SINGAPORE: There must be stronger representation of less developed countries in the International Monetary Fund’s power structure, Second Finance Minister Tan Sri Nor Mohamed Yakcop said.
“The power structure, as decided in the past, has always been tilted towards developed countries,” he said.
He was speaking to The Star after attending the main session of the IMF/World Bank Group 2006 meetings yesterday.
Nor Mohamed is here as a representative of the IMF’s SEA Group, which consists of Asean countries, Tonga, Nepal and Fiji.
He said the group also called for more transparency in the selection process of countries to have stronger voting power in the IMF.
He added that while the IMF had proposed a two-step reform to address the issue, it had not been clear in outlining the criteria for this selection.
The priority at these annual meetings is to tackle IMF’s power structure, which includes the issue of country representation. The target is to complete the reforms by the 2008 meetings.
Under the first step, the IMF aims to boost the voting shares of China, South Korea, Mexico and Turkey to reflect their increased clout by increasing their quotas, or financial commitments, to the IMF.
Its quota determines the weight of each country’s vote. The US vote counts for about 17%, while the SEA Group has a vote of 3.17%.
Nor Mohamed said the reform had failed to address the under-representation of many countries including Malaysia.
“We also do not have a clear assurance that, in the second step of the reform, developing countries will have a higher quota,” he said.
The minister said the selection criteria was not clear as it appeared that only each country’s GDP was taken into account.
“There are other factors such as openness of the economy, variability and reserves, that are important to determine a country’s eligibility of having their voting increased in the IMF,” he said, adding that the SEA Group also expressed concern on IMF’s surveillance system on exchange rates.
He said the countries were not agreeable to the present method, which involved specific recommendations on a particular country’s exchange rate.
“The system should be reviewed as it is based on economic assumptions,” he said.
Did you find this article insightful?