[Title] Economic Communique, Making a Success of Globalization for the Benefit of All

Preamble

1. We, the Heads of State and Government of seven major industrialized democracies and the President of the European Commission, have met in Lyon for our 22nd annual Summit. Our discussions have taken place within the framework of a reflection on benefits and challenges posed by increasing economic globalization.

2. Economic growth and progress in today's interdependent world is bound up with the process of globalization. Globalization provides great opportunities for the future, not only for our countries, but for all others too. Its many positive aspects include an unprecedented expansion of investment and trade; the opening up to international trade of the world's most populous regions and opportunities for more developing countries to improve their standards of living; the increasingly rapid dissemination of information, technological innovation and the proliferation of skilled jobs. These characteristics of globalization have led to a considerable expansion of wealth and prosperity in the world. Hence, we are convinced that the process of globalization is a source of hope for the future. History shows that rising living standards depend crucially on reaping the gains from trade, international investment and technical progress.

3. Globalization also poses challenges to societies and economies. Its benefits will not materialize unless countries adjust to increased competition. In the poorer countries, it may accentuate inequality and certain parts of the world could become marginalized. The adjustment needed is, however, imposing rapid and sometimes painful restructuring, whose effects, in some of our countries, can temporarily exacerbate the employment situation. Globalization of the financial markets can generate new risks of instability, which requires all countries to pursue sound economic policies and structural reform.

4. Our countries have made a decisive contribution to the progress of liberalization and globalization. We must do our best to ensure that this process fully responds to the hopes it has aroused and that globalization serves the interest of people, their jobs and their quality of life. The potential benefits of the process for people must be translated into real opportunities in our own societies and in the poorer countries of the world. In an increasingly interdependent world we must all recognize that we have an interest in spreading the benefits of economic growth as widely as possible and in diminishing the risk either of excluding individuals or groups in our own economies or of excluding certain countries or regions from the benefits of globalization.

5. This requires increased international cooperation. The adaptation of our international institutional structures; liberalization of markets, fair rules and their extension to new players; the capacity to respond to crises of varying scale and nature, as well as a readiness to support the efforts of those countries striving to escape from the miseries of economic underdevelopment will be necessary for future progress. We call upon other countries with the financial capacity and a stake in the international trade and monetary system to join us in these efforts so as to share the responsibilities and the burdens fairly among ourselves and with others. We will thus be able to make a success of globalization for the benefit of all.

I. Strengthening Economic and Monetary Co-operation

6. Growing international economic interdependence unquestionably holds out new opportunities for the entire global community. At the same time, it adds to our collective responsibilities and the need for more effective co-operation among our countries to face new challenges.

7. Since we met in Halifax, economic developments have been on the whole positive and disparities of economic performance among us have been narrowing. Canada and United States continue to enjoy sustained non-inflationary growth. In Japan, the recovery is gathering strength. Some European countries, admittedly, experienced a slowdown, but economic fundamentals are improving and we are confident that growth will pick up in the second half of the year.

Looking ahead, the economic fundamentals remain sound and well oriented: inflation has settled at a low level, the interest rates have come down substantially, reaching historically low levels in some of our countries and external and internal imbalances have been substantially reduced. However, we recognize that some difficulties still lie ahead: public deficits and debt remain too large and national savings too low, unemployment is still unacceptably high in many countries and despite all the progress already achieved in the area of structural reforms, our economies are not yet as resilient and adaptable to changes as they should be.

Outside the G-7 sphere, economic prospects also look very encouraging. Emerging economies are experiencing robust growth. Sound macroeconomic policies and progress toward market-based institutions have contributed to improving economic performance in many developing countries and countries in transition.

