IMF seeks reform

SINGAPORE – The International Monetary Fund meets in Singapore next week – its first meeting in Asia since the 1997 financial crisis – vowing to revamp itself to give greater power to emerging economies in hopes of enhancing the 61-year-old institution’s legitimacy.

At the top of the agenda is a two-year plan of reforms, the first of which is to boost the influence of China, South Korea, Mexico and Turkey in the 184-member fund, in recognition of their rising economic might.

In undertaking the reforms, the IMF is acknowledging that the Washington-based financial institution’s credibility has been threatened by a power structure skewed toward the United States and Europe – something critics of the IMF have maintained for years.

“If (the IMF) is to retain its legitimacy and maintain its effectiveness, and be a useful vehicle for promoting international cooperation, all of the fund’s members must be confident that they have a fair share in its decision making and that their voice will be heard,” Rodrigo de Rato, the fund’s managing director, said last week.

The proposals have met with doubt and criticism from some member nations, which suggests that the reforms might face internal opposition during the Sept. 19-20 annual meeting, held with the IMF’s sister institution, the World Bank.

The gathering is expected to draw 16,000 delegates and other participants – but few protesters due to Singapore’s ban on outdoor demonstrations, citing concerns that street protests could be exploited by terrorists for possible attacks.

The World Bank, meanwhile, has put fighting corruption at the top of its agenda in its efforts to help countries grow their economies and assist the poor. The bank’s president, Paul Wolfowitz, who has championed this issue, has blocked more than $1 billion in loans to a range of countries because of the nations’ illegal practices.

At the IMF, China and South Korea, Asia’s No. 2 and 3 economies, are, along with Turkey and Mexico, the four nations the IMF considers most underrepresented in the institution.

The proposal under consideration will give greater voting shares to those countries by increasing their financial contributions to the fund, known as quotas. The larger the quota, the larger that country’s voting share.

China currently has a voting share of 2.93 percent, while South Korea has 0.76 percent, Mexico has 1.196 percent, and Turkey has 0.453 percent. The proposal would boost their combined voting share to nearly 7 percent from 5.34 percent now.

The United States has the largest voting share, with about 17 percent, while European countries together hold over a third.

The package of reforms was approved by the fund’s 24-member executive board ahead of the meeting but still needs to be ratified by 85 percent of the board of governors.