the MDGs will critically depend on finding appropriate solutions to several key implementation challenges and securing funding for the initiative. In this regard, I very much commend Bank and IMF staffs for bringing the various legal, financial and operational issues to the fore as this allows to make well-informed decisions that are in accordance with the rules and principles of the institutions concerned. Switzerland emphasizes the importance of safeguarding the IDA's, the ADF's and the IMF's long-term financial integrity, the respect of fundamental institutional principles as well as preserving IDA's and ADF's nature as loan-making facilities. For the IDA and the ADF, this calls for clear rules to monitor additionality of debt relief resources for the IDA 14 period and beyond. It is crucial to ensure the effectiveness of debt relief, as the donor community and recipient countries are accountable to their citizens and tax payers. Therefore, the debt relief proposal should be implemented through a sufficiently strong frame- work of performance and poverty reduction. We are strongly commit- ted to continuing working with all other shareholders and Bank and Fund staff to arrive at a debt relief scheme that is sound, comprehen- sive, and based on a broad consensus and fair burden sharing. I acknowledge the progress in the area of aid financing. While I remain convinced that increasing official development assistance through ordinary budgetary means is the simplest and most effective way, I am still open to examine initial experiences with new mechanisms by those countries that have chosen to go ahead. Harmonization and alignment are key for enhancing aid effective- ness. The High Level Paris declaration on alignment and harmonization is a valuable achievement in this regard and its implementation requires our full attention. I note that this is coherent with the key findings of the World Bank's reviews of the Poverty Reduction Strategy approach as well as of Conditionality, which I strongly endorse. The welcome improvements in governance, growth and human devel- opment observed in several African countries need to be sustained and 128 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 129 spread to the many countries still lagging behind. Therefore, the special focus on Africa is timely and important. At the same time, this should not deter us from maintaining and enhancing development efforts in other regions. The World Bank's Action Plan for Africa is well-structured and builds on lessons learned as well as on analytical and practical efforts by other key actors. I particularly support the focus on results, growth and building partnerships. The likely scaling up of aid to Africa represents a unique chance to make big strides towards the MDGs. At the same time, this poses important challenges for the governments and the IFIs, includ- ing the need to mitigate possible negative macro- and micro-economic effects, such as Dutch disease, overcome human and institutional capac- ity constraints as well as reduce aid dependency. I would like to underscore the importance of bringing the Doha Round to an ambitious success and signal the urgency to reach a politi- cal commitment at the Hong Kong Ministerial in the collective interest of strengthening the multilateral trading system. A failure would be an enormous setback, especially for developing countries, and I firmly believe that trade is key to ensure long-term growth. Not only of agri- culture, but also non-agricultural and services market access for devel- oping countries are significant. A positive outcome requires action from both developed and developing countries, including emerging economy countries. I thank the Bank for its valuable analytical and practical contribu- tions, including its efforts to help mainstream trade into poverty reduc- tion strategies and fostering more complete follow-up by governments and donors as well as its contribution in the process of enhancing the Integrated Framework. In this context, I recall the challenges and enor- mous needs which many developing countries continue to face in the area of infrastructure. Orienting infrastructure development towards sustainable and environmentally clean technologies should be given special attention. The poorest countries and poorest people pay a disproportionate price in natural disasters. The awareness about the very likely links between some natural disasters and climate change as well as the strong relation between environmental problems and poverty has to be increased. Concerted action is urgently required, not only at the global scale, but also at the regional, national and the local level, by govern- ments and private business. Along with this there are a number of actions which the World Bank Group and other multilateral organiza- tions can take to address climate change within their own operations and policies. I look forward to a more substantive discussion of this topic at the next Development Committee meeting. In conclusion, I would like to underscore the importance of a well- balanced participation of all members in the Bank's and the Fund's 129 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 130 decision making. This is important for the institutions' effective func- tioning. Switzerland is ready to work towards a solution that ensures an adequate representation across the membership. Representation must continue to reflect the position of countries in the international finan- cial system, and their contribution to financial stability. A consensus on an adjustment of quotas could also include an increase in basic votes to strengthen the representation of low-income countries. THAILAND: THANONG BIDAYA Governor of the Bank It is my great honor for me to express my appreciation to the World Bank/IMF and the United States for their warm hospitality in the 2005 World Bank/IMF Annual Meetings in Washington D.C. I would also like to join my fellow governors in extending my warm welcome to Mr. Paul Wolfowitz on your appointment as the new President of the World Bank. I believe that you will use your vast knowledge and expe- rience to lead the Bank in fulfilling the dream of "a world free of poverty" during your tenure. Rising oil price and volatile short-term capital movements as well as natural disasters have detrimental impacts on the world economy. There is a definite need for collective actions to moderate these shocks before their impacts destabilize the prospect of world economic growth and stability in the near term. Despite these impacts, Thailand has proven to be resilient in weathering these man-made and natural disas- ters. Last year, Thai economic growth reached 6.1 percent. This year, despite continuously rising oil price and the tragic natural disasters of Tsunami, Thai economic growth will remain positive and vibrant at least at 4 percent. Inflation will be contained at around 4 percent despite the cost push, while our foreign reserves remain high, above three times higher than our short-term external debts. We will continue to be vigi- lant to ensure sustainable growth with strong economic stability. The Thai government is firmly committed to a balanced sustainable growth for both economic and social development objectives. Today, we are proud to have successfully reached most of the MDGs' target well ahead of schedule. The targets for reducing poverty and hunger, achiev- ing universal primary education, promoting gender equality, as well as combating HIV/AIDS and malaria remain high priority although most target have already been achieved. We will aim higher to establish a new set of "MDG-Plus targets," which are more ambitious, but attain- able, than those agreed internationally. Prime Minister Thaksin Shi- nawatra's government has also set a policy target to eradicate poverty by the year 2009. 130 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 131 As a successful middle income country in achieving development goals, Thailand is in a new mode able to contribute positively to the Global Partnership for Development. By taking an expanded role in sub-regional development, Thailand is actively sharing with other coun- tries in the Greater Mekong Sub-region our own experience and know how from first-hand experience in the fight to reduce poverty. In addi- tion, we are actively engaged with our neighbors to improve and facili- tate transport linkages within the sub-region. We have established a new agency, Thailand's Neighboring Countries Economic Development Cooperation Agency (NEDA), to continue this thrust in a meaningful way. Thailand is now ready to fully cooperate, where possible, with international organizations, particularly the Bretton Woods Institu- tions, in extending our support to assist socio-economic development programs in other developing countries in the region and beyond. On matters relating to the World Bank, we appreciate the important roles played by the World Bank in supporting our committed reforms in the areas of human and social capital, competitiveness, poverty, and environment. However, in relation to the World Bank's policy in gen- eral, we feel that the direction of the Bank placed emphasis on only one region although all regions face similar challenges in reaching the MDGs. As a multinational institution, we would like the Bank to be more balanced by giving equal emphasis to problems facing every region. Thailand would also like to commend the IMF for making con- tinuous efforts to strengthen its roles in the international capital mar- kets. Nevertheless, we would like to caution the Fund against moving into areas that are not the Fund's core mandate, so as to keep the Fund focused on its policies to ensure the effectiveness of its surveillance mandate. In addition, on capacity building, it has been our experience that longer-term technical assistance is much needed. However, the introduction of user fees for services would be a great disservice to the Fund, as it would deter member countries to participate in benchmark- ing exercises. Last but not least, we would like to draw attention on the Board of Governors concerning the relationship between the Bretton Woods Institutions and their members. At the heart of the issue is the reform to ensure that the voices of all countries and regions are equitably rep- resented to reflect their role in the world economy. The voting shares of developing countries need to be adjusted to reflect their true weight in the world, and the rights of minority shareholders have to be protected. These reforms are long overdue. To retain its credibility and mutual trust from their members, the Board of Governors and management should strongly press for these changes; otherwise, how could these Institutions preach member countries on governance issues. 131 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 132 TONGA: SIOSIUA T.T. `UTOIKAMANU Governor of the Bank and the Fund It is indeed an honor for me to address the Board of Governors of the International Monetary Fund and the World Bank Group on behalf of the Government of the Kingdom of Tonga at the 2005 Annual meetings. At the outset, I wish to express my government's sympathy and con- dolences to the Government and the people of the United States who have suffered from recent hurricanes in the Gulf Coast. I would like to congratulate Mr. Paul Wolfowitz on his appointment as president of the World Bank Group. I also take this opportunity to thank his predecessor Mr. James Wolfensohn for sterling performance in guiding the World Bank Group during his tenure in office. World economic growth has been on an upward trajectory over the last three years, with strong growth projected again this year. At the same time, global imbalances and high and rising oil prices remain an important downside risk. Despite the increase in oil prices, growth in developed countries and major Asian countries has been robust stem- ming from sound macroeconomic policies. The issue of debt relief approved by the G8 in Gleneagles is an important milestone for developing countries but will still require pru- dent implementation to protect the financial integrity of the multilateral institutions without diverting aid flows from other essential activities. At the same time, we support the call for the international commu- nity to give further attention to the unsustainable debts of other poor countries excluded from the HIPC process, as well as those that have continued to service their debts. Special attention should also be focused on small and vulnerable countries facing growing debt burdens, and to domestic debt which is imposing a significant fiscal burden on some poor countries. The Heads of State and Heads of Government at the conclusion of the historic High Level Summit in New York on the 16th September 2005 reaffirmed their commitment to achieving the Millennium Devel- opment Goals by the 2015. The Financing of Development Meeting held prior to the Summit also reaffirmed the commitments by the devel- oped countries to achieving the 0.7% target of GNP for ODA by 2015. Tonga has incorporated appropriate policy measures to put it on track to meeting the MDGs by 2015. The recent UN Human Develop- ment Report 2005 ranked Tonga at 54 among 177 countries. Tonga supports efforts to reach a mutually acceptable resolution to the outstanding issues to the Doha Round during the forthcoming Hong Kong conference on international trade. In order to support international efforts to combat money launder- ing and the financing of terrorism, Tonga has joined the Asian Pacific Group on Money Laundering as the 29th member in May 2005. 132 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 133 Turning to domestic issues, Tonga's economy has responded to prudent fiscal and monetary policy measures as evidence by GDP growth of 2.5% in 2004/2005. Preliminary projections indicated that GDP would grow by 2.9% in 2005. Inflation fell from an average of over 10% in 2004 to 8% in July 2005 and the fiscal balance improved to a surplus of 0.1% of GDP in 2004/2005 after several years of deficits. At the same time, the Kingdom's external reserves improved significantly to above the minimum threshold of three months of import cover after having being under downward pres- sure for several years due to rapid expansion of Government spending on supporting certain public enterprises and the public service. After having achieved these steady improvements in macroeco- nomic conditions, the Kingdom now faces serious challenges to main- taining these positive developments. In September 2005, a significant increase in public service remuner- ation, which was not previously budgeted for, was approved. Prelimi- nary estimates suggest that there is a high probability that this will exert pressure on the fiscal and external sector balances and inflationary forces which will have a destabilizing impact on the domestic economy. The Government has decided to reprioritize its spending and its fiscal and monetary policy settings in order to mitigate the adverse imbal- ances brought about by the new policy development. The fiscal pressure is projected to worsen in 2006/07 as a large portion of the approved pay structure will be backdated to July 1, 2005. Therefore, the government plans to implement a comprehensive package of measures to regain macroeconomic stability over the medium term by accelerating its reform program in areas such as corporatization and privatization of Government activities. Given this recent develop- ment, urgent technical and financial support will be required from the Fund and the Bank as well as Tonga's other development partners. Finally, we would like to acknowledge with appreciation the techni- cal and financial assistance that both institutions have provided to the Kingdom and people of Tonga. We look forward to a continued close working relationship with the Fund and the Bank in the future. May I conclude by wishing the Bank and the Fund continued success in resolv- ing the many difficult challenges that lie ahead. TUNISIA: TAOUFIK BACCAR Governor of the Fund (on behalf of the Joint Arab Group) It is a privilege for me to deliver the Joint Arab group speech for this year's Annual Meetings of the Board of Governors of the World Bank and the International Monetary Fund. Please allow me at the outset, on behalf of all the Arab Governors, to congratulate Mr. Paul Wolfowitz on his appointment as President of 133 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 134 the World Bank and to express our support for his endeavors to achieve the Bank's objectives, and also to thank Mr. Rodrigo de Rato for his continued attention to the challenges facing our region. I also wish to express my deep sorrow and sympathy to the American people for the tragic aftermaths resulted from Hurricane Katrina. It is comforting in respect of the status of the global economy to note that this year's growth rates are expected to stay at a more sustainable level in an environment of low inflation, with most regions of the world, including the Arab region, enjoying healthy growth rates. We regret, however, the absence of tangible progress to address external payments balances and fiscal deficits of major industrial countries. It is therefore, as we see it, a reason for IMF to work more effectively to promote global financial stability. We also note that the rise in oil prices, so far, has not caused a slow- down in global economic growth, demonstrating increased resilience of the global economy in dealing with such increase. Nevertheless, we stress the fact that curbing volatility of oil prices is in the best interest of all countries, which entails joint efforts to enhance investments in crude oil production sector as well as refinery capacity in order to increase oil supply and meet growing demand. Moreover, we call for enhancing dialogue and collaboration mechanisms between producers and consumers, and for improving information gathering mechanisms. In this regard, we note the importance of strengthening the Global Energy Forum. On their part, oil-exporting countries in the Arab region have substantially increased their oil production and put in place investment plans to expand production capacity. Moreover, we urge the International Financial Institutions (IFIs) to promote appro- priate mechanisms to address difficulties faced by oil-importing devel- oping countries. We reaffirm our strong support for the strategies and decisions agreed in Monterrey, Doha, and Johannesburg, which set out a frame- work for fighting poverty and achieving the Millennium Development Goals (MDGs) as agreed by world leaders. We note, however, with con- cern that most developing countries, despite implementing deep eco- nomic and structural reforms, will not be able to meet the MDGs. We, therefore, call on the industrial donor countries to reaffirm their com- mitment to achieving these goals, and to scale up their efforts to reach the goal of an ODA/GDI ratio of 0.7%. We also urge the international community to increase technical assistance and to improve coordina- tion of the same. We also affirm that Arab countries are committed to meeting the MDGs and reaching the set goals. We also support the pro- posal of the State of Qatar to host the First Follow-up Conference of the International Conference on Financing for Development, as pro- vided for in the Monterey Consensus in 2007. 134 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 135 We urge international organizations engaging in development to devote more attention to eliminating the digital divide and the flagrant inequality between developed and developing countries in control and ownership of knowledge as well as information and communication technologies. In this respect, the World Summit on the Information Society to be held in Tunis in November 2005 constitutes a great oppor- tunity to adopt concrete actions in order to appropriately help develop- ing countries. We reaffirm our strong support for expanding developing country participation in decision-making processes and increasing their voice in international financial organizations. We believe that this will, in turn, enhance the legitimacy of such organizations, thereby increasing the efficacy of their respective recommendations and capabilities. We also reaffirm our commitment to multilateral trade liberalization in the context of the World Trade Organization and regret that no progress has been made on this issue, so far. In this regard, we express hope for a successful completion of the Doha round, notably in liberal- ization of agricultural produce trade. We also urge the Bretton Woods institutions (BWIs) to address trade-related vulnerabilities in develop- ing countries, especially with regard to the impact of the phasing out of quotas under the Multi Fiber Agreement. We welcome the introduction of the Trade Integration Mechanism by IMF to deal with this issue and call for further progress on adapting the Fund's instruments to deal with balance of payments deficits due to exogenous shocks. The Arab countries of our region attach particular importance to global capital flows and their projected growth in coming years. We deem it necessary for IMF to have a clear and effective role in this regard in order to support developing countries, address volatility of capital flows and reform its precautionary mechanisms. We believe this will require IMF to upgrade its expertise in this regard and address its shrinking capital base. With regard to the IMF's role in low-income countries (LICs), in our view, its surveillance role, programs and analyses need be tailored to particular circumstances of each of these countries, taking into consid- eration their debt burdens as well as their own potentials to meet their financial and technical requirements. This takes me, Mr. Chairman, to addressing the G8 debt relief initia- tive for HIPC countries. We hope that this initiative can contribute effec- tively to economic growth in those countries. We also hope that it should not be linked to further conditionality and should help such countries meet their MDGs. We hope that the Bank and IMF will play a con- structive role in designing an operational framework for implementing this initiative, in such a way that will not adversely affect these institu- tions' future ability to provide financial resources for development. In 135 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 136 this regard, we reaffirm that countries embracing this initiative should provide the two institutions with the necessary resources to deliver their share of additional debt relief for HIPCs. We also call for expanding this initiative to include a wider group of heavily indebted countries in order to reduce their debt burdens and minimize pressures over their limited financial resources. There was noticeable overall improvement in the performance of Arab economies last year, driven by several factors, notably: structural reforms in many of these countries, sound financial policies, as well as higher oil revenues. It has been noted that oil-exporting countries bet- ter used their oil revenues to strengthen their fiscal and financial posi- tions and to achieve higher growth rates, with positive spillover to other countries in the region. The main challenge facing our region is the creation of sufficient employment opportunities for a burgeoning and youthful labor force. In this regard, most Arab countries have implemented significant reforms, including: improvement of the investment climate, trade liber- alization, promotion of small enterprises, and protection of property rights. We recognize that there is still a need for further reform to enhance economic growth in order to absorb the rising labor force in the region and to further diversify the region's sources of income. We are, in indeed, proceeding in this direction. We note the various initiatives and programs launched by interna- tional and regional organizations and groupings in support of reforms in our region. Of particular importance are the International Finance Cor- poration's Private Enterprise Partnership Facility (PEP-MENA), the Euro-Mediterranean Partnership and Investment Initiative, and the Task Force for Developing Investment in Cooperation with Arab Busi- nessmen and their Counterparts in Industrial Countries. We expect the Bank and IMF to support successful implementation of such initiatives and projects. We applaud the Bank's initiative to streamline and simplify its lend- ing procedures, which will have positive impact on reducing the cost of doing business. We are confident that the Bank's increasing reliance on countries' rules and procedures with regard to project implementation will have a positive impact on the level and quality of Bank's operations in Arab countries. However, we urge the World Bank's management to continue to explore other innovative ways to reduce the cost of doing business. We welcome last year's pickup of activity in our region, and we also welcome its new strategy to increase its business in our region. How- ever, we believe that this institution's involvement in the region is still shy of the level required to promote small- and medium-size enterprises and to attract foreign direct investment. It is our hope that new initia- 136 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 137 tives will help address some of these vulnerabilities. We also urge IFC to give particular attention to public-private partnership projects in infrastructure, local currency lending, and the creation of equity funds. We see regional integration as essential to fostering regional trade, sharing best practices, and harmonizing approaches and strategies. In this regard, we welcome the achievements made in the Pan-Arab Free Trade Area, which came into effect at the beginning of this year. It is our hope that the World Bank will develop appropriate mechanisms and instruments to finance regional integration programs and enhance our regional institutions' capacity. We also call for further cooperation and coordination between international and regional institutions and funds operating in the Arab region, notably in activities that foster regional integration. In this regard, we welcome the IMF's support for the Trade Facilitation Seminar in the Maghreb Region, to be held in Algiers in November 2005. We commend the valuable assistance that the Bank and the Fund have provided as part of Iraq's economic stability and reconstruction efforts, and we urge both institutions as well as other donors to continue such efforts and doubling their contributions. The active role of our two institutions in Palestine has also been commendable and we look for- ward to heightened efforts to alleviate the dire conditions of the Pales- tinian people living under occupation. We also call for utilizing the opportunity afforded by the current favorable conditions, especially after the Israeli withdrawal from Gaza Strip, to revive the peace process and end Israeli occupation of the occupied Palestinian territories, till the establishment of an independent Palestinian state. We also welcome the Bank and the Fund's re-engagement with the Sudan and considera- tion of future re-engagement with Somalia. We reiterate our urgent call for the Fund and the Bank to ensure suf- ficient representation of nationals from our region at all levels of both Institutions, particularly at the senior management level, as the current ratio remains very low compared to ratios of other regions. In conclusion, we extend our deepest gratitude for your chairman- ship of the annual meetings this year, and we look forward to greater cooperation and involvement between Arab countries of our region and Bretton Woods Institutions with a view to accelerating economic development in our countries and to assist developing countries in their efforts to meet MDGs. TURKEY: ALI BABACAN Governor of the Fund I would like to begin by welcoming Mr. Wolfowitz and wish him suc- cess in his position as President of the World Bank Group. 137 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 138 I am glad to see that the global economic outlook is still favorable and the global financial system remains resilient. Despite this positive picture, however, there are some global imbalances that we need to address in the medium term. We also need to examine carefully the fac- tors that have contributed to the emergence of these imbalances. The economic policies should target an increase in savings in the United States, growth enhancing structural reforms in the euro area and more flexible exchange rate policies and financial market reforms in Asia. We are encouraged by China's initial policy move towards exchange rate flexibility, which would help not only in facilitating macroeconomic management in China but also to the unwinding of global imbalances. We believe that the Chinese authorities would strengthen their policy with more exchange rate flexibility and continued reforms of the finan- cial sector. The high and volatile oil price remains a matter of concern that could slow the global economy. Given the fact that oil prices will remain high in the foreseeable future, countries need to pursue prudent policies by reducing fiscal deficits, easing exchange rate rigidities and enhancing structural reforms in order to make their economies more resilient. The world economy is now much larger than it was at the time of the last quota increase. Therefore, the Fund needs to adjust itself and its policy tools by ensuring that aggregate quotas are adequate and fairly distrib- uted. This would allow all member countries to have appropriate voice in the Fund, which would enhance the Fund's legitimacy and effective- ness. Unfortunately, the support necessary for a general quota increase does not seem to exist at this moment. Therefore, it is worth exploring ways to redistribute quotas outside of a general quota increase. The imbalances in the current distribution of quotas are clearly unsustain- able, and they should be addressed urgently through ad hoc quota increases. This brings me to the issue of Fund's strategic direction. The integra- tion of capital markets has increased the size, speed, and reach of shocks across mature and emerging-market countries. Fund policies should be designed to meet the macroeconomic challenges that lie ahead. In particular, it is important to tackle the global payments imbal- ances, respond to capital account crises and help all members, especially low-income countries. We are encouraged by the international community's continued commitment to the MDGs. We welcome the result-oriented approach of the Africa Action Plan and the G8 Debt Relief proposal. The num- ber of poor in Africa has doubled from 150 million to 300 million dur- ing the last two decades, which justifies the need for increased support to Africa. However, we would like to point to the fact that development challenges in some other regions of the world, such as Central Asia, are 138 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 139 also pressing. We urge the international development community to put more emphasis also on the economic and social development of the Central Asian countries. Let me now turn to the G-8 Debt Cancellation Proposal, which has been very positively received by the international community. Debt relief would definitely help reduce poverty and achieve sustainable high growth in low-income countries. However, its impact would be marginal and temporary if it is not accompanied by responsible and coherent policies designed to achieve the Millennium Development Goals (MDGs). Countries should not become complacent and should con- tinue with appropriate policies. As for the debt relief effort, I would like to emphasize that the work on the modalities and financing of the G8 proposal should pay due atten- tion to its implications on IMF and World Bank finances, equal treatment of all members, and fair burden sharing among countries. In particular; with respect to cancellation of debt to the IMF, I would like to point to the risk that the burden of debt cancellation could be shifted to the emerging markets via the surcharge mechanism. With respect to cancellation of debt to IDA, we should develop mechanisms that would ensure that the com- pensation for IDA is additional to the existing commitments and IDA's capacity to assist poor countries in the future is not jeopardized. We note that despite all the endeavors of the international develop- ment community, progress towards attainment of MDGs has been slow and uneven. Considering the fact that 70 percent of the developing world's poor live in middle-income countries, we believe that the inter- national development community should develop a new approach, focusing more on the poor people of middle-income countries, in order to accelerate progress toward the MDGs in these countries. The MDGs agenda rightly places emphasis on reducing poverty in all its dimensions. We believe that, economic growth accompanied by job creation should be the main driver of poverty reduction. In this respect, I would like to stress the crucial role of the World Bank Group in the sustainable development of the economies of developing coun- tries. The Bank Group's invaluable global expertise and experience should be disseminated more effectively. Its role will be instrumental in analyzing impediments to job creating growth, and helping developing countries formulate their own growth strategies based on best practices. The World Bank Group can also assist developing countries by low- ering non-financial and financial costs, such as reducing its lending rates and increasing fee waivers. The cost of borrowing can be lowered through the use of country systems in Bank operations and procure- ment. Use of local currency financing is also important for developing countries, as it eliminates the potential currency mismatch between rev- enues and debt service, and helps to improve local financial markets. 139 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 140 We welcome the Bank's intention to improve the conditionality it attaches to its loans. The Bank's reaffirmation that it will not take a pre- scriptive approach to reform is another step in the right direction. One of the important lessons learned from past experience is that the "one size fits all" approach to conditionality does not work, and that pro- grams should be country owned and country led. Therefore, the Bank Group, should be more careful in the design of conditionality: condi- tions should be customized to country specific circumstances, required actions should be within the Government's control and maximum flexi- bility should be ensured to accommodate changing circumstances. With respect to sustaining adequate level of fiduciary standards, we would like to reiterate our support for an ongoing simplification agenda. I would like to highlight the central role of infrastructure in the development agenda to promote growth and achieve MDGs. Invest- ment needs are enormous in all regions. Therefore, we welcome the Bank Group's intention to scale up infrastructure lending by taking into consideration the lessons learned from past infrastructure programs. Let me finally briefly touch upon the most recent developments in the Turkish economy. The GNP growth in 2004 reached at almost 10 percent while inflation was down to below 10 percent, one third of its 2002 level. This remarkable performance also continued in 2005. We expect growth to stabilize at around 5 percent in 2005 while CPI infla- tion further declining to below the 8 percent target despite the all-times record global energy prices and significant hikes in major commodity prices. Public net debt to GNP ratio is expected to come down to below 60% by the end of 2005, levels representing a drop of more than 30 per- centage points in just four years time. Looking ahead we will continue with our prudent fiscal and monetary policies and fortify the resilience of our economy against possible future volatilities. Strengthened eco- nomic activity, improved macroeconomic fundamentals and strict adherence to our structural reform policy lend great support to our efforts. The steadfast implementation of the structural reform agenda is a top priority and currently we are working on social security, tax and financial sector reforms which will be completed in a matter of months. UNITED STATES: JOHN W. SNOW Governor of the Bank and the Fund We meet at a particularly challenging time for the United States. I want to take this opportunity to thank all those from around the world who have responded with solidarity and offers of support in the wake of Hurricane Katrina. The U.S. economy is strongly positioned, even in the face of the eco- nomic impacts of the hurricanes, to continue on a path of growth and 140 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 141 deficit reduction. Growth in the first half of 2005 was a solid 3.5 percent. The unemployment rate fell to 4.9 percent in August, the lowest rate in four years. Although the immediate outlook has softened slightly, recovery efforts are likely to boost growth early next year. The vitality, flexibility, and resilience of the U.S. economy will be tremendous assets as we move forward. The world economy, too, has continued to expand strongly since we met last year. The outlook is favorable. Nonetheless, we must be mind- ful of the risks of higher oil prices and persisting global imbalances. We all share responsibility for managing these challenges. The United States has made clear that we will reduce our fiscal deficit. Although recovery from the hurricane will expand spending in the near term, we remain on track to cut the deficit in half by FY 2009. But one country's efforts are not enough. Fiscal consolidation in the United States without action elsewhere will yield slower global growth, higher unemployment, and less progress on poverty reduction. Slower growth in the United States is clearly not the answer, and would be in no one's best interest. As I have said, addressing global imbalances is a shared responsibility. We welcome the actions taken by China, and also by Malaysia, to adopt a more flexible exchange rate. This is a step for- ward, but greater flexibility is still needed. And throughout East Asia efforts need to be undertaken to spur the growth of domestic demand and reduce reliance on exports. In addition, structural reforms in labor and product markets are essential in Europe to boost domestic demand and growth, as are reforms to enhance productivity growth and the flow of resources among sectors in Japan. In other parts of Asia, financial and corporate reforms are needed to put growth on a solid path. A vibrant global economy is in all of our interests. Making the benefits of growth available to each and every one of our countries depends on free trade. Tariffs, subsidies and trade barriers are unnecessary impediments to growth. President Bush laid out a very clear message on trade last week at the United Nations. A successful conclusion of the Doha Round will bring benefits for every country--and particularly for the developing world. Trade in services in particular can greatly benefit developing countries, providing knowledge and infrastructure to facilitate economic growth and create jobs. This is especially true in the case of financial services. An effi- cient, well-regulated financial sector is a key element for achieving eco- nomic growth and stability in developing countries. The IMF and World Bank remain central to the task of promoting growth and stability in the world economy. We want these institutions to be as effective as possible. Together we have made progress on reform. But the United States believes that there is more to accomplish. In the IMF, ongoing evolution is needed to keep the institution rel- evant and effective for all its members in the modern global economy. 141 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 142 In our view, this means an IMF that is tightly focused on its core mis- sion of promoting international financial stability and balance of pay- ments adjustment. The IMF must set high standards for strong policies, both in its lending programs and through surveillance. It must not shy away from tough judgments--including on exchange rate regimes. The IMF also has an important, but limited, role to play in promoting strong policies in low-income countries whether through the new Policy Sup- port Instrument, technical assistance, or lending in cases of actual bal- ance of payments need. For all members, a modern governance structure is vital to preserve the IMF's centrality. It is time to begin the process of making both quotas and representation reflect the realities of today's world economy. In the World Bank, we have seen improvements over the past few years as the Bank has strengthened its focus on measurable results at the project and country level. Now the Bank needs to adopt the results approach for the institution as a whole, including evaluating staff on project results rather than volume. The fight against corruption--both in recipient countries and within the institution--must continue unabated. The Bank, too, should stay focused on its core mission - reducing poverty through private-sector-led economic growth. The Bank needs to identify an appropriate role in middle-income countries, whose success means they no longer need the Bank to finance their development needs. This will involve thinking through what the Bank can offer these countries in ways that both fill unmet needs and pre- serve the Bank's focus on its core mission. To make growth achievable and future aid more likely to bolster success, we simply must confront unsustainable debt burdens in the poorest countries. We believe it is essential now to proceed with imple- mentation of the proposal, endorsed by the G-8 leaders in Gleneagles, to provide full debt cancellation for Heavily Indebted Poor Countries (HIPCs), and conclusively end the lend-and-forgive approach to devel- opment assistance. The G-8 countries have collectively pledged to ensure that debt cancellation will not diminish the resources of our institutions, and I personally repeat that pledge today. I call on each of you to join this effort and make debt relief a reality. I look forward to advancing our shared agenda. VIETNAM: LE DUC THUY Governor of the Fund First of all, on behalf of the delegation of the Socialist Republic of Vietnam, I would like to express our deep gratitude to the host country, the United States of America, and the IMF and the WB for their efforts in organizing this important event. I would like also to avail myself of 142 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 143 this opportunity to congratulate Mr. Paul D. Wolfowitz on chairing the first Annual Meetings in his position as the President of the WB. Since the last Annual Meetings, the global economy has continued its strong growth, though at a more moderate pace than the year 2004, yet more sustainable with inflation under control. Large economies like the US and China have continued their high growth rate while Japan has regained its momentum, and Asia and the Pacific region has main- tained its dynamic development. This year, the issue of deep concern for many countries, especially the developing ones in Asia, is the impact of the increasing oil prices on economic growth. In addition to policy responses in the form of fiscal and monetary adjustments, it is impor- tant to improve the efficient use of energy and to increase investment in oil refining projects for the purpose of reducing pressures of oil prod- ucts' retail prices on the prices of crude oil. Over the past year, the IMF and the WB have exerted their enor- mous efforts in improving and strengthening the international financial systems, and promoting the balanced and sustainable development of the global economy. Fulfilling its mandates set out in the Articles of Agreement, the IMF has been continuously reforming itself in order to be able to conduct more efficiently the role of the largest international financial institution in overseeing economic developments in each indi- vidual country, in various regions and in the world as a whole; and pro- viding policy advice and technical assistance, thereby ensuring macroeconomic stability, socio-economic development, and poverty reduction. In order to achieve the Millenium Development Goals, over the past year, the WB has focused its assistance on the developing coun- tries, particularly the poor ones, to facilitate their growth and poverty reduction and strengthen their debt sustainability as well. Vietnam strongly supports the joint initiative of these two institu- tions to strengthen the voice and participation of both developing and transitional countries in the decision making process of the IMF and the WB. We also welcome the two institutions' emerging joint initiative to support the developing countries in the process of trade liberaliza- tion and integration, and do hope that this initiative will cover not only the WTO members but also those countries seeking membership in this organization like Vietnam, since the WTO accession might make these countries face with enormous challenges as a result of the struc- tural adjustments as well as significant changes of their legal frame- work to meet the WTO requirements. Beside these common efforts, we also welcome the WB's Infrastructure Action Plan which was launched in July 2003 for the purpose of supporting the infrastructure development of the developing countries, of which those countries in the Mekong Delta region have been chosen as a targeted group in the coming time. 143 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 144 We also support the Africa Action Plan to help the poor countries in Africa reach the Millenium Development Goals. Vietnam is willing to accelerate its cooperation and share the experiences in development and poverty reduction with African countries, thus contributing to the international efforts of reaching the noble objectives set out by the United Nations. In this context, it is necessary to note that in parallel with expanding and accelerating the activities of the two institutions, the financial availability to fulfill these tasks should also be taken into due consideration. In this regard, the issues raised by the G8 Debt Relief Initiative and debt relief for the poor countries are those to be treated more comprehensively. In addition, as one of the countries in the Asia­Pacific region, we hold that the WB should reserve more attention and appropriate resources in helping this region to achieve sustainable growth and poverty reduction, since the Asia­Pacific region is facing with enormous challenges with a large poor population, in spite of its being seen as a dynamic region in economic development. The year 2005 is an important milestone for Vietnam because this is the final year of the country's Socio-Economic Development Plan for 2001­2005, and also the year to pave the way for the next 5-year plan in the 2006­2010 period. In spite of the difficulties caused by the avian flu, the adverse climate conditions and the increasing oil prices, the national economy has continued to progress. This is evidenced by the GDP growth rate of 7.63% for the first half of the year, the increasing indus- trial, agricultural and services outputs, the strong export performance with the growth rate of 18.7% during the first 8 months, the sound fis- cal activities, the flexible but prudent monetary policy, and the stable macroeconomic environment. Thanks to the economic achievements together with the continued improvement of policy and institutional framework, foreign investment inflow has remarkably increased, result- ing in an increasing amount of additional disbursement and new regis- tered capital in the first 8 months of 2005 of 49.2% against the corresponding period of last year. Vietnam has also made all its efforts in accelerating its economic integration with the region and elsewhere. WTO accession by end-2005 has become one of the top goals of Viet- nam's external economic activities, and the Government's efforts toward this end have been acknowledged by its partners through their commitments to support the country's accession to the WTO. Donors continue to support Vietnam's attempt to reach the objective of inte- grating economic growth with poverty reduction by the clear demon- stration of the implementation of the Comprehensive Poverty Reduction and Growth Strategy (GPRGS). Noting the achievements in maintaining high economic growth and poverty reduction, the UNDP's most recent Human Development Report has re-ranked Vietnam to the 108th from the previous 112th among the total 177 countries. 