Senator HICKENLOOPER. From that standpoint we are not putting up as much as our productive capacity would indicate, is that correct? Secretary FowLER. That is right. Because there are more things than this to be taken into account: the unusual burden the United States bears in other areas of international operations, particularly mutual security. CREDITS TO INDIA AND PAKISTAN Senator HICKENLOOPER. I have been looking through the statistical record here in sum total and for certain individual years. I notice as of December 31, 1967, India has had credits of $889 million. Secretary FOWLER. Yes, sir. Senator HICKENLOOPER. And Pakistan has had credits of $330 million; it was $329,975,000-plus. Secretary FOWLER. Yes, sir. Senator HICKENLOOPER. It is practically $330 million. So in effect almost all of this money-that is the big bulk of it has gone to India and Pakistan. Is this Bank set up solely for the benefit of India and Pakistan? Secretary FOWLER. No, sir. I would like to make some comments on that because I think it is a very pertinent question here. You are quite right that the shares that have gone to India and Pakistan have mounted to 52%1⁄2 percent to India and 19%1⁄2 percent to Pakistan of the total resources. The reasons advanced for this include the following: That, first, on the need and capacity to use aid, both India and Pakistan are at a stage in their economic development where they can effectively use large amounts of assistance. Second, that there is some advantage in a concentration of the use of IDA resources, given this kind of a situation. IDA resources have, as a matter of policy, been utilized mainly for the benefit of the poorer, in terms of per capita income, of the developing nations and to those who have a capacity to use the credits. Looked at on a per capita basis also, India alone has a population of about $500 million or about one-fourth of the developing free world. The CHAIRMAN. People, not dollars? Secretary FOWLER. Five hundred million people, that is right, I beg your pardon. I am used to thinking so much in terms of dollars that I am afraid The CHAIRMAN. You equate the two? Secretary FOWLER. The Secretary of the Treasury, regardless of any humanistic instincts he may have brought to the job sooner or later Senator HICKENLOOPER. Isn't that the way most of these countries think of the United States-in terms of the amount of dollars they can get out of us? Secretary FOWLER. If IDA commitments are examined on a per capita basis among recipients, India and Pakistan are by no means out of line when you group the poorest of the less developed countries. Senator HICKENLOOPER. However, neither of them seems to like us very well. Secretary FOWLER. I never felt, Senator, this kind of business is a popularity contest. Senator HICKENLOOPER. I think it has certainly proven not to be. Secretary FOWLER. That is right. BETTER GEOGRAPHIC DISTRIBUTION OF IDA RESOURCES The view has been expressed that in the future IDA should aim at a broader country diversification of its activities. The policies of IDA are being reexamined on this point at this particular time, and we, the U.S. Government, favor a broadening of this geographic distribution of IDA resources. We look for this to be accomplished with this new IDA replenishment. So I think the point of your question is one well worth raising. I think it is a weakness and we take the position that weakness should be corrected and there should be a broadening of the diversification. Senator HENLOOPER. Doesn't the fact that the big bulk of this money is going to India and Pakistan cause a lot of resentment on the part of other countries, especially in Africa and perhaps some other places? They may feel that we are overemphasizing these countries and not giving other undeveloped countries enough to develop their resources? Secretary FOWLER. Perhaps Mr. Merchant who follows this day by day could comment on this. Mr. MERCHANT. I think it is true there is a feeling among many, many of the African countries and indeed Latin American countries, too, that there has been a disproportionate emphasis on the shares going to India and Pakistan. In Latin America, I would make two points: One is that there are relatively few countries there which, by existing standards of eligibility for IDA assistance, are in fact eligible. Senator HICKENLOOPER. Would you just explain or amplify that a little as to why? Mr. MERCHANT. Right. A rough rule of