Asian nations want more muscle to flex at IMF

Asian nations want to wield more power at the International Monetary Fund and other global forums to reflect their growing economic clout but Europe seems reluctant to cede influence, analysts say.

China and South Korea, along with Turkey and Mexico, are expected to win increased IMF voting rights in Singapore later this month when the Fund holds its first annual meeting in the region since the 1997 Asian financial crisis.

Other Asian members are also expected to push for a greater say in a second round of rebalancing next year at the institution, which since the end of World War II has been dominated by the United States, Europe and Japan.

"It is going in the right direction but it is too little too late," said Professor Eisuke Sakakibara of Waseda University, a former Japanese vice minister of international finance known as "Mr Yen" for his sway over markets.

"This is almost 10 years after the East Asian crisis took place. The initial step is very small so a much more radical adjustment needs to be done in the coming years," said Sakakibara, who was nominated by Japan in 2000 to head the IMF but lost out to Germany's Horst Koehler.

Despite being a global economic powerhouse China -- with 2.94 percent of IMF voting rights -- currently has less say than Belgium and the Netherlands combined.

"The problem we have at the moment is the quotas do not represent the rapid growth of regions like Asia," said Professor Charles Adams at the Lee Kuan Yew School of Public Policy in Singapore.

"My guess is that the feeling in Asia is there has to be quite a significant rejuggling of quota shares," said Adams, who worked at the IMF for 25 years.

Many Asian nations remain wary of the IMF because of the harsh policy medicine handed out to cure the ills of the 1997 financial crisis.

Malaysia pointedly ignored the IMF and fixed its currency to the dollar to protect it from speculators during the Asian financial crisis and its economy fared much better than most of its neighbours in the painful recovery.

Asian nations have now built up large foreign currency reserves to protect against possible future crises while pressing ahead with regional initiatives like a currency swap arrangement launched in 2000 in Chiang Mai.

Wary of the IMF, the borrowing in the region from the IMF has declined since a peak of 17.8 billion dollars in 1997 to just 300 million dollars last year.

The IMF is also seeking to enhance its role in financial surveillance by shifting from a focus on individual countries to multilateral consultations, which could include a role trying to help tackle global economic imbalances -- summed up in the massive US current account deficit and China's yuan.

"This is an issue that is probably being very closely watched in this part of the world. With all of the attention focused on China it's obviously a sensitive issue," said a source close to the Fund.

The United States, which has a large 17.08 percent IMF quota, has voiced support for change but European nations, including Germany, seem more hesitant.

Japan, which currently has a relatively large 6.13 percent share of IMF voting rights, has been one of the most vocal proponents of reform.

"The IMF quotas should reflect the economic reality of the day," said a Japanese finance ministry official, who declined to be named.

"Such reforms would certainly result in a decrease in Japan's share but that's the responsibility we have to bear as an industrialized country," the official added.

In Seoul, a finance and economy ministry official said South Korea felt it had been "underestimated" in the IMF, adding: "South Korea will use its increased say for the IMF's development."

Change is also in the air at the Group of Seven/Eight summits, which have been inviting China and India to their meetings as guests. G7 finance ministers are scheduled to meet on September 16 in Singapore.

"I think the G7 has to be fundamentally changed to include countries such as China, India and Russia, and some emerging countries, because their influence is already very big," said Professor Sakakibara.

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