Madam Chairperson,
Distinguished Governors,
Ladies and Gentlemen,

May I welcome you warmly to Rome and to this 24th Session of the Governing Council of IFAD. This year 2001 according to some, is really the first year of the new Millennium. It is a year that marks an important moment of change for IFAD.

I would like to thank His Excellency Natale D'Amico, Under-Secretary in the Italian Ministry of Finance and Governor for Italy, for being with us today to deliver the message of the Italian Government. Throughout the Fund's twenty-three years, Italy has provided us with strong support as well as warm hospitality, reflecting Italy's deep and longstanding commitment to international co-operation for development.

We are deeply honoured by the participation this year at the Council of the President of the Arab Republic of Egypt, His Excellency Mohamed Hosni Mubarak. We will have the opportunity of hearing his statement later this morning.

May I also express my appreciation for the eloquent message of the Secretary General of the United Nations, His Excellency Mr. Kofi Annan, in support of the efforts that IFAD is making, in strong collaboration with other United Nations organizations, to end poverty, malnutrition and hunger.

It is a pleasure to welcome here my friend and colleague Catherine Bertini, the Executive Director of the World Food Programme, and Mr. David Harcharik, the Deputy Director General of FAO, whose presence with us symbolizes the close relations and growing collaboration among the three Rome-based United Nations organizations.

Madam Chairperson,

This Governing Council marks the eighth and last time that I will have the privilege of addressing the Council as President of IFAD. I would like to use this opportunity to look at the path we have travelled together over these last eight years and reflect on the coming challenges for the Fund.

These years have seen substantial changes, both within IFAD as an institution and in the wider world that affects the conditions of our clients, the rural poor - smallholder farmers, herders, artisans and above all poor rural women.

Madam Chairperson,

By 1993 IFAD was widely recognized as an innovative institution that looked at the world of the poor through their own eyes, from the grassroots level, rather than at them from the top-down.

The main elements of IFAD's approach were well developed. Targeted assistance rather than relying on trickle-down of benefits. Opening the door to credit for the poor. Participative technology development and responsive extension services focussed on the crops and animals of the poor. Small-scale water control and conservation that poor farmers could manage themselves and which would benefit them directly. A focus on marginal areas and countries where others were reluctant to go. Attention to land degradation and desertification. And direct involvement by the intended beneficiaries as well as NGOs in the design and implementation of projects.

These qualities had rightly earned for IFAD a strong reputation for delivering imaginative and participative poverty alleviation projects. At the same time, however, some significant problems were emerging.

IFAD's replenishment process had proved unduly protracted and painful. 1992, for example, was the last year of the Fund's Third Replenishment. Yet, very little progress had been made towards concluding the Fourth Replenishment. As a result of its funding problems, IFAD's lending level in 1992 was about 300 million dollars with only 24 projects that year. Moreover, disbursements, what the projects actually delivered to the poor, had fallen to USD 174 million dollars.

IFAD's administrative budget on the other hand had been rising. In the two previous years, the budget and project development costs had grown by 31 % to a level of USD 70 million in 1992.

Thus IFAD was at risk of being considered an institution whose projects were widely admired but which was becoming too small in its coverage and too expensive in its operations.

The challenge was to build on the Fund's strengths while enhancing its impact and outreach and making the institution more efficient and cost-effective.

This challenge was underlined by the Rapid External Assessment of the Fund carried out in 1994 under the chairmanship of Professor Ivan Head of Canada. The Assessment Team, after an extensive review of IFAD operations and discussions with member states as well as other multilateral institutions, agreed that IFAD had the potential to "become the foremost agent for coherent and rational activity in rural poverty diminishment". Reaffirming the validity of the Fund's mission, the Report also called on IFAD to become a knowledge organization on rural poverty.

In our response to meeting this challenge we took a number of initiatives to adapt the Fund's governance and re-engineer its work processes.

Member States endorsed wide-ranging changes in the Fund's structure to adapt it to new economic conditions and address some of the factors that had made its replenishment process so difficult. As a result, the Fund's Fifth Replenishment whose negotiations started in February 1999 was concluded within 18 months, by July 2000, together with an institutional Plan of Action for the Replenishment period.

Internally, all the Fund's major work processes were reviewed in-depth, by groups made up of IFAD staff. On the basis of their recommendations, the project cycle was streamlined and made more flexible and continuous with greater emphasis given to implementation issues. Major changes were also made in the budget process and areas such as document management and the Fund's information system.

Again, on the basis of staff inputs, a Vision Statement was prepared and provided the basis for the Fund's Corporate Strategy and Corporate Scorecard. The latter made transparent what the responsibility of individual operational units was and how it related to the work of other units, thus giving each IFAD staff member a better sense of what was expected of him or her and, even more important, what they should expect of themselves.

This reengineering of our work processes brought about a major improvement in the Fund's budgetary position and the relationship between the budget and its lending programme. Between 1992 and 2000, for example, IFAD's administrative budget and project development costs, in real terms, have been reduced by 26%. In fact, today these administrative expenditures are lower in actual US dollars than they were in 1992.