8. In this context, our economic policies will continue to be directed at sustaining non-inflationary growth. This is a vital prerequisite to the creation of jobs and bringing down unemployment. While recognizing that our individual circumstances may vary, we share a common commitment to a medium-term economic strategy: credible fiscal consolidation programs, successful anti-inflationary policies and as a consequence low interest rates, and strengthened structural reform. These should contribute to investment, growth and job creation. Such policies will contribute to reducing external imbalances, thereby promoting international monetary stability and maintaining the conditions for harmonious growth in global trade and business.

9. Sound economic policies are the most important foundation for preventing exchange rate misalignment that may heighten uncertainty in the global economy and be detrimental to trade and growth. We welcome the broad movements in the major currencies since April 1995. These are positive and promising developments, and have helped to improve the conditions for sustained growth across the G-7. We endorse the views of our Ministers of Finance on international monetary stability. We request our Ministers of Finance to continue to co-operate closely on economic policy and in the exchange markets. In this connection, we attach importance to the implementation of improved practical measures to deal with risks relating to the operation of the global financial markets and we request our Ministers to report to the next Summit on this issue.

10. The globalization of the financial markets has contributed to the creation of a more complex financial environment. Better prudential regulation and supervision in the financial markets are essential elements in preserving the stability of the international monetary and financial system. In this respect, we welcome the progress on the strengthening of capital standards, including the recent agreement on capital adequacy standards for banks' exposure to market risk, improved disclosure and enhanced surveillance.

11. Co-operation among regulatory and supervisory authorities should continue to adapt to financial innovations, and to the growth in cross-border capital movements and internationally-active financial institutions. We welcome the work accomplished by the international bodies concerned with banking and securities regulation. Over the year ahead, we should seek to make maximum progress on the following objectives:

- enhancing co-operation among the authorities responsible for the supervision of internationally-active financial institutions, importantly by clarifying their roles and responsibilities;

- encouraging stronger risk management and improved transparency in the markets and connected activities, especially in the innovative markets;

- encouraging the adoption of strong prudential standards in emerging economies and increasing co-operation with their supervisory authorities; international financial institutions and bodies should increase their efforts to promote effective supervisory structures in these economies. We ask our Finance Ministers in consultation with the relevant institutions to report back on this issue at our next meeting;

- studying the implications of the recent technological advances which make possible the creation of sophisticated methods for retail electronic payments and how to ensure their benefits are fully realized.

12. The increased integration of global capital markets, the changes in magnitude and composition of financial flows, and the increased diversity and number of creditors and borrowers present new opportunities and new challenges. That is why, in order to promote monetary stability, we proposed last year in Halifax a number of measures for the international financial system, notably the International Monetary Fund, to strengthen the ability to deal effectively with these challenges.

We welcome the work accomplished since the Halifax Summit toward the implementation of these proposals. The surveillance capacities of the IMF have been enhanced, standards for the provision of economic and financial information to the markets have been established and an emergency financing mechanism has been created. We welcome the G-10 report on resolving the liquidity crises of sovereign borrowers. This report emphasizes the importance of market discipline, and calls for the enhancement of current procedures for handling international financial emergencies, in order to minimize the need for official support in the future.

13. Together with the international community as a whole, we undertake to ensure that the IMF has the resources needed to perform its tasks in the service of international monetary stability:

- We welcome the agreement reached on a framework for doubling the resources currently available to the IMF under the General Arrangements to Borrow in order to respond to financial emergencies. These arrangements will include a broader group of countries with the capacity to support the international monetary system. We welcome this sharing of monetary responsibilities, thereby adapting our co-operation to new economic circumstances;

- The IMF should remain an institution based on quotas providing the resources necessary to accomplish its traditional tasks. Any quotas increase should take into account the changes in the economic and financial weight of its members. Given the prospective evolution of the Fund's liquidity, we request that the 11th quota review be completed as soon as possible.

14. Lastly, the IMF should continue to reflect on the role of Special Drawing Rights within the international monetary system. We continue to hope for progress on proposals that would permit all Member countries to participate on an equitable basis in the SDR system. We invite the IMF Member States to pursue their dialogue in order to settle this issue.

