(Note in the following texts, "billion" equals 1,000 million.)

Following are O'Neill's prepared statements to the International Monetary and Financial Committee and the joint Development Committee.

(begin International Monetary and Financing Committee text)

Statement to the International Monetary and Financial Committee Meeting Treasury Secretary Paul O'Neill Washington, DC September 28, 2002

It's a pleasure to be here with all of you today to renew our commitments to action to support a strong global economy and to help the IMF in its pivotal role in eliminating the flow of funds that support terrorism, improving crisis prevention and resolution, and meeting the challenges of development.

Promoting global growth, North America continues to be the engine of global recovery. After a shallow downturn, the U.S. economy is firmly rebounding, due to timely fiscal and monetary policy action. Further, the United States is vigorously putting measures in place to improve corporate disclosure, enhance corporate accountability, and strengthen the independence of auditing. It is critical to the health of the world economy that all industrial nations implement the sound macroeconomic policies and structural reforms necessary to sustain robust domestic demand and create multiple engines of global growth.

Many emerging markets throughout the world have worked hard to strengthen their economic policy frameworks in recent years and are now reaping the fruits of their efforts. Growth in Asia continues to rebound from the crisis of the late 1990s and central and eastern Europe is posting solid growth for the third consecutive year. Many countries in South America, however, face uncertainties. Here, the international community stands ready to support those that are working to improve economic performance and restore robust growth. My recent trips to South America, Central Asia and Africa confirmed my strong conviction that trade liberalization is critical for increasing productivity, accelerating growth, and alleviating poverty. I urge all countries to join the United States in a spirit of cooperation as we seek to make substantial progress in under the Doha Development Agenda.

Eliminating the flow of funds that finance global terror

The fight to eliminate terrorist financial flows is a key global challenge. We have made significant progress, but the war is not won. The United States commends the welcome actions taken by the IMF and the World Bank to move forward on comprehensive assessments of members' compliance with anti-money laundering and terrorism financing principles, based on the FATF recommendations.

We will support FATF's endorsement of this approach at the FATF Plenary in early October and we will then look forward to the rapid implementation of the pilot program to assess country compliance with this standard.

The United States would like to be an early participant in this program. This initiative is now coming close to being implemented in a practical way. Clearly it is even more important today than it was earlier.

Crisis prevention and resolution

Preventing crisis is the first order of business for the IMF. I strongly believe the IMF will perform this duty best when it is focused on those areas most central to its expertise. The United States also strongly commends the Fund's work to enhance transparency, promote the use of codes and standards, strengthen its financial sector work, and sharpen surveillance. The work underway to strengthen debt sustainability analysis, better understand national balance sheets, and reinforce the robustness of economic projections is critical to crisis prevention.

Despite our best efforts, crises will happen and we must be better prepared to facilitate their resolution. An improved sovereign debt restructuring process will help reinforce discipline on official sector lending because the existence of a more orderly and predictable restructuring process, when restructuring is inevitable, will reduce uncertainty during times of crisis. The United States strongly welcomes the significant progress being made on the contractual approach to sovereign debt restructuring. We are particularly encouraged by the broad support expressed by both borrowers and creditors for the implementation of this approach. In addition, we strongly support the continued pursuit of the statutory approach.

The IMF is now conducting its routine five-year review of the adequacy of quotas. Limiting official resources is a key tool for increasing discipline over lending decisions. Further, the IMF's liquidity position is extremely strong. There is no need to increase IMF quotas.

Supporting low-income countries

Around the globe, I have seen numerous examples of the resourcefulness and ingenuity of people who are struggling to meet their basic human needs and realize their potential. Every human being has the potential to succeed, and it's up to the leaders of every nation to create an economic framework that provides individuals the opportunity to meet their potential.

Rising incomes and living standards are the lynchpin to long-term economic success. Only leaders at home can create lasting systems that invite domestic and foreign investment -- the key drivers to creating jobs and rising incomes. The United States is eager to support nations that are working to create an environment for growth and prosperity, by ruling justly, investing in people and expanding economic freedom.

The United States will fulfill its commitment to HIPC debt relief, including through contributions to the HIPC Trust Fund, but debt relief alone is no guarantor of future success. HIPC nations need to create an economic foundation for job creation and rising incomes, and the donor community, including the IMF and World Bank need to work with them to avoid excessive borrowing that will create a future unsustainable debt burden.

For our part, we must avoid creating the next generation's HIPC problem. We must encourage leaders to create the conditions for growth. President Bush has proposed an annual $5 billion Millennium Challenge Account, to award grants to nations that are following the path to success. We have also worked hard to have the World Bank and African Development Bank provide significant financing on a grant basis -- particularly to the HIPCs. In sum, reinforcing good policies and insisting that grants and other resources achieve real measurable results, are crucial to ensuring that HIPC is not temporary relief but an ingredient in permanent success.

