10912 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT NINTH ANNUAL REPORT 1953-1954 a" K. S. Venkatraman INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPPIENT Supplement to the NINTH ANNUAL REPORT A Summary of Developments in the Bank from July 1 to September 20, 1954 MEMBERSHIP AND SUBSCRIPTION Israel became a member of the Bank on July 12. Its subscription to the Bank's capital stock is 45 shares with a total par value of $4,500,000. The Bank now has 57 members and total subscribed capital of $9,153,000,000. THE BANK'S OPERATIONS Summary of Lending Since the end of the fiscal year, the Bank has made three loans, in Ceylon, Austria and Mexico, for an amount equivalent to $92,110,000, bringing total coimmitments to $2,oo6,558,464 for 107 loans in 36 countries. Austria On July 19 the Bank made its first loan in Austria for the Reisseck-Kreuzeck hydroelectric project described on pages 21-22 of the Ninth Annual Report, The loan will consist of European currencies equivalent to $12 million. It is expected that about half the loan will be disbursed in Italian lire and about half in Swiss francs. Italian lire in the amount of approximately 3,750 million will be provided out of Italy's subscription to the Bank's capital; and some 26 million Swiss francs required to cover the balance of the loan will be drawn from the proceeds of the Bank's sales of its bonds in Switzerland. The co-borrowers are the Draukraftwerke (Drau River Power Company) and the Verbundgesellschaft (Austrian Electric Power Corporation), which as part of its national power network controls the operations of the Draukraftwerke. The loan is for a term of 25 years and bears interest of 4-3/4% per annum. Amortization will begin in July 1959. -2- Ceylon On July 9 the Bank signed the Loan Agreement for a loan of d19,110,000 to Ceylon to help finance the Aberdeen-Laksapana hydroelectric scheme which w4ill supply additional power to southwestern Ceylon. The project is described on page 13 of the Ninth Annual Report. The loan is for a term of 25 years and bears interest of 4-3/4%o per annum. Amortization will begin in January 1959. Mexico On August 24 the Bank made a loan of $61 million to the Pacific Railroad of Mexico for equipment needed for a program to rehabilitate and modernize the railroad Two United States commercial banks are participating in the loan, without the International Bankts guarantee, to the extent of $2,420,000. The Bank of the Manhattan Company is purchasing $1,000,000 of the first maturity; and the Chemical Bank & Trust Company is purchasing $1,420,000 of the loan - the $210,000 remaining of the first maturity and all the second maturity of $1,210,000. The Pacific Railroad serves the northwest coast of Mexico and traverses one of Mexico's most rapidly growing and important agricultural areas. The re- habilitation and modernization program is being undertaken so that the Railroad will be able to keep pace with the increasing demands of the region. The Bank's loan will pay for the purchase abroad of 33 diesel locomotives for all-purpose use; 31 diesel locomotives for light service; 684 freight cars; four million railroad ties; 170,000 short tons of rail to re-lay about 1,000 miles of track; other track material, and communications and shop equipment. Part of this equipment has already been imported or ordered. It is estimated that the entire program will cost the equivalent of about $80 million and will take four years to complete. In addition to the rehabilitation of its physical facilities, important changes are being made in the administration and operation of the Railroad. Also, the Railroad has retained the engineering firm of Coverdale & Colpitts, on whose survey the program is based, to assist in the execution of the rehabilitation f ) -3- program. The loan is for a term of 15 years and bears interest of 4-5/8% per annum. Amortization will begin in June 1959. The discussions between the Mexican Light and Power Company (Mexlight) mentioned on page 34 of the Annual Report have resulted in a rate adjustment for Mexlight. The Government has awarded the Company a 21-1/2% increase of power rates effective in October 1954 as an interim measure to compensate for the effect of the devaluation of the peso and of recent wage increases on Mexlight's financial position. A final adjustment is expected to be made in the near future. Netherlands On August 12 the Government of the Netherlands prepaid $52,215,000 and 12,498,200 Belgian francs on the 25-year loan it received from the Bank on August 7, 1947. The prepayment covers the longest maturities on the loan, those falling due in 1970, 1971 and 1972. Originally, the loan amounted to $195 million of which $190,362,000 was outstanding at the time of the prepayment. As a result of the prepayment the outstanding balance was reduced to $137,861,000. On September 14 the KLM Royal Dutch Airlines refinanced with The Chase National Bank of the City of New York and National City Bank of New York the balance of $5.6 million due on a $7 million loan made in March 1952 by the International Bank. The two New York banks are each refinancing $2.8 million, repayable in semi-annual instalments over a period of four years, with the first instalment due January 1, 1955. FINANCIAL ACTIVITIES AND RESOURCES New Bond Issues Since the end of the fiscal year, three new bond issues have been sold by the Bank. They totaled the equivalent of $7h.5 million and brought the total of bonds outstanding to $851 million. 4 A oublic of'fering in the Netherlands, made on July 20, was the first issue of guilder bonds of the Bank. It consisted of Fl.40 million (equal to aoproximately $10O5 million) of 3-% fifteen year bonds. The issue was offered to the public at par by an underwTriting syndicate of 14 Dutch banks headed by the Nletherlands Trading Society (Nederlandsche Handel-Maatschappij, N.V.). A sterling issue of TL5 million (equal to approximately $14 million) 3-% stock (1969/74) Was acquired by a group of London banking firms which offered the stock to the oublic at 98% on July 21. The firns were Baring Brothers & Co. TLimited, Hambros Bank Limited, Lazard Brothers & Co., Limited, Morgan Grenfell & Co., Limited, N. M'. Rothschild & Sons and J. Henry Schroder & Co. This was the second issue made by the Bank in the United Kingdom. The first consisted of :5 million 3-% 20-year stock, and was offered to the public in May 1951 by the same group. On September 20, the Bank placed a 50 million issue of United States dollar bonds with investors in 23 countries outside the United States. This was the first private placement of direct dollar obligations of the Bank. The issue is known as the Five Year Bonds of 1954; interest is at 2N% a year. The principal agents for the Bank in the transaction were Morgan Stanley & Cc. and The First Boston Corooration. N1o underwriting arrangements were involved in the placement of the issue. Sales of Bonds from the Bank's Portfolio Since June 30, the Bank has sold the equivalent of $18.8 million principal amount of borrowers' obligations. Of thnis amount, 0345,000 were sold wTith, and $185. million without, the Bank's guarantee. These sales brought the total of bonds sold from the Bank's portfolio to t123.7 million, including i.8 million of rarticipations, without the Bank's guarantee, by several srivate banks in loans which are not yet effective. Of thLis total, $58.1 million have been sold with, and $65.6 million without, the Bank's guarantee. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT NINTH ANNUAL REPORT TO THE BOARD OF GOVERNORS 1953 - 1954 WASHINGTON 25, D. WASHINGTON 25, D.C. A INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT September 24, 1954 My dear Mr. Chairman: In accordance with Section 10 of the By-Laws of the International Bank for Reconstruction and Development, I have been authorized by the Executive Directors to submit to the Board of Governors this Ninth Annual Report of the Bank. The report includes financial statements as of June 30, 1954, based on an audit of the accounts of the Bank made pursuant to Section 19 of the By-Laws. It also incorporates, pursuant to Section 19 of the By-Laws, an administrative budget for the fiscal year ending June 30, 1955. The report covers the Bank's activities for the fiscal year beginning July 1, 1953 and ending June 30, 1954. Sincerely yours, EUGENE R. BLACK, President. Chairman, Board of Governors, International Bank for Reconstruction and Development. CONTENTS Page Summary-THE BANK'S YEAR IN REVIEW ................................ 1 Chapter I-COLLABORATION IN PROJECT PREPARATION AND EXECUTION ..................................................... 4 Economic Appraisal .................................................. 5 Preparation and Planning ............................................ 5 Domestic Currency Requirements ................................ 6 Administration and Management ................................ 7 Continuing Relationship with Borrowers .................... 8 Security Arrangements ................................................ 8 The Bank's Objectives ................................................ 9 Chapter II-THE BANK'S OPERATIONS ........................................ 11 Asia ...................................................... 13 The Middle East ...................................................... 16 Africa .......................... ............................ 18 Australasia ...................................... ................ 2 1 Europe ..................................................... 21 Western Hemisphere ................................................ 28 Chapter III-FINANCIAL ACTIVITIES AND RESOURCES .............. 38 Earnings, Reserves and Repayments . . 38 Funds Available for Lending ...................................... 38 Disbursements ...................................................... 42 Chapter IV-MANAGEMENT AND ORGANIZATION .................... 43 Organization and Personnel ........................................ 43 Training Programs .................................................... 43 Staff Retirement Plan .................................................. 43 Administrative Budget ......................... . -d3 Chapter V-MISCELLANEOUS ...................................................... 44 Relations with Other International Organizations ... 44 International Finance Corporation ............................... . 44 Membership and Subscriptions . . 45 APPENDICES ............... ............................ 47 GROWTH OF THE BANK (CUMULATIVE TOTALS EXPRESSED IN MILLIONS OF U.S. DOLLARS) 2,000 2,000 1,800 1,800 1,600 1,600 LOAN COMMITMENTS (NET OF CANCELLATIONS AND REFUNDINGS) 1,400 1] /,400 A/ t.~/ 1,200 -/--- 1,200 GROSS DISBURSEMENTS . * 1,000 /60 800 600 } - e .'/ 0 400 /lip 200 ~ ~ oO 01 0~ ~ ~~~~~~~~~~~~~e -8 400 7 .......................... < . 60 / / / / .................. /* OBLIGATIONS OF t *8S,// .................00..... t BORROWERS _40 200 < /....... .. . ........... I/ ,.I SOLD BY BANK 120 RPAYMENTS OF PRINCIPAL TO BANK 0 L----~ aao-0 1947 1948 1949 1950 1951 1952 1953 1954 FISCAL YEARS ENDING JUNE 30 *Net income appropriated to Supplemental Reserve, and commissions appropriated to Special Reserve Summary-The Bank's Year In Review Lending Operations assisted by loans to a private pulp and paper Twenty-six loans in 16 countries were signed company in Chile and to a credit institution in- during the fiscal year. The sum lent amounted tended to foster private manufacturing enterprise to $324 million, representing the highest reached in Turkey. in any fiscal year. By the end of the year the The Bank also made loans concerned with Bank had made 104 loans, bringing the total of more than one sector of the economy of the recip- Bank funds committed to $1,914 million in 34 ient country. Loans of this kind will help trans- countries. The total of effective loans outstand- port, agriculture and industry in Australia and ing and held by the Bank on June 30 amounted a 12-year program for the development of south- to $1,663 million. ern Italy. The greater part of the year's lending was Disbursements for improvements in basic services. The surm of $119 million was lent for transport. Loans The Bank disbursed the equivalent of $302 were made for railroad programs in Brazil, French million on new and existing loans during the West Africa and South Africa. Better highways year, bringing total disbursements to $1,406 mil- will be provided in Colombia, Ecuador and Nicar- lion. agua. A contribution to the improvement of With the steady improvement in the maritime transport will result from a loan to supply position in Europe, disbursements which Norway in connection with purchases of new borrowers spent in Europe increased from the vessels for the merchant marine, and from addi- equivalent of $68 million in 1952-53 to $115 tional funds for a port development program in million during the year under review. Turkey. Transatlantic air transport will benefit At the same time, the growing importance under a loan for a radio transmitter building in of the Bank's operations in currencies other than Iceland. Natural gas, recently discovered in the United States dollar was shown by the sharp Pakistan, will be made available as fuel for power increase, to 27% for the year, in the proportion generation and industry as a result of a transmis- of disbursements repayable in such other curren- sion line to be constructed with the help of Bank cies. This increase reflected the larger sums made financing from the gas field to Karachi. available to the Bank from capital subscriptions A total of $107 million was lent for the paid in by member countries in non-dollar cur- expansion of electric power facilities. This rencies and from borrowings outside the United helped to finance large investment programs in States. Japan and South Africa, and included three loans for hydroelectric and thermal power development Financial Position in Brazil. It also included a much smaller sum The Bank earned a net income of $20 mil- lent to Nicaragua for the supply of a diesel unit lion during the year. This was added to a sup- in Managua. plemental reserve which at the end of the year Farm output will be helped in Iceland, Pan- amounted to $97 million. The Special Reserve, ama and Peru. Industrial production will be to which the 1% commission charged on out- []I standing balances of all Bank loans is credited, drawing up programs of action. The missions increased by $12 million, reaching a total of $49 went to Malaya, Nigeria and Syria. All three million. At the end of the year, the Bank's have finished their field work, and the report of total reserves stood at $146 million. the mission to Nigeria is nearing completion. All service charges and principal repayments The report of the mission to British Guiana was due to the Bank and to holders of borrowers' obli- presented to the Government in August 1953, gations sold by it were met during the year. and a program based largely upon the recom- Repayments of principal, including advance pay- mendations made has since been adopted. ments, amounted to $21 million. A total of The Bank also met requests from a number $57 million has so far been repaid on all loans of its member countries for advice on specific made by the Bank: $17 million to the Bank and development problems. It examined the possibil- $40 million on loans sold from portfolio. ity of setting up financing institutions to assist The funds available for lending were in- private enterprise in Ceylon, India and Lebanon, creased by further releases by various European and assisted in organizing an Economic Planning member countries from the 18% capital subscrip- and Coordination Board in Ecuador. In order tions paid in their own currencies. The equiv- to advise on methods of stimulating the growth of alent of $29 million became available from this capital markets, the Bank's Director of Market- source. In addition, $81 million became avail- ing visited a number of countries including Costa able subject to certain limitations. Rica, El Salvador, Panama and the Philippines, Five bond issues, amounting to the equivalent and a Bank consultant studied methods of devel- of $221 million, further added to the Bank's oping the market for government securities in resources. Two of the issues were made in United Ceylon. States dollars, two in Swiss francs and one in Advice has been given on a wide range of Canadian dollars. Nearly half of the new bonds, problems directly connected with the Bank's lend- including more than $50 million in United States ing operations, and in certain cases special studies dollar bonds, were bought by investors outside have been initiated on subjects of importance to the United States. In addition the Bank received the Bank and its members. The Bank is coop- payment for an issue of 50 million Swiss francs erating in an examination undertaken by the which had been offered in June 1953. At the Mexican Government of the country's future elec- end of the year the total of Bank bonds outstand- tric power needs, and of methods of financing ing amounted to the equivalent of $777 million. them. The Bank's resources were replenished by sales of borrowers' obligations totaling $22 mil- Other Developments lion. In addition, direct participations by private The membership of the Bank increased from investors in Bank loans amounted to $12 million. 54 to 56 during the year, bringing total sub- Of the total increase during the year in funds scribed capital to the equivalent of $9,149 mil- made available to the Bank from all sources, lion. Haiti became a member in September 39% was obtained within the United States and 1953, and Indonesia in April 1954. Czecho- 61% in other countries. slovakia was suspended from membership and will cease to be a member on December 31, 1954, in Technical Assistance Activities teasneo ute cin the absence of further action. The Bank organized three general survey Engineers of India and Pakistan, together missions during the year to assist particular coun- with engineers from the Bank, in September 1953 tries in assessing their economic potential and in resumed their discussions of technical measures [21 for increasing the supplies of water from the year, and was the subject of additional consulta- Indus River system for purposes of economic de- tion between the Bank and various member gov- velopment. These discussions continued through- ernments. In June 1954 a report was trans- out the rest of the fiscal year. mitted to the Secretary General of the United Additions were made to the Bank's field rep- Nations pointing out that the prospects for se- resentation. Resident representatives were sta- curing the necessary capital for the Corporation tioned in Brazil and Pakistan, and a representative had not changed during the year, in that the gov- was stationed in Beirut to maintain contact with member coLntries in the Middle East. ernments from which it would have to draw the The proposal to set up an International Fi- greater part of its funds were not at present pre- nance Corporation was further studied during the pared to commit themselves to subscribe capital. 