G20 urged to speed up IMF reform

The Korea Times

The Korea Times

National

Mon, October 2, 2023 | 11:09

G20 in Seoul

G20 urged to speed up IMF reform

Posted : 2010-09-01 20:21

Updated : 2010-09-01 20:21

For Korea, there are a myriad of daunting tasks to address as host country before the G20 Seoul Summit slated for Nov. 11 to 12.

Indian Amb. Skand R. Tayal

This interview is part of articles highlighting Korea’s preparations for the Nov. 11-12 G20 Summit slated for Seoul, marking 70 days before the summit. ― ED.

By Lee Tae-hoon

For Korea, there are a myriad of daunting tasks to address as host country before the G20 Seoul Summit slated for Nov. 11 to 12. Among them, what seems most elusive is to find the middle ground on reform of international organizations, particularly the International Monetary Fund.

Earlier this year when the world was still experiencing the global financial crisis, it didn’t seem so difficult to bridge the gap between advanced and emerging countries as the two sides shared the view that developing economies should play a bigger role in the post-crisis world.

In previous summits, the leaders of the G20 nations agreed to speed up reform on the IMF quota system to give a greater say to under-represented emerging countries and to complete the initiative by the Seoul Summit.

However, with the crisis seemingly over and the forum approaching, the issue is becoming controversial as advanced countries, many believe, are balking at giving up their rights at global financial institutions.

Against this backdrop, non-G7 nations have voiced concern over the slow progress in IMF reform. India is one of the vocal countries that advocate swift IMF reform. In an interview with The Korea Times, Indian Ambassador to Korea Skand R. Tayal said, “We have some concern that the IMF reform is not progressing as expected.”

He said that ambiguity in the language of the G20 statement on IMF governance reform and a failure to design a clear formula on how to shift the existing quota shares remain major stumbling blocks.

At the Pittsburgh summit in September 2009, the IMF and the G20 agreed to shift at least 5 percent of IMF quotas to developing countries, but did not specify on how much goes to whom.

Many of Asia’s emerging and developing countries, including Korea, claim that they are underrepresented in the IMF, where the current quota for China, the world’s second largest economy, ranks only sixth or 3.7 percent.

The quota of India, the world’s 11th largest economy, is 1.9 percent and that of Korea, the world’s 13th largest economy, is only 1.4 percent, which are not considered commensurate with their economic sizes and positions in the global economy.

Observers say the global imbalance is largely attributed to overrepresentation of advanced countries with the United States and Japan holding 17.1 and 6.1 percent, respectively, while EU member states have 32 percent.

“To move ahead, it is essential that the G20 provides greater clarity and removes ambiguity on this issue,” Tayal said.

Citing Indian Finance Minister Pranab Mukherjee’s recent comment, he noted that the Pittsburg Summit Declaration gave an important political direction, but the language of the statement has been subject to varying interpretations.

“The most crucial reforms are the quota and voice reforms in the IMF and all other reforms should flow from and follow it,” he quoted Mukherjee as saying.

Tayal also pointed out that the IMF is a quota-based organization and that character must be maintained.

He said India believes that the leadership of international banking institutions should be selected through open competition strictly based on the merits of candidates, rather than on the basis of their nationality.

On the basis of an “unwritten” rule or gentlemen’s agreement, the chief of the IMF has always been European since its inception in 1945.

Some observers say Asia has a large pool of competent economists and that the time is ripe for a non-European, possibly from an emerging country in Asia, to lead the IMF.

Incumbent managing director Dominique Strauss-Kahn is considering leaving the IMF’s top seat before the end of his term to compete in the 2012 French presidential election.

In July, Strauss-Kahn also mentioned that he would like to see a non-European successor.

“I want a sign of change that the person who follows me in the position will come from an emerging or low-income country,” he said at a conference in Daejeon, Korea.

Montek Ahluwalia of India, a prominent economic policymaker with World Bank experience, Zhou Xiaochuan, governor of the People’s Bank of China, and Sakong Il, head of Korea’s G20 preparation committee, have been touted as possible candidates to replace Strauss-Kahn.

leeth@koreatimes.co.kr