I.H.T. Op-Ed Contributor
By PHILIP BOWRING
Published: May 26, 2011
HONG KONG — The first non-Western head of the International Monetary Fund should be from Asia, home of two of the three biggest economies and holder of most of the world’s foreign exchange reserves. Yet even before the arrest of Dominique Strauss-Kahn it was clear that not only were the odds still biased in favor of Europe, but Asia would find it very difficult to agree on a candidate, let alone one acceptable to the West.
That is a pity because East Asian countries have the greatest interest in ensuring global monetary stability, low inflation and international trade, which would be threatened by another round of mayhem in debt and currency markets. Asians have no interest in soft handouts to developing countries. Nor is it in their interest for the I.M.F. to continue to be obsessed with the problems of the euro zone, which are fundamentally more political than economic.
When the succession issue was discussed on the sidelines of the recent Asian Development Bank meeting in Hanoi it was clear that the front runner to succeed Strauss-Kahn — who was then expected to compete for the presidency of France — was Christine Lagarde, the French finance minister, who announced this week she would run for the top job. She was able to play a high profile role in Hanoi thanks to France’s chairmanship of the Group of 20; she impressed many with her grasp of issues and ability to say what many wanted to hear.
Meanwhile, divisions within Asia seemed to override misgivings about another European at the helm.
China gave the impression that it knows the chances of a Chinese candidate are thin due to the reservations of other large Asian countries, as well as many in the West. Until Beijing has a fully convertible currency and produces an individual viewed as capable of rising above China’s national interest, it may be difficult for it to get wide enough support. As a result, Beijing has no particular desire to push for anyone from another Asian country.
A Japanese leader would be a logical choice, given Japan’s years at the top table of international finance; and the country has very able officials. But they are seen, fairly or not, to lack political weight and public presence. Japan’s domestic debt problems undercut its massive foreign reserve strength. China, too, would prefer not to have a Japanese in the top post.
One Indian name has been mentioned — Montek Singh Ahluwalia — who has excellent credentials as a former I.M.F. official and is seen as a liberalizing force in Indian economic policy. But there is scant support in East Asia for a candidate from India, which has been a fringe player on Asian as well as international financial issues. The same applies to Indonesia.
As a middle-sized developed economy, South Korea might qualify but there no obvious candidates. With a Korean heading the United Nations there is limited appetite for another Korean in a top international job.
Publicly many Asian countries back the demand for an I.M.F. head from anywhere but the West. But privately many are not at all sure whether they want someone from a non-Asian developing country such as South Africa or Latin America, however competent the individual. Major Asian countries know that world finances are in a fragile state and the I.M.F. needs a head with intellectual and political clout.
Until they can agree with one of their own the big Asian nations may prefer to stick with the devils they know. Change must come when voting reforms at the I.M.F. come into force, but it will not be easy to agree on who will be the first Asian to lead it.