1 It is assumed throughout the discussion that there is little or no doubt about the need for international economic assistance of substantial magnitude. The question is not whether such external assistance is appropriate, but how it may most efficiently be provided.

2 See, e.g., remarks of Lord Keynes at Bretton Woods, 1 United Nations Monetary and Financial Conference 84 (1944).

3 The Bank's Articles of Agreement appear in 60 Stat. 1440, T.I.A.S., No. 1502, 2 U.N. Treaty Series 134 (effective Dec. 27, 1945) (hereinafter cited as Bank Agreement).

4 Bank Agreement, Art I(ii). In practice, the Bank has neither issued guaranties nor participated in private loans. A concise description of the Bank's operations appears in R. Mikesell, Public International Lending for Development 61-70 (1966).

5 Of the Bank's subscribed capital stock carried on its books at over $23 billion, more than $20 billion is not paid in but is subject to call in accordance with Bank Agreement, Art. II, § 5. See 1969 World Bank/International Development Association Ann. Rep. 64-65; International Commerce, Aug. 25, 1969, p. 24. Consequently the Bank must borrow in order to lend.

6 Bank Agreement, Art. Ill, § 4(i).

7 The Bank Agreement does not expressly enjoin equity investment, but the implication is clear from the explicit provisions relating to loans and guarantees in Arts. Ill and IV. Although the Bank probably has implied powers (see text at note 116 below), it would be unreasonable in light of the loan and guarantee provisions to include the power to invest risk capital among them.

8 The Bank Agreement requires it to lend at a rate of interest which in its opinion is “reasonable” and “appropriate to the project.” See Bank Agreement, Art. Ill, § 4(iv). The rate has recently been increased from 6% to 7 percent. See New York Times, Aug. 13, 1969, p. 59, col. 2 (city ed.).

9 See Articles of Agreement of the International Finance Corporation, Arts. I and III, 7 U.S. Treaties 2197, T.I.A.S., No. 3620, 264 U.N. Treaty Series 117 (effective July 20, 1956), as amended, 12 U.S. Treaties 2945, T.I.A.S., No. 4894, 439 U.N. Treaty Series 318 (effective Sept. 21, 1961) (hereinafter cited as IFC Agreement).

10 IFC Agreement, Art. II, § 3.

11 See Articles of Agreement of the International Development Association, 11 U.S. Treaties 2284, T.I.A.S., No. 4607, 439 U.N. Treaty Series 249 (effective Sept. 24, 1960) (hereinafter cited as IDA Agreement). For discussion of the terms of IDA credits, see text at note 99 below.

12 See H. Rep. No. 91-31, 91st Cong., 1st Sess., p. 2 (1969). The second replenishment was finally assured when Congress, after failing to act in 1968 on U. S. participation, authorized the U. S. contribution in the spring of 1969 in the amount of $480 million. See Public Law No. 91-14 (May 23, 1969). In the meantime, IDA's uncommitted resources had fallen to $87 million as of Jan. 30, 1969, and its lending activities had been substantially curtailed. See H. Rep. No. 91-31, op. cit., pp. 4, 6.

13 An annual breakdown of World Bank net income and transfers to IDA from 1964 through 1968 appears in Hearings on H.R. 33 before the House Committee on Banking and Currency, 91st Cong., 1st Sess., p. 44 (1969).

14 See Convention on the Settlement of Investment Disputes Between States and Nationals of Other States, 17 U.S. Treaties 1270, T.I.A.S., No. 6090, 575 U.N. Treaty Series 159 (effective Oct. 14, 1966). Because of the extensive literature on the Center, no attempt is made to discuss it extensively herein. For bibliography, see the ICSID Annual Reports.

15 “Assistance” may be a misleading word in the context of international development. A loan on conventional terms may provide “assistance” in the sense that it supplies needed capital, but would involve no genuine transfer of resources if it contains no subsidy element. See H. Johnson, Economic Policies Toward Less Developed Countries 25 (1967).

16 See Agreement Establishing the Inter-American Development Bank, 10 U.S. Treaties 3029, T.I.A.S., No. 4397, 389 U.N. Treaty Series 69 (effective Dec. 30, 1959).

17 See Articles of Agreement of the Asian Development Bank, 17 U.S. Treaties 1418, T.I.A.S., No. 6103, 571 U.N. Treaty Series 123 (effective Aug. 22, 1966).

18 UNCTAD was originally convened pursuant to Economic and Social Council Res. 917 (XXXIV), Official Records, Annexes, Agenda Item 4, at p. 12 (1962), endorsed in General Assembly Res. 1785 (XVII), Official Records, Supp. No. 17 (A/5217), p. 14 (1962). For a perceptive analysis of the work of UNCTAD I, see S. D. Metzger, “Developments in the Law and Institutions of International Economic Relations: UNCTAD “ 61 A.J.I.L. 756 (1967).

19 See General Assembly Res. 2029 (XX), Official Records, Supp. No. 14 (A/6014), p. 20 (1965), combining the Special Fund and the Expanded Program of Technical Assistance into the new UNDP. UNDP provides funds for pre-investment surveys as well as for research and planning carried out by the U.N. and related agencies (including the World Bank), and undertakes technical assistance programs in conjunction with related agencies. Its activities are financed by contributions from U.N. Member nations.

20 See General Assembly Res. 2152 (XXI), Official Records, Supp. No. 16 (A/6316), p. 24 (1966). UNIDO is designed to perform a wide range of services to promote industrialization in the developing countries. Operational expenses are derived from U.N. Member contributions and from UNDP.

