IMF Redefining Its Relationship with Asia

Better representation key to continued IMF legitimacy

IMF finding new ways to work with Asia

Listening to Asia's needs

Tensions in IMF-Asia relations emerged during the Asian financial crisis a decade ago, and the widening gap between the region’s economic size and its representation in the institution has been another strain.

The IMF is committed at the highest levels—reflected in recent remarks by IMF Managing Director Dominique Strauss-Kahn—“to rebuild, to renew the [IMF’s] relationship with the region”.

A high-level conference—co-hosted by the IMF and government of Korea—next week in Daejeon, Korea will address this issue head on, with conference sessions dedicated to Asia and the IMF, and Growing Asian Integration and Global Governance. The conference is part of a more concerted effort by the Fund “to take our engagement with Asia to the next level,” said IMF Asia and Pacific Department Director Anoop Singh.

Improving Asia’s representation

Referring to the need to overhaul the IMF’s governance structures, Strauss-Kahn has said that “increased effectiveness means increased legitimacy, and governance reforms are the key to unlocking legitimacy.”

Criticisms leveled at Fund governance have focused on the dominant role of industrialized countries, and the failure to keep pace with the rising economic power of emerging market economies, including many in Asia.

Asia is leading the global recovery and IMF estimates suggest it will become the largest economic region over the next two decades. Asia’s “leadership role in the current global crisis demonstrates the many improvements in the economic framework that have been put in place—and sustained—over the last decade,” said Singh. Extensive financial sector reforms in particular have helped the region withstand pressures from the global crisis.

Asia currently holds around 20 percent of the IMF’s voting power, but that figure is set to increase.

Building on quota and voice reforms agreed in April 2008, the IMF is working toward more sweeping reforms. “We are now committed to a quota shift of at least 5 percent, to give a greater voice to dynamic emerging markets and developing countries. This must be done by the January 2011 deadline, which in reality means by the G-20 summit in Seoul in November,” Strauss-Kahn said. He added that other aspects of IMF governance would also be addressed, including staff diversity and the management selection process.

Constructive engagement with Asia

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