IMF seeks stronger mandate for capital movements<\/p>\n
By Vincent Lingga<\/p>\n
HONG KONG (JP): While many developing countries fear the great
\npains incurred by the financial crisis in Southeast Asia since
\nJuly, the International Monetary Fund is pushing hard for a
\nstronger mandate to promote capital movements in the world.<\/p>\n
The IMF's top policy making body, known as the Interim
\nCommittee, is fine-tuning specific recommendations on key
\nelements of an amendment to the IMF articles of agreement which
\nwill grant it jurisdiction over global flows of private capital.<\/p>\n
"That is one of the agendas being discussed by the Interim
\nCommittee," IMF Managing Director Michel Camdessus told a press
\nconference on the upcoming annual meetings of the IMF and World
\nBank starting here Monday.<\/p>\n
IMF, Camdessus said, can help countries promote an orderly
\nliberalization of capital flows to prevent chaotic
\nliberalization.<\/p>\n
Other topics to be discussed at the meetings include exchange
\nrate arrangements, Asian capital markets, globalization of
\nthe financial market, banking and financial reform, second
\ngeneration reforms, IMF financial quota arrangements and the
\nSpecial Drawing Rights (IMF reserve assets).<\/p>\n
The meetings will convene amid the currency turmoil affecting
\nseveral Southeast Asian countries, notably Thailand, the
\nPhilippines, Malaysia and Indonesia.<\/p>\n
"In this increasingly integrated global economy and financial
\nmarket, you no longer have the right to make mistakes," Camdessus
\nsaid, referring to Southeast Asia's currency crises.<\/p>\n
Camdessus said the IMF's 181 members have in principle agreed
\non the need to liberalize capital accounts with the understanding
\nthat there will be flexible transition arrangements for
\ncountries.<\/p>\n
IMF and the World Bank believe private capital flows play an
\nincreasingly vital role in boosting economic growth in the
\nemerging markets, especially in view of the declining official
\ncapital flows such as government aid.<\/p>\n
Last year, for example, private capital flows to developing
\ncountries quadrupled to US$255 billion from $57 billion in 1990
\nand these funds have contributed greatly to spurting economic
\ngrowth in the leading emerging markets, according to IMF.<\/p>\n
IMF deputy managing director Shigemitsu Sugisaki agreed that
\nthe currency turbulence in Southeast Asia should not change the
\nfavorable judgment that private capital flows have greatly helped
\nemerging markets achieve high growth and increase living
\nstandards.<\/p>\n
"However, recent developments in this part of the world have
\ntaught us that integrated financial markets can involve large
\ncosts to countries which pursued policy inconsistencies and
\nstructural weaknesses," Sugisaki said.<\/p>\n
Sugisaki said IMF did not want to push for premature capital
\naccount liberalization because this should be appropriately
\nsequenced with economic stabilization measures and structural
\nreforms to strengthen the financial system.<\/p>\n
The World Bank has also stressed the vital importance of a
\nsound financial system in the current globalization era.<\/p>\n
"The penalties of maintaining a fragile, underdeveloped
\nfinancial system are severe," said World Bank vice president for
\nthe East Asia Region Jean-Michel Severino.<\/p>\n
The need for a sound and strong financial system is one of the
\nstrongest messages in the latest IMF and World Bank reports
\nconcerning the financial turbulence in Southeast Asia.<\/p>\n
The reports warn that a country with a relatively primitive
\nfinancial system which wants to plug into the high-voltage global
\ncapital market to raise needed investment is surely in for a
\nnasty shock.<\/p>\n
The currency crisis has been so important that financial
\nleaders from around the world will join IMF and World Bank
\nexecutives in a seminar here Sunday to discuss banking and
\nfinancial reforms.<\/p>\n
The seminar will discuss reports by the Basle Committee of the
\nBank for International Settlement on new core principles of
\nbanking supervision and by the Group of 10 developed countries on
\nfinancial stability in emerging markets.<\/p>",
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