Asia seeks more say in IMF, WB

Asia seeks more say in IMF, WB

Lesley Wroughton, Reuters/Washington

Fast-growing Asian nations on Saturday (Sunday in Jakarta)
demanded more power in global financial institutions, but whether
their calls would be the catalyst for real change was unclear
despite backing from major powers.

The debate over control in the International Monetary Fund
(IMF) and World Bank, weighted in favor of leading industrial
powers, took on new momentum as U.S. Treasury Secretary John Snow
acknowledged the structure of the IMF should reflect the current
global economic reality.

Snow and Canadian Finance Minister Ralph Goodale said an
increase in quotas, contributions which in turn determine voting
rights, was unnecessary because the IMF was already flush with
funds, with borrowers repaying debts and overall IMF lending down
amid a healthy pace of global growth.

Both ministers argued it would be better to rebalance the
quota system.

"In our view, members need to develop a plan for voluntary
transfer of quota shares from some of the most overweight to the
most underweight large emerging market countries, while
protecting the shares of the poorest countries," Snow said.

IMF member quotas are based broadly on a country's relative
weight in the world economy and generate most of the IMF's
resources. The weight of the quota determines a member's
financial contribution to the IMF and its voting power.

Any changes in quotas requires 85 percent approval.

European nations were mostly silent on Saturday on the issue,
a source of growing tension in the IMF that dominated speeches on
the first day of the semi-annual meetings of the World Bank and
IMF.

The subject got only a fleeting mention in the end-of-day
communique by the IMF's policy-setting committee.

A Group of Eight (G-8) official at the meeting said there was
lengthy discussion about quotas, but resistance from European
countries kept the language in the communique on quotas vague.

Analysts and IMF officials have long argued that European
countries should merge into a single chair that would raise
Europe's voting power and make way for developing nations.

"This is a complex issue," Germany's Deputy Finance Minister
Caio Koch-Weser told reporters in Washington. "This can't be a
question of Europe on the one side and Asia on the other," he
said, "The picture is much more complicated."

Koch-Weser said the quota adjustments would be difficult and
require lengthy discussion, adding, "It should also not be
confused with ... how we coordinate policy in Europe."

The IMF's major shareholders -- the United States and major
European powers -- have long controlled decisions in the fund and
determined who leads it. Changes to the quota allocations would
mean they would have less sway.

A senior official with the Group of 24 developing countries
said Asia was frustrated with the fact that representation in the
institutions did not adequately reflect their expanding share of
the global economy.

"The process is just starting but clearly no one is prepared
to make the first move," said the official. "The Asian economies
are not going to wait around for very much longer and will start
moving away from the Fund."

IMF officials said Asian countries, including Thailand and
Malaysia, were pushing for some signal from richer nations of
change by the IMF fall meetings in Singapore late next year.

Han Duck-soo, South Korea's minister of finance and economy,
said a fix for the problem was "long overdue."

"When the fund fails to be fair in its quotas distribution, it
also loses its credibility and legitimacy," Han said. "For the
fund to retain relevance, it must urgently address the quota
representation issue."

Thailand's Finance Minister Thanong Bidaya said if the IMF
wanted to retain its credibility there needed to be change.

"The board of governors and management should strongly press
for these changes; otherwise, how could these institutions preach
to member countries on governance issues," he said.

In unusually candid remarks, Japan's finance minister said the
current distribution of IMF quotas "represents another form of
unsustainable global imbalance."