Address to the Second Committee of the Fifteenth Session of the United Nations General Assembly on October 14, 1960.

Mr. Chairman,

May I first of all offer to you the congratulations of my delegation on your election as the Chairman of this Committee. We are confident that under your wise guidance this Committee will be able to maintain, if not enhance, its past record of constructive achievement. We also extend our good wishes to Mr. Rao and to Mr. Ahmad on their election as Vice-Chairman and Rapporteur.

My delegation has listened with great interest to the statement made before this Committee by the Under-Secretary for Economic and Social Affairs. Mr. De Seynes has drawn attention to the most striking feature of the current world economic situation, the wide and continuing discrepancy in the rate and trend of economic development between the industrialized and the under-developed countries. The value of the net national product at factor cost of 16 developed countries stands, as of this year, nearly 300% higher than share of about 60 other countries and territories. This situation is reflected in the wide, and what is more tragic, a growing difference in the standards of living of the peoples inhabiting different parts of this same world. The 100 under-developed countries and territories, comprising about 2/3rds of the total population of the globe, have an average annual per capita income of approximately $120. The average is less than $70 in my own country, as in several others. What these figures signify in terms of human needs can be realized only if we place them in the perspective of the average per capita income of the more fortunate countries – more than $2,000 in the United States, $875 in Britain and the Scandinavian countries, and $550 in the USSR.

These differences, Mr. Chairman, tell a story of human misery which the world of today can no longer afford to ignore. Modern communications have reduced distance to proximity: lands which were once distant have become virtual neighbors. No country can now live in isolation or insulate itself against the tensions and forces that originate in the rest of the world.

The fact that the world has become one, not only in terms of distance, but also in the dissemination of ideas, has had several consequences. For one thing, the peoples of the under-developed countries no longer accept poverty as a part of inexorable destiny. On one hand they have reached the very edges of starvation; on the other they are today exposed to the ideas and aspirations of peoples who live in the more developed countries. New vistas have opened up before them giving shape to their suppressed longings. The age of despair imposed on them for so long by colonial rule and domination has given way to an age of expectation and demand. This phenomenon presents a unique opportunity and a great danger. It could be harnessed to the accomplishment of the great constructive tasks that face less developed countries. On the other hand, if the economic gulf between the advanced and the under-developed countries keeps steadily widening as at present, the resultant frustrations could only heighten world tensions. We are living in times when conflict, ideologies, economic no less than political –are competing for the allegiance of man. It is a matter of concern to us that the challenge implicit in this situation, so pregnant with peril has not as yet received that wide understanding and acceptance which is its due.

The growing oneness of the world has also made it abundantly clear that there is no fundamental conflict or dichotomy between the economic development of the under developed countries and the prosperity and well being of the industrialized countries. One is essentially a function of the other. The context of economic growth provides the most effective and consistent framework for the harmonization of economic policies. The development of the backward areas of the world would undoubtedly raise the levels of living everywhere, increase demand, develop trade, and in general help the international economy to reach a higher level. The so-called structural changes in industry, of which we have heard so much recently, have already been completed in most of the Western countries. In fact, the imports of the under-developed countries have consistently exceeded their exports since the end of the Korean War, and they have almost all been forced to draw heavily on their external reserves. These reserves were at best but small and, if a balance at a higher level is to be achieved, the resources and, therefore, the productive capacity of the under-developed countries must be raised in proportion.

The Ministerial level meetings of the Economic and Social Council held last summer in Geneva have served to emphasize the economic interdependence of the world. What is essential, in the opinion of my delegation, is the promotion of a sense of international responsibility for raising the levels of living in under-developed countries, and the adoption of a global approach to the problems of economic growth and dynamics. Without the development of such responsibility, the substance of the problem of economic development must continue to elude us.

The central problem of economic development is the provision of adequate investment capital to the under-developed countries. There is a feeling in the advanced countries that the less developed countries do not make sufficient effort to mobilize their own idle resources by internal measures. In the industrialized countries the process of capital formation is almost automatic as a result of adequate savings, but in the almost stagnant economies of the under-developed countries, the margin between income and consumption is so low as to make the capacity for savings practically non-existent. In Pakistan, in spite of compulsory savings measures, popularization of savings institutions, expansion of banking facilities, and the provision of varied incentives in the tax structure for investment from profits, the rate of savings which we have been able to generate has fallen far short of development needs. In order to prevent the slowing down of development programmes, Pakistan has also attempted to encourage the import to capital goods at the cost of restricting drastically imports of consumer goods and other necessities of life. These steps have been taken because we are fully aware of the need for self-help in economic development. It must be realized, however, that if economic development on the desired level and with the desired speed is to be financed entirely from domestic resource, the economic and political structure of an under-developed country is exposed to stresses and strains which might make orderly progress of any kind impossible.