21 See General Assembly Res. 2186 (XXI), Official Records, Supp. No. 16 (A/6316), p. 34 (1966). The Capital Development Fund is intended to supplement existing sources of capital assistance by means of grants and soft loans. It has had trouble getting started and is not yet a significant supplier of development capital.

22 Sensitive questions have sometimes arisen as to relationships among the various U.N. agencies concerned with development. For such an instance involving the World Bank, see text at note 68 below.

23 For the evolution of U. S. bilateral development assistance since World War II, see Mikesell, op. cit. note 4 above, pp. 46-49, 52-55. He points out that systematic U. S. development lending to low-income countries did not begin in earnest until 1957. Until then, U. S. development assistance was limited to Export-Import Bank loans (on hard terms) and credits for surplus agricultural commodities.

24 See Executive Order No. 10,973, 3 C.F.R. 493 (1959-1963 Comp.), 22 U.S.C. §2381.

25 Development loan authority is provided by 22 U.S.C. §§ 2161-2169. A minimum interest rate is prescribed in 22 U.S.C. § 2161(d). See text at note 101 below.

26 See 22 U.S.C. § 2171.

27 See ibid. §§ 2181-2184.

28 7 U.S.C. §§ 1701-1709.

29 For a brief description of the program, including its aspects under other Titles of Public Law 480, see AID, Principles of Foreign Economic Assistance 23-25 (rev. ed., 1965). This pamphlet also contains descriptions of other AID-administered programs.

30 For a breakdown by purpose and geographic area, see 1969 World Bank/IDA Ann. Rep. 90-91. A detailed list of IDA credits to Jan. 31, 1969, appears in Hearings on H.R. 33 before the House Committee on Banking and Currency, 91st Cong., 1st Sess., pp. 48-53 (1969).

31 Annual address by the President of the World Bank, Robert S. McNamara, in Summary Proceedings of 1968 Annual Meetings of the Boards of Governors of the World Bank, IFC and IDA, pp. 9-13 (hereinafter cited as Summary Proc, by year). In agriculture and education this will continue a trend begun in recent years. For further discussion, see text at note 174 below.

32 For World Bank loans and IDA credits by country, see 1969 World Bank/IDA Ann. Rep. 92-93. There has been considerable discontent in the U. S. Congress over the concentration by IDA on assistance to India and Pakistan. See Hearings on H.R. 33 before the Senate Committee on Foreign Relations, 91st Cong., 1st Sess., pp. 10-13, 20 (1969); Hearings on H.R. 33, op. cit. note 30 above, pp. 44, 47, 55. There are indications that in the future IDA will spread its credits more evenly among recipient states. See H. Rep. No. 91-31, op. cit. note 12 above, p. 5.

33 See text at note 93 below.

34 1969 IFC Ann. Rep. 36-45.

35 1968 IFC Ann. Rep. 11-12.

36 AID, U. S. Economic Assistance Programs Administered by the Agency for International Development and Predecessor Agencies, April 3, 1948-June 30, 1968, pp. 6-7, 41 (1969). The figure does not include military aid, Export-Import Bank loans or surplus food transactions.

37 Commission on International Development, Partners in Development 138 (1969) (hereinafter cited as Pearson Commission Report). The figure does not include food aid.

38 President Nixon's 1969 Message to the Congress on Foreign Aid, 60 Dept. of State Bulletin 515, 519 (1969).

39 UNCTAD II, Report and Annexes, U.N. Doc. TD/97, Vol. I, p. 39 (1968); General Assembly Res. 2415 (XXIII), Official Records, Supp. No. 18 (A/7218), p. 31 (1968); This goal is more ambitious than the one percent of net national product target recommended in 1965 by die Development Assistance Committee of the OECD. See OECD 1968 Development Assistance Review 31. It also exceeds the original UNCTAD goal of one percent of national income. See UNCTAD I, Final Act and Report, U.N. Doc. E/Conf. 46/141, Vol. I, p. 44 (1964).

40 UNCTAD II, Problems and Policies of Financing, U.N. Doc. TD/97, Vol. IV, p. 26 (1968). The net flow of financial resources, from which the UNCTAD percentages are determined, includes official and private long-term capital transfers net of capital repatriations. See UNCTAD I, Final Act and Report, op. tit. note 39 above, p. 44, note 54. In 1968 the net flow from the U. S. was 0.65 per cent of gross national product. It appears, however, that this figure includes net (short-term) export credits. See International Commerce, Sept. 29, 1969, p. 8.

41 UNCTAD II, Problems and Policies of Financing, loc. cit. note 40 above. Countries with greater proportional transfers were, in descending order of magnitude, France (the only country to exceed the one percent target), The Netherlands, Belgium, the United Kingdom, Portugal, Italy and Australia.

42 For a breakdown by country and by year of U. S. grants and dollar loans for development, see AID, op. cit. note 36 above, pp. 15-65.

43 See National Planning Ass'n., A New Conception of U. S. Foreign Aid 8 (1969).

44 Testimony of William S. Gaud, former Administrator of AID, in Hearings on Presidential Determination on Countries Receiving Development Loans and Technical Assistance, before the Senate Committee on Foreign Relations, 90th Cong., 1st Sess., p. 3 (1967).

