SINGAPORE, 14 September 2006 — The IMF-World Bank Meetings opened yesterday in Singapore with a focus on the key issues that will affect the world economy over the next few years.
While the formal meetings do not begin until Sept. 19, many of the key issues will be discussed and the issue that is expected to dominate discussions is that of voting rights and quotas at the IMF.
For the delegates from the developing world, this is a particularly significant issue as the quota or shareholding determines the voting right of the country in the 184-member organization and thus the power of the nation to shape the policy of the IMF particularly in the area of prevention and crisis management. Increased voting rights also come hand in hand with the increased obligations to the IMF.
The review of the voting rights was raised by IMF managing director, Rodrigo de Rato at a speech in Spruce Meadows, Calgary, Canada on Sept. 8. De Rato noted that, “Over the last thirty years, new economic powers have arisen,” and because of this, the Fund would have to, “Adapt both its works and governing structure to reflect the new realities.”
The United States, followed by the European Union and Japan dominate the shareholdings and the voting rights of the IMF. As the largest shareholder, the US dominates the policymaking of the IMF, while the IMF managing director is by tradition a European (To balance things, the presidency of the World Bank traditionally goes to an American.) While this reflects the global economic pecking order, many of the IMF’s critics have accused it as being a tool of American hegemony, and during instances like the 1997 Asian financial crisis, the IMF was accused of imposing policies created by experts from the developed world with little knowledge of the ground situation.
As such, the calls for reviewing the voting rights in the IMF have been growing louder, particularly from developing nations. De Rato says, “There is a clear need for a rebalancing of quotas to reflect changed economic realities, especially the increased economic weight of major emerging markets,” and during the meetings in Singapore, De Rato plans to, ask members to approve an increase in the quotas of four under-represented countries: China, Korea, Mexico, and Turkey, and to endorse a broader reform of the quota process over the next two years. “This would involve a new formula designed to capture member countries’ weight in the global economy in a simpler and more transparent manner,” he said.
De Rato’s ideas have been generally well received by the delegates from the developing world.
“Asian economies and countries would be very conscious of the fact that in 1997 the economies over here were affected by the Asian financial crisis, and some blame it on the IMF,” said Singapore’s Senior Minister Goh Chok Tong. “Surely they want to have a bigger voice in the IMF to ensure that should such an event recur, then they would have a voice in saying how their own economy should be managed under such a situation. Countries like China have become more important in the global economy. Asian countries contribute nearly a quarter of world’s GDP but only have 10 percent of voting rights. Surely they should be given more voice.” However, while the idea of reforming the IMF’s voting system has been generally well received, not all nations have approved of the IMF’s methods. India, which is in favor of increasing the voting rights of developing nations, is opposed to the IMF’s two-tier system of reforms. Indian IMF representative Bhawani Mishra says that India wants to “change the formula” and making transparent and simple.
