Special Message to the Congress Requesting Funds for the International Development Association and the Asian Development Bank

To the Congress of the United States:

As their role in conveying financial assistance to developing countries has steadily enlarged in recent years, multilateral lending institutions have become vital to our hopes for constructing a new international economic order.

One of the most important of these institutions is the International Development Association, a subsidiary of the World Bank that provides long-term loans at low interest rates to the world's poorest nations. During the 13 years of its operation, IDA has provided over $6. 1 billion of development credits to nearly 70 of the least developed countries of the world. Two dozen countries have contributed funds for this effort.

By next June, however, the International Development Association will be out of funds unless it is replenished. As a result of an understanding reached in recent international negotiations, I am today proposing to the Congress that the United States join with other major industrialized nations in pledging significant new funds to this organization. Specifically, I am requesting that the Congress authorize for future appropriation the sum of $1.5 billion for the fourth replenishment of IDA. Initial payments would be made in fiscal year 1976 and the full amount would be paid out over a period of years.

I am also requesting that the Congress authorize an additional $50 million for the Special Funds of the Asian Development Bank. The bank is one of the major regional banks in the world that complements the work of the International Development Association and the World Bank.

Legislation for both of these authorities is being submitted to the Congress today by the Secretary of the Treasury.

STRENGTHENING THE INTERNATIONAL ECONOMIC SYSTEM

Just over a year ago, in September 1972 at the annual meeting in Washington of the International Monetary Fund and the World Bank, I stressed the urgent need to build a secure structure of peace, not only in the political realm but in the economic realm as well. I stated then that the time had come for action across the entire front of international economic problems, and I emphasized that recurring monetary crises, incorrect alignments, distorted trading arrangements, and great disparities in development not only injured our economies, but also created political tensions that subvert the cause of peace. I urged that all nations come together to deal promptly with these fundamental problems.

I am happy to be able to report that since that 1972 meeting, we have made encouraging progress toward updating and revising the basic rules for the conduct of international financial and trade affairs that have guided us since the end of World War II. Monetary reform negotiations, begun last year, are now well advanced toward forging a new and stronger international monetary system. A date of July 31, 1974, has been set as a realistic deadline for completing a basic agreement among nations on the new system.

Concurrently, we are taking the fundamental steps at home and abroad that will lead to needed improvement in the international trading system. On September 14, while meeting in Tokyo, the world's major trading nations launched new multilateral trade negotiations which could lead to a significant reduction of world trade barriers and reform of our rules for trade. The Congress is now considering trade reform legislation that is essential to allow the United States to participate effectively in these negotiations.

ESSENTIAL ROLE OF DEVELOPMENT ASSISTANCE

While there is great promise in both the trade and monetary negotiations, it is important that strong efforts also be made in the international effort to support economic development--particularly in providing reasonable amounts of new funds for international lending institutions.

A stable and flexible monetary system, a fairer and more efficient system of trade and investment, and a solid structure of cooperation in economic development are the essential components of international economic relations. We must act in each of these interdependent areas. If we fail or fall behind in one, we weaken the entire effort. We need an economic system that is balanced and responsive in all its parts, along with international institutions that reinforce the principles and rules we negotiate.

We cannot expect other nations--developed or developing--to respond fully to our call for stronger and more efficient trading and monetary systems, if at the same time we are not willing to assume our share of the effort to ensure that the interests of the poorer nations are taken into account. Our position as a leader in promoting a more reasonable world order and our credibility as a negotiator would be seriously weakened if we do not take decisive and responsible action to assist those nations to achieve their aspirations toward economic development.

There are some two dozen non-communist countries which provide assistance to developing countries. About 20 percent of the total aid flow from these countries is now channeled through multilateral lending institutions such as the World Bank group--which includes IDA--and the regional development banks.

These multilateral lending institutions play an important role in American foreign policy. By encouraging developing countries to participate in a joint effort to raise their living standards, they help to make those countries more self reliant. They provide a pool of unmatched technical expertise. And they provide a useful vehicle for encouraging other industrialized countries to take a larger responsibility for the future of the developing world, which in turn enables us to reduce our direct assistance.

The American economy also benefits from our support of international development. Developing countries today provide one-third of our raw material imports, and we will increasingly rely upon them in the future for essential materials. These developing countries are also good customers, buying more from us than we do from them.

NEW PROPOSALS FOR MULTILATERAL ASSISTANCE

Because multilateral lending institutions make such a substantial contribution to world peace, it must be a matter of concern for the United States that the International Development Association will be out of funds by June 30, 1974, if its resources are not replenished.

The developing world now looks to the replenishment of IDA's resources as a key test of the willingness of industrialized, developed nations to cooperate in assuring the fuller participation of developing countries in the international economy. At the Nairobi meeting of the World Bank last month, it was agreed by 25 donor countries to submit for approval of their legislatures a proposal to authorize $4.5 billion of new resources to IDA. Under this proposal, the share of the United States in the replenishment would drop from 40 percent to 33 percent. This represents a significant accomplishment in distributing responsibility for development more equitably. Other countries would put up $3 billion, twice the proposed United States contribution of $1.5 billion. Furthermore, to reduce annual appropriations requirements, our payments can be made in installments at the rate of $375 million a year for four years, beginning in fiscal year 1976.

We have also been negotiating with other participating nations to increase funds for the long-term, low-interest operation of the Asian Development Bank. As a result of these negotiations, I am requesting the Congress to authorize $50 million of additional contributions to the ADB by the United States beyond a $100 million contribution already approved. These new funds would be associated with additional contributions of about $350 million from other nations.

MEETING OUR RESPONSIBILITIES

In addition to these proposals for pledging future funds, I would point out that the Congress also has before it appropriations requests for fiscal year 1974--a year that is already one-third completed--for bilateral and multilateral assistance to support our role in international cooperation. It is my profound conviction that it is in our own best interest that the Congress move quickly to enact these pending appropriations requests. We are now behind schedule in providing our contributions to the International Development Association, the Inter-American Development Bank and the Asian Development Bank, so that we are not keeping our part of the bargain. We must show other nations that the United States will continue to meet its international responsibilities.

All nations which enjoy advanced stages of industrial development have a grave responsibility to assist those countries whose major development lies ahead. By providing support for international economic assistance on an equitable basis, we are helping others to help themselves and at the same time building effective institutions for international cooperation in the critical years ahead. I urge the Congress to act promptly on these proposals.

RICHARD NIXON

The White House,

October 31, 1973.