...because that's where the money is. Above is Korean PM Lee Myung-Bak welcoming IMF Managing Director Dominique Strauss-Kahn to his country. Now here's another story most of the whitebread commentariat has missed, but that's unsurprising. However, they perhaps ought to pay more attention for it may be Asia that rescues their behinds from the fiscal morass they're digging themselves in. It's only natural that with most of the Western world in sorry fiscal shape, the IMF is calling on Asia to play a larger role in global economic governance. In plain English, that's called "rattling the begging bowl in Asia."Not so long ago if you remember, Korea was forced to resort to IMF emergency lending during the Asian financial crisis. Although it has since gone soft on hardcore Washington Consensus-style prescriptions of liberalization, privatization, and deregulation, the IMF did indeed prescribe the lot for South Korea. Not that it was necessarily popular or successful with even current IMF leadership spurning high neoliberal ideology, but there are good reasons a somewhat reinvented IMF wants to make amends. (Remember, its managing director has always been from old Europe, while its first deputy managing director from the US.)
In the meantime, how the world has changed! Now flush with reserves--more than a quarter of a trillion dollars--South Korea is not only the current chair of the G20 but an economic force to be reckoned with. Instead of being dictated terms to by the Washington-based institution, the IMF crew has set up shop in Korea to try and woo the favour of South Korea and other Asian nations. Yes, it's quite apologetic now for the misery it inflicted. From the IMF website comes news of the recently concluded conference in Daejon, South Korea:
Wrapping up a two-day conference on Asia’s future, IMF Managing Director Dominique Strauss-Kahn announced a set of commitments, labeled the “Daejeon Deliverables,” that he said will significantly strengthen the Asia-IMF partnership in a year that South Korea chairs the Group of Twenty (G-20).And here are the new IMF pledges of support:
Acknowledging that the IMF’s relationship with Asia had been damaged during the 1997–98 Asian crisis, Strauss-Kahn said the IMF had changed and learned important lessons that had helped the 187-member global institution tackle the recent global economic crisis better. “This conference has been an opportunity for the IMF to begin the process of stepping up its engagement with Asia,” said Il SaKong, chairman of Korea’s G-20 summit presidential committee. More than 1,000 regional economists, bankers, analysts, and financial media crowded into the Korean city of Daejeon for the conference, titled “Asia 21: Leading the Way Forward,” hosted by the Korean government and the IMF.
At a concluding press conference, Strauss-Kahn made three key commitments to Asia, which is leading the world out of the recession caused by the global financial crisis, but which now faces challenges from large capital inflows that may trigger economic overheating.The cynic in me thinks all this (revisionist) lovey-dovey stuff has something to do with the IMF attempting to fundraise 250 billion euros out of the 750 billion euro bailout package for ailing EU member states. As yet, there have been no concrete details provided of where these proposed IMF monies will come from.
• The IMF will work to make its analysis more useful and available to Asian members. This includes strengthening the IMF’s early warning systems, sharpening its focus on cross-border spillovers, and increasing work on cross-cutting themes, including macrofinancial linkages. It committed to a more even-handed approach to its surveillance of economies around the world.
• The IMF will work to strengthen the global financial safety net. To do so, the Fund will work closely with Asia—through Korea’s leadership on this issue in the G-20. The IMF is examining several options to strengthen its tools to help prevent crises and mitigate systemic shocks, including more tailored crisis prevention facilities and multi-country approaches.
• The IMF will support the further strengthening of Asia’s role and voice in the global economy. This can be done, first of all, by building on the package of 2008 IMF reforms which boosted Asia’s voting power in the Fund. The IMF is working on a second stage to be completed by the G-20 summit in Seoul in November. In addition, the Fund will strengthen its collaboration with regional organizations in Asia—and, as a first step, Asia will be represented at a major meeting on this issue that the IMF is organizing in October 2010.
Strauss-Kahn said he wanted to make Asia feel at home at the IMF and become more involved in global solutions. For Asia’s low-income countries, Strauss-Kahn noted they have the potential to become the next generation of emerging markets. Delegates also focused on continued inequality in Asia, despite the growing prosperity, with the IMF Managing Director talking about inclusive growth.
There's even a new factsheet where the IMF issues more apologies for its handling of the Asian financial crisis along with talk about less draconian conditionalities and more social prioritization. Here's the key text:
The IMF learned important lessons from the Asian crisis. In particular, the Fund recognizes that while tough measures are needed to address deep economic problems, the conditions accompanying its programs need to be more focused on the problems at hand, and it needs to be more conscious of the social impact of those programs. The IMF has sought to apply this and other lessons to its more recent lending programs. The example of Asia’s resilience during the current crisis and the examples of good practice from the region have helped inform IMF advice to other member countries.Ultimately, the IMF may have more to gain from Asia than the other way round. With the Chiang Mai Initiative Multilateralization (CMIM) in full swing and quite possibly forming the basis of a regional IMF, Asia has no real problems going it alone. Yet somewhat obviously, the IMF welcomes more funding from Asia--even to fight fires in the developed world. Neoliberalism, we hardly knew ye.
