- International
Activities -
Statement Prepared for the Development Committee of the Boards of
Governors of the World Bank and International Monetary Fund
The Honourable Jim Flaherty, Minister of Finance for Canada,
on behalf of Antigua and Barbuda, Bahamas, Barbados, Belize, Canada,
Dominica, Grenada, Guyana, Ireland, Jamaica, Saint Kitts and Nevis, Saint
Lucia, and Saint Vincent and the Grenadines
Singapore, September 18, 2006
These meetings provide a valuable opportunity for us to reflect on our
achievements and, more importantly, on areas where we need to redouble our
efforts. We have spent much of this weekend discussing how to sustain and
build momentum through our collective efforts to achieve concrete
development results in support of the Millennium Development Goals (MDGs).
Governance and Corruption
Accountability and effectiveness are key themes for discussion this
weekend. We had very successful discussions on quota reform and improved
surveillance yesterday at the International Monetary and Financial
Committee, which will contribute to a more effective and representative
International Monetary Fund (IMF). Within this committee, we have focused on
how promoting good governance, including fighting corruption, and mutual
accountability are essential to efforts to accelerate progress towards the
MDGs. We know that aid is less effective in countries plagued by weak
governance. While I think we have made good progress in recent months on
this issue, significant challenges lie before us.
Ultimately, we need to recognize that only countries themselves-led by
their own governments-can provide the leadership and ownership needed to
strengthen governance. However, donors and international agencies can and
should help with this process. Aid must be delivered in ways that support
our partners’ capacity to govern and promote accountability in the use of
public resources.
The World Bank has demonstrated that it is a leader in governance and
anti-corruption. We welcome the Bank’s efforts since we met last spring to
articulate a broad strategy to promote a more coherent, transparent and
results-oriented approach. Going forward, we need to deepen our
understanding of the challenges that weak governance and corruption pose for
the development process and address more specifically how the Bank can
meaningfully address these issues. As well, there remains a need for clear
operational guidelines to better understand how decisions should be taken on
World Bank support in situations where weak governance and corruption
present real risks.
In countries where corruption is a challenge, we need to have clearer
rules on the Bank’s terms of engagement. We continue to urge the Bank to
remain engaged even in countries where corruption represents a significant
challenge, because without the Bank’s efforts, there may be little
progress forward. But the World Bank cannot tackle these issues on its own,
and we look to continued progress in developing a common approach to
tackling corruption, involving other donor partners as well as other
multilateral development banks.
In effect, we all need to engage in the fight against corruption.
International institutions must ensure that their in-house operations meet
high integrity standards and that their interventions in member countries
promote good governance. Developed countries must lead by example by trying
to ensure that the operations of their governments and corporations are
models of transparency and accountability.
Aid Effectiveness
Canada, Ireland and the Commonwealth Caribbean countries are strongly
committed to working in partnership with others in an environment of mutual
accountability to reach the MDGs by the 2015 target. Meeting these goals
requires that, in addition to strengthening governance and accountability,
developing countries manage their economies effectively and follow through
on national poverty reduction strategies. For their part, donor countries
must increase the effectiveness of their aid. Ensuring predictability of aid
flows is critical to allowing developing partners to commit to essential
reform and capacity-building measures. Developing countries also need to
receive longer-term commitments to core areas of funding, especially for the
provision of services to the poor.
We urge donors to reduce the aid management burden, particularly on the
poorest and smallest states, in line with commitments under the Paris
Declaration on Aid Effectiveness. Progress on these issues is important to
secure stronger results on the ground. The Bank should draw on its recent
experience in Africa and continue to promote stronger donor alignment,
harmonization and coordination. In this regard, we encourage the expansion
of recent efforts by the World Bank to prepare Joint Assistance Strategies
with other donors based on national development strategies, such as Poverty
Reduction Strategy Papers. And because the collection of accurate and timely
statistics is critical to gaining an accurate understanding of progress
achieved and the challenges that remain, I would reiterate my earlier
suggestion that countries’ statistical capacity be routinely appraised in
the context of Country Assistance Strategies.