45 See note 12 above. In addition, Congress has authorized the use of 10 percent of U. S. development loan funds for lending to the World Bank Group or to the Asian Development Bank. See 22 U.S.C. § 2165.

46 See AID, The Foreign Assistance Program, Fiscal Year 1968, p. 37. Such contributions are authorized pursuant to 22 U.S.C. § 2221.

47 See W. Friedmann, G. Kalmanoff and R. Meagher, International Financial Aid 433- 437 (1966); 1968 World Bank/IDA Ann. Rep. 18-19. The World Bank has been the catalyst for most of these arrangements, and makes periodic economic reports on development progress and needs in the countries involved. See I. Friedman, International Problems of Economic Development 6 (1967) (address to Canadian Political Science Ass'n.).

48 Testimony of William S. Gaud, op. cit. note 44 above, p. 5.

49 See Indus Basin Development Fund Agreement, 12 U.S. Treaties 19, T.I.A.S., No. 4671, 444 U.N. Treaty Series 259 (1960), as amended, 15 U.S. Treaties 396, T.I.A.S., No. 5570, 503 U.N. Treaty Series 388 (1964). See also the Tarbela Development Fund Agreement, T.I.A.S., No. 6492 (1968). For further discussion, see Knop, “The World Bank in the Indus Basin: A Unique Form of Multilateral Aid,” 2 J. Law and Economic Development 284 (1968); 1968 World Bank/IDA Ann. Rep. 20-22.

50 In evaluating the development effort it should be kept in mind that external capital provides only a small portion of the funds invested in the developing countries. Domestic savings provide about 80 percent of the investment capital. See I. Friedman, The Developing Countries in the Past Twenty Years: Growth Transformation and Problems 7 (1968) (paper presented to the Conference on World Cooperation for Development, Beirut). Nevertheless, in 1967 alone there was a net flow of financial and technical resources from official and private sources in OECD Development Assistance Committee member states of more than $11 billion. OECD 1968 Development Assistance Review 25.

51 The figures appear in UNCTAD Secretariat, Review of Recent Trends in Trade and Development, 1968, U.N. Doc. TD/B/184/Rev. 1, p. 15. World Bank estimates differ somewhat from the UNCTAD figures, but also indicate a significant gap in per capita growth rates between developing and industrialized countries. The World Bank data indicates that the per capita annual growth in gross domestic product for developing countries during 1960-1967 was 2.5 percent, and for industrialized countries, 3.6 percent. See 1969 World Bank/IDA Ann. Rep. 46. Cf. OECD 1968 Development Assistance Review 117.

52 These figures appear in the Appendix to Hearings on H.R. 33 before the Senate Committee on Foreign Relations, 91st Cong., 1st Sess., pp. 41-54 (1969).

53 See I. Friedman, op. cit. note 47 above, p. 8. A table setting forth several economic indicators by region for the years 1960-1967 appears in 1969 World Bank/IDA Ann. Rep. 47.

54 See text at note 178 below.

55 A few words of explanation are in order at this point about the discussion that follows. First, the focus is not on specific legal issues raised by international development financing contracts. As to this, see G. Delaume, Legal Aspects of International Lending and Economic Development Financing (1967); A. Broches, “International Legal Aspects of the Operations of the World Bank,” 98 Hague Academy, Recueil des Cours 301 (1959). Second, this writer's primary discipline is law, not economics. Judgments with high economic content are therefore rendered with some diffidence, but rendered nevertheless. Where specific recommendations are offered, they are intended more to stimulate further thought than to provide definitive solutions. Finally, it should be noted that the manuscript for this article was prepared before the work of the Pearson Commission (established by the World Bank to study the development effort) was completed. Consequently, references herein to the Commission's work are necessarily sketchy.

56 See R. Gardner, In Pursuit of World Order 127 (rev. ed., 1966).

57 See, e.g., Johnson, op. cit. note 15 above, p. 24; Friedmann, Kalmanoff and Meagher, op. cit. note 47 above, pp. 160, 210, 240; testimony of David M. Kennedy, United States Secretary of the Treasury, in Hearings on H.R. 33, op. cit. note 30 above, p. 41.

58 See, e.g., National Planning Ass'n., op. cit. note 43 above, pp. 5-6.

59 See 22 U.S.C. §§ 2151, 2167, 2168.

60 Ibid. § 2370.

61 Ibid. § 2370(e)(1).

62 See § 301(e)(3) of the Foreign Assistance Act of 1963, 22 U.S.C. § 2370(k). See also J. Nelson, Aid, Influence and Foreign Policy 56 (1968); Friedmann, Kalmanoff and Meagher, op. cit. note 47 above, pp. 441, 465.

63 See, e.g., Senate Foreign Relations Committee Staff Study, “Colombia—A Case History of U. S. Aid,” in Sen. Doc. No. 91-17, 91st Cong., 1st Sess., p. 659 at 677 (1969), concluding that the United States has responded to short-term political pressures from Colombia.

64 Bank Agreement, Art. Ill, § 5(b).

65 Ibid., Art. IV, § 10.

66 See IDA Agreement, Art. V, §§ 1(g), 6; IFC Agreement, Art. Ill, § 9.

67 See Bank Agreement, Art. V, § 5(c); IDA Agreement, Art. VI, § 5(c); IFC Agreement, Art. V, § 5(c).

68 General Assembly Res. 2105 (XX), Official Records, Supp. No. 14 (A/6014), pp. 3-4 (1965), adopted by a vote of 74-6-27.

