To be checked against delivery

Mr Chairman,
Distinguished Governors,
Ladies and Gentlemen,

May I warmly welcome you to Rome and to this Twenty-Fifth Session of the Governing Council of IFAD.

We are grateful to His Excellency Mario Baccini, Under Secretary of State at the Ministry of Foreign Affairs of our host country, for being with us today and delivering the message of the President of the Italian Republic, His Excellency, Mr Carlo Azeglio Ciampi. The message from the President of our host country emphasises Italy's commitment to fighting poverty.

We are deeply honoured by the participation at our Council of the President of the Federal Republic of Nigeria, His Excellency Olusegun Obasanjo. His role in the restoration of democracy and his leadership in his own country and across the region, especially his part in shaping the New Partnership for Africa's Development (NEPAD), offers the promise of a new start for Africa.

It is also a pleasure to welcome Mrs Catherine Bertini. This will be the last occasion on which she will participate in the Governing Council in her present capacity. I had the chance last week at the WFP Executive Board to pay tribute to the strong leadership and dedicated service Catherine Bertini has shown in working to support the vulnerable and poor of this world.

Mr Chairman,

This is the first time that I have the honour of addressing the Governing Council as President of IFAD. The months that I have been at IFAD have been very stimulating, and I have found the Fund's work and objectives to be truly inspiring. Let me also add that I have been impressed by the devotion and commitment of IFAD staff.

But the year that has passed since the last Governing Council has been a turbulent one for the world. The tragic events of 11 September and their aftermath have reminded us of the close interlinkages of our global society. They have brought forth a new recognition of the importance of inclusive political and economic processes and the imperative of making globalization work for all.

Last year was also marked by a severe economic downturn that, aggravated by the events of September, threatens to deepen the vulnerability of poor countries and poor peoples and intensify poverty in many parts of the world.

These trends remind us that globalization works unevenly, with some reaping growing benefits from the free flow of capital, information and goods and services. Yet for hundreds of millions, life continues to be a struggle for mere survival.

Mr Chairman,

The last two months I have had the opportunity to visit IFAD-supported projects in remote regions in Nigeria and Senegal. There are two images that I remember vividly. One was a woman in a small village in Katsina in Northern Nigeria. She had succeeded in increasing her income. But as impressive was the self confidence she had gained to deal with officials and even ministers. Given a microphone in her hand, she held the meeting spellbound as she described her problems and what solutions she had found to deal with them. Looking to the future she wanted a better road to the market, a primary school and a television centre. Poverty was still her reality but hope and dignity her message.

The second image is of a simple house in a poor village in Matam, Senegal. The great pride was a shiny safe with a large ledger-book on top of it. Members of the savings group had meticulously entered each cash deposit, each loan and repayment. Their repayment rates, as in many other IFAD projects, were well over 90%. That safe was a symbol of theirentry into the modern world of which they were fiercely and justifiably proud. Poverty was still their reality but hope and dignity their message.

Mr Chairman

Today over twelve hundred million people still live in extreme poverty, with incomes of less than one dollar per day.

World leaders at the Millennium Summit in September 2000 proclaimed their commitment to reduce by half the proportion of humanity in extreme poverty by 2015. This recognition is not limited to governments. At the World Economic Forum earlier this month, it was striking to see heads of major private corporations and financial institutions underlining the importance and urgency of dealing with poverty. Many of their statements stressed that chronic poverty is a source of instability and a breeding ground for desperation. The same strong message, in a different context, comes from the World Social Forum in Porto Alegre in Brazil.

This new broader commitment to poverty reduction creates growing opportunities for IFAD to build partnerships and alliances.

Mr Chairman,

Last year, a number of important steps were taken to make IFAD more effective.

A new Strategic Framework for IFAD has been formulated for the period 2002-2006. It builds on the Rural Poverty Report 2001 and the regional poverty assessments as well as on the experience of the Action Plan 2000-2002. The framework was developed with the broad participation of IFAD staff.

The strategic framework starts with the Millennium Summit goals. It aims to strengthen the Fund's catalytic role. Enabling the Rural Poor to Overcome their Poverty is the mission statement. Three strategic objectives are highlighted: strengthened capacity of the rural poor and their organizations; improving access to productive natural resources and technology; and increased access to financial services and markets.

A key aim of the strategy is to strengthen the Fund's impact through strong partnerships with host-country institutions, farmer associations and other civil-society organizations, as well as bilateral and multilateral agencies. This will allow IFAD and, more importantly, national stakeholders, to participate actively in the poverty-reduction strategy process, thusensuring that poor people and their interests are fully taken into account.