A substantial contribution of foreign capital is needed to create conditions which would enable the under-developed countries to break through the “vicious circle of poverty” and sustain a sufficient pace of development o reach the “take off” stage. My delegation in happy to note that in the last few years a certain degree of progress has been achieved in this direction, both as regards the availability of funds and the improvement of institutional machinery for international action. The United Nations Special Fund has been described as “ a strategic break-through of incomparable significance” for economic development. It has an important role to play in the building of infrastructure and in increasing the capacity for absorption of capital in the under-developed countries. Equally gratifying has been the recent establishment of the International Development Association. A considerable sum of money has thereby been added to the stream of funds available for developmental purposes. If the Association comes to enjoy, as we hope it will, a certain degree of flexibility, which would allow it to take into account the specific situations of different countries in negotiating terms of loans, it would undoubtedly give a new life to the international credit system.

The International Bank for Reconstruction and Development and the International Finance Corporation have continued to afford the under-developed countries invaluable assistance in finding loan capital for their development. Since 1957-58 such loans have averaged a figure of about $700 million annually as compared to an annual rate of $400 million in earlier years. The loans have been utilized to finance the development of mineral resources, improvements in transportation systems, and general economic, including agricultural, development,. Over the years the bank has come to occupy a position of great prestige in the international financial community which enables it to perform many subsidiary functions of great value to the developing countries. I would like to take this opportunity, Mr. Chairman, to express here our deep appreciation of the role played by the International Bank in the settlement of the Indus Water question. The signing of the Indo-Pakistan Canal Water Treaty last month in Karachi is an event of historic importance for which the World Bank deserves much credit. The Treaty is likely to have a profound effect on the economic development of the entire Sub-continent. We appreciate also the plan evolved by the bank for financing the massive expenditures involved, and are grateful to the friendly governments which have so generously committed their resources and, thereby, contributed towards the final settlement.

While emphasizing the importance of international assistance in the matter of financing and providing other assistance to the developing countries, we do not wish to minimize, or in any way under-rate, the valuable contribution which bilateral assistance and regional arrangements, such as the Colombo Plan, have rendered. In the case of Pakistan, for instance, the contribution made by the Colombo Plan in initiating and sustaining development in such basic fields as agriculture, health and social welfare services, labor and public administration, can hardly be over-emphasized. Similarly, of the total of approximately $1½ billion that Pakistan has received in foreign assistance during the past decade, no less than one billion dollars has come through bilateral assistance from the United States.

The situation in respect of the flow of international private investment to the under-developed countries has also improved to certain extent,. Both capital-exporting and recipient countries have adopted a number of measures designed to increase the total flow of funds to the low-income economies. My own country, for example, has provided several new incentives and facilities for foreign investors, such as, repatriation of profits without restriction, liberal tax holidays, compensation guarantees, relief from double taxation, special concessions to specified industries and so on. An Investment Promotion Bureau has been established to provide the fullest possible information and assistance to foreign investors. The Bureau is charge with receiving all applications for the establishment of new industrial concerns involving foreign investment, disseminating information regarding investment opportunities in Pakistan, and assisting foreign and local investors in obtaining import licenses, land, building materials, power, water, railway sidings, technical help and any other facility for which the cooperation of the central or provincial governments or statutory bodies is necessary.

The fact, however, remains, Mr. Chairman, that the total of funds available to the under-developed countries at present, estimated to be about $4 billion per year, is pitifully inadequate to their needs. We have, as I have noted earlier, about 100 countries and territories with an average per capita income of $120 per year. The total of capital available to them through domestic savings and international investments makes possible an annual rate of increase in their national incomes of about 3%. Correcting this figure against the average rate of population growth, we are left with an annual net increase in national income of only 1%. This means in the case of Pakistan, for example, a net increase in personal living standards of about 70 cents per person. This is far too low and unacceptable.

In view of this situation, it is a matter of regret to my delegation that the response of member countries, particularly the developed countries, to General Assembly resolution 1424(XIV), sponsored by 47 nations and adopted by 67 votes to none with 15 abstentions last year, has not been very encouraging. The resolution called upon member states to reappraise their position as regards extending material support for the early establishment of a United Nations Capital Development Fund. In our opinion, Mr. Chairman, the eventual establishment of such an organization first conceived of as UNEDA, then as SUNFED, and now finally as a U.N. Capital Development Fund, is imperative, and in the long run, inevitable. It has been argued that with the recent inauguration of the International Development Association, the efforts towards the establishment of multilateral agency have come to their final fruition, and alternatively, that since the totality of funds available for international public investment is in any case necessarily limited, it is unrealistic to plan for an additional financing machinery at the present, when, the resources of most potential contributors are fully committed to the financing of the I.D.A. We do not agree with this point of views. The recent up-swing in world economic activity has undoubtedly brought forward new capital resources, as shown by the fact that they have been found for bilateral and multilateral action outside the United Nations. In this situation, we believe that the I.D.A and a SUNFED – type fund could very profitably “co-exist” and supplement each other. Although the I.D.A would undoubtedly increase the total of funds available to the under-developed countries, it would only partly meet their total requirements not only in quantity, but also as to the type of financing required. Moreover, a truly multilateral United Nations agency, such as the proposed fund, has the basic advantage that it enables those nations to0 make a contribution to international economic cooperation which, for reasons of policy or scruple, do not find themselves able at the moment to participate in the International Development Association.

