operative League, has been very active-Murray Lincoln, who is president of the Cooperative League of the United States, located in Columbus, Ohio.

Mr. BETTS. I think that is all.

The CHAIRMAN. Mr. Ashley?

Mr. ASHLEY. Mr. Bell, I wonder if you know anything about this situation: The CCC has been criticized recently for its failure to sell surplus agricultural commodities on the world market at the going world price, and the same time it has been pointed out from various quarters that American investors have put money into foreign agriculture, and as a result of our failure to sell agricultural products on the world market, and the fact that American money has been put into foreign agriculture, the relative position of the United States and foreign nations has changed quite considerably since, let us say, the prewar period with respect to competing in the free world agricultural market.

Do you know anything about that, sir?

Mr. BELL. No. Frankly, I have only newspaper reading knowledge of that. In the agricultural field I know there has been considerable publicity on the points you mentioned about the disposal of surplus agricultural products, but I would suggest you get someone from the Department of Agriculture, or perhaps some of the farm organizations who follow those things closely.

I am afraid I couldn't be very helpful.

Mr. ASHLEY. Although it is pertinent to the question?

Mr. BELL. Yes.

Mr. ASHLEY. Thank you.

The CHAIRMAN. Mr. Nicholson?

Mr. NICHOLSON. I have no questions.

The CHAIRMAN. Mr. Fountain?

Mr. FOUNTAIN. No questions, Mr. Chairman.

The CHAIRMAN. Mr. Vanik?

Mr. VANIK. I only have one question. I am sorry to have been late for the testimony.

I have scanned over the printed statement. I see a great deal of merit to the International Finance Corporation and its purposes, but I am wondering how far the Government should go. Would you like to make any comment with respect to the facts? There has been some talk about increasing foreign investments by giving a tax incentive. Do you have any statement you would like to make on that point?

Mr. BELL. Our board has considered that, and has taken no definite position at this time, because no specific legislation has been considered in any public hearings. We have suggested the matter should be carefully and thoroughly studied by tax experts.

Mr. VANIK. One of the things that goes through my mind is American investors in foreign lands who may take advantage of the Export-Import Bank facility, and then take advantage of the IFC and end up with very little of their own capital in the enterprise, and then get a tax abatement, which might be unfair with respect to the rest of our economy.

I personally feel that we shouldn't give any tax incentives. I feel the tax rate ought to be uniform for all segments of our economy. That is merely my point of view.

I have no further questions. That was the only thing that went through my mind. Thank you, Mr. Chairman.

The CHAIRMAN. Mr. Reuss?

Mr. REUSS. No questions, Mr. Chairman.

The CHAIRMAN. Mr. Bell, we are glad to have had you with us. We will consider your testimony when we go into executive session. Mr. BELL. Thank you.

The CHAIRMAN. Mr. Clerk, call the next witness.

Mr. HALLAHAN. The next witness is Dr. Henry Tenenbaum, of the Washington Board of Trade.

The CHAIRMAN. You may proceed as you desire, and insert any relevant matter you may desire into the record.

STATEMENT OF DR. HENRY TENENBAUM, CHAIRMAN, SPECIAL COMMITTEE ON INTERNATIONAL FINANCE CORPORATION, WASHINGTON BOARD OF TRADE

Mr. TENENBAUM. Mr. Chairman, and members of the House Committee on Banking and Currency, my name is Henry Tenenbaum. I appear before this committee on behalf of the Washington Board of Trade, whose membership numbers more than 6,000 business and professional leaders of the Washington metropolitan area. Many of our members represent leading American business corporations.

I am a member of the world trade committee of the Washington Board of Trade, and the chairman of a special committee on the International Finance Corporation, set up to make a study of this proposed institution and to submit its findings and recommendations to the Washington Board of Trade.

I have been authorized to appear before your committee on behalf of the Washington Board of Trade, and to present its views on the proposed International Finance Corporation.

On March 7, 1955, the report and recommendations of our special committee which strongly supported the creation of the proposed International Finance Corporation were adopted as policy by the board of directors of the Washington Board of Trade.

In a letter dated March 10, 1955, addressed to the President of the United States, Mr. Francis J. Kane, president of the Washington Board of Trade, stated that the Washington Board of Trade firmly believes that the creation of this new financial institution will tend to promote world trade and foreign investments so vital to the economic growth of the United States of America.

The support given the proposed International Finance Corporation by the Washington Board of Trade stems from its awareness that world trade and foreign investments are among the basis of our friendly relations with other countries and our allies abroad, and that they vitally affect the economic welfare and the political security of the United States and of the free world.

More specifically, the support given the proposed International Finance Corporation is based on the following considerations:

In the past, and particularly before World War I, economic development through foreign investments was largely carried out by private enterprise. Private capital was invested not only in industrial and commercial undertakings, but also in such basic public utilities as

power production, water supply, telephone systems, and railways. The sources for these foreign investments were primarily British and western European. The role of the United States for providing private funds for foreign investments was rather limited.

In recent years, private investments have not played an adequate role in the economic development of the underdeveloped areas of the world. Since World War II, foreign private investments have been on a small scale, except in a few countries in particular industries. The traditional sources for foreign investments have been greatly reduced. The United States, which has entered this field rather recently, remains today the major source of capital funds for economic and industrial development abroad.

On the other hand, the requirements for economic development in the underdeveloped areas of the world, are tremendous. At the same time, the political and social pressures for their speedier industrialization are increasing. What is here at stake is the economic and social progress of these countries and indirectly their political stability and reliability as allies in a free world. From the point of view of the United States, the strengthening of our defense potential and of our system of political alliance is involved.

We in the United States have already recognized the need for economic development overseas. We have our own Export-Import Bank, and have given our support to the International Bank for Reconstruction and Development. These institutions fulfill extremely important functions. However, their role in providing loans for economic development overseas is limited. Neither of these institutions can provide funds which are in the nature of venture capital.