131 Chapter I-Collaboration in Project Preparation and Execution The number of loans made by the Bank, siders all these aspects before a loan is made. It now 104, has doubled in the past three years, continues to be concerned with them throughout and in that time projects financed by earlier loans the life of the loan. Where necessary, special have entered new phases of construction and op- arrangements mutually acceptable to the Bank and eration. This has brought a great increase in the the borrower are made in advance to deal with amount of work done by the Bank in the appraisal problems that seem likely to arise in carrying out of projects, and in assisting the borrower to bring or operating a project. them to successful completion and operation. The Bank seeks to establish a full under- This chapter discusses briefly the nature and standing on the substance and needs of a project extent of the interest of the Bank in the projects before a loan is made. Where practicable, this financed. The discussion is intended to illustrate understanding is reflected in contracts with bor- how this interest is pursued in the operations of rowers, in guarantee agreements with govern- the Bank, and to show how it is reflected in cer- ments, and in various other written arrangements tain features of loan contracts and other arrange- among the parties to the loan. The borrower and, ments with the parties concerned. where appropriate, the guarantor, normally agree The Bank feels it essential that any project to take the steps necessary to the timely comple- financed make as large a contribution as possible tion of the project. There is provision for the to the productive resources of the economy which borrower to give the Bank progress reports, and the loan is designed to strengthen. In a financial for the Bank to examine the situation that may sense, a project which fell short of its objectives exist in the field at any time. Through these chan- could waste the funds of both the Bank and the nels, managerial and financial as well as engi- borrower. In an economic sense. the consequences neering and other physical problems may be of poor execution could be more serious still, brought to light. On all substantial matters affect- since the projects financed by the Bank are usually ing the successful execution and operation of a not an end in themselves, but are intended to project, the Bank, the borrower and the guarantor help provide a basis for economic advance over agree to consult, in normal course and not as a a broad front. matter of emergency or special negotiation. To avoid these dangers the Bank, in deter- Many of the undertakings financed by the mining whether it should finance a project, asks Bank are of a kind or on a scale new to the to be fully informed in advance on matters that organization carrying them out. Discussion in ad- have an important bearing on the outcome. These vance of a loan, or actual experience as the project matters include, among others: the economic progresses, may indicate that the responsible merits of the undertaking; engineering and other organization is not fully equipped to deal with physical phases of the project; the financing of particular physical, financial or administrative local and any other expenditure not covered by problems; indeed, regardless of the stage of de- the loan; management and administration during velopment reached by the country concerned, con- both construction and operation. The Bank con- sultant services or other outside assistance may [4) be required by any organization embarking on port through the valley would be an important a new project. In cases where assistance is needed aid to the economic development of Colombia. the Bank is willing, and conceives it to be an But it was not known what traffic to expect, or integral part of its function, to see that this as- whether it could be served best by improving the sistance is provided-either through members of navigability of the river, by building motor roads its own staff or through help to the borrower in through the valley, or by constructing a railroad. obtaining expert assistance elsewhere. The Government and the Bank therefore brought It obviously is not practicable to discuss in an engineering firm to examine prospective here in any detail all the different kinds of situa- traffic needs and to determine the best way of tion that arise, or all the steps the Bank may take meeting them. The firm's report, which included toward meeting them. But an outline can be given a comprehensive traffic study of the entire Co- of the main types of problem which may be en- lombian railway system, gave a factual basis for countered in putting a project into effect, and judging the merits of the railroad link. which the Bank may be able to help in solving. Preparation and Planning Econiomic Appraisal Before a loan is made, the Bank examines The Fifth Annual Report explained the eco- the principal plans and specifications to see nomic standards by which the Bank determines whether they are appropriate and to see whether, what projects may on economic grounds be suit- out of experience available to it, improvements table for financing. It will therefore only be said can be suggested in the project. This has provided now that, in consultation with the authorities of a way of discovering weaknesses in planning, some the country concerned, the Bank tries to select of which, if left unremedied, could have had most high-priority projects within the framework of serious consequences for the project. In one in- the country's overall economic needs. stance, it was shown that the water available One vital test of the economic value of a would be insufficient to supply the turbines pro- project is an assessment of the size of the demand posed for a hydroelectric plant on which a large and the suitability of the project to meet it. This part of the construction had already been done. is important not only in reaching a decision on On the Bank's recommendation the project was the economic justification of a project but also in redesigned in order to make it practicable. In deciding on its scale and other matters affecting another instance, it was found that the type of its precise nature. There may be no doubt, for rolling stock proposed for a railway system would instance, that more electric power would greatly be running over bridges too weak to carry it benefit a particular region; yet it will be necessary safely; and the strengthening of the bridges by to know as much as can be learned about the the borrower was made a part of the project. probable size and characteristics of the market The preparatory study may also provide an for power before generating and transmission opportunity for the Bank to suggest ways in which facilities can be effectively planned. In connection the economic value of a project can be increased with projects of various kinds, in fact, it is normal by modifications or additions to the original pro- for the Bank to call for market or traffic studies, posal. An exchange of ideas with the Indian Iron and it often advises regarding the collection and and Steel Company, for instance, resulted in the analysis of such information. conclusion that the addition of a new coke oven The Magdalena Valley Railroad project, now to the Company's construction program would being financed by the Bank in Colombia, came make it possible and useful to retain and mod- about from a study of transport needs. The Gov- ernize two blast furnaces that otherwise would ernment and the Bank believed that better trans- have been abandoned. Discussion of proposals [5} for improving the operations of Callao, Peru's stipulations on the way the finance should be major seaport, showed that the acquisition of raised. This is a complex problem which takes equipment for handling bulk as well as general many forms; but the Bank must satisfy itself of the cargo would accomplish even greater savings than intent and the ability of the borrower to provide the project originally proposed; and the amount the funds. In projects depending on governmental of the loan was increased so as to cover both resources these funds are commonly supplied purposes. through annual appropriations by the Govern- Often there is an earlier stage of collabora- ment; but in exceptional cases, as with the road tion, when a proposal is brought to the Bank with construction programs in Ethiopia and Nicaragua, a request for advice on how to go about more the Government may provide funds by direct al- detailed preparation. The Bank will give general locations of revenue from a specified tax. advice as to procedure, but it will usually rec- Whatever the method of meeting the na- ommend that the prospective borrower retain an tional currency needs of a project, the Bank en- experienced firm or individual to assist in the sures that the necessary steps are thought out preparation of the project. The Bank has not lent and planned in advance. In this planning, allow- for the preliminary studies required to determine ance is made so far as possible for changes that the feasibility of a project. On occasion, however, may later take place in price levels and wage it has included the foreign exchange costs of the rates. When these changes have nevertheless detailed engineering required in actually carrying called for a revision of the original plans, the out the project. Bank has often been able to help the borrower The Bank not only wishes to be satisfied, in in working out methods for raising the additional the borrower's as well as in its own interest, that funds needed. the plans for a project are sound; it also needs The Bank stresses the importance of avoid- to know that construction will be entrusted to ing procedures, either in raising the money needed competent hands and will be properly supervised. for construction or in subsequent operation, which In cases where the borrower has not already found may have an inflationary impact, or which may them, the Bank stresses the importance of em- absorb an unduly large share of the capital avail- ploying properly qualified firms for construction able to meet the country's other investment needs. and supervision of the project. The Bank believes that, in the absence of special considerations to the contrary, projects which can Domestic Currency Requirements earn revenue should be designed to cover their The Bank lends only part of the money re- own costs and to be self-supporting in terms of quired for a project and, except in a few special local currency. circumstances, has lent only for foreign exchange Since the tariffs for electric power, transport expenditures. But the generator financed by a and related services are in most countries subject loan from abroad serves its purpose only when to governmental regulation, when the Bank is installed in a powerhouse built by local labor lending for these services it seeks to assure itself paid with domestic currency. So far as it can, in advance that adequate rates will be allowed. In therefore, the Bank wishes to be assured before some cases the existing level of rates may be making a loan that the local financing necessary adequate; the Bank may then be concerned only to complete the project will, in fact, be forth- to receive an assurance that official policy will be coming. to keep it so in future. In other cases the estab- The loan agreement usually indicates the lished level may be inadequate. When this situa- borrower's responsibility for providing necessary tion was encountered in a recent lending opera- funds not covered by the loan, and may make tion for electric power in Asia, an agreement t6] to authorize the necessary increases in rates was quire measures to ensure that salary standards obtained from the Government. In the case of are adequate, that tenure of employment is rea- natural gas in Pakistan, no established pattern sonably secure and that promotion will be by of rates existed. In setting up the loan to the Sui merit. The Bank studies these matters and may Gas Transmission Company, the Bank therefore suggest ways of improving the conditions under received assurance that the rates would be fixed which management has to operate. at a level which would allow a satisfactory return. In governmental enterprises, even though Revenue-earning projects may offer oppor- management possesses the necessary qualifications, tunities for mobilizing private investment. The it cannot be fully effective if its actions are ham- Bank urges borrowers to seize these opportunities pered by outside interventions and pressures. As whenever they appear to be present. In El Salvador a protection against this, the Bank has sometimes the Bank assisted the Lempa River Commission recommended the establishment of an autonomous to prepare a bond issue to finance the local cur- body to run a project. rency expenditure of a hydroelectric project whose The problems of management during the foreign exchange costs were to be met by a Bank construction stage can be eased by the choice of loan. In lending for the Seyhan project in Turkey, dependable contractors and the employment of arrangements were made in collaboration with experienced supervisors. But problems may arise the Government to raise private capital for a through failures of coordination and timing, or utility company formed to generate and distribute through the emergence of unforeseen physical power; and the majority of the stock of the com- difficulties. Moreover, a large construction pro- pany was bought by private investors. gram carried out by an existing organization may Whether a revenue-earning enterprise is in require the strengthening of top management, as public or private ownership, the Bank examines well as of technical personnel, to keep pace with the earning prospects of the completed project. the growth of the enterprise. It compares the expected rate of return with that The operation of a completed project may earned in similar enterprises elsewhere. In ac- present other more serious types of management cordance with sound lending practice, it may where problem. Good management at this stage is some- appropriate make provisions regarding such mat- times taken to consist merely of the technical ters as the debt-equity ratio, working capital avail- capacity to operate a plant or administer a serv- ability, and future dividend policy. ice; and this, clearly, is an indispensable qualifi- cation. But the outcome will also depend on other Administration and Management important qualities of leadership, and on the abil- However thorough the preparation, no proj- ity of the manager to look beyond the require- ect is likely to succeed unless it is put in the hands ments of the immediate task and to envisage fu- of able management. Particularly in countries rela- ture problems arising out of the development tively new to large-scale enterprise, managerial and growth of the enterprise. Management must skill may be scarce; and in many cases its exer- have not only technical competence but also a cise is hampered by outmoded practices and com- talent for handling personal relationships; har- plicated regulations. Progress may be impeded monious relations with labor, with governmental by inadequate accountancy standards and inven- agencies involved, and with the public, may be tory controls, cumbersome procurement proced- vital to the success of the enterprise. The capacity ures, or ill-advised personnel policies. It is often to build a staff and to delegate authority may be necessary to take positive steps toward making a of crucial importance. A successful industrial man- career in the new enterprise attractive to the ager must be prepared to adjust his output in best-qualified people; this may, for instance, re- quantity, quality and price to the needs of his [71 market, and will miss no opportunity of estab- than later, any difficulties that may arise. And lishing a new outlet, developing a new process difficulties, many of which cannot be foreseen, or turning to a more favorable source of raw inevitably arise. Few, if any, projects financed by material or fuel supply. the Bank have proceeded precisely according to As a safeguard against the dangers which plan. Landslides, typhoons, currency devaluations, may arise from managerial weaknesses, the Bank changes of government-these and other occur- may arrange that the management of a project rences have in one case or another interfered with must be acceptable to the Bank as well as to the timely execution. Early knowledge of difficulties borrower. This may call for a re-examination of puts the Bank in a position to begin discussion the managerial arrangements of an existing or- of the best solution promptly with the borrower, ganization, or for assistance in setting up a suit- and to move the project toward a successful able organization before a new enterprise is conclusion. launched. The Bank may also advise on the quali- fications required for key posts; if requested, it Security Arrangements may assist in finding suitable persons to fill them. The Bank, like any investor, makes arrange- Thus it has helped the borrower to make suitable ments to protect its loans against default. But its managerial appointments in a development bank special constitution and objectives require it to in the Middle East, a river valley project in Asia avoid rigid adherence to set procedures in ques- and a port authority in Latin America. In cases tions of security; it seeks to match its require- where managerial skills within the country need ments with the needs of particular loans. The in the early stages to be supplemented from out- considerations that influence the Bank may differ side, one of the objectives is to impart those skills from those that are familiar to borrowers in other so that local staff may take over responsibility situations, and they have sometimes been misun- as soon as possible. derstood. Moreover, they may bear directly upon the relationship between the Bank and the bodv responsible for a project. Although security ar- As was mentioned earlier in this discussion, rangements are not in all cases directly concerned the Bank keeps closely in touch with the project with the project, they are considered appropriate throughout the life of the loan. It receives periodic for discussion here. reports from borrowers, and members of the staff In conformity with the Articles of Agree- visit the project to see at first hand the work being ment, the Bank has obtained a governmental done. This practice arises from the provision of guarantee of all loans not made to a government. the Articles of Agreement that "the Bank shall The governmental obligation, as borrower or guar- make arrangements to ensure that the proceeds of antor, is the ultimate protection for Bank loans. any loan are used only for the purposes for which Given this protection the Bank does not, in the the loan was granted, with due attention to con- absence of special considerations, require mort- siderations of economy and efficiency." But it has gages, pledges or other positive security for the been found that the reporting procedure set up, obligations of member governments either as bor- in addition to providing a yardstick by which the rowers or as guarantors. Bank can measure the progress made, has in many On the other hand the Bank must be as- cases provided the management of the project sured that it will n6t receive from its members with a flow of information important to the con- less favorable treatment than other future cred- duct of its affairs. itors. For that reason it includes the so-called The purpose of the Bank in closely following negative pledge clause as a standard feature in its up a project is to bring to light sooner, rather loan and guarantee agreements with member gov- {8} ernments. Essentially, that clause provides that in