In this connection, Mr. Chairman, I would venture to make a suggestion. As you are aware, in the last few years numbers of under-developed countries have produced Five Year and other long term plans for their economic development. Pakistan has inaugurated its Second Five Year Plan in the course of this year; India will be launching its third. Several more are likely to follow. The plans are, in effect, the formulation of long term policies for economic growth. Such formulations are necessary in order to achieve the maximum, if not the optimum, utilization of limited resources. Nor are such programmes for economic growth, provided they are sufficiently pragmatic and flexible, incompatible with conditions permitting full scope to private initiative.

The emergences of such long-term projections have made a broadening of institutional arrangements for international cooperation necessary. The need is on two levels: financing of the programmes and their coordination.

A common characteristic of most of the plans for economic development is their urgent need for financial assistance. Pakistan’s Second Five year Plan envisages a total expenditure of U.S. $3,990 million. The plan is proposed to be financed to the extent of U.S. $2,310 million from internal resources and U.S. $1,680 million from foreign assistance. The successful implementation of the plan depends essentially upon the inflow of foreign capital in the shape of multilateral and bilateral assistance and private foreign capital.

The available institutional machinery for international cooperation is not geared to meet either the amount or the nature of these requirements. The loans of the International Bank, for instance, have in the past, with some exceptions, been for the financing of specific projects, and the maturities of these loans have been largely determined by the type of project rather than by the overall conditions of the economy. What is needed are loans for the support of development programmes as a whole, or for certain parts of the programme, and an extension of the period of repayment of the loans. The policy of linking loans to specific projects is inadequate in other respects also. It often leads to unintended distortions in favor of basic utilities and large schemes to the neglect of activities which have a more immediate impact on production; agricultural development schemes and social service projects usually remain under-financed.

Coordination of the new development plans is likely to be as important a task as their financing. There is an immediate need for expert advice, collection and collation of data, development of techniques for medium and long term plans, and above all, for harmonization of policies. What is needed is the establishment of a consultative machinery for the coordination of development plans on a regional basis. It is necessary for a new international body to perform in respect of development plans the functions which the U.N. special fund performs in respect of individual projects.

It is the view of my delegation, Mr. Chairman, that a United Nations Capital Development Fund, conceived in terms of the new plans for development, could fulfill both the needs which we have described, namely, the need for financing and the need for coordination. The rapidly deteriorating economic situation of the under-developed countries makes the early establishment of such a body a matter of high priority. It would be regrettable, indeed, if the question of financing of economic development it placed on the agenda of e General Assembly, from year to year, merely as a salve to the United Nations’ conscience. The time has come to break new ground and mark a departure from the established patterns of thinking. I would remind the distinguished representatives present here that these development plans embody almost the last hope and chance for the peoples of the under-developed countries, and the success or failure of these plans will be of decisive importance to all of us.

There is one other aspect of the situation. Mr. Chairman, to which I would like to draw attention. I refer to the fall in the price-index of primary commodities in recent years and the consequent change in the terms of trade against the under-developed countries. The fall in the price level of primary commodities has been such that the loss suffered by the under-developed countries is in some cases greater than the total of international aid and assistance received by them so far. Even the present up-swing in world economic activity has failed to bring about a corresponding rise in commodity prices. While the quantum of commodity trade rose by 10% in 1959, the over-all commodity price level fell by 2% as compared to 1958 and by 8% as compared to 1957. In fact, the terms of trade of primary commodities in relation to manufactures has at the moment reached its lowest level since 1950. This has meant, in effect, a drastic reduction in the flow of capital resources available for programmes of economic development.

It is against this background of inadequate financial resources that the movement of commodity prices is to be viewed. In this context, it will be a tragic mistake, Mr. Chairman, to regard the price movements in the commodity market as simply exercises in the interplay of impersonal market forces. Price movements in the commodity market affect the most reliable and effective instrument of economic development, namely, the capacity of the under developed countries to contribute to their own development. No lasting success can be achieved in the field of economic growth unless and until, as a recent report of the International Bank for Reconstruction and Development has pointed out, the under-developed countries are enabled to mobilize their own resources. The capacity of the under-developed countries to contribute to their own development depends largely on their export earnings as the plant and machinery and the technical facilities required for the purpose of development have to be imported from industrialized countries. The under-developed countries have, under the present circumstances, to rely on the sale of their primary commodities for their export earnings.

