Asia Cynical After IMF/World Bank Meeting (fwd)

[Robert Weissman <rob@essential.org>]

Asia cynical after IMF/World Bank meeting
BANGKOK, Oct 9 (Reuters) - Asia is increasingly cynical about the
International Monetary Fund (IMF) and its traditional prescriptions for
solving economic crises.
This week's annual meetings of the IMF and World Bank appeared on Friday to
have done little to persuade many Asian officials and economists that the
agencies can rescue the region from its worst recession in half a century.
While Western officials at the meetings in Washington, which ended on
Thursday, generally agreed that freeing capital flows and strict monetary
discipline were still essential, many economists from Beijing to Bombay
disagreed.
``The IMF's terms are too harsh,'' said Zhen Bingxi, the head of the World
Economy Division of China's Foreign Ministry think-tank, China Institute of
International Studies.
``The IMF's strong prescription has made many countries suffer from
diarrhoea
from too many wrong medicines ... Many economies do not need austerity but
a
relaxed financial environment,'' he told Reuters.
The whirlwind of economic recession that has swept across Asia since the
devaluation of the Thai baht in July 1997 has challenged much of the
traditional economic wisdom in the region and led some to question the
benefits of globalisation.
Only a minority of Asian economists think the draconian capital and
currency
controls imposed on the Malaysian ringgit by Prime Minister Mahathir
Mohamad
were an ideal response.
But there is widespread sympathy for the conditions that led to them and a
feeling that, under some circumstances, capital controls may be justified
if
markets become too volatile.
Many Asian currencies have lost more than a third of their value in the
past
year at the hands of, mostly Western, foreign exchange dealers, and
investment
in former ``Tiger'' economies has collapsed as the Asian financial crisis
has
deepened.
``The brute fact is that after five days of intense discussion and debate,
we
are still at a loss as to why contagion has continued to spread,'' Indian
Finance Minister Yashwant Sinha said. ``Nor do we seem to have achieved
clear,
agreed and effective measures to contain the crisis.''
One proposal that has emerged consistently in varying forms from Asian
officials in Washington and at home is for greater international
cooperation
to monitor capital markets and provide some sort of early warning system
for
economic crises.
``There should be more sophisticated and efficient mechanisms for
monitoring
short-term capital movements, and in some cases, there should be certain
mechanisms to make a more stable market environment, especially for
developing
countries,'' said Kim Yong-duck, the South Korean finance ministry's deputy
director general for international finance.
He said the meetings could even lead to a consensus about adopting some
form
of controls on volatile capital flows.
``I think this is a good opportunity for all nations to pay more attention
to
the future of the international financial community and the orderly
management
of international financial problems. I hope there might be a good result,''
he
said.
``Last year's crisis in Asian countries confirmed, more or less, an
inappropriate management of short-term capital movements,'' Kim said.
Choedchai Khannabha, a top economist at Thailand's finance ministry,
agreed:
``The IMF must find effective ways to control thousands of global hedge
funds
which have (caused) havoc in the financial world. It cannot continue
ignoring
this problem.''
Part of the resentment in Asia to the IMF and its policies is based on what
some see as a Western-centred view of the world. Many feel the IMF is too
closely aligned to the United States and doesn't understand Asia's
problems.
``The U.S. always attaches more importance to the financial health of Latin
America than that of Asia, although the problem facing Latin America is not
as
big as Asia.''
Mark Macfarland, economist at Santander in Manila, said the Washington
meetings had exposed the Europeans' refusal to acknowledge the depth of the
crisis in world financial markets.
``There is a future for the IMF provided they smarten up their act,'' he
said.
``They've been an abject failure in Asia.''
``There is a cynical view...that the role of the IMF in Asia has been
nothing
more than to ensure that international creditors get their money back. That
view is quite widely held in Asia, especially in Korea,'' he said.
Economist Budi Hikmat of Indonesian state-owned Danareksa Sekuritas said
the
IMF had a future, but it should avoid rigid monetarism and also look at
other
things.
``The IMF meeting has somehow acknowledged that the rigid standard
prescription is no longer effective. That is an encouraging move,'' he
said.
Lilian Ong, international economist at Macquarie Bank in Sydney said the
IMF
had come under a lot of criticism, but had tried to adapt as events have
occured. She pointed to modifications made by the agency to the Thai rescue
package.
``I think the impression still is that it (the IMF) is the best we've got.
It
might need some adjustment, some changes to the way things are done, but it
really is the best we've got and we really do need a world body when crisis
like that occur.''