lending to private borrowers the Bank attempts the Bank will share proportionally in any positive to conform to established lending standards and security or priority on governmental assets that to regulate its security arrangements accordingly. may in the future be created to secure external To accept more lenient conditions than are cus- debt. The Bank regards this kind of assurance as tomary for private capital might discourage bor- necessary to enable it to continue its normal prac- rowers from using private funds when available tice of dealing with governments on an unsecured on reasonable terms, and private lenders from basis, and as fair and appropriate to the Bank's investing in development projects. character as a cooperative institution in whose The decision whether to ask for positive loans all members have a financial stake. loans alebsheisecurity from private borrowers depends on the When the borrower is a governmental body particular circumstances of each case. In prac- the Bank does not normally obtain security beyond tice, the Bank has usually required it. Mortgages that provided by a negative pledge covenant from or comparable charges were provided, for ex- the borrower. In two types of situation, however, ample, in the recent loans to Compafiia Manufac- the Bank may wish to take positive security for turera de Papeles y Cartones for pulp and paper loans to these bodies. First, if the borrower has production in Chile and to the Sui Gas Trans- given mortgages or other positive security to prior mission Company in Pakistan, as well as in earlier creditors, the Bank may ask similar security to loans such as those to the Brazilian Traction, assure itself of equal treatment. Second, in the Light and Power Company and to the Dutch ship- circumstance that the borrower has appropriate ping companies. foreign exchange assets or assets from which for- eign exchange can readily be realized, the Bank The Bank's Objectives may wish to take security, particularly if this in- creases the likelihood of participation by private It is sometimes suggested that, since the Bank investors. In practice, these circumstances have lends only with a governmental guarantee, it need seldom arisen. When they have, it has been prin- not pay great attention to the details of the proj- cipally with loans to corporations which, though ect itself or to the organization of the body re- wholly or substantially owned by a government, sponsible. But the Bank's main purpose is to assist are organized and operated like private com- its member countries to draw maximum benefit panies. That is true, for example, of the loan to from the development process. It is concerned, KLM (Royal Dutch Airlines), where the Bank primarily to ensure that its loans make the great- obtained a chattel mortgage on aircraft. est possible contribution to increasing production, Loans to private borrowers involve some- raising living standards and opening opportunities what different considerations. Here it is also im- for further investment. The Bank's interests there- portant to ensure that the Bank is not placed in fore go considerably beyond those of the more the position of a junior creditor, particularly be- usual type of lending institution, and the achieve- cause of the need to retain a voice in the case ment of its objectives cannot be ensured by safe- of reorganization or similar proceedings. More- guards dealing only with questions of debt service. over, a guaranteeing government, in making good These objectives require that, quite apart- on its guarantee and as a consequence succeeding from consideration of interest and principal pay- to the Bank's rights against the private borrower, ments to the Bank, the project must succeed. It would legitimately expect to succeed to a senior is for this reason that the Bank has sought, in. creditor's position and not to find its claim rank- ways indicated above, to give direct assistance in ing below those of private creditors. In any case, solving the many problems which may arise be- [911 fore a fresh investment of external capital can satisfaction to the Bank when projects are yield its full return. prepared and carried smoothly to success with Responsibility for the management and little call for practical assistance and advice from execution of a project rests upon the operating the Bank. But the complexities of development bodies and not upon the Bank, and the question projects are such that it expects this type of prac- whether a project will succeed depends above all tical collaboration to remain an integral part of its on their handling of it. It is of course a matter of operations. [101 Chapter II-The Bank's Operations This section is a country-by-country descrip- member government concerned. The interest tion of the operations of the Bank in the past rates shown include the 1% commission which, fiscal year. For each country in which the Bank under the Bank's Articles of Agreement, is allo- was active, information is given on one or more cated to the Bank's Special Reserve. Additional of the following topics: loans made; negotiations details, such as maturity dates of loans, amounts and surveys looking to possible loans; reports of disbursed and repayments of capital, are shown progress on Bank-financed projects; and technical assistance. Loans that were fully disbursed prior inatbur sary o se to the beginning of the fiscal year are discussed beginning on page 54. in previous Annual Reports. Loans made during the fiscal year brought Preceding the account of operations in each the total of the Bank's lending to $1,914 mil- country is a list by fiscal year of all loans made in lion ($1,874 million net of $40 million of can- that country. Unless otherwise indicated, loans cellations and refundings). The table on the have been made to member governments; loans following page classifies this total according to to other borrowers have the guarantee of the the purpose and regional distribution of loans. ASIA AND THE MIDDLE EAST Indus River System by the Secretary General of the League, the Inter- Engineers of India and Pakistan, together national Bank in November 1953 submitted a with engineers from the Bank, in September 1953 memorandum outlining some of the fundamental resumed their discussions of technical measures problems of organizing a development bank and for increasing the supplies of water from the making suggestions about how these problems Indus River system for purposes of economic de- might be approached. velopment. In February 1954 the management of the Bank put forward a proposed outline as a framework for a comprehensive plan, and this In October 1953 the Bank stationed at was taken under consideration by the Govern- Beirut, Lebanon, a staff member accredited to ments. Egypt, Iraq, Jordan, Lebanon, and Syria. He has responsibility for explaining and interpreting the Arab Development Bank Bank's objectives, policies and activities; he ad- In May 1953 the Beirut Conference of Min- vises prospective borrowers on the preparation and isters of National Economy and Finance of the presentation of projects for the Bank's considera- Arab States authorized the secretariat of the Arab tion; and he develops and maintains contacts with League to study a project for establishing an Arab governments, business communities, regional or- Development Bank to assist economic develop- ganizations and international organizations in the ment in the Arab States. In response to a request area. till Bank Loans Classified by Purpose and Area-June 30, 1954 (In millions of United States dollars, net of cancellations and refundings) Total Area Purpose T and Type of Supplies ~~~Asia & Western and Ty,Zpe of Supplies A3Middle Austral- Hemi- Financed East Africa asia Europe sphere GRAND TOTAL ...... ........ 1,874 232 199 204 782 457 RECONSTRUCTION LOANS: TOTAL: France, The Netherlands, Den- mark, Luxembourg ................... 497 - - - 497 - OTHER LOANS TOTAL ............................... 1,377 232 199 204 285 457 ELECTRIC POWER: Machinery, equipment and construction materials ........... 509 63 88 33 35 290 TRANSPORT ........... ............. 397 86 71 74 63 103 Railroads: locomotives, rolling stock, rails, shop and station equipment and materials .......... ............. 201 63 68 17 3 50 Shipping: vessels and marine equip- ment .............. ............ 37 - - - 37 - Ports: docks, warehouses, harbor craft, loading and dredging machinery.... 24 4 1 - 16 3 Airlines: aircraft and airport equip- ment .............. ............ 34 - - 27 7 - Roads: construction equipment and vehicles ........................ 87 5 2 30 - 50 Pipelines: pipe, fittings and materials for natural gas .................. 14 14 - - - COMMUNICATIONS: Telephone and tele- graph equipment and supplies) ....... 26 2 - - - 24 AGRICULTURE AND FORESTRY ........ 167 47 - 71 29 20 Mechanization: farm machinery and equipment ......... ............ 76 - - 58 2 16 Irrigation and flood control: construc- tion equipment and materials ....... 57 37 - 6 13 1 Land improvement: construction equip- ment and materials ............... 22 10 - 7 3 2 Grain storage: construction materials and equipment .................. 5 - - - 4 1 Timber production: machinery and vehicles ........... ............. 7 - - - 7 - INDUSTRY ............ ............. 168 32 - 26 90 20 Manufacturing machinery ..... ...... 145 32 - 19 74 20 Mining equipment ....... .......... 23 - - 7 16 - GENERAL DEVELOPMENT ...... ...... 110 2 40 - 68 - Development banks ................ 2 - 18 - General development plans ..... ..... 90 - 40 - 50 - f12) ASIA Burma Administration will assist in providing top staff The Bank sent the report of its fact-finding for the institute. mission to the Government in September 1953. A Bank mission visited Ceylon in April and The mission bad visited Burma earlier in the year May 1954 to discuss with the Government sug- gestions for the establishment of a privately- to review the economic and financial situation and owedvlpmncroatntorvieon owned development corporation to provide loan to discuss the Government's development plans. and equity capital for private enterprise. In Feb- Ceylon ruary 1954 a Bank consultant advised the Gov- ernment and the Central Bank of Ceylon on Negotiations have been concluded for a loan measures for further developing the market for of $19,110,000 to help finance the Aberdeen- government securities. Laksapana hydroelectric scheme, which will sup- ply additional power to southwestern Ceylon, the India most productive and populous part of the Island. Fiscat $34 million 15-year 4%o loan of August Ceylon has virtually no fuel resources, and the 1950: 18, 1949 for railway rehabilitation; growing demand for power can be met most eco- reduced at request of borrower on May 16, 1950 to $32.8 million, which nomically by developing hydroelectric potential. had been disbursed by March 1951. The Aberdeen-Laksapana scheme is intended $10 million 7-year 31½2% loan of Septem- ber 29, 1949 for importation of agri- to develop the power potential of the Kehelgamu cultural machinery; reduced to $8.5 and Maskeliya rivers at a point about 50 miles million on July 27, 1951, to $7.5 mil- lion on August 25, 1952 and to $7.2 east of Colombo, the capital. Eventually the million on January 1, 1954 at request total generating capacity of this development will of borrower. be 150,000 kilowatts. The scheme is being car- $18.5 million 20-year 4% loan of April 18, 1950 for power development. ried out in stages, of which the first was com- Fiscal $31.5 million 15-year 49% loan of De- pleted in 1951. 1953: cember 18, 1952 to Indian Iron and Steel Company, Limited, for expan- The Banks loan will help finance the next sion of iron and steel production fa- stage. In this stage, a storage dam will be built cilities. on the Kehelgamu to regulate the river's flow so $19.5 million 25-year 4Y/8% loan of Janu- ary 23, 1953 for electric power devel- that more power can be generated; another 25,- opment, flood control and irrigation; 000 kilowatts will be added to the generating reduced to $10.5 million on Febru- ary 4, 1954 at request of borrower. capacity of the station; and additional transmis- Total: $100.5 million, net of cancellations. sion lines and distribution facilities will be con- The Government of India has approached structed. It is expected that the project will be the Bank for loans to assist in financing the con- completed in approximately four years. struction of two electric power plants in the State The Government has taken additional steps of Bombay and to make a power study of the to carry out the recommendations of the general Greater Bombay Area. Early in 1954 a Bank survey mission which visited Ceylon in 1951. engineer re-examined economic, technical and fi- A member of the Bank's staff went to Ceylon in nancial aspects of a proposed thermal plant to be April 1954 to advise the Government on the located on Trombay Island and to be owned and organization of an autonomous technical research operated by the three Tata electric companies. institute which is being set up to undertake ap- He also examined existing information on a pro- plied industrial research. It is expected that the posed hydroelectric plant on the Koyna River Bank and the United Nations Technical Assistance to be operated by the State of Bombay. A report {13} on the power study has been sent to the Govern- makes a total of over one million acres that have ment. been reclaimed in the five years of the project's In February 1954 a Bank mission went to operation. It is estimated that by the end of India to explore the possibilities of establishing the 1955-56 plowing season a total of about 1V2 a privately owned and operated development cor- million acres will have been cleared. poration to finance the expansion and moderni- The $31.5 million loan for an expansion of zation of private industry. The findings of this the productive capacity of the Indian Iron and group were favorable; and a steering committee Steel Company has not yet become effective. The consisting of prominent Indian businessmen was Government of India, as guarantor of the loan, set up to draft a charter for a corporation which has informed the Bank that the causes for the would finance existing and new industries through delay have been overcome and that arrangements loans and equity participations, and provide busi- to proceed with the expansion scheme can soon ness ventures with technical and managerial ad- be made. vice. Upon establishment of such a corporation, Japan the Bank will consider making a loan to it. Fiscal $21.5 million 20-year 5% loan of October Two of the Bank's previous loans are helping 1954: 15, 1953 to Japan Development Bank todvlo lcti owrrsore i h Dm-to be re-lent to Kansai Electric Power to develop electric power resources in the Damo- Company, Incorporated, for power de- dar Valley. India's largest thermal power plant, velopment. constructed at Bokaro with the help of the $18.5 $11.2 million 20-year 5% loan of October 15, 1953 to Japan Development Bank million loan of 1950, was put into commercial to be re-lent to Kyushu Electric Power operation in October 1953. It is being operated Company, Incorporated, for power de- by the Damodar Valley Corporation, which is velopment. distributing thepowrtcoline,$7.5 million 20-year 5% loan of October distributing the power to coal mines, steel works, 15, 1953 to Japan Development Bank various other industries and electric utilities in to be re-lent to Chubu Electric Power the Damodar Valley. Meanwhile work is prog- Company, Incorporated, for power de- velopment. ressing on the two hydroelectric plants, storage Total: $40.2 million. dams and an irrigation system for the Damodar These loans are helping to finance the con- Valley, which the $19.5 million loan made in struction of three high-efficiency thermal power 1953 is helping to finance. Completion of a stations being built by private companies in cen- 60,000-kilowatt plant at Maithon is expected by tral and south Japan. The companies serve parts the middle of 1956, and a 40,000-kilowatt plant of Japan comprising approximately 30% of the at Panchet Hill in the following year. By agree- total area and containing about 40% of the popu- ment between the Bank and the borrower the lation. The new stations will have a combined $19.5 million loan was reduced by $9 million in view of the fact that an equivalent amount could capacto 291,000 kilo tthich csp10%tof Governent's Japan's present public utlity thermal capacity. be made available from the Indian Government's They will furnish additional power to supplement resources of pounds sterling. resources of pounds sterling Ihydroelectric supplies and will replace less efficient Steady progress is being made in ridding large thermal units. An indication of the efficiency of areas of land in central India from the weed the new stations is that savings in fuel consump- called kans grass, with the help of tractors and tion, compared with existing thermal plants, will other equipment bought with the loan of Septem- be sufficient in the case of the Kansai plant to pay ber 1949. During the 1953-54 plowing season, off its construction cost in six years. some 280,000 more acres of infested land were Although power production in Japan has returned to the production of food crops. This increased markedly over the prewar level, supply { 141 is still running far behind demand, and shortage zation of the United Nations. The mission's re- of power is a serious obstacle to the growth of port is now being prepared at Bank headquarters. industrial production. The new generating ca- pacity will help to meet the demands of indus- Philippines trial plants manufacturing metals, machinery, tex- The Bank's Director of Marketing made a tiles and chemicals, and of coal mines and ship- second visit to the Philippines in July of 1953 yards. These industries are of key importance in further to assist in establishing a capital market for Japan's efforts to improve its international balance government securities. of payments. At the request of the Government, a mission Thailand visited Japan toward the end of 1953 to discuss Fiscal $3 million 15-year 33/4%H loan of October economic problems and policies and to look into 1951: 27, 1950 for railway rehabilitation. possible further assistance by the Bank. On the Fully disbursed June 1954. basis of the mission's report, the Bank expressed $18 million 20-year 4%o loan of October 27, 1950 for irrigation project. the view to the Government that in the develop- $4.4 million 15-year 33/4% loan of Octo- ment of an investment program for Japan, par- ber 27, 1950 for port development. ticular consideration should be given to: (1) in- Total $25.4 million. creasing agricultural and livestock output; (2) Projects financed with the help of these three lowering costs of steel production by modernizing loans are making satisfactory progress. Most of equipment and techniques used in the industry; the buildings at the Makkasan railway workshops (3) reducing the cost of mining coal, particular- near Bangkok, which the Bank's $3 million loan ly coking coal; (4) augmenting supplies of both is helping to finance, have been completed; and thermal and hydroelectric power and exploring the installation of equipment is expected to be the extent of reserves of subterranean steam as an finished by August 1954. All the railway signal- additional source of power; and (5) bettering ing equipment has been delivered and is being the international