15. As we recognized last year, international financial fraud is a growing problem for our financial systems. In order to strengthen the fight against this phenomenon, we will continue to look for ways of facilitating, as much as possible, the exchange of information on cases involving serious financial crime and regulatory abuse between law enforcement agencies and regulatory bodies, in accordance with our own domestic legal systems and other basic principles. We intend to maintain our dialogue to review progress and developments in this field.

16. Finally, globalization is creating new challenges in the field of tax policy. Tax schemes aimed at attracting financial and other geographically mobile activities can create harmful tax competition between States, carrying risks of distorting trade and investment and could lead to the erosion of national tax bases. We strongly urge the OECD to vigorously pursue its work in this field, aimed at establishing a multilateral approach under which countries could operate individually and collectively to limit the extent of these practices. We will follow closely the progress on work by the OECD, which is due to produce a report by 1998. We will also follow closely the OECD's continuation of its important work on transfer pricing, where we warmly endorse the significant progress that the OECD has already achieved.

17. In order to face the challenges of economic and fiscal impact of aging populations, we remain committed to ensuring sustainability of our social security system.

II. Promoting Strong and Mutually Beneficial Growth of Trade and Investment

18. Expanding trade and investment has led to marked increases in global wealth and prosperity and should continue to play this role in the future. Growth in trade and investment will be sustainable and therefore most beneficial to all if conducted within a strong multilateral framework of rules.

19. We give high priority to achieving a multilateral agreement on investment in the OECD that provides high standards of investment protection and liberalization, with effective dispute settlement. We look forward to the successful completion of these negotiations by June 1997.

20. We place a high priority on an efficient, dynamic, respected and open multilateral system. We reaffirm the central role of the WTO and the preeminence of multilateral rules, which should serve as the framework for regional initiative. We reaffirm our commitment to working to strengthen the confidence in and credibility of the multilateral trading system by avoiding taking trade and investment measures that would be in contradiction with WTO rules and OECD codes, and by using and complying with any applicable provisions for consultation and dispute settlement when differences arise. We emphasize that bilateral or regional free trade agreements should be trade liberalizing and should cover substantially all trade.

We will continue to monitor the strict implementation of commitments and precise compliance with timetables agreed at the end of the Uruguay Round. In accordance with the rules of the World Trade Organization and on the basis of significant liberalization commitments, we support the accession of new members to the WTO.

21. We recognize the importance of the integration of developing countries in the global trading system as an essential element of sustainable growth and development. We have agreed on ways to help developing countries, especially the least developed, to benefit more fully from the results of the Uruguay Round.

22. Together with our partners we will work for the success of the first ministerial conference of the WTO in December 1996. We will ensure full and effective implementation of the Uruguay Round results according to the agreed timetables. We are resolved to complete all ongoing negotiations in the service sector and to relaunch talks in Singapore on financial services so as to reach significant, balanced and non-discriminatory liberalization commitments by December 1997.

We strongly support the conclusion of a mutually beneficial Information Technology Agreement.

23. Global liberalization of trade and a high level of environmental protection should be mutually supportive. It will be important, for example, to ensure that WTO rules and multilateral environmental agreements and ecolabelling programs are complementary. The Singapore Ministerial Conference of the WTO will be an important opportunity to demonstrate the ability and willingness to integrate environmental protection and thus sustainable development concerns into the multilateral trading system. We welcome the ongoing work launched at Marrakech and look to the Singapore Ministerial Conference to make substantive recommendations for action.

24. In addition to pursuing full implementation of the Uruguay Round agreement, we invite the WTO Ministerial Conference to broaden its agenda to include topics of special importance for trade and investment liberalization, by:

- beginning an examination of trade and investment in the WTO and work towards a consensus which might include the possibility of negotiations;

- discussing the interaction between trade and competition policy with a view to determining how to proceed;

- exploring possible new industrial tariff initiatives in sectors to be agreed by consensus.

