hrough the facilities of the International Bank for Reconstruction and Development. The question of financing was referred by the Economic and Social Council to the Subcommission on Economic Development, which devoted its spring meeting to an exhaustive study of practical ways to increase the amount of capital made available for development purposes. The report of the Subcommission made a series of practical suggestions, most of which have since been approved both by the Council and by the General Assembly itself. These recommendations included, among others, the following: (a) suggestions as to the best means for mobilizing domestic capital, based upon the studies made by the special United Nations group of experts which met during the fall of 1949; (b) suggestions with regard to attracting foreign private capital and the need for the negotiation of treaties for this purpose; (c) suggestions as to certain specific ways in which the International Bank might make its loan policy more liberal and increase its available capital, consistent with sound banking practices. The latter suggestions included a recommendation that the Bank should provide funds in certain cases to cover the costs of a project which are initially payable in the home currency of the borrowing country as well as covering foreign-exchange costs. The Subcommission pointed out that there remains a basic problem with regard to the financing of certain types of projects in the underdeveloped countries which, although fundamental to development, cannot be regarded as self-liquidating, i.e. as earning by themselves enough money to repay to the lending institution full principal and interest on the loan. Such projects include port development, road and railroad development, schools, hospitals, etc. Such projects are called "economic and social overhead projects," and it is these nonself-liquidating projects and the question of how they are to be financed and "gotten under way" which constitute the "hard core" of the problem. When the report of the Subcommission was considered in the Council at its eleventh session at Geneva, the Council was impressed by the soundness of the Subcommission's work and adopted a resolution incorporating most of its suggestions. It also requested the International Monetary Fund to prepare studies bearing on the capacity of the underdeveloped countries to obtain the necessary foreign-exchange reserves to service foreign-capital investments. These studies will be based upon the experience of other countries which have now achieved a greater degree of economic development. The General Assembly's Economic Committee devoted its principal attention to these problems during its sixth session. There was gen eral recognition that there is need for an expansion and steadier flow of foreign capital, both public and private, in order to assure the desired rate of economic development in the underdeveloped countries, as well as a more effective and sustained mobilization of domestic savings. In a significant speech the Indian representative brought out the fact that the standard of living in the India-Pakistan subcontinent was not even being maintained at its present very low level and pointed out the political dangers which may be expected to result from this. Many delegations stressed the desirability that capital might flow in on the heels of technical assistance. General satisfaction was expressed with the increasing attention being paid by the International Bank to the problem of financing the development of underdeveloped countries and with the more liberal trends which had been mentioned in the Bank's report. The desirability that the Bank make loans in currencies other than dollars was also stressed. Finally, it was realized that current political disorders in the world are such that developed countries such as the United States and the United Kingdom cannot now afford to make investment capital available on a greatly increased scale. Both President Truman and Senator Sparkman, the United States delegate on the Economic Committee, pointed out that after a general and satisfactory disarmament plan had been put into effect the savings which might be derived there from would be such as to make available increased resources for development purposes, and the responsibility of the U.S.S.R. and its associated countries for holding up the development process was clearly underlined. The General Assembly adopted a resolution which recommended that the Council consider practical methods, conditions, and policies for achieving the adequate expansion and steadier flow of foreign capital, both public and private, and asked that special attention be paid to the financing of non-self-liquidating projects. Meanwhile, during 1950, the International Bank made considerable progress in increasing its assistance to underdeveloped countries. It loaned over $300,000,000 to 10 of its members, namely, Australia, Brazil, Colombia, Ethiopia, India, Iraq, Mexico, Thailand, Turkey, and Uruguay, thus bringing the total of the Bank's loans made since its establishment to well over a billion dollars. Among the most significant of the loans thus made was the loan of $7,000,000 to Ethiopia. This loan demonstrates the mixture of technical assistance and financial aid which the Bank gives to its members and lays stress upon the Bank's interest in helping to develop local small-scale private industries. The loan is the first made to any African nation and is also interesting in having been negotiated within the borrowing country rather than in Washington. Not only does the oan cover equipment for the repair of Ethiopia's highways which had leteriorated throughout the war, but the agreement provides for the stablishment of a highway authority, the management of which will be selected by the Government in consultation with the Bank. The administration so chosen will have the duty of training Ethiopian personnel as well as reestablishing a road network. Meanwhile, $2,000,000 of the loan will be made available to a new Ethiopian Developnent Bank which is intended to make loans on reasonable terms to small private industries within the country. Many small factories n the country require capital to finance the procurement of equipment, and this capital must in many cases be foreign exchange. The Ethiopian Government, in consultation with the International Bank, will select a suitable management and staff for the Development Bank. The loan of $9,000,000 to Turkey, which followed shortly after the Ethiopian loan, carries the same idea further. In Turkey, as in most other countries, there are many small-scale, worthwhile private industrial projects