... .. • ,. • • • INTE.RNATIONAL RANK :F'OR F.E;CONSTRGC~PXON 1Pm DEVELOFY·.:ENT 'rho f oJ.low:i nr~ nev.rs item i.iill be rolcr.tsed a 4:, the UN'I 1 IL 1-L!~l·:. LOHDON TIME o:e T'I.-£1 :rJ01\;m Ol 1• GOV~Jfo.'OHS of ,. Tb]~ INTERNATIONAL BANK Press Ho lease No, 65 'l'he t5c,cond Aml"tial Report of the Intc·r 1t.1. t,irmal Bank for Rcconstruotion and Development, as a.ppro-v{\Q l;)y the Executiv? _);~rectors, 1vas :)resented today by John J. l~cCloy 1 the Bank's Pr.asident, to the Bourd of Governors at their Second Annual Eeeting in London, The repo:::t reflects the activ5.ties of the Bank since the First Annual Meeting in Sep·:i,1·th3r 1911-6; explains the Bank's • role in helping to meet the ::,r;)blema facing 1,,:3.r-torn EL1rope and the eco- nomically underdeveloped countrfos of Latin kro:rica, Asia., Africa and the },.:iddle ::Tiast; and sun1rna:-ciz,0s the ;irinciples adopt(3d by the Bank for carrying out its a:;_)pointed functions, :D'i!lancla.l s·!:,t:1. t(m1cnts cov13ring the fiscal yenr end·ed June JO, 1947, a.11d the administrci.t1ve budget fo'!:' the fiscal year e11ding June _30, 19,4S ri.re also :included. During this second year of its existence the Bank began the opGration-. al phase of its actlvitics, both as louder and borrower. As s:10-wn .by the rcr•ort and supplemental ma terin.l 1;1ado available to the Governors, fou.'t' loans, aggregating )!1-97,00C,ooo, havG been me.de, and an J.lli tial {)250,000,000 of the Bank's bonds wore floa t~~d in ·the United Stu tcs ea.pi tal market, 11 tha. t in order to carry out its task of holping The repo1,t em,h~isi ze to raisG the lev0l of wo1·ld "?roducticii i1s e;rca.tly and as raJ.)idly as possible, the Bank must concentrate on nthose :t:i:i;•ojGct.s or progz•ams ••• which prom:Lst:l the greatest increase in Pl"Odtictive ou~)1..1,t in the sho1,tuGt possible time."
• - 2 - • Aceordingly 1 the Ba:r.. 1 < htw up to now nocossar:i.J.y given part:i.culo.r emphasis to the problems of European recov0ry, The ror_)ort notes the snbstant,fa.l pro~";resfJ townrd rentora.tion of prewar p1 .. odnct~.on lovclo alr~mdy achieved by the E1.1ro::.x::an countries themselves, but points out that this pro3ress has not becm uniform and that the vaet e::-:tent of war 0.a.mago m·.1k·~s it necessary to di vort much of these countries' production to the rr;;storation and renewal of thoir basic stocks of wen.1th. Threr::: major bottbnecks,· in th€ Bank's view, :tmpedo European re- com;truction, They are food., fuel and :mc.npowGr, T:10 la.ck of all three prevcmts full U3e of J1\1r()pe' s rosources ar..d makes n:1cesso.ry abnorrrial impol .. ts from abroo.d. The shi.n·ta.ge of .food, the re1)ort states, not onl:r µresents a problem • of subsistence tut irnrr:orwo1y complicc:L tos th(3 task of restoring Eu.rope's industrial productton 1 "for ad()quat,3 food to sttp})ly o.n.l maintahi vitality is a.s essential e.s ad:;)quc.. te machino:-cy to enab:.1.c worh:rs to achieve their ty." lfost of the food ti:) make up .Enropo 's dclfici t must come full l)roductivi from the high-priced dollar area; the drt1.in on J1'uropea.11 dollar resources is indicated by thG efit~mate that "expendit~1res in 191:-'7 fol" imported grain t~1s and ArJentina alone will amount 'I and gra:ln products frt1m the United [3ta to ~jJ., 200 nti..llion, or six times the cost of such prodltots from these area:3 in 1939." Sintlla.rly 1 the repo:t"t sees tho shortc:tge of energy resources, es- pecially coal, e.s at the heart of tho industrial product.ion problem. Eur0po' s coal product:i.011 form.Grly ri11:.rt n<.1arly all her no0ds. Now it falls t can be only pn1~t1y made up by United States c,oal, • far short and th0 dof:lci which must be !)aid for iD see.rec dollc,rs a11d il1Vi.;lvos liuge shipping costs, In an effort to a ttaok t!·ds bottlonocl: the B;:1.nk sent a technloa.l group to