We also recognize that there is a will to address the question of the relationship between trade and internationally recognized core labour standards.

We also believe that there is more to be done in areas where other obstacles still seriously impede freer access to markets, in particular:

- by encouraging more convergence between national standards and international norms, by further regulatory reform and by mutual recognition of procedures for testing and for certification;

- by enhancing the disciplines of and expanding the number of countries subscribing to the Agreement on Government Procurement and, in furtherance of this goal, by developing an interim arrangement on transparency, openness and due process in government procurement practices;

- by effectively enforcing and further developing intellectual property disciplines.

25. In order to facilitate the free flow of trade, we will initiate an effort to further standardize and simplify customs procedures among our countries. Uniform documentation and electronic transmission standards would reduce costs for business and government, complement efforts in the WTO by eliminating barriers to trade and development, and so promote growth.

26. Lastly, we are resolved to combat corruption in international business transactions, which is detrimental to transparency and fairness and imposes heavy economic and political costs. In keeping with the commitment of OECD Ministers to criminalize such bribery in an effective and co-ordinated manner, we urge that the OECD further examine the modalities and appropriate international instruments to facilitate criminalization and consider proposals for action in 1997.

27. Looking ahead beyond the Singapore Ministerial Conference and recognizing that our next meeting will take place on the eve of the 50th anniversary of the founding of the multilateral trading system, we are committed to working together with our partners to give sustained impetus to trade liberalization.

III. Enhancing Our Approach to Employment Probrems

28. The development of a more global economy and advances in information technology are engines of economic growth and prosperity. But they also may be seen by some as a source of dislocation and insecurity. Our challenge is to ensure that our economies can adapt so that all our citizens can benefit from the opportunities created by the new global economy. We must achieve both economic growth and a widely shared prosperity. The reduction of unemployment and the creation of quality jobs are urgent priorities. We recognize the crucial role of the private sector for achieving these goals.

29. We seek to enhance the effectiveness of policies aimed at stimulating growth and jobs. This requires action in a wide range of structural policies, within a framework of sound macro-economic policies. We welcome the conclusions reached by the Ministerial Conference on Employment in Lille, and we have agreed to pursue the following policies:

- we reaffirm our belief that investment in people is as vital as investment in capital. We will therefore pay special attention to a sound basic education, skill formation and training, which is a lifelong undertaking, and to improving the transition from school to work;

- we are determined to prevent and fight against social exclusion. We must define ways to reinforce people's employability throughout their working lives by facilitating the transition from one job to another;

- we pledge to carry out practical reforms, consistent with the specific situation in each of our countries, aimed at achieving a high level of employment and widely-shared prosperity: these include tax and social system reforms to ensure that "work pays," particularly for the least well-off; lowering social security charges which place a burden on low-skilled jobs, in countries with high indirect labour costs; and improving public employment agencies;

- in order to foster entrepreneurship we will modernize our regulatory frameworks where needed in the markets for goods and services, to enhance our economies' ability to respond to rapid change and to encourage job creation; we welcome the work on regulatory reform by the OECD and look forward to its conclusions;

- we will facilitate the dissemination, notably in the direction of small and medium-sized businesses, of new technologies, which are creating plentiful, quality jobs.

30. We thank the ILO and the OECD for the quality of their contributions to the Lille conference. We very much hope that these two organizations will continue their work especially on the interaction between macroeconomic policies and structural reforms, as well as on "best practice" in the fields of technology, innovation and investment in human capital in the best-performing businesses, and policies to enlarge employment opportunities for the most vulnerable workers of society.

31. We welcome the proposed meeting in Japan to reflect in greater depth on employment issues.

IV. Implementing a New Global Partnership for Development:An Ambition for the 21st Century

32. Thanks to sound domestic economic policies and to an increasingly global economy, many developing countries are experiencing robust growth, assisted by their expanding involvement in international trade and capital inflows. But there is a growing divide between these countries and those, mainly low income countries, which are currently unable to benefit from these opportunities and are falling further behind.

