[stop-imf] Third World Network: Select IMF Chief on Merits

[Robert Weissman]

Statement by the Third World Network
22 March 2004


IMF CHIEF SHOULD BE SELECTED THROUGH A SYSTEM THAT IS OPEN,
PARTICIPATORY AND BASED ON MERIT


The Third World Network, which is a network of citizen groups in the
developing world, calls on the members of the International Monetary
Fund to use a fair, transparent, participatory system of selecting its
new Managing Director.   Candidates should be considered and eventually
chosen based on merit, and not on nationality or some other
discriminatory criterion.

Such a modern and democratic system of appointment to the IMF=92s top post
should replace the traditional system of untransparent and unseemly
"back-room deals" in which a few major developed countries pick a
candidate among themselves and other IMF members have to accept their
choice, whether they like it or not.

The unwritten rule that the IMF managing director has to be a European
national is old-fashioned, outdated, and unacceptable.  Surely the post
should given to the person in the world most suited to manage the
organization, and should not be the preserve of a certain nationality.

The principles of good governance, transparency, democracy and
meritocracy are promoted constantly by the IMF to its clients.  Indeed
the IMF insists that its borrowingcountries adopt these principles if
they are to obtain loans.

These same principles must be now be used to select the new managing direct=
or.

Although the IMF has 184 members, and theoretically the new MD can come
from any of these countries, it is the "tradition" that the post is
reserved for a European. In exchange, the post of President of the World
Bank, the sister organization of the IMF, is reserved for an American.

Choosing the IMF=92s MD has in the past not been through an open process
involving the IMF=92s 184 members, but through a "back room deal"
involving a few rich countries.

The selection of  the former managing director, Mr. Horst Kohler, four
years ago was itself the result of an unseemly scramble between the
major rich countries, which was then heavily criticized for its
arbitrariness. This time around, the Europeans are again insisting on
their apparent prerogative, with European Commission president, Romano
Prodi, saying he was "deeply convinced this position should be occupied
by a European."

But this "reservation" of the top spot for a European is not in any
constitutional provision.  It is only a convention, and one that is
challenged by developing countries as well as pockets of the establishment.

The Financial Times of London declared in an editorial headline: "The
IMF should not be a European fief:  Time to end the carve-up of top Fund
and World Bank jobs."  It concluded:  "It is time to end the 55-year-old
traditional horse-trading that allots the head of the IMF to a European
and the World Bank to an American and to institute a global executive
search for candidates based on merit, rather than nationality."

Officials in developing countries have also been arguing just that.
They have a larger stake in the IMF as they are the recipients of the
IMF=92s loans and of the policies that come with the loans. Policy
mistakes made by IMF management and staff can have (and have had)
devastating effects on the economy and social-political fabric of the
developing countries. They thus feel they must be given greater
participation rights in decision-making, including in the choice of
person for the IMF=92s top post.

Moreover, there are many persons in the developing world who qualify as
suitable candidates for the post.

On 19 March, a statement was issued by the G-11 Executive Directors,
representing emerging and developing countries from Asia, Africa, Latin
America, and the Middle East, joined by a group of Executive Directors
from Australia and Switzerland, who each represent a range of countries,
along with the Executive Director from the Russian Federation.  Together
they represent well over 100 countries.

After a meeting to discuss the selection process for a new Managing
Director of the IMF,
they issued a statement that the group is of the view that the candidate
nominated for the position must be an eminent person, familiar with the
goals of the institution.

They stated that the process of identifying and selecting the candidate
must be open and transparent, with the goal of attracting the best
person for the job, regardless of nationality. A plurality of candidates
representing the diversity of members across regions would be in the
best interest of the Fund.

They added that all members of the Executive Board should be consulted
in the process of considering candidates that lead to the selection of
the Managing Director and informed in a timely manner regarding
candidates, including their credentials and knowledge of the institution.

The Third World Network supports the joint statement of the G-11
Executive Directors and others, who represent a majority of the IMF
membership.   This position should now also be supported by all other
Members, especially the major shareholder countries.

TWN also supports the call by the secretariat director of the Group of
24 (which represents developing countries in the IMF and the World
Bank), Mr. Ariel Buira, who said at a press briefing in Geneva on 9
March that the new IMF managing director should be chosen through "a
transparent, democratic and participatory process on the basis of merit
regardless of nationality, and not through back room deals among a few coun=
tries."

The call by the developing countries for a fair selection process is
itself in line with a report of the working group on the appointment of
the heads of the IMF and World Bank, set up by the executive boards of
the IMF and World Bank.  The boards had endorsed the group=92s report on
25 April 2001.

The working group=92s report recommended that in choosing the IMF managing
director, all executive directors should be informed in a timely manner
regarding the candidates, their credentials and knowledge of the
institution.  All members of the executive board should be consulted in
the process of considering the candidates.  The choice of a candidate
representing the diversity of the IMF=92s membership across regions would
be in the best interests of the Fund regardless of nationality.

These recommendations, which have been adopted by the IMF board itself,
must now be implemented in the selection of the new managing director.

The issue of how the IMF head is selected is part of the larger problem
of undemocratic  governance of the Fund and the World Bank. The
decision-making power in these institutions is divided through votes
which are in turn weighted according to the quotas allocated to each
country for owning shares in the institutions.

An overwhelming share of the quotas are held by the developed countries
(for  example, the US having 17% of the total, Japan, Germany, France
and the UK 22%, and Canada, Netherlands, Italy and Belgium 11%).

The original quotas were set more than 50 years ago and do not reflect
changed realities, such as the increased share of developing countries
in world income, trade and foreign exchange reserves. But it is
difficult to change them because of resistance from the rich countries
that benefit from the system.

Even if reform of the undemocratic voting rights system may take a
longer tijme to achieve, the reform of the way the managing director of
the IMF is chosen can and should be implemented now.

The new managing director should thus be selected from the widest
possible field, and not restricted to one nationality.

The criteria for selection should include that the candidate is familiar
not only with international finance in general, but with the context of
development, and the problems facing developing countries, including
problems that the IMF has been unable to satisfactorily resolve or may
have even contributed to through its past policy advice or loan conditional=
ities.

The candidate should also have a track record that gives confidence that
he or she can provide leadership to manage and solve pressing global
financial problems, including volatility of capital flows, the
fluctuations in exchange rates, external debt problems, the need to
reform loan conditionalities, and to build a new international financial
architecture.



This statement is issued by Martin Khor (Director) and Goh Chien Yen
(Legal Advisor) of the Third World Network.   Contact:
twnet@po.jaring.my