Address to the Second Committee of the United Nations General Assembly on November 11, 1959.

Mr. Chairman,,

May I begin by congratulating our distinguished Under Secretary for Economic and Social Affairs, Mr. Phiulippe de Seynes, for his extremely lucid and penetrating appraisal of the problem of economic development of the under-developed countries.

My delegation has also read with deep interest the report presented by the Secretary-General to the Economic and Social Council, analyzing the various suggestions and proposals made in the United Nations economic bodies during the recent years on topics relating to economic development, such as primary commodities and international commodity trade, the development of resources industrialization, technical assistance, financing, etc. I may say that we find ourselves in general agreement, both with the analysis and the conclusions of the Secretary-General, as well as with the recommendations made by the Economic and Social Council to intensify development efforts.

Mr. Chairman, all these statements and analyses, all the conclusions and recommendations serve to highlight the following broad features of the situation:

(a) the vast magnitude and complexity of the problem;
(b) the close inter-dependence of the developed and the under-developed countries in this context; and
(c) the urgency of finding appropriate solutions to these problems.

I do not propose to embark upon a detailed survey of the factor which go to make up what is undoubtedly a depressing picture of the present economic situation and the even gloomier long-term prospects of under-developed countries. Other speakers before me have no doubt adequately dealt with the subject. Moreover, I understand that this Committee is working against time. I would, therefore, confine myself to a few observations emphasizing the urgency of finding solutions to our problems.

Mr. Chairman, no one who has taken a moderately intelligent interest in the contemporary history of the post-war years can fail to recognize the vital role that the under-developed countries have come to play in the complex of international relations. This importance is not due only to the fact that an over4whelmingly large percentage of worlds’ population lives in these areas, nor even because they form majority of membership in this great world organization, but mainly because they represent enormous “Power vacuums”. When rival economic systems are advertising their wares, these vast populations stand fascinated and expectant at the threshold of a glorious tomorrow, but they also stand extremely perplexed. In this posture, one false step from any one of them and the world could be plunged into devastating conflict.

It is true that at present the statesmen of the leading nations are striving to bring about a relaxation of tension by limiting armaments. This must not, however, be allowed to full us into a false sense of security, for, disarmament, even if it should be achieved, will not by itself remove the deeper causes of war. One of the root causes of war is the economic disequilibrium in the world. We think that as long as these dangerous vacuums of power, these yawning chasms of grinding poverty, ill-health and ignorance remain unabridged, all hopes of a lasting peace in our times must prove chimerical. And, be it noted that while these negotiations go on, time will not be standing still in the under-developed countries. If things do not go forward, they must go backwards; such is the inexorable law of life. Strong and compelling pressures are constantly building up within these countries for better or for worse, pressures which will not resisted for long. During the last 18 months, a number of regimes in Asia and Africa, including that in my country, have been swept away because they were not able to respond effectively top these pressures. The weak and fumbling regimes have been replaced by politically strong and stable ones which appear to be well equipped for setting the course of these countries on the right track. For example, my country’s government has, within a very short period of time, launched a number of far-reaching programmes of reform and has already succeeded in reshaping the pattern of our internal political, economic and social life. We are determined to overcome all obstacles in our way to progress so far as it lies in our power. But there are things which do not lie in our power. Among them the most important are the international economic forces. They are beyond our control and yet they have a most powerful impact on the lives of each one of us,. If these economic forces continue to act unfavorably, people in these countries may well begin asking themselves the question; “What next?” And who, Mr. Chairman, can answer it today.

Now, Mr. Chairman, let us look at these problems a little more closely. A basic problem of economic development of the underdeveloped countries is that of finding adequate investment. The rate of domestic savings is too low and even what there is, is swallowed up by the enormous rate of population increase. The introduction of measures to control growth of population in itself requires considerable investment in raising educational as well as general standards of living. Here we come face to face with one of the several vicious circles with which our problem is hemmed in. To break it we need international assistance and, indeed, this has been forthcoming in generous measure, both bilaterally and multi-laterally. Nevertheless, the problem still remains. The role of the United Nations is to devise effective measures to combat whatever may be obstructing the realization of our aims.

As my delegation sees it, the central problem of under-developed countries can be examined in three different aspects, as, indeed, it has been in the past. First, we must ask ourselves if the means at present available to finance economic development are sufficient, and, if not, to find out more effective ways and means of increasing international flow of private and public capital to under-developed countries. Secondly, there is the question of adequacy or otherwise of means to make available the necessary measure of technical assistance to these countries in order to raise the low level of the skills of the population. Lastly, there is the paradoxical problem created by the dependence of under-developed countries on exports of primary commodities, the prices of which have not only fallen but fluctuated widely, while the prices of industrial manufactures have continued to rise steadily.

