Attached are four copies of the Final Report of the Canadian Delegation to ECOSOC on Agenda Item 4 Economic Development of Under-Developed Countries. Also attached are copies of the relevant documents.

WALLACE NESBITT

[PIÉCE JOINTE/ENCLOSURE]

Rapport de la délégation à la vingt-sixième session du Conseil économique et social

Report of Delegation
to Twenty-Sixth Session of Economic and Social Council

CONFIDENTIAL Geneva, August 4, 1958

ITEM 4
FINAL REPORT
ECONOMIC DEVELOPMENT OF UNDER-DEVELOPED COUNTRIES

The report of the Preparatory Committee on the Special Projects Fund (E-3074) and Secretariat studies on (a) the international flow of private capital (E-3128), (b) international Tax Problems (E/3074) and (c) international economic assistance to the under-developed countries (E-3131) were submitted to the Council as a basis for discussion on economic development.

1. In the earlier opening debate in Plenary on the world economic situation most delegations had referred to the need for assistance to the under-developed countries and it was evident that the debate on Item 4 would be concentrated on discussion of the adequacy of the proposed Special Fund as an instrument for meeting these needs. Accordingly, before commencement of the debate in Plenary on Item 4 the Canadian Delegation initiated discussion with other interested delegations to consider the steps essential to secure adoption of the recommendations of the Preparatory Committee.

2. At preliminary meetings representatives of the United States, United Kingdom, France, Canada and the Netherlands agreed that our primary efforts should be directed to ensuring that the recommendations of the Preparatory Committee are adopted without change. It was agreed that Assembly action to this end would undoubtedly be facilitated by a Council recommendation. Accordingly, the Secretariat was requested to prepare a resolution setting forth the main recommendations of the Preparatory Committee. It was further agreed that this resolution should form an annex to a covering ECOSOC resolution by which the Assembly would approve the recommendations and invite member states to make appropriate contributions. At this point other members of ECOSOC which had also participated in the work of this Preparatory Committee were invited to participate in private discussion of the annex and the covering resolution.

3. In this group the annex prepared by the Secretariat was approved with minor changes but considerable difficulty was experienced in arriving at agreement on the exact character of the covering resolution. Initially this difficulty was limited to a single paragraph of the draft resolution and arose from the desire of the Netherlands, Yugoslavia and others to introduce a paragraph which would give the impression that the Special Projects Fund is the forerunner of SUNFED. Although the United States recognized the possibility that in due course a Fund for capital development may emerge, the United States and to a lesser extent the United Kingdom were unwilling to accept any language which implied that they have given firm commitments to establish this Fund. In particular the United States contended that any such implication would jeopardize congressional support for the Special Fund. After long and arduous negotiation the United States and Netherlands finally agreed on a paragraph Noting the conditions envisaged in Part III of General Assembly Resolution 1219 (XII) under which the General Assembly shall review the scope and future activities of the Special Fund and take such action as it may deem appropriate . Once this paragraph, which appears as paragraph 2 of the covering resolution, was approved, the remainder of the resolution was quickly agreed and submitted as Council document E/AC.6/L.228 (attached) with the Secretariat draft appearing as an annex thereto.

4. While these private discussions were proceeding delegations were participating in the Plenary debate on this item. By agreement the members of the Preparatory Committee, inter alia, stressed their belief that the proposals of the Preparatory Committee represented the best possible compromise arrived at after long and difficult negotiations and that they should receive widespread support. A copy of the Canadian statement in Plenary is attached.

5. As anticipated all delegations agreed on the need for economic assistance for the under-developed countries. In varying degrees the original sponsors of SUNFED (Netherlands, Yugoslavia and the under-developed countries) expressed regret that it was not possible to proceed with the long discussed SUNFED. However, they welcomed the inauguration of the new Fund. The United States, Canada and the United Kingdom on the other hand emphasized that the inauguration of the new Fund represented an important step forward in the provision of assistance for the under-developed countries. They referred to the long and difficult negotiations leading to the recommendation for the Special Fund and urged unanimous support for the recommendations of the Preparatory Committee.

6. Only the USSR introduced a dissenting note. After a general statement stressing the needs of the under-developed countries and the failure of existing financial agencies, both public and private, to meet these needs, the USSR professed to be distressed because the Council was not proceeding with the immediate establishment of SUNFED. The USSR went on to indicate that certain of the recommendations of the Preparatory Committee should be changed to improve the character of the new Fund. Although the USSR did not introduce formal proposals at this stage it was clear that the proposed changes were those on which the USSR had reserved its position during meetings of the Preparatory Committee. The USSR proposed:

   1. that membership in the new Fund should not be limited to the members of the United Nations and the agencies but should be open to all countries (this was clearly intended to cover the People's Republic of China);

   2. that the President of the International Bank should not be included as a member of the Consultative Board;

   3. that contributions should be accepted from sources other than member states of the United Nations and the specialized agencies;

   4. that the recommendations of the Preparatory Committee on currency of contributions should be set aside in favour of a paragraph which would provide that contributions shall be made in any currency a country may choose.

