The 62nd Meeting of the Development Committee |
Reform of the World Bank Over the past half century, the World Bank with its outstanding expertise has taken a leading role in tackling development issues. Aiming at economically, socially and environmentally sustainable growth, it has taken the lead in efforts to reduce worldwide poverty, adopting the approach of focusing on structural and institutional problems, social policies, and ownership of developing countries. This was followed by the launch of the Comprehensive Development Framework (CDF) in 1999. While the progress of its implementation in pilot countries has not always been smooth, the CDF principles long-term vision and strategy, enhanced country ownership, more strategic partnership among stakeholders, and accountability for development results have been widely accepted by the development community around the world and have started to be applied to field practice. The idea of the CDF has also been incorporated into the poverty reduction strategies that are being prepared in IDA-eligible countries.In our struggle for reducing poverty, the Bank has been one of the most valuable institutions that humanity has developed in this century. As we move into the 21st century, we anticipate that the Bank will play a major role in reducing world poverty even more effectively and efficiently not only in low-income countries but in middle-income countries as well. In order to meet these anticipations, the Bank has already put forward the "program approach" in which the Bank will:
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| ● | respect a country-led and country-owned policy framework | |
| ● | assess the country's institutions and private sector strength as the basis for determining the Bank's country support while taking fully into account its policies | |
| ● | develop and implement the Bank's assistance program based on the country's vision and the Bank's diagnosis | |
| ● | monitor and evaluate the Bank's contribution to poverty reduction and other country development objectives while recipient countries monitor and evaluate overall performance
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| This is a result-oriented approach respecting country ownership in the context of comprehensive poverty reduction strategy. Such an approach should be commended, as it will make the Bank operations more effective. The Poverty Reduction Support Credit (PRSC) is proposed as a new instrument under this program approach. It is a programmatic structural adjustment credit that complements the IMF's Poverty Reduction and Growth Facility (PRGF) and is synchronized with the budget cycle of a recipient country. Japan supports the introduction of such an instrument, as it will lead to enhancing the development impact of the Bank's lending to IDA-eligible countries. At the same time, it is essential for the Bank and the IMF to define each role and to promote collaboration by having a clearer focus the PRSC for social and structural policies and the PRGF for macroeconomic stability. Japan welcomes the latest move of the World Bank Group to review its entire operation towards middle-income countries. Based on its experience with the recent crises in Asia and elsewhere, the Bank has also been playing an important role, in cooperation with the IMF, in strengthening the international financial architecture on many fronts including a) developing international standards and codes; and b) strengthening the financial sector through the Financial Sector Liaison Committee and the Financial Sector Assessment Program. We hope that the Bank will maintain its momentum of contribution by drawing upon its expertise while fully taking into account country-specific circumstances. All these efforts certainly deserve recognition. At the same time, however, we must not forget that, in the wake of structural changes that are taking place in the world economy, the international environment for developmental assistance is also continuously changing. Consequently, the Bank's role should be subject to constant review to allow for further improvements in its operations and organization. To this end, I would like to emphasize the following:
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| To increase development impact, the Bank must further enhance its efforts at supporting structural and institutional reform in recipient countries and improving social sector operations. We need to recognize the importance of the policies adopted in developing countries and structural and social issues that underpin these policies, so that developing countries could secure sustainable development as well as achieve fair and stable society. Needless to say, there is no disagreement on the importance of growth in development. Taking the Asian experience as an example, we can find that the Asian economic development has been assisted largely by the Bank and Japanese strategy, which put the highest priority on growth. Thus, it is crucial to pay due attention to the importance of growth while pursuing comprehensive approach focusing on structural and institutional problems aiming at poverty reduction. | |
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| Unless developing countries, which have the primary responsibility for reducing their poverty, commit themselves to formulating and implementing programs for poverty reduction, we cannot expect to see much progress. We hope that the Bank will provide the best possible support for developing countries' own efforts to reduce poverty. In addition, we urge the Bank to extend assistance for capacity building in a variety of fields, so that developing countries themselves can identify the factors that hinder their efforts to reduce poverty and solve problems effectively. It is particularly essential to link poverty reduction strategies prepared by developing countries with the Bank's Country Assistance Strategies as early as possible. | |
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| It is important for us to place greater emphasis on good governance in developing countries. Good governance will not only support the effectiveness of development aid but also enable growth to be sustainable. We believe that strengthening support for countries with good performance in a variety of areas, including governance, will increase the effectiveness of the Bank's overall operations. | |
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| The increasing magnitude of private capital flows into developing countries requires the Bank to enhance selectivity of its operations so as not to supplant private capital flows. As a means to achieve this, the Bank's loan pricing policy could be placed under comprehensive review. In addition, investment operations for the private sector should have a clearer focus on development impact. For that, operational strategies, organization and evaluation mechanism are to be subject to comprehensive review. | |
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| It will also be important for the Bank to promote cooperation with regional development banks (RDBs) and other aid agencies in such areas as lending, policy assessment and research. In pursuing better cooperation, it must fully take into account the expertise and comparative advantage of other organizations. For example, the Asian Development Bank has contributed greatly to development in the Asia-Pacific region by carrying out effective and efficient operations with deeper insight and wider expertise in the region. Furthermore, with regard to the Bank's substantial decentralization since 1997, it is time for the Board of the Bank to review progress in cooperation in the field between the Bank and RDBs as well as the costs and benefits of decentralization. | |
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| We urge the Bank to improve its accountability and transparency. The Bank's holistic approach has led to an expansion in the range of stakeholders, and effective collaboration with these stakeholders will be necessary to enhance the Bank's operational effectiveness. Dialogue and cooperation with these stakeholders will surely contribute to upgrading the quality of the Bank's activities. In this respect, I welcome the revision of disclosure policy which is now in process with external consultations.
