Last year's Annual Report described a year of change and renewal. This year many of those changes have begun to bear fruit. Disbursements and quality are up; projects at risk are down; and our clients are reporting improvements across the institutionfrom more client responsiveness to more humility.

This year has seen further changes: the implementation of the Cost Effectiveness Review; further decentralization of decisionmaking powers to the field; a new budgeting and planning process for the first time linked to strategic objectives; and the introduction of a new human resources policy designed to end the traditional divisions between headquarters and local staff in the field and between regular and nonregular staff. Much remains to be done. But the progress of the last twelve months provides us with a solid foundation on which to build. None of this would have been possible without the wholehearted support and guidance of our executive board.

For many of our clients the year has also brought profound change. We do not yet know what the long-term effects of the East Asian crisis will be, but the impact on the poor has already been savage. For all of us at the World Bank Group, the crisis has highlighted the fact that financial and social policy must go hand in hand. With the support of our shareholders we have set up the new Special Financial Operations Unit to look at financial and social issues in crisis countries on an urgent basis. We are also expanding our work on long-range financial sector reform and focusing much more attention on social assessments.

With its threat of returning millions to poverty, the crisis has also underlined the fact that, as I put it in my speech at the Annual Meetings in September 1997, the challenge of inclusion is the key development challenge of our time. Across the globe, too many people are missing out on the fruits of economic success. Our goal must be to reduce these disparities across and within countries; to bring more and more people into the economic mainstream; to promote equitable access to the benefits of development, regardless of nationality, race, or gender.

To do this we must boost our work with our partners in government and in the other donor agencies, civil society, and the private sector. We must reach out much more proactively to disadvantaged groupsespecially women and indigenous peoplesand we must take a more holistic view of development itself. It is my strong belief that we will not make development meaningful, sustainable, and inclusive until we put people at the center of the development process. This means a much greater focus on country ownership and participation, a better appreciation of local conditions, and more attention to the role of culture.

You will find these themes reflected in the pages of this Annual Report. Taken together, they show an institution which is repositioning itself to meet the demands of a new millenniuman institution committed to results, partnerships, and inclusive development. The 4.8 billion people who are our ultimate clients deserve nothing less.