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

97. Airgram From the Mission to the Organization for Economic Cooperation and Development to the Department of State¹

CEDTO A–406

Paris, December 18, 1964.

SUBJECT

• DAC Meeting on Coordination

From Leddy. ADCOR. Day and a half meeting on coordination December 9–10 focused primarily on problems of coordination financial assistance in individual recipient countries. General agreement that substantially more coordination needed than now undertaken. List of countries receiving $30 million or more annually from several different donors prepared by Secretariat, and supplementary comments by Chenery suggested a priori case can be made for necessity of coordination in some 25 or 30 countries. Allowing for those now covered by consortia and consultative groups, or by CIAP, substantial problem remains.

Large part of discussion devoted to IBRD, what it has done to coordinate assistance in past and what it will do in future. IBRD Vice-President Geoffrey Wilson made presentation and fielded numerous questions. Wilson explained that Bank consortia limited to India and Pakistan because soundings in 1960 and 1961 revealed lack of willingness on part of major donors to join additional groups of this sort. Consultative groups proved acceptable alternative arrangement, because they do not undertake fund raising operations. In past Bank had applied two criteria before agreeing undertake formation of consortia or consultative groups: (1) country must have an adequate plan and development program, and (2) it must be committed to policies likely to promote economic development. Decision by Bank that country met these criteria thus constituted recommendation of recipient country as worthy of donor attention.

There was no searching discussion of operation of either form of coordinating arrangement. Delegates for the most part seemed satisfied with Bank consortia, or at any rate desirous of avoiding comments which might touch on Bank sensitivities. Wilson attempted to blur distinction between consortia and consultative groups, indicating that aside from fact that consultative groups did not establish target for aid givers, other differences were of degree.

There was general opposition to “arm twisting” efforts of consortia and this obviously explanation of unwillingness European countries to see further consortia established. Chairman made some effort to probe procedures whereby recipient countries’ planning assumptions as to availability of certain amounts of assistance are brought into line with what is actually supplied, but his questions elicited little more than historical account of factors influencing first Indian plan. British rep stated his conviction that from the point of view of developing countries most important aspect of consortia was the assurance they gave of continuing availability of funds. British colonial experience had demonstrated such assurance to be essential for satisfactory planning. He suggested that this objective might be accomplished without objectionable pressure on donors by modification of procedures followed in consultative groups, with participating countries making declaration of minimum continuing contribution they were prepared to provide. (He called this an “entry fee.”)

As to the influence of consortia and consultative groups on country performance and effective utilization of aid, Bank representative appeared somewhat more complacent than certain country representatives. He suggested that Bank was in a better position to undertake this delicate task than individual donors or donor group such as DAC because its membership included the less-developed countries, and they therefore felt a certain sense of identity with the Bank. He seemed to claim success in this endeavor for consultative group operations for consortia. Chenery, on other hand, thought that the problem of performance was a largely neglected area where there was a large potential payoff. He felt there needed to be a clearer understanding of relations of aid and performance.

General desire was expressed for the Bank to increase the activities and to do its utmost. Wilson indicated there was little likelihood of more consortia but good prospect for additional consultative groups. The Bank was prepared to relax criteria for establishing such groups and was ready to consider countries which, though lacking overall plan gave promise of good performance. When queried as to the Bank’s ability and willingness to do wholesale job of appraising individual country plans which UNCTAD Conference called for, Wilson was somewhat vague. When asked specifically how far the Bank might go if urged by DAC, he avoided a definite answer. He indicated that the Bank had limited manpower available for this kind of activity and suggested that general economic reports of the Bank might in some measure meet this requirement. In response to questions implying close collaboration of Bank with DAC in producing appraisals of LDCs, he was at pains to point out that Bank’s membership included many LDCs and that the Bank had to take account of their sensitivities. Implication was that the Bank could not afford to become too closely identified with donor organization.

(In corridor conversation with Coffin, Wilson elaborated by saying that, unless LDCs were present at the country reviews, they would resent Bank’s participation. Did not close door to possibility of regional reviews with focus on several specific countries, nor to sessions where, like consortia, LDC reps attend part. Ended by saying he would want to hear evidence of donor country interest in the Bank’s participation from others than U.S.)

Chairman of the Turkish and Greek Consortia made mild and (for Greek) discursive statements on two OECD groupings. Coffin offered critical appraisal of Turkish Consortium, pointing out that although Turkey of high importance, planning, evaluation and performance relatively good, with improving communications among donors and with Turks, there had been all too little success in achieving concerted views on amounts, sharing, type of aid, terms, timing, and performance goals. There had also been less than adequate institutional support by OECD for the consortium. With the Prise de Conscience and the articulation of the six-point program, there was now hope of achieving the kind of follow-up which the consortium needed. This invitation to a candid self-appraisal was not accepted and no further discussion ensued. No one suggested possibility of other OECD consortia or possibility that organization might sponsor consultative groups.