144 3807-CH04_Statement_p019-145.pdf 3/24/06 7:21 AM Page 145 The remaining months of 2005 will be a challenging time for Viet- nam. Due to the problems posed by the continuing increase of the world oil prices and the resulted pressure on other commodities' prices, the increased trade and technical barriers in targeted markets, and the unexpected climate movements, the Government is required both to improve the quality of growth and accelerate the pace of growth. To these ends, the 5-year Socio-Economic Development for 2006­2010 with the goals of annual GDP growth rates of 7.5 to 8% and out of the list of low income countries by the year 2010 has been mapped out with the broad public participation and the active support of the interna- tional donor community. We hope that the implementation of a plan with such broad participation and careful consideration of practical ele- ments will help Vietnam achieve its objectives of sustainable growth, significant improvement of the business environment, comprehensive reform of the enterprise and banking sectors, expansion and improve- ment of the investment efficiency, thereby taking a new step of external economic development, and getting well prepared to cope with enor- mous challenges when the country fully integrates into the AFTA and becomes a WTO member. It is my firm belief that the utmost determination and endeavor by the Government and people of Vietnam to overcome the challenges ahead to achieve a sustainable economic development, improve its peo- ple's living standard, and integrate into the global economy will be actively supported by the international community, including the IMF and the WB. 145 3807-CH05_ConRmrk_p146-147.pdf 3/24/06 7:20 AM Page 146 CONCLUDING REMARKS BY PAUL WOLFOWITZ PRESIDENT OF THE WORLD BANK GROUP Mr. Chairman, let me join with others in thanking you for the way you've presided over these meetings, I must say, with real style and a valiant attempt to keep enforcing discipline, which I think we all appreciate. And also thank you for that precise and eloquent presentation you made at our opening, including your excellent exposition of the situa- tion of your own country, which I learned a great deal from, and I appreciate that. I'd like to take this occasion, too, even though there are relatively few people here to hear it. But it's a time for me to say thank you to a fantastic staff that has supported me enormously in the last three months, and Jim Wolfensohn in the last 10 years. It is as professional and dedicated an organization as one will find anywhere in the world, working every day of the year to give the poorest people of the world the opportunity to enjoy the kind of life that some of us--that we enjoy and sometimes perhaps take for granted. And at this particular time of year, they work particularly hard and we could not pull of a meeting of this complexity in such a short time without an enormous amount of effort by hundreds and hundreds of people on the World Bank staff and the IMF staff. But I do want to single out three in particular. Paatii Ofosu-Amaah, who is a wonderful secretary of the Board who is constantly keeping us on schedule day after day, but also during these meetings. Paatii, thank you. Zia Qureshi, who stepped in heroically when we unexpectedly had a gap in the executive secretary position for the Development Committee and did a flawless job. And Pat Davies, who I am told has been working on these meetings for at least 13 years and is the Chairman of the Joint Fund Conference Secretariat. Thank you all for not only what you've done for these meet- ings but what you do every day. I believe we have made significant progress in these meetings in ful- filling our obligations to the world's poorest people, who are ultimately the people that we represent here at these meetings. The high point of these meetings is the historic endorsement provided by both the Devel- opment Committee and the IMFC of the G-8 proposal to cancel 100 percent of the debts of some of the world's poorest countries. Indeed, as Trevor Manuel said this morning, this meeting took the G-8 proposal and made it into the G-184 proposal, and only a meeting like this could do that. 146 3807-CH05_ConRmrk_p146-147.pdf 3/24/06 7:20 AM Page 147 I was particularly pleased by the firm assurances provided on Friday in a letter I received from the G-8 Ministers. The path to complete debt relief has now been cleared. Across Africa and around the world, lead- ers in 38 countries will no longer have to choose between spending to benefit their people and repaying impossible debts, often the legacy of governments long past. We will move swiftly to give the Bank's Board of Directors a paper outlining a compensation schedule and a monitoring system as requested by the Development Committee, a process that can be com- pleted within weeks. I'm particularly pleased that in this breakthrough on 100 percent debt relief, the Bank's shareholders committed to preserving IDA's financing capacity dollar for dollar by ensuring that there will be addi- tional funds. The Development Committee also gave its full support to the Bank's Africa Action Plan. There was a unanimous view that we have reached a critical point in history, with a real opportunity to help Africa acceler- ate growth and reforms. Taken together, the G-8 commitments and the Africa Action Plan represent the largest commitment to increase development assistance in the past 50 years. This increased assistance will only be effective if it is matched with strong performance by the developing countries. As Prime Minister Blair has said, it is a deal for a deal. It is the improved performance of so many developing countries, including in Africa, that gives me the hope that this is a real moment of opportunity. However, perhaps even more important than both these tremendous advances is the need for a comprehensive trade agreement at the Doha Round of the WTO negotiations in December. A trade agreement in Hong Kong would provide the spur for investment and economic growth that promises a lasting exit from poverty for millions, even bil- lions of poor people in developing countries. We have agreement on more aid, we have consensus on debt relief. So let's complete the picture and deliver a true development round on trade. 147 3807-CH06_Futa_p148-150.pdf 3/24/06 7:20 AM Page 148 CONCLUDING REMARKS BY THE CHAIRMAN THE HONORABLE ANDRÉ-PHILIPPE FUTA My fellow Governors, we now come to the conclusion of our annual deliberations. In closing the 2005 Annual Meetings, I would like to briefly review the major themes that have emerged from our delibera- tions and their implications for the work priorities of the Bank and the Fund for the coming year. First, we reaffirmed our collective responsibility in pursuing bolder policies that would spur higher, stable, and more balanced growth. In this regard, we underlined the crucial roles of the Bank and the Fund in enhancing the coherence and consistency of the international monetary, financial, and trading systems, and in fostering international coopera- tion to address economic challenges. Second, we discussed the importance of enhancing the development partnership and financing for the Millennium Development Goals (MDGs), especially in the context of the urgency of Africa's develop- ment challenges, and debt relief. In this regard, we agreed with the enhanced focus on results, country-led strategies, the need to create the enabling environment for stronger private-sector-led growth, and good governance. Governors broadly welcomed the G-8 Debt Relief Initia- tive which aims to provide a valuable opportunity to reduce debt and increase resources for achieving the MDGs. We look forward to a prompt implementation of and delivery on these commitments. The call for substantially increasing the level and effectiveness of aid, and improving the quality of aid was also noted. Third, we discussed the importance of trade in fostering growth and in promoting global prosperity. The need for further trade liberaliza- tion, especially in agricultural products was highlighted. We under- scored the critical importance of integrating poorer countries more fully into the global economy by allowing them fair access to markets. Gov- ernors noted the Bank/IMF proposal for an enhanced Integrated Framework for Trade-related Technical Assistance and they expressed interest in further study as well as implementation of these proposals. We look forward to the timely and successful outcome of the Doha Development Round. Fourth, at this critical juncture in the global economy and the chal- lenges facing the poorest countries, Governors stressed the importance of further strengthening World Bank and IMF collaboration. We emphasized the need for the BWI to step up their efforts in assisting their member countries to maintain macroeconomic and financial sta- bility, build capacity, and improve governance, including the legal and regulatory frameworks essential for a vibrant private sector. Governors 148 3807-CH06_Futa_p148-150.pdf 3/24/06 7:20 AM Page 149 noted the jointly produced second Global Monitoring Report which calls for a five-point action plan to achieve the MDGs. Fifth, Governors discussed the importance of voice and participa- tion of developing and transition countries in the BWI, and of the need to adapt the governance structures to reflect the changing realities in the global economy. Governors also welcomed the IMF's recognition in its medium-term strategy of the need to adapt to new challenges and the changing needs of member countries. My fellow Governors, before adjourning, I would like to say that it has been my privilege to have served as Chairman of the Boards of Governors of the Bank and the IMF. I thank you for your support dur- ing my tenure as Chairman of these meetings. Allow me also to reiter- ate my hearty welcome to Mr. Wolfowitz to his leadership position at the World Bank, and my tribute to Mr. De Rato for his exemplary stew- ardship of the IMF. I would also like to commend the staffs of the Bank and the IMF for their dedication and hard work. My deep appreciation also goes to Mr. Ofosu-Amaah and Mr. Anjaria, as well as the staff of the Joint Secretariat for their hard work and dedication, which have helped make our meetings such a success. I would like to congratulate the Minister of Finance of Guyana, who succeeds me as Chairman of the Boards of Governors. I would also like to express my sincere gratitude for the kind words he just extended to me. Fellow Governors, I wish you safe travel home and I look forward to seeing you again next year in Singapore. 149 3807-CH06_Futa_p148-150.pdf 3/24/06 7:20 AM Page 150 GUYANA: SAISNARINE KOWLESSAR Alternate Governor of the Bank for Guyana Guyana is honored to accept the Chairmanship of the Boards of Governors of the International Monetary Fund and the World Bank Group for the coming year. Guyana's Chairmanship underscores our recognition of the critical role played by the Bretton Woods Institutions in promoting a sound international financial system, and in promoting growth and reducing poverty worldwide. Fellow Governors, I am sure you will join me in thanking Minister Futa for his skillful and efficient conduct of this year's meetings. Our discussions this year touched upon a number of important issues. While the global economy is growing strongly, a number of risks loom in the horizon, including high and volatile oil prices and a tight- ening of global financial markets. For a number of regions, such as ours in the Caribbean, those risks also include frequent natural disasters and reduced access to markets in our traditional trading partners. Meeting these challenges will require continued commitment by all of us to and fiscal strengthening, structural reforms, and flexibility in adapting to the rapidly changing global developments. All countries and regions must come together at this critical juncture to face these challenges and make meaningful progress toward meeting the hopes and aspirations of mil- lions of the world's people, which are reflected in the Millennium Development Goals. In this regard, I welcome the new instruments endorsed by Governors this weekend to strengthen support for our low- income members, as well as the agreement on the G-8 proposal for debt relief. Finally, and no less urgently, we must give new impetus to our efforts to take forward the Doha trade round. I would like to take this opportunity to thank President Wolfowitz and Managing Director de Rato and their dedicated staff for carrying out their work in an effective and efficient manner. I would also like to convey our appreciation to our hosts, the government and people of the United States, and the citizens of the District of Columbia, for their hos- pitality and for the security arrangements they have provided. In closing, I look forward to working with all of you on the impor- tant agenda over the next months, and to seeing all of you at our Annual Meetings next year in Singapore. 150 3807-CH07_Document_p151-153.pdf 3/24/06 7:20 AM Page 151 DOCUMENTS OF THE BOARD OF GOVERNORS SCHEDULE OF MEETINGS1,2 Saturday September 24 8:30 A.M. Opening Ceremonies Address from the Chair Annual Address by President, World Bank Group3 Annual Address by Managing Director, International Monetary Fund Procedures Committees Reports Chairman, ICSID Administrative Council Annual Discussion Sunday September 25 4:00 P.M. Annual Discussion (continued) Adjournment 1 The Meetings were held at Constitution Hall (Saturday A.M. session) and Fund Headquarters 2 Conference Hall (Sunday P.M. session) and all sessions were joint sessions. 2 The International Monetary and Financial Committee met on Saturday, September 24, 2005 at 11:30 A.M. The Development Committee met on Sunday, September 25, 2005 at 9:00 A.M. 3 The World Bank Group consists of the following: International Bank for Reconstruction and Development (IBRD) International Finance Corporation (IFC) International Development Association (IDA) International Centre for Settlement of Investment Disputes (ICSID) Multilateral Investment Guarantee Agency (MIGA) 151 3807-CH07_Document_p151-153.pdf 3/24/06 7:20 AM Page 152 PROVISIONS RELATING TO THE CONDUCT OF THE MEETINGS1 ADMISSION 1. Sessions of the Boards of Governors of the World Bank Group and the International Monetary Fund will be joint and shall be open to accred- ited press, guests and staff. 2. Meetings of the Joint Procedures Committee shall be open only to Governors who are members of the Committee and their advisers, Executive Directors, and such staff as may be necessary. PROCEDURES AND RECORDS 3. The Chairman of the Boards of Governors will establish the order of speaking at each session. Governors signifying a desire to speak will generally be recognized in the order in which they ask to speak. 4. With the consent of the Chairman, a Governor may extend his state- ment in the record following advance submission of the text to the Secretaries. 5. The Secretaries will have verbatim transcripts prepared of the pro- ceedings of the Boards of Governors and the Joint Procedures Com- mittee. The transcripts of proceedings of the Joint Procedures Committee will be confidential and available only to the Chairman, the President of the World Bank Group, the Managing Director of the International Monetary Fund, and the Secretaries. 6. Reports of the Joint Procedures Committee shall be signed by the Committee Chairman and the Reporting Members. PUBLIC INFORMATION 7. The Chairman of the Boards of Governors, the President of the World Bank Group and the Managing Director of the International Monetary Fund will communicate to the press such information concerning the proceedings of the Annual Meetings as they may deem suitable. 1 Approved on July 12, 2005 pursuant to the By-laws, IBRD Section 5 (d), IFC Sec- tion 4(d), and IDA Section 1(a). 152 3807-CH07_Document_p151-153.pdf 3/24/06 7:20 AM Page 153 AGENDA BANK1 Annual Report Financial Statements and Annual Audit Allocation of FY05 Net Income Administrative Budget for FY2006 Annual Report of the Development Committee Selection of the Members of the Joint Procedures Committee and its Officers for 2005­2006 IFC1 Annual Report Financial Statements, Accountant's Report, Administrative Budget and Designations of Retained Earnings IDA1 Annual Report Financial Statements and Annual Audit Administrative Budget for FY2006 MIGA2 Annual Report Financial Statements and Annual Audit Selection of the Members of the MIGA Procedures Committee and its Officers for 2005­2006 1 Approved on August 10, 2005 pursuant to the By-Laws, IBRD Section 5(a), IFC Section 4(a) and IDA Section 1(a). 2 Approved on August 10, 2005 pursuant to Section 4(a) of the MIGA By-Laws. 153 3807-CH08_Joint_p154-158.pdf 3/24/06 7:20 AM Page 154 JOINT PROCEDURES COMMITTEE Chairman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Democratic Republic of the Congo Vice Chairmen . . . . . . . . . . . . . . . . . . . . . . . . . . Peru Saudi Arabia Reporting Member . . . . . . . . . . . . . . . . . . . . . . Bulgaria MEMBERS Australia Libya Bangladesh Malaysia Bulgaria Nicaragua Dem. Rep. of the Congo Peru Dominican Republic Poland France Russia Germany Rwanda Ghana Saudi Arabia Hungary South Africa Italy United Kingdom Jamaica United States Japan 154 3807-CH08_Joint_p154-158.pdf 3/24/06 7:20 AM Page 155 REPORT OF THE JOINT PROCEDURES COMMITTEE REPORT I September 23, 2005 At the meeting of the Joint Procedures Committee held on Septem- ber 23, 2005, items of business on the agendas of the Boards of Gover- nors of the Bank, IFC, and IDA were considered. The Committee submits the following report and recommendations on Bank and IDA business: 1. 2005 Annual Report The Committee noted that the 2005 Annual Report and the activi- ties of the Bank and IDA would be discussed at these Annual Meetings. 2. Financial Statements, Annual Audits, and Administrative Budgets The Committee considered the Financial Statements, Accountants' Reports, and Administrative Budgets contained in the 2005 Bank and IDA Annual Report, together with the Report dated June 23, 2005. The Committee recommends that the Boards of Governors of the Bank and IDA adopt the draft Resolutions . . .1 3. Allocation of Net Income of the Bank The Committee considered the Report of the Executive Directors dated August 4, 2005 on the Allocation of FY05 Net Income. . . .2 The Committee recommends that the Board of Governors of the Bank adopt the draft Resolution. . . .3 1 See page 165 and 185. 2 See page 199. 3 See page 165. 155 3807-CH08_Joint_p154-158.pdf 3/24/06 7:20 AM Page 156 The Committee submits the following report and recommendations on IFC business: 1. 2005 Annual Report The Committee noted that the 2005 Annual Report and the activi- ties of IFC would be discussed at these Annual Meetings. 2. Financial Statements, Annual Audit, and Administrative Budget The Committee considered the Financial Statements and the Accountants' Report contained in the 2005 Annual Report, and the Administrative Budget attached to the Report dated June 23, 2005. The Committee recommends that the Board of Governors of IFC adopt the draft Resolution . . .1 Approved: /s/ André-Philippe Futa /s/ Dimitar Kostov Democratic Republic Bulgaria--Reporting Member of the Congo--Chairman (This report was approved and its recommendations were adopted by the Board of Governors on September 24, 2005) 1 See page 169. 156 3807-CH08_Joint_p154-158.pdf 3/24/06 7:20 AM Page 157 JOINT PROCEDURES COMMITTEE REPORT III1 September 23, 2005 The Joint Procedures Committee met on September 23, 2005 and submits the following report and recommendations: 1. Development Committee The Committee noted that the Report of the Chairman of the Joint Ministerial Committee of the Boards of Governors of the Fund and the Bank on the Transfer of Real Resources to Developing Countries (Development Committee) would be presented to the Boards of Gov- ernors of the Fund and Bank pursuant to paragraph 5 of Resolutions Nos. 29-9 and 294 of the Fund and Bank, respectively . . .2 and subse- quently entered into the record. The Committee recommends that the Boards of Governors of the Fund and the Bank note the report and thank the Development Com- mittee for its work. 2. Officers and Joint Procedures Committee for 2005/2006 The Committee recommends that the Governor for Guyana be Chairman, and that the Governors for Luxembourg and Mozambique be Vice Chairmen of the Boards of Governors of the Fund and of the World Bank Group, to hold office until the close of the next Annual Meetings. It is further recommended that a Joint Procedures Committee be established to be available, after the termination of these meetings and until the close of the next Annual Meetings, for consultation at the dis- cretion of the Chairman, normally by correspondence and, if the occa- sion requires, by convening; and that this Committee shall consist of the Governors for the following members: Burundi, Cameroon, Chile, France, Germany, Guyana, Honduras, India, Indonesia, Islamic Repub- lic of Iran, Japan, Luxembourg, Malta, Mongolia, Mozambique, Netherlands, Rwanda, Saudi Arabia, Serbia and Montenegro, Suri- name, Sweden, the United Kingdom, and the United States. 1 Report II related to business of the Fund. 2 See page 14. 157 3807-CH08_Joint_p154-158.pdf 3/24/06 7:20 AM Page 158 It is recommended that the Chairman of the Joint Procedures Com- mittee shall be the Governor for Guyana and the Vice Chairmen shall be the Governors for Luxembourg and Mozambique and that the Gov- ernor for Mongolia shall serve as Reporting Member. Approved: /s/ André-Philippe Futa /s/ Dimitar Kostov Democratic Republic of Bulgaria--Reporting Member the Congo--Chairman (This report was approved and its recommendations were adopted by the Board of Governors on September 24, 2005) 158 3807-CH09_Miga_p159-161.pdf 3/24/06 7:20 AM Page 159 MIGA PROCEDURES COMMITTEE Chairman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Democratic Republic of the Congo Vice Chairmen . . . . . . . . . . . . . . . . . . . . . . . . . . Peru Saudi Arabia Reporting Member . . . . . . . . . . . . . . . . . . . . . . Bulgaria MEMBERS Australia Libya Bangladesh Malaysia Bulgaria Nicaragua Dem. Rep. of the Congo Peru Dominican Republic Poland France Russia Germany Rwanda Ghana Saudi Arabia Hungary South Africa Italy United Kingdom Jamaica United States Japan 159 3807-CH09_Miga_p159-161.pdf 3/24/06 7:20 AM Page 160 REPORT OF THE MIGA PROCEDURES COMMITTEE REPORT I September 23, 2005 At the meeting of the MIGA Procedures Committee held on Sep- tember 23, 2005, the items of business on the agenda of the Council of Governors of MIGA were considered. The Committee submits the following report and recommendations on MIGA business: 1. 2005 Annual Report The Committee noted that the 2005 Annual Report and the activi- ties of MIGA would be discussed at this Annual Meeting. 2. Financial Statements and Annual Audit The Committee considered the Financial Statements and Accoun- tants' Report contained in the 2005 Annual Report. The Committee recommends that the Council of Governors adopt the draft Resolution . . .1 3. Officers and Procedures Committee for 2005/2006 The Committee recommends that the Governor for Guyana be Chairman and the Governors for Luxembourg and Mozambique be Vice Chairmen of the Council of Governors of MIGA to hold office until the close of the next Annual Meeting. It is further recommended that a Procedures Committee be estab- lished to be available, after the termination of this Annual Meeting and until the close of the next Annual Meeting, for consultation at the dis- cretion of the Chairman, normally by correspondence and, if the occa- sion requires, by convening; and that this committee shall consist of the Governors for the following members: Burundi, Cameroon, Chile, France, Germany, Guyana, Honduras, India, Indonesia, Islamic Repub- lic of Iran, Japan, Luxembourg, Malta, Mongolia, Mozambique, Netherlands, Rwanda, Saudi Arabia, Serbia and Montenegro, Suri- name, Sweden, the United Kingdom, and the United States. 1 See page 188. 160 3807-CH09_Miga_p159-161.pdf 3/24/06 7:20 AM Page 161 It is recommended that the Chairman of the Procedures Committee shall be the Governor for Guyana and the Vice Chairmen shall be the Governors for Luxembourg and Mozambique and that the Governor for Mongolia shall serve as Reporting Member. Approved: Approved: /s/ André-Philippe Futa /s/ Dimitar Kostov Democratic Republic Bulgaria--Reporting Member of the Congo--Chairman (This report was approved and its recommendations were adopted by the Council of Governors on September 24, 2005) 161 3807-CH10_Resolutions_p162-188.pdf 3/24/06 7:19 AM Page 162 RESOLUTIONS ADOPTED BY THE BOARD OF GOVERNORS OF THE BANK BETWEEN THE 2004 AND 2005 ANNUAL MEETING Resolution No. 564 Transfer from Surplus to Fund the Trust Fund for Liberia RESOLVED THAT: (1) the Bank transfer from surplus, by way of grant, US$25,000,000 as of the effective date of this Resolution to the Trust Fund for Liberia (TFLIB), established and administered by the International Develop- ment Association (Association), such transfer to be drawn down by the Association immediately, and used in accordance with the resolution establishing TFLIB; and (2) the amount of such grant may at any time be converted in whole or in part into other currencies as may be needed for the purposes of TFLIB. (Adopted on October 13, 2004) Resolution No. 565 Transfer from Surplus to Fund Trust Funds for Tsunami Recovery in India and Indonesia RESOLVED 1. THAT the Bank transfer from surplus US$2.5 million as of the effec- tive date of this resolution to a trust fund for emergency support to the Government of India's tsunami recovery activities, established by the International Development Association (the Association), adminis- tered by the Association, such transfer to be drawn down by the Asso- ciation immediately upon the establishment of the trust fund, and used in accordance with the resolution establishing the trust fund; and 2. THAT the Bank transfer from surplus US$25 million as of the effective date of this resolution to a trust fund for emergency support to the Government of Indonesia's tsunami recovery activities, established by the International Development Association (the Association), admin- istered by the Association, such transfer to be drawn down by the Association immediately upon the establishment of the trust fund, and used in accordance with the resolution establishing the trust fund. 162 3807-CH10_Resolutions_p162-188.pdf 3/24/06 7:19 AM Page 163 3. The amount of such grants may at any time be converted in whole or in part into other currencies as may be needed for the purposes of the trust funds. 4. The transfers referenced in paragraphs 1 and 2 are contingent upon establishment of the trust funds proposed therein. (Adopted on April 22, 2005) Resolution No. 566 Forthcoming Annual Meetings of the Boards of Governors Change of 2005 Annual Meetings Date RESOLVED: THAT the 2005 Annual Meetings shall be convened in Washington, D.C. on Sunday, September 25, 2005, and that Resolution No. 546 shall be amended accordingly. (Adopted on May 24, 2005) Resolution No. 567 Remuneration of the President WHEREAS the Executive Directors have considered the remuner- ation of the President of the Bank, in light of the commencement of a new Presidential term; WHEREAS the Executive Directors have recalled the long-standing practice of parity between the total remuneration of the President of the World Bank (the President) and the Managing Director of the IMF (the Managing Director); WHEREAS the Executive Directors have been holding consulta- tions on an informal basis with the IMF concerning the remuneration of the President and the Managing Director and are of the opinion that the remuneration of the President of the Bank should be subject to review when reviews of the remuneration of the Managing Director of the Fund are undertaken under the applicable remuneration framework at the Fund; WHEREAS the Executive Directors recommend that, while main- taining total remuneration unchanged, the balance between salary and 163 3807-CH10_Resolutions_p162-188.pdf 3/24/06 7:19 AM Page 164 allowance components of the President's remuneration should be adjusted by increasing the salary component to $376,380, which would be fully offset by decreasing the President's allowance to $67,380, thus maintaining unchanged total remuneration in line with the current remuneration of the Managing Director of the Fund. NOW, THEREFORE, the Board of Governors hereby adopts the following Resolution: The annual salary of the President shall be US$376,380, with effect from June 1, 2005. (Adopted on July 6, 2005) Resolution No. 568 Direct Remuneration of Executive Directors and Their Alternates RESOLVED: THAT, effective July 1, 2005, the remuneration of the Executive Directors of the Bank and their Alternates pursuant to Section 13(e) of the By-Laws shall be paid in the form of salary without a separate sup- plemental allowance, and such salary shall be paid at the annual rate of $204,400 per year for Executive Directors and $176,810 per year for their Alternates. (Adopted on August 24, 2005) 164 3807-CH10_Resolutions_p162-188.pdf 3/24/06 7:19 AM Page 165 RESOLUTIONS ADOPTED BY THE BOARD OF GOVERNORS OF THE BANK AT THE 2005 ANNUAL MEETING Resolution No. 569 Financial Statements, Accountants' Report and Administrative Budget RESOLVED: THAT the Board of Governors of the Bank consider the Financial Statements, Accountants' Report and Administrative Budget, included in the 2005 Annual Report, as fulfilling the requirements of Article V, Section 13, of the Articles of Agreement and of Section 18 of the By- Laws of the Bank. (Adopted on September 24, 2005) Resolution No. 570 Allocation of FY05 Net Income RESOLVED: 1. THAT the Report of the Executive Directors dated August 4, 2005 on "Allocation of FY05 Net Income" is hereby noted with approval; 2. THAT the addition to the General Reserve of the Bank of $589.5 million, plus or minus any rounding amount less than $1 million, and the addition to the pension reserve of $68 million for the rea- sons given in the Report of the Executive Directors, are hereby noted with approval; 3. THAT the Bank transfer to the International Development Associ- ation, by way of a grant out of the FY05 net income of the Bank, $400 million to be reflected as a direct reduction in equity, which amount may be used by the Association to provide financing in the form of grants in addition to loans, such transfer to be made at such time and manner as decided by the Executive Directors; 4. THAT the Bank transfer to the HIPC Debt Initiative Trust Fund, by way of immediate grant out of the Bank's FY05 net income, $210 million to be reflected as a direct reduction in equity; 165 3807-CH10_Resolutions_p162-188.pdf 3/24/06 7:19 AM Page 166 5. THAT the Bank retain $52.5 million as surplus; and 6. THAT the Bank transfer to reserves $100 million of the $400 mil- lion of net income previously retained as surplus in FY04 that was earmarked solely for subsequent transfers to IDA, HIPC, and/or reserves. (Adopted September 24, 2005) 166 3807-CH10_Resolutions_p162-188.pdf 3/24/06 7:19 AM Page 167 RESOLUTION ADOPTED BY THE BOARD OF GOVERNORS OF IFC BETWEEN THE 2004 AND 2005 ANNUAL MEETINGS Resolution No. 241 Membership of Malta WHEREAS, Malta has applied for admission to membership in the International Finance Corporation in accordance with Section 1(b) of Article II of the Articles of Agreement of the Corporation; and WHEREAS, pursuant to Section 17 of the By-Laws of the Corpo- ration, the Board of Directors, after consultation with representatives of Malta, has made recommendations to the Board of Governors regarding this application; NOW, THEREFORE, the Board of Governors hereby RESOLVES: THAT the terms and conditions upon which Malta shall be admitted to membership in the Corporation shall be as follows: 1. Definitions: As used in this Resolution: (a) "Corporation" means International Finance Corporation. (b) "Articles" means the Articles of Agreement of the Corporation. (c) "Dollars" or "$" means dollars in currency of the United States of America. 2. Subscription: By accepting membership in the Corporation, Malta shall subscribe to 1,615 shares of the capital stock of the Corpora- tion at the par value of $1,000 per share. 3. Payment of Subscription: Before accepting membership in the Cor- poration, Malta shall pay $1,615,000 to the Corporation represent- ing payment in full for the 1,615 shares of the capital stock subscribed. 4. Information: Before accepting membership in the Corporation, Malta shall furnish to the Corporation such information relating to its application for membership as the Corporation may request. 167 3807-CH10_Resolutions_p162-188.pdf 3/24/06 7:19 AM Page 168 5. Effective Date of Membership: Malta shall become a member of the Corporation with a subscription as set forth in paragraph 2 of this Resolution as of the date when Malta shall have complied with the following requirements: (a) made the payment called for by paragraph 3 of this Resolution; (b) furnished such information as may have been requested by the Corporation pursuant to paragraph 4 of this Resolution; (c) deposited with the International Bank for Reconstruction and Development an instrument stating that it has accepted without reservation in accordance with its law the Articles and all the terms and conditions prescribed in this Resolution, and that it has taken all steps necessary to enable it to carry out all its obligations under the Articles and this Resolution; and (d) signed the original Articles held by the International Bank for Reconstruction and Development. 6. Limitation on Period for Fulfillment of Requirements of Member- ship: Malta may fulfill the requirements for membership in the Cor- poration pursuant to this Resolution until December 31, 2005, or such later date as the Board of Directors may determine. (Adopted on May 16, 2005) 168 3807-CH10_Resolutions_p162-188.pdf 3/24/06 7:19 AM Page 169 RESOLUTION ADOPTED BY THE BOARD OF GOVERNORS OF IFC AT THE 2005 ANNUAL MEETING Resolution No. 242 Financial Statements, Accountants' Report, Administrative Budget and Designations of Retained Earnings RESOLVED: 1. THAT the Board of Governors of the Corporation consider the Financial Statements and Accountants' Report included in the 2005 Annual Report and the Administrative Budget contained in the Report to the Board of Governors on IFC's FY06-08 Business Plan and Budget (the "Report"), as fulfilling the requirements of Article IV, Section 11, of the Articles of Agreement and of Section 16 of the By-Laws of the Corporation; 2. THAT the Corporation's FY05 net income of $2,015 billion be transferred to retained earnings, as reflected in IFC's fiscal year 2005 financial statements, is hereby noted with approval; 3. THAT the designation of $125 million of the Corporation's retained earnings for IFC's Funding Mechanism for Technical Assistance and Advisory Services reflected in IFC's fiscal year 2005 financial statements as discussed in the Report is hereby noted with approval; and 4. THAT the designation of $250 million of the Corporation's retained earnings for IFC's Performance-Based Grants Initiative reflected in IFC's fiscal year 2005 financial statements, on terms to be approved by the Board of Directors at a subsequent date, as discussed in the Report is hereby noted with approval. (Adopted on September 24, 2005) 169 3807-CH10_Resolutions_p162-188.pdf 3/24/06 7:19 AM Page 170 RESOLUTION ADOPTED BY THE BOARD OF GOVERNORS OF IDA BETWEEN THE 2004 AND 2005 ANNUAL MEETINGS Resolution No. 209 Additions to Resources: Fourteenth Replenishment WHEREAS: (A)The Executive Directors of the International Development Associ- ation (the "Association") have considered the prospective financial requirements of the Association and have concluded that it is desir- able to authorize a replenishment of the resources of the Associa- tion for new financing commitments for the period from July 1, 2005 to June 30, 2008 (the "Fourteenth Replenishment") in the amounts and on the basis set out in the report of the IDA Deputies, "Addi- tions to Resources: Fourteenth Replenishment, Working Together to Achieve the Millennium Development Goals" (the "Report"), approved by the Executive Directors on March 10, 2005, and sub- mitted to the Board of Governors; (B) The members of the Association consider that an increase in the resources of the Association is required and intend to take all nec- essary governmental and legislative action to authorize and approve the allocation of additional resources to the Association in the amounts and on the conditions set out in this Resolution; (C) Members of the Association that contribute resources to the Asso- ciation in addition to their subscriptions as part of the Fourteenth Replenishment ("Contributing Members") are to make available their contributions pursuant to the Articles of Agreement of the Association (the "Articles") partly in the form of subscriptions car- rying voting rights and partly as supplementary resources in the form of contributions not carrying voting rights; (D)Additional subscriptions are to be authorized for Contributing Members in this Resolution on the basis of their agreement with respect to their preemptive rights under Article III, Section 1(c) of the Articles, and provision is made for the other members of the Association ("Subscribing Members") intending to exercise their rights pursuant to that provision to do so; 170 3807-CH10_Resolutions_p162-188.pdf 3/24/06 7:19 AM Page 171 (E) It is desirable to provide for a portion of resources to be contributed by members to be paid to the Association as advance contributions; (F) Additional subscriptions and contributions are to be authorized for Contributing Members to provide compensation for the Associa- tion's debt forgiveness commitments under the Heavily Indebted Poor Countries ("HIPC") Debt Initiative as established in 1996 and enhanced in 1999; (G)Provision is made for the payment of additional subscriptions and contributions contingent upon progress on specified measures; (H)It is desirable to authorize the Association to provide financing in the form of grants and guarantees in addition to loans; and (I) It is desirable to administer any remaining funds from the replen- ishment authorized by Resolution No. 204 of the Board of Gover- nors of the Association (the "Thirteenth Replenishment") as part of the Fourteenth Replenishment. NOW THEREFORE THE BOARD OF GOVERNORS HEREBY ACCEPTS the Report as approved by the Executive Directors, ADOPTS its conclusions and recommendations AND RESOLVES THAT a general increase in subscriptions of the Association is authorized on the following terms and conditions: 1. Authorization of Subscriptions and Contributions. (a) The Association is authorized to accept additional resources from each Contributing Member in the amounts and as speci- fied for each such member in Columns (2) (3) (4) (5) and (9) of Table 1 attached to this Resolution, and each such amount will be divided into a subscription carrying voting rights and a con- tribution not carrying voting rights as specified in Table 2 attached to this Resolution. (i) As part of the resources described in paragraph 1(a) above, the Association is authorized to accept additional subscrip- tions and contributions from Contributing Members to compensate the Association for the Association's debt for- giveness commitments under the HIPC Debt Initiative in the amounts and as specified in Column (9) of Table 1 attached to this Resolution. (ii) As part of the resources described in paragraph 1(a) above, the Association is authorized to accept additional contingent 171 3807-CH10_Resolutions_p162-188.pdf 3/24/06 7:19 AM Page 172 subscriptions and contributions from Contributing Members in the amounts and as specified in Column (4) of Table 1 attached to this Resolution (a "Contingent Contribution"). (b) The Association is authorized to accept additional resources from any member for which no contribution is specified in Table 2 attached to this Resolution and additional resources from Contributing Members incremental to the amounts speci- fied for each such member in Column (12) of Table 1 attached to this Resolution. (c) The Association is authorized to accept additional subscriptions from each Subscribing Member in the amount specified for each such member in Table 2 attached to this Resolution. (d) The rights and obligations of the Association and the Con- tributing Members in respect of the authorized subscriptions and contributions in paragraphs (a) and (b) above will be the same (except as otherwise provided in this Resolution) as those applicable to the ninety percent portion of the initial subscrip- tions of original members payable under Article II, Section 2(d) of the Articles of Agreement (the "Articles") by members listed in Part I of Schedule A of the Articles. (e) It is confirmed that, in the absence of the express statement contained in paragraph 1(d) of this Resolution in the authoriz- ing resolutions for the ninth through the thirteenth replenish- ments of the resources of the Association, the rights and obligations of the Association and Contributing Members in respect of such authorized subscriptions and contributions will be as provided in paragraph 1(d) of this Resolution. 2. Agreement to Pay. (a) When a Contributing Member agrees to pay its subscription and contribution, or a Subscribing Member agrees to pay its subscrip- tion, it will deposit with the Association an instrument of commit- ment substantially in the form set out in Attachment I to this Resolution ("Instrument of Commitment") and, with respect to its contribution for debt forgiveness under the HIPC Debt Initiative, a Contributing Member will either include such contribution in an Instrument of Commitment or make a HIPC Transfer Contribu- tion, as defined and specified in paragraph 9(a) of this Resolution. (b) When a Contributing Member agrees to pay a part of its sub- scription and contribution without qualification and the remain- der is subject to enactment by its legislature of the necessary appropriation legislation, it will deposit a qualified instrument of commitment in a form acceptable to the Association ("Qualified Instrument of Commitment"); such member undertakes to exer- 172 3807-CH10_Resolutions_p162-188.pdf 3/24/06 7:19 AM Page 173 cise its best efforts to obtain legislative approval for the full amount of its subscription and contribution by the payment dates set out in paragraph 3(b) of this Resolution. (c) When a Contributing Member agrees to pay part of its sub- scription and contribution as a Contingent Contribution, it will so specify in its Instrument of Commitment or Qualified Instru- ment of Commitment and will stipulate which of the conditions set out in the Schedules to Attachment I to this Resolution will apply to its Contingent Contribution. 3. Payment. (a) Each Subscribing Member will pay to the Association the amount of its subscription in full within 31 days after the date of deposit of its Instrument of Commitment; provided that if the Fourteenth Replenishment shall not have become effective by December 15, 2005, payment may be postponed by the member for not more than 31 days after the Effective Date as defined in paragraph 6(a) of this Resolution. (b) Each Contributing Member that deposits an Instrument of Commitment that is not a Qualified Instrument of Commitment will pay to the Association the amount of its subscription and contribution in three equal annual installments no later than: 31 days after the Effective Date or as agreed with the Association; January 16, 2007; and January 15, 2008; provided that: (i) the Association and each Contributing Member may agree to earlier payment; (ii) if the Fourteenth Replenishment shall not have become effective by December 15, 2005, payment of the first such installment may be postponed by the member for not more than 31 days after the date on which the Fourteenth Replenishment becomes effective; (iii) the Association may agree to the postponement of any installment, or part thereof, if the amount paid, together with any unused balance of previous payments by the Con- tributing Member concerned, is at least equal to the amount estimated by the Association to be required from that mem- ber up to the due date of the next installment for purposes of disbursements for financing committed under the Four- teenth Replenishment; and (iv) if any Contributing Member deposits an Instrument of Com- mitment with the Association after the date when the first installment of the subscription and contribution is due, pay- ment of any installment, or part thereof, will be made to the Association within 31 days after the date of such deposit. 173 3807-CH10_Resolutions_p162-188.pdf 3/24/06 7:19 AM Page 174 (c) If a Contributing Member has deposited a Qualified Instrument of Commitment and, upon enactment of appropriation legislation, notifies the Association that an installment, or part thereof, is unqualified after the date when it was due, then payment of such installment, or part thereof, will be made within 31 days after the date of such notification. (d) Each Contributing Member that makes a Contingent Contribu- tion, will pay to the Association its contingent contribution at the same time as payment of the next annual installment fol- lowing the date of fulfillment of the conditions specified in its Instrument of Commitment, or as agreed with the Association. 4. Mode of Payment. (a) Payments pursuant to this Resolution will be made, at the option of the member: (i) in cash, on terms agreed between the member and the Association; or (ii) by the deposit of notes or similar obligations issued by the government of the member or the depository designated by such member, which shall be non- negotiable, non-interest bearing and payable at their par value on demand to the account of the Association. (b) The Association will encash notes or similar obligations of Con- tributing Members, on an approximately pro rata basis among donors, or as agreed between a Contributing Member and the Association. With respect to a Contributing Member that is unable to comply with one or more encashment requests, the Association may agree with the member on a revised encashment schedule that yields at least an equivalent value to the Association. (c) The provisions of Article IV, Section 1(a) of the Articles will apply to the use of a Subscribing Member's currency paid to the Association pursuant to this Resolution. 5. Currency of Denomination and Payment. (a) Members will denominate the resources to be made available pursuant to this Resolution in SDRs, the currency of the mem- ber, or, with the agreement of the Association, in a freely con- vertible currency of another member, except that if a Contributing Member's economy experienced a rate of inflation in excess of ten percent per annum on average in the period 2001­2003, as determined by the Association as of the date of adoption of this Resolution, its subscription and contribution will be denominated in SDRs. (b) Contributing Members will make payments pursuant to this Res- olution in SDRs, a currency used for the valuation of the SDR, or, with the agreement of the Association, in another freely convert- 174 3807-CH10_Resolutions_p162-188.pdf 3/24/06 7:19 AM Page 175 ible currency, and the Association may freely exchange the amounts received as required for its operations. Subscribing Mem- bers will make payments in the currency of the member or in a freely convertible currency with the agreement of the Association. (c) Each member will maintain, in respect of its currency paid by it under this Resolution, and the currency of such member derived therefrom as principal, interest or other charges, the same con- vertibility as existed on the effective date of this Resolution. (d) The provisions of Article IV, Section 2 of the Articles with respect to maintenance of value will not be applicable. 6. Effective Date. (a) The Fourteenth Replenishment will become effective and the resources to be contributed pursuant to this Resolution will become payable to the Association on the date (the "Effective Date") when Contributing Members whose subscriptions and contributions aggregate not less than SDR 7,353 million shall have deposited with the Association Instruments of Commit- ment, Qualified Instruments of Commitment or HIPC Transfer Notifications (as defined in paragraph 9(b) of this Resolution), provided that this date shall be not later than December 15, 2005, or such later date as the Executive Directors of the Asso- ciation may determine. (b) If the Association determines that the availability of additional resources pursuant to this Resolution is likely to be unduly delayed, it shall convene promptly a meeting of the Contribut- ing Members to review the situation and to consider the steps to be taken to prevent a suspension of financing to eligible recipi- ents by the Association. 7. Advance Contributions. (a) In order to avoid an interruption in the Association's ability to commit financing to eligible recipients pending the effective- ness of the Fourteenth Replenishment, the Association may deem, prior to the Effective Date, one third of the total amount of each subscription and contribution for which an Instrument of Commitment has been deposited with the Association, or for which a HIPC Transfer Notification (as defined in paragraph 9(b) of this Resolution) has been received by the Association, as an "Advance Contribution," unless the Contributing Mem- ber specifies otherwise in its Instrument of Commitment or HIPC Transfer Notification. (b) The Association shall specify when Advance Contributions pursuant to subparagraph (a) are to be paid to the Association. 175 3807-CH10_Resolutions_p162-188.pdf 3/24/06 7:19 AM Page 176 (c) The terms and conditions applicable to contributions to the Fourteenth Replenishment shall apply also to Advance Con- tributions until the Effective Date, when such contributions shall be deemed to constitute payment towards the amount due from each Contributing Member for its subscription and contribution. (d) In the event that the Fourteenth Replenishment shall not become effective pursuant to paragraph 6(a) of this Resolution, (i) voting rights will be allocated to each member for the Advance Contribution as if it had been made as a subscription and contribution under this Resolution, and (ii) each member not making an Advance Contribution will have the opportunity to exercise its preemptive rights under Article III, Section 1(c) of the Articles with respect to such subscription as the Associa- tion shall specify. 8. Commitment Authority. (a) Subscriptions and contributions other than Contingent Contri- butions will become available for commitment by the Associa- tion for financing to eligible recipients in three equal annual installments: (i) the first installment will become available to the Association for commitment from the Effective Date, pro- vided that Advance Contributions may become available ear- lier under paragraph 7(a) of this Resolution; (ii) the second installment will become available from July 1, 2006, and (iii) the third installment will become available from July 1, 2007. (b) Contingent Contributions will become available for commit- ment by the Association for financing to eligible recipients when and to the extent they are paid to Association in accor- dance with paragraphs 3 and 4 of this Resolution. (c) The Association shall promptly inform Contributing Members if a member that has deposited a Qualified Instrument of Com- mitment and whose subscription and contribution represents more than 20 percent of the total amount of the resources to be contributed pursuant to this Resolution has not unqualified at least 66 percent of the total amount of its subscription and con- tribution (excluding the amount of any Contingent Contribu- tion) by January 16, 2007, or 31 days after the Effective Date, whichever is later, and the total amount thereof by January 15, 2008, or 31 days after the Effective Date, whichever is later. (d) Within 31 days of the dispatch of notice by the Association under subparagraph (c), each other Contributing Member may notify the Association in writing that the commitment by the Association of the second installment of such member's sub- 176 3807-CH10_Resolutions_p162-188.pdf 3/24/06 7:19 AM Page 177 scription and contribution shall be deferred while, and to the extent that, any part of the subscription and contribution referred to in subparagraph (c) remains qualified; during such period, the Association shall make no financing commitments to eligible recipients in respect of the resources to which the notice pertains unless the right of the Contributing Member is waived pursuant to subparagraph (e). (e) The right of a Contributing Member under subparagraph (d) may be waived in writing, and it shall be deemed waived if the Association receives no written notice pursuant to such sub- paragraph within the period specified therein. (f) The Association may enter into financing commitments with eligible recipients conditional on such commitments becoming effective and binding on the Association when resources under the Fourteenth Replenishment become available for commit- ment by the Association. 9. HIPC Contributions. (a) Contributing Members making an additional subscription and contribution to compensate the Association for forgiveness of debt under the HIPC Debt Relief Initiative, will do so either: (i) through an additional subscription and contribution to the Association's regular resources (a "HIPC Additional Contribu- tion") or (ii) through a contribution to the HIPC Debt Initiative Trust Fund (the "HIPC Trust Fund") administered by the Asso- ciation (a "HIPC Transfer Contribution"). (b) Contributing Members making a HIPC Transfer Contribution will either (i) enter into a Contribution Agreement with the Association as administrator of the HIPC Trust Fund; or (ii) for Contributing Members that are already current contributors to the HIPC Trust Fund, send to the Association a notice of addi- tional contribution, (each constituting a "HIPC Transfer Notifi- cation"). Such HIPC Transfer Notification will provide for a contribution to be made to the HIPC Trust Fund in the amount set forth in Column (9) of Table 1 to this Resolution to be payable in three equal annual installments no later than 31 days after the Effective Date, January 16, 2007, and January 15, 2008; provided that the Association and each Contributing Member may agree to earlier payment. (c) When any amount of a HIPC Transfer Contribution is paid to compensate the Association for forgiveness of debt under the HIPC Debt Initiative, such amount of the HIPC Transfer Con- tribution will be treated as a subscription and contribution under the Fourteenth Replenishment. 