BOARDS OF GOVERNORS - 2004 ANNUAL MEETINGS - WASHINGTON, D.C.
INTERNATIONAL MONETARY FUND
WORLD BANK GROUP
INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT
INTERNATIONAL FINANCE CORPORATION
INTERNATIONAL DEVELOPMENT ASSOCIATION
INTERNATIONAL CENTRE FOR SETTLEMENT OF INVESTMENT DISPUTES
MULTILATERAL INVESTMENT GUARANTEE AGENCY
Statement by the Hon. Dr. Michael Cullen,
Governor of the Fund for New Zealand,
at the Joint Annual Discussion
Introduction
Fellow Governors and delegates, I am delighted to participate once again in this meeting.
This year holds special significance as the 60th anniversary since the formation of the Bretton Woods Institutions. The
two sister institutions have played an influential and leading role in economic and development issues over the past 60
years. While neither institution is quite in the form envisaged by Keynes or White in 1944, the outcomes achieved
support the need for the formation of both institutions:
- greater stability to economic growth and cycles;
- stronger fiscal policies;
- greater surveillance of financial and monetary systems;
- widely observed standards and codes; and
- greater transparency.
Development Effectiveness and Harmonisation
This is a time of great challenge for the international community. A major UN review will take place next year of
progress against the Millennium Development Goals (MDGs). We are lagging behind and we must turn this situation around.
We need to look closely at development financing and effectiveness issues. The Bretton Woods Institutions, and the World
Bank, in particular, have vital roles to play.
New Zealand strongly supports the international efforts to turn development assistance towards a focus on results. The
Bank has made good progress on this front. New Zealand endorses the Bank’s Results Management agenda, including its work
on statistical capacity building. It is important to follow through on the outcomes of the Marrakesh conference on
Managing for Development Results. This work is critical to improving the effectiveness of development outcomes. When
Official Development Assistance (ODA) resources are scarce, and numerous contending priorities exist, the multilateral
system must play its part to demonstrate impact and results.
I have been interested in the discussions on the need to improve linkages between the United Nations and the Bretton
Woods Institutions. The United Nations and Bretton Woods Institutions have differing mandates, funding bases and
representation, but there are overlapping responsibilities and both are striving to deliver more effective and
sustainable development outcomes, and do so more efficiently. Better coordination and harmonization between the two sets
of institutions, and other donors, would improve the effectiveness of their operations and, importantly, reduce the
transaction costs for developing countries. Much more needs to be done, particularly at the country level.
Fundamentally, we need international actors assisting developing countries by harmonizing their support around country
owned priorities and plans. The world is too small, and developing countries face enough pressure on their
administrations already, to have unhelpful competition, duplication and overlap of external assistance.
New Zealand is responsive to the need to provide more stable and predictable aid flows. Through our aid programme we are
moving towards multi-year commitments with our development partners which will enable them to plan and budget over a
longer time frame. We are also looking to improve the effectiveness of the assistance provided to support poverty
reducing expenditure in core partners through greater use of sector wide approaches, in coordination with other donors,
and budget support. This has been most apparent in the Pacific, where New Zealand has worked closely with Australia and
other regional donors in Pacific partner countries.
Pacific
Governors, I look forward to reading the review by the Bank’s Operations and Evaluation Department of its engagement in
the Pacific over the past 10 years. I am concerned that the review of the Pacific has reached some disappointing
conclusions about the Bank’s performance in the region. I strongly encourage the Bank to act on the findings of the
review and ensure that the conclusions are taken fully into account in the development of a strategy for future
engagement in the Pacific. I also encourage the Bank to consult widely on its strategy with stakeholders in the Pacific.
The need for a coherent Bank strategy that takes full account of the efforts of other players is as great as ever. The
Bank and Fund have valuable expertise to offer their partners in the Pacific, and it is important that they remain
engaged in an effective and appropriate manner. The best way forward is learning from the past and building an effective
programme for the future.
Last year New Zealand’s Prime Minister chaired the Pacific Island Forum. In a recent strategic review by the Forum,
members adopted a “Pacific Vision” and identified four priority topics for the forum to address: economic growth,
sustainable development, good governance and regional security.
The review identified these issues as ones leading to:
- enhanced regional cooperation;
- greater sharing of resources; and
- new thinking about the relationships between sovereign states.