In discussion other methods and institutional means for coordination, Chenery pointed to significant work now being done in CIAP, particularly in area of self-help. He suggested that CIAP would probably make substantial contribution in this area. Harding (UK) made general case for regional organizations, pointing out their great advantage as politically acceptable institutions, including both donors and recipients, and possibility they afforded of directing LDC’s critical attention one at another. Suggested that larger effort should be made to encourage CIAP-like organization in other parts of the world. No exception taken to proposition such organization desirable but others pointed out that at their present stage of development they were hardly an adequate answer to current problems in Africa and Asia.

Examination of existing and prospective coordination efforts showed that total requirements would not be covered by institutions now operating in field. This conclusion naturally led to consideration of what contribution DAC might make. Chairman’s initial suggestion that DAC list those countries which seemed to merit careful look and arrange series of meetings of qualified country representatives to consider what form of coordination called for in each case ran into strong opposition from Harding who stated that in his view DAC was not fit for task. This discussion occurred at end of first day and meeting adjourned on this inconclusive note. Following morning, German rep (Kanberg) said past DAC coordination efforts unsatisfactory because they looked only backward. Suggested that there should be country meetings in future where emphasis was on forward look. Certain sums of aid would presumably be available; meetings should consider best way to use this aid. Attempts should be made to assess existing needs and to agree among donors on best way to divide responsibilities.

At this stage, Chairman made fresh effort to define area of agreement revealed in meeting, stating following propositions to which no objection voiced.

1. DAC recognized and stressed importance of Bank role and welcomed intention of Bank to expand its activities.

2. DAC should attempt to support and encourage other institutional means of coordination wherever they existed. CIAP had substantial promise in field and DAC should take advantage of opportunity to learn more of its operations. Unknown developments impend in UNCTAD organs, and Elson Working Group should follow these closely. Consideration should be given to potential of other regional organizations. Secretariat should review these institutions and make report which would be considered by second meeting on coordination.

3. Moreover, should ask other working parties to think of institutional implications of their work and perhaps to prepare recommendations for DAC on how conclusions should be implemented. He hoped that groups could examine problems frankly and could make report to DAC without necessity of clearance by Governments.

4. With reference to list of countries which seemed merit some degree of coordination, he asked that he be authorized to discuss with delegations situations where there seemed prima facie case for coordination and to arrange meetings of countries interested. Such meetings would be informal and should not involve whole membership of DAC. Out of these meetings might emerge positions which would need to be reported back to full committee.

When it was pointed out that this year’s work program already agreed to called for meetings in Liberia, Guinea, Sierra Leone, Iran, Afghanistan and possibly Somalia, Chairman stated that he felt these meetings should take place if any country desired it.

Discussion of coordination of technical assistance more limited in scope. There was agreement as to importance of problem, but, as Chairman pointed out, in this field we are still at point where many things need to be examined more closely.

TA programs are increasing, more and more countries are involved, and few of them have field representatives. There is a generally recognized need for effective coordination of financial and technical assistance but little is being done to accomplish this. Even consortia have devoted very little attention to this question.

By common consent coordination of TA is best accomplished by recipient countries. However, there is no body of information which shows how widely or how effectively LDCs undertake this function and we have only general feeling that in many cases they are failing to do an effective job. Coffin suggested it would be useful to have an appraisal of situation in LDCs. Parsons of Secretariat suggested that there is probably acute need for technical assistance to LDC government institutions dealing with technical assistance.

Parsons thought regional organizations promised to make some contribution in this area, suggesting that they might simplify and reduce expenses of administration. He pointed out that CIAP already making some progress in this field. Others doubted that progress in this area could be expected soon, Canadian rep pointing to experience under Colombo Plan as proof of reluctance of LDCs to limit independence of action.

Chairman picked up suggestion UK rep that study in depth be made of experience in administration and coordination of technical assistance in one LDC with view to defining problem more specifically and determining most important points at which coordination needed. Somewhat inconclusive discussion thereupon ensured as to whether proposed TA study of Thailand would accomplish this purpose.

Chairman also proposed that DAC make effort to produce agreed statement of coordination objectives in field of technical assistance and that this statement be referred, via donor governments, to field representatives wherever several donors active. Field representatives would be instructed to hold at least one meeting to discuss DAC documents. It would be matter for local decision whether continuing activity were undertaken in accordance with principles and to seek objectives which would be set forth in DAC statement.

Finletter

1. Source: Department of State, Central Files, AID 1. Limited Official Use. Drafted by Alex B. Daspit (AID), cleared by Coffin (AID) in draft and by Robert L. Yost (ECON) and Alexis E. Lachman (AID), and contents approved by Alice May.