World Bank extends membership to former Soviet republics

April 28, 1992|By Gilbert A. Lewthwaite | Gilbert A. Lewthwaite,Washington Bureau

WASHINGTON -- Russia and most of the former Soviet republics were invited yesterday to join the capitalist world's two premier financial institutions, clearing the way for a massive injection of Western aid and what Moscow's new economic "czar" called a "radical speeding up" of foreign investment.

The admission of the emergent democracies widens the global scope of the World Bank and the International Monetary Fund.

The two institutions, formed at a meeting of 44 nations in the New Hampshire village of Bretton Woods in 1944, have helped guide economic and financial order in the free world since. They have 156 member countries with Russia and the other republics cleared to join. The membership formalities are expected to be completed next month.

U.S. Treasury Secretary Nicholas F. Brady said the membership agreement was an "historic milestone" and added, "History will judge us harshly, and rightly so, if we fail to seize this opportunity to achieve a truly global market economy."

Lewis Preston, president of the World Bank, said: "The bank is now closer to the goal of a global organization dedicated to the reduction of poverty and expansion of opportunities for all citizens in our member countries."

Azerbaijan and Turkmenistan were the only former Soviet republics excluded from the membership invitation because of a delay in processing their applications, which are expected to be completed later this year.

Membership in the two institutions is key to a projected $150 billion in Western financial aid that is expected over the next five years to ease the transition of the former Soviet Union from communism to capitalism.

XTC Just how far that transition is likely to go was outlined yesterday by Yegor Gaidar, Russian deputy prime minister and chief architect of his country's economic reforms.

"We are very much prepared to open practically all branches of this economy," he told members of the U.S. Chamber of Commerce.

He said oil, gas and gold as areas already attracting foreign investment.

Russia is "terribly interested" in Western involvement in the country's conversion to civilian use of its military-industrial complex, he said.

Opening the Russian economy to Western investment will be no easier than transforming it to a free-market system, Mr. Gaidar said. He apologized for the inevitable bureaucratic hassles and the corruption that Western investors are likely to encounter but pointed to the "big possibilities."

He was applauded by U.S. business executives when he said, "It is probably the most important market for the risk and venture capital. And there is always this kind of capital in the world. So I hope we have a common future together."

The republic's sell-off of formerly public enterprises will proceed "as rapidly as it is possible," Mr. Gaidar said.

In the past month, 20 times as many enterprises were made private as in all of 1991. "All the same, it is . . . very small if you compare it with the magnitude of the Russian economy," he said.

Finance ministers of the richest seven industrial nations endorsed Sunday a $24 billion aid package for Russia this year, conditioned on continued economic reform in the republic, including privatization. The aid could start flowing as early as July.

It is made up of $18 billion in multilateral and bilateral aid, and $6 billion drawn on the International Monetary Fund as a stabilization fund for the ruble to enable the Russian currency to find a "realistic" level on the free currency exchange.

The current plan, Mr. Gaidar said, is for the ruble to establish its value against the dollar as of July 1 and then to be held within 7.5 percent of that value, with the stabilization fund being used, if necessary, to keep it within that range.

Mr. Gaidar said his negotiations with the finance ministers of the Group of Seven -- the United States, Canada, Japan, Germany, France, Italy and the United Kingdom -- were "very constructive" and did not include demands on Russia "to do anything that is inconsistent with our own ideas of what should be done in this economy."

Reform is "politically difficult," he said, but "the process of the transition of Russian society, of Russian economy toward this community of developed, civilized nations, I hope, will be the most important event of the end of this century."

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