which could be undertaken if local capital, foreign exchange, and technical and managerial techniques could be mobilized to carry them out. Private capital exists but has been reluctant to participate in local industrial development. Accordingly, the International Bank, consistent with the policies of the Economic and Social Council, has assisted the Turkish Government in establishing the Industrial Development Bank of Turkey, the capital of which was subscribed by a group of 18 private institutions and the purpose of which is to assist in establishing new private industrial enterprises. The International Bank will supply the foreign-exchange requirements of the projects which the new bank will finance. Meanwhile, the International Bank has made available to the Turkish Bank a general manager who was formerly on the staff of the International Bank. A similar loan has been made to Mexico. The loan to Iraq of $12,000,000 for the construction of a system of flood control on the Tigris River is intended to bring back some of the ancient prosperity of that country. The loan will be secured by an assignment of oil royalties. It will make possible the construction of a dam 50 miles above Baghdad which will divert excess flood waters through a special canal to an unpopulated and barren depression in the desert. The Bank's technical-assistance mission program has also been pushed forward. During the year general diagnostic missions were sent, among other places, to Iran, South Africa, Turkey, and Syria. In the case of Uruguay, the Bank, jointly with the Food and Agriculture Organization, sent a mission to investigate agricultural production, marketing and prices, the dairy industry, soils and fertilizer, for estry, extension services, and cold-storage facilities. The mission will suggest means for the development of the agricultural economy of that country. In Pakistan the Bank cooperated with the United Nations and the Food and Agriculture Organization in a 3-month seminar at which high-level government officials were given the chance to study the complicated problems of combined resource development in the hope that these countries might be assisted in developing wellintegrated plans. Stress was laid upon the problem of how to develop properly worked-out projects for presentation to the International Bank for financing-a technique which most of these countries have found particularly difficult. An indication of the growing prestige of the Bank in the eyes of the financial community comes from the fact that in February 1950 the Bank was able to sell $100,000,000 worth of its 2 percent serial bonds at a premium which represents an interest rate to the Bank of even less than 2 percent and thus to refund earlier issues paying a higher interest rate. In March it sold over $6,000,000 of its Swissfranc bonds in that country. Its net income for the fiscal year ending June 30, 1950, was between $13,000,000 and $14,000,000. The major changes in foreign trade and payments which occurred during 1950 inevitably affected the work of the International Monetary Fund, which, in seeking to promote order and stability in the foreign-exchange field, is constantly concerned for the balance of payments of its 49 member countries. At the outset of the year the Fund had just participated in arranging for a very wide devaluation of currencies in relation to the United States dollar. In its annual report which appeared in September 1950 the Fund found that the immediate effect of the devaluation had been helpful to most of the devaluating countries. The Fund conserved its resources of convertible currency during the year, adhering to an agreement reached in April 1948 that members participating in the aid program of the Economic Cooperation Administration should not purchase United States dollars from the Fund unless in exceptional and unforeseen circumstances. The Fund continued, however, to act as a permanent forum for consultation among its members on foreign-exchange policies and for working out the application of the Fund's articles of agreement as applied to their current problems. As defense expenditures, especially of the United States, also helped to improve members' payments positions in the period following devaluation, the Fund emphasized the need for member governments to adopt rigorous counterinflationary measures under the new conditions. In the field of research, one of the important studies carried out by the Fund in 1950 was the study of the balance-of-payments positions of a number of countries which are contracting parties under the General Agreement on Tariffs and Trade and whose trade restrictions had come under review during the year. The study was carried out at the request of the contracting parties in accordance with an arrangement under which the Fund must be consulted when countries which are contracting parties under the General Agreement justify import restrictions imposed under that agreement on grounds of financial necessity. The study, which concluded that the balanceof-payments position of certain of these countries had sufficiently improved to warrant the relaxation of the restrictions, was discussed by the contracting parties at their Torquay meeting in the fall, and it is anticipated that it will lead to the relaxation of some of these restrictions. 5. Food and Agriculture FOOD AND AGRICULTURAL POLICY Food is a weapon for peace. The dramatic increases in food production which science makes possible, coupled with enlightened measures of land reform, could, if brought to the hungry populations of Asia, the Near East, Africa, and Latin America, ally these people on the side of peace and democracy as no other weapon can do. Food is also a weapon of revolution. The promise of food and of land held out to the hungry, landless peasants of the world is the biggest prize offered by totalitarian leaders of conquest and aggression. It is an essential element of United States foreign policy to mobilize food resources as a great weapon for peace. One channel through which we are making a small effort in this direction is the Food and Agriculture Organization (FAO), the food and agricultural arm of the United Nations. FAO is concerned with the improvement in living standards and conditions of the two-thirds of the world's people who live on the land and make their living by farming, forestry, or fisheries. FAO is equally concerned with improvement in the food and nutrition standards of about two-thirds of the world's peoples living both in the city and on the farm. At least two-thirds of the world's peoplerural and urban-live on intimate terms with poverty, hunger, disease, 941458-51-11 143 |