69 See the statement of the Bank's General Counsel to the Fourth Committee of the General Assembly, Nov. 28, 1966, in 6 Int. Legal Materials 150 (1967). The General Assembly has renewed its appeals to the Bank to refrain from assisting Portugal and South Africa. See, e.g., General Assembly Res. 2426 (XXIII), Official Records, Supp. No. 18 (A/7218), pp. 61-62 (1968). This resolution also recommended that the Bank “withdraw” previously granted loans to Portugal and South Africa. The Bank has declined to do so. See its letter of Dec. 17, 1968, to the Secretary General of the U.N., in 8 Int. Legal Materials 444 (1969).

70 Bank Agreement, Art. V, §§ 8(a) and (b) would seem to require that the Bank not only co-operate with the U.N., but that it “give consideration to the views and recommendations” of the U.N. in making decisions on applications for loans or guaranties “relating to matters directly within the competence” of the U.N. This is broader language than that originally proposed at Bretton Woods. See 1 U.N. Monetary and Financial Conference 206-207, 478, 626 (1944). For the Bank's relationship agreement with the U.N., see 16 U.N. Treaty Series 341 (1947), especially Art. IV, § 3. Three of the Bank's Governors voted against the loan to South Africa, relying on the GeneralAssembly's recommendation. See Hearings on Proposed World Bank Loan to NIBID of Greece, before the Subcommittee on International Finance of the House Committee on Banking and Currency, 90th Cong., 2d Sess., pp. 14-15 (1968).

71 See address by George D. Woods, Economic and Social Council, 38th Ses., Official F. Consolo, representing the Bank, in Economic and Social Council, 45th Sess., Official Records (E/SR. 1363), p. 54 (1965); Friedmann, Kalmanoff and Meagher, op. cit. note 47 above, pp. 383-384.

72 See UNCTAD I, Final Act and Report, op. cit. note 39 above, p. 50; statement of F. Consolo, representing the Bank, in Economic and Social Council, 45th Sess., Official Records (E/SR. 1541), p. 70 (1968).

73 L. Nurick, Certain Aspects of the Law and Practice of the International Bank for Reconstruction and Development 6, note 3 (1967) (mimeo). See also Hearings on Proposed World Bank Loan to NIBID of Greece, op. cit. note 70 above, pp. 5-6, 18-19 (moratorium on loans to Greece until satisfactory arrangements were made to pay prewar debts).

74 See note 61 above.

75 Bank Agreement, Art. Ill, § 4(v) requires the Bank in making a loan to “pay due regard to the prospects that the borrower … will be in a position to meet its obligations under the loan… .”

76 See testimony of Livingston T. Merchant, Hearings on Proposed World Bank Loan to NIBID of Greece, op. cit. note 70 above, p. 10.

77 Although total contributions to multilateral assistance agencies have been increasing, it is doubtful that this represents significant policy changes in favor of increased multilateralism on a sustained basis. See OECD 1968 Development Assistance Review 52. But see President Nixon's 1969 Foreign Aid Message, he. cit. note 38 above, p. 517.

78 See J. King, Economic Development Projects and Their Appraisal 11-15 (1967).

79 Case studies appear to bear this out. See Friedmann, Kalmanoff and Meagher, op. cit. note 47 above, pp. 160 (Colombia), 210 (Sudan), 240 (Thailand) (all involving World Bank technical advice). Compare ibid, at 205 (French bilateral aid to Senegal); cf. National Planning Ass'n., op. cit. note 43 above, pp. 5-6 (criticizing U. S. over-activism in providing technical assistance).

80 Bank Agreement, Art. Ill, § 5(a); IDA Agreement, Art. V, § 1(f); IFC Agreement, Art. Ill, § 3(iii).

81 AID, The Foreign Assistance Program, Fiscal Year 1968, p. 19. See 22 U.S.C. §§ 2151, 2354.

82 Costs increase for one or more of several reasons, including the absence of international competitive bidding, monopolistic pricing tendencies and greater shipping costs. See, e.g., J. Bhagwati, “The Tying of Aid,” in UNCTAD II, Problems and Policies of Financing, op. cit. note 40 above, p. 45.

83 See I. Friedman, op. cit. note 47 above, p. 2; J. Pincus, “Costs and Benefits of Aid: An Empirical Analysis,” in UNCTAD II, Problems and Policies of Financing, op. cit. note 40 above, p. III at 126-128; cf. Bhagwati, loc. cit. note 82 above, pp. 58-59.

84 New York Times, June 21, 1969, p. 3, cols. 1-2 (city ed.).

85 A recent and relatively minor modification of this policy will permit aid dollars sent to Latin America to be used for purchases in Latin America as well as in the United States. See New York Times, Nov. 1, 1969, p. 14, col. 3 (city ed.).

86 The United States receives about 20 percent of procurement under IDA credits, though the net U. S. contribution to IDA has been slightly greater than 40 percent. Testimony of David M. Kennedy, in Hearings on H.R. 33, op. cit. note 30 above, pp. 61-62.

87 See Appendix to IDA Board of Governors Res. 66, in 1968 Summary Proc. 119.

88 Cf. General Assembly Res. 2170 (XXI), Official Records, Supp. No. 16 (A/6316), pp. 30, 31; UNCTAD Decision 29 (II), Report and Annexes, op. ctt. note 39 above, p. 40.