competitive position of Japan's installed. industry for the manufacture of various types of The irrigation project in the central plain, machinery. The Government has indicated a de- for which the Bank has lent $18 million, is ex- sire to obtain loans for these purposes, and the pected to be completed toward the end of 1958. Bank is preparing to send technical missions to Work on the network of irrigation canals and on Japan for closer studies. the Chao Phya River barrage near Chainat is proceeding satisfactorily. Malaya and Singapore During the year, considerable progress was made on the project for improving the port of A Bank general survey mission was in Malaya Bago.Tecneltruhhesdbrt and ingporein anuay-My 194 t preare Bangkok. The channel through the sandbar at andomSingapiore in Jaur-a 1954rnmes to prepe the estuary of the Chao Phya, which should per- nomic development. The mission was organied mit ships of 10,000 tons to enter the port, was finally completed in January 1954 after a num- at the request of the Governments of the Federa- ber of difficulties in the dredging operation had tion of Malaya, of Singapore and of the United been overcome. A two-year management con- Kingdom, and consisted of 13 members, including tract for the maintenance of the channel by for- nationals of eight different countries. Four ag- eign contractors was signed in May. Some de- ricultural specialists attached to the mission were lays are still being encountered, however, in the nominated by the Food and Agriculture Organi- delivery and installation of port equipment. An £151 expert recommended by the Bank to help the delegation was in Washington from September Port Authority to reorganize its operations has 1953 to March 1954 for technical discussions on presented his report to the Government and the a program to rehabilitate and develop the railway Authority. The Authority will employ an exper- system. The Bank is in continuing contact with ienced adviser to assist in carrying out the recom- the Government on this matter. mendations of the report and in administering the At the request of the Government, a Bank port. representative was in Thailand from December Following the report of the Bank mission 1953 to March 1954 to discuss various economic which visited Thailand in early 1953, a Thai and financial problems with Government officials. THE MIDDLE EAST Egypt ductions of travel time, of vehicle maintenance The Bank has offered to review the project costs and of trucking rates on some routes. The Bank has disbursed $1 million of its for a high dam on the Nile above Aswan to pro- Tml lan madesourovde foreign excang vide flood control, irrigation and hydroelectric ' m to the Ethiopian Development Bank. Since the power. Such a studv would seek to determine start of operations in 1951, the credit activities that the project is practical and economic and ofteDvlpetBn aegonsol u would~~~ efetvl utlz .iewae.TeBn of the Development Bank have grown slowly but steadily, and the institution is now making a profit. has also offered to examine a project for manu- facturing fertilizer by using the hydroelectric pow- At the end of June 1954 total invested funds out- er now being installed at the existing Aswan dam. standing amounted to Eth. $6.5 milliond as com- *pared with Eth. $1.1 mnillion at the end of 1-951. Ethiopia These funds were invested both in agriculture and in industrial plants, mostly for the process- Fiscal $5 million 20-year 4% loan of September 1951: 13. 1950 for rehabilitation of roads. ng of agricultural products. The International Fully disbursed in May 1954. Bank loan has been used almost exclusively for $2 million 20-year 4% loan of September industrial projects; agricultural loans have been 13, 1950 for Development Bank. $1.5 million 20-year 4% loan of February 19, 1951 for rehabilitation and devel- After a delay caused principally by initial opment of telecommunications. organizational difficulties, the $1.5 million tele- Total: $8.5 million. communications loan became eifective in February Disbursement of the Bank's $5 million loan 1954; meanwhile the program of the Imperial to finance the foreign exchange costs of road- Board of Telecommunications for improvements building equipment, materials and services has of telephone, telegraph and radio systems has pro- been completed. The rehabilitation program is gressed. The Board has completed its adminis- progressing: the reconstruction of the three main trative organization, has carried out extensive con- roads radiating from Addis Ababa to Assab, Jimma struction and rehabilitation work on lines and and Lekempti is nearly finished; and maintenance equipment, and has inaugurated several training has been provided on most of the 2,500-mile net- courses. Although the program will not be com- work of primary roads. The entire network is pleted until the end of 1955, the networks are now usable, most of it in all seasons of the year. already handling increased traffic. The Imperial Highway Authority should complete Two persons nominated by the Bank at the the rehabilitation program by March 1955 and request of the Government assumed important will continue maintenance of the system. Bene- posts in Ethiopia during the fiscal year. One be- ficial effects of the program are reflected in re- came Governor of the State Bank of Ethiopia in t161 December 1953; the other took up his duties as The loan of £5 million made in June 1954 adviser to the Minister of Finance in May 1954. will help finance the foreign exchange costs of constructing a natural gas pipeline in West Paki- Iraq stan. The project, based on the recent discovery Fiscal $12.8 million 15-year 33/¾% loan of June of natural gas about 350 miles from Karachi, will 1950: 15, 1950 for flood control, for the first time make this fuel available in Paki- Total: $ 12.8 million. stan. Because of its limited resources of coal and Construction of the barrage to divert flood oil, this new domestic source of fuel is of par- waters from the Tigris River above Baghdad was ticular importance to Pakistan's economic develop- begun in August 1953. Work is about half fin- ment. The pipeline will run through the Lower ished on the dike and canal that will lead these Indus Valley to Sukkur, Hyderabad and Karachi. waters into the Wadi Tharthar depression. Prog- Initially the market for gas will be confined to ress is somewhat behind schedule, partly because large industrial consumers in these cities. of re-planning which will improve the project The borrower, the Sui Gas Transmission both technically and economically and partly be- Cmn wormed in Fuar 1954.mThree- cause of the heavy floods this year. It is expected that the project as a whole will be sufficiently quarters of the shares of the Company are held by private investors in Pakistan and the United far dvaced o dvertflod waersearb in1956 Kigdom, and one-quarter, by the Pakistan Indus- In August 1953 a Bank representative visited tialdopment Corporatin Sligtly more Iraq for discussions with the Development Board tilDvlpetCroain lgtymr than one-half of the shares are in Pakistani owner- concerning steps being taken to implement the so recommendations of the Bank's general survey wealth Dvlmen Fin Company ofmthe mission of 1951-52.- wealth Development Finance Company of the mission of 195 1-52. United Kingdom hold the remainder. The Trans- Jordan mission Company will be operated by the Burmah Oil Company's Pakistan subsidiary, which has been Bank representatives visited Jordan in May reandsmna 1954 to discuss the Government's request for as- ring agent for 20 years. Six British banks are participatin g in the loan, sistance in studying the country's development po- ko tentialities. without the Bank's guarantee, to the extent of £645,000, representing the first seven maturities, Lebanon falling due semi-annually from August 1, 1956 The Bank informed the Government in Oc- through August 1, 1959. The participating tober 1953 of its views regarding the desirability banks are The Chartered Bank of India, Australia and prospects of establishing an industrial devel- & China; the Eastern Bank; Grindlays Bank; opment bank in Lebanon, and offered further as- Lloyds Bank; the Mercantile Bank of India; and sistance. the National Bank of India. The $3.25 million loan of June 1952 for Pakistan the purchase of agricultural machinery to aid in Fiscal $27.2 million 15-year 45s% loan of March the reclamation of 110,000 acres of wasteland in 1952: 27, 1952 for railway rehabilitation. the Punjab Province of West Pakistan became ef- $3.25 million 7-year 41/s% loan of June fective in February 1954. The Agricultural Ma- 13, 1952 for agricultural machinery. Fiscal £5 million ($14 million) 20-year 43/4% chinery Organization set up to carry out the rec- 1954: loan of June 2, 1954 to Sui Gas Trans- lamation project started operations in mid-1953. mission Company, limited, for con- struction of natural gas pipeline. The Bank assigned a techncian to assist the Or- Total: $44.45 million ($ equivalent). ganization's newly recruited staff in getting the [171 project under way; this technician is continuing as Trust to rehabilitate badly deteriorated wharves at an adviser, under the sponsorship of the Food and the port of Karachi; a program for the further Agriculture Organization. The operating effec- development of the railways in East and West tiveness of the Agricultural Machinery Organiza- Pakistan; and a pulp and paper mill in East Paki- tion is continuing to improve; by June 30, 1954, stan. 110,000 acres had been cleared. The land is being settled and planted to crops, principally wheat Syria and sugar cane, as fast as it is cleared. A general survey mission visited Syria from A delay in placing orders for equipment fi- February to April 1954 to prepare recommenda- nanced by the $27.2 million loan of March 1952 tions to assist the Government in formulating a for a program to improve and modernize the long-term development program. The mission railways in East and West Pakistan has necessi- consisted of ten members: a public finance adviser tated extension of the closing date of the loan from the International Monetary Fund; two agri- £ from May 1954 to July 1955. About half of cultural experts nominated by the Food and Ag- the loan has been disbursed. Operation and riculture Organization; four consultants recruited maintenance of the diesel electric locomotives and by the Bank to advise on transportation, industry, other equipment financed by the Bank continues water resources, and housing and community plan- to be satisfactory, and an improvement in freight and passenger service has resulted. ning; and three Bank staff members. One of the two agricultural experts was provided by the Ford In November 1953 the Bank stationed a spe- Fonai.Thmsin'rertsnwbig cial representative in Pakistan. He has advised in the execution of Bank-financed projects and in prepared. the preparation of proposed projects. He also The Bank and the Syrian authorities are con- represents the Bank on the committee set up by tinuing technical studies of a project to equip the the Pakistan Minister of Finance to coordinate Port of Latakia, which is now being enlarged and external financial assistance for development. improved. The Government is preparing a re- During the year the Bank discussed with the vised program of road construction. In June Government and other prospective borrowers the 1954 three Bank consultants completed a field possibility of financing other development proj- survey of a project for draining and reclaiming ects. Among these were the expansion program the Ghab swamplands in the valley of the Oron- of the Karachi Electric Supply Corporation, which tes. Discussions regarding the financing of these would more than double supplies of electricity projects will be resumed when technical prepara- to the Karachi area; a scheme of the Karachi Port tibns have been completed. EUROPE, AFRICA AND AUSTRALASIA AFRICA Belgian Congo This loan, like the $30 million loan made Fiscal $40 million 25-year 4½2% loan of Septem- to Belgium on the same day, is supporting the 1952: ber 13, 1951 to the Belgian Congo for Ten-Year Plan for the Development of the Congo. development plan. Guaranteed by Bel- Disbursement of the loan, which is geared to the gium. Made simultaneously with loan rate of public investment in the Plan, was near- of $30 million to Belgium (See page r ompltob June 3 194 onl $1.6 22). ing completion by June 30, 1954; only $1.6 Total: $40 million. million then remained in the loan account. After 118] a slow start in 1950, the rate of expenditure un- freight carried has risen to a level two-thirds der the Plan was greatly accelerated in 1952 and greater than prewar. exceeded 5 billion Congolese francs ($100 mil- The Bank's loan will provide funds for the lion) in 1953. The main investment has been purchase of 35 diesel mainline locomotives and in transport, agriculture, hydroelectric power de- 34 diesel switching ingines for the two longest velopment and housing; substantial expenditures and most heavily used lines, running from Dakar, have also been made for public health and educa- in Senegal, into French Sudan, and from Abidjan, tion. in the Ivory Coast, into the Upper Volta. The diesels will be cheaper to operate than the steam French West Africa locomotives they will replace, and can be ex- Fiscal $7.5 million 12-year 41/2% loan of June pected to pay for themselves in about six years. 1954: 10, 1954 to the Office Central des Chemins de Fer de la France d'Outre- Nigeria Mer for modernization of French West African Railways. Guaranteed by A general survey mission visited Nigeria Total; $7.5 million. from September to December 1953 to prepare recommendations to the Government for a pro- This loan will assist a modernization pro- gram of economic development. The mission had gram being carried out by the French West African 15 members: five from the Bank's staff; one from Railway Administration, which operates under the staff of the International Monetary Fund; the control of the Central Office for French Over- three consultants nominated by the Food and Ag- seas Railways. J. P. Morgan & Co. is partici- riculture Organization; and six consultants re- pating in the loan, without the Bank's guarantee, cruited by the Bank to advise on mineral resources, to the extent of $609,000 covering the first two power, animal husbandry, roads, public health, maturities falling due on December 1, 1956 and water resources and irrigation, and education and June 1, 1957. social services. The report of the mission is near- Efficient rail transport is essential to the de- ing completion. velopment of French West Africa: distances are great; river transport is generally impracticable; Northern Rhodesia and roads are costly to build and maintain. About Fiscal $14 million 19-year 4¾% loan of March four-fifths of the freight now carried by the rail- 1953: 11, 1953 to the Territory of Northern ways moves in overseas trade. Rhodesia for railway development. Guaranteed by the United Kingdom. During the second World War, the railways Total: $14 million. suffered seriously from lack of replacement parts Good progress has been made during the and could not be adequately maintained. In 1947 year on the three-year development program of the French authorities began a long-range program the Rhodesia Railways which this loan is helping to modernize equipment and increase operating to finance. The Railways serve Northern Rho- efficiency. Track, telecommunications and repair desia, Southern Rhodesia and Bechuanaland and facilities are being improved, rolling stock is being have been heavily overburdened because of the modernized, and steam locomotives are being re- exceptionally rapid development of the Rhodesias placed by diesels on all the four separate meter- since the war. About half the locomotives, pas- gauge lines which constitute the system. By the senger and freight cars to be purchased under the end of 1952 the equivalent of $45 million had program have been delivered and are in operation. been spent and about half the program had been Improvements are being made in existing lines completed. In the meantime, the volume of through track renewal and regrading; other traffic [19J and operating facilities are being modernized and $30 million 10-year 43Y4% loan of August The building of the new line from 28, 1953 for expansion of transpor- expanded. The bulldmg of the new lme from tation facilities. Fully disbursed in Bannockburn in Southern Rhodesia to the border June 1954. of Portuguese East Africa is proceeding on sched- Total: $110 million. ule, and is expected to be complete in the first The two loans made during the fiscal year, half of 1955. This new track will connect with like the earlier loans, were to provide additions a line being built by the Portuguese Government to electric power and transportation service made to the port of Lourenco Marques, and will give necessary by the rapid expansion of the economy. the land-locked territories served by the Rhodesia The fast growth of industry and the expansion of Railways a new outlet to the sea. gold mining operations in the Orange Free State during the postwar period have put a heavy and Southern Rhodesia continuing strain on public services, and especial- Fiscal $28 million 25-year 43Y4% loan of Febru- ly on the railway system and power supply. 