7. The Delegations on the Preparatory Committee announced that they were cooperating in preparation of a resolution. When it was ready the Economic Committee was convened and the resolution (under the sponsorship of Canada, Chile, France, Mexico, Netherlands, Pakistan, United Kingdom, United States, Yugoslavia thereby including all members ofthePreparatory Committee on the Council, except the USSR) was introduced by Kaufmann (Netherlands) who had been Rapporteur of the Preparatory Committee. The delegations of the United States, Pakistan, Yugoslavia and France followed to emphasize the wide support for the draft. By agreement, Canada and the other sponsors withheld their comments until the USSR had been given the opportunity to indicate its attitude toward the draft resolution. As anticipated the USSR stated its intention to request modification of the resolution in the way indicated during the statement in the general debate. At this point Canada, followed by Mexico, made brief interventions pointing out that the new recommendations advanced by the USSR were of the same character as proposals already investigated very fully (and rejected) in the Preparatory Committee. The resolution before the Council represented a carefully balanced compromise which while not completely satisfactory to any single delegation offered an acceptable basis for inauguration of the Fund. The Canadian representative stated, inter alia, that he considered that all delegations were ready to establish the Fund and if the USSR representative is really anxious to show his cooperation and his desire to make the Fund a success, he could do so by joining with others in accepting the recommendations of the Preparatory Committee and by indicating the contribution which his Government intended to make to the Special Fund. If the USSR representative again advanced the suggestion which had not been acceptable to the Preparatory Committee the Canadian delegate would find it necessary to explain why those suggestions had not been acceptable.

8. Although it seemed possible that the USSR had decided merely to speak for the record, amendments were submitted on all points referred to in its statements (see document E/AC.6/L.229, attached).

9. In a relatively perfunctory debate it became evident that these amendments would be rejected by large majorities and further appeals were made to the USSR to withdraw its amendments in order to permit a unanimous vote. The USSR insisted on a vote and all the amendments were rejected by very substantial majorities. As far as the Delegation was able to record the votes on each amendment were as follows:
   
   

   	In Favour	Against	Abstention
   First Amendment	4 (USSR, Poland, Yugoslavia and Indonesia)	13	1 (Sudan)
   Second Amendment	1 (USSR)	15	2 (including Poland)
   Third Amendment	4 (including USSR, Poland and Yugoslavia)	14	0
   Fourth Amendment	4 (including USSR, Sudan and Poland)	12	2 (Finland and Costa Rica)

   The resolution as a whole then received unanimous support. Following the vote the USSR representative explained that although he had voted for the resolution the final position of his Government would be presented in the General Assembly. A similar explanation was given in Plenary where the resolution was again adopted unanimously.

10. It is evident that the USSR intends to re-open these questions in the General Assembly and the position taken in the Economic and Social Council accurately foreshadows a serious effort to gain wider support for these proposals. Although the member states on the Preparatory Committee, including Yugoslavia, were willing to maintain a common front at the Council, the possibilities for deviation are greater in the Assembly. It will therefore be important for the Canadian and other delegations at the Assembly to ensure that the uncommitted countries receive clear explanations of the nature of the proposed arrangements for establishment of the Special Fund and that they are encouraged to reject proposals for a change in the resolution.

11. A development of the debate on the Special Project Fund which will probably have further repercussions was the submission by the representative of the World Federation of United Nations Associations of a large number of individuals in the more industrialized countries to lend to or invest part of their savings in an International Fund or Institution administered by the United Nations and its Specialized Agencies for the purpose of assisting less-developed countries . One of the primary purposes of this proposal was to stimulate interest in the Economic Assistance Programme of the United Nations by giving a large number of small investors all over the world an opportunity to participate in it. In private discussions with the representative of WFUNA proposal the Canadian Delegation suggested it would be wisest to defer introducing the proposal until a practical programme had been worked out for putting it into effect. However, the WFUNA representative apparently had a mandate to submit the scheme at this session of ECOSOC. In introducing it he admitted that there were technical problems of implementation but suggested that one way in which capital could be raised was by issuing bonds at less than the commercial rate and within the revenue from these bonds to the Bank for Reconstruction and Development.

12. The WFUNA proposal was commented on favourably by several delegations in the course of the debate in Economic Committee. TheNetherlands, Chile and Pakistan Delegations all expressed the hope that it would be implemented. On the other hand the United Kingdom, while indicating its interest, pointed out that thorough study would be needed to show whether it would work. Since it can be expected that this proposal will be brought up again in the future, probably in a more concrete form, careful consideration should be given to it by the interested Department in Ottawa.