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TWN Info Service on Finance and Development  (Jul07/08)

26 July 2007


DEVELOPING NATIONS SIDELINED FOR IMF TOP JOB

A coalition of developing countries at the International Monetary Fund (IMF) issued a tacit warning Monday that the highly political process of selecting the next IMF chief may be intimidating non-European countries from putting forth candidates, and further discrediting the institution.

The statement by the Group of 24 (G24), which operates as an association of minority shareholders in the IMF and the World Bank and which has previously complained about the lack of democracy at the IMF, was also seen as one of the clearest signals of distrust in how the IMF is being run.

It came as sources at the IMF tell IPS that highly qualified candidates from developing nations are hesitating to apply for the managing director position because they see the process as skewed in favour of the European candidate, Dominique Strauss-Kahn. They say that the near unanimous agreement among European finance ministers to back Strauss-Kahn makes the successful outcome of his nomination a done deal.

Below is a report on the selection process by Emad Mekay of Inter-Press Services (IPS). It was published in SUNS #6300 Wednesday 25 July 2007.

With best wishes
Martin Khor
TWN

Developing Nations Sidelined For IMF Top Job

By Emad Mekay (IPS)

A coalition of developing countries at the International Monetary Fund (IMF) issued a tacit warning Monday that the highly political process of selecting the next IMF chief may be intimidating non-European countries from putting forth candidates, and further discrediting the institution.

The statement by the Group of 24 (G24), which operates as an association of minority shareholders in the IMF and the World Bank and which has previously complained about the lack of democracy at the IMF, was also seen as one of the clearest signals of distrust in how the IMF is being run.

It came as sources at the IMF tell IPS that highly qualified candidates from developing nations are hesitating to apply for the managing director position because they see the process as skewed in favour of the European candidate, Dominique Strauss-Kahn.

They say that the near unanimous agreement among European finance ministers to back Strauss-Kahn makes the successful outcome of his nomination a done deal.

A source inside the Fund, who wished to remain anonymous, says that South African Finance Minister Trevor Manuel is a favourite of some countries, even though he has not publicly expressed interest. They have confided that they do not want to put his name forward before receiving guarantees that transparency and democracy pledges by rich nations will be honoured.

Sources say that Manuel would be a highly competitive candidate given his long-term tenure as chairman of the Joint Development Committee, which coordinates activities of the IMF and the World Bank, and his credibility in dealing with many of the issues facing poor nations.

The 24-member Board of Executive Directors that helps run the day-to-day affairs of the Washington-based IMF recently asserted that the selection of the next managing director would be transparent and democratic, and that all 185 members of the Fund were free to nominate candidates.

The Board vowed that this time around, it would be a merit-based process with clear criteria, no geographic preference, and the objective of selecting the managing director by consensus rather than by a simple majority of votes.

But two weeks ago, the European nations, who together have the largest bloc of votes on the board, quickly rallied behind the French candidate, former finance minister Dominique Strauss-Kahn, effectively declaring that they will not even consider others.

Strauss-Kahn, 58, is the only candidate so far for the Washington-based post. He was finance minister from 1997 to 1999. In that role, Strauss-Kahn oversaw the much debated privatisation of France Telecom and the creation of Europe’s single currency, the Euro.

The immediate and unanimous support of the Europeans for his candidacy appears to have prompted the veiled rebuke from the G24 on Monday.

“Non-European candidates will only be prepared to come forward if there is confidence that the spirit of the aforementioned Executive Board commitment will be respected by all members,” the G24 said in a statement. “We therefore commit ourselves fully to these principles and call on advanced economies to do the same.”

While the group worded their statement in diplomatic terms, they made it clear that they saw no strong support for the democratic principles initially propagated by the rich countries and the IMF’s board.

“A strong commitment to an open, transparent and multilateral selection process will greatly enhance the legitimacy and effectiveness of the next Managing Director and of the institution at a time when the IMF is confronted with fundamental challenges to its relevance and viability,” said the statement.

Observers say that the statement from the G24 is not just a call for reform. It is evidence of how much developing nations have come to distrust the IMF.

“It (the statement) has big value in that it shows that [the] G24 do not really trust the opening of the process as being presented by the major countries in the IMF,” said Aldo Caliari of the Centre of Concern in Washington.

“It’s an important indicator of a real sense of distrust about the likelihood that someone who is not a European will be taken seriously into consideration,” he said.

The G24 countries are Algeria, Egypt, Iran, Philippines, Argentina, Ethiopia, Lebanon, South Africa, Brazil, Gabon, Mexico, Sri Lanka, Colombia, Ghana, Nigeria, Syria, Cote D’Ivoire, Guatemala, Pakistan, Trinidad and Tobago, Democratic Republic of Congo, India, Peru and Venezuela.

The debate about the selection process is hardly a new one.

Under an unwritten agreement with the United States, European countries choose the head of the IMF in return for Washington naming the president of the Fund’s sister institution, the World Bank. The G24 has consistently called for a change of this practice.

The IMF is set to decide on a new candidate to replace Rodrigo de Rato, the current managing director who announced his plans to quit the job come October.

Civil society groups, think tanks, some economists and developing nations have long urged a follow-up of recommendations made in April 2001 by a joint World Bank-IMF working group on how to choose the managing director. The recommendations called for opening up the process.

But although the two institutions’ executive boards adopted the recommendations as guidance for the future, they were never implemented.

 


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