1952: ary 27, 1952 to the Colony of South- The Bank has now lent $50 million to im- ern Rhodesia for power development. Guaranteed by the United Kingdom. prove transportation in the Union. The $20 mil- Total: $28 million. lion loan of January 1951 was used mainly for This loan is helping to finance imports of the import of locomotives and rolling stock, work- equipment and materials required in a program shop machinery and structural materials needed to expand the supply of electric power. The pro- through March 1953. The $30 million loan of gram is part of Southern Rhodesia's general plan August 1953 is helping to finance imports needed gram economic development during the four years from that time to March 1956; most of it is being for economic development during the four years applied to the purchase of steam and electric ending in March 1955. Power facilities are being locomoti e fre has and eq ent increased by the installation of about 230,000 financed by the two loans should help the rail- kilowatts of new thermal generating capacity, the et o m 0i n lways meet the increase of nine million tons of erection of some 2,000 miles of transmission lines, traffic expected in the two years ending March and the installation of additional distributing 1955. A small part of each loan was also al- equipment. located to the purchase of road vehicles and harbor During the program's third year, ending in craft. March 1954, 90,000 kilowatts were added to gen- The two power loans, amounting to a total erating capacity. The projects financed by the of $60 million, were made to the Electricity Sup- loan are progressing on schedule and by June ply Commission (ESCOM) which supplies about 30, 1954, $20.6 million of the loan had been three-quarters of the electricity consumed in the withdrawn. Union. ESCOM is carrying out an expansion pro- gram that will increase its generating capacity by Union of South Africa 80% between 1952 and 1958. The $30 mil- Fiscal $30 million 20-year 4% loan of January 23, lion loan of January 1951 paid for imports of 1951: 1951 to Electricity Supply Commis- electrical equipment during a two-year period; sion for power development. Fully disbursed by October 1953. it was completely disbursed in October 1953. $20 million 15-year 3344% loan of January The $30 million loan of August 1953 is helping 23, 1951 for expansion of transporta- finance needed for the continuation of tion facilities. Fully disbursed by to imports March 1953. the program; it is being applied particularly to Fiscal $30 million 10-year 43/4% loan of August the purchase of turbo-generators, boilers, struc- 1954: 28, 1953 to Electricity Supply Com- mission for power development. tural materials and electrical supplies. [20) AUSTRALASIA Australia Considering the three loans together, agri- Fisca* $100 million 25-year 4V4% loan of August culture and transportation are receiving the larg- 1951: 22, 1950 for development program. est amounts of the proceeds. Nearly $70 million Fully disbursed by December 1953. has been allocated to tractors, trucks and agricul- Fiscal $50 million 20-year 43/4% loan of July 8, tural machinery. Equipment such as combine 1953: 1952 for development program. Fiscal $54 million 15-year 43/4% loan of March harvesters, hay balers, corn planters and pickers 1954: 2, 1954 for development program. and specialized tractors have contributed to the Total: $204 million. recent gains in agricultural productivity in Aus- With the $54 million loan made in March tralia. During the years 1951-1953, some 3.4 1954, the Bank has lent a total of $204 million million acres were approved for inclusion in the to Australia to assist in carrying out large-scale War Service Land Settlement scheme. This land development in both public and private sectors has provided more than 2,000 new farm holdings, of the economy. Most of the equipment needed and much of the equipment financed by the Bank for these undertakings is being financed by Aus- is being used in the development of these farms. tralia, either locally or through its sterling re- In the 1953-54 season, production of most of sources. But Australia's needs for certain equip- Australia's main agricultural products had nearly ment essential to various development plans could reached the targets set for 1957-58. only be met in the dollar area, and it is for pur- About $67 million is being spent for im- chases of this equipment that the three loans have provement of the railways, for modernization and made dollar exchange available. The two earlier expansion of air travel service, and for better loans have now been almost completely disbursed. road transport. The re-equipment of railways, particularly the dieselization of sections of track Th motrcn.oni aigfrawd where provision of water for steam locomotives range of imported capital goods and equipment. whrpovsnofatrortenlcmtis rNgew ofrimportedlcapitalegoodslandeequipment. had been a serious problem, has brought about a Newt agicul tulyforalmpro equipmentwil bs ud opar- marked improvement in rail service at lower cost. ticularly for improving existing farms and open- The Bank's loans are also being used for ing new areas to cultivation. Transport equipment poe development, and ne thermal includes trucks suited to Australian road condi- plants wit a etotl enti api of 150,- tion, coponets or te doestc maufacure plants with a total generating capacity of 150,- tions, components for the domestic manufacture 000 kilowatts are either already in operation or of diesel locomotives, and 12 aircraft, for which will shortly be completed. Other funds from the loan will provide part of the cost, for Aus- the loans have been allocated to help increase pro- tralia's domestic and international air services. duction of coal and metals, and for the purchase Other goods include equipment to construct and of manufacturing equipment to increase produc- maintain roads, and for various manufacturing tion in the steel, automotive, food-processing, tex- industries. tile and other industries. EUROPE Austria natural resources remaining to be developed in Negotiation of a loan for the Reisseck-Kreu- Europe. The project, begun in 1947, was about zeck power project in southern Austria is well one-third completed and already in partial op- advanced. This project will be an important step eration at the end of 1953; and the contemplated in realizing Austria's potential for the generation loan, consisting primarily of Italian lire and Swiss of hydroelectric power, which is one of the chief francs and amounting to the equivalent of $12 [211 million, would provide about half the funds Finland necessary to complete it. Work yet to be done Fiscal $12.5 million 15-year 4% loan of August on the project includes the expansion of generat- 1950: 1, 1949 to Bank of Finland for de- ing capacity at the main power station from 25,- velom nt ofpower, wood-products industries and limestone powder pro- 000 to 104,000 kilowatts; the construction of a duction. Fully disbursed by December new 8,000-kilowatt station; a pumping station; 1953. dams, tunnels, canals and other civil works. The $2.3 million 2-year 3% loan of October 17, 1949 for equipment for timber project is expected to be complete by the end of production; reduced at request of bor- 1958. About one-third of the power produced rower on September 30, 1951 to $2.1 million. This loan has been completely by the project will be exported to Italy under a repaid. long-term contract. Fiscal $20 million 18-year 43/4% loan of April 1952: 30, 1952 to Bank of Finland for devel- opment of power and wood-products Belgium industries and for agricultural im- Firc.il $16 million 20-year 414%I loan of March provement. 1949: 1, 1949 for steel plants and electric Fiscal Swedish kronor 18 million ($3.48 million) 1949. 1 1949wfr. selpat 1953: 18-year 4¾/%' loan of November 13, power. 1952 to Bank of Finland for woodl- Fiscal $30 million 25-year 4½2%c loan of Septem- products industries. 1952: ber 13, 1951 for development of the Belgian Congo. Made simultaneous- Total: $38.08 million ($ equivalent), net of can- ly with loan of $40 million to the Bel- cellations. gian Congo (See page 18). Bank funds made available for the moderni- Total: $46 million. zation and expansion of the wood-products indus- The $16 million loan has been almost com- try have amounted to the equivalent of more than pletely disbursed. A balance of $1.8 million not $23 million: $10.5 million from the loan of needed for the original projects has been reallo- August 1949, $9.5 million from the loan of cated to finance part of the cost of a hot strip fin- April 1952, and all of the 18 million Swedish ishing mill being built by S.A. d'Ougr6e-Marihaye. kronor (about $3.48 million) lent in November Shipment of equipment began late in 1953; the 1952. In each case the Bank of Finland, which mill is expected to be complete in July and to is the borrower, has re-lent the funds to well- begin operations in August 1954. established firms in the industry for the purchase All but $1.2 million of the $30 million loan of equipment. The loan of August 1949 was made in September 1951 for the development Of fully disbursed in December 1953. The projects the Belgian Congo has now been disbursed. The being financed under the later loans have pro- gressed satisfactorily and no difficulties are ex- loan was designed to reduce the pressure on Bel- g pected which would delay their completion by gium's foreign exchange position resulting from ted of 1955. By the impronts Belgium's contribution to the development of the should ru i n the increas enpr Congo. Withdrawals under the loan are not re- dutecact in sulphate p,5C lated to specific imports but are geared to the rate in newsprint and 501%o in kraft and writing paper. Of public investment in the Congo Development Power projects being financed with the help Plan as a whole. of $9.5 million from the $20 million loan of Denmark April 1952 are somewhat behind schedule and are now expected to be completed in 1958. They Fiscal $40 million 25-year 41/4c-% loan of August will add 275,000 kilowatts to Finland's generat- 1948: 22, 1947 for reconstruction. Fully dis- bursed by March 1949. ng capacity and icrease supplies of power by Total: $40 million. one-third. {22} Most of the $1 million which had been ing the general economic and financial situation allocated to the purchase of agricultural equip- and evaluating the Government's long-term in- ment out of the $20 million loan has been dis- vestment program. The mission noted the prog- bursed. The equipment arrived in Finland in ress that had been made in achieving balance of October 1953 and because of favorable weather payments equilibrium, increasing production and conditions was in operation well into the winter stabilizing the value of the currency. On the basis months. It is being used to clear land for settle- of the mission's findings the Bank has informed ment, to drain marshlands, clear river courses the Government that it believes a close and con- to improve timber floating operations, and to open tinuing relationship can be established between new roads into the forests. the Bank and Greece. The Bank plans to send The Government has discussed with the Bank a mission to Greece in July to begin the examina- the possibility of additional loans in various Eu- ropean currencies mainly for the wood-products of if poe proposals. industries and electric power. A Bank mission Early in the year the Government began to visited Finland in April and May 1954 to review study the problem of the defaulted internal and the economic situation and to study possible external prewar debt. In June 1954 the Gov- projects. ernment invited representatives of the foreign France bondholders to negotiate a settlement. Fiscal $250 million 30-year 41/4% loan of May Iceland 1947: 9, 1947: to Cr6dit National for recon- struction. Fully disbursed by January Fiscal £875,000 ($2,450,000) 22-year 438% loan 1948. 1951: of June 20, 1951 for power develop- Total: $250 million. ment. Fully disbursed by February A loan of $7.5 million for modernization of 1954. the railways in French West Africa, made to the Fiscal £360,000 ($1,008,000) 22-year 4'/2% 1952: loan of November 1, 1951 for agri- Central Office for French Overseas Railways on cultural development. Fully disbursed June 10, 1954, is guaranteed by the Government by March 1953. of France. A description ofteloanisgivenon Fiscal $854,000 equivalent in European currencies of France. A description of the loan iS given on 1953: 17-year 43/4% loan of August 26, page 19. 1952 for a fertilizer plant. Fully dis- bursed by April 1954. Germainy Fiscal $1,350,000 equivalent in European curren- In June 1953 discussions were begun be- 1954: cies 22-year 5%' loan of September 4, 1953 to Iceland Bank of Development tween the Government and the Bank about the for agricultural development. possibility of Bank loans to the Industriekredit- £90,000 ($252,000) 12-year 43¾/,% loan of September 4, 1953 to Iceland Bank of bank for the re-equipment of certain export in- Development for building to house dustries, and to August Thyssen Hutte for the radio transmitter equipment. construction of a cold strip rolling mill. In Febru- Total: $5,914,000 ($ equivalent). ary 1954 the Government withdrew its request The Bank has now made two loans to help for loans for these projects, when it became clear a program for agricultural development. The that the dollar requirements were much less than £360,000 loan of November 1951 helped to pay had originally been expected and were not of suffi- for imports needed during 1952; the $1,350,000 cient magnitude to require Bank assistance. loan of September 1953 is financing imported Greece equipment and materials needed through 1954. A Bank mission spent several weeks in The agricultural program aims to increase Greece during September and October 1953 study- farm production by 50% by 1965, and should (23 1 improve the country's foreign exchange position tions were completed and formally opened in the considerably, through import savings and export latter part of 1953. The Sog station is supplying earnings. Good progress has been made toward electricity to Iceland's capital, Reykjavik, and to achieving the annual targets established for the the surrounding area, in which are concentrated program. There was a 15 % increase in the num- 50%o of Iceland's population and over 80% of ber of sheep from 1952 to 1953; more than 7,000 its industries. It should meet all demands in the acres of new grassland were cleared and seeded; area until about 1957. The Laxa station has in- and sheds were built to house 1,200 cattle and creased the supply of electricity to an area which 11,800 sheep. includes Akureyri, the second largest city in Ice- The £90,000 loan of September 1953 was land, and should meet its growing power require- made to finance the construction of a building to ments until about 1960. house some of the radio equipment operated by The $854,000 loan for the construction of the Icelandic Post and Telegraph Administration a nitrogen fertilizer plant was fully disbursed on for civilian aircraft flying over the North Atlantic. April 15, 1954. The plant was completed early The equipment is at present sheltered in an in- in 1954 and began operating in April. At full adequate temporary structure and a new building capacity it can produce 18,000 tons of ammonium is needed to assure adequate and reliable service. nitrate annually, which will meet Iceland's needs Construction started shortly after the loan was for fertilizer and furnish a surplus for export. made and has since progressed satisfactorily. The new building should be completed and the equip- Italy ment transferred and installed by September 1954. Fiscal $10 million 25-year 41/2% loan of Octo- Under an arrangement administered by the 1952: ber 10, 1951 to Cassa per Opere Stra- ordinarie di Pubblico Interesse nell' International Civil Aviation Organization Italia Meridionale (Cassa per il Mez- (ICAO), the cost of the radio service is paid from zogiorno) for development of south- contributions by 11 countries, including Iceland, ern Italy. Fully disbursed by Septem- whose airlines operate over the North Atlantic. Fiscal $10 million 25-year 5% loan of October ICAO has arranged for increased contributions 1954: 6, 1953 to Cassa per Opere Stra- ordinarie di Pubblica Interesse nell' from these countries to assure sufficient revenue Italia Meridionale (Cassa per il Mez- to service the Bank's loan. Maintenance of the zogiorno) for development of south- ern Italy. radio service will help Iceland to continue to earn foreign exchange from international aviation, and Total: $20 million. benefit the airlines of the participating countries. These two loans were made to meet the in- Both loans made during the year were made creased demand for dollar imports arising from to the Iceland Bank of Development, established expanded economic activity and employment gen- in 1953 along lines recommended by the Inter- erated by the Government's program for the de- national Bank. In February 1954 the Minister velopment of southern Italy and the islands of of Finance notified the Bank that the Iceland Bank Sicily and Sardinia. of Development would in future be responsible The program, being administered by the for the administration of all Bank loans to Ice- Cassa per il Mezzogiorno, has been extended for land. two years and now is intended to cover a 12-year The loan of £875,000, made in June 1951 period ending in 1962. It contemplates expendi- to pay for imports from Europe for hydroelectric tures of about 100 billion lire ($160 million) a plants on the Sog and Laxa Rivers, was complete- year. Three-quarters of the expenditures will be ly disbursed in February 1954. Both power sta- for the development of agriculture through land t241 reclamation, irrigation, flood control and soil con- These loans were sold to private in- vestors in 1948 and 1949, and were servation. About eight million acres of land will repaid by July 1953, five years before be reclaimed. Of this, about 900,000 acres, or final maturity. 10 times as many as before, will be irrigated; the Fiscal $15 million 15-year 4% loan of July 26, 1950: 1949 to Maatschappij tot Financiering rest will be drained, leveled and cleared. About van het Nationaal Herstel N.V. (Her- a quarter of the funds will be spent on roads, water stelbank) for industrial re-equipment projects; reduced at request of bor- works and tourist facilities. Completion of 44 rower to $7.5 million, which amount aqueducts will provide drinking water for about had been disbursed by December 1953. 1,000 communities. The construction of some Fiscal $7 million 6-year 41/V8% loan of March 1952: 20, 1952 to Koninklijke Luchtvaart 1,300 miles of new roads and the repair of 6,400 Maatschappij N.V. (KLM) for pur- miles of existing roads are to be carried out by chase of aircraft. Fully disbursed by the end of 1954. ~~~~~~~~~August 1953. the end of 1954. Total: $221.5 million, net of cancellations. Disbursement of the Bank's loans has been Final disbursements under the $15 million geared to investment expenditures by the Cassa loan of July 1949 (subsequently reduced to $7.5 per il Mezzogiorno. The first loan was completely million) to the Herstelbank were made in Decem- disbursed in September 1953. The lira counter- ber 1953. The textile industry absorbed about part of the two loans is being re-lent by the Cassa half the proceeds, and the chemical industry about to finance projects located within the regions be- one-third; the rest was divided among firms in the ing developed. Projects financed with the counter- metal, electrical, glass and paper industries. part of the first loan have included a superphos- The $7 million loan to KLM (Royal Dutch phate plant, a welded tube plant, two cement Airlines) was completely disbursed in August plants and a woolen mill; the counterpart of the 1953; by the end of December 1953, all the air- second loan is to be used for power development. craft being purchased under KLM's modernization and re-equipment program had been delivered and Luxembourg put into service. The Bank's loan financed about Fiscal $12 million 25-year 41/4e%O loan of August one-fifth of the cost of the program, which included 1948: 28, 1947 for equipment for steel mill the purchase in the United States of 23 aircraft,. and railroads; reduced at request of 17 for inter-continental flights and six for Euro- borrower on December 19, 1949 to $11.8 million, which was disbursed pean routes. by the end of that month. Total: $11.8 million, net of cancellations. Norway The Netherlands Fiscal $25 million 20-year 43/40%o loan of April 1954: 8, 1954 for economic development. Fiscal $195 million 25-year 4¼4% loan of August Total: $25 million. 