89 See, e.g., 1969 World Bank/IDA Ann. Rep. 47.

90 IDA Board of Governors Res. 66, op. cit. note 87 above, pp. 117-118.

91 National Planning Ass'n., op. cit. note 43 above, pp. 9-10. There are of course some caveats to be expressed about increased multilateralization. The loss of national control and reduction of national flexibility must be weighed against the benefits. In addition, not all multilateral development organizations would offer the advantages of expertise and apolitical decision-making. Consequently the arguments for increased multilateralism should be taken essentially to be arguments for increased support of the World Bank Group. See also the Pearson Commission Report 213-227, recommending increased multilateralization and noting the need for improvement of multilateral machinery.

92 See 22 U.S.C. § 2165, authorizing transfers to the World Bank Group which would otherwise be precluded by 22 U.S.C. §§ 282c, 284c and 286c. Cf. 22 U.S.C. § 285c, concerning financing for the Asian Development Bank.

93 See I. Friedman, op. cit. note 50 above, p. 10, estimating that the grant element in foreign aid from all sources declined from 76 percent in 1961 to 63 percent in 1966. See also OECD 1968 Development Assistance Review 56-57.

94 Outstanding debt owed by 79 developing countries increased from $21,587 billion at the end of 1961 to $47,542 billion as of June 30, 1968. Debt service payments increased from $2,314 billion in 1961 to $4,018 billion in 1968. 1969 World Bank/IDA Arm. Rep. 48.

95 See D. Avramovic, Economic Growth and External Debt 11 (1964).

96 Hearings on H.R. 33 before the Senate Committee on Foreign Relations, 91st Cong., 1st Sess., p. 36 (1969).

97 I. Friedman, op. cit. note 50 above, Appendix 1, Table 8.

98 Ibid, at 8; cf. 1969 World Bank/IDA Ann. Rep. 39-40.

99 See, e.g., Hearings on H.R. 33, op. ctt. note 30 above, p. 5. IDA does, however, pass along to the borrower the currency devaluation risk unless there is a uniform IMF reduction in par values or a substantial devaluation of a major currency which would call for adjustment of the debt on equitable grounds. IDA General Conditions Applicable to Development Credit Agreements, § 4.03 (Jan. 31, 1969).

100 See address by Robert S. McNamara to the Bond Club of New York, May 14, 1969, p. 8 (World Bank reprint); New York Times, he. cit. note 8 above.

101 22 U.S.C. § 2161(d). AID does not in practice exceed these minimum terms. See AID, The Foreign Assistance Program, Fiscal Year 1968, p. 4.

102 See Friedmann, Kalmanoff and Meagher, op. cit. note 47 above, p. 428; AID, The Foreign Assistance Program, Fiscal Year 1968, p. 1.

103 World Bank Staff Study, Suppliers’ Credits from Industrialized to Developing Countries 12 (rev. ed., 1967).

104 See ibid, at 12-18.

105 Ibid, at 28. The World Bank Group has actively supported development finance companies. See note 153 below.

106 Cf. Mikesell, op. cit. note 4 above, p. 89; World Bank Staff Study, op. cit. note 103 above, pp. 28-30.

107 See World Bank Staff Report, The Horowitz Proposal 4-5 (1965).

108 Ibid, at 19-25; UNCTAD Secretariat, “The Horowitz Proposal,” in UNCTAD II, Problems and Policies of Financing, op. cit. note 40 above, p. 141 at 147. The decision adopted at UNCTAD II fell short of endorsing the proposal. UNCTAD Decision 29 (II), Report and Annexes, op. cit. note 39 above, p. 40 at 42.

109 World Bank Staff Report, op. cit. note 107 above, pp. 31-32.

110 In the form of the uncalled portion of its capital stock, amounting to more than $20 billion. See note 5 above. See generally Delaume, op. cit. note 55 above, pp. 220- 221.

111 See text at note 13 above. The transfers are made pursuant to World Bank Board of Governors Res. 208, in 1964 Summary Proc. 30.

112 See the statement of the Bank's representative before the UNCTAD Trade and Development Board, U.N. Doc TD/B/SC.7/SR.13, pp. 9-10 (1967); see also Hearings on S. 3378 before the Senate Committee on Foreign Relations, 90th Cong., 2d Sess., p. 34 (1968). In 1969, for the first time, the Executive Directors of the Bank recommended a transfer to IDA of over half the Bank's net income. See International Commerce, Aug. 25, 1969, p. 24.

113 See Hearings on H.R. 33, op. cit. note 96 above, p. 16.

114 ee ibid, at 14; Sen. Rep. No. 91-166, 91st Cong., 1st Sess., p. 15 (1969) (supplemental views); Sen. Rep. No. 1670, 90th Cong., 2d Sess., p. 8 (1968).

115 The Bank staff considered the use of the Bank's excess credit capacity to borrow for IDA, but rejected the idea on the ground that it would prejudice the Bank's credit standing. World Bank Staff Report, op. tit. note 107 above, pp. 19-21. For further possible alternatives to the Horowitz proposal, see J. Weaver, The International Development Association: A New Approach to Foreign Aid 179-183 (1965). See also the Pearson Commission Report 221-222, recommending that creditor countries commit at least one half of their interest receipts on bilateral loans to subsidize World Bank interest rates.

116 See Broches, he. cit. note 55 above, p. 336.

117 ank Agreement, Art. V, § 14(a) provides: “The Board of Governors shall determine annually what part of the Bank's net income, after making provision for reserves, shall be allocated to surplus and what part, if any, shall be distributed.” It does not elaborate on the nature of the permitted distributions.