177 3807-CH10_Resolutions_p162-188.pdf 3/24/06 7:19 AM Page 178 10. Authorization of Grants. The Association is hereby authorized to provide financing under the Fourteenth Replenishment in the form of grants. 11. Authorization of Guarantees. The Association is hereby authorized to provide financing under the Fourteenth Replenishment in the form of guarantees. 12. Administration of IDA13 Funds under the Fourteenth Replenishment. (a) On the Effective Date, any funds, receipts, assets and liabilities held by the Association under the Thirteenth Replenishment will be administered under the Fourteenth Replenishment, sub- ject, as appropriate, to the terms and conditions applicable to the Thirteenth Replenishment. (b) Pursuant to Article V, Section 2(a)(i) of the Articles, the Associ- ation is authorized to use the funds referred to in paragraph 12(a) above, and funds derived therefrom as principal, interest or other charges, to provide financing in the forms of grants and guaran- tees under the terms, conditions and policies applicable under the Fourteenth Replenishment. 13. Allocation of Voting Rights under Fourteenth Replenishment. Voting rights calculated on the basis of the current voting rights system will be allocated to members for subscriptions under the Fourteenth Replenishment as follows: (a) Each Subscribing Member that has deposited with the Associa- tion an Instrument of Commitment will be allocated the sub- scription votes specified for each such member in Table 2 on the effective payment date pursuant to paragraph 3(a) of this Res- olution. Each Subscribing Member will be allocated the addi- tional membership votes specified in Column c-3 of Table 2 on the date such member is allocated its subscription votes. (b) Each Contributing Member that has deposited with the Associa- tion an Instrument of Commitment will be allocated one third of the subscription votes specified for each such member in Table 2 on each effective payment date pursuant to paragraph 3(b) of this Resolution. Each Contributing Member will be allocated the additional membership votes specified in Column b-4 of Table 2 for its subscription on the date such member is allocated the first one third of its subscription votes. (c) Each Contributing Member that has made a HIPC Transfer Contribution will be allocated a proportionate share of the sub- scription votes specified for such member in Column b-3 of Table 2 from time to time and at least annually following pay- 178 3807-CH10_Resolutions_p162-188.pdf 3/24/06 7:19 AM Page 179 ment of any amount of its HIPC Transfer Contribution to com- pensate the Association for forgiveness of debt under the HIPC Debt Initiative. (d) Each Contributing Member that has made a Contingent Con- tribution will be allocated subscription votes at the time and to the extent of payments made in respect of its related subscrip- tion and contribution. (e) Each member that has deposited with the Association a Quali- fied Instrument of Commitment will be allocated subscription votes at the time and to the extent of payments made in respect of its subscription and contribution. (f) Any member that deposits its Instrument of Commitment after any of the dates specified in paragraph 3(b) of this Resolution will be allocated, within 31 days of the date of such deposit, the subscription votes to which such member is entitled on account of such deposit. (g) If a member fails to pay any amount of its subscription or sub- scription and contribution when due, the number of subscrip- tion votes allocated from time to time to such member under this Resolution in respect of the Fourteenth Replenishment will be reduced in proportion to the shortfall in such payments, but any such votes will be reallocated when the shortfall in pay- ments causing such adjustment is subsequently made up. (Adopted on April 13, 2005) 179 3807-CH10_Resolutions_p162-188.pdf 3/24/06 7:19 AM Page 180 Replenishment Fourteenth the to Contributions 1: ableT 180 3807-CH10_Resolutions_p162-188.pdf 3/24/06 7:19 AM Page 181 Equivalent) USD in (Amounts otes V and Contributions Subscriptions, 2: ableT 181 3807-CH10_Resolutions_p162-188.pdf 3/24/06 7:19 AM Page 182 Equivalent) USD in (Amounts otes V and Contributions Subscriptions, 2: ableT 182 3807-CH10_Resolutions_p162-188.pdf 3/24/06 7:19 AM Page 183 Equivalent) USD in (Amounts otes V and Contributions Subscriptions, 2: ableT 183 3807-CH10_Resolutions_p162-188.pdf 3/24/06 7:19 AM Page 184 Equivalent) USD in (Amounts otes V and Contributions Subscriptions, 2: ableT 184 3807-CH10_Resolutions_p162-188.pdf 3/24/06 7:19 AM Page 185 RESOLUTION ADOPTED BY THE BOARD OF GOVERNORS OF IDA AT THE 2005 ANNUAL MEETING Resolution No. 210 Financial Statements, Accountants' Report and Administrative Budget RESOLVED: THAT the Board of Governors of the Association consider the Financial Statements, Accountants' Report and Administrative Budget, included in the 2005 Annual Report, as fulfilling the requirements of Article VI, Section 11, of the Articles of Agreement and of Section 8 of the By-Laws of the Association. (Adopted on September 24, 2005) 185 3807-CH10_Resolutions_p162-188.pdf 3/24/06 7:19 AM Page 186 RESOLUTIONS ADOPTED BY THE COUNCIL OF GOVERNORS OF MIGA BETWEEN THE 2004 AND 2005 ANNUAL MEETING Resolution No. 71 Reclassification of Slovenia WHEREAS Slovenia, as one of the successor states to the rights and obligations of the former Socialist Federal Republic of Yugoslavia, became a member of the Multilateral Investment Guarantee Agency ("MIGA") effective on March 19, 1993; WHEREAS the Government of Slovenia now requests that Slove- nia be reclassified by the Agency from a Category Two member coun- try to a Category One member country; WHEREAS in accordance with Article 31 of the MIGA Convention, the power to reclassify a member is vested in the Council of Governors; WHEREAS in accordance with Article 8(a) of the MIGA Conven- tion, as a Category Two member country, Slovenia paid twenty-five per- cent of its paid-in cash portion of its capital subscription in its local currency; and as a Category One member country Slovenia would need to substitute an equivalent amount in a freely usable currency; THE COUNCIL OF GOVERNORS HEREBY RESOLVES THAT: 1. Slovenia is hereby reclassified as a Category One member country; 2. Slovenia shall substitute in any freely usable currency the twenty- five percent of the paid-in cash portion of the capital subscription it originally paid in local currency. (Adopted on May 31, 2005) Resolution No. 72 MIGA 2005 Review for FY00­04 WHEREAS, Article 67 of the MIGA Convention provides that "the Council shall periodically undertake comprehensive reviews of the activities of the Agency as well as the results achieved with a view to 186 3807-CH10_Resolutions_p162-188.pdf 3/24/06 7:19 AM Page 187 introducing any changes required to enhance the Agency's ability to serve its objectives"; WHEREAS, Resolution No. 59 entitled "Second Review of the Activities of the Agency in Accordance with Article 67 of the MIGA Convention," adopted by the Council of Governors on September 27, 2000 states that the next periodic review under Article 67 of the MIGA Convention shall be undertaken during fiscal year 2005; WHEREAS, the Board of Directors reviewed the activities of the Agency covering the period from fiscal years 2000 to 2004, as well as the results achieved and the actions to be taken in the future to enhance the Agency's ability to serve its objectives and informed the Council of Governors accordingly; NOW THEREFORE the Council of Governors hereby resolves THAT: The Council expresses its satisfaction with the analysis of the activi- ties of the Agency; The Council welcomes the actions taken by the Agency to increase cooperation with other members of the World Bank Group with the objective to supplement and complement their activities; The Council welcomes the actions taken by the Agency to introduce a new business model which seeks to promote and enhance MIGA's operations in its member countries; and The next periodic review under Article 67 of the MIGA Convention shall be undertaken during fiscal year 2010, unless circumstances require that such a review be conducted earlier. (Adopted on July 5, 2005) 187 3807-CH10_Resolutions_p162-188.pdf 3/24/06 7:19 AM Page 188 RESOLUTION ADOPTED BY THE COUNCIL OF GOVERNORS OF MIGA AT THE 2005 ANNUAL MEETING Resolution No. 73 Financial Statements and Accountants' Report RESOLVED: THAT the Council of Governors of the Agency consider the Finan- cial Statements and the Report of Independent Accountants included in the 2005 Annual Report, as fulfilling the requirements of Article 29 of the MIGA Convention and of Section 16(b) of the By-Laws of the Agency. (Adopted on September 24, 2005) 188 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 189 REPORTS OF THE EXECUTIVE DIRECTORS OF THE BANK August 25, 2004 Transfer from Surplus to Fund the Trust Fund for Liberia In view of the need for emergency reconstruction and recovery assis- tance in Liberia, as set forth in the re-engagement strategy for Liberia approved by the Executive Directors on March 9, 2004, and in order to promote the purposes of the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA) in these circumstances, the Executive Directors consider that a program of assistance for Liberia should be undertaken forthwith as an initiative for the benefit of the members of IBRD and IDA. The Exec- utive Directors recommend that the Board of Governors authorize the transfer from surplus of the amount of US$25 million to establish the Trust Fund for Liberia. Accordingly, the Executive Directors recommend that the Board of Governors adopt the draft Resolution. . . .1 (This report was approved and its recommendation was adopted by the Board of Governors on October 13, 2004) March 18, 2005 Transfer from Surplus to Fund Trust Funds for Tsunami Recovery in India and Indonesia 1. In view of the need for exceptional assistance to India and Indone- sia following the tsunami of December 26, 2004, and in order to pro- mote the purposes of the International Bank for Reconstruction and Development (the Bank) and the International Development Association (the Association) in these circumstances, the Executive Directors consider that programs of emergency assistance for tsunami recovery in India and Indonesia should be undertaken forthwith as an initiative for the benefit of the members of the Bank and of the Association. The Executive Directors recommend that the Board of Governors authorize transfers from surplus as follows: (a) US$2.5 million to support the Government of India's tsunami recovery activities, and 1 See page 162. 189 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 190 (b) US$25 million to support the Government of Indonesia's tsunami recovery activities. 2. The transfers will be made to trust funds to be established for these purposes and are contingent upon the establishment of such trust funds upon approval by the Executive Directors. 3. Accordingly, the Executive Directors recommend that the Board of Governors adopt the draft Resolution. . . .1 (This report was approved and its recommendation was adopted by the Board of Governors on April 22, 2005) April 18, 2005 Forthcoming Annual Meetings of the Boards of Governors Change of 2005 Annual Meetings Date On August 15, 2002, the Board of Governors adopted Resolution No. 546 providing that the 2005 Annual Meetings should be convened in Washington, D.C., beginning on Monday, September 26, 2005. The Executive Directors of the International Monetary Fund (Fund) and the World Bank (Bank) recently established a Joint Work- ing Group to review arrangements for the 2005 and future Annual Meetings. The Joint Working Group has made a recommendation that, given the uncertain impact of security on the logistical arrangements for the Annual Meetings, the 2005 Annual Meetings should take place on Sunday, September 25, 2005 rather than on Monday, September 26, 2005. This recommendation has been endorsed by the Executive Directors of the Fund and Bank, and it is recommended that the Board of Gov- ernors adopt the Resolution . . .2 by a vote without meeting. (This report was approved and its recommendation was adopted by the Board of Governors on May 24, 2005). 1 See page 162. 2 See page 163. 190 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 191 May 31, 2005 Remuneration of the President 1. On August 2, 2004, the Executive Directors of the International Bank for Reconstruction and Development ("Bank") approved a report to the Board of Governors recommending an increase in the salary component of the President's remuneration. The Executive Directors' review of the remuneration and subsequent recommen- dations were made in light of an increase in the remuneration of the incoming Managing Director of the International Monetary Fund ("Fund"). The Board of Governors approved Resolution 561 (Sep- tember 16, 2004), authorizing the salary increase. That increase, combined with an increase in the allowance component of the remuneration approved by the Executive Directors, resulted in the total remuneration of the President of the Bank and the Managing Director of the Fund being the same. 2. In their 2004 review, the Executive Directors considered that the need for high standards of transparency and accountability required a systemic approach to address questions of the President's remu- neration. They noted that the review provided the opportunity of preparing the framework for decisions by the Executive Directors and the Board of Governors at the time of a new Presidential con- tract in May 2005. 3. The Executive Directors took particular note of the consistent prac- tice under which the President of the Bank and the Managing Director of the Fund have had the same total remuneration since 1946, with the same salary and allowance components until 2000. They also observed that the Bank and Fund also share a common history, membership and governance structure that places responsi- bility with the respective Board of Governors for determination of the remuneration of the President of the Bank and the Managing Director of the Fund, as well as the remuneration of the Executive Directors. On this latter point, the Executive Directors took note of the parity between the remuneration of the Executive Directors and their Alternates at both institutions and they consequently pro- posed that steps should be taken to develop, with the Fund, a joint framework for decisions on the remuneration of the President and Managing Director. 191 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 192 4. With respect to a joint framework for decisions regarding the remu- neration of the President and Managing Director, the Bank Board of Governors decided (Resolution 560, dated September 16, 2004) that: "Having regard to the long-standing practice of the President of the World Bank and the Managing Director of the IMF, the Board of Governors of the Bank: (a) invites the Board of Governors of the IMF to consider a joint framework for decisions on the remuneration of the President and the Managing Director, including the potential role in this regard of the Joint Committee on Remuneration of the Executive Directors and their Alternates; and (b) requests the Exec- utive Directors of the Bank to prepare proposals on such a frame- work, in consultation with the Executive Directors of the IMF." 5. Consultations between the Bank and Fund concerning the remu- neration of the President and the Managing Director are ongoing on an informal basis. A report will be sent to the Bank Board of Governors in due course to inform them of all understandings reached. 6. On March 31, 2005, the Executive Directors appointed Mr. Paul Wolfowitz as the President of the Bank effective June 1, 2005. This appointment afforded the Executive Directors the opportunity to review the history and practice in regard to the remuneration of the President. In so doing, the Executive Directors underscored the need for clarity in the principles and procedures governing such decisions and recalled the long-standing practice of parity between the total remuneration of the President and the Managing Director. They noted that currently the salary of the President of the Bank is $302,470 and the allowance is $141,290, and for the Managing Director of the Fund, the salary is $376,380 and the allowance is $67,380. In both cases, total remuneration is $443,760. On the basis of the review and of the above described considerations, they agreed to avail themselves of this opportunity, without changing the total remuneration, to return to the parity between salary and allowance components of the total remuneration of the President of the Bank and the Managing Director of the Fund that had existed until 2000. 7. Consequently, the Executive Directors consider that parity in the levels of salary and allowance for the President should be restored to the same amounts as for the Managing Director of the Fund, without any change in the existing parity in total remuneration. They therefore recommend that the Board of Governors approve an increase in the President of the Bank's salary to $376,380, which 192 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 193 would be fully offset by a decrease in the President's allowance to $67,380, thus maintaining total remuneration unchanged. Both components should continue to be subject to an annual increase, based on the Consumer Price Index for the Washington, D.C. area. Both the salary and allowance components of the total remunera- tion would be disclosed to the public. 8. The Executive Directors are of the opinion that the remuneration of the President of the Bank should be subject to review when reviews of the remuneration of the Managing Director of the Fund are undertaken under the applicable remuneration framework at the Fund. The Executive Directors further noted that they may review the President of the Bank's remuneration whenever they deem it warranted, and, on the basis of such a review, to make such recommendations and take such actions as they deem appropriate. 9. Accordingly, the Executive Directors have approved the submis- sion to the Board of Governors of the Bank of the draft Resolution . . .1 for a vote without a meeting pursuant to Section 12 of the By-Laws. (This report was approved and its recommendation was adopted by the Board of Governors on July 6, 2005) 1 See page 163. 193 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 194 July 4­5, 2005 Report to the Boards of Governors of the Bank and the Fund by the Joint Committee on the Remuneration of Executive Directors and their Alternates I. INTRODUCTION 1. Pursuant to Section 14(e) of the By-Laws of the Fund and Section 13(e) of the By-laws of the Bank, the undersigned were appointed to the 2005 Joint Committee on the Remuneration of Executive Directors and their Alternates (JCR). 2. The JCR met in Frankfurt on July 4­5, 2005. 3. The JCR undertook a streamlined review of the remuneration of IMF and World Bank Executive Directors and Alternates. This review was in line with the process recommended by the 1997 JCR and followed by JCRs since 1998, which calls for a full-scale review once every four years, starting in 2000 and streamlined reviews in other years. The last full-scale review took place in 2004. 4. The approach and methodology followed by the Committee are described in Section II of this report. The Committee's recommen- dations with respect to the remuneration and benefits of Executive Directors and Alternates are provided in Sections III and IV. Sec- tion V contains recommendations on procedures to be followed by future JCRs. Recommendations on matters requiring a vote by Governors are in Section VI, with the draft resolutions in Attach- ments I and II. II. METHODOLOGY USED BY THE 2005 JCR 5. The JCR took note of the fact that the 2004 Committee had under- taken a thorough review of aspects relating to the remuneration of Executive Directors and Alternates, including their role and responsibilities, the choice of external comparators, the relative position of Directors vis-à-vis the management and senior staff of the two institutions, major changes in benefits, and issues of paral- lelism between the two institutions. 194 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 195 6. The JCR followed the recommendations of the 2004 Committee with respect to a streamlined approach, under which the next full- scale review of the remuneration and benefits of Executive Direc- tors would take place in 2008, barring exceptional circumstances that would warrant a more thorough consideration of factors affect- ing remuneration and benefits at an earlier date. It noted that under the proposed streamlined procedure, the JCRs for 2005, 2006, and 2007 would formulate their recommendations by reference to a lim- ited set of indicators, which could include each year's increases in the remuneration of the President of the World Bank and the Man- aging Director of the Fund, movements in the consumer price index for the Washington metropolitan area, and any real increases in the public sector salary scales of selected member countries. With respect to information on external comparators, the JCR consid- ered these data to be useful, but felt that alternative, cost-effective ways should be explored to obtain data of higher quality in the future. Whether changes in benefits would need to be considered in the interim years would depend on the significance of developments in the two institutions. 7. The JCR reviewed the roles and responsibilities of Executive Direc- tors in the Bank and the Fund. It found that there had been no major changes in job content of Executive Directors from the pre- vious year that would warrant a full-scale review instead of the streamlined procedure. However, in light of the increasing com- plexity of the challenges faced by the Bretton Woods Institutions, and in view of the important role of Executive Directors in their governance, JCR members agreed with the 2004 and previous Com- mittees that the two institutions should be well-placed to attract experienced individuals of high intellectual caliber with diplomatic skills and a global outlook. 8. Based on these considerations, the JCR examined data on a num- ber of comparator positions, and other relevant data, including the following: · The Executive Directors of the Bank have recommended to the Board of Governors that the structure of the remuneration (salary and allowance) of the President of the Bank be revised, with effect from June 1, 2005 to be the same as that of the Man- aging Director of the Fund. The vote by the Board of Governors is scheduled to be completed on July 6, 2005. The remuneration of the President of the Bank and Managing Director of the Fund, which by their contracts is linked to the movement in the 195 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 196 Washington metropolitan area consumer price index, was increased by 4 percent with effect from July 1, 2005. · The increase in salary structure for the Fund staff was 3.6 percent as of May 1, 2005, and the salaries of the Deputy Managing Direc- tors of the Fund were increased by 4 percent as of July 1, 2005. In addition, the Committee was informed that the Fund's staff salary structure was increased retroactively, with effect from May 1, 2004, by 2 percentage points. · The average increase in the salary structure for the World Bank staff was 3.9 percent as of July 1, 2005. The salary increases for the Bank's Managing Director and Senior Vice Presidents, which will be effective from July 1, 2005, will be based on a similar increase matrix as applied to the other staff in professional grades. · Changes in the salaries of public sector employees in fourteen member countries1 showed considerable variation such that the averages are not very meaningful or indicative. However, salary increases in most countries were modest. 9. The JCR, while mindful of the desirability of avoiding a specific or close link between the remuneration of the management or senior staff of the Bank and the Fund and Executive Directors in order to avoid any conflict of interest or appearance of conflict of interest, was concerned that the Executive Directors' remuneration should be positioned at an appropriate level in terms of the hierarchy of management and senior staff to reflect the responsibilities and authority of the Executive Directors and to support the selection and appointment of persons of the requisite qualifications, experi- ence, and seniority. 10. The JCR also considered the conclusion of the 2004 Committee, which had stressed the importance of gradually repositioning the remuneration of Executive Directors relative to that of the senior management and staff of the two institutions over a period of 7­10 years. To correct the past deterioration, the 2004 Committee had suggested that future JCRs take this structural adjustment compo- nent carefully into account in making recommendations to the Boards of Governors on the remuneration of Executive Directors. 1 Argentina, Brazil, Democratic Republic of the Congo, France, Germany, India, Japan, Korea, Mexico, Morocco, Netherlands, Poland, United Kingdom, and United States. 196 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 197 11. The JCR noted that the Bank and Fund are currently reviewing their respective staff compensation systems. The Committee recog- nized that these reviews might have implications for the relation of the Executive Directors' salary to the salaries of the senior man- agement and staff of the two institutions. While remaining support- ive of the principle of gradual repositioning affirmed in 2004, the JCR felt it would not be appropriate to take a further step in this direction in 2005. 12. The JCR noted that the consumer price index for the Washington metropolitan area had risen by 4 percent (May 2004 to May 2005). Furthermore, the JCR referred to the analysis in the 2004 review of the impact of exchange rate movements among major currencies and agreed with the conclusion that it would not be feasible or appropriate to adjust for such movements. 13. Finally, the JCR was mindful of the efforts of many member coun- tries, and of the Bank and Fund, to exercise fiscal discipline. III. RECOMMENDATIONS WITH RESPECT TO REMUNERATION 14. Executive Directors. Taking all above considerations into account, the Committee recommends an increase of 3.9 percent in the total remuneration of Executive Directors from $196,730 to $204,400 effective on July 1, 2005. It observed that such an increase would be slightly less than the 2005 adjustments in the remuneration of the President of the Bank and the Managing Director of the Fund and the Washington consumer price increase, in line with the 2005 struc- tural increase for Bank staff, and somewhat more than the 2005 structural increase for Fund staff (not taking into account the 2 per- centage point correction from 2004). 15. Alternate Executive Directors. The Committee considered the role and responsibilities of Alternate Executive Directors in the Bank and the Fund. It took note of the progressive increase in the Alter- nates' remuneration from 85 percent of the total remuneration of Executive Directors in 1997 to 86.5 percent in 2000, based on recog- nition of their increased responsibilities by various JCRs. The JCR also acknowledged the 2004 Committee's view that the current ratio continued to be appropriate. 197 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 198 16. Based on these considerations, the Committee recommends an increase of 3.9 percent in the total remuneration of Alternate Exec- utive Directors from $170,170 to $176,810, which leaves the ratio of the remuneration of Alternate Executive Directors to that of Exec- utive Directors unchanged. IV. RECOMMENDATION ON BENEFITS 17. The Resolutions No. 337 (Bank) and No. 34-7 (Fund), which were approved by the respective Boards of Governors in 1979, provide that changes in levels of benefits to reflect actual costs, or other minor modifications to existing benefits that do not change the basic nature of such benefits, may be made available to Executive Directors and Alternates by the respective Executive Boards. Sig- nificant changes in existing benefits as well as new benefits are to be considered by the Joint Committee on the Remuneration of Exec- utive Directors and their Alternates and may not be made available to Executive Directors and Alternates until approved by the respec- tive Boards of Governors. 18. The JCR notes the 2004 review of all major outstanding benefits issues including the applicability to Executive Directors of the changes in expatriate benefits introduced by the Bank in 1999. In view of no significant changes in the benefits for the Bank and Fund staff following the 2004 review, the JCR recommends to the Boards of Governors no change to the Executive Directors' benefits in 2005. The Committee does take note of the relatively minor changes to maternity leave benefits recently introduced by the Bank. These changes do not require approval of the Board of Gov- ernors and may be introduced, if appropriate, by the Executive Directors of the Bank. V. RECOMMENDATIONS ABOUT THE PROCEDURES FOLLOWED BY JCRS 19. The JCR recommends that the 2008 JCR undertake the next sched- uled full-scale review as previously recommended by the 2004 JCR. Like the 2004 Committee, however, the JCR wishes to stress the importance of addressing any new benefits issues as they arise, including in interim reviews. Going forward, in view of its costs, it will be appropriate to consider further streamlining of the JCR 198 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 199 process, including the exploration of alternative, cost-effective ways to obtain better information on external comparators. VI. RECOMMENDATIONS REQUIRING A VOTE BY THE GOVERNORS 20. In light of the recommendations on remuneration of Fund and Bank Executive Directors and their Alternates (paragraphs 14 and 16 above), the Committee recommends that the draft resolu- tions . . .1 for the Fund and the Bank, be adopted by the respective Boards of Governors of the Fund and the Bank. 21. The Joint Committee directs the Secretary of the Fund and the Vice President and Corporate Secretary of the Bank to transmit this report to the Boards of Governors of the Fund and the Bank, respectively, for a vote without meeting in accordance with Sections 13 and 14(e) of the By-Laws of the Fund and Sections 12 and 13(e) of the By-Laws of the Bank. (This report was approved and its recommendation was adopted by the Board of Governors on August 24, 2005) August 4, 2005 Allocation of FY05 Net Income 1. The General Reserve of the Bank as of June 30, 2005 was $22,057 million. As of that date, the surplus of the Bank was $447.8 million, of which $400 million was earmarked for IDA/HIPC and/or Reserves, and the Special Reserve created under Article IV, Section 6 of the Bank's Articles of Agreement totaled $293 million. The Bank's reported net income for the fiscal year ended June 30, 2005 (FY05) amounted to $3,831 million. The Bank's Operating Income is used as net income for annual net income allocation pur- poses. For FY05, Operating Income (which is the same as reported net income prior to FY01) was $1,320 million. 1 See page 164. 199 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 200 2. The Executive Directors have considered what action to take, or to recommend that the Board of Governors take, with respect to FY05 net income. The Executive Directors have concluded that the inter- ests of the Bank and its members would best be served by the fol- lowing dispositions of the net income of the Bank: (a) the addition of $589.5 million to the General Reserve, plus or minus any rounding amount less than $1 million; (b) the addition of $68 million to the pension reserve representing the excess of the SRP and RSBP contribution amounts over the accounting expense; (c) the transfer to the International Development Association, by way of a grant of $400 million, which amount would be usable to provide financing in the form of grants in addition to loans; (d) the transfer to the HIPC Debt Initiative Trust Fund, by way of immediate grant, of $210 million to be used to provide debt relief on debt owed to the International Development Associa- tion under the HIPC Debt Initiative framework; (e) the retention as surplus of $52.5 million; and (f) the transfer to reserves of $100 million of the $400 million of net income previously retained as surplus in FY04 that was ear- marked solely for subsequent transfers to IDA, HIPC, and/or reserves. 3. Accordingly, the Executive Directors recommend that the Board of Governors note with approval the present Report and adopt the draft Resolution. . . .1 (This report was approved and its recommendation was adopted by the Board of Governors on September 24, 2005) 1 See page 165. 200 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 201 REPORT OF THE BOARD OF DIRECTORS OF IDA March 10, 2005 Additions to Resources: Fourteenth Replenishment 1. The International Development Association (IDA) was established in 1960 to support the efforts of the world's poorest countries to reduce poverty, improve living conditions and boost economic growth. IDA resources are provided as long-term concessional loans or as grants to 81 low-income countries to help them achieve their development objectives, including the Millennium Develop- ment Goals (MDGs, Box 1).1 IDA is a key supporter of the part- nership between developed and developing countries around the MDGs, helping countries make the policy improvements needed to ensure that increased donor financing channeled through IDA and other agencies can be used as effectively as possible. 2. IDA resources finance projects and programs that help build and sustain the policies, institutions, infrastructure and human capital needed for equitable and environmentally sustainable development in low-income countries. This helps reduce poverty, allows more people to participate in the mainstream economy, and ensures that people can lead longer, healthier and more productive lives. Improving living standards for the world's poor is a long-term task that requires close partnerships, and a strong focus on both the effi- cient use of resources and on the outcomes they generate, as well as on ensuring resource flows that are sustainable and predictable over the medium and long term. In this, IDA plays its part, working closely not just with governments, but also with other international organizations, donor agencies, the private sector and civil society. IDA's aim is to operate with the greatest possible transparency; safeguard and account for its resources in all its operations; and measure its impact and the results it achieves. 3. As the world's largest single provider of concessional resources for low-income countries, IDA is a cornerstone of the efforts by the international community to achieve countries' development goals. Annual commitments in recent years have ranged from $7 billion to $9 billion, and IDA is the most significant source of external 1 As endorsed by Heads of State and Government in the U.N. General Assembly on September 8, 2000. 201 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 202 Box 1: The Millennium Development Goals Goal 1. Eradicate extreme poverty and hunger · Halve, between 1990 and 2015, the proportion of people whose income is less than one dollar a day. · Halve, between 1990 and 2015, the proportion of people who suffer from hunger. Goal 2. Achieve universal primary education · Ensure that, by 2015, children everywhere, boys and girls alike, will be able to complete a full course of primary schooling. Goal 3. Promote gender equality and empower women · Eliminate gender disparity in primary and secondary education, preferably by 2005, and to all levels of education no later than 2015. Goal 4. Reduce child mortality · Reduce by two-thirds, between 1990 and 2015, the under-five mortality rate. Goal 5. Improve maternal health · Reduce by three-quarters, between 1990 and 2015, the maternal mortality ratio. Goal 6. Combat HIV/AIDS, malaria and other diseases · Have halted by 2015 and begun to reverse the spread of HIV/AIDS. · Have halted by 2015 and begun to reverse the incidence of malaria and other major diseases. Goal 7. Ensure environmental sustainability · Integrate the principles of sustainable development into country policies and programs and reverse the losses of environmental resources. · Halve by 2015 the proportion of people without sustainable access to safe drinking water. · By 2020 to have achieved a significant improvement in the lives of at least 100 million slum dwellers. Goal 8. Develop a Global Partnership for Development · Develop further an open, rule-based, predictable, non-discriminatory trad- ing and financial system. · Address the special needs of the least developed countries. · Address the special needs of landlocked countries and small island devel- oping states. · Deal comprehensively with the debt problems of developing countries through national and international measures in order to make debt sustain- able in the long-term. · In cooperation with developing countries, develop and implement strategies for decent and productive work for youth. · In cooperation with pharmaceutical companies, provide access to afford- able essential drugs in developing countries. · In cooperation with the private sector, make available the benefits of new technologies, especially information and communications. 202 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 203 support for many countries' growth and development objectives, as well as for specific infrastructure and sectoral priorities critical to MDG achievement, such as education and health. IDA provides its assistance in accordance with country-owned strategies developed through country-led consultative processes and reflected where available in Poverty Reduction Strategy Papers (PRSPs). 4. IDA's resources come from several sources, the largest of which is contributions from donor countries provided according to agree- ments reached during periodic replenishment negotiations, which are normally held every three years. Other important sources are repayments on outstanding credits, including from the many coun- tries that have graduated from IDA, some of which are now con- tributing to IDA as donors, as well as IBRD net income transfers and IDA investment income. 5. Representatives of donor countries (the "IDA Deputies") and rep- resentatives of borrower countries (collectively referred to in this report as "Participants"), discussed the Fourteenth Replenishment of IDA resources (IDA14) over a series of meetings beginning in February 2004.2 The meetings were chaired, initially by Jeffrey Goldstein,3 then Managing Director of the World Bank, and subse- quently by Geoffrey Lamb, Vice President and Senior Counselor to the President of the World Bank. Participants sought the views of other stakeholders, including through consultations with Asian opinion leaders in Hanoi, Vietnam in July of 2004, and by inviting comments from civil society on the draft report. Policy papers dis- cussed at the replenishment meetings, as well as the summaries of the meetings are available on IDA's external website.4 6. This report sets out the Participants' conclusions and recommenda- tions for the IDA14 period arising from discussions at the Replen- ishment meetings, which covers the three years between July 1, 2005, and June 30, 2008. The report points to the enduring core ele- ments of IDA's policy framework (Section I), and gives additional guidance in selected areas where the Participants thought this was needed to further strengthen IDA's effectiveness (Section II). 2 IDA14 meetings: February 18­20, 2004, in Paris; July 9­11, 2004, in Hanoi; October 4­6, 2004, in Washington DC; December 13­14, 2004, in Athens; and Feb- ruary 22, 2005, in Washington DC. 3 Elected by Deputies according to the election procedure introduced in IDA13. 4 http://www.worldbank.org/ida 203 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 204 Several innovations are particularly noteworthy. First, the report outlines a more robust results measurement system to be imple- mented during IDA14, which tracks key indicators of country out- comes and measures IDA's contribution to those outcomes. Second, the report provides a new approach to grant allocation that uses the likelihood of debt distress as the primary determinant of eligibility for grant financing. This approach is based on assessments of coun- tries' debt sustainability and performance, as well as on their need for resources, while preserving the long-term strength and financial capacity of IDA as a key partner of the world's poorest countries. Third, it ushers in the full disclosure of IDA's Country Performance Ratings (CPR), in recognition of the importance of transparency in IDA, including in the allocation of IDA's resources on the basis of performance. Lastly, the report contains recommendations regard- ing growth, private sector development, and donor coordination and harmonization issues, which were topics for special considera- tion in the IDA14 discussions. 7. The report is organized as follows. Section I sets out IDA's current strategy for assisting countries in their efforts to reduce poverty. Sec- tion II presents the guidance Participants gave on the five special themes they selected for special attention during the replenishment discussions, including growth and private sector development, debt sustainability and grant allocation, results measurement in IDA14, and improving how IDA works with development partners. Section III reviews agreements on HIPC and the financing of IDA's HIPC-related costs. Section IV reviews the framework for managing IDA's financial resources. Section V sets forth the Participants' request to the Executive Directors to recommend to the Board of Governors the adoption of the draft IDA14 Resolution (see Annex 3). SECTION I: IDA'S STRATEGY FOR POVERTY REDUCTION 8. The policy, operational and financial framework that underpins IDA's strategy for reducing global poverty builds on the guidance set out in successive replenishment documents. The IDA replenish- ment process has continually set new and challenging precedents for the World Bank and for the development community. These precedents have contributed to the evolution in thinking about how best to assist the world's poorest countries. This section summarizes 204 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 205 the key elements of IDA's current strategic framework.5 Partici- pants recommended that during the IDA14 period this framework continue to be implemented as IDA's basic development approach; that it be further strengthened through the conclusions and recom- mendations set forth in this report; and that it be implemented through instructions and guidance to IDA's Management and staff, based on the monitorable actions for IDA14 set out in Annex 2, Table 3. Progress on implementing IDA14 undertakings will be dis- cussed at a Mid-Term Review meeting. A. The Context: Fighting Poverty in a Global Age 9. As a group, IDA countries have made significant progress in recent decades to grow and to reduce poverty. Between 1981 and 2001 the poverty rate measured at $1 a day fell from 49.7 percent to 31.2 per- cent and 488 million people in these countries escaped from severe poverty. Social indicators have also improved. For instance, literacy rates among young adults increased from 60 to 76 percent overall, and from 49 to 72 percent for young women. Life expectancy has also increased from 54 to 59 years--despite the impact of AIDS, which in Africa has reduced life spans by more than 13 years in the worst affected countries. The countries that have made the most progress are those that experienced prolonged periods of economic growth, which are also those that made the most progress in improving their social and economic policies. 10. Yet, despite the economic progress in recent decades in many parts of the world, inequality across nations has continued to widen, and poverty is a fact of life for the vast majority of the 2.5 billion people living in low-income countries. An estimated 700 million people in these countries live in abject poverty with incomes of less than $1 a day, and about 1.7 billion live on less than $2 a day. Almost 1 billion people are chronically undernourished, and the vast majority of the 60 million people with HIV/AIDS live in low-income countries. The average under-five mortality rate in low-income countries is 121 deaths per 1,000 live births, compared to a rate of less than seven in 5 Policy guidance provided in the context of the IDA replenishment negotiations is operationalized for IDA countries inter alia through Sector Strategy Papers (SSP), the Bank's Operational Policy (OP) framework, and the Strategic Framework for the World Bank Group. 205 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 206 high-income countries, and the mortality rate for women in child- birth in some low-income countries is more than 100 times that of rich countries.6 These interrelated problems continue to limit the prospects of billions of people, but can be addressed by well- designed and well-implemented public sector programs, comple- mented by private sector initiatives. 11. The context of today's effort to reduce poverty is a rapidly globaliz- ing world, where private investment, trade and technological advances play increasingly significant roles, and where international and national civil society organizations are more and more active and engaged. The benefits of globalization need to be brought to all, through market-based pro-poor growth policies, effective pub- lic institutions, investment in people, and institution building. 12. In recent years, a consensus has emerged within the development community around the shared objectives of achieving the MDGs and the partnership between developed and developing countries that is needed to achieve these goals. Under this consensus, devel- oped countries must both reduce barriers to trade to promote an international economy more conducive to growth and develop- ment, and provide adequate aid resources. Developing countries must focus on good governance, sound policies and robust institu- tions, the strength of which is the key determinant of the effective- ness of aid. 13. Developed countries must also help to ease debt burdens, where they are unsustainable and inhibit countries' development prospects. IDA sponsors the enhanced Heavily Indebted Poor Country (HIPC) Initiative and works with its partners, including the IMF, to support client countries in effective management of their external debts. A system for ensuring that IDA's support takes account of the risk of debt distress is described in Section IIC. 6 World Development Indicators 2004, World Bank. 206 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 207 B. IDA's Role: Country-Led and Performance-Driven 14. Operating within this consensus, IDA provides vital financial resources and policy advice to 81 low-income countries.7 These countries have little or no access to market-based financing, and IDA, as the largest single source of concessional assistance to the world's poorest countries, plays a critical role in their efforts to achieve sustained growth and poverty reduction. IDA is a long- term development instrument. IDA finances are managed to ensure that substantial, predictable and sustainable resource flows are available to countries over the medium and long term based on their performance and demonstrated capacity to effectively utilize IDA resources. 15. IDA's approach to reducing poverty has evolved over time, incor- porating the lessons learned and the knowledge gained from the experience of developing countries and the efforts of the interna- tional community to assist them. Its key strength lies in its country programs and in its emphasis on country-led development, as man- ifested by its support for PRSPs.8 Experience has shown that devel- opment can only be achieved when poor countries themselves take control of their destinies. IDA aims to work in partnership with the governments of recipient countries to support the priorities that emerge from their own development strategies, which are based on consultative processes that include the private sector and civil soci- ety. IDA seeks to provide an integrated package of finance, policy advice and institutional support to its clients and works in collabo- ration with the rest of the World Bank Group (WBG), other devel- opment institutions, the private sector, and civil society. 7 Eligibility for IDA assistance is primarily based on relative poverty, defined as Gross National Income (GNI) per person below an established threshold ($895 per year for fiscal year 2005), and lack of creditworthiness to borrow on market terms. Eligible countries are listed in Annex D to OP3.10 of the World Bank Operational Manual. Exceptions for (i) some small island economies, and (ii) some countries with GNI above the cut-off for two consecutive years to receive hardened IDA terms, will continue to apply during the IDA14 period. IDA resources are allocated based on the quality of countries' policies and institutions (see Annex 1). 8 The Country Assistance Strategy (CAS) is IDA's main tool for planning its assis- tance programs and ensuring they are tailored to each country's needs. The CAS draws from the borrower's own development vision and strategy for reducing poverty as outlined in its Poverty Reduction Strategy Paper (PRSP). See IDA11 Replenish- ment report, Section I; IDA12 Replenishment report, Section IV; and IDA13 Replen- ishment report, Section III. The Deputies' conclusions and recommendations with respect to CASs in the IDA13 report shall continue to apply during IDA14. 207 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 208 16. The last decade of development experience has contributed to a deeper understanding of the complexity of the development process and of the need for action on many interrelated fronts. IDA's comparative advantage lies in its ability to take an integrated, multi-sectoral view of the challenge of poverty reduction in each IDA country, the analytical and technical capacity it brings to bear in grappling with complex development problems, and the leader- ship it can provide as a convening body for the rest of the donor and international community. 17. Experience has also shown that development resources are most effective in reducing poverty in countries that are pursuing good growth and poverty reduction policies. IDA has been leading the development community in the effort to align resources with coun- try effort and performance through its Performance-Based Alloca- tion (PBA) system, which has also proven to be a useful tool for other partners.9 The PBA system is based upon an assessment of countries' policies in the areas of economic management, structural issues, social inclusion and equity, public sector management and institutions, and it takes full account of the central role played by good governance in the effective use of development assistance. IDA continues to refine the PBA system, by incorporating the les- sons learned from experience and new research findings, and by committing to make the performance ratings fully transparent. IDA is also encouraging other partners to align their resources with per- formance, and is working with Regional Multilateral Development Banks (RMDBs) toward greater harmonization of these systems. 