1948: 7, 1947 for reconstruction. Fully dis- bursed by June 1948. The general lines of Norway's investment Fiscal $12 million 10-year 39/16% loans of July policy have been set out in a long-term program 1949: 15, 1948 to N. V. Stoomvaart Maat- schappij "Nederland" (two loans of for the period 1954-1957. Particular emphasis $2 million each), N. V. Vereenigde is being laid on export industries, which account Nederlandsche Scheepvaartmaatschap- pij (one loan of $2 million), N. V. for more than one-third of the country's total pro- Nederlandsch - Amerikaansche Scoom- duction, and on shipping, which is one of Nor- vaart-Maatschappij 'Holland-Amerika , Lijn" (one loan of $2 million), and way's major sources of foreign exchange earnngs. N. V. Rotterdamsche Lloyd (two loans While the Bank's loan is intended to help of $2 million each), for purchase of ships. Fully disbursed by August 1948. Norway carry forward economic development in [251 general, disbursements will be linked to the de- equipment from abroad. These projects are sub- livery of merchant ships being built in foreign mitted to the International Bank for approval be- shipyards. During 1954 more than one-fifth of fore loans are made. total Norwegian investment will be in shipping. From the start of its operations in 1951 to In general, Norwegian ship owners have sufficient the end of May 1954 the Development Bank had resources and credit in their own currency to fi- granted 221 loans amounting to 98.5 million nance this expansion. For the economy as a Turkish liras (about $35 million). The Devel- whole, however, the payments to be made abroad opment Bank's loans were made for a wide variety for ships impose a heavy burden. Largely as a of industrial projects, the main fields of activity result of these payments, Norway will need addi- being cotton and wool processing, the manufacture tional amounts of foreign exchange estimated at of building materials, and food processing. Indi- the equivalent of $52 million in 1954. The vidual loan applications approved by the Interna- Bank's loan will cover $25 million of this amount. tional Bank as of June 30, 1954 totaled the equiv- By the end of June 1954 the Bank had disbursed alent of $9.6 million and provided foreign ex- $10 million of the loan. change for 33 of these projects. Two United States commercial banks are Since its establishment the Development participating in the loan to the extent of $2,016,- Bank has made an important contribution to the 000, without the Bank's guarantee. The Bank of development of private industry in Turkey, not America has purchased $1,512,000 and The Phil- only through its own investments but also by adelphia National Bank $504,000 of the first four stimulating investment from other sources. As a maturities falling due semi-annually from October rule, the capital invested by the Development 15, 1957 through April 15, 1959. Bank's borrowers in each project has exceeded the Turkey amount lent by the Development Bank itself. The Fiscal P12.5 million 25-year 4V49loan of July Development Bank has also mobilized private Fscal $12.5 million 25-year 41d4% loan of July capital through the issue of its own stock, and the 1951: 7, 1950 for development of ports. $3.9 million 18-year 37/8% loan of July 7, successful sale of new shares soon after the second 1950 for grain storage facilities. International Bank loan was made attests to the $9 million 15-year 3YVi% loan of October high standing that the Development Bank has 19, 1950 to Industrial Development Bank of Turkev for development of among investors in Turkey. The issue, which was private industry. equal in amount to the original share capital of Fiscal $25.2 million 25-year 4¾4% loan of June 12.5 million Turkish liras, was oversubscribed, 1952: 18, 1952 for multipurpose dam and power facilities on the Seyhan River. and the number of shareholders rose from 33 to Fiscal $9 million 15-year 4;7/8% loan of Septem- 287. To further replenish its Turkish lira funds, 1954: ber 10, 1953 to Industrial Develop- the Development Bank also obtained a loan of ment Bank of Turkey for develop- ment of private industry. T.L. 6.25 million from the Central Bank and the $3.8 million 21½2-year 47/8% loan of Feb- Is Bank of Turkey. ruary 26, 1954 for development of ports. In February 1954 the International Bank Total: $63.4 million. made a loan of $3.8 million to supplement the A second loan of $9 million was made to $12.5 million lent in July 1950 for a series of the Industrial Development Bank of Turkey in port improvement and construction projects. September 1953. This, like the earlier loan, fur- This supplemental loan will cover an increase in nished the Development Bank with foreign ex- foreign exchange requirements brought about by change to re-lend to private industrial concerns technical revisions in the projects and by increased for projects requiring imports of machinery and prices of imported equipment and materials. [ 26 1 Since the time of the $1 2.5 million loan the stantial progress had been made on the dam foun- physical volume of Turkey's foreign trade has in- dation. The major permanent equipment has creased by about 90% and domestic trade has also been ordered and contract prices for the equip- increased greatly. The improvements being car- ment were somewhat lower than the estimates at ried out are those most urgently needed to relieve the time the loan was negotiated. harbor congestion and to raise operational effici- The .ukurova Utility Power Company, ency. which will own and operate the power facilities Most of the engineering designs of the port of the Seyhan project, has been licensed by the projects have been completed. The permanent Government. Private investors, who have a ma- equipment, predominantly for handling cargo, has jority interest in the Company, have subscribed 14 been delivered at six ports and most of it is in op- million Turkish liras of the issued capital; of rhis eration. Construction is under way on the ex- amount 4 million has been paid in and another pansion of the ports of Salipazar and Haydarpasa 3.5 million will be paid by December 1954. A on the Bosphorus. The mechanical equipment State Waterworks Administration, which was for handling grain, chrome ore and coal at Isken- established by law in December 1953, will be derun on the Mediterranean has been ordered and in charge of completing, operating and maintain- a contract has been awarded for the substructure ing the irrigation facilities of the project. work. Bids have been invited for the construc- tion at Alsancak (the port of Izmir) on the Yugoslavia Aegean, and the preliminary work of preparing the site has been completed on the new port at Fiscal $2.7 million 2-year 3% loan of October Samsun on the Black Sea. 1950: 17, 1949 for equipment for timber production. Fully disbursed by De- Most of the projects being financed under the cember 1950, and now completely $3.9 million grain storage loan of July 1950 have F repaid. Fiscal $28 million equivalent in European cur- been completed. The 29 new steel storage sheds, 1952: rencies 25-year 4½2% loan of Octo- at 21 inland points, have been built; most of them ber 11, 1951 for power, mining, in- were available for storing the 1953 harvest and . dustrial and other projects. Fiscal $30 million equivalent in European cur- all of them are ready for 1954. Eight of the 1953: rencies 25-year 478F% loan of Febru- nine inland silos have been completed; three of ary 11, 1953 for power, mining, in- them were in operation by December 195 3 and all dustrial and other projects. of them will be ready for 1954 crops. Construction of the new reinforced concrete silos at the ports The non-dollar loans of October 1951 and of Iskenderun and Haydarpasa will be finished by February 1953 have financed the import of key December 1954; the silo at the port of Izmir is items needed for projects in all the major sectors scheduled for completion by mid-1955. The of the economy. Good progress has been made 2,000 tarpaulins, purchased with the loan, are toward completing the more than 50 projects al- being used throughout the country where ware- though the severe winter in 1954 hampered con- house space is not available. struction of several. A number of industrial Progress on the multipurpose dam and projects, for example the Pancevo glass plant and power facilities on the Seyhan river, for which a the Blazuj plywood mill, have been completed loan of $25.2 million was made in June 1952, is and are in operation. Others, such as the Sisak good. The detailed engineering design of the seamless pipe mill and the Zenica steel mill, al- project has been completed. By December the though not completed, are already in partial river had been diverted and by March 1954 sub- operation. In addition, Bank-financed invest- [271 ments have increased the effective capacity of The Bank has followed the economic situa- electric power stations and distribution networks, tion in Yugoslavia closely during the year, and coal and metal mines and industrial plants. All has had frequent discussions with Yugoslav au- but a few of the projects are expected to be com- thorities on the course of their investment pro- plete and in operation by the end of 1954. gram. WESTERN HEMISPHERE President's Visit to Latin America $18.79 million 20-year 47/8% loan of Feb- ruary 24, 1954 to Brazilian Traction, In February and March 1954 the President Light and Power Company, Limited, of the Bank spent four weeks visiting member for power development. countries in Central and South America, and dis- Total: $194.09 million. cussed their problems of economic development. The $7.3 million loan of July 1953 is being The countries visited were El Salvador, Honduras, used to finance imported equipment for a hydro- Nicaragua, Costa Rica, Panama, Ecuador, Uru- electric power project in the State of Minas guay and Brazil. At the invitation of the Gov- Gerais. The co-borrowers are the Centrais Eletri- ernment, he also spent a few days in Argentina. cas de Minas Gerais, a state-owned power company, and one of its operating subsidiaries, the Compan- Brazil hia de Eletricidade do Alto Rio Grande. The proj- Fiscal $75 million 25-year 4% loan of Jan- ect includes the building of a dam at Itutinga Falls 1949: uary 27, 1949 to Brazilian Traction, on the Rio Grande, the construction of a power Light and Power Company, Limited, station with 24,000 kilowatts of generating for power and telephone development. Fully disbursed by December 1953. capacity, and the erection of transmission lines and Fiscal 15 million 25-year 4¼44% loan of May 26, substations. Itutinga lies within the industrial 1950: 1950 to Companhia Hidro Eletrica do complex of Rio de Janeiro, Belo Horizonte and Sao Francisco for power development. Volta Redonda. The area contains important de- Fiscal $15 million 25-year 414% loan of Jan- 1951: uary 18, 1951 to Brazilian Traction, posits of iron, manganese and tin-bearing ores. Light and Power Company, Limited, Industry will take about 80% of the power to be for power development. Fully dis- generated at the new plant and the remainder will bursed by December 1953. Fiscal $25 million 25-year 43/4% loan of June be taken by public utilities serving three small 1952: 27, 1952 to Comissao Esradual de En- towns. ergia El&trica of Rio Grande do Sul for power development. The $12.5 million loan of December 1953 $12.5 million 15-year 45/8% loan of June to the Government is the second the Bank has 27, 1952 for improvement of railways. made for an emergency program to improve the Fiscal $3 million 5-year 41/4% loan of April 30, services of the Central Railroad. The first loan, 1953: 1953 for highway improvements, also for $12.5 million, was made in June 1952 to Fiscal $7.3 million 20-year 5% loan of July 17, finance the equipment most urgently needed to 1954: 1953 to Centrais Eletricas de Minas Gerais, S.A. and Companhia de Elet- improve the Central's freight service. The more ricidade do Alto Rio Grande for pow- recent loan is for the suburban services of the Cen- er development. tral and will help to finance the import of 100 $12.5 million 15-year 47/8% loan of De- cember 18, 1953 for improvement of electric motor cars, 100 trailer cars, parts for an- railways. other 100 trailer cars to be assembled in Brazil, $10 million 20-year 5%o loan of December and spare parts. The Central's suburban service is 18, 1953 to Usinas Eletricas do Para- an important means of transport for industrial, napanema, S.A. for power develop- ment. commercial and government workers living in the {281 suburbs of Rio de Janeiro and in the areas ad- the help of the Bank have already added over joining the Federal District. Properly equipped 400,000 kilowatts of generating capacity to the and operated, the service should be the best and Brazilian Traction system. The only project not cheapest form of mass suburban transport in the essentially complete is the Nilo Pecanha (for- area. merly Forqacava) power station, in the Rio de The $10 million loan of December 1953 is Janeiro area, where two 65,000-kilowatt generat- helping to finance the foreign exchange costs of ing units out of a total of six have yet to be a hydroelectric project consisting of a dam across installed. the Paranapanema River at Salto Grande, a hydro- Work has continued to go forward on the electric plant with a generating capacity of 60,000 hydroelectric project on the Sao Francisco River, kilowatts, and associated transmission and distribu- for which the Bank made a $15 million loan to tion facilities in the States of Sao Paulo and Par- the Companhia Hidro Eletrica do Sao Francisco in ana. The power will serve rapidly expanding 1950. Construction of the power station and in- ana.~~~~~~~~~~ stallation of the equipment were expected to be agricultural and urban centers in this coffee-grow- ing region, and will enable the Sorocabana Rail- complete during the second half of 1954; and the road, one of the important railways in Sfio Paulo, connecting transmission lines to Recife and Sal- to electrify more of its system. vador have been erected. Construction difficul- ties, caused by the extremely swift flow of the The $18.79 million loan of February 1954 river and by irregularities of the river bottom. tO the Brazilian Traction, Light and Power Coin- have delayed the completion of the dam across pany will finance imported equipment to be in- the main stream. stalled in a 160,000-kilowatt thermal electric Progress on the hydroelectric and thermal power plant at Piratininga near the city of Sao power projects in the State of Rio Grande do Sul, Paulo. To meet the demand for additional pow- being financed with the help of the $25 million er in this important industrial center, Sao Paulo loan to the Comissao Estadual de Energia E1et- Light and Power Company, a subsidiary of Bra- rica (CEEE), has been considerably slower than zilian Traction, began construction of the plant in expected. This is due to delays in placing orders 1952. A thermal power plant was chosen be- for equipment and to difficulty in obtaining a cause it could be more quickly brought into opera- sufficient number of experienced engineers for tion than additional hydroelectric capacity and CEEE. A number of European engineers, how- because eventually it would guarantee a larger ever, have now been engaged by CEEE. The amount of continuous power from the Company's projects are part of a State program for the con- hydroelectric system. Droughts have frequently struction of new and the enlargement of existing reduced hydroelectric output in the Sao Paulo power generating and transmitting facilities that area, and in the past three years the waters in the will add about 130,000 kilowatts to generating Company's reservoir have fallen to one-fifth of capacity within the State. normal storage. The Piratininga plant is sched- Satisfactory progress is now being made un- uled for completion by the latter part of 1954. der the Bank's $3 million loan for a program of The $75 million loan of 1949 and the sup- highway maintenance and construction in the plemental credit of $15 million in 1951 have State of Rio de Janeiro. Earlier administrative been financing projects within an 8-year program difficulties in getting import licenses for equip- of Brazilian Traction to expand its electric power ment have been overcome. Equipment is now and telephone services in the areas of Sao Paulo arriving in substantial quantities and the pace of and Rio de Janeiro. Most of the projects are com- construction and maintenance work should there- plete; and power installations financed with fore be much accelerated. [29 1 To establish closer contact between the Bank toward exploring possibilities in the interior of and Brazil, the Bank has established a Resident the colony for the development of hydroelectric Representative in Brazil with headquarters in Rio power, timber production, cattle raising and min- de Janeiro. He took up his duties in May 1954. ing. British Guiana British Honduras In August 1953 the Bank transmitted to the At the request of the Government, a Bank Governor of British Guiana the report of the gen- representative visited British Honduras in June eral survey mission which visited the colony in 1954 to discuss the colony's development program. February and March 1953. In March 1954 the Chile Legislative Council approved in principle an ex- cal 3 paddand accelerated development program for Fiscal $13.5 millio4n 20-year 41r2% loan FofMarch panded adaclrtddvlpetpormfr 1948: 25, 1948 to Corporaci6a de Fomento the years 1954 and 1955 based largely on the de la Producci6n (Fomento) and Em- mission's recommendations. presa Nacional de Electricidad, S.A. (Endesa) for power development. The mission recommended an investment $2.5 million 61/½-year 3¾z% loan of March program designed to increase national income by 25, 1948 to Corporaci6n de Fomento . , . ~~~~~~~de la Producci6n fo r ag,ricultural 20%' and per capita income by 6%fo over the nextdel rucinf-aiutrl 20 and per capita income by 6% over the next machinery. Fully disbursed by Decem- five years. The program would require govern- ber 1949. ment expenditure of 66 million British West In- Fiscal $1.3 million 10-year 43,)% loan of October 1952: 10, 1951 to Corporaci6ni de Fornento dies dollars (equivalent to U.S. $38.5 million) de la Producci6n for exploratian and over the five years from 1954 through 1958. use of water resources of the Rio Most of this amount, in the opinion of the mis- Elqui Valley. sFiscal $20 million 17-year 5%6 loan of September sion, could be financed from the internal and ex- 1954: 10, 1953 to Corporaci6n de Fomento ternal resources normally available to the Govern- de la Producci6n and Compamia Man- ment. ufacturera de Papeles y Cartones S.A. ment. ~~~~~~~~~~~~~~for construction of paper and pulp The largest investment was recommended mills. for agriculture. The mission emphasized the im- Total: $37.3 million. portance of increasing the production of food The loan of $20 million made in September crops and recommended, among other things, the 1953 to a privately-owned corporation, Compania expansion of agricultural research and extension Manufacturera de Papeles y Cartones, and to the services as aids to the small-scale farming which Corporaci6n de Fomento de la Produccion as co- is becoming more customary in British Guiana. borrower, is helping to finance the construction of Improvement of transportation and com- a chemical pulp mill and a newsprint paper mill munications, and especially of roads, was regarded near Concepci6n. The newsprint paper mill will by the mission as likewise deserving priority in make about 44,000 tons of newsprint and 6,600 the public investment program. Proposals were tons of boxboard a year from mechanical pulp, also made for expanding industries based on tim- chemical pulp and scrap paper. The chemical pulp ber and agricultural resources, and for improve- mill will make about 50,000 tons of chemical ments in education and housing. pulp and 10,000 tons of kraft paper annually. The mission urged that the groundwork be The main equipment for the mills has been or- laid now for projects to be undertaken after 1958, dered and the preparation of the plant sites is well the last year of its proposed program. It em- under way. phasized particularly the desirability of studies The establishment of the new mills will be looking toward new land reclamation