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TRANSCRIPT
LE COPY 11055Report No. :11055 Type: (PUB)
Title: THE WORLD BANK POLICIES & OP
Author: WORLD BANKExt.: 0 Room: Dept.:OLD PUBLICATION 1960
The
V{0-{a~~hL- -J
-:ANKPolicies and Operations
INTERNATIONAL BANK FOR
RECONSTRUCTION AND DEVELOPMENT
June 1960
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Nio., of Si i ver 1 Ia asterr . 1 Di cZio 1 Total
THE WORLD BANK
Policies and Operations
PREPARED BY THE STAFF OF THE BANK
JUNE 1960
Published by the INTERNATIONAL BANK
FOR RECONSTRUCTION AND DEVELOPMENT
Washington, D. C.
Contents
CHAPTER 1 - ORIGIN, NATURE AND FUNCTIONS . . . 1-9
Underlying Purpose and General Description . . . . 2
The Course of Bank Lending ... . . . .. 5
Issuance of Bank Obligations ... . . . .. 7
Technical Assistance and Mediation . . . . . . . . 8
CHAPTER 2- MEMBERSHIP AND ORGANIZATION . . . 10-19
Composition of Membership and Voting Rights . . . . 10
Withdrawal and Suspension of Membership ... . . 11Organizational Structure . . . . . . . . . . . . 11Board of Governors ... . . . . . . . . . . 12Executive Directors and Management . . . . . . . 13Organization of Staff ... . . . . . . . . . 14Staff Loan Committee ... . . . . . . . . . 18
Offices .... . . . . . . . . . . . . . 18Annual Report, Audit and Administrative Budget . . . 19
CHAPTER 3 - FINANCIAL STRUCTURE . . . . . . . 20-27
Capitalization ..... ......... . 20
The Capital Increase of 1959 .... .... . . 22Primary Sources of Funds for Lending Operations . . 23
Resources Behind Bank Obligations . . . . . . . . 25
CHAPTER 4 - MISCELLANEOUS . . . . . . . . . . 28-33
Relationship with Other International Organizations . . 28Mediation of the Indus Basin Dispute . . . . . . . 30Legal Status, privileges and Immunities . . . . . . . 32
CHAPTER 5 - MAJOR OPERATIONAL POLICIES . . . . 34-49
Assessment of Repayment Prospects . . . . . . . . 34
The Specific Project Provision ... ..... . 36
Selection and Analysis of Projects .. ... .. . 39
Types of Expenditures Financed . . . . . . . . . 43
Methods of Procurement under Bank Loans . . . . . 44
Economic and Financial Policies of Borrowing Country . 45
Continuing Relationship with Borrowers . .... . 46
Promotion of Local Private Enterprise . . . . . . . 47
CHAPTER 6 - PROCEDURES FOR MAKING ANDADMINISTERING LOANS ... . . . . 50-56
Exploratory Discussions and Preliminary Investigation . . 50
Project Examination and Determination of Loan Conditions 52
Methods of Investigation ... . . . . . . . . 53
Formal Negotiations . . . . . . . . . . . . . 54
Administration .... . . . . . . . . . . . 55
CHAPTER 7 - LENDING ACTIVITIES ANDFINANCIAL RESULTS . . . . . . . . . 57-69
General .... . . . . . . ...... . 57
Reconstruction Lending . ...... . . . 59
Development Lending ... . . ... ... . 59
Purposes of Bank Loans ... . ... ... . 60
Distribution of Expenditures under Bank Loans . . . . 64
Currencies Used in Loans . ..... . .. . . 66
Term, Interest Rate and Other Charges . . . . . . . 66
Financial Results of Operations ... ... .. . 68
CHAPTER 8- TECHNICAL ASSISTANCE . . . . . . . 70-84
Assistance in Development Programing . . . . 71
Other Technical Assistance ... . . ..... . 79
Economic Development Institute . . . . . . . . . 80
Training Programs ... . . . ...... . 82
Relations with Other Agencies ... ..... . 83
CHAPTER 9 -THE BANK AND THEINVESTMENT MARKET .. ..... . 85-106
Policy Considerations ... . . ..... . . 86The United States Market ...... . . . .. 86Bond Sales in the United States Market . .... . 89
The Market Abroad .. . .. . . . . . . . . 91The Market Abroad for United States Dollar Issues . . . 92
Borrowing Other Currencies ... . ..... . 93
Belgian Issue .... . . . .. .... . . 93
Canadian Issues .... . . .. ..... . 94
German Issues . . . . . . . . . . . . . . . 95Netherlands Issues ... . . . ..... . . 95
Swiss Issues .... . . . ...... . . 96
United Kingdom Issues . . . . . . . . . . . . 97Action by Other Countries . . . . . . . . . . . 98
Types of Securities Sold by the Bank .. .... . 99Sales of Borrowers' Obligations ... ..... . 100
Joint Bank-Market Operations ... ..... . 102
Holders of Bank Obligations . . . . . . . . . . 105
CHAPTER 10- INTERNATIONAL FINANCECORPORATION (IFC) . . . . . . . . 107-114
IFC Operations ..... .. . . .. . . . 112
CHAPTER 11- INTERNATIONAL DEVELOPMENTASSOCIATION (IDA) . .. .... . 115-121
Purposes ....... . . ...... . 116
Membership and Initial Subscriptions . . . . . . . 116
Operations ....... .. ...... . 117
Resources and Use of Currencies . . . . . . . . . 119
Organization and Management . . . .. .. .. 120
Tables
1. Summary of Funds Available for Loans ... . . . 25
2. Resources Behind Bank Obligations ... . . . . 27
3. Bank Loans Classified by Purpose and Area . . . . . 58
4. Distribution of Expenditures under Loans . . . . . . 65
5. Term of Loans ... . . . . . . . . . . . 66
6. Income and Expenses ... . . . . . . . . . 69
7. U.S. Dollar Bond Issues .9.0. . . . . . . . . 908. Loans Sold and Agreed to be Sold . . . . . . . . 101
9. Joint Bank-Market Operations ... . . . . . . 10310. Estimated Distribution of Bank Obligations ... . . 106
11. IFC Commitments ... . . . . . . . . . . 113-114
12. Subscriptions to IDA . . . . . . . . . . . . 121
Appendices
A. Balance Sheet . . . . . . . . . . . . . . . 124-125
B. Comparative Statement of Income and Expenses . . . . 126
C. Statement of Subscriptions of Member Countries andVoting Power .... . . . . . . . . . . . 127
D. Summary Statement of Loans . . . . . . . . . . 128-129
E. Funded Debt of the Bank . . . . . . . . . . . 130-131
F. Notes to Financial Statements . . . . . . . . . . 132-133
G. Statement of Loans ... . . . . . . . . . . 134-145
H. International Finance Corporation-Membership andSubscriptions to Capital Stock . . . . . . . . .. 146-147
1
Origin, Nature and Functions
EARLY IN WORLD WAR 1i the economic and financial experts of
the Allied Nations began to consider what plans could be made
to meet the economic problems of the peace. They recognized
that if the peace were to be won, attention would have to be
given not only to the immediate relief and physical reconstruction
of economies disrupted by the war but also to "the expansion, by
appropriate international and domestic measures, of production,employment, and the exchange and consumption of goods which
are the material foundations of the liberty and welfare of allpeoples .... " Discussions were held on a variety of proposals
that were intended to help realize these economic goals of the
atlies.Among these proposals, post-war monetary and financial plans
had begun to be considered as early as 1941. From deliberationson these plans over the ensuing three years, the outlines of two
complementary financial institutions emerged. The first-to be-
come the International Monetary Fund-was to promote inter-
national currency stability by helping to finance its members'
temporary balance of payments deficits and by providing for the
Article VII, Mutual Aid Agreement between the United States and Great
Britain.
progressive elimination of exchange restrictions and the observanceof accepted rules of international financial conduct. The secondinstitution-to become the International Bank for Reconstructionand Development (popularly known as the World Bank)-was,as its name implies, to help finance the reconstruction and de-velopment of its member countries.
By the spring of 1944, after prolonged and intensive discussionsbetween Treasury representatives of the United States and theUriited Kingdom and consultations with representatives of othercountries, the proposals for these two organizations had reachedan advanced stage. A United Nations Monetary and FinancialConference was accordingly convened. Following preliminarymeetings at Atlantic City, the representatives of 44 nations as-sembled at Bretton Woods, New Hampshire, on July 1, 1944,and, three weeks later, completed final drafts of Articles ofAgreement for the Fund and the Bank for submission to thevarious participating governments for their acceptance.
All the nations which participated in the Bretton Woods Con-ference except the U.S.S.R., Liberia and New Zealand subse-quently approved the charters of both the Fund and the Bank.The Articles of Agreement of the Bank were formally acceptedby a majority of the participants by December 27, 1945. Sixmonths later, on June 25, 1946, the Bank opened for business andproceeded to call up capital from its member governments.
Underlying Purpose and General Description
The participants at Bretton Woods realized that at the end ofthe war, there would be a pressing need for international capitalto finance both the reconstruction of productive facilities destroyedby the war and an increase in productivity and living standards,especially in the underdeveloped areas of the world. The require-ments were recognized as being so great, and the risks so large,that private capital would be unable to fulfill them without someform of governmental guarantee. The Bretton Woods Conferencefelt that the problem could best be solved by the creation of a new
2
type of international investment institution which would be au-thorized to make or guarantee loans for productive reconstructionand development projects, both with its own capital funds andthrough the mobilization of private capital, and which would beprovided with a financial structure under which the risk of suchinvestment would be shared by all member governments roughlyin accordance with their economic strength. This is the solutionwhich was embodied in the Bank's Artides of Agreement.
The Artides establish the Bank as an intergovernmental in-stitution, corporate in form, all of whose capital stock is ownedby its member governments. The Bank's authorized capital is theequivalent of $21 billion, of which the equivalent of approxi-mately $18.5 billion has been subscribed.' Only part-about one-tenth-of this, however, is paid in. Much the greater part of theBank's capital remains subject to call by the Bank only if requiredto meet its obligations arising out of borrowings or guarantees.
This capital structure provides the Bank both with substantialloan resources from its own paid-in capital and with even moresizeable guarantee resources. The latter, consisting of the uncalledportion of all capital subscriptions enables the Bank to mobilizeprivate capital for international investment, mainly through thesale of Bank obligations to private investors. As the records ofthe Bretton Woods deliberations indicate, the emphasis from thebeginning was not so much on what the Bank could lend directlyout of its paid-in capital as on the concept of the Bank as pro-viding a safe bridge over which private capital could move intothe international field. Indeed, it is one of the unique features ofthe Bank that although it is an intergovernmental organization, itmust rely upon the private investment community for most of itsfinancial resources.
The provision of guarantees to international lenders repre-sented no innovation of itself; several loans to European govern-ments in the early inter-war period, for example, carried the
1 Up to September 1959, the authorized capital was $10 billion. An accountof the action taken to increase the Bank's capital is given in Chapter 3.
3
guarantee of other European governments. The new feature of
the guarantee written into the Bank's charter was the sharing of
the risk on an international basis, with each of the Bank's mem-
bers responsible up to the amount of its capital subscription for
the Bank's outstanding borrowings and guarantees. The amount
of the risk thus guaranteed was limited, as a practical matter,
by the charter requirement that the total outstanding amount of
the loans made or guaranteed by the Bank was not to exceed
100% of its total unimpaired subscribed capital, reserves and
surplus.In drafting the provisions of the Articles of Agreement govern-
ing the use to which the Bank was to put the funds available to
it, whether from its paid-in capital or from the sale of its obliga-
tions, the Bank's founders were acutely aware of the need to avoid
the errors which had characterized much of the international
lending of the past, and particularly during the inter-war period.
Capital raised through sales of securities in foreign capital markets
had frequently made little or no contribution to the productive
capacity of the borrowers. Many of the loans had also been made
without reference to the ability of the borrowers to service new,
or even existing, foreign debt. These lending practices un-
doubtedly contributed to the widespread defaults in the 1930's.
To avoid these errors of the past, the Bank's charter contains
a number of protective provisions governing loans to be made or
guaranteed by the Bank. These loans must be for productive
purposes and, except in special circumstances, must be to finance
the foreign exchange requirements of specific projects of recon-
struction or development. The merits of all projects financed must
be carefully studied and arrangements made designed to assure
that the most useful and urgent projects are dealt with first. The
borrower may be a member government, a political subdivision
or a business, industrial or agricultural enterprise, but if the bor-
rower is other than the government, the loan must be guaranteed
by the member government in whose territories the project is
located, or by its central bank or some comparable agency; in
4
practice, the Bank has always obtained a government, as distinctfrom a central bank, guarantee. The Articles of Agreement enjointhe Bank to act "prudently" in making loans, paying "due regardto the prospects that the borrower and, if the borrower is not amember, that the guarantor will be in a position to meet itsobligations under the loan" . . . . The Bank is also specificallyrequired to make arrangements to ensure that the proceeds of eachloan are used only for the purposes for which the loan wasgranted, with due attention to considerations of economy andefficiency and without regard to political or other non-economicconsiderations.
The charter contains two other provisions governing the char-acter of Bank lending which deserve mention at this point. Thefirst is a prohibition against "tied" loans; that is, the Bank is toimpose no conditions requiring the proceeds of its loans to be spentin the territories of any particular member or members. The sec-ond is a requirement that the Bank must be satisfied, before mak-ing or guaranteeing any loan, that in the prevailing market con-ditions the borrower would be unable to obtain the loan fromprivate sources under reasonable conditions.
The Course of Bank Lending
Although the Articles of Agreement require the Bank to give"equitable consideration to projects for development and projectsfor reconstruction alike," it was contemplated at Bretton Woodsthat the initial emphasis of Bank activity would necessarily haveto be on the urgent problems of reconstruction. And, in fact,the first loans of the Bank, made in 1947 and totaling $497million, were in the nature of emergency assistance to four West-ern European countries to prevent a threatened interruption inthe flow of essential imports: These loans, by permitting theborrowing countries to sustain the volume of imports necessaryboth for continued rehabilitation and operation of their pro-ductive facilities, helped to prevent a disastrous drop in productionand possible economic collapse.
But even when these loans were made, it was already apparent
that the assumptions made at Bretton Woods about the require-
ments for European recovery had been both too simple and too
optimistic. The concept of Bretton Woods had been that the
critical short-range relief needs of Europe after the war were to
be met through donations by the United Nations Relief and Re-
habilitation Administration (UNRRA), which had already been
established; the external financing needed for more permanent
recovery programs, to the extent that it could not be furnished
from other sources, was to be supplied by loans from the Bank.
Recovery was conceived of primarily in terms of the rebuilding
of factories, mines, railroads and other specific productive facili-
ties.By 1947 it had become dear that the physical devastation, dis-
ruption of trade and industrial and governmental dislocations
caused by the war were far greater than had been envisaged at
Bretton Woods. Unforeseen political conflicts accentuated the
economic difficulties. As a result, the requirements for European
recovery at the end of the UNRRA period involved much more
than the reconstruction or modernization of specific productive
facilities; there was also urgent need for financial aid to continue
imports of food, fuel and raw materials which, for the time being,
could come only from the dollar area. Despite substantial credits
from the United States and Canada, European resources of dollar
exchange had fallen to dangerously low levels by the end of 1946.
When it made its reconstruction loans in 1947, therefore, the
Bank recognized that important as this financing was to fill urgent
immediate needs, the long-term requirements for European re-
covery were far too large for the Bank to meet with the resources
at its command and, in fact, were far greater than the amount
which the countries of Western Europe could afford to borrow
with any reasonable prospect of being able to repay. At that time,
the Marshall Plan proposals which eventuated in the European
Recovery Program were already under consideration by the United
States Government and the Bank gave them its full support.
6
When the European Recovery Program came into operation,the Bank turned its attention to its other major responsibility, thefinancing of productive projects in the less developed areas ofthe world. This has since been the principal area of Bankactivities. Since the end of the European Recovery Program theBank's development lending has induded assistance for the lessdeveloped areas of Europe within the Bank's membership. Forexample, the development of Southern Italy has been the objectof large-scale Bank lending. Most of the Bank's developmentloans have been for basic facilities such as power, transportation,heavy industry, and irrigation and land reclamation, which areprerequisites for increased productivity in wide sectors of theborrowing countries' economies.
Issuance of Bank Obligations
The Bretton Woods Conference appears to have assumed thatby virtue of the guarantees of Bank obligations provided by itscapital structure, the Bank would have ready access to the privateinvestment market. The problem of marketing the Bank's se-curities, however, proved to be considerably more complicated.Investors as a group knew little about the Bank or the resourcesbehind Bank obligations; because of the experience of the inter-war years they were reluctant to engage in any investment whichpartook of the nature of foreign lending; and they were hesitantin any event about the purchase of unseasoned securities. Overand above this, at the time when the Bank commenced operationsmost institutional investors in the United States, who constitutedby far the largest group of potential purchasers of Bank securities,were subject to state or federal laws which either prohibited orgreatly restricted their purchase of Bank obligations. It was there-fore necessary for the Bank, before it could raise money in theUnited States market, to undertake a widespread informationprogram and to make intensive efforts to obtain legislationqualifying its securities for institutional investment.
The Bank's marketing activities are discussed in Chapter 9.
7
As that discussion shows, a broad market for Bank obligations
has been created in the United States and by December 31, 1959,
$1,642 million of United States dollar bonds were outstanding,
of which about 40%7 wete held by investors outside the United
States. The Bank also made an early exploration of the possibility
of raising money in the British and Continental investment
centers, and has sold bond issues there from time to time as
circumstances permitted. In the past few years, Germany has
become a source of considerable new capital for the Bank's
operations. Bank bonds have been issued in the capital markets
of Belgium, Canada, Germany, the Netherlands, the United
Kingdom and Switzerland in the currencies of those countries.Total Bank bonds and notes outstanding on December 31, 1959,
were equivalent to $1,990 million.
Technical Assistance and Mediation
The Bank has been increasingly called upon to supplement its
investment activities by providing technical assistance of various
kinds to its less developed member countries. This function was
not stressed at Bretton Woods but, over the years, it has taken
on increasing importance.Advice has been provided as a normal and essential part of loan
operations, and has included help in the determination of priori-
ties among different projects, suggestions with respect to the
technical plans for projects, and recommendations on administra-
tive and organizational arrangements and on means of financing
the local costs of projects. But more and more members' have
asked the Bank to assist them by providing technical assistance
in matters not directly connected with loan proposals. Such help
has been particularly concerned with development programing;
in response to requests, the Bank has sent teams of experts to
many countries and territories to analyze their economies and to
make recommendations designed to form the basis of long-term
development programs. Bank staff members or consultants
retained by the Bank have also helped a number of member
8
countries on other important development problems, such asthe establishment of programming and co-ordinating agencies,the formulation of major economic and financial policies, and theorganization or expansion of local capital markets. A discussionof these activities is contained in Chapter 8.
Increasingly, also, the Bank is called upon to lend its goodoffices in seeking the settlement of economic disputes betweenits member cotntries. The best known example is the role theBank has played since 1952 in the dispute between India andPakistan over the sharing of the waters of the Indus Basin. Othercases concerned disputes arising from nationalization of the SuezCanal and the subsequent military action in the area; the Bankwas able to negotiate two settlements, the first concerning thecompensation to be paid to the Suez Canal Company and thesecond involving a solution of the financial difficulties which aroseout of the Suez conflict between the Governments of the UnitedKingdom and the United Arab Republic.
9
2Membership and Organization
Composition of Membership and Voting Rights
As of December 31, 1959, the Bank had 68 members (see
Appendix C).1 Since the Articles of Agreement require member-
ship in the International Monetary Fund as a condition for ad-
mission to membership in the Bank, the same 68 governments
are also members of the Fund. As already noted, only three of
the 44 governments represented at Bretton Woods-Liberia, New
Zealand and the U.S.S.R.-did not join. After having been a
member since January 1946, Poland withdrew from the Bank in
March 1950. Czechoslovakia was suspended from membership
on December 31, 1953, because of failure to pay the balance on
its capital subscription, and ceased to be a member of the Bank
on December 31, 1954.Each member of the Bank has 250 votes plus one additional
vote for each $100,000 share of capital stock subscribed by it.
The shares and votes of the Bank's member countries are shown
in Appendix C. The Articles provide that with certain designated
' As of December 31, 1959, the applications for membership from Laos and
Portugal had been approved by the Board of Governors. Laos, with a subscription
of $10 million, and Portugal with a subscription of $80 million, had until June 30,
1960, to accept membership.
10
exceptions, all matters before the Bank are to be decided by amajority of votes cast.
Withdrawal and Suspension of Membership
Any member is entitled to withdraw from membership in theBank at any time. Withdrawal is effective on the date whennotice of withdrawal is received by the Bank.
Any member which fails to fulfill any of its obligations to theBank may be suspended by decision of a majority of the Gov-ernors, exercising a majority of the total voting power. Unless asuspended member is restored to good standing within one yearby a similar vote, its membership is automatically terminated.
When a government ceases to be a member, the Bank arrangesfor the repurchase of its shares of capital stock at book value aspart of the settlement of accounts with the member. The govern-ment remains liable, however, for its direct obligations to the Bankas borrower or guarantor and for its contingent liabilities, includ-ing liability on the uncalled 80% of its capital subscription, withrespect to loans or guarantees contracted by the Bank before thedate it ceased to be a member.
Organizational Structure
The Bank's organization consists of:a. A Board of Governors composed of one Govemor and one
Alternate Governor appointed by each member.b. The Executive Directors, now 18 in number, of whom pursuant
to the Artides five are appointed by the five largest shareholders,and 13 are elected by the remaining members. Each ExecutiveDirector appoints an Alternate with power to act for him in hisabsence.
c. An international staff headed by the President, who is selectedby the Executive Directors. As of December 31, 1959, the staffnumbered about 650 persons of 50 different nationalities.
In the discharge of their offices, the President, officers and staffof the Bank owe their duty entirely to the Bank and to no other
11
authority. Under the Articles of Agreement, each member gov-ernment has undertaken to respect the international character ofthis duty and to refrain from all attempts to influence any of thestaff in the discharge of their official responsibilities.
Board of Governors
Under the Articles of Agreement, all the powers of the Bankare vested in the Board of Governors as representatives of theBank's stockholders. However, with certain exceptions, the Boardof Governors is authorized to delegate, and has in fact delegated,its powers to the Executive Directors. The exceptions include theadmission of new members, the increase or decrease of the capitalstock, the suspension of a member, decisions of appeals frominterpretations of the Articles of Agreement made by the Execu-tive Directors, approval of formal agreements with other inter-national organizations, and decisions on distribution of the netincome of the Bank and on the liquidation of the Bank.
The Board of Governors is required to meet once each year.The Inaugural Meeting took place at Savannah, Georgia, inMarch 1946. The annual meetings are held in September of eachyear, jointly with the annual meeting of the Board of Governorsof the International Monetary Fund. Of the 14 annual meetingsup to 1959, eight have been in Washington, D. C., the head-quarters city of the Bank, and the others in London, Paris, MexicoCity, Istanbul and New Delhi. Since many members appoint asGovernors of the Bank and Fund their Ministers of Finance, theheads of their Central Banks or others holding comparable posi-tions, the annual meeting of the Board of Governors has come tobe regarded as an important occasion for high level exchangesof views, both formal and informal, on major international finan-cial and monetary problems.
In cases where a decision by the Board of Governors is re-quired between annual meetings, as for example on the admissionof new members, it is obtained by telegraphic or mail vote. Spe-cial meetings are authorized, but none has so far been called.
12
Executive Directors and Managernent
The Articles of Agreement provide that the Executive Directorsshall be appointed or elected every two years. In accordance withnormal business practice the Directors are responsible for theconduct of the general operations of the Bank. They have officesand hold their meetings at Bank headquarters. Their currentpractice is to have a regular meeting once a month, with frequentspecial meetings to handle specific items of business as they arise.
The duties and remuneration of the Executive Directors andtheir Alternates were the subject of study by a committee of theBoard of Governors established at the Annual Meeting in 1948.The committee noted the major responsibilities assigned to theExecutive Directors under the Articles of Agreement and stressedparticularly the importance of their function in the formulationof Bank policy. It expressed the view, however, that it was notnecessary for the discharge of those responsibilities that an Execu-tive Director and his Alternate both serve on a full-time basis.The report recommended that in the absence of special circum-stances, a country or a group of countries should be representedgenerally by the Executive Director, with the Alternate appearingonly occasionally, or by the Alternate, with the Executive Direc-tor normally appearing only at meetings or other times of specialimportance. The report further recommended that the compensa-tion of Executive Directors and Alternates be based on the timeactually devoted to Bank work.
The report of this committee was approved by the Governorsat the Annual Meeting in 1950, and the recommendations con-tained in the report have since been followed.
A majority of the Executive Directors, exercising 50% or moreof the total voting power, constitutes a quorum. Each appointedDirector casts the votes of the member appointing him and eachelected Director casts the votes of the members whose votescounted toward his election. All the votes which a Director isentitled to cast must be cast as a unit and cannot be divided. For
13
the preliminary consideration of certain policy matters, two stand-ing committees of Executive Directors have been established.They are the Financial Policy Committee and the Pension Com-mittee.
The President of the Bank is selected by the Executive Directorsand acts as their Chairman; he has no vote except a decidingvote in case of an equal division. The President is chief of theoperating staff of the Bank and, subject to the direction of theExecutive Directors on questions of policy, is responsbile for theconduct of the ordinary business of the Bank, organization of itsstaff, and appointment and dismissal of its officers and employees.
The Bank has had three Presidents: Mr. Eugene Meyer, whopresided from June 18, 1946 to December 18, 1946; Mr. John J.McCloy, who served from March 17, 1947 to June 30, 1949; andMr. Eugene R. Black, who has held the office since July 1, 1949.By action of the Executive Directors, the term of Mr. Black'sservice, which was originally due to expire on June 30, 1954, hastwice been extended and now runs until May 1, 1963. The Man-agement of the Bank now consists of the President and two VicePresidents, to whom the President allocates responsibilities.
In the conduct of the Bank's operations, the respective rolesof the Executive Directors on the one hand, and of the Manage-ment and staff on the other, are roughly comparable to those pre-vailing in most corporate institutions. Management and staffcarry on the actual operational activities of the Bank in accordancewith general policies approved by the Executive Directors. Allloans and bond issues, the annual budget, reports to the Boardof Governors and other matters involving policy issues are sub-mitted to the Executive Directors for decision. The ExecutiveDirectors normally take action upon recommendations by theManagement.
Organization of Staff
The organization of the staff is outlined in the chart on thefollowing page, which also shows the names of the principal
14
ORGANIZATION CHARTApril 1960
PRESIDENTEUGENE R. BLACK
VICE PRESIDENTWILLIAM A. B. ILIFF
VICE PRESIDENTJ. BURKE KNAPP STAFF
COMMITTEE
DEPARTMENT OF DEPARTMENT OF DEPARTMENT OF DEPARTMENT OF DEPARTMENT OF MARKETINGOPERATIONS - OPERATIONS - OPERATIONS - OPERATIONS - TECHNICAL DEPARTMENT
EUROPE, AFRICA. FAR EAST SOUTH ASIA AND WESTERN OPERATIONSAND AUSTRALASIA FAREATMIDDLE EAST HEMISPHERE
S. R. coPE M. ROSEN J. RUCINSKI 0. A. SCHMIDT S. ALDEWERELD 6. L. MARTINDIRECTOR DIRECTOR DIRECTOR DIRECTOR DIRECTOR DIRECTOR
ECONOMIC STAFF TECHNICAL OFFICE OF THE LEGAL ADMINISTRATION TREASURER'S OFFICE OFASSISTANCE SECRETARY DEPARTMENT DEPARTMENT DEPARTMENT INFORMATION
ANDPLANNING STAFF
L. B. RIST R. H. DEMUTH M. M. MENDELS A. BROCHES W. F. HOWELL R. W. CAVANAUGH M. N. GRAVES. JR.DIRECTOR DIRECTOR SECRETARY GENERAL COUNSEL DIRECTOR TREASURER DIRECTOR
ECONOMIC DEVELOPMENT INSTITUTE
AN INTERNATIONAL STAFF COLLEGE UNDER THESUPERVISION OF THE MANAGEMENT OF THE BANK
M. L. HOFFMAN - DIRECTOR
officers of the Bank. The main responsibilities of the variousdepartments and offices are as follows:
a. Area Departments of Operations. There are four area depart-ments of operations, each of which is responsible for maintainingoperational relationships with a particular geographical group ofthe Bank's member countries. These four departments cover (1)Europe, Africa and Australasia; (2) Far East; (3) South Asiaand the Middle East; and (4) the Western Hemisphere. Thesedepartments, with the assistance of other appropriate depart-ments, perform the following principal functions for the membercountries within their respective areas: develop plans for loans,missions and related operations; examine loan applications andnegotiate and administer loans; appraise development programs;follow economic developments in and assess creditworthiness ofmember countries; co-ordinate preparation of operational, eco-nomic and technical reports on loan operations; in consultationwith the Technical Assistance and Liaison Staff, plan and directtechnical assistance activities; and negotiate releases of local cur-rency capital subscriptions.
b. Department of Technical Operations. This department has theresponsibility of assessing the merits of projects proposed to theBank for financing and of following the progress of projectsfinanced by the Bank. It is also responsible for investigating andappraising specific fields of economic development in membercountries, and of following developments in various specific fieldsof economic activity, such as agriculture, industry, mining, power,transport and trade.
c. Marketing Department. This department develops and executesprograms for the sale of Bank bonds and portfolio securities.
d. Economic Staff. This office is responsible for advising on generaleconomic problems and on the general aspects of the Bank's eco-nomic approach to its operations, preparing general economicand financial studies, including studies on foreign debt, invest-ment, commodity price trends, and furnishing statistical services.
e. Technical Assistance and Planning Staff. The principal responsi-bilities of this office are to make studies and recommendationson matters of general concern to the Bank not falling within theresponsibilities of any other department or office; maintain liaison
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with the United Nations and other international organizations;develop policies and procedures for administration of technicalassistance and provide staff advice on all technical assistancematters; in co-operation with other departments, recruit tech-nical assistance personnel; assist in the review, editing and pub-lication of general survey mission reports; co-ordinate the activi-ties of the Bank regarding development banks and assist membercountries in their establishment and financing.
f. Of/ice of the Secretary. This office provides secretariat servicesfor meetings and activities of the Board of Governors, the Exec-utive Directors and their committees, and the Staff Loan Com-mittee; plans and co-ordinates meetings of the Board of Gov-ernors and Executive Directors; and processes applications formembership.
g. Legal Department. This department advises the Management,departments and offices of the Bank, the Board of Governorsand the Executive Directors on legal questions relating to allaspects of the Bank's work; prepares legal documents such asloan and guarantee agreements and documents in connection withthe issuance of securities by the Bank; reviews other documentsfrom a legal standpoint; and furnishes counsel to represent theBank in legal proceedings if necessary.
h. Administration Department. This department provides adminis-trative services and supplies; reviews budget proposals; preparesthe administrative budget and administers the Bank's adminis-trative budget program; reviews and approves for payment alladministrative expenses; develops and operates a personnel pro-gram, including a training program; conducts internal audits;and administers the Staff Retirement Plan, the Bank's insuranceprogram and the general files and records.
i. Treasurer's Department. This department advises the Manage-ment on financial policies for the Bank; schedules cash require-ments and provides for the collection, custody, investment anddisbursement of Bank funds; handles questions relating to capitalsubscriptions and participates in arrangements for bond issues;maintains relations with depositories and fiscal agents; examinesand verifies and approves withdrawal applications of borrowers;maintains the Bank's accounting system; and prepares reports onthe Bank's financial position.
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j. Office of Information. This office plans and carries out theBank's public information activities. It is responsible for thepreparation of the Bank's Annual Report. It also prepares pressreleases, articles, booklets and films, maintains a library of photo-graphs, and makes all external distribution of Bank informationmaterial. It maintains relations with press, radio and television,organizes press and information conferences, arranges speakingengagements, and co-operates with the Marketing Departmentin distributing information concerning Bank securities.
k. Economic Development Institute. The Economic DevelopmentInstitute is a staff college operated by the Banl for senior officialsfrom underdeveloped countries. The Institute provides a six-month course of study each year for a selected small group ofexperienced administrators whose daily work involves decisionson economic policy and the formulation and administration ofdevelopment programs or projects. The course of study has anessentially practical orientation and is designed to give the par-ticipants a broad perspective of the problems of economic de-velopment and to increase their effectiveness in carrying out theirresponsibilities.
Staff Loan Committee
The principal instrument for achieving co-ordination of theconduct of Bank operations throughout all departments andoffices is the Staff Loan Committee, whose function it is to con-sider and advise the President on all significant aspects of theBank's work. The Staff Loan Committee is composed of one ofthe Vice Presidents (Chairman), the Directors of each of theArea Departments, the Department of Technical Operations, theLegal Department, the Economic Staff, and the Technical Assist-ance and Planning Staff, the Treasurer and, when marketing mat-ters are under consideration, the Director of Marketing.
Offices
The headquarters of the Bank are located at 1818 H Street,N.W., Washington 25, D. C. The Marketing Department has itsoffice in New York City in the premises of the Federal Reserve
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Bank of New York and the Bank maintains a European office inParis at 4 Avenue d'Iena. In addition, resident representativesof the Bank are stationed in various member countries from timeto time as circumstances require.
Annual Report and Audit
The Bank publishes an Annual Report containing an auditedstatement of its accounts as of the close of its fiscal year onJune 30. The Bank also publishes quarterly a Summary Statementof its financial position and a Profit and Loss Statement showingthe results of its operations. The Bank employs the firm of Price,Waterhouse & Co., as independent auditors.
