Asian voices needed in race for IMF top job | Connect Asia

Asian voices needed in race for IMF top job

Asian voices needed in race for IMF top job

Updated 18 January 2012, 16:20 AEDT

France's Finance Minister Christine Legarde has formally declared her candidacy for the Managing Director of the International Monetary Fund, opening up a global race for the position.

It comes as emerging economies express frustration at the six-decade old tradition, under which a European national assumes the top IMF job.

The Chief of Mexico's Central Bank has also put his name forward to be considered for the job, but so far there are no contenders from Asia, despite the region's growing influence on the world economy.

Presenter: Liam Cochrane

Speaker: Saul Eslake, ecopnomist and Director of the Productivity Growth Program with the Grattan Institute

ESLAKE: well because these are powerful influential positions of which they've enjoyed a monopoly since they were established in 1944 under the Bretton Woods agreement, and like all people who've enjoyed privileges for a long time they're reluctant to give them up in the face of new challenges to their right to hold them.

COCHRANE: Obviously Asia is a huge emerging factor in the world economy, are there candidates from Asia that you think could make good managing directors of the IMF?

ESLAKE: There certainly are and they include Mr Koroda who's been the head of the Asian Development Bank for the last decade. They would include the current Finance Minister of Singapore, they could include the Indian gentleman, Mr Singh, who has previously worked for the IMF's evaluation office as well as being a senior Indian official, and perhaps most prominently they could include the current Governor of Bank Negara Malaysia, Zeti, and also the former Indonesian finance minister, Sri Indrawati Mulyani, all of whom, particular Sri Indrawati who has the same credentials I would argue for the position as Madame Legarde of France. Now I certainly don't want to imply any criticism of Madame Legarde, who's been a very successful finance minister of France by all accounts and shown leadership within the G20 in responding to the financial crisis and trying to find new systems of regulating the financial system in the aftermath of the financial crisis. But I'd say first of all that there is no compelling reason why a European should get the job just because Europe is currently facing a financial crisis. After all the Europeans themselves haven't done such a good job of managing that crisis themselves, and indeed there's reason to be concerned that because a European with political aspirations for the future is holding the job that she or he might actually be softer on Europe than should be the case for an authority like the IMF. After all I don't recall anyone saying during the Asian financial crisis that it would be a good thing if the IMF were headed by an Asian, I don't recall anyone saying during any of the Latin American crises, of which the IMF has had to deal, that it would be a good thing if the IMF had been headed by someone from that region. And the argument that the IMF should be headed by a European because the biggest item on the IMF's agenda is a European crisis, is just a bogus attempt to shore up an outdated and unjustified privilege.

COCHRANE: So why isn't there a stronger push to put forward an Asian candidate? Is a factor in that the lack of unity to stand behind one single candidate?

ESLAKE: That obviously is a factor given the way in which the IMF works, that is it's almost like what we in Australia would call a pre-selection process where the factions lined up behind their individual chosen candidates, and the Asians haven't factionalised and grouped behind a single candidate in the way the Europeans have done. But frankly that in my view misreads the whole point. The head of the IMF is actually a technocratic position, until Dominique Strauss-kahn's predecessor, who had been the Spanish finance minister, this was a job that was always held by people whose backgrounds were in central banks, not politics, because essentially it's a technocratic kind of job. Unfortunately it now seems to have been a resting place for politicians mid-way through their political careers who hope that a term as the head of the IMFwill enhance their prospects of succeeding to a more important job. And I think that is actually quite regrettable. It might be a good thing if the Asians or emerging countries more broadly were able to put their weight behind a single candidate, they would need to do that, know that in order to overcome the roughly 48 per cent of the vote on the IMF board that the Americans and the Europeans have between them, but really the process ought to be one in which the board of BIMF interviews and assesses the credentials of whichever candidates apply for the job from whichever country they happen to have and choose the one who best fits the criteria that had been laid down by the board for that position irrespectve of their nationality or citizenship.

COCHRANE: Saul Eslake even if the managing director's position does go to France's Finance Minister, as is widely expected, there have been promises of greater power for Asian countries within the IMF. Do you think those promises will be fulfilled?

ESLAKE: I think they'll have to be if the IMF wants to retain its relevance in a rapidly changing world, and if the IMF wants to fund itself in the way it may well need to in order to deal with the various risks that are confronting the global economy and the global financial system. After all if the IMF turns to need more money to bail out some indigent European government for example, it will probably need to turn to some of the world's emerging financial powers like China in order to subscribe the capital that it requires. Certainly the US and most European countries facing public debts of close to or over 100 per cent of GDP or Japan with public debt approaching 200 per cent of GDP, aren't going to have a lot of coins to drop in the IMF bucket as it passes it around the community of nations hoping to raise more money. And I would think countries like China, India, Brazil and the like are well within their rights to demand a greater say in how the IMF's run is there to be expected to make a greater contribution to the IMF's capacity to deal with global financial and economic problems.

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