IMF deaf to Asia no longer, chief Lagarde vows

Economy July 14, 2012 00:00

By Achara Deboonme

The Nation

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The International Monetary Fund may have turned its ears away from Asian voices during the 1997 crisis, but the current chief promises recognition that the global institution belongs to all 188 member nations, not just those in Europe.

The International Monetary Fund may have turned its ears away from Asian voices during the 1997 crisis, but the current chief promises recognition that the global institution belongs to all 188 member nations, not just those in Europe.

At the "Inaugural Bank of Thailand Policy Forum" on Thursday evening, which marked the end of her Asian tour, IMF managing director Christine Lagarde calmly acknowledged criticism that the organisation is busy bailing out European nations because it is a European institution.

"It’s frustration inside my heart. You talked about the IMF which I don’t know," she said in response to the criticism floated from the floor by Masahiro Kawai, dean and chief executive officer of the Asian Development Bank Institute.

She noted that when she took over the job a year ago, European banks were told to recapitalise, and she encountered a flood of criticism. "It’s OK. I have thick skin. I can take it.

"When we feel strongly about something that we have analysed and tried to change as much as we can, then we just say it, whether it is to the governments of the Europeans, the US government or the governments of Southeast Asia. I will say [it], or my team will say [it], whether the country is big or small …

"Our duty is totally independent. In saying so, we don’t belong to Europe. We don’t belong to advanced economies. I regard the institution [as meant] to serve the entire community of all 188 members."

She acknowledged that the IMF could not tread anywhere it wants, as it would conduct analysis only if asked.

At the end, she asked Kawai to observe the operations of the IMF in Washington, DC.

Lagarde’s predecessors were heavily criticised by Asian economies after the 1997 economic crisis over the universal austerity packages applied to all regardless of their different economic and social conditions.

At a dinner talk, Lagarde promised that the IMF would be "country-attentive and country-specific", ready for dialogue with the respective governments.

In her speech on "New Perspectives on Asia’s Role in the Global Economy" delivered to the guests, including several former Bank of Thailand governors and Thai bankers, "Let me also be candid," Lagarde said. "We are well aware of the history of our relationship with Asia. We recognise that sometimes we have not listened enough when in fact you were right. And we know that not all bad memories have completely gone.

"Tonight, I want you to know that the IMF has learned – and the IMF has changed. In our interconnected world, we know we must continue to change. We must continue to work toward being an even more effective partner for Asia – and for Thailand. We must listen and be prepared to revise the textbook of crisis resolution depending on country specifics, on regional ties."

She said she believed that putting this into practice would lead to changes in three main elements.

First, economic analysis and policy advice must become even more relevant and more useful for members. Second, the IMF must continue to adopt lending instruments to meet Asia’s needs. And third, the IMF must keep pushing to ensure that Asia’s role and voice in the organisation is a true reflection of the region’s new economic standing in the world.

She said she was also pleased that China, Japan and India would be among the 10 largest shareholders of the IMF, a change in structure that would ensure more even-handed policy-making.

"This is not simply about technicalities. This is about Asia having a more powerful say in the IMF – and about the IMF being a more effective partner with Asia," she said.

She noted that there had been times in history when Asia had been important for the world; this certainly is another moment in history when that is the case.

"So it is time for the IMF to open our ears to Asian voices and our minds to Asian ideas, and our textbook to Asian solutions. This is no mere rhetoric. Asia is a linchpin for global economic stability and is being heard, both through its growing stature in the global economy, and also in the corridors of the Fund, from which we try to understand the global economy and be an agent for improved stability."

In the speech, she lauded Thailand’s sharp economic recovery in the aftermath of the US-led 2008 crisis, with the Kingdom showing 8-per-cent growth in 2010. It also bounced back strongly after last year’s devastating floods.

Since 2009, across Asia and the Pacific, economic growth has been nearly twice as fast as global growth – an average of almost 6 per cent a year compared with around 3 per cent for the world.

Lagarde added that amid an economic crisis hitting all corners of the globe, Asian policy-makers were the only ones still worried when their gross domestic products were growing by less than 6 per cent per annum. Despite potential vulnerabilities, Asians are well placed to respond, she said, and their lessons are something that the IMF wants to share with the world.

Lagarde’s visit to Thailand is her first since being named IMF chief last year.