Administrative expenses of the Bank are controlled throughan administrative budget. This budget is prepared annually by theManagement after careful examination of the projected workprogram of each department and office; it is then presented to theExecutive Directors for their review and approval. The Manage-ment holds budget reviews regularly each quarter with the headsof the departments and offices to reappraise projected work pro-grams, to review expenditures and, when necessary, to preparemodified budget estimates.
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3Financial Structure
Capitalization
Up to September 1959 the authorized capital stock of the Bankwas $10 billion in terms of United States dollars of the weight
and fineness in effect on July 1, 1944. It was divided into 100,000
shares of the par value of $100,000 each.
Under the Articles of Agreement the capital subscription of
each member is divided into three parts:
a. 2% of each subscription is payable in gold or United Statesdollars, which may be used freely by the Bank in any of itsoperations.
b. 18% of each subscription is payable in the currency of the sub-scribing member. These funds may be lent only with the consentof the member whose currency is lent. The Articles of Agree-ment require each member to maintain the value of the Bank'sholdings of currency derived from this portion of the member'ssubscription, if the par value of its currency is reduced or if theforeign exchange value of its currency depreciates to a significantextent in the member's territories. From time to time, the Bankhas received additional amounts of currency pursuant to thisrequirement. Similarly, if the par value of a member's currency
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is increased, the Bank is required to return to the member theincrease in the value of such currency held by the Bank.
c. The remaining 80% of each subscription is not available to theBank for lending but is subject to call only if required by theBank to meet its obligations on borrowings or on loans guaran-teed by it. Payments on any such call may be made either ingold, U.S. dollars, or the currency required to discharge theobligations of the Bank for which the call is made.
The uncalled capital under (c) constitutes assets which the Bankis bound to use when necessary. The obligations of the membersto make payment on such calls are independent of each other; inother words, default of one or more members would not excuseany other member from its obligation to make payment. Callsneed not be deferred until the obligation has actually maturedbut may be made sufficiently in advance of maturity to enable theBank to meet the obligation as it becomes due. No member maybe required to pay more than the unpaid balance of its capitalsubscription. On the other hand, as pointed out in the previouschapter, even withdrawal from membership does not relieve agovernment either from its direct obligations to the Bank or fromits contingent liabilities (including its obligaton to make paymentsof calls on the 80% portion of its subscription) for losses onloans or guarantees contracted by the Bank before the governmentconcerned ceased to be a member.
Thus the uncalled portions of the subscriptions, while notavailable for lending by the Bank, constitute in effect a guaranteeof the Bank's obligations by the Bank's members, with the mem-bers sharing proportionately in the risks of the Bank's loans andeach member putting its own credit behind Bank obligations to theextent of the uncalled portion of its own capital subscription.
This capital structure proved effective in enabling the Bank toborrow large sums in the capital markets of the world, and par-ticularly in the United States, the member country with the largestinvestment resources (see Chapter 9). In buying the Bank'sbonds, investors attach great importance to the security provided
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by the guarantees of the member countries. For example, until
the capital increase in September 1959 the uncalled portion of the
capital subscription of the United States was $2,540 million, and
this guarantee was sufficient to support the Bank's borrowing
operation in the United States for several years.
The Capital Increase of 1959
By the end of 1958 the outstanding funded debt of the Bank
had risen to nearly $2 billion, of which three-quarters was in the
form of U.S. dollar obligations. At the then current rate of
borrowing by the Bank it seemed likely that the Bank's dollar
debt would in a few years come to equal, if not to exceed, the
total of the uncalled portion of the United States subscription and
it was felt that the Bank's future borrowing in the investment
market would be facilitated by an increase in the uncalled portion
of members' subscriptions. Accordingly, at the Annual Meeting
of the Bank's Board of Governors in New Delhi in 1958, the
Board of Governors adopted a resolution proposed by the Gov-
ernor for the United States, that the Executive Directors of the
Bank promptly consider the question of enlarging the resources
of the Bank through an increase in its authorized capital and to
submit an appropriate proposal to the Board of Governors.
In response to this resolution the Executive Directors of the
Bank, in December 1958, submitted to the Governors a number
of recommendations which were adopted by the Board of Gov-
ernors. Pursuant to these, the authorized capital stock of the Bank
was increased from $10 billion to $21 billion, effective Septem-
ber 15, 1959. Each member was given an opportunity to double
its subscription compared to what it was on January 31, 1959.
Since the purpose of the capital increase was to raise the Bank's
guarantee resources, rather than to obtain cash funds from mem-
ber governments for lending, one of the resolutions adopted by
the Board of Governors provides that the 2% and 18% portions
of subscriptions on account of this general increase are to be
called only when required to meet obligations of the Bank for
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funds borrowed or loans guaranteed by it. While this resolutionis not legally binding on future Boards of Governors, the resolu-tion does record an understanding among members that theseportions of subscriptions on account of the general increase shallnot be called for use by the Bank in its lending activities or foradministrative purposes.
In addition to the doubling operation, a number of countries,including Canada, Germany and Japan, were given an opportunityto make special increases in their subscriptions, in addition to the100%o general increase. In order to preserve parity of treatmentbetween members, the subscription of the special increases in-volved the payment by the member countries concerned of 1%oin gold or dollars and of 9%o in the currency of the member.
By the end of 1959 most of the member countries of the Bankhad completed action to increase their subscriptions and the resultwas a rise in subscribed capital to over $18.6 billion by Decem-ber 31, 1959, compared to $9.5 billion a year before. The effectof this large increase in the Bank's capital was to provide massivereinforcement of the security offered to investors and thereforeof the Bank's borrowing power. In the case of the United States,for example, the portion of its subscription remaining on call rosefrom $2,540 million to $5,715 million, and for the United King-dom, from $1,040 million to $2,340 million.
Primary Sources of Funds for Lending Operations
The Bank obtains its funds for loans from the followingsources: payments made by members on account of their capitalsubscriptions; borrowings in the various capital markets of theworld; and net earnings. Sales to investors of portions of theBank's loan portfolio and repayments of loans to the Bank, whilerepresenting only a recovery of funds originally derived from oneof the above sources, have the same effect as new capital in thatthey reduce the amount the Bank would otherwise have to obtainfrom other sources.
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a. Capital Suibscriptions. The portion of the subscription of allmembers which is payable in gold or U.S. dollars, and which isfreely available for lending, amounted to $196 million on De-cember 31, 1959. Payment of an additional $2.5 million in thiscategory had not been made as of December 31, 1959. On thesame date, the member countries had paid in the equivalent of$1,782 million as their national currency subscriptions to theBank's capital. These currencies are available for Bank lendingonly with the consent of the member country concerned. (Theonly exception to the rule is that the Bank may freely use thesesubscriptions to defray its administrative expenses in membercountries, and the national currencies have in fact been used forthis purpose.) As of December 31, 1959, the total of nationalcurrencies that the Bank had been able to use in its lending,including amounts allocated to future disbursements, was over$1,400 million. The remainder of the national currency sub-scriptions were still governed by restrictions of one kind oranother which prevented the Bank from making use of them
for lending.
b. Sale of Bank Obligations. As of December 31, 1959, the Bankhad sold its own obligations in an aggregate principal amountequivalent in various currencies to $2,580 million, of which theequivalent of approximately $1,990 million was then outstand-ing. (See Chapter 9.)
c. Net Earnings. The growth of the Bank's net earnings is de-scribed in Chapter 7. As of December 31, 1959, net earnings,exdusive of commissions amounted to the equivalent of $311million. Those net earnings have been allocated to a Supple-mental Reserve against Losses on Loans and Guarantees and areused in Bank operations.
d. Portfolio Sales and Principal Repayments. As of December 31,1959, the total amount raised through sales to investors of partsof Bank loans (see Chapter 9), aggregated the equivalent of$651 million, of which $69 million was with the Bank's guaran-tee, and $582 million was without guarantee.
Total principal repayments of loans, including prepayments,amounted to $294 million to the Bank and $283 million toinvestors who had purchased parts of Bank loans.
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The following table shows the funds obtained by the Bank forlending purposes from all the foregoing sources. The table doesnot include released national currency subscriptions which havenot yet been allocated for use in the Bank's loan operations orwhich are not available for use without further approval by themember concerned.
TABLE 1
SUMMARY oF FUNDS AVAILABLE FOR LOANS UP To DECEMBER 31, 1959
(In U.S. dollar equivalents)
Portion of subscriptions of all members paid in gold orUS dollars ....................................... $ 195,539,000
National currency portion of subscriptions madeavailable for lending .............................. 1,416,100,000
Total available from capital subscriptions ............. $1,611,639,000Funds available from outstanding bonds and notes ..... 1,989,803,000Funds available from operations and exchange ad-
justments ........................................ 306,700,000Funds available from sales of loans ................... 651,300,000Funds available from principal repayments ............ 293,600,000
GROSS TOTAL ................................. $4,853,042,000Disbursed on Loans ................................. 3,591,195,000
BALANCE AVAILABLE FOR DISBURSEMENT ............... $1,261,847,000
Resources Behind Bank Obligations
Bonds issued by the Bank and its contingent liability on securi-ties guaranteed by it are general obligations of the Bank. Theprincipal resources supporting the Bank's obligations consist ofcash and short-term investments representing both working capitaland the Special Reserve, receivables on account of subscribedcapital (non-negotiable, non-interest bearing demand notes repre-senting national currency subscriptions not needed in operations),the Bank's loan portfolio, and uncalled capital subscriptions.
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The Bank's loan portfolio exceeds the amount of the Bank's
indebtedness, since its loans are in part disbursed out of the paid-in capital subscriptions of member governments and out of the
Bank's retained earnings.
In addition, as required by the Articles of Agreement, there
is a Special Reserve Fund, invested in liquid assets, which may
be used only to meet the Bank's own obligations arising out ofborrowings or guarantees. Under the Articles, during the first ten
years of the Bank's operations a commission of not less than 1%and not more than 11/2% per annum had to be charged on the
outstanding portion of all loans made by the Bank out of bor-
rowed funds and on all loans guaranteed by the Bank, and thecommissions received were to be set aside in the Special Reserve;
after ten years, the rate of commission could be reduced or in-
creased, as deemed advisable by the Bank in its discretion. The
commission charge has remained at 17o to date and has beencharged on all loans, including loans made out of capital. When
the Bank had completed its first ten years of operations in 1956,
the Executive Directors decided to take no action for the time
being with regard to changing the 1% commission. As of De-
cember 31, 1959, the Special Reserve stood at $151 million.
Besides the loan portfolio and Special Reserve, the Bank's obli-
gations have behind them the Bank's unqualified right to call
upon all member governments for the uncalled portion of their
capital subscriptions, aggregating the equivalent of over $16.6
billion. The United States obligation alone is $5,715 million; up
to this amount, therefore, the Bank's obligations on its borrowings
and on loans guaranteed by it are in effect covered by the full
faith and credit of the United States.' It may be noted that, with
the exception of such defaults as occurred in connection with
I Section 7 of the Bretton Woods Agreements Act (59 Stat. 512 el seq.; 22
U.S.C. 286 et seq.), which authorized United States membership in the Bank, gives
the Secretary of the Treasury the authority, without further congressional action,
to make payments on the United States subscription to the Bank as required from
time to time and for that purpose to use as a public-debt transaction the proceedsof sale of certain government securities.
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World War I obligations, Canada, the United Kingdom, and theother Commonwealth countries, the Scandinavian countries, West-ern Europe, and a number of other members whose capital sub-scriptions, with that of the United States, make up more than85% of the total, have never failed to meet all contractual debtservice.
The Articles of Agreement, as noted above, restrict the amountof loans and guarantees by the Bank to 100%o of its unimpairedsubscribed capital, reserves and surplus. In fact, however, theBank's outstanding loan commitments are far from this maximumand are not likely to approach it in the foreseeable future.
The following table summarizes the resources behind the Bank'sobligations:
TABLE 2
RESOURCES BEHIND BANK OBLIGATIONS AS OF DECEMBER 31, 1959
(In U.S. dollar equivalent.r)
Disbursed loans outstanding held by Bank ..... ...... $ 2,669,034,698Uncalled Capital Subscriptions:
United States ..... ..... $ 5,715,000,000Other Membcrs .......... 10,919,010,000
Total ........................................ 16,634,010,000
Receivable on account of subscribed capital .......... 488,000,585Due from banks and other depositories* ............. 167,060,396Investments (including time deposits) ............... 899,860,762Special Reserve .................................... 151,072,783Net excess of miscellaneous assets over liabilities ..... 43,136,318
TOTAL RBsoURCES ................... ............... $21,052,175,542
* Includes gold valued at $735,159.
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Miscellaneous
Relationship with Other International Organizations
Formal relationships between the Bank and the United Nationsare governed by an agreement approved by the Bank's Board of
Governors in September 1947 and by the United Nations General
Assembly in November 1947. The Bank is a specialized agency
within the meaning of Article 57 of the Charter of the United
Nations. The agreement between the Bank and the United Na-
tions specifically recognizes that "by reason of the nature of its
international responsibilities and the terms of its Articles of
Agreement, the Bank is, and is required to function as, an inde-
pendent international organization." The agreement contains
provisions governing such matters as reciprocal representation,
consultation and exchange of information other than confidential
material. It provides that no formal recommendation will be
made by either organization to the other without reasonable prior
consultation, and the United Nations specifically recognizes that
"the action to be taken by the Bank on any loan is a matter to be
determined by the independent exercise of the Bank's own judg-
ment" and that "it would be sound policy [for the United Na-
tions] to refrain from making recommendations to the Bank with
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respect to particular loans or with respect to the terms or condi-tions of financing by the Bank."
At the working level, informal contact has been maintainedby the Bank's staff with the United Nations Secretariat, par-ticularly with the United Nations Technical Assistance Adminis-tration and the Department of Economic and Social Affairs, inorder to exchange information and to avoid duplication or con-flict of work. Bank representatives attend meetings of variousUnited Nations organs when matters of interest to the Bank areunder discussion, including meetings of the General Assembly,the Economic and Social Council, and the regional economic com-missions. The President of the Bank is a member of the Adminis-trative Committee on Co-ordination, which is composed of theSecretary General of the United Nations and the heads of all thespecialized agencies, and Bank staff members participate in thework of subsidiary bodies of that Committee. The Bank alsoparticipates in the work of the United Nations Special Fund,the President of the Bank serving as a member of the three-manConsultative Board to the Fund.
Mutually advantageous working relations have also been es-tablished with other specialized international organizations, par-ticularly the International Monetary Fund (IMF), the Food andAgriculture Organization of the United Nations (FAO), theWorld Health Organization (WHO), the United Nations Edu-cational Scientific and Cultural Organization (UNESCO) and theUnited Nations Technical Assistance Board. There is frequentinformal consultation between the staffs of the Bank and IMF,and members of IMF staff have on occasion participated in Bankmissions. In certain administrative fields, such as the maintenanceof facilities used by both organizations and the establishment ofstaff pension and health programs, joint or co-operative arrange-ments have been made by the Bank and IMF. Close workingrelationships have been established with FAO, both through Bankattendance at many FAO meetings and through frequent staffcontacts. FAO normally helps to recruit, assists in the briefing,
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and reviews the reports of the agricultural members of Bank
general survey missions; in some cases FAO has also shared the
costs of those mission members. In several cases joint Bank-FAOmissions were organized to survey the agricultural sectors of the
economy of a member country and to formulate recommendationsfor further development of agricultural production. When Bank
general survey missions have included experts in the fields of
public health and education, the Bank has received the help of
WHO and UNESCO in recruiting appropriate personnel.In helping to organize the Institute of Scientific and Industrial
Research in Ceylon early in 1955, the Bank worked with the
United Nations Technical Assistance Administration.The Bank is represented at the annual meetings of the Bank
for International Settlements. It also maintains liaison with the
Organization of American States, the Organization for EuropeanEconomic Co-operation and the Consultative Committee on the
Colombo Plan.
Mediation of the Indus Basin Dispute
In September 1951, Mr. Eugene R. Black, President of the
World Bank, wrote to the Prime Ministers of India and Pakistan
offering the Bank's good offices toward the negotiation of an
agreement on the sharing of the waters of the Indus system of
rivers, which had become a matter of dispute between the two
countries as a consequence of the partition of 1947. This initiative
was accepted by both Governments and was followed by a series
of negotiations, with the Bank acting as a mediator, which have
continued for the past eight years. The negotiations reached a
decisive point with the visit to India and Pakistan in May 1958
of Mr. Black and Mr. W. A. B. Iliff, the Bank's Vice President
who has had charge of the negotiations from the beginning.
During this visit, agreement was secured from both Governmentsto certain general principles affording a satisfactory basis for
working toward a final settlement. In August 1958 work began
on the drafting of a Water Treaty between the two Governments.
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This Treaty, which was expected to be completed in mid-1960,is based on a division of the Indus Waters on the lines of theProposal made by the Bank to the two Governments in February1954. Under this Proposal the three Eastern Rivers of the Indussystem (Sutlej, Beas and Ravi) would be for the use of India,and the three Western Rivers (Indus, Jhelum and Chenab) wouldbe for the use of Pakistan.
This division of the waters necessitates the construction ofworks to transfer, from the three Western Rivers, supplies tomeet the irrigation uses in those areas of Pakistan which havehitherto depended on supplies from the three Eastern Rivers.The effect of this transfer would be to release the whole flowof the three Eastern Rivers for irrigation development in India,and, as part of the Treaty, India would agree to contribute towardthe costs of these works. The system of works to be constructedwould, however, provide further substantial additional irrigationdevelopment both in India and Pakistan and, as well as irrigation,would develop important hydroelectric potential in both countries.It would also make an important contribution to soil reclamationand drainage in Pakistan, and provide a measure of flood protec-tion in both countries.
It is estimated that the total cost of the system of works toachieve these results would be approximately $1,000 million,partly in foreign exchange and partly in local currencies.
The Bank has evolved a Plan to finance the required expendi-ture and has had assurances from certain friendly governments oftheir readiness to' participate in the cost of the Plan, over andabove the amounts to be contributed by India and Pakistan andby the Bank itself. The implementation of the financial plan,and the participation of the governments concerned would, ofcourse, be contingent on the ratification of the Water Treaty byIndia and Pakistan and would be subject to such parliamentaryand congressional action as may in each case be necessary. Theparticipation of each of the friendly governments concerned wouldbe as follows:
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A. IN FOREIGN EXCHANGE
Australia .L. LA 6,964,286 in grantsCanada ....... Can.$ 22,100,000 in grantsGermany ....... DM. 126,000,000 in grantsNew Zealand ........ NZ. 1,000,000 in grantsUnited Kingdom..£ 20,860,000 in grantsUnited States ....... U.S.$177,000,000 in grants, and
U.S.$103,000,000 in loans
B. IN LOCAL CURRENCY
United States ...... The equivalent of U.S.$235,000,000
The President of the World Bank is prepared to recommend
to the Bank's Directors that the Bank should participate with
loans to India and Pakistan of the order of $103 million.
The Bank's financial plan envisages that all construction con-
tracts would be open to competitive bidding, and that the foreign
exchange contributions would be freely usable for purchases any-
where in accordance with procedures similar to those followed
by the Bank in its normal operations. The costs of the construc-
tion program would be spread over a period of approximately
ten years, and the general supervision of the program would be
undertaken by the Bank.
Legal Status, Privileges and Immunities
The Articles of Agreement contain provisions which accord to
the Bank, in the territories of each of its members, legal status
and certain privileges and immunities. Each member government
is required to take whatever action is necessary in its territories
to make these provisions effective under its own law. The more
important of these provisions of the Articles of Agreement may
be summarized as follows:
a. Legal Status.The Bank has full juridical personality with capacity to makecontracts, to acquire and dispose of property, and to sue and besued.
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b. Jldicial Process.Actions may be brought against the Bank in the territories ofany member in which the Bank has an office, has appointed anagent for accepting service or notice of process, or has issuedor guaranteed securities, but no actions against the Bank may bebrought by its members or persons acting for or deriving daimsfrom its members.
c. Privileges and Immunities.The Governors and Executive Directors, and their Alternates,and the officers and employees of the Bank are immune fromlegal process for acts performed by them in their official capacity,except when the Bank waives such immunity. Unless they arelocal nationals, they are to be accorded by each member govern-ment the same immunities from immigration restrictions, alienregistration requirements and national service obligations, and thesame treatment in respect of traveling facilities, as are accordedto officials of comparable rank of other member governments.
The archives of the Bank are inviolable. The assets of theBank are immune from seizure, attachment or execution prior todelivery of final judgment against it. The official communica-tions of the Bank are to be accorded by each member the sametreatment accorded to official communications of other members.
The Bank, its assets, property, income, and its authorizedoperations and transactions are immune from all taxation andfrom all customs duties. The Bank is also immune from liabilityfor the collection or payment of any tax or duty.
No tax is to be levied on or in respect of salaries paid by theBank to Executive Directors, Alternates or employees of the Bankwho are not local nationals.' No tax is to be levied on anysecurity issued by the Bank which discriminates against thatsecurity solely because it is issued by the Bank, nor is any suchtax to be levied if its sole jurisdictional basis is the place orcurrency in which the security is issued, made payable or paid,or the location of any office of the Bank.
1 Whether or not a person is taxed on his Bank salary depends upon the lawsof his own country. Since the laws of different members vary in this respect, theburden of taxation is unequal. To assure equality of treatment of its staff, the Banksets salaries on a net-of-tax basis. If an employee is required by his governmentto pay taxes on his Bank salary, the Bank pays him an amount in addition to hisnet-of-tax salary designed to cover such taxes. In computing the amount of thisadditional payment, it is assumed that the employee's gross salary (net-of-tax salaryplus tax reimbursement) is his only income.
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5Major Operational Policies
THIs CHAPTER DESCRIBES the major operational policies of the
Bank. These policies relate largely to the methods and standards
by which the Bank seeks to determine how much it can prudently
lend in any member country, for what purposes its loans should be
made, what types of loan are most likely to achieve those pur-
poses, and the conditions which need to be established to assure
that the Bank's financing will in fact be effective. Although most
of the policies described in this Chapter derive directly or in-
directly from general provisions of the Articles of Agreement,
they are examined here from the standpoint of the way they have
actually been applied in the solution of practical operating prob-
lems. It should be emphasized that the Bank is operating in a
complicated and largely new field, and in an economic environ-
ment which is constantly changing. These circumstances have
required, and will continue to require, that the Bank keep its
policies flexible.
Assessment of Repayment Prospects
In making or guaranteeing a loan the Bank is obliged under its
Articles of Agreement to pay "due regard to the prospects that
34
the borrower, and, if the borrower is not a member, that theguarantor, will be in a position to meet its obligations under theloan;" the Articles further enjoin the Bank to act "prudently" inthe interests both of the borrowing country and of the membersas a whole. Even apart from this provision of the Charter, itwould be implicit in the concept of the Bank as a continuinginstitution, designed to operate on a sound business basis andwith funds borrowed in the private market, that it should makeloans only where there are reasonable prospects of repayment.
This does not mean, of course, that the Bank adopts the stand-ards of the market place in determining how much it can lend inindividual countries. On the contrary, as already noted, one of theprincipal reasons for creating the Bank was to have an agencywhich would accept the special risks inherent in international in-vestment in cases where, by reason of those risks, private in-vestors were unwilling or unable to act unaided. For example,the Bank must accept the risk of another world war if it is toachieve the purposes envisaged in its Articles of Agreement.Similarly, the Bank has to accept the risk of a recurrence of aworld-wide depression of the type experienced in the 1930's; infact, for the long term the Bank adopts for operational purposesthe assumption that production, income and trade in the worldas a whole will continue to expand. But the Bank's acceptanceof risks of this type affecting the creditworthiness of its borrowersgenerally does not relieve it of the obligation to make an objec-tive economic appraisal of the amount of external debt which eachprospective borrowing country can reasonably be expected toservice and to keep its loans within the limits so determined.
The assessment of repayment prospects involves an exerciseof judgment after consideration of a multitude of factors. Theavailability of natural resources and the existing productive plantwithin the country are the obvious starting points, but equallyimportant is the capacity of the country concerned to exploitits resources and operate its productive facilities effectively. Thejudgment required therefore involves, among other things, an
35
evaluation of the effectiveness of the government administrationand of the business community, the availability of managerial,supervisory and technical skills, the scale and character of invest-
ment, and the economic and financial policies which are likelyto be followed, particularly as they affect the level of domestic
savings and the flow of foreign private capital. The probable
impact of all these factors upon the country's future balance ofpayments must then be assessed in the light of such considerations
as the likely prospects for the country's principal exports andimports, and the effect of population increases.
But creditworthiness is not determined by economic forces
alone; within fairly wide limits it is determined, also, by theintangible factor of the country's attitude towards its foreign
debts. A country which shows a willingness to maintain debtservice at the expense, if necessary, of sacrifices in consumption
standards is plainly a better credit risk than a country, even witha potentially somewhat stronger economy, which does not treatits foreign obligations with equal seriousness. In this connection,
the past debt record of the country is significant. To be sure,events have sometimes made defaults inevitable, but in suchcases the attitude of the country to its obligations, and the sort
of settlement it has made or offered to its creditors, are valuable
guides in judging credit for future loans. The Bank is convincedthat its loans are likely to be most effective, and repayment pros-
pects therefore brightest, where the government shows a serious
and courageous approach to its economic and financial problems
and regards the maintenance of both internal stability and external
credit as important means of promoting the country's long-term
development.
The Specific Project Provision
Underlying many of the Bank's lending policies is the provision
of the Articles of Agreement requiring that "loans made or guar-
anteed by the Bank shall, except in special circumstances, be for
the purpose of specific projects of reconstruction or development."
36
The objective of this provision is simply to assure that Bankloans will be used for the most productive purposes. In effect, theonly requirement which it imposes is that, before a loan is granted,there shall be a clear agreement both on how the proceeds of theloan are to be expended and on what the loan is expected toachieve. Otherwise it would be impossible for the Bank to judgewhether or to what extent a loan is likely to be effective in raisingthe level of production.
In the early days of Bank operations, there was considerablecriticism of the specific project approach, but the criticism wasalmost always based on the assumption that the Bank examinesthe merits of particular projects in isolation, without referenceto their relation to the over-all development needs of the borrow-ing country. In fact the Bank does precisely the opposite. As ismore fully explained below, the Bank seeks in the case of eachborrowing country to determine the appropriate investment priori-ties and then to adapt its financial assistance to them. Consistentlywith this approach the Bank has encouraged its members to for-mulate long-term development programs and has provided anumber of them with substantial technical assistance for thispurpose. The existence of such a program, particularly in coun-tries whose investment requirements are large in relation to theiravailable financial resources, greatly facilitates the task of deter-mining which projects are of the highest priority in the light oftheir prospective contribution to the program as a whole.
Once a determination has been made of the most urgent needsof any member country, the only safeguard by which the Bankcan assure that its resources are in fact used to meet those needsis to require, before granting a loan, that an agreement be reachedwith the borrower on the precise purposes of the loan, whetherit be for a single project or for a program of related projects. Ifthe Bank were to make loans for unspecified purposes or for vaguedevelopment programs which had not been worked out in termsof the specific projects by which the objectives of the program areto be achieved, there would be danger that the Bank's resources
37
would be used either for projects which were economically or
technically unsound or had low priority, or for economically un-
justified consumer goods imports.This danger is by no means hypothetical. Many projects pre-
sented to the Bank, particularly in the earlier years of its opera-
tion, were far from satisfactory in form. In many cases there were
inadequate or incorrect cost estimates; there were also frequently
deficiencies in the technical plans or proposed financial or ad-
ministrative arrangements. During the course of discussions be-
tween the Bank and the borrower, it has often been possible to
work out modifications of a project to reduce its cost, to increase
its technical efficiency or to improve its financial or organizational
features. And occasionally a substitute project or one conceived
on a somewhat different scale has been found to be more useful or
more economic than the one originally proposed.
There are special cases, of course, where detailed project in-
vestigations are neither necessary nor feasible. The 1947 recon-
struction loans to France, Denmark and the Netherlands, for
example, were designed to meet emergency needs of those coun-
tries for foreign funds to finance a large variety of imports essen-
tial to the rehabilitation and continued operation of their in-
dustries. Because those needs affected so many different sectors
of the economy, because it was so urgent to assist in meeting
the needs in order to prevent a disastrous dedine in production,
and because the Bank had satisfied itself that the goods financed
by the loans were to be used for essential and productive purposes,
the Bank was willing to make the necessary financing available
without detailed examination of the specific projects in connection
with which the goods were to be employed. As these loans indi-
cate, the specific project provision is not interpreted as committing
the Bank to a single inflexible lending technique to be applied
without regard to the actual needs of a given situation. It is rather
a lending policy which, in the opinion of the Bank, is desirable
in the vast majority of cases to ensure that member countries
use their limited capacity for foreign indebtedness to the best
38
advantage, and make the best use of the funds lent to them bythe Bank.
Selection and Analysis of Projects
The available resources of every country, and its capacity toborrow abroad, are limited. To the extent that they are devotedto particular investment projects, other projects may have to beabandoned or delayed. To be of maximum effectiveness, there-fore, Bank investment must be devoted to those undertakingswhich will contribute most to strengthening the economy of theborrowing country.
In practice, the Bank seeks to accomplish this objective by in-vestigating the over-all economic position of the borrowing coun-try, with particular reference to its proposed investment expendi-tures and probable investment resources, and the relation ofindividual projects to the country's major development needs.This investigation may reveal, first, that some projects which havenot been submitted to the Bank and for which financing has nototherwise been arranged nevertheless merit a high priority; and,second, that a number of those submitted to the Bank are ofrelatively low priority. The Bank expresses its views accordinglyin its discussions with the authorities of the country concerned,emphasizing its preference for financing the projects that seemmost urgently required and advising postponement of those thatappear less immediately important to the country's development.
There is no single test by which the relative urgency and pro-ductivity of various alternative projects can be judged. The situa-tion in each country must be considered on its own merits. Inevery case, however, the Bank's general approach is the same:it seeks first to determine what are or should be the importantgoals of a proper investment program and then to gauge therelative priority of the various projects by the extent of theircontribution to those goals.
Where the project under consideration is intended to pay itsway, such as a power system, railroad or manufacturing plant,
39
the Bank wishes of course to satisfy itself, before granting a loan,that the enterprise is likely to achieve that objective. But therelative profitability of different projects is frequently not a
sufficient test of their relative contribution to a country's develop-ment. In many cases, certain basic investments in public utilities,transportation and ports, flood control, reclamation, irrigation andsimilar projects are required before other investments in more
immediately profitable activities can be undertaken. The indirect
benefits properly attributable to these basic investments may bevery great even though the direct earnings of the activities, atleast in the short run, are not high or may even be nonexistent.
For example, a highway system, unless it involves toll roads,yields no direct revenue but it may foster all kinds of industrial
and agricultural activity. Similarly, flood control, irrigation and
land reclamation projects may often be among the most usefuland most urgent investments to be undertaken, even though, if
their cost is paid out of general tax revenues rather than fromwater charges or other direct assessments, they provide no direct
financial return.As a matter of general policy, derived implicitly from the
Articles of Agreement, the Bank concentrates its lending on proj-
ects designed to contribute directly to a productive capacity and
normally does not finance community projects of a primarily
social character, such as street-paving, water supplies, sewage,
housing, hospitals and schools. Although projects of this latter
type are plainly basic to the development of any country, the Bank
believes that its loans, which normally finance only a small part
of the total investment expenditures of the borrowing country,
can most effectively be applied in the more directly productive
sectors of the economy.Determination of the economic priority of the project is, of
course, only a first step. The Bank also needs to assure itself that
the technical, financial and administrative plans for the project aresatisfactory. Determination of these points often involves in-vestigation, study and negotiation over a broad field. For example,
40
the Bank wishes to be satisfied that the engineering plans havebeen competently drawn, that the project is suitably designed (andnot unnecessarily elaborate), and that construction will be en-trusted to competent hands and will be properly supervised. Itwishes to be satisfied, too, that cost estimates are as complete andaccurate as possible and that the financial structure of the enter-prise is appropriate for the type of venture involved. The arrange-ments for obtaining the remainder of the capital not supplied bythe Bank are also carefully scrutinized to determine their ade-quacy to assure prompt completion of the project. If the planningor proposed arrangements appear unsatisfactory in any of theserespects, the Bank seeks to help the borrower to work out suitablemodifications.
In making the necessary preparations for a successful projectthe Bank believes that considerable advantages can often be ob-tained if the borrower calls in consultants. Employment of con-sultants can protect the borrower against unnecessary expendituredue to imperfections in the broad design, and can insure thatengineering and other factors are thoroughly investigated andplanned before work begins. During actual construction theemployment of consultants to supervise the work of contractorsand others can help to keep down costs and to guard againstdelays in the construction schedule. The Bank, therefore, recom-mends to its borrowers that they employ consultants on all projectswhere benefits of this kind are likely to be derived.
The Bank places particular stress upon the assurance of ade-quate management for the project-a problem of substantial diffi-culty in many underdeveloped countries where managerial andadministrative experience is often extremely limited. Becausemanagement is so often the key to the success of projects pre-sented for Bank financing, it is the practice of the Bank, in thosecases where adequate local management is not available, to sug-gest that the borrowing country or the enterprise concerned lookabroad for organizations or individuals qualified to assist inrunning the enterprise, at least during the initial stages, and to
41
provide appropriate management training to local personnel.Where this type of arrangement is agreed to, the Bank uponrequest frequently helps the borrower to find individuals qualifiedfor the task. Thus before advancing funds for the project, theBank always seeks to satisfy itself that the management will bewell constituted, regardless of nationality. In respect of a numberof government projects, the Bank has asked that their operationbe entrusted to a quasi-autonomous authority, or in some otherfashion be insulated, so far as possible, from political pressuresand rigidities of government administrative procedures. In anumber of cases, the Bank's help has been sought and given inthe establishment and staffing of operating authorities of this sort.