33. We need therefore to define a new global partnership between developing countries, developed countries and multilateral institutions. This will involve a fresh look at development policies including development aid, its content and the bilateral and multilateral instruments through which it is provided.

34. This new partnership should set its sights on enabling all developing countries, whatever their stage of development, to share and participate in the benefits of globalization. To that end, it should take the achievement of sustainable development as its fundamental objective. Goals should include the reduction of poverty and social inequities, the respect of internationally recognized labour standards, protection of children, a strengthened civil society, protection of the environment, improved health and education.

35. We want the partnership to achieve concrete results. We emphasize the usefulness of indicators capable of measuring progress toward development objectives in specific countries in areas such as extreme poverty, infant, child and maternal mortality, and primary education. Other essential aspects of development must also be considered, including a number of non-measurable qualitative factors. We welcome the ongoing work of the OECD on this subject.

36. The new development partnership should be mutually beneficial and based on a spirit of solidarity and burden-sharing among all those involved:

- the developing countries have a fundamental responsibility for promoting their own development. This means conducting sound and consistent economic and social policies, promoting a political and legal environment conducive to the development of the private sector, and encouraging domestic and foreign investment. Democracy, human rights and good governance are indispensable components of development. It is up to these countries to give priority to funding social and economic development programs and to avoid unproductive expenditures, in particular excessive military spending, without prejudice to their right to self-defense. It is in their interest to commit themselves actively to the multilateral system and to promote regional co-operation;

- the developed countries must support the efforts of the developing countries in a spirit of common purpose and efficiency. Their growth and market-opening policies also benefit developing countries. In implementing these policies, they should seek to create an environment which encourages trade and private financial flows in the developing countries direction. Bilateral agreements for investment protection and generalized preference measures contribute to this objective. We renew our commitment to secure substantial flows of official aid and to improve the quality of this aid. The whole international community should be mobilized in this effort, and new donors should assume growing responsibility, so that the burden is more equally shared;

- the multilateral development institutions, co-operating among each other and with bilateral donors, play an important role in promoting development and encouraging the developing countries to reduce poverty, to implement sound economic policies and to improve capacity. They must be provided with sufficient and appropriate financial resources for this purpose. Their strength depends on the active participation of all members. Efforts by the multilateral institutions to discourage unproductive expenditures in developing countries should be pursued and supported by donor countries in their own bilateral aid and credits.

37. Within the framework of this new partnership, the priority must be to implement more effectively-targeted policies, with four complementary objectives:

- external financial support should take into full account the differentiation between countries in transition, emerging economies and the poorest countries. Sub-Saharan Africa continues to face unusually severe challenges. We will concentrate resources on those countries that need them most and that can use them effectively, reflecting the fact that their policy program is credible and that their Government is fully committed to implement it. Grants and concessional financing should be directed primarily to meet the financial requirements of the poorest countries which have no or limited access to the international capital markets, once they can demonstrate their commitment to create the conditions to use them effectively;

- giving more explicit priority to sustainable development and the alleviation of poverty. This should mean adequate ODA funding of essential sectors such as health and education, basic infrastructures, clean water schemes, environmental conservation, micro-enterprises, agricultural research and small-scale agriculture, with for example the help of IFAD;

- we should support the establishment of a dynamic and competitive private sector in developing countries based on small and medium scale enterprises. ODA can play a catalytic role in creating the conditions in which such a private sector can flourish;

- lastly, further integrating the Least and Less Developed Countries into the global economy, using the full range of policy instruments having an impact on development. Within the multilateral environment which has emerged from the Uruguay Round Agreement, this should be an essential objective. We will support the LLDCs' efforts to achieve such integration, for example, by responding favourably to requests for technical assistance in the fields of investment, privatisation and export diversification, and encouraging international organisations and programs to do likewise. We will implement the provisions of the Marrakech Decision on Measures in Favour of Least Developed Countries. In this context we will examine what each of us could do to improve their access to our markets and we encourage others to do the same, including other developing countries.