118 Bank Agreement, Art. Ill, § 4(iv).

119 See address by David Horowitz, 1968 Summary Proc. 46, 48; cf. Mikesell, op. cit. note 4 above, pp. 69-70.

120 Note should also be taken of the proposal to supplement existing sources of concessionary finance by reserving a portion of the new IMF Special Drawing Rights allocations of the wealthy members to finance expanded IDA development assistance. See, e.g., Report of the Subcommittee on International Exchange and Payments of the Joint Economic Committee, “A Proposal To Link Reserve Creation and Development Assistance,” 91st Cong., 1st Sess. (1969). It has been thought in some quarters (with considerable justification) that SDRs should be given time to prove themselves in their envisaged r61e as supplemental reserve assets before they are assigned additional functions as earmarked development resources. The latter potentiality, however, should not be laid aside and forgotten.

121 UNCTAD Secretariat, Review of Recent Trends in Trade and Development, 1968, op. cit. note 51 above, p. 21.

122 1968 World Bank/IDA Ann. Rep. 51.

123 See World Bank/IMF Staff Study, The Problem of Stabilization of Prices of Primary Products, Part I, p. 12 (1968); GATT, International Trade 1967, pp. 80-81.

124 Much of the initiative has come from UNCTAD. For evaluation of the UNCTAD proposals, see Metzger, loc. cit. note 18 above, pp. 760-764, 767-772. See also the exchange between Dr. Raúl Prebisch, UNCTAD Secretary General, and Professor Metzger in Eleventh Hammarskjöld Forum: Law and Policy Making for Trade Among “Have” and “Have-Not” Nations 52-61, 76-85 (1968).

125 Wold Bank/IMF Staff Study, op. cit. note 123 above.

126 lbid. at 103-133.

127 See ibid, at 118-133. For discussion of the changing concept of commodity agreements from price-stabilizing to price-boosting mechanisms, see Metzger, loc. cit. note 18 above, pp. 762-764.

128 See World Bank/IMF Staff Study, op. cit. note 123 above, pp. 135-152, for a discussion of the possible diversification alternatives.

129 See the International Coffee Agreement of 1968, Art. 54, T.I.A.S., No. 6584; 7 Int. Legal Materials 237 (1968).

130 See Report of the Executive Directors of the World Bank and IDA, Stabilization of Prices of Primary Products 3 (1969).

131 Ibid, at 4-6. At the same time the IMF Executive Directors approved a plan to provide limited drawing rights for the financing of buffer stocks, subject to the Fund's usual three to five-year repurchase arrangement. See Report of the Executive Directors of the Fund, Stabilization of Prices of Primary Products 3 (1969). The plan is to be co-ordinated with the Fund's compensatory financing discussed in the text at note 133 below.

132 The Bank has increasingly been providing local cost financing. See Mikesell, op. cit. note 4 above, pp. 66-67. Bank Agreement, Art. IV, § 3(b), authorizes the Bank to provide local currency “in exceptional circumstances when local currency required for the purposes of the loan cannot be raised by the borrower on reasonable terms … .” Art. IV, § 3(c) authorizes the Bank (again, “in exceptional circumstances“) to provide foreign exchange to cover local expenditures “if the project gives rise indirectly to an increased need for foreign exchange … .” Art. Ill, § 4(vii) requires (“except in special circumstances“) that loans be for specific projects. The Bank has interpreted “specific project” to be “a capital investment to develop facilities to provide goods or services.” King, op. cit. note 78 above, p. 3. A similar “project” limitation appears in IDA Agreement, Art. V, § 1(b), but is omitted from the IFC Agreement. Support generally for diversification pursuant to a plan in a given country or regional group would seem to be support for a specific project in the sense quoted above.

133 See IMF Decision No. 1477-(63/8), Feb. 27, 1963, in Selected Decisions of the Executive Directors and Selected Documents 40 (1965), as amended by Decision No. 2192-( 66/81), Sept. 20, 1966, in 1967 IMF Ann. Rep. 159. For further discussion, see IMF, Compensatory Financing of Export Fluctuations (2d report, 1966); Metzger, loc. cit. note 18 above, pp. 764-766.

134 See I. Friedman, op. cit. note 47 above, pp. 11-13.

135 World Bank Staff Study, Supplementary Financial Measures (Dec. 1965). The study was requested by UNCTAD. See UNCTAD I, Final Act and Report, op. cit. note 39 above, p. 52.

136 World Bank Staff Study, op. cit. note 135 above, pp. 6-14. The Bank staff estimates that the administering agency would need $1.5 to $2 billion in cash and promissory notes for an initial experimental period of five years. Ibid, at 71.

137 See the Report of the UNCTAD Inter-Governmental Group, Supplementary Financial Measures, U.N. Doc. TD/33/Rev. 1, pp. 5-7 (1968).

138 See note 132 above. See also World Bank Staff Study, op. cit. note 135 above, pp. 57-59.

139 See UNCTAD Secretariat, “Review of the Trade in Manufactures and Semi- Manufactures,” U.N. Doc. TD/10/Supp. 1, in UNCTAD II, Problems and Policies of Trade in Manufactures and Semi-Manufactures, U.N. Doc. TD/97, Vol. Ill, p. 125 at 128 (1968).