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Poverty Reduction and Global Public Goods The remarkable advancements of information and communication technology and transportation have dramatically accelerated the movements of information, people, goods, and capital well beyond national boundaries. Against such a backdrop, there are growing needs for us to address certain challenges on a global scale that have direct relevance to development, such as HIV/AIDS and environment. While concrete development aid has so far been taking a country-focused approach, addressing global challenges will require a new approach. The Bank's clear definition of "global public goods" is an important step towards future discussions over them. The Bank is now actively dealing with issues in the following priority areas.
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| ● | Promoting improved economic governance | |
| ● | Trade integration | |
| ● | Combating communicable diseases | |
| ● | Protecting the global environmental commons | |
| ● | Improving access to information and knowledge
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| All of these five areas are included in Japan's priority areas for development assistance. For example, Japan has identified HIV/AIDS as one of priority areas in its mid-term ODA policy. Japan announced the Global Issues Initiative on Population and AIDS (GII) in 1994, and has already provided a total of USD 88 million in ODA to combat AIDS, including over USD 23 million in contributions to UNAIDS since 1996. To address the problem of digital divide, Japan announced just prior to the Kyushu-Okinawa G7 Summit a comprehensive co-operation package based on official financial assistance. In addition, Japan urges the Bank, the Asian Development Bank and other multilateral development banks to help bridge digital divide by making use of their expertise and their experiences in global and regional programs. Japan is willing to support these efforts. Nevertheless, I would like to emphasize that whenever the Bank provides support to global public goods, we need to make sure that it has a comparative advantage in that particular area over other institutions, such as WHO. Given the nature of a financial institution, the Bank has an inherent limit to the role it should play in providing support to global public goods. Thus, it is essential for the Bank to identify its own areas of comparative advantage in relation to other institutions, and to collaborate with those institutions when necessary. The Bank also needs to establish appropriate collaborative relationships, in particular, with RDBs, while respecting their regional knowledge and their unique mandate in their region. In deciding the level of support the Bank provides to global public goods, it must incorporate such factors as the overall balance of resource allocation, consistency with Country Assistance Strategies, and absorption capacity of recipient countries. As to the level of DGF (Development Grant Facility) grant to multi-donor facilities, prudence will be required to go beyond the existing level of grant, given the nature of the Bank as a financial institution. Only recently have global public goods emerged as a new focus for the Bank, and the progress report by the Bank is due next spring. We need to make a comprehensive review over the role of the Bank in each global public good at that time. I would like to request that the progress report make an appropriate evaluation of the Bank's activities relevant to global public goods.
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Enhanced HIPC Initiative and the Poverty Reduction Strategy As we move into the next century, another significant challenge will be the speedy and effective implementation of the enhanced HIPC Initiative. Since the endorsement of this Initiative at last year's Annual Meetings, ten countries so far have reached their decision points under the enhanced framework. However, in order to expeditiously secure the link between debt relief and poverty reduction in as many HIPCs as possible, the international community still must take further steps toward speedy and effective implementation of the Initiative. The Bank and the IMF should make full use of the Joint Implementation Committee established this May, and redouble their efforts to this end. Japan is making the following contributions to the Initiative:
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| ● | In order to ensure speedy implementation of the Initiative by supporting the debt reduction efforts of multilateral development banks, Japan has pledged up to USD 200 million to the HIPC Trust Fund, part of which has already been disbursed. | |
| ● | Japan has also committed to a contribution to the IMF PRGF-HIPC Trust Fund, part of which has already been disbursed. | |
| ● | Japan has committed to extend the largest bilateral debt relief among all creditor countries including 100% debt reduction of ODA claims and 100% debt reduction of non-ODA claims under the framework of the Paris Club. | |
| ● | Japan will continue to be committed to supporting HIPCs through various assistance measures including further provision of grant assistance.
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| It is crucial for countries that have already pledged to contribute to the HIPC Trust Fund to make their contributions in a timely manner to enable smooth implementation of the Initiative. In addition, HIPCs themselves need to more actively tackle their economic reforms and expeditiously develop their poverty reduction strategies. Poverty reduction strategies based on the ownership of developing countries are a powerful means of alleviating poverty. What must remain foremost in our minds during the formulation process is to ensure the participation of all parties concerned, including the civil society, local communities and bilateral donors. Without this, developing countries cannot claim that they have successfully ensured their ownership, nor will be able to reap the full benefit of international aid. In response to the needs of developing countries, Japan stands ready to support the formulation of poverty reduction strategies with a particular focus on participatory process. | ||