With respect to the more developed countries, the Bank also reIviewed its interest rates to those countries which are able to cover the bulk of their financial requirements for external capital from market sources. As a result of its study, the Bank in February 1965 decided that it would charge such countries rates of interest approximately comparable to those they pay when borrowing in the market. These would be up to 1 percent higher than the Bank's standard interest rate, which remained at 52 percent during the past year. Pursuant to this policy, the Bank approved a $75 million, 25-year loan in Japan at 61⁄2 percent, and a $100 million, 15-year loan in Italy at 64 percent.

SETTLEMENT OF INVESTMENT
DISPUTES

The Executive-Directors of the Bank in March 1965, approved the text of a Convention on the Settlement of Investment Disputes between states and nationals of other states for submission to the member governments. The convention is designed to promote an atmosphere of mutual confidence between private foreign investors and countries desiring to attract a larger flow of private international capital. Under the agreement, an International Center for the Settlement of Investment Disputes would be established to provide procedures to conciliate

or arbitrate disagreements between private investors and governments of foreign countries where they have invested. The convention, which represents the culmination of several years of intensive preparatory work by the Bank as well as by the legal experts of member countries, will become effective 30 days after it has been signed and ratified by 20 governments.

The Center would be an autonomous international institution under the auspices of the International Bank, and would be administered by an Administrative Council consisting of one representative of each state party to the convention. Its facilities will be available on a voluntary basis to contracting states and foreign investors which are nationals of other contracting states in accordance with rules laid down in the convention. The Center itself will not act as conciliator or arbitrator, but will maintain panels of qualified persons from which conciliators or arbitrators may be selected. Although recourse to conciliation or arbitration will be entirely voluntary, a state and a foreign investor which have agreed to use the facilities of the Center, must abide by the recommendations of the conciliator and comply with the award of the arbitrator. In his letter of transmittal, Mr. George D. Woods, President of the Bank, urged favor

able consideration of the convention which, in his opinion, "can make an important and needed contribution to the cause of economic development." As of June 30, 1965, the convention had been signed by four countries: The Ivory Coast, Jamaica, Tunisia, and the United Kingdom.

IBRD AS COORDINATOR OF EXTERNAL ASSISTANCE

In order to promote a more efficient use and coordination of foreign aid, the International Bank, in conjunction with a group of capitalexporting countries most directly concerned, introduced the idea of the consortium, designed to mobilize and coordinate the flow of external assistance to particular countries. The first consortium was organized in 1958 in support of the development program in India. In 1960, a similar consortium was organized by the Bank for aid to Pakistan. These consortia have met annually since first established. The Bank is also a member of consortia on Greece and Turkey, administered by the OECD.

For certain other developing countries, the Bank has also organized consultative groups of interested capital-exporting countries. Although these groups do not engage in annual pledges of aid, they serve a purpose similar to that of consortia, by identifying priority needs

for development financing and coordinating the bilateral efforts of the donors involved. Since 1962, such groups have been organized at the request of Colombia, Nigeria, the Sudan, and Tunisia. Additional countries are expected to be added shortly to the list of countries where the IBRD performs this coordinating function.

The consortium of governments and institutions interested in the coordination of external aid to India held its 12th meeting in Washington in April 1965, under the sponsorship of the Bank. The meeting was assembled to discuss aid for India during 1965-66, the fifth and final year of India's third 5-year plan. In addition to approximately $4.4 billion of aid pledged during the first 4 years of the third plan, the April 1965 meeting pledged additional aid totaling $1,027 million for commitment during the fifth year of the plan. It is expected that up to onehalf of this aid will be in the form of nonproject assistance. Pledges made by member countries during each year of India's 5-year plan are set forth in table 8.

The U.S. Executive Director of the International Bank, or his Alternate, acting on the advice of the Council, supported the decisions taken with respect to the foregoing matters.

SECURITY SALES AND SALES OF

LOANS

In contrast to a net decrease in each of the four preceding half-year periods, the outstanding funded debt of the Bank during the first half of 1965 increased by approximately $240 million, to a total of $2,724 million.

Increases occurred through the public sale of approximately $282 million in bonds and the private placement of the equivalent of $98 million in notes of the Bank. The bond sales included $200 million of 42-percent, 25-year, dollar bonds, of which $17.9 million were subject to delayed delivery arrangements; Can$25 million (US$23.1 million equivalent) of 54-percent, 25-year bonds; 250 million Deutsche marks ($62.5 million equivalent) of 52percent, 20-year bonds; 60 million Swiss francs ($14 million equivalent) of 434-percent, 18-year bonds; and the private placement outside the United States of $98 million in 44-percent, 5-year, notes, of which $60 million was denominated in Deutsche marks and $38 million in dollars. The funded debt was decreased by $140 million through the retirement of bonds and notes and net purchases for sinking and purchase funds.

Sales of loan maturities continued to decline during the half-year period and amounted to $41.1 million, as compared to $200 million in the first half of 1963. The reduction in sales reflected the Bank's policy of not offering in the U.S. market the obligations of countries subject to the U.S. interest equalization tax, and the impact of the voluntary credit restraint program, as well as rising security yields in Europe. As of June 30, 1965, total sales of loans, including participations, amounted to $1,884.8 million, of which all but $69 million were made without the Bank's guarantee. Of total sales, $977 million has been repaid.

The National Advisory Council gave the approval of the United

States to the Bank's borrowing operations in U.S. currency as well as to sales by the Bank of portions of its loan denominated in U.S. dollars.

FISCAL RESULTS

Income, loans and repayments of the IBRD achieved new records in the fiscal year ended June 30, 1965. The increase in net income from $97.5 million in fiscal 1964 to $136.9 million in fiscal 1965 reflects both an increase in operating earnings and a change in the treatment of loan charges. A major portion of the latter was previously considered as commissions to be credited to the Special Reserve. Since July 1, 1964, with a few minor exceptions, all income from loans has been considered as regular income. Combined net income and loan commissions amounted to $138 million for the year ended June 30, 1965, as compared with $131 million for the previous year.

In July 1965, the Executive Directors of the Bank allocated $61.9 million of fiscal 1965 net income to the Supplemental Reserve Against Losses on Loans and Guarantees, and recommended that the remaining $75 million of net income be transferred to the International Development Association as a grant."

Bank loans in the 1965 fiscal period were in excess of $1 billion, and principal repayments received by the Bank amounted to $136.5 million. Cumulative repayments through June 30, 1965, rose to $1,886 million, approximately one-half of which were made to the Bank, with the remainder to purchasers of borrowers' obligations sold by the Bank.

The Board of Governors approved the recommendation at the annual meeting in Washington in Sept. 1965. The allocation of $75 million is in addition to a $50 million allocation to the International Development Association from the Bank's net income for fiscal 1964. [Footnote in source text.]

[NOTE: The report excerpted above is the last to be submitted on a semiannual basis and the last report dealing with the activities of the previous National Advisory Council on International Monetary and Financial Problems. The new National Advisory Council on International Monetary and Financial Policies, established under Executive Order 11269 of February 14, 1966, will, as provided in Public

Law 89-126,33 thereafter submit reports to the President and to the Congress on a fiscal year basis. Excerpts from the report of the new National Advisory Council for fiscal year 1966 will be printed in the 1966 volume of "American Foreign Policy: Current Documents."]

32 31 Fed. Reg. 2813; also, the Department of State Bulletin, Mar. 14, 1966, pp. 404-405. 33 Approved Aug. 14, 1965 (79 Stat. 519).

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