V. Enhancing the Effectiveness of Multilateral Institutions for the Benefit of Development

38. To be effective in supporting this global partnership for development, the multilateral institutions must pursue their efforts to adapt and reform. We welcome the widespread support for institutional reform that has arisen in the past year and we are determined to help increase this momentum.

39. In Halifax a year ago, we called for reforms of the international financial institutions in order to improve co-ordination, reduce overlap, and increase their effectiveness. Reform efforts have intensified over the past year. The reform of the Development Committee has made it possible for Ministers from developed and developing countries to consider issues together and provide guidance to the institutions. The World Bank and the IMF are co-operating more closely with tangible results, for example in their joint studies on debt and public spending. Collaboration among the heads of the multilateral development banks has been intensified. Operational and administrative reforms are underway and attention must be directed to effective implementation.

We commend the work undertaken by the Multilateral Development Banks to make procurement processes more transparent. We encourage efforts by all the multilateral institutions to support reforms that will help to promote good governance and to reduce corrupt commercial practices.

A sustained effort is needed in reforming the development banks to achieve better results on the ground, while reducing costs further. We endorse the recommendations of the Development Committee Task Force for closer co-operation between banks at all levels.

40. In Halifax, we committed ourselves to encourage the broadening and deepening of the reform process underway in the United Nations system. We believe that our initiatives have significantly contributed to an increasing awareness of necessary changes in the system as a prerequisite for improved efficiency, with a view to tangible benefits for recipients of the various development activities.

We particularly appreciate the outcome of the 9th session of UNCTAD at Midrand where we succeeded, together with all our partners, to pave the way for a thorough reform which can also be regarded as an important point of reference for the reform of the UN economic and social sector. We also deem significant the recent decision to strengthen the co-ordinating role of ECOSOC. We welcome the UN regional economic commissions initiatives to examine their activities, adjust priorities, restructure programs and reorganize their staff to increase efficiency and cost effectiveness.

We will work with other members to make rapid progress in the reform of the UN in order to rationalize and strengthen its role in development.

41. The United Nations plays a crucial role in the organization of international co-operation in favour of sustainable development, and in fostering consensus around development objectives and policies.

The UN's priority areas are, notably: reduction of poverty, employment, housing, the provision of essential services, and especially those relating to health and education, the advancement of women and protection of children, and humanitarian assistance in general.

The UN also has a fundamental role to play in promoting democracy, human rights and the rule of law, protection of the environment, emergency relief and post-conflict stabilization, and technical assistance to enable the poorest countries to participate in international trade and investment.

42. In order to be more effective in the field of development, the UN must clarify its role and comparative advantages. It must enhance the efficiency of its Secretariat and operational framework, make them more coherent and ensure genuine co-ordination at all levels. Proposals to that effect should focus on existing structures and build on ideas which have emerged in various discussions on UN reform.

43. Reform could center upon the following main points:

- the three Secretariat departments responsible for development should be merged under the authority of a single Under Secretary-General;

- the Under Secretary-General should notably serve as Executive Secretary of ECOSOC in order to enhance the Council's policy formulation and coordinating role;

- the Secretary-General, assisted by the Under Secretary-General and supported by the Head of the UN Office of Internal Oversight Services, in co-operation with the heads of agencies, should urgently review the roles and mandates of specialized agencies and commissions involved in development with a view to eliminating overlap and improving effectiveness. This review should include an examination of the case for merging their development functions. The Secretary-General should make recommendations in this sense and pursue their implementation through the Administrative Committee on Co-ordination and ECOSOC;