thumb, Senator, is that countries with a per capita income of over $250 are not considered, generally speaking to be IDA countries. The countries with the very low incomes are the principal beneficiaries of the IDA credits. The second point I was going to make in connection with Latin America is that there is the Alliance for Progress and the InterAmerican Development Bank. In Africa a somewhat different situation has existed with respect to IDA. That is that so many of those countries received their independence very, very recently, and are still in the early stages of creating the government structures and acquiring the skills which are necessary to do fundamental economic planning and to prepare projects for submission for consideration by the IDA Board. There has, therefore, been something of a delay in credit applications for projects coming in. This flow has stepped up and I think if one looks at the list of recipients of IDA credits in the last year there has been a very definite increase in the number of projects located in Africa. As the Secretary said, with an increase in the resources of IDA, I think there is every reason to believe that the proportion which goes to the subcontinent will significantly decline and there will be appropriately increased amounts going to the other underdeveloped areas. Senator HICKENLOOPER. Thank you, Mr. Merchant. TERMS AND STATUS OF REPAYMENTS AND CARRYING CHARGES Mr. Secretary, Secretary Fowler, has the lending program been going on long enough to come to the point when the money will again be repaid to the Bank? It has been going 8 years. Secretary FOWLER. No, sir. Ten years is the term, and I think the first beginnings of a revolving fund type of operation will begin in 1971. Senator SYMINGTON. Excuse me, did you say IDA terms were 10 years? Secretary FOWLER. The period of grace, the initial period of grace. Senator SYMINGTON. Of not repaying anything. Secretary FOWLER. Not repaying anything for 10 years, except the service charge. Senator HICKENLOOPER. It has been going 8 years. Senator HICKENLOOPER. None of them have anticipated that repayment date and paid in a little; have they? Secretary FOWLER. I don't think there has been any debt prepay ment. Senator HICKENLOOPER. Have there been any defaults on the carrying charges? Secretary FOWLER. No, sir, I don't believe so. Of course by saying carrying charges you pinpoint the problem. We haven't had any real experience yet with defaults in a technical sense-no IDA loans could be in default-but I think the service charges have all been kept well up to date and maintained. Senator HICKENLOOPER. AS I understand, a borrower pays an annual service charge in convertible currencies of three-quarters of 1 percent in lieu of interest charges. Are those current? Secretary FOWLER. Yes, sir. Senator HICKENLOOPER. The payments are all current; there are no defaults? Secretary FOWLER. Yes, sir. Senator HICKENLOOPER. Just one more question-I am curiouswhat has ever happened to that plan for the Monetary Fund to build a country club here in Washington? That was one of the most important projects apparently a while back. What has happened; have they broken ground for that yet? Secretary Fowler. I am not current on that. Mr. MERCHANT. I believe, in fact I am sure, ground has been broken, Senator. That was financed and created exclusively by the Monetary Fund. The World Bank has not contributed any funds to that facility. Senator HICKENLOOPER. I see. I suppose they will install other conveniences when they get the club built out of this fund? Mr. MERCHANT. Out of this fund? Senator HICKENLOOPER. Out of the Monetary Fund. You are not connected with it? Mr. MERCHANT. I am not in a position to say. Senator HICKENLOOPER. That is something somebody else knows something about. Mr. MERCHANT. Yes. Senator HICKENLOOPER. I don't think I will be around here when they finish that country club. So thank you, Mr. Chairman. The CHAIRMAN. Senator from Missouri. SOFT LOAN WINDOWS Mr. Secretary, first let me say that as you know I have the greatest respect for you, and there is nobody in Government for whom also I have more respect than Mr. Merchant. It is a difference of opinion on policy we are discussing here today. Back in 1960 or 1961, we were told that IDA loans would mostly go to Central and South America. Later we found 50 percent of the loans were going to India and 20 percent to Pakistan; and there was only one loan to