This week-end, ministers of finance and leaders of development
NGOs will meet with officials of the International Monetary Fund and
World Bank in Washington. Among the topics will be reform of the two
global financial institutions, which were created by the United States
and its allies to fund and guide economic development after World War
II. From Washington, VOA's William Eagle reports.
A few weeks ago, the leaders of the world's most industrialized
countries, the G-20, promised a trillion dollars in support for
developing countries hit by the most severe global economic downturn in
more than 50 years.
But financial experts say if the International Monetary Fund is to
succeed, its leadership - dominated by Western countries and Japan -
needs to include poor countries and emerging economies like China, India
and Brazil.
Usually, the IMF chief is a European, while the head of the World Bank
is an American. Reformers would like to see the posts opened to the
most skilled candidates, regardless of region.
Also, the 185-member Board of Governors of the IMF is weighted toward the
West. Major decisions must have the support of more than 85 percent of
the votes cast by the board.
Its members are allotted a different percentage of votes. The United
States has 17 percent, in effect giving it veto power, preventing other
countries from reaching the 85-percent of the votes needed to pass
significant policy changes. Twenty-five nations of the European Union
have 32 percent of the vote. The combined voting shares of China,
India, Brazil and Mexico are a little over 10 percent. Sub-Saharan
Africa has just more than four percent.
Two researchers at the Center for Global Development in Washington want
to change that.
A senior fellow at the Center, Vijaya Ramachandran, and co-author Enrique Rueda-Sabater complain the power of board members
is based on a combination of factors, including economic and
geo-political influence.
Some of the world's most populous countries, including Pakistan, and
most important economies, like China and India, are underrepresented.
The Two Percent Solution
Ramachandran says this proposal would apportion voting shares to any
countries that have either two percent of the world's population or two
percent of global GDP. The new arrangement changes the balance of power
in favor of those with large populations or large economies. The plan,
she says, balances representation and effectiveness in a transparent
manner.
"While resources are included in discussions [about reform]," she said, "people rarely look at the question of population: where do a majority of the world's [people] live? [Under our proposed plan], it is countries like Pakistan, Bangladesh, and Nigeria [all with two percent of the world's population] that come into the equation. [However], the smaller and midsize economies do not make that cut."
"Some [lack the] population or economic [strength to figure
in the plan]: neither Australia nor South Korea have two percent of the
world's population or GDP, [though they do have] significant influence
[on the boards of the IMF and World Bank relative to India, Nigeria and
other populous countries]."
Under the plan, the countries that do not make the two percent cut could
be organized in regional blocs and be represented on the board by a
leader chosen by member countries. Leadership could be held on a
rotating basis. This, she says, would bring small and midsize countries
to the table.
The Double-Majority System
Others have different ideas.
The development finance coordinator for ActionAid International in
Nairobi, Soren Ambrose favors a "double-majority" system requiring a
majority of member countries to approve significant decisions. This
would be in addition to the system in use today.
Ambrose says under this plan, a wealthy minority could not overrule the
bulk of member countries.
"For a major decision or policy change to happen," he said, "there should be a
required a second vote requiring a [majority of] countries. So it would
be like U.N. General Assembly, where you would need a majority of
countries in the IMF to support a proposal for it to pass, in addition
to getting a majority of votes under current voting arrangements."
The calls for change extend to the World Bank as well. One solution is
supported by an NGO supporting reform, the Bretton Woods Project. It
calls for a system of parity between members, where lenders and
borrowers would each have an equal number of votes on the bank's
executive board.
Ramachandran of the Center for Global Development says the proposals do
not enjoy universal support. Some fear the reforms might dilute the
strong working relationship between the united States and Europe, which
are said to be critical for development.
On the other hand, development activists fear that without better
representation, emerging powers like China and India are not likely to
cooperate on issues such as limiting greenhouse gas emissions or
increasing support for efforts by the IMF and World Bank to shield poor
countries from the global recession.