Over the same period, the Fund's programme of work has grown by more than 40%. Last year's projects, with a total investment cost of just over USD 1 billion will, on full development, help some 10 million poor people work their way out of poverty.

Disbursements have risen by 80% from their 1992 level to USD 312 million in 2000. This major increase in IFAD's disbursements reflects the attention and effort that has been given to ensuring that project implementation was carried out effectively and on a timely basis.

Madam Chairperson,

Along with these institutional changes to improve the process of project preparation and delivery, we have given equal attention to making the content of our programmes fully responsive to the changing world facing the rural poor.

As more countries adopt policy approaches based on market forces, important new opportunities are opening up for poor farmers and other rural producers, but greater risks as well. Moreover, in many countries, services for marketing, extension, credit, supply of fertilizers and other inputs which had earlier been provided by state agencies, are being cut back.

Promoting the growth of private technical services responsive to local demand is an important priority in this context. IFAD projects such as last year's Natural Resource Management Project in Bolivia as well as projects in Mexico and Uganda are giving special attention to this issue. Our earlier experience in countries like Peru and Guatemala has shown that even poor farmers are willing to pay for extension services, if these are responsive to farmer needs.

Unfortunately, markets in many rural areas remain underdeveloped, often with a handful of traders dominating the markets. Helping poor farmers organise themselves and gain access to up-to-date market information as well as build linkages with outside traders are important goals of last year's projects in Azerbaijan and Georgia as well as Mexico and Venezuela. This will be a growing priority for IFAD interventions.

Perhaps the most pioneering aspect of IFAD's work has been to show that the poor are indeed bankable. Building on our long-standing experience of opening the door to credit for poor rural men and women, we are now trying to promote viable rural financial institutions that offer not only credit but savings and other services like insurance. In fact, bringing about a rural financial system that can respond to the changing needs of smallholder farmers and other rural producers will provide them a ladder out of poverty.

Last year's Microfinance Support Programme in India illustrates our approach. The programme will promote a national framework for microfinance institutions based on commercial principles and charging market rates on loans. Moreover, the bulk of the financing for the USD 134 million cost of the Microfinance Programme will come from the banking institutions themselves, which will finance most of the lending.

The India programme, together with similar projects with national coverage in Ghana, Niger and Tanzania last year, show how we are working with host country governments to mainstream innovative approaches for rural poverty alleviation into the broader national policy framework. This provides a new dimension for IFAD's role as a catalyst, promoting programmes in favour of the rural poor on a much larger scale.

Let me mention just one more area where the Fund has sharpened its programme approach, our wide-ranging collaboration with NGOs and other civil society institutions. Civil society institutions today are being regarded not merely as ways of delivering project services, but as partners. For example, in last year's Indonesia project, NGOs were seen as stakeholders from the beginning and indeed were part of the negotiating team which finalised the project.

In the Indonesian Project, as well in projects last year in Bolivia, Morocco and the Sudan, civil society institutions will play a key role in improving natural resource management and combating land degradation. The Fund's selection as the agency to house the Global Mechanism of the United Nation Desertification Convention, has given a new impetus to our own long-standing efforts to promote sustainable land and management practices and halt further degradation.

Madam Chairperson,

IFAD is today cost-effective in its operations with an annual programme that reaches millions of poor people. Yet, change and reform have to be a continuing process. Thus last year we launched a second phase of our reengineering, this time to strengthen our financial, human resource and administrative services functions. These reforms, using the potential of modern information technology, will lead to substantial savings in these areas in the coming years.

We are also intensifying our efforts to make IFAD a knowledge organisation on poverty, improving access to insights from our own experience and sharing and testing them with the lessons drawn from the experience of others.

The Fund's replenishment process, however, still provides a continuing challenge. As I said, a consensus on the Fifth Replenishment was reached within 18 months, by July 2000. But, confirmations of pledges by individual countries have come slowly and IFAD received no contributions under the fifth Replenishment in the year 2000. I am happy to say however that this morning a number of countries announced their pledges and we have now completed the Fifth Replenishment.

Nonetheless, the delays experienced in the Fifth Replenishment contributions make it imperative for member states to give attention to ways of streamlining the Replenishment process further and to ensure that the Sixth Replenishment, covering the period 2003 - 2005, starts on time.

Unfortunately, 2000 was also marked by a great deal of volatility in the financial markets, with our equity holdings actually showing a loss. Nonetheless, since 1997, when our diversification policy was initiated, IFAD has enjoyed a net benefit in its investment income, compared to what it would have been, had we continued the previous investment policy. But the lack of Fifth Replenishment contributions in 2000 and delays in payment of earlier replenishments, combined with the poor performance of the investment portfolio that year, have compelled us to reduce the proposed lending programme for 2001. I hope, however, that we will be able to resume a normal lending programme next year, assuming that the Fifth Replenishment contributions are made in a timely way.

