FROM THE OFFICE OF PUBLIC AFFAIRS

The United States is committed to increasing opportunities for people in the developing world to create a decent living for themselves and their families. As President George W. Bush has said: "A world where some live in comfort and plenty, while half of the human race lives on less than $2 a day is neither just, nor stable." The international community does not have all the answers. But it can do a better job by learning from its successes and its failures. It must also think more innovatively about solutions to basic development problems.

Global terrorism is a serious threat to the very foundations of our economies and societies. We appreciate the commitment of the World Bank and its regional affiliates to support international efforts to prevent funds inadvertently going to terrorists. However, more remains to be done to strengthen due diligence procedures for monitoring their own and borrower use of funds and to provide technical assistance to help countries put in place needed regulations and institutions. These crucial areas require priority attention and action.

Both the emerging economies and the poorest countries are enduring the adverse impact of the global slowdown. Their economic recovery will depend primarily on their following sound national policies. Rising productivity has been the driving force behind increases in economic growth and rising per capita income throughout history. Countries that have been successful consistently make wise policies choices that energize the private sector and prioritize human capital development to improve productivity and growth.

Prudent monetary and fiscal policies will lay the foundation for economic activity and a flourishing private sector. Good governance and a competent public administration that promotes the rule of law, enforceable contracts, and other conditions necessary to encourage an entrepreneurial culture are also necessary. Basic social services such as health and education are also vital to enabling any population to participate in and contribute to economic growth.

Many developing countries have already recognized that it is in their interest to implement these policies. In doing so, they discourage capital flight and nurture domestic savings and investment, the indispensable ingredients for development and growth. They also position themselves to attract resources from abroad when investor confidence rebounds. Without stronger private-sector led economies that can generate the employment and tax revenues needed to support crucial public expenditures, countries will never achieve the sustainable growth and poverty reduction they seek. This is the message that the Development Committee should send to the UN Financing for Development Conference, which will convene next year in Mexico.

The World Bank Group is well equipped to help its developing member countries to follow this path. To maximize the development effectiveness of its resources, the Bank must be more selective in focusing them on countries that demonstrate -- not just commit to -- sound policy actions and on efforts to directly boost productivity and raise the living standards of their people.

We urge the Bank Group to focus its efforts on helping its clients to diversify the sources of their growth, promote accountable governance, raise human productivity, and expand the access of the poor to physical infrastructure, new productive technologies, and social services. The Bank must also be rigorous in measuring the results of its assistance.

The Bank should dramatically increase the share of its funding provided as performance based grants to the poorest and least creditworthy countries for education, health, nutrition, water supply, sanitation and other human needs. Many development loans that have important long-term economic benefits will take years to generate the resources necessary to cover the resulting debt service. Low-income countries are also highly vulnerable to economic shocks and natural disasters over the repayment period of traditional loans. I believe that the economic impact of the global slowdown make it even more imperative to move soft loan multilateral development bank lending toward grants. The financial implications of a switch to grants are relatively modest and phase in over time. Lost revenues to creditors, of course, directly translate into benefits for the poorest countries.

With regard to the three agenda items on which Ministers are invited to comment:

HIPC

The ultimate success of the HIPC Initiative will depend not on the number of beneficiaries or the level of debt relief they receive, but rather by the extent to which such relief contributes to measurable gains in human development and poverty reduction. Quality of effort, rather than speed, in extending debt relief is of the essence. We should support ongoing debt sustainability by providing new assistance on appropriate terms, including the increased use of grants.

The MDBs need to do a better job of coordinating among themselves and ensuring that their own internal governance and operations are transparent. The administrative overload on borrowers can be reduced by harmonizing donor policies to the highest appropriate standard. For the MDBs, the most immediate priority should be to adopt uniform but best practice standards to safeguard the use of MDB resources. And they should assist borrowing countries in strengthening their administrative capacity to adhere to these standards.

Literacy and learning are the foundation of democracy and development. Quality education empowers the individual and will yield major dividends in terms of better health and greater productivity. The Bank's progress report underscores the huge challenges entailed in expanding educational access. The situation is worsening as the developing countries, particularly in Africa, lose teachers to the HIV/AIDS epidemic at an alarming rate. Hopefully, the Global Fund for AIDS, TB and Malaria will soon begin to reverse the spread of AIDS. I look forward to discussing a coherent donor education plan, and an expanded World Bank role in this area, at our next Committee meeting.