18. While the allocation of IDA's financial resources is and will continue to be primarily driven by policy performance, IDA also confronts the fact that many poor people live in countries with seri- ous and persistent performance problems. In these Low-Income 9 IDA's Performance-Based Allocation (PBA) system was introduced in 1977, and IDA donors have since continued to affirm that lending allocations should be based on annual assessments of country policy performance (see IDA10 Replenishment report, Section II; IDA11 Replenishment report, Section II; IDA12 Replenishment report, Section III; and IDA13 Replenishment report, Section III, and Annex 1). The system has continued to evolve, including through the introduction of a special emphasis on good governance. Further modifications are being introduced in the cur- rent report, including with respect to the full disclosure of IDA's performance ratings. An explanation of how the PBA system will be operated during the IDA14 period is included in Annex 1. 208 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 209 Countries Under Stress (LICUS), weak institutions, absence of government commitment or violent conflict can severely limit progress on poverty reduction. In the most severe LICUS country cases, particularly those in prolonged political crisis, substantial financial allocations from IDA are inappropriate. In these coun- tries, IDA stays engaged through dialogue to promote policy change and good governance, focused capacity-building to help restore essential functions of the state and social service delivery to the most vulnerable groups.10 In LICUS countries that are in tran- sition from conflict and other forms of political instability, as well as in the more stable LICUS countries that are making progress on reform, well-designed IDA financing can provide timely assistance in stabilizing fragile transitions; protecting human, social and insti- tutional capital; and supporting reform processes. More needs to be understood about the appropriate form for external assistance to take in these difficult situations, and IDA is working closely with partners including the Organization for Economic Cooperation and Development's Development Assistance Committee (OECD- DAC), the European Commission (EC) and the United Nations (UN) to learn more about aid effectiveness in fragile states. C. IDA's Strategy: The Twin Pillars 19. IDA's strategy for poverty reduction has evolved over time to incor- porate emerging lessons from both clients and partners. At times, these lessons have reaffirmed the continuing relevance of IDA's original priorities; at other times they have helped IDA refine its approach to better address the complexities of development. IDA's strategy rests on two interdependent pillars, into which critical crosscutting issues such as gender, environment and governance are being mainstreamed: · Fostering the climate and conditions for sustainable growth, investment and job creation that are inclusive of poor people. · Empowering poor people to participate in development and investing in them. 20. Sustainable growth requires a dynamic private sector and an effi- cient and effective state with the right balance between their com- plementary functions. Efforts to enhance growth should aim to 10To support LICUS countries IDA also relies on small amounts of grant funding financed by transfers from IBRD net income and surplus, and channeled through the LICUS Trust Fund. 209 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 210 expand income, employment, and services for the poor. The private sector is the engine of productivity, growth and job creation, but the state needs to ensure sound macroeconomic policies, financing for infrastructure services, and responsible and transparent manage- ment of public finances. Governments also need to ensure sound regulatory institutions that encourage private initiative in ways that benefit society as a whole, including through policies that increase poor people's access to markets and capital. Private initiative can complement government efforts to empower poor people by pro- viding basic infrastructure and social services--conditions essential for improving the livelihoods of the poor. In most IDA countries, microeconomic constraints to growth in the form of a poor invest- ment climate present a major hurdle to private investment and employment. Micro, Small and Medium Enterprises (MSMEs), which form a major part of private activity, are disproportionately affected by poor investment climates, the improvement of which is a key focus for IDA (see Section IIB). 21. Governments should endeavor to set up fiscal systems that generate resources for development in non-distortionary ways and to estab- lish legal and judicial systems that operate fairly and effectively. Supporting countries in their efforts to establish adequate infra- structure is a key priority for IDA. While public investment and effective regulatory frameworks play key roles in ensuring that countries have adequate infrastructure, private investment also needs to be tapped, including via public-private partnerships.11 Trade is a crucial component of economic growth and is being sup- ported by IDA through programs to develop national, regional and international trade and infrastructure linkages, especially in regions and subregions where domestic markets are small and intra- regional trade is underdeveloped, and to help poor countries develop capacity for trade policy formulation and negotiation. Enhancements of IDA's policies with respect to growth and trade are detailed in Section IIA. Lastly, stable and transparent govern- ments can contribute significantly to the security of populations and the confidence of economic actors, and hence to investment and quality growth. 11The importance of regulation in privatized infrastructure in particular is addressed in Kessides, Ioannis N., Reforming Infrastructure: Privatization, Regulation, and Competition, World Bank, June 2004, available at http://econ.worldbank.org/prr/ reforming_infrastructure/. 210 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 211 22. It is important that short-term gains in economic growth not come at the expense of the well-being of future generations. Therefore, IDA aims to design its programs and projects with a view to ensuring long- term environmental and social sustainability, as well as to promote social inclusion, cohesion and accountability.12 In rural areas where most poor people live, improvements in well-being can only be achieved through increasing the productivity of both farm and non- farm economies. Reducing the vulnerability of poor people to the impacts of natural disasters and long term environmental degradation is also a priority for IDA. 23. Empowering the poor and investing in them entails improving the quality and reach of social service delivery, with a special focus on unserved and underserved communities. These investments have crucial benefits for poor people by improving their standards of liv- ing, building human capital needed to increase their productivity, and facilitating their emergence from poverty. Over the past few years, IDA has developed sector strategies to guide its work in the key social sectors: Education; Health, Nutrition and Population; and Social Protection. For these sectors, an important challenge for IDA and its development partners is how to ensure long-term financing within a performance-based framework. New Bank guidelines on eligibility of expenditures in World Bank lending will increase the flexibility of IDA to finance recurrent expenditures as a transition to long-term fiscal sustainability.13 · Education priorities include working to ensure that all children have access to a good quality basic education, with a special focus on girls and on the poorest groups. IDA is a strong supporter of the objectives of the Education For All (EFA) initiative14 and works with countries to accelerate progress toward these goals. In particular, IDA supports countries' efforts to reform their 12IDA works to mainstream environmental aspects into its operations through its Environment Strategy; see Making Sustainable Commitments: An Environment Strategy for the World Bank, World Bank Group, 2001, available at www. worldbank.org/environment. 13Eligibility of Expenditures in World Bank Lending: A New Policy Framework, R2004-0026, 2004 14These are: (i) expanding and improving early childhood education; (ii) ensuring that by 2015 all children complete primary education of good quality; (iii) ensuring access to appropriate learning and life skills programs; (iv) achieving a 50 percent improvement in levels of adult literacy by 2015; (v) eliminating gender disparities in primary and secondary education by 2005, and achieving gender equality in educa- tion by 2015; and (vi) focusing on learning outcomes. 211 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 212 education systems, to lay the foundations for sustainable financ- ing of the sector to improve access without losing focus on edu- cation quality, and on innovative delivery mechanisms such as distance learning.15 · Health, Nutrition and Population (HNP) priorities include help- ing countries protect populations from the impoverishing effects of illness, malnutrition, and high fertility. This involves working to enhance the performance of healthcare systems by promoting equitable access to preventive and curative HNP services that are affordable, effective, well managed, of good quality, and respon- sive to clients including those from poor and disadvantaged groups. Health sector expansion must be accompanied by a strong emphasis on improving quality. Furthermore, health care financing must be made sustainable by mobilizing adequate lev- els of resources, establishing broad-based risk pooling mecha- nisms, and maintaining effective control over public and private expenditure.16 In the HNP sector, IDA collaborates closely with a number of partner agencies, including the World Health Orga- nization (WHO), UNAIDS, and the Global Fund to Fight AIDS, Tuberculosis and Malaria (GFATM). These collaborative efforts are particularly important in the fight against communicable dis- eases, and especially HIV/AIDS, which is a key priority for IDA. · Social Protection priorities include reducing the vulnerability of the poor and improving their ability to cope with adverse eco- nomic shocks, natural disasters, ill health and disability. Social protection also involves cost-effective and well-targeted pro- grams that proactively help people to take on higher-return activ- ities with less concern about the risks. IDA supports countries' efforts toward the elimination of harmful child labor, making labor markets more equitable and inclusive, implementing legal reforms to protect poor people's right to assets (e.g., women's property rights), providing insurances and safety nets to assist the poor and vulnerable, and strengthening community-based coping mechanisms, including through social funds.17 15See Education Sector Strategy, World Bank, 1999, available at www.worldbank .org/education/. An update of this strategy is underway. 16See Sector Strategy: Health, Nutrition, & Population, World Bank, 1997, available at www.worldbank.org/hnp/. 17See Social Protection Sector Strategy: From Safety Net to Springboard, World Bank, 2000, available at www.worldbank.org/sp/. 212 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 213 24. Crosscutting themes: IDA recognizes that a number of critical issues cut across growth and equity concerns and are important for IDA's work. These include gender issues, environmental protection and governance, and IDA actively incorporates these themes in its analytical work and strategies, as well as in all its programs and projects. · Gender equality promotes faster growth, enables individuals to move more quickly out of poverty, and enhances the well-being of men, women, and children. Gender inequalities pose a serious obstacle to growth and poverty reduction in many IDA countries. These inequalities are apparent across sectors, in low girls' enroll- ment and retention rates in schools, gender dynamics of HIV/AIDS, and limited access of women to financial services and participation in economic activities. IDA works to address these issues in its assistance, by raising awareness of gender issues across sectors and building the capacity of governments and Bank staff to promote gender equality in their policies and programs.18 · Environment. Proper management of the environment plays a critical role in ensuring that development in IDA countries is sus- tainable and poverty reduction is lasting. Environmental improvements enhance the quality of life and growth, by promot- ing the health of populations, reducing vulnerability to natural disasters and environmental hazards, and protecting the quality of the regional and global commons. IDA strives to achieve these goals by strengthening its analytical and advisory services through environmental analyses, integrating environmental assessments in project and program design (including assessment of indirect and cumulative impacts), encouraging IDA countries to reflect environmental analysis in their poverty reduction strategies, and supporting capacity building. Several processes have been initiated in recent years that have significant implica- tions for the application of IDA's safeguard policies. These include the revision of the operational policy on development 18See IDA12 Replenishment report, Section I on mainstreaming gender into IDA's operations, and IDA13 Replenishment report, Section II on expanding IDA's gender dialogue with its partners and civil society. In response to a request by IDA12 Deputies, the World Bank adopted the Gender Mainstreaming Strategy in September 2001, which aims to integrate gender issues fully as a central part of the Bank's work and sets the framework for the incorporation of gender issues into IDA's operations. See Integrating Gender into the World Bank's Work: A Strategy for Action, World Bank, 2001, available at www.worldbank.org/gender. 213 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 214 policy lending,19 the proposed pilot program to use country sys- tems, safeguards harmonization with other international financial institutions, and investment lending simplification and modern- ization. Participants called on IDA to establish procedures and mechanisms that ensure that such new approaches to safeguards provide equivalent protection to the environment and vulnerable social groups in project design and implementation. · Governance. Efficient, transparent, and accountable public sector institutions are necessary not only for implementing growth-enhancing policies, but also for sustaining equitable growth and poverty reduction and protecting the rights of the poor and ensuring access to basic services. The implementation and sustainability of economic and social policies that promote poverty reduction and growth are critical to long-term devel- opment. IDA gives special weight to the importance of gover- nance in its performance-based resource allocation system, and to operationalizing the Bank's public and private sector institu- tional reform and anticorruption agenda into its policies and programs. 25. The requirements of sustainable development and poverty reduc- tion are complex and demanding, and more work needs to be done to understand the determinants of poverty-focused growth at the country-level. Tensions and trade-offs inevitably arise when pursu- ing development outcomes with scarce resources, and IDA seeks to work with its partners at the country level to assist them in manag- ing these tensions, in examining the trade-offs implied by different policy choices, and in channeling resources most effectively to reduce poverty. 26. IDA has increasingly involved beneficiaries in the design and implementation of its interventions, which helps ensure their effec- tiveness and sustainability.20 Particular attention is now given to the 19Bank Operational Policy 8.60 on Development Policy Lending, introduced in August 2004. 20See IDA11 Replenishment report, Part 1 on Country Assistance Strategies, IDA's main tool for planning its assistance programs and ensuring they involve participa- tion and are tailored to each country's needs. Also see IDA12 Replenishment report, Section IV for working with government, civil society and other donors to tailor IDA's CASs. 214 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 215 empowerment of women and vulnerable or marginalized groups, while recognizing that there is still more to be done to ensure that these voices are adequately reflected in all of IDA's activities. 27. People need a secure environment to go about their daily lives and improve their lot. Security services must serve the interests of the communities within which they work without consuming dispropor- tionate shares of national resources, and fair and nonviolent means must be available for the resolution of disputes. IDA supports coun- tries in their efforts to establish a safe environment for all members of society, especially the poorest. It also works to consolidate peace and stability in countries emerging from conflict. IDA's allocation system for post-conflict countries, and IDA's collaboration with other partners on post-conflict issues, both help to ensure that they receive timely and adequate financial support throughout the recov- ery period, while maintaining a strong link to performance.21 D. Working at the Country Level: Ownership and Strategic Selectivity 28. The experience of the last two decades has shown that development can only be sustained if policy reforms are broadly supported by a range of stakeholders at the country level. IDA has seized upon this principle in its work by supporting country-owned strategies built around good policies, institutions and governance. Underpinning this work are the principles of the Comprehensive Development Framework (CDF), including country ownership; a long-term, holistic vision and strategy; partnership amongst stakeholders; and a focus on accountability and development results.22 Further details of how IDA works with its partners at the country level are pro- vided in Section IIE. 29. PRSPs aim to operationalize these principles in low-income coun- tries, putting poverty at the center of governments' development plans and providing space for all actors, including the private sector 21See IDA13 Replenishment report, Annex 2. 22The CDF approach is operationalized through PRSPs, and provides the foun- dation for implementing partnership at the country level. See IDA13 Replenish- ment report, Section II at: http://siteresources.worldbank.org/IDA/Resources/ FinaltextIDA13Report.pdf. See also the guide to staff on implementing CDF principles: Supporting Development Programs Effectively: Applying the Compre- hensive Development Framework Principles, November 2004. 215 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 216 and civil society, to engage on critical issues. Each IDA country is expected to adapt the MDGs to country circumstances using the PRSP as an instrument and taking appropriate account of such fac- tors as poverty profile, fiscal situation, and administrative capacity. IDA has played a key role in supporting the initial development of the PRSP approach and will continue to have an important role to play in solidifying the benefits of this process.23 More work needs to be done to strengthen the realism of PRSPs, by improving their analytical underpinnings and prioritization, including the attention they devote to growth and constraints on private sector activities and infrastructure development, and the poverty impact of policies and programs. This will help to improve the customization of the PRS process to country conditions and processes, ensure consis- tency between PRSPs and countries' budget processes and align donor support with PRSPs. The consideration of PRSPs by national legislative bodies is encouraged to further strengthen country own- ership. The strengthening of country capacity and processes for planning, implementing, and monitoring reforms is also an impor- tant aspect of increasing the effectiveness of reforms. IDA's ability to cooperate closely with development partners and to take an inte- grated view across multiple sectors and between macro and micro issues make it a key player in supporting its client countries in this process.24 Furthermore, IDA recognizes the need for even stronger donor coordination processes to effectively support PRSPs and also to respond to the needs of small countries that do not have full or formal PRSPs. 30. The diagnosis of development problems and prospects is critical to well-designed policies and programs, and to helping countries put in place systems to ensure effective use of public resources, including through accountability and transparency of government revenues and expenditures. In collaboration with its partners, IDA seeks to maintain a base of analytical and diagnostic knowledge needed to underpin its programs and those of other donors and strengthen 23In July 2004, the Operations Evaluation Department of the World Bank conducted an independent review of the Poverty Reduction Strategy Initiative, and put forth rec- ommendations on improving the Initiative. See The Poverty Reduction Strategy Ini- tiative: An Independent Evaluation of the World Bank's Support Through 2003, World Bank, 2004, available at http://www.worldbank.org/oed/prsp/. 24See IDA13 Replenishment report, Section II for IDA's policy framework for imple- menting the PRSP process. 216 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 217 countries' own development efforts.25 This is achieved through a range of products such as country economic memoranda, public expenditure reviews, country procurement assessment reports, country financial accountability assessments, integrated fiduciary assessments, public finance management performance measure- ment reports, and economic, poverty and sectoral analyses. When available analysis indicates weaknesses in the recipient's fiduciary systems, IDA will identify and address the steps needed to secure acceptable fiduciary arrangements. 31. Selectivity is important to success. Within countries and within a greater partnership framework in support of PRSPs, IDA focuses its efforts in support of the PRSP through its CAS, identifying those areas of critical importance to its clients where it has a clear com- parative advantage--for example, by supporting policy reform, capacity enhancement, demonstration effects and learning. IDA seeks to complement the efforts of other partners and work where its leverage is greatest. 32. IDA's highly concessional resources are concentrated in the poorest countries. South and East Asia are home to the greatest number of the world's poor and receive substantial amounts of IDA financing. The poor countries of Europe and Central Asia, the Middle East and North Africa, Latin America and the Caribbean, and the Pacific are also IDA partners. IDA also recognizes the particularly severe development challenges faced by countries in Sub-Saharan Africa, including: endemic diseases; long-term civil and cross- border conflicts; weak governance; lack of access for many people to education and other services; inadequate or nonexistent infra- structure; limited access to alternative sources of financing; climatic 25The IDA13 Replenishment report (Section III) emphasized the need to improve the analytical underpinnings of IDA's work, and to ensure that its Economic and Sector Work (ESW) complements the analytical work of others, including the United Nations agencies, bilateral and multilateral institutions, the ILO, and researchers and government institutions in borrowing countries. It also underlined the importance of utilizing the Common Country Assessments of the UN, and of building borrower countries' capacity to undertake analysis. Analytical work such as Poverty Assess- ments (PA), Poverty and Social Impact Analysis (PSIA), Country Economic Mem- oranda (CEM), Public Expenditure Reviews (PER), Country Financial Accountability Assessments (CFAA), and Country Procurement Assessment Reviews (CPAR) serve as key building blocks for IDA's CASs. 217 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 218 and environmental problems and shortage of natural resource endowments. A key IDA objective is therefore to direct half of its assistance to Africa, provided that the performance of individual countries warrants it, and to support the efforts of these countries to use these resources effectively. IDA's strategic framework for Africa addresses four key areas: · Improving governance and resolving conflict. This includes greater attention to post-conflict issues, fiscal transparency including better management of revenues from natural resources, and support for public sector management reforms and anti- corruption measures. · Developing human resources, including supporting the fight against HIV/AIDS and other communicable diseases, social pro- tection, and education, particularly for girls. · Promoting increased growth, notably through a sound policy and institutional environment for investment; increased infrastruc- ture development; and greater regional integration along with the liberalization of--and creation of physical infrastructure for-- intra-regional trade. · Debt reduction and development assistance--relieving unsus- tainable debt burdens, and increasing the quantity and quality of aid. E. Global and Regional Public Goods 33. While the focus of IDA's programs is clearly at the country level, IDA recognizes that development and poverty reduction are affected by a range of issues that cross national boundaries. While the main weight of its interventions is in country programs, IDA seeks to contribute to the resolution of global problems where they are shown to be of particular relevance to poverty reduction. Five areas have been identified for attention: communicable diseases, environmental commons, economic governance and social stability, trade integration, and the knowledge revolution. IDA collaborates closely with other partners in all these areas, for example with the Global Environment Facility (GEF) on the environment, and with UNAIDS and GFATM and other actors in the case of communica- ble diseases. 34. HIV/AIDS and other deadly communicable diseases destroy mil- lions of lives every year and threaten to reverse development gains, especially in the hardest-hit areas of Africa and among vulnerable groups such as women and children. They pose an enormous chal- lenge to the international community. IDA will continue its work to 218 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 219 combat these diseases and mitigate their effects, both at the coun- try level through disease-specific interventions and support for health systems strengthening, and across countries through regional projects, as well as through support for international initiatives. 35. IDA recognizes that regional and trans-boundary questions can exercise an important influence on countries' development efforts. IDA seeks to develop and apply regional solutions to regional prob- lems, including through a pilot program that provides financial and analytical support necessary to complement critical national activi- ties aimed at promoting deeper regional integration. IDA also aims to work more closely with other institutions that have a regional base and expertise--notably the Regional Multilateral Develop- ment Banks--and other donors with regional programs. F. Partnerships 36. In its work to support governments' efforts to develop and imple- ment broad-based strategies for growth and poverty reduction, and at the regional and global levels, IDA cooperates closely with key institutional partners, including:26 · The International Monetary Fund. The IMF is one of IDA's clos- est institutional partners, collaborating across the range of IDA client countries on the basis of country-owned poverty reduction strategies. The IMF takes the lead on macroeconomic issues, the Bank on social and structural issues. There is also strong cooper- ation on other low-income country issues such as debt, including through the jointly sponsored HIPC Initiative, and on the treat- ment of aid inflows in the macroeconomic framework. · The United Nations. IDA has strong relationships with the spe- cialized agencies, funds and programs of the UN system. Collab- oration has been strengthened in recent years, at both the interagency and the country levels, and is particularly important in working toward and monitoring the MDGs, implementing the PRSP process, and addressing conflict emergencies and post- conflict reconstruction (with UNDP and UNHCR). Strong progress has also been made in areas such as the health sector, including through the joint sponsorship of UNAIDS, and through work on the health-related MDGs with WHO. 26For additional descriptions of partnerships with other multilateral organizations see "Coherence, Coordination and Cooperation Among Multilateral Organizations: Progress and Challenges," Board Report, April 2004. 219 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 220 · The Regional Multilateral Development Banks (RMDBs) are close partners of IDA, both at the country level and on cross- country issues within regions. Collaboration has grown steadily in the areas of financial management, including procurement reform, the performance-based allocation of resources, analytical work and the environment, and is set to further expand on gov- ernance, corruption and capacity-building. The RMDBs are also key partners in the implementation of the PRSP process and the HIPC Initiative. · The European Commission (EC) works closely with IDA on shared analytical work, financial management, and statistical sys- tems and data collection. Other areas of cooperation include the HIPC Initiative, the PRSP process, and the Strategic Partnership for Africa (SPA). · Bilateral donors active in the IDA process include both OECD- DAC and non-DAC donors. Both DAC and non-DAC bilateral donors are a key source of development finance, and of comple- mentary skills and practical experience in project and public sec- tor management. This is especially valuable in addressing political and governance dimensions of development. With these donors, IDA has been making a strong push forward through the PRSP process and through the OECD-DAC Working Party on Aid Effectiveness and Donor Practices, to ensure the greatest measure of alignment and harmonization of development pro- grams at the highest standards. · Civil society. IDA works with a great number of Civil Society Organizations (CSOs) throughout the world, including the pri- vate sector, and community-based, indigenous peoples, faith- based organizations, and foundations. IDA engages with CSOs both for the purpose of consulting on policy and other issues, and to support their efforts e.g., in service delivery such as through the IDA-financed Multi-Country HIV/AIDS Program (MAP) for Africa. G. Impact and Monitoring Results 37. The ability to monitor progress and measure results is integral and essential to IDA's overall strategy. A monitoring framework for the MDGs has been designed by the staff of the World Bank and IMF, in consultation with the UN, the RMDBs, the World Trade Organi- zation (WTO), and OECD-DAC, and is now being implemented 220 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 221 Bank-wide.27 Within this framework IDA introduced, as part of the IDA13 Replenishment agreement, a preliminary system of indica- tors for monitoring and evaluating its own effectiveness, grounded in the MDGs and in countries' own monitoring systems. Based on this early experience, Participants welcomed the enhanced results framework proposed for IDA14 (see Section IID), which aims to monitor development outcomes and link these outcomes to IDA country programs and projects. This is a challenging but necessary task, as a better linking of development outcomes to government policies and to donor interventions will ultimately benefit the poor and increase accountability for the use of donor resources. To address existing data deficiencies and enhance countries' efforts to collect and use data, an important IDA objective is to build a stronger focus on outcomes into its country strategies, and to enhance direct support for efforts to build capacity to measure results. H. Transparency and Accountability in IDA 38. Transparency is fundamental to development progress in three ways. It draws more stakeholders, supporters and ideas into the development process; it facilitates coordination and collaboration among development partners; and it improves development effec- tiveness by fostering public integrity and accountability for results. Just as IDA urges transparency and openness in the governance of its client countries, IDA should aim to meet the highest standards of transparency in its operations, policies and publications, and rec- ognize a responsibility to make available as rich a range of infor- mation as possible for poor countries and the international development community. 39. There have been many initiatives in recent years to increase IDA's openness, including consulting with and involving stakeholders in its deliberations, and enhancing public information about IDA's policies and activities. In IDA14, IDA aims to continue the leader- ship role it is playing among development partners in increasing transparency and will take additional steps to enhance the openness 27World Bank, Global Monitoring Report 2004: Policies and Actions for Achieving the Millennium Development Goals and Related Outcomes. June 2004. 221 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 222 of its work. Means by which IDA works toward its objective of increased transparency and accountability include: · IDA Replenishment Discussions. To ensure an open and trans- parent deliberative process, the IDA replenishment discussions now include representatives from borrower countries; the policy papers discussed at the replenishment meetings are made avail- able to the public; and public comments are sought on the pol- icy recommendations contained in this report. IDA also consults with regional stakeholders to hear their views on how to tackle the key challenges that IDA countries and their part- ners confront.28 · Disclosure. Sharing of information on IDA policies and opera- tions stimulates public debate on and broadens understanding of development issues, and also helps to create public support for development efforts. Accordingly, Participants welcome the enhancement of IDA's disclosure of information in recent years. IDA now makes an enormous amount of operational information available to the public, ranging from project and policy docu- ments to strategy and evaluation documents. Bank Management has also initiated an extensive program to proactively enhance information dissemination and outreach, including a program to strengthen Public Information Centers across the world through which IDA's knowledge resources are made more widely accessi- ble. Participants urge IDA to continue to demonstrate leadership among the multilateral development institutions on transparency in its own deliberations and the accountability of its operations and to continue to enhance public access to information on Board proceedings, including the disclosure of Board minutes. In partic- ular, Participants request that progress in the implementation of projects and programs receiving financial support from IDA (including performance indicators and results, as appropriate) be published at the completion of such projects and programs, in addition to periodically during their execution. Moreover, during the period of IDA14, Participants noted that Management has committed to carry out an independent comprehensive assess- ment of its control framework including internal controls over IDA operations and compliance with its charter and policies, and that such assessment would be made available to the public after disclosure has been approved by IDA's Executive Directors. 28During the second meeting of the IDA14 meeting in Hanoi in July, the Participants had a daylong consultation meeting with opinion-leaders from Asian countries. 222 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 223 · Country performance assessments. Central to IDA's effectiveness is its practice of allocating its resources in accordance with assess- ments of the performance of each IDA country as measured by key social and economic policies and with a strong focus on gov- ernance. A key means of strengthening the performance assess- ment system, and thus ensuring that IDA's resources are even better aligned with countries' capacity to use these scarce resources with maximum impact on shared poverty-reduction goals, is the disclosure of its country performance assessment rat- ings. Participants therefore welcome the recent decision by IDA's Executive Directors to fully disclose the Country Policy and Insti- tutional Assessment (CPIA) ratings for IDA countries, starting in IDA14. They noted that this will provide client countries and other stakeholders with transparent information about CPIA methodology, findings and ratings for all IDA countries, which, in turn, should enhance the quality and robustness of the ratings, as well as public confidence in IDA's performance assessment.29 · Consultation. Strengthening the voices of locally-affected stake- holders in IDA-financed project decisions remains an important challenge. Experience has demonstrated that consultation with cofinanciers, partners, and groups and individuals with relevant knowledge of development issues also helps to enhance the qual- ity of Bank-financed operations. For this reason, Participants call on IDA to strengthen documentation of stakeholder feedback from consultations required under the Bank's safeguard policies. · Financial flows. Participants recognized the need for increased transparency of revenue flows from extractive industry projects to governments. They emphasized that IDA's financial assistance to a project with a significant impact on revenues should be pred- icated upon the government having in place, or committing to establish, a functioning system for accounting for revenues and their use. The government should also have in place, or commit to establish, a functioning system for the independent auditing of such revenue receipts and the public dissemination of the results. IDA should closely monitor the implementation of these systems and take appropriate (and timely) actions if they are not being effectively implemented. Although these actions are especially 29CPIA disclosure will be preceded by comprehensive country consultations includ- ing workshops with country representatives to disseminate information on the CPIA methodology and process. Bank staff will also discuss assessment outcomes with country authorities as part of the ongoing policy dialogue between the Bank and the country. 223 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 224 relevant to extractive industry projects with significant revenue impacts, they are also applicable to IDA's budget support opera- tions, as set out in IDA's operational policy OP/BP 8.60 Develop- ment Policy Lending, recently approved by IBRD and IDA's Executive Directors. SECTION II: SPECIAL THEMES FOR IDA14 40. At the first meeting of the IDA14 Replenishment process, held in Paris, in February 2004, the Participants selected five "special themes" that they would focus on during the replenishment negoti- ations. These special themes include the issues of: (1) growth in IDA countries; (2) private sector development; (3) debt sustain- ability and grant allocation; (4) results measurement; and, (5) work- ing together at the country level. Participants discussed these special themes during the second, third and fourth meetings, and their findings and recommendations for each of these special themes are presented below. A. Growth in IDA Countries 41. Participants stressed that sustained economic growth is a prerequi- site for poverty reduction. They noted that the growth performance in IDA countries, including African countries since the mid-1990s, is encouraging. However, there are disparities in performance among IDA countries, and the achievement of the first MDG--to eradicate extreme poverty and hunger--may be difficult in certain regions even if this recent growth trend were to continue. Partici- pants emphasized that accelerating and sustaining the recovery will be important for achieving results on growth and poverty, as will continued strong attention to the human development agenda. In this regard, they noted that increasing investments and deepening the implementation of policies that support the productivity of the investments are of utmost importance. Participants were encour- aged by the role of aid in policy reforms and in supporting the social and physical infrastructure needed for growth. 42. Participants urged greater efforts to identify the remaining con- straints to growth in specific country contexts and to provide an appropriate mix of lending and non-lending assistance to remove the constraints. Stronger policies, more attention to human capital formation and increased financing for infrastructure will alleviate 224 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 225 constraints to growth. Participants noted that weak institutions are a key constraint on growth, and urged increased attention to this issue. They underscored the need to reduce transaction costs of doing busi- ness in IDA countries, widen the reach of the market and decrease costly state interventions in the economy. Governance reforms which increase transparency, improve economic and social services, and reduce incentives for corruption can lower the costs of doing business, gain the confidence of the private sector and increase pro- ductivity. Participants also stressed that better market access, includ- ing to industrial country markets, is a critical condition for sustaining and accelerating growth, as is macroeconomic stability. 43. Participants stressed the importance of equity to sustain growth and for growth to have the desired impact on poverty. By fostering shared benefits from the growth process, equity-based measures, including emphasis on investment in people, enhance the quality and impact of economic growth, and help sustain public support for growth-promoting policies. Participants welcomed the work under- way in the Bank on various aspects of growth, equity and poverty. The analytical work being undertaken on "pro-poor" growth will deepen understanding of the linkages between growth, income dis- tribution and poverty. The World Development Report for 2006 will explore whether development strategies that incorporate equity are more likely to be successful than others. It will delve into the factors that underlie inequality, paying special attention to issues emerging from globalization and the distributional conse- quences of policy reforms and economic fluctuations. Key Bank Instruments and Priorities for Growth Promotion 44. Participants underscored the role of the country-led PRS process as an important instrument for defining the approach of each IDA country to poverty reduction and the coordination of donor assis- tance. They recommended that countries give adequate attention to growth and private sector development (PSD) issues in the PRS, as strong efforts in these areas are vital to making progress on the MDG agenda. Participants also noted the importance of using CASs to establish priorities for IDA's assistance to countries in the implemen- tation of their PRSs, and to coordinate with development partners. 45. Participants noted that successful growth strategies must address both macroeconomic and microeconomic dimensions to help create an economic environment that enables resources to be allocated and utilized efficiently. Participants recognized recent efforts by 225 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 226 IDA in this regard, including: (i) the launch, in FY03, of the results- based CAS pilot program in seven countries to help identify mea- surable results from IDA's assistance programs and develop indicators to measure progress toward such results in recipient countries;30 and (ii) increased attention to private sector develop- ment, including through stronger collaboration between the Inter- national Finance Corporation (IFC) and IDA in the preparation of CASs. They encouraged more joint IFC/IDA CASs, to enable more coherent use of Bank-wide instruments to foster private sector activities. 46. Participants urged further efforts to raise the scope and quality of growth diagnostics and policies in CASs, improve alignment to country-owned development objectives, and sharpen the focus on areas of IDA's comparative advantage and opportunities to collab- orate with other development partners. 47. Strengthening IDA's analytical work: Participants stressed the importance of country-focused economic and sector work (ESW) for providing an informed basis for growth and poverty-reducing policies, and supported continued efforts to ensure that IDA remain at the forefront of analytical work on country policy, insti- tutions and development issues. They welcomed the significant improvements in the number and quality of core diagnostic reports for IDA countries since the launching of the ESW reform program in FY99. They noted the shifts in the composition and forms of ana- lytical work--including country advisory papers; core diagnostic reports; workshops; training and capacity-building; and "just-in time" policy notes--to respond more flexibly to changes in bor- rower demands. 48. Participants welcomed IDA's efforts to increase client participation in ESW preparation to help build capacity, ownership and consen- sus for reform efforts, and also the greater frequency of collabora- tion between IDA and development agencies in undertaking analytical work, which helps avoid duplication of efforts, and reduces the burden on already fragile capacity in IDA countries. 30These pilots are to be reviewed in FY05, and lessons from the pilot review are expected to inform the design and implementation of the results-based CAS in more IDA countries during IDA14 (see also Annex 2, Table 2). 226 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 227 49. In reviewing the experience with core diagnostic reports, Partici- pants recommended that more emphasis be put on reports that inte- grate macroeconomic, sector and structural reform issues for growth, and that assess investment needs and potential sources of finance required for growth. They noted the importance of analyti- cal work focused on public resource management issues, which is essential to provide a sound framework for growth. 50. Participants agreed that for countries that do not have large lending programs--for example, small and vulnerable economies, and LICUS--IDA's ESW should be carefully tailored to address issues of particularly high priority in the country context. To maximize the impact of its expanded menu of analytical and diagnostic work, IDA should complement its own efforts with increased donor collabora- tion to cover ESW gaps. They stressed the need for IDA to continue to innovate in how it supports the particular needs of this group of countries. They recognized that the quality of Bank policy engage- ment and tailored analytical work may prove to be more important in such circumstances than the quantity of lending provided. 51. Participants welcomed the results tracking framework for monitor- ing and reporting progress at various stages of the ESW product cycle that IDA has developed. In the next cycle of the ESW Progress Report, during IDA14, Participants look forward to an assessment of coverage of existing ESW gaps, and the overall progress made in improving ESW quality; increasing collaboration with other partners; implementing the ESW results framework; and disclosing ESW products. 52. Financial Assistance: Participants reviewed the positive impact on growth policies of IDA credit and grant assistance in support of pol- icy reform, human development and infrastructure. They noted that policy-based lending, which has accounted for over 25 percent of IDA commitments since the mid-1990s, builds on a broad under- standing in the development community that sound policies, good governance and institutional development are necessary for effi- cient use of resources to achieve poverty-reducing growth. Partici- pants noted that Development Policy Operations (DPOs) should remain below 30 percent of total IDA commitments during the IDA14 period.31 Management will monitor annually the overall 31IDA resources committed under DPOs to countries reengaging with IDA after a prolonged period of inactivity and used by recipients for the purpose of repaying bridge financing used to clear arrears would not be included in this percentage. 227 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 228 share of DPOs in IDA countries. If it is projected that it could exceed 30 percent for any year, Management will report that pro- jection to the Executive Directors for review and guidance. Deputies stressed the need for clarity and consensus to frame deci- sions on any move beyond this 30 percent share of DPOs in IDA14. They agreed on the importance of clear principles and a framework for assessing the readiness of recipient countries to make produc- tive use of DPOs. Deputies asked Management to prepare a pro- posal for such a framework, based on a systematic review of experience, for consideration and endorsement by Deputies at the Mid-Term Review. Participants also noted the trend toward greater use of Poverty Reduction Support Operations (PRSOs), which are anticipated to replace policy-based lending gradually in PRSP countries. These operations--which tend to focus on public sector governance, financial and private sector development, human development and social protection, and also increasingly on infrastructure--require significant capacity in recipient countries. They urged continued strong focus on ensuring that adequate fidu- ciary safeguards are put in place to underpin this type of lending. They also supported a continued strong role for investment lending to expand the productive capacity of the economy in all IDA coun- tries through, for example, enhancing capacity of line ministries, especially where conditions are not yet in place to support lending through PRSOs and other DPOs. 53. Participants stressed that continued progress in the social sectors is a critical element of the growth agenda, and will require addressing a combination of factors, including weak borrower policies, inade- quate capacity and gaps in donor funding. As such, Participants noted the importance of maintaining IDA's strong performance as a lender to the social sectors, which has resulted in better education, health and social protection services in IDA countries. While IDA has been the largest long-term investor in the prevention and miti- gation of HIV/AIDS, the progress that IDA has enabled in the social sectors remains at risk of being reversed by the HIV/AIDS pandemic. 