With regard to the availability of finance, Mr. Chairman, my delegation is happy to note that a new multilateral organization, the International Development Association, is being brought into being shortly as an adjunct of the International Bank. We believe that this new institution with its programme of “soft” loans will fill a much needed place in the existing pattern of international assistance programmes. It is, however, too early to form any definite assessment of its scope of activities. Judging from the initial proposed capital it seems that the loans to be given by the International development Association would go only part of the way in meeting the needs of the under-developed countries. For this reason my delegation feels that there is still a place for a United Nation Capital Development Fund, the creation of which we have always supported. Apart from certain inherent psychological advantages that a universal Fund of this kind, operated under the aegis of the United Nations, possesses, my delegation feels that it would enable those nations to make their contribution to international economic cooperation which, for reasons of policy or scruple, do not find themselves able to participate in the newly formed International Development Association.

The situation of the flow of private international investment into the under-developed countries remains unsatisfactory despite the fact that most of the countries concerned have considerably liberalized their fiscal and industrial policies to make them more attractive to foreign investors. My own country, for example, has provided several new incentives and facilities for foreign investors. One of the important concessions is that participation of local capital in any fixed proportion is no longer insisted upon. Bilateral agreements for avoidance of double income-tax have been concluded with many countries. The mining industry has been granted a special tax relief. An Investment Promotion Bureau has been set up by the Central Government with branches in both the Provinces for providing the fullest possible information and assistance to foreign investors.

My delegation is also pleased to note that in the last few years significant progress has been made in the sphere of rendering technical assistance to the under-developed countries, both as regards the availability of funds and the improvements of institutional machinery for international action. It is needless to stress how desperately the under-developed countries stand in need of industrialization. Whatever brings this objective nearer to realization is worthy of our whole-hearted support. The recently created United Nations Special Fund has been rightly described as “a strategic break-through of incomparable significance” for economic development. It has an imp0rtant role to play, especially in infrastructure improvements and in building up the capacity for absorption for capital in the under-developed countries. Equally gratifying has been the role played in the last few years by the Expanded Programme of Technical Assistance. It must, however, be stated that the availability of funds for both the Special Fund and Expanded Programme of Technical Assistance falls short of the minimum needs.

This, Mr. Chairman, brings me to the last and in the view of my delegation, the most important aspect of all, namely, that relating to the instability of commodity prices. For, upon a satisfactory solution of this problem depends our most reliable and effective instrument of economic development, namely, the capacity of the under-developed countries themselves to contribute to their own development. No lasting success can be achieved in the field of economic growth unless and until, as the report of the International Bank for Reconstruction and Development has pointed out, the under-developed countries are enabled to mobilize their own capital resources. In any case, we cannot go on relying indefinitely upon international assistance as a permanent feature of our economic life.

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. It is a matter of considerable concern to us that the returns on the sale abroad of primary commodities have diminished very considerably over the last several years. This fact has been brought out emphatically in almost every survey of world economic conditions. I shall limit myself to inviting attention, by way of illustration, to the fact that the fall in the price index of primary commodities in the course of one single year from mid-1957 to mid-1958 has reduced export earning of the under-developed countries by about 8% representing a loss in their import capacity equivalent to about six years’ loans to them by the International Bank for Reconstruction and Development at the 1956-57 levels. It may also be pertinent to mention here that in the case of my own country, the total financial aid which we have received from different sources up until now, has been less than half of the total loss which we have suffered on account of the fall in the price of our primary commodities.

The situation created by the wide-spread decline in the price of primary commodities has been aggravated by a rise in the price of manufactured goods thus reducing still further the ability of the under-developed countries to procure the means of their economic progress. This again is a phenomenon well recognized in all economic appraisals. Every under developed country must have felt the frustrating consequences of the combination of these two vital economic factors on their efforts to improve the standards of their people. In Pakistan, the purchasing power of the export value of our primary commodities is today a little less than 50% of what it was in 1948 and 1949.

May I, Mr. Chairman add that the future as one can see it today does not hold prospects of any improvement in the present situation. All trends indicate that the cost of manufactured goods in the industrialized countries will, mainly because of the wage increases and other social benefits, continue to rise, that the manufacture of substitutes will continue to reduce the demand for primary commodities and that the demand of the under-developed countries for manufactured goods, in order to increase their production of primary commodities and industrial products in keeping with the increase in population, will continue to rise. These premises cannot but lead to the widening of the gap between the standards of living of the people of the under-developed countries and those of the industrialized countries. The extremity of such consequences can be judged from the estimate that even today, no less than 1,362 million inhabitants out of a total of 1,800 million, living in under-developed countries, have a per capita income of $8 per month as compared to the $9 per day in the highly industrialized countries.

