By raising the voting shares of four previously under-represented members,
including China, the International Monetary Fund (IMF) on Monday officially
launched an overhaul that, hopefully, will leave the 61-year-old institution
more effective as a result.
The IMF's reform plan won support from an overwhelming majority of member
countries, which bodes well for the prospects of the reform.
In the next stage, the reform will involve adjusting a bigger range of voting
rights in favour of developing countries and an attempt to install a new
operating mechanism.
Reform is known to be an extremely difficult business at any international
organization. So for those who are concerned with the future of global economic
relations, this broad agreement among IMF members can serve as a small comfort,
especially after the debacle at the World Trade Organization over the Doha
Round.
Ultimately, the goal of IMF reform is for it to better perform its role as
the key guardian of global financial stability.
The IMF's work in providing emergency funding assistance and policy
consultation in past decades deserves recognition.
But many of the remedies it imposed on crisis-hit countries were far from
being effective. Some of the IMF's relief packages were even interpreted as
tools to intervene in member countries' domestic affairs and have led to
resentment and wariness towards the organization.
Judging by the global economic status quo, the likelihood of financial
failures is not likely to lessen, leaving the IMF with an even more challenging
task.
Instead of working as a fire fighter after crises flare up, the IMF should
strengthen its work in surveillance and policy co-ordination among its members
to forestall economic catastrophes.
But this will depend on the IMF's ability to enhance its credibility. The
redistribution of its voting rights will be the first substantial step in
achieving that end.
For more than half a century, the IMF's voting structure reflected the global
economic landscape at the time of its inception. Obviously, this is unfair to
emerging economies, which have disproportionately low weight in the IMF's
decision-making.
The current reform plan should also include the establishment of a mechanism
for future adjustments, since the economic map will not remain static in the
future.
Tough negotiations will be unavoidable in the next stage of the plan's
implementation because it will involve what many see as a realignment of
interests.
For those who mastermind the reform, wisdom and tactics are needed to present
a well-accepted, calculating method.
But the reform's success will hinge on member states' determination to grasp
this opportunity to reinvent the IMF.
(China Daily 09/20/2006 page4)