A loan approved for the Rural Financial Intermediation Programme in Ethiopia last year exemplifies the partnership approach. Perhaps the most critical constraint to raising productivity that faces smallholder farmers in Ethiopia is lack of credit and financial services.

The new programme will respond to this need by building a system of rural microfinance institutions and savings and credit societies. These institutions will help an estimated 1.5 million rural households, some 7.5 million poor men, women and children, to gain access to credit, in many cases for the first time in their lives.

The Fund's loan of USD 25.7 million for the programme has mobilized substantial cofinancing from the African Development Bank and from Ethiopian financial institutions to cover its total investment cost of USD 88.7 million.

Ethiopia's population is about 63 million, out of which an estimated 40% or 25 million people are below the national poverty line. Thus this one intervention will offer about a quarter of Ethiopia's poor opportunity to work their way out of poverty.

Mr Chairman,

In addition to our strategy work, internal changes are underway to raise the operational effectiveness. Building on the Process Re-Engineering Programme, which was approved by the Governing Council two years ago, the Strategic Change Programme is focusing on modernizing financial and human-resource management, information systems and administrative services. The programme will also develop stronger strategic planning and management capacities.

Similarly, steps have been taken to develop a new information and communication strategy and a modernized human-resource policy.

Another initiative taken over the last year relates to the Fund's participation in the HIPC Debt Initiative. The long-term cost implications to IFAD of the Debt Initiative are now well over USD 400 million and, until last year, IFAD had received only one contribution from The Netherlands to help finance these. However, over the last year, our efforts have led to a growing understanding that IFAD requires additional funding for the HIPC costs, as was done for IDA, the African Development Bank and IDB. Such funding can be provided by giving IFAD equitable access to the World Bank Trust Fund, as well as through direct contributions. I am glad to say that in recent months, Belgium, Germany, Italy and Switzerland have announced specific contributions for IFAD's HIPC requirements. Others have endorsed the principle of access to the HIPC Trust Fund. We will continue our efforts to make sure that IFAD is treated in a comparable way with regard to the HIPC as other multilateral institutions.

The Fund's investment policy has also been a matter of review this past year. The severe volatility of financial markets over the last two years resulted in sharp changes in the Fund's investment income and its resource position. In consultation with Member States, a new investment policy has been developed to reduce the Fund's exposure to equities from 45 to 10%. In consequence, investment income in the future is likely to be less volatile. This will allow Member States and management to focus their attention on the replenishment process as the main source of financing IFAD's resource needs. During 2001 IFAD committed USD 434 million, which was lower than the long-term planned level, but disbursements of USD 300 million were a record high.

Let me also say a word about our efforts to strengthen IFAD's role in fighting desertification and land degradation, which is the key issue facing millions of poor farmers. IFAD is proud to host the Global Mechanism of the United Nations Convention to Combat Desertification, which, as the Secretary-General noted, is a key mechanism for the effective implementation of the Convention. Our own programmes provide a synergy for the GM's work that we will mobilize fully.

During this past year we have also, with the help of an international executive search company, selected a new Vice President. Mr John Westley, who has played a key role in IFAD as Vice-President since 1998, will be leaving the institution in April. The support he has given me during my first year in office has been invaluable. I am pleased to introduce our new Vice-President, Mr Cyril Enweze from Nigeria, who comes with the rich experience most recently of five years as Vice-President of the African Development Bank. I also have the pleasure of presenting our new Assistant President for the Economic Policy and Resource Strategy Department, Mr Phrang Roy from India. I now look forward to appointing a woman for the remaining Assistant President vacancy.

Mr Chairman,

Last year, IFAD brought out its Rural Poverty Report 2001. Launched in New York in February 2001 by the Secretary General, Mr Kofi Annan, the report has been the basis of workshops and seminars in a large number of developed and developing countries, most recently in France, Nigeria and Senegal. The report has had, I believe, a significant impact, and its messages have begun to enter the development dialogue.

The poverty report highlighted that three quarters of the world's extreme poor, some nine hundred million people, live in rural areas, depending on agriculture and related crafts, trade and services for their livelihood.