Because of the many other claims upon public funds for projectsunattractive to private capital, the Bank believes that, to thegreatest extent practicable, competitive industry should be left toprivate enterprise. This is not to say that the Bank has an absolutebar against loans to government owned industries but it willundertake such financing only in cases where private capital is notavailable, and if it is satisfied, after thorough examination, thatthe government's participation will be compatible with efficientoperation and will not have an unduly deterrent effect upon theexpansion of private initiative and enterprise.
The Bank recognizes, of course, that by financing one particularinvestment, it may be releasing the borrower's other resources forsome other investment. This is a principal reason why the Bankseeks to consult with its member countries not only on the meritsof projects for which loans are requested but concerning thecountry's projected investment as a whole. The fact that oneeffect of its loan may be to release resources for other uses doesnot, however, relieve the Bank in any way from the obligation ofsatisfying itself that the particular projects it finances are eco-nomically and technically sound and have a high priority. As hasalready been noted, the Bank's project investigations have fre-quently resulted in more effective utilization of the resources of
42
both the Bank and of its borrowers. Furthermore, as the under-developed countries have become more generally familiar withthe Bank's method of investigating projects and with the criteriait applies, they have tended gradually to apply similar standardsto the investment projects which they finance from their ownresources.
Types of Expenditures Financed
It is the Bank's established practice not to finance the wholecost of any project or program. The Bank's normal lending takesthe form of loans in foreign exchange to finance that part of thecost of the project or program representing the requirements forimported goods and services. The use of Bank loans to cover onlythese direct import needs meets the development financing re-quirements of the borrower and, at the same time, assures thatthe foreign exchange furnished by the Bank will be used fordirectly productive purposes. Moreover, the policy whereby suchcountries meet local currency expenditures without drawing upontheir limited external creditworthiness is a practical way of assur-ing that they will mobilize their own resources to meet a sub-stantial part of the cost of the projects or programs concerned.
The situation is different in the case of those countries, primarilycapital equipment producing countries, whose direct foreign ex-change requirements for imported capital goods for investmentprojects or programs suitable for Bank financing are small inrelation to their creditworthiness. Such countries may not alwayshave sufficient savings of their own to provide all the capitalrequired for productive projects or programs of high priority andfinancing them by credit creation might jeopardize monetarystability. In such cases, the Bank is willing to consider loans offoreign exchange to finance a portion of the local expendituresin connection with projects or programs of a type otherwisequalified for Bank financing, although, as in the case of directimport loans, the borrowing country itself will normally be ex-pected to provide the major part of the cost. Cases like this are,
43
however, regarded as an exception to the normal pattern of Bank
lending. The Bank's Articles of Agreement also permit it inexceptional circumstances, to make a loan in the borrower's own
currency.
Methods of Procurement under Bank Loans
In accordance with provisions of the Articles of Agreementthe Bank does not tie use of the proceeds of a loan to a particular
source of supply; borrowers are free to use the proceeds to makepurchases in any member country. In addition, purchases may bemade in Switzerland, in recognition of the fact that Switzerland,
although not a member of the Bank, has co-operated closely infinancial matters and has established by agreement a special re-
lationship with the Bank.The Bank is required by the Articles of Agreement to ensure
that loan proceeds "are used only for the purposes for which theloan was granted, with due attention to considerations of economy
and efficiency." Indeed, the Bank attaches great importance, in its
own interest as well as that of the borrowing country, to the
procurement of the goods needed for a project on the best possible
terms. Moreover, as a co-operative international institution among
whose principal purposes is promotion of the "long-range bal-
anced growth of international trade," the Bank wishes all of its
member countries to have a fair opportunity to supply goods
which are financed by Bank loans. To this end the Bank en-
courages its borrowers to obtain supplies on a competitive inter-
national basis unless this procedure is clearly inappropriate. In
some cases, in order to make sure that maximum benefit is ob-
tained from this system of procurement, the Bank may advise a
borrower to employ a qualified consultant to assist in determiningthe qualifications of bidders, in preparing specifications and in
analyzing the bids.But circumstances will sometimes arise where, although the
goods are to be imported, international competition may not be
appropriate. Cogent reasons may be advanced by the borrower
44
for making his purchases in some particular market: such reasonsmight include the desire to match existing equipment in order toavoid complications and expense in maintenance and spare parts;familiarity of the operating organization with certain types ofequipment; the availability of dealers' maintenance and servicefacilities for specific types of equipment; or the fact that the equip-ment required is available only in one market.
Even where international competition has not been adopted forprocurement of equipment, the Bank satisfies itself before makingdisbursements that the equipment is suitable for the project andthat the terms of the purchase are reasonable.
The Bank never requires, or even proposes, that a borrowershould place a contract with a designated supplier of goods orservices or that competition should be restricted to a designatedgroup of suppliers. Nor does the Bank furnish lists of suppliersto its borrowers. Decision regarding which suppliers should beinvited to bid and to which of them the contract is to be awardedis the responsibility of the borrower, subject only to the ability ofthe borrower to satisfy the Bank as to the suitability of the goodsand the reasonableness of the terms of purchase.
Economic and Financial Policies of Borrowing Country
It happens not infrequently that the Bank's examination ofgeneral economic conditions in the borrowing country reveals theexistence of economic or financial practices or policies which soadversely affect the financial and monetary stability of the countrythat, if continued, they would endanger both the productive pur-poses and the repayment prospects of a Bank loan. In such cases,it is the policy of the Bank to require, as a condition of Bankfinancing, that the borrowing country institute measures designedto restore stability to its economy. The Bank does not, of course,insist that all remedial measures which may appear necessary inthe case of any given country be completed before that countrymay qualify for a loan. On the other hand the Bank is not nor-mally willing to rely simply on a representation that such remedial
45
measures will in due course be taken. The Bank's position ismidway between these extremes; it requires concrete evidence thatthe government is actually taking appropriate steps to establishstability, but, once given such evidence, it is usually willing tomake a loan concurrently with the execution of the measuresadopted.
The Bank has taken a similar position in the case of those mem-ber countries whose. credit is impaired by the existence of an un-settled default on their foreign obligations. The Bank is obliged,under its Articles of Agreement, to encourage international invest-ment for the development of the productive resources of its mem-bers. It has, therefore, a direct interest in the creation and mainte-nance of satisfactory relations between its member countries andtheir external creditors. Accordingly, the Bank's normal practiceis to inform loan applicants who are in default on foreign obliga-tions that the Bank will be unable to assist them unless and untilthey take appropriate steps to reach a fair and equitable settlementof their debts. It may be added that this problem, which wasserious in the immediate post-war period, has been reduced to verysmall proportions as a result of the progress made by the Bank'smember countries in dearing up defaults.
There are other types of governmental policies, too, which mayso adversely affect the future economic growth of the borrowingcountry, that they serve as a deterrent or a bar to Bank lending.Such a case is the adoption of rate policies for utilities, whetherpublidy or privately owned, whidh are so restrictive that theutilities cannot operate on a sound basis, still less provide forfuture expansion.
Continuing Relationship with Borrowers
It is the Bank's practice to maintain a dose relationship with itsborrowers throughout the life of each loan. There are two mainaspects to this continuing relationship. First, the Bank operatesprocedures to assure that loan funds are expended only for au-thorized goods or services and dosely follows the progress of the
46
projects being financed. Secondly, the Bank keeps in touch during
the entire life of the loan with economic and financial develop-
ments in the borrowing country through information submitted
by the government, periodic visits to the country by Bank officials,
and consultation and exchange of views with the government's
representatives.The objective of the Bank's check on the progress of the projects
is to bring to light at the earliest possible moment unforeseen
difficulties, technical, administrative, financial and the like, which
frequently arise in the execution of large-scale construction pro-
grams. Early knowledge of the existence or the prospect of such
difficulties puts the Bank in a position to discuss possible solutions
with the borrower in good time. In this manner, a number of
difficulties which might have hindered the successful accomplish-
ment of various projects have been averted or overcome.
Similar considerations motivate the Bank in giving continuing
attention throughout the life of each loan to the general economic
and financial conditions in the borrowing country. One objective
is, of course, to ensure that the maintenance of service on Bank
loans is not jeopardized by the emergence of conditions which
might reasonably be prevented. But the Bank also has a broaderobjective in view. By keeping closely in touch with the progress
of its members, the Bank hopes to be of some assistance to them
in meeting important economic problems. The member countries,in turn, are able to discuss their plans for investment well in
advance and to obtain an early indication of the Bank's opinion.
On both sides this tends to facilitate subsequent financing from
the Bank or from other sources.
Promotion of Local Private Enterprise
In its efforts to stimulate development, the Bank places special
stress upon the growth and expansion of the private sector of the
economy. A great many of the Bank's loans are designed, either
directly or indirectly, to stimulate private investment, and the im-
portance of private enterprise, particularly in directly productive
47
pursuits, has consistently been emphasized by Bank general surveymissions.
The principal lending to private enterprise has been in heavyindustry and power generation. Examples of the former are loanstotaling over $155 million to the two large privately owned steelcompanies in India, and a series of loans to the Japanese steelindustry, totaling about $150 million. Loans to private powercompanies included almost $120 million to the Brazilian TractionCompany, and $37 million to the Mexican Light & Power Com-pany, which distributes electricity in Mexico City.
Loans directly to private enterprise are limited by the require-ment of the Bank's Articles that any such loan must be guaranteedby the government or by the central bank or its equivalent. Asa result, a great deal of the Bank's lending for industry is carriedon through the intermediary of a development bank, which candraw on World Bank loans as a source of foreign exchange tofinance new industrial ventures. The Bank attaches such impor-tance to development banks as instruments to assist the develop-ment process, particularly in the private sector, that it has done agreat deal to foster existing development banks and to assist insetting up new ones wherever appropriate. In addition to makingfinance and technical advice available to development banks, theBank has published two studies on their structure and operation,with a view to providing information and guidance to all coun-tries operating or wishing to operate in this field. The first study,entitled "Development Banks" by William Diamond, a staff mem-ber of the Bank, was published in October 1957, and the second,"Problems and Practices of Development Banks" by Shirley Bos-key, another member of the Bank's staff, was published at thebeginning of 1960. Both books are obtainable from The JohnsHopkins Press. These two studies are based on the Bank's manyoperations in the development bank field and draw freely on theexperience of institutions in many parts of the world.
It still remains true, however, that direct Bank lending forprivate enterprise is limited both by the guarantee required and by
48
the impossibility for the Bank of administering a very large num-ber of relatively small loans to industrial concerns. It was partlybecause of these limitations that the Bank supported the establish-ment of another international agency, the International FinanceCorporation, which came into existence as an affiliate of the Bankin 1956. The function of IFC is to make investments in privatelyowned productive enterprises without government guarantee. Adescription of the work of the IFC is given in Chapter 10.
Another example of indirect Bank lending for development isin the field of agriculture. The purpose of a large part of theBank's lending in this sector has been to provide improved equip-ment, livestock and buildings for farmers. But it would clearlyhave been impracticable for the Bank to deal directly with thevery large number of units that together make up the agriculturalsector of an economy. Moreover, there has often been a particularneed for assistance to a local agency able to provide medium andlonger-term credit, technical advice and other specialized servicesfor farmers. The Bank has, therefore, frequently found it usefulto advance funds to banking institutions which themselves providethe assistance needed by farmers.
Although much of the Bank's contribution to the promotion oflocal private enterprise is indirect, it is not the less important. Ashas already been indicated, most Bank loans are for basic utilities-highways, railroads, power facilities, irrigation and reclamationprojects and the like-which are an essential condition for thegrowth of private enterprise. Where these utility services areprovided by a private company, the Bank lends directly to the com-pany with the government's guarantee; where, as is more often thecase, the utility facilities are publicly owned and operated, theBank's loans are made to the government or to a governmentalagency. But whether the loan is to a public or private borrower,the resulting expansion of utility services, particularly of powerand transportation, goes hand-in-hand with the development ofprivate initiative in industrial, agricultural, mining and other un-dertakings.
49
6Procedures for Making
and Administering Loans
THE PROCEDURES FOLLOWED by the Bank in making and adminis-tering loans necessarily vary considerably from case to case. Dif-ferences in the conditions and experience of the countries in whichthe projects are located, in the extent to which the Bank has be-come familiar with them, and in the projects themselves, all affectthe character not only of the investigation made. of each loan
application but also of the subsequent administration of each loan.
No two applications or loans are handled in exactly the same way.Nevertheless, over the course of. the Bank's history, certain basicstandards governing these phases of the Bank's operations havebeen developed. These are described in the present Chapter.
Exploratory Discussions and Preliminary Investigation
Wherever possible, the Bank prefers to have informal explora-tory discussions with prospective borrowers before a formal loanrequest is made. These discussions enable the Bank to determine
whether the project to be financed is of a type which the Bank can
consider, and to indicate to the prospective borrower what kinds
50
of information the Bank needs to have concerning economic con-ditions in the borrowing country and concerning the project. Ifthe prospective borrower is not a government, the Bank requiresan indication from the government that it will guarantee a loanfor the project before starting any serious investigation. Often, ifthe prospective borrower is a government, its initial approachconsists of an indication of its general development aims and atentative inquiry as to the possibility, extent and conditions ofBank assistance. Such inquiries often lead to an invitation to theBank to study the government's investment program with a viewto possible Bank financing for a portion of it.
In general, the actual processing of a loan request falls into twoparts: a preliminary one, in which the Bank reviews the economicsituation and prospects of the borrowing country and the relationof the project under consideration to its economic needs and po-tentialities, and then a more technical and critical examination ofthe engineering, financial and other aspects of the project and ofthe appropriate conditions for a loan. These two stages of investi-gation may proceed more or less concurrently or they may be suc-cessive, depending on the circumstances.
The main object of the preliminary investigation is to satisfythe Bank that the borrower can repay the loan and that the projectwill make a significant contribution to the economy of the borrow-ing country. If the project is in a country with which the Bank hashad no previous experience, the Bank seeks to acquire a compre-hensive picture of the structure and development of the economy.It therefore begins its study with such fundamentals as a reviewof the country's agricultural, mineral and industrial resources, thestate of basic facilities such as transport and power, the amountand quality of manpower resources, the pattern of external tradeand payments, and the condition of internal finances. If the Bankhas previously made a loan in the country or has otherwise becomefamiliar with its economy, this preliminary comprehensive review
-,is dispensed with and the inquiry is confined to an intensive studyof recent economc developments and prospects..
51
In either case, the object of the economic investigation is to de-termine (1) whether the country needs and can effectively use an
addition to its investment resources and, if so, how much and atwhat rate; (2) the extent to which the country can afford to serviceadditional foreign indebtedness; (3) the development require-ments of the country, the order of priority of the various fields ofinvestment, the fields in which Bank financing can make thegreatest contribution, and the place in these priorities of the par-ticular project under consideration; and (4) whether the economicand financial policies of the government are well adapted to theneeds of the country or whether some modification of those
policies would remove obstades to the development process orstrengthen the country's balance of payments position.
Although the Bank is precluded by its Charter from making ordeclining to make loans to achieve political objectives, it cannotignore conditions of obvious political instability or uncertaintywhich may directly affect the economic and financial prospects ofthe borrower, and the political situation, to the extent that it may
bear upon the soundness of the proposed loan, must therefore betaken into account in the initial investigation.
On the basis of the preliminary study, the Bank can decide inprinciple whether a loan should be granted and, if so, whether
the particular project under consideration is appropriate for Bankfinancing. If the investment program of the government has beenavailable to the Bank for study, it can at this point indicate proj-ects within the program it believes should be given precedence.
Project Examination and Determination of Loan Conditions
If the preliminary investigation has led the Bank to favorableconclusions, the second and more detailed investigation begins.Staff specialists or consultants are called upon to make a thoroughexamination of the technical plans for the project. A similar ex-amination is made of the plans for financing that part of the costof the project which is not expected to be met out of the Bank'sloan. It may be necessary to check the market survey made by
52
the borrower or, if none has been made, to assist the borrower inmaking one. It is also necessary to examine in detail and some-times to suggest revisions in the administrative and managerialarrangements proposed by the borrower to carry out and operatethe project. If a revenue producing enterprise, public or private,is the prospective borrower, the past record of the enterprise isclosely scrutinized. An assessment is made of the financial returnon the goods or services the project will produce and the economicbenefits which the country is expected to derive from its execution.
At this stage, if appropriate, the Bank may also work out spe-cific recommendations for strengthening the economic and finan-cial policies of the member government. As the previous Chapterhas shown, the adoption of such recommendations may sometimesbecome a condition for Bank financing.
Methods of Investigation
Much of the work of these two investigations takes place in theBank's headquarters. Here the Bank studies all available infor-mation about the country and the project. In addition to its ownfiles, the Bank takes advantage of the large reservoir of sourcematerial which is made available to it by many other institutions,national and international, public and private. Information fromall these sources is supplemented by information specifically re-quested from the borrower.
No study in the Bank's headquarters, however, can yield thebenefits of an on-the-spot investigation. At some stage in theprocessing of a loan, therefore, the Bank usually sends one ormore missions to the borrowing country to familiarize itself atfirst hand with the project and with economic conditions. Thecomposition of the mission and its responsibilities depend on thetask at hand. It may consist of one or two persons or of half adozen persons of various qualifications. The mission membersare normally drawn from the Bank staff but, since the Bank can-not keep on its permanent staff experts in each of the many fieldswhich it may be called upon to examine, it frequently employs
53
independent consultants for specific short-term assignments, or
borrows technical experts for this purpose from member govern-ments, other international agencies or private firms.
Formal Negotiations
If the second, technical phase of the investigation results in a
satisfactory report on the project, the Bank advises the borrowerthat it is ready to begin formal negotiations for a loan. As the
Bank's experience has broadened and as its members have grownfamiliar with the provisions of the Bank's loan and guaranteeagreements, it has become possible in most cases to complete for-
mal negotiations expeditiously.Negotiations are carried out on behalf of the Bank by its Man-
agement and staff but the Executive Directors are kept abreast
of the major problems arising in the course of discussions with theborrower, as they are informed of the main results of the investi-
gations leading up to the negotiations. When agreement has beenreached on the project and on the terms and conditions of the
loan, the loan and guarantee agreements and all supporting docu-
mentation are presented to the Executive Directors, together withthe recommendation of the President, for their approval.'
After approval by the Board of the Bank and the signing of
the loan agreement, a period of several months usually elapses
before the agreement becomes effective. The coming into effectof the loan agreement generally depends upon the fulfillment of
certain prescribed conditions, including the condition that the
Bank be satisfied with the action taken by the borrower and
guarantor to make the loan and guarantee agreement valid and
binding obligations. Only after the agreement has become effec-
tive can disbursements be made.
I The President's recommendation to the Executive Directors is accompanied by
the report of a special committee set up in accordance with the Articles of Agree-
ment. This committee, which consists of designated Bank officials and an expert
selected by the Governor representing the member in whose territory the project is
located, certifies that it finds that the project to be financed comes within the
purposes of the Bank, is in the interests of the member country concerned and of
the members as a whole, and accordingly merits the financial assistance of the Bank.
54
Administration
The administration of the loan covers its disbursement andservicing, a continuing scrutiny of the execution and later theoperation of the project, and a continuing review of the economicand financial conditions of the borrower and of the country inwhich the project is located. These continue until the loan hasbeen fully repaid.
The first purpose of the administration of a loan is to assure,in the interests of both the borrower and the Bank, that the pro-ceeds are used, in an economical manner, for the purposes forwhich they were intended. To this end the Bank disburses fundsunder its normal project loans only as expenditures are incurredfor specified goods and services. This is a requirement not onlyof the Bank's Articles of Agreement but of sound business pro-cedure. By means of this procedure and the reporting systemmentioned below, it is possible to follow each item financed bythe Bank, from the determination of specifications and the place-ment of an order to the delivery of the item and its actual usein the project.
Disbursements are made by the Bank on receipt of satisfactorydocumentation. Normally this will provide evidence that thegoods or services to be financed are covered by the loan agree-ment, that they are reasonable in cost and of proper quality, andthat shipment is being made. The evidence required is based onnormal banking procedures.
Administration of a loan cannot stop with the supervision ofthe use of the proceeds, which cover only part of the cost of anyproject. A generator financed by the Bank serves its purpose onlywhen installed in a powerhouse. Accordingly, the Bank followsthe process of construction, by requiring records to be kept andregular reports to be submitted on the progress of the entireproject. Such reports cover progress on the work of engineeringsurvey, specification and design, progress in placing contracts forgoods and services and in their manufacture and delivery, prog-ress in physical construction, and the course of expenditure on the
55
project. Both physical progress and actual expenditures are shown
in relation to original work schedules and cost estimates. The
form and detail of the reports vary from case to case, but must
be sufficient to meet the minimum requirements of the Bank,
which are of the same kind that a prudent businessman needs in
controlling his own affairs.Reports from the borrower are supplemented by periodic visits
to the project by Bank staff. On such visits, Bank personnel
examine the site of the project and the work being done, scrutinize
the accounts of the borrower, observe the use and maintenance of
goods and equipment purchased with the loan proceeds, and
satisfy themselves as to the management and administration of
the project. Problems arising in the course of construction are
discussed and solutions jointly explored. Changes in the speci-
fications of the project or in construction schedules are some-
times found necessary and are mutually agreed upon. Such
changes, and also changing financial conditions affecting wages
and prices, may increase the cost of the project beyond the amount
originally forecast; in this case, the borrower and the Bank usually
consult on the measures that need to be taken to provide the
extra funds and so assure completion of the project.
Concurrently with its observation of the progress of the project,
the Bank keeps abreast of economic and political developments
in the borrowing country, both through periodic staff visits and
through regular economic and financial reports from the govern-
ment. The government is also-required to advise the Bank of any
major development which might endanger the execution of the
project or interfere with the service or repayment of the loan.
The borrowing country's reports and the Bank's own inspec-
tions may result in specific recommendations for improvements in
the execution of Bank financed projects, and sometimes serve as a
basis on which the Bank can take up the existence of factors whichmight unfavorably affect the country's external credit standing.
They also afford a useful background against which the Bank can
determine future policy.
56
7Lending Activities
and Financial Results
General
As of December 31, 1959, the gross total of Bank loan com-mitments aggregated the equivalent of $4,871 million in UnitedStates dollars and other currencies. The net total of outstandingloan commitments on December 31 was $3,794 million afterallowing for refundings, cancellations and terminations, portfoliosales, repayments to the Bank and exchange adjustments.
In all, 249 loans had been made to governments, governmentagencies or private borrowers with government guarantee in 51countries or territories. These loans have financed nearly 600different projects. A full Statement of the Bank's loans appearsas Appendix G. A Summary Statement by countries is given inAppendix D.
Disbursements on Bank loans through December 31, 1959,totaled the equivalent of $3,591 million. While U.S. dollars wereused for most of the earlier disbursements, other currencies haveincreasingly been used; in the fiscal year 1958-59, for example,46%o of disbursements were in non-dollar currencies.
57
TABLEJ3
BANK LOANS CLASSIFIED BY PURPOSE AND AREAAS OF DECEMBER 31, 1959
(Millions of U.S. dollars, net of cancellations and ref undings)
AreasPurpose
WesternTotal Africa Asia Austral- Europe Hemi-
asia sphere
GaAND TOTAL 4,759 696 1,431 318 1,356 958
DavELoPMENT LOANS: TOTAL 4,262 696 1,431 318 859 958
Electric Power:Generation and7distriburion 1,492 178 416 29 333 536
Transportation: 1,451 439 521 132 69 290
Railroads 777 261 349 37 3 127Shipping 12 - - - 12 -
Ports and waterways 216 63 80 - 47 26Roads 325 65 72 51 - 137Airlines and airports 57 - 6 44 7 -
Pipelines 64 50 14 - - -
Communications:Telephones, telegraph and radio 24 2 - - - 22
Agricetlure and Forestry: 323 - 68 104 87 64
Farm mechanization 118 - - 90 2 26Irrigation and flood control 153 - 53 6 73 21Land dearance and improvement 27 - 14 6 2 5Crop processing and storage 6 - - - 4 2Livestock 11 - 1 - - 10Forestry 8 - - 2 6 -
Industry: 767 37 351 53 280 46
Iron and steel 338 - 302 14 22 -
Paper and pulp 113 - 4 1 88 20Fertilizer and other chemicals 57 - - - 57 -
Other industries 92 - 5 24 59 4Mining 83 35 - 14 12 22Development banks 84 2 40 - 42 -
General Development: 205 40 75 - 90 -
REcoNsraucTioN LOAMS: ToTAL 497 - - - 497 -
58
Reconstruction Lending
As already noted, the Bank's first loans were made to help inthe post-war reconstruction of four countries of Western Europeand antedated the European Recovery Program. The first bor-rower was the Credit National of France, a semi-public corpora-tion to which the Bank lent $250 million in May 1947. In Augustof the same year, the Bank lent the Netherlands $195 million,Denmark $40 million and Luxembourg $12 million.
The proceeds of the loans to France, the Netherlands andDenmark were used to purchase imports for many different sectorsof the economy--manufacturing, agriculture, transport and elec-tric power. The goods purchased came almost exdusively fromthe United States, and consisted about equally of raw materials-mainly petroleum, cotton, coal and lumber-and of finishedgoods, ranging from factory and farm machinery to railwaylocomotives, ships and structural steel. The loan to Luxembourgwas used to purchase equipment for the steel industry, which isthe mainstay of that country's economy, and for the railways.
Development Lending
Since 1948 the emphasis of Bank lending has been on the long-term financing of productive projects in the less developed coun-tries of the world. Here the Bank found itself faced with prob-lems very different from those involved in European reconstruc-tion. The task was not simply to maintain imports of fuel, rawmaterials and capital goods; the underdeveloped countries neededto strengthen greatly the foundations on which modern economiesdepend: electric power systems, roads, railroads, ports, irrigationworks and the like. At the same time, the underdeveloped coun-tries had relatively little experience, either in business or govern-ment, of planning investment; they were greatly hampered by ashortage of technicians and administrators able to design andcarry out projects; and they had only a limited ability to muster
59
even the modest resources of local capital for the kind of long-
term investment on which steady and continuous economic de-
velopment depends. It was obvious that the Bank could not move
as quickly in development financing as it had in reconstruction.
The Bank's first development loans were made in Latin Ameri-
ca, commencing in 1948, and by December 31, 1959, loans in
Latin America aggregated $958 million, net of cancellations and
refundings.The Bank's first loan in Asia was made in 1949; and its first
loans in the Middle East, Australia and Africa were made in 1950.
Of these areas, Asia and the Middle East together have received
loans aggregating the equivalent of $1,431 million; countries in
Africa have borrowed the equivalent of $696 million and Aus-
tralia has borrowed nearly $318 million. Loans to European coun-
tries since the reconstruction loans have totaled the equivalent of
nearly $860 million, exduding loans for dependent territories.
Purposes of Bank Loans
A. ELECTRIC POWER
To date, the largest amount lent by the Bank, $1,492 million,
has been for electric power development. These loans were for
projects which will add a total of over 12 million kilowatts of
generating capacity to the electric power systems of the countries
in which the loans were made. Most of these power projects also
included the installation of additional transmission and distribu-
tion facilities. The loans have ranged from one of $1,450,000 for
the installation of 2,500 kilowatts of generating capacity to re-
lieve the power shortage in Tegucigalpa, the capital of Honduras,
to an $80 million loan for the great Kariba hydroelectric power
scheme in the Federation of Rhodesia and Nyasaland. This loan,
the largest the Bank has ever made for a single project, helped
to finance the first stage of the scheme-the construction of a dam
400 feet high at Kariba Gorge on the Zambezi River, a 500,000-
kilowatt plant and nearly 1,000 miles of transmission lines.
60
Because of the importance of electric power to the economic
development of its member countries, the Bank has particular
interest in the possibilities of using nuclear energy for the genera-
tion of electric power; for this reason an Atomic Energy Advisor
was appointed to the staff in August 1955. With his assistance,
analyses were made of the economics of nuclear power in various
situations, and the Bank's findings were distributed to member
governments. The general condusions were that in the existing
state of knowledge and techniques, nudear power stations would
be economic only in situations where a high base load existed,
allowing large nuclear power plants to operate at a high percent-
age of utilization. The time when nuclear power could be eco-
nomically applied to meet the needs of most of the Bank's less
developed countries was still in the future; smaller nudear power
units were not yet economic, especially in situations where high
power demand existed only for short peak periods.
The distribution of this analysis was followed in September
1957 by a panel discussion by nuclear experts from several coun-
tries at the Annual Meeting of the Bank in Washington, D. C.
The conclusions of this discussion confirmed the main findings
of the Bank analysis. Meanwhile, wishing to test these findings,
the Bank took advantage of the opportunity to enter into a joint
study with Italy which led to the award of a contract for the firstnuclear power plant to be built in that country-and also the first
such plant to be ordered on the basis of international competitive
bidding. The study included the preparation of specifications for
a nuclear power plant of 100,000 kilowatts of capacity, and the
review by an international panel of experts of the tenders which
were submitted by manufacturers from several countries. The
final award of the contract was made by the Italian utility cor-
poration especially formed to build and operate the nuclear power
plant, and in September 1959 the Bank made a loan of $40 million
to help to finance construction of the plant. The nuclear power
station is being constructed at the mouth of the Garigliano River,
south of Rome, and is scheduled for completion in 1963.
61
B. TRANSPORT
Bank lending for transport has been almost as large as for
electric power. A total of $1,451 million has been lent in 30countries for rail, road or air transport, ports, waterways, shippingand pipelines. Of the total, $777 million has been lent for railwayimprovements in 14 different countries. While most of the fundshave been used to buy locomotives or rolling stock, the loansare also assisting in the construction of new rail lines and repairshops in some countries and rehabilitation programs in others.India alone has received $257 million in loans for the moderniza-
dion and expansion of its railway system.
An amount of $325 million of the transport loans was tofinance equipment and services for the improvement of roadtransport. In ten Latin American countries the loans are helpingto finance projects for the construction, rehabilitation or mainte-nance of some 30,000 miles of roads. In Africa, loans are assist-ing in improving key highways in Ethiopia, Ruanda Urundi andthe Belgian Congo; while the largest road loan yet made was oneof $72 million to construct or irpprove approxirnately 1,800 milesof Iran's highway network. Bank loans have provided finance
for port improvements in Belgium (where inland waterways arealso included), Burma, Ecuador, India, Nicaragua, Pakistan,Peru, Turkey, Thailand, Sudan and Yugoslavia; for ships in the
Netherlands and for commercial aircraft in the Netherlands, Aus-tralia and India. A recent loan is assisting the improvement of
the Suez Canal, to enable that important waterway to handlelarger vessels and provide better service for ships in transit.
Pakistan received a loan for the construction of a 350-mile natural
gas pipeline which is supplying fuel for industrial expansion in
Karachi and other centers. Another loan helped to pay for a
412-mile oil pipeline in the Sahara from the new oil field at HassiMessaoud in the Sahara to the Algerian port of Bougie on theMediterranean.
62
C. INDUSTRY
In recent years Bank lending for industry has risen sharply and
now totals $767 million. Countries of Asia have received the
largest amount for industrial development. In Japan the chief
beneficiaries have been the leading steel producers, who have
received about $150 million in loans for the expansion and
modernization of their production facilities; in India two private
steel companies have received over $157 million in loans for their
expansion programs. Other industrial loans have included funds
for manufacturers of paper products in Chile and Pakistan, a
cement producer in Peru, the wood-products industries in Finland,
the development of manganese deposits in the African Republic
of Gabon, and a wide variety of industrial undertakings in the
Netherlands and Italy.
Some of these loans have been made directly to private indus-
tries, with government guarantees; others have been made to
governments or government financing institutions which re-lend
or allocate the proceeds to manufacturing or mining enterprises;
and finally some have been made to development banks. Develop-
ment banks provide not only finance for the private sector butalso help to mobilize savings, enterprise and skills for productiveventures. The Bank has helped to create private development
banks in Turkey, India, Ceylon, Pakistan and Iran and has made
loans totaling $77.4 million to the banks in Turkey, Ethiopia,
India, Pakistan, Austria and Iran.
D. AGRICULTURE
Agricultural loans have amounted to $323 million. The greater
part was for investment in basic agricultural development-irriga-tion, flood control and land clearance and improvement. The
loans have also financed mechanized farm equipment, crop proc-
essing and storage facilities, livestock and forestry. In most in-
stances, the projects aided by the Bank formed a relatively small
part of wider programs aimed at expansion of agricultural output
63
and the improvement of productivity. Agriculture has also bene-fitted substantially from other forms of Bank lending, particularlyfor transport and power.
E. GENERAL DEVELOPMENT PROGRAMS
The final category of Bank loans shown in Table 4 consists ofcredits, amounting to the equivalent of $205 million, made forprograms of economic development in the Belgian Congo, Iran,Southern Italy and Norway. The Bank lent the Congo $40 millionto cover part of the expenditures incurred during the first threeyears of its Ten-Year Development Plan; disbursements on theloan were geared to the general rate of expenditure on the pro-gram instead of to specific imports. At the same time the Banklent $30 million to Belgium to cover part of the indirect foreignexchange costs occasioned by its support of the Congo program.A total of $50 million has been lent to Norway for the importa-tion of capital goods required to continue the development of theeconomy. A loan of $75 million to Iran provided interim financ-ing for the Seven-Year Development Plan. A loan of $10 millionwas made to cover the indirect foreign exchange costs arisingfrom a program for the development of Southern Italy. The Banksubsequently lent a further $238 million for the same programwith the local currency counterpart being allocated to specificprojects of irrigation, electric power and industry, which are in-cluded in these categories in Table 3.
