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Ministry for Foreign Affairs

Meeting of the World Bank Development Committee in Hong Kong

Meeting of the World Bank Development Committee, Hong Kong
Statement by H.E. Mr. Halldór Ásgrímsson, Minister for Foreign Affairs, Iceland,
on behalf of the Nordic and Baltic Countries
22. september 1997



I. Helping Countries Combat Corruption and Improve Governance

1. The Nordic and Baltic constituency welcomes that the World Bank and the IMF have placed corruption and good governance on the international development agenda. We also commend the efforts to provide a framework for addressing corruption as a development issue in the Bank's assistance to countries and in its operational work generally. The framework sets out a good foundation for the institutions' commitment to fighting corruption, and we look forward to its implementation.

2. Corruption is a complex and politically sensitive issue and a matter of growing concern to governments all around the world. Not only does corruption have a negative impact on economic growth but evidence also shows that those who suffer the consequences most intensely are the poor.

3. Governance and corruption are interlinked since corruption usually flourishes in countries where governance is weak. I believe that accountability and transparency, strong public and civil institutions, an independent judiciary and media, and the rule of law are fundamental in safeguarding a country from corruption. Legal and institutional safeguards are only tools in the combat. The prerequisite and driving force is the scrutiny of those who govern by the governed through an active civil society, democracy and free and fair elections.

4. The prime responsibility for combating corruption rests with governments themselves but the development community can be a strong partner in this endeavor. Development cooperation must be carried out in such a way that ineffective governance structures are opened up to public scrutiny and reformed. It is crucial that mechanisms are established to ensure that funds channeled through development cooperation are protected against corruption and contribute to improved accountability and transparency.

5. Policy reform and institutional strengthening should be central in Bank and IMF efforts to combat corruption in the public sector. They fall within the mandates and comparative advantages of the institutions. Corruption must be taken into account in country risk analyses and lending decisions.

6. Focus should not only be on the public sector but on the private sector as well. We should draw on the experience of IFC and MIGA in this field. Deregulation, open markets and free competition are important instruments in the fight against corruption.

7. Corruption entails both a payer and receiver. It is a global problem. The Nordic and Baltic countries fully support the international efforts to combat fraud and corruption, among them the current efforts in the Working Group on Bribery in the OECD.

II. The World Bank Group and the Private Sector

Action Program to Facilitate Private Involvement in Infrastructure

8. The traditional role of the World Bank Group in financing large infrastructure projects is evolving. The key challenge now lies in facilitating private investments not least into countries and subsectors where private involvement has been low. As stated by the World Bank infrastructure investment in developing countries totals about USD 250 billion per year, thus the Bank's role will mostly be catalytic.

9. The Nordic and the Baltic countries fully support the five-point action program and consider two items of particular importance. The first, advisory services, addresses the key issue of policy framework and institutional capacity building in order to improve the overall investment environment and to assist project development. Bank advice on legal, financial and regulatory frameworks is particularly important in cases were private actors are granted a monopoly position. The second, strengthened and expanded guarantees, addresses one of the most important considerations for private investors, that of risk mitigation. We appreciate that the Bank Group is in the process of systematizing its guarantee products, and follow this work with keen interest, as much remains to be done. Bank Group cooperation, in general, is strongly called for in the efforts to facilitate private investment in infrastructure. Thus, the roles of IFC and MIGA in the action program need to be spelled out more clearly.

10. Furthermore, I welcome supporting subsovereign entities, since it strengthens their capacity to facilitate actions directly benefiting the poor.

11. The Bank Group's participation in the field of private involvement in infrastructure must be seen in the larger context of enhancing private sector development. It is of concern to us, that share-holders have yet to see a substantial and overriding private sector development strategy for the World Bank Group, particularly as relates to institution building and fostering a conducive environment for private sector development, natural areas for Bank leadership.

Addressing MIGA Resource Constraints

12. The Nordic and the Baltic countries continue to recognize MIGA's important role in facilitating foreign direct investment in the developing countries. The Nordic and Baltic countries have noted with interest the two step approach outlined to solve MIGA's resource constraints.

13. Dependent on the support of other major partners, we can accept implementation of the first step in order to reach a speedy solution to MIGA's acute liquidity problem. However, before taking the second step, MIGA must have a strategy for reinsurance in national export guarantee agencies, and for selectively targeting its resources for optimal development effectiveness.

III. Implementation of the HIPC Initiative

14. As strong supporters of the HIPC initiative, we are deeply concerned over disagreements over the initiative's costs and a general unwillingness to contribute, which are shifting focus from the needs of the eligible countries. Sufficient contributions must be made from all partners involved, i.e. the Paris Club, multilateral institutions and bilateral donors, especially the G7 countries. We will follow the implementation of the initiative closely, and will consider providing funds in a favorable manner with due regard to other donors. We emphasize that the analyses prepared by the World Bank and the International Monetary Fund should form the basis for decisions regarding the level of the debt relief to be provided to individual countries. In closing I wish to reiterate that my constituency strongly feel that a permanent solution to the unsustainable debt burden of the developing countries concerned must be the result of the HIPC Initiative.


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