Paradoxically, even as the focus on poverty has sharpened, domestic investment and official development assistance (ODA) to agriculture and the rural sector have fallen sharply. As the theme paper for the Council brings out, ODA to agriculture has fallen by nearly half from 1988 to 1999. In parallel, domestic public investment in agriculture has also fallen, for example in sub-Saharan Africa from 6.2% of total expenditure in 1990 to 3.9% in 1998. It is hardly surprising that during the last decade the rate of poverty reduction fell compared to the previous two decades.

And to quote from the New Partnership for Africa's Development (NEPAD) "Inprovement in agricultural performance is a prerequisite of economic development. Bilateral donors and multilateral institutions have paid too little attention to the agricultural sector and rural development, where more than 70% of the poor people in Africa reside. The entire donor community must reverse such negative trends."

Mr Chairman,

The commitment to the Millennium Summit poverty-reduction goal calls for new policies and additional resources, both domestic and external. Recognizing this, the international community has taken the initiative to convene the International Conference on Financing for Development to be held in Mexico next month. This conference provides a timely opportunity to focus world attention on an agenda for action to translate the vision of the Millennium Summit into real changes in the daily lives of the poor.

This year, in view of the importance of these issues, we have tried to adapt the Governing Council format to enable it to play a proactive role in this critical dialogue. Unlike the past, this Council session has a specific theme, Financing Development - The Rural Dimension. Another innovation is the interactive discussion the Council will have this afternoon on the theme together with the round tables tomorrow on regional strategies. The theme paper highlights some of the key considerations in this discussion. I am sure that the results of the Council's deliberations on the rural dimension of financing development will deliver a strong political message to the Mexico conference.

Building on that message, we intend to organize an event at the Financing for Development conference to highlight the importance of agriculture and rural development for poverty eradication. I am happy to say that we have worked closely with FAO and WFP in the preparations. In fact, our three agencies are jointly sponsoring the conference event. I am sure that a coordinated effort by FAO, WFP and IFAD at the Mexico Conference will ensure that the voice of the rural poor is heard.

Mr Chairman,

The level of additional resources required to achieve the Millennium Summit goals has been a subject of much discussion and analysis in recent months. A report prepared for the last session of the Development Committee of the World Bank and International Monetary Fund has estimated that additional ODA of USD 54 billion per year is required, that is, doubling the existing ODA level. Several industrialized countries have recognized the need for such substantial increases in ODA to respond to the opportunities created by the Millennium Summit for more rapid poverty reduction.

There has been less discussion, however, on how those resources should be channelled to make a real impact on poverty. There is, at present, a disconnect - in fact, a fundamental inconsistency - in where ODA goes and where poverty is. International development cooperation must increasingly focus on where the poor are - the rural areas - and the sources of their livelihood - agriculture and related activities. Since a great majority of the poor live and work in rural areas, there should be greater balance in the way ODA is channelled between urban and rural areas.

Mr Chairman,

Poverty and deprivation have long been with us. But that does not mean they are an inevitable part of society. The Millennium Summit showed that the international community has now recognized this and decided to act upon it.

IFAD's own operations at the level of about USD 450 million per year leverage substantial other resources, allowing the Fund to support poverty programmes with a total annual investment of about USD 1 billion. These programmes reach, on average, some ten million poor people each year, bringing them substantial support in raising their productivity and output. Our community-level programmes also help poor groups draw benefits from large-scale investments, such as road networks, dams and other infrastructure financed by national governments and other institutions.

IFAD's programmes could be increased substantially and relatively quickly so as to make a meaningful contribution to achieving the Millennium Summit poverty goal. Bringing about a more rapid rate of poverty reduction requires both a higher level of development resources, including ODA, and a better balance of existing flows.

IFAD is an institution directly relevant to the new focus on poverty reduction. It has proved effective in undertaking innovative programmes that help even the poorest of the poor achieve lives free of deprivation and want. An institution like IFAD will, I hope, receive a significant part of the additional resources mobilized for poverty reduction. The negotiations of the Sixth Replenishment, offer a means for this.

Mr Chairman,

Next year will mark the Fund's twenty-fifth anniversary.
With the support of our Member States, and on the basis of the strong foundation IFAD already has, I am sure we can build an institution that is unique not only in its exclusive focus on rural poverty but also in its effectiveness in addressing it.

During this first year at IFAD, I have witnessed at first hand the capacity of poor people to grow, like those villagers in Senegal. That desperation and despair turn into dignity and hope when opportunities are offered, like those village women in Katsina. That effective poverty reduction is possible and do-able and that IFAD's mission statement to "Enable the rural poor to overcome their poverty" is as important today, if not more, as when IFAD was created.

Thank you.