Distribution of Expenditures under Bank Loans
In the early years of its operations, Bank loans were used al-most exclusively for purchases in the United States. Europe atthat time did not have available significant amounts of capitalgoods for export to other countries; on the contrary, the Europeancountries themselves needed capital equipment from the UnitedStates. Accordingly, most of the loan applications filed with theBank were designed to secure financing for essential goods whichthe borrowers needed to import from the United States. As
64
European productive capacity recovered, this situation changedradically and borrowers from the Bank are now obtaining a greatdeal more of the goods they need from sources of supply outsidethe United States.
Table 4 shows the geographical distribution of expendituresunder Bank loans.
TABLE 4
DISTRIBUTION OF EXPENDITURES UNDER LOANSFISCAL YBARS ENDING JuNBH 30
(Estimates rounded to equivalent in millions of United States dollars)
Cumfilative Firsttotal 6 mos.
tbrough Fiscalyears ended FiscalJune 30, June 30 Year Adjust- Cumulative total to
Disbursements by 1957 1958 1959 1960 ment* December 31, 1959Borrowers for
Imports from.: Amount Amount Amount Amount Amount Amouvnt Percent
Belgium $ 70.1 $ 10.7 $ 13.9 $ 3.5 $ 98.2 3.3Canada 116.5 4.2 8.3 1.5 130.5 4.5France 57.2 4.3 22.2 4.9 88.6 3.0Germany 138.0 63.3 69.2 17.1 287.6 9.8Italy 24.5 21.4 26.8 8.3 81.0 2.8Japan 6.4 30.6 23.7 5.2 65.9 2.2Sweden 21.2 3.5 8.8 4.8 38.3 1.3Switzerland 41.9 4.7 11.4 4.2 62.2 2.1United Kingdom 226.9 69.4 87.0 39.0 422.3 14.4United States 1,199.9 142.8 125.8 41.7 +8.0 1,518.2 51.7All other countries 106.8 13.6 23.7 8.7 -8.0 144.8 4.9
TOTALS: $2,009.4 $368.5 $420.8 $138.9 $2,937.6 100.0
Other disbursements"* 286.6 130.2 161.8 75.0 653.6
GRAND TOTALS: $2,296.0 $498.7 $582.6 $213.9 $3,591.2
* Represents aggregate of ccrtain transactions of U.S.A. origin formerly classified overthe past several years under 'all other countries."
** These include disbursements on loans in which the funds are used for local exoendi-.tures or for broad development programs where the source of the items importe. withBank funds is not specified.
65
Currencies Used in Loans
Most of the Bank's loans are disbursed over the constructionperiod of the project, as the goods and services are delivered or
provided, and the Bank provides the borrowers with the currenciesthey need for this purpose. For example, if a borrower buysequipment in the United Kingdom, the Bank normally supplies
the borrower with sterling, while if the purchase is made inFrance, the borrower normally receives French francs.
The Bank may obtain the particular currency needed by theborrower either out of its own holdings in that currency or by
purchasing it with other currency which it holds. In the first case,the loan is repayable in the currency provided to the borrower; inthe second case the loan is repayable in the currency used by the
Bank to buy the currency furnished to the borrower.Appendix D includes a table showing the distribution arnong
different currencies of disbursements by the Bank from its ownholdings through December 31, 1959. The table indicates the
amounts of the different currencies actually charged to borrowersunder Bank loans; it does not necessarily represent total purchasesin the country whose currency is indicated.
Term, Interest Rate and Other Charges
The Bank normally makes medium or long-term loans, with theprincipal repayments beginning at the end of a period of grace
and thereafter spread over the remainder of the life of the loan.The number and amount of Bank loans of various maturities is
shown in Table 5.In establishing the length of its loans, the Bank has generally
followed the principle that the term should bear some relation-ship to the estimated useful life of the equipment or plant beingfinanced. For example, the cost of a hydroelectric power plantconsists partly of installations such as a dam, embankments, a
powerhouse and so on, which last for a very long time, and partlyof generating equipment which has a shorter economic life. For
66
TABLE 5
TERM OF LOANS
(In millions of U.S. dollar equivalnts)
Lou 1 th Nuomber Gross Amount
Less than 10 years ......... 28 $ 203.310-14 years ............... 34 377.115-19 years ............... 74 1,328.120-24 years ............... 63 1,164.825 years and over ......... 50 1,797.8
such projects the Bank has usually made loans for 20 to 25 years.On the other hand, loans made for the purchase of less durablegoods, such as trucks or farm machinery, have often been forabout seven years.
The loan contracts as a general rule provide for equal semi-annual installments made up of principal and interest payments.Payments of principal gradually increase as interest paymentsdecrease until the loan is completely amortized by final maturity.The borrower is normally given a period ranging from two tofive years before the first installment of principal comes due; thelength of the period is generally determined by the time estimatedto be necessary to bring the project into operation.
The rate of interest charged by the Bank is based on the ratewhich it would itself have to pay to borrow money at the timethe loan is made, plus a 1% annual commission charge which isallocated to a Special Reserve, and a fraction, about a quarterof 1%, to meet administrative costs. In practice, because ofchanges in money rates in the main capital markets in which theBank sells its bonds, the long-term lending rate of the Bank hasvaried between 41/4% and 6114%. The Bank does not distinguishbetween borrowers in regard to the rate of interest charged.
The full interest rate is charged only on that part of the loanwhich has actually been disbursed. To compensate the Bank tosome extent for the cost of holding funds at the disposal of the
67
borrower, a commitment charge is made on the undisbursed por-
tion of a loan. In the case of the Bank's early loans, this charge
was 11127o, but since 1950 the Bank has charged 3/4 of 1%o.
Financial Results of Operations
The Bank has not had any defaults in payments of interest or
principal on its loans. As of December 31, 1959, it had accumu-
lated reserves equivalent to $462 million. The Special Reserve,
derived from loan commissions and held in liquid form, amounted
to the equivalent of over $151 million. Accumulated net earn-
ings, placed in a Supplemental Reserve against losses on loans and
guarantees, amounted to the equivalent of $311 million.
The Bank's fiscal year runs from July 1 to June 30. Gross in-
come, consisting principally of income from loan charges and
earnings on investment of the Bank's liquid assets, and induding
loan commissions allocated to the Special Reserve, have risen
from the equivalent of approximately $18.70 million in fiscal
1948 to the equivalent of $146.17 million in fiscal 1959.
Net income, which is allocated to the Supplemental Reserve,
rose from the equivalent of approximately $5.3 million in fiscal
1948 to the equivalent of $46.5 million in fiscal 1959. Annual
allocations of loan commissions to the Special Reserve rose during
the same period from approximately $3 million to about $24 mil-
lion. Annual expenditures rose from the equivalent of about
$10.4 million to the equivalent of about $75.7 million. It should
be noted that payments of bond interest and expenses for bond
issuance were nearly $66 million out of total expenses of $75.7
million in 1959.The Bank's income and expenses are shown from fiscal 1947
to date in Table 6.
68
TABLE 6
INCOME AND EXPENSES
(In millions of U.S. dollars)
Commissions ExpensesAllocated
Fiscal Gross to Special Interest NetYear Income Reserve and Otber Admin. Income
1947 ............... $ 1.24 $ .03 $ .06 $2.08 $ .88(deficit)
1948 ............... 18.70 3.05 6.34 4.05 5.261949 ............... 26.57 4.99 6.98 4.07 10.531950 ............... 31.13 5.66 8.14 4.37 12.951951 ............... 34.59 6.39 7.25 4.84 16.111952 ............... 42.75 7.56 11.90 5.14 18.121953 ............... 52.39 9.55 16.55 5.72 20.571954 ............... 62.26 11.71 21.36 5.97 23.221955 ............... 71.85 13.31 27.01 6.64 24.881956 ............... 78.63 14.75 27.86 7.44 28.591957 ............... 90.64 16.73 30.41 7.57 35.941958 ............... 118.82 20.16 48.32 8.26 42.081959 ............... 146.17 24.00 65.95 9.75 46.471960 (6 mos.) .......... 84.58 13.18 37.66 4.97 28.77
69
8Technical Assistance
EVER SINCE THE BANK entered the field of development lending,
it has been called upon for technical aid and advice to member
governments on matters relating to loan operations. Sometimes
this aid has consisted of helping the government to define priori-
ties among different projects. Sometimes Bank technicians have
advised modifications in the technical plans for a project, to reduce
its cost, or make it more efficient, or adapt it better to the coun-
try's needs. And sometimes the Bank has made suggestions as to
administrative or organizational arrangements for a project or as
to plans for its financing, including the raising of local capital.
Increasingly, however, the Bank has been asked to provide tech-
nical assistance on a broader scale and on matters not connected
with immediate loan proposals, and it is with services of this
type that the present Chapter deals.
Although such requests have related to a wide variety of prob-
lems, the Bank has sought to confine its activities primarily to
those fields where, by reason both of its character as a develop-
ment financing institution and of the operational experience
gained by its staff, it could be considered to have particular quali-
fications for the assignment. Its advisory assistance has therefore
70
emphasized, although by no means been limited to, the fields ofdevelopment programing and mobilization of local capital.
Assistance in Development Programing
The Bank's concern with development programing grew di-rectly out of its operational experience. During the early years,many applications for development loans filed with the Bankwere hardly more than lists of projects which the member govern-ment had under consideration, with little indication of the relativepriority of various projects, the relation between them or theirplace in the development pattern being worked out for the coun-try as a whole. A good deal of the time and attention of theBank's staff was necessarily devoted, therefore, to helping mem-ber governments determine priorities among the different projectsthey had in mind and sometimes to suggesting additional projectsin fields which seemed to have been neglected. Missions sent bythe Bank to less developed member countries confirmed the in-adequacy of development programing efforts in many cases, andstressed the consequent risk that scarce investment resourcesmight be misapplied. They noted, with few exceptions, theabsence of any effective government agency charged with design-ing a consistent over-all framework of development and apprais-ing proposed projects within the pattern of such a framework.
It was against the background of this experience that the Bankdecided, in 1949, to comply with a request of the Governmentof Colombia to organize a general survey mission to analyze theColombian economy and to make recommendations on the basisof which the Government could formulate a long-term develop-ment program. The mission to Colombia was in the nature of anexperiment, but its results were sufficiently encouraging to con-vince the Bank that this type of assistance could, in appropriatecases, do much to stimulate development.
Up to the present time, acting on request of the governmentsconcerned, the Bank has organized general survey missions to thefollowing countries:
71
Date of Organkcation County
1949 .Colombia
(Turkey1950. Nicaragua190......................Niagu
GuatemalaCuba
Iraq91 .Ceylon
Surinam1952 .Jamaica
1953. [British Guiana193...................... BishGanNigeria
1954.. ....... .. fMalayaSyria
1955 . Jordan
1956 .Italian Somaliland
1957 .Thailand
1958 . Libya
1959 .. TanganyikaVenezuela
The terms of reference of these survey missions have varied
in accordance with the needs of the respective countries, but their
basic purposes have been identical. They are intended to survey
the development potentialities and problems of the countries to
which they are sent, and then to make recommendations that will
assist the governments in formulating long-term development pro-
grams. The emphasis is on three points. The first is to estimate
in a rough order of magnitude the amount of investment which a
country can appropriately undertake with the resources at its com-
mand. The second is to recommend priorities for public invest-
ment among the important sectors of the economy and among
72
types of undertakings within each sector, after taking private in-vestment requirements into account. The third is to suggesteconomic and financial policies and administrative measures neces-sary to assure the success of the development program. In addi-tion, the missions are frequently able to make important technicalrecommendations for improving productivity in various sectorsof the economy.
The size and composition of the missions have varied with theneeds of the particular economies surveyed. The smallest groupconsisted of four experts and the largest of 16; the average hasbeen about 12. These experts are recruited on an internationalbasis; in all nationals of 23 different countries have served,with individual missions including as many as eight differentnationalities.
The Bank has received assistance from many other organizationsin this aspect of its work. FAO has nominated agricultural expertsfor most of the missions and in several cases has shared in thepayment of those experts. The International Monetary Fund hasprovided the services of staff members. Public health expertshave been recruited in co-operation with WHO and educationalexperts in co-operation with UNESCO. Experts have also beenseconded by various member governments and by governmentorganizations such as the United States Federal Reserve System.The mission members have been widely representative of pri,; ateindustry and finance, academic circles and public service.
In each case, one or more members of the Bank's staff haveparticipated, to make available the experience already gained bythe Bank in this type of work and to ensure continuity in relationsbetween the Bank and the country concerned. The tendency hasbeen to use Bank staff members for the econemic posts on themission, and frequently for the post of mission chiefs as well, andto rely primarily on outside experts in other fields.
It has been the Bank's view that part of the costs of generalsurvey missions should be defrayed by the government concerned,both in fairness to the other stockholders of the Bank and as an
73
indication of the government's seriousness of purpose in request-
ing the Bank's help. The practice has been for the Bank to pay
the salaries of its own staff attached to the missions, half thesalaries of outside experts, and all traveling and living expenses
of the mission outside the country concerned. This leaves to the
government responsibility for payment of half of the experts'
salaries and all local expenses while the mission is in the country.
The analysis and recommendations of the mission are published
in a report, prepared in such form that it can be utilized not only
by technicians, but by all interested elements of the community.To this end, arrangements are made for translating the report
into the language of the country concerned and for its publicationwithin that country. An English version of each report is also
published by The Johns Hopkins Press of Baltimore, Maryland.
The reports make no attempt to formulate a detailed blueprint
for the country's economic development; quite apart from the
desirability of leaving ample scope for individual initiative, the
development processes are too complicated, and the factual data
too meager to make such blueprinting practicable. The objective
of the mission reports is rather to set forth feasible development
targets, to recommend the amount of investment and the direc-
tions of public investment necessary to achieve those targets over
a period of years, and to advise the government on those major
economic, financial and administrative problems which must be
satisfactorily solved if the recommended investment program is
to be effective. An effort is made to avoid, on the one hand, such
a proliferation of recommendations on small technical details
that the broad development pattern is obscured, and, on the other
hand, recommendations of such a general character that they
provide an inadequate guide to action.
The contents of the report are the responsibility of the chief
of the mission, and the Bank always makes clear in transmitting
the report to the government that the views expressed are those
of the mission rather than positive recommendations by the Bank
74
as an institution. Nonetheless, the Bank's staff keeps closely intouch with the progress of the mission and carefully reviews itswork, with a view both to making constructive suggestions and toenabling the Bank to satisfy itself that the report has been com-petently prepared and lays the foundations of a sound develop-ment program.
The recommendations of a general survey mission are, ofcourse, of full value only insofar as they are incorporated by therecipient government into its own program and insofar as theprogram is then implemented. The Bank has consistently urged,therefore, that the report of a mission be widely disseminated inthe country, that the recommendations be subjected to carefulstudy and to such modification as the responsible authorities deemnecessary, and that some continuing agency be established to keepunder constant review and periodically to revise whatever programmay eventually emerge from consideration of the report. In sev-eral cases, the B3ank has provided the services of staff members orconsultants to help member governments both in their study ofmission recommendations and in putting them into effect.
The Bank has also provided programing assistance by othertechniques. In response to a request in 1951 from the Governmentof Nicaragua for Bank help in the formulation of a developmentprogram, the Bank assigned two members of its staff, an econo-mist and an engineer, to spend a year in Nicaragua workingdirectly with the Government, not only in drawing up a programbut in taking the first steps toward putting it into effect. Duringthe course of this work the Bank's representatives helped toarrange for other experts in various specialized fields to come toNicaragua for short periods under the auspices of the Bank, theFund, FAO and other organizations. At the end of the first year,a report was prepared by the Bank's representatives setting forththe program which they had worked out in co-operation with theNicaraguan authorities. The Bank thereafter maintained a repre-sentative in the country for several years to advise on the furtherelaboration and implementation of the program.
75
Similarly, in meeting a request for a general survey from theGovernment of Thailand the Bank agreed to station a small mis-sion in Thailand from mid-1957, to work for a year in co-opera-tion with a selected group of Thai officials in preparing recom-mendations and in considering steps to put them into effect. Whilethe mission's purpose was much like that of a general surveymission, there was less emphasis on a formal report; the mainconcern was to make preparations for effective implementationof the recommendations. The mission's report was presented tothe Government in 1959 and, as in the Nicaraguan case, a residentrepresentative of the Bank has remained in Thailand to assist in
the organization and carrying out of the development program.Somewhat similar methods have been used in assisting the
governments of other countries. For example, from 1953 to 1958,a Bank office was maintained in Panama, staffed by one and at
times two representatives, to advise on economic and financialpolicies and actions to be taken in promoting development. InHonduras two Bank representatives spent several months in 1954and 1955 assessing the economic potential of the country and
assisting the government in preparing an investment program;and a resident representative was stationed in that country until
the end. of 1959 to advise on ways of carrying out the program.Assistance along similar lines was given to Guatemala in 1955
and 1956, to Ecuador in 1955-1959, to Haiti in 1957-1959 and toPeru in 1957-1960. A resident advisory mission has been stationedin Pakistan since the end of 1958.
More limited programing assistance has been given to other
countries. In Mexico, an arrangement was made between theGovernment and the Bank to establish a joint working party, con-sisting of two Mexican and two Bank economists, to assess themajor long-term trends in the Mexican economy with particularreference to Mexico's ability to absorb additional foreign invest-ment. In Chile, Uruguay and Peru, the Bank and FAO sponsored
joint missions to analyze the agriculture of those countries andto formulate recommendations for the further development of
76
agricultural production; a Bank mission made a similar study ofthe agriculture of Colombia. Another mission to Colombia wasasked to give assistance in launching the first regional develop-ment program to be attempted in a Latin American country; itadvised the newly-created Cauca Valley Corporation on the firststeps to be taken in the co-ordinated development of the resourcesof the Valley. In Pakistan, with the co-operation of FAO, theBank helped to establish an Agricultural Enquiry Commission, toreview the nation's agricultural situation and policies and recom-mend measures for improvement; the Bank and FAO jointlyfinanced the services of the non-Pakistani members of the Com-mission and of its staff.
The Bank has now been organizing general survey and otheradvisory missions over a long enough time for some of the effectsto be seen. In no case, of course, has a country adopted andimplemented in full the recommendations of a mission. Nor wasthis to be expected. A report must first go through a process ofselection, adaptation and assimilation by the country itself. Re-sults have varied because of many factors such as the leadershipand interest available in the government, the political considera-tions affecting economic decisions, and other circumstances par-ticular to the country concerned.
One of the main values of the reports has lain in the fact thatthey often represent the first attempt in a country to make ananalysis of the economy as a whole and to project the develop-ment process over a number of years. As a result of missionrecommendations, several countries have created new bodies forcentral economic programing and others have changed or strength-ened the administrative machinery of existing bodies. Regardlessof whether formal action of this kind has been taken, the missionshave generally exerted an important influence in favor of a co-ordinated long-term approach to development problems.
A wide variety of specific accomplishments, both in over-allplanning and in particular branches of the economy, can beattributed in whole or in part to the work of these Bank missions.
77
Thus in Colombia the Governrnent set up a non-partisan economiccommittee to study the mission report and to recommend actionto be taken on the various proposals contained in it. Apart froma number of general policy changes that resulted, it was decidedto rehabilitate the whole trunk road network along lines recom-mended by the Bank. Nicaragua accepted the Bank's recom-mendations as the basis for its future economic policy andorganized a National Economic Council to co-ordinate the Gov-ernment's policies and supervise the execution of a developmentprogram. A National Development Institute was set up to pro-vide medium-term financing for industry and agriculture; a Budget
Bureau was organized to increase efficiency in handling the na-tional finances; an income tax was introduced and various reformswere made in the tax structure.
In Jamaica a development program covering the years 1955-1960 was drawn up on the basis of the Bank's report. In Hon-duras a highway program, the urgent need for which was stressedby the Bank mission, was initiated. In Uruguay renewed attentionwas paid to the need to combat over-grazing and soil erosion byencouraging land enclosure and better use of water supplies.
In Ceylon a planning organization was created to carry on thefunction of development programing, as recommended by themission. A development bank was set up to encourage the growthof private industrial enterprise, and mission recommendationswere taken into account in government decisions to put a numberof industrial projects into private hands. An Institute of Scien-tific and Industrial Research was established, with a Bank staffmember serving as its first director, to explore ways of improvingproductive techniques and to develop new industries and newproducts based on materials available in the island. In Malayathe mission report was used as the basis of discussion in drawingup a long-term development program; various specific recom-mendations, such as the establishment of a central bank andchanges in the education program, were put into effect. In theMiddle East the use made of funds available in the development
78
budget of Iraq was substantially influenced by mission recom-mendations, and Syria made a number of specific changes such asa reorganization of public debt administration; the current publicinvestment priorities of the Syrian region of the U.A.R. followedessentially the mission's recommendations. The Government ofNigeria adopted federal and regional development programs andreorganized development institutions along lines suggested by themission. And the development planning machinery being or-ganized by the Government of Thailand is based on recommenda-tions of the mission.
Other Technical Assistance
Much of the other advisory work undertaken by the Bank hasbeen concerned with problems of mobilizing local capital. Ref-erence has already been made to the development banks set up ina number of member countries. In addition, several existinginstitutions have been reorganized with the aid of Bank staffmembers or consultants employed or recommended by the Bank.The Bank has also helped member countries in mobilizing localcapital for specific projects. It lent the services of its Directorof Marketing to advise the Salvadorean authorities on an internalbond issue to finance the local currency costs of a hydroelectricproject for whidc a Bank loan had been made. Advice was givenon ways of mobilizing local private capital for investment in apower distribution company in Turkey, and in a paper mill anda natural gas pipeline in Pakistan. With the object of devisingways to stimulate the growth of a local capital market the Direc-tor of Marketing has visited the Dominican Republic, Ecuador,Guatemala, Iceland, Panama, Peru, the Philippines and othercountries. Bank staff members or consultants have paid visits toColombia, Cuba, Nicaragua and other member countries for thesame purpose.
The Bank also receives a variety of requests to nominate spe-cialists for employment by member countries in economic develop-ment work. Candidates have been required for such positions as
79
economic or financial adviser, head of a development bank orcentral bank, or adviser to a government planning agency. TheBank has also been able, through its wide international connec-tions, to locate experts qualified to deal with specific technicalproblems, for instance, with sulphur processing in Iraq, railwayoperation in Ecuador and Thailand, port administration in Turkeyand pulp and paper manufacture in Pakistan. Sometimes, as inthe case of the Honduran Development Bank, the ColombianPlanning Office, the Turkish Industrial Development Bank, andthe Iranian Seven-Year Plan Organization, the Bank has madeavailable one of its own staff members to fill executive or advisorypositions. In other cases it has helped to recruit outside expertspossessing the necessary qualifications.
Economic Development Institute
Shortcomings in government planning and administration formone of the greatest obstacles to economic development. To giveassistance in this field the Bank established, with financial supportfrom the Ford and Rockefeller Foundations, an Economic De-velopment Institute which is designed to serve as a staff collegefor senior officials of less developed member countries. TheInstitute held its first course in January to June 1956, and its fifthsix-month session was coming to a close early in 1960. Duringthe summer of 1959 the Director and staff of the Institute or-ganized a short course for development officials in the Caribbeanregion, at the University College of the West Indies in Jamaica.
The Institute's aim is to improve the quality of economic man-agement in government in less developed countries by gatheringtogether a group of senior officials from those countries andstudying with them the practical problems that arise in preparingand carrying through development programs and projects. Ex-perience with the courses indicates that the Institute can make auseful contribution; particularly valuable has been the opportunityoffered to the participants to consider together the long-rangefactors that lie behind the pressing daily problems of development.
80
The courses of the Institute are devoted to discussion and thepooling of experience rather than to formal instruction. Thecurriculum is made up mainly of seminar discussions and smallgroup meetings, but it also indudes a number of lectures by out-side experts. Attention is concentrated on actual situations andon policies concerned with those sectors of the economy whichare of special importance to development. Full use is made ofthe lessons that can be learned from case studies of the planningand execution of individual projects, and from the experienceaccumulated by the Bank in its operations. To acquaint partici-pants with economic methods and practices in the United States,visits are organized to financial, industrial, commercial and agri-cultural institutions;. and extended field trips in Mexico andSouthern Italy have afforded an opportunity for intensive exam-ination of development problems and programs on a national orregional scale.
The first five courses organized by the Institute were attendedby 101 officials from 42 countries. In selecting each official fora course attention is paid not only to the degree of his responsi-bility for development work but also to the likelihood that he willremain in government service after returning home. Prominentpersons from the professions, academic life and business may inspecial circumstances be accepted for study at the Institute, al-though none has so far been selected. As a contribution towardthe costs of the Institute, $1,500 is paid on behalf of each candi-date by the government, central bank or other appropriate institu-tion of the country from which he comes.
The Institute has a small full-time staff that consisted during1959-1960 of the Director and three other economists, two ofthem seconded from the staff of the Bank. In addition, seminarson foreign trade and monetary policy and on problems of indus-trial development were conducted by outside specialists. Membersof the staff of the Bank, including economists, engineers, financialanalysts, commodity experts and country specialists, take part inthe work of the Institute whenever their special knowledge is
81
likely to be of value, and documents are provided to illustrate theBank's operations.
Training Programs
Another type of service furnished by the Bank, dosely alliedin purpose to its technical assistance, has consisted of trainingprograms designed primarily to give officials of member countriesinformation about the Bank and its policies and methods, a betterunderstanding of economic development problems and techniques,and particular knowledge of various phases of financial adminis-tration.
The Bank's General Training Program is now in its twelfthyear. Including the 1960 dass, 101 persons from 58 countries,mostly junior career officials, have participated in this program.During each course, which lasts approximately six months, theparticipants attend lectures and discussions on such subjects asdevelopment economics, balance of payments, national incomeaccounting, project preparation and analysis, private foreign in-vestment and Bank policies and procedures. The trainees makestudies of development experience in different countries and of thepossible application of that experience to their own countries.One week is devoted to a visit to the Tennessee Valley Authority,and another is spent visiting securities exchanges and financial in-stitutions in New York. Short courses in national income account-ing at the Department of Commerce and in balance of paymentsanalysis at the International Monetary Fund are induded.
The trainees also spend some time making case studies of in-dividual Bank projects. This brings them into direct touch withthe staff members concerned with the projects, and allows themto see how the broad operating procedures of the Bank are appliedin the light of practical operating problems.
In addition to this general training program, the Bank hasprovided individually specialized training for many officials frommember countries. The training is tailored to meet the individualrequirements of each official. It may indude study of the general
82
work of the Bank, the methods of preparing projects for Bankfinancing, various aspects of public administration such as budget-ing, tax policy and central bank administration, as well as othersubjects required to meet the special needs of the official con-cerned. In making arrangements for this type of training the Bankhas received the co-operation of many Canadian and United Statesgovernment agencies and a number of private financial and otherinstitutions.
Relations with Other Agencies
The Bank keeps in close touch with other agencies engaged inproviding technical assistance for economic development, espe-cially with the United Nations and its several Specialized Agen-cies. As was noted earlier, a number of these agencies have givenvaluable co-operation in the organization of general survey mis-sions. Although the Bank takes part in the work of the UnitedNations Technical Assistance Board, it finances its technicalassistance activities from its own income and so does not sharein the annual contributions made by governments to finance theExpanded Program.
A particularly close relationship exists between the Bank andthe United Nations Special Fund, a primary purpose of which isto assist the complex pre-investment studies that are often neces-sary before the financing of major projects can be arranged, oreven properly considered. Some of these projects may later bedeemed suitable for Bank financing. The President of the Banksits on the Consultative Board of the Special Fund, and the Bankhas agreed to act as Executing Agency for several Special Fundprojects.
The experience of the World Bank, since it started operationsin 1946, has amply confirmed the conviction of its Managementthat technical and financial help to economic development areclosely interdependent, and that the Bank is able to make apeculiarly valuable contribution to the development process bybringing these two essential components together. Its lending and
83
technical assistance activities will continue to go forward hand-in-hand. The establishment of the International Development As-sociation as an affiliate of the Bank may also be expected toextend substantially the scope and effectiveness of the Bank'stechnical help.
84
9The Bank and
the Investment Market
THIS CHAPTER is devoted to a discussion of the Bank's bonds, themethods employed in issuing them and of some of the moreimportant policy considerations which have affected marketingactivities. It also contains a discussion of portfolio sales, loanparticipations and operations undertaken jointly by the Bank andthe private market.
On December 31, 1959, the Bank had outstanding direct obli-gations equivalent to $1,990 million. Investors on that date alsoheld the equivalent of $19.4 million of obligations bearing theBank's unconditional guarantee.
Thirty-two public issues of the Bank had been marketed-fifteen in the United States, seven in Switzerland, three each inCanada and the United Kingdom, two in the Netherlands, andone each in Belgium and Germany. By private placement theBank hac[alsd~old four additional bond issues and eleven noteissues, all dominiated in United States dollars, to investors outsidethe United States; two additional Swiss franc bond issues and anote issue in Switzerland; and two Deutsche Mark note issues.The aggregate principal amount of Bank obligations sold to
85
December 31, 1959, was equivalent to $2,580 million of which
$8 million is subject to delayed delivery arrangements and $590
million had matured, had been called for redemption or had been
retired through sinking fund and purchase fund operations.
Policy Considerations
At Bretton Woods it was believed that the guarantee of loans
made by private investors would be the major function of the
Bank. In practice, operations have not developed in that direction.
There are a number of reasons for this. When the Bank started
operations its credit had not been established and it was likely
that if it guaranteed any loans they would bear varying rates, in-
fluenced by the credit of the borrowers. Moreover, since securities
guaranteed by the Bank would not have been as readily market-
able as its direct obligations, use of the guarantee would have
increased the cost of money to the borrowers. Consequently, it
was decided to concentrate on selling the Bank's own bonds in the
market, and to use the proceeds for direct loans.
Initially, the scale and timing of issues were determined by the
amount of loans made. The practice was followed of having
funds on hand sufficient to cover all loan commitments, even
though disbursements were expected to stretch over three or four
years. As the Bank's credit became established and the market
for its bonds improved, this requirement was relaxed, but sufficient
funds are kept on hand to cover at least one year's disbursements.
The establishment of a new security in any capital market
always takes time. Consequently, it was decided early in the
Bank's history that it would not be desirable to wait until the
national currency portions of the Bank's capital had been fully
utilized, but rather to take advantage of favorable opportunitiesto introduce Bank securities to the various capital markets.
The United States Market
The only market able to provide funds, in the Bank's first year
of operations, was the United States. The character of this market
86
presented immediate and formidable difficulties. The financialcommunity distrusted any investment connected with internationallending and the Bank suffered the disadvantage of being new andlittle known. Moreover, the market for bonds in the United Statesis composed largely of banks, insurance companies and other in-stitutional investors. Under Federal law and the laws of theStates, many of these investors could not legally purchase theBank's bonds. Early in 1947, therefore, the Bank began-and hascontinued up to the present-a wide program to acquaint in-vestors and officials with facts about the Bank, to create a marketfor its bonds and to qualify them for institutional investment.The program has met with considerable success and by December31, 1959, the Bank's bonds were, subject to various statutory andadministrative qualifications, legal investment for:
Commercial Banks in 48 States and the District of Columbia;Savings Banks in 30 States and the District of Columbia;'Life Insurance Companies in 46 States and the District of
Columbia;Other Insurance Companies in 42 States and the District of
Columbia;Trust funds in 43 States and the District of Columbia.
In addition, eight States have passed legislation specificallyauthorizing the investment of public funds in obligations of theBank, and in a number of other States it is believed that publicfunds may be invested in Bank obligations under legislation affect-ing the eligibility of these obligations for institutional investors.As a result, substantial investments in Bank bonds have been madeby administrators of public funds, state employees' pension fundsbeing the main buyers in this category.
Federal action was also necessary to qualify the Bank's bondsas eligible investments for national banks and for insurance com-panies in the District of Columbia and to enable national banksto assist in the marketing of World Bank issues. Prior to theenactment of legislation by the United States Congress, nationalbanks were permitted to underwrite and deal only in United States
Only 38 States have separate savings banks.
87
Government, state and municipal bonds. The latter, moreover,were accorded exemptions under the Securities Act of 1933 andthe Securities Exchange Act of 1934, but these exemptions did notapply to World Bank bonds which, instead, were placed in essen-
tially the same category as private corporate obligations.
The Bank's marketing activities were greatly facilitated, there-
fore, when the United States Congress, in 1949, enacted legislation(Public Law 142-81st Cong.; Act of June 29, 1949) amendingthe National Bank Act and the Bretton Woods Agreements Actto deal with this situation. The amendment to the National BankAct permits national banks and state member banks of the Federal
Reserve System to deal in and underwrite securities issued by theBank up to 10%o of their unimpaired paid-in capital stock and
unimpaired surplus, provided those securities are at the time eligi-ble for purchase by national banks for their own account. Pur-
suant to a ruling by the U. S. Comptroller of the Currency, Bankbonds are eligible for purchase by national banks for their ownaccount up to 10% of their capital and surplus and are also eligi-
ble as security for U.S. Government deposits. The amendment
to the Bretton Woods Agreements Act' exempts securities issued
or guaranteed by the Bank from certain provisions of the Securities
Act of 1933 and the Securities Exchange Act of 1934, in effect
according them the same general treatment under these Acts as
United States Government, state and municipal bonds.
' The legislation calls for the Bank to file with the Securities and Exchange
Commission such reports with respect to its securities as the Commission deter-
mines to be appropriate in view of the official character of the Bank and its opera-
tions and to be necessary in the public interest or for the protection of investors;
requires the Securities and Exchange Commission and the National Advisory Council
on International Monetary and Financial Problems to file periodic reports with the
Congress as to the effect of the Act on the Bank's operation and permits the Securi-ties and Exchange Commission, acting in consultation with the National Advisory
Council, to suspend the exemption granted the Bank's obligations from the Securi-
ties Acts. Under rules promulgated by the Commission, reports are required in
connection with each public issue by the Bank in the United States. These reports
are designed to make available at the Commission information similar to that which
would have to be included in a registration statement filed under the Securities Act
of 1933.