Following the review, Forum leaders have taken a number of decisions that are likely to have far-reaching implications
for the Forum, including how it interacts with the rest of the world.
Leaders have approved the development of a Pacific Plan for intensified regional cooperation It will be a basis for
stronger and deeper links between the sovereign countries in the Pacific region. The Pacific Plan will also affect the
way that international agencies interact with the Forum region in the future. The development of the plan would benefit
from input and assistance from the Fund and the Bank. I encourage both the Bank and the Fund to be actively involved
when views and opinions are being sought on the Pacific Plan, and to actively seek out opportunities to strengthen its
engagement with the Pacific Island Forum. We have, for the first time in decades, a chance to unite behind one vision,
one regional response. Let us not see the opportunity foregone.
Debt Sustainability
New Zealand is concerned about the high debt levels in a large number of developing countries. New Zealand has supported
the Heavily Indebted Poor Countries Initiative and the efforts to reduce debt levels to sustainable levels. New Zealand
commends the Bank and Fund for their recent work on a debt sustainability framework. New Zealand is supportive of this
work and would like to see a consistent approach applied to future lending by the Bank, Fund and other multilateral
institutions.
High debt servicing costs are an impediment to growth. Strong institutions and policies, and accountability arrangements
are necessary pre-conditions for growth. The resources that the Bank and Fund provide for technical assistance and
capacity building are very important so that the underlying causes behind the debt distress and poor performance are
addressed.
New Zealand supports a comprehensive and balanced approach to development, including effective ODA contributions and
trade liberalization to open markets for poor countries. Looking ahead, New Zealand continues to consider concessionary
financing to be a valuable source of development financing. We are pleased to be participating in the international
Development Agency (IDA 14) negotiations, and look forward to their successful conclusion in the next few months.
WTO: Doha Development Agenda
The agreement to the framework package on 31 July of this year was an important and historic milestone for the World
Trade Organisation (WTO). The agreement brings many benefits to the nations involved and also brings credibility to the
multilateral trading system and the WTO. I am pleased with the agreement and see it as an important step for the Doha
Round and for the WTO in general.
Agriculture remains at the heart of the Doha negotiations, offering the greatest potential for gains to developing
countries. While many details are still to be negotiated, many of the difficult political decisions have been taken,
ensuring technical work can continue.
The outcomes in other areas such as non-agricultural market access, services, Singapore issues, trade facilitation and
other development issues are encouraging. We recognise that there are reservations, particularly from developing
countries, to further liberalisation but hopefully the positive outcomes on agriculture will encourage developing
countries to engage effectively on these other issues.
We encourage both the Bank and Fund to be active participants in the process. Areas such as trade facilitation and
providing financial support for improvements in ports, customs, and other trade-related infrastructure, are areas where
the Bank and Fund could be involved.
Into the future, New Zealand remains committed to a multilateral trading system and the pursuit of further
liberalisation. There is still much work to be done including improving access to markets and improved trade rules that
can benefit everyone. It is important to remember that a comprehensive package in the future could stimulate worldwide
increases in income and lift millions out of poverty. The stakes are very high and we hope the momentum from this
historic agreement will continue.
Internal Reform
New Zealand is an advocate of the internal reforms to improve the transparency, effectiveness and efficiency of the Bank
and the Fund. We would like to voice our support for the Bank and Fund’s work in relation to internal governance and
external transparency. We would like to see more work on budget reforms to encourage more explicit linkages between
resource allocation and outcomes.
One area of reform from within the Bank that has resonated well with New Zealand is the replacement of Adjustment
Lending with Development Policy Lending. We support this change as the new policy acknowledges that each country has its
own set of unique circumstances and that governments must take ownership of reforms to develop a program that meets
their countries’ needs. Hopefully the new policy will lead to broader participation in government policy making and a
greater understanding of the social and environmental impact.
It is unfortunate that the handling of remuneration issues by both institutions in this anniversary year has been untidy
and has highlighted the governance problems that still need to be addressed. The handling of the issue has given no
credit to either institution and has shown that sibling rivalry between the two sisters has not been constructive, and
that more professional and transparent remuneration and promotion systems need to be put in place.
Concluding Comment
Finally, allow me to close by restating that the Fund’s and Bank’s contribution to the Pacific region is important. We
look forward to increasing dialogue with the Bank and our development partners on the issues facing small states in the
Pacific in the coming year.
ENDS