- upon being appointed, the Under Secretary-General should support the process by conducting a review of existing UN development funds and programs in close consultation with the heads of relevant individual bodies. Where a strong case for rationalization can be made, funds and programs should be merged into the UNDP, which would thus be enhanced;

- the Under Secretary-General should also carry forward the rationalization of UN's economic analysis and reporting in consultation with other organizations involved in economic analysis such as the IMF, the World Bank and the OECD, with a view to eliminating duplication;

- UN field premises and administrative systems in the field should be further consolidated and the timetable for approval of UNDP, UNFPA and UNICEF country programs should be harmonized;

- savings resulting from improved cost effectiveness should be reinvested in development programs. The Secretary-General should study ways of implementing this goal.

44. UNCTAD IX was a major milestone in the renewal of UNCTAD. In close partnership with the other member States, we succeeded in reforming UNCTAD's intergovernmental machinery and in refocusing its work on a small number of priorities to promote development through trade and investment with the aim of facilitating the integration of developing countries in the international trade system. We are committed to the implementation of these reforms. The LLDC's will be the major beneficiaries of this action. We also welcome the WTO and the renewed UNCTAD initiative to enhance mutual co-operation with each other, with due regard to their respective mandates.

45. We urge greater co-operation between UN agencies, the international financial institutions and the WTO:

- regular meetings between the United Nations Secretary General, the IMF Managing Director, the World Bank President and the WTO Director General, and at other levels, would assure the co-ordinated and concerted action of these institutions. This closer co-operation must take into account the necessity for each institution to concentrate on areas of comparative advantage and to avoid unnecessary duplication;

- UNDP, other UN agencies, the World Bank, the IMF, the WTO and regional development banks could work together, in full co-operation with the host country, in the preparation of country strategy reports submitted to their respective governing bodies. Regular meetings of donors in each country should be organized to facilitate the exchange of information and the shaping of programs according to the comparative advantages of each institution. Bilateral donors should be involved in this process. The resident United Nations co-ordinator or the World Bank or regional development bank representative could organize these meetings at regular intervals. Such meetings will help co-ordinate and rationalize the work of donors while reducing costs;

- the non-military aspects of peace operations (including such tasks as democratization, police training, institution building, and delivery of humanitarian assistance) should be addressed through a comprehensive approach. In this regard, we encourage a closer co-operation between the United Nations, the International Financial Institutions and the relevant regional organizations, in order to facilitate the transition between the emergency intervention phase and the rehabilitation phase. Consultation among multilateral and bilateral donors in post-conflict countries should also be reinforced.

VI. Providing the Necessary Multilateral Support for Development

46. The replenishment of the concessional resources of the multilateral financial institutions must be completed. In this context, we stress the importance of sharing this burden equitably, we welcome the emergence of new donors and we encourage other countries to participate.

47. We welcome the fact that all donors have agreed to contribute to IDA-XI and the activation of the Interim Trust Fund. This agreement will enable the Association to lend up to US$22 billion over three years. This is a major success. It is important that all donors ensure the success of IDA-XI by fully respecting their commitments on time.

48. We also welcome the replenishment of the resources of the African Development Fund, whose work is of vital importance for this continent, recognizing the reforms already made by the management of the Bank. Timely replenishment of the Asian Development Fund is also important.

49. We are committed to a continuing Enhanced Structural Adjustment Facility (ESAF) as the centerpiece of the International Monetary Fund support for the poorest countries, and we welcome the proposals of the Managing Director of the IMF for greater concessionality in ESAF lending for a limited number of poor and highly indebted countries, as the IMF's contribution to putting them in a sustainable position. We will examine constructively and positively the options for financing the needed subsidies, using primarily resources held by the IMF, without excluding bilateral contributions. If needed, the IMF should consider optimizing its reserves management in order to facilitate the financing of ESAF. This will enable the IMF to hold out to the poorest countries the prospect of macro-economic stability and structural reforms aimed at growth.

