IMF's Camdessus leaves controversial legacy in Asia

IMF's Camdessus leaves controversial legacy in Asia

By James T. Areddy

HONG KONG (Dow Jones): Asians will remember Michel Camdessus mostly for his arms -- specifically the way he folded them while watching the presidents of South Korea and Indonesia succumb to financial crisis two years ago and sign requests for International Monetary Fund (IMF) bailouts.

A senior Asian Development Bank (ADB) official speaking shortly after those episodes said Camdessus's rigid stance and wry smile -- "like a Cheshire cat" -- erased all hope that the international community could scotch the crisis quickly.

By not realizing that Indonesians would bitterly recall Dutch colonialism nor that South Koreans would feel humiliated in defeat, the French-born Camdessus, who announced his intention to resign as IMF managing director on Tuesday, demonstrated naivete about Asia that would impale workout efforts needed to support the economies, the ADB official said.

Asia's restructuring has certainly been slow-going. And the IMF's initial formula for snuffing out crisis in Asia will cloud Camdessus's reputation long after he resigns next February from the post he has occupied for over 12 years at the Washington- based fund.

Nevertheless, analysts said Wednesday that after some costly initial missteps, the IMF learned how to alter its strategy in Asia so as to foster a rebound in the "crisis" economies. Every one of these crisis economies, South Korea, Thailand, the Philippines and possibly even Indonesia should return to positive economic growth this year after two years of weakness.

Indeed, the faster-than-expected economic takeoff in Asia this year has cooled the criticism that was initially heaped on the hard-nosed approach of Camdessus in Thailand, South Korea and Indonesia.

"The picture of him with Soeharto will be remembered by a lot of people," said Soedradjad Djiwandono, Indonesia's central bank governor at the time of the January 1998 episode and now a university professor.

"I know he didn't mean to look down on our president at that time, but for the Indonesian point of view, it looked like he did it (intentionally)," Soedradjad said in an interview with Dow Jones Newswires on Wednesday.

Soedradjad ended up being forced out of his job in February 1998 by former Indonesian President Soeharto because he sided with the IMF in opposing the president's plan to introduce a currency board. Two months later, Soeharto himself was ousted. Soedradjad said Camdessus's pressure was only part of the reason, since tension against Soeharto had been building for years. "It's a combination," he added.

Of the IMF, he said, "sometimes they get too much blame and sometimes they get too much credit. A lot of learning has been going on both sides."

The initial problem may not have been so much with Camdessus himself, but with a fundamental misunderstandings between the IMF and Asian governments, according to Bank of Thailand Governor Chatu Mongol Sonakul.

"He came here when it was necessary. He did try to warn us" about potential vulnerabilities in the financial system, said Chatu Mongol on Wednesday. "He was as effective as he could be."

"Without the IMF, we were going to be in real trouble," said another Thai, Phisit Pakkasem, a former government economics policy maker and now chairman of bank firm Tisco Group.

But "the way he handled things was like a typical international technocrat" who had no real understanding of the real-life situation in the Asian countries, Phisit told Dow Jones. "I think he's been there too long."

Several others said the U.S. domination of the IMF was a key flaw of the IMF's approach in Asia and may explain why Camdessus is leaving the organization two years before his contract expires.

Charles Goodhart, an adviser to the Bank of England and professor at London School of Economics, said Wednesday that the IMF may have been "carried away somewhat by its free-market ideology" but that overall it faced no easy decisions in containing the regional financial crisis.

Although he declined to talk about Camdessus specifically, Goodhart said the IMF suffered from a perception that it was acting "as a cat's paw for U.S. interests. If it hadn't been, I think it's advice would have been more easily accepted."

Phisit said he believes that Camdessus -- a self-described "French socialist" -- ultimately came into conflict with Washington over huge financial losses for the fund in its Russian program. Therefore, Camdessus's resignation is "dignified," he added.

Meanwhile, as a result of disappointment with the persistent weakness in economies early in the Asian financial crisis despite the whirlwind tours by Camdessus and First Managing Director Stanley Fischer, the IMF stationed the head of its Asian desk, Hubert Neiss, on virtually permanent duty in the region in 1998. But Neiss, who spends a lot of his time in Indonesia where the problems remain most acute, will retire in January and will be succeeded by one of his deputies, Yusuke Horiguchi.

The Asian officials said they hope there will be more recognition of Asia when a new managing director is chosen even though they said they understand the job traditionally goes to a European.

But don't anticipate big changes in the IMF management structure as a result of Camdessus's departure and the lingering criticism the institution, according to Kunio Saito, head of the IMF's Tokyo office.

"These issues are usually discussed at the time of a capital increase, and we just had a capital increase," he said.