[Kabar-indonesia] Transcript: IMF Moves to Rebuild Its Asian Image

[JoyoNews at aol.com]

Australian Broadcasting Corporation
June 20, 2006
-transcript-

IMF moves to rebuild its Asian image

The IMF is moving to rebuild its image in Asia, reforming membership and 
making it easier for Asia to get funds quickly in a crisis. To lift its Asian 
input, the Washington-based IMF has invited China and Japan to take part in work 
on dealing with global financial imbalances. And at its annual meeting in 
Singapore in September, the Fund says it'll offer proposals to give proper 
recognition to the economic weight of Asia.

Presenter/Interviewer: Graeme Dobell

Speakers: Rodrigo de Rato, managing director of the International Monetary 
Fund; Australia's Treasurer Peter Costello

DOBELL: One of the defining images of the Asian financial crash was a 
photograph in January, 1998, of Indonesia's President signing a rescue package with 
the International Monetary Fund. Suharto sat at the desk with his head bowed 
over the document while the IMF chief, Michel Camdessus stood over the President 
with his arms folded. That image of Asia bowed still haunts the IMF and is 
part of the suspicion it confronts in Asia. Australia's Treasurer, Peter 
Costello, says part of the answer is to reform the Fund to give proper weight to Asia.

COSTELLO: IMF reform is something that Australia has been pushing for some 
time. But we believe that the IMF represents more the historical weight of 
countries in the global economy than the current weight. We believe that Asia is 
under-represented in the IMF and that there should be reformed quotas to 
recognise the growing global importance of emerging economies in Asia.

DOBELL: The managing director of the IMF, Rodrigo de Rato, says the Fund has 
to reflect the economy of the 21st century. He says that the annual meeting of 
the IMF and World Bank in Singapore in September, will consider changes to 
the funding quotas - these quotes determine voting rights within the Fund. 
Countries which are under-represented such as China and South Korea would have 
their rights lifted to better reflect their importance in the world economy.

DE RATO: The question of quotas is a crucial question. That's not only an 
Asian issue, but it's certainly important for Asia. And I think we have a chance 
and I will work on it to bring to Singapore some proposals that will help the 
institution take the right steps in the next two years become more flexible in 
terms of recognising the different ways of countries in the governance of the 
institution.

DOBELL: After the suffering imposed by the financial crisis, Asia has set out 
to escape the clutches of the so-called Washington consensus, enforced by the 
IMF and the World Bank. Asian countries have built huge currency reserves and 
a new regional structure, the Chiang Mai Initiative, to do currency swaps 
within Asia. The IMF wants to see these as the first and second lines of defence 
in a crisis, leading naturally to the Fund as the third line of defence.

DE RATO: To integrate these lines of defence and to make all the participants 
aware of while the risk and also the possible conditionality for countries 
affected for a crisis, is going to be key looking forward.

DOBELL: The problem for the IMF is that in the last Asian crisis its bailout 
policy was linked to what were seen as harsh demands for cuts in government 
sepnding that made the economic disaster worse. For that reason, the Washington 
consensus is both feared and distrusted in Asia. Mr de Rato says the dangers 
of disorder in the world financial market still exist - especially an abrupt 
fall in the value of the US dollar. In a crisis, he has to persuade Asia to talk 
to the IMF again.

DE RATO: I want to make sure that when financial market conditions worsen the 
service we offer to our members are sufficiently useful that they will come 
to us for support if they need it too.

DOBELL: And the promise from the Fund is that there'll be no repeat of the 
broad conditions imposed on Suharto or the rest of Asia in 1997 and 98. Now the 
head of the Fund promises Asia a new lending policy to deal with a crisis that 
is more automatic, has fewer conditions and recognises the need to ensure 
economic stability.

DE RATO: The instrument would be designed to help members avoid crisis, but 
also to respond to them if they occur. To be more attractive than previous 
approaches the instrument would need to provide for more automatic drawings for 
programs that are on track, and also for finance upfront.

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Joyo Indonesia News Service
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