Madam Chairperson,

World leaders at the Millennium Summit last September made a historic commitment on poverty, to reduce the proportion of those living in extreme poverty, on less than one dollar a day, by half by the year 2015.

This global poverty target defines the scale of the task before us and has created a benchmark to measure progress. Virtually all United Nations organisations and international financial institutions have, in their respective sectors, now adopted poverty eradication as a major strategic objective.

Two years ago, as we looked to the new Millennium, we thought it was the right moment to examine the lessons from our own experience and relate these to the experience of other institutions working against poverty, as well as inputs from academic research. This was the genesis of the IFAD Rural Poverty Report 2001 that was launched on 5 February by the Secretary General of the United Nations.

As the Rural Poverty Report shows, not only does the large majority of the world's poor currently live in rural areas, but the dominance of rural poverty is likely to continue well into this century. Moreover, anyone who has visited large third world cities cannot fail to see the flood of rural immigrants that deepen and entrench urban poverty. It is difficult to imagine that poverty in such urban areas could be tackled in a lasting way, unless opportunities are generated in the countryside that reduce this tide of economic migration.

The centrality of rural poverty is thus the first thing to recognize in the effort to end overall poverty.

Most multilateral institutions joining in the effort to reduce rural poverty are concentrating on the social sector, especially health and education, and helping strengthen institutions important for governance and policy formulation. These are crucial tasks, especially for the medium term. But few other institutions are providing direct support to enhance the productive activities of the rural poor.

Yet, raising their production is essential for today's poor to overcome the deprivation that is their daily life and improve their prospects for survival into that medium term. Moreover, rising incomes in the hands of the rural poor help sustain rural health, education and other services. This is what IFAD does. There is thus not an overlap, but in fact a strong complementarity, between our work and that of the other institutions which are now giving a new priority to poverty.

Madam Chairperson,

The Rural Poverty Report highlights that the present rate of poverty reduction is about one third of that required to achieve the Millennium Summit target, and in Africa it is barely one sixth. We have to do much better.

Most of the poor depend on agriculture and related trades and crafts for their livelihood. Yet agriculture has received a falling share of international aid, now about 12% of overall ODA, which itself has declined in real terms in the 1990's. In fact, international financing for agriculture fell by nearly 40% between 1988 and 1998, even as the declared support for poverty alleviation has become more intense.

Thus the second key message of the Report is that, in order to achieve more rapid poverty reduction, greater priority - and resources - have to be given to agriculture which provides the economic basis of the rural poor.

IFAD's member states need to respond to these challenges. After all, our members are the same as those who proclaimed the Millennium target.

A good place to start with higher resources for the poor would be in IFAD, a tested and proven instrument to fight poverty. After seeing this institution for eight years, I can say that IFAD has the capacity to deliver a far larger volume of support to the rural poor, to empower them and create the conditions for them to work their way out of poverty.

We now reach some ten million poor people a year. IFAD could double that level if we had the resources, and thus make a major contribution to achieving the Millennium Summit target. I hope that when member states look again at IFAD's resource needs, they will do so in the context of the challenge of the Millennium poverty target, and IFAD's potential to help achieve it.

Madam Chairperson,

Twelve hundred million men, women and children still live today in extreme poverty. Beyond those numbers lies the poignancy of wasted lives and forgotten hopes. During my own visits to our projects, I witnessed many times how little external support is required to help poor men and women reclaim their lives and assure better ones for their children.

One such woman is Amie Doumbuya whom I met in Mali in a remote village called Sinebougou, 50 kilometers from any road, where the IFAD-supported Segou Village Development Programme was just starting up. When I was leaving the village, Amie came out of the crowd to offer me a bowl of millet, as a present she told me for my wife, to share her own good fortune for the opportunity that the project was giving her. I could not convince her to keep the grain for her five children standing close to her, two of whom had bloated stomachs, signs of malnourishment. Today Amie can earn enough to feed herself and her children. Giving women such as Amie hope is perhaps IFAD's greatest achievement.

Madam Chairperson,

Serving as IFAD's President for these last eight years has been an enormously rewarding experience for me. I would like to express my deep gratitude to His Highness the Amir of the State of Kuwait for having chosen to nominate me for the Presidency of IFAD. And I would like, equally, to thank the Fund's Governors, and through you, the member states, for having elected me to this post.

Here, let me add a word to acknowledge the committed and devoted efforts of our staff and the great satisfaction I have had in working with them. During these years, when so many changes were taking place, the Fund's staff continued to focus firmly on our mission and on the needs of our clients, the poor. Their expertise, experience and commitment is what makes IFAD a unique and effective institution.

My period in Rome has been not only deeply satisfying for me professionally, but fulfilling years for my family as well. For that I would like to recognise the support extended by the Government of Italy to IFAD and to me personally, and, above all, the warmth of the people of Rome and Italy. Our Roman experience is something we will treasure and carry with us all our lives.

Thank you.