88
As a result of this legislation, United States banks have helpedmaterially in developing the market for the Bank's bonds byserving both as underwriters and distributors. Certain of thelarger banks also deal in outstanding issues of the bonds andhelp in broadening the market for them.
The bonds are well seasoned in the United States market andare regarded as investments of high quality. They are rated"AAA" or the equivalent by the three largest bond rating servicesin the country. The market action of the bonds has comparedfavorably with high-grade corporate and United States Govern-ment issues.
Bond Sales in the United States Market
Public offerings of bonds in the United States investmentmarket have been and continue to be the principal source of long-term borrowed funds to the World Bank. The fifteen issuesfloated on this market aggregate $1,460,000,000, of which thirteenissues were outstanding, in whole or in part, in the amount of$1,161,347,000 on December 31, 1959. (See Table 7.)
The Bank has employed several methods in marketing its issuesin the United States. The first five issues-sold between July 1947and September 1951- were offered by various means: an agencyarrangement, competitive bidding and sponsorship arrangements.None of these methods proved to be satisfactory in the light of theBank's role as a continuing borrower.
The Bank resorted to negotiated underwriting in May 1952, inconnection with an issue to be sold at that time. All subsequentissues in the United States have been sold and distributed on thisbasis. Nationwide syndicates of large investment banking firms,commercial banks and dealers headed by The First Boston Cor-poration and Morgan Stanley & Co. have served as underwriters,and have organized selling groups consisting of large numbers ofinvestment dealers throughout the country.
In adopting this method, the Bank believed it would inducea continuing and active effort on the part of the banks and invest-
89
TABLE 7
U.S. DOLLAR BOND ISSUES
Principal'
Issue and Maturity outstanding
2% Serial Bonds of 1950, due 1960-62 .................. $ 30,000,0003X% Two year Bonds of 1958, due 19602 . .......... 75,000,00043/% Two year Bonds of 1959, due 19612 . .......... 100,000,00033/4% Ten year Bonds of 1958, due 1968 . ........... 150,000,00033/2% Fifteen year Bonds of 1954, due 1969 . ......... 84,996,000332% Nineteen year Bonds of 1952, due 1971 . ........ 52,917,0003% Twenty-Five year Bonds of 1947, due 1972 ......... 141,865,000432% Fifteen year Bonds of 1958, due 1973 . ......... 97,100,0003/8% Twenty-Three year Bonds of 1952, due 1975 ....... 46,054,0003% Twenty-Five year Bonds of 1951, due 1976 ........ 50,000,000432% Twenty year Bonds of 1957, due 1977 . ......... 92,048,0004°40/% Twenty-One year Bonds of 1957, due 1978 ........ 97,181,0004X4% Twenty-One year Bonds of 1958, due 1979 ........ 149,500,00043 4% Twenty-Three year Bonds of 1957, due 1980 ....... 69,686,0003X4% Thirty year Bonds of 1951, due 1981 . .......... 100,000,000
I In addition to U.S. dollar bond issues, there were outstanding ten U.S. dollar noteissues aggregating $305.5 million.
2 Entire issue privately placed with investors outside the United States.
ment houses involved to sell Bank bonds and to develop a broadermarket for them. It was also believed that the establishment ofan informed and interested group of investment houses anddealers would develop a ready and active market for World Bankissues in the United States. Proof of the success of the under-writing technique can be seen in the fact that in the two calendaryears 1957-58, six issues of the Bank's bonds aggregating $675million were successfully distributed in the United States market-$275 million in 1957 and a record $400 million in 1958. Inaddition a satisfactory secondary market for Bank issues has beenestablished.
The Bank had no recourse to the United States market incalendar 1959; all publicly offered bonds in that period were
90
denominated in currencies other than dollars. By February 1960,however, market conditions improved and the Bank offered atpar, on February 9, $125 million of 5% Twenty-Five Year Bonds.The coupon on these bonds was the highest to date on any Bankissue offered in the United States.
Included in the terms of sale of the new issue were variousfeatures which had been developed with previous Bank issues inthis market in order to make them especially attractive to institu-tional investors. Certain institutional investors were extended theprivilege of taking bonds on a delayed delivery basis on one ormore quarterly dates through February 15, 1962. Consequently,they were enabled to arrange their purchases of the new issue inthe light of their projected cash positions; the Bank, on the otherhand, was able to co-ordinate a part of its borrowings with itsdisbursements, which usually extend over a period of several years.
Purchasers of the new issue were also protected against earlyrefunding by the fact that the bonds were made non-redeemablein the first ten years of their life. Both the delayed delivery pro-vision and protection against early redemption have been includedin all public issues by the Bank in the United States since January1957.
The Market Abroad
Both as an international organization and as a borrower whichmust go to the market periodically to finance operations, it isimportant that the Bank should not be unduly dependent on anyone source of funds. While the United States has been and in alllikelihood will continue to be the principal source of borrowedfunds, the Bank has consistently sought to develop, sources ofboth dollar and non-dollar funds in other capital markets.
The market for the Bank's bonds and notes abroad breaks downinto two main segments: a wide international market for theBank's United States dollar issues; and a market for issues in othercurrencies in Canada, Germany, Switzerland, the United King-dom and other capital exporting countries of Western Europe.
91
The Market Abroad for United States Dollar Issues
It was estimated that as of December 31, 1959, about $684million, or 41%, of the Bank's outstanding United States dollar
obligations were held abroad by private and governmental in-vestors in more than 40 countries. A sizeable part of these hold-ings were long-term bonds, but by far the larger portion-at least
$500 million-consisted of short-term bonds and notes withmaturities ranging from one to three years and largely held in
the portfolio of central banks in a number of countries.
The sale abroad of the Bank's United States dollar issues has
been assisted by certain exemptions from U.S. taxes accruing toholders of World Bank dollar bonds and notes who are non-
resident aliens or foreign corporations. (See page 100.)
Despite postwar stringencies small parts of the Bank's firstdollar issues found their way abroad. As early as 1950 theNetherlands Government permitted trading on the AmsterdamExchange of trust certificates representing $5 million of the
Bank's 37o Twenty-Five Year Bonds due 1972. In addition, overa period of several years, virtually all of a $100 million issue of
2% Serial Bonds due 1953-62, which were sold in the U.S. at
competitive bidding, were acquired by central banks outside the
United States. In September 1953, $40 million of a public offer-
ing in New York of $75 million of 3% Three-Year Bonds werepurchased for private and governmental accounts in 16 countries
outside the United States.
In 1954, the Bank placed privately $50 million of 21/2%o Five-Year Bonds entirely outside the United States. Purchasers in-
cluded institutional investors and governmental accounts in 23countries. This type of transaction has been repeated a numberof times since 1954, the latest being the placement in August 1959
of $100 million of 43/4% Two-Year Bonds with 63 institutions
and governmental accounts in 35 countries.
The biggest single holder of World Bank obligations is the
Deutsche Bundesbank, the Central Bank of Germany. Since July
92
1957, the Bundesbank has been a consistent purchaser of one, twoand three-year U.S. dollar notes of the World Bank. The totalof such purchases to the end of 1959 aggregated $403 million, ofwhich $120 million had matured, leaving a total of $283 millionof World Bank dollar notes held by the Bundesbank on December31, 1959. A further sizeable amount of dollar obligations of theWorld Bank has been placed with the Bundesbank in the formof short-term bonds. The Bundesbank has also lent DeutscheMark to the World Bank. (See page 95.)
Borrowing Other Currencies
The Bank on December 31, 1959, had 19 issues of bonds andnotes outstanding in currencies other than U.S. dollars. Theaggregate of these issues was equivalent to $348 million and rep-resented borrowings by the Bank in Belgian francs, Canadiandollars, Deutsche mark, Netherlands guilders, Pounds sterling andSwiss francs. The Bank makes every effort to obtain increasingamounts of its funds in non-dollar currencies so as to be betterable to supply its borrowers with the variety of currencies theyrequire.
In the early period of the Bank's operations, many traditionalinvestment markets were virtually closed to all but domestic issues,as those countries struggled to overcome post-war difficulties. Inlater years, the costs of borrowing abroad frequently remainedhigher than in the U.S. investment market. During parts of 1959,however, this was no longer the case, and the Bank was able tofloat four public issues-one each on the Belgian, German, Swissand British markets-totaling the equivalent of almost $109million. This was the largest volume of public offerings abroadby the Bank in any one year, and also marked the Bank's firstpublic offerings of Belgian franc and Deutsche mark bonds.
Belgian Issue
The Bank has sold one issue in the Belgian investment market.It was offered publicly at par on May 4, 1959, and consisted of
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Belgian francs 500 million ($10 million equivalent) of 5% Ten-Year Bonds due 1969. The offering was made by an underwritinggroup consisting of Banque de la Soci&6 G6n6rale de Belgique,Banque de Bruxelles, Kredietbank and Soci&6 Belge de Banque.This issue has been listed for trading on the Brussels and AntwerpExchanges. In addition to permitting the Bank to sell bonds onthe investment market, the Government has exempted from in-come tax-other than "impot complementaire personnel"-in-terest and redemption premium on bonds issued by the Bank.
Canadian Issues
The Bank has sold three issues in Canada aggregating Can. $55million. All of them were offered publicly in the Canadian marketthrough syndicates of investment firms and charter banks headedby Wood, Gundy & Company, Limited, Dominion SecuritiesCorpn., Limited, and A. E. Ames & Co., Limited. The first issuewas sold in 1952 and consisted of Can. $15 million 4%O Ten-YearBonds. All outstanding bonds of this issue were redeemed by theBank in 1955. The second issue, Can. $25 million 31/2½ Fifteen-Year Bonds was sold in 1954; and the third, Can. $15 million31/4¼o Ten-Year Bonds in 1955. As of December 31, 1959, out-standing Canadian dollar issues of the Bank amounted to Can.$37.3 million. The Bank of Canada is fiscal agent for the Cana-dian dollar issues.
Preparation of the market for Bank issues in Canada entaileda legislative program that was essentially the same, although morelimited in scope, as that undertaken in the United States. Rulingswere obtained in several provinces that facilitated the sale of thebonds. Special legislation enacted by the Canadian Parliamentin 1947 permitted insurance companies and in 1953 loan and trustcompanies to invest in Bank obligations. In 1955 the Provinceof Ontario and in 1956 the Province of British Columbia enactedlegislation which made the bonds of the Bank, or obligationsbearing its guarantee, eligible for investment by insurance, loanand trust companies incorporated or registered in these provinces.
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German Issues
In Germany one issue of World Bank bonds has been soldpublidy. It consisted of DM 200 million ($47.6 million equiva-lent) of 5%o Fifteen-Year Bonds. The offering was made at paron April 9, 1959, by an underwriting group of German bankinghouses headed by Deutsche Bank A.G. and the Dresdner BankA.G. The issue is listed on the principal exchanges of Germanyincluding Berlin, Hamburg, Dusseldorf, Frankfurt and Munich.
The World Bank has also borrowed Deutsche Mark from theDeutsche Bundesbank, the Central Bank of Germany. The firstof these borrowings, amounting to DM 200 million, was arrangedin June 1958 and under the agreement the full amount of theloan was drawn down by the World Bank from time to time as itrequired funds. As evidence of its indebtedness the World Bankissued to the Bundesbank 3% Notes due July 7, 1961.
In January 1960 a second borrowing in Deutsche Mark wasarranged with the Bundesbank, also in an amount of DM 200million. Under the agreement, the World Bank may from timeto time, prior to January 31, 1961, draw down the principal ofthe loan. As evidence of its indebtedness, the World Bank willissue to the Bundesbank its 43/4%o Notes due three years from thedate of each draw down of principal. Deutsche Mark derivedfrom the borrowing from the Bundesbank are fully convertibleat the option of the World Bank.
A further DM 10 million was borrowed by the Bank in Oc-tober 1959, by means of private placement of 41/2%o Notes duein 1961 with a European institution other than the Bundesbank.
After giving effect to all the above transactions, the WorldBank has borrowed a total of DM 610 million, equal to about$145 million.
Netherlands Issues
The Bank has sold two issues of guilder bonds in the Nether-lands. Both issues were publicly offered through an underwriting
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syndicate of 14 Dutch banks headed by the Netherlands TradingSociety. The first sale of f4o million, equivalent to about $10.5million, of 31/2% Fifteen-Year Bonds was made in 1954; thesecond, f40 million 31/2% Twenty-Year Bonds, in 1955. Out-standing guilder bonds of the Bank on December 31, 1959,aggregated about f79 million, equal to about $20.8 million. TheNetherlands Trading Society is fiscal agent for the guilder bonds.
In 1950 the same banking group which subsequently under-wrote the two guilder issues applied to have "Netherlands Trus-tee Certificates," issued against certain United States dollar bondsof the Bank, listed on the Amsterdam Stock Exchange. The appli-cation was approved and purchases of Bank bonds have been madein the United States for the account of Netherlands investors,who exchange the bonds for trustee certificates.
The Netherlands Government facilitated introduction of theBank's dollar bonds on the Amsterdam market by exempting thetrustee certificates from requisitioning under foreign exchangeregulations. Though not specifically directed toward the Bank,legislation passed by the Netherlands in 1956 had the effect ofmaterially broadening the market for the Bank's guilder issues.The act permits certain public funds to invest in guilder securities,listed on the Amsterdam Exchange, which are the obligations offoreign governments or of institutions in which the NetherlandsState participates with other governments. Included were work-men's compensation funds, disability and old age pension funds,civil service pension funds and the postal savings bank.
Swiss Issues
The Bank, on December 31, 1959, had outstanding eight issuesin Switzerland totaling about Sw F 567 million, equivalent toabout $131.9 million. Seven of these issues, all bonds, had beensold to the public by a syndicate of leading Swiss banks, headedby the Swiss Bank Corporation, Cr6dit Suisse and Union Bank ofSwitzerland. Two other Swiss franc bond issues were placed atprivate sale in 1948 and 1950, but have since been retired.
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Maturities on outstanding issues of bonds range from 10 to 20years. A further issue of Swiss franc bonds was publicly offeredin Switzerland on January 29, 1960, consisting of Sw F 60 million($13,960,000) of 41/2%o Twelve-Year Bonds.
Although not a member of the Bank, Switzerland has enteredinto an agreement which recognizes the Bank's international per-sonality and legal capacity and grants it facilities which corre-spond in large part to those which the Bank enjoys in the terri-tories of its members. This has facilitated the Bank's marketingoperations in Switzerland by clarifying its legal status there andby according it certain tax and other benefits.
As a further evidence of its co-operation with the Bank andits desire to aid in financing overseas economic development, theSwiss Government has lent the Bank from its own resources Sw F200 million, roughly equivalent to $46.5 million, at an interestcost of 3%/8% a year. This loan, which became effective on Jan-uary 1, 1957, was arranged in September 1956 and approved bythe Swiss Parliament the following December. It has a final ma-turity of eight years and is repayable in six equal annual instal-ments beginning in 1960.
The proceeds of the loan are in "free" Swiss francs, the bulkof which have been converted into United States dollars in accord-ance with the wishes of the Swiss Government, which wanted toinvest the funds without adding to the liquidity of its internalmoney market. The Bank's need for Swiss francs for loan dis-bursements is expected to be covered through flotations of bondson the Swiss investment market.
United Kingdom Issues
The Bank has sold three sterling issues aggregating £20million, equal to $56 million, in the London market. Two issuesconsisted of £5 million of 31/2% Twenty-Year Stock (Bonds),the first being sold in May 1951 and the second in July 1954.The latest issue, offered in December 1959, consisted of £10million of 5% lTwenty-Three Year Stock. In each instance, the
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issue was sold to a London syndicate of banking firms composedof Baring Brothers & Co., Ltd., Hambros Bank, Ltd., LazardBrothers & Co., Ltd., Morgan Grenfell & Co., Ltd., N. M. Roth-schild & Sons, and J. Henry Schroder & Co. The securities werethen publicly offered throughout the United Kingdom by largegroups of dealers. Baring Brothers & Co., Ltd., is fiscal agent forthe sterling issues.
Various legal and administrative rulings were made in theUnited Kingdom which have facilitated these marketings. Inaddition, special legislation was enacted by Parliament exemptingtransfers of the securities from the United Kingdom stamp duty.
Since this stamp duty is a relatively substantial item, the exemp-tion was of particular benefit. Outstanding sterling bonds of the
Bank aggregated £19,203,905 on December 31, 1959, equal toapproximately $53.8 million, £796,095 principal amount having
been retired under sinking fund provisions.
Action by Other Countries
In addition to the action taken by those countries in which theBank has sold issues, a number of other governments have takensteps to broaden the market for its bonds in their territories.
The French Government has authorized the listing of various
issues of the Bank on the Paris Bourse. French foreign exchange
regulations permit residents of France to purchase the bonds inthe United States with dollars acquired from the sale of other
dollar securities there. Bonds so acquired are traded on theBourse and may be purchased directly against French francs. InTurkey the Ministry of Finance has registered the Bank's bonds
on the Istanbul Stock Exchange, according them the privileges andregistration fee exemptions accorded to Turkish State obligations..Australia has taken action to make the bonds a permissible in-vestment for insurance companies and South Africa has made
them eligible for investment by commercial banks. Chile, Cuba,Colombia and Mexico have dassified the bonds as legal invest-
ments for banks and other financial institutions and have
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permitted those institutions to invest part of their foreign exchangereserves in Bank bonds. In 1955, Mexico exempted income fromthe Bank's bonds and other obligations from Mexican income tax,irrespective of the nationality and domicile of the holder.
Various of the Bank's issues are now listed on securities ex-changes in many cities outside the United States, including Lon-don, Paris, Amsterdam, Brussels, Antwerp, Luxembourg, Zurich,Basle, Geneva, Mexico City, Berlin, Hamburg, Frankfurt, etc.
Types of Securities Sold by the Bank
Bonds and notes issued by the Bank are its direct obligations;none is secured by a pledge of specific assets and, as required bythe Articles of Agreement, both the bonds and notes state thatthey are not an obligation of any government. The note issuescontain no negative pledge clause nor do they provide for sinkingfunds or for redemption prior to maturity.
All of the bonds, however, contain a provision to the effectthat, with a minor exception, the Bank will not pledge any of itsassets to secure other debt unless the bonds share pro rata in suchpledge. Including the Swiss franc and the U.S. dollar bonds soldin 1960, all outstanding bond issues of the Bank, with the ex-ception of four United States dollar issues, seven Swiss francissues and the Belgian franc and Deutsche Mark issues, containsinking fund provisions obliging the Bank to purchase or redeembonds for sinking fund purposes in varying amounts during thelife of the issue. Each issue, except for four United States dollarissues, is subject to redemption prior to maturity at the optionof the Bank, upon varying conditions. It should be noted that inregard to all long-term U.S. dollar issues offered publicly sinceJanuary 1957, sinking fund operations and first call date do notcome into effect until ten years after issuance of the bonds.
Under the Articles, holders of Bank obligations do not, as such,enjoy any general exemption from taxes on interest paid to them.As noted in Chapter 4, the bonds and the interest thereon are notsubject to any tax (a) which discriminates against the bonds
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solely because they are issued by the Bank, or (b) the sole juris-dictional basis for which is the place or currency in which thebonds are made payable or paid, or the location of any office orplace of business maintained by the Bank. Also, under the Articlesthe Bank is not under any obligation to withhold or to pay any taxon the interest on the bonds.
As regards United States taxation, the Treasury Departmenthas ruled that interest on bonds issued by the Bank is exemptfrom income taxes, induding withholding taxes, if paid to an in-dividual who is not a national or resident of the country or to acorporation organized under the laws of a country other than the
United States, whether or not it is engaged in trade or businessin the United States, unless the corporation is a life insurance com-
pany and the interest is attributable, within the meaning of theInternal Revenue Code, to the company's insurance business in theUnited States. Similar tax exemptions also exist in certain othermember countries where the Bank has issued bonds.
The Federal Reserve Bank of New York has been designatedas fiscal agent for the World Bank in connection with each of its
United States dollar bond issues. As such, the Federal ReserveBank handles payments of principal and interest, registration,transfer and exchanges of bonds, and other fiscal functions.
Sales of Borrowers' Obligations
By December 31, 1959, the Bank had sold or arranged to sellto investors by private placements the equivalent of $651 millionof the obligations of its borrowers received in connection with itsloans to them. Of these obligations, about $368 million were out-standing on that date and $283 million had been repaid. Startingas a modest source of replenishment of funds, these transactionshave become an important adjunct to the financing of the Bank'sloan operations and have brought private investment into thefinancing of development in member countries.
Through 1950, most obligations sold from loan portfolio car-
ried the Bank's guarantee. Increasingly thereafter sales were
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made without recourse to the Bank, and in the last five years allsuch sales have been made without the Bank's guarantee. Thisdevelopment reflects improved conditions in the member countriesand investor acceptance of the standard of Bank lending.
Prior to fiscal 1951-52, virtually all purchases of portions ofBank loans were made by private institutional investors in theUnited States. Since then, however, the majority of such purchasesyear by year has been made by investors elsewhere, including thepurchase by governmental accounts of their own government'sobligations to the Bank.
TABLE 8
LOANS SOLD AND AGREED TO BE SOLD
(In U.S. Dollar Equivalents)
No. ofInvestors Amount
Purchased by U.S. Investors 57 $237,842,017Purchased by Investors Abroad 131 413,510,027
TOTAL 188 $651,352,0441
l Included in the total is the equivalent of $69,003,844 sold with the guarantee of theBank; and $582,348,200 sold without the Bank's guarantee.
As previously stated, sales by the Bank from its loan portfolioare private placements of securities. In some cases the sales aremade after the loan contract between the Bank and the borroweris signed and disbursements have been made; in others the sales arearranged about the time of the signing of the contract and thefunds are called when disbursements are made. The first methodaccounted for roughly $426 million of the total to December 31,1959, with purchasers abroad taking $375 million. Private institu-tions in the United States-including banks, savings banks, in-surance companies-have made the bulk of their purchases by the
101
second method, accounting for about $193 million of the total of$233 million of borrowers' obligations sold by this means.
A sales peak of $148 million was reached in fiscal 1958-59, andthe $82.9 million sold in the first half of fiscal 1959-60 was thesecond highest in volume of sales recorded in any six month
period.Market conditions, especially those affecting the supply of short
and intermediate term funds, exert an influence on the volume
of sales of borrowers' obligations, particularly to private institu-tional investors. The market, however, is not the only factor.For example, in fiscal 1958-59, a period of tight money, the de-
cision of the Netherlands Central Bank to permit private Dutchbanks to use a part of their cash reserves to buy some $55 millionof Netherlands Government obligations from the World Bank
substantially swelled the volume of portfolio sales in that period.
Joint Bank-Market Operations
Since December 1954, the Bank has entered into 13 joint
operations with United States investment banking houses whereby
a World Bank loan is made to coincide with the raising of addi-tional funds from private investors, either by means of a public
offering of the borrower's bonds on the investment market, by
private placement of securities with institutional investors, or by a
combination of the two.The funds raised from the market and from the Bank loan are
both applied to financing the development of the country involvedand in some cases the proceeds of both are applied to a particulardevelopment project or program. Agreement on the use of the
funds is reached beforehand by representatives of the borrowingcountry or agency, the investment banking firms concerned and
the World Bank.The first of these joint operations took place in December 1954,
when Belgium borrowed $50 million-$20 million from the
World Bank and $30 million from the market-to finance a part
of the cost of a large port and waterways development program.
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Since 1954 there has been one or more of these transactions ineach year, and in all, ten governments or governrnental agencieshave used this means to raise funds for development. The totalof such transactions amounted to $539 million by December 31,1959, with World Bank loans accounting for about $239 millionand the market for about $300 million of the total.
TABLE 9
JOINT BANK-MARKET OPERATIONS TO DECEMBBR 31, 1959
World Bank Bond or TotalYear Country Loan Note Issue Financing
1954 Belgium ........... $ 20,000,000 $ 30,000,000 $ 50,000,0001955 Norway ........... 25,000,000 15,000,000 40,000,0001955 Union of South
Africa ........... 25,200,000 25,000,000 50,200,0001956 Australia (Qantas) 9,230,000 17,770,000 27,000,0001957 Air India Inter-
national 5,600,000 ,11,200,000 16,800,0001957 Belgium .10,000,000 30,000,000 40,000,0001957 Union of South
Africa .25,000,000 35,000,000 60,000,0001958 Fed. of Rhodesia &
Nyasaland 19,000,000 6,000,000 25,000,0001958 Union of South
Africa .25,000,000 25,000,000 50,000,0001958 Austria .25,000,000 25,000,000 50,000,0001959 Japan .10,000,000 30,000,000 40,000,0001959 Denmark .20,000,000 20,000,000 40,000,0001959 Italy (Cassa per il
Mezzogiorno).... 20,000,000 30,000,000 50,000,000*
$239,030,000 $299,970,000 $539,000,000
* Does not include a loan of $20,000,000 to the Cassa per ii Mezzogiorno (Italy) by theEuropean Investment llank, made at the same time as the World Bank loan and the publicoffering of the Cassa's Bonds on the U.S. investment market.
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The total raised by joint operations in 1959 was a record $130million. Denmark, for example, borrowed $40 million-$20million from the World Bank and $20 million through the saleof 51/2½7 Fifteen-Year Bonds by means of a public offering on theU.S. investment market. The Bank's loan was applied to financingthe foreign exchange costs of an electric power program; andfunds derived from the bond issue were used by Denmark toacquire capital equipment for development.
Japan also borrowed $40 million through a joint operation in1959: $10 million from the Bank, $15 million through a publicoffering of 51/2%o Fifteen-Year Bonds on the U.S. market and $15million through private placement of 41/2% Three, Four andFive-Year Bonds with the assistance and advice of an investmentbanking firm. In this case the Bank's loan and the market fundsare being applied to the same large hydroelectric project on theIsland of Honshu.
The Southern Italy Development Fund (Cassa per il Mez-zogiorno) an agency of the Government of Italy, borrowed $70million in 1959 in a joint Bank-Market-European Investment Bankoperation. The borrowing from the World Bank amounted to$20 million; a further $20 million was borrowed by means of apublic offering of 51/2% Fifteen-Year Bonds on the U.S. marketand $10 million was raised through private placement of 43/4%7oFour and Five-Year Bonds with the assistance of an investmentbanking firm; in addition the Cassa borrowed $20 million fromthe European Investment Bank. The lire equivalent of the pro-ceeds of the bond issues was applied to the general program of theCassa, while the funds borrowed from the World Bank and theEuropean Investment Bank financed a power project on the South-ern Italian mainland and industrial projects in Sicily.
The World Bank favors frequent joint operations with themarket for a variety of reasons: (1) the call on its own resourcesis reduced by the amount made available by the market, therebylowering the amount the Bank must raise through the sale of itsown obligations; (2) the resources of institutional investors are
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directly enlisted in the financing of development; and (3) oppor-tunities are presented to member countries to establish tlHeircredit in the investment market which ultimately may enable themto finance future development without recourse to the WorldBank or other governmental agencies.
For example, South Africa and the Federation of Rhodesia andNyasaland issued their first publicly offered bonds in the UnitedStates in connection with joint Bank-Market operations. In addi-tion, the transactions involving Austria, Belgium, Denmark, Italy,Japan and Norway brought public bond issues of these countriesto the U.S. market for the first time since the thirties.
In these joint operations with the market, the Bank has noliability on the bonds or notes issued in connection with the marketofferings or the private placements. In general, however, finalmaturities on the Bank's loans run well beyond those of the obli-gations sold or placed in the market. The exceptions are the loansto South Africa and one of the loans to Belgium in which the finalmaturity of the Bank's loans and the final maturity of the bondissues coincide; at ten years in the case of South Africa and 15years in the case of Belgium.
Holders of Bank Obligations
Of the total of direct and guaranteed obligations of the Bank,equivalent to approximately $1,990 million, outstanding on De-cember 31, 1959, investors in the United States were estimated tohold about $977 million, or roughly 49%. These holdings weredistributed approximately as follows: pension and trust funds,25%; life insurance companies, 12%; savings banks, 10%; com-mercial banks and other investors, 2%.
Investors outside the United States have increased their holdingsof Bank obligations in each year since 1950, and it is estimatedthat on December 31, 1959, they held about 51%o of the Bank'sdirect and guaranteed obligations, or the equivalent of $1,032million. Of this amount, these investors held about $684 millionof the Bank's dollar bonds, and about $348 million of its bonds
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payable in currencies other than dollars. These holders indude
private investors and central banks in more than 40 countries.
Table 12 below shows the estimated distribution of holdings
of the Bank's direct and guaranteed obligations on December 31,
1959.
TABLE 10
ESTIMATED DISTRIBUTION OF BANK OBLIGATIONS
(IAn U.S. dollar eqivaknt.s)
Amount % of Total
United StatesPension and Trust Funds .......... $ 500.6 24.9Life Insurance Companies ......... 231.0 11.5Savings Banks ................... 199.2 9.9Commercial Banks & Others ...... 46.1 2.3
$ 976.9 48.6Investors outside the United States 1,032.4 51.4
TOTAL ..................... $2,009.3 100.0
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10
International Finance Corporation(IFC)
SOON AFTER THE BANK BEGAN TO OPERATE it became apparentthat certain limitations of its activities left uncovered an importantarea of development financing. The requirement that all Bankloans be guaranteed by the government of the borrowing com-pany restricts the Bank in lending to private enterprises. Bor-rowers may fear that a government guarantee might lead toofficial interference in their businesses. Governments, on the otherhand, may be reluctant to favor one private borrower overanother. For these reasons, in the early years of the Bank itsofficers began to consider the possibility of an institution thatcould deal directly with private business without governmentguarantees. Discussions to this end were carried on with membergovernments, and with representatives of private business andfinancial communities of the member countries.
The idea crystallized, and the International Finance Corporation(IFC) came into existence in July 1956 as an autonomous inter-national institution designed to stimulate growth in its developingmember countries by investing in productive private enterprises inassociation with private capital and management, and without anygovernment guarantee.
IFC membership is open only to members of the Bank. TheCorporation is affiliated with the Bank through Boards of Direc-tors and Governors of almost identical composition. However,the Corporation is an entirely separate legal entity, with its own
107
funds, staff, and methods of operation. IFC operates in a manner
similar to a private investment firm, with a compact staff of engi-
neers, investment officers, accountants, and lawyers. In addition
it uses outside consultants to deal with special technical problems
or market surveys. Ordinarily it retains local legal counsel.
The basic difference between IFC and other public financial
organizations, including the World Bank, is that the latter confine
operations to fixed interest loans, while IFC makes investments
with equity-type features and deals directly with private business.
The World Bank and other public lending organizations have
funds which are sufficient in themselves to make substantial
impact upon the economies of the countries where the projects
are located. By contrast, IFC's role in economic development may
be described as that of a catalyst, using its more limited funds in
conjunction with private business and investment capital in the
expansion of private industrial enterprises in the developing areas.
IFC expects that ordinarily at least one-half the cost of projects
will be financed by private capital. Thus, far from competing
with private capital, IFC works with it and stimulates its flow.
IFC judges projects on the basis of their merits as investments
for private capital. To be successful, IFC's over-all profits must
be sufficient to demonstrate that its type of investment is attractive
to private investors.
IFC is prohibited by its charter from investing in capital stock.
Its investments are nevertheless made on a venture capital basis in
company with and accepting risks similar to those incurred by
private capital. As a logical corollary, IFC expects to obtain
returns commensurate with the risk. This is done through rights
to additional compensation related to profits, or by rights to sub-
scribe to stock. While IFC may not itself acquire stock, it can sell
its rights to others, thus realizing capital profits on successful
investments. As a matter of policy IFC does not invest in enter-
prises in North America, Japan, and the highly industrialized
countries of Western Europe. IFC investments are confined to
projects located in the less developed member countries.
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The time needed to bring a project to the point where it is readyfor IFC investment varies widely. The few projects which havecome to IFC well-prepared and documented-with market andengineering studies, financial plans and organization and otherpertinent details-have been handled quickly. However, most ofthe proposals presented to IFC are in preliminary stages and oftenrequire long periods of preparation by the sponsors and IFC.
Although it may seem too obvious to require comment, theimportance of adequate management for any industrial under-taking is frequently not fully realized. It has become generallyaccepted that experienced technicians are required to direct theoperation of complicated machines and processes, but there is lessunderstanding of the equal necessity in industrial enterprises forexperienced executive management. The success of modern busi-ness is as fully dependent on financial planning and control, mar-keting, sound organizational structure and adequate supervisionand training of personnel as it is upon machines and technology.
It is IFC's experience that projects presented are more oftenlacking in adequate provision for management than for capital.Although the majority of projects which IFC has financed arelocally managed, there are a number of instances in which it hasseemed essential to secure foreign management experience. Per-haps the most desirable form in which this can be obtained isthrough partnership with an experienced company from one ofthe industrialized countries, thus combining a financial investmentwith management skills. Other alternatives are managementcontracts with such companies or the services of experiencedforeign individuals until local personnel became qualified.
Since IFC came into existence in 1956, the lending agenciesoperating in the less developed countries have increased both innumber and in resources. The scale of IFC activities has un-doubtedly been limited by the fact that governmental institutions,both in the industrialized and in the developing countries, makeavailable to a limited number of private enterprises credit frompublic funds at rates much lower than commercial rates.
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In the industrialized countries there is increasing public pressure
to encourage private enterprise as a larger factor in economic
growth of the developing areas. This trend is stimulated by
private industry's productivity, as well as by growing skepticism
of the effectiveness of some of the economic aid extended to the
governments of the developing countries. But, financing of private
enterprise by government funds continues apace. It is welcomed
by businessmen who have obtained or hope to obtain such funds.