54. Participants stressed that infrastructure is a critical underpinning for growth and expanded economic opportunity for the poor. At the same time, many IDA countries face a substantial infrastructure deficit, a severe shortage of resources to repair and expand critical services and utilities, and a lack of effective regulatory institutions which are critical to the success of infrastructure reform efforts. They agreed that IDA can play a unique role in terms of financing, 228 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 229 technical expertise and linkage of infrastructure provision policy and regulatory reforms to promoting both economic growth and better access by the poor to clean water, power and communica- tions. They welcomed the World Bank Group's Infrastructure Action Plan introduced in July 2003, which is helping to revitalize financing for infrastructure, by focusing on more and better analyt- ical work, strengthening the infrastructure project pipeline, and employing a broader range of instruments for infrastructure devel- opment, including leveraging private capital through the use of IDA guarantees and on-lending to sub-sovereign entities. They underlined the importance of a balance which ensures strong invest- ment in new infrastructure while also properly maintaining existing infrastructure. Participants recognized that the demand for infra- structure from IDA countries is increasing and that a substantial increase of IDA commitments in infrastructure is anticipated dur- ing IDA14. 55. Governance and public institutions: Participants underscored the central importance of good governance in creating the conditions for growth, and endorsed the efforts of IDA and its development partners to combat corruption and enforce public accountability in borrowing countries to enable both domestic and external resources to be used more productively. They welcomed the main- streaming of governance reforms in operational activities to combat corruption, enhance appropriate public resource use and enlist the confidence of the private sector. They noted three important areas in which this agenda is being furthered: · Diagnostic work, such as PERs, CFAAs, CPARs and integrative fiduciary assessments, focus directly on public resource manage- ment, particularly, budgeting, expenditure reporting; auditing and enforcing financial accountability rules; and ensuring procure- ment processes that are timely and transparent. · Investment climate issues, e.g., property rights, the legal and judi- cial system, scope of responsibilities of legislatures and their capacity to exercise them, regulation of investments and invest- ment incentives, and the overall cost of doing business, including the costs of inadequate infrastructure, are being addressed to improve the business environment and encourage the private sec- tor (see also Section IIB below). · As discussed in Section IIE, donor collaboration is a central part of governance reforms. For example, the Public Expendi- ture Financial Accountability group is a collaborative initiative involving the EC, the Bank, RMDBs, IMF and bilateral donors. These organizations and donors have worked closely with the 229 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 230 Bank to assist countries affected by conflict and other gover- nance problems. 56. Participants also took account of the recommendations of the Expert Panel convened to review the methodology that underpins IDA's PBA system. They stressed the importance of ensuring a con- tinued strong focus on governance--which is strongly linked to growth--by maintaining the present strength of the governance fac- tor, while at the same time reducing its volatility by using a three year moving average for the procurement flag component. They agreed that experience with the governance factor should be reviewed at the IDA14 Mid-Term Review, and welcomed ongoing efforts to harmonize the allocation approaches of the RMDBs. 57. Trade, growth, and poverty reduction: Participants noted the importance of trade for IDA countries, and stressed that the com- petitiveness and market access issues are essential elements of suc- cessful strategies for growth, job creation and poverty reduction. They noted that an open, liberal and rules-based trading environ- ment is a fundamental factor enabling countries to service their debts in a sustainable manner and is itself a powerful instrument in helping to avoid debt distress. They welcomed the creation of a new World Bank Trade Department in July 2002, which has streamlined IDA's work in this area, and helped build partnerships with agencies engaged in trade-related activities. They also welcomed the Bank's analytical and policy work on the relationship between the trading environment and development, as well as efforts to strengthen trade policy reform and provide advisory services to help countries expand and diversify exports; to help borrowers improve trade negotiation capacity, especially in view of the Doha Round trade issues and the WTO accession process; to provide direct support for operational work; and to encourage regional integration. The over- all work on trade has a broad multi-sector perspective, which includes barriers to trade issues (e.g., customs, trade logistics, stan- dards), agriculture market access and specific commodity market issues, services liberalization, and poverty. 58. Participants noted IDA's operational trade work, which stresses technical assistance and trade facilitation, agriculture trade and other market access issues, and helps borrowing countries integrate better into the world trading system. A series of transport and trade facilitation audits have been initiated to identify critical drivers of high trade transaction costs, especially in landlocked countries, and provide a basis for technical assistance and investment projects. 230 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 231 Participants further stressed the usefulness of the Integrated Framework (IF) program--a multi-donor effort led by the Bank-- to identify constraints to trade and the potential to expand and diversify the exports of IDA countries. In recognition of the impact trade policies can have on poverty, Participants encouraged IDA to evaluate transitional costs, including impact on the poor, and pro- posals for appropriate mitigation policies for countries embracing the trade liberalization agenda, especially with respect to market access issues, including markets for agricultural products, and the poverty impact of open trade policies. 59. Participants also supported the work program on trade issues for the IDA14 period, which will include issues related to adjustment costs and the distributional effects of reforms; studies investigating why and how some countries have successfully used trade reforms as part of a growth strategy; analyzing the implications of global reform for individual developing countries; and investment and pilot projects aimed inter alia at integrating small agricultural pro- ducers into global supply chains. During the IDA14 period, IDA will prepare a progress report on the implementation of the work program, including progress in assisting countries integrate trade policy into their PRSs. B. Private Sector Development 60. Participants reviewed the implementation of IDA's private sector development (PSD) strategy,32 and affirmed that a vibrant and com- petitive private sector is key to growth and poverty reduction. Pri- vate markets are the engine of productivity growth, which provides a central avenue for higher incomes, economic growth and employ- ment generation. Private initiative can also contribute to fulfilling the government responsibility of ensuring access to basic services by providing improved infrastructure, health and education services that empower the poor. These are essential conditions for sustain- able improvements in livelihoods. 32Articulated in the document Private Sector Development Strategy: Directions for the World Bank Group. April 2002. This was followed by a Implementation Progress Report, June 2003. To put the PSD strategy into action, regional PSD Strategy Imple- mentation Plans were prepared in FY04. The PSD strategy is complemented by other operational strategies, notably those related to the International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA), and Small and Medium Enterprises (SMEs). 231 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 232 61. Participants endorsed the strategy's two broad objectives: (i) extending the reach of markets through investment climate reform33 with a special focus on measures that help Micro, Small and Medium Enterprises (MSMEs) thrive; and (ii) improving access to basic infrastructure and social services through private participation. Participants noted that the PSD strategy was innova- tive in its attention to the investment climate, in its focus on the diagnostic agenda, and in its support for broader coordination and new instruments to address the challenges identified. The invest- ment climate takes on additional significance in IDA countries, where most private activity takes place in the informal sector. Since most entrepreneurial activity by the poor takes place in the infor- mal sector, efforts to improve the investment climate, comple- mented by access to capital--for example through microfinance initiatives--are critical to empowering the poor. Work on invest- ment climate reforms is also crucial as a precondition to the success of other types of PSD interventions in IDA countries by the other members of the World Bank Group (WBG). 62. Participants encouraged IDA to strengthen its analytic/diagnostic work,34 non-lending technical assistance, knowledge management, and training activities. IDA uses survey-based diagnostics, including Investment Climate Assessments (ICAs) and the Doing Business Project (DB), to identify the microeconomic constraints to the growth of firms and to employment. During IDA14, five to ten investment climate surveys are expected to be launched in IDA countries each year. In addition, five to ten investment climate coun- try diagnostics will also be conducted in IDA countries, with the objective of ultimately ensuring that all IDA countries are covered. 63. Participants stressed that while initial efforts are promising, invest- ment climate reforms should be consistently reflected including in CASs, PRSPs, operations and country performance assessments. The emphasis of investment climate work should shift toward the design of effective solutions and to implementation of those solu- tions. As a baseline of investment climate information becomes available, they called for IDA to adapt accumulated investment 33Investment climate refers to factors influencing firms' opportunities and incentives. Kaufmann and Kraay (2002), showed that country investment climate factors are strongly associated with per capita income growth. 34The recent high profile analytic work on PSD is the World Development Report (2005), which focuses on "A Better Investment Climate for Everyone." 232 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 233 climate knowledge to local environments, and shift its diagnostic efforts toward monitoring key indicators over time in partnership with other stakeholders. 64. Participants urged that IDA's support to private sector activity, including that to the MSMEs, continue to be built on market-based approaches. They noted that as MSMEs suffer disproportionately from impediments in the investment climate, across-the-board improvements have a disproportionate benefit to the MSME sector. The MSME sector, which serves as a critical link between the growth and poverty agenda, also has significantly less access to financial and business development services than larger enterprises. IDA's strategy of providing direct support to MSMEs while also strengthening the business environment and building capacity in financial systems and business development services was appropri- ate. They urged IDA to continue leveraging its capacity by working through intermediary institutions that have substantially lower transaction costs in supplying finance and services to individual enterprises. Participants welcomed ongoing efforts to scale-up this work. 65. To document successful reform efforts and capture lessons for adoption/replication by other countries, a review of IFC-IDA col- laboration on MSMEs in Africa will be conducted and reported at the IDA14 Mid-Term Review. Participants urged that successful pilot initiatives in MSME support be scaled-up and their features widely disseminated to operational staff. They further noted that the scope and reach of the WBG's MSME work, including that of the Project Development Facilities (PDFs), could be further extended in IDA countries. 66. Participants noted that the World Bank has been piloting Output- Based Aid (OBA)35 approaches in IDA countries in order to 35OBA has been proposed as a tool for supporting the delivery of basic services-- infrastructure, health and education. OBA schemes introduce commercial discipline and efficiency of private providers in the provision of basic services while also addressing affordability concerns. Under this approach, disbursement of public fund- ing (including IDA credits and grants) would be tied to the delivery of specified ser- vices or outputs by the providers. The providers bear significant performance risks related to the delivery of such services. This contrasts with the traditional approach of directing public funding to the financing of assets where tax payers pay even if there is nonperformance. OBA provides strong incentives to achieve results. 233 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 234 increase accountability and allow stronger involvement of the pri- vate sector. The WBG will undertake a review of OBA to draw les- sons learned from these pilot experiences which will be made available at IDA14 Mid-Term Review. 67. Finally, Participants underscored that the crosscutting nature of investment climate issues requires enhanced collaboration across all PSD staff in all parts of the Bank, IFC and MIGA. Participants noted that the CAS and PRSP are the starting point for such col- laboration, but that systematic dialogue at the regional and coun- try level (such as the country dialogues already initiated by the PSD anchor) can further enhance the complementarity of work across networks and units. Strengthened ex-post evaluations of IFC and MIGA activities in IDA countries will be important to further increase the overall development effectiveness of their operations. 68. Participants urged the WBG to strengthen the ongoing collaborative efforts to promote private sector development in IDA countries through: (i) joint work on the investment climate; (ii) joint approaches to new public-private partnerships in infrastructure; and (iii) joint work on MSME support in Africa. Going forward, they urged the WBG to explore the possibility of scaling up OBA-based projects as well as the IDA-IFC MSME programs. They also encour- aged the WBG to include, where possible, private sector imple- menting agencies in regional operations. In addition, Participants agreed that IDA should explore the issues involved in lending directly to the private sector without sovereign counter-guarantee. Since this would pose a major policy change, and financial and risk management challenges to IDA, they requested further work on such a move and a report at the time of the IDA14 Mid-Term Review. 69. Finally, participants took note of the various ongoing efforts by the WBG to reach out to external partners, which have resulted in the mobilization of financial and technical assistance for the promotion of private sector development. In particular, they noted efforts by the WBG to work with external partners to strengthen the invest- ment climate in IDA countries as well as to improve the provision of infrastructure services. They encouraged the WBG to continue with the collaboration to reinforce its own efforts to foster private activity in client countries. 234 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 235 C. Debt Sustainability and Grants in IDA14 70. Participants agreed that debt sustainability will be the basis for the allocation of grants to IDA-only countries in IDA14. Unlike in IDA13, grants in IDA14 will no longer be allocated according to multiple, special-purpose eligibility criteria. Instead, under the new grant allocation system, the share of grants in total IDA financing will emerge from a country-by-country analysis of the risk of debt distress. 71. Participants broadly endorsed the Joint Bank-Fund debt sustain- ability framework (DSF) as the analytical underpinning for the link between debt sustainability and grant eligibility.36 The DSF links the risk of debt distress to the quality of policies and institutions in low-income countries. Participants further noted that the two broad pillars of the DSF are directly relevant to the allocation of IDA grants by: (i) providing a set of indicative thresholds of external debt-burden indicators which take into account countries' policies and institutions as well as their vulnerability to exogenous shocks; and (ii) analyzing the actual and projected behavior of debt-burden indicators and other key macroeconomic variables as indicated e.g. in Debt Sustainability Analyses (DSAs), both under baseline and plausible shock scenarios. 72. Regarding the first pillar of the debt sustainability framework, Par- ticipants supported the adoption of lower debt and debt-service thresholds than those originally proposed in the Framework Paper.37 They noted that the main implications of lower thresholds would be twofold: (i) wider country grant coverage; and (ii) a higher overall grant share. In order to preserve IDA's financial strength over time, Participants stressed that the overall grant share should remain within a sustainable level. With the new assumptions on the thresholds, the overall grant share is estimated to be around 30 per- cent. They asked IDA Management to report periodically on the evolution of the overall grant share and implications for IDA's 36See IMF and IBRD (2004a), Debt Sustainability in Low-Income Countries-- Proposal for an Operational Framework and Policy Implications, Washington, D.C., February 2004. Henceforth referred to as the "Framework Paper." 37IMF and World Bank (2004b). Choice of Indicative Debt-Burden Thresholds-- Alternative Options, OM2004-0091, Washington, D.C., November 2004. 235 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 236 finances, and to report on the implementation of the grant alloca- tion framework by the Mid-Term Review. 73. Participants urged staff to work closely with the IMF to make rapid progress on the design and implementation of the second pillar, and asked for a proposal to be presented at the Mid-Term Review. They noted that until the second pillar can be operationalized, eligibility will hinge on ratings from the thresholds-based ranking system. Such ranking will be based on selected debt-burden indicators,38 against which countries' debt levels will be compared. The appropriate credit and grant mix for each country will then be determined according to its debt-distress risk category, namely, high, moderate, or low. During the transition to a system that fully takes into account the key aspects of the second pillar, insights from available DSAs will be used to inform the decision on how to classify countries. 74. Participants noted that grant eligibility in IDA14 will follow two additional principles, in order to reduce risks related to the "free rider" issue: (i) grants will be limited to IDA-only countries.39 If a country is reclassified from blend to IDA-only status during the period between the end of the IDA14 Replenishment discussions and the Mid-Term Review, it will continue to be ineligible for grants over the course of IDA14; and (ii) a mechanism will be devised whereby a country could cease to be eligible for grants if its gov- ernment or other public sector entities contract or guarantee new loans from alternative sources of financing which threaten to defeat the debt sustainability objective that IDA grants are intended to help achieve. Participants stressed that close coordination among lenders would be needed to ensure that grant-making by IDA does indeed help reduce countries' risk of debt distress. They requested that a specific proposal addressing the "free rider" issue be pre- sented to IDA's Executive Directors before the end of FY05. 38Participants considered that two "stock" indicators--the Net Present Value (NPV) of debt-to-exports and NPV of debt-to-GDP ratios--and a "flow" indicator--the debt service-to-exports ratio--would be the most appropriate ones as they capture most of the relevant information to determine debt distress risks while minimizing potential data and moral hazard problems 39Gap countries (with per capita incomes above IDA's operational cutoff for more than two consecutive years) are not eligible for IDA grants. See Debt Sustainability and Financing Terms in IDA14: Further Considerations on Issues and Options, IDA14 policy paper, November 2004. 236 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 237 75. Participants noted two exceptions to the debt distress-based grant eligibility criterion. First, two special transitional cases, Kosovo and Timor-Leste, will be eligible for grants. For Kosovo, eligibility is based on its status as part of Serbia and Montenegro under United Nations Administration and will continue during IDA14 until its status changes and it is able to borrow. Timor-Leste will be eligible for grants to avoid a sudden shift of status vis-à-vis other IDA13 grant-recipient countries under the post-conflict criterion, and will be gradually phased out of grant eligibility during the IDA14 period.40 Second, as in IDA12 and IDA13, limited grant financing would be available to support recovery efforts during the pre- arrears clearance phase of countries that are eligible for exceptional post-conflict IDA allocations (see Annex 1, paragraph 9). 76. Participants agreed that IDA will establish a provision for the grant financing of the portion of the cost of regional projects that is attrib- utable to IDA-only countries eligible for 100 percent grants under the debt-distress criterion. 77. Participants supported the adoption of a Modified Volume Approach (MVA), the application of a 20 percent volume discount on grants, and the exclusion of revenues-based indicators from the eligibility mechanism while it is still transitioning to a DSA-based system. Par- ticipants stressed that the MVA reconciles two policy objectives: (i) it provides poor countries with an adequate volume of resource trans- fers in light of MDGs; and (ii) it maintains a strong relationship between policy performance and IDA's resource transfers. 78. Participants pointed out that the 20 percent volume discount will be subdivided in two components, each addressing a different objec- tive: (i) an incentives-related portion (11 percent), to help maintain the strength of IDA's incentive system; and (ii) a charges-related (9 percent) portion, to finance foregone charge income on IDA14 40Timor-Leste will receive 100 percent of its allocation on grant terms in FY06, 60 percent in FY07 and 30 percent in FY08. The grant portion of each year's alloca- tion will be subject to a 9 percent discount to recover charges. Participants considered that two "stock" indicators--the Net Present Value (NPV) of debt-to-exports and NPV of debt-to-GDP ratios--and a "flow" indicator--the debt service-to-exports ratio--would be the most appropriate ones as they capture most of the relevant infor- mation to determine debt distress risks while minimizing potential data and moral hazard problems. 237 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 238 grants. They noted that post-conflict countries eligible for excep- tional IDA allocations (see Annex 1, paragraph 9) would only be subject to a charges-related volume discount. 79. The grant component of regional projects will be subject only to the 9 percent charge-related volume discount, to avoid increased costs to IDA in terms of foregone charge income. 80. Participants concurred that the resources from the incentives- related volume discount on grants will be reallocated to IDA-only countries41 through the use of a PBA-based rule, that is, according to their respective share in the PBA norm (net of the share in the PBA norm of blends, hardened-term countries and post-conflict countries eligible for exceptional IDA allocations). The credits and grants mix applied to the reallocated resources will be the same as in the first round of allocation of IDA resources, that is, in accor- dance with countries' risk of debt distress. For those countries receiving additional resources in the form of grants, no further vol- ume discount will be applied. 81. Participants noted the high synergy between addressing shocks and the proposed framework. They pointed out that critical questions remain unanswered, however, including: (i) the magnitude of shocks vis-à-vis available resources; and (ii) the difficulties in defin- ing shocks for operational purposes. Participants requested staff to continue to explore the feasibility of strengthening IDA countries' response to shocks, giving due consideration to the role to be played by other entities, including the IMF, and to report back on the results of such work by Mid-Term Review. 82. Participants observed that the resources from the charges-related discount on grants will be available for lending to IBRD/IDA blend countries, by creating a "hard terms" lending window. To ensure sufficient borrower interest in such a window, the interest rate to be charged will be more concessional than the prevailing IBRD lend- ing rate. The Participants agreed to a spread of 200 basis points below the IBRD lending rate in fixed-rate terms. To reduce coun- try credit risk for IDA, lending through the hard terms window will be restricted to creditworthy blend countries with per capita 41Except for IDA-only, grant-recipient post-conflict countries, since they are a priori excluded from the pool of countries that could be targeted for the incentive-related volume discount on grants. 238 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 239 incomes below the operational cutoff for IDA but with an active IBRD lending program. D. Results Measurement in IDA14 83. The Monterrey Consensus underscored the shared responsibility for achieving development results, including the MDGs, and the dual importance of increased and more effective, development assistance. The World Bank has played a major role in the interna- tional partnership to manage toward development results, and has reflected that commitment in the IDA13 Replenishment arrange- ment and in the development of an enhanced system to monitor results for IDA14. Building on the lessons learned from the IDA13 results measurement system, Participants agreed on an enhanced and broader-based system for IDA14, consisting of a two-tiered approach to monitor: (i) progress on aggregate country outcomes (see Annex 2, Table 1), and (ii) IDA's contribution to country out- comes (see Annex 2, Table 2). Participants noted that there remained inherent difficulties in attributing specific development outcomes to particular actions by IDA. They also took note of the monitorable actions for IDA14 (see Annex 2, Table 3) and requested that Management report on progress in implementing IDA's results-related mandates at the Mid-Term Review. 84. Tier 1: Monitoring Country Outcomes: Over the course of the IDA14 period, Participants requested that IDA Management mon- itor aggregate progress on 14 key country outcome indicators, and report on them every three years in line with IDA replenishments. These indicators reflect prevailing IDA country PRS priorities, are consistent with the MDGs, and capture both the economic growth and the human development priorities of ongoing IDA programs. Criteria for selecting the indicators included their relevance to desired outcomes, sensitivity to policy action, measurability and the cost of data collection (to avoid excessive data collection burdens for low-income countries). While attribution of outcomes to a par- ticular actor or agency is impossible at this level, monitoring changes in these indicators is important because the donor commu- nity, including IDA, has a collective responsibility to ensure that external support helps developing countries move in the right direc- tion on core development outcomes over the long run. 85. In addition, Participants requested IDA-funded projects to be designed to support country monitoring of core outcomes. Thus, all 239 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 240 new IDA operations for FY06 and beyond, in four sectors (health, education, water supply, and rural road transport)42 will report on, and strengthen country capacity (where this is not already being done) to ensure adequate monitoring of key sector outcomes included in the IDA14 results measurement system: (i) under-five child mortality rate; (ii) primary education completion rate; (iii) proportion of the population with improved access to a safe water source; and (iv) proportion of the rural population with access to an all-season rural road. This will help ensure that countries have the capacity to generate regular data for these fundamental devel- opment outcomes, to use IDA operations to strengthen this capac- ity, and to help staff and the recipient countries to remain focused on key outcomes influenced by IDA-financed operations. 86. Tier 2: Monitoring IDA's Contribution to Country Outcomes: In addition to tracking development outcomes across IDA's borrow- ers, the IDA14 results measurement system will assess key aspects of IDA's contribution to country outcomes. An important vehicle for this purpose is the results-based CAS, which links IDA pro- gramming more clearly to country priorities. Participants requested that during IDA14, Management monitor and target43 the cumula- tive introduction of results-based CASs in IDA countries to ensure progress toward results reporting at this level. In the longer run, fol- lowing full implementation of the new results-based CASs, an addi- tional indicator will be based on reporting on results-based CAS outcomes. 87. With respect to the IDA portfolio, Participants requested that Man- agement monitor and target the quality-at-entry of IDA operations, which is a leading indicator for positive outcomes, and track and target the share of IDA operations that successfully achieve their development outcomes. Quality-at-entry is evaluated annually by the Bank's Quality Assurance Group (QAG) through the examina- tion of a random sample of projects. The most recent data show 85 percent satisfactory quality-at-entry for the IDA portfolio. Dur- ing the IDA 14 period, Participants requested that Management work to improve the quality-at-entry of IDA projects beyond this level as indicated in Table 2 of Annex 2. Specifically, the target is to 42These are the sectors where IDA, in aggregate, is most active. 43Targets for the introduction of results-based CASs in IDA countries are: 16 by end FY05, 30 by end FY06 and 45 by end FY07. 240 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 241 increase the average satisfactory quality-at-entry for the portfolio during the IDA14 period as compared to the given baseline. 88. The Bank's Operations and Evaluation Department (OED) vali- dates project outcome ratings by reviewing Implementation Com- pletion Reports (ICRs) for all IDA projects exiting the portfolio. These data, which are based on independent ex-post evaluation and are available annually for all exiting projects, are currently the most reliable measure of project outcomes across the IDA portfolio. Par- ticipants requested that Management work to improve on the FY03 aggregate average satisfactory outcome rating of 75 percent in IDA countries over the IDA14 period. They also requested that Man- agement should work to decrease the number of multi-year prob- lem projects and keep project quality under careful scrutiny. 89. At the individual project level, Participants emphasized the impor- tance of strengthening outcome-oriented objectives and monitor- ing. Participants requested Management to monitor the extent to which results frameworks are incorporated into the design of IDA- financed projects by explicitly assessing the results framework underpinning project design in quality-at-entry assessments. They also requested that Management work toward implementing a results framework for IDA projects and programs that includes indicators connected to a timeline with baseline data and periodic assessments of project and program performance against defined expectations. Implementation for policy-based loans will be consis- tent with a good-practices paper being completed by Management by July, 2005, as well as lessons developed by the MDB Evaluation Cooperation Group. Furthermore, they requested that over the course of the IDA14 period, Management would work to ensure that 100 percent of IDA investment projects initiated after July 1, 2004, and DPOs for which Concept Review takes place on or after September 1, 2004, include such frameworks. They urged that all CASs initiated after January 2005 would be results-based CASs. 90. OED assesses the evidentiary base provided in project ICRs to evaluate the achievement of outcomes. Participants requested that the share of ICRs with satisfactory data on project outcomes is improved above the level achieved over the last two years (76 per- cent) as indicated in Table 2 of Annex 2. Thus, the proposed target is to increase the share of ICRs with satisfactory data on project outcomes for the portfolio during the IDA14 period as compared to the given baseline. These project-level indicators are a useful gauge of the extent to which measurable results are being specified and 241 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 242 monitored throughout the project cycle. These data will be comple- mented with summary data on disbursement lags by sector and themes, and all reports on these indicators will distinguish between IDA grants and loans.44 91. Participants recognized that efforts to strengthen the results orien- tation of IDA projects and programs will need to include efforts to strengthen a `culture of results' at both country and among IDA management and staff. Management notes that its current staff per- formance review system includes upfront specification of Results Agreements, and has recently signaled that the quality and per- formance of lending and non-lending portfolios is a key dimension of the review of management performance. Participants encour- aged Management to continue its work to integrate information on progress toward results, calibrated to what is achievable in specific country and sectoral contexts, into performance review processes. At the institutional level, ongoing reviews of organization effective- ness and internal budget process reforms are also designed to signal a sharper focus on development effectiveness. 92. Participants recognized that, while project outputs, such as health clinics constructed, will not on their own have an impact, they are necessary for achieving development outcomes. Participants there- fore, requested that IDA monitor progress on selected aggregate project outputs in four sectors where IDA is active across a range of countries: health, education, transport and water (the same four sectors for which IDA projects will assist countries to strengthen outcome indicators). They noted that output indicators will be recorded for all projects, but definitions of outputs can not be stan- dardized across all projects within a sector without undermining country ownership and fit to particular institutional environments and sectoral policies. Outputs will be drawn from ICRs. These indi- cators will have the advantage of capturing changes that can be attributed to IDA's interventions. The performance indicators are outlined in Table 2 of Annex 2. 93. Improving Statistical Capacity in IDA Countries: Participants recognized that country capacity to measure progress toward core development outcomes is critical to country-led implementation of poverty reduction strategies, and is the foundation for global 44For operations that comprise both credit and grant elements IDA will track these indicators only to the extent that this is practical and provides meaningful information. 242 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 243 monitoring of progress toward the MDGs and the IDA results measurement system. They therefore urged IDA to play a leading role in coordinating efforts to strengthen the capacity to compile and use statistics in IDA countries.45 They requested that IDA work with international partners to compile information on the sta- tistical systems of IDA countries, including indicators of their sta- tistical capacity. Participants encouraged IDA to prepare profiles of countries' statistical capacity and make this information public on the Bank's external website. They also asked IDA to work with development partners to monitor statistical capacity building activ- ities undertaken in client countries and to prepare annually and make public a note describing and tracking the progress of efforts to improve statistical capacity. 94. Participants requested that IDA play a leadership role in the global partnership for statistical capacity-building. They requested that IDA continue its support for the PARIS21 consortium and intensify support within its CASs and projects for national statisti- cal capacity-building. Furthermore, they asked that IDA work in partnership with its development partners to implement the global action plan to strengthen statistical systems, including household surveys. They urged IDA to assist countries in preparing national strategies for the development of statistics. The World Bank's Trust Fund for Statistical Capacity Building and PARIS21 should support countries adopting a fast-track approach to preparing strategic plans. Participants also supported IDA's initiative to start a pilot program to align and harmonize internationally sponsored surveys and to make improvements in statistical practices consistent with national statistical development plans. In selecting countries for this work, they urged that priority be given to IDA countries preparing CASs. This work should be coordinated through the new Interna- tional Household Survey Network, formed as part of the Mar- rakech Action Plan for Statistics. 95. The IDA program and its results measurement system can help poor countries improve data collection contributing to better decision making that fosters progress toward established goals. Strengthening the results focus of CASs and IDA operations will increase support to countries for building capacity to manage for results and will help ensure that core development outcomes are regularly monitored. 45Methods for Monitoring the Achievements Made Towards IDA Results Indicators, Committee on Development Effectiveness, October 2004 (CODE2004-0077) 243 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 244 Participants requested that IDA work together with other develop- ment partners to continue to harmonize results reporting require- ments around national monitoring and evaluation systems for implementation of poverty reduction strategies. E. Working Together at the Country Level: The Role of IDA 96. Participants noted that, since 1995, levels of Official Development Assistance (ODA) had fluctuated between $48 billion and $59 bil- lion per annum, with roughly 70 percent coming from bilateral donors and 30 percent from multilateral donors. Further substantial increases in these flows are expected in the near future, as donor countries continue to deliver on their Monterrey commitments. They also noted that, while IDA's share of total ODA has fallen from 9.2 percent in 1995 to 5.6 percent in 2002, its share of multi- lateral disbursements had remained steady at around 35 percent. 97. Participants recognized that the changes in financial flows still left IDA in a key position in the development architecture. IDA has a good ratio of disbursements to commitments46 and its country aid allocations are the most efficient in terms of targeting poverty reduction. IDA's presence in virtually all low-income countries and in most socioeconomic sectors gives it a comparative advantage in providing an integrative service in terms of donor coordination. They affirmed that IDA should continue to capitalize on its com- parative advantages, including: · As the development agency that undertakes the most country- specific analytical work and research on economic development, and as a source of global knowledge in this area, it helps to strengthen the knowledge base for all development partners. · By working closely with the IMF, it ensures coherence between the long-term development objectives and the shorter-term require- ments of macroeconomic fiscal and monetary management. · By participating fully in--preferably country-led--country level coordination processes based on CDF principles. · With its increased presence at the country level resulting from the major Bank-wide decentralization program, IDA can help inte- grate the efforts of donors and improve the design and imple- mentation of aid programs. 46IDA Disbursement Ratios FY95-04, Technical Note, August 2004. 244 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 245 98. Participants also recognized that the Bank had made a major effort to strengthen relations with other multilateral donors, including the UN and its agencies. Much of the focus of this effort has been the alignment and harmonization activities that are now under way, engaging the Bank, RMDBs, and the OECD-DAC. They wel- comed the note on "Indicators and Harmonization" that IDA pro- duced for the Athens Meeting, in which the Bank confirmed its commitment to monitor progress on harmonization. This would be done through a set of indicators drawing on the agreement reached by the donor community as a whole at the DAC High Level Forum. They noted that, once agreement has been reached on the indica- tors framework, IDA would construct a baseline against which to monitor progress of the relevant indicators for its operations, and would monitor and periodically report on progress against the base- line to Participants. In addition, Participants urged IDA also to emphasize donor coordination in CASs, including through the adoption of harmonization indicators. Lastly, they welcomed the inclusion of harmonization indicators as part of the Bank's Key Per- formance Indicators (KPIs) program.47 99. The PRS process should be country-led with broad participation from civil society and the private sector, and should align government and donor resources with the objectives of empowering the poor and promoting growth. Participants affirmed that the PRS process had become one of the key instruments for the delivery of coordinated aid. Yet the PRS process still needs to be strengthened before it can be considered an effective tool for the majority of low-income coun- tries. In order to draw lessons for strengthening the PRS process and aid effectiveness, Participants reviewed experiences in Vietnam, venue of the second IDA14 replenishment meeting, and noted a number of features of IDA's work there which have made an impor- tant contribution to the development effort, including: · Support for the Government's own national planning documents and processes as the basis for the Vietnamese PRS; · Support for a strengthening of the growth analysis underpin- ning the PRS, and efforts to make the PRS as comprehensive as possible; 47 The Key Performance Indicators are part of the Bank budget reform program, under which operational units within the Bank will be judged against a set of quan- tifiable measures designed to track performance in achieving stated goals over time. Indicators are structured in an hierarchical framework and designed to include, at the regional level, measures of harmonization and alignment with other donors and national authorities. 245 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 246 · Progress on harmonization of procedures, and a commitment to strengthen and improve Government systems, including through the provision of capacity building assistance, with the intention that these systems will ultimately be used by donors; · Efforts to maximize ownership of, and partnership in, the PRSC among the donor community; · Moves toward producing an increasing share of analytical work in partnership with other donors and Government; · Efforts to address and enhance sectoral coherence while recog- nizing the value of a variety of different aid instruments in sup- porting sectoral frameworks; and · A highly decentralized office, with both the Country Director and many Task Managers based in country.48 100. Drawing on such lessons from IDA's operations, key changes to be made include supporting countries taking charge of the imple- mentation and evaluation of the process, strengthening national public financial management systems and promoting a stronger link of the PRS to national decision-making processes including budgetary processes, supporting analytical work on the links between poverty and growth, and strengthening a partnership framework that will enable donors to align further to the PRS process. In support of this, they urged that IDA should: · Undertake more upstream analytical work, particularly in the area of public finance, and, when requested by the government, follow up the work with support to the country, to strengthen and improve the quality of its PRSP. · Carry out more of its work jointly with recipient governments and other donors, and share the results of this work as widely as possible. · When the reforms supported by DPOs provided by IDA are expected to have significant distributional impacts, assess these impacts through poverty and social impact analysis (PSIA) or other analytical studies. These assessments will be based on analysis undertaken by the recipient, other development agen- cies, civil society organizations, or the IDA's own work. Where IDA undertakes these assessments it will invite the recipient and other donors active in the country to participate as fully engaged partners. 48Increasing Aid Effectiveness and the Role of IDA: Learning Lessons from the Vietnam Experience, Joint Japan/UK Paper for IDA14, September 10, 2004. 246 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 247 · Report on progress made by IDA in implementing the recom- mendations of the Bank's Review of World Bank Conditionality. · Help strengthen country processes for planning, implementing, and monitoring by further mainstreaming efforts at the country level to improve the coverage and quality of statistics as well as policymakers' capacity to interpret the statistics. For example, IDA should work in partnership with other donors to strengthen statistical systems in IDA countries. 101. Participants noted that, in parallel with the PRS process, impor- tant initiatives have been launched on results measurement, and on alignment and harmonization of donor assistance. The Bank is playing an active part in all these activities and has been leading in some areas, notably on results measurement, public financial man- agement and statistical capacity-building. In this context, they affirmed that the substantial work on donor coordination of recent years should be continued. Participants noted that many of these initiatives will only bear fruit over the medium- to long-term and underlined the importance of `staying the course' to reach tangible results. They further urged that IDA assist the process by moni- toring progress on donors' coordination and harmonization. Building on the CDF evaluation IDA should work with OECD- DAC and other partners to monitor progress being made in work- ing together at the country level. 102. Participants noted the particular challenges posed by LICUS countries, which are home to over 400 million people and threaten regional and global stability when conflict and epidemic disease spill across borders. These countries are highly heterogeneous and it would not be appropriate to come up with a boilerplate approach across the whole group. Participants recognized that IDA has made headway in expanding its development approaches to address the needs of LICUS countries through the LICUS Ini- tiative, emphasizing knowledge, institution-building and harmo- nization, and a differential approach between countries in prolonged political crisis; fragile political or post-conflict transi- tion; political stability but poor policy environments; and periods of deteriorating governance. They affirmed that IDA should con- tinue to work with other donors (both DAC and non-DAC), which is particularly important where the capacity to manage frag- mented donors' programs is even more limited than usual. Partic- ipants also observed that it would be useful for the Bank and the UN to discuss how to further strengthen collaboration based on their respective competences in post-conflict countries, especially 247 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 248 in the early phases of recovery, with the aim of reaching conclu- sions that will facilitate speedy and effective cooperation at the country level. They welcomed the fact that the Bank would evalu- ate carefully the report of the UN High Level Panel on Threats, Challenges and Change and its reform proposals pertaining to conflict prevention and reconstruction, and that it looks forward to deepening collaboration on global policy and country-level operational partnerships to address the critical peace, security and development nexus. 103. Participants noted that difficulties in aid delivery also exist for small and vulnerable states. Aid levels to small states have declined since 1991, and to small states that were also in the LICUS group they declined even more. The Participants recog- nized, however, that the Bank, for its part, had increased its budget allocations for analytical and advisory services (AAA) and other support to small states substantially since FY00. Nevertheless lev- els of analytical work in such states remain below the levels of other countries, and the LICUS small states have particular diffi- culty in mobilizing assistance. Participants supported Bank efforts to further increase its support in such states by improving incen- tives for Bank staff to work on them and by mobilizing additional resources through trust funds. They urged the Bank to work closely with the RMDBs, which are also engaged in enhancing support to small states. To strengthen support from IDA to small states countries, Participants recommended increasing the base amount that IDA makes available to all IDA countries from SDR 3 million to SDR 3.3 million. Participants encouraged the Bank to look at other measures to increase support for small states, such as increasing incentives for Bank staff to work on such states, and using trust funds to support the cost of Bank staff engaged in small states advisory work. 104. Participants recognized the importance of regional programs in addressing issues such as trade and transport, HIV/AIDS and shar- ing of water and energy resources. They noted that the pilot pro- gram on regional projects introduced in IDA13 has experienced strong demand. They affirmed that IDA should continue its role as a financier, and provider of analytical support for regional pro- grams, with due regard for country ownership (see Annex 1, para- graph 9). Furthermore, IDA should work to support initiatives aimed at facilitating deeper regional economic integration, such as the NEPAD initiative. They also recommended that IDA continue 248 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 249 to consult with the RMDBs to enhance cooperation, to avoid over- lap and to ensure that each institution's programs are based on its comparative advantage. IDA's role is especially important where such finance and support is necessary to complement critical national activities aimed at creating the conditions for deeper regional integration. 