140 See UNCTAD Res. 21 (II), Report and Annexes, op. cit. note 39 above, p. 38.

141 See Metzger, loc. cit. note 18 above, pp. 767-772; Johnson, op. cit. note 15 above, pp. 114-115; G. Meier, “Aid Through Trade Proposals: Some Criticisms,” 2 Proceedings of the Stanford International Society 98 at 102-105 (1967). Only the most preliminary steps have been taken toward serious negotiations, and final agreement is by no means assured. See New York Times, July 14, 1969, p. 47, col. 5 (city ed.); ibid., Nov. 15, 1969, p. 3, cols. 1-6 (city ed.).

142 Johnson, op. cit. note 15 above, p. 115.

143 See Meier, he. cit. note 141 above, p. 103.

144 GATT, Arts. VI, XVI, T.I.A.S., No. 1700; United States Countervailing Duty Act, 19 U.S.C. § 1303.

145 See, e.g., G. S. Nicholas & Co. v. United States, 249 U.S. 34, 39 (1919). For discussion with reference to GATT, see M. Rom, “GATT: Export Subsidies and Developing Countries,” 2 J. World Trade Law 544, 557 (1968).

146 Promotion of exports through selective export subsidies would seem to fall within the “project” limitation in the Bank Agreement, much as support for development finance companies is thought to be support for specific projects. See Friedmann, Kalmanoff and Meagher, op. cit. note 47 above, p. 405.

147 19 TJ.S.C. § 1303.

148 Brief mention should be made of a further mechanism for promoting industrial exports. In response to a growing need for suppliers’ credit rediscounting faculties for developing countries’ exports, the Inter-American Development Bank (IDB) has initiated a program to refinance intra-Latin American exports. See World Bank Staff Report, Suppliers’ Credits—Rediscounting Facilities for Exports from Developing Countries, Annex A (1968). See also U.N. Department of Economic and Social Affairs, Export Credits and Development Financing, U.N. Doc. E/4274 and Add. 1 (1967). Such rediscounting facilities deserve encouragement and support.

149 Bank Agreement, Art. I(ii). See 1 United Nations Monetary and Financial Conference 86-88 (1944).

150 See J. Baker, The International Finance Corporation 193 (1968).

151 Ibid, at 198.

152 See E. Reid, The Future of the World Bank 42-46 (1965). Considerable concern on this score has been expressed by the Bank Governors representing the African states, many of whom have urged an amendment to the IFC Agreement to permit support of publicly owned enterprises. See 1967 Summary Proc. 53, 58, 61; 1968 Summary Proc. 41.

153 1969 IFC Ann. Rep. 12. The Bank Group as a whole had provided financial assistance to 28 development finance companies. 1969 World Bank/IDA Ann. Rep. 17.

154 See Baker, op. cit. note 150 above, p. 198.

155 IFC Agreement, Art. Ill, § 3(vii).

156 See Baker, op. cit. note 150 above, p. 199.

157 See M. Rosen, “IFC Recruits Capital for Development,” 3 Columbia J. World Business, No. 6, p. 39 at 47-48 (1968).

158 See 1969 IFC Ann. Rep. 8-10.

159 For background, see World Bank Staff Report on the Status of the International Bank Studies on Multilateral Investment Guarantees, 5 Int. Legal Materials 92 (1966). Because of space limitations it is not possible here to discuss or even touch on all questions raised by the draft convention. For treatment of the basic questions surrounding the idea of an international investment insurance agency, see G. Schwarzenberger, Foreign Investments and International Law 170-181 (1969).

160 See Report of the Committee of the Whole to the Executive Directors on Draft Articles of Agreement for International Investment Insurance Agency (Aug., 1968). The United States has not been a principal resister.

161 See Draft Articles of Agreement of the International Investment Insurance Agency (Aug. 15, 1968) (hereinafter cited as Draft Insurance Agreement). The Agency would expressly be given international legal personality. Draft Insurance Agreement, Art. V, § 1. This is a clearer assertion of international legal status than appears in the Bank Agreement, which provides that “The Bank shall possess full juridical personality … .” (Art. VII, § 2 ) . See Broches, loc. cit. note 55 above, pp. 316-329. General operations of the Agency would be supervised by a Board of Directors with a composition weighted in favor of the capital-exporting members. Plenary authority would be in a Council composed of one representative of each member. See Draft Insurance Agreement, Art. II. Disputes involving members and disputes under insurance contracts would be settled by binding arbitration. Ibid., Art. VI.

162 Draft Insurance Agreement, Art. Ill, § 1.

163 Ibid., Art. Ill, § 5.

164 Ibid., Art. IV, § 5.

165 As of 1968, six capital-exporting countries had such programs: Australia, Denmark, Germany, Japan, Norway and the United States. I. Friedman, op. cit. note 50 above, p. 13. Some others are following suit. France and the United Kingdom, however, have not. See Pearson Commission Report 109.

166 Thus, under a national program, tied procurement may be made a condition to the issuance of the guaranty. For illuminating criticism of this feature of the U. S. investment guaranty program, see P. Hornbostel, “Investment Guaranties: Bureaucracy Clogs the Flow,” 4 Columbia J. World Business, No. 2, p. 37 at 45-46 (1969).

167 See note 27 above. For discussion of the U. S. programs, see L. Collins and A. Etra, “Policy, Politics, International Law and the United States Investment Guaranty Program,” 4 Columbia J. Transnatl Law 240 (1966); F. Kirgis, “Extended Risk and Latin American Housing Guaranties: Foreign Assistance Through Business Risk Protection for Private Enterprise,” 53 Virginia Law Rev. 285 (1967).