Political pressures and objectives also enter these transactions.
Often the main purpose of credits furnished by the industrialized
countries is to stimulate exports; this, rather than the economic
soundness of the project, is frequently the governing consideration.
To many the argument seems plausible that making government
funds available to private industry is an effective means of pro-
moting growth and expansion; that cheap money is a stimulus to
industrial expansion; and the cheaper the money the greater the
stimulus. No one will dispute that businessmen prefer to obtain
capital as cheaply as possible. However, this coin has another
side. Only a limited amount of government capital is available
for private business. Therefore, only a small proportion of sound
enterprises can be financed by such public funds. It seems obvious
that the major part of private industrial growth must be financed
by private capital, and that government funds can supply only
marginal amounts to relatively few enterprises.
In all of the industrialized countries today there is a wide range
of opportunities for investment and by and large they are open
both to domestic capital and to that from beyond the country's
borders. There is justification for the opinion of most investors
that there are greater risks in investing in the developing countries
than in the industrialized areas. Therefore, private investment
capital will go into the developing countries only if possible
rewards are substantially higher than in the more mature areas.
Taking into account these considerations, let us examine how
government lending at relatively low rates affects the flow of
private capital into enterprises in the developing countries.
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Company X in a developing country secures funds from agovernment institution, either at home or abroad, at a rate con-siderably cheaper than it can obtain from private sources. In thiscase private capital has obviously been put out of competition.More important, other managements needing funds and aware ofthe favorable terms that Company X has obtained, naturally seekthe same benefit. They easily convince themselves that the cheapgovernment rate represents the fair cost of capital; that sinceCompany X obtained public finance they, too, are entitled to it;and that private investors asking prevailing commercial rates areto be scorned. In the process of waiting and hoping to get a shareof limited low-cost public funds, many businessmen delay orabandon enterprises and forego profits which would amply pro-vide for the higher costs of private investment funds. As, accord-ing to Gresham's Law, bad money drives out good money, like-wise cheap government money drives away private investmentcapital. It may well hinder rather than promote industrial growth.
In the past few years there has been increasing interest on thepart of private investment capital in the United States andWestern Europe in the opportunities for investment in the devel-oping areas. The individual, or even the institution well-equippedfor domestic investment, finds it difficult to examine projectsoverseas. IFC is prepared to do the work and incur expense inorder to present well-prepared proposals to these potential in-vestors, enabling them to consider participation without undueexpense to themselves. Thus IFC with its growing experience andcontacts should be increasingly effective in assisting this trend ofprivate financial capital to move into the developing areas.
IFC Operations
As of March 31, 1960, IFC had 59 member nations and a sub-scribed paid-in capital of $96,506,000. Of this, the equivalent ofmore than $27,000,000 was committed to 26 enterprises in 12countries. These enterprises are in the fields of manufacturing,
111
processing, or mining. There are 19 in Latin America, 5 in Asia,and 2 in Australia. The terms are varied, but a broad pattern isdiscernible. Typically, investments are in the form of unsecuredloans, with amortizations commencing after 2 to 5 years, and withfinal maturities of 10 to 12 years. Generally investments bearfixed interest at rates ranging from 6%o to 7%, and usually carry-ing options on shares. In most cases IFC is also entitled tosome additional contingent interest or a share in the profits.
In a fertilizer project in Peru, half of IFC's total investment of$1,400,000 was made in income notes, with no fixed interest butdependent on profits. This is the nearest approach which IFC can
now make to an equity investment. Several other projects nowunder negotiation will include such income notes.
Generally, IFC's investments are in the medium size projectsmost suitable for growth in the developing areas. The assets ofthe enterprises range from the equivalent of about $400,000 to$20,000,000; the IFC investments from $140,000 to more than$3,000,000. However, consistent with its chief role of catalyst,IFC will consider larger investments, especially where they willattract participation of important amounts of private capital.
Of the projects in which the Corporation is participating, 13 areowned and managed by residents of the country, 8 are joint enter-prises of local and foreign ownership and management, and 6 are
subsidiaries of foreign firms.Several IFC investments merit special mention. In the case of
Champion Celulose of Brazil, an IFC commitment of $4,000,000attracted private participations totaling $3,175,000 by two UnitedStates banking houses and other private investors. This left IFC'snet investment at only $825,000. Financing for a copper miningand smelting operation in Chile was provided by an IFC invest-ment of $3,100,000 accompanied by $6,200,000 put up by threeprivate United States institutions. IFC's investment of $2,450,000in Willys-Overland of Brazil was accompanied by $1,050,000from two American financial institutions.
112
TABLE 11SUMMARY OF
INTERNATIONAL FINANCE CORPORATION COMMITMENTS
Expressed in United States Dollars(As of April 15, 1960)
CountryObligor Date of Net
Type of Business Commitment Terms Commitment
AUSTRALIADuncan's Holdings, Ltd. Sept. 1957 7% interest and additional pay-
(Lumber and mill products) ments contingent on profits; ma-turities 1961-67; option on shares $ 660,000
Rubbertex Proprietary, Ltd. Jan. 1959 6% interest and additional pay-(Rubber products) ments contingent on profits; ma-
turities 1961-70; option on shares 225,000BRAZIL
Siemens do Brasil Cia. de Eletricidade June 1957 6% interest; maturities 1962-68;(Electrical equipment) option on shares 1,000,000
Olinkraft S.A. Celulose e Papel Jan. 1958 7% interest; maturities 1963-70;(Pulp and paper) option on shares 957,000
D.L.R. Plasticos do Brasil, S.A. April 1958 7% interest; maturities 1961-68;(Automotive parts) additional payments contingent
on profits; option on shares 450,000Willys-Overland do Brasi, S.A. Industria June 1958 7% interest; maturities 1963-66;
e Comercio additional payments contingent(Motor vehicles) on profits; option on shares 2,450,000
Companhia Mineira de Dec. 1958 7% interest; maturities 1963-69;Cimento Portland, S.A. additional payments contingent
(Cement) on profits; option on shares 1.200,000*Champion Celulose, SA. June 1959 7% interest and additional pay-
(Pup) ments contingent on profits; ma-turities 1965-69; option on shares 4,000,000
CHILECementos Bio-Bio, S.A. July 1959 7% interest and additional pay-
(Cement) ments contingent on profits; ma-turities 1966-71; option on shares 1,000,000
Empresa Minera de Mantos Blancos, S.A. Aug. 1957 7% interest and additional pay-(Copper mining and smelting) ments related to dividends; ma-
turities 1964-68; option on shares 2,200,000Same June 1959 Same 900,000Compania Molinos y Fideos Carozzi June 1959 6% interest and additional pay-
(Pasta products) ments contingent on profits; ma-turities 1963-70; option on shares 1,500,000
COLOMBIAFabrica de Calletas y July 1959 6% interest and additional inter-Confites Noel, S.A. est related to profits; maturities
(Food products) 1964-69; option on shares 1,000,000Laminas del Caribe, S.A. June 1959 7% interest and additional pay-
(Fibreboard) ments contingent on profits; ma-turities 1962-67; option on shares 500,000
EL SALVADORIndustrias Textiles, S.A. May 1959 7% interest and additional pay-
(Textiles) ments contingent on profits; ma-turities 1962-69; option on shares 140,000
'Prticipations through IFC were: The Deltec Corporation of New York $2,225,000Chemical Intemational Finance, Ltd. $ 750,000Bankers International Corporation $ 200,000
(continued)
113
Summary of International Finance Corporation Commitments (continued)
Expressed in United States Dollars
(As of April 15, 1960)Country
Obligor Date of. NetType of Busiss Commitment Terms Commitment
GUATEMALAIndustria Harinera Cuatemalteca, SA. Oct 1958 5% interest and additional pay-
(Flour milling) ments contingent on profits; ma-turities 1963-66; option on shares $ 200,000
INDIAKirloskar Oil Engines, Ltd. April 1959 61/2% interest and additional pay-
(Diesel engines) ments contingent on profits; ma-turities 1965-70; option on shares 850,000
IRANSherkate Sahami Kahkashan June 1959 7% interest and additional pay-
(Ceramic tiles) ments contingent on profits; ma-turities 1962-68 300,000
MEXICOEngranes y Productos Industriales, S.A. Aug. 1957 9% interest and additional pay-
(Machine and foundry products) ments contingent on profits; ma-turities 1961-6 600,000
Bristol de Mexico, S.A. Sept. 1957 7% interest and additional pay-(Aircraft engine overhaul) ments contingent on profits; ma-
turities 1960-66; option on shares 520,000
PAKISTANSteel Corporation of Pakistan, Ltd. June 1958 7% interest and additional pay-
(Rolled steel products) ments contingent on profits; ma-turities 1964-68; option on shares 630,000
Adamjee Industries, Ltd. July 1958 7% interest; maturities 1964-68;(Cotton textiles) option on shares 750,000
PERUFerftilizantes Sinteticos, S.A. Sept. 1959 7% interest and additional pay-
(Synthetic anmmonia and fertlizers) ments contingent on $3,186,000,maturities 1965-69; additionalinterest contingent on profits,without fixed interest, on $700,-000, maturities 1970-74; optionon shares 3,886,000
Industrias Reunidas, S.A. Sept. 1959 6% interest and additional pay-(Household apphances) ments contingent on profits; ma-
turities 1962-67; option on shares 250,000
Luren, S.A. and Ladrillos Calcareos, S.A. Sept. 1959 7% interest and additional pay-(Limestone and bricks) ments contingent on profits;
maturities 1963-69; option onshares 280,000
Durisol del Peru, SA. Nov. 1959 7% interest and additional pay-(Building material) ments contingent on profits; ma-
turities 1965-69; option on shares 300,000
THAILANDConcrete Products & Aggregate Co., Ltd. June 1959 6% interest and additional pay-
(Concrete products) ments contingent on profits; 'ma-turities 1961-69 300,000
$27,048,000
Of this amount, participations through IFC were: Handelsfinanz A.G. $2,486,000Compagnie Financiere de Suez $ 350,000
114
11
International Development Association(IDA)
AT THE ANNUAL MEETING of the Bank's Board of Governorsin New Delhi in l958, the Governor for the United States broughtforward new proposals for international development financing.His initiative, which was informal, followed earlier discussionsin the United States Senate and concerned the possibility of es-tablishing a new international development institution whichwould be administered by the World Bank and which wouldmake funds available to the less developed member countries onterms imposing a lesser burden on their balance of paymentsthan conventional Bank loans.
This initial approach was followed in the ensuing 12 monthsby discussions between the United States and other governments.These discussions resulted in a resolution passed by the Board ofGovernors at-their Annual Meeting in Washington in October1959, requesting the Executive Directors of the Bank to draw upArticles of Agreement for the proposed new Association.
By the end of January 1960 the Artides had been completedand transmitted to all member countries of the Bank with therecommendation by the Executive Directors that the Articles be
115
accepted. It remained for the Bank's member governments todecide whether they wished to join IDA, and if so, to take thelegislative or other action necessary to accept membership and tosubscribe funds.
The Articles provide that IDA will enter into force whengovernments whose subscriptions aggregate at least 65% of totalinitial subscriptions have accepted membership. This requirementmust be met by December 31, 1960. The earliest date on whichIDA may come into being is September 15, 1960.
A preamble to the Articles states the conviction of the signatorygovernments that mutual co-operation for constructive economicpurposes, healthy development of the world economy and bal-anced growth of international trade foster peace and world pros-perity; that higher standards of living and economic and socialprogress in the less developed countries are desirable, not only inthe interests of those countries but also for the international com-munity as a whole; and that achievement of these objectiveswould be facilitated by an increase in the international flow ofcapital, public and private, to assist in the development of theresources of the less developed countries.
The main features of IDA, as proposed, are as follows:
Purposes
The purposes of IDA are defined: . . . to promote economicdevelopment, increase productivity and thus raise standards ofliving in the less developed areas of the world induded withinthe Association's membership, in particular by providing financeto meet their important developmental requirements on termswhich are more flexible and bear less heavily on the balance ofpayments than those of conventional loans, thereby furtheringthe developmental objectives of the International Bank for Re-construction and Development and supplementing its activities."
Membership and Initial Suhscriptions
Membership of IDA is open to member countries of the Bank.
116
The initial resources proposed for IDA are $1,000 million, anamount which will be obtained if all existing member countriesof the Bank join IDA and thereby accept the subscriptions as-signed to them. IDA subscriptions are to be roughly proportionateto subscriptions to the Bank's capital. Thus the United Stateswould be the largest subscriber, with a subscription of $320.29million. The United Kingdom would be the next largest with$131.14 million. As in the Bank, voting rights in IDA will beroughly proportionate to subscriptions.
A unique feature of IDA is that member countries have beendivided into two groups for purposes of subscription of funds(see Table 12, page 121). Subscriptions will be payable overa five-year period, and the countries in both groups will subscribe10% of their initial subscriptions in gold or freely convertiblecurrencies. Different provisions are made for the two groups,however, with regard to the remaining 90%o of their initial sub-scriptions. The first group, the 17 more industrialized membercountries of the Bank, will pay their 90 % in five equal install-ments in gold or freely convertible currencies, whereas the secondgroup, the 51 less developed member countries, will pay their90 % in their national currencies, which IDA will not be free toconvert into other currencies or to use to finance exports fromthe country concerned without its consent. The Executive Direc-tors have expressed the hope that the more developed of thesecond group of countries will soon be in a position to release atleast some part of the 90 % of their subscriptions for use by IDA.
Operations
The Articles have been drafted in very general terms, givingthe Association wide latitude to shape its financing to meet theneeds of actual cases as they arise.
IDA is to finance development in the less developed membercountries and the less developed dependent and associated terri-tories included within the membership of member countries. TheArticles provide that IDA financing shall be for purposes which,
117
in the opinion of IDA, "are of high developmental priority in thelight of the needs of the area or areas concerned and, except inspecial circumstances, . . . for specific projects." In their Reporttransmitted to member countries with the Articles of Agreement,the Executive Directors point out that IDA is thereby authorizedto finance "any project . . . which will make an important con-tribution to the development of the area or areas concerned,whether or not the project is revenue-producing or directly pro-ductive. Thus projects such as water supply, sanitation, pilothousing and the like, are eligible for financing, although it isexpected that a major part of the Association's financing is likelyto be for projects of the type financed by the Bank." The Execu-tive Directors state that the words "specific projects" are under-stood, as they are in the Bank's practice, to include such proposalsas a railway program, an agricultural credit program, or a groupof related projects forming part of a development program. IDAwill not provide financing if it is available from private sourceson reasonable terms, or could be provided by loans of the typemade by the Bank.
IDA will impose no conditions that the proceeds of its financingshall be spent in the territories of any particular member or mem-bers; IDA will in general follow the practice of the Bank in en-couraging its borrowers to make use of international competitionin the placing of orders for goods and services. And IDA willalso follow the Bank in disbursing its funds to recipients onlyto meet expenses in connection with a project as they are actuallyincurred.
IDA's financing out of initial subscriptions is to take the formof loans. Broad latitude is provided for these loans, the Articlesproviding that the forms and terms shall be such as IDA "maydeem appropriate." This will permit the Association to providefinance in any of a number of ways: for example, by providingfor lenient terms of repayment (such as loans repayable in foreignexchange with long maturities or long periods of grace, or both,or loans repayable wholly or partly in local currency), by lending
118
free of interest or at a low rate of interest or by some combinationof the foregoing.
IDA may provide financing to a member government, to thegovernment of a territory included within IDA's membership, toa political subdivision, to a public or private entity in the terri-tories of a member or members, or to a public international orregional organization. Unlike the Bank, which must obtain agovernmental or comparable guarantee when lending to a bor-rower other than a member government, it is left to IDA's dis-cretion whether to require such a guarantee. IDA is directed toco-operate with other public international bodies and membercountries providing financial and technical assistance to the lessdeveloped areas, and specifically to enter into formal arrange-ments with the United Nations.
It is also provided that IDA shall not interfere in the politicalaffairs of member countries nor be influenced in its decisions bythe political character of the member or members concerned.Only economic considerations are to be relevant to IDA's de-cisions.
Resources and Use of Currencies
IDA is to keep the adequacy of its resources under regularreview. It is contemplated that the first review would take placeduring the first five-year period, and subsequent reviews at inter-vals of approximately five years thereafter. General or individualincreases in subscriptions may be authorized at any time.
IDA may also enter into arrangements to receive from anymember, in addition to its own subscription, supplementary re-sources in the currency of another member provided that themember whose currency is involved does not object. For example,the United States has indicated that it might offer to IDA someof its holding of foreign currencies arising through sales of sur-plus commodities under Public Law 480. The provision of suchsupplementary resources would not entitle the subscribing mem-ber to any additional voting rights.
119
Organization and Management
The structure of IDA is adapted to administration by the Bank.
Thus IDA is to have a Board of Governors, Executive Directors,
and a President, all of whom will be the holders of those positions
in the Bank, serving ex officio in IDA. The Governors may dele-
gate to the Executive Directors the same broad powers as have
been so delegated in the affairs of the Bank. As to staffing, officers
and staff of the Bank are to be appointed, to the extent practic-
able, to serve as such in IDA, which accordingly will have no
separate officers or staff, at least initially. Should a different
course at any time appear desirable there is sufficient flexibility
to permit the appointment of officers (other than the President)
and staff who would be concerned solely with IDA's affairs.
Other Articles contain detailed provision for such matters as
withdrawal or suspension of membership; status, immunities and
privileges; amendments; interpretation and arbitration; and arbi-
tration; and signature and entry into force.
120
TABLE 12
INTERNATIONAL DEVELOPMENT ASSOCIATION
Initial Subscriptions
(US $ millions)
PART I
Australia ............... 20.18 Japan ................. 33.59Austria ................ 5.04 Luxembourg ............ 1.01Belgium ............... 22.70 Netherlands... ......... 27.74Canada ................ 37.83 Norway ................ 6.72Denmark ............... 8.74 Sweden ................ 10.09Finland ................ 3.83 Union of South Africa ... 10.09France ................. 52.96 United Kingdom ........ 131.14Germany ............... 52.96 United States ........... 320.29Italy ................. 18.16 763.07
PART II
Afghanistan ............ 1.01 Israel ................. 1.68Argentina ............... 18.83 Jordan ................. 0.30Bolivia .... 1.06 Korea .1.26Brazil ................. 18.83 Lebanon ............... 0.45Burma ................. 2.02 Libya ................. 1.10Ceylon ................. 3.03 Malaya ................ 2.52Chile ................. 3.53 Mexico ................ 8.74China ................. 30.26 Morocco ............... 3.53Colombia .............. 3.53 Nicaragua .............. 0.30Costa Rica ............. 0.20 Pakistan ... ........... 10.09Cuba ................. 4.71 Panama ................ 0.02Dominican Republic ..... 0.40 Paraguay .............. 0.30Ecuador ................ 0.65 Peru ................. 1.77El Salvador ............ 0.30 Philippines ............. 5.04Ethiopia ............... 0.50 Saudi Arabia ........... 3.70Ghana ................. 2.36 Spain ................. 10.09Greece ................. 2.52 Sudan ................. 1.01Guatemala ............. 0.40 Thailand ............... 3.03Haiti ................. 0.76 Tunisia ................ 1.51Honduras .............. 0.30 Turkey ................ 5.80Iceland ................ 0.10 United Arab Republic .. 6.03India ................. 40.35 Uruguay .............. 1.06Indonesia ...... 11.10 Venezuela .7.06Iran ................ 4.54 Viet-Nam .............. 1.51Iraq . . . .... 0.76 Yugoslavia ............. 4.04Ireland ................ 3.03 236.93
TOTAL. 1,000.00
121
APPENDICES
APPENDIX A
Balance SheetEXPRESED IN JNre STATES CURRENCY
ASSETS
Gold (Valued at $35 per fine troy ounce) . . . . . . . . . . . . . . . . . $ 735,159Due from Banks and Other Depositories
Member currencies,including $11,755,284 United States dollars
Unrestricted ... . . . . . . . . . . . $ 23,081,625Subject to restrictions-NoTE B . . . . . . . . 140,895,260 $163,976,885
Non-member currency (Swiss francs) . . . . . . . 2,348,352 166,325,237
tnvestmentsGovernment obligations (at cost or amortized cost)
United States (Face amount $836,490,000) . . . . . $825,325,257Canada (Face amount CanSl9,050,000) . . . . . . 17,208,539United Kingdom (Face amount £3,225,000) . . . . . 8,981,200Germany (Face amount DM2,200,000) . . . . . . 520,217 $852,035,213
Time deposits maturing within six months, including$41,000,000 United States dollars . . . . . . 41,376,188
Accrued interest. . . . . . . . . . . . . 6,449,361 899,860,762
Receivable on Account of Subscribed CapitalReoeivable in United States currency
Calls on subscription to capital stock . . . . . . . $ 2,500.000Receivable in other member currencies-NOTE B
Non-negotiable, non-interest-bearing, demand notes $484,414,979Amounts required to maintain value of currency holdings 1,085,606 485,500,585 488,000,585
Effective Loans Held by Bank (See Appendix D)-NoTE C(Including undisbursed balance of $862,453,852) . . . . 3,531,488,550
Acerued Interest, Commitment and Service Chargeson Loans-NorE C . . . . . . . . . . . . 29,165,627
Receivable from Sale of SterUng Stock (See Appendix E) . . 20,020,000
Receivable from Purchasers on Account of Effective LoansAgreed to be Sold(l ncluding undisbursed balance of $30,135,646) 43,055,200
Unamortized Bond Issuance Costs . . . . . . . . . 17.543,638
Land and Buildings . . . . . . . . . . . . . $ 8,579,546Less reserve for depreciation . . . . . . . . . . 277,722 8,301,824
OtherAssets 1,851,617
Special Reserve Fund Assets-NOTE DDue from Banks-member currency-Utjsted States . . . $ 452Investment securities-United States Government obligations
($144,236,000 face amount; at cost or amortized cost) . . 144,063,576Acrued loan commissions-NoE C 7,008,755 151,072,783
Staff Retirement Plan Assets(Segregated and held in trust) . . . . . . . . . . 9,458,074
Total Assets $. . . . . 5,366,879,056
124
APPENDIX A
December 31, 1959See N/w-es to Finnncia/ S.1-men-,, Appe-dix F
LIABILITIES, RESERVES AND CAPITAL
LiabilitiesAccrued interest on borrowings . . . . . . . . . . . . . . S 23,590,591Accounts payable and other liabilities . . . . . . . . . . . . 4,138,047Undisbursed balance of effective loans
Held by Bank . . . . . . . . . . . . . . . . . . S 862,453,852Agreed to be sold . . . . . . . . . . . . . . . . . 30,135,646 892,589,498
Funded debt (See Appendix 1)(Of this amount $184,466,905 is due within one year) . . . . . . . 1,989,803,001
Reserves for LossesSpecial reserve-NOTE D . . . . . . . . . . . . . . . . $ 151,072,783Supplemental rescrve against losses on loans and guarantees-NoTE E . . . 310,851,062 461,923,845
Staff Retirement Plan Reserve . . . . . . . . . . . . . . . 9,458,074
CapitalCapital stock-NOTE F
Authorized 210,000 shares of $100,000 par value eachSubscribed 186,144 shares . . . . . . . . . . . . . . $18,614,400,000
Less-Uncalled portion of subscriptions-NOTE G . . . . . . 16,634,010,000 1,980,390,000
Payments on account of pending subscriptions . . . . . . . . 4,986,000
Contingent Liability-LOANS SOLD UNDER GUARANTEE-NOTE H . . $19,461,000
Total Liabilities, Reserves and Capital . . . . . $5,366,879,056
125
APPENDIX B
Comparative Statement of Income and ExpensesFOR TH-E'SIX MONTHS ENDED DECEMBER 31. 1958 AND DECEMBER 31. 1959
EXPRESSED IN UNITED STATES CURRENCY-See Notes to Financial Sta-ements, Appendix F
Month of December July ]-December 31
1958 1959 1958 1959
Income
Income from investments . .. .. . 5 2,126,510 $ 3.152,992 SI 1,856,343 $16,767,399
Income from loans:Interest .7,294,988 8,584,718 41,870,760 50,201,540
Commitment charges . . . . . 587,053 579,142 3,028,436 3,469,399
Commissions . . . . . . . . 1,983,170 2,239,668 11,473,932 13,180,165
Service charges . . . . . . . . 9,357 6,208 63,816 42,623
Other income . . . . . . . . . 97,574 192,005 530,714 920,629
Gross Income . . . . . . $12,098,652 $14,754,733 S68,824,001 $84,581,755
Deduct-Amount equivalent to commissionsappropriated to Special Reserve-NOTED 1,983,170 2,239,668 11,473,932 13,180,165
Gross Income Less ReserveDeduction. $10,115,482 $12,515,065 S57,350,069 S71,401,590
Expenses
Administrative expenses:Personal services . . . . . . . 5 445,633 S 472,229 5 2,763,577 S 2,798,918
Contributions to staff benefits . . . 53,555 80,180 298,770 464,216
Fees and compensation . . . . . 49,283 37,146 290,295 286.091
Representation . . . .7,422 5,543 41,964 69,922
Travel . . . .163,882 44,060 1,027,110 750,228
Supplies and material . . . . . . 362 8,736 40,392 46,533
Office occupancy . . . . . . . 59,144 33,502 294,716 233,683
Communication services . . . . . 20,490 26,931 142,553 141,827
Furniture and equipment 11,058 13,738 68,612 59,538
Books and library services . . . . 7,683 9,942 46,480 56,929
Printing . . .. 4,839 9,040 46,207 44,147
Insurance . . . . 1,880Cr 2,357 8,530 11,839
Other expenses . . . . . . . . 2,609 3Cr 17,007 4,100
Total Administrativc Expenses . $ 824,080 $ 743,401 S 5,086,213 $ 4,967,971
Interest on borrowings . . . . . . 5,394,091 6,223,472 30,543,664 36,449,579
Bond issuance and other financial expenses 131,721 122,040 652,640 750,308
Discount on sale of loans . . . . . - 86,468 - 460,008
Gross Expenses . . . . . . $ 6,349,892 5 7,175,381 $36,282,517 $42,627,866
Net Income-Appropriated to SupplementalReserve Against Losses on Loans andGuarantees-NOTE E . . . . . . . $ 3,765,590 $ 5,339,684 $21,067,552 S28,773,724
126
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APPENDIX D
Summary Statement of LoansDECEMBER 31, 1959
EXPRESSED IN UNITED STATES CURRENCY-See Notes to Financial Statements, Appendix F
Effective loans held by Bank
Members in whose territories loans Disbursed Undisbursed Loons not yethove been model portion porlion
2Total
3effec1ive4
Australia . .5. . . . . S 250,933,082 $ - $ 250,933,082 $ -Austria ... . . . . . . 59,456,156 26,154,604 85,610,760 9,000,000Belgium ... . . . . . 95,146,846 14,340,279 109,487,125Brazil .. . . . . . . 157,612,230 66,060,761 223,672,991 11,600,000Burma . . . . . . . . . 12,444,803 6,737,197 19,182,000Ceylon ... . . . . . . 13,219,983 9,466,767 22,686,750Chile ... . . . . . . 40,590,104 22,751,152 63,341,256 32,500,000Colombia ... . . . . . 70,369,000 24,016,000 94,385,000 2,800,000Costa Rica . . . . . . . . 2,966,933 1,280,067 4,247,000Denmark ... . . . . . 36,957,200 14,349,800 51,307,000Ecuador ... . . . . . 16,644,682 26,565,318 43,210,000El Salvador . . . . . . . 20,622,705 7,821,295 28,444,000Ethiopia . . . . . . . . 11,831,378 8,457,622 20,289,000Finland. . . . . . . . . 44,411,953 33,628,847 78,040,800France ... . . . . . . 229,648,000 14,000,000 243,648,000 50,000,000Guatemala . ..... . 16,654,963 380,037 17,035,000Haiti . . . . . . . . . 1,002,964 1,211,036 2,214,000Honduras ... . . . . 3,399,441 4,753,559 8,153,000 1,450,000Iceland . .... . 4,937,720 - 4,937,720India ... . . . . . 381,052,799 141,106,397 522,159,196Iran ......... . 65,633,971 59,429,029 125,063,000 5,200,000Italy ... . I . . . . 156,334,012 62,452,821 218,786,833 40,000,000Japan . . . . . . . . . 185,620,799 50,825,880 236,446,679 44,000,000Lebanon ... . . . . 6,545,034 20,454,966 27,000,000Luxembourg ... . . . . 5,848,000 - 5,848,000Malaya ... . . . . . . 615,237 33,704.763 34,320,000Mexico ... . . 137,723,556 24,623,444 162,347,000Nicaragua ... . . . . . 13,922,535 1,781,465 15,704,000Norway ... . . . . . 62,714,843 20,385.157 83,100,000Pakistan ... . . . . . 74,983,070 42,732.088 117,715,158 14,900,000Paraguay ... . . . . . 2,510,000 - 2,510,000Peru ... . . . . . . 32,950,446 5,538,636 38,489,082Philippines ... . . . . . 14,160,580 3,352,420 17,513,000South Africa . . . . . . . 115,847,958 3,728,3 87 119,576,345Sudan .l.. . . . . . . 18.258,218 18,991,782 37,250,000Thailand ... . . . . 45,265,114 52,444,886 97,710,000Turkey ... . . . . . . 52,344,454 1,470,547 53,815,001United Arab Republic . . . . - - - 56,500,000United Kingdom . . . . . . 127,802,559 32,701,148 160,503,707Uruguay . . . . . . 48,690,305 4,755,695 53,446,000 7.000,000Yugoslavia ....... . 50,880,000 - 50,880,000
Totals ... . . . $2,688,553,633 $862,453,852 $3,551,007,485 $274,950.000Less Exchange Adjustments . . . . . . . . . . . 19,518,935
$3,531,488,550
128
APPENDIX D
Summary Statement of Loans (continued)DECEMBER 31, 1959
EXPRESSED IN UNITED STATES CURRENCY-See Notes to Financial Statements, Appendir F
SUMMARY OF CURRENCIES REPAYABLEON EFFECTIVE LOANS HELD BY BANK
Currency Amounit
Australian pounds . .... $ 24.01 2,703X Loans are made (a) to the member or (b) to a political Austrian schillings . . .* . . 9,613,382
subdivision or a public or a private enterprise in the Belgian francs .41,847,912territories of the member with the member's guarantee. Burmese kyats 676,155
2 This does not include $30,135,646 of effective loans Canadian dollars . . . 93,329.033which the Bank has agreed to sell. Of the undisbursed Ceylon rupees . . . . . . . . 540,000balance, the Bank has entered into irrevocable commit- Danish kroner . 8,171,400ments to disburse $8,160,079. Deutsche marks . . . . . . . . 163,863,605
Finnish markkas . . . . . . . 1,387,9403 Original principal amount of loans French francs . . . . . . . . 49,933,482
signed . . . . . . . . . . . $4,871,037,893 Ghanaian pounds . . . . . . . 560,148Indian rupees. ....... 14,449.435
DEDUCT: Iranian rials .4,943,796(a) Cancellations, termi- Iraqi dinars .428,825
nations and refund- Irish pounds. . . . . . 1,467,083ings . . . . . $112,303,003 Israel pounds . . . . . . . . 900,000
(b) Principal repayments Italian lire .36,377,095to the Bank . . . 294,403,123 Japanese yen. ........ 40,771,932
(c) Loans sold or agreed Luxembourg francs . . . . . . 1,515,630to be sold of which Malayan dollars . . . . . . . . 831,763$30,135,646 has not Mexican pesos . . . . . . . . 9,054,542yet been disbursed . 638,374,282 Netherlands guilders .48,795.157
(d) Loans not yet effective 274,950,000 1,320,030,408 Norwegian kroner. . 4,554,901Pakistan rupees . . . . . . . . 174,552
$3,551,007,485 Pounds sterling .227,173,721DEDUCT: Exchange adjustments .. 19,518,935 South African pounds. ..... 13,452,059
Sudanese pounds. .. l, .. 200 025Effective loans held by Bank . . . . $3,531,488,550 Swedish kronor . 1,200,049
Swiss francs. ........ 130,609,8914Agreements providing for these loans have been United States dollars. 1,734.241'626
signed, but the loans do not becomne effective and disburse- Venezuelan bolivares ...... 2.018,448ments thereunder do not start until the borrower and Yugoslav dinars . . . . . . 1,647,343guarantor, if any, take certain action and furnish certaindocuments to the Bank. The Bank has agreed to sell Disbursed portion of effective loans held$12,977,762 of loans not yet effective and thus the total of by Bank . $2,688,553,633both effective and non-effective loans sold or agreed to besold is the equivalent of $651,352,044. ADD: Undisbursed portion of effective
loans held by Bank . . . . 862,453,852
$3,551,007,485DEDUCT: Exchange adjustments . . 19.518.935
Effective loans held by Bank . . . . $3,531.488,550
129
APPENDIX E
Funded Debt of the BankDECEMBER 31, 1959
EXPRESSED IN UNrTED STATES CURRENCY-See Notes to Financial Statements, Appendix F
Pay.abt in tenor ad -nosunty ou.sanding fund req.irn.n,ut_
United States Dollans4,4% Notes of 1957. dut 1960. S 30,000,000 None'2% Serial Bonds of 1950, due 1960-62 . . . 300000000 None'212% Notes of 1958. doe 1960-61 . . .50,000,000 Non'-4y'% Notes of 957 dan 1960-61 . . .50000000 None-2'h% Notes of t958. dun 960 .. 15,000000 None'P/4% Two Year Bonds of 1958, due 1960 .75,000,000 None-2'h% Note of 1958, due 1961 .40,000 000 None-454% Notes of 1959. due 1961 . . . . . , 5000,000 None-4'/,% Two Year Bonds of 1959, doe 1961 . 100.000.000 Non'-454%7, Notes of 1959, due 1961. 2500,000 None-412% Note of 1959. dua 1962 . 25.000,000 None-3',4% Note of 1959. dun 1962 ............ 580000000 Nose'45'% Note of 1959, due 1962 . 30000,000 None-3554% Ten Year Bonds of 1958, due 1968 .150000,000 Nonec354% Fiften Year Bonds of 1954, due 1969 .84.996,000 1960 S 996.000
1961-66 $4,000,0001967-68 35,000,000
3SA% Nineteen Year Bonds of 1952, dun 1971 .52917,000 1960 S 917,000961-66 $2,.000,000967-70 32,500,000
375 Twenty-Five Year Bonds of 1947, doe 1972. 141,865,000 1960 5 865.0001961-62 $3,000,(963 -67 $4,500,000
1968_72 $7 500 000
4'h% Fiften Year Bonds of 1958, due 19732 . 97,100,000 1964-73 $5 000.0003fs% Twenty-Three Year Bonds of 1952, due 1975 .46,054,000 1960 S 54,000
500000 1961-74 S1,500,00035% Twnnty-Fiv- Year Bonds of 195l, due 1976 .50000,000 .963 S1,000 000
9 1.~ 964-73 $2,000,000454% Twenty Year Bonds of 1957, due 1977 I . 92,043.000 1967-76 355000 00045'4% Twenty-One Year Bonds of 1957, dun 1978 2 .97,181,000 1967-71 $4 000 000
1972-77 35,00,0041,% Twenty-One Year Bonds of 1958, don 19792 .149,500.,000 1968-77 $7,000,000
1978 35.000.0004304% Twenty-Three Year Bonds of 1957, due 1980 -. .. 69.606,000 1968-79 $35,0O 000
10000 1900 SI 500,000'/4a% Thirty Year Bonds of 1951, due 1981 .100,000,000 966-67 $2 000,000
1968-73 S33000.0001974-80 54,000,000
Sub-Total , 5S1,641,847,000
Belgian Franes5% Ten Year Bonds of 1959, duo 1969 (BF500,000,000) . S 10,000,000 None
St-Tt1tal .$.. . . . . . . . . . . . . . . 5 10,000,000
Canadian Dollars3t/4% Ten Year Bonds of 1955, dua 1965 (CanS]3,641,000) . . . S 12,400,909 1960 CanS141.000
1961-64 CanS500.000352% Fifleon Y,ar Bonds of 1954, due 1969 (CanS23,674,0001 ... 21,521,818 1960 CanS274000
1961-65 Can$800.0001966-68 CanS900,000
Sub-Toetal . $ 33,922,727
Deutsche Marks4A74 Notes of 1959, due 1961 (DM10,000,000) S. 2,380,952 None-3% Note of 1958, due 1961 (DM200,000,000) . 47,619,048 None'5% Bonds of 1959, duo 1965-74 (DM200,000,000) . 47,619,048 None
Sub-Total. . S 97,619t0481
Netherlands Guildees354% Fifteen Year Bonds of 1954, dan 1969 (f38,978,000) . . . . S 10,257,368 1960 f2,978,000
35/2% Twenty Year Bonds of 1955, due 1975 (f40,000,000) . . . . 10,526,316 1961-74 f2.640,0001975 f3,040.000
Sub-lotal . S 20,783,684
130
APPENDIX E
Funded Debt of the Bank (continued)DECEMBER 31, 1959
EXPRESSED IN UNITED STATES CURRENCY-See Nore, to Financial Statements, Appendir F
P,w,cj,, A,,,a ... ,o,6,npa!-ble ;N hear and mat -ily f-alin.e and, rrqotremen,
Pounds Sterling38% Twenty Year Stock of 1951, due 1971 (f4,263,205) . .. . S 11,936,974 1960 f 52,525
1961-71 £ 166,7003`'2% Twenty Year Stock of 1954, due 1974 (14,940,700) . . . . 13,033,960 1960 £ 116,742
1961-74 £166,7005% Twenty-Three Year Stock of 1959, due 1982 (LI0,000,000)' . . . 28.000,000 1965 82 £270,000
Sub-Total .S... . . . . . . . . . . . . . s 53,770,934
S0.iss Franc3Yn% Swiss Franc Loan of 1957, due 1961-65 (SW F 166.666,666) . . 5 38,782,237 None3t,2% Ten Year Bonds of 1952. due 1962 (Sw F 30.000,000) . . . 11,634,673 None31,2% Twetve Year Bonds or 1951, due 1963 (Sw F 50.000000) . . . 11,634,671 None31/,% Fifteen Year Bonds of 1953, doe 1968 (Sw F 50.000,DD(B . . . 11 634 671 None384% Fiftecn Year Bonds of 1953 (Nov. Issue), duoe 1968(w F530000,000) 11634,671 None3Y1/% Eighteen Y,:or Bonds of 1954, due 1972 (Sw F 50.000.000) . . 11.634,671 None
4% Fiteen Year Bonds of 1959. doe 1974 (Sw F 100.000,000) . . . 23,269,343 None3'.,% Twenty Year Bonds of 1955, due 1976 (Sw F 50.000,000) . . 11,634,671 1965-74 Sw F4,000,000
1975-76 Sw F 5,000.000
Sub-Total .5... . . . . . . . . . . . . . S 131,859,608
Grass Total . . . . . . . . . . . . . . . . s 959.803.001 I
I Each issue, except those indicated with an asterisk, is Date ofsubject to redemption prior to maturity at the option of the Issue Antinl final deliveryBank at the prices and upon the conditions stated in the ssue_nrorrnr_fino__________respective bonds. The amounts shown as annual sinking 41/2% 15YearBondsof1958, $2,900,000 Dec. 1,1960fund requirements are the principal amounts of bonds to be due 1973purchased or redeemed to meet each year's requirement, 414% 21 Year Bonds of 1957, $2,819,000 Feb. 1, 1960except that in the cases of the 312% Twenty Year Stock of due 19781951 and of 1954 and 5% Twenty-lThree Year Stock of 1959 41I4% 21 Year Bonds of 1958, S 500,000 Apr. 15, 1960the amount shown is the amount of funds to be provided due 1979annually for purchase or redemption. The amounts are 43/4% 23 Year Bonds of 1957, $1,800,000 Nov. 1, 1960shown after deduction of sinking fund requirements met as due 1980of the date of this statement.