It is gratifying to observe that the acuteness and magnitude of the problem has been well appreciated by the various bodies dealing with economic problems under the aegis of the United Nations. The Commission on International Commodity Trade and the Interim Coordinating Committee for International Commodity Arrangements have undertaken studies on the subject. Recommendations have been made that the industrialized countries should abolish import duties on primary commodities and do away with all protective measures and import restrictions with regard to primary commodities. My delegation fully supports these recommendations. It has been suggested that the best approach to solve the problem is by way of dealing with each commodity separately and through bilateral agreements between exporting and importing countries. The setting up of buffer stocks has also been considered as a measure conducive to stabilization of prices. These are no doubt useful suggestions but experience has shown that, by themselves, these measures cannot provide the answer to the rapidly deteriorating situation confronting us.

In the opinion of my delegation, Mr. Chairman, it is essential that the problem must be faced in its entirely and with a sense of urgency that the circumstances call for. A thorough analysis should be made of the causes that affect the return to the producer of primary commodities. Remedial measures would necessarily have to be of a short term and a long term character. It will be essential to introduce, with the minimum loss of time, a diversification in the production of under-developed countries. The achievement of this end calls for considerable foreign exchange resources to be available to those countries. While we search for long-term solutions, it is of the greatest importance that we should find immediate means of enabling the under-developed countries to sustain their economic progress at some reasonable level. Such resources are, as I have brought out earlier, being depleted by the adverse balance in terms of trade of the under-developed countries. My delegation is of the view that the serious situation facing us demands the creation of a Compensatory Fund to counter-balance the short-fall in the earnings of the primary producers vis-à-vis the industrial countries. We visualize that disbursements from such a fund would be limited to extreme fluctuations of prices so as not to disturb the ordinary pattern of international trade with its normal margins of fluctuations. Necessary precautions will also need to be incorporated in the rules of administration of the fund to ensure that the scheme of compensation does not encourage un-economic production in countries exporting primary commodities.

May I add that the proposal now made is not altogether a new one. It only seeks to give definite shape to an idea which has been examined and supported by economic experts. The committee of five experts appointed by the Secretary-General under General Assembly Resolution 623 (vii) to consider Commodity Trade and Economic Development gave careful thought to the possibility of introducing automatic financial compensation schemes to correct extraordinary fluctuations in terms of trade. They considered that there were merits, but also difficulties and shortcomings in such a scheme and recommended finally, and I quote –“However, should nations prove unable to agree on their arrangements for moderating either the excessive fluctuations of prices and incomes or the ill consequences of these fluctuations, then they might do well to take a second look at automatic compensatory schemes.” Mr. Chairman my delegation is convinced that the ill consequences of the fluctuations have reached a degree which calls for the immediate consideration of the compensatory scheme.

We find that this specific aspect of the problem has also been brought up in the discussions of the 7th Session of the Commission on International Commodity Trade. The report of the Session states and I quote –“ The Commission agreed to consider at its 8th Session international measures designed to compensate for fluctuations in foreign exchange receipts from the export of primary commodities, in this connection the Commission recommends that the International Monetary Fund be invited to inform the Commission about its policies and procedures as they bear on the subject under consideration.”

My delegation is of the view that the consideration of a compensatory fund of the nature proposed calls for urgent examination by a committee of experts in consultation with the countries producing primary commodities and those which are the principal importers of such commodities. Further, the association of the International Monetary Fund and the Food and Agriculture Organization with the examination of this problem would, we feel, be invaluable and should be secured. The Committee should be required to submit its report in time for discussion at the next session of the General Assembly.

In conclusion, Mr. Chairman, may I say how fully my delegation subscribes to the vies expressed by our distinguished Secretary-General in the statement he made on July 6, 1959, before the Economic and Social Council on the problem of commodity instability. I quote: “while I recognize the acute difficulties in this field. I cannot help wondering whether we have really exhausted all our intellectual and moral resources in trying to find a more broadly based solution to the problem than has thus far emerged. It is, perhaps, at least worth considering whether a new approach might be made towards some such solution…….For the longer run ahead, are we sure that there is a sufficient awareness of the problems and frustrations which are building up progressively in the under-developed countries as their peoples grow more and more conscious of the fact that time is slipping away from them? Can we rest content with the fact that all the efforts of recent years and I do not under-estimate them have still not sufficed prevent to the gap between rich and poor countries from continuing to increase. There is a widespread feeling in the under-developed countries of the need for some new breakthrough on the road to economic development” unquote.

I submit that the proposal formulated by my delegation is in line with this thinking and I commend it for your acceptance.

Thank you, Mr. Chairman.