(end International Monetary and Financing Committee statement)

(begin Development Committee statement)

Statement to the Development Committee Treasury Secretary Paul O'Neill Washington, DC September 28, 2002

Since our last meeting, I have had the opportunity to travel to Africa, Central Asia and Latin America -- three pivotal regions, each with enormous economic potential and each confronting a unique set of development challenges. I appreciate the many opportunities these visits afforded to listen and to learn. And I value the insights I received from the people in these regions, from small-scale farmers and market vendors to development officials and government ministers.

These trips confirmed for me that people in all developing countries, even the poorest, have the potential to succeed greatly. Yet in far too many countries, the universal desire to succeed has led to frustration at the slow pace of progress and disappointing development results. I share this frustration in that I find it hard to understand why, in this twenty-first century, this era of momentous scientific and technological advances, so many people still lack access to safe water or why so many children die from disease before they reach their fifth birthday. Or why poverty is increasing in countries richly endowed with both human talent and natural resources.

Clearly, there is no simple universal blueprint for overcoming all the country-specific economic and social obstacles that impede sustainable development progress. Yet, I am convinced with the consensus of Doha, Monterrey and Johannesburg setting the agenda, we can do a better job in combating poverty if we place greater attention on two aspects of the development agenda that underlie most success stories: (1) the factors that enable people and countries to become more productive; and (2) better measuring and monitoring and managing for development results.

The Goal of Productivity Growth

We can be more effective in achieving improved living standards if we prioritize our efforts to address the basic causes of low productivity -- such as poor policies, low business investment, and inadequate education and health care -- that are now holding countries and people back.

The need for sound policies is fundamental. This includes outward-oriented engagement with global markets and investment. In every country there is no substitute for honest leadership committed to good and publicly accountable economic management. Progress in meeting the goals of the Millennium Declaration is heavily contingent on improving the quality and productivity of resource use. We therefore welcome the stepped up efforts of the Bank and Fund to strengthen public expenditure tracking and fiduciary management and we urge that these efforts be intensified. All countries need to establish appropriate frameworks that build confidence and curb the ability of those who would subvert the financial system, including terrorists, in order that the strongest sustainable real economic gains are realized.

It is also crucial to create an environment that promotes vibrant private enterprise and investment. If developing countries are to realize their economic potential, it is essential that they and their donor partners move more forcefully to reduce the impediments that are constraining the creation of high productivity jobs by the private sector.

Priority must be accorded to human resource development and the investments needed to improve delivery systems for health, education, water and sanitation. These social sector investments increase individual productivity and have major spillover benefits economy-wide.

Conversely, the absence of basic services, such as clean water and sanitation -- which most of us take for granted -- make the prospects for economic progress more remote.

The United States supports efforts underway to identify best practice approaches that can be replicated elsewhere to help close the gaps -- in data, policies, institutional capacity, and financing -- that now constrain the expansion of quality education. Our goal should be to substantially increase the number of children with full functional ability to read, write and compute by age ten.

Although delivery of health services and access to clean water pose different challenges, the importance of coordinated approaches that focus on program quality and the delivery of results cut across these three issues. It is difficult to envision substantial progress in any of these areas without major improvements in on-the ground coordination by official and private donors.

Better Measuring and Monitoring and Managing for Development Results

Delivering and measuring development results at all levels should be a development priority. The IDA-13 agreement [13th replenishment of the International Development Association] launches a fundamental shift of focus within the MDBs [multilateral development banks] to measurable results. It is, however, only a beginning. A more comprehensive approach across all the MDBs is needed to measure progress towards targeted development results and to assess the reasons for success and failure. Such a system is crucial for donors to ensure the effectiveness of their assistance. It is even more important for the citizens and governments of borrowing countries who need real results, in real time, for real people. We urge a sustained and prioritized effort by all of the MDBs to create and integrate a results based operational plan that focuses on key measurable outcomes in every grant and loan, and every country strategy.

Quality baseline data are necessary to effectively operationalize a results-based system. Yet accountability for standardizing, collecting and building capacity to measure poverty and social indicators does not now reside with designated institutions. We recommend that the World Bank take the lead in working with other appropriate institutions in preparing a report for our consideration at the spring meetings on how best to establish an accountability structure within the international system for standardizing and measuring a set of priority development results. We suggest focus on indicators related to the goals of the Millennium Declaration and for such key areas as productivity growth, private sector development and public expenditure management.

HIPC

For the HIPC countries in particular, we must be careful to avoid business-as-usual lending that could put these countries back into untenable positions. The United States will work with other donors in order to finish the HIPC program. But that is not enough.

Delivering the improved economic performance and poverty reduction that we all seek will require concentrating our attention on helping these countries implement long-term growth strategies that promote strong productivity gains, human resource development, and individual enterprise.

(end Development Committee statement)

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