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Asian leaders call for safety net, more representation

By Xiao Xin and Lan Lan (China Daily)
Updated: 2010-09-14 09:08
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TIANJIN - Asian government officials gathered at the Summer Davos meeting now underway in the port city called for establishment of a financial safety net to reduce impacts of any future financial crisis.

They also urged a push in reform of quota distribution in the International Monetary Fund (IMF) and a bigger voice for underrepresented countries, such as those from Africa, in major international organizations.

South Korean officials put forward the idea of an international financial safety net ahead of the November G20 summit in Seoul.

As part of the safety net, South Korea is pushing forward the Global Stabilization Mechanism, a framework to complement other bilateral and regional liquidity support arrangements for countries hit by contagion in a systemic economic crisis.

The country's suggestion was supported by Mari Elka Pangestu, Indonesia's trade minister, who termed it a "second lifeline of defense" during a discussion at the Summer Davos Forum on Monday.

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During the 1997 Asian financial crisis, several economies suffered heavily while solutions offered by major international organizations worsened the situation. The IMF played a very "different" role in that crisis, Pangestu recalled.

Since then, many Asian countries have piled up foreign exchange reserves and started to seek a new global financial mechanism that could better protect them.

Participants at the forum urged more "political push" to accelerate the process of quota reform of international organizations.

"Quota reform serves as the basis for further (global) governance reform," said Cui Tiankai, China's vice-minister of foreign affairs.

In September 2009, major emerging economies such as China, Brazil, Russia and India demanded that 5 percent of the quota held by developed countries in IMF representation be transferred to the developing world.

Developed countries agreed to later transfer the quota, but progress has so far been limited, analysts said.

"Increasing (quota) is easy, but decreasing (quota) is very difficult," said Zhu Min, special adviser to the managing director of the IMF.

Zhu and Cui also said that Africa is underrepresented in international organizations. "We must give them more voice," Cui said.