projects and an important step toward the fuller use of Chile's {301 extensive forest resources. In 1952 the Bank-FAO rest of the Bank's loan would be used to pay for agricultural mission stressed the importance of equipment to pump the water for irrigation. forestry, pointing out that timber resources could become 2n important source of foreign exchange Colombia earnings and a valuable means of diversifying Fiscal $5 million 7-year 31V2% loan of August Chilean exports. The new plants will not only 1950: 19, 1949 to Caja de Cr6dito Agrario, Industrial y Minero for agricultural eliminate the neecd tO import chemical pulp and machinery; reduced at request of bot- newsprint but will produce a surplus of these rower on April 2, 1951 to $4.9 mil- products for expcrt. lion, which had been disbursed by February 1951. Work on the hydroelectric power projects Fiscal $3.53 million 20-year 4% loan of Novem- carried out bv Endesa under the $13.5 mil- 1951: ber 2, 1950 to Central Hidroelectrica being del Rio AnchicayA, Limitada, for pow- lion loan of March 1948 has been proceeding er development. ,atisfactorilyduring the year. Endesa's operations $2.6 million 20-year 4% loan of Decem- ber 28, 1950 to Central Hidroel6c- continue to be hampered by a shortage of local trica de Caldas, Limitada, for power currency but it is hoped that nearly all of the pro- development. Fully disbursed by July gram wili be completed by the end of 1954. One 1953. ofam the three generating units to be installed atthe$16.5 million 10-year 37/s% loan of April of the three generatinc, units to be installed at the 10, 1951 for highway construction and Los Cipreses plant near Santiago (two of which rehabilitation. are being financed by the Bank) is expected to go Fiscal $2.4 million 20-year 41½5% loan of No- t1, 1 1952: vember 13, 1951 to Central Hidro- into operation shortly; the second unit will be el6ctrica del Rio Lebrija, Limitada, for ready by the end of 1954. Most of the transmis- F power development. Fiscal $25 million 25-year 43/4% loan of August sion system has been constructed, and the inter- 1953: 26, 1952 for construction of the Mag- connection between the Los Cipreses and the dalena Valley Railroad and centrai repair shops. Abanico ne+wcrk which serves the Concepci6n Fiscal $14.35 million 10-year 43/4% loan of Sep- area is scheduled for completion by the end of 1954: tember 10, 1953 for highway rehabil- 1954. The construction of the 2,000 kilometers itation and maintenance. Toz;al: $69.28 million, net of cancellations. of distribution lines in rural areas is almost fin- ished. Work is now proceeding on the mechan- The $14.35 million highway loan of Sep- ical irrigation part of the project. All orders have tember 1953, like the loan of $16.5 million, will benlaedfotequpmn andtestdribe used to finance a part of the Government's pro- been stared in two areas, gram for rehabilitation, extension and mainte- has been started in two areas.t Work onteispaeofteluRv nance of the national highway system. By the Work on the first phase of the Elqui River end of March 1954, 880 miles of road had been project, for which the Bank made a loan of $1.3 reconstructed and 120 miles of new roads com- million in Octcber 1951, was completed during pleted; 360 miles of paving was finished on re- the year. Funds were used to buy drilling and constructed and new roads. The contractors were other equipment to measure the underground carrying out maintenance on 1,700 miles of high- wvater rescurces of the Elqui River Valley in north ways; and the Bank was assisting the Ministry of central Chile. The data collected from this phase Public Works in the staffing and organization of of the project have been submitted to the United a special Maintenance Division. States Bureau of Reclamation for analysis and Except for continuing maintenance, it is now the final report fronm the Bureau is expected to be expected that the program will be completed in ready in August 1954. If the report were to the first part of 1956. Some effects are already show that there is enough water in this area, the apparent. Travel time for motor vehicles on the [31 ) Armenia-Ibagu6 stretch of the Buenaventura-Bo- with the National Planning Office, established in gota highway, for instance, has been cut in half 1952 as a result of work begun when the Bank's by widening and better grading of the road; and General Survey Mission visited Colombia in 1949. protracted closings of the highway due to land- The leave of absence of the Bank staff member slides have been avoided since construction be- who had served as Planning Adviser to the Office gan. Costs of freight hauled over the Buenaven- for the past year has been extended to May 1955. tura-Bogotd road have been reduced by almost half The work of the highway engineering consultant since 1950. On another stretch of highway link- who had been stationed in Colombia since 1951 ing the important provincial trading centers of was completed in January 1954. Pereira and Cartago, the travel time has been cut by 60 % and traffic volume has nearly doubled. Costa Rica The construction of a railroad in the Mag- At the request of the Government, a Bank dalena Valley, being financed by $20 million of economist went to Costa Rica in May 1954 to the $25 million loan of August 1952, is proceed- bring up to date the Bank's information on the ing satisfactorily. Work began in January 1953 economy; and the Bank's Director of Marketing and although somewhat behind the original paid a short visit to make recommendations for the schedule, by April 1954 satisfactory progress had improvement of the domestic bond market. been reported on the construction of some 60 miles of grading. No use has been made as yet of Cuba the $5 million of the loan which is set aside for Two members of the staff visited Cuba in the improvement of railway workshops. June for discussions with Government officials and Of the three hydroelectric projects financed leading members of the banking and business com- with the help of Bank loans, two are in operation, munity about possible fields for collaboration be- and construction of the third should be completed tween Cuba and the Bank. by the end of 1954. The Caldas project has been supplying power to the city of Manizales since Ecuador 1951, and the expansion of the distribution sys- Fiscal $8.5 million 10-year 45g8% loan of Feb- tem should be completed during 1954. The Le- 1954: ruary 10, 1954 to Comite Ejecutivo de Vialidad de la Provincia del Guayas brija plant began operations in March 1954 and for highway construction. has quadrupled the supply of electricity in Buca- Total: $8.5 million. ramanga. The Anchicaya project is expected to The loan will meet the foreign exchange start supplying power to Cali and the surrounding costs of a four-year highway construction program area by the end of 1954. to be carried out by the Highway Committee of Although the $5 million loan of August the Province of Guayas. The Province covers a 1949 for the purchase of agricultural machinery large part of Ecuador's coastal plain, where agri- has been fully disbursed and about half repaid, cultural development has been severely hampered the Caja de Cr6dito Agrario has been able to con- by lack of roads and high transportation costs. tinue imports under the loan through a revolving Existing roads are for the most part unpaved and fund. At the end of the year under review, near- become impassable in the rainy season. The pro- ly $15 million worth of machinery had been gram includes the conversion to all-weather high- purchased out of the fund. A Bank mission left ways of eight of the existing roads radiating from for Colombia at the end of June to discuss a sec- Guayaquil, the country's chief port; the construc- ond loan for agricultural machinery. tion of a central road maintenance shop; and the The Bank has continued close collaboration acquisition of ferries which will operate between {321 Guayaquil and Duran, the terminus of the railroad pected to go into operation in September. They from Quito, the capital. will double electric generating capacity in El Sal- Most of Ecuador's cotton, rice and sugar, as vador. Nevertheless the growth in the demand well as the bulk of the chief export crops, bananas, for power, stimulated by the Lempa River project, cacao and coffee, are produced in the coastal re- is such that more capacity will soon be needed. A gion. This area comprises about 17 million acres third 15,000-kilowatt unit, financed entirely from of land, of which only 1.25 million acres are cul- local sources, has already been ordered and the tivated. The new highways can be expected to possibility of further hydroelectric development of open new lands to cultivation and lead to more the Lempa River is under active study. effective use of lands now under cultivation. Most of the electricity from the new plant is Since the loan was granted there have been being distributed in San Salvador, the capital, and changes in the composition of the Highway Com- in San Miguel, a key industrial center. It is per- mittee which have postponed the opening of the mitting the establishment of new factories and loan for disbursements to the borrower. providing a basis for expanding capacity in exist- ing plants making cement, shoes, flour, metal In May 1954 the Government created an furniture, asbestos sheet, fertilizer, textiles, leather goods, construction materials, soap, pottery and along lines suggested by the Bank. At the re- matches. Agriculture will be benefited by the quest of the Government the Bank is assisting in establishment of power-operated pumping stations organizing the work of the Board and in recruit- for irrigation. ing its technical staff. The Bank has also agreed In October-November 1953 a mission visited to station a representative in Ecuador to assist the Board~ infruaigaln-ag.eeomn El Salvador to study a proposed coastal highway Board in formulating a long-range development program. It is expected that he will assume his project. The Bank advised the Government in duties in August. At the request of the Govern- February 1954 that it would be ready to negotiate ment, the Bank isrecruitinganexperttoaa loan to cover the foreign exchange costs of this ment, the Bank iS recruiting an expert to advise poetwe otetmtsaecmltd on the reorganization of the railroads with the object of improving efficiency of operation. The Bank's Director of Marketing visited El Salvador in May 1954 to study the possibilities of In October 1953 the Ecuadorian Congress dvlpn nitra aia akt ratified a debt settlement which had been nego- tiated between the Ecuadorian Government and Haiti the Council of Foreign Bondholders of London in May 1953. In April 1954 a mission visited Haiti to study its economy and examine its investment program. El Salvador Honduras Fiscal $12,545,000 25-year 414% loan of Decem- 1950: ber 14, 1949 to Comisi6n Ejecutiva The Government has asked the Bank for Hidroel6ctrica del Rio Lempa for assistance in formulating a long-term development power development, program. Two members of the staff visited Hon- To ta: $12,545,000. duras in June 1954 to discuss this request. The hydroelectric plant on the Lempa River, partly financed by this loan, was inaugurated by Mexico the President of the Republic in June 1954. The Fiscal $24.1 million 25-year 4½2% loan of Jan- first of the two 15,000-kilowatt Bank-financed 1949: uary 6, 1949 to Comisi6n Federal de Electricidad and Nacional Financiera units Is already in operation and the second is ex- for power development 1331 $10 million 1-year 4½27% loan of January The difficulties experienced by Mexlight in 6, 1949 to Comisi6n Federal de Elec- financing the peso costs of its construction pro- tricidad and Nacional Financiera for power development. (Refunded) gram, referred to in the Eighth Annual Report, Fiscal $26 million 25-year 41/2 loan of April 28, were alleviated in September 1953 when the 1950: 1950 to Mexican Light and Power Companv, Limited, for power devel- Government approved the Company's application opment. Fully disbursed in June for an increase in power rates and the Company 1954. obtained a substantial long-term credit from Na- Fiscal $10 million (maturitv dates 1952-1957) 1951: 31/2.% line of credit of October 18, cional Financiera. The devaluation of the peso 1950 to a consortium of eight Mexi- in April 1954, however, has made a further rate can banks and Nacional Financiera can b a adjustment urgently necessary, and the Company lcr financial assistance to small enter- Frises. Expired on June 30, 1952 with is now engaged in discussions with the Govern- $532,000 of loans outstanding. Of this ment toward this end. amount $4,000 was canceled on July 1, 1953. The balance of 8528,000 has In October 1953 the Mexican Government been disbursed. undertook a comprehensive study of Mexico's fu- FiscJl $29.7 million 25-year 41/2% loan of Jan- ture requirements for electric power, with special 1952: uary 11. 1952 to Comisi6n Federal de Electricidad and Nacional Financi- reference to sources from which they could be eia for power development. financed. The Government accepted the Bank's Totc,: $80,328.000, net of cancellations and re- offer to cooperate in the execution of this study. fundings. The Bank engaged a senior official of the British By the end of 1954, work is expected to be Electricity Authority, which granted him a year's complete on the construction programs being car- leave of absence, to act as its resident representa- ried out by the Federal Electricity Commission and tive in Mexico to assist in this study. In addition, the Mexican Light and Power Company (Mex- the Bank is making available the services of mem- light) with the help of the loans made in 1949 bers of its staff from time to time as needed, and and 1950. The principal projects still under is helping to obtain suitable consultants for construction-Mexlight's 45,000-kilowatt Patla specialized parts of the study. hydroelectric plant, and additions totaling 88,200 A Bank mission visited Mexico in May and kilowatts to the Commission's Miguel Aleman June 1954 to study a project for the rehabilita- hydroelectric development - are scheduled to tion of the Pacific Railroad. The Railroad runs come into operation in the course of the year. from Guadalajara to Nogales on the U.S.-Mexi- The main project being financed by the can border, and serves Mexico's most rapidly Bank's $29.7 million loan of 1952 is the Com- growing agricultural area. mission's 150,000-kilowatt Tingambato plant in Nicaragua the Miguel Aleman system serving Mexico City. Fiscal $3.5 million 10-year 418% loan of June 7, Work has progressed more slowly than was ex- 1957: 1951 for highway construction. pected, but completion is now scheduled for $1.2 million 7-year 4% loan of June 7, October 1955. Other projects financed by this 1951 to the Banco Nacional de Nica- ragua for agricultural machinery. loan have made gcood progress. The 30,000-kilo- Of this amount, $6,879 was cancelled watt steam plant at Monterrey came into full op- on January 1, 1954, by which date the balance of 51,193.121 had been dis- eration in January 1954, and a 10,000-kilowatt bursed. steam lnt atVrcu sa hepitoope Fiscal $550,000 10-year 4½~% loan of October plant at Veracruz is at the point of comple- D1952: 29, 1951 for grain storage facilities. tion. The 52,000-kilowatt El Cobano hydroelec- Of this amount, $3,006 was canceled tric station in Michoacan should be completed by on December 11, 1953, by which date the balance of $546,994 had been dis- the end of the year. bursed. [ 341 Fiscal $3.5 million 10-year 43/4% loan of Septem- contained in the report of the Special Representa- 1954: ber 4, 1953 for highway construction. $450,000 10-year 43/4% loan of Septem- tive presented in September 1952. In accordance ber 4, 1953 for power development. with those recommendations, a NTational Develop- Total: $9,190,115, net of cancellations. ment Institute was established irn January 1954 to Progress under the $3.5 million highway stimulate new agricultural and industrial enter- loan ou 9 hprise by means of financial and technical assistance. loan of June 1951 has been good. Of the eight main highways being constructed with equipment Panama financed by the loan, one was completed, except for asphalt surfacing, in April 1954; the 48-mile Fiscal $1.2 million 7-year 45/Y87 loan of Septem- 1954: ber 25, 1953 to Instituto de Fomento link between Managua, the capital, and Le6n, the Econ6mico for agricultural develop- second largest city in Nicaragua, was scheduled ment. for completion in August 1954, and through traf- $290,000 8-year 4l/8s / loan of Septemnbe, 25, 1953 to InstitLito de Fomento fic had already begun to use the road early in the Econ6mico for grain storage facilities. year. Pending completion of the main highway Total: $1.49 million. program, work has been deferred on the roads to The Government is now making intensive be built with the assistance of the Bank's $3.5 en gti - efforts to encourage agricultural production in million loan of September 1953. This second Panama; and these loans will pay for imports phase of the road program, to be completed over which will begin to meet the most urgent require- a 5-year period, includes construction of 25 miles ments of the farming community for better equip- of main and 430 miles of secondary roads. ment and impoe sorgfcities.Bt loans The~~~~~~~~~ elcti geeaigui*orteMnga nent and improved storage facilities. Both loans The electric generating unit for the Managua were made to the Instituto de Fomento Econ6mico electric plant, financed by the $450,000 loan of (IFE), created in January 1953 to make loans for September 1953, is being installed and should go private enterprises and to plan public develop- into operation later in 1954. into operationelater in 1954.overnment,the mental investment, especially in agriculture. At the request of the Government, the Bank Part of the $1.2 million loan is being used to buy tractors and other equipment for use in Nacional import additional farm machinery with agricultural machinery pools. IFE will operate the a revolving fund arranged for when the $1.2 pools and will perform services for farmers on a million agricultural machinery loan was made contract basis. The pools have been established at in June 1951. By June 30, 1954, equipment four key points and a substantial amount of the worth about $250,000 had been imported under machinery has been delivered. It will be used this arrangement. for land clearance as well as for cultivation and In February 1954 the Government requested harvesting. The loan is also financing the import the Bank to consider financing the foreign ex- of machinery and equipment to be sold to farmers change costs, estimated at about $7 million, of who obtain credits from IFE for their purchase. constructing a new power plant to serve Managua The $290,000 loan will be used to import and the surrounding area. A Bank engineer vis- materials needed by IFE to build a 4,000-ton ited Nicaragua in May-June 1954 to examine the capacity plant at Panama City for drying and stor- project. ing corn and beans. By reducing losses from The Bank continues to maintain a Special spoilage, the new plant should lessen seasonal Representative in Managua to advise and assist fluctuations in the prices received for crops and the National Economic Council in coordinating should raise the income of producers, thereby en- the development program. The Government has couraging local agricultural production. It should continued to implement the recommendations also improve Panama's trade position by reducing r35 imports of grain and beans that now amount to The loan of $1.7 million made in April about $2 million a year. 1954, like the earlier loan of $1.3 million, is being At the request of the Government, the Bank used to import equipment for the agricultural since October 1953 has maintained a Special Rep- machinery pools of Servicio Cooperativo Inter- resentative in Panama to advise on economic and americano de Producci6n de Alimentos (SCIPA), financial policies and to assist in drawing up a an agency of the Ministry of Agriculture. development program. The National City Bank of New York is participating in the $1.7 million loan, without Paraguay the Bank's guarantee, to the extent of $250,000 Fiscal $5 million 9-year 43/E% loan of December representing $50,000 of each of the first five 1952: 7, 1951 for agricultural machinery and maturities, falling due semi-annually from July supplies and road-building equipment. 