105. Participants recognized that the Bank plays a key fiduciary and administrative role in many global programs. The Bank also finances programs that support the same core objectives and which are often delivered in conjunction with other donors. On HIV/AIDS, in particular, IDA remains unique in its provision of implementation support at the country level, its ability to work across sectors, its capacity to channel money to the public and pri- vate sectors and civil society, particularly at the community level, its existing involvement in complementary activities such as health sector reform and PRSP/PRSOs, and its willingness to fund proj- ects that others will not, particularly in post-conflict situations and regionally. They urged IDA to build on these strengths to increase the effectiveness of other sources of funding which lacked IDA's implementation and technical infrastructure. They affirmed that IDA should continue to support programs at the national and regional levels, when such support results in increased harmoniza- tion and coordination of donor efforts, and helps to build imple- mentation capacity. SECTION III: HIPC INITIATIVE 106. Participants reiterated their strong support for the HIPC Initiative which is providing debt relief to the world's poorest and most indebted countries. They emphasized the importance of closely linking HIPC debt relief with countries' poverty reduction efforts through the PRSP process. They noted the progress that had been made in the implementation of the enhanced HIPC Initiative since its adoption at the beginning of IDA12 and that IDA debt relief is now provided to all eligible HIPCs. 107. Participants reviewed the impact of HIPC debt relief on IDA's finances. Participants reaffirmed the basic HIPC principle that debt relief should not reduce IDA's capacity to support poverty reduction and development and should be additional to other 249 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 250 IDA assistance.49 They noted that current plus expected resources available to finance IDA's debt relief costs will be fully utilized by the end of calendar year 2005, i.e., early in the IDA14 period. IDA will therefore need additional financing of about SDR 1.2 billion during IDA14 to be able to deliver its agreed debt relief program. 108. Deputies discussed the arrangements for donors to provide HIPC- related contributions to IDA, and agreed that such arrangements should be flexible and simple to administer. Each donor's share will be determined based on the agreed burden-sharing and shown as a separate column in Table 1 of the IDA14 Resolution. They discussed two possible mechanisms for donors to provide their HIPC-related contributions: (a) contributing directly to IDA; or (b) channeling contributions through the HIPC Debt Initiative Trust Fund. The contributions will be recorded separately from regular IDA contributions in order to ensure that HIPC debt relief is additional to other IDA assistance. 109. Donor funds provided directly to IDA will be treated in the same manner as regular contributions, becoming part of IDA's general resources. Donors can choose to submit one Instrument of Com- mitment (IOC) that would include the amount of the HIPC- related contribution, or separate IOCs for regular contributions and HIPC-related contributions. Donors can pay their HIPC con- tributions in cash or promissory notes. Since these additional con- tributions will reimburse IDA for its foregone reflows during fiscal years 2006­2008, they will be drawn down over this three-year period. Donors will receive voting rights for contributions upon payment to IDA14. 110. Another possibility is for donors to make HIPC contributions directly to the HIPC Trust Fund. Donors would sign contribution agreements with IDA, as administrator of the HIPC Trust Fund, specifying the contribution amount and payment modalities--in cash or promissory notes, to be drawn down over a three-year period. Donors will deposit their contributions in the World Bank component of the HIPC Trust Fund, and contributions will be transferred to IDA to reimburse IDA for its foregone credit reflows. Since these funds become part of IDA's general resources at the time of transfer from the HIPC Trust Fund to IDA's cash 49This principle was originally articulated in the Development Committee Commu- niqué, September 27, 1999, paragraph 7. 250 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 251 accounts, donors will receive additional voting rights in IDA fol- lowing such transfers. Management will report periodically to donors on the status of their contributions to the HIPC Trust Fund. SECTION IV: MANAGING IDA'S FINANCIAL RESOURCES 111. Given the time it takes to reap the benefits of investments in growth and poverty reduction, the three years of the IDA14 Replenishment Period (2005­2008) represent a critical juncture in the effort low-income countries are making to reach the MDGs. Deputies recommend therefore that IDA14 donor contributions of SDR 14.1 billion be provided so as to achieve a total replenish- ment of SDR 24.2 billion during the IDA14 period consisting of funding for IDA14 commitment authority of SDR 23.7 billion and financing of foregone charge income on IDA13 grants of SDR 0.4 billion. Donor funding will comprise: regular assistance commit- ments of SDR 12.5 billion; foregone charge income on IDA13 grants of SDR 0.4 billion; and IDA's debt relief costs under the HIPC Initiative during the IDA14 period of SDR 1.2 billion. A total of SDR 12.2 billion was pledged at the final replenishment meeting, and Deputies urged further efforts by donors to fill the remaining gap. Replenishment funding would also comprise trans- fers from the IBRD net income (if available) in the amount of SDR 1.1 billion, and commitments against IDA's internal resources50 in the amount of SDR 8.7 billion. A. Prospective New Members and Donors 112. Participants welcomed Slovenia to the IDA14 discussions as a new donor. Participants noted that, in their view, there are still a num- ber of countries that have the economic capability to contribute to IDA but have not yet done so. These include Bahrain, Brunei Darussalam, Chile, Cyprus, Qatar and the United Arab Emirates. Participants agreed that they and Management should continue to encourage these countries to become IDA donors. 50Internal resources include principal repayments, investment income, and other non-donor resources. 251 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 252 113. Participants noted that Ukraine became a member of IDA in May 2004.51 They also noted that the Bahamas and Venezuela, which are still in the process of becoming IDA members, also intend to become IDA donors. B. Commitment Authority, Grant Financing and Risk Management 114. IDA's commitment authority for new financing is derived from donor contributions, internal resources, and IBRD net income transfers. 115. Participants noted that repayments of outstanding credits consti- tute the most important component of internal resources. Partici- pants appreciated the analysis presented during the replenishment discussions demonstrating that IDA would have sufficient liquid- ity available to fund future credit disbursements, and also that future replenishments would be supported by an adequate level of internal resources. Participants endorsed IDA's existing practice of using internal resources to complement donor resources to increase IDA's commitment authority.52 116. Deputies agreed to provide resources to replace IDA's foregone charge income due to IDA13 grants, by way of additional donor contributions during IDA14.53 Regarding the provision of grants in IDA14, Deputies reaffirmed their commitment to maintain the strength of IDA's finances. 117. Deputies agreed that Thirteenth Replenishment funds carried over into the Fourteenth will be administered under the terms of the Thirteenth Replenishment with respect to financial manage- ment matters such as payment, encashment, and allocation of vot- ing rights. For ongoing operational matters such as commitment 51Membership in IDA totals 165 countries. 52During IDA14, an important share of internal resources would be drawn from IDA's liquidity. At the meeting in Hanoi, Management illustrated the expected profile of reducing IDA's liquid assets over time. 53Modalities of IDA13 Grant Financing--Technical Note, IDA/SecM2004-0379, May 26, 2004. 252 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 253 authority, Fourteenth Replenishment terms, conditions and proce- dures will apply. C. Burden-Sharing and IBRD Transfers 118. Participants acknowledged the dual challenge of securing an ade- quate replenishment size while achieving an acceptable burden- sharing framework. Deputies noted that adjusted Gross National Income (GNI) remains a useful point of reference for IDA shares, but that it cannot be followed rigidly as the basis for determining replenishment shares. In view of substantial exchange rate move- ments since the date of the agreement on the IDA13 replenish- ment, Deputies agreed that flexibility was required on the part of each donor for a successful outcome of the replenishment. 119. Deputies proposed IDA14 donor contributions of SDR 14.1 bil- lion, including contributions to the HIPC Trust Fund to replace IDA's foregone credit reflows due to debt relief provided during the IDA14 period. Commitments (subscriptions and contribu- tions) shown in Table 1 of Annex 3 reflect the agreement among donors. 120. Donor contributions become available in three equal tranches. It is the practice of some donors to deposit qualified instruments of commitment to IDA, and as a result, payments are subject to annual legislative approvals. In view of this, since the Seventh Replenishment, donors, under the pro rata provision, have restricted the use of part of their contributions in the event of any shortfall from donors whose contributions exceed 20 percent of the total. Deputies agreed to retain the pro rata provision, recog- nizing that it is not expected to apply in IDA14 since no donor is expected to account for 20 percent of total donor contributions. 121. Participants noted that the ability of IDA to assist low-income coun- tries over the next three years depends heavily on the agreed IDA14 funding package and that a critical component of this funding pack- age was IBRD's continued ability to provide net income transfers to IDA. Such transfers are approved annually by the Board of Gover- nors of the IBRD. Participants emphasized the priority they attach to continued and substantial transfers from IBRD net income to IDA. They urged the IBRD to increase IBRD's net income transfers to IDA in SDR terms, relative to IDA13 levels, consistent with IBRD's financial priorities. 253 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 254 D. Effectiveness and Advance Contribution Scheme 122. Deputies recommended that donor financing for IDA14 be made subject to an effectiveness condition similar to that used under previous IDA replenishments. The purpose of such a condition is to ensure that most donor financing, including contributions by major donors, is in place on time. The Deputies recommended that donor contributions to IDA14 become effective when Instru- ments or Qualified Instruments of Commitment (IOCs) account- ing for 60 percent of the total donor contributions have been received by IDA. 123. Participants discussed the expected limited availability of com- mitment authority for making grants at the start of the IDA14 period. Principal reflows derived from credits extended in replen- ishments prior to IDA11 cannot be used for the financing of grants as the associated replenishment resolutions did not author- ize the making of grants. IDA would, therefore, need to rely on donor contributions to back new grant commitments during IDA14. In view of the likely larger volume of grants in IDA14 than in IDA13, and because many countries would receive their IDA assistance exclusively in the form of grants during IDA14, the timely availability of commitment authority for grants is of particular concern. Since the first tranche of donor resources in IDA14 would generally not become available until the second half of FY06, IDA's ability to extend grants during the first six to nine months of FY06 would depend on donors providing their IOCs in an early, advanced manner. 124. Deputies noted the importance of providing their IOCs as early as possible. Some donors' budgetary and legislative timetables per- mit them to make their contributions at an early stage in the fiscal year. In past IDA replenishments, some donors agreed that a share of their contributions could be used before the replenish- ment became effective under the Advance Contribution Scheme (ACS). In view of the limited availability of commitment author- ity for grants during the first six to nine months of FY06, Deputies agreed to eliminate the threshold for the ACS. One-third of the amount specified in a contributing member's IOC, will therefore be released for commitment authority purposes immediately upon receipt of the IOC by IDA and prior to the effectiveness of the replenishment unless otherwise stated. 254 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 255 125. As noted in the paragraph above, the first tranche will be released either upon receipt of IOCs, or upon effectiveness of the replen- ishment as specified by the donor. The second and third tranches are normally released based on payments received from donors during the second half of the relevant fiscal year. This timing would also result in the same issue discussed above--namely that commitment authority for grants will be limited during the first half of the fiscal year. Prior to IDA13, IDA's practice was to release commitment authority from donor contributions based on IOCs, not on payments. To avoid disruption in IDA's ability to make grant commitments, IDA will revert to the practice of using IOCs as the basis for commitment authority and release the sec- ond and third tranches of donor contributions on July 1, 2006, and July 1, 2007, respectively. 126. Deputies noted two other options to address this commitment authority issue: (i) introducing conditional grants; and (ii) con- verting credits to grants. Grants during the first six to nine months of IDA14 could be made conditional upon availability of sufficient commitment authority from donor contributions. Alternatively, IDA14 grant operations could be approved as credits in the first six to nine months of IDA14 with an automatic conversion to grant terms as and when sufficient donor resources become avail- able. Upon conversion, any IDA service and commitment charges paid under the credit would be refunded to the borrower. To the extent required, Management would adopt a combination of con- ditional grant approvals and conversion of credits into grants, as described above. E. Contribution Procedures 127. Deputies recommended that the contribution and payment arrangements for donors continue as in previous replenishments. They recommended a target effectiveness date for the replenish- ment of December 15, 2005. Donors will provide their contribu- tions in the form of cash or notes in three equal annual installments. The first installment will be due 31 days after the replenishment becomes effective, except for advance contributions which will be paid as specified by IDA after the advance contribu- tion scheme becomes effective. The second installment will be paid no later than January 15, 2007, and the third installment no later 255 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 256 than January 31, 2008. IDA may agree to payment postponement under the provisions of the IDA14 Resolution. 128. Deputies recommended that subscription and payment arrange- ments for non-donors continue as in previous replenishments. Subscription payments of noncontributing members will be fully paid in one installment and in national currency, either in cash or notes. 129. Encashment. Donor contributions will be encashed on an approx- imately pro rata basis among donors (Attachment II of the IDA14 Resolution). Donors may, with the agreement of Management, adjust their encashments to reflect their legal and budgetary requirements. Deputies agreed to indicate any special preferences in this regard to Management when donors deposit their IOC. Deputies recognized that the timing of encashments affects IDA's resource base. They agreed that in exceptional cases, should unavoidable delays occur, IDA's encashment requests to the affected donor are expected to be adjusted to take into account any past payment delays by that donor and any related lost income to IDA. IDA may also agree with any member on a revised encashment schedule that yields at least an equivalent value to IDA. 130. Valuation of contributions. Deputies agreed to denominate their contributions in their respective national currencies, in SDRs, or, with the approval of IDA, in any convertible currency of another member country. They also agreed to determine the currency of payment for each donor contribution as of the date of conclusion of the IDA14 replenishment discussions. For the purpose of estab- lishing the equivalence of value among different currencies and the SDR, donors agreed to use the average daily exchange rate for the period April 1, 2004, through September 30, 2004. To help maintain the value of contributions from donors with high infla- tion rates, contributions from donors with domestic annual infla- tion of 10 percent or higher in 2001­2003 will be denominated in SDRs. 131. Reporting of contributions. Participants requested Management to report regularly to the Executive Directors on the status of each donor's commitment and actual contributions to IDA and to 256 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 257 include this information in the Annual Report of the World Bank and other publications as appropriate. F. Additional Contributions 132. Additional Contributions. Donors may at any time make addi- tional contributions to the amounts shown in Table 1 of Annex 3. Such contributions could reduce the financing gap and result in a corresponding increase in IDA's available commitment authority. 133. Contingent Contributions. Deputies agreed to specific actions to be taken on donor harmonization and conditionality in IDA oper- ations as set out in the policy matrix (Annex 2, Table 3) and in the Schedules to the form of IOC attached to the draft resolution. Deputies asked Management to report on progress on the required actions at two points during the IDA14 period: by Sep- tember 2005 and at the IDA14 Mid-Term Review. Donors can link additional contributions to these agreed actions and make such contributions contingent upon a determination by IDA's Execu- tive Directors that the measures specified have been taken. G. Voting Rights 134. Participants noted that IDA's voting rights system was designed to protect the voting power of the developing countries in IDA. At present, however, there is a large discrepancy between votes allo- cated and actual voting rights, because not all Part II members have subscribed for the full amount allocated to them. In this con- text, work is underway to facilitate the taking up of subscriptions by Part II members. Management sent letters to concerned mem- bers requesting that they take up their outstanding allocations. The letters were accompanied by all the necessary forms (IOCs and payment instructions) to effect the subscription process. This issue was further discussed with country delegations at the time of the Annual Meetings in October 2004. 135. Participants agreed that the existing IDA voting rights system con- tinue for the IDA14 period. 257 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 258 SECTION V: RECOMMENDATION 136. Deputies proposed that the Executive Directors recommend to the Board of Governors the adoption of the draft IDA14 Resolution. . . .1 (This report was approved and its recommendation was adopted by the Board of Governors on April 13, 2005) 1 See page 170. 258 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 259 REPORT OF THE BOARD OF DIRECTORS OF IFC March 31, 2005 Membership of Malta 1. In accordance with Section 17 of the By-Laws of the International Finance Corporation, the application of Malta for membership in IFC is hereby submitted to the Board of Governors. 2. Representatives of Malta have been consulted informally regarding the terms and conditions recommended in the attached draft Reso- lution and they have raised no objection thereto. 3. Accordingly, the Board of Directors recommends that the Board of Governors adopt the draft Resolution . . . .1 (This report was approved and its recommendation was adopted by the Borad of Governors on May 16, 2005) 1 See page 167. 259 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 260 REPORTS OF THE BOARD OF DIRECTORS OF MIGA April 14, 2005 Reclassification of Slovenia from a Category Two Member Country to a Category One Member Country 1. Slovenia, as one of the successor states to the rights and obligations of the former Socialist Federal Republic of Yugoslavia, became a member of the Multilateral Investment Guarantee Agency ("MIGA") effective on March 19, 1993. 2. For the purposes of the MIGA Convention, Slovenia is presently classified as a Category Two member country. The Slovenian authorities have requested MIGA, in a letter dated November 30, 2004, to reclassify Slovenia from a Category Two member country to a Category One member country. 3. Subsections (vi) and (x) of Article 31 of the Convention vest in the Council of Governors the powers to, respectively: (a) reclassify a member of the Agency as a Category One or a Category Two coun- try, and (b) amend the Convention, its Annexes and Schedules. There are no objective parameters to classify a country as Category One or Category Two. Since the establishment of MIGA, three countries (Greece, Spain and Portugal) have been reclassified from Category Two to Category One and one country (South Africa) has been reclassified from Category One to Category Two. 4. As a Category Two member country and having exercised the option contemplated in Article 8(a) of the Convention, Slovenia paid twenty-five percent of its paid-in cash portion of its capital sub- scription (equivalent of US$27,591) in its local currency. As a Cate- gory One country, Slovenia would need to substitute the equivalent amount in any freely usable currency. 5. Slovenia graduated from the International Bank for Reconstruction and Development borrower status as of March 17, 2004 and changed membership categories in the International Development Association, from a Part II to a Part I, on July 30, 2004. 260 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 261 6. Accordingly, the Board of Directors recommend that the Council of Governors adopt the Resolution . . .1 reclassifying Slovenia as a Category One member country and asking Slovenia to substitute a freely usable currency for its paid-in cash portion of the capital sub- scription it originally paid in local currency. (This report was approved and its recommendation was adopted by the Council of Governors on May 31, 2005) 1 See page 186. 261 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 262 MIGA 2005 Review for FY00-04 May 10, 2005 Introduction 1. This report encompasses a review of MIGA's activities over the period from fiscal year 2000 to 2004. Article 67 of MIGA's Con- vention states that "the Council [of Governors] shall periodically undertake comprehensive reviews of the activities of the Agency as well as the results achieved with a view to introducing any changes required to enhance the Agency's ability to serve its objectives." 2. This is the third such review in MIGA's history; the first review was undertaken in 1994, and was approved by the Council of Governors (Resolution No. 48) in August 1994; and the second review was undertaken during fiscal year 2000 and was approved by the Council of Governors (Resolution No. 59) in September 2000. 3. Since MIGA's creation, the market for political risk insurance (PRI) has undergone substantial change, driven by both compet- itive forces within the industry and the external operating envi- ronment. There was a steady growth in the private market for PRI provision in the 1990s, with a lengthening in available tenors and increase in capacity. With the economic and political events of the new century, including September 11, 2001, market capac- ity has become volatile and has contracted significantly, by as much as 50 percent. The private market has started to show some recovery recently, but tenors over five years are still not widely available, and reinsurers have become more discriminating in their underwriting activities. Countries with high-risk perception, such as frontier markets, are not well-served by the private mar- ket and require MIGA's leadership to make them acceptable to private insurers. 4. These changes in the external environment, as well as the lessons learned from the review of MIGA's past activities, have demanded a review of MIGA's strategic directions. What follows is a summary of MIGA's strategic directions for the period FY-05-08 and a fuller discussion of the findings of the review. 262 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 263 Strategic Directions 2005­2008 5. MIGA's review of its strategic directions was guided by: (a) an assessment of the current external environment, including trends in foreign direct investment (FDI) flows around the world and the developing private market for political risk insurance; (b) an under- standing of MIGA's comparative advantages within the PRI mar- ket, which help the Agency add value for its clients and shareholders; and (c) the lessons learned from the review of the past five years of operations. 6. The analysis shows that the Agency does have an important role and comparative advantage in promoting FDI to support develop- ment, and that it will remain a financially self-sustaining institution, complementing the activities of the other World Bank Group mem- bers. The Agency's core competencies, the external environment, development needs of its client countries, and the roles and compe- tencies of other insurers determine the areas and niches where MIGA can bring real value and hence where it should focus in the future. Based on these factors, management has identified four operational priorities for MIGA going forward: · Investment in infrastructure development · Investment into frontier markets · Investment in conflict-afflicted environments · Investment among developing countries, or south-south investment 7. Infrastructure is an area where MIGA has proven itself a leader when it comes to arranging complex transactions and mitigating risks. Infrastructure investments often involve untested municipal governments, which lead to investor concerns about sub-sovereign risk. The relatively high-risk and long-term nature of the sector is such that other insurers and investors see MIGA as having a clear comparative advantage through its `deterrence effect'. To be of best help, MIGA needs to consider engaging governments early on in the concession process, in coordination with the World Bank, to ensure that a sound framework is developed, and to attract a broader swath of quality investors. Focusing on projects that sup- port regional integration, particularly in Africa, will be an impor- tant element for MIGA to be successful. 8. Frontier markets--high-risk and/or low-income countries and markets--represent both a challenge and an opportunity for the Agency. These are the markets that have the most need and stand to benefit the most from foreign investment, but which most 263 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 264 investors are wary of and therefore attract little foreign business. These are also markets where other insurers are not prepared to enter, or will only go in at high premiums and short tenors. As a member of the World Bank Group, MIGA is well-positioned to insure political risks for investments in these countries, which are not well-served by either the private or public market. 9. MIGA is already a proven presence in conflict-affected countries, where other insurers typically stay away, playing a key role in getting much-needed new business in the door. MIGA's guarantees provide investors with the comfort they need to take that first step, and those initial investments have a powerful demonstration effect in terms of attracting more FDI. The development benefits of MIGA's inter- ventions in these places have been far-reaching, helping to restore cash flows, spurring production, creating jobs, getting financial sec- tors back on their feet, and transferring skills and technology. 10. Companies from developing countries are starting to contribute a greater proportion of FDI flows into other developing countries. While firms from Asia have led the investment trend, there is a base of investors from a number of other developing countries, with financial ability and know-how, who can make investments into other developing countries. For these investors, political risk insur- ance can make a difference in the decision to go ahead or not. But often in their countries, the private insurance market is not suffi- ciently developed and national export credit agencies lack the abil- ity and capacity to offer political risk insurance. MIGA can therefore play an important role in catalyzing FDI from these coun- tries. MIGA Review FY00-04 11. Membership. During the review period, membership in MIGA expanded considerably, increasing by fifteen countries, from 149 at the beginning of FY00 to 164 by the end of FY04.1 This rise has enabled the Agency to increase its operating capital as well as pro- mote FDI, and the concomitant development benefits, into more countries. 1 As defined in MIGA's Convention, membership in the Agency is open to all mem- bers of the IBRD. During the review period, the following countries became members of MIGA: Cambodia, the Lao People's Democratic Republic, and St. Kitts and Nevis (FY00); Central African Republic and Thailand (FY01); Chad, Syrian Arab Repub- lic, and Serbia and Montenegro (FY02); Afghanistan, Gabon, Rwanda, Tajikistan, and Timor-Leste (FY03); and the Islamic Republic of Iran and Suriname (FY04). 264 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 265 Table 1 Guarantees Issued, Projects Supported, Gross Exposure and Cancellations ($ billion) FY00 FY01 FY02 FY03 FY04 Projects Supported (No.) 37 46 33 37 35 Guarantees Issued (No.) 53 66 58 59 55 Total Guarantees Issued1 1.86 2.15 1.36 1.37 1.08 Cancellations and other adjustments2 0.93 1.28 1.22 1.69 1.06 Net Exposure3 2.82 3.16 3.20 3.20 3.26 Gross Exposure 4.37 5.18 5.26 5.08 5.19 1Includes guarantees issued under the Cooperative Underwriting Program. 2Includes cancellations, replacements, reductions, expiries, and translation adjustments. 3Net exposure is gross exposure less reinsurance. Operations Overview 12. Guarantees. The global business environment has changed consid- erably since the last strategic review of MIGA's activities in 2000. A combination of economic crises and political events--September 11, 2001, regional economic crises, corporate scandals, terrorism and conflict, and, in general, a slower global economy--caused interna- tional investment activities and FDI to decline markedly, particu- larly in areas where MIGA's guarantees are needed most, such as in infrastructure. 13. Over the period FY00-04, about 290 guarantees were issued for $7.3 billion in coverage, bringing the total amount of guarantees issued to about $13.5 billion since MIGA's inception. The amount of new guarantees issued in a single fiscal year peaked at $2.2 billion in FY01, and then fell to $1.4 billion in FY02, and to $1.1 billion by FY04 (see Table 1). The decrease was a result of investors' reluc- tance to make new investments in developing countries and to finance expansions of existing operations, in the wake of the crises and events mentioned above. It should be noted, however, that despite these adverse conditions, MIGA was able to insure roughly the same number of projects in FY04 as in FY00, a reflection in part of the Agency's efforts to reach out to smaller investors. MIGA's gross and net exposures remained fairly constant over the review period, averaging around $5.2 billion and $3.2 billion, respectively. 14. MIGA's portfolio has an average guarantee life of six to seven years, which is consistent with the experience of other public insurers. Contract cancellations were therefore high during the review 265 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 266 period, averaging 12 percent of gross exposure, with a peak of about 19 percent in FY03, mainly due to cancelled financial sector proj- ects in Latin America. Cancellations can result from a number of factors, including the fact that investors generally tend to feel more comfortable with political risks and start self-insuring after a few years; investments change ownership and coverage may then not be desired; or projects may simply not go forward as planned. Most of these developments, other than where projects do not go forward, may be viewed as positive developments, as MIGA's role is to facil- itate entry into countries and sectors where investors or insurers are initially unwilling to go on their own. 15. MIGA's collaboration with private and public insurers, through rein- surance and coinsurance arrangements, increased over the period under review. MIGA has both reinsured itself and provided reinsur- ance to other primary insurers. Roughly 40 percent of the Agency's gross exposure is currently reinsured. The cornerstone of MIGA's relationship with the private market is its favorable quota share treaty reinsurance agreements with Ace Bermuda Insurance Co. Ltd. and XL Re Ltd. The treaty reinsurance is supplemented on a project-by- project basis through the use of facultative reinsurance and the Coop- erative Underwriting Program from the public and private sectors. These collaborative arrangements allow MIGA to leverage its own capacity and more prudently manage its portfolio, while benefiting investors, who gain access to increased coverage and possibly funding, and other insurers, who benefit from risk sharing, and host govern- ments, which benefit from increased investment. Strong relationships with the private insurance industry are important, particularly since MIGA's role as a multilateral, and as stated in its Convention, requires the Agency to complement and not compete with other insurers. 16. During the review period, MIGA also continued to strengthen its partnership with the public insurance market, through the signing of memoranda of understanding with more than 31 public agencies (both national and multilateral) offering political risk insurance (see Table 2). To date, MIGA has coinsured or reinsured with 16 public agencies, three of which are from developing countries. In FY04, for example, the Agency obtained facultative reinsurance from two public insurers for the South Africa Regional Gas project in Mozambique. MIGA has also developed a facultative reinsur- ance program with the Slovene Export Credit Corporation in sup- port of its investment insurance activities. Talks have also begun with India's Export Credit Guarantee Corporation on the possibil- ity of providing them with reinsurance. 266 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 267 Table 2 Memoranda of Understanding Signed During the Review Period, FY00-04 Partner Organization Year Signed African Trade Insurance Agency (ATI) FY04 Banque de Développement des États de l'Afrique Centrale (BDEAC) FY04 Export Guarantee Fund of Iran (EGFI) FY04 Jordan Loan Guarantee Corporation (JLGC) FY04 Servizi Assicurativi del Commercio Estero of Italy (SACE) FY04 Agence Nationale Chargée de la Promotion des Investissements et des Grands Travaux (APIX), Senegal FY03 Asian Development Bank FY03 Export-Import Bank of Romania FY03 African Development Bank (AfDB) FY02 Banco Nacional de Desenvolvimento Econômico e Social (BNDES), Brazil FY02 Compañía Española de Seguros de Crédito à la Exportación, S.A. (CESCE), Spain FY02 Export Credit Guarantee Corporation of India, Ltd. (ECGC) FY02 Export Credit Insurance Corporation of South Africa Ltd. (ECIC) FY02 Export-Import Bank of Thailand (EXIM) FY02 Fundación ProBarranquilla, Colombia FY02 Österreichische Kontrollbank Aktiengesellschaft (OeKB), Austria FY02 PROPARCO, France FY02 Securadora Brasileira de Crédito À Exportação S/A (SBCE), Brazil FY02 Slovene Export Corporation (SEC), Slovenia FY02 Trade and Investment Development Corporation of Philippines (TIDCORP) FY02 Austria Wirtschaftsservice Gesellshaft mbH (AWS) FY01 Export Credit Insurance Organization (ECIO), Greece FY01 FINNVERA PLC, Finland FY01 Islamic Corporation for the Insurance of Investments and Export Credit (ICIEC) FY01 Korea Export Insurance Corporation (KEIC) FY01 People's Insurance Company of China (PICC-SINOSURE) FY01 PwC Deutsche Revision Aktiengesellschaft Wirtschaftsprufungsgesellschaft (PwC), Germany FY01 Eksport Kredit Fonden (EKF), Denmark FY00 Export Credit Bank of Turkey FY00 Malaysia Export Credit Insurance Berhad (MECIB) FY00 Societá italiana per la cooperazione all'estero (SIMEST), Italy FY00 267 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 268 Table 3 Gross Exposure by Region (in percent) FY00 FY01 FY02 FY03 FY04 Latin America and the Caribbean 51 57 55 43 33 Sub-Saharan Africa 12 12 15 19 13 Middle East and North Africa 1 2 2 3 5 Europe and Central Asia 22 19 20 26 38 Asia and the Pacific 14 10 10 12 13 Note: Percentages add up to more than 100 percent because of multi-country agreements. Table 4 Gross Exposure by Sector (in percent) FY00 FY01 FY02 FY03 FY04 Infrastructure 29 29 36 41 38 Financial 34 36 35 29 35 Oil, Gas and Mining 14 14 12 12 11 Agribusiness and Manufacturing 13 13 11 11 9 Tourism and Services 10 8 6 7 7 17. During the review period, the guarantees portfolio shifted, with the shares in Europe and Central Asia (ECA) and Middle East and North Africa (MNA) increasing, while in relative terms Latin America and the Caribbean (LAC) decreased. Shares in sub- Saharan Africa (SSA) and Asia remained stable (see Table 3). From a sectoral perspective, the portfolio share of infrastructure projects increased, while agribusiness and manufacturing declined, and the financial sector held relatively steady. However, it is impor- tant to note that although the portfolio share of exposure in Africa, infrastructure and to south/south investors may have increased, in all three of these priority areas, the number of actual projects sup- ported annually declined when comparing FY04 performance with FY00. 18. The sectoral distribution of the portfolio has also changed. The share of infrastructure increased from 29 percent in FY00 to 38 per- cent in FY04, while agribusiness and manufacturing declined from 13 to 9 percent. The financial sector maintained its share of the portfolio, accounting for about a third, while the extractive indus- tries remained under 14 percent. Given that MIGA's portfolio is small, sectoral and regional changes are often determined by a few large projects or repeat, individual investors (see Table 4). 268 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 269 19. Such is the case with two particular investors--Raiffeisen Zentral- bank Osterreich AG (RZB) and Bank Austria Creditanstalt AG (BACA)--which together have accounted for a growing share of MIGA's guarantees. Banks such as ABN Amro, Citibank, and ING have historically also been strong users of MIGA's guarantees as they have expanded operations overseas. The value of guarantees issued to RZB and BACA steadily increased from 7 percent of total gross commitments in FY00 to 55 percent in FY04. There are some indications that this trend is starting to reverse, with business pick- ing up in other areas, and the banking sector starting to mature and consolidate in the transition economies where these banks have been investing. 20. It is difficult to accurately estimate how much FDI has been facili- tated through the projects MIGA has supported. There are defini- tional issues regarding what constitutes FDI, inconsistencies in reporting FDI figures across countries, and often problems in obtaining accurate figures from investors. There are also basic con- ceptual issues: while the amount of FDI facilitated may be fairly clear for a large, discrete project, there are difficulties when the investment being supported is an ongoing enterprise or bank. Nonetheless, information provided by investors in their initial applications to MIGA suggests that over $50 billion has been facil- itated since MIGA first started operations in 1988, a relatively small share of total FDI going to developing countries. But it is important to view MIGA's role not so much as increasing its share of total FDI going to developing countries, but rather as increasing total flows of productive investment to countries and sectors where it is needed most. This highlights MIGA's developmental role and value added in the market. 21. With respect to MIGA's performance in priority areas, as articu- lated in the MIGA Review 2000, the results are mixed (see Table 5). Net exposure in IDA-eligible countries increased in the past three years, reaching $1.7 billion, or 35 percent of the outstanding portfo- lio in FY04. This was up from 30 percent in FY01. However, despite extensive outreach in the region, the number of projects and port- folio share in sub-Saharan Africa decreased in FY04, although a number of noteworthy projects were supported. Net exposure to infrastructure projects remained constant from FY02-04, but with an increasing share in water and sanitation projects--two in China and one in Russia in FY04--due to MIGA's ability to underwrite political risk associated with sub-sovereign entities. MIGA's support for small- and medium-sized investments increased from just three 269 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 270 Table 5 Guarantee Projects in Priority Areas (number of projects) FY00 FY01 FY02 FY03 FY04 IDA-eligible countries 12 18 14 19 20 SMEs 3 18 11 10 14 South-South 9 8 11 12 8 Sub-Saharan Africa 8 8 9 8 4 Infrastructure 12 10 17 7 7 in FY00 to 18 in FY01, and then 10 to 14 in FY02-04. With a new Small Investment Program, offering a standardized package of insurance and a streamlined underwriting process, this is expected to increase. 22. In addition to these priorities, over the past few years MIGA has increased its support for FDI into conflict-affected countries, a des- tination where other insurers are less willing to go. To date, the Agency has issued more than $1.9 billion in guarantees for 77 proj- ects in countries affected by conflict. These projects have helped spur economic growth and create jobs, and have been particularly important in the immediate aftermath of conflict when private investment is urgently needed and investors need the security of insurance. For example, a special guarantee facility, backed by a trust fund from the European Union (EU), helped MIGA encour- age investments into Bosnia and Herzegovina. Similarly, in FY04, MIGA developed a $12 million guarantee facility for Afghanistan that will insure FDI as well as loans to local businesses from foreign banks in the country. The Agency expects to leverage up to $60 mil- lion through cooperation with the Asian Development Bank, the Department for International Development (DFID, UK), IDA, and private insurers. MIGA's Afghan initiative is also notable in that it combines PRI and technical assistance (TA) through the placement of a residential advisor (funded by the German govern- ment) and ongoing advisory services to the national investment pro- motion agency in conjunction with the World Bank. 23. New Contract of Guarantee. In January 2004, MIGA introduced its new form of contract of guarantee, which was developed in close consultation with the market, and is much simpler and easier to work with for both MIGA and its clients. 24. The Small Investment Program. To support a potentially growing source of FDI, MIGA developed a Small Investment Program 270 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 271 Box 1: Sugar Project in Mozambique A MIGA guarantee issued in FY01 is helping to rehabilitate Mozambique's largest sugar estate, creating thousands of jobs and generating significant eco- nomic and social benefits in the country's Marromeu region. MIGA extended $65 million in investment insurance to the "Sena Group"--a consortium of Mau- ritian companies--and to the Industrial Development Corporation of South Africa Ltd., covering their equity investments, management and technical assis- tance contract, and loan for the project. The project, located on the Zambezi River, entails the rehabilitation and man- agement of the former Sena Sugar Estate, which was severely damaged during Mozambique's prolonged civil war. The investment has so far resulted in the pro- duction of roughly 750,000 tons of sugar cane a year, which gets processed for both domestic and foreign markets. The project is one of the largest economic development undertakings and a main employer in northern Mozambique, which has attracted little FDI. It has resulted in extensive benefits to the local community and country. The enterprise currently employs 5,000 people, more than half of whom work full-time on a per- manent basis. The rest are employed short-term, mainly to help with harvests. A number of social benefits have made a critical difference for local residents, including higher incomes that allow parents to send their children to school, improve housing, and purchase bicycles. Employees also benefit from a small health clinic sponsored by Sena, while the nearby Beira hospital receives free water, electricity, equipment, and medicine from the company. Sena has itself built a water plant for the community, brought in its own electricity generator, and built the refinery. The investor has also rehabilitated a school that operates three shifts on a 24-hour basis to accommodate three separate classes. Buildings not used by the company are provided free-of-charge to others, including an NGO running an orphanage for HIV orphans and a police station. Sena contin- ues to carry out all repairs and maintenance. (SIP) in fiscal 2004. The SIP offers a simplified guarantees product, involving a standardized package of risk coverages and a quicker and more efficient underwriting process. It addresses many of the problems relating to underwriting processes and information requests that small- and medium-sized investors have encountered in working with MIGA in the past. The pilot program is being implemented in close cooperation with external partner institutions such as commercial banks and export credit agencies. The program aims to encourage more south-south investments, as well as increase small- and medium-sized investments in countries and regions that have not yet benefited significantly from FDI flows. 271 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 272 25. Environmental, social, and disclosure policies. During the review period, a number of changes were made that strengthened MIGA's contribution to the environmental and social dimensions of proj- ects. Following inputs from stakeholders and extensive discussions with MIGA's Board in early FY00, the Agency began implementing an interim Environmental Assessment and Disclosure Policy during a two-year trial period. Following this trial, the Board concurred that MIGA should continue to apply these policies in their extant form. MIGA also adopted, on an interim basis, its own version of safeguards policies, consonant with those of the International Finance Corporation (IFC) and World Bank. These will be reviewed following the IFC Board approval of its equivalent poli- cies in FY06. 26. Compliance Advisor and Ombudsman. In 1999, the Compliance Advisor and Ombudsman (CAO) office was created as an inde- pendent body to assess IFC and MIGA projects. The creation of the office was the culmination of efforts by IFC and MIGA, their share- holders, sponsors, other members of the private sector, and repre- sentatives of nongovernmental organizations, to develop the most appropriate mechanism that would allow individuals and communi- ties affected by IFC and MIGA projects to raise their concerns directly. The position was the first of its kind in a multilateral devel- opment institution, and since its establishment, the office has been lauded from both within and outside the Bank Group. The Presi- dent and MIGA senior management have benefited from its inde- pendent inputs on safeguard policy implementation and inter-agency cooperation. As a testament to its success, other mul- tilaterals (including the Asian Development Bank) have recently shown an interest in replicating the CAO office and its roles. 27. During the review period, the CAO office provided important advice to MIGA on a number of fronts. Regarding projects, most notable were social issues surrounding the Bulyanhulu Gold Mine in Tanzania and resettlement issues associated with the Minera Antamina mine in Peru. Regarding Buylanhulu, the CAO found that the mine's activities were in line with best practices in the min- ing industry, determined that a compliance audit was not necessary, and stated that the project appeared to already meet a standard of compliance. With respect to Antamina, the CAO conducted a pre- liminary review and recommended that MIGA enhance its capacity in the area of resettlement and ensure that social development expertise was available for consultation on future projects. (Man- agement subsequently acted on these recommendations.) 272 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 273 28. The CAO office also offered counsel on MIGA's Environmental and Social Review Procedures (ESRP). CAO staff examined all aspects of MIGA's ESRPs, from initial project screening through review and clearance, to arrangements for ensuring project compli- ance. After reviewing these processes for 42 projects evaluated dur- ing FY00-FY02, the CAO released its findings in December 2002. The report lauded MIGA for consistently adhering to its procedural requirements, consistently categorizing new projects, and diligently tracking progress on specific contract conditions. The review also recommended that MIGA could strengthen its ESRPs by taking specific action. Included in these suggestions were: hiring a social specialist to review its projects, adopting a more systematic approach to determining clients' capacity for environmental and social management, and developing a closer collaboration in rela- tion to risk assessment between guarantees and project review and screening operations. 29. MIGA also benefited from the CAO's role as a contributing mem- ber to the World Bank Group's Extractive Industries Review. The CAO reviewed MIGA's extractive industry projects and proce- dures. Among its findings, the report suggested that MIGA man- agement should consider and take a position on how best to address sustainability issues, develop formal pathways for sharing knowl- edge and experiences with staff, and consider whether the broader advisory services capacity on sustainability with the Bank Group could be harnessed and applied as an extension of its advisory ser- vices products. 