  Korean Finance Minister Yoon Jeung-Hyun (l) sits alongside IMF chief Dominique Strauss-Kahn at conclusion of Asia 21 Conference | IMF photo
By R Kim
IDN-InDepth NewsAnalysis
SEOUL (IDN) – Asia and the International Monetary Fund are set to build strong ties in run-up to the summit meeting of the Group of Twenty (G20) major industrial nations and emerging economies in November 2010 in Seoul. The Fund's relationship with Asia had suffered during the 1997-98 Asian crisis.
"Most of the old devils have been killed and I think that lays the foundations for doing something new, working together," IMF managing director Dominique Strauss-Kahn said at a two-day roundtable discussion in the Korean city of Daejon.
Strauss-Kahn wants to "make Asia feel at home at the IMF and become more involved in global solutions". Keen to mend relations, Strauss-Kahn assured that the IMF has changed and learned important lessons that had helped the 187-member global institution tackle the recent global economic crisis better. He was wrapping up a two-day conference in South Korea on Asia's future on July 13, 2010.
Strauss-Kahn announced a set of commitments, labeled the 'Daejeon Deliverables', that he said will significantly strengthen the Asia-IMF partnership in a year that South Korea chairs the G20.
"This conference has been an opportunity for the IMF to begin the process of stepping up its engagement with Asia," said Il SaKong, chairman of South Korea's G20 summit presidential committee.
More than 1,000 regional economists, bankers, analysts, and financial media attended the conference in the Korean city of Daejeon, titled 'Asia 21: Leading the Way Forward' hosted by the Korean government and the IMF.
"The conference has provided a useful opportunity to reflect on Asia's success over the past decade, but also to have a frank exchange of views on the challenges for the region going forward," Il SaKong stated.
At a closing press conference, Strauss-Kahn made three key commitments to Asia, which is leading the world out of the recession caused by the global financial crisis, but which now faces challenges from large capital inflows that experts fear may trigger economic overheating.
The IMF will work to make its analysis more useful and available to Asian members. This includes strengthening the IMF's early warning systems, sharpening its focus on cross-border spillovers, and increasing work on cross-cutting themes, including macro-financial linkages. It committed to a more even-handed approach to its surveillance of economies around the world.
The IMF will work to strengthen the global financial safety net. To do so, the Fund will work closely with Asia -- through Korea's leadership on this issue in the G20. The IMF is examining several options to strengthen its tools to help prevent crises and mitigate systemic shocks, including more tailored crisis prevention facilities and multi-country approaches.
The IMF will support the further strengthening of Asia's role and voice in the global economy. According to the IMF, this can be done, first of all, by building on the package of 2008 IMF reforms which boosted Asia's voting power in the Fund. The IMF is working on a second stage to be completed by the G20 summit in Seoul in November.
In addition, the Fund will strengthen its collaboration with regional organizations in Asia -- and, as a first step, Asia will be represented at a major meeting on this issue that the IMF is organizing in October 2010.
For Asia's low-income countries, Strauss-Kahn noted they have the potential to become the next generation of emerging markets. Delegates also focused on continued inequality in Asia, despite the growing prosperity, with the IMF Managing Director talking about inclusive growth.
ASIA'S PIVOTAL ROLE
Delegates at the conference noted that Asia has shown remarkable resilience during the global financial crisis and has emerged as an economic powerhouse that is leading the global recovery. But with parts of the world still seeing sub-par growth, Asia should shift away from exports toward domestic demand as it continues to raise living standards.
"For the Asian region to play a pivotal role in the global economy, it is necessary to enhance domestic demand through continued structural reform, and strengthen international cooperation, as well as regional cooperation, to resolve global imbalances and establish a global financial safety net," said Finance Minister Yoon Jeung-Hyun.
Yoon told reporters that conference that Korea was working with the IMF to develop an effective international financial safety net following the global crisis that would be discussed at the Seoul summit. Plans for the safety net include proposals to broaden contingent financing that countries could draw on in case of trouble, and a global stabilization mechanism that could create swap arrangements between regional mechanisms.
"I was impressed by Mr. Strauss-Kahn saying that the IMF would strongly support regional financial safety nets like the Chiang Mai Mechanism," said Haruhiko Koroda, President of the Asia Development Bank. "All in all, I think the IMF has really changed and I think it is now really on the side of the Asian countries to respond to these significant changes."
"We have the opportunity to develop a financial safety net which involves both regional coinsurance and the IMF as global insurer," said Singapore Finance Minister Tharman Shanmugaratnam.
"We are better off with both regional surveillance and IMF surveillance rather than one or the other. It will also enable us, when crises hit, to respond with the speed and magnitude that modern day crises need. The lessons of the past two years is about interconnectedness, no matter where a crisis starts … contagion is fast and furious."
Strauss-Kahn said he was pleased at the recognition of the changes that had been undertaken at the IMF. The Fund had played a large role in helping to resolve the recent global crisis, it had become more flexible, especially on the conditions attached to loans, and had put new emphasis on social goals and helping the most vulnerable during a crisis. (IDN-InDepthNews/16.07.2010)
Copyright © 2010 IDN-InDepthNews | Analysis That Matters
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