The high-level economic meeting in Daejeon, hosted by the International Monetary Fund (IMF), concluded Tuesday with a set of conclusions for a renewed relationship between Asian countries and the Bretton Woods nations.
IMF managing director Dominique Strauss-Kahn said the meeting had witnessed frank discussions on lessons learned from the Asian financial crisis and how they had changed the way the institution worked.
“Our discussions have helped in the shaping of a set of deliverable follow-up actions that, I believe, will significantly strengthen the Asia-IMF relationship in the future.”
The follow-ups, Strauss-Kahn said, would translate into three measures. The first is for the IMF to make its analysis more useful and available to Asian members. This, he said, included the strengthening of early warning systems, sharpening the focus on cross-border spillovers and increasing the work on cross-cutting themes, including macro-financial linkages.
“We will strive for an even-handed approach to surveillance, which will enhance the effectiveness of the IMF’s policy advice,” he said in Daejeon, the fifth-largest city in South Korea.
The second measure, probably the hottest issue debated among G20 countries, is the adoption of the so-called global financial safety net as part of IMF facilities. Strauss-Kahn said the mechanism, if approved by member countries, would include more tailored crisis prevention facilities and a multilateral approach.
“Listening to Asia’s voice will help us ensure that its needs will be better reflected in the way the safety net is constructed,” he added.
Strauss-Kahn said the financial safety net proposal would involve setting up currency swap arrangements to rescue countries suffering from a sudden capital outflow. Such an arrangement would avoid forcing countries to build up large foreign reserves to protect themselves against a possible liquidity crisis.
Though some countries opposed the idea of an IMF-led safety net initiative, Korea has been pushing the concept to be included as an agenda item during the G20 Summit in Seoul scheduled for November.
Korean Strategy and Finance Minister Yoon Jeung-hyun said parallel sessions at the Daejeon meeting witnessed a consensus on the need for a global financial safety net and the possible role of the IMF in it.
“I believe these discussions will be of great help in drawing out specific and practical results at the G20 Seoul Summit,” Yoon said. He added that the Korean government would present specific policy directions for development agenda at the summit.
The final follow-up measure to the Daejeon talks, Strauss-Kahn said, was for the IMF to further support Asia’s role and voice in the global economy through, among others, boosting Asia’s voting power within the institution.
He had said a minimum of 5 percent shift of voting rights would go to Asia in addition to the 2.7 percent shift made in 2006.
“The old agreement that says the World Bank president director should come from the US and a managing director at the IMF should come from Europe is obsolete,” he concluded.