30. Pre-Claims, Claims and Mediation. MIGA is faced at any given time with as many as a dozen investment disputes that could result in claims for the Agency. MIGA's unique role as an "honest broker" that can help resolve disputes between investors and governments was put to good use during the review period. MIGA was involved in a number of negotiations to help resolve potential claim situa- tions. Even when MIGA's guaranteed investments are not involved, the Agency has provided guidance to countries to help resolve dis- putes, with the express goal of removing impediments to future for- eign investment. For example, MIGA's long-term mediation efforts in Ethiopia, to resolve outstanding claims dating from the Mengistu regime, have yielded tangible results. By FY04, some 40 claims had moved toward resolution with concrete settlement offers from the government of Ethiopia. The resulting improvement in the invest- ment climate enabled the country to conclude bilateral treaties with France and Germany in FY03. 273 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 274 31. When mediation is unsuccessful, MIGA has also sent an important signal about its willingness and ability to pay claims. MIGA has paid three claims in its history. The first was paid to Enron for a power project in Indonesia in FY00, and was recovered with the full cooperation of the Indonesian government by FY04. The second, resulting from a small civil war loss due to damages to a hydroelec- tric project in Nepal, was paid in early FY05, and the third was recently paid to a guarantee holder for losses suffered in the context of the Argentine crisis (both after the review period). 32. Technical assistance and online knowledge services. The scale and scope of MIGA's technical assistance activities have increased sub- stantially over the years, with 30­40 projects ongoing at any given time. IDA countries have been a special focus of MIGA's TA, typi- cally comprising 40 percent of the portfolio, with Africa the primary regional beneficiary. The relative mix of activities and the nature of the interventions have also evolved, with a marked shift from one- off interventions to multi-year engagements. This has helped improve coordination and integration with World Bank private sec- tor programs. Figure 1 shows how MIGA's role fits with the rest of the Bank Group's activities to promote FDI. In FY04, MIGA's work plan was developed with an explicit effort to improve coordination of future TA with the Bank Group's country assistance strategies. 33. MIGA's interventions in TA have been based on specific criteria identified in MIGA Review 2000 for prioritizing countries: (a) the existence of an adequate legal and regulatory framework for FDI; (b) the commitment and ability of client agencies to absorb assis- tance; (c) the priority of the country for MIGA and the World Bank's country assistance strategy; and (d) the ability to cover a portion of the costs via country co-payment or mobilization of donor funding. 34. Each country engagement commences with a country diagnostic needs assessments, measuring the country's strengths and weak- nesses in terms of responding to investors' needs. The design of MIGA TA flows from the results of these assessments and is agreed in detail with client countries. In recent years, MIGA has focused on developing and employing new tools and approaches to TA and in strengthening its network of partnerships, not just within the Bank Group, but with the broader development community. A number of standardized products have been developed, including a toolkit for investment promotion agencies that covers best practice in promoting for investment and in servicing the needs of foreign 274 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 275 Figure 1 World Bank Group Promotion of FDI Creating a Formulating Attracting investors Steps in conducive national investment and anchoring FDI enhancing enviroment for promotion strategy within the domestic FDI-flows FDI economy · Business climate, · Contribution of FDI to · Investor research/surveys, administrative barriers, development, role of Internet and IT for legal environment, investment promotion outreach, investor Key investor incentives, agencies (IPA), IPA servicing and aftercare, issues competition policy, structure/function-- investment dispute and statistical database-- World Bank/FIAS mediation--MIGA concerns World Bank/IFC · IPA strategies and · Backward linkages into for FDI Foreign Investment business plans for local economy--IFC Advisory Service investment promotion · Policies on linkages, (FIAS) intermediaries, business- corporate social · Benchmarking sector government partnerships, responsibility--World competitiveness-- targeting promotion Bank/FIAS MIGA efforts--MIGA · Arbitration--International Centre for Settlement of Investment Disputes (ICSID) investors, and an online knowledge portal--the FDI Promotion Center, which was launched in FY04. MIGA has also branched out into investor-based research on FDI. In FY02, an FDI Survey was published, which furthered understanding of the medium-term global expansion plans of international companies, their business objectives, and the geographic locations most likely to benefit. In FY03, a benchmarking study was conducted to determine and com- pare operating costs and conditions in six Asian countries for two industry sectors--electronics and shared services. Response from the client countries was highly positive and MIGA is now in the process of rolling out the Enterprise Benchmarking Program (EBP) on a global basis. 35. Online information services have also become an increasingly important activity for MIGA over the years. The Investment Pro- motion Network (IPAnet) is a key Internet portal site for investors seeking information on the investment environment and business opportunities in developing countries. In FY02, MIGA launched the FDI Xchange, an email update service delivering information on new investment opportunities, market research, and business environment analysis through personalized alerts. Then in FY03, MIGA launched the Investor Information Development Program, 275 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 276 a $500,000 initiative funded by the Japanese government and the Development Gateway, to help selected countries leverage technol- ogy to develop, mobilize, and disseminate critical investment infor- mation. By the end of FY04, the online investor information services were attracting more than 50,000 visitors per month, with 7,000 subscribers to the FDI Xchange email alerts, and the FDI Pro- motion Center had attracted some 1,000 registered users in its first six months of operation. 36. More than half of MIGA's TA has been developed in partnership with either the Bank Group or external donors. This has allowed MIGA to leverage its discretionary budget and implement long- term interventions in client countries. Currently, MIGA is actively partnering with a number of agencies, including EuropeAid, US Agency for International Development, the governments of Japan, Austria, Switzerland and Germany, the Commonwealth Secretariat, UNCTAD, UNIDO, and the World Association of Investment Pro- motion Agencies (WAIPA). 37. In FY02, with funding from the Swiss government, MIGA launched an initiative designed to encourage investors to take advantage of increased African trade access to the US and EU markets. In FY04, MIGA created the Invest-In-Development Facility with funding from the Austrian government and Commonwealth Secretariat to support country-focused technical assistance programs, FDI research, and knowledge-sharing initiatives. In FY03, MIGA and the Austrian government began development of the European Investor Outreach Program, which is designed to attract European investments into the Western Balkans. MIGA is currently imple- menting new country-focused TA programs in several countries in Europe, Africa, Asia, and Latin America with support from bilat- eral donors. 38. In order to enhance the synergies between TA and other areas of work both within MIGA and with other partners, a number of issues are being addressed. First, partly because MIGA's TA pro- gram has broader objectives than MIGA's guarantee products, the Agency has not capitalized as much on the potential synergies that exist between TA and the guarantees operation. Addressing this issue is a priority that is receiving extensive attention in the context of the recently merged guarantees and TA Operations Depart- ments. Second, a need to address the perceived overlap of activities with the Foreign Investment Advisory Services group (FIAS) is 276 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 277 being tackled through a new FIAS-MIGA Protocol signed in FY05. Third, the development of MIGA's online information services, which has focused primarily on technical assistance in the past, has been expanded to more fully leverage opportunities to market guar- antees and support for some of the Agency's broader development goals. 39. Training of insurance partners. From FY00-04, MIGA took the lead in providing training to a growing number of external partners on the provision of investment guarantees and risk assessment. The training aimed primarily to spread best practices on underwriting political risks, and was a vehicle for enhancing cooperation with the Agency's official partners. The effort was driven by increasing demand from recently created or restructured export credit agen- cies in developing countries, as well as a number of private groups, such as brokers and banks. Beginning with small workshops responding to ad hoc requests for training, MIGA greatly scaled up its efforts to provide broader instruction to a larger group of partic- ipants. Over this period, MIGA provided training to about 100 rep- resentatives from roughly 25 different agencies. Financial Overview 40. Income and returns. Income from the guarantees business has remained stable for the past three years (see Table 6). Investment income has declined significantly over the same period as a result of the significant drop in interest rates. Overall income, therefore, has trended downwards for the past three years, with total income declining by 15 percent in FY04 alone. At the same time, adminis- trative expenses have increased by 27.8 percent over the past three years, 9.8 percent from FY03 to FY04 alone. As a percentage of total guarantee income therefore, administrative expenses have been ris- ing in recent years, from 31 percent in FY02 to 51 percent in FY04. 41. Return on Operating Capital (ROC) has been falling in the recent years, after a modest improvement in FY01. The recent decline was largely due to the combined effect of MIGA's strengthened capital base and declining net income (before provisioning), which in turn was driven by rapidly rising administrative expenses and a low interest rate environment. Removing the effect of investment income (and therefore interest rate environment), the Operating ROC has also declined in recent years, indicating that the addi- tional capital strength MIGA acquired has not yet been fully 277 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 278 deployed in its underwriting business, in part due to the difficult global business environment, and that increased budgetary resources have not translated into additional operating income. 42. Finance and risk management. The objective of the Agency's Finance and Risk Management Group is to provide a sound basis for strategic decision-making by MIGA's senior management to ensure the Agency's financial sustainability both in the short- as well as longer-term. 43. Significant progress was made over the past couple of years to establish a comprehensive finance and risk management frame- work. In particular, MIGA developed key analytical tools (includ- ing a costing/pricing model and an economic capital model), and the Board approved new policies (including a new liquid asset manage- ment policy, which provides for the expansion of the universe of asset classes eligible for investment, in order to increase relative investment returns, and a new provisioning methodology). And a new technical module was put in place to manage MIGA's capital. 44. On the trust fund side, following the strategic decision to use the administrative platform developed by the Bank, every effort was made to bring all MIGA trust funds onto such a platform to ensure best fiduciary and internal control practice. All MIGA trust fund Table 6 Income, Expenses and Returns ($ millions) FY00 FY01 FY02 FY03 FY04 Income Income from Guarantees 29.5 36.5 40.4 39.5 40.9 Investment and Other Income 26.2 33.3 30.9 25.3 14.3 Total Income 55.7 69.8 71.3 64.8 55.2 Expenses Administrative Expenses (18.1) (19.8) (21.9) (25.5) (28.0) Other Expenses (0.1) (0.7) (1.0) (1.2) (1.6) Income from Guarantees Minus Expenses1 11.3 16.0 17.5 12.8 11.3 Net income1 37.5 49.3 48.4 38.1 25.6 Return on Operating Capital (ROC)2 6.7% 7.5% 6.9% 5.0% 3.2% Guarantee Related ROC3 2.0% 2.5% 2.5% 1.7% 1.4% 1Before provisioning. 2ROC defined as net income less provisioning as a percentage of operating capital. 3Operating ROC defined as net income less provisioning less investment income as a percentage of operating capital. 278 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 279 managers are now certified under the World Bank's program. On the budget and resource management side, MIGA management has launched an important initiative to review and strengthen practices across the Agency. Finally, the maintenance of the highest account- ing, financial reporting, internal control, and governance standards in an environment of ever-increasing scrutiny on the part of exter- nal auditors, internal auditors, MIGA's Audit Committee members, and Board members remains a priority for the Agency. 45. The General Capital Increase. As a result of a General Capital Increase (GCI) of $850 million, approved by MIGA's Council of Governors in March 1999, MIGA's liquidity position and risk- bearing capacity were substantially improved during the review period. As of FY04, about 97 percent of the GCI had been either subscribed or reserved. The capital increase was an important fac- tor in MIGA's achievement of a secure position, in terms of its oper- ating capital and the resources available to pay claims, which in turn allows the Agency to expand its services and take on more risk, both of which serve to enhance the Agency's development impact. 46. The GCI compounded the challenge of maintaining the parity of voting power between Category 1 and Category 2 countries, as stip- ulated in Article 39(a) of MIGA's Convention. The issue was that if the achievement of parity were to take place before the end of the GCI subscription period (March 2003), parity would immediately be lost if one or more countries did not subscribe to the GCI shares. Therefore, the Council of Governors postponed the review of the reallocation of shares to achieve parity until after the GCI was com- pleted. The rationale was to give countries an additional opportu- nity to subscribe to the shares, and thus bring MIGA closer to the goal of parity. Following the closure of the GCI in March 2003, the Board of Directors concurred on May 6, 2004, with MIGA man- agement's recommendation for a "Parity Factor" solution that would automatically adjust voting shares when there were any changes in country membership. Subsequently, through Resolution No. 70, the Council of Governors approved this solution in October 2004. Organizational and Implementation Overview 47. Organizational changes. Institutional and staffing growth, combined with changes in the external environment, prompted a number of organizational changes in MIGA during the review period. These changes were intended to strengthen finance and risk 279 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 280 management, country risk assessment, client outreach, and the operations evaluation function. 48. A Syndications Unit and a Marketing Unit were set up within the Guarantees Department in FY00, but the Marketing Unit was spun off as a separate Corporate Relations Unit in FY02. With this move, the Unit's focus was more on external communications than on mar- keting. A Country Development Group (CDG) was also estab- lished in FY00 but transferred to a newly created Finance and Risk Management Department in FY02. In FY03, responsibility for coordination with the Bank Group, especially on Country Assis- tance Strategies (CASs), was explicitly moved out of the opera- tional units and vested with the Policy and Environment Department, which was set up in FY03. 49. Then, in early FY04, a regional focus in the Guarantees Depart- ment (which had been renamed the Underwriting Department) was reintroduced through a matrix system with managers having com- bined responsibilities for sectoral and regional activities. During this period, staff were also deployed to the field in an attempt to get closer to clients. 50. The Investment Marketing Services (IMS) Department--with its technical assistance and online information units--continued to develop its own work program. The outputs and activities of the department grew with increasing support from external funding resources, mainly from partner and client contributions, and trust funds. By FY04, this support accounted for 52 percent of the total funding sources for the department. 51. An Operations Evaluation Unit (OEU) was set up in FY03, and its independent assessment of MIGA's development effectiveness pro- vided valuable recommendations for the Agency. OEU conducted its second Agency-wide review in FY04, examining a number of guarantee projects from FY96-98 and two more recent TA pro- grams. This evaluation pointed to weaknesses in the way MIGA conducted its project analysis (particularly development impact assessments) and its contractual requirements with respect to ensur- ing greater environmental and social compliance. It also suggested that linkages with the Bank Group on CASs needed to be strength- ened. Regarding TA, the evaluation found that the quality of MIGA's interventions was generally high, with relevant recommen- dations made to investment promotion intermediaries (IPIs). But the review noted that it was difficult to measure any direct improve- 280 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 281 ments in FDI flows as a result of the TA, mainly because investment decision-making is influenced by intervening variables outside the control of IPIs. 52. Many of the organizational changes, particularly the deployment of staff to the field, contributed to escalating administrative costs at a time when operating income remained flat. Administrative costs rose by 55 percent from FY00-04, while total income remained unchanged. 53. Human resource management and staff diversity. During the review period, MIGA continued to pursue a successful path to staff diver- sity (see Table 7). The Agency's human resources function operated independently of the World Bank, but it is now outsourced to the Bank, and as a result, policies and accountabilities are now more closely aligned with those of the Bank. 54. Client management. One of the key issues during the review period was client management, which tended to be driven by short-term imperatives rather than longer-term needs. Projects were some- times rushed to meet fiscal year-end targets, at times at the expense of long-term relationship with clients. Turnaround time for responding to applications for guarantees and inquiries on premi- ums was not always swift as a result of competing work demands Table 7 Staff Diversity in MIGA World Bank Group Staff MIGA Staff % of all staff % of all staff Number at grade level Number at grade level Part 2 Staff Levels GF-GG 2,321 54 25 47 Levels GH+ 602 35 7 32 Women Levels GF-GG 1,728 40 25 47 Levels GH+ 427 25 8 36 Sub-Saharan Africa/ Caribbean Staff Levels GF-GG 516 12 7 13 Levels GH+ 124 7 1 5 Part 2 Women Aggregate GF+ 728 14 16 21 Note: World Bank Group figures as of December 31, 2004. MIGA figures as of February 23, 2005. 281 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 282 and complex internal processes. But contract changes introduced in FY04 helped simplify terms and procedures, reduced waiting peri- ods to file claims, and introduced improvements in other areas that clients welcomed. 55. Marketing. During the review period, considerable attention was paid to marketing. But without a clear strategic discipline or defined action plans to achieve stated objectives, and with short- term rather than longer-term horizons, it was not as effective as it could have been. Marketing tended to be ad hoc and focused on one-off high-profile events, such as Mobile Offices (road shows in developing countries). More targeted, low-key sustained efforts to identify and retain guarantee clients were not given priority. Mar- keting in the US--the second largest investor country--was not given adequate attention and MIGA's representative for Europe, based in Paris, had no clear mandate or accountability for generat- ing deals. In general, the field offices were not of a critical mass to generate and then follow up on leads. There was a heavy reliance on a single broker, who was responsible initially for bringing in the Raiffeisen Zentralbank (RZB) deals, but the use of other brokers and partners for marketing was not fully exploited. And there was insufficient attention and resources directed towards leveraging relationships with law firms, accountants, and other business part- ners, rather than just banks. 56. There was a marked improvement in awareness-building through the development of a corporate website, marketing materials, and a proactive communications and media strategy. But during the early part of the review period, MIGA was not as transparent as it could have been and, as a result, was an easy target for external misunder- standing and criticism, particularly from, but not limited to, the NGO community. With a new management team on board, greater efforts were being made by the end of FY04 to systematically engage exter- nal stakeholders in discussions on policies and projects, and to dis- close information in a much more transparent and proactive way. An agreement was made to hold bi-annual meetings with civil society participants during the Bank Group's Annual and Spring Meetings. 57. Information technology and systems renewal. During the period under review, MIGA invested considerable resources in informa- tion technology and systems renewal, including the introduction of a guarantees database, Intranet, revamped corporate website, and client relationship management system. In addition, although MIGA took some steps to integrate systems with the rest of the 282 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 283 World Bank Group, these efforts were confined to the areas of desktop support, local area network (LAN) administration, and voice and telecommunications. The current system, which is little utilized by staff, is expected to be replaced in FY06 with a more streamlined and integrated solution. MIGA's client management system underwent a number of changes from FY00­04, but it was too complicated, sought too much information, and was over- whelming to staff. The database was designed to be not just a listing of clients, but a way of tracking all interactions with them. Despite a commitment to ensure adequate staff training, the database never really took off, and the information that was fed into the system became quickly outdated. As a result, the database was not very useful in supporting client management. MIGA had more success with its communications tools, including the new websites--which saw significant jumps in usage over the past few years and have become dynamic repositories for Agency information. Lessons Learned 58. Since its establishment in 1988, MIGA has built up a business that is relevant and useful to both investors and host countries. Despite MIGA's accomplishments, the Agency's strategy over the review period tended to be more conservative than necessary, with a short- term horizon. The last few years reveal a number of lessons that MIGA needs to take into account as it looks to the future. An orga- nizational structure that limited the Agency's response to changing market conditions, an outreach that has been costly but not proven fully effective, a lack of product innovation and flexibility in the face of evolving client needs, an approval culture where volume was prized over development impact, stagnating income from the guar- antees business, and a heavy dependence on a very few clients have affected its ability to be more effective. Furthermore, collaboration with the World Bank and the IFC did not deepen although there were a few joint projects undertaken. 59. Having been created at a time when FDI flows to developing coun- tries were inconsequential following the global recession of the early 1980s, MIGA has faced a challenging environment over the past decade. However, its many internal reorganizations and busi- ness process changes did not always help the Agency scale up its development impact as expected. 60. MIGA's business model of the past several years can be traced back to the Agency's origins in the late 1980's. MIGA's Three-Year 283 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 284 Business Plan (FY05­FY07) and FY05 Administrative Budget pro- posed changes in that model to enhance the Agency's development effectiveness. The new approach has MIGA taking a more proac- tive role in working with countries in cooperation with the other institutions of the World Bank Group. 61. The following lessons and experiences, based on this review, as well as client and stakeholder feedback through surveys, focus groups, roundtables and individual meetings, provide some guidance for future directions as MIGA implements its new business model. Development Effectiveness 62. OEU recommendations and NGO feedback point to the need for MIGA to continually focus on improving its development effec- tiveness through better ex-ante analysis and monitoring of projects, and ensuring compliance with safeguard policies. They also point to the need for greater harmonization of policies and procedures for Category B projects with those of the IFC. Key recommendations of OEU's extractive industries evaluations include the need for MIGA to move beyond mere compliance with safeguard policies toward actively promoting the potential benefits it brings to proj- ects, and better integrating economic, environmental, and social issues in projects. Learning from experience, MIGA has increas- ingly paid more attention to the economic, environmental, and social aspects of projects, and has begun to articulate the added value it brings in terms of incorporating and enforcing safeguards. MIGA management has made some progress in applying a number of new analytical requirements for project assessment, as well as on training underwriters in development impact analysis. 63. OEU also recommended that MIGA focus its technical assistance on areas where it can provide additionality and complementarity to the World Bank Group, other donors, and the private sector. Other lessons and recommendations included endorsing and implement- ing a clear and coherent strategy for selecting clients to ensure the highest development impact, as well as establishing a system for tracking the impact of its work. 64. Client and partner feedback and market developments suggest that MIGA needs to expand its coverage offerings in order to improve its ability to support FDI in priority areas. Specifically, MIGA should provide coverage for standalone debt. MIGA should also cover investments in existing firms and assets, and not simply `new' 284 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 285 assets. MIGA would then be helping retain investments in a coun- try and creating new assets by encouraging a market for the sale of existing assets through its PRI cover for local investors inter- ested in the purchase of such existing assets. MIGA should also cover domestic as well as foreign investors in joint ventures. This would help support a level playing field that does not discriminate against domestic investors and encourage joint partnerships between local and foreign investors, which would benefit both parties, and the host country. Last, MIGA should certify the underwriting process of political risk insurance providers in devel- oping countries, which would enable MIGA to further its goal of helping these agencies develop professionally, as well as reach a broader investor base. 65. Synergies with World Bank guarantees. In the past, while there have been important occasions where MIGA and the guarantees program in the World Bank have worked well together, an ongoing response from clients has been that there is confusion about the dif- ferences in the products and the hierarchy. It is often not too clear to the market which part of the Bank Group should be called upon for which projects. This has posed particular challenges for MIGA with respect to the World Bank's partial risk guarantee program. Over the review period, there has been closer cooperation between MIGA and the World Bank, but this has been ad hoc and depen- dent on individual commitments. The experiences with joint World Bank-MIGA projects, such as the South Africa Regional Gas proj- ect, the West Africa Gas Pipeline, and others, suggest that there are opportunities for the World Bank Group to strengthen synergies, so that the right guarantee instrument is deployed for each project and the risks are properly shared. Marketing and Client Management 66. It is clear from past experience that an insufficient focus on achiev- ing long-term goals hampered business outreach in the past. Generating new business leads, and capitalizing on existing ones, requires an ongoing, proactive marketing plan that is based on MIGA's strategic priorities. Key elements to the plan should include developing and maintaining close relationships with indi- vidual investors and directing marketing efforts to key investor regions. Just as important, cross-functional coordination internally should avoid duplicative efforts, make use of MIGA's institutional knowledge base, and create a consistent marketing message. Look- ing to the future, the Agency needs to more fully incorporate 285 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 286 communications into its operations, and more fully tap the inherent publicity that comes from a proactive media strategy. 67. The May 2004 integration of the Agency's primary product lines-- guarantees and technical assistance--represents an opportunity to engage with MIGA's clients more comprehensively. The Agency's clients face complex problems, and addressing them requires solu- tions that go beyond one product line. The merger of these business lines, with one manager, budget, and work program, was a critical first step towards enabling the Agency to offer integrated solutions. 68. Equally important, key client management, and the technical sys- tems that support this, are critical to the Agency's ability to engage with clients on a consistent and efficient basis. The modified system should be accessible on a country and sector basis, and should incor- porate the Agency's technical assistance activities. A new system is currently being developed. For it to work, MIGA needs to undergo a cultural shift, where information-sharing becomes an automatic part of the corporate culture and is rewarded, and where staff feel a sense of ownership of the system. MIGA is currently conducting a series of client surveys to identify perceptions and needs in the areas of political risk insurance and technical assistance. Partnerships with Other Insurers 69. MIGA has the capacity to syndicate large transactions through the Cooperative Underwriting Program, and facultative reinsurance and coinsurance programs. Because of the strong relations MIGA has built up with the private insurance market, the Agency has been able to support large projects where the amount of capacity required exceeds the ability of any one insurer to provide, and to deliver capacity into markets that have been closed to others because of country limits (e.g., Brazil) or risks. MIGA should apply the lessons learned from its work with the private sector to the pub- lic insurance market, particularly in the area of reinsurance. This process began in FY04 and is ongoing. MIGA should also consider building the capacity of public insurers to do proper due diligence and analysis of projects, including environmental and social compli- ance, and then reinsuring a pro rata share of their total exposure in order to help the public insurer conform to their exposure and country concentration limits. MIGA in essence should consider providing treaty reinsurance. This would help the Agency to reach out to local, particularly small- and medium-sized (SME), investors 286 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 287 more effectively and to build up the capacity of public insurers in developing countries. 70. Overall, MIGA's workshops on PRI have been well-received and have provided useful information that helps export credit agencies expand operations to encourage investment in developing coun- tries. They have also helped developing country export credit agen- cies get their investment guarantee operations off the ground. While MIGA should continue this training as a complementary component of its core services, one weakness that needs to be addressed is the lack of consistent follow-up to encourage the iden- tification of joint projects, continued collaboration, as well as appli- cation of best practices. Finance and Risk Management 71. MIGA needs to take additional steps to address legacy gaps and to reach the point where the finance and risk management framework can be considered as complete. First, there is a need to review the use of treaty reinsurance, facultative reinsurance, and credit lines, as well as the system of exposure limits to provide a systematic basis for managing the liability side of the balance sheet. In addition, MIGA must articulate a foreign exchange risk management policy, with a view towards offering products in the currencies that are most appropriate for clients. Second, a good case can be made to take on more risk on the asset side of the balance sheet (as insur- ance companies usually do), and therefore to review the strategic asset allocation embedded in the liquid asset management policy, with a view towards expanding the universe of asset classes eligible for investment beyond fixed income. Finally, MIGA must issue a Management Discussion and Analysis (MD&A) by the end of FY05, and will use this document as the basis for communicating with external counterparts (including rating agencies). Last but not least, MIGA will take the necessary steps to meet the Sarbanes- Oxley (SOX) 404 requirements, in close coordination with the World Bank and IFC.2 2 The Sarbanes-Oxley Act, passed by the US Congress in 2002, requires a broad range of detailed financial reporting and disclosures. 287 3807-CH11_Reports_p189-288.pdf 3/24/06 7:19 AM Page 288 Systems Renewal 72. MIGA's systems have not always been fully adequate in the past, and have not always been in line with all the normal practices and operating standards of the World Bank Group. This poses some real business risks for the Agency, which has required developing a strategic long-term plan for renewal. Considerable progress has already been made in this regard, in terms of identifying necessary actions and beginning to resolve critical areas. Areas identified as priorities include the replacement of the guarantees database; the development of a proper client relationship management system; and the creation of web portal interfaces for MIGA, its clients, and donors. Funds were specifically allocated in the FY05 budget on a one-off basis to address systems issues. Recommendations 73. Accordingly, the Board of Directors recommends that the Council of Governors adopt the attached draft Resolution. . . .1 (This report was approved and its recommendation was adopted by the Council of Governors on July 5, 2005) 1 See page 186. 288 3807-CH12_Members_p289-319.pdf 3/24/06 7:19 AM Page 289 ACCREDITED MEMBERS OF THE DELEGATIONS AT THE 2005 ANNUAL MEETINGS Afghanistan Amine Kherbi Soraya Mellali Governor Djamel Moktefi Anwar ul-Haq Ahady Angola Alternate Governor Wahidullah Shahrani Governor Carlos Alberto Lopes Adviser Paul Banerjee Alternate Governor Adib Farhadi Manuel Costa Abdul Qadeer Fitrat Said Tayeb Jawad Adviser Alain Kelly Manuel Antonio Mariam Nawabi Rosa de Jesus Sousa Baptista Daniel Paul O'Brien Teresa Bento da Silva Leonel F. de Carvalho Bernardo Albania Pedro de Jesus Chitas Martinho Bachi Codo Governor Felizardo Da Silva Ridvan Bode Nicolau De Sousa Luis dos Santos Alternate Governor Agostinho Fernandes Fatos Ibrahimi Ana Aleixo Fernandes Lucombo Joaquim Luveia Adviser Augusto Archer Mangueira Mimoza Vangjel Dhembi Josefina Pitra Diakite Kreshnik Grezda Antonio Manuel Ramos Da Cruz Gramoz Kolasi Kristaq S. Luniku Antigua and Barbuda# Genci Mamani Edmond Thanati Alternate Governor Helena Vako Trevor Blake Whitfield M. Harris, Jr.* Algeria Adviser Governor Starret D. Greene Mourad Medelci Deborah-Mae Lovell Alternate Governor Argentina Abdelhak Bedjaoui Governor Adviser Martin Redrado Hadia Amrane Hadji Babaammi Alternate Governor Sid Ahmed Dib Jorge Madcur Ammar Hiouani Gerardo M. Hita* Zakia Ighil * Temporary <> Not a member of IFC # Not a member of IDA 289 3807-CH12_Members_p289-319.pdf 3/24/06 7:19 AM Page 290 Adviser Alternate Governor Jose Octavio Bordon Kurt Bayer Alieto Guadagni Federico Molina Adviser Adrian Nador Norbert Feldhofer Oscar Tangelson Hans-Georg Kramer Manfred Lepuschitz Armenia Walter Mayr Wolfgang Nitsche Governor Thomas Nowotny Vahram Nercissiantz Fiona Pacifico Griffini Alternate Governor Azerbaijan Karen Chshmarityan Alternate Governor Adviser Haqverdiyev Oktay Arman Israelian Tigran Khachatryan Adviser Arman Kirakosyan Faig Adil Oglu Mammadov George Kocharian Fikret M. Pashayev Davit Lokyan H.E. Tatul Margaryan Bahamas, the# Aghvan Vardanyan Governor Australia James H. Smith Governor Alternate Governor Peter Costello Ruth R. Millar Alternate Governor Adviser Kirsty McNichol Michael Halkitis Simon D. Wilson Adviser David Ian Alexander Bahrain# Nigel Bailey Nicolas Keith Brown Governor Geoffrey Francis Ahmed Bin Mohammed Al-Khalifa Philip Gaetjens David Gazard Alternate Governor Richard Murray Zakaria Ahmed Hejres Terrence K. O'Brien Kellie Olsen Adviser Suzanne Pitson Mahmood Hashim Al-Kooheji Robert Stewart Naser Mohamed Yusuf Albalooshi Michelle Stone Yousuf A. Humood Charles Tapp Abdul-Rahman Ali Saif Austria Bangladesh Governor Governor Karl-Heinz Grasser M. Saifur Rahman * Temporary <> Not a member of IFC # Not a member of IDA 290 3807-CH12_Members_p289-319.pdf 3/24/06 7:19 AM Page 291 Alternate Governor Franciscus Godts Md. Ismail Zabihullah Bruno G. Guiot Siddiqur R. Choudhury* Olivier Henin Shamsher M. Chowdhury* Caroline Janssens Zakir Ahmed Khan* Frans Van Daele Michel Van Der Stichele Adviser Peter Van Der Stoelen Fakrul Ahsan Jean Van Houtte Kazi Nurun Nabi Belize Barbados Governor Governor Said W. Musa Owen S. Arthur Alternate Governor Alternate Governor Carla Barnett Grantley W. Smith Adviser Adviser Michael Bejos Donna Forde Nestor Mendez Michael Ian King Lisa Shoman Patrick McCaskie Joseph D. Waight Belarus# Benin Governor Governor Andrei V. Kobyakov Zul-Kifl Salami Alternate Governor Alternate Governor Gennady Medvedev* Massiyatou Latoundji Lauriano Adviser Adviser Georgy Egorov Jules Ahodekon Mikhail Khvostov Mohamed Assani Vladimir Valerievich Mironovich Fatahi A. Chitou Oleg Morozov Paul Derreumaux Mikhail V. Nikitsenka N. Mathias Houndonougbo Uladzimir Novik Justine Odjoube Pavel Shidlovsky Cyril Oguin Belgium Bhutan Alternate Governor Governor Jean-Pierre Arnoldi* Lyonpo Wangdi Norbu Koenraad Van Loo* Alternate Governor Adviser Lham Nidup Gino Alzetta Paul Cartier Bolivia Geert Criel Armand De Decker Governor Erwin De Wandel Waldo M. Gutierrez Iriarte Philippe Gerard * Temporary <> Not a member of IFC # Not a member of IDA 291 3807-CH12_Members_p289-319.pdf 3/24/06 7:19 AM Page 292 Alternate Governor Eduardo Loyo* Rodrigo Castro Otto Alexandre Schwartsman* Adviser Adviser Jaime Aparicio Jose Ricardo da Costa Aguiar Alves Luis A. Arnal Pompeu Andreuccineto Fresia Guzman Marcio Ayrosa Moreira Mathew Martin Rodrigo Augusto Barbosa Juan Carlos Vilanova Sergio Bath Ronaldo Malagoni de A. Cavalcante Bosnia and Herzegovina Daso Maranhao Coimbra Evandro S. Didonet Governor Paulo Faveret Adnan Terzic Viviane Pretti Feitosa Anita Fiori Alternate Governor Nestor Forster, Jr. Dragan Doko Claudio Vasconcelos Frota Ives Fulber Adviser Jose Antonio Gragnani Adnan Hadrovic Luiz Guimaraes Mirza Hajric Helio Mori Zlatko Hurtic Ricardo Franco Moura Bisera Turkovic Marcelo Amorim Netto Bojan Zec-Filipovic Augusto Brauna Pinheiro Darko Zelenika Rossano Maranhao Pinto Cicero Figueiredo Pontes Botswana Sergio Savino Portugal Alexandre Pundek Rocha Governor Jose Maria Rabelo Baledzi Gaolathe Bruno Walter Coelho Saraiva Anderson Caputo Silva Alternate Governor Roberto Smith Serwalo S.G. Tumelo Rogerio Studart Arlindo Villaschi Adviser Lapologang Caesar Lekoa Brunei Darussalam<># Harold Luke Ita Mary Mannathoko Alternate Governor Ontefetse Kenneth Matambo Abdul Rahman Ibrahim Peggy Onkutlwile Serame Jefri Salleh* Brazil Adviser Arbi Hamid Governor Hisham Hanipah Henrique de Campos Meirelles Zaki Hassanol Alternate Governor Bulgaria# Afonso S. Bevilaqua Roberto Abdenur* Governor Otaviano Canuto* Plamen Oresharski Luiz Fernando Furlan* Joaquim V. Levy* Alternate Governor Dimitar Kostov * Temporary <> Not a member of IFC # Not a member of IDA 292 3807-CH12_Members_p289-319.pdf 3/24/06 7:19 AM Page 293 Adviser Adviser Zornitza Arsenieva Mahamat Sarwal Adoum Gergana Beremska Dieudonne Evou Mekou Ivan Chernev Mevaa Lucien Rumyana Kyuchukova Andre Mfoula Edjomo Kornelia Ninova Svetlana Dimitrova Panova Canada Elena Poptodorova Tihomir Stoytchev Governor Ralph Goodale Burkina Faso Alternate Governor Governor Robert Greenhill Francois M. Zoundi Paul Boothe* Tom Bui* Alternate Governor Peter Cameron* Lene Sebgo Andrew Clark* Seydou Bouda* John Davies* Celestin Kouka Zalle* Colette Kaminsky* Tertius Zongo* Marcel Masse* Lee-Ann McKechnie* Adviser Stephen Millar* Daniel Bambara Bruce Montador* Christian Ranger* Burundi Greg Reade* Jonathan Rothschild* Governor Sarah Taylor* Dieudonne Ngowembona Patrick Tobin* Vinita Watson* Alternate Governor Leon Nimbona Adviser John Embury Adviser Stephen Douglas Free Louis Barampanze David Gamble Mathias Sinamenye Nathalie Gauthier Sharmila Khare Cambodia Steven McLaren Ronald Thomas McMorran Governor Francois Page Vissoth Vongsey Steve Pugliese Pratima Rao Alternate Governor Jesse Wood Sothy Chan Cape Verde Adviser Vichith Chou Governor Touch Eng Joao Pinto Serra Cameroon Alternate Governor Victor A.G. Fidalgo Alternate Governor Daniel Njankouo Lamere * Temporary <> Not a member of IFC # Not a member of IDA 293 3807-CH12_Members_p289-319.pdf 3/24/06 7:19 AM Page 294 Adviser Adviser Antonio Carvalho Zhijun Cheng Fernando Jorge D.L. Santos da Fei Zhaohui Moeda Feng Gong Carlos Fernandes Semedo Huiping Huang Qian Li Central African Republic Xudong Li Weihua Liu Governor Liu Zhongxin Sylvain Maliko Shubin Mu Xiang Peng Alternate Governor Hua Tian Dieudonne Padoundji-Yadjoua Guanzhu Wang Hui Wang Adviser Wang Wei Honore Mbaye Wang Zhongjing Yvon Songuet Wu Jinkang Yang Fang Chad Yang Shaolin Yang Yingming Governor Jiandi Ye Mahamat Ali Hassan Lei Zhang Zhao Xiaoyu Alternate Governor Yong Zhou Sobdibet Hinsalbet Colombia Adviser Baradine Oumar Governor Alberto Carrasquilla Chile Alternate Governor Governor Santiago Montenegro Trujillo Nicolas Eyzaguirre Luis Guillermo Echeverry* Alejandro Gamboa* Alternate Governor Luis Alberto Moreno Mejia* Luis Eduardo Escobar Juan Carlos Pinzon* Luis Felipe Jimenez* Felipe Sardi Cruz* Bernardita Piedrabuena* Adviser Adviser Ivan Duque Jorge Kaufmann Christian Knudsen Clara Parra China Esteban Piedrahita Claudia Patricia Rios Governor Ingrid Rodriguez Jin Renqing Comoros Alternate Governor Li Yong Governor Kuilin Ju* Imani Younoussa Yang Jinlin* Zhu Guangyao* Alternate Governor Zou Jiayi* Saadi Abdallah Moindjie * Temporary <> Not a member of IFC # Not a member of IDA 294 3807-CH12_Members_p289-319.pdf 3/24/06 7:19 AM Page 295 Adviser Adviser Said Abdillahi Alexandre Assemien Mohamed Moindze Yao Claude Beugre Hamidi Mohamed Salima Melissa Coquillat Martin Gbedey Congo, Democratic Republic of the De Isaac Koffi Paul Koffi Governor Georgette Mbrah Andre-Philippe Futa Victor J. Nembelessini-Silue Aubert Zohore Alternate Governor Tshishimbi Muamba Croatia Emile Bongeli Yeikelo Ya Ato* Governor Adviser Ivan Suker Lingosa Momi Faustin Mawakani Samba Alternate Governor wa Bilenga Tshishimbi Martina Dalic Congo, Republic of Adviser Ruzica Adamovic Alternate Governor Andrijana Eljuga Pacifique Issoibeka Ana Marija Holzer Werft Ana Hrastovic Adviser Anton Kovacev Antoine Banvidi Relja Martic Georges Guekoumou Ivan Pitesa Josias Itoua-Yocka Hrvoje Radovanic Jean Mbossa Clement Mierassa Cyprus Jean Paul Ngouele Jean Baptiste Ondaye Governor Gilbert Ondongo Michael Sarris Costa Rica Alternate Governor Leslie G. Manison* Governor Federico Carrillo Zurcher Adviser Euripides Evriviades Alternate Governor Androula Panayi David Fuentes Basil Polemitis Adviser Czech Republic Alberto Franco Mejia Carmen Maria Madriz Contreras Alternate Governor Miroslav Singer Cote d'Ivoire Eduarda Heksova* Alternate Governor Adviser Boniface Britto Tomas Kvapil Oussou Kouassy* Lenka Loudova Petr Pavelek * Temporary <> Not a member of IFC # Not a member of IDA 295 3807-CH12_Members_p289-319.pdf 3/24/06 7:19 AM Page 296 Petr Prochazka Ana Beatriz Rodriguez Petr Sedlacek Eduardo Rodriguez Tomas Sedlacek Ramon S. Tarrago Marek Zeman Ecuador Denmark Governor Governor Fausto Ortiz Ulla Toernaes Alternate Governor Alternate Governor Mauricio Pareja Canelos Ole Moesby* Gonzalo Ponce* Marco Varea* Adviser Louise Brincker Adviser Pernille Falck Andres Teran Parral Ole Torpegaard Hansen Jette Lund Egypt, Arab Republic of Peter Olesen Governor Djibouti Mahmoud Mohieldin Governor Adviser Ali Farah Assoweh Mohamed Abdel Gawad Allam Alaa A.E. Atta Alternate Governor Maher Elsherif Simon Mibrathu Nabil Fahmy Sherif Ahmed Kamel Adviser Seif Kandeel Sikieh Kayad Mohamed Hisham Seif Eldin Roble Olhaye Ayman Zaineldine Mohamed Ihab Zidan Dominica El Salvador Alternate Governor Rosamund Edwards Governor Jennifer Nero* Eduardo Zablah-Touche Dominican Republic Alternate Governor Roberto Siman* Governor Juan Temistocles Montas Adviser Roger Alfaro Alternate Governor Nicola Angelucci Daniel Toribio Jose Hernandez Adviser Equatorial Guinea Jaime Alvarez Rafael Camilo Governor Julio C. Estrella Jaime Ela Ndong Hector Guiliani Luis Reyes * Temporary <> Not a member of IFC # Not a member of IDA 296 3807-CH12_Members_p289-319.pdf 3/24/06 7:19 AM Page 297 Alternate Governor Finland Jose Ela Oyana Governor Eritrea Eero Heinaluoma Governor Alternate Governor Berhane Abrehe Kidane Martti Hetemaki* Peter Nyberg* Alternate Governor Marjatta Rasi* Martha Woldegiorghis Pertti Rauhio* Estonia# Adviser Ulla-Maija Finskas Governor Inkeri Hirvensalo Aivar Soerd Satu Huber Pekka Hukka Alternate Governor Pauli Kariniemi Renaldo Mandmets Ari-Pekka Latti Asko Luukkainen Adviser Kristina Sarjo Riina Laigo Laura Torvinen Madis Muller Anneli Vuorinen Merle Sagar Priit Turk France Ethiopia Governor Thierry Breton Adviser Fiseha Aberra Alternate Governor Fesseha Asghedom Tessema Xavier Musca Kassahun Ayele Pierre Duquesne* Gizachew Bizuayehu Beyene Ambroise Sixte Fayolle* Newyaychristos Gebreab Brigitte Girardin* Seife Desta Haile Mulu Ketsela Adviser Felleke Mammo Marie-Jeanne Amable Fesseha A. Tessema Olivier Arnau Basdevant Abii Tsige Olivier Georges Ma Cuny Delphine D'Amarzit Fiji Nathalie Delapalme Alain Demarolle Governor Bertrand Marie J. Dumont Aisake J. Taito Laurent Duriez Ramon Fernandez Alternate Governor Laurent Fiscus Millie Low Benoit Gausseron Patrick Gitton Adviser Marie Guevenoux Jesoni Vitusagavulu Jean-Paul Guihaume Peceli V. Vocea Pierre Jacquet * Temporary <> Not a member of IFC # Not a member of IDA 297 3807-CH12_Members_p289-319.pdf 3/24/06 7:19 AM Page 298 Bruno Joubert Adviser Alexis Kohler Beka Dvali Guillaume Lacroix Eter Kvintradze Sylvain Lambert Levan Mikeladze Jacques Lapouge Mamuka Murjikneli Jean-David Levitte Joseph Nibladze Stephanie Leydier Thierry Mathou Germany Jacques Mistral Emmanuel Moulin Alternate Governor Jerome Pasquier Caio K. Koch-Weser Regis Pelissier Joerg Asmussen* Brice Quesnel Eckhard Deutscher* Anthony Requin Gudrun Grosse Wiesmann* Marc Yvon Robert Michael Hofmann* Etienne Rolland-Piegue Erich E. Stather* Bernard Salzmann Rolf Wenzel* Elisabeth Sandor Jean-Michel Severino Adviser Serge Tomasi Susanne Dorasil Jerome Walter Martin Dorschel Hubert Gebele Gabon Wolfgang Gerstmann Qays Hamad Governor Maritta R.V.B. Koch-Weser Casimir Oye-Mba Hartmut Krebs Michael Plessow Alternate Governor Gerhard Ressel Christian Bongo Jurgen Schmid Rosel Schmidt-Rommeis Adviser Walter Stechel Pierre Etoughe Uwe Wolff Eliane Dovi Kouassigan-Bailly Juergen Zattler Huguette Mboumba Moussodou Jean Philippe Ndong Biyogho Ghana Ulriche Stevie Remanda nzang Governor Gambia, The Kwadwo Baah-Wiredu Governor Alternate Governor Alieu M. Ngum Anthony Akoto Osei Alternate Governor Adviser Yusupha Kah Johnson Adasi Isaac Aggrey Georgia Ernest Ako-Adjei Nelly Apo Governor Michael Ayesu Aleksi Aleksishvili Edward Boakye-Agyeman * Temporary <> Not a member of IFC # Not a member of IDA 298 3807-CH12_Members_p289-319.pdf 3/24/06 7:19 AM Page 299 Angela Brown Farhat Alternate Governor Kofi Frimpong Julio Roberto Suarez* Drusilla Frimpong Addo Rasheed Inusah Guinea Paul S.M. Koranteng Jennifer Lartey Alternate Governor Fritz Poku Eugene Camara Yvonne Odoley Quansah Sekou Traore* Greece Guinea-Bissau Governor Governor George Alogoskoufis Issufo Sanha Alternate Governor Alternate Governor Plutarchos Sakellaris Jeremias Antonio Dacruz Adviser Adviser Eleftherios Anghelopoulos Dalmacio Francisco Benicio Ioulia Armagou Vasco Da Silva Heleni Dendrinou-Louri Paulo F. Gomes Charalambos Dimitriou Walter Jones Petros G. Doukas Alfredo Paulo Mendes Zoi Evangelopoulou Charles C. Okeahalam Iakovos Georganas Megan Sibole Dimitrios Giannos Niguel Twose Tryphon Kollintzas Annita Mavromichalis Guyana Efstathios Paizis-Paradellis Spyros P. Papanicolaou Governor Loukas Papazoglou Bharrat Jagdeo Georgios Politakis Paraskevi Protopapas Alternate Governor George Savvaides Saisnarine Kowlessar Vasileios Tokakis Adviser Grenada Coby Opuni Frimpong Gobind Nauth Ganga Governor Lisaveta V. Ramotar Anthony Boatswain Haiti Alternate Governor Timothy Antoine Governor Henri Bazin Adviser Denis G. Antoine Alternate Governor Georges Henry Guatemala Adviser Governor Raymond Alcide Joseph Maria Antonieta de Bonilla Alfred Fils Metellus Remy Montas * Temporary <> Not a member of IFC # Not a member of IDA 299 3807-CH12_Members_p289-319.pdf 3/24/06 7:19 AM Page 300 Ericq Pierre Saurabh Garg Gabriel Verret Raminder Jassal Manoj Joshi Honduras K. Kanagasabapathy Anoop Mishra Governor A.K. Misra William Chong Wong Madhusudan Prasad Krishnan Saranyan Alternate Governor Ranendra Sen Orlando Garner* V.S. Seshadri