' In the cases of the 41/2% Twenty Year Bonds of 1957
The following table shows the aggregate principal and the 43h% Twenty-Three Year Bonds of 1957 the Bankamount of the maturities, sinking fund and redemption will, as purchase funds, use its best efforts to purchaserequirements each year for the five years following the date bonds of these issues in the open market or by acceptanceof this statement: of tenders at prices up to and including 100% of the prin-
cipal amount plus accrued interest. After all bonds of theseissues, including those sold for delayed delivery, have been
Period Amotint issued, and proportionately less before then, the purchasePeriod Amo lanr funds will be at the annual rate of $5,000,000 through 1966
in the case of the 4%% Twenty Year Bonds of 1957 and atJan. 1 1960to Dec.31, 1960 . . . . . $184,466,905 the annual rate of $3,750,000 through 1967 in the case ofJan. 1, 1961 toDec.31, 1961 . . . . . 279,619,154 the434%Twenty-ThreeYearBondsofl957. ThepurchaseJan. 1, 1962 to Dec. 31, 1962 ..... 156,753,825 funds are cumulative on a month-to-month basis onlyJan. 1, 1963 to Dec. 31, 1963 . . . . . 36,253,825 within each calendar year.Jan. 1, 1964to Dec. 31, 1964 ..... 30,619,154 4In December, 1959 the Bank arranged to borrow
DM200 million (U.S. equivalent $47.6 million approxi-mately) by private placement. Under the agreement, the
Total . . . . . . . . . 5687,712,863 amount can be drawn down from time to time over 12months beginning January 31, 1960. On the occasion ofeach drawing the Bank will deliver a 41/4% Three Year
2 The Bank has entered into agreements to sell additional Note in the amount drawn.bonds of the following issues and delivery of these bonds ' Under the terms of the Subscription Agreement withwill be made and payment therefor will be received by the the underwriters, £2,350,000 was paid to the Bank onBankintheaggregateamountsandlatvariousdatestoand December 21, 1959, £2,500,000 is to be paid on Febru-including the dates shown hereafter: ary 22, 1960 and the balance on April 19, 1960.
131
APPENDIX F
Notes to Financial StatementsDECEMBER 31, 1959
N O T E A members are obligated to make such payments only whenAmounts in currencies other than United States dollars such currencies are recovered by the Bank. The equivalenthave been translated into United States dollars: of S1,085,606 is due from 4 members in order to maintdin
she value of their currencies as required under Article 11,(i) In the cases of 51 members, at the par values as Section 9.specified in the "Schedule of Par Values", published bythe International Monetary Fund; Some members have converted part or all of the Bank's
holdings of their 18% currency into United States dollars(ii) In the cases of the remaining 17 members (Afghan- to be used and reused as United States dollars in the Bank'sistan, Bolivia, Canada, Chile, China, Greece, Indonesia, operations, subject to the right of the Bank or the memberItaly, Korea, Malaya, Paraguay, Peru, Saudi Arabia, to reverse the transactions at any time, with immediateThailand, Tunisia, Uruguay and Viet-Nam), the par effect as to dollars then held by the Bank, and, as to dollarsvalues of whose currencies are not so specified, at the loaned, upon repayment of the loans. Such dollars whilerates used by such members in making payments of held by the Bank or on loan are not subject to the provi-capital subscriptions to the Bank; and sions of Article 11, Section 9. Such dollars held by the Bank
(iii) Jn the case of Swiss francs, a non-member or repayable on loans are shown in these financial state-currency, at the rate of 4.2975 francs to I United States ments under "United States dollars" and, where relevant.dollar. as "unrestricted".No representation is made that any of such currencies is NOTE Cconvertible into any other of such currencies at any rate The principal disbursed and outstanding on loans and theor rates. See also Note B. accrued charges for interest, commitment fee, service
charge and loan commission are receivable in UnitedNO0 TES B States dollars except the following amounts for which theThese currencies of the several rmembers, and the notes dollar equivalent is shown:issued by them in substitution for any part of such cur- . .rencies as permitted under the provisions of Article V, Principal Outstandig.S934,793,072Section 12, are derived from the 18% of the subscriptions Accrued Interest, Commitment andto the capital stock of the Bank which is payable in the Service Charges. .. . . . . . 10,338,728currencies of the respective members. Such 18% may be Accrued Loan Commissions . . . . 2,447,489loaned by the Bank, and funds received by the Bank on Total . . . . . . . $947,579,289account of principal of loans made by the Bank out ofsuch currencies may be exchanged for cther currencies or The dollar equivalent shown as principal outstandingreloaned, only with the approval in each case of the includes amounts which in accordance with Article 11,member whose 18% currency is involved; provided, how- Section 9 will be payable by members to maintain theever, that, if necessary, after the Bank's subscribed capital value of their currencies when such currencies are recov-is entirely called, such currencies may, without restriction ered by the Bank.by the members whose currencies are offered, be used or N oTE Dexchanged for the currencies required to meet contractualpayments of interest, other charges oramortization on the The amount of commissions received by the Bank onpaymenks ownborrowings other toargeet the amotizatio nthes loans made or guaranteed by it is required under ArticleBank's own borrowings or to meet the Bank's liabilities IV, Section 6, to be set aside as a special reserve to bewith respect to contractual payments ott loans guaranteed kept available for meeting obligations of the Bank created
by it. ~~~~~~~~~~~~by borrowing or by guaranteeing loans. On all loans grant-Under Article 11, Section 9, each member is required, if ed to date the effective rate ofcomimission is 1 % per annum.the par value of its currency is reduced or if the foreignexchange value of its currency depreciates to a significant N o T Eextent in its territories, to maintain the value of the Bank's Pursuant to action of the Board of Governors and Exec-holdings of its 18% currency, including the principal utive Directors the net income of the Bank has beenamount of any notes substituted therefor, and the Bank allocated to a Supplemental Reserve Against Losses onis required, if the par value of a member's currency is Loans and Guarantees Made by the Bank; and the futureincreased, to return to the member the increase in the net income of the Bank will, until further action by thevalue of such 18% currency held by the Bank. To the Executive Directors or the Board of Governors. beextent such currencies are out on loan, the Bank and the allocated to this reserve.
132
APPENDIX F
Notes to Financial Statements (continued)DECEMBER 31, 1959
NOTE FIn terms of United States dollars of the weight and fineness Period Amountin effect on July 1, 1944. Jan. 1, 1960 to Dec. 31, 1960 . . . . S 766,000
NOTE G Jan. 1, 1961 to Dec. 31, 1961 . . . . 11,000,000mette Jan. 1, 1962 to Dec. 31, 1962 . . . . 1,000,000
Subject to call by the Bank only when required to meet the Jan. 1, 1963 to Dec. 31, 1963 . . . . 1,000,000obligations of the Bank created by borrowing or guaran- Jan. 1, 1964 to Dec. 31, 1964 . . . . 500,000teeing loans. As to $14,891,520,000 the restriction on Thereafter .. .1 . . . . . . . 5,195,000calls is imposed by the Articles of Agreement; as to erea_er_5,1_5,000$1,742,490,000 by a resolution of the Board of Governors. Total $19,461,000
NoTE HThe Bank has sold under its guarantee $69,003,844 of The Board of Governors has approved application forloans of which amount $49,542,844 has been retired. The Membership from Laos ($10 million) and Portugalfollowing table sets forth the maturities of the guaranteed ($80 million) who have until June 30, 1960 to acceptobligations outstanding: membership.
133
APPENDIX G
Statement of Loans
Loan Date of (nloiaiOnuBaorton,, cad gasrantor' antaber Program or prajrri loan aorr,nrnil hiaiar,tiea eoimasiJon)
AUSrRALIA 29 AU Equipment for development . . . Aug 22, 1950 1955-1975 41h%66 AU Equipment for development . . . . July 8, 1952 1957-1972 4M4%96 AU Equipment for development . . . Mar 2, 1954 1957-1969 43/4%
HIl AU Equipmcnt for development . . . . Mar 18, 1955 1958-1970 4 Ys%155 AU Purchase of aircraft . . . Nov 15, 1956 1964-1966 4 434%156 AU Equipment for development . . . Dec. 3, 1956 1959-1972 434%
TOTAL
AUSTRIA (Guarantor)Verbundgenellschaft, Draukraftwerke 102 AUA Electnc power development . July 19, 1954 1959-1979 43/4%Verbundgesellschaft, Draukraftwerke 148 AUA Electric power development . . . . Scpt 21, 1956 1959-1976 5%Vorariberger Illwerke 118 AUA Electric power development . . . . June 14, 1955 1960-1979 45/4%Vorariberger Illwerke 179 AUA Electric power development Oct. 10, 1957 1960-1979 51/4%Verbundgesellschaft,Donaukraftwerkel49 AUA Electric power development . . . . Scpt 21, 1956 1960-1981 5%Verbundgesellschaf,Donaukraftwerke2l3 AUA Electric power development . . Dec 2, 1958 1964-1983 53/4%Oesterreichische
Investitionskredit A G 192 AUA Industrial financing Apr 28, 1958 1959-1975 512%Oesterreichische
Investitionskredit A G 237 AUA Industrial financing Sept 25. 1959 Final 1974 Note6
TOTAL
BELGIUM 14 BE Equipment for steel and power industries: Mar. 1, 1949 1953-1969 414 %48 BE Belgian Congo Development Plan Sept 13, 1951 1957-1976 43.4%
107 BE Waterways and port improvements Dec 14, 1954 1965-1969 4Ys%174 BE Waterway improvement . . Sept 10, 1957 1963-1972 5 3%
BELGIUM (Guarantor)Belgian Congo 47 BE Belgian Congo Development Plan . Sept 13, 1951 1957-1976 41/2%Belgian Congo 184 BE Highway construction and improvement Nov 27, 1957 1961-1976 6%,Ruanda-Urundi 165 BE Port and highway development June 26, 1957 1961-1977 5 Y%
TOTAL
BRAZIL 65 BR Railway rehabilitation . . . June 27, 1952 1955-1967 4Ys%75 BR Highway muinienance and improvement Apr. 30, 1953 1954-1959 41h%92 BR Railway rehabilitation . . . Dec 18, 1953 1959-1969 43Ys%
BRAZIL (Guarantor)Brazilian Traction (Ist Installment) I BR Electric power & telephones. . . Jan. 27, 1949 1953-1974 4(4%Brazilian Traction (2nd Installment) I BR-S Electric power development Jan 18, 1951 1955-1976 41/4%Brazilian Taclion 95 BR Electric power development . . . Feb 24, 1954 1955-1974 4 y%Brazilian Traction 229 BR Electric power development June 17, 1959 1963-1978 6%Sao Francisco Hidro Elet Co 25 BR Electric power development . . . . May 26, 1950 1954-1975 414%Com Estadual Energia Eletrica 64 BR Eleclnc power development . . . June 27, 1952 1957-1977 43/,%CEARG & CEMIG 76 BR Electric power development . . . July 17, 1953 1957-1973 5%Usinas Eletricas Paranapanema 93 BR Electric power development . . . . . Dec. 18, 1953 1958-1974 5%Usinas Eletricas Paranapanema 187 BR Electric power development . . . Jan 22, 1958 1962-1978 5Ys%Central Eletnca de Furnas, S A. 211 BR Elcctric power development . . . Oct 3, 1958 1964-1983 53/4%
TOTAL
BURMA 139 BA Railway development . . . . May 4, 1956 1959-1971 4,4%BURMA (Guarantor)
Rangoon Port Commissioners 140 BA Port development . . . May 4, 1956 1960-1976 434%
TOTAL
CEYLON 101 CE Electric power development . . . July 9, 1954 1959-1979 4 /4%209 CE Electric power dcvelopment Sept 17, 1958 1961-1978 51Y. %
TOTAL
CHILE (Guarantor)Fomento & Endesa 5 CH Electric power development , . Mar 25, 1948 1953-1968 4tA%Fomenlo & Endesa 153 CH Elcctric power development . . . . Nov 1, 1956 1960-1976 5%Fomento & Endesa 244 CH Electric power development Dec 30, 1959 1963-1985 6%Fomento 6 CH Agncultural development . . . Mar 25, 1948 1950-1955 33/4%Fomento 49 CH Exploration for and use of water . Oct 10, 1951 1955-19 ai 4 Y.%Fomento & Papeles y Cartones 83 CH Construction of paper and pulp mills Sept 10, 1953 1958-1970 5%Fomento & Schwager 171 CH Coal expansion & modernization . July 24, 1957 1963-1972 5i/4%Fomento & Lota 172 CH Coal expansion & modernization . . . July 24, 1957 1962-1972 53/4 %,
- TOTAL
134
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.A. 88 < 00 LAOo At O6eA 8
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7~~~~~~~~ OLACLOL 006 ww 0 LA 6 6 6 t. o8 8 1 8A-w
x 8 bw R w s; < 8 £ 9 9 g | | f { g | f f f t 9 w s o _ R [ w j j f | | l - tOc~~~~
STATEMENT OF LOANS (continued)
Loan Date of (ldBacro wfe,and gueran,orl number Peoure orproeci loan . mnenr Ma-ariea conmslon)
COLOMBIA 43 CO Highway construction and rehabilitation . Apr 10, 1951 1954-1961 36%68 CO National railways project . Aug 26, 1952 1957-1978 43h,%84 CO Highway construction and rehabilitation . Sept. 10, 1953 1956-1963 4'h%
144 CO Highway construction and rehabilitation . June 6, 1956 1959-1971 4'/4%coLoMBJA (Guarantor)
Caja de Credito 18 CO Agricultural development . . . . . Aug 19, 1949 1952-1956 3'h/%Caja de Credito 108 CO Agricultual development . . . Dec 29, 1954 1957-1961 41/4%CiIDRAL 38 CO Electnc power development . . . . . Nov 2, 1950 1954-1970 4%CHIDRAL 113 CO Electric power development . . . . Mar. 24,1955 1959-1975 43/,%CHtDRAL 215 CO Electric power development . . . . . Dec 15, 1958 1961-1979 514 %Caldas Hidro-Elec. Co 39 CO Electnc power development . . . . Dec. 28, 1950 1952-1971 4%Caldas Hidro-Elec. Co. 217 CO Electric power development Jan. 30, 1959 1962-1979 5N4%Hidroelectnca del Rio LebrUa 54 CO Electnc power development . . Nov. 13, 1951 1954-1972 4'h%Ferrocamles Nacionales 119 CO National railways project . . . . . June 15, 1955 1958-1980 43/4%Empresas Publicas de Medellin 225 CO Electric power development . May 20, 1959 1963-1984 6%
TOTALCOSrA RICA (Guarantor)
Banco Central de Costa Rica 147 CR Agricultural development and light industry Sept 18,1956 1958-1963 4¾/4%Banco Central de Costa Rica 219 CR Agricultural development and light industry Feb 11, 1959 1960-1965 53/4%
TOTAL
DENMARK 3 DE Post-war reconstruction . . . Aug 22, 1947 1953-1972 4'/4%218 DE Electnc power development . , , Feb 4, 1959 1962-1978 5b4%
TOTAL
ECUADOR 176 EC Highway maintenance and construction . Sept 20, 1957 1962-1977 53/4%181 EC Railway improvements . . Nov 1, 1957 1959-1961 6%
ECUADOR (Guarantor)
Com. Ejec. Vilidad (Guayas) 94 EC Highway construction . . . . . Feb. 10, 1954 1958-1964 4h%
Empresa Electnca Quito, S. A. 137 EC Electric power development . . . . Mar. 29, 1956 1959-1976 43/4%Empresa Electnca Quito, S A. 177 EC Electric power development . . . Sept. 20, 1957 1962-1977 53/4%Autoridad Portuana de Guayaquil 212 EC Port construction and development Oct. 9, 1958 1963-1983 5'h%
TOTAI
EL SALVADOR 104 ES Coastal highway project . . . . . . Oct 12, 1954 1959-1966 4(4%216 ES Highway construction . . . . Jan. 7, 1959 1963-1974 5'h%
EL aALVADOR (Guarantor)Comision del Rio Lempa 22 ES Electnc power development . . . . Dec. 14. 1949 1954-1975 41/4%Comision del Rio Lempa 221 ES Electnc power development . . . . Feb. 20, 1959 1962-1984 53/4%
TOTAI
ETHIOPIA 31 ET Highway rehabittation . . . Sept 13, 1950 1956-1971 4%32 ET Development of pnvate industry Sept 13. 1950 1956-1971 4%42 ET Telecommuntcations . . . . Feb 19, 1951 1956-1971 4%166 ET Highway construction and improvement June 28, 1957 1961-1977 5%%
TOTAT
FINLAND 21 Fl Equipment for timber production . . . Oct. 17, 1949 1950-1951 - 3%FINLAND (Guarantor)
Bank of Finland 16 Fl Power, wood processing and limestone . Aug. 1, 1949 1953-1964 4%Bank of Finland 61 Fl Power, wood processung and agnculture . Apr. 30, 1952 1955-1970 434%Bank of Finland 70 Fl Wood processming . . . . . . . . Nov. 13, 1952 1955-1970 4 3%Bank of Finland 112 Fl Power and wood processing. . . . . Mar 24, 1955 1958-1970 4 %%Mortgage Bank of Finland Oy 142 Fl Electnc power development . . . . . May 22, 1956 1959-1976 43,%Mortgage Bank of Finland Oy 222 Fl Paper and pulp projects . . . . . . Mar 16, 1959 1962-1974 53/4%
TOTAl
FRANCE (Guarantor)Credit National I FR Post-war reconstruction . . . . . . May 9, 1947 1952-1977 41/4%Overreas Railways Administration 100 FR Railway improvement . . . . . . June 10, 1954 1956-1966 4(4%Electricite et Gaz d'Algerie 131 FR Electric power development . . . . . Aug. 26, 1955 1957-1975 41/4%Compagnie Miniere de l-Ogooue 230 FR Manganese project . . . June 30, 1959 1963-1974 6%Societe Petroliere de Gernce 242 FR Oil pipeline . . Dec 10, 1959 1961-1971 6%
TOTA
GUATEMALA 124 GU Highwayconstruction and maintenance . July 29, 1955 1959-1970 457e
HArM 141 HA Highway maintenance . . . . . . May 7, 1956 1961-1967 4',h%
136
EXPRESSED IN UNITED STATES CURRENCY
Ca3nscellatio,s, Effectic loa,ns sold Effective Undisb-rsedOriginal Loans lcrnioatior. Principal org greed lobeosd' loa ns Principal balsore fprincipal nor ycr ond eepayttnt, hbid by anonr effective
-amass effective' refondios tro Bok TOrtal soles Portion motor-d' Bank dinborsed ionm
S 16,500,000 S - S - S 11,782,000 S 800,000 S 800,000 S 3,918,000 S 16,500,000 S -25,000,000 - - 1,852,000 - - 23,148,000 22,093,192 2,906,80814,350,000 - - 6,503,000 - - 7,847,000 14.350.000 -16,500,000 - - 993,000 - - 15,507,000 12,352,367 4,147,633
5,000,000 - 74,559 2,925,441 2,000,000 2,000,000 - 4,925,441 -5,000,000 - - - 3,000,000 3,000,000 2,000,000 5,000,000 -3,530,000 - - 837,000 148,000 148,000 2,545,000 3,530,000 -4,500,000 - - 185,000 - - 4,315,000 4,500,000 -2,800,000 2,800,000 - - Note 3 - - - -
2,600,000 - - 606,000 194,000 194,000 1,800,000 2,600,000 -4,600,000 - - - - - 4,600,000 757,496 3,842,504
2,400,000 - - 544,200 84,800 84,800 1,771.000 2,400,000 -15.900,000 - - - 866,000 642,000 15,034,000 12,114,390 3,785,61012,000,000 - - - 100,000 - 11,900,000 2,666,555 9,333,445
130,680,000 2,800,000 74,559 26,227,641 7,192,800 6,868,800 94,385,000 103,789,441 24,016,000
3,000,000 - - 377,000 366,000 366,000 2,257,000 3,000,000 -3,500,000 _ - - 1,510,000 - 1,990,000 2,219,933 1,280,067
6,500,000 - - 377,000 1,876,000 366,000 4,247,000 5,219,933 1,280,067
40,000,000 - - 899,000 6,243,000 4,433,000 32,858,000 40,000,000 -20,000,000 - - - 1,551,000 - 18,449,000 5,650,200 14,349,800
60,000,000 - - 899,000 7,794.000 4,433,000 51,307,000 45,650,200 14,349,800
14,500,000 - - - 141,000 - 14,359,000 2,899,118 11,600,882600,000 - 600.000 - - - - - -
8,500,000 - 1,000,000 1,352,000 - - 6,148,000 7,500,000 -5,000,000 - - - 197,000 97,000 4,803.000 4,759,305 240,6955,000,000 _ - - - 5,000,000 1,593,800 3,406,200
13,000,000 - - - 100,000 - 12,900,000 1,682,459 11,317,541
46,600,000 - 1,600,000 1,352,000 438,000 97,000 43,210,000 18,434,682 26,565,318
11,100,000 - - 931,000 250,000 250,000 9,919,000 10,710,442 389,5585,000,000 - - - 300,000 - 4,700,000 - 5.000,000
12,545,000 - - 720,000 1,000,000 1,000,000 10,825,000 12,545,000 -3,000,000 - - - - - 3,000,000 268,263 2,731,737
31,645,000 - - 1,651,000 1,550,000 1,250,000 28,444,000 23,523,705 8,121,295
5,000,000 - - 1,013,000 - - 3,987,000 5,000,000 -2,000,000 - - 404,000 - - 1,596,000 1,700,851 299,1491,500,000 - - 303,000 - - 1,197,000 1,500,000 -
15,000,000 - - - 1,491,000 - 13,509,000 6,841,527 8,158,473
23,500,000 - - 1,720,000 1,491,000 - 20,289.000 15,042,378 8,457,6222,300,000 - 197,869 2,102,131 - - - 2,102,131 -
12,500,000 - - 5,004,990 3,884,010 1,559,010 3,611,000 12,500,000 -20,000,000 - - 4,603,000 1,806,000 - 13,591,000 20,000,000 -
3,479,464 - 1,415 799,249 - - 2,678,800 3,478,049 -12,000,000 - - - 2,972,000 1,490,000 9,028,000 1 2,000,000 -15,000,000 - - 286,000 280,000 280,000 14,434,000 11,265,451 3,734,54937,000,000 - - - 2,302,000 - 34,698,000 7,105,702 29,894,298
102,279,464 - 199,284 12,795,370 11,244,010 3,329,010 78,040,800 68,451,333 33,628,847
250,000,000 - - 38,000 32,459,000 24,919,000 217,503,000 250,000,000 -7,500,000 - 408,433 599,567 2,598,000 1,559,000 3,894,000 7,091,567 -
10,00,000 - - - 1,749,000 1,050,000 8,251,000 10,000,000 -35,0OD,000 - - - 21,000,000 - 14,000,000 4,159,246 30,840,75450,000,000 50,000,000 - - - - - - -
352,500,000 50,000,000 408,433 637,567 57,806,000 27,528,000 243,648,000 271,250,813 30,840,754
18,2Q0,000 - - 589,000 576,000 576,000 17,035,000 17,819,963 380,037
2,600,000 - - - 386,000 - 2,214,000 1,388,964 1,211,036
137
STATEMENT OF LOANS (continued)
Ioon Delai of t,artaddnBa,es.wee, and g aber Peagnmraapajee loass geeemms- Ma: aevies eawissa
HONDURAS 135 HO Highway maintenance . . . . . Dec 22, 1955 1957-1964 4,4%195 HO Highway construction and improvement May 9, 1958 1961-1978 534%
HONDURAS (Guarantor)
Empresa Nacional de EnergiaElectrica 226 HO Electric power development May 20, 1959 1962-1974 * 6%
TOTAL
ICELAND 46 IC Electric power development . . . . . June 20, 1951 1956-1973 4h%53 IC Agncultural development . . . . Nov. 1, 1951 1956-1973 4th%69 IC Fertilizer plant. . . . . . . . . Aug 26, 1952 1954-1969 434%
ICELAND (Guarantor)'Iceland Bank of Development 79 IC Agncultural development . . . Sept. 4, 1953 1958-1975 5%Iceland Bank of Development 80 IC Construction of radio transmitter building. Sept. 4, 1953 1954-1966 434%
TOTAL
INDIA 17 IN Railway rehabilitation . . Aug. 18, 1949 1950-1964 4%19 IN Agncultural development . Sept, 29, 1949 1952-1956 3'h%23 IN Electnc power development . Apr. 18, 1950 1955-1970 4%72 IN Damodar multi-purpose project . . . Jan 23, 1953 1956-1977 43J%
167 IN Railway improvements . . . . . July 12. 1957 1961-1972 5h%168 IN Railway improvements . . . . . . July 12, 1957 1961-1972 5%%169 IN Railway improvements . . . July 12, 1957 1961-1972 5h%170 IN Railway improvements . . July 12, 1957 1961-1972 5h%203 IN Electnc power development . . . July 23, 1958 1961-1978 5h4%207 IN Railway improvements . . Sept 16, 1958 1963-1979 5M4%223 IN Electric power development Apr 8, 1959 1965-1984 5i4 %
233 IN Railway improvements July 15, 1959 1963-1979 6%INDtA (Guarantor)
Indian Iron & Steel Company 71 IN Iron and steel expansion Dec. 18, 1952 1959-1967 4s4%Indian Iron & Steel Company 159 IN Steel expansion . . . . . . Dec 19, 1956 1960-1967 5%Tata Group of Hydro Companies 106 IN Eleciric power development . Nov. 19, 1954 1958-1974 434%Tata Group of Hydro Companies 164 IN Electric power development May 29, 1957 1960-1975 5h%I C I C 1 109 IN Development of private industry Mar 14, 1955 1961-1969 4h%I C. 1. C. 1. 232 IN Development of private industry - July 15, 1959 1962-1969 Note6The Tata Iron and Steel Co , Ltd. 146 IN Expansion of steel production facilities. June 26, 1956 1959-1971 454%The Tata Iron and Steel Co, Ltd. 182 IN Expansion ofsteel production facilities Nov 20, 1957 1960-1971 6%Air-India International Corp. 161 IN Purchase of aircraft Mar 5, 1957 1965-1966 534%Calcutta Port Commissioners 198 IN Port improvements June 25, 1958 1963-1978 5'h%Trustees of the Port of Madnms , 199 IN Port improvements June 25, 1958 1963-1978 5'h%
TOTAL
IRAN 160 IRN Short term financing for developmeni plan Jan 22, 1957 1959-1962 5%227 IRN Road construction and improvement May 29, 1959 1961-1976 6%
[RAN (Guarantor)I M. D B 1. 240 IRN Development of private industry Nov 23, 1959 1964-1974 Note
6
TOTAL
IRAQ 26 IRQ Construction of a flood control project .June 15, 1950 1956-1965 334%
ITALY (Guarantor)Cassa per Il Mezzogiomo 50 IT Development Plan for Southern Italy . . Oct 10, 1951 1956-1976 434%Cassa per d Mezzogiorno 88 IT Development Plan for Southern Italy . Oct. 6, 1953 1958-1978 5%Cassa per d Mezzogiorno 117 IT Development Plan for Southern Italy . . June 1, 1955 1958-1975 434%Cassa per Il Mezzogiorno 150 IT Development Plan for Southern Italy . Oct 11, 1956 1959-1976 5%Cassa per Il Mezzogiorno 189 IT Development Plan for Southern Italy . . Feb. 28, 1958 1961-1978 5'h%Cassa per Il Mezzogiorno 224 IT Development Plan for Southern Italy , Apr 21, 1959 1963-1979 53/4%Cassa per Il Mezzogiorno 235 IT Development of nuclear power Sept 16, 1959 1964-1979 6%
TOTAL
138
EXPRESSED IN UNITED STATES CURRENCY
Canoellavion." Effective loanssold EfIecti, Udisb,roedOriginal Loans tcrninoten: Pricipal or agreed to be so-d loans Principl bolonce ofprincipal ott yet and repaYments held by amountt efective
.moont effective' refunding, to Bank Toal sole Potrtion ..tar-ed B-ok disbutted loa'
5 4,200,000 S - S - S 376,000 5 872,000 5 872,000 S 2,952,000 S 3,849,131 S 350,8695,500,000 - - - 299,000 - 5,201,000 1,097,310 4,402,690
1,450,000 1,450,000 . - Note 3 - - - -
11,150,000 1,450,000 - 376,000 1,171.000 872,000 8,153,000 4,946,441 4,753,5592,450,000 - - 408,800 - - 2,041,200 2,450,000 -1,008,000 - - 144,200 - - 863,800 1,008,000 -
854,000 - _ 246,000 - - 608,000 854,000 -
1,350,000 - - 79,000 - - 1,271,000 1,350,000 -252,000 - - 98,280 - - 153,720 252,000 -
5,914,000 - 976,280 - - 4,937,720 5,914,000 -34,000,000 - 1,200,000 7,978,911 16,556,583 11,333,535 8,264,506 32,800,000 -10,000,000 - 2,796,1117 2,263,000 4,940,813 4,940,813 - 7,203,813 -18,500,000 - 1,779,500 1,339,000 5,390,000 3,035,000 9,991,500 16,720,500 -19,500,000 - 9,000,000 1,061,000 507,000 - 8,932,000 10,500,000 -24,000,000 - - - - - 24,000,000 24,000,000 -19,110,000 - - - - - 19,110,000 19,1 10,000 -11,200,000 - - - - - I 1,200,000 11,200,000 -35,700,000 - - - - - 35,700,000 35,700,000 -25.000,000 - - - 262,810 - 24,737,190 12,755,153 12,244,84785.000.000 - - - 1,000,000 - 84,000,000 85,000,000 -25,000,000 - - - - - 25,000,000 962,476 24,037,52450,000,000 - - - 3,762,000 - 46,238,000 7,424,283 42,575.717