15, 1956 through July 15, 1958. Total: $5 million. The equipment in SCIPA's machinery pools All the goods purchased out of the $1.9 is used for plowing and harvesting, for land recla- million of the loan made available for disburse- mation and for opening new areas to cultivation. ment in September 1952 have now arrived in The first loan was fully disbursed in February 1954 Paraguay. They consisted mainly of agricultural and all the equipment purchased with it is being implements and fence wire for small farms, and operated by SCIPA. During the year 1953, of road-building equipment. The farm equipment an estimated 250,000 hours of work by tractors has been distributed and is in use throughout the from the pools, three-quarters were accounted for country. The road project is going forward on by Bank-financed tractors. In all 27,000 acres schedule and the major part should be completed of land were plowed, 4,000 harrowed and 10,000 by the end of 1954. planted and cultivated. Late in 1953 a Bank mission visited Para- The greater part of the second agricultural guay to examine the general economic sitLation, machinery loan is being spent for the purchase to observe the progress of the projects and to dis- of heavy equipment to increase SCIPA's land cuss with the Paraguayan authorities plans for the clearing and land preparation activities. The use of the remaining $3.1 million of the loan, balance is being spent on cultivation and trans- Study is now being given to revisions of the orig- portation equipment, spare parts and shop tools. inal project. Good progress has been made during the The Bank's Special Representative, who had year under the $2.5 million loan to improve the been stationed in Paraguay at the end of 1952 to Port of Callao. All the equipment for handling assist in matters related to the loan, completed general cargo has been delivered and is operating his initial assignment in August 1953. He re- satisfactorily. Construction of the foundation of turned to Paraguay in an advisory capacity dur- the grain elevator has been completed and a con- ing March-June 1954. tract is about to be concluded for the building of Peru the superstructure. The equipment for unloading grain has now arrived and is expected to be put Fiscal: $2.5 million 15-year 41/2 loan of Jan- into operation within two months. 1952: uary 23, 1952 for port improvements. Fiscal $1.3 million 7-year 41/i% loan of July 8, In January 1954 a mission visited Peru to 1953: 1952 for agricultural machinery. Fully review the economic situation and to discuss the disbursed by February 1954. technical aspects of projects for which Bank financ- Fiscal $1.7 million 7-year 4¼4% loan of April 1954: 12, 1954 for agricultural machinery. ing had been sought. Subsequently the Bank Total: $5.5 million. notified the Government that it was ready to open 1361 negotiations for a loan for the Quiroz-Piura irri- pected to come into operation before January gation project. The Government informed the 1955, and the entire transmission system is sched- Bank that it was re-examining its investment pro- uled for completion by mid-1955. Expansion of gram and for the time being was postponing exe- distribution networks both in Montevideo and in cution of the project. The Bank has also in- the interior is progressing well. formed the Compania Nacional de Cemento Port- Progress on the telephone program has been land del Norte that it is prepared to start negotia- somewhat slower than was expected. However, tions for a loan for the construction of a cement seven new telephone exchanges have been put in- plant in northern Peru as soon as the company has to operation in Montevideo and two others are adequately increased its equity capital. being expanded; three new exchanges are being A mission went to Peru in May 1954 to ex- built in towns in the interior. Twenty-eight amine a project for agricultural development thousand new telephones have been installed. which would be carried out by the Banco de Fo- The main work still to be done under the program mento Agropecuario. is the installation of underground telephone cables The Government has now negotiated settle- in Montevideo and the construction and rehabili- ments for resuming service on all government or tation of overhead telephone lines throughout the government-guaranteed debt which had been in country. default. Following the settlement of Peru's dol- During the year a special committee appoint- lar debt early in 1953, the Government, in De- ed by the Government drew up a program to in- cember 1953, reached an agreement with the crease livestock production, based on the recom- Council of Foreign Bondholders of London on mendations of the Bank-FAO mission of 1951. the terms of settlement to be offered to holders of The committee was assisted by a Bank consultant defaulted sterling bonds. These terms were ap- on animal husbandry who was in Uruguay from proved by the Peruvian Congress in February November 1953 to May 1954. The program is 1954. designed to demonstrate, on selected owner-oper- ated farms, better techniques of livestock produc- Uruguay tion, through improved pasture management, im- Fiscal $33 million 24-year 41/4%o loan of August provement of pasture lands, provision of addition- 1951: 25, 1950 to Administraci6n General al water supplies, control of cattle diseases and de las Usinas EIRtricas y los Te- lefonos del Estado (UTE) for power forage conservation. An independent commis- and telephone development program. sion will be established to administer the program. Total: $33 million. The Bank has informed the Government that it Construction has been accelerated during the is prepared to negotiate a loan for the program past year on the project for the expansion of elec- when certain organizational and administrative tric power and telephone facilities of Usinas Elec- steps have been taken. tricas y los Telefonos del Estado (UTE). All of Discussions with Uruguayan authorities are the 39 diesel power units, with a combined capac- well advanced on the proposed financing of an- ity of over 17,000 kilowatts, have been installed other 50,000-kilowatt thermal power unit in and are operating in 31 communities in the inte- Montevideo. Discussions also are continuing on rior. The civil works have been nearly com- the construction of a 103,000-kilowatt hydroelec- pleted on the 50,000-kilowatt thermal generating tric power plant on the Rio Negro in central Uru- plant at Montevideo; all the equipment has been guay. Consideration of a loan for railway de- delivered and is to be installed by December 1954. velopment is in abeyance pending further study About 65 miles of the new I10,000-volt transmis- of means of improving the financial position of sion lines are in operation; other sections are ex- the railways. {371 Chapter Ill-Financial Activities And Resources EARNINGS, RESERVES AND REPAYMENTS The Bank's net income in 1953-54 amount- income was $41 million, income from investments ed to $20 million, compared with $18 million $9 million and miscellaneous income $0.2 mil- during the previous fiscal year. As usual, the lion. Gross expenses increased from $24 mil- net income was carried to a supplemental reserve lion in 1952-53 to $30 million in the past year. against losses on loans and guarantees, and in- This risc was due mainly to increases in payments creased that reserve to $97 million. of interest and other costs on the increased amounts Loan commissions, representing a charge of of the Bank's borrowings. 1 % on outstanding balances of all loans, totaled Borrowers met all repayments of principal $12 million for the year. This sum was cred- due during the year to the Bank and to holders of ited, as required by the Articles of Agreement, to borrowers' obligations sold by it; the total repaid the Special Reserve for meeting the Bank's obli- was $20 million. In addition, prepayments of gations. The Special Reserve was thus increased about $1 million were made on loans made in to $49 million. Belgium, Finland and Mexico. Total reserves of the Bank at the end of the A total of $57 million has been repaid by year were $146 million. borrowers. Of this sum, $17 million has been The year's gross income, excluding loan com- paid to the Bank and $40 million has been paid missions, was $50 million. Of this amount loan on loans sold from portfolio. FUNDS AVAILABLE FOR LENDING When the Bank began operations in 1946, its increased by $310 million. Of this amount $189 chief financial resources for some time to come million, or 61% came from other than United were expected to be dollars drawn from the Unit- States sources. Some of this consisted of pay- ed States capital subscription and from the United ments of interest and other loan charges. As States capital market. mentioned in succeeding sections of this Chapter, As economic conditions improved in other more of it came from releases of the 18 % cap- member countries which had exported capital be- ital subscriptions and from sales of bonds and fore World War II, these countries too were ex- portfolio securities. Since the Bank's operations pected to add to the resources of the Bank, by re- began, the proportion of its total lendable resources leasing their paid-in capital subscriptions for lend- drawn from outside the United States has been ing, by allowing the Bank to borrow in their mar- increasing; by the end of the fiscal year it had risen kets and by permitting investors to buy securities to 38%. from the Bank's loan portfolio. The following table shows funds available In the past year there has been a consider- for lending and indicates those obtained from able acceleration in the growth of funds available United States sources, and those obtained from from outside the United States. Lendable funds other sources. (381 FUNDS AVAILABLE FOR LENDING (Expressed in United States dollars) Source of Furnds Obtained Within Obtained Outside Total United States United States 2%, portion of subscription of all members $ 179,475,000 $ 63,500,000 $115,975,000 18fc portion of subscription made available by: Canada 53,356,000 53,356,000 South Africa 4,419,000 4,419,000 United States 571,500,000 571,500,000 Western European members (listed below) 91,900,000 91,900,000 Total available capital subscriptions $ 900,650,000 $ 635,000,000 $265,650,000 Funds available from operations 98,200,000 - 98,200,000a Funds available from sale of bonds 776,678,000 501:878,000b 274,800,000b Funds available from principal repayments and loans sold or agreed to be sold 118,833,000 47,466,000b 71,367,000b Gross total available funds $1,894,361,000 $1,184,344,000 $710,017,000 a The net amount of funds available from operations has been shown as obtained outside the United States because it consists primarily of interest payments received from borrowers. Income (derived largely from investments) obtained in the United States has been more than offset by expenditures there, and the difference has been cov- ered out of gross income from all sources. b Estimated Funds fron Capital Siubscription This was an increase of $29 million over the The United States and Canada are the only total available at the end of the previous fiscal member countries of the Bank which have so far year. Funds conditionally available increased by felt able to make all, or nearly all, of the capital $81 million to a total of $389 million. This left they have paid in to the Bank available for lending $79 million in Western European currencies still on a freely convertible basis. Varying amounts unreleased, as compared with $187 million at from the subscriptions of other member countries June 30, 1953. have also been made available, but generally sub- Releases of 18% capital subscriptions total- ject to consultation with the releasing member or ing $33 million have also been made by 18 other to other limitations. member countries, namely: Colombia, Costa Rica, Additional funds for lending became avail- Ecuador, El Salvador, Finland, Greece, Guatemala, able to the Bank during the year from the 18% Honduras, Iceland, India, Lebanon, Mexico, Pak- capital subscriptions of Western European mem- istan, Paraguay, Philippines, Syria, Thailand and bers. The total amount of Western European Yugoslavia. So far, these currencies have not member currencies used by the Bank, or allocated been used for loans. to existing loans, grew to the equivalent of $92 The trend of operations in the past year million, as follows: makes clear that the Bank and its borrowers will Austria $ 250,000 have increasing opportunities to use the currencies Belgium 5,700,000 Denmark 1,500,000 of its Western European members. The Bank France 34.500,000 will therefore continue to press for more liberal Germany 3,100,000 Italy 4,250,000 releases of 18%o capital. The Bank hopes that Luxembourg 100,000 . . b .. Netheriands 2,200,000 It will be found possible to relax the conditions Norwa7 500,000 which inhibit the use of many of these releases Sweden 3,900,000 tJnited IKirod3m 35,900,000 and reduce their value to the Bank. £393 Funds from Bond Issues The remaining $5 million was purchased by the Markedly favorable conditions prevailed in Netherlands Trading Society, as underwriter, and the securities markets of the United States and was distributed to investors in the Netherlands by most other major capital centers during the fiscal a syndicate of fourteen banks and investment firms year. In the United States, for instance, the price headed by the Society. level of Treasury and other high grade bonds rose More than $40 million of this issue was pur- sharply above the levels of the previous 12 months. chased by investors outside the United States. These conditions enabled the Bank to sell more Initial distribution abroad was as follows: $20 bond issues in more capital markets than in any million to central banks and special funds in 11 earlier year, and resulted in the further expansion countries; $10 million to the Swiss Bank Corpora. of the market for the outstanding obligations of tion, Basle, and the Credit Suisse, Zurich, for sale the Bank. A notable result of the new issues in Switzerland; $3.5 million to a London banking was the significant increase in the sale of both group; $1 million each to banks in Sweden and dollar and non-dollar bonds outside the United Belgium; and $5 million to the Netherlands Trad- States. ing Society as underwriter in the Netherlands. Five new bond issues were offered. They The balance of the 3 % three-year bonds was totaled the equivalent of $221 million: there bought widely in the United States. Many of the were two United States dollar issues amounting to ZD bonds were purchased by commercial banks, which $175 million; two Swiss franc issues amounting had bought only small quantities of the Bank's to SwfrlOO million; and one Canadian dollar long-term issues but whose investment require- issue amounting to Can$25 million. In addi- ments were met by the relatively short term to tion an issue of Swfr5 0 million which had been maturity of this offering. Distribution of the offered in June 1953 was delivered and paid for three-year 3's undoubtedly was the broadest yet in July 1953. achieved by the Bank for any of its issues. Purchasers outside the United States bought about $96 million, or 44% of all new issues of- ing A seon UnitedfSttesndolar issue cons fered, and this amount included more than $50 of off f n 312%wbond million of the Bank's dollar bonds. For the first was of in January 1954.tAn udrwritin group of 167 banks and investment firms, again time, banking firms outside the United States par- headed by The First Boston Corporation and Mor- ticipated as underwriters of Bank issues denom- gan Stanley & Co., offered $98 million of the mnated in United States dollars. bonds in the United States. Credit Suisse of Zu- Total outstanding issues of the Bank on June rich underwrote $2 million of the issue for distri- 30, 1954, amounted to the equivalent of $777 bution in Switzerland. Widespread subscriptions million: $665 million in United States dollars and were received from life insurance companies, sav- $112 million in other currencies. ings banks and pension and trust funds in the United States dollar issues: An issue of $75 United States, many of them being institutions million of 3 % three-year United States dollar that previously had not bought Bank bonds. In bonds was publicly offered in September 1953. addition to the amount distributed by Credit Suisse, A syndicate of 147 banks and investment firms in investors abroad purchased more than $8 million the United States underwrote $70 million of the of the issue. issue, under the joint management of Morgan Stwiss franc issues: Two Swiss franc issues of Stanley & Co. and The First Boston Corporation. the Bank were offered in Switzerland in Novem- { 401 berl953andMarchl954. Eachamountedto50 Sales from the Bank's loan portfolio, made million Swiss francs and carried a coupon of without guarantee, also rose during the year to $14 3½1/2 to. The first issue is a 15-year maturity and million, a record figure. Additional sales of $8 the second matures in 18 years. Public offering million were made with the unconditional guar- of the issues was made at par by an underwriting antee of the Bank. Total participations and port- syndicate headed by the Swiss Bank Corporation folio sales in the year amounted to about $34 of Basle, the Credit Suisse and the Union Bank of million, compared with $15 million in the pre- Switzerland, of Zurich. The issues were broadly vious fiscal year. distributed among institutional and individual in- Participations by investors in the Bank's vestors in Switzerland and were heavily oversub- loans and purchases from the portfolio from the scribed. start of operations in 1946 to June 30, 1954 ag- These were the fourth and fifth Swiss franc gregated the equivalent of $105 million, of which issues of the Bank publicly offered in Switzerland. $47 million were without and $58 million with At the end of the fiscal year total outstanding Swiss the Bank's guarantee. At the end of the fiscal franc bonds of the Bank amounted to Swfr263 year, outstanding obligations carrying the Bank's million, equivalent to approximately $61 million. guarantee amounted to $27 million. Repayments Canadian dollar issue: The fifth issue of the on guaranteed obligations had reached $31 mil- Bank in the fiscal year was floated on the Canadian lion and on obligations without guarantee had market in June 1954. It consisted of Can$25 reached $9 million. million of 3½ c