Raj Pratap Singh Adviser Vumlunmang Vualnam Luis Cosenza Elizabeth Rivera Indonesia Hungary Governor Jusuf Anwar Alternate Governor Laszlo Orlos* Alternate Governor Zsuzsanna Varga* Hartadi A. Sarwono Adviser Adviser Peter Horvath Anggito Abimanyu Adam Kirchknopf Indra Gunawan Andras Simonyi Edward Robert Gustely Andri Hadi Iceland Ibnu Hadi Linggawati Hakim Alternate Governor Herwidayatmo Baldur Gudlaugsson* Edward Hutabarat Hermann Orn Ingolfsson* Tuti Wahyuningsih Irman Anny Ratnawati Adviser Eddy Kusnadi Sariaatmadja Anna Hjartardottir Rionald Silaban Thorsteinn Ingolfsson Maurin Sitorus Olafur Sigurdsson Chairul Tanjung Thorsteinn Thorgeirsson Anna Katrin Vilhjalmsdottir Iran, Islamic Republic of India Governor Davoud Danesh Ja'fari Governor P. Chidambaram Alternate Governor Mohammad Khazaee Torshizi Alternate Governor A.K. Jha Adviser Ashok Lahiri* Mohammad Reza Akbar Beygi Chander Mohan Vasudev* Hassan Alaei Heidar Mostakhdemin Hosseini Adviser Masoud Mozayani Prasad Ananthakrishnan Ahmadreza Pakbaz Ajay Bisaria Koorosh Taherfar Sumitra Chowdhury Gholamreza Tajgardon * Temporary <> Not a member of IFC # Not a member of IDA 300 3807-CH12_Members_p289-319.pdf 3/24/06 7:19 AM Page 301 Iraq Italy Governor Governor Ali Abdul Ameer Allawi Antonio Fazio Alternate Governor Alternate Governor Faik Abdul Rasool Ignazio Angeloni Francesca Manno* Adviser Shuruk Abdul-Razzak Adviser Ahmed Ibrahim Ali Paola Ansuini Derrill V. Allatt Carlo Baldocci Christian Digemose Fabrizio Befani Kamal Field Biagio Bossone Mudhir Mohammed Salih Kasim Maria Cannata Jeremiah Pam Valerio Crispolti Hussein Uzri Giannandrea Falchi Francesco Forte Ireland Fabio Franceschini Vittorio Grilli Governor Isabella Imperato Brian Cowen Giorgio Leccesi Alessandro Legrottaglie Alternate Governor Domenico Lombardi Robert Bradshaw* Empedocle Maffia Noel O'Gorman* Giandomenico Magliano Pier Luigi Mancuso Adviser Barbara Marchitto John Conlon Massimiliano Mazzanti Noel Fahey Marco Milanese Carina Harte Carlo Monticelli Adrian J. Kearns Domenico Nardelli Earnan O'Cleirigh Cecilia Piccioni Stephen OSullivan Roberto Rinaldi Brendan Ryan Fabio Rossi Paula Slattery Arrigo Sadun Michael J. Somers Marco Saladini Gerald Steadman Francesco Spadafora Thomas Whelan Stefano Stefanini Armando Varricchio Israel Sergio Vento Ignazio Visco Governor Stanley Fischer Jamaica# Alternate Governor Governor Eli Yoseph* Omar Lloyd Davies Adviser Alternate Governor Ran Alon Wesley George Hughes Colin Bullock* * Temporary <> Not a member of IFC # Not a member of IDA 301 3807-CH12_Members_p289-319.pdf 3/24/06 7:19 AM Page 302 Adviser Toshiyuki Miyoshi Murna Morgan Yasushi Noguchi Gordon Shirley Tadashi Nunami Ken Okaniwa Japan Toshio Oya Michio Saito Governor Takahiro Sekido Sadakazu Tanigaki Keiji Shibata Tetsuro Shigeto Alternate Governor Yasushi Taira Toshihiko Fukui Tsuyoshi Takahashi Eiji Hirano* Yasuo Takamura Kiyoto Ido* Shuichi Taketsugu Shigeo Kashiwagi* Hiroki Terada Kiyoshi Kodera* Kiichi Tokuoka Sumio Kusaka* Yasuhiro Tokutaka Toshiro Muto* Kenichi Tomiyoshi Takehiko Nakao* Shoji Tsueoka Yoshio Okubo* Toshio Tsuiki Shiro Sadoshima* Seiichi Tsurumi Naoyuki Shinohara* Shinichi Uchida Rintaro Tamaki* Yasuto Watanabe Hiroshi Watanabe* Naoko Yamaguchi Nobuo Yamasaki Adviser Ai Yamazaki Takeshi Akahori Osamu Yoshida Masatsugu Asakawa Shoichiro Yuyama Toshinori Doi Takashi Ezaki Jordan Takashi Hanajiri Koichi Hasegawa Governor Yoshihito Hidaka Suhair Al-Ali Hiroko Higuchi Tsuguhiko Hoshino Alternate Governor Moriaki Inamoto Jamal Al-Asal Jun Iwasaki Tetsuo Kabe Adviser Naoaki Kamoshida Samer Dabbas Yusuke Kanazawa Jafar Abed Hassan Ema Kato Maher Matalka Hironori Kawauchi Satoshi Kawazoe Kazakhstan Daisaku Kihara Rie Kishino Governor Michio Kitahara Kayrat Nematovich Kelimbetov Kazuhiko Koguchi Fusako Konishi Alternate Governor Shiro Konuma Gani N. Uzbekov Takeshi Kurihara Shigeki Kushida Adviser Masanori Matsuo Arman G. Dunayev Takashi Miyahara Karim Massimov Yoshiaki Miyashita * Temporary <> Not a member of IFC # Not a member of IDA 302 3807-CH12_Members_p289-319.pdf 3/24/06 7:19 AM Page 303 Kenya Gwi Beom Kim Hee Jae Kim Governor Ik Joo Kim David Mwiraria Kyo-Shik Kim Kyung Hee Kim Alternate Governor Sung Min Kim Joseph Kanja Kinyua Yoon-Kyung Kim Sang-Won Kwon Adviser Hun Tae Lee Dorothy Angote Joon-Kyu Park Maurice John Pette Kanga Hoo-Kyu Rhu Beatrice Karago Sangmin Ryu Donald K. Kibera Jin Chang Shin Jackson Kinyanjui Chang Hun Song Esther Jepkembol Koimett Dae-Hee Yoon Geoffrey Ngungi Mwau Hye-Jung Yoon Leonard Ngaithe Jong-Won Yoon Beatrice Ngoe Tae Sik Yoon Kamau Thugge Tae Yong Yoon James Wakiaga Kuwait Kiribati Governor Governor Bader Meshari Al-Humaidhi Taneti Maamau Alternate Governor Alternate Governor Abdulwahab Ahmed Al-Bader Eretia Mwemwenikarawa Adviser Korea, Republic of Talal Al Fassam Ahmad Alghuwainem Governor Eid Al-Rasheedi Sung Jin Kim Yousef B.Y.H. Al-Roumi Salem Abdullah Al Jaber Al Sabah Alternate Governor Hesham Ibrahim Al-Waqayan Tae-Kyun Kwon Fahad Khaled Al Zamami Yeung Kyun Rhee* Ahmad Mohammed Abdulrehman Bastaki Adviser Abdulrahman Hashim Byungchan Ahn Eun Ku Bae Kyrgyz Republic Min Chang Choong-Haeng Cho Alternate Governor Dong Chul Cho Bakytbek Tynaliev* In-Kang Cho Joong-Kyung Choi Lao People's Democratic Republic Kyu-Yun Choi Kyung Wook Hur Governor Yong-Sik Joo Chansy Phosikham Jee Young Jung Dae Bong Kang Alternate Governor Kyoung Hwa Kang Phanthong Phommahasay* Dong Hoon Kim Viengthong Siphandone* * Temporary <> Not a member of IFC # Not a member of IDA 303 3807-CH12_Members_p289-319.pdf 3/24/06 7:19 AM Page 304 Adviser Liberia Angkhamsada Mouangkham Rithikone Phoummasack Governor Bounthanh Vongsoury Christian D. Herbert Latvia Alternate Governor Lusinee F. Kamara, Sr. Governor Oskars Spurdzins Adviser Ethel Davis Alternate Governor Alexander Deline Andris Liepins* Francis A. Dennis Musah Dixon Adviser Richard A. Dorley Gints Freimanis Charles Greene Edmunds Krastins Elfrieda Stewart Tamba Irena Krumane David Zarlee Inna Steinbuka Inta Vasaraudze Libya Lebanon Governor Taher E. Jehaimi Governor Jihad Azour Alternate Governor Ali Ramadan Shnebesh Alternate Governor Alain A. Bifani Adviser Bader Abuaziza Adviser Husen Almesrati Farid Abboud Ali Suleiman Aujali Nadine Aboukhaled Ahmed Jehani Faysal Abou Zaki Yasser Akkaoui Lithuania, Republic of# Mohamad B. Chatah Marwan Francis Governor Mazen Hanna Zigmantas Balcytis Adnan Kassar Zeina Kassem Alternate Governor Raffi Kendirjian Ramune Vilija Zabuliene Marwan M. Nsouli Rola Saleh Rizk Adviser Jurgita Kazlauskaite Lesotho Luxembourg Governor Likonelo Hlasoa Governor Luc Frieden Alternate Governor Motena Tsolo Alternate Governor Jean Guill Adviser Retselisitsoe Mabote Adviser Anthony Mothae Maruping Cedric Nicolas Ig Crelo Molelekeng E. Rapolaki Guenther Grosche * Temporary <> Not a member of IFC # Not a member of IDA 304 3807-CH12_Members_p289-319.pdf 3/24/06 7:19 AM Page 305 Georges Heinrich John Ngambi Arsene Joseph Jacoby Bernard Sande Serge Kolb Ted Thokozani Sitimawina Miguel Marques-Gomes Jean-Louis Siweck Malaysia Francois Zenner Governor Macedonia, former Yugoslav Republic of Zeti Akhtar Aziz Governor Alternate Governor Nikola Popovski Ibrahim Mahaludin Puteh* Alternate Governor Adviser Goran Anceski* Nursiah Arshad Anis Rizana Mohd. Zainudin Adviser Maja Bogdanovska Maldives Zoran Dabic Nikola Dimitrov Governor Paskal Stojceski Qasim Ibrahim Madagascar Alternate Governor Abdullah Jihad Governor Haja Nirina Razafinjatovo Adviser Mohamed Naseem Ibrahim Alternate Governor Riluwan Shareef Henri Bernard Razakariasa Mali Adviser Monique Andreas Governor Esovelomandroso Abou-Bakar Traore Narisoa Rajaonarivony Modeste Randriambololona Alternate Governor Maxence Louis Randriantoetra Marimantia Diarra Rasolozakanyly Ravoninjatovo Tahinarinoro Razafindramary Adviser Inhaye Ag Mohamed Malawi Illalkamar Ag Oumar Mossadeck Bally Governor Mamadou Camara Goodall E. Gondwe Mamadou Diarrah Oumar H. Dicko Alternate Governor Abdoulaye Diop David Faiti Choguel Kokalla Maiga Sory Ibrahima Soumare Adviser Moustapha Traore Charles S.R. Chuka Victor Geddes Malta# Jane Kambalame Richard Msowoya Governor MacDonald Mwale Tonio Fenech * Temporary <> Not a member of IFC # Not a member of IDA 305 3807-CH12_Members_p289-319.pdf 3/24/06 7:19 AM Page 306 Alternate Governor Alternate Governor Paul Zahra Alonso Pascual Garcia Tames Francisco J.J. Castro y Ortiz* Adviser Jorge Familiar* Lino Briguglio Luis Alberto Pazos* Ricardo Sanchez Baker* Marshall Islands Adviser Governor Eugenio Alarcon-Yturbide Jefferson Barton Veronica Baranda Claudia Bazua Alternate Governor Jose Martin Garcia Bruce Bilimon Timoteo E. Harris Howard Mario Laborin Mauritania Porfirio Sanchez Miguel Siliceo Governor Jose Maria Zubiria-Maqueo Mohamed Ould El Abed Micronesia, Federated States of Alternate Governor Isselmou Ould Sidi El Moctar Alternate Governor Rose Nakanaga Adviser Bass Abal Abass Adviser Abba Ould Ahmed Tolba Tanya L. Harris Fatoumata Sy Ba Abdallah Ould Cheikh-Sidia Moldova SidAhmed Ould Elbou Tijani Ould Kerim Governor Mohamed El Heyba Ould Zinaida Grecianii Lemrabott Diombar Thiam Alternate Governor Valeriu Lazar Mauritius Adviser Governor Alexandru Cebotari Rama Krishna Sithanen Mihai Manoli Alternate Governor Mongolia Krishnanand Guptar Governor Adviser Ochirbat Chuluunbat Premduth Aubeeluck Peter Craig Alternate Governor Shafeenaaz Nurmahomed Tserendagva Odongua* Shiu Ching Young Kim Fat Adviser Mexico Batsukh Enkhkhuyag Togtokhbaatar Ganzorig Governor Bold Ravdan Francisco Gil Diaz Ganbold Sodnom * Temporary <> Not a member of IFC # Not a member of IDA 306 3807-CH12_Members_p289-319.pdf 3/24/06 7:19 AM Page 307 Morocco Nepal Governor Governor Fathallah Oualalou Madhukar S.J.B. Rana Alternate Governor Alternate Governor Zouhair Chorfi* Bhanu Prasad Acharya Adviser Adviser Sabah Benchekroun Bruce F. Henderson Abdeslam Chebli Rudra Kumar Nepal Mohamed El Merghadi Prithivi Bahadur Pande Adil Embarch Shambhu Prasad Paudyal Mustapha Faris Kailash Raj Pokharel Ali Lamrani Kedar Bhakta Shrestha Aziz Mekouar Laxmi Bahadur Shrestha Benyoussef Saboni Netherlands Mozambique Governor Governor Gerrit Zalm Adriano Afonso Maleiane Alternate Governor Alternate Governor Agnes van Ardenne Antonio Fernando Laice* Adviser Adviser Idsert Boersma Jose A. Sulemane Hans Docter Suzanne Koopmans Myanmar Augusta Korthals-Altes Ad Melkert Governor Pieter Moorrees Hla Tun Kees-Jaap Ouwerkerk Robert-Jan Sieben Alternate Governor Mark Timmermans Myo Nwe R.J. Treffers Jack Twiss Quarles van Ufford Adviser Yvette Van Eechoud Aung Kyi Boudewijn Van Eenennaam Khin Thida Maw Rene E. Van Hell Ye Tun Myat Rein Veldhuizen Yin Yin Myint Jacob Waslander Min Han Soe Edu Willemse Aung Kyaw Thuya New Zealand Namibia# Governor Governor Angela Hauk-Willis Helmut Angula Alternate Governor Alternate Governor Gareth Chaplin Carl-Hermann G. Schlettwein * Temporary <> Not a member of IFC # Not a member of IDA 307 3807-CH12_Members_p289-319.pdf 3/24/06 7:19 AM Page 308 Adviser Norway Matthew Dalzell Joanna Gordon Governor Hilde Frafjord Johnson Nicaragua Alternate Governor Governor Atle Leikvoll* Mario Arana Sevilla Adviser Alternate Governor Svein Aass Mario Alonso Icabalceta Ola Brevik Henrik Harboe Adviser Ingunn Klepsvik Raul Barrios Jon Lomoy Jorge Wong-Valle Merethe Nergaard Gjermund Saether Niger Haakon Smedsvig Alternate Governor Oman Ramatou Diamballa Moumouni Boubacar Saidou* Governor Mohammed bin Nasser Al-Khasibi Adviser Saadou Bakoye Alternate Governor Yolande Eyoum Ali Mohammed Redah Jafar Saidou Gambo Alassane Kone Adviser Yacoubou Maman Sani Abdul Hakeem Al-Ansari Abdoulaye Soumana Najeeb Al-Busaidi Warith bin Mubarak Al-Kharusi Nigeria Pakistan Governor Ngozi N. Okonjo-Iweala Governor Salman Shah Alternate Governor Olusegun O.O. Ogunkua Alternate Governor Olabode M. Agusto* Khalid Saeed Irene Chigbue* Mansur Muhtar* Adviser Aamir Nazir Gondal Adviser Jehangir Karamat Aliyu Ahmed Mushtaq Malik Joachins Peters Anetoh Aftab Qureshi Ogunmuyiwa Balogun Mohammad Sadiq Edith Jibunoh Talat Waseem Babatunde F. Lawal Haruna Mohammed Palau Abdulkareem Olabanji Olaoye Ojemane O. Orevba Governor Mohamed Lawal Sani Casmir E. Remengesau A.B. Shehu Donald Uduehi * Temporary <> Not a member of IFC # Not a member of IDA 308 3807-CH12_Members_p289-319.pdf 3/24/06 7:19 AM Page 309 Alternate Governor Peru Lawrence Alan Goddard Governor Adviser Fernando Zavala Lombardi Hersey Kyota Rhinehart Silas Alternate Governor Wayne Wong Waldo Mendoza Bellido Ivan Rivera* Panama Adviser Governor Eduardo Ferrero Ricaurte Vasquez M. Jaime Quijandria Alternate Governor Philippines Aracelly Mendez Governor Papua New Guinea Margarito B. Teves Governor Alternate Governor Bart Philemon Amando M. Tetangco, Jr. Alternate Governor Adviser Simon Tosali Editha Sarmiento Alido Cyd Amador Adviser Edgardo J. Angara Lucas Alkan Jimmy Blas Glenn Blake Rene J. Buenaventura Valentine Kambori Rey Anthony David Mathias Lasia Albert F. Del Rosario Manu Momo Evan Garcia Evan J. Paki Johanna Garcia Mark Slade William B. Go Arthur Somare Placido L. Mapa, Jr. Vincent Sumale Jeremias N. Paul, Jr. Renato Pizarro Paraguay Antonino P. Roman Ramon Y. Sy Governor Vicente B. Valdepenas, Jr. Ernst F. Bergen S. Poland Alternate Governor Jorge von Horoch Governor Jerzy Pruski Adviser Juan Angel Alvarez Alternate Governor Cesar Amado Barreto Otazu Krzysztof Majczuk* Hugo Rafael Caceres Aguero Pedro Correa Adviser Guillermina Frizza Edward Basinski Jose Insfran Pelozo Monika Borowska-Massalska Bruno Jaen Bohorques Jakub Karnowski Felix Kasamatsu Remigiusz Nawrat Francisco Ogura Romuald Szymczak James Spalding * Temporary <> Not a member of IFC # Not a member of IDA 309 3807-CH12_Members_p289-319.pdf 3/24/06 7:19 AM Page 310 Portugal Adviser Andrei Bugrov Governor Vladimir Dmitriev Fernando Teixeira dos Santos Timur Eyvazov Igor Finogenov Alternate Governor Vadim Grishin Carlos Costa Pina Andrei N. Illarionov Mario Lobo* Nadezhda Ivanova Nuno Mota Pinto* Andrei Kasianenko Stanislav Katash Adviser Petr Kaznacheev Franquelim Fernando Garcia Alves Andrei Kondakov Eduardo Silva Lima Mikhail Korobkin Maria Fernanda Pargana e Oliveira Andrei Kostin Goncalo Castilho Santos Dmitriy Levchenkov Vadim Levin Qatar<># Boris M. Lvin Eugene Miagkov Governor Ekaterina Myskova Yousef Hussain Kamal Sergei Nosachev Konstantin Panov Alternate Governor Tatiana Proskuryakova Hussain Al-Abdulla Oksana Sergienko Aleksandr Shamrin Adviser Andrei Shinayev Ali Shareef Al Emadi Vladimir Stolyarenko Ahmed Mohammed Al-Shaabi Sergei Storchak Abdurahman Dashti Vasiliy Titov Denis Ursulyak Romania# Yury Ushakov Gennady Yezhov Governor Sebastian Vladescu Rwanda Alternate Governor Alternate Governor Cristian Popa Francois Nkulikiyimfura Jean Jacques Nyirubutama* Adviser Alina Carmen Beldescu Adviser Angela Caju Kaliza Karure Anca Ciobanu Nsenga Zac Doina Gabriela Cristea Sorin Duc Aru St. Kitts and Nevis Viorel Onel Stefan Petrescu Governor Denzil Douglas Russian Federation Alternate Governor Governor Vance Amory* Aleksei Kudrin Adviser Alternate Governor Jasmine Huggins Sergei Ignatiev* Izben Williams Alexey G. Kvasov* * Temporary <> Not a member of IFC # Not a member of IDA 310 3807-CH12_Members_p289-319.pdf 3/24/06 7:19 AM Page 311 St. Lucia Alternate Governor Hamad Al-Bazai Alternate Governor Yahya Alyahya* Len Ishmael Trevor Brathwaite* Adviser Garth P. Nicholls* Ahmed Al-Kholifey Abdulrahman M. Al-Kudsi St. Vincent and the Grenadines<> Abdallah S. Alazzaz Yousef I. Al-Bassam Governor Amr Al Dabbagh Laura Anthony-Browne Abdulrahman Al-Hamidy Abdullah I. Al-Hudaithi Alternate Governor Taymour Abdullah Ali Reza Adolphus Laidlow Abdulhamid Al-Khalifa Abdulrahman Mohammed Samoa Almofadhi Fahad Al Mubarak Governor Ahmed A. Al Nassar Hinauri Petana Ramzi A. Al-Nassar Saad M. Alnefaee Alternate Governor Khalid Alohaly Paul Meredith Abdulrahman Aloraini Saeed Al-Qahtani Adviser Rashed Abdulaziz Al-Rashed Serah Retzlaff Mansour Al-Saawi Saud Al-Saleh San Marino<># Sami Al-Yousef Jitendra G. Borpujari Governor Said H. Hashim Claudio Felici Richard R. Herbert Abdullah Saleh Kamel Alternate Governor Subodh Kumar Keshava Luca Papi* Melhem F. Melhem Abdulaziz A. O'Hali Adviser Hutham S. Olayan Daniele Bodini Lubna Olayan Antonio Valentini Senegal Sao Tome and Principe<> Governor Governor Abdoulaye Diop Maria do Carmo Silveira Alternate Governor Alternate Governor Mamadou Faye* Americo Oliveira Adviser Adviser Amadou Lamine Ba Agapito Mendes Dias Alhousseynou Diallo Mamadou Woury Diallo Saudi Arabia Sogue Diarisso Adama Dieye Governor James Leonard Fleming Ibrahim A. Al-Assaf Papa M. Ndiaye Evelyne Tall * Temporary <> Not a member of IFC # Not a member of IDA 311 3807-CH12_Members_p289-319.pdf 3/24/06 7:19 AM Page 312 Serbia and Montenegro Alternate Governor Hwee Hua Lim Governor Chan Heng Chee* Igor Luksic Laurence Lien* Alternate Governor Adviser Mladjan Dinkic Tracy Chan Lynette Cheng Adviser Goh Chye Boon Mirjana Doncic Maya Devi Gupta Predrag Kovacevic Chee Koon Lee Gordana Lazarevic Chivy Li Zorica Maric Djordjevic Moo Yubin Goran Mrdja Kah Meng Ng Dragana Ostojic Susan L.K. Sim Milan Parivodic Ariel Tan Mirko Stojcevic Samuel Tan Ivan Vujacic Vladimir Vukojevic Slovak Republic Seychelles# Alternate Governor Elena Kohutikova Governor Martin Bruncko* Claude Sylvestre Morel Slovenia Alternate Governor Ronald Cafrine* Governor Andrej Bajuk Adviser Jeremie Bonnelame Alternate Governor Andrej Kavcic Sierra Leone Adviser Governor Ksenija Maver John O. Benjamin Stanislava Zadravec-Caprirolo Alternate Governor Solomon Islands Samura Kamara Governor Adviser Peter Boyers Joseph Momoh Kallon John Karimu Alternate Governor F.B.L. Mansaray Shadrach Fanega Stephen Prior Abdul Rahman Turay South Africa Singapore Governor Trevor Andrew Manuel Governor Raymond Lim Alternate Governor Elias Lesetja Kganyago * Temporary <> Not a member of IFC # Not a member of IDA 312 3807-CH12_Members_p289-319.pdf 3/24/06 7:19 AM Page 313 Adviser Sudan Mshiyeni Belle Marlon Geswint Governor Reginald Dumisa Jele El Zubair Ahmed El Hassan Tonia Kandiero Tshepo Duan Mahloele Alternate Governor Aaron Daniel Mminele Rabaa Ahmed Elkhalifa Brian Molefe Ismail Momoniat Adviser Rosalind Colleen Mowatt Elmutasim Abdalla Ahmed Elfaki Mmakgoshi Phetla-Lekhethe Omer Ibrahim Elsayed Danel Janse Van Rensburg Saifelddin Atta Fadl Elseed Logan Wort Ahmed Ali Hassan Abdalla Ibrahim Ali Ismail Spain Gamal Malik Laila Omer Bashir Omer Governor Somia Amir Osman Pedro Solbes M. Nasreldin A.A. Wali Alternate Governor Swaziland David Vegara Figueras Governor Adviser Absalom M.C. Dlamini Soledad Abad Joaquin de la Herran Mendivil Alternate Governor Rosa de las Heras Musa D. Fakudze Ester Felices Inigo Fernandez de Mesa Sweden Federico Ferrer Ramon Guzman Alternate Governor Galo Herrero Villanueva Carin Jamtin Sofiane Abdelhafid Khatib Bjorn Fritjofsson* Luis Linde Maria Jesus Luengo Martin Adviser Luis Marti Nina Blomberg Ricardo L. Martinez Rico Hanna Brogren Alberto Nadal Dag Ehrenpreis Luis Orgaz Erik Eldhagen Maria Serrano Stefan Emblad Alberto Soler Ingemar Eriksson Maria Teresa Tello Claes Hammar Carlos Westendorf Susanna Hughes Ruth Jacoby Sri Lanka Caroline Leijonhufvud Anders Oljelund Governor Gunnar Pihlgren Sarath Leelananda Bandara Anders Wahlberg Amunugama John Zanchi Alternate Governor Switzerland Rajapakse A. Jayatissa Bernard Anton Bandara Governor Goonetilleke* Jean-Daniel Gerber * Temporary <> Not a member of IFC # Not a member of IDA 313 3807-CH12_Members_p289-319.pdf 3/24/06 7:19 AM Page 314 Alternate Governor Andrew M. Daraja Serge Chappatte* Elsie Kanza Oscar Knapp* Hussein S. Khatib Pietro Veglio* Isaack Kilato John Benti Kimaro Adviser Ngosha Said Magonya Daniel Beck-Ohara Joyce Mapunjo Alex Biscaro Sarah Salehe Masasi Christian Blickenstorfer Deodatus Ludalo Matta Ba Philippe Etienne Arthur Mwakapugi Raymund A. Furrer Athunami Mwinyigoha Giulio Haas Blandina Nyoni Hans-Ueli Hunziker John Chimile Rubambe Pradeep Itty Darius Kurek Thailand Eric Martin Danielle Meuwly Monteleone Governor Peter Siegenthaler Thanong Bidaya Alexander Wittwer Alternate Governor Syrian Arab Republic Naris Chaiyasoot* Veerabongsa Ramangkura* Governor Pannee Sathavarodom* Amer Husni Lutfi Adviser Alternate Governor Jutamas Arunanondchai Mohammad Hamandosh Paisan Chotipaibulpan Choedchai Khannabha Adviser Ampon Kittiampon Imad Moustapha Mahesuan Kruewan Sakun Lambasara Tajikistan Ekniti Nitithanprapas Warunee Pan-Krasang Governor Atthaphon Phibunthanaphatthana Safarali Najmuddinov Thirachai Phuvanatnaranubala Khan Prachuabmoh Alternate Governor Somrasri Prasongpol Negmatdzhon K. Buriyev* Bunluasak Pussarungsri Thaweelap Rittapirom Adviser Veerathai Santiprabhob Djamoliddin Nuraliev Siribha Satayanon Pornwasa Sirinupong Tanzania Sujjapongse Somchai Ketsuda Supradit Governor Chularat Suteethorn Abdallah Omar Kigoda Pongpanu Svetarundra Potjanee Thanavaranit Alternate Governor Tipsuda Thavaramara Gray S. Mgonja Ubolwan Usawattanagul Porametee Vimolsiri Adviser Perames Vudthitornetiraks Enos S. Bukuku Jerome J. Buretta * Temporary <> Not a member of IFC # Not a member of IDA 314 3807-CH12_Members_p289-319.pdf 3/24/06 7:19 AM Page 315 Timor-Leste Adviser Samia Baccar Governor Ayech Bouselmi Mari Bin Amude Alkatiri Samir Chebil Marleine Davis Alternate Governor Riadh Dridi Jose Manuel Guterres Mohamed Nejib Hachana Adviser Turkey Jose Luis Guterres Constancio Pinto Governor Ibrahim H. Canakci Togo Alternate Governor Governor Memduh Aslan Akcay Yandja Yentchabre Adviser Adviser Dilara Basarir Djia Kibanda Negbane Erdem Basci Hatedheema Nonon Saa Omer Bayar Mayanendja Nonon Saa Emel Demirgoren Ozgur Demirkol Tonga Halit Ertugrul Ozge Ileri Governor Yuksel Karaca Siosiua T.T. 'Utoikamanu Ahmet Kesik Haci Ahmet Kilicoglu Alternate Governor Kemal Madenoglu Aholotu Saafi Palu Melih Nemli Fekita Utoikamanu* Salih Ozatay Akil Ozcay Adviser Ozgur Pehlivan Monalisa Palu Mustafa Rumeli Gulbin Sahinbeyoglu Trinidad and Tobago Mustafa Ertan Tanriyakul Erhan Usta Governor Selim Yesilbas Jerry Hospedales Gunay Yesildoruk Onur Yildirim Alternate Governor Hayden Vincent Manzano Turkmenistan# Adviser Governor Michael S. Mendez Geldymurad Abilov Marina Valere Adviser Tunisia Parakhat Durdyev Dovran M. Muratnazarov Governor Mered Bairamovich Orazov Mohamed Nouri Jouini Kakamurat Yagshimamedov Alternate Governor Kamel Ben Rejeb * Temporary <> Not a member of IFC # Not a member of IDA 315 3807-CH12_Members_p289-319.pdf 3/24/06 7:19 AM Page 316 Uganda Nagy S. Kolta Yaser Mansour Governor Joyshil Mitter Ezra Suruma Abdulla Mohamed Saleh Michael H. Tomalin Alternate Governor C.M. Kassami United Kingdom Adviser Governor Damoni Nuwaman Kitabire Hilary Benn Nimisha Madhavani Edith Ssempala Alternate Governor Longino Kigambo Tisasirana Gordon Brown Godfrey B. Tumusiime Masood Ahmed* Suma Chakrabarti* Ukraine Jon Cunliffe* Stephen John Pickford* Governor Tom Scholar* Volodymyr Anatolijovych Caroline Sergeant* Ignashchenko Nicholas H. Stern* Rosemary Stevenson* Adviser Shriti Vadera* Yevgen Burkat Paul Williams* Myroslav Ilinskyi Yuriy Karpenko Adviser Olexandr Kirieiev Ed Balls Sergiy Korsunskyi James Bowler Volodymyr Kuchyn Mark Bowman Anatoliy Maksyuta Michael P. Collyer Volodymyr Makukha Donald Cook Liudmyla Musina Peter Dodd Denys Sheibut James Droop Volodymyr Sidorov Michael Ellam Tamara Solyanyk Mandeep Kaur-Grewal Olexander Storozhuk Paul Kissack Mykola Udovychenko Vanessa MacDougall Nataliya Zhovanyk Moazzam Malik Callum McCarthy United Arab Emirates John Moye Raine Kell Newton Smith Alternate Governor Tom Neylan Mohammed Khalfan Bin Khirbash Jonathan Ockenden Thomas Moore Orlik Adviser Susan C. Prowse Nariman Abdulla Al Awadhi Paul Radford Saaed Murabak Al-Hajeri Chris Sharrock Mohamed Al Mazrouei Vickie Sheriff Qamber Ali Al Mulla Graham Stegmann Omar Alqazi Joseph Thornton Richard James Amos Lindsey Jennifer Whyte Anthony Bush Justin Williams Robert Douglas Dowie Penelope J.A. Williams John Eldredge * Temporary <> Not a member of IFC # Not a member of IDA 316 3807-CH12_Members_p289-319.pdf 3/24/06 7:19 AM Page 317 United States Arnold Havens Andrew Haviland Governor John Hurley John W. Snow Mark Jaskowiak Elaine Jones Alternate Governor Debra Juncker Timothy D. Adams* Sophia King Charles Greenwood* Gwyn Koepke Robert B. Holland* Lukas Pender Kohler Robert Kimmitt* Keith Kozloff Karen Mathiasen* Keith Krulak Bobby Pittman* Chris Kushlis Robin Ruth Ritterhoff* Nancy Lee Josette Shiner* Benjamin Leo Tony Wayne* Stuart Levey John Lippeatt Adviser Sarah Lockart Roy Adkins David P. Loevinger Anne Alikonis Clay Lowery Katherine Janel Almquist Theodore Lyng Jeffrey Baker Christopher P. McCoy William Baldridge Larry McDonald Andrew Baukol Dan McGlinchey Rachel Bayly Brookly Jean McLaughlin Gregory J. Berger E. Douglas Menarchik Seth Howard Bleiweis Eric Meyer Ken Borghese David Miller Francois Boye Molly Millerwise Jonathan Wingate Burks Richard Morford William Center Scott Allen Morris Terrence J. Checki William C. Murden Susan M. Chun Andrew S. Natsios Daniel Clune Norman K. Nicholson David B. Cohen Walter North Michael Sean Considine Katerina Ntep Brian B. Cox Malachy Nugent Paul William Curry Akorlie Nyatepe-Coo Benjamin Jared Cushman John Vincent Ohara Robert Dohner James E. Painter Stephen Paul Donovan Ashok Parameswaran Dora Douglass Francisco Parodi Gordana S. Earp Sara Paulson David Edwards Cynthia Perry Marie Ewens Daniel Walter Peters Patrick C. Fine Traci Ann Phillips Tony Fratto Lawrence Christopher Plantier Judy Garber Chip Mark Philip Poncy Barbara Geiser John Ralyea, III Mary Eileen Gilligan Sonja V. Renander Daniel Glaser Allen Rodriguez Stephen Gooch Nilmini Gunaratne Rubin William Taylor Griffin Ahmed Saeed Thomas Hastings Muneera Salem-Murdock * Temporary <> Not a member of IFC # Not a member of IDA 317 3807-CH12_Members_p289-319.pdf 3/24/06 7:19 AM Page 318 Georgia Sambunaris Vanuatu Charles Schott Katleen Sengstock Governor Charles O. Sethness Moana Carcasses Alex Severns Alpita A. Shah Alternate Governor Gordon Shettle Simeon Athy Faryar Shirzad Michal Shwarzman Venezuela, Republica Bolivariana de# Gianluca Signorelli Jon Andrew Simon Adviser Chris Smith Jose Ricardo Conde Martinez Charles Snyder Jose Sojo Patrick Stuart Adam Szubin Vietnam Ramin Toloui Luyen Doan Tran Governor Lian von Wantoch Le Minh Hung Christopher Walker Elizabeth A. Weiss Adviser Olin L. Wethington Huynh Que Ha Le Tan Loc Uruguay# Chien Tam Nguyen Nguyen Tan Thanh Governor Nguyen Thac Hoat Carlos Viera Cordoba Nguyen Thi Thanh Mai Pham Quang Dung Alternate Governor Thanh Tan Pham Fernando E. Lorenzo* Yemen, Republic of Adviser Marcelo Bisogno Governor Ariel Fernandez Cova Ahmed Mohammed Sofan Alberto Grana Garcia Conrado Ramos Alternate Governor Carlos Steneri Mutahar Abdulaziz Al-Abbasi Uzbekistan Adviser Hesham Abdulrahman Governor Fouad Al-Kohlany Faizulla M. Mullajanov Abdulhakim A. Al Eryani Abdulwahab Al-Hajjri Alternate Governor Nassr Saleh Alharbi Murat Yakubjanov Ibrahim Alnahari Rashad Al-Rassas Adviser Omar Salim Bazara Behrus Abdullaev Adonis Fakhri Bakhtiyorkhan Abdullakhanov Galal Mohamed Moula Botir Arifdjanov Sami Sofan Abdulaziz Kamilov Shukhrat Abdusha Vafaev * Temporary <> Not a member of IFC # Not a member of IDA 318 3807-CH12_Members_p289-319.pdf 3/24/06 7:19 AM Page 319 Zambia Zimbabwe Governor Alternate Governor Ng'andu Peter Magande Willard L. Manungo* Alternate Governor Adviser Situmbeko Musokotwane Mutasa Dzinotizei Chandavengerwa Gwashavanhu Adviser John Mafararikwa Walubita Imakando Martha Mugwenhi Inonge Mbikusita-Lewanika Charles Marongwe Mujajati Abraham Mwenda Meisie Namasasu Ronald Simwinga * Temporary <> Not a member of IFC # Not a member of IDA 319 3807-CH13_Members_p320-331.pdf 3/24/06 7:18 AM Page 320 ACCREDITED MEMBERS OF DELEGATIONS (MIGA) AT THE 2005 ANNUAL MEETING Afghanistan Alternate Governor Kurt Bayer Governor Anwar ul-Haq Ahady Azerbaijan Alternate Governor Alternate Governor Wahidullah Shahrani Haqverdiyev Oktay Albania Bahamas, The Governor Governor Ardian Fullani James H. Smith Alternate Governor Alternate Governor Fatos Ibrahimi Ruth R. Millar Algeria Bahrain Governor Governor Mourad Medelci Ahmed Bin Mohammed Al-Khalifa Alternate Governor Alternate Governor Abdelhak Bedjaoui Zakaria Ahmed Hejres Argentina Bangladesh Governor Governor Roberto Lavagna M. Saifur Rahman Alternate Governor Alternate Governor Martin Redrado Md. Abul Kalam Azad* Armenia Barbados Governor Governor Vahram Nercissiantz Owen S. Arthur Alternate Governor Alternate Governor Karen Chshmarityan Grantley W. Smith Australia Belarus Governor Governor Peter Costello Andrei V. Kobyakov Austria Belgium Governor Alternate Governor Karl-Heinz Grasser Jean-Pierre Arnoldi* Koenraad Van Loo* *Temporary 320 3807-CH13_Members_p320-331.pdf 3/24/06 7:18 AM Page 321 Belize Burkina Faso Governor Governor Said W. Musa Hamade Ouedraogo Alternate Governor Alternate Governor Carla Barnett Lene Sebgo Benin Burundi Governor Governor Zul-Kifl Salami Dieudonne Ngowembona Alternate Governor Alternate Governor Massiyatou Latoundji Lauriano Leon Nimbona Bolivia Cambodia Governor Governor Waldo M. Gutierrez Iriarte Vissoth Vongsey Alternate Governor Alternate Governor Rodrigo Castro Otto Sothy Chan Bosnia and Herzegovina Cameroon Governor Governor Adnan Terzic Polycarpe Abah Abah Alternate Governor Alternate Governor Dragan Doko Daniel Njankouo Lamere Botswana Canada Governor Governor Baledzi Gaolathe Ralph Goodale Brazil Alternate Governor Robert Greenhill Governor Paul Boothe* Antonio Palocci Tom Bui* Peter Cameron* Alternate Governor Andrew Clark* Henrique de Campos Meirelles John Davies* Colette Kaminsky* Bulgaria Marcel Masse* Lee-Ann McKechnie* Governor Stephen Millar* Plamen Oresharski Bruce Montador* Christian Ranger* Alternate Governor Greg Reade* Dimitar Kostov Jonathan Rothschild* *Temporary 321 3807-CH13_Members_p320-331.pdf 3/24/06 7:18 AM Page 322 Sarah Taylor* Congo, Democratic Republic of the Patrick Tobin* Vinita Watson* Governor Andre-Philippe Futa Cape Verde Alternate Governor Governor Jean-Claude Masangu Mulongo Joao Pinto Serra Congo, Republic of Alternate Governor Victor A.G. Fidalgo Alternate Governor Pacifique Issoibeka Central African Republic Costa Rica Governor Sylvain Maliko Governor Federico Carrillo Zurcher Alternate Governor Dieudonne Padoundji-Yadjoua Alternate Governor Francisco de Paula Gutierrez Chad Cote d'Ivoire Governor Mahamat Ali Hassan Governor Bouabre Paul Antoine Bohoun Alternate Governor Sobdibet Hinsalbet Alternate Governor Boniface Britto Chile Croatia Governor Nicolas Eyzaguirre Alternate Governor Martina Dalic China Cyprus Governor Jin Renqing Governor Michael Sarris Alternate Governor Li Yong Alternate Governor Kuilin Ju* Leslie G. Manison* Yang Jinlin* Zhu Guangyao* Czech Republic Zou Jiayi* Alternate Governor Colombia Miroslav Singer Governor Denmark Alberto Carrasquilla Governor Alternate Governor Ulla Toernaes Santiago Montenegro Trujillo Alejandro Gamboa* Alternate Governor Ole Moesby* *Temporary 322 3807-CH13_Members_p320-331.pdf 3/24/06 7:18 AM Page 323 Dominica Alternate Governor Renaldo Mandmets Governor Swinburne Lestrade Ethiopia Alternate Governor Alternate Governor Rosamund Edwards Abi Woldemeskel Dominican Republic Fiji Governor Governor Hector Manuel Valdez Albizu Aisake J. Taito Alternate Governor Finland Juan Temistocles Montas Governor Ecuador Eero Heinaluoma Governor Alternate Governor Magdalena Barreiro Riofrio Peter Nyberg Martti Hetemaki* Alternate Governor Marjatta Rasi* Marco Varea* Pertti Rauhio* Egypt, Arab Republic of France Governor Governor Mahmoud Mohieldin Thierry Breton El Salvador Alternate Governor Xavier Musca Governor Pierre Duquesne* Eduardo Zablah-Touche Ambroise Sixte Fayolle* Brigitte Girardin* Equatorial Guinea Gabon Governor Jaime Ela Ndong Governor Casimir Oye-Mba Alternate Governor Jose Ela Oyana Alternate Governor Christian Bongo Eritrea Gambia, The Governor Berhane Abrehe Kidane Governor Alieu M. Ngum Alternate Governor Martha Woldegiorghis Alternate Governor Yusupha Kah Estonia Georgia Governor Aivar Soerd Governor Aleksi Aleksishvili *Temporary 323 3807-CH13_Members_p320-331.pdf 3/24/06 7:18 AM Page 324 Germany Alternate Governor Saisnarine Kowlessar Alternate Governor Caio K. Koch-Weser Haiti Joerg Asmussen* Eckhard Deutscher* Governor Gudrun Grosse Wiesmann* Henri Bazin Walter E. Hermann* Michael Hofmann* Alternate Governor Erich E. Stather* Raymond Magloire Rolf Wenzel* Honduras Ghana Governor Governor William Chong Wong Kwadwo Baah-Wiredu Alternate Governor Alternate Governor Maria Elena Mondragon de Villar Anthony Akoto Osei Hungary Greece Alternate Governor Governor Zsuzsanna Varga George Alogoskoufis Iceland Alternate Governor Plutarchos Sakellaris Alternate Governor Hermann Orn Ingolfsson* Grenada India Governor Anthony Boatswain Governor P. Chidambaram Alternate Governor Timothy Antoine Alternate Governor A.K. Jha Guatemala Ashok Lahiri* Alternate Governor Indonesia Maria Antonieta de Bonilla Governor Guinea Jusuf Anwar Governor Alternate Governor Madikaba Camara Burhanuddin Abdullah Alternate Governor Iran, Islamic Republic of Eugene Camara Governor Guyana Davoud Danesh Ja'fari Governor Alternate Governor Bharrat Jagdeo Mohammad Khazaee Torshizi *Temporary 324 3807-CH13_Members_p320-331.pdf 3/24/06 7:18 AM Page 325 Ireland Alternate Governor Gani N. Uzbekov Governor Brian Cowen Kenya Alternate Governor Governor Robert Bradshaw* David Mwiraria Noel O'Gorman* Alternate Governor Israel Joseph Kanja Kinyua Governor Korea, Republic of Stanley Fischer Governor Italy Duck-Soo Han Governor Alternate Governor Antonio Fazio Seung Park Yeung Kyun Rhee* Alternate Governor Ignazio Angeloni Kuwait Francesca Manno* Governor Jamaica Bader Meshari Al-Humaidhi Governor Alternate Governor Omar Lloyd Davies Bader Mohamed Al-Saad Alternate Governor Kyrgyz Republic Wesley George Hughes Alternate Governor Japan Kubat Abduldaevich Kanimetov Governor Lao People's Democratic Republic Sadakazu Tanigaki Governor Alternate Governor Chansy Phosikham Kiyoto Ido* Kiyoshi Kodera* Alternate Governor Toshiro Muto* Phouphet Khamphounvong Takehiko Nakao* Shiro Sadoshima* Latvia Naoyuki Shinohara* Rintaro Tamaki* Governor Hiroshi Watanabe* Oskars Spurdzins Jordan Lebanon Governor Governor Suhair Al-Ali Sami Haddad Kazakhstan Alternate Governor Fadi Makki Governor Kayrat Nematovich Kelimbetov *Temporary 325 3807-CH13_Members_p320-331.pdf 3/24/06 7:18 AM Page 326 Lesotho Malaysia Alternate Governor Governor Moeketsi Majoro Zeti Akhtar Aziz Libya Alternate Governor Ibrahim Mahaludin Puteh* Governor Taher E. Jehaimi Maldives Alternate Governor Governor Ali Ramadan Shnebesh Qasim Ibrahim Lithuania Alternate Governor Abdullah Jihad Governor Zigmantas Balcytis Mali Alternate Governor Governor Ramune Vilija Zabuliene Abou-Bakar Traore Luxembourg Malta Governor Governor Luc Frieden Tonio Fenech Alternate Governor Alternate Governor Jean Guill Paul Zahra Macedonia, Former Yugoslav Republic of Mauritania Governor Governor Nikola Popovski Mohamed Ould El Abed Alternate Governor Alternate Governor Goran Anceski* Isselmou Ould Sidi El Moctar Madagascar Mauritius Governor Governor Haja Nirina Razafinjatovo Rama Krishna Sithanen Alternate Governor Alternate Governor Henri Bernard Razakariasa Krishnanand Guptar Malawi Micronesia, Federated States of Governor Governor Goodall E. Gondwe Nick L. Andon Alternate Governor Alternate Governor David Faiti Lorin Robert *Temporary 326 3807-CH13_Members_p320-331.pdf 3/24/06 7:18 AM Page 327 Moldova Nigeria Governor Governor Valeriu Lazar O. Mailafia Mongolia Alternate Governor Olusegun O.O. Ogunkua Governor Norov Altankhuyag Norway Alternate Governor Governor Damba Baasankhuu Hilde Frafjord Johnson Morocco Alternate Governor Atle Leikvoll* Governor Fathallah Oualalou Oman Mozambique Governor Mohammed bin Nasser Al-Khasibi Governor Adriano Afonso Maleiane Pakistan Namibia Governor Nawid Ahsan Governor Helmut Angula Alternate Governor Tanwir Ali Agha Nepal Palau Governor Madhukar S.J.B. Rana Governor Casmir E. Remengesau Alternate Governor Bhanu Prasad Acharya Alternate Governor Lawrence Alan Goddard Netherlands Panama Governor Gerrit Zalm Governor Ricaurte Vasquez M. Alternate Governor Agnes van Ardenne Papua New Guinea Nicaragua Governor Bart Philemon Governor Mario Arana Sevilla Alternate Governor Simon Tosali Alternate Governor Mario Alonso Icabalceta *Temporary 327 3807-CH13_Members_p320-331.pdf 3/24/06 7:18 AM Page 328 Paraguay Russian Federation Governor Governor Ernst F. Bergen S. Aleksei Kudrin Alternate Governor Alternate Governor Jorge von Horoch Sergei Ignatiev* Alexey G. Kvasov* Peru St. Kitts and Nevis Governor Fernando Zavala Lombardi Governor Denzil Douglas Alternate Governor Waldo Mendoza Bellido Alternate Governor Ivan Rivera* Wendell E. Lawrence Philippines St. Lucia Governor Alternate Governor Margarito B. Teves Len Ishmael Trevor Brathwaite* Poland Samoa Governor Jacek Tomorowicz Governor Tiata Pulufana Saunoa Alternate Governor Agnieszka B. Rudniak-Jancewicz Alternate Governor Aiono Tile Gafa Portugal Saudi Arabia Governor Fernando Teixeira dos Santos Governor Ibrahim A. Al-Assaf Alternate Governor Carlos Costa Pina Alternate Governor Mario Lobo* Hamad Al-Bazai Yahya Alyahya* Qatar Senegal Governor Yousef Hussain Kamal Governor Abdoulaye Diop Alternate Governor Abdullah Bin Khalid Al-Attiyah Serbia and Montenegro Romania Governor Igor Luksic Governor Sebastian Vladescu Alternate Governor Mladjan Dinkic Alternate Governor Cristian Popa *Temporary 328 3807-CH13_Members_p320-331.pdf 3/24/06 7:18 AM Page 329 Seychelles Sudan Alternate Governor Governor Francis Chang Leng El Zubair Ahmed El Hassan Sierra Leone Swaziland Governor Governor John O. Benjamin Meshack M.L. Shongwe Alternate Governor Sweden Samura Kamara Alternate Governor Singapore Carin Jamtin Governor Switzerland Raymond Lim Governor Slovak Republic Oscar Knapp Alternate Governor Syrian Arab Republic Elena Kohutikova Governor Slovenia Amer Husni Lutfi Governor Tajikistan Andrej Bajuk Governor Alternate Governor Negmatdzhon K. Buriyev Andrej Kavcic Tanzania South Africa Governor Governor Abdallah Omar Kigoda Trevor Andrew Manuel Alternate Governor Alternate Governor Gray S. Mgonja Elias Lesetja Kganyago Thailand Spain Governor Governor Thanong Bidaya Pedro Solbes M. Timor-Leste Alternate Governor David Vegara Figueras Governor Maria Madalena Brites Boavida Sri Lanka Alternate Governor Governor Jose Manuel Guterres Sarath Leelananda Bandara Amunugama Togo Alternate Governor Governor Rajapakse A. Jayatissa Yandja Yentchabre *Temporary 329 3807-CH13_Members_p320-331.pdf 3/24/06 7:18 AM Page 330 Trinidad and Tobago United States Governor Governor Jerry Hospedales John W. Snow Alternate Governor Alternate Governor Hayden Vincent Manzano Timothy D. Adams* Charles Greenwood* Tunisia Robert B. Holland* Robert Kimmitt* Governor Karen Mathiasen* Mohamed Nouri Jouini Bobby Pittman* Robin Ruth Ritterhoff* Turkey Josette Shiner* Tony Wayne* Governor Ibrahim H. Canakci Uruguay Alternate Governor Governor Memduh Aslan Akcay Carlos Viera Cordoba Turkmenistan Alternate Governor Fernando E. Lorenzo Governor Geldymurad Abilov Uzbekistan Uganda Alternate Governor Murat Yakubjanov Governor Ezra Suruma Vanuatu Alternate Governor Governor C.M. Kassami Moana Carcasses Ukraine Alternate Governor Simeon Athy Governor Volodymyr Anatolijovych Vietnam Ignashchenko Governor United Kingdom Le Duc Thuy Governor Yemen Republic of Hilary Benn Governor Alternate Governor Ahmed Mohammed Sofan Gordon Brown Jon Cunliffe* Alternate Governor Stephen John Pickford* Mutahar Abdulaziz Al-Abbasi Tom Scholar* Caroline Sergeant* Zambia Nicholas H. Stern* Rosemary Stevenson* Governor Shriti Vadera* N'gandu Peter Magande Paul Williams* *Temporary 330 3807-CH13_Members_p320-331.pdf 3/24/06 7:18 AM Page 331 Alternate Governor Situmbeko Musokotwane Zimbabwe Alternate Governor Willard L. Manungo *Temporary 331 3807-CH14_Observers_p332-336.pdf 3/24/06 7:22 AM Page 332 OBSERVERS AT THE 2005 ANNUAL MEETING African Development Bank Group Liqun Jin Mikio Kashiwagi Donald Kaberuka Werner Erich Liepach Francis Norman Black Juanito Limandibrata Thierry de Longuemar Khempheng Pholsena Henock Kifle James Rockett Diko Jacob Mukete Kazu Sakai S.A. Olanrewaju Anil Terway Arunma Oteh Masao Uno Frederick Amoo Quarshie Association of African Development African Export-Import Bank Finance Institutions Jean-Louis Ekra Japp Senzi Motsa Benedict Okechukwu Oramah Edorie Kenneth Ogegbu Lawrence Okelue Osa-Afiana African Fund for Guarantee and Economic Cooperation Bank for International Settlements Jean-Louis Gankpe Malcolm D. Knight Habib Soumana Svein Andresen Souleymane Tamboura David Bieri Gavin Bingham Andean Development Corporation Mar Gudmundsson Andre Icard Luis Enrique Garcia Rodriguez Rupert Thackray Thorne Felix Bergel Luis Miguel Castilla Black Sea Trade and Development Bank Carolina Espana Hugo Sarmiento Mikhail Jernov Mauricio Yepez Valery Vladimirovich Aksenov Arab Bank for Economic Caribbean Community Development in Africa Fay Ingrid Housty Medhat Sami Lotfy Evelyn Wayne Ebe Ould Ebe Caribbean Development Bank Arab Monetary Fund Compton Bourne Jassim Abdulla Al-Mannai Patrick Desmond Brunton Yisr Burnieh Alan David Slusher Asian Development Bank Center for Latin American Monetary Studies Haruhiko Kuroda Shamshad Akhtar Kenneth G. Coates Robert M. Bestani Corina Arteche Brent Dark Jaime Osvaldo Coronado Philip Charles Erquiaga Jose Linaldo Gomes de Aguiar Jeffrey Lee Hiday Maria Luisa Gutierrez 332 3807-CH14_Observers_p332-336.pdf 3/24/06 7:22 AM Page 333 Central African Economic East African Community and Monetary Community Kipyego Cheluget Dieudonne Mouiri-Boussougou Kenneth Bagamuhunda Benoit Ketchekmen Henry Jabbo-Obbo Central African States Development Bank East African Development Bank Adoum Malloum Mahesh K. Kotecha Habil Okunda Olaka Central American Bank for Economic Integration Economic Community of West African States Marvin Taylor-Dormond Eduardo Membreno Mohammed Ibn Chambas Nick Rischbieth Christian N. Adovelande Claudia Rodriguez Monisoye Olorunsola Afolabi Carlos Watson Samuel Ajala Rose Mbatomon Ako Central American Monetary Council Abiola Caroline Atomori Barthelemy D. Drabo Miguel A. Chorro Serpas Gilles Hounkpatin David Lansana Bockari Kamara Common Fund for Commodities Nelson O. Magbagbeola Frank Ofei Shunichi Hari European Bank for Reconstruction Common Market for Eastern and Development and Southern Africa Jean Lemierre Alex Gitari Kwimenya Alexandre Draznieks Michael Gondwe Steven Fries Kombo James Moyana Julie Green Brigid Janssen Commonwealth Secretariat Lorenz Jorgensen Steven D.F. Kaempfer Winston Cox Isabelle Laurent Eliawony J. Kisanga Hubert Pandza Fabrizio Saccomanni Cooperation Council for the Axel Van Nederveen Arab States of the Gulf European Central Bank Nasser Ibrahim Al-Kaud Jean-Claude Trichet Council of Europe Development Bank Elisabeth Ardaillon-Poirier Lorenzo Bini Smaghi Raphael Alomar J. Onno de Beaufort Wijnholds Nunzio Guglielmino Soizic Frin Krzysztof J. Ners Otmar Issing Thierry Poirel Michele Kirstetter Apolonio Ruiz Ligero Julie McKay Luca Schio Georges Pineau Konstantin Von Klitzing Raymond Ritter Regina Karoline Schueller Christian Thimann 333 3807-CH14_Observers_p332-336.pdf 3/24/06 7:22 AM Page 334 European Commission Cheryl Morden Vera P. Weill-Halle Joaquin Almunia Amann Peter Bekx International Labour Organization Moreno Bertoldi Daniel A.A. Daco Duncan S. Campbell Karen De Jonghe Armand F. Pereira Antonio de Lecea Servaas Deroose Islamic Development Bank Fokion Fotiadis Stefano Manservisi Ahmad Mohamed Ali Al Madani Amy Medearis Walid Mohamad Abdelwahab Angelos Pangratis Rami Mahmoud Ahmad Elisabeth Pape Faisal Abdul Aziz Alzamel Klaus P. Regling Sangone Amar Odile Renaud-Basso Ilgar Veysal Isayev Loukas Stemitsiotis Majid Sabbagh Kermani Vlassia Vassikeri D.M. Qureshi Christiane West Mohammed Tariq El Mansour Ould Veten Feten European Free Trade Association Islamic Financial Services Board Petur G. Thorsteinsson Rifaat Ahmed Abdelkarim European Investment Bank Nor Sadnawaty Saifuddin Philippe Maystadt Kuwait Fund for Arab Jean-Louis Biancarelli Economic Development Philippe de Fontaine Vive Thomas Hackett Abdulkarim Abdullah Al-Muttawa Rene Karsenti Abdul Karim Sadik Daniel Ottelenghi Fiona Turner Latin American Reserve Fund Food and Agriculture Organization Julio Velarde of the United Nations Alfonso R. Machado Animesh Shrivastava Nordic Development Fund Inter-American Development Bank Jens Lund Sorensen Stella Eckert Dennis Flannery Per Eldar Sovik Jacques Rogozinski Karina Chamba Nordic Investment Bank Eloy B. Garcia John R. Hauge Johnny Akerholm Steven Reed Erkki A.O. Karmila Jorge Roldan Kari Kukka Desmond Thomas Torben Nielsen Michael Toman Lars-Ake Gunnar Olsson International Fund for OPEC Fund for International Agricultural Development Development Lennart Bage Suleiman Jasir Al-Herbish Uday Abhyankar Said Aissi 334 3807-CH14_Observers_p332-336.pdf 3/24/06 7:22 AM Page 335 Ibrahim M.I. Alturki United Nations Children's Fund Barbara Hausjell Jun Kukita Organisation for Economic Co-operation and Development United Nations Conference on Trade and Development Donald J. Johnston Richard Manning Heiner Flassbeck Jean-Philippe Cotis Vincent R. Koen United Nations Development Programme Michael Georg Roeskau Sandra Wilson Kemal Dervis Patrice Couer-Bizot Organization of American States Heather Harkins David Lockwood Jose Miguel Insulza Michael Marek Irene Klinger Rosemary Nuamah Paul O. Spencer Hafiz Pasha Alexandra Solovieva Organization of the Petroleum Exporting Countries United Nations Economic Commission for Latin America and the Caribbean Adnan Shihab-Eldin Mohammad Alipour-Jeddi Ines Bustillo Helvia Velloso Pacific Islands Forum Secretariat United Nations Educational, Scientific, Laisiasa Natakubu Tora and Cultural Organization Palestine Liberation Organization Christine Alfsen-Norodom Salam K. Fayyad West African Development Bank Abdelaziz M. Abu-Dagga (BOAD) Mazen Saleem Jadallah Andrea Vercoe Boni Yayi Omar Fall Southern African Development Yao Agbo N'De Hounouvi Community West African Economic Remigious Makumbe and Monetary Union Angelo Eduardo Mondlane Soumaila Cisse United Nations Alain F. Bocco Adele Congo-Kabore Jose Antonio Ocampo Frederic Assomption Korsaga Radhia Achouri Joachim Ouedraogo Suzanne Bishopric Farooq Chowdhury West African Monetary Institute Oscar de Rojas Hazem Fahmy Michael Olufemi Ojo Jan Allen Kregel Peter J. Obaseki Eduardo Christian Ossa Om Pradhan World Health Organization David Smith Paula Souverijn-Eisenberg Xavier Leus 335 3807-CH14_Observers_p332-336.pdf 3/24/06 7:22 AM Page 336 World Trade Organization Pascal Lamy Annet Blank Richard Eglin Maria Aranzazu Gonzalez Laya Keith M. Rockwell Singapore Planning Team 2006 Annual Meetings Peter Swee Koon Ang Philip Yuen Wah Chong Kok Piaw Chua Jacky Kong Seng Foo Pieter Idenburg Winson Khoo Tommy Koh Yong Guan Koh Bhavani Krishnasamy Jack Seng Kiat Lim Siew Lian Lim Valerie Chye Neo Lim Kee Hong Low Arunachalam Mahizhnan Jun Hoe Man Serene Li Sze Ong Wee Min Ong Catherine Pek Wan Ow Carol Mei Mei Tan Kim Seng Tan Shawn Wei Tze Tan Kenny Hui Hian Tay Yong Mong Tay Shirley Mei Ling Tee Andy Khin Voon Wong Eric Wee Teck Yap Alice Yeo Raymond Ai Leng Yeo Wai Hon Yeo Christine Mei Foong Yong 336 3807-CH15_Directors_p337-340.pdf 3/24/06 7:22 AM Page 337 EXECUTIVE DIRECTORS AND ALTERNATES IBRD, IFC, IDA September 24, 2005 Executive Directors Alternate Executive Directors Mahdy Ismail Aljazzaf Mohamed Kamel Amr (Kuwait) (Arab Republic of Egypt) Yahya Alyahya Abdulrahman Mohammed Almofadhi (Saudi Arabia) (Saudi Arabia) Gino Alzetta Melih Nemli (Belgium) (Turkey) Biagio Bossone Nuno Mota Pinto (Italy) (Portugal) Otaviano Canuto Jeremias N. Paul, Jr. (Brazil) (Philippines) Joong-Kyung Choi Terrence K. O'Brien (Republic of Korea) (Australia) Eckhard Deutscher Walter E. Hermann (Germany) (Germany) Sid Ahmed Dib Shuja Shah (Algeria) (Pakistan) Pierre Duquesne Anthony Requin (France) (France) Paulo F. Gomes Louis Philippe Ong Seng (Guinea-Bissau) (Mauritius) Herwidayatmo Nursiah Arshad (Indonesia) (Malaysia) Robert B. Holland (United States) Thorsteinn Ingolfsson Svein Aass (Iceland) (Norway) Alexey G. Kvasov Eugene Miagkov (Russian Federation) (Russian Federation) Luis Marti Jorge Familiar (Spain) (Mexico) 337 3807-CH15_Directors_p337-340.pdf 3/24/06 7:22 AM Page 338 Executive Directors Alternate Executive Directors Marcel Masse Gobind Nauth Ganga (Canada) (Guyana) Ad Melkert Tamara Solyanyk (The Netherlands) (Ukraine) Yoshio Okubo Toshio Oya (Japan) (Japan) Jaime Quijandria Alieto Guadagni (Peru) (Argentina) Tom Scholar Caroline Sergeant (United Kingdom) (United Kingdom) Mathias Sinamenye Mulu Ketsela (Burundi) (Ethiopia) Chander Mohan Vasudev Zakir Ahmed Khan (India) (Bangladesh) Pietro Veglio Jakub Karnowski (Switzerland) (Republic of Poland) Zou Jiayi Yang Jinlin (People's Republic of China) (People's Republic of China) 338 3807-CH15_Directors_p337-340.pdf 3/24/06 7:22 AM Page 339 DIRECTORS AND ALTERNATES MIGA September 24, 2005 Directors Alternate Directors Mahdy Ismail Aljazzaf Mohamed Kamel Amr (Kuwait) (Arab Republic of Egypt) Yahya Alyahya Abdulrahman Mohammed Almofadhi (Saudi Arabia) (Saudi Arabia) Gino Alzetta Melih Nemli (Belgium) (Turkey) Biagio Bossone Nuno Mota Pinto (Italy) (Portugal) Otaviano Canuto Jeremias N. Paul, Jr. (Brazil) (Philippines) Joong-Kyung Choi Terrence K. O'Brien (Republic of Korea) (Australia) Eckhard Deutscher Walter E. Hermann (Germany) (Germany) Sid Ahmed Dib Shuja Shah (Algeria) (Pakistan) Pierre Duquesne Anthony Requin (France) (France) Paulo F. Gomes Louis Philippe Ong Seng (Guinea-Bissau) (Mauritius) Herwidayatmo Nursiah Arshad (Indonesia) (Malaysia) Robert B. Holland (United States) Thorsteinn Ingolfsson Svein Aass (Iceland) (Norway) Alexey G. Kvasov Eugene Miagkov (Russian Federation) (Russian Federation) Luis Marti Jorge Familiar (Spain) (Mexico) 339 3807-CH15_Directors_p337-340.pdf 3/24/06 7:22 AM Page 340 Directors Alternate Directors Marcel Masse Gobind Nauth Ganga (Canada) (Guyana) Ad Melkert Tamara Solyanyk (The Netherlands) (Ukraine) Yoshio Okubo Kenichi Tomiyoshi (Japan) (Japan) Jaime Quijandria Alieto Guadagni (Peru) (Argentina) Tom Scholar Caroline Sergeant (United Kingdom) (United Kingdom) Mathias Sinamenye Mulu Ketsela (Burundi) (Ethiopia) Chander Mohan Vasudev Zakir Ahmed Khan (India) (Bangladesh) Pietro Veglio Jakub Karnowski (Switzerland) (Republic of Poland) Zou Jiayi Yang Jinlin (People's Republic of China) (People's Republic of China) 340 3807-CH16_Officers_p341-342.pdf 3/24/06 7:22 AM Page 341 OFFICERS OF THE BOARDS OF GOVERNORS IBRD, IFC AND IDA AND JOINT PROCEDURES COMMITTEE FOR 2005/2006 Chairman. . . . . . . . . . . . . . . . . . . . . Guyana Vice Chairmen . . . . . . . . . . . . . . . . Luxemburg Mozambique Reporting Member . . . . . . . . . . . . . Mongolia Members . . . . . . . . . . . . . . . . . . . . . Burundi Cameroon Chile France Germany Guyana Honduras India Indonesia Iran Japan Luxembourg Malta Mongolia Mozambique Netherlands Rwanda Saudi Arabia Serbia and Montenergro Suriname Sweden United Kingdom United States 341 3807-CH16_Officers_p341-342.pdf 3/24/06 7:22 AM Page 342 OFFICERS OF THE MIGA COUNCIL OF GOVERNORS AND PROCEDURES COMMITTEE FOR 2005/2006 Chairman. . . . . . . . . . . . . . . . . . . . . Guyana Vice Chairmen . . . . . . . . . . . . . . . . Luxembourg Mozambique Reporting Member . . . . . . . . . . . . . Mongolia Members . . . . . . . . . . . . . . . . . . . . . Burundi Cameroon Chile France Germany Guyana Honduras India Indonesia Iran Japan Luxembourg Malta Mongolia Mozambique Netherlands Rwanda Saudi Arabia Serbia and Montenergro Suriname Sweden United Kingdom United States 342 THE WORLD BANK GROUP Headquarters 1818 H Street, N.W. Washington, D.C. 20433, U.S.A. Telephone: (202) 473-1000 Facsimile: (202) 477-6391 Website: www.worldbank.org