Foreign Relations of the United States, 1964–1968, Volume IX, International Development and Economic Defense Policy; Commodities

101. Memorandum of Conversation¹

Paris, February 5, 1965.

PARTICIPANTS

• Burke Knapp, IBRD Vice President
• John Miller, IBRD Paris Representative
• Ambassador Leddy, US Mission to OECD
• Frank M. Coffin, US Representative to DAC
• Alex Lachman, Development Assistance Adviser, US Delegation to DAC

SUBJECT

• Bank-DAC Relationships

After long and useful discussion on problems of Turkish Consortium, current debt exercise, Bank’s study, and Bank attitude to possible future lending, the question of Bank-DAC liaison was discussed.

Mr. Knapp conveyed the information that the Bank, in pursuance of its desire to widen its work with consultative groups, had worked out a list of possibilities: Chile, Peru, Brazil (with a question expressed as to acceptability to Brazil), Morocco, Ethiopia, East Africa (assuming this is acceptable to DAC, the regional possibilities are of interest to the Bank), Philippines, Thailand, Malaysia, Iran (if it does something to “pull its socks up”), and (dependent on many factors) the UAR. This was a potential list of 11 consultative groups to be added to the two existing consortia and four consultative groups. He also expressed the Bank’s hope that the quality of work being done in the present consultative groups could be improved. He concluded by saying that George Woods was thinking of personal visits to Bonn, London, and perhaps other capitals to enlist support for the new list. If he was not able to go himself, another senior official would be sent.

Mr. Coffin said that the problem remained of effecting the proper relationship between the Bank and DAC for countries, other than those on the Bank’s list, which may be significant recipients of aid from several donors. He explained that this was proving to be a year of reappraisal and probing for new directions for future work for the DAC. Through its working parties on financial aspects, and requirements and performance and a newly formed experts group of development economists, it was attempting to arrive at a body of doctrine looking toward more rational allocation and use of assistance for development—taking into account both LDC performance and debt servicing capacity. When and if the DAC nations accepted this concept as a major policy objective, they would then, hopefully, apply the resulting doctrine and analytical approaches through reviews of individual LDCs. At this point the DAC would greatly benefit from both papers and experts available to the Bank.

Mr. Knapp said that he did not want to be misunderstood as being negative but that he was speaking from experience. He said that he had no objection at all to the DAC sponsoring its own consultative groups but that in such cases it was not realistic to rely on the Bank for staff work. The Bank was going to have a large task to develop the staff it would need for the additional consultative groups. The DAC should develop and increase its own staff for such consultative groups as it wished to organize.

Mr. Coffin said that he had not made himself clear. He had not been suggesting that DAC mount new consultative groups. The Turkish Consortium was quite enough of an operational responsibility for OECD at present. And OECD would be doing well to provide effective institutional resources for it. Moreover, although the total OECD Secretariat was larger than the total staff of the Bank, the development secretariat was very small and could not be expected to be dramatically enlarged.

Mr. Coffin said that the traditional preoccupation of the DAC had been the content of donor aid programs, with the aim of bringing pressure to bear for increased aid on better terms. Although donor programs would continue to be examined, pressure from “the 77” could be expected to increase. The DAC could, he thought, in the future serve its members best by helping develop a rationale and consistency in aid allocation and programming policy—which would in turn make it more likely that donor programs could have sustained and even increased public support. The implication for DAC, if this objective were accepted, was increased attention to problem of individual LDCs.

To fulfill this new role, a new way of conducting DAC business was beginning to be envisaged. The concept was not that of a sustained operation, involving special staff for particular countries, but rather that of well prepared meetings. The meetings would be devised not to elicit either global pledges or commitments to projects but to probe deeply the problems of a LDC and to achieve a consensus among donors on a sensible development strategy. Such an agreed strategy would have implications for the aid given by donors (kinds, magnitude, terms, sectors) and for the priority objectives and the quality of performance of the recipient. The implementation of the agreed strategy would, however, be left to donors to carry out through their own bilateral programs and their own dealings with the recipient. Occasionally donors might think it desirable to set up some coordinating arrangement among their representatives in the field. While an LDC might be—over time—the subject of more than one meeting, if circumstances warranted, each meeting would be viewed as self sufficient for the purposes of increasing donor consensus. Over a period of a couple of years the DAC might be able to consider most of the significant aid-receiving countries not in groups under the IBRD aegis.

Mr. Knapp had not been aware of this concept. It was different from the traditional issue he had discussed on earlier occasions, i.e., what groups should the IBRD sponsor vs. those the DAC should sponsor. He said that he was not too concerned over the problem of irritating LDCs by sending representatives and data to the DAC. He pointed out that the consortia met without LDCs, without creating suspicion or resentment. He did add, however, that he had told Secretary General Kristensen that, should the OECD be viewed as the center of “the western caucus”, LDCs might take a more hostile view. Ambassador Leddy then referred to his own experience at Geneva and said he felt the LDCs preferred that the industrialized countries try to agree on issues and programs they would be willing to support. In any event, with 77 nations acting together, the industrialized countries also had to work more closely together.

Mr. Knapp said that the problem which troubled him was simply that of additional burden on the IBRD’s staff. Mr. Coffin then said that a practicable step would be, when the DAC itself had decided whether or not it wished to embark on a work program of the nature he had described, for members of the development secretariat to OECD to discuss with Bank staff what assistance DAC would like to have and what might be available.

At this point Mr. Knapp said that if only the DAC could determine a year’s program in advance, specifying the countries for which reviews were contemplated, and the times of these reviews, the Bank could take this into account and be in a better position to make a useful contribution. For example, if the DAC were to review, say, Ghana next September, and the timing were known long in advance, Bank personnel could schedule their own workload with this meeting in mind. In the past DAC country meetings had been called with inadequate time to prepare. Effective participation meant more than sending a bank expert from Washington to Paris. It required much study and preparation.

Mr. Coffin said this was a very helpful suggestion, that, indeed, DAC would have to put itself in a position to lay out such a work program well in advance of scheduled meetings.

It was on this note that the discussion concluded.

Comment: Both Ambassador Leddy and Mr. Coffin felt that this was a significant and constructive discussion. It had originally been intended to hold this discussion with Mr. DeMuth but they felt that the opportunity to review these matters with an IBRD official of Mr. Knapp’s seniority should not be passed. It was perfectly clear that up to now the suggestions made concerning the DAC might operate and the kinds of liaison which might be appropriate were new to Mr. Knapp. Indeed, it was clear that he had been thinking in terms of the DAC wanting to draw on the IBRD to help staff coordinating groups and that he considered such an arrangement unacceptable. When the alternative concept was made clear, he not only raised no objections but, in effect, suggested that the DAC develop a long-range work program in consultation with the Bank. It was of course made clear on both sides that the positions stated were personal opinions, which did not have official status in the Bank or the DAC. It appeared, however, that a possibility for a mutually satisfactory division of responsibilities and a significant area of useful cooperation may have been discovered.

1. Source: Washington National Records Center, AID Administrator Files: FRC 68 A 2148, PRM 7–1, Development Assistance Committee, FY 1965. No classification marking. Drafted by Coffin. The meeting was held in Ambassador Leddy’s office. An attached covering letter from Coffin to Bell, February 10, reads in part: “We were pleased to see Burke’s receptivity once he had clearly in mind the type of relationship between IBRD and DAC which we were talking about. It is my thought that this would be useful background in continuing discussions with the Bank and with officials and delegations of DAC countries.” In a handwritten note to Gaud on this letter, Bell wrote: “This sounds very constructive.”