I applaud Singapore's Senior Minister Goh Chok Tong on his call for Singapore and other Asian countries to push for greater say in the International Monetary Fund, which will stage its annual meeting together with the World Bank in the Republic from Sept 11 to Sept 20.
Please see abridged article below by Bloomberg on September 4.
What the former Singapore Prime Minister said is truly necessary as the IMF structure is archaic even though it behaves as if it has the mandate from heaven to tell countries how to restructure their economies.
Please see earlier posting, which argued how the IMF is in effect controlled by a handful of developed countries due to their overwhelming voting power. Five countries -- US, Japan, Germany, France and UK -- control nearly 40 per cent of the voting power as shown in the IMF chart.
Singapore Should Get Bigger Voice in IMF, Goh Says
By Linus Chua and Haslinda Amin
Sept. 4 (Bloomberg) -- Singapore and other Asian countries should push for a bigger voice in the International Monetary Fund as the region gains importance within the global economy, Senior Minister Goh Chok Tong said.
The IMF will give China, South Korea, Mexico and Turkey a larger voice at the annual meeting in the next two weeks to match their increasing size, Managing Director Rodrigo de Rato told reporters on Sept. 1, describing the formula for government representation in the fund as "unsatisfactory.''
"We have to get others in Asia who think like us to see how we can have a bigger voice in the IMF,'' Goh said in an Aug. 31 interview in Singapore. "Asia is growing and Asia has become more important in contributing to the global economic growth.''
Asian economies want a greater voice in the management of the IMF, the global agency charged with ensuring the health of the world economy, to ensure it doesn't repeat mistakes during the 1997 regional financial crisis.
The U.S. has the largest share of votes at the fund, with more than 17 percent. Japan is second with 6.13 percent. By comparison, the voting shares of all sub-Saharan African countries total 4.6 percent of the vote, and Singapore has 0.4 percent. Increases in voting shares for developing countries are likely to be a central topic for the IMF meeting in Singapore.
Voting rights at the IMF, which represents 184 countries, are a legacy of the organization's founding in 1945, at the end of World War II. Voting rights have been increased to reflect changes in member nations' positions in the global economy, the IMF said on its Web site.
Asia, which makes up nearly a quarter of the world's gross domestic product and has a third of capital inflows, wants more say in fund policies. The IMF made incorrect forecasts about Indonesia, South Korea and Brazil and mishandled economic crises in the three countries, an independent report from the IMF said in 2003.
In 2002, the IMF praised Malaysia's currency peg to the U.S. dollar as a "stability anchor,'' four years after having warned the country was taking a "retrograde step'' in using such a peg to stabilize its markets. It was widely criticized for its handling of the 1997-1998 Asian financial crisis, when the fund advised many countries to raise interest rates to protect the value of regional currencies. Banking crises erupted across the region as companies and consumers struggled to repay loans at higher rates.
Resistance to Change
Still, some countries oppose changes to voting rights at the meeting in Singapore. Bundesbank President Axel Weber said European Union states shouldn't surrender voting power to poorer nations, Handelsblatt reported Aug. 27. The IMF should instead devise a voting mechanism that is "fair and transparent'' for all, Weber was quoted as saying.
India will also oppose any changes in the quotas of developing countries in the IMF, the Business Standard reported Aug. 31, citing an unidentified official at the finance ministry. India is against any changes that will hurt its interests, the official was cited as saying.
"International cooperation is not an easy issue, every country has its own interests, and I think all the interests have to be taken into account,'' de Rato told reporters on Sept. 1. "The question is to be able to see your own interest in the picture of the whole institution.''
With a greater say in how the IMF is run, China and other developing nations may be more willing to heed the fund's calls to allow their currencies to strengthen, say the plan's backers, which include the U.S. and Canada. That would help reduce the U.S.'s record $805 billion current-account deficit, which Bank of Canada Governor David Dodge says risks a global recession.
More Voting Power
The proposal would give the four nations voting power that more closely approximates their weight in the global economy. Belgium, which has a $352 billion economy, has more voting power -- sometimes referred to as a quota -- than Brazil, India, Mexico or South Korea. All four of those nations have economies that are at least 70 percent bigger. Asia, excluding Japan and Australia, has about 10 percent of the voting rights.
"We should give a greater voice to economies that are growing which would have a bigger weight in the world economy. They may be poor nations now, but they would become middle-income countries very quickly,'' Goh said. "This would include Singapore, small, but we are in a sense an open economy, we do well, so we believe we should have a bigger voice in the IMF.''