168 AID, The Foreign Assistance Program, Fiscal Year 1968, pp. 70-71, and Department of State Bulletins.

169 AID, op. cit. note 168 above, p. 71.

170 Hornbostel, foe. cit. note 166 above, p. 40.

17l Cf. G. Meier, “Legal-Economic Problems of Private Foreign Investment in Developing Countries,” 33 Chicago Law Rev. 463, 487-488 (1966). The Draft Insurance Agreement, in Art. Ill, § 2(b), provides that “the term ‘investment’ includes the contribution of assets in either monetary or non-monetary form and the reinvestment of earnings.” Although this may be broad enough to include (as “assets“) the transfer of know-how under licensing agreements, it does not seem to cover management agreements. In any event, the definition should be expanded and clarified to include both of these arrangements unambiguously. In addition, Art. Ill, § 1, enumerating the risks which may be insured against, should expressly provide for coverage of the risk of governmental breach of such agreements. This would avoid any question as to whether governmental breach of a business contract is confiscation or equivalent governmental action under § l (ii) , or is a non-commercial risk eligible for coverage under the omnibus provisions of § l(iv). It is noteworthy that licensing arrangements are clearly eligible under the U. S. investment guaranty program. 22 U.S.C. § 2183(a). Management agreements are eligible only under certain circumstances. See AID, Aids to Business 16 (1966).

172 The reasons for providing such a forum have much in common with those for extending coverage to include transfer of know-how. Rising sensitivities in developing countries to foreign direct investment call for increasingly flexible mechanisms to adjust conflicting interests. These mechanisms should be designed not only to promote capital transfers in traditional forms, but to reduce both prospective and realized tensions. The International Center for the Settlement of Investment Disputes may perform these functions in some cases, but additional means should be available.

173 Art. II, § 9, deals with channels of communication between the agency and member states; Art. VI, § 1, calls for negotiation of disputes between the agency and a member.

174 See 1968 Summary Proc. 9. In the fiscal year ended June 30, 1969, the Bank Group increased its development financing by 87 percent over the previous fiscal year. New York Times, July 2, 1969, p. 55, col. 2 (city ed.).

175 See text at note 157 above.

176 See 1968 Summary Proc. 11-12; statement of George D. Woods, Economic and Social Council, Resumed 43rd Sess., Official Records (E/SR. 1510), pp. 11-12 (1967).

177 Myrdal, Asian Drama, Vol. II, p. 1392 (1968).

178 Address by Robert S. McNamara at Notre Dame University, May 1, 1969, p. 16 (World Bank reprint).

179 Ibid, at 18; 1968 Summary Proc. 13.

180 See AID, The Foreign Assistance Program, Fiscal Year 1968, pp. 9-11, 32. AID has also recently entered into a cost-sharing arrangement with Agribusiness Council, Inc., a private organization, under which the latter will administer AID grants to induce U. S. agribusiness concerns to explore opportunities in developing countries. See International Commerce, Sept. 1, 1969, p. 7.

181 National Planning Ass'n., op. cit. note 43 above, pp. 14-18.

182 Ibid, at 5-6, 15. For a similar view as to AID's shortcomings in technical assistance, see G. Lodge, “U. S. Aid to Latin America: Funding Radical Change,” 47 Foreign Affairs 735, 743 (1969). Lodge suggests channeling the major portion of U. S. aid to Latin America through a revitalized Alliance for Progress, with the remainder administered by a Congressionally chartered American Foundation. Cf. President Nixon's address to the Inter-American Press Association, New York Times, Nov. 1, 1969, p. 14, cols. 1-8.

183 This would mean, apparently, that it could guarantee its own investments. See National Planning Ass'n., op. cit. note 43 above, pp. 18-21. Cf. International Private Investment Advisory Council, The Case for a U. S. Overseas Private Enterprise Development Corporation (Dec. 1968). Compare AID's new agribusiness program, discussed in note 180 above.

184 National Planning Ass'n., op. cit. note 43 above, p. 21; cf. Lodge, he. cit. note 182 above.

185 For a brief comparative discussion, see W. Friedmann, Methods and Policies of Principal Donor Countries in Public International Development Financing 48 (1962). Note should also be taken of ADELA, a multinational private joint venture which makes and encourages investment (including equity investment) in Latin America. Members of the joint venture are banks and business corporations. See New York Times, March 10, 1968, p. F17, cols. 6-8.

186 Unfortunately, there is little imminent prospect of a government-supported organization with equity investing capability. The Nixon Administration has endorsed the creation of an Overseas Private Investment Corporation, but has proposed little more than a transfer to it of existing AID private investment programs. 60 Dept. of State Bulletin 515, 516 (1969).

187 See, e.g., Title IX of the Foreign Assistance Act, 22 U.S.C. § 2218.

188 See W. Friedmann, “Creative Legal Interpretation and the Process of Institutional Adjustment,” in Thompson (ed.), Institutional Adjustment: A Challenge to a Changing Economy 111, 114-115 (1967); cf. K. Parsons, “The Institutional Basis of a Progressive Approach to Economic Development,” in ibid, at 19, 33-38; Myrdal, op. cit. note 177 above, pp. 853-863, 887-900.

189 Particularly noteworthy in this respect is the International Legal Center, which not only supports the improvement of legal education but also law reform and law dissemination projects in developing countries. See its pamphlet, The International Legal Center (May, 1969).