In a surprisingly upbeat annual report, the World Bank yesterday said that developing countries had adjusted to world economic problems better than their richer partners, and that their rapid growth would continue into the mid-1980s.
At the same time, the Bank expressed concerns about rising protectionist sentiment, and warned rich nations against creation of "artifical barriers" to small-nation exports that will only delay the "inevitable" industrialization process in the Third World.
The Bank's report, preliminary to the annual joint meeting with the International Monetary Fund September 25-28 (in Washington) also revealed that:
The Bank will give new emphasis to loans for exploration of oil in Third World countries. Loans for 6 to 8 projects amounting to $500 million are scheduled annually beginning with fiscal 1981.
Excellent harvests, especially in southeast Asia, have considerably eased food shortages. The Bank claimed that targets set by President Robert S. McNamara in his Nairobi speech in 1973, including a goal of a 40 per cent increase for agriculture lending, had been achieved.
Total loans for fiscal 1978 exactly hit the planned target of $6.1 billion. But tentative commitments of $6.8 billion for fiscal 1979 are contingent on a doubling of the Bank's capital. For the time being, $6.8 billion is the target. But officials said that it could be diminished if hopes for the capital increase - to be discussed fully at the annual meeting - are not realized.
The better performance of the less developed world was relected in a 14 per cent increase in the dollar value of exports of a wide range of goods. The current account deficit, in the aggregate, dropped from $37.2 billion in 1975 to $22 billion in 1977.
In addition, the trade deficit, at $12.7 billion in 1977, was only half of the average in 1974-75 - the immediate years after the five-fold boost in world oil prices. This is not a transitory phenomenon, but a trend "likely to continue - barring increases in trade barriers," the report said.
Officials said there were many reasons for the good progress in the Third World. With time, they pointed out, many (but not all) have overcome basic poverty, and thus have enjoyed a "take-off" trend.
In addition, middle-tier countries were said to have enjoyed good management, resulting in better response to international economic crises than was the case in some of the industrial nations.
Moreover, according to the report, the cumulative amounts of world aid and assistance, including the World Bank's, were put to good use. In particular, India - a major Third World nation and the Bank's biggest client - has done especially well, partly as a matter of luck and partly because of better agricultural prospects.
Some bank officials are even more optimistic than the guarded "committee language" of the report. "The world doesn't look too bad," said one official. "Not only have the LDC (Less Developed Countries) grown faster than developed countries, but they borrowed less, their deficits are down, and their reserves are in good shape.
"The situation looks pretty comfortable, and I don't hear the kind of talk about (loan) defaults that we heard last year."
This official was also more hopeful on the trade outlook, "because most of the protectionist feasures taken by the developed countries have been taken against other developing countries.
Nevertheless, the thrust of the report stresses the need to be on guard against increasing barriers so that trade can expand among the developed and developing countries. It notes that 28 per cent of total manufactured goods exported from industrialized countries go to developing countries.
Today, the report adds, some 30 or more developing nations export a significant amount of manufactured goods, compared to no more than half-dozen a decade ago. The volume is growing at about a 15 per cent annual rate - which the report says can be sustained if protectionism is held in check, and if the LDC's liberalize their own export policies.
The bank's increased attention to oil development stems from inflated world prices that make practical exploration of many prospective areas, formerly not thought to be competitive. This effort also had the blessing of the major nations at the Bonn economic summit and earlier from the Conference on International Economic Co-operation (CIEC).
Bank officials said that studies have been made in 56 oil-importing developing countries, only 14 whom are now producing oil. Many of the bank's initial loans will be for the development of natural gas, which is now being flared off.
In most of these countries, officials said, there is no national oil company to help develop the potential, and the international oil giants for one reason or other haven't been interested.
The bank's first oil development loan - $150 million - was made last year to India for the Bombay High offshore field. The report said that as is true for all minerals, the Bank can finance only a small portion of the financial requirements for LDC petroleum exploration, which is estimated at $6 billion in 1975 dollars.
Most of the money for actual exploration, it said, will best be left to risk capital.