50. We welcome progress achieved in the alleviation of the debt problems and the active implementation, by the Paris Club, of the Naples terms. However, for some heavily indebted poor countries, we acknowledge the need for additional action, in particular to reduce debts owing to multilateral institutions and other bilateral creditors that are not members of the Paris Club. Following the proposals developed by the Bretton Woods Institutions, we look forward to a concrete solution being agreed by next Autumn at the latest on the following basis:

- the solution should provide an exit for unsustainable debt and be based on a case by case approach adapted to the specific situation of each country concerned, once it has shown its commitment to pursuing its economic adjustment;

- the continuation of ESAF will provide the basis for a reduction in the burden of the debt to the IMF for these countries;

- we welcome the proposal by World Bank management to commit 500 million $ to this initiative and substantial amounts for future years. We will support and work together for an overall World Bank contribution of the order of 2 billion $ for this initiative. We look to the World Bank together with the Regional Development Banks to develop practical funding mechanisms for treating debt owed to these institutions;

- as concerns bilateral credits, we are committed to work, in conjunction with a maximum possible contribution by the World Bank and the IMF, to achieve financial viability and debt sustainability for all these countries which undertake the necessary adjustment efforts. We acknowledge Official Development Aid debt cancellation already given by some creditor countries. We urge the Paris Club creditor countries, where they deem appropriate, on a case by case basis, to go beyond the Naples terms for these countries. These efforts would include, on a voluntary basis, debt conversion schemes up to 20% instead of currently 10% of the stock of debts, and increased debt alleviation. In parallel, and on the basis of the same assessment, all other bilateral creditors are encouraged to make their own contributions to these countries in terms comparable.

VII. Toward Successful Integration of Countries in Transition into the Global Economy

51. The end of the cold war has given a decisive impetus to globalization by offering former socialist economies the opportunity to assume their rightful place in the world economy.

52. We welcome the good economic results achieved by many countries in transition which have undertaken macro-economic stabilization and structural reform. Many countries, especially in Central Europe, have pursued resolute stabilization and structural reform programs and have achieved robust growth last year. Other countries which have not yet embraced reform fully lagged behind. Most of the countries of the former Soviet Union started reforms later than Central Europe, but many of them are poised to begin growing this year. We encourage all countries in transition to pursue their economic reforms in order to achieve or consolidate these gains. The EBRD plays an important role in supporting these reforms and we welcome the agreement to increase its capital.

53. We support Ukraine's efforts to continue with political and economic reforms and to further integrate into the world economy. In this respect we welcome the latest agreement with the IMF and encourage Ukraine to fully implement the agreed reform program.

We welcome the Moscow Summit declaration relating to Ukraine and the commitment of President KUCHMA to close reactor no. 1 at Chernobyl by the end of 1996, in the framework of the program to close the whole plant by the year 2000. We reaffirm our commitment to full implementation of the Memorandum concluded with Ukraine, through close co-operation with this country and the international financial institutions. In this regard, we welcome the financial decisions already taken by the international community, and we stress that all parties concerned must respect the agreed agenda of the comprehensive program.

54. We support Russia's ongoing political reform and its commitment to democracy. Economic and political reforms are mutually reinforcing and position Russia to play a more significant role in the global economy. We welcome the agreement between the Russian authorities and the IMF on an EFF. This agreement testifies to Russia's continued commitment to financial stabilization and economic reforms. Russia's economic success and its integration in the world economy depend on full implementation of its commitment. Crucial for economic recovery is now private investment which requires a reliable economic, legal and administrative environment. We welcome the historical agreement between Russia and the Paris Club on a comprehensive medium-term rescheduling of Russia's external debt, which will enable this country to exit from the rescheduling cycle. This agreement will enable discussions to take place between Russia and the members of the Paris Club to see whether conditions could be agreed for Russia's participation as a creditor.

Next Summit

55. We have accepted the invitation of the President of the United States to meet in Denver next year.