'Globalizing' the International Monetary Fund<\/p>\n
By John Dodsworth<\/p>\n
JAKARTA (JP): Ministers Rizal Ramli and Prijadi Praptosuhardjo
\nalong with acting Bank Indonesia Governor Anwar Nasution are
\ntraveling this week to Prague to represent Indonesia at the
\nAnnual Meetings of the International Monetary Fund and World
\nBank.<\/p>\n
The meetings will be an opportunity for the new economic team
\nto discuss the activities of the IMF and the World Bank in
\nIndonesia and to exchange views on economic policy.<\/p>\n
But more than that, it is a chance for Indonesia to make its
\nvoice heard and to join in discussions on the globalization, on
\nthe role of the IMF, and the future of the international
\nfinancial system.<\/p>\n
The word \"globalization\" may not appear on the formal agenda,
\nbut the theme will pervade the meetings. The rapid growth of
\ninternational trade and investment has brought enormous progress
\nto many countries. But capital flows can be volatile, exposing
\ncountries to the risk of financial crisis.<\/p>\n
And with some countries integrating into the global economy
\nmore quickly than others, the gap between rich and poor countries
\nis growing ever larger.<\/p>\n
Horst Koehler, who became Managing Director of the IMF in May,
\nhas expressed his determination to strengthen the voice of
\ndeveloping countries within the institution. Since joining the
\nIMF, he has traveled to Africa, Asia, Eastern Europe and Latin
\nAmerica to listen to views on the IMF's role and how it needs to
\nchange.<\/p>\n
He will now use his first Annual Meetings to outline his
\nvision of the IMF's future, presenting ideas on how to make the
\nIMF more effective in today's rapidly evolving world economy.<\/p>\n
In his travels, which brought him to Indonesia, Koehler learned
\nthat countries generally share his conviction that the IMF should
\nfocus its work more sharply on policies that foster economic
\ngrowth and financial stability -- those relating to the
\ngovernment budget, money and credit, the exchange rate, and
\nfinancial markets.<\/p>\n
Good policies in these areas, implemented with consistency and
\ngood governance, can help all countries, including Indonesia,
\nreap the benefits of globalization. Such policies will also
\nenable countries to be better able to withstand economic shocks,
\nincluding shocks from outside. And such policies will contribute
\nto economic growth and recovery, which is indispensable for
\nreducing poverty.<\/p>\n
The IMF works to promote the health of the economies of each
\nof its member countries and the global economy. Like a good
\ndoctor, it must focus on prevention where possible and cure when
\nnecessary. Prevention means helping countries to become less
\nvulnerable to crises. This calls for a sharper focus in the IMF's
\npolicy dialog with its members on such issues as balance of
\npayments deficits, the exchange rate, and the strength of banks.<\/p>\n
It means a new emphasis on making high-quality economic
\ninformation available to the public regularly and promptly. And
\nit requires stronger relationships to be developed between
\ngovernments and countries' private lenders and investors.<\/p>\n
But crises have not always been prevented. Indeed, the past
\ndecade has seen financial crises strike around the globe,
\nincluding in Mexico, Thailand, Korea, Russia, Brazil, and, of
\ncourse, Indonesia.<\/p>\n
Like contagious diseases, some of these crises have spread
\nrapidly from country to country, attracting labels like \"Asian
\nflu.\" The IMF is continuing to examine how best it can help
\ncountries manage and resolve crises.<\/p>\n
Countries that find themselves in difficulties, such as
\nIndonesia, often do need IMF loans to ease adjustment and support
\nreform. But, as is well known from discussions over Letters of
\nIntent, there are conditions attached to IMF loans to ensure that
\nthe money is put to good use.<\/p>\n
What experience from around the world shows is that economic
\nreforms work best when the country is committed to them. To
\nimprove country \"ownership\" of policy programs, the Fund is
\nlooking at how the conditions attached to lending can be best
\ntailored to individual country circumstances.<\/p>\n
In Indonesia, the new economic team has boldly proclaimed
\ntheir \"ownership\" of the economic program. This is indeed a very
\nwelcome development.<\/p>\n
\"We value the work of the Fund.\" Koehler has heard this
\nrepeatedly from developing country members. The IMF has a role to
\nplay in helping all of its 182 members share in the benefits of
\nglobalization. This includes the poorest and most heavily
\nindebted.<\/p>\n
Under the Initiative for Heavily-Indebted Poor Countries, the
\nIMF has played its part in substantially reducing the debt
\nburdens of 10 countries over the past year, and is aiming for
\nanother 10 by the end of 2000.<\/p>\n
This represents significant progress in reducing debt burdens
\nand freeing resources for poverty reduction. Some have asked why
\ndebt reduction has not proceeded faster, but time is needed to
\nensure that debt relief goes hand in hand with policies-including
\ngood governance-that create the conditions for a better future.<\/p>\n
The IMF is also supporting these policies with concessional
\nloans from its Poverty Reduction and Growth Facility.<\/p>\n
These are crucial issues. Indeed, for Indonesia, the issues of
\nglobalization and engagement with world financial markets are of
\ncritical importance in trying to sustain economic recovery from
\nthe recent crisis.<\/p>\n
Koehler has reminded member countries that the IMF belongs to
\nall its members and that \"all members can present on an equal
\nbasis their ideas [and] their objectives\".<\/p>\n
The Prague meetings provide an opportunity for voices and
\nideas from around the world to be heard as the world's financial
\nleaders prepare the IMF for the new century.<\/p>\n
The writer is Senior Resident Representative of the
\nInternational Monetary Fund.<\/p>",
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