Investing in People
Today, there are 115 million children who have never entered school and
another 130 million who will never complete primary school. Yet we know that
investment in basic education is essential to achieve significant and
sustainable results in poverty reduction. Canada believes that the
international community has an important role to play in advancing efforts
to achieve improvements in school enrolment as well as in primary school
completion rates. This will require investments in bricks and mortar, in
staff training and salaries, in teaching materials and in incentive schemes
to encourage parents to enrol their sons and daughters.
Canada’s investments in basic education in Africa have almost
quadrupled since 2000, reaching $100 million annually by 2005. This has
produced concrete results, contributing to more than 9 million additional
enrolments in primary schools, with more than half of these places going to
girls. We will continue to invest in education for African children,
increasing our bilateral funding to $150 million a year over the next four
years. Canada is also a strong supporter of the Education For All-Fast Track
Initiative (EFA-FTI), which encourages donor and recipient countries to work
in a spirit of partnership to achieve the education MDGs. Canada recently
announced it will provide a $25-million contribution towards multilateral
engagement with the EFA-FTI. This is in addition to the $46 million that
Canada has committed through its bilateral aid program to the EFA.
More than 7 million people die annually from infectious diseases like
pneumococcus, malaria, HIV/AIDS and tuberculosis, mostly in poor countries.
Compounding this loss of life is the economic burden that disease places on
families, and the repercussions for national economic development. We have
spent much of the past year exploring a number of innovative finance
proposals to help address international development challenges, particularly
those in global health. To this end, the Advance Market Commitment (AMC)
pilot appears to us to be a particularly promising initiative. Canada is
ready to contribute $100 million to support an AMC pilot project, which
should be ready to launch by the end of this year, to develop vaccines. We
urge donors to demonstrate support for an AMC pilot for a pneumococcus
vaccine by providing the necessary financial commitments to ensure that we
can launch this important project this year.
And in recognition that gender issues remain an area where more work is
needed, we are encouraged by the World Bank’s renewed attention and
efforts to advance women’s economic empowerment to achieve growth, poverty
reduction and meet the MDGs. We believe that gender equality is an area in
which the Bank has a comparative advantage and can provide strong
leadership.
Renewing the Trade Agenda
The Doha Development Round was seen by many as an opportunity to further
integrate developing countries into the multilateral trading systems. While
we recognize the impasse, we continue to believe that a successful outcome
to the Round would be the best way to realize the potential of trade as a
tool for development. We stand ready to work with other World Trade
Organization (WTO) members and the Director General of the WTO to find a way
forward. In the meantime, we encourage all donors to meet their “Aid for
Trade” commitments and support the continued strengthening of the Enhanced
Integrated Framework as an effective collaborative mechanism for the
identification, delivery and assessment of trade-related assistance. We also
look to the World Bank and the IMF to continue their advocacy work on trade
liberalization and to continue their support of furthering the Aid for Trade
agenda.
Debt Reduction
The international development community has made great progress in debt
reduction for the poorest countries. The Multilateral Debt Relief Initiative
(MDRI) became effective at the IMF in January 2006 and at the International
Development Association (IDA) in July 2006. We have every expectation that
it will shortly become effective at the African Development Fund (AfDF).
Canada and Ireland are strong supporters of the ongoing work to address
unsustainable debt burdens in low-income countries. In this context, it is
important that we ensure that the MDRI leads to increased development
resources. To achieve this, international financial institutions must be
fully compensated for the costs of the MDRI and funding must be additional.
We are committed to maintaining the financing capacities of the IMF, IDA and
the AfDF as these institutions implement the MDRI. Ireland is paying its IDA
share of MDRI costs up front. Canada has already paid its IMF share of MDRI
costs and will begin making its payments to IDA and the AfDF as planned.