31,500,000 - 1,480,000 2,528,000 700,000 - 26,792,000 26,336,454 3,683.54620.000,000 - - - 1,032,000 - 18,968,000 15,123,447 4,876.55316,200,000 - 2,250,000 - 1,364,000 1,011,000 12,586,000 12,875,191 1,074,8099,800,000 - - - - - 9,800,000 7,618,607 2,181,393
10.000.000 - - - - 10,000,000 4,798,610 5,201,39010,000,000 - - - 200,000 - 9,800,000 - I0.0000,OO75,000,000 - - - 2,355,000 2,355,000 72,645,000 75,000,000 -32,500,000 - - - 15,000,000 - 17,500,000 32,500,000 -
5,600,000 - - - - - 5,600,000 5,600,000 -29,000,000 - - - 1,113,000 - 27,887,000 2,267,289 26,732,71114,000,000 - - - 592,000 - 13,408,000 1,630,449 12,369,551
610,610,000 - 18,505,687 15.169,911 54,775,206 22,675,348 522,159.196 447,126,272 144,978,04175,000,000 - - 4,937,000 5,000,000 5,000,000 65,063,000 75,000,000 -72,000,000 - - - 12,000,000 - 60,000,000 1 1,990,333 60,009,667
5,200,000 5,200,000 - - - - - - -
152,200,000 5,200,000 - 4,937,000 17,000,000 5,000,000 125,063,000 86,990,333 60,009,66712,800,000 - 6,506,054 6,293,946 - - - 6,293,946 -
10,000,000 - - 473,000 2,186,000 658,000 7,341,000 10,000,000 -10,000.000 - - - 1780,000 439,000 8,220,000 10,000,000 -70,000,000 - 1,600,000 - 13,286,000 3,000,000 55,114,000 67,920,000 480,00074,628,000 - - 159,000 8,276,738 1,200,000 66,192,262 65,653,506 8,974,49475,000,000 - - - 12,830,429 - 62,169,571 38,061,673 36.938,32720,000,000 - - - 250,000 - 19,750,000 3,690,000 16,310,00040,000,000 40,000,O00 - - - Note3 - - -
299,628,000 40,000,000 1,600,000 632,000 38,609,167 5,297,000 218,786,833 195,325,179 62,702,821
139
STATEMENT OF LOANS (continued)
Lon Dolte of ""'iuinBorrower asnd grrantor' number Pronram o, proojet loon argre ment. Maturitr-ro, mmie-ion
JAPAN (Guarantor)Japan Devclopment Bank 89 JA Electnc power (Kansai) . Oct. IS, 1953 1957-1973 5%Japan Development Bank 196 JA Electric power (Kansai) . . . June 13, 1958 1962-1983 5hY%Japan Developmcnt Bank 90 JA Electric power (Kyushu) .. . Oct 15, 1953 1957-1973 5%Japan Development Bank 91 JA Electric power (Chubu) . , . Oct 15, 1953 1957-1973 S5%Japan Development Bank 205 JA Electric power (Chubu) . . . . Sept 10, 1958 1962-1983 5Y,%Japan Development Bank 133 JA Steel plate mill (Yawala) . . . Oct 25, 1955 1958-1970 4%%Japan Development Bank 239 JA Steel production facilities (Yawata) . Nov. 12, 1959 1962-1975 6%Japan Development Bank 136 JA Industnal projects , Feb. 21, 1956 1958-1971 4i4%Japan Development Bank 157 JA Steel strip mill (Kawasaki) . . . Dec 19, 1956 1960-1971 5%Japan Development Bank 188 JA Steel production facilities (Kawasaki) Jan 29, 1958 1960-1971 5h%Japan Development Bank 200 JA Electric power (Hokuriku) . June 27, 1958 1961-1983 5%%Japan Development Bank 201 JA Steel production facilitis (Sumitomo) . July 11, 1958 1961-1973 539%Japan Development Bank 204 JA Steel production facilities (Kobe) . Aug 18, 1958 1960-1973 5h%Japan Development Bank 206 JA Steel production facililies(Nippon Kokan) . Sept 10, 1958 1960-1973 55/4°%Japan Development Bank 220 JA Electric power (Miboro) . , . Feb 17, 1959 1974-1983 534%Japan Development Bank 238 JA Steel production facilities (Fuji) . . Nov 12. 1959 1962-1975 6%Land Development Corporation 158 JA Land reclamation . . . . . Dec 19, 1956 1959-1971 5%Atchi Irrigation Public Corp. 173 JA Multi-purpose project . . . . Au8. 9. 1957 1961-1977 Sih%
TOTAL
LEBANON (Guarantor)Lttani River Authority 129 LE Electric power development, irrigation . Aug. 25, 1955 1961-1980 4ih%
LUXEMBOURO 4 LU Steel mill and railroads . . . Aug 28, 1947 1949-1972 41/4%
MALAYA (Guarantor)Central Electricity Board 210 MA Electric power development . . . Sept. 22, 1958 1964-1983 5'b%
MEXICO (Guarantor)Financiera & Comision 12 ME Electric power development . . . . Jan 6, 1949 1953-1973 4(5%Financtera & Comision 13 ME Electric power development . . . . Jan. 6, 1949 July 1, 1950 4ya%Financiera & Comision 56 ME Electric power development . . . Jan 11, 1952 1955-1977 4(4%Financiera & Comision 194 ME Eleciric power development . May 5, 1958 1962-1983 5YS%Mexlight 24 ME Electric power development . Apr 28, 1950 1953-1975 4(4%Mexhlght 186 ME Electric power development . . . . . Jan. 14, 1958 1959-1977 55S%Bank Consortium & Financiera 33 ME Development of small industnal projects Oct 18, 1950 1952-1957 3Ya%Ferrocarril del Pacifico 103 ME Railway rehabilitation . . . Aug. 24, 1954 1959-1969 45h%
TOTALNETHERLANDS 2 NE Post-war reconstruction . . Aug. 7, 1947 1954-1972 414%
2a NE Post-war reconstruction . . . May 25, 1948 1953-1954 414%NEtiiERLANDS (Guarantor)
Stoomvaart Mij "Nederland" 7, 7a NE Purchase of S S Raki and S S Roebiah July I5, 1948 1949-1958 3-9/16%7,Vcreenigde Schvrt. MU. 8 NE Purchase of S.S Almkerk . . . July 15, 1948 1949-1958 3-9/16%Holland-Amerika Lijn 9 NE Purchase of S S Alblasserdijk . . . . July 15, 1948 1949-1958 3-9/16%Rotterdamsche Lloyd 10, 1In NE PurchaseofSS FrieslandandSS Drente July 15, 1948 1949-1958 3-9/16%/,Herstelbank 15 NE Post-war industrial reconstruction . July 26, 1949 1952-1964 4%Herstelbank 163 NE Capital for industry, transport and
commere . . . . May 15, 1957 1959-1962 5%%KLM Royal Dutch Airlines 59 NE Purchase of aircraft . Mar 20, 1952 1954-1958 41h%
TOTALNICARAGUA 45 NI Highway construction. . . . June 7, 1951 1954-1961 4(4%
52 NI Construction of grain storage facilities. . Oct 29, 1951 1954-1962 4(%81 NI Highway construction . . . . . Sept 4, 1953 1957-1963 434%82 NI Electric power development . . . . Sept 4, 1953 1955-1963 4t3b°%
NICARAGUA (Guarantor)Banco Nacional de Nicaragua 44 NI Agricultural development . June 7, 1951 1954-1958 4%Emp Nal Luz y Fuerza 121 NI Electric power development . . July 8, 1955 1958-1975 43/%Emp Nal Luz y Fuerza 154 NJ Eleciric power development (Supplemental) Nov 15, 1956 1959-1971 4Y4%Instituto de Fomento Nacional 122 NI Electric power development . . July 8, 1955 1958-1975 4y4%Instituto de Fomento Nacional 130 NI Agricultural development . . . . Aug 26, 1955 1957-1967 41i%Autoridad Portuaria de Connto 143 NI Port construction and development . May 22, 1956 1959-1976 434%
TOTAI
140
EXPRESSED IN UNITED STATES CURRENCY
Cancellagb,na, Effecti.. lean sold Effective Undislo-edOriginal Ls, tern-acl- Pincipal or agreed to be sold' lons Principal balance fprinipa flt ye and rePaymen-s held by aon efferti,eamount efctitet refundings to Ba nk Trtal aales Partian mottLed' Bank diabursed loanav
$ 21,500,000 S - S 922,429 S - S 3,576,773 S 2,610.000 S 17,000,798 S 20,577,571 S -37,000,000 - - - 1,070.000 - 35,930,000 29,624.759 7,375,24111,200,000 - 749.680 63,627 1,799,694 1,360,000 8,586,999 10,450,320 -7,500,000 - 1,043,611 5,000 1,071,000 911,000 5,380,389 6,456,389 -
29,000,000 - - - 336,000 - 28,664,000 10,710,984 18,289,0165,300,000 - 171,142 - 985.000 625,000 4,143,858 5,12,8858 -
20,000,000 20,000,000 - - Note] - - - -8,100,000 - 539,555 - 1,190,000 1,076,000 6,370,445 7,560,445 -
20,000,000 - - - 1,277,000 - 18,723,000 20,000,000 -8,000,000 - - - 734,000 - 7,266,000 8,080,000 -
25,000,000 - - - 789,000 - 24,211,000 23,576,875 1,423.12533,000,000 - - - 1,I 00,00 - 31,900,000 18,912,397 14,087,60310,000,000 - - - 784,810 - 9,215,190 10,000.000 -22.000,000 - - - 1,698,000 - 20,302,000 19,552,519 2.447,48110.000.000 - - - - - 10,000.000 4,883,448 5,116.55224,000,000 24,000,000 - - Note
3- - - -
4,300,000 - - 126,000 - - 4,174,000 .3,588,000 712,0007,000,000 - 1,700,000 - 721,000 - 4,579,000 3,925,138 1,374,862
302,900,000 44,000,000 5,126,417 194,627 17,132,277 6,582,000 236,446,679 202,947,703 50,825,880
27,000,000 - - - - - 27,000.000 6,545,034 20,454.966
12.000,000 - 238,017 1,619,983 4,294,000 3,130,000 5,848,000 11,761,983 -
35,600,000 - - - 1,280,000 - 34,320,000 1,369.442 34,230.558
24,100,000 - - 3,257,700 3,968,300 2,921,300 16,874,000 24,100,000 -10,000,000 - 10,000,000 (Refunding) - - - - -29,700,000 - - 1,810,000 2,868,000 1,816,000 25,022,000 29,700,000 -34.000,000 - - - 1,323,000 - 32,677,000 9,609,561 24,390,43926,000,000 - - 2,941,000 2,307,000 2,307,000 20,752,000 26,000,000 -I I,000,000 - - 2,000 1,000,000 178,000 9,998.000 11.000.000 -10,000,000 - 9,472,112 527,888 - - - 527,888 -61,000,000 - - - 3,976,000 2.420,000 57,024,000 60,766,995 233.005
205,800.000 - 19,472,112 8,538,588 15,442,300 9,642,300 162,347,000 161,704,444 24,623,444
191,044,212 - - 103,372,212 87,672,000 25,858,000 - 191,044,212 -3,955,788 - - - 3,955,788 3,955,788 - 3,955,788 -
4,000,000 - - - 4,000,000 4,000,000 - 4,000,000 -2,000,000 - - - 2,000,000 2,000,000 - 2,000,000 -2,000,000 - - - 2,000,000 2,000,000 - 2,000,000 -4,000,000 - - - 4,000,000 4,000,000 - 4,000,000 -
15,000,000 - 7,548,015 1,025,089 6,426,896 4,318,911 - 7,451,985 -
15,000,000 - - - 15,000,000 3,500,000 - 15,000,000 -7,000,000 - - 3,500,000 3,500,000 3,500,000 - 7,000.000 -
244,000,000 - 7,548,015 107,897,301 128,554,684 53,132,699 - 236,451,985 -
3,500,000 - - 2,417,000 29,000 29,000 1,054,000 3,500,000 -550,000 - 3,006 325,994 29,000 29,000 192,000 546,994 -
3,500,000 - - 1,361,000 - - 2,139,000 3,580,000 -450,000 - - 227,000 - - 223,000 450,000 -
1,200,000 - 6,879 1,164,121 29,000 29,000 - 1,193,121 -7,100,000 - - - 724,000 424,000 6,376,000 7,100,000 -1,600,000 - - - 101,000 50,000 1,499,000 1,267,665 332,335400,000 - - 23,000 - - 377.000 400,000 -
1,590,000 - - - 735,000 514,000 765,000 1,499,367 6333,200,000 - - - 121,000 60,000 3,079,000 1,751,503 1,448,497
23,000,000 - 9,885 5,518,115 1,768,000 1,135,000 15,704,000 21,208,650 1,781,465
141
STATEMENT OF LOANS (continued)
Loon Dale of (-nc.ldingBurro we, and uoranor' number Progrom or projeel loan ogreelneni Molurille, romn,alano)
NORWAY 97 NO General development . . . . . Apr 8, 1954 1957-1974 4y4%115 NO General development . . . Apr 19, 1955 1960-1975 4'/4%138 NO Electric power development . . . May 3, 1956 1961-1976 4 4%231 NO Electric power development July 8, 1959 1964-1984 6%
-TOTAL
PAKISTAN 60 PAK Railway rehabilitation . . . Mar 27, 1952 1954-1967 4%%62 PAK Agnculturat development . June 13, 1952 1954-1959 41,4%
180 PAK Railway improvements . Oct 18, 1957 1961-1973 6%241 PAK Railway improvements . Nov 30, 1959 1963-1975 6%
PAKISTAN (Guarantor)Sut Gas Transmission Co 99 PAK Natural gas pipeline . . . June 2, 1954 1956-1974 43/4%Karachi Electric Supply Corp. 120 PAK Electnc power development . June 20, 1955 1957-1970 4%%Karachi Electric Supply Corp. 191 PAK Electric power development Apr 23, 1958 1963-1978 51'%Karachi Electric Supply Corp. 234 PAK Electric power developmcnt . . Aug 13, 1959 1962-1974 6%Karnaphuli Paper Mills, Ltd 125 PAK Construction of paper and pulp mill . Aug 4, 1955 1956-1970 4%%Trustees of the Port of Karachi 126 PAK Port construction and development Aug 4. 1955 1960-1980 434%P. I C I C 185 PAK Development of private industry Dec 17, 1957 1962-1972 514 %P I C I C 236 PAK Development of private industry Sept 25, 1959 1962-1969 Note
6
TOTALPANAMA 123 PAN Highway rehabilitation . . . July 12, 1955 1959-1964 41/4%PANAMA (Guarantor)
Instituto de Fomento Economico 86 PAN Agricultural development . Sept 25. 1953 1955-1960 4%%Instituto de Fomento Economico 87 PAN Construction of grain storage facilities. Sept 25, 1953 1955-1961 4%%
TOTALPARAGUAY 55 PA Agricultural development , , Dec 7. 1951 1954-1964 4]h%PERU 57 PE Port development. . . . . Jan. 23, 1952 1954-1967 41'%
67 PE Agncultural development . . . July 8, 1952 1954-1959 414%98 PE Agricultural development . . Apr 12, 1954 1956-1961 4'4%
114 PE Irrigation project . . . Apr. 5. 1955 1959-1980 4'4%127 PE Highway maintenance . . . . Aug 5, 1955 1958-1964 41/4%
PERU (Guarantor)Banco de Fomento Agropecuarto 105 PE Agricultural development . . . . Nov 12, 1954 1957-1963 41/4%Banco de Fomento Agropecuano 162 PE Agricultural developmcnt Mar 13, 1957 1959-1965 5'h%Cemento Pacasmayo 116 PE Construcion of cement plant .-. . . Apr 19, 1955 1958-1970 4%%Peruvian Corporation Ltd 190 PE Railway rehabilitation . . . Apr 3, 1958 1961-1973 51'%Autondad Portuaria del Callao 208 PE Port development . . . . . Sept 17, 1958 1963-1978 534%
TOTALPHILIPPINES (Guarantor)
National Power Corpoation 183 PH Electric power development Nov 22, 1957 1960-1982 6%
SOUThI AFRICA 40 SA Expansion of transport facilities. . Jan 23. 1951 1956-1965 33/4%77 SA Expansion of transport facilities. Aug 28, 1953 1955-1963 434%
134 SA Expansion of transport facilities. . . Nov. 28, 1955 1958-1966 4'h%178 SA Railway improvements . Oct. 1, 1957 1960-1967 5'3%214 SA Railway improvements . . . Dec. 2, 1958 1961-1968 5h4%228 SA Railway improvements June 10, 1959 1961-1969 6%
SOUTH AFRICA (Guarantor)Electricity Supply Commission 41 SA Electric power development Jan. 23, 1951 1954-1970 4%Electricity Supply Comnussion 78 SA Electnc power development . . . . . Aug 28, 1953 1955-1963 4 34%
TOTAL
SUDAN 202 SU Expansion of railways and watertransport facilities .. . . July 21, 1958 1961-1978 514%
THfAILAND 35 TH Railway rehabilitation . . . . Oct 27, 1950 1954-1966 33/4%36 TH Irngation project . . . . . . Oct. 27, 1950 1956-1971 4%37 TH Port consmrucion and development - Oct 27, 1950 1954-1966 3V4%
THAtLAND (Guarantor)State Railway of Thailand 128 TH Railway rehabilitation . . . . . Aug. 9, 1955 1958-1970, 4%%Port Authority of Thailand 151 TH Port construction and development . , Oct 12, 1956 1958-1971 43/4%Yanhee Electncity Authority 175 TH Multi-purpose project . . . . Sept 12, 1957 1963-1982 5V4%
TOTAT
142
EXPRESSED IN UNITED STATES CURRENCY
Cancellati, Fffectieoas sold Effetive Und.bunedOriginal Ln ritio Pricip-l or agreed to be sold* bans Principol balance ofpr=ncipa not yel and repayntMe held by anolns effect,camoant effective' cefundinga to Bank Total sales Par! ian tao! red' Bank disbursed laans-
S 25,000,000 S - S - S - S 3,657,000 S 2,550,000 S 21,343,000 S 25,000,000 $ -25,000,000 - - - 1,250,000 - 23,750,000 25.000,000 -25,000,000 - - - - - 25,000,000 17,288,728 7,711,27220,000,000 - - - 6,993,000 - 13,007,000 780,105 19,219,895
9f,000,000 - - - 11,900,000 2,550,000 83,100,000 68,068,833 26,931,16727,200,000 - - 8,645,400 935,600 935,600 17,619,000 26,167,363 1,032,637
3,250,000 - - 2,253,000 997,000 997,000 - 3,250,000 -31,000,000 - - - 850,000 - 30,150,000 20,354,867 10,645,13312,500,000 12,500,000 - - NoteS - - - -
14,000,000 - - - 1,806,000 1,806,000 12,194,000 14,000.000 -13,800,000 - - 8,400 2,049,600 2,049,600 11,742,000 13,776,585 23,41514,000,000 - - - 198,000 - 13,802,000 1,202,992 12,797,0082,400,000 2,400,000 - - Note
3- - - -
4,200,000 - - - 775,000 775,000 3,425,000 4,200,00! -14,800,000 - - - 216,842 - 14,583,158 9,552,903 5,247,0974,200,000 - - - - - 4,200,000 655,769 3,544,231
10,000,000 - - - - - 10,000.000 - 10,000,000
151,350.000 14,900,000 - 10,906,800 7,828,042 6,563,200 117,715,158 93,160,479 43,289,5215,900,000 - - 4,200,000 1,700,000 1,700,000 - 5,900,000 -
1,200,000 - 542,574 657,426 - - - 657,426 -290,000 - - 290,000 - - - 290,000 -
7,390,000 - 542,574 5,147,426 1,700,000 1,700,000 - 6,847,426 -5,000,000 - 511,010 1,878,990 100,000 100,000 2,510,000 4,488,990 -2,500,000 - 89,472 437,528 951,000 556,000 1,022,000 2,410,528 -1,300,000 - - 860,750 439,250 439,250 - 1,300,000 -1,700,000 - - 644,000 392,000 392,000 664,000 1,700,000 -
18,000,000 - - - 496,000 245,000 17,504,000 17,846,811 153,1895,000,000 - - 353,000 683,000 683,000 3,964,000 4,984,641 15,359
5,000,000 - 2.29 1,182,771 748,000 748,000 3,069,000 4,999,771 -5,000,000 - - - 1,101,000 357,000 3,899,000 4,998,932 1,0682,500,000 - 2,918 - 310,000 310,000 2,187,082 2.497,082 -15,000,000 - 15,000,000 - - - - - -6,575,000 - - - 395,000 - 6,180,000 1,205,980 5,369,020
62,575,000 - 15,092,619 3,478,049 5,515,250 3,730,250 38,489,082 41,943,745 5,538,636
21,000,000 - 2,500,000 - 987,000 - 17,513,000 15,147,580 3,352,420
20,000,000 - - 6,133,000 1,867,000 1,867,000 12,000,000 20,000,000 -30,000,000 - - 1,034,980 23,675,020 14,850,020 5,290,000 30,000,000 -25,200,000 - - 1,008,000 3,024,000 1,008,000 21,168,000 25,200,000 -25,000,000 - - - 2,903,000 - 22,097,000 25,000,000 -25,000,000 - - - 2,542,000 - 22,458,000 25,000,000 -11,600,000 - - - 2,484,000 - 9,116,000 7,871,613 3,728,387
30,000,000 - - 866,760 9,125,895 7,509,895 20,007,345 30.000,000 -30,000,000 - - 134,000 22,426,000 14,258,000 7.440,000 30,000,000 -
196,800,000 - - 9,176,740 68,046,915 39,492,915 119,576,345 193,071,613 3,728,387
39,000,000 - - - 1,750,000 - 37,250,000 20,008,218 18,991,782
3,000,000 - - 1,078,000 189,000 189,000 1,733,000 3,000,000 -18,000,000 - - 3,646,000 796,000 - 13,558,000 18,000,000 -
4,400,000 - - 1,584,000 275,000 275,000 2,541,000 4,400,000 -
12,0(*,000 - - - 1,105,000 1,105,000 10,895,000 11,893,118 106,8823,400,000 - 140,922 92,078 184,000 184,000 2,983,000 3,259,078 -
66,000,000 - - - - - 66,000,000 13,661,996 52,338,004
106,800,000 - 140,922 6,400,078 2,549,000 1,753,000 97,710,000 54,214,192 52,444,886
143
STATEMENT OF LOANS (continued)
Ln D-te of (I.0.udingBorrowee and guarantor' number Program or peoje-- loon agreement Moaturiaran,m- -as-on)
TURKEY 27 TU Construction of grain storage facilities July 7, 1950 1954-1968 3i%28 TU Port construction and development . . July 7. 1950 1956-1975 4114%28 TU.S Port construction and development . Feb 26, 1954 1956-1975 43%63 TU Seyhan Dam multi-purpose project . . June 18, 1952 1960-1977 4Y4%
TURKEY (Guarantor)Industrial Development Bank 34 TU Development of pnvate industry . . Oct. 19, 1950 1957-1965 3Y4%Industnal Development Bank 85 TU Development of private industry . . . Sept 10, 1953 1958-1968 41S%
TOTAL
UNIrED ARAB REPUBLIC (Guarantor)
Suez Canal Authority 243 UAR Suez Canal development project . Dec 22, 1959 1962.1974 6%
UNMrD KINGDOM (Guarantor)Southern Rhodesia 58 SR Electric power development . . . . . Feb. 27. 1952 1956-1977 4y4%Northemn Rhodesia 74 NR Railway development. . . . . Mar 11, 1953 1956-1972 4-Y4%Federal Power Board-
Rhodesia and Nyasaland 145 RN Electric power development June 21, 1956 1963-1981 5%Rhodesia and Nyasaland 197 RN Railway improvements June 16, 1958 1961-1976 5Y%East Africa High Commission 110 EA Railways and harbors . . . . . Mar 15. 1955 1958-1974 414%Nigeria 193 UNI Railway development May 2, 1958 1962-1978 51%
TOTAL
URUGUAY 245 UR Agricultural development Dec 30, 1959 1963-1971 6%URUDUAY (Guarantor)
U T B 30 UR Power and telephone development . Aug 25, 1950 1955.1974 41/4%U.T E 132 UR Electnc power development . . Aug 29, 1955 1958-1975 41/4%U T. E. 152 UR Electnc power development . . Oct. 25, 1956 1961-1981 5%
TOTAL
YUGOSLAVIA 20 YU Equipment for timber production . . . Oct 17, 1949 1950-1951 3%51 YU Power, mining, transport, industrial, Oct 11, 1951 1955.1976 41/%73 YUf agricultural and forestry project . . Feb 11, 1953 1956-1978 4i%
TOTAL
GRAND TOTALS
144
EXPRESSED IN UNITED SrATES CURRENCY
Cancella-llns,. Efective loans "id Effe-tve Undiob..sedOriginal L-a-s tertnnatlcru Principal oragreed tohe old loans Principal balanceofprincipal nor yes -nd repayments held by ansun- effectiveamouns effective erfandins soBank Tatalsales Petlonmatured' Bank disbursed aons'
S 3,900,000 S - S - S 1,154,000 $ 144,000 $ 144,000 S 2,602,000 S 3,900,000 S -12,500,000 - - 1,735,000 - - 10,765,000 12,500,000 -
3,800,000 - - 498,000 - - 3,302,000 3,061,215 738,78525,200,000 - 2,356.000 - - - 22,844,000 22,600,254 243,746i9,000,000 - 320,579 2,353,420 - - 6,326,001 8,675,789 3,6329,000,000 - - 1,024,000 - - 7,976,000 8,515,616 484,384
63,400,000 - 2,676,579 6,764,420 144,000 144,000 53,815,001 59,252,874 1,470,547
56,500,000 56,500,000 - - Note3
- - - -
28,000,000 - - 166,000 8,084,000 4,501.000 19,750,000 28,000.000 -14,000,000 - - 93,000 4,485,293 2,379,000 9,421,707 14,000,000 -
80,000,000 - - - 10,554,000 - 69,446,000 65,435,542 14,564,45819,000,000 - - - - - 19,000,000 12,016,491 6,983,50924,000,000 - - - 7,973,000 1,935,000 16,027,000 24,000,000 -28,000,000 - - - 1,141,000 - 26,859,000 16,846,819 11,153,181
193,000,000 - - 259,000 32,237,293 8,815,000 160,503,707 160,298,852 32,701,1487,000,000 7,000,000 - - - - - - -
33,000,000 - - 7,750,000 2,150,000 500,000 23,100,000 33,000,000 -5,500.000 - - - 654,000 426,000 4,846,000 5,500,000 -
25,500,000 - - - - - 25,500,000 20,744,305 4,755,69571,000,000 7.000,000 - 7,750,000 2,804,000 926,000 53,446.000 59,244,305 4,755,695
2,700,000 - - 2,700,000 - - - 2,700,000 -28,000,000 - - 4,198,000 - - 23,802,000 28,000,000 -30,000,000 - - 2,922,000 - - 27,078,000 30,000,000 -60,700,000 - - 9,820,000 - - 50,880,000 60,700,000 -
$4,871,037,893 $ 274,950,000 S112,303,003 S 294,403,123 $ 638,374,282 $282,844,445 $3,551,007,485 $3,591,195,392 S 892,589,498
Less exchange adjustments 19,518,935
$3,531,488,550
NOTES:I Loans made (a) to the member or (b) to a political sub- The total of both effective and non-effective loans sold ordivision or a public or private enterprise in the territories agreed to be sold is the equivalent of $651,352,044.of the member with the member's guarantee. 4 This includes amounts which, according to information
2 Agreements providing for these loans have been signed, available to the Bank, have been prepaid prior tobut the loans do not become effective and disbursements maturity.thereunder do not start until the borrower and guarantor, 5This includes S30,135,646 of effective loans which theif any, take certain action and furnish certain documents Bank has agreed to seli. Of the undisbursed balance, theto the Bank. Bank has entered into irrevocable commitments to dis-
3 The Bank has entered into agreements to sell the below burse $8,160,079.listed portions of loans wlhich are not yet effective: 6 The interest rate on these loans was not fixed at the time
Principal Amounl the loans were signed; interest will be applied to eachLoan Agreed to be Sold portion of the loans at the Bank's current rate when such
229 BR 5 300,000 portion is committed for a specific project.244 CH 175,000215 CO 280,000226 HO 123,000235 IT 1,054,762238 JA 2,566,000239 JA 2,055,000234 PAK 330,000241 PAK 949,000243 UAR 5,145,000
$12,977,762
145
APPENDIX H
INTERNATIONAL FINANCE CORPORATION
Membership and Subscriptions to Capital Stock
As of March 31, 1960
Subscriptions
Amount(in Thousands Percent of
Member Countries of Dollars) Total
A fghanistan ................................... III 12
Argentina .................................... 1 ,662 1.72Australia ..................................... 2,215 2.30
Austria ..................................... 554 .57
Belgium ...................................... 2,492 2.58
Bolivia ...................................... 78 .08
Brazil ..................................... 1,163 1.21
Burma ..................................... 166 .17Canada ...................................... 3,600 3.73
Ceylon ..................................... 166 .17
Chile ..................................... 388 .40
Colombia ..................................... 388 .40
Costa Rica ................................... 22 .02
Cuba .... 388 .40
Denmark .... 753 .78
Dominican Republic ........................... 22 .02
Ecuador ...................................... 35 .04
El Salvador ................................... 11 .01
Ethiopia ..................................... 33 .03
Finland ...... : 421 .44
France ...... ... 5,815 6.03
Germany ..................................... 3,655 3.79
Ghana ..................................... 166 .17
Greece ........ . . .. . ... 277 .29
Guatemala .. ... ... 22 .02
Haiti ........ ... ... 22 .02
Honduras .................................... 11 .01Iceland ...................................... 11 .01
India ..................................... 4,431 4.59
Indonesia ..................................... 1,218 1.26
146
APPENDIX H
INTERNATIONAL FINANCE CORPORATION
Membership and Subscriptions to Capital Stock-Continued
As of March 31, 1960
Subscriptions
Amount(in Thousands Percent of
Member Countries of Dollars) Total
Iran ...................................... 372 .39Iraq ................................ 67 .07Ireland ... 332 .34Israel ... . . . . 50 .05Italy ..................................... 1,994 2.07
Japan ..................................... 2,769 2.87Jordan ..................................... 33 .03Lebanon ..................................... 50 .05Libya .. .55 ............... .06Luxembourg .................................. 111 .12
Malaya ...................................... 277 .29Mexico ...................................... 720 .75Netherlands ................................... 3,046 3.16Nicaragua .................................... 9 .01Norway ...................................... 554 .57
Pakistan ...................................... 1,108 1.15Panama ...................................... 2 *
Paraguay ..................................... 16 .02Peru ...................................... 194 .20Philippines .................................... 166 .17
Spain ..................................... 1,108 1.15
Sweden ...... 1,108 1.15Thailand ..... ,.. , , ... 139 .14Turkey ... 476 .49Union of South Africa ......................... 1,108 1.15
United Arab Republic .......................... 662 .69United Kingdom .............................. 14,400 14.92United States ................................. 35,168 36.44Venezuela .................................... 116 .12
Totals .................................... 96,506 100.00
* Less than .005 percent.
147