The question is essentially one of the totally of funds available for economic development. Strains on the balance of payment of a primary producing country develop from two sources: strains which arise from the development programmes of the country, and strains which arise from the fall in its export earnings. As regards the first set of strains, it will be seen that there is a constructive element in them. Such strains in fact could be regarded as a measure of dynamic policy, and although it is possible, especially in theory, to rationalize or reduce them, a certain degree of pressure from them is inevitable. The second set of strains arising fr4om the fall in export earnings in the nature of an additional, unwelcome, and depressive burden. As things are at present, his additional burden is seriously affecting the development plans of the under-developed countries, and bringing to nought international cooperation, in all its manifold manifestations, directed to this end.

Apart from the continuing fall in prices, the commodity market has also been subject to excessive short term fluctuations, such fluctuation have tended to disrupt economic planning to discourage initiative and to threaten foreign exchange reserves. Developing countries are unable to foresee what their foreign exchange earnings are likely to be for a given period. A very slight shift in the economic forces operating in the industrialized countries is sufficient to reduce radically the purchasing power of the primary exporting countries and to bring to nothing any long term formulations which they might have made in respect of their economic and social growth.

In The long run the most fruitful approach to commodity problems would undoubtedly seem to lie in the creation of demand for primary commodities in the under-developed countries themselves. This process of transforming the exporters of primary commodities into their users, is, however, the very process of economic development, which is predicated on the maintenance of a steady level of export earnings. In the short run there are several lines of enquiry which could with advantage be pursued. It will be extremely interesting, for instance, to have an assessment of the possibility of using compensatory financing measures to off-set fluctuations in the export income of primary producing countries. A group of experts is being appointed for this purpose in terms of General Assembly Resolution 1423 (XIV), which my delegation had the honor to sponsor last year. We await the report of the group of experts with considerable interest. Similarly, the implications and possibilities for an extension of commodity agreements and the economic consequences of the establishment of international buffer stocks need to be very carefully examined.

In conclusion, Mr. Chairman, I would like to say a few words on the subject of land reforms. Land reforms, which entail, in effect, the transformation of the agrarian structure of a country, is an essential facet of the process of economic development, and it is a pity that not enough attention has so far been paid to it in the consideration of international economic and social policies. We welcome the inclusion of this item in the agenda, and we hope that it will lead to a detailed and constructive discussion in this committee, which may find expression in the report of the Secretary-General called for in terms of General Assembly resolution 1426 (XIV).

The land reforms which have been recently introduced in Pakistan constitute a landmark in the field of agrarian legislation, and I think it will be appropriate if I present here a few of its salient features.

In January, 1959, President Mohammad Ayub Khan announced sweeping agrarian reforms for West Pakistan. The reforms were sorely needed, 0.1 percent of the owners held amongst them 15 percent of the land in properties of over500 acres each, and at the other end of the scale were 65 percent of the owners together holding just as much land in holdings of less than 5 acres each. A better distribution of land was obviously called for. On the other hand, many of the agricultural holdings were too small to be economic. The government, therefore, appointed a commission to examine the problem and make suitable recommendations. The commission, after very careful study, recommended that a ceiling and a floor should be fixed for agricultural holdings. The ceiling for the ownership of land was fixed at 500 acres for irrigated land and 1,000 acres for unirrigated land. These recommendations were accepted by the government and another commission has been appointed to implement them. This commission is at work and the land in excess of the ceiling fixed, which has been surrendered by the land owners, is being distributed to cultivating tenants, who are becoming land owners. Adequate compensation is being paid over an extended period for the land which has been taken over from the landlords. This compensation is financed out of the payments to be received from the new land owners over a period of time. As a result of this reform, 6 million acres of land are being distributed to cultivating tenants and nearly one and a half million tenants will become land owners.

In East Pakistan, legislation for land reform, designed to confer ownership rights on tenants and to eliminate intermediaries between the cultivators and the government was enacted as long ago as 1950. The legislation was, however, not effectively implemented. The present government has taken steps to ensure the implementation of this reform in East Pakistan and necessary funds are being provided for the payment of compensation to the previous land owners and other intermediaries. The reforms, which are being implemented with vigor, have already eliminated a state of feudalism which prevailed in certain parts of the country and have provided a greater equality of opportunity and an increased incentive for production. The social and economic benefits of these reforms to the country are expected to be enormous.

Thank you, Mr. Chairman.