Central or South America, a loan to Venezuela. We lost the discussion at that time and this soft loan window to the World Bank was established. In 1965 I went out with Mr. Eugene Black, had the honor of being with him when he set up the Asian Bank. At that time, I reported I thought he could get the Bank set up and approved by Congress, provided it didn't have any soft loan window. It was set up, as I remember-$200 million we put in, $200 million the Japanese put in, $300 million from Asia and $300 million from Europe. In recent weeks and months there has been a lot of discussion about a soft loan window to this Asian Bank. Do you know how much of the billion dollars agreed upon in the Asian Bank in 1965 on a hard loan basis has been loaned out by that Bank? Secretary FOWLER. I noted you had some colloquy with Under Secretary Barr in this committee in connection with the InterAmerican Development Bank's capital stock, and I believe his answer Senator SYMINGTON. The Asian Bank is what I am talking about. Secretary FOWLER. Yes, your question or a question of some member of the committee which pertained to this and, as I recall, the answer Under Secretary Barr gave at that time was that there had been one loan of $5 million. Senator SYMINGTON. Out of a billion. Secretary FOWLER. That is right. I will correct that if I am in error, but I seem to recall, I examined Mr. Barr's testimony here, and it is just the recollection I have at this time. COPPER Senator SYMINGTON. In answer to Senator Fulbright on the balance of payments, you mentioned the copper strike. Secretary FOWLER. Yes, sir. Senator SYMINGTON. Is it true that one of the largest, if not the largest, single export we made recently to France was copper? Secretary FOWLER. I am not sufficiently familiar with the trade pattern in copper, Senator Symington, to give you an answer. Senator SYMINGTON. Thank you, Mr. Secretary. WORLD BANK EARNINGS ON LOANS How long has the World Bank been making so-called hard loans? Secretary FOWLER. The World Bank has been, I think, in operation since about 1947. Senator SYMINGTON. I think 22 years. Secretary FOWLER. Yes; I beg your pardon, 22 years. In the first, 1946-47 fiscal year there were $92 million of disbursements so it was well on the way at that time. Senator SYMINGTON. During this period the Bank has been receiving regular payment on its loans plus interest, correct? Secretary FOWLER. Yes, sir. Senator SYMINGTON. When the Bank gets repaid for its loans, as I understand it, the Bank pays off the bondholders with interest; correct? Secretary FOWLER. Yes; that is generally correct, yes, sir. Senator SYMINGTON. Who owns the bonds? Secretary FOWLER. The bonds are widely held in the United States and in foreign countries. Senator SYMINGTON. By private Secretary FOWLER. By private institutions and public institutions. Senator SYMINGTON. And over and beyond the repaid principal and the interest which goes to the bondholders, the World Bank itself receives an additional amount, is that correct? Secretary FOWLER. I don't understand that. Senator SYMINGTON. Well, put it this way, ever since the World Bank has been operating it has been making a profit. Secretary FowLER. That is right. Senator SYMINGTON. What have been the total earnings of the World Bank since its inception? Secretary FoWLER. Just a minute. The CHAIRMAN. A billion two, isn't it? Senator SYMINGTON. A billion two, isn't it? Senator SYMINGTON. No, I think it is a billion 200 million, isn't it? 1967. The CHAIRMAN. I have a letter of May 8, 1968, from the President and he says the reserve stands at one billion two; reserves are earnings. Secretary FowLER. That is right. So the earnings from June 30, 1967, to the current date must make up that difference. Senator SYMINGTON. So actually it would be more than a billion two as current today; would it not? Secretary FoWLER. A little more than a billion two. There is a billion and 22 million on June 30, 1967, and Senator Fulbright's information from the President is more current than mine. The CHAIRMAN. It is May 8 and he says the reserves stand at a billion two. Secretary FoWLER. That is correct. WORLD BANK LENDING POLICY TOWARDS IDA Senator SYMINGTON. Has the World Bank ever appropriated any of its earnings to the soft loan window of its own Bank? Senator FOWLER. Yes, sir; it has. Senator SYMINGTON. How much? Senator SYMINGTON. In 1967 the total contribution was around $10 million, was it not? |