The International Bank for Reconstruction and Development is limited in its operations because of the statutory requirement of a guaranty by the Government, central bank, or its equivalent, of the country where the project to be financed is located.

This feature of the World Bank's lending operations discourages potential private borrowers in the countries concerned, who are frequently apprehensive that such a guaranty will lead to Government interference in the management of their enterprises.

Governments are also reluctant to give a guaranty to private companies because of the possible political implications of such guaranties. For this reason, the World Bank cannot give its support to projects which more than any others may promote the development of natural resources and industrial diversification. These spheres are by law and/or tradition the fields for private enterprise. The lending activities of the World Bank are thus ordinarily limited to the financing of projects such as transportation, roadbuilding, and service industries which in many countries belong to the public sector.

It was the recognition of the fact that the World Bank cannot adequately meet the need for stimulating private international investment that led to the proposal for a new mechanism, the International Finance Corporation, which will not only provide capital to productive private enterprises abroad but will also induce increased investment by a greater number of private investors, both local and foreign. An important contribution to stimulate more private international investment and to the economic development of many underdeveloped areas will thus be made through the creation of the proposed International Finance Corporation.

This new institution will fill a gap in the existing mechanism for financing economic and industrial development overseas. This gap cannot be filled by the existing public institutions. On the other hand, private initiative has been unable to play its traditional role in this important sphere.

It is indeed well known that in recent years private enterprise had to take a secondar place in this field. The reconstruction period after the end of World War II was necessarily accompanied by an increased trend toward substitution of public loans and foreign-aid programs for private lending. Thanks to the wisdom and generosity of the United States of America, the reconstruction of the world economy since the end of the last war has proceeded faster than many thought it would. We have now reached a phase where the restoration of private lending for economic development abroad will be an indispensable condition for the further growth of the world economy and the foreign trade of the United States.

In the early stages of this phase private capital will need encouragement and assistance of various forms. We believe that the proposed International Finance Corporation will be in an excellent position to provide such assistance. By fulfilling this role, it will promote a larger flow of international private investments, and thus contribute to the restoring of private enterprise to its rightful place in this important sphere of economic development.

In this way private initiative will be stimulated not only among the potential investors of the capital exporting countries, but also among the potential investors of the capital importing countries. As is known, in recent years a trend in a number of underdeveloped countries has developed which consists in governments carrying out industrial development programs. By stimulating more investments of private foreign capital in the underdeveloped areas of the world a higher rate of investment of private local savings available in those areas will be engendered. As a result, the creation of private local industries in the countries will be stepped up. In our opinion, the proposed International Finance Corporation will, therefore, greatly contribute to reverse this trend of governments engaging in the industrial development of their countries and to substitute and develop private enterprise to the maximum extent in those areas.

We also believe that the new institution will act as a catalyst and a clearinghouse by bringing together private investors on an international basis and thus stimulate a more active participation of private capital in the industrial development of the underdeveloped areas of the world.

The most immediate contribution of the International Finance Corporation will be the provision of funds to enable private investors, both domestic and foreign, to undertake promising projects which are now held back by lack of adequate capital. In almost all the underdeveloped countries there are opportunities for profitable and productive undertakings in which private investors are willing to invest but which they cannot finance entirely by themselves. situations of this type the IFC can provide the margin necessary to enable sound projects to go forward.

Through the proposed IFC private investors who have not yet recognized the opportunities they have in investing abroad might be

induced to enter the foreign investment field. The new corporation can approach private investors not merely with a promising idea, but also with an offer of financial participation and, providing the project proved sound and appropriate, financial arrangements would be worked out.

Participation of the IFC in a project will encourage investors to embark on projects from which they may be deterred not as a result of a lack of capital but as a result of lack of confidence. The mere participation of the IFC will help them to overcome this lack of confidence.

The proposed International Finance Corporation will also be able to induce local capital in underdeveloped areas to be invested in more productive enterprises. Very frequently the local capital resources are being invested in speculative, real estate, and other enterprises, which are of little or no value for the economic and industrial development of the respective countries. The IFC will thus play a vital role in stimulating a more productive use of available local savings in underdeveloped areas.

On the whole, we feel that the creation of the proposed International Finance Corporation will greately contribute to the restoration of a sound system of private international finance as we have known it in the past. During the depression of the thirties, this system broke down. The war and its aftermath made its rebuilding impossible and extremely difficult. Now that the world economy seems to have found a new equilibrium, the time has come for creating new instrumentalities for strengthening the world economy and for restoring private enterprise to its rightful place. The proposed IFC is such an instrumentality.

It is in recognition of the possibilities for stimulating the flow of private foreign investments that the Washington Board of Trade supports the creation of the proposed International Finance Corporation.

Finally, the Washington Board of Trade believes that increased investments overseas will promote a greater volume of world trade necessary for the economic strength of the United States and of the free world.

We therefore support adoption of the legislation which is now before your distinguished committee.

Thank you, Mr. Chairman.

The CHAIRMAN. Are there any questions?

If not, you may stand aside.

Mr. NICHOLSON. Mr. Chairman; this sets up a new sort of investment to make foreign trade better?

Mr. TENENBAUM. I did not get your question.

Mr. NICHOLSON. This sets up some kind of a corporation to invest money in foreign business.

Mr. TENENBAUM. Yes. The idea of this new corporation is to bring together private investments of the United States and the other countries, particularly capital-exporting companies of the world, together with local investors in the areas concerned, and the IFC would make some kind of a contribution to fill the remaining gap.

Let us assume in a country like Brazil there is a group which would like to set up a textile plant. They have $1 million available. There may be an American company or a textile corporation which is willing