Today in New Delhi, India
Oct 19, 2018-Friday
New Delhi
  • Humidity
  • Wind

Asia's ambitions for IMF top job remain elusive

When the topic of International Monetary Fund (IMF) succession was floated at an Asian financial summit in Hanoi earlier this month, the most popular name mentioned was not from the region at all.

world Updated: May 19, 2011 10:14 IST

When the topic of International Monetary Fund (IMF) succession was floated at an Asian financial summit in Hanoi earlier this month, the most popular name mentioned was not from the region at all.

With Asia's emerging economies, particularly China and India, now the main driver of global growth, calls have been building for a review of the post-World War II consensus that sees an American head the World Bank and a European the IMF.

But in Vietnam, it was French finance minister Christine Lagarde, attending an Asian Development Bank (ADB) meeting, who was being tipped to succeed her compatriot Dominique Strauss-Kahn, participants said.

Events have taken a dramatic turn with the stunning arrest in New York of Strauss-Kahn, who had been expected to give up his post as IMF managing director to make a run for the French presidency next year.

Observers say that although the race has been thrown wide open by attempted rape charges that forced Strauss-Kahn to quit Thursday, the Asia-Pacific region is unlikely to make a unified push for one of their own to replace him.

The timing should be good for an Asian bid -- regional economies are mostly on solid footing in the aftermath of the 2008-2009 global recession and the European Union (EU) is hobbled by a debt crisis among some members.

Even British Prime Minister David Cameron has indicated that having an Asian candidate would reflect the shift in the world's focus to the region.

But apart from the need for Asian unity, analysts say the region's chances will rest on whether the IMF's influential members, in particular the US and EU, are willing to reform the global financial power structure.

Rajiv Biswas, the Singapore-based chief Asia Pacific economist at IHS Global Insight, said the tradition of the Bretton Woods institutions' leadership "is a post-colonial relic that needs to be ended immediately".

"With the rise of China, India and Indonesia added to the economic weight of Japan, the size of the Asia Pacific as an economic region continues to rise," Biswas said.

However, "much will depend on whether the Western countries with the largest shares of voting rights are willing to accept that the way the governance of the IMF and World Bank has worked in the past is not appropriate".

Europe and the United States still control a major chunk of the voting rights in the IMF, with Washington having veto rights over major decisions.

Ironically, Europe's debt crisis will likely benefit a candidate from that continent, bolstering arguments that a European is best qualified to clean up the bloc's own financial mess.

But even if that argument wins the day this time, it will not silence the debate in a region where bitterness still lingers over the IMF's unforgiving approach when economies crumbled in the 1997-98 Asian financial crisis.

"The IMF is overdue for a relook at its European-only tradition. This seems outdated in a G20 world when the role of emerging economies and Asia is increasingly recognised as critical," said Simon Tay, chairman of the Singapore Institute of International Affairs.

"Having said that, the idea of an immediate appointment of an Asian to replace Strauss-Kahn is probably unwise and untimely. There is a great urgency and a lot will have to be done about European economies," he said.

"The last thing the world needs now is an Asian outsider who may be resisted and even resented," Tay said, suggesting an emerging-nation candidate could be best considered in one or two years.

Contenders include Montek Singh Ahluwalia, one of India's most prominent policy planners, former South Korean finance minister Il Sa-Kong, and Singapore's Tharman Shanmugaratnam who was much-praised as chair of the IMF's International Monetary and Financial Committee.

South Africa's National Planning Commission chief Trevor Manuel, and Turkey's Kemal Dervis, a former head of the United Nations Development Programme, have also been named as possible successors.

"Asia is not really unified," said Julius Caesar Parennas, a senior advisor at the Institute for International Monetary Affairs in Tokyo.

If the continent's finance ministers had a candidate in mind, that individual should have emerged during the ADB meeting in Hanoi, he said.

"The different countries have some idea of presenting their own candidates but they really haven't sorted out if they want to go as a bloc. I think there is no consensus," he said.

"Lagarde was in Hanoi and she was already laying the groundwork for her IMF bid. And it seems that there are several Asian finance ministers who have expressed support for her."

First Published: May 19, 2011 10:12 IST