To the Congress of the United States:
I herewith submit to the Congress the Articles of Agreement for the establishment of the International Development Association. I recommend legislation authorizing United States membership in the Association and providing for payment of the subscription obligations prescribed in the Articles of Agreement.
The Association is designed to assist the less-developed countries of the free world by increasing the flow of development capital on flexible terms. The advisability of such an institution was proposed by Senate Resolution 264 of 1958. Following this Resolution, the National Advisory Council on International Monetary and Financial Problems undertook a study of the question. The Council's conclusions and the favorable response of representatives of other governments who were consulted during the course of the study have resulted in the Articles of Agreement which satisfy the objectives of that Resolution and which I am submitting herewith. The accompanying Special Report of the Council describes the Articles in detail.
We all know that every country needs capital for growth but that the needs are greatest where income and savings are low. The less-developed countries need to secure from abroad large amounts of capital equipment to help in their development. Some part of this they can purchase with their current savings, some part they can borrow on conventional terms, and some part is provided by private foreign investors. But in many less-developed countries, the need for capital imports exceeds the amounts they can reasonably hope to secure through normal channels. The Association is a multilateral institution designed to provide a margin of finance that will allow them to go forward with sound projects that do not fully qualify for conventional loans.
In many messages to the Congress, I have emphasized the clear interest of the United States in the economic growth of the less-developed countries. Because of this fundamental truth the people of our country are attempting in a number of ways to promote such growth. Technical and economic aid is supplied under the Mutual Security Program. In addition, many projects are assisted by loans from the Export-Import Bank, and we also participate with other free world countries in the International Bank for Reconstruction and Development which is doing so much to channel funds, mainly from private sources, to the less-developed areas. While we have joined with the other American Republics in the Inter-American Development Bank, there is no wide international institution which, like our Development Loan Fund, can help finance sound projects requiring a broad flexibility in repayment terms, including repayment in the borrower's currency.
Conceived to meet this need, the International Development Association represents a joint determination by the economically advanced countries to help accelerate progress in the less-developed countries. It is highly gratifying that so many other free world countries are now ready to join with us in this objective.
The Association is a cooperative venture, to be financed by the member governments of the International Bank. It is to have initial subscriptions totaling one billion dollars, of which the subscription of the United States would be $320.29 million and the subscriptions of the other economically strong countries would be $442.78 million. The funds made available by these countries would be freely convertible. The developing countries would subscribe $236.93 million, of which ten per cent would be freely convertible. Members would pay their subscriptions over a five year period and would periodically re-examine the adequacy of the Association's resources.
The International Development Association thus establishes a mechanism whereby other nations can join in the task of providing capital to the less-developed areas on a flexible basis. Contribution by the less-developed countries themselves, moreover, is a desirable element of this new institution. In addition, the Association may accept supplementary resources provided by one member in the currency of another member. Thus, some part of the foreign currencies acquired by the United States primarily from its sales of surplus agricultural commodities may be made available to the Association when desirable and agreed to by the member whose currency is involved.
The Articles of Agreement give the Association considerable scope in its lending operations so that it can respond to the varied needs of its members. And because it is to be an affiliate of the International Bank, it will benefit from the long and successful lending experience of the Bank. By combining the Bank's high standards with flexible repayment terms, it can help finance sound projects that cannot be undertaken by existing sources. With a framework that safeguards existing institutions and traditional forms of finance, the Association can both supplement and facilitate private investment. It will provide an extra margin of capital that can give further momentum to growth in the developing countries on terms that will not overburden their economies and their repayment capacities.
The peoples of the world will grow in freedom, toleration and respect for human dignity as they achieve reasonable economic and social progress under a free system. The further advance of the less-developed areas is of major importance to the nations of the free world, and the Association provides an international institution through which we may all effectively cooperate toward this end. It will perform a valuable service in promoting the economic growth and cohesion of the free world. I am convinced that participation by the United States is necessary, and I urge the Congress to act promptly to authorize the United States to join with the other free nations in the establishment of the Association.
DWIGHT D. EISENHOWER