A growing concern, however, is that significant debt reduction creates
substantial new borrowing room in some countries, which if not managed
carefully could rapidly be filled with unproductive new financing. This new
financing could reverse recent efforts to maintain debt sustainability under
the World Bank-IMF Debt Sustainability Framework (DSF) and result in a rapid
re-accumulation of debt in poor countries. We believe that more can and
should be done to break such a “lend-and-forgive” cycle and ensure
long-term debt sustainability. The review of the DSF in the context of the
IDA14 Mid-Term Review will be important to advance this issue. It will also
be important for borrowers to improve their debt management capacity, which
is an area where the World Bank can provide expertise. Creditors must also
do their part. A coordinated approach by all creditors, based on the
analysis underlying the DSF, could help mitigate the risk of excessive
borrowing.
Fragile States
Canada welcomes the World Bank’s ongoing support for fragile states,
including in post-conflict situations. Canada is actively involved in
assisting a number of fragile states, with large development assistance
programs, for example, in Afghanistan and Haiti.
While it is clear that the Bank has made considerable progress in its
involvement in fragile states over the past four years, more needs to be
done. Canada is working with the Bank to set up a Fragile States Partnership
and Knowledge Initiative to develop and strengthen knowledge about effective
approaches in fragile states. One area for further work is the Bank’s aid
allocation system. While we support a performance-based allocation system to
determine IDA aid volume, we believe that there is scope to refine the
system to be more effective in responding to the special challenges of state
fragility. In this area, the IDA14 Mid-Term Review provides an opportunity
to make real progress as we prepare for IDA15.
While there is also scope to continue to improve the Bank’s
state-building, governance and capacity development work, the Bank provides
real value added in this area. This area requires long-term engagement and
sustained investments in order to achieve lasting results. The Bank’s
financing predictability through IDA and long-term focus have allowed it to
take on a leadership role in this area.
International Bank for Reconstruction and Development (IBRD) Partner
Countries
We welcome the World Bank’s recent evaluation of its role in IBRD
partner countries. Bank engagement must be based on its comparative
advantage, and poverty reduction must remain the focus of its efforts in
these countries. In that vein, the Bank must continue to increase the
effectiveness of its collaboration with other international players,
including the IMF, bilateral donors and the private sector, in developing a
comprehensive strategy to guide the Bank’s involvement in these countries
over the longer term.
As a measure of success, these countries should become less dependent on
aid dollars over time and better able to attract private sector financing,
including foreign direct investment (FDI). Currently, five emerging market
economies account for 60 per cent of all FDI inflows into developing
countries. The Bank should work to increase the number of recipients
receiving significant FDI flows over the next decade.
Meeting the Needs of Small States
Efforts to advance the development agenda cannot overlook the particular
challenges of small states, including those in the Caribbean. The
international community, led by the World Bank, must play an enhanced role
in assisting small states to position themselves for success in the global
economy. Despite the strong global economic growth in recent years, the
economic growth of small states has failed to keep pace with larger low- and
middle-income countries. In some cases, this has reflected the faster than
anticipated erosion of trade preferences. As a consequence, many of these
economies are falling short of reaching the MDGs. To rectify this situation,
there is a dire need for better analytical work on options for growth,
competitiveness, economic diversification and international trade.
The continuing loss of critical skills in small states as a result of
migration also needs to be addressed. Support for human resource development
is crucial as these countries expand service exports and other areas where
they are competitive. On the related issue of remittances, which are an
important source of foreign exchange and capital for many small states, we
encourage the Bank to continue its work with other international financial
institutions and partner countries to better understand these arrangements
and help facilitate these transfers.
The small island states of our constituency remain at risk of natural
disasters. The Bank needs to continue to work with these countries and their
partners to mitigate these risks. We continue to support the Bank’s
development of a Catastrophe Risk Insurance Facility in the Caribbean and
other small states, and call upon other donor governments and the private
sector to join these efforts. A longer-term challenge is the transfer of
existing and new technologies required for adaptation to new weather
patterns, particularly in the key sectors relating to agriculture and water
resource management. We strongly support the Bank’s plan to expand
analytical work to develop screening tools to assess the nature of climate
risks to development projects, build the capacity of institutions and
communities to better cope with the risk of natural disasters, and support
the development of new and more innovative risk management tools.
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