• - 3 ... survey the coal fields of Silcisfo. and the Ruhr, and has bcon investigating the possibilities open to it, to he.lp incri)aso coo.1 production in Et1ropo. Th0 third groat impediment to Europoan recovery is tlw shortago of ma111:,ower. Tho Bank stresses tho.t much still re:mains to be done to r0- intogrn.to into tho econon"y the labor forces d:i.slocatod by the war. It points to tho "large pools of manpower which are either employed in non- tJrod1.:wti vc pursuits or ,:Lro not er.1ploycd at all" -- in displaced perso:1s co.mps, in armies a:,1d munition fai3tories: ,~nd in swollen govort.1.!ncntal (:H3tnbli3hments -- a::; potential sources o:t: manpower for vital production. It snggeGts also tho possiblli ty of pormi t-ting sur1:Jlus German and Italian t aroas. worl:crs to irrrrn.i.gr.:tto voluntm.~ily into labor-d0fici • nEurope itself must m::tko the rn:?..j0r contribution to tho solution of all of those r;:,robJ.onis", tho report sta tos. "Outside assisto.~·.:Jc is vital, but it rc)resents a small :;~rconte.go of the tot.o.l effort,." 'l1ho roport stresses that notable progross has already boon made by mrmy countries, but that it is necossa:cy for thE) European nations themselves, individually or col.l,)ctivoly, to tak0 furth(~r stops. One of tho most im~-;iortant is to restore intorne;l .f'ine.ucio.l stability through 001.md bu.d3otary and tax I)ractic0st Othors are to intograte thG various Europc~n J:•oconstructicn pror;rams so as to r.i.void ov,)r-lapp1.ng and take full t'.dvantago of la.bo:t· t:i.on; to remove or lower trado barriorn; cmd, subj oct to neces- speoi.o.liza. sary socuri ty pro cautions, to ut:i.liz0 G0rmanproductivo facilities. I, Rucognizing that tho final n'l ture and scope of the M:t1·shall Plan ennnot h(:}lp but affect the Bo.nk ts role in European reconstruction, thG • report sti..gg,-;ut::; that the d:i.scnss1.ono now going on in P~1.ris may provide an opportunity f'or tho Euro:peari nr.i.tions t~ work out tog(.:ther some t1echanism for ins ti tu ting the nccess;.u.7 r::easuros of economic reform and cooperu t:ton,
• -4- and states the Bank'G desire to give any possible as3istnnce. The only loans granted by tho Bar1k before Augunt 10, 1947, of the period covered by the report, were to France and the Netherlands, in the amounts of f~250,ooo,ooo and (~195,000,000 res,ectivcly. The report s1.11nmarizes tho reasons for each credit and the conditions a ttachod to them. Additional material describing two loo.ns grantod since August 10 (~40,000,000 to Denmark and ($12,000,000 to L11~c0mbourg -- is also being pro- sentod to the Governors. Although the most pressing ce.lls -upon the Ba.riJ!': have boon for pv.r- poses of European recovery, the ropor·G stress0s th~t reconstruction o.~1d development needs in other areas -- Latin America, Africa, Asia, and tho Middle East -- are also being s.ctively considered. "Indeed it should not • be ver.y long before the financing of d0velo~)J~1ent :proj octs in those 0:rcus will te.nd to bGcome tho primo.r1 concern ct the Bank," The Bartl<: cannot do tho whole job, the repor·t makes clo::ir, b0cav.se the development work that appears feasible requires fino.ncio.1 c.nd tochrdcc~l help in amounts which only the free flow of ?t·ivo.tE.l ca.pi tc.l can provide~ The Bank's aim is to stimulate and assist this private investment. The report suggests that for many pi"osycctive borrowers tl::.e flrst st~p toward reoponfa,g the flow of capi taJ. is to clear up their e1::tornal debt record by rca.ching f~ir settlement agroomonts v.d.-th their creditors. The possibility of setting up an impartial body of ox:;orts to ri;:;commond just settlements, as woJ.l o.s to propose mcasuros to pla.ce the finances of tho oountr:Los con- cerned on a sound basis 1 is suzgostcd; the Bnnk sta.tes ;tts willing11ess to • ~nsist in any such of'forts • A loan from the Baitlr. would not noc0ssa.rily be contin.:;0nt upon. coroplGtion of all remedi~l measures required to improve the prospective
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