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Demands of developing world find more takers

posted on 25/09/2003: 1692 views



IMF Managing Director Horst Köhler, World Bank President James Wolfensohn and Kasper Villiger, the Swiss finance minister who was the chairman of this year's annual meetings, yesterday gave their public backing to the campaign for increased representation of the developing world in the Bretton Woods twins. "I do think that an consensus is possible for all of us, including an increase in basic voting rights for developing countries," Köhler said. Wolfensohn agreed.



These statements will reinforce the momentum gathering behind a decisive and potentially deeply divisive issue. The big battles and the minor haggling will now begin, with the next important date being the spring meetings of the two institutions in Washington next year. It will not be an easy task because the US will wish to protect its effective veto position and other countries may not wish to give up their shares, while there will be a clamour of rising nations which feel that it is time to give them greater representation along with the developing world.



What did emerge quite clear was the agreement at the top table that there should be a greater voice for the developing world. Backing Wolfensohn's call for trade reform and more aid, Köhler said: "Even more important than money is the recognition that we are all sitting in one boat, poor countries, rich countries, emerging market countries. "There is no longer a way forward for a better world with peace and prosperity if there is not a recognition that there is an interdependent world and therefore multilateral co-operation.



A better balance in the world is needed," he said adding that at Dubai this week there had been "a greater sense of balance in the discussions between developed and developing countries." Hitherto, well-represented small European countries have been seen as opponents of a shift in voting power where they stood to lose. But yesterday Villiger, interviewed by Gulf News, suggested a way out of the potential impasse, at least in the short term: "I think there's a need for a certain equilibrium, I think we could do it in basic votes."



Constitutions

World Bank-IMF constitutions give all countries equal "basic" or membership voting rights, but countries also have "quotas" which give voting rights to reflect their economic power. An increase in basic votes would give developing countries a bigger say without having to put more money into the IMF and World Bank. Villiger said an adjustment of quotas - which would give big emerging economies more clout - would be "too difficult" at this stage. The US is resisting this because it can see that potentially its veto power will be eliminated. It now has 17.14 per cent; the veto threshold is 15 per cent.



Although some officials say that voting strengths are not so important because the institutions operate through consensus, there are important symbols - of the US predominance, and the fact that the developing countries together have less than 40 per cent of the total votes.



The US is the biggest shareholder in both the World Bank and the IMF, with 16.39 per cent in the bank and just over 17 per cent in the fund. It is followed by Japan with 7.86 in the bank and 6.15 in the fund, Germany, France and the UK with just over four per cent each in the bank and slightly higher shares in the fund. Up and coming developing countries like China and India have 2.78 per cent each in the bank, the same as Saudi Arabia, and China has more and India less in the fund.



Although the coming year might see agreement on more basic votes and a third African board director, placating poor countries, IMF officials say that a change in quotas, bringing a fundamental realignment of power, cannot be avoided when the IMF and the World Bank meet in three